D. KINDS OF CIVIL OBLIGATIONS: Aright 1179.

Aright 1179. Every obligation whose performance does not depend upon a future or uncertain event, or
upon a past event unknown to the parties, is demandable at once.
1. AS TO PERFECTION & EXTINGUISHMENT: x x x. (Emphasis supplied.)
We affirm the findings of the MeTC and the RTC that there is no date of payment indicated in the
Promissory Notes. The RTC is correct in ruling that since the Promissory Notes do not contain a period,
a. PURE HSBCL-SRP has the right to demand immediate payment. Article 1179 of the Civil Code applies. The
(CHAPTER 3) Different Kinds of OBLIGATIONS spouses Broqueza’s obligation to pay HSBCL-SRP is a pure obligation. The fact that HSBCL-SRP was
SECTION 1 - Pure and Conditional OBLIGATIONS content with the prior monthly check-off from Editha Broqueza’s salary is of no moment. Once Editha
Broqueza defaulted in her monthly payment, HSBCL-SRP made a demand to enforce a pure obligation.
Article 1179. Every obligation whose performance does not depend upon a future or uncertain In their Answer, the spouses Broqueza admitted that prior to Editha Broqueza’s dismissal from HSBC in
event, or upon a past event unknown to the parties, is demandable at once. December 1993, she "religiously paid the loan amortizations, which HSBC collected through payroll check-
ofollowing:" A definite amount is paid to HSBCL-SRP on a specific date. Editha Broqueza authorized
Every obligation which contains a resolutory condition shall also be demandable, without HSBCL-SRP to make deductions from her payroll until her loans are fully paid. Editha Broqueza, however,
prejudice to the effects of the happening of the event. defaulted in her monthly loan payment due to her dismissal. Despite the spouses Broqueza’s protestations, the
payroll deduction is merely a convenient mode of payment and not the sole source of payment for the loans.
Article 1197. If the obligation does not fix a period, but from its nature and the circumstances it can HSBCL-SRP never agreed that the loans will be paid only through salary deductions. Neither did HSBCL-
be inferred that a period was intended, the court may fix the duration thereof. SRP agree that if Editha Broqueza ceases to be an employee of HSBC, her obligation to pay the loans will be
suspended. HSBCL-SRP can immediately demand payment of the loans at anytime because the obligation to
The court shall also fix the duration of the period when it depends upon the will of the debtor. pay has no period. Moreover, the spouses Broqueza have already incurred in default in paying the monthly
In every case, the court shall determine such period as may under the circumstances have been installments.
probably contemplated by the parties. Once fixed by the court, the period cannot be changed by
them. CASE: re Article 1179, par. 1
Case: In the matter of the Intestate Estate of Justo Palanca, deceased, George Pay vs. Segundina Chua
 A pure obligation is one which is not subject to a condition or a term and it is immediately Vda. De Palanca, June 28, 1974, J. Fernando.
demandable that there is nothing to exempt the debtor from compliance therewith. Facts: George Pay as creditor of the late Justo Palanca (who died in Manila on July 3, 1963) claimed payment
(Floriano vs. Delgado) from the latter premised from a promissory note dated January 30, 1952, which has the following details: ―For
 What is a demand note? It is subject to neither a suspensive condition nor a suspensive value received from time to time since 1947, we jointly and severally promise to pay to Mr. George Pay at his
office the sum of P26, 900 with 12% interest rate per annum upon receipt by either of the undersigned of cash
period. The demand is not a condition precedent , since the effectivity and binding effect of
payment from the Estate of the late Don Carlos Palanca and Justo Palanca or upon demand‖. Then came
the note does not depend upon the making of the demand: the note is binding even before this paragraph: "The Court has inquired whether any cash payment has been received by either of the signers
the demand is made. Neither does the demand constitute an implied suspensive period of this promissory note from the Estate of the late Carlos Palanca. Petitioner informed that he does not insist on
since there is nothing to prevent the creditor from making a demand. this provision but that petitioner is only claiming on his right under the promissory note." After which, came
the ruling that the wording of the promissory note being "upon demand," the obligation was
Case: Hongkong and Shanghai Banking Corp., Ltd. Staff Retirement Plan vs. Spouses Bienvenido and immediately due. Since it was dated January 30, 1952, it was clear that more "than ten (10) years has
Editha Broqueza, November 17, 2012, J. Carpio. already transpired from that time until to date. The action, therefore, of the creditor has definitely
Facts: Spouses Broqueza, as employees of HSBC and members of Petitioner HSBC-SRP (purposely for the prescribed." The result, as above noted, was the dismissal of the petition.
benefit of the employees), obtained loans specifically, car and appliance loan which are to be paid through Issue: Whether or not Pay’s claim against the estate of the deceased through the promissory note has already
automatic salary deduction. The promissory note appears to have this period for which the employees can pay prescribed.
for the loan: ―… on or before until fully paid…‖ Meanwhile, when a labor dispute arose between HSBC and Held: YES. The obligation being due and demandable, it would appear that the filing of the suit after
its employees, majority of the employees of the former were terminated including herein respondent (with fifteen years was much too late. For again, according to the Civil Code, which is based on Section 43 of Act
supposed co-respondent Gerong who was eventually withdrawn through a manifestation because she settled No. 190, the prescriptive period for a written contract is that of ten years. From the manner in which the
her OBLIGATIONS to the company). Because of such dismissal, herein respondents were not able to pay the promissory note was executed, it would appear that petitioner was hopeful that the satisfaction of his credit
monthly amortizations of their loans. Thus, the HSBC-SRP considered the accounts for respondents as could he realized either through the debtor sued receiving cash payment from the estate of the late Carlos
delinquent. Demand to pay the obligation were made upon respondents but failed to pay the same. In a Palanca presumptively as one of the heirs, or, as expressed therein, "upon demand." There is nothing in
civil suit for recovery and collection of sum of money against respondents, MeTC ruled that the nature of the record that would indicate whether or not the first alternative was fulfilled. What is undeniable is
HSBC-SRP’s demands for payment is civil and has no connection to the labor dispute and that by reason of the that on August 26, 1967, more than fifteen years after the execution of the promissory note on January
respondents’ termination from employment, it resulted in the loss of continued benefits under the retirement 30, 1952, this petition was filed. The defense interposed was prescription. Its merit is rather obvious. Article
plan. Thus, the loans secured by their future retirement benefits to which they are no longer entitled are 1179 of the Civil Code provides: "Every obligation whose performance does not depend upon a future or
reduced to unsecured and pure civil OBLIGATIONS. As unsecured and pure OBLIGATIONS, the uncertain event, or upon a past event unknown to the parties, is demandable at once." This used to be Article
loans are immediately demandable. RTC affirmed the MeTC. But CA reversed the same saying that HSBC- 1113 of the Spanish Civil Code of 1889.
SRP’s complaints for recovery of sum of money against respondents are premature as the loan
OBLIGATIONS have not yet matured. Thus, no cause of action accrued in favor of HSBC-SRP. Hence, this Q: Does the happening of a condition give rise to the OBLIGATION?
appeal. A: Not necessarily, only if suspensive condition; if resolutory condition, the happening extinguishes
Issue: Whether or not the interpretation of the subject promissory note is correctly classified by MeTC and
the OBLIGATION;
RTC as being a pure obligation.
Held: YES. In ruling for HSBCL-SRP, we apply the first paragraph of Article 1179 of the Civil Code:
Q: In an OBLIGATION with a TERM will the answer above be the same?
Amen | Compiled Notes
A: Yes. 2 expellers P25,000/each ―to be shipped from San October 26, 1918
Francisco in the month
b. CONDITIONAL of September, 1918 or
as soon as possible‖
Article 1181. In conditional OBLIGATIONS, the acquisition of rights, as well as the extinguishment 2 electric motors P2,000/each ―Approximate delivery February 27, 1919
or loss of those already acquired, shall depend upon the happening of the event which constitutes the within 90 days—This is
condition. not guaranteed‖
In all these contracts, there is a final clause as follows:
Article 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the The sellers are not responsible for delays caused by fires, riots on land or on the sea, strikes
conditional obligation shall be void. If it depends upon chance or upon the will of a third person, the or other causes known as "Force Majeure" entirely beyond the control of the sellers or their
obligation shall take effect in conformity with the provisions of this Code. representatives.
Smith Bell notified Mr. Sotelo of the arrival of these goods but the latter refused to receive and pay the pay
prices stipulated. The plaintiff brought suit against the defendant, based on four separate causes of action,
Balane:  We are talking here of a suspensive condition. alleging, among other facts, that it immediately notified the defendant of the arrival of the goods, and asked
instructions from him as to the delivery thereof, and that the defendant refused to receive any of them and to pay
First sentence of Article 1182. their price. The case having been tried, the court below absolved the defendants from the complaint insofar as the
 The condition must be suspensive, potestative & depends on the sole will of the tanks and the electric motors were concerned, but rendered judgment against them, ordering them to "receive
debtor. the aforesaid expellers and pay the plaintiff the sum of fifty thousand pesos (P50,00), the price of the said
goods, with legal interest thereon from July 26, 1919, and costs." Both parties appeal from this judgment.
EXAMPLE: "I promise to sell you my car for P1.00 whenever I like."
Issue: Whether or not under the contract being entered into by the parties, the plaintiff corporation is held in
delay by reason of the period stipulated in the contract.
Q: Why does it make the obligation void?
A: Because such an obligation lacks one of the essential elements of an obligation, the vinculum Held: NO. Under these stipulations, it cannot be said that any definite date was fixed for the delivery of the
juris, the binding force- the means by which it is enforceable in couright In this case, there is no goods. As to the tanks, the agreement was that the delivery was to be made "within 3 or 4 months," but that
binding force. There is no obligation. It is a joke. period was subject to the contingencies referred to in a subsequent clause. With regard to the expellers, the
contract says "within the month of September, 1918," but to this is added "or as soon as possible." And with
Potestative Condition  is one which depends solely on the will of either one party. reference to the motors, the contract contains this expression, "Approximate delivery within ninety days," but
EXAMPLE: "I will give you my plantation in Davao provided you reside in Davao right after this, it is noted that "this is not guaranteed." The oral evidence falls short of fixing such period.
permanently." From the record it appears that these contracts were executed at the time of the world war when there existed
rigid restrictions on the export from the United States of articles like the machinery in question, and maritime,
as well as railroad, transportation was difficult, which fact was known to the parties; hence clauses were
Casual Condition  is one where the condition is made to depend upon a third person or upon inserted in the contracts, regarding "Government regulations, railroad embargoes, lack of vessel space, the
chance. exigencies of the requirements of the United States Government," in connection with the tanks and "Priority
EXAMPLE: "I will give you my land in Floridablanca if Mt. Pinatubo erupts this year." Certificate, subject to the United State Government requirements," with respect to the motors. At the time of
the execution of the contracts, the parties were not unmindful of the contingency of the United States
Mixed Condition  is one which depends partly upon the will of one of the parties & partly on Government not allowing the export of the goods, nor of the fact that the other foreseen circumstances therein
either chance or the will of a third person. stated might prevent it.
Considering these contracts in the light of the civil law, we cannot but conclude that the term which the
parties attempted to fix is so uncertain that one cannot tell just whether, as a matter of fact, those
Q: What if the condition is suspensive, potestative & depends solely on the will of the creditor, articles could be brought to Manila or not. If that is the case, as we think it is, the OBLIGATIONS must
is the conditional obligation valid? be regarded as conditional.
A: Yes. In fact, the obligation is not even a condition obligation. It is a pure obligation, binding at OBLIGATIONS for the performance of which a day certain has been fixed shall be demandable only when the
once. day arrives.
A day certain is understood to be one which must necessarily arrive, even though its date be unknown.
CASE: the term which parties attempted to fix were so uncertain it must be regarded as condition If the uncertainty should consist in the arrival or non-arrival of the day, the obligation is conditional and
shall be governed by the rules of the next preceding section. (referring to pure and conditional
Case: Smith Bell & Co., Ltd. vs. Vicente Sotelo Matti, March 9, 1922, J/ Romualdez. OBLIGATIONS). (Aright 1125, Civ. Code.)
Facts: In August 1918, plaintiff corporation and defendant entered into contracts whereby the former obligated And as the export of the machinery in question was, as stated in the contract, contingent upon the sellers
itself to sell and the latter to purchase from it the following which accordingly delivered with dates below: obtaining certificate of priority and permission of the United States Government, subject to the rules and
regulations, as well as to railroad embargoes, then the delivery was subject to a condition the fulfillment of
Items/Products Prices Delivery date under the Actual date of delivery which depended not only upon the effort of the herein plaintiff, but upon the will of third persons who could in
promissory note no way be compelled to fulfill the condition. In cases like this, which are not expressly provided for, but
impliedly covered, by the Civil Code, the obligor will be deemed to have sufficiently performed his part
2 steel tanks P21,000 ―to be shipped from New April 27, 1919
York to Manila within 3 of the obligation, if he has done all that was in his power, even if the condition has not been fulfilled in
reality.
or 4 months‖
Amen | Compiled Notes
  A negative condition (not to do an impossible thing)  Just disregard the condition
Article 1183. Impossible conditions, those contrary to good customs or public policy and those (Article 1183, par. 2.)
prohibited by law shall annul the obligation which depends upon them. If the obligation is divisible,  A condition not to do an illegal thing (negative)  This is not expressly provided for in
that part thereof which is not affected by the impossible or unlawful condition shall be valid. the provision but is implied. The obligation is valid.
EXAMPLE: "I will sell you a piece of land provided you do not plant marijuana on it."
The condition not to do an impossible thing shall be considered as not having been agreed upon.
Article 1184. The condition that some event happen at a determinate time shall extinguish the
Balane: obligation as soon as the time expires or if it has become indubitable that the event will not take place.
This refers to a suspensive condition.
There are 2 classes of impossible conditions: Balane: This article refers to suspensive conditions. If the condition is resolutory, the effect is the
opposite.
1. Impossible in fact
EXAMPLE: "I promise to sell my car to Mr. M for P2 if he can swim across the Pacific Article 1185. The condition that some event will not happen at a determinate time shall render the
Ocean for 2 hours." obligation effective from the moment the time indicated has elapsed, or if it has become evident that
the event cannot occur.
2. Impossible in law  or one which attaches an illegal condition If no time has been fixed, the condition shall be deemed fulfilled at such time as may have probably
EXAMPLE: "I promise to sell my car to Mr. M for P2 on condition that he burns the been contemplated, bearing in mind the nature of the obligation.
College of Law."
Balane: This article refers to a suspensive condition.
Effect of Impossible Condition  It annuls the obligation which depends upon them.
 The entire juridical tie is tainted by the impossible condition. Correlate this with Articles Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.
727 & 873.
Balane: This article refers to a suspensive condition.
Article 727. Illegal or impossible conditions in simple & remuneratory donations shall be considered as not
imposed. Doctrine of Constructive Compliance  There are three requisites in order that this article may
Article 873. Impossible conditions & those contrary to law or good customs shall be considered as not imposed & apply:
shall in no manner prejudice the heir, even if the testator should otherwise provide. 1. Intent on the part of the obligor to prevent fulfillment of the condition. The intent does not
have to be malicious.
Tolentino: 2. Actual prevention of compliance (by the obligor)
 In contracts, an impossible condition annuls the contract. 3. Constructive compliance can have application only if the condition is potestative. It can
 In gratuitous dispositions, the impossible condition is simply disregarded. also apply to mixed condition as to that part which the obligor should perform.

Balane: The first statement is inaccurate because donation is a contract & in a donation, the Kinds of Conditional OBLIGATIONS:
impossible condition does not annul the contract. It is simply disregarded. The proper way to say it
is that: a. Suspensive Condition (Condition precedent)
 In an onerous transaction, an impossible condition annuls the condition obligation.
 In a gratuitous disposition, as in a donation or testamentary disposition, an Article 1187. The effects of a conditional obligation to give, once the condition has been fulfilled, shall
impossible condition attached to the disposition is simply considered as not imposed. retroact to the day of the constitution of the obligation. Nevertheless, when the obligation imposes
reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall
Q: Why is there a difference? be deemed to have been mutually compensated. If the obligation is unilateral, the debtor shall
appropriate the fruits and interests received, unless from the nature and circumstances of the obligation it
A: Because in a donation as well as in a testamentary disposition, the causa or consideration is the
should be inferred that the intention of the person constituting the same was different.
liberality of the donor or testator, as the case may be. Even if you take away the impossible
condition, there is still a reason for the disposition to exist- liberality. They (donation & testamentary
 In OBLIGATIONS to do and not to do, the court shall determine, in each case, the
disposition) have both their underpinnings, liberality. But in an onerous transaction, since an onerous
retroactive effect of the condition that has been complied with.
prestation which is reciprocal requires concomitant performances, that impossible condition becomes
part of the causa. Therefore, if the condition is impossible, there is failure of causa. In no causa,
Balane:
there is also no contract.
This article refers to suspensive condition. This article sets forth the rule of retroactivity in an
obligation to give. This rule is logical but impractical. Many modern Civil Codes have discarded it.
Paras:
 Positive suspensive condition to do an impossible/ illegal thing  The obligation is
void (Article 1183, par. 1.)
Amen | Compiled Notes
No Retroactivity as to the Fruits  Notice that there is no retroactivity with respect to the fruits. As for the OBLIGATIONS to do and not to do, the provisions of the second paragraph of article 1187
The fruits are deemed to cancel out each other. If only one of the thing produces fruits, there is no shall be observed as regards the effect of the extinguishment of the obligation.
obligation to deliver the fruits.
Balane: A condition is a future & uncertain event upon which an obligation or provision is made
Article 1188. The creditor may, before the fulfillment of the condition, bring the appropriate actions for the to depend.
preservation of his right.
Tolentino: Futurity & uncertainty must concur as characteristics of the event.
The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition.
 A past thing can never be a condition. A condition is always future & uncertain.
Balane: This article refers to suspensive conditions.
Past event unknown to the parties  It is really the knowledge of the event which constitutes the
Bring the appropriate actions  According to JBL Reyes, the phrase "may xxx bring the
future. It is the knowledge which is future & uncertain.
appropriate actions" is inaccurate. To bring action is to file a suit. But the creditor is not
restricted to filing a suit.
EXAMPLE: "I will treat you for lunch if you get the highest score in the Civil Law Final
The proper verb is not "bring" but "take." For example, in a sale of land subject to suspensive
Exams (on the assumption that Prof. Balane has already finished checking the papers.)"
condition, the creditor should have the suspensive condition annotated on the title of the land. This is
Here, the event (getting the highest score) is already a past event, yet the knowledge is
not bringing an appropriate action but taking an appropriate action.
future & uncertain.
The principle in this article is: Vigilantibus et non dormientibus jura subveniunt  which means
Condition compared to a term 
that the laws aid those who are vigilant, not those who sleep upon their rights.

Q: Why does Article 1188 give the creditor a recourse although technically the creditor still have no Condition Term
right? As to element of Same, may be past Same, always future
A: Because as a matter of fact, although technically the creditor still have no right, he is already futurity event unknown to
expecting a right. You cannot let the creditor sit & fold his arms & wait for his right of expectancy to parties
be rendered illusory. in the aspect of uncertain certain
certainty
Article 1189. When the conditions have been imposed with the intention of suspending the efficacy of an
obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of the Conditions can either be:
thing during the pendency of the condition: 1. Suspensive condition (condition precedent) wherein the happening of the event gives
(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished; birth to an obligation
(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is 2. Resolutory condition (condition subsequent) wherein the happening of the event will
understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a extinguish the obligation.
way that its existence is unknown or it cannot be recovered;
(3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the
creditor; c. WITH A TERM OR PERIOD:
(4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission
of the obligation and its fulfillment, with indemnity for damages in either case; Article 1180. When the debtor binds himself to pay when his means permit him to do so, the
(5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of obligation shall be deemed to be one with a period, subject to the provisions of article 1197.
the creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the Balane: A term is a future and certain event upon which the demandability (or extinguishment) of
usufructuary. (1122) an obligation depends.

(b) Resolutory Condition (Condition subsequent) Tolentino: Period must be (1) future (2) certain and (3) possible.

Balane: Article 1190 refers to resolutory conditions. This is just the opposite of Article 1189. A term can either be:
1. Suspensive term (ex die- from the day) or one the arrival of which will make the
Article 1190. When the conditions have for their purpose the extinguishment of an obligation to give, obligation demandable;
the parties, upon the fulfillment of said conditions, shall return to each other what they have received. 2. Resolutory term (in die- into the day) or one the arrival of which will extinguish the
In case of the loss, deterioration or improvement of the thing, the provisions which, with respect to
obligation. The period after which the performance must terminate.
the debtor, are laid down in the preceding article shall be applied to the party who is bound to return.
Terms classified according to source;
Amen | Compiled Notes
 1. Legal, period fixed by law Article 1194. In case of loss, deterioration or improvement of the thing before the arrival of the day certain, the
2. voluntary, stipulated by parties rules in article 1189 shall be observed.
3. judicial, fixed/allowed by court
Balane: There are three requisites in order for Article 1189 to apply--
May also be, (a) express, specified 1. There is loss, deterioration or delay
(b) tacit, e.g. stipulated to do some work which may only be done at a particular season. 2. There is an obligation to deliver a determinate thing (on the part of the debtor)
Or, 3. There is loss, deterioration or improvement before the happening of the condition.
1. Original period 4. The condition happens.
2. Grace period, extension fixed by parties
Article 1195. Anything paid or delivered before the arrival of the period, the obligor being unaware of the
period or believing that the obligation has become due and demandable, may be recovered, with the fruits and
Or
interests.
a. definite, fixed known date or time,
b. indefinite, event will happen but not known when
 Article 1195 applies only in OBLIGATION to give;
Effect of Period: OBLIGATION with term are demandable only when day fixed for performance
Balane:
arrive; right of action arises only when date fixed arrives;
Mistaken Premature Delivery  This article assumes 2 things:
\Article 1193. OBLIGATIONS for whose fulfillment a day certain has been fixed, shall be (1) the delivery was by mistake;
demandable only when that day comes. (2) the mistake was discovered before the term arrives.

OBLIGATIONS with a resolutory period take effect at once, but terminate upon arrival of the day  Both the things & the fruits can be recovered.
certain.
If the term has already arrived, the question is moot & academic. But can he recover the fruits
A day certain is understood to be that which must necessarily come, although it may not be known produced during the meantime? It depends on what school of thought you follow:
when. Tolentino: According to one school of thought, the debtor is entitled to the fruits produced in the
If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it
meantime.
shall be regulated by the rules of the preceding Section. Caguioa: According to another school of thought, all the fruits received during the pendency of the
term belong to the creditor.
MANRESA: A term or period is an interval of time, which, exerting an influence on an obligation
as a consequence of a juridical act, either suspends its demandability or produces its When fruits & interests cannot be recovered notwithstanding premature delivery:
extinguishment. 1. When the obligation is reciprocal & there has been premature performance (by both
parties);
Distinguished from Condition: 2. When the obligation is a loan in which the debtor is bound to pay interest;
CONDITION TERM / PERIOD 3. When the period is for the creditor's exclusive benefit;
As to fulfillment uncertain event an event that must necessarily come, whether 4. When the debtor is aware of the period & pays anyway. (Knowledge, tacit waiver of
on a date known before hand or at a time which benefit of term)
cannot be predetermined
As to influence on the a condition gives rise to has no effect upon the existence of 2. Presumed for whose benefit: BOTH
obligation an obligation or OBLIGATIONS, but only their demandability
extinguishes one already or performance Article 1196. Whenever in an obligation a period is designated, it is presumed to have been established for the
existing benefit of both the creditor and the debtor, unless from the tenor of the same or other circumstances it should
Effect May have retroactive NO retroactive effect, except when there is a appear that the period has been established in favor of one or of the other.
effect special agreement
As to time may refer to a past event always refer to the future Balane:
unknown to the parties
General rule: If a period is attached in an obligation, the presumption is that it is for the benefit of
As to will of debtor a condition which a period left to the debtor's will merely
depends exclusively on empowers the court to fix such period both parties.
the will of the debtor
annuls the obligation  The consequence is that the creditor cannot compel the performance before the arrival of
the term; the debtor cannot compel acceptance before the arrival of the term.
Balane: In a (suspensive) term, the obligation has already arisen except that it is not yet demandable.

Amen | Compiled Notes

If the term is for the benefit of the creditor  The creditor can demand performance anytime; but Article 1191. Xxx
the debtor cannot insist on payment before the period. the court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

Article 1687. xxx

If the term is for the benefit of the debtor  The creditor cannot demand performance anytime;
However, even though a monthly rent is paid, & no period for the lease has been set, the court may fix a longer
but the debtor can insist on performance anytime. term for the lease after the lessee has occupied the premises for over one year. If the rent is weekly, the court may
likewise determine a longer period after the lessee has been in possession for over six months. In case of daily
EXAMPLE: rent, the court may also fix a longer period after the lessee has stayed in the place for over one month.
"I promise to pay within 60 days." This is a term for the benefit of the debtor.
"I promise to pay Clara the sum of P100, 000 on or before Oct. 31, 1996." This is a term for the Article 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be
benefit of the debtor. deemed to be one with a period, subject to the provisions of article 1197.
-In contract of Loan, without interest, term is usually for benefit of debtor, thus he may pay in
advance; CASE: Where obligation does not fix a period; When fixing a period is mere formality —
-If there is stipulation as to interest, period is generally for both parties, debtor cannot pay in advance
vs. will of creditor; unless he also pays interest in full. Case: Chavez vs. Gonzales, 32 SCRA 547.
Facts: In the early part of July 1963, Rosendo Chavez delivered to Fructuoso Gonzales, who is a typewriter
repairer, a portable typewriter for routine cleaning and servicing. Gonzales was not able to finish job after
3. When NO period is fixed some time despite repeated reminder. Gonzales merely gave assurances but failed to comply with the same. In
October 1963, Gonzales asked from Chavez the sum of P6.00 for the purchase of spare parts which amount
Balane: was duly given to the former. On October 26, 1963, Chavez asked for the return of the typewriter. Gonzales
Cases where the Court may fix a period  just delivered it in a wrapped package. And it was only upon reaching home that Chavez found out that the
typewriter was in shambles, with the interior cover and some parts and screws missing. On October 29, 1963,
1. Article 1197, par. 1 Chavez demanded the return of the missing parts and the P6.00 which was heeded to. Thereafter, Chavez had
the typewriter repaired for P89.85. Chavez sued for damages.
Article 1197. If the obligation does not fix a period, but from its nature and the circumstances it can Issue: Whether or not Gonzales is liable for damages for the subsequent repair of the typewriter of Chavez.
be inferred that a period was intended, the court may fix the duration thereof. Held: YES. The SC found that both Chavez and Gonzales had a perfected contract for cleaning and servicing
of typewriter intending for Gonzales to finish the work at some future time although such time was not
The court shall also fix the duration of the period when it depends upon the will of the debtor. specified and that such time had passed without the work having been accomplished, for Gonzales returned the
typewriter cannibalized and unrepaired, which in itself is a breach of obligation, without demanding that he
In every case, the court shall determine such period as may under the circumstances have been should be given more time to finish the job or compensation for the work he had already done. The time for
probably contemplated by the parties. Once fixed by the court, the period cannot be changed by compliance having evidently expired and there being a breach of contract by non-compliance, Gonzales
them. cannot invoke Article 1197 for he admitted non-performance by returning the typewriter that he was obliged
to repair. The fixing of a period would thus be a mere formality and would serve no purpose than to
delay. For such, Gonzales is liable under Article 1167 for the cost of the execution of the obligation in a
Exceptions: proper manner.

Article 1682. The lease of a piece of rural land, when its duration has not been fixed, is understood to have been Case: Vicente Singson Encarnacion vs. Jacinta Baldomar, Oct. 4, 1946, J. Hilado.
made for all the time necessary for the gathering of the fruits which the whole estate leased may yield in one year, Facts: Vicente Singson Encarnacion, owner of the house numbered 589 Legarda Street, Manila, some six
or which it may yield once, although two or more years may have to elapse for the purpose. years ago leased said house to Jacinto Baldomar and her son, Lefrado Fernando, upon a month-to-month basis
for the monthly rental of P35. After Manila was liberated in the last war, specifically on March 16, 1945, and
Article 1687. If the period for the lease has not been fixed, it is understood to be from year to year, if the rent on April 7, of the same year, plaintiff Singson Encarnacion notified defendants, the said mother and son, to
agreed upon is annual; from month to month, if it is monthly; from week to week, if the rent is weekly; & from vacate the house above-mentioned on or before April 15, 1945, because plaintiff needed it for his offices as a
day to day, if the rent is to be paid daily. xxx result of the destruction of the building where said plaintiff had said offices before. Despite this demand,
defendants insisted on continuing their occupancy. When the original action was lodged with the Municipal
Article 1606 in pacto de retro sale where the period is not specified by the parties Court of Manila on April 20, 1945, defendants were in arrears in the payment of the rental corresponding to
said month, the agrees rental being payable within the first five days of each month. That rental was paid prior
Article 1606. The right referred to in article 1601 (the right of conventional redemption on the part of the vendor a to the hearing of the case in the municipal court, as a consequence of which said court entered judgment for
retro), in the absence of an express agreement, shall last four years from the date of the contract. restitution and payment of rentals at the rate of P35 a month from May 1, 1945, until defendants completely
vacate the premises. In the Court of First Instance, the defendants interposed defense that the contract which
XXX they had celebrated with plaintiff since the beginning authorized them to continue occupying the house
indefinitely and while they should faithfully fulfill their OBLIGATIONS as respects the payment of the
 contract of services for an indefinite term (because fixing of a period by the court may amount to rentals. However, Vicente Singson Encarnacion, jr., contended that the lease had always and since the
involuntary servitude) beginning been upon a month-to-month basis. The Court of First Instance gave more credence to the lessor.
Issue: Whether the contract can be interpreted as a month-to-month basis thereby giving more credence to the
Article 1197. Xxx effect that herein lessor can eject lessee at anytime possible.
The court shall also fix the duration of the period when it depends upon the will of the debtor.

Amen | Compiled Notes

Held: YES. We think that the Court of First Instance was right in so declaring. Furthermore, carried to its Case: Philippine Banking Corporation representing the estate of Justina Santos Y Canon Faustino,
logical conclusion, the defense thus set up by defendant Lefrado Fernando would leave to the sole and deceased vs. Lui She in her own behalf and as administratrix of the intestate estate of Wong Heng,
exclusive will of one of the contracting parties (defendants in this case) the validity and fulfillment of the deceased., 21 SCRA 53.
contract of lease, within the meaning of article 1256 of the Civil Code, since the continuance and fulfillment of Facts: Justina Santos y Canon Faustino and her sister Lorenzo were the owners in common of a piece of land
the contract would then depend solely and exclusively upon their free and uncontrolled choice between in Manila. This parcel, with an area of 2,582.30 square meters, is located on Rizal Avenue and opens into
continuing paying the rentals or not, completely depriving the owner of all say in the matter. If this defense Florentino Torres street at the back and Katubusan street on one side. In it are two residential houses with
were to be allowed, so long as defendants elected to continue the lease by continuing the payment of the entrance on Florentino Torres street and the Hen Wah Restaurant with entrance on Rizal Avenue. The sisters
rentals, the owner would never be able to discontinue it; conversely, although the owner should desire lived in one of the houses, while Wong Heng, a Chinese, lived with his family in the restaurant. Wong had
the lease to continue, the lessees could effectively thwart his purpose if they should prefer to terminate been a long-time lessee of a portion of the property, paying a monthly rental of P2,620.
the contract by the simple expedient of stopping payment of the rentals. This, of course, is prohibited by On September 22, 1957 Justina Santos became the owner of the entire property as her sister died with no other
the aforesaid article of the Civil Code. (8 Manresa, 3d ed., pp. 626, 627; Cuyugan vs. Santos, 34 Phil., 100.) heir. Then already well advanced in years, being at the time 90 years old, blind, crippled and an invalid, she
was left with no other relative to live with. Her only companions in the house were her 17 dogs and 8 maids.
Case: Dario and Gaudencio Eleizegui vs. Manila Lawn Tennis Club, May 19, 1903, J. Arellano. Her otherwise dreary existence was brightened now and then by the visits of Wong's four children who had
Facts: This suit concerns the lease of a piece of land for a fixed consideration and to endure at the will of the become the joy of her life. Wong himself was the trusted man to whom she delivered various amounts for
lessee. By the contract of lease the lessee is expressly authorized to make improvements upon the land, by safekeeping, including rentals from her property at the corner of Ongpin and Salazar streets and the rentals
erecting buildings of both permanent and temporary character, by making fills, laying pipes, and making such which Wong himself paid as lessee of a part of the Rizal Avenue property. Wong also took care of the
other improvements as might be considered desirable for the comfort and amusement of the members. "The payment; in her behalf, of taxes, lawyers' fees, funeral expenses, masses, salaries of maids and security guard,
court is of the opinion that the contract of lease was terminated by the notice given by the plaintiff on August and her household expenses.
28 of last year . . . ." And such is the theory maintained by the plaintiffs, which expressly rests upon article "In grateful acknowledgment of the personal services of the lessee to her," Justina Santos executed on
1581 of the Civil Code, the law which was in force at the time the contract was entered into (January 25, November 15, 1957 a contract of lease (Plff Exh. 3) in favor of Wong, covering the portion then already leased
1890). The judge, in giving to this notice the effect of terminating the lease, undoubtedly considers that it is to him and another portion fronting Florentino Torres street. The lease was for 50 years, although the lessee
governed by the article relied upon by the plaintiffs, which is of the following tenor: "When the term has not was given the right to withdraw at any time from the agreement; the monthly rental was P3,120. The contract
been fixed for the lease, it is understood to be for years when an annual rental has been fixed, for months when covered an area of 1,124 square meters. Ten days later (November 25), the contract was amended (Plff Exh. 4)
the rent is monthly. . . ." The second clause of the contract provides as follows: "The rent of the said land is so as to make it cover the entire property, including the portion on which the house of Justina Santos stood, at
fixed at 25 pesos per month." (P. 11, Bill of Exceptions.) an additional monthly rental of P360. For his part Wong undertook to pay, out of the rental due from him, an
In accordance with such a theory, the plaintiffs might have terminated the lease the month following the amount not exceeding P1,000 a month for the food of her dogs and the salaries of her maids.
making of the contract — at any time after the first month, which, strictly speaking, would be the only month On December 21 she executed another contract (Plff Exh. 7) giving Wong the option to buy the leased
with respect to which they were expressly bound, they not being bound for each successive month except by a premises for P120,000, payable within ten years at a monthly installment of P1,000. The option, written in
tacit renewal (aright 1566) — an effect which they might prevent by giving the required notice. The Tagalog, imposed on him the obligation to pay for the food of the dogs and the salaries of the maids in her
OBLIGATIONS which, with the force of law, the lessors assumed by the contract entered into, so far as household, the charge not to exceed P1,800 a month. The option was conditioned on his obtaining Philippine
pertaining to the issues, are the following: "First. . . . They lease the above-described land to Mr. Williamson, citizenship, a petition for which was then pending in the Court of First Instance of Rizal. It appears, however,
who takes it on lease, . . . for all the time the members of the said club may desire to use it . . . Third. . . . the that this application for naturalization was withdrawn when it was discovered that he was not a resident of
owners of the land undertake to maintain the club as tenant as long as the latter shall see fit, without altering Rizal. On October 28, 1958 she filed a petition to adopt him and his children on the erroneous belief that
in the slightest degree the conditions of this contract, even though the estate be sold." adoption would confer on them Philippine citizenship. The error was discovered and the proceedings were
It is evident that they had no intention of stipulating that they reserved the right to give such notice. Clause 3 abandoned.
begins as follows: "Mr. Williamson, or whoever may succeed him as secretary of said club, may terminate this On November 18, 1958 she executed two other contracts, one (Plff Exh. 5) extending the term of the
lease whenever desired without other formality than that of giving a month's notice. The owners of the land lease to 99 years, and another (Plff Exh. 6) fixing the term of the option of 50 years.
undertake to maintain the club as tenant as long as the latter shall see fit." In two wills executed on August 24 and 29, 1959 (Def Exhs. 285 & 279), she bade her legatees to respect the
Although the relief asked for in the complaint, drawn in accordance with the new form of procedure contracts she had entered into with Wong, but in a codicil (Plff Exh. 17) of a later date (November 4, 1959) she
established by the prevailing Code, is the restitution of the land to the plaintiffs (a formula common to various appears to have a change of hearight Claiming that the various contracts were made by her because of
actions), nevertheless the action which is maintained can be no other than that of desahucio, in accordance machinations and inducements practiced by him, she now directed her executor to secure the annulment of the
with the substantive law governing the contract. The lessor — says article 1569 of the Civil Code — may contracts.
judicially dispossess the lessee upon the expiration of the conventional term or of the legal term; the On November 18 the present action was filed in the Court of First Instance of Manila. The complaint
conventional term — that is, the one agreed upon by the parties; the legal term, in defect of the conventional, alleged that the contracts were obtained by Wong "through fraud, misrepresentation, inequitable conduct,
fixed for leases by articles 1577 and 1581. undue influence and abuse of confidence and trust of and (by) taking advantage of the helplessness of the
Issue: Whether or not the duration of the term of lease can be fixed by the couright plaintiff and were made to circumvent the constitutional provision prohibiting aliens from acquiring lands in
Held: The Civil Code has made provision for such a case in all kinds of OBLIGATIONS. In speaking in the Philippines and also of the Philippine Naturalization Laws."
general of OBLIGATIONS with a term it has supplied the deficiency of the former law with respect to the From this judgment both parties appealed directly to this Couright After the case was submitted for decision,
"duration of the term when it has been left to the will of the debtor," and provides that in this case the term both parties died, Wong Heng on October 21, 1962 and Justina Santos on December 28, 1964. Wong was
shall be fixed by the court. (Aright 1128, sec. 2.) In every contract, as laid down by the authorities, there is substituted by his wife, Lui She, the other defendant in this case, while Justina Santos was substituted by the
always a creditor who is entitled to demand the performance, and a debtor upon whom rests the obligation to Philippine Banking Corporation.
perform the undertaking. In bilateral contracts the contracting parties are mutually creditors and debtors. Thus, Justina Santos maintained — now reiterated by the Philippine Banking Corporation — that the lease contract
in this contract of lease, the lessee is the creditor with respect to the rights enumerated in article 1554, and is (Plff Exh. 3) should have been annulled along with the four other contracts (Plff Exhs. 4-7) because it lacks
the debtor with respect to the OBLIGATIONS imposed by articles 1555 and 1561. The term within which mutuality; because it included a portion which, at the time, was in custodia legis; because the contract was
performance of the latter obligation is due is what has been left to the will of the debtor. This term it is which obtained in violation of the fiduciary relations of the parties; because her consent was obtained through undue
must be fixed by the court. influence, fraud and misrepresentation; and because the lease contract, like the rest of the contracts, is
absolutely simulated.
Amen | Compiled Notes
 Paragraph 5 of the lease contract states that "The lessee may at any time withdraw from this agreement." Tuason & Co., Inc., and instance, seeking to compel the latter to comply with their obligation, as stipulated in
It is claimed that this stipulation offends article 1308 of the Civil Code which provides that "the contract must the above-mentioned deed of sale, and/or to pay damages in the event they failed or refused to perform said
bind both contracting parties; its validity or compliance cannot be left to the will of one of them." obligation.
Issue: Whether or not the option given to Wong to buy the property despite him being an alien is valid. Both defendants J. M. Tuason and Co. and Gregorio Araneta, Inc. answered the complaint, the latter
Held: NO. Taken singly, the contracts show nothing that is necessarily illegal, but considered collectively, particularly setting up the principal defense that the action was premature since its obligation to construct the
they reveal an insidious pattern to subvert by indirection what the Constitution directly prohibits. To be sure, a streets in question was without a definite period which needs to he fixed first by the court in a proper suit for
lease to an alien for a reasonable period is valid. So is an option giving an alien the right to buy real property that purpose before a complaint for specific performance will prosper.
on condition that he is granted Philippine citizenship. As this Court said in Krivenko v. Register of Deeds:20 Plaintiff moved to reconsider and modify the above decision, praying that the court fix a period within which
[A]liens are not completely excluded by the Constitution from the use of lands for residential defendants will comply with their obligation to construct the streets in question.
purposes. Since their residence in the Philippines is temporary, they may be granted temporary Defendant Gregorio Araneta, Inc. opposed said motion, maintaining that plaintiff's complaint did not expressly
rights such as a lease contract which is not forbidden by the Constitution. Should they desire to or impliedly allege and pray for the fixing of a period to comply with its obligation and that the evidence
remain here forever and share our fortunes and misfortunes, Filipino citizenship is not impossible presented at the trial was insufficient to warrant the fixing of such a period.
to acquire. Issue: Whether the period fixed by the court is proper.
But if an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of which Held: We agree with the petitioner that the decision of the Court of Appeals, affirming that of the Court of
the Filipino owner cannot sell or otherwise dispose of his property, 21 this to last for 50 years, then it becomes First Instance is legally untenable. The fixing of a period by the court under Article 1197 of the Civil Code of
clear that the arrangement is a virtual transfer of ownership whereby the owner divests himself in stages not the Philippines is sought to be justified on the basis that petitioner (defendant below) placed the absence of a
only of the right to enjoy the land ( jus possidendi, jus utendi, jus fruendi and jus abutendi) but also of the right period in issue by pleading in its answer that the contract with respondent Philippine Sugar Estates
to dispose of it ( jus disponendi) — rights the sum total of which make up ownership. It is just as if today the Development Co., Ltd. gave petitioner Gregorio Araneta, Inc. "reasonable time within which to comply with
possession is transferred, tomorrow, the use, the next day, the disposition, and so on, until ultimately all the its obligation to construct and complete the streets." Neither of the court below seems to have noticed that, on
rights of which ownership is made up are consolidated in an alien. And yet this is just exactly what the parties the hypothesis stated, what the answer put in issue was not whether the court should fix the time of
in this case did within the space of one year, with the result that Justina Santos' ownership of her property was performance, but whether or not the parties agreed that the petitioner should have reasonable time to perform
reduced to a hollow concept. If this can be done, then the Constitutional ban against alien landholding in the its part of the bargain. If the contract so provided, then there was a period fixed, a "reasonable time;" and all
Philippines, as announced in Krivenko v. Register of Deeds,22 is indeed in grave peril. that the court should have done was to determine if that reasonable time had already elapsed when suit was
filed if it had passed, then the court should declare that petitioner had breached the contract, as averred in the
Case: Lim vs. People complaint, and fix the resulting damages. On the other hand, if the reasonable time had not yet elapsed, the
Facts: Lourdes Lim is a businesswoman who went to Maria Ayroso and proposed to the latter to sell Ayroso’s court perforce was bound to dismiss the action for being premature. But in no case can it be logically held that
tobacco. Ayroso agreed to the proposition to sell her tobacco consisting of 615 kilos at P1.30/kilo. The under the plea above quoted, the intervention of the court to fix the period for performance was warranted, for
agreement reads: ―This is to certify that I have received from Maria Ayroso of Nueva Ecija, 615 kilos of leaf Article 1197 is precisely predicated on the absence of any period fixed by the parties.
tobacco to be sold at P1.30/kilo. The proceed in the amount of P799.50 will be given to her as soon as it was Even on the assumption that the court should have found that no reasonable time or no period at all had been
sold”. Of the P799.50, only P240 was paid by Lim. Lim failed to pay the balance. Ayroso filed an Estafa case fixed (and the trial court's amended decision nowhere declared any such fact) still, the complaint not having
against Lim. sought that the Court should set a period, the court could not proceed to do so unless the complaint in as first
Issue: Whether Lim’s obligation to pay Ayroso is immediately demandable as soon as the tobacco was amended; for the original decision is clear that the complaint proceeded on the theory that the period for
disposed of. performance had already elapsed, that the contract had been breached and defendant was already answerable in
Held: YES. The SC ruled that it was clear in the agreement that the proceeds of the sale of the tobacco should damages.
be turned over to the complainant as soon as the same was sold, or, that the obligation was immediately Granting, however, that it lay within the Court's power to fix the period of performance, still the amended
demandable as soon as the tobacco was disposed of. Hence, Article 1197 of the NCC, which provides that the decision is defective in that no basis is stated to support the conclusion that the period should be set at two
court may fix the duration of the obligation if it does not fix a period, does not apply. The agreement cannot be years after finality of the judgment. The list paragraph of Article 1197 is clear that the period can not be set
understood to mean that the duration of the period depends upon the will of the debtor which the court can fix arbitrarily. The law expressly prescribes that —
the duration thereof. Instead the agreement between them was one of agency with the OBLIGATION to return the Court shall determine such period as may under the circumstances been probably contemplated
the unsold tobacco and the proceeds of the sale demandable. by the parties.
All that the trial court's amended decision (Rec. on Appeal, p. 124) says in this respect is that "the proven facts
Case: Gregorio Araneta, Inc. vs. Phil. Sugar Estates Dev., May 31, 1967, J.B.L. Reyes. precisely warrant the fixing of such a period," a statement manifestly insufficient to explain how the two
Facts: J. M. Tuason & Co., Inc. is the owner of a big tract land situated in Quezon City, otherwise known as period given to petitioner herein was arrived at.
the Sta. Mesa Heights Subdivision, and covered by a Torrens title in its name. On July 28, 1950, through It must be recalled that Article 1197 of the Civil Code involves a two-step process. The Court must first
Gregorio Araneta, Inc., it (Tuason & Co.) sold a portion thereof with an area of 43,034.4 square meters, more determine that "the obligation does not fix a period" (or that the period is made to depend upon the will of
or less, for the sum of P430,514.00, to Philippine Sugar Estates Development Co., Ltd. The parties stipulated, the debtor)," but from the nature and the circumstances it can be inferred that a period was intended"
among in the contract of purchase and sale with mortgage, that the buyer will — (Aright 1197, pars. 1 and 2). This preliminary point settled, the Court must then proceed to the second step,
Build on the said parcel land the Sto. Domingo Church and Convent and decide what period was "probably contemplated by the parties" (Do., par. 3). So that, ultimately, the
while the seller for its part will — Court can not fix a period merely because in its opinion it is or should be reasonable, but must set the time
Construct streets on the NE and NW and SW sides of the land herein sold so that the latter will be a that the parties are shown to have intended. As the record stands, the trial Court appears to have pulled the
block surrounded by streets on all four sides; and the street on the NE side shall be named "Sto. two-year period set in its decision out of thin air, since no circumstances are mentioned to support it. Plainly,
Domingo Avenue;" this is not warranted by the Civil Code.
The buyer, Philippine Sugar Estates Development Co., Ltd., finished the construction of Sto. Domingo Church
and Convent, but the seller, Gregorio Araneta, Inc., which began constructing the streets, is unable to finish the Case: Pacifica Millare vs. Hon. Hernando, Antonio Co and Elsa Co., June 30, 1987, J. Feliciano.
construction of the street in the Northeast side named (Sto. Domingo Avenue) because a certain third-party, by Facts: Pacifica Millare, lessor and spouses Co lessee in a 5-year contract of lease of People’s Restaurant, a
the name of Manuel Abundo, who has been physically occupying a middle part thereof, refused to vacate the commercial establishment located at the corner of McKinley and Pratt Streets in Bangued, Abra. At the last week
same; hence, on May 7, 1958, Philippine Sugar Estates Development Co., Lt. filed its complaint against J. M. of the 5-year period, the lessor offered to extend the lease if spouses Co will agree to increase rental from P350 to
Amen | Compiled Notes
P1200 a month. The spouses counter-offered the rental to P700 but this discussion was set aside. Later, a demand CONDITION – every future and uncertain event upon which an OBLIGATION or
letter was issued by lessor to vacate premises without renewal of expired contract which the lessor disagreed and provision is made to depend;
filed an ejectment case. The spouses Co filed a separate case for the court to order renewal of contract and fix
rental at P700 a month. Spouses deposited monthly rental in court while the plaintiff filed Motion to Dismiss for
FUTURE & UNCERTAIN EVENT – the acquisition or resolution of the rights is made to
lack of jurisdiction and no cause of action but the same was denied.
Issue: Whether the Spouses Co have valid cause of action in claiming renewal of lease contract. depend by those who execute the juridical act;
Held: YES. There was implied renewal of lease contract but only on a month-to-month basis, but not for another
5 years. Hence, par. 1 of Article 1197 is clearly inapplicable, since the Contract of Lease did in fact fix an original CLASSIFICATION OF CONDITIONS:
period of 5 years, which had expired. It is also clear from par. 13 of the contract that the parties reserved to 1. SUSPENSIVE – the happening of the former gives rise to an OBLIGATION;
themselves the faculty of agreeing upon the period of the renewal contract. The 2nd par. of Article 1197 is equally 2. RESOLUTORY – the happening of the latter extinguishes rights already existing.
inapplicable since the duration of the renewal period was not left to the will of the lessee alone, but rather to the PAST BUT UNKNOWN – a condition may refer to past event unknown to the parties;
will of both the lessor & the lessee. Most importantly, Article 1197 applies only where a contract of lease clearly IMPOSSIBLE CONDITION:
exists. Here, the contract was not renewed at all, there was in fact no contract at all the period of which could have
1. PHYSICALLY IMPOSSIBLE – when it is contrary to law of nature;
been fixed. SC agreed the TRO and injunction.
2. JUDICIALLY IMPOSSIBLE – when contrary to law, morals, good customs and public
Article 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be safety
deemed to be one with a period, subject to the provisions of article 1197.
PURE OBLIGATIONS  when it is not subject to a term, period and no condition;
4. When debtor loses the benefit of period - demandable at once
- it is immediate demandability, give time for debtor to comply
Article 1198. The debtor shall lose every right to make use of the period:
(1) When after the obligation has been contracted, he becomes insolvent, unless he gives a PERIOD- is an event that is future but certain (just a matter of time); e.g. passing this class (Civil
guaranty or security for the debt; law Review 2)
(2) When he does not furnish to the creditor the guaranties or securities which he has promised;
(3) When by his own acts he has impaired said guaranties or securities after their establishment, PAST EVENT – cannot be future event, cannot be considered uncertain;
and when through a fortuitous event they disappear, unless he immediately gives new ones
equally satisfactory;
(4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the SUSPENSIVE CONDITION:
period; *rights are acquired, upon the happening of a condition.
(5) When the debtor attempts to abscond.
Article 1181 – OBLIGATION created upon the happening of a condition
(6) Article 2109 - If the creditor is deceived on the substance or quality of the thing pledged, he may either claim
another thing in its stead, or demand immediate payment of the principal obligation. (The sixth ground was added RESOLUTORY- extinguished, or loss of existing rights, upon the happening of a condition
by Prof. Balane.)
*Thus a contract may be perfected but its demandability suspended.
Effects of Loss of Term (Article 1198):
 OBLIGATION becomes immediately due & demandable even if period has not yet Article 1186 – deemed constructively fulfilled; applied only to suspensive not to resolutory
expired. condition
 OBLIGATION is converted to a pure OBLIGATION
 Insolvency of DEBTOR – need not be judicially declared; state of financial difficulty is Article 1187 – effects of conditional OBLIGATION to give;
enough. E.g. A sold a house & lot to B, 1M
Condition: if B will pass the bar exam
Balane: In number one, factual insolvency is enough. A judicial declaration of insolvency is not Term: effect retroacts after the passing is announced on April;
required.
Jan.2004 Sept. 2004 Oct.04 Apr.05
Summary of the Different Kinds of OBLIGATIONS As to Perfection and Extinguishment perfection (without condition/ condition
Pure)
DIFFERENT KINDS OF OBLIGATIONS:
PURE AND CONDITIONAL OBLIGATIONS – when the OBLIGATION contains no terms
or conditions; [1544] Retroactive effect
Article 1188 – preserve his interest
CONDITIONAL OBLIGATIONS – one which is subject to condition;
PROTECT HIS EXPECTANCY
Amen | Compiled Notes
 1. Register with the Registry of Property Article 1195 – advanced payment
2. witness Article 1196 – benefit of period
3. possession in good faith
4. Injunction  if the sell was not consummated or not for sale Presumption – if the period is designated, the benefit is for both the creditor & debtor

RESOLUTORY CONDITION Exception: the tenor of the same or other circumstances, it should appear that the period has been
Article 1190 – no exception, nothing will be left. established in favor of one or the other;

SUSPENSIVE CONDITION – upon the happening of the condition, the OBLIGATION exists Article 1197 – 3 reasons why the court will fix the period:
(―existence of OBLIGATION is affected‖) 1. if the OBLIGATION does not fix a period, but from its nature & circumstances it
can be inferred that a period was intended by the parties;
CLASSIFICATION OF CONDITION: 2. in the duration of the time depends upon the will of the debtor
1. POTESTATIVE – when the fulfillment of the condition depends upon the will of the 3. if the debtor binds himself to pay when his means permit him to do so
party to the OBLIGATION;
2. CAUSAL – depends upon chance 2nd or 3rd person Article 1198 – memorize!
3. MIXED – depends partly upon the will of the party & partly upon chance or a 3rd person
Article 1198. The debtor shall lose every right to make use of the period WHEN:
Article 1182: Potestative – sole will of the debtor (1) after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or
 Potestative suspensive is VOID. security for the debt;
(2) he does not furnish to the creditor the guaranties or securities which he has promised;
Example. A will give 5% commission to B, but it depends on the will of A, void;
(3) by his own acts he has impaired said guaranties or securities after their establishment, and when
 All other potestative conditions, valid. through a fortuitous event they disappear, unless he immediately gives new ones equally
satisfactory;
Article 1183 – impossible condition (4) the debtor violates any undertaking, in consideration of which the creditor agreed to the period;
1. physical impossibility (5) the debtor attempts to abscond.
2. legal impossibility
Article 873 – impossible testamentary conditions Q: How could there be guaranty when debtor is insolvent?
 disregard A: 3rd person (surety)
Ex. Article 727 – donation
Q: when is OBLIGATION due & demandable even if period has expired?
CONDITION PERIOD / TERM A: if debtor has lost right to make use of such period (Article 1198)
1. future & uncertain event 1. future &certain
2. suspensive condition 2.suspensive Illustrations:
period/―demandability‖ 1. As to when the obligation will arise? It will depend on the nature of the obligation. How
3. resolutory condition 3. resolutory period would you know what kind of obligation? It depends on the stipulation of the party, if the
source of obligation is the law then the law may provide how the obligation may be
SUSPENSIVE PERIOD – prior to the period, there is already an OBLIGATION, but it is suspensive complied with. Having said that another important consideration, we should go to the
by the period; nature of the obligation as to prestation whether it is an obligation to give, to do, or not
to do because whatever may be the cause of prestation there will be general rules as to
Article 1164- the OBLIGATION to deliver arises upon the perfection of the contract if subject to how the obligation are to be complied with.
suspensive period & not suspensive condition
2. Specifically xxx a valid obligation, an obligation to give a generic thing what would be the
RESOLUTORY PERIOD – ―terminated‖ but the effects that accrued in the past will remain;
source of this obligation? What contract? Would that be a valid obligation as to the sale of
RESOLUTORY CONDITION – ―extinguishes‖ as if nothing happens; retroactive effect of the car? CAN THERE BE A VALID OBLIGATION ARISING FROM A CONTRACT OF SALE
OBLIGATION; INVOLVING A GENERIC THING? No specific thing has been agreed by a party. When would
there be a valid sale of a car which is a generic car? When a thing, though generic is
EFFECTS OF FORTUITOUS EVENT IN PERIOD / TERM: capable of being determined without a need of a new agreement. Therefore, a car per se
-the contract shall be deemed suspended but the Fortuitous Event shall not stop the running of the as an object of a sale cannot be a valid sale. Therefore, may there be a valid obligation to
term or period agreed upon; deliver a generic thing as generic as a car or a condo unit, if there is such obligation it will
arise from what source? Yes, it may arise from other sources like a legacy, in a will a car is
Amen | Compiled Notes
 given to an heir, maybe a donation involving a car, no particular, the law does not require a good family. If the debtor xxx however, the creditor wanted to hold the debtor liable for
specific thing in order for an obligation to arise. the loss, but the creditor was not able to prove that the debtor failed to exercise due care,
can the debtor be held liable? Yes, if there is another standard of care required, also known
3. Assuming in the will of X a car was given, I hereby give a car to my favorite grandchild A, as utmost diligence. Therefore, if there is no stipulation as to degree of diligence,
now upon the death of X, the executor delivered to A a brand new Toyota Yaris, A refused therefore the degree of diligence is diligence of a good father of a family? Not necessarily,
to accept the car and demanded for a brand new Mitsubishi lancer, who is correct? In an the law may provide for the degree of diligence necessary, like what law, like the law on
obligation to deliver a generic thing and the features of the thing has not been determined, common carrier.
the law provides that the debtor cannot deliver an inferior kind neither the creditor can
demand for a superior thing. The problem in this rule is that how would we know if the 8. A obliged himself to deliver and to transfer ownership to B a female pig, the agreement
thing being offered is just the appropriate thing, what is superior and inferior is very was entered January 1, the delivery was made May 1, however, when the pig was
subjective? The purpose of the testator. What do you think would be the purpose of the delivered to B, he demanded for the delivery of piglets, the piglets was born in February
testator that the grandchild is entitled to a better car? When for instance the purpose of 15, does A have the right over the piglet? It will depend when the time the obligation to
the testator is to give the grandchild a race car. Having said that, therefore the child may deliver arises because the law provides that the creditor has the right to the fruits of the
be entitled to a car better than Yaris? Not necessarily. So what possible circumstances thing from the time the obligation to deliver arises, however, he will only have real rights
would affect the claim? If the estate cannot afford the car, the legitimes might be affected. over the fruits when the same has been delivered. This reasonable because for example A
So what is the solution? May be the executor may deliver a cheaper car like an altis not an owns the pig, if he was aware that in feb 15 the pig is pregnant, therefore he would want
evolution. Again sec. 1246 is very much relevant rule as regards obligation to deliver a to deliver the pig only after 4 months when the pig has already gave birth. Therefore the
generic thing. obligation as to when to deliver will depend on? First as to the answer that the obligation
will become due upon demand in what aspect will demand affect the time the obligation
4. A obliged himself to deliver a brand new Mitsubishi lancer dlx 2008 black, due October 30, will become due? Do you agree that an obligation becomes demandable upon demand?
October 25, the B creditor demanded for the delivery of the car, A did not deliver until As I mentioned earlier, you cannot demand if the obligation is not yet due, therefore
Nov. 1, the car he intended to deliver to B was destroyed probably of earthquake, can A demand has nothing to do with being due, because if it is not yet due you cannot demand
be compelled to deliver the car? Yes the debtor can be compelled to deliver the thing. Is A validly, therefore the effect of demand is what? To suspend the running of the prescriptive
already in default? The demand here is premature; demand should be made when the period. Therefore an obligation becomes due when? It depends on the obligation. What
obligation is already due for a person to incur in delay. Having said that can A be compelled kind of obligation? Whether the obligation is pure, conditional, or with a term. Thus, in
to perform the obligation? Yes because the reason here is the object involved is a generic which obligation or OBLIGATIONS would the obligation be due and demandable at once?
thing and when a generic thing is lost because of fortuitous event, the obligation is not Pure obligation and conditional obligation when the condition is resolutory because upon
extinguished because generic things do not perish. In other words, in OBLIGATIONS to give the happening of the resolutory condition it will extinguish the obligation.
a very important consideration is whether a thing to be delivered is generic or
determinate. 9. When would therefore an obligation be considered a pure obligation? A pure obligation is
considered as such when it does not depend upon a future and uncertain event this is
5. Obligation to deliver a limited generic thing, like one of the horses of A, 5 of the horses of apparently correct, do you agree with this? This is wrong, why wrong? It should be future
A died, what is the effect? It depends on the number of horses that A has, because if A still or uncertain event, why or where lies the difference in or and and? if and it can pertain to
has other horses then there are other horses that may be delivered, the obligation is not only condition and you are not pertaining to term, while if you use or future will pertain to a
extinguished. An obligation to deliver a limited generic thing will only be extinguished if all term, thus, if or is used, both the term and condition is excluded.
of the thing belonging to that group will perish due to fortuitous event.
10. A promissory note is what kind of obligation as to perfection and extinguishment?
6. An obligation to deliver a determinate thing, the principal obligation of the debtor here is? According to the SC in the case of Pay v. Palanca, it appears to be an alternative obligation,
The very thing which he promised to deliver in other words if A the debtor promised to it may be considered as a pure or conditional obligation, because as worded there appears
deliver to B his Toyota Yaris, but instead, he offered to deliver brand new MB sporights to be a condition but it also appears that it is demandable at once. What was the phrase in
car worth 4M, will the obligation be extinguished? It may be extinguished; while the that promissory note which is the basis that the same is with condition? Upon receipt of
creditor may not be compelled to he may accept the delivery of another thing. Now in this the share from the estate of Don Palanca. On the other hand, the phrase UPON DEMAND is
scenario, what is the mode of extinguishment? Novation, more specifically, dacion in the basis why the PN seemed to be a pure obligation. The trial court ruled that the PN was
payment which shall be governed by law on sales. a pure obligation, the judge here asked the plaintiff, under what cause of action have you
filed this case, upon receipt or upon demand? The plaintiff said upon demand, the trial
7. What are the accessory OBLIGATIONS of an obligation to deliver a generic thing? An court here held that the action for compel performance has already prescribed. A
obligation to preserve and to take good care of the thing with the diligence of a father of a PROMISSORY NOTE IS CONSIDERED A PURE OBLIGATION, therefore it is demandable at
Amen | Compiled Notes
 once, the prescriptive period begins to run from the time the cause of action accrued, in expiration of period may the son be compelled to pay? Yes when the son recovers from
this case the period of prescription began to run at the time of execution. cancer or when the son dies of other causes not cancer.

11. BAR EXAM QUESTION: A grandfather promised the grandchild that he will give the GC a 13. A agreed with B, he promised to give his condo unit to B if B will not become a priest in 10
brand new car if he passed the bar examination, thereafter the GC passed the bar exam, years. 2 weeks after the agreement, B entered the seminary; therefore it is already certain
the GC demanded the GF said that his obligation is void because it depends upon a the obligation will not arise? The condition is suspensive; the condition may still be
potestative condition, is the GF correct? In this case, the condition is passing the bar exam, demandable. Because when B entered the seminary it does not necessarily confirm that he
and therefore the answer is the obligation is valid because the condition is not purely will become a priest because he might still get out of the seminary. The condition here is
potestative, the condition does not purely depend on the will of the debtor. The rule that B will not become a priest, this is a negative condition, in a negative condition,
th
relative in this case is if the happening of the condition depends upon the sole will of the ordinarily, and when will it be certain that the condition will not arise? If within the 10
debtor the obligation is void. Having said this, aright 1182, in a conditional obligation year he already becomes a priest. Therefore, in relation to the obligation, if 2 weeks after
when the condition depends solely upon the will of the debtor it is always void correct? the obligation B entered the seminary? Not necessarily.
Not necessarily. When may it be a valid obligation? When the condition is resolutory. What
is the rationale behind this, why would the law consider an obligation void when it 14. The debtor prevented the happening of the condition; he may be compelled to perform
depends on a suspensive condition, the happening of which depends solely on the will of the obligation? Not necessarily, it must be an intention of the debtor. Assuming he
the debtor? Because then the debtor may make sure that the obligation will not happen. voluntarily prevented, does this mean that he is compelled? Not necessarily. When will
What if the debtor said, I will give you my car if I go to Baguio, this is void, but what if he the debtor voluntarily prevent the happening of the condition and the performance of
went to Baguio 2 days after, can he be compelled to deliver his car? The obligation is void; obligation will not arise? When he prevented the happening of the condition as matter of a
a supervening event that makes the obligation valid will not make the void obligation valid. right.
Passing the bar exam is a mixed obligation, CASUAL, in other words passing the bar is not
dependent upon the will of the examinee, why? Because it will also depend upon the SC, or 15. BAR EXAM QUESTION: In 2001 A obliged himself to deliver a house and lot to B upon B’s
it depends upon the examiner. Let’s assume that passing the bar is a potestative condition, passing the bar exam, B passed the bar exam in 2005, however when B passed the bar
therefore the GF was correct that his obligation is void? No, why not? Because in order exam it so happen that A already sold the house and lot to C in 2003, who has the better
that the obligation to be void, the happening of the event must depend solely on the will of right over the house and lot? B the effect of the happening of the condition in a conditional
the debtor, here, the GF will not take the exam, the GC, so the happning of the condition obligation will retroact to the time of the constitution of the agreement as if the condition
does not depend on his own will. has already happened before the property was sold to C, this does not have an exception?
The exception is when C is a buyer in good faith, when would C be a buyer in good faith?
12. If the debtor promised to pay “if his son does not die of cancer within one year” what is when the agreement between A and B is not registered. Assuming that B has a better right,
the status of the obligation? There are two important provisions in relation to effect therefore B demanded for the delivery of the property and he also demanded for the
conditions to OBLIGATIONS are aright 1182 or the provision about impossible obligation. rental, is it a valid claim? this may seem a unilateral obligation, although a good answer is if
When the condition is an impossible condition, it will annul the obligation, however the the obligation of A is unilateral obligation, who is entitled to the fruits if this problem
SC will not use the phrase shall annul because in fact the obligation is void, shall annul pertains to a unilateral obligation, in the first place what transaction may have been
presupposes valid but it shall be annulled, which is wrong in the first place the obligation entered into by A and B in the obligation to give? it may be xxx so who will be entitled? the
is impossible, the obligation will never arise. The more accurate statement is THE donor, why the donor absolutely? No it is very clear from the agreement of the party that
OBLIGATION IS VOID. In this problem what kind of condition is involved? If the son does the fruits will pertain to the creditor from the time of constitution. If this is donation when
not die of cancer within 1 year. This condition is? Suspensive. Passing the bar exam, give will the creditor be entitled to the fruits? Upon the happening of the condition unless it is
me an example when it would be a resolutory condition? I will give continuous support shown that the intention of the debtor is to give to the creditor even the fruits of the
until you pass the bar exam. In the first problem, if his son does not die, what kind of property. However, if the obligation is reciprocal? In the contract of sale, and therefore
condition? Aside from suspensive, it is possible, it is negative, and mixed condition not only what is considered the fruits in relation to the obligation of B, as to A the fruit is the rental,
dependent on the will of the debtor but other factors as well. Having said this, if the in the first place if the obligation is sale what is obligation of B, payment and interest. The
obligation is an impossible condition, therefore the obligation may not be a valid payment and interest are the fruits.
obligation? It may, if the condition is negative impossible condition, because under the law,
the law provides that the negative impossible condition is deemed not written, therefore 16. Before the happening of the condition, what is the implication, did the condition happen
the effect is? The obligation becomes a pure obligation because no condition is attached to or not? Not yet. Before the happening of the condition what if an action was filed by the
the obligation. In this discussion therefore, the happening of the condition does not creditor against the debtor will that action prosper? Yes it may prosper it will depend on
depend solely on the will of the debtor, the condition is also possible, so when will the the action, whether it is xxx even if the right of the creditor is an inchoate right such right is
obligation become due? If the son does not die of cancer after 1 year. Even before the
Amen | Compiled Notes
 already protected. Example of this action: Annotation so that third persons will be bound by D. Alternative OBLIGATIONS  where the debtor must perform any of several prestations,
their agreement. when several objects due, the fulfillment of one is sufficient, generally the debtor chooses which
one.
17. Obligation to deliver a condo unit, before of the happening of the condition, the debtor
had the condo renovated, the condition happened, the creditor demanded for the E. Facultative  where only one thing is due but the debtor has reserved the right to substitute it
delivery of the condo unit, the debtor claimed that he can only be compelled to deliver if with another (Article 1206)
he is reimbursed for the expenses of the renovation, until then he has the right to retain -election here is never granted to creditor
the condo unit, is the contention correct? The debtor has the right to remove those that
Q: In conjunctive, right to choose is always with debtor?
may be removed without damaging the property.
A: NO. No right to choose because all must be performed.
18. A term pertain to an event, correct? Yes. When may a term pertain to an event? When the Q: In Alternative, right to choose can be given to 3rd person?
event is uncertain, like what? Death. But the definite term example? Dec. 25, 2009. Now, is A: YES. (Article 1000) as long as it is not contrary to law, morals, public order, public policy and
it correct to say that just like a conditional obligation, in obligation with a term, depending etc.
whether the term is suspensive or resolutory the obligation will arise or the obligation will
be extinguished? The error in the statement is when it provides that upon the arrival of the Q: In an agreement where there is no stipulation as to who has right to choose?
period the obligation arises because in an obligation with a term there is already an A: It depends. If Alternative, generally debtor chooses; if facultative, only with debtor
obligation, the arrival of the period will result in the demandability of the obligation,
because since this is a term IT IS CERTAIN TO HAPPEN, THE PERIOD WILL ARRIVE BUT THE Q: What if debtor has right to choose and he delays?
TIME OF HAPPENING IS JUST UNCERTAIN. A: right is not lost by mere delay; (before creditor files his action)

19. The kinds of periods discussed in the case of Eleizegui: Legal, voluntary. There will always (b) Alternative OBLIGATIONS
be a period in contract of sale? No. when will there be a period in a contract of sale?
Article 1199. A person alternatively bound by different prestations shall completely perform one of them.
Period as to payment of the price which is known as sale on credit, if it is installment sale on The creditor cannot be compelled to receive part of one & part of the other undertaking.
installment. This is correct because even on lease there is a period. Legal – a period fixed by
law, Example: Period provided by law like in contracts of lease if the parties failed to agree Tolentino: The characteristic of alternative OBLIGATIONS is that, several objects being due, the
as to the period, depends on the manner of payment if annually 1 year and if monthly 30 fulfillment of one is sufficient xxx.
days. Judicial period – Aright 1180 if the obligor will pay if his means permits him to do so.
Article 1200. The right of choice belongs to the debtor, unless it has been expressly granted to the creditor.
20. BAR EXAM QUESTION: A borrowed money from B in Jan 1 payable at the end of the year, The debtor shall have no right to choose those prestations which are impossible, unlawful or which could not have
the same was secured by a real estate mortgage, they agreed that B can occupy the house been the object of the obligation.
and lot during the period agreed upon, however, by June 30 of that year, A offered to pay
Balane:
the entire indebtedness and demanded B vacate the house, can the creditor be compelled
Q: To whom does the right of choice belong?
to accept the payment? Can the creditor be compelled to vacate the house? It depends
A: General rule: To the debtor (Article 1200)
whether the period is solely for the benefit of the debtor or both the debtor or the creditor. Exception: When expressly granted to the creditor (cannot be implied).
If the same is for the benefit of the debtor what is the right? Xxx
* There is a third possibility where the choice may be made by a third person upon agreement of the
parties. (expressed)
(2) OBLIGATIONS according to plurality of objects:
Q: What is the technical term of the act of making a choice in alternative OBLIGATIONS?
A. Simple A: Concentration.
 The right to choose is indivisible  debtor can’t choose part of one prestation and part of
B. Multiple another;
 Here, plaintiff’s action must be in alternative form;
C. Conjunctive  where the debtor must perform more than one prestation
Q: A promised to deliver to B his carabao, dog & goat. What kind of OBLIGATION is this? Article 1201. The choice shall produce no effect except from the time it has been communicated.
A: conjunctive obligation.

Balane:
Amen | Compiled Notes
Requirement of Communication of choice  If the choice belongs to the creditor, of course, he has
to communicate his choice to the debtor. The debtor is not a prophet. g. If all but one are lost through the fault of the debtor & the last one was lost through
fortuitous event, the obligation is extinguished.
No required form  may be ORAL, IN WRITING, TACITLY, OR OTHER UNEQUIVOCAL
MEANS. 2. Choice is the creditor's

Q: If the choice belongs to the debtor, why require communication before performance if the choice Article 1205. When the choice has been expressly given to the creditor, the obligation shall cease to be alternative
belongs to him anyway? from the day when the selection has been communicated to the debtor.
A: To give the creditor an opportunity to consent to the choice or impugn it. (Ong v. Sempio-Dy, 46 Until then the responsibility of the debtor shall be governed by the following rules:
P 592.)
(1) If one of the things is lost through a fortuitous event, he shall perform the obligation by delivering that which
the creditor should choose from among the remainder, or that which remains if only one subsists;
BUT how can the creditor impugn it if the choice belongs to the debtor? The better reason would be (2) If the loss of one of the things occurs through the fault of the debtor, the creditor may claim any of those
to give the creditor a chance to prepare for the performance. subsisting, or the price of that which, through the fault of the former, has disappeared, with a right to damages;

Not CONSENT: Only declaration of choice made, communicated to the other party, unilateral (3) If all the things are lost through the fault of the debtor, the choice by the creditor shall fall upon the price of any
declaration will; one of them, also with indemnity for damages.

The same rules shall be applied to OBLIGATIONS to do or not to do in case one, some or all of the prestations
Articles 1202 to 1205 talk of the loss of some of the prestations before performance.
should become impossible.

1. If the choice is to the debtor's a. If one or some are lost through fortuitous event, the creditor may choose from those remaining.-
Article 1205 (1)
a. When only one prestation is left (whether or not the rest of the prestations have been lost through
fortuitous event or through the fault of the debtor), the debtor may perform the one that is left.-
b. If one or some are lost through the debtor's fault, the creditor has choice from the remainder or
Article 1202.
the value of the things lost plus damages.- Article 1205 (2), supra.
Article 1202. The debtor shall lose the right of choice when among the prestations whereby he is alternatively
bound, only one is practicable. c. If all are lost through the debtor's fault, the choice of the creditor shall fall upon the price of any
of them, with indemnity for damages.-- Article 1205 (3), supra.
b. If the choice is limited through the creditor's own acts, the debtor can ask for resolution plus
damages. d. If some are lost through the creditor's fault, the creditor may choose from the remainder.

Article 1203. If through the creditor's acts the debtor cannot make a choice according to the terms of the e. If all are lost through fortuitous event, the obligation is extinguished.
obligation, the latter may rescind the contract with damages.
f. If all are lost through the creditor's fault, the obligation is extinguished.
c. If everything is lost through the debtor's fault, the latter is liable to indemnify the creditor
for damages. Distinguished from Facultative OBLIGATIONS:

Article 1204. The creditor shall have a right to indemnity for damages when, through the fault of the debtor, all Article 1206. When only one prestation has been agreed upon, but the obligor may render another in substitution,
the things which are alternatively the object of the obligation have been lost, or the compliance of the obligation the obligation is called facultative.
has become impossible.
The indemnity shall be fixed taking as a basis the value of the last thing which disappeared, or that of the service The loss or deterioration of the thing intended as a substitute, through the negligence of the obligor, does not
which last became impossible. render him liable. But once the substitution has been made, the obligor is liable for the loss of the substitute on
Damages other than the value of the last thing or service may also be awarded. account of his delay, negligence or fraud.

d. If some things are lost through the debtor's fault, the debtor can still choose from those Tolentino: Facultative vs. Alternative -
remaining.
Alternative OBLIGATION Facultative OBLIGATION
e. If all are lost through fortuitous event, the obligation is extinguished. As to contents of the there are various prestations all only ONE principal prestation
obligation of which constitute parts of the constitutes the obligation, the
obligation accessory being only a means
f. If all prestations but one are lost through fortuitous event, & the remaining prestation was to facilitate payment.
lost through the debtor's fault, the latter is liable to indemnify the creditor for damages. As to nullity the nullity of one prestation the nullity of the principal
Amen | Compiled Notes
 does not invalidate the prestation invalidates the While ―I promise to pay‖ followed by signatures of 2 or more persons – solidary; individually and
obligation, which is still in obligation & the creditor collectively; individually and jointly.
force with respect to those cannot demand the substitute
which have no vice even when this is valid JOINT character is PRESUMED: WHEN no stipulation as to liability of several debtors,
As to choice the right to choose may be only the debtor can choose the
presumption is joint, and each is liable only for his proportionate part of the OBLIGATION;
given to the creditor substitute prestation.
As to effect of loss only the impossibility of all the impossibility of the
the prestations due without principal prestation is J/FO of court as to several defendants when solidarity has not been specified, the liability of the
fault of the debtor extinguishes sufficient to extinguish the defendants is joint; court cannot amend.
the obligation obligation, even if the
substitute is possible Effects of Joint Liability:
1. The demand by one creditor upon one debtor, produces the effects of default only with
Balane: respect to the creditor who demanded & the debtor on whom the demand was made, but
not with respect to the others;
Facultative OBLIGATIONS always involve choice by the debtor. 2. The interruption of prescription by the judicial demand of one creditor upon a debtor does
 In theory, it is easy to distinguish a facultative obligation from an alternative one. But in not benefit the other creditors nor interrupt the prescription as to other debtors. On the
practice, it is difficult to distinguish the two. You just have to find out what the parties same principle, a partial payment or acknowledgement made by one of several joint
really intended. debtors does not stop the running of the statute of limitations as to the others;
 Only One prestation is DUE and enforceable by the creditor at the time of choice; if the 3. The vices of each obligation arising from the personal defect of a particular debtor or
substitute becomes impossible d/t fault of debtor the OBLIGATION is not affected, thus creditor does not affect the obligation or rights of the others;
no damages; 4. The insolvency of a debtor does not increase the responsibility of his co-debtors, nor does
 If after choosing the substitute and choice is communicated to creditor, the principal it authorize a creditor to demand anything from his co-creditors;
prestation becomes impossible, OBLIGATION is not extinguished but has become a 5. In the joint divisible obligation, the defense of res judicata is not extended from one debtor
simple OBLIGATION that must be performed; and he will be liable for damages in delay, to another. (Manresa)
neglect or bad faith.
Article 1208. If from the law, or the nature or the wording of the OBLIGATIONS to which the preceding article
 If principal OBLIGATION becomes impossible by fault or negligence of creditor, debtor
refers the contrary does not appear, the credit or debt shall be presumed to be divided into as many equal shares as
cannot be compelled to perform the substitute (no more substitute, becomes simple) – there are creditors or debtors, the credits or debts being considered distinct from one another, subject to the Rules
extinguished. of Court governing the multiplicity of suits.

3. AS TO RIGHTS & OBLIGATIONS OF MULTIPLE PARTIES: Disjunctive OBLIGATION: This is not covered by New Civil Code; there are 2 or more creditors
[Joint & Solidary OBLIGATIONS, Articles 1207-1222] and 2 or more debtors but they are named disjunctively as debtors and creditors in the alternative.
*The rules on solidary OBLIGATIONS must apply  because if rules on alternative
a. Joint OBLIGATIONS OBLIGATIONS will be applied then the debtor will generally be given the choice to whom shall he
give payment.
Balane: A joint obligation is one in which each of the debtors is liable only for a proportionate part
of the debt or each creditor is entitled only to a proportionate part of the credit. In joint Example: A binds himself to pay P100 either to X or Y  A or B will pay 100 to X.
OBLIGATIONS, there are as many OBLIGATIONS as there are debtors multiplied by the number
of creditors. b. Indivisible OBLIGATIONS

There are three kinds of joint OBLIGATIONS: Article 1209. If the division is impossible, the right of the creditors may be prejudiced only by their collective
1) Active joint  where the obligation is joint on the creditor's side; acts, & the debt can be enforced only by proceeding against all the debtors. If one of the latter should be insolvent,
2) Passive joint  where the obligation is joint on the debtor's side; & the other shall not be liable for his share.
3) Multiple Joint  where there are multiple parties on each side of a joint obligation.
Article 1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of
itself imply indivisibility.
Tolentino:
The joint obligation has been variously termed mancomunada or mancomunada simple or pro rata;  The OBLIGATION here is joint, even if the performance is indivisible;

In the PROMISSORY NOTE the phrase "We promise to pay," used by 2 or more signers, creates a Joint Indivisible OBLIGATION: There are several debtors or creditors but the prestation is
pro rata liability (JOINT); indivisible  Example: Delivery of a house or a determinate thing;
 Fulfillment requires the concurrence of ALL debtors, although they are each for his part; and on
side of creditors, collective action required for acts which may be prejudicial;
Amen | Compiled Notes
 Consent required, must still communicate choice after consensus.
c.1. Active Solidarity
INDIVISIBILITY SOLIDARITY
Refers to the prestation, Article 1211. Solidarity may exist although the creditors & the debtors may not be bound in the same manner &
Refers to the legal tie or vinculum defining the
which is not capable of by the same periods & conditions.
extent of liability
partial performance
Each cannot demand Article 1207. The concurrence of two or more creditors or of two or more debtors in one & the same obligation
Effects to Joint creditors Each may demand the full prestation
more than his share does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render,
Each is not liable for Each has the duty to comply with entire entire compliance with the prestation. There is solidary liability only when the obligation expressly so states, or
Effects to joint debtors when the law or the nature of the obligation requires solidarity.
more than his share prestation
Balane:
Article 1224. A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the Q: When is an obligation with several parties on either side Joint or Solidary?
debtors does not comply with his undertaking. The debtors who may have been ready to fulfill their promises shall A: The presumption is that an obligation is joint because a joint obligation is less onerous that a
not contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the solidary one.
service in which the obligation consists.
There is solidary obligation in the following::
If there is plurality of creditors to only one debtor, the OBLIGATION can be performed by delivery (1) When the obligation expressly so states – stipulation by parties;
of the object to all the creditors jointly; (2) When a will expressly makes charging or a condition in solidum;
 Delivery to only one creditor makes the debtor liable for damages to the other debtors for (3) When the law requires  crimes, conspiracy, act or one is act of all; in torts – joint
non-performance, unless they have authorized this one creditor to collect in their behalf; tortfeasors
 If only one or some, not all creditors demand fulfillment the debtor may refuse to deliver  The liability of joint tortfeasors, which include all persons who command, instigate, promote,
and insist that all the creditors together receive the thing, if not consignation to the court encourage, advise, countenance, cooperate in, aid or abet the commission of a tort, or who
may be had; approve of it, after it is done, if done for their benefit. (Tolentino)
 In non-performance, debtor is liable for damages  here with respect to damages, the (4) nature of the obligation requires solidarity – Article 19-22, NCC;
prestation becomes divisible, each creditor may recover proportionately.  A moral wrong cannot be divided into parts, thus must be solidary; akin to Quasi
Q: Is an OBLIGATION-not do divisible or not? Delicts/ Quasi Contracts (Articles 2183 & 2187)
A: No (Tolentino)  Liability may arise from the provisions of Articles 19 to 22 of the NCC. If 2 or more persons
A: OBLIGATION-not do when there are several debtors, is a joint indivisible OBLIGATION. acting jointly become liable under these provisions, their liability should be solidary because
of the nature of the obligation. xxx The acts giving rise to liability under these articles have a
c. Solidary OBLIGATIONS common element- they are morally wrong.
 Article 10, RPC; Article 2194, & Article 2157, NCC
Balane: Art. 10. Offenses not subject to the provisions of this Code. — Offenses which are or in the future may be
A solidary obligation is one in which the debtor is liable for the entire obligation or each creditor is punishable under special laws are not subject to the provisions of this Code. This Code shall be
entitled to demand the whole obligation. If there is only one obligation, it is a solidary obligation. supplementary to such laws, unless the latter should specially provide the contrary.

There are three kinds of solidarity: Article 2194. The responsibility of two or more persons who are liable for quasi-delict is solidary.
(1) Active solidarity where there are several creditors with one debtor in a solidary obligation;
(2) Passive solidarity where there is one creditor with several debtors solidary bound; Art. 2157. The responsibility of two or more payees, when there has been payment of what is not due, is
solidary. (n)
(3) Mixed Solidarity where there are several creditors & several debtors in a solidary
obligation.
(5) Imposed by final judgment upon several defendants – must be expressed in the judgement
for the obligation, cannot be amended after finality.
According to Tolentino:
 Solidary OBLIGATIONS may also be referred to as mancomunada solidaria or joint &
Characteristics of Active Solidarity (solidary creditors): (Tolentino)
several or in solidum.
 It has also been held that the terms "juntos o separadamente" in a promissory note creates a ESSENCE  Mutual agency, or mutual representation, which consists in the authority of each
solidary responsibility; creditor to claim & enforce the rights. Of all, with the resulting OBLIGATION to pay each one what
 Where there are no words used to indicate the character of a liability, the phrase "I promise to belongs to him.
pay," followed by the signatures of 2 or more persons, gives rise to an individual or solidary 1. Since it is a reciprocal agency, the death of a solidary creditor does not transmit the
responsibility. solidarity to each of his heirs but to all of them taken together;
 The words "individually & collectively" also create a solidary liability. So does an agreement  (Similar to Article 1005 where brothers & sisters of decedent inherit in their own
to be "individually liable" or "individually & jointly liable." right per capita while nephews & nieces, per stirpes by right of representation.)
Amen | Compiled Notes
 2. Each creditor represents others in the act of requiring payment, & in all other acts which  Example: Is sureties who are solidarily liable without their debtors but binds themselves to
tend to secure the credit or make it more advantageous. Hence, if he receives only a varied conditions distinct from the principal debtors; BUT, the OBLIGATION of surety
partial payment, he must divide it among the other creditors. He can interrupt the period of may not be greater than that of ea principal debtor, nor more burdensome.
prescription or render the debtor in default, for the benefit of all other creditors;
3. A credit once paid is shared equally among the creditors unless a different intention  An OBLIGATION to pay sum of money is not novated in a new instrument wherein the old
appears; is ratified, by changing only the terms of payment and adding other OBLIGATIONS not
4. Debtor may pay any of the creditors but if any demand, judicial or extrajudicial is made on incompatible with the old one. [Inchausti & Co. v. Yulo, 34 Phil 978, 1908]
him, he must pay only to the one demanding payment (Article 1214);
5. One creditor does not represent the others in such acts as novation, compensation & Case Doctrine: The owner of the bus is not jointly and severally liable to the bus driver who was
remission (even if the credit becomes more advantageous). In these cases, even if the criminally charged for a criminal act but instead subsidiarily liable thereto.
debtor is released, the other creditors can still enforce their rights against the creditor who
Case: Rolito Calang and Philtranco Service Enterprises, Inc. vs. People, August 3, 2010.
made the novation, compensation or remission;
Facts: At around 2:00 p.m. of April 22, 1989, Rolito Calang was driving Philtranco Bus No. 7001, owned by
6. Each creditor may renounce his right even against the will of the debtor, & the latter need Philtranco along Daang Maharlika Highway in Barangay Lambao, Sta. Margarita, Samar when its rear left side
not thereafter pay the obligation to the former. hit the front left portion of a Sarao jeep coming from the opposite direction. As a result of the collision,
Cresencio Pinohermoso, the jeep’s driver, lost control of the vehicle, and bumped and killed Jose Mabansag, a
Characteristics of Passive Solidarity (solidary debtors) bystander who was standing along the highway’s shoulder. The jeep turned turtle three (3) times before finally
stopping at about 25 meters from the point of impact. Two of the jeep’s passengers, Armando Nablo and an
ESSENCE  each debtor can be made to answer for the others, with resulting right to the debtor- unidentified woman, were instantly killed, while the other passengers sustained serious physical injuries.
payor to recover from others their respective shares, akin to mutual guaranty (Manresa): The prosecution charged Calang with multiple homicide, multiple serious physical injuries and damage to
property thru reckless imprudence before the Regional Trial Court (RTC), Branch 31, Calbayog City.
1. Each debtor may be required to pay the entire obligation but after payment, he can recover
The RTC ordered Calang and Philtranco, jointly and severally, to pay P50,000.00 as death indemnity to the
from the co-debtors their respective shares (this is something similar to subrogation); heirs of Armando; P50,000.00 as death indemnity to the heirs of Mabansag; and P90,083.93 as actual damages
2. Interruption of prescription as to one debtor affects all the others; but the renunciation by to the private complainants.
one debtor of prescription already had does not prejudice the others, because the The petitioners appealed the RTC decision to the Court of Appeals (CA), docketed as CA-G.R. CR No. 25522.
extinguishment of the obligation by prescription extinguishes also the mutual The CA, in its decision dated November 20, 2009, affirmed the RTC decision in toto. The CA ruled that
representation among the solidary debtors. petitioner Calang failed to exercise due care and precaution in driving the Philtranco bus. According to the CA,
3. The debtor who is required to pay may set up by way of compensation his own claim various eyewitnesses testified that the bus was traveling fast and encroached into the opposite lane when it
against the creditor, in this case, the effect is the same as that of payment; evaded a pushcart that was on the side of the road. In addition, he failed to slacken his speed, despite admitting
that he had already seen the jeep coming from the opposite direction when it was still half a kilometer away.
4. The total remission of the debt in favor of a debtor releases all the debtors; but when this
The CA further ruled that Calang demonstrated a reckless attitude when he drove the bus, despite knowing that
remission affects only the share of one debtor, the other debtors are still liable for the it was suffering from loose compression, hence, not roadworthy.
balance of the obligation. The CA added that the RTC correctly held Philtranco jointly and severally liable with petitioner Calang, for
5. All the debtors are liable for the loss of the thing due, even if such loss is caused by the failing to prove that it had exercised the diligence of a good father of the family to prevent the accident.
fault of only one of them, or by fortuitous event after one of the debtors has incurred in Issue: Whether or not Calang and Philtranco will be correctly held jointly and solidarily liable to the victims of
delay; the collision.
6. The interests due by reason of the delay of one of the debtors are borne by all of them. Held: NO. We, however, hold that the RTC and the CA both erred in holding Philtranco jointly and severally
liable with Calang. We emphasize that Calang was charged criminally before the RTC. Undisputedly,
Philtranco was not a direct party in this case. Since the cause of action against Calang was based on delict,
Legal Bonds in solidarity may be uniform or varied:
both the RTC and the CA erred in holding Philtranco jointly and severally liable with Calang, based on quasi-
delict under Articles 21761 and 21802 of the Civil Code. Articles 2176 and 2180 of the Civil Code pertain to
Uniform  when debtors are bound by same conditions and clauses; the vicarious liability of an employer for quasi-delicts that an employee has committed. Such provision of law
Varied  where obligors, although liable for the same prestation, are nevertheless not subject to does not apply to civil liability arising from delict.
same terms and conditions; before fulfillment of such condition or arrival of such term, an If at all, Philtranco’s liability may only be subsidiary. Article 102 of the Revised Penal Code states the
action may be brought against such debtor or any other solidary debtor for recovery of the subsidiary civil liabilities of innkeepers, tavernkeepers and proprietors of establishments, as follows:
entire OBLIGATION, minus the portion corresponding to the debtor affected by the varied In default of the persons criminally liable, innkeepers, tavernkeepers, and any other persons or corporations
condition or term; upon happening however, this portion may be claimed by creditor from shall be civilly liable for crimes committed in their establishments, in all cases where a violation of municipal
ordinances or some general or special police regulations shall have been committed by them or their
any of the debtors.
employees.
 When one of solidary debtors is bound by varied terms and conditions, for instance a Innkeepers are also subsidiary liable for the restitution of goods taken by robbery or theft within their houses
suspensive condition or a suspensive period, creditors may still demand for fulfillment of from guests lodging therein, or for the payment of the value thereof, provided that such guests shall have
the whole prestation prior to the happening of the condition or arrival of the term, minus notified in advance the innkeeper himself, or the person representing him, of the deposit of such goods within
the share of this debtor bound by varied condition/term. This latter portion may be the inn; and shall furthermore have followed the directions which such innkeeper or his representative may
demanded from anyone of the debtors soon as the term arrives or condition happens. have given them with respect to the care of and vigilance over such goods. No liability shall attach in case of
robbery with violence against or intimidation of persons unless committed by the innkeeper’s employees.

Amen | Compiled Notes

The foregoing subsidiary liability applies to employers, according to Article 103 of the Revised Penal Code, The obligation in the case at bar being described as "individually and jointly", the same is therefore
which reads: enforceable against one of the numerous obligors.
The subsidiary liability established in the next preceding article shall also apply to employers, teachers,
persons, and corporations engaged in any kind of industry for felonies committed by their servants, pupils, CASE DOCTRINE: The direct liability of the insurer under indemnity contracts against
workmen, apprentices, or employees in the discharge of their duties.
The provisions of the Revised Penal Code on subsidiary liability – Articles 102 and 103 – are deemed written
Third Party Liability does not mean that the insurer can be held solidarily liable with the
into the judgments in cases to which they are applicable. Thus, in the dispositive portion of its decision, the insured &/ or the other parties found at fault.
trial court need not expressly pronounce the subsidiary liability of the employer. Nonetheless, before the
employers’ subsidiary liability is enforced, adequate evidence must exist establishing that (1) they are indeed MALAYAN INSURANCE V. CA [165 SCRA 536]
the employers of the convicted employees; (2) they are engaged in some kind of industry; (3) the crime was Facts: Malayan Insurance on March 29, 1967 issued in favor of Sio Choy, a Private Car Comprehensive
committed by the employees in the discharge of their duties; and (4) the execution against the latter has not Policy effective from April 18, 1967 to April 18, 1968 covering a Willys jeep. The insurance coverage for
been satisfied due to insolvency. The determination of these conditions may be done in the same criminal third-party liability was P20,000. During the effectivity of the said policy, the insured jeep while being driven
action in which the employee’s liability, criminal and civil, has been pronounced, in a hearing set for that by one Juan Campollo, an employee of San Leon Rice Mill, collided with a passenger bus owned by
precise purpose, with due notice to the employer, as part of the proceedings for the execution of the judgment. Pangasinan Transportation Co. (Pantranco) causing damage to the insured vehicle and injuries to the driver and
Martin Vallejos who was riding in an ill-fated jeep. Vallejos sued for damages against Sio Choy, Malayan
CASE: An agreement to be ―individually liable‖ or ―individually and jointly‖ liable denotes a solidary Insurance and Pantranco. However the trial court only ordered Sio Choy, Malayan and San Leon to pay
obligation, not a joint liability. Vallejos a total of P29,103 (jointly and severally liable) but Malayan will be liable only up to P20,000, the
RONQUILLO V. CA [132 S 274, Sept. 28, 1983] consideration in the policy. CA affirmed the judgment of the trial court that Sio Choy, the San Leon Rice Mill,
FACTS: In a collection case, parties entered into a compromise agreement wherein the plaintiff Antonio So areed Inc. and the Malayan Insurance Co., Inc. are jointly and severally liable for the damages awarded to the
to reduce its total claim of P117, 498.95 to only P110,000 and defendants Ernesto Ronquillo, Offshore Catertrade plaintiff Martin C. Vallejos. It ruled, however, that the San Leon Rice Mill, Inc. has no obligation to indemnify
Inc., Johnny Tan and Pilar Tan agreed to acknowledge the validity of such claim and further bind themselves to or reimburse the petitioner insurance company for whatever amount it has been ordered to pay on its policy,
initially pay out of the total indebtedness, the amount of P55,000 on or before December 24, 1979, the balance of since the San Leon Rice Mill, Inc. is not a privy to the contract of insurance between Sio Choy and the
P55,000, defendants, individually and jointly agree to pay within a period of 6 months from January 30, 1980. insurance company.
However, defendants failed to pay the initial sum on December 24, 1979. Ronquillo asked that his ¼ share of P13, Issue: Whether or not Malayan Insurance is solidarily liable with Sio Choy and San Leon Rice Mill to
750 be accepted as payment. But So nevertheless asked for the execution of the decision in its entirety against all Vallejos.
defendants, jointly and severally. Ronquillo opposed it by saying that it was not expressly declared that it was Held: NO. We hold instead that it is only respondents Sio Choy and San Leon Rice Mill, Inc, (to the exclusion
solidary. The trial court ruled that liability was solidary. of the petitioner) that are solidarily liable to respondent Vallejos for the damages awarded to Vallejos.
ISSUE: Whether the nature of liability as termed ―jointly and severally‖ of the defendants means being solidary; It must be observed that respondent Sio Choy is made liable to said plaintiff as owner of the ill-fated Willys
hence the full payment can be demanded by anyone of the defendant and thereby correctly rejecting the tender of jeep, pursuant to Article 2184 of the Civil Code which provides:
payment of Ronquillo of his ¼ share only. Art. 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver, if the former, who was in the
HELD: YES. vehicle, could have, by the use of due diligence, prevented the misfortune it is disputably presumed that a
In this regard, Article 1207 and 1208 of the Civil Code provides — driver was negligent, if he had been found guilty of reckless driving or violating traffic regulations at least
Art. 1207. The concurrence of two or more debtors in one and the same obligation does not imply that twice within the next preceding two months.
each one of the former has a right to demand, or that each one of the latter is bound to render, entire If the owner was not in the motor vehicle, the provisions of article 2180 are applicable.
compliance with the prestation. Then is a solidary liability only when the obligation expressly so states, On the other hand, it is noted that the basis of liability of respondent San Leon Rice Mill, Inc. to plaintiff
or when the law or the nature of the obligation requires solidarity. Vallejos, the former being the employer of the driver of the Willys jeep at the time of the motor vehicle mishap,
Art. 1208. If from the law, or the nature or the wording of the obligation to which the preceding article is Article 2180 of the Civil Code which reads:
refers the contrary does not appear, the credit or debt shall be presumed to be divided into as many Art. 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but
equal shares as there are creditors and debtors, the credits or debts being considered distinct from one also for those of persons for whom one is responsible.
another, subject to the Rules of Court governing the multiplicity of quits. xxx xxx xxx
The decision of the lower court based on the parties' compromise agreement, provides: Employers shall be liable for the damages caused by their employees and household helpers acting within the
1. Plaintiff agrees to reduce its total claim of P117,498.95 to only P110,000.00 and defendants agree to scope of their assigned tasks, even though the former are not engaged ill any business or industry.
acknowledge the validity of such claim and further bind themselves to initially pay out of the total indebtedness xxx xxx xxx
of P110,000.00, the amount of P5,000.00 on or before December 24, 1979, the balance of P55,000.00, The responsibility treated in this article shall cease when the persons herein mentioned proved that they
defendants individually and jointly agree to pay within a period of six months from January 1980 or before observed all the diligence of a good father of a family to prevent damage.
June 30, 1980. (Emphasis supply) It thus appears that respondents Sio Choy and San Leon Rice Mill, Inc. are the principal tortfeasors who are
Clearly then, by the express term of the compromise agreement and the decision based upon it, the defendants primarily liable to respondent Vallejos. The law states that the responsibility of two or more persons who are
obligated themselves to pay their obligation "individually and jointly". liable for a quasi-delict is solidarily.
The term "individually" has the same meaning as "collectively", "separately", "distinctively", respectively On the other hand, the basis of petitioner's liability is its insurance contract with respondent Sio Choy. If
or "severally". An agreement to be "individually liable" undoubtedly creates a several obligation, and a petitioner is adjudged to pay respondent Vallejos in the amount of not more than P20,000.00, this is on account
"several obligation is one by which one individual binds himself to perform the whole obligation. of its being the insurer of respondent Sio Choy under the third party liability clause included in the private car
In the case of Parot vs. Gemora, We therein ruled that "the phrase juntos or separadamente or in the comprehensive policy existing between petitioner and respondent Sio Choy at the time of the complained
promissory note is an express statement making each of the persons who signed it individually liable for the vehicular accident.
payment of the fun amount of the obligation contained therein." Likewise in Un Pak Leung vs. Negorra, We While it is true that where the insurance contract provides for indemnity against liability to third persons, such
held that "in the absence of a finding of facts that the defendants made themselves individually hable for the third persons can directly sue the insurer, however, the direct liability of the insurer under indemnity contracts
debt incurred they are each liable only for one-half of said amount against third party liability does not mean that the insurer can be held solidarily liable with the insured and/or

Amen | Compiled Notes

the other parties found at fault. The liability of the insurer is based on contract; that of the insured is based on He who made the payment may claim from his co-debtors only the share which
tort. corresponds to each, with the interest for the payment already made. If the payment is
In the case at bar, petitioner as insurer of Sio Choy, is liable to respondent Vallejos, but it cannot, as made before the debt is due, no interest for the intervening period may be demanded.
incorrectly held by the trial court, be made "solidarily" liable with the two principal tortfeasors namely xxx xxx xxx
respondents Sio Choy and San Leon Rice Mill, Inc. For if petitioner-insurer were solidarily liable with said In accordance with Article 1217, petitioner, upon payment to respondent Vallejos and thereby becoming the
two (2) respondents by reason of the indemnity contract against third party liability-under which an insurer can subrogee of solidary debtor Sio Choy, is entitled to reimbursement from respondent San Leon Rice Mill, Inc.
be directly sued by a third party — this will result in a violation of the principles underlying solidary To recapitulate then: We hold that only respondents Sio Choy and San Leon Rice Mill, Inc. are solidarily liable
obligation and insurance contracts. to the respondent Martin C. Vallejos for the amount of P29,103.00. Vallejos may enforce the entire obligation
In solidary obligation, the creditor may enforce the entire obligation against one of the solidary debtors. On on only one of said solidary debtors. If Sio Choy as solidary debtor is made to pay for the entire obligation
the other hand, insurance is defined as "a contract whereby one undertakes for a consideration to indemnify (P29,103.00) and petitioner, as insurer of Sio Choy, is compelled to pay P20,000.00 of said entire obligation,
another against loss, damage, or liability arising from an unknown or contingent event." petitioner would be entitled, as subrogee of Sio Choy as against San Leon Rice Mills, Inc., to be reimbursed by
In the case at bar, the trial court held petitioner together with respondents Sio Choy and San Leon Rice Mills the latter in the amount of P14,551.50 (which is 1/2 of P29,103.00 )
Inc. solidarily liable to respondent Vallejos for a total amount of P29,103.00, with the qualification that
petitioner's liability is only up to P20,000.00. In the context of a solidary obligation, petitioner may be Article 1212. Each one of the solidary creditors may do whatever may be useful to the others, but not anything
compelled by respondent Vallejos to pay the entire obligation of P29,013.00, notwithstanding the qualification which may be prejudicial to the latter.
made by the trial court. But, how can petitioner be obliged to pay the entire obligation when the amount
stated in its insurance policy with respondent Sio Choy for indemnity against third party liability is only Acts beneficial: each solidary debtor may,
P20,000.00? Moreover, the qualification made in the decision of the trial court to the effect that petitioner is
sentenced to pay up to P20,000.00 only when the obligation to pay P29,103.00 is made solidary, is an evident
 interrupt prescription,
breach of the concept of a solidary obligation. Thus, we hold that the trial court, as upheld by the Court of  constitute a debtor in default,
Appeals, erred in holding petitioner, solidarily liable with respondents Sio Choy and San Leon Rice Mill, Inc.  bring suit so that OBLIGATION may produce interest
to respondent Vallejos.
Acts prejudicial: Solidary creditor cannot do anything prejudicial to the others, like remission,
Discussion on Reimbursement in solidary liability. novation, compensation, merger or confusion  but such provision in Article 1212 conflicts with
As to the second issue, the Court of Appeals, in affirming the decision of the trial court, ruled that petitioner is
Article 1215;
not entitled to be reimbursed by respondent San Leon Rice Mill, Inc. on the ground that said respondent is not
privy to the contract of insurance existing between petitioner and respondent Sio Choy. We disagree. Tolentino: What will be done then? Harmonize Articles 1212 & 1215 by  such acts of
The appellate court overlooked the principle of subrogation in insurance contracts. Thus — extinguishment, which is prejudicial to co-creditors, will be valid so as to extinguish the claim
... Subrogation is a normal incident of indemnity insurance (Aetna L. Ins. Co. vs. Moses, against the debtors, but not with respect to the rights of co-creditors which subsists and may be
287 U.S. 530, 77 L. ed. 477). Upon payment of the loss, the insurer is entitled to be enforced against such creditor who performed the act alone.
subrogated pro tanto to any right of action which the insured may have against the third
person whose negligence or wrongful act caused the loss (44 Am. Jur. 2nd 745, citing Balane:
Standard Marine Ins. Co. vs. Scottish Metropolitan Assurance Co., 283 U.S. 284, 75 L. There is an apparent conflict between Article 1212 & 1215.
ed. 1037).
Article 1212 states that the agency extends only to things which will benefit all co-creditors. But not
The right of subrogation is of the highest equity. The loss in the first instance is that of
the insured but after reimbursement or compensation, it becomes the loss of the insurer anything which is prejudicial to the latter. In Article 1215, he can do an acts prejudicial to the other
(44 Am. Jur. 2d, 746, note 16, citing Newcomb vs. Cincinnati Ins. Co., 22 Ohio St. 382). creditors, like remission for instance.
Although many policies including policies in the standard form, now provide for
subrogation, and thus determine the rights of the insurer in this respect, the equitable Article 1213. A solidary creditor cannot assign his rights without the consent of the others.
right of subrogation as the legal effect of payment inures to the insurer without any
formal assignment or any express stipulation to that effect in the policy" (44 Am. Jur. Article 1214. The debtor may pay any one of the solidary creditors; but if any demand, judicial or extrajudicial,
2nd 746). Stated otherwise, when the insurance company pays for the loss, such has been made by one of them, payment should be made to him.
payment operates as an equitable assignment to the insurer of the property and all
remedies which the insured may have for the recovery thereof. That right is not Tolentino: This is in line with the concept of Mutual agency which is the essence of active
dependent upon , nor does it grow out of any privity of contract (emphasis supplied) or solidarity, implies mutual confidence, thus one creditor cannot assign/transfer his rights to another
upon written assignment of claim, and payment to the insured makes the insurer without consent of the others.
assignee in equity (Shambley v. Jobe-Blackley Plumbing and Heating Co., 264 N.C.
456, 142 SE 2d 18). 9
Effects of Unauthorized Transfer: No effect, no rights transferred; assignee does not become
It follows, therefore, that petitioner, upon paying respondent Vallejos the amount of riot exceeding P20,000.00,
shall become the subrogee of the insured, the respondent Sio Choy; as such, it is subrogated to whatever rights solidary creditor, co-creditors and debtor/s not bound by such transfer;
the latter has against respondent San Leon Rice Mill, Inc. Article 1217 of the Civil Code gives to a solidary  Payment made by this assignee will not extinguish OBLIGATION; suit filed by him may
debtor who has paid the entire obligation the right to be reimbursed by his co-debtors for the share which not interrupt the rights.
corresponds to each.  EXCEPT, if the assignee is also one of the co-creditors, because mutual confidence is
Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If incumbent.
two or more solidary debtors offer to pay, the creditor may choose which offer to accept.

Amen | Compiled Notes

Justice JBL REYES: Article 1213 places unjustifiable and unnecessary burden on the rights of
solidary creditors upon his own share. The article should have read as: Article 1219. The remission made by the creditor of the share which affects one of the solidary debtors does not
 A solidary creditor who assigns his rights without the consent of his co-creditors shall release the latter from his responsibility towards the co-debtors, in case the debt had been totally paid by anyone of
them before the remission was effected.
answer subsidiarily for any prejudice caused by the assignee in connection with d credit
assigned. Article 1915. If two or more persons have appointed an agent for a common transaction or undertaking, they shall
 Liability was compared to agent & principal. be solidarily liable to the agent for all the consequences of the agency.

Balane: Tolentino:
General Rule  A debtor may pay any of the solidary creditors. Novation  A solidary debtor binds himself alone, assumes the debt, releases the other debtors. But
Exception  If demand is made by one creditor upon the debtor, in which case the latter must pay this debtor cannot bind himself to a new debt without the consent of others.
the demanding creditor only. -If creditor makes the novation without the debtor and does not secure consent of other debtors, the
latter is released. The new contract binds only the debtor who secured the novation.
Tolentino: -Mere extension of time given by creditor to a solidary debtor does not release others from the
Judicial Demand  when such is made by one of solidary creditors, tacit mutual representation is OBLIGATION  no novation here.
deemed revoked. Dation in payment by one debtor extinguishes as in payment if made immediately, otherwise if
 Defendant-debtor should pay to the plaintiff-creditor to effect extinguishment; payment to promised only, this is a novation.
any of other creditors who did not sue would be deemed payment to a 3rd person.
 Plaintiff-creditor merely consolidates in himself the representation of all the others, but the When merger & compensation, there is total extinguishment of the OBLIGATIONS; only
essence of solidarity of creditors should not be nullified; reimbursements remain; if partial, then application of payments should govern;

Extra-judicial Demand  same as above; demand by several creditors separately, debtor should A surety who is bound in solidum will be released by any material alteration in the principal contract
pay the one who notified him 1st ; if they demand at d same time, or collectively, debtor may choose made without knowledge & consent of surety, e.g. extension of time, unless surety’s liability is
to whom to pay. varied, as in installment payments.

Other Instances: When 1 creditor makes a remission, the extent of that particular OBLIGATION is extinguish, this
Debtor upon whom demand was made pays to a creditor other than the one who made the creditor is liable to co-creditors for their shares.
demand in violation of Article 1214  This is considered payment to a third person (Article
1241, par. 2) & the debtor can still be made to pay the debt. The only concession given to the When remission favors only one debtor, in full share, this debtor is released fr solidary
debtor is that he is allowed to deduct the share of the receiving creditor from the total amount OBLIGATION, if partial, he retains the solidary OBLIGATION & becomes a surety of the whole
due even if he paid the entire amount due to that creditor. OBLIGATION;

Creditor A makes demand on debtor Y  Does it mean that he cannot pay the share pertaining to Factors to consider in effects of acts under Article 1215:
creditor B? 1. the relation between Creditors and that of debtors;
A: According to commentators he can. But this is dangerous because there may already be an 2. the relation among co-debtors themselves.
agreement on the part of the creditors.
Baviera:
-Tolentino warns that to make the debtors pay for the whole amount to the demanding creditor  Principals are always liable solidarily;
even if partial payment has already been made to another creditor might amount to unjust  Agents are not liable solidarily unless expressly stipulated (res inter alios acta)
enrichment. This rule/restriction has already been scrapped in some modern civil codes
allowing freedom of choice to the debtor even after demand. b. Passive Solidarity

Q: There are three creditors A, B & C & there are three debtors X, Y & Z. A makes a demand on Article 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simul-
Y. X pays B. taneously. The demand made against one of them shall not be an obstacle to those which may subsequently be
A: This is not covered by Article 1214. directed against the others, so long as the debt has not been fully collected.

Article 1215. Novation, compensation, confusion or remission of the debt, made by any of the solidary creditors Q: If a judgment made in an action brought by a solidary creditor against a solidary debtor will it be
or with any of the solidary debtors, shall extinguish the obligation, without prejudice to the provisions of article res judicata against the co-debtors?
1219. A: A favorable judgment that inures to the benefit of the co-creditors will be res judicata as to the
latter;
The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to the
others for the share in the obligation corresponding to them.
Amen | Compiled Notes
An adverse judgment would have the same effect if the action of the plaintiff-creditor is not founded compliance with such procedure a condition precedent before an ordinary action against the
on a cause personal to him, but actually consolidates in him all the rights as well of his co-creditors. surviving solidary debtors, should the creditor choose to demand payment from the latter, could be
(Tolentino)  similarly translated as to co-debtors; entertained to the extent that failure to observe the same would deprive the court jurisdiction to
take cognizance of the action against the surviving debtors. Upon the other hand, the Civil Code
 Since in solidarity, there is unity of legal tie, notwithstanding plurality of subjects; expressly allows the creditor to proceed against any one of the solidary debtors or some or all of
 A judgment that declares the OBLIGATION does not exist extinguished the them simultaneously. There is, therefore, nothing improper in the creditor's filing of an action
OBLIGATION the defendant-debtor, and such decision inures to the benefit of co-debtors, against the surviving solidary debtors alone, instead of instituting a proceeding for the settlement
unless the cause is personal to the def-debtor. of the estate of the deceased debtor wherein his claim could be filed.

PASSIVE SURETY Similarly, in PNB vs. Asuncion, 80 SCRA 321 at 323-324, this Court, speaking thru Mr. Justice Makasiar,
SOLIDARITY reiterated the doctrine.
Solidary debtors solidary guaranty A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing therein
Extent of Liability whole OBLIGATION only to the extent of contract stipulations/as prevents a creditor from proceeding against the surviving solidary debtors. Said provision merely
expressed sets up the procedure in enforcing collection in case a creditor chooses to pursue his claim against
Liability Primary Subsidiary the estate of the deceased solidary, debtor.
Effects of Extension of solidary OBLIGATION releases the surety It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this matter.
time granted by creditor remains Said provision gives the creditor the right to 'proceed against anyone of the solidary debtors or
some or all of them simultaneously.' The choice is undoubtedly left to the solidary, creditor to
determine against whom he will enforce collection. In case of the death of one of the solidary
CASE: If one of the alleged solidary debtor dies during the pendency of the collection case, the debtors, he (the creditor) may, if he so chooses, proceed against the surviving solidary debtors
court where said case is pending retains jurisdiction to continue hearing the charge as against the without necessity of filing a claim in the estate of the deceased debtors. It is not mandatory for him
surviving defendants. (1216) to have the case dismissed against the surviving debtors and file its claim in the estate of the
deceased solidary debtor . . .
PNB V. INDEPENDENT PLANTERS [122 SCRA 113] As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of Court were applied
literally, Article 1216 of the New Civil Code would, in effect, be repealed since under the Rules of
Facts: Appeal by the Philippine National Bank (PNB) from the Order of the defunct Court of First Instance of
Court, petitioner has no choice but to proceed against the estate of Manuel Barredo only.
Manila (Branch XX) in its Civil Case No. 46741 dismissing PNB's complaint against several solidary debtors
Obviously, this provision diminishes the Bank's right under the New Civil, Code to proceed against
for the collection of a sum of money on the ground that one of the defendants (Ceferino Valencia) died during
any one, some or all of the solidary debtors. Such a construction is not sanctioned by the principle,
the pendency of the case (i.e., after the plaintiff had presented its evidence) and therefore the complaint, being
which is too well settled to require citation, that a substantive law cannot be amended by a
a money claim based on contract, should be prosecuted in the testate or intestate proceeding for the settlement
procedural rule. Otherwise stared, Section 6, Rule 86 of the Revised Rules of Court cannot be made
of the estate of the deceased defendant pursuant to Section 6 of Rule 86 of the Rules of Court which reads:
to prevail over Article 1216 of the New Civil Code, the former being merely procedural, while the
SEC. 6. Solidary obligation of decedent.— the obligation of the decedent is solidary with another debtor, the
latter, substantive.
claim shall be filed against the decedent as if he were the only debtor, without prejudice to the right of the
WHEREFORE the appealed order of dismissal of the court a quo in its Civil Case No. 46741 is hereby set
estate to recover contribution from the other debtor. In a joint obligation of the decedent, the claim shall be
aside in respect of the surviving defendants; and the case is remanded to the corresponding Regional Trial
confined to the portion belonging to him.
Court for proceedings.
The appellant assails the order of dismissal, invoking its right of recourse against one, some or all of its
solidary debtors under Article 1216 of the Civil Code —
ART. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them Tolentino: Passive Solidarity vs. Suretyship
simultaneously. The demand made against one of them shall not be an obstacle to those which may Similarity:
subsequently be directed against the others, so long as the debt has not been fully collected. (1) both stands for some other person;
Issue: Whether in an action for collection of a sum of money based on contract against all the solidary debtors, (2) both may require reimbursement
the death of one of the defendants deprives the court of jurisdiction to proceed with the case against the  If surety binds itself in solidum, creditor may go against anyone of them.
surviving defendants.
Held: It is now settled that the quoted Article 1216 grants the creditor the substantive right to seek satisfaction
Distinctions Passive Solidarity Suretyship
of his credit from one, some or all of his solidary debtors, as he deems fit or convenient for the protection of
Solidary debtor is liable liable only as to his own OBLIGATION
his interests; and if, after instituting a collection suit based on contract against some or all of them and, during
for his own
its pendency, one of the defendants dies, the court retains jurisdiction to continue the proceedings and decide
OBLIGATION & that
the case in respect of the surviving defendants.
of his co-debtors’
Thus in Manila Surety & Fidelity Co., Inc. vs. Villarama et al., 107 Phil. 891 at 897, this Court ruled: Primary liability Subsidiary liability
Construing Section 698 of the Code of Civil Procedure from whence the aforequoted provision Extension of Time does not release a releases a solidary guarantor or surety
(Sec. 6, Rule 86) was taken, this Court held that where two persons are bound in solidum for the given by creditor solidary debtor (extinguishment)
same debt and one of them dies, the whole indebtedness can be proved against the estate of the (novation)
latter, the decedent's liability being absolute and primary; and if the claim is not presented within
the time provided by the rules, the same will be barred as against the estate. It is evident from the Article 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary
foregoing that Section 6 of Rule 87 (now Rule 86) provides the procedure should the creditor desire debtors offer to pay, the creditor may choose which offer to accept.
to go against the deceased debtor, but there is certainly nothing in the said provision making
Amen | Compiled Notes
He who made the payment may claim from his co-debtors only the share which corresponds to each, with the A: Yes (Manresa and Tolentino), gratuitous acts should be construed restrictively as to permit the least
interest for the payment already made. If the payment is made before the debt is due, no interest for the transmission of rights (Article1378). Thus, if W paid 9,000 and X and Z were suppose to reimburse him 3000
intervening period may be demanded. each, Y could be compelled to contribute 1000 as to the insolvency of X.

When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the Article 1220. The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him
obligation, such share shall be borne by all his co-debtors, in proportion to the debt of each. to reimbursement from his co-debtors.

Article 1218. Payment by a solidary debtor shall not entitle him to reimbursement from his co-debtors if such Article 1221. If the thing has been lost or if the prestation has become impossible without the fault of the solidary
payment is made after the obligation has prescribed or become illegal. debtors, the obligation shall be extinguished.

Article 1219. The remission made by the creditor of the share which affects one of the solidary debtors does not If there was fault on the part of any one of them, all shall be responsible to the creditor, for the price & the
release the latter from his responsibility towards the co-debtors, in case the debt has been totally paid by anyone of payment of damages & interest, without prejudice to their action against the guilty or negligent debtor.
them before the remission was effected.
If through a fortuitous event, the thing is lost or the performance has become impossible after one of the solidary
Tolentino: Payment by one solidary debtor in whole – extinguishes the OBLIGATION and releases debtors has incurred in delay through the judicial or extrajudicial demand upon him by the creditor, the provisions
the credit  gives rise to a new OBLIGATION for reimbursement by the other debtors to this one of the preceding paragraph shall apply.
debtor who paid (JOINT OBLIGATION); plaintiff creditor may be properly substituted by the debtor
Article 1895. If solidarity has been agreed upon, each of the agents is responsible for the non-fulfillment of the
who paid; agency, & for the fault or negligence of his fellow agents, except in the latter case when the fellow agents acted
beyond the scope of their authority.
EXCEPT: If payment was made after the OBLIGATION prescribed or become illegal (mistake or
not). (Article 1218) Article 1222. A solidary debtor may, in actions filed by the creditor, avail himself of all defenses which are
 After the OBLIGATION has prescribed or becomes illegal, it is no longer due & derived from the nature of the obligation & of those which are personal to him, or pertain to his own share. With
demandable. None of the solidary debtors can be compelled by the creditors to pay. respect to those which personally belong to the others, he may avail himself thereof only as regards that part of the
debt for which the latter are responsible.
 Thus, if one debtor pays, he cannot reimburse from his co-debtors because his action will
not revive the inexistent OBLIGATION;
Effects of Article 1221 is limited to non-performance because of loss of the thing or impossibility of
 Generally, neither could he recover from the creditor to whom he paid (Article 1424);
prestation that is due  if such is anchored with a fortuitous event, without fault or delay on any
except perhaps under solutio indebiti.
debtor, then OBLIGATION is extinguished; no debtor is liable.
 If debtor is at fault on the loss/impossibility; Or if in delay even before the
Balane:
loss/impossibility  the OBLIGATION is converted to indemnification (of the price,
Effect of Remission.
damages & interests).
Problem: Solidary debtors W, X, Y & Z are indebted to A for P12,000. A remits the share of Y
(P3,000).  If guilty debtor is made to pay by demand of creditor, he cannot recover from his co-
debtors (if there was loss/imp), he will shoulder the whole amount of the loss thing +
Q: Can Y be sued? indemnity;
A: Yes, for the P9,000 (P12,000 less P3,000 share of Y) his share was remitted but not the solidary  If another co-debtor pays the whole amount he could recover fr his co-debtors;
OBLIGATION.  In case of non-performance without loss of the thing/has not become impossible: but
Q: Supposing X is insolvent? there is delay, fraud, fault or negligence, or some other breach of OBLIGATION, creditor
A: Y can still be made to contribute. Remission will benefit Y only in so far as his share is may also recover damages; here, if guilty debtor pays, he will not shoulder the whole
concerned. His liability in case of insolvency of one co-creditor is not affected. amount, his co-debtors will pay him their equivalent share in the original OBLIGATION.
Guilty debtor shoulders the amount of damages though.
Q: Can A demand the P9,000 from Y? Balane:
A: Yes. But he can recover the same from W, X & Z. Three Defenses of Solidary Debtor:
1. Those derived from the nature of the obligation is a total defense;
Q: If W paid the whole debt before A remits Y’s share, may W still demand reimbursement of Y’s e.g., prescription, illegality of obligation (illicit object); vitiated consent; unenforceability
share? under the Statute of Frauds; non-happening of condition; arrival of resolutory period;
A: Yes, Article 1219, Y will not be released from his solidary OBLIGATION. Upon W’s full extinguished OBLIGATION d/t payment, remission;
payment the entire OBLIGATION was extinguished, there’s nothing more to remit in Y’s favor. 2. Those defenses personal to the debtor-defendant;
e.g., insanity  If it involves vitiation of consent, total defense. If it involves a special term
Q: After A remits share of Y, W pays in full the remaining 12,000. X then becomes insolvent. May Y be or a condition, a partial defense.
compelled to contribute to the share of X? 3. Those defenses personal to other co-debtors;
e.g., defense as to the share corresponding to other debtors is a partial defense, i.e.
suspensive condition or period as to the OBLIGATION of one co-debtor.
Amen | Compiled Notes
 not contribute to the indemnity beyond the corresponding portion of the piece of the thing or of the value of the
4. AS TO PERFORMANCE OF PRESTATION service in which the obligation consists.

Article 1225. For the purposes of the preceding articles, OBLIGATIONS to give definite things & those which
a. Divisible OBLIGATIONS
are not susceptible of partial performance shall be deemed to be indivisible.
Article 1223. The divisibility or indivisibility of the things that are the object of OBLIGATIONS in which there is When the obligation has for its object the execution of a certain number of days of work, the accomplishment of
only one debtor & only one creditor does not alter or modify the provisions of Chapter 2 of this Title (Nature & work by metrical units, or analogous things which by their nature are susceptible of partial performance, it shall be
Effect of OBLIGATIONS). divisible.

Balane: However, even though the object or service may be physically divisible, an obligation is indivisible if so provided
 This kind of OBLIGATIONS has something to do with the performance of the prestation, by law or intended by the parties.
& not to the thing.
 The thing may be divisible but the OBLIGATION may still be indivisible, e.g. In OBLIGATIONS not to do, divisibility or indivisibility shall be determined by the character of the prestation in
OBLIGATION to deliver 100 sacks of jasmine rice found in Warehouse of specific each particular case.
address on a fixed date (determinate OBLIGATION);
 Or thing is indivisible but performance is divisible, i.e. stage-by-stage construction of a TOLENTINO: To enforce a Joint Indivisible OBLIGATION, Article 1209 has established the
public road where obligor may deliver every 15% of work done and collect its necessity of COLLECTIVE FULFILLMENT and the action must be against all the debtors.
proportionate cost from government agency concerned, performance bonds here may also  In case of non-performance by any of the debtors, the OBLIGATION is converted into
be termed as such. liability for losses & damages = DIVISIBLE.
 THUS, if one debtor is insolvent, or fails to pay his share, the other debtors will no
Divisible obligation is one susceptible of partial performance. longer be liable for his share. The entire liability for all damages is shouldered by the
An indivisible obligation is one that must be performed in one act. defaulting debtor.

Test of Divisibility: Whether or not it is susceptible of partial performance. Solidarity vs. Indivisibility

Solidarity Indivisibility
General rule: Obligation is indivisible which means that it has to be performed in one act
Refers to vinculum, and principally to refers to the prestation or the object of the
singly. the subjects of OBLIGATION OBLIGATION
Why? Because the law provides so: Unless there is an express stipulation to that effect, the creditor Requires plurality of subjects plurality not required
cannot be compelled partially to receive the prestations in which the obligation consists. Neither Solidarity remains even in case of when OBLIGATION is converted to liability for
may the debtor be required to make partial payments. xxx (Article 1248, par. 1.) breach of one, they all remain liable damages, the indivisibility ceases to exist, each debtor
for indemnity becomes liable for his part of indemnity
Tolentino: Death of debtor terminates solidarity indivisibility affects the heirs of a decedent debtor, they
 When division would diminish the value of the whole remain to be bound to perform the same prestation
 QUALITATIVE, when the thing is not really homogeneous, i.e. inheritance;
 QUANTITATIVE, when the thing divided is homogeneous and may be separated into Factors to Determine Whether OBLIGATION is Divisible or not
parts if movable, or limits may be set if immovable; 1. will or intention of the parties, which may be expressed or presumed;
 IDEAL, when parts are not separated materially, but assigned to several persons, as in 2. objective or purpose of stipulated prestation;
pro-indiviso co-owners; 3. nature of the thing;
Three Exceptions to the Rule on Indivisibility: 4. provisions of law affecting the prestation
1. When the parties so provide. (Article 1248, par. 1.)  In OBLIGATIONS to give, indivisibility is presumed; except:
2. When the nature of the obligation necessarily entails performance in parts. 1. when work is agreed to be by units of time or measure;
3. Where the law provides otherwise. 2. or otherwise susceptible of partial performance = divisible

Divisibility of Obligation distinguished from divisibility of object:  In indivisible OBLIGATION, partial performance is equal to non-performance. Thus, partial
 Divisibility of obligation or prestation does not necessarily mean a divisible obligation. payment based on quantum meruit is not availed. (Articles 1233 and 1248 forbids partial
 Divisibility of object is not the same as divisibility of obligation. fulfillment) “Work half done is worst than work undone!”
Exceptions:
 But the reverse is not the same. Indivisibility of object means an indivisible obligation.
(1) OBLIGATION has been substantially performed in good faith  debtor may recover as
Article 1224. A joint indivisible obligation gives rise to indemnity for damages from the time anyone of the
if there had been complete performance, minus the damages suffered by creditor;
debtors does not comply with his undertaking. The debtors who may have been ready to fulfill their promises shall (2) Creditor accepts, despite partial performance, with knowledge of incompleteness,
without protest  OBLIGATION is deemed fully performed.
Amen | Compiled Notes
 ENTIRE contract SEVERABLE contract Article 1613. In the case of the preceding article, the vendee may demand of all the vendors or co-heirs that they
Consideration single apportioned (expressly/implied) come to an agreement upon the repurchase of the whole thing sold; and should they fail to do so, the vendee
Prestation/s several, distinct, separate items cannot be compelled to consent to a partial redemption.
When a part is illegal whole contract partly enforceable
unenforceable Article 1248. Unless there is an express stipulation to that effect, the creditor cannot be compelled partially to
One void undertaking void contract if not illegal, then valid covenants may be receive the prestations in which the obligation consists. Neither may the debtor be required to make partial
enforced payments.
Viz. Statute of Frauds must be in writing if separate chattels may be sold below
However, when the debt is in part liquidated & in part unliquidated, the creditor may demand & the debtor may
limits set by Statute of Frauds, even when
effect the payment of the former without waiting for the liquidation of the latter.
the sum total exceeds, contract not affected
Article 1583. Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by installments.
b. Indivisible OBLIGATIONS
Where there is a contract of sale of goods to be delivered by stated installments, which are to be separately paid
Article 1209. If the division is impossible, the right of the creditors may be prejudiced only by their collective for, & the seller makes defective deliveries in respect of one or more installments, or the buyer neglects or refuses
acts, & the debt can be enforced only by proceeding against all the debtors. If one of the latter should be insolvent, without just cause to take delivery of or pay for one or more installments, it depends in each case on the terms of
the others shall not be liable for his share. the contract & the circumstances of the case, whether the breach of contract is so material as to justify the injured
party in refusing to proceed further & suing for damages for breach of the entire contract, or whether the breach is
Article 1210. The indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of severable, giving rise to a claim for compensation but not to a right to treat the whole contract as broken.
itself imply indivisibility.
(3) Express agreement
Examples of Indivisible OBLIGATIONS:
Article 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver the
(1) By virtue of its object thing produced to the employer & transfer dominion over the thing. This contract shall be governed by the
following articles as well as by the pertinent provisions on warranty of title & against hidden defects & the
Article 618. Easements are indivisible. If the servient estate is divided between two or more persons, the payment of price in a contract of sale.
easement is not modified, & each of them must bear it on the part which corresponds to him.
If it is the dominant estate that is divided between two or more persons, each of them may use the easement in its Illustrations:
entirety, without changing the place of its use, or making it more burdensome in any other way. 1. Obligations involving different parties; in other words, in a problem involving two or more debtors
and or two or more creditors. Usual scenario: There are two or more debtors but only one creditor
(2) Express provision of law but lately there would be scenarios 2 or more creditors even only one debtor (consider this
possibility) The usual question: how much can one of the debtor compelled to pay if this is an
Article 2089. A pledge or mortgage is indivisible, even though the debt may be divided among the successors in obligation to pay a sum of money? Or how much can a creditor validly demand from the debtors?
interest of the debtor or of the creditor. Clearly the question pertains to whether it is joint or solidary because if this is joint each debtor
can only be compelled to pay his share and each creditor entitled to demand also as to his share.
Therefore, the debtor's heir who has paid a part of the debt cannot ask for the proportionate extinguishment of the Basis: There are as many debts as there are debtors and as many credits as there are creditors.
pledge or mortgage as long as the debt is not completely satisfied. That is why in an example if there are 3 debtors and 2 creditors, in a joint obligation, there are how
many debts? Other authors say, 3 debts, this is WRONG because this three debtors, each of them
Neither can the creditor's heir who received his share of the debt return the pledge or cancel the mortgage, to the would have two debtors. These debts are separate and distinct from each other. In other words, we
prejudice of the other heirs who have not been paid. would divide the entire obligation into three debtors, as each debtor has two creditors. Effectively
there are six debts.
From these provisions, it is expected the case in which, there being several things given in mortgage or pledge, 2. Ex. (BAR EXAM QUESTION) Foreign medical students rented an apartment unit from Thelma. In
each one of them guarantees only a determinate portion of the credit. the contract it was stipulated that the students would be responsible for the payment involving the
bills in utilities. Now after one semester, three of the students went back home to their country. And
The debtor, in this case, shall have a right to the extinguishment of the pledge or mortgage as the portion of the only one was left and in fact, this foreign student transferred to another apartment unit that is
debt for which each thing is specially answerable is satisfied. smaller in size. But the lessor Thelma actually discovered that there is an unpaid telephone bill in
the amount of P80,000.00. So Thelma demanded payment of the entire 80k from the foreign student
Article 2090. The indivisibility of a pledge or mortgage is not affected by the fact that the debtors are not who was left in the country. The student said that I can only be compelled to pay 1/4 of the 80k.
solidarily liable. Who is correct? The foreign student is correct. Common reason that is wrong: That there is no
stipulation that the obligation is solidary so therefore it is joint. This is wrong argument; inaccurate.
Article 1612. If several persons, jointly & in the same contract, should sell an undivided immovable with a right Wrong because the implication of the answer is solidarity would only arise if it is so stipulated.
of repurchase, none of them may exercise this right for more than his respective share. This is wrong, because under 1207 there are three exceptional circumstances when an
obligation would be considered solidary:
The same rule shall apply if the person who sold an immovable alone has left several heirs, in which case each of a. If so stipulated.
the latter may only redeem the part which he may have acquired. b. The law on the matter requires solidarity.
Amen | Compiled Notes
 c. Because the nature of the obligation requires solidarity. What if one of the debtors became insolvent, will that result to an increase in liability of the other
3. That’s why if you are confronted with a problem whether an obligation is joint or solidary, do not debtors? Will that prejudice other debtors? Answer: again, it will depend on whether the
just base it on the stipulations. It may not be stipulated but the law may provide for such. But obligation is joint or solidary.
the more fundamental matter is that I have to emphasize, just because the problem pertains to a a. If it is a solidary obligation, e.g. A, B, C debtors and C became insolvent. How much
contract of lease doesn’t mean that the answer could be found at the provisions of lease. Bear in can A be held liable if the debt is 100k? If C became insolvent, how much will A be
mind that the general principles in obligations-contracts are applicable to these contracts. Thus, the liable? B will be liable for the entire amount because the obligation is solidary. This is
correct answer is the student is correct because the obligation is a Joint Obligation. Because not a proper answer because you just repeated the facts. The question there is, why
there was no stipulation for solidarity, the law on the matter does not require solidarity and the would A be held liable for the whole 100k if one of them is insolvent? Reason here is,
third, the nature of the obligation does not require solidarity. Common wrong: because the law this debtor can still be compelled to pay despite one of the debtors is insolvent because
presumes that the obligation is joint. First, the law did not so provide, you didn’t see any word in solidary obligations the share of the insolvent will have to be shouldered by the other
―presume‖ in relation to that. If there is really a presumption, it is not a conclusive presumption. Do debtors who are not insolvent, because “each one of them” as the law says which is
not stop and claim that it is presumed. Read the facts in relation with the applicability of laws. wrong, because it should be “any one of them” may be held liable for the entire
4. Example: the problem pertains to succession and after the death of X, the heirs found out that in amount. So A may still be held liable despite the insolvency of one of the debtors.
the will a certain car was given to grandchild A. But B and C took possession of the car after the b. If the obligation is joint, if one of them is insolvent would that result in the increase of
death of X and they took the car out for a joy ride. So while driving, the driver, B cause the total liability of the others? NEVER. Because a very important principle in joint obligations,
destruction of the car. C on the other hand was only a passenger. B died while C got injured. Can C these debts are separate and distinct from each other. That’s why even if one of the
be held liable for the incident? Probably with damages? Answer: YES. Even if it was not C’s fault. debtors is insolvent it will not affect/ prejudice the other debtors. On the other hand, if
Because the nature of the obligation requires solidarity this is base on an express provision of one of the debt was condoned, can there be partial condonation? YES. Can there be even
the law – Article 927. Under this provision, if two or more heirs take possession of a property partial condonation even in solidary obligation? YES. The word ―condone‖ does not
which is given to another heir and it was lost or destroyed because of one of them, they will be mean the obligation is extinguished. In joint, if one of the debts of the debtor was
held solidarily liable. condoned, would that benefit the other debtors? No, again their debts are separate and
5. Before going into the law, how will you know if the party so stipulated that it is solidary? what if distinct from each other. If the creditor demanded from A and condoned the share of B.
the word ―solidary‖ was not use, does it mean that it is not solidary? No. ―jointly and collectively‖- A cannot invoke the condonation in favour of B to benefit him.
Ronquillo vs CA ; ―jointly and severally‖- used in banking section; ―in solidum‖; ―individually c. In a solidary obligation, if the creditor condoned one of the share of the debtors, can the
and jointly‖; ―distinctively‖; ―separately‖; ―collectively‖. condonation benefit the other debtors? In a way, because the other debtor can only be
6. Ex. I promise to pay X followed by two or more signatures of the debtors, this is considered to be compelled to pay less than the share of the debtor whose share was condoned. In other
solidary. ―WE‖ – does not connote that it is JOINT, it may be solidary. Should read the whole words, if A, B, and C = 300k. A’s share was condoned. But this is a solidary obligation,
contract or PN, maybe it is in the end that there is a stipulation that it is solidary. how much can B be compelled to pay? Only 200k because he can raise the
7. Article 2194 – joint tortfeasors. Two or more persons liable under quasi-delict will be held condonation of A as a partial defense. If C was insolvent, it doesn’t matter, it is still
solidarily liable. 200k because it is a solidary obligation, the share of C will have to be shouldered by
8. Ex. In agency, if you will be asked as to who will be liable. Do not just say agent and principal. It is the other debtors who are not insolvent that is why B can still be compelled to pay
not all the time that the agent and principal are solidarily liable. But you should complete the 50k. Why? B can still be compelled or be held liable as he is still not exempt from his
scenario, like: If the agents acted in excess of his authority and the principal contributed in obligation to his co-debtors.
making the person believe that the agent had full power, the principal and the agent would be 12. Distribution of share in insolvency: proportion to the share of the debtors.
held solidarily liable this is under 1911. But also expressly provided two or more principals, in 13. I forgot to mention the nature of obligation in solidary: nature, insofar as SC had ruled in this case
relation to a transaction involving an agent they are held solidarily liable by law. xxx: that the obligations of two or more employers under the worker’s compensation act on the
9. In relation to partners, ordinarily for partners obligations arising from contracts, JOINT only. premise that there are two or more employers. Their obligation to the employee is solidary, not
Unlike in code of commerce or commercial transactions, it is SOLIDARY. Ex: if the obligation because it is stipulated in the contract, not because the law the workers compensation act provides,
arising from quasi-delict, maybe one of the partners was in the performance of his obligations, but the court said but because of the NATURE of the obligation, it is solidary.
another suffered damage because of the wrongful act by his partner. The law provides under Article 14. But in this one last scenario, in Gutierrez vs. Gutierrez, 3 persons were held liable, 1. father of the
1824 in relation to Article 1822, that the partners will be held solidarily liable among themselves minor driver, 2. driver of the passenger truck/bus and 3. the owner of the passenger truck. If you
and with the partnership. Ex: in the course of the partnership, one of the partners misappropriated remember, the driver of the truck and the owner were held liable under contract of carriage. The
the sum of money received from a client for the partnership. Under the law, all the partners are father was held liable, because the minor was negligent, and the one injured is a passenger of the
held solidarily liable among themselves and with the partnership. bus, the father can be held in vicarious case and be held liable under quasi-delict, nonetheless the
10. Even in Solutio Indebiti – if two or more persons received a thing which they don’t have the right to three of them were held SOLIDARILY liable, was there a stipulation? NO. Is there a law? NO. If I
demand and which was delivered to them by mistake, they can be held solidarily liable. As you have to support this ruling, it may only be supported on this ground: by the nature of the obligation
read the provisions of the law, bear in mind that some of this provisions, two or more persons requires solidarity. Not a good ruling but because of the nature, it can now be considered as a good
may be held solidarily liable. Ex. In the Family Code, are there provisions where the spouses will one.
be held solidarily liable? YES. As to those obligations where conjugal properties will be charged 15. MALAYAN INSURANCE vs. CA – similar facts in the sense that, 3 persons were held liable, 1.
with expenses. Owner of the jeepney who was not even present when the accident happened, 2. Insurance
11. So what if the obligation, aside from their particular rights and obligations as to their shares, take company, 3. Ricemill owner. The rice mill owner was correctly held liable because it was his driver
note again if the obligation is 150k there 3 creditors, in a joint obligation, each one is entitled to who caused the injury through his negligence, vicarious liability. Malayan is really liable in
50k if there is no designation as to respective shares. This claim is very wrong: The share is equal insurance contract, because the jeepney was insured. The owner of the jeepney was held liable but
because it is joint. As if the debtors will always share equally because it is joint or the creditors will he was not held liable in the SC. As owner of the jeepney he can only be held liable only if he was
receive equally because it is joint. Not true. Rather in Article 1208, if there is no designation as to present there during the mishap and if he didn’t exercise due diligence where by the exercise of due
the respective shares, they will share equally. That’s why even if it is joint, they can talk about it diligence he could have prevented the mishap. He also cannot be held liable because he is not the
and have an agreement as to the shares each of them will receive it may be differently or the same. employer of the driver. Malayan said they cannot be held solidarily liable because the other two is
Amen | Compiled Notes
 under quasi-delict and their liability is under contract. xxxx If we apply this ruling, in Gutierrez, refuses to accept does it mean that he can be considered in delay in relation to 100k? As a rule, NO.
although there’s a substantial distinction as they are held liable under different causes. That’s why A creditor cannot be compelled to accept a partial performance. As a rule, partial
I can accept a ruling in regular mishaps even if they are held under different causes of action they performance is none performance. He cannot be compelled to accept therefore he cannot be
may validly held solidarily liable on the ground that the nature of the obligation requires considered in delay. Debtor will be the one who will be in delay. But of course there are exceptions
solidarity. to this rule: INSTALLMENT. Why would the creditor accept the partial payment? Because it has
16. Into the rights and obligations: favorite in the bar. been agreed by both the creditor and the debtor. In other words, such obligation is called a
a. In relation to this: Defenses: We have already discussed the insolvency as a defense. DIVISIBLE OBLIGATION.
INSOLVENCY whether it is in a joint obligation or in solidary obligation, in joint, the 20. Are there obligations which are in a way are divisible even they are not stipulated b y the parties?
insolvency of one cannot be invoke by the others because their obligation is distinct YES. As provided by law these are obligations that requires the performance for a number of
and individual. In solidary, it also cannot be invoked because it will be shouldered by days or in metric units. On the other hand, are there obligations which by their nature are
the other debtors. Personal defense of MINORITY: if one of the debtors was a minor indivisible? Not even the parties would stipulate for solidarity? The law would also tell us YES. A
at the time the contract was entered into. This is an obligation arising from a contract. Is good example would be an obligation to deliver a definite thing. Obligation to deliver a horse. It
minority a defense? If it is a defense, who can invoke such? If he can invoke the cannot be that the obligation is divisible. By its very nature it is indivisible. Example, if A, B and C
defense, is it a total or partial defense? As to the minor himself, it is always a defense, it obliged themselves to deliver to X a specific horse, the value of the horse is 90k. However before
doesn’t matter if the obligation is joint or solidary, it is always a TOTAL defense. the obligation became due, the horse died due to the fault of A. if X creditor, filed an action against
Contract is voidable. If the minor wants the contract to be annulled, he must return C. May the action prosper? Decide the case. First, there are those who would say that the action
whatever he has received from the other party- Mutual restitution. He wants to annul would not prosper because not all the debtors were impleaded in this case. This is wrong. First, if
then he must return what he has received. If the one invoking minority is not the minor the question is ―may‖ the action prosper, you should first see who is the aggrieved party or the
himself, can he invoke? It DEPENDS. If it is JOINT, cannot invoke because it is injured party. It doesn’t mean that X is the plaintiff he is the injured party. But if he is really the
separate and distinct. If it is Solidary, YES but is it a total or partial defense? Only injured party and this is clear under the law, he has a remedy or remedies available to him. Next
PARTIAL. Example: 5 debtors – one of them is a minor. 50k – debt. Creditor question would be: what was the remedy invoked? If the remedy invoked is wrong then the case
demanded payment to the other creditors like to B, how much can B be compelled to would be dismissed. In the problem, that would have been correct that the all debtors should have
pay despite one of them is a minor? Only 40k because he can only invoke minority as to been impleaded only if the action is for specific performance. But under the circumstances, if you
the share of the minor. are the lawyer, would you file an action for specific performance? NO. Because the horse already
b. There can be a defense: Total Defense in any kind of obligation that you can invoke in died. If you are the creditor’s lawyer, you would advice your client to ask for an amount of money
whether joint or solidary and can be invoked by anyone. That defense goes into the which is equivalent to the value of the horse. Will the action prosper against C? To answer the
NATURE OF THE OBLIGATION. E.g. if an action was filed against one of the question, you should know the nature of the problem. The problem here pertains to joint
debtors, but the action was dismissed but thereafter the creditor filed another action indivisible obligation (JIO). Why joint? Because there is no stipulation, law on the matter does not
against another debtor, is it possible that the action will not prosper, that it will be require solidarity, and the nature of the obligation does not require solidarity. It is also indivisible
dismissed? YES. If the ground for the dismissal of the first action is because the because it involved the delivery of a determinate thing, a definite thing. Knowing that this is JIO,
contract is void, then yes cause there’s no obligation to speak of. and cannot be fulfilled due to the fault of one of the debtors, law says this obligation would be
17. PNB CASE: During the pendency of the action for the recovery of sum of money, one of the converted into a monetary obligation with each debtor only be held liable to each of his share
debtors died may this action still be prosecuted despite the death of one of the debtors? The effect and only the debtor at fault be the only one liable for damages. In other words, how much can C
of this rather would the debt of one of the debtors result in the court losing jurisdiction of the case? be held liable in the problem? Only 30k. But if this is a Solidary Indivisible Obligation? How
Others claim in this case that the claim should be filed with the estate of the deceased, is that much will C be held liable? 90k plus damages. But of course C can seek reimbursement to B for
correct? Regardless if joint or solidary, xxx if joint, one of the debtors died, the share would be null 30k only. But only to A can C seek reimbursement for the damages as A is the one who was at
and void only with regard to the share of the debtor who died but as to the other joint debtors they fault.
would still be held liable because it is a separate and distinct obligation. But if this is a solidary 21. Maybe for midterms: In a problem, A obliged himself, promise to pay X or Y. when the obligation
obligation, one of them died, would that result in the court losing jurisdiction over the case? No, was already due, X demanded the payment from A but thereafter Y also demanded payment from
because in solidary obligation, the creditor can demand to any of the debtors for the fulfilment of A. A then paid Y instead of X even though X demanded first. May X have a cause of action against
the obligation. The trial court can continue with the proceeding of this case. A? Does A still have a liability to X? First, start with what kind of obligation is involved. This is
18. But a very good case is the CALANG CASE: Negligent act of the driver. The driver and the owner neither joint nor solidary because of the word ―OR‖ had this been ―and‖ then maybe it can be a
were held liable. Can they be held solidarily liable? Yes, they can be held solidarily liable if the joint or solidary obligation. Second, conjunctive or alternative, this is also wrong because there is
source of the obligation is quasi-delict. In quasi-delict xxxx liability of the employer is also a only one prestation involve, in those kinds of obligations, there should be two or more prestations
direct and primary liability. And persons held liable under quasi-delict can be held solidarily liable. involved. In other words, what kind of obligation is involved here? DISJUNCTIVE
In this case, this is a criminal complaint filed against the driver because he injured and killed OBLIGATION. The problem with this, in this scenario, there is no express provision or article
someone and he was convicted. And in the conviction there is a civil liability. If someone died as a which would provide us with this rule in relation to this problem as to whether X would still have a
result of a crime or quasi-delict, Article 2206 there’s a so-called indemnity and there is also what cause of action against A. But the answer to the question would be if the intention of the parties is
you call actual damage. Even without proof, the minimum that should be given is P25,000.00 clear as to who has the right to choose to whom payment should be made. If A has the right to
by way of temperate damages. In addition to indemnity. BUT in this case, by way of damages choose, does it matter if X demanded the payment first, no it doesn’t matter. If X and Y has the
the driver and Philtranco was held solidarily liable. BUT the SC said this is wrong, these two right to choose and it was clear that X has the right to receive or recover the amount, A should
persons cannot be held solidarily liable. Why? Because in death, the liability involved is only a have paid X instead of Y so X would still have a cause of action against A. So the problem here
subsidiary liability. In other words, the employer cannot be held liable until the properties of the would be: That the intentions of the parties were not clear as to whom payment should be made.
convict have been exhausted. Solidary is direct, that you do not need to exhaust the properties of Then who has the right to choose, since no express provision we have to apply other provisions by
another. That is why it can never be solidary. I think this is a good ruling. analogy. Tolentino would want us to apply rules in SOLIDARY obligations. So would X have a
OTHER KINDS OF OBLIGATIONS cause of action against A? YES, because is solidary obligations, if there are two or more creditors,
19. An obligation to pay 1M, can the debtor compel the creditor to accept a 100k? What if the creditor the debtor should pay the creditor who has first made the demand. Atty Uribe cannot agree with
Amen | Compiled Notes
 Tolentino. Why? Because the three exceptional rules are not present in the case. Rather I would Facts: In May 1962 Robes-Francisco Realty & Development Corporation, now petitioner, agreed to sell to
support the answer that we should apply the rules on Alternative Obligations. There is a semblance private respondent Lolita Millan for and in consideration of the sum of P3,864.00, payable in installments, a
as there is an alternative subjects. If in alternative obligations, would X still have a cause of action parcel of land containing an area of approximately 276 square meters, situated in Barrio Camarin, Caloocan
against A? No more because in alternative, the law provides that the debtor has the right to choose City, known as Lot No. 20, Block No. 11 of its Franville Subdivision. 2
unless otherwise expressly granted to the creditor. Millan complied with her obligation under the contract and paid the installments stipulated therein, the final
payment having been made on December 22, 1971. The vendee made a total payment of P5,193.63 including
5. AS TO THE PRESENCE OF AN ACCESSORY UNDERTAKING IN CASE OF BREACH interests and expenses for registration of title. 3
Thereafter, Lolita Millan made repeated demands upon the corporation for the execution of the final deed of
sale and the issuance to her of the transfer certificate of title over the lot. On March 2, 1973, the parties
a. OBLIGATIONS with a Penal Clause
executed a deed of absolute sale of the aforementioned parcel of land. The deed of absolute sale contained,
among others, this particular provision:
Article 1226. In OBLIGATIONS with a penal clause, the penalty shall substitute the indemnity for damages & That the VENDOR further warrants that the transfer certificate of title of the above-described
the payment of interests in case of non-compliance, if there is no stipulation to the contrary. Nevertheless, parcel of land shall be transferred in the name of the VENDEE within the period of six (6) months
damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the from the date of full payment and in case the VENDOR fails to issue said transfer certificate of title,
obligation. it shall bear the obligation to refund to the VENDEE the total amount already paid for, plus an
interest at the rate of 4% per annum. (record on appeal, p. 9)
The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. Notwithstanding the lapse of the above-mentioned stipulated period of six (6) months, the corporation failed to
cause the issuance of the corresponding transfer certificate of title over the lot sold to Millan, hence, the latter
Balane: Articles 1226 to 1230 on obligation with a penal clause is the same as liquidated damages filed on August 14, 1974 a complaint for specific performance and damages against Robes-Francisco Realty &
found in Articles 2226 to 2228 by authority of Lambert v. Fox, 26 Phil. 588. Development Corporation.
Issue: Whether or not the petitioner is correct in invoking Article 1226 of the Civil Code which provides that
(Tolentino) Penal Clause- A penal clause is an accessory undertaking to assume greater liability in in obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of
case of breach. The purpose is to strengthen the coercive force of the obligation. When a penal interests in case of noncompliance, if there is no stipulation to the contrary.
Held: NO. We would agree with petitioner if the clause in question were to be considered as a penal clause.
clause is present, damages do not have to be proved.
Nevertheless, for very obvious reasons, said clause does not convey any penalty, for even without it, pursuant
to Article 2209 of the Civil Code, the vendee would be entitled to recover the amount paid by her with legal
Thus, DUAL FUNCTION OF PENAL CLAUSE: rate of interest which is even more than the 4% provided for in the clause.
(1) To provide for liquidated damages It is therefore inconceivable that the afore-cited provision in the deed of sale is a penal clause which will
(2) To strengthen the coercive force of the OBLIGATION by threat of greater responsibility in preclude an award of damages to the vendee Millan. In fact the clause is so worded as to work to the advantage
case of breach. of petitioner corporation.

Characteristics of Penal Clause: CASE DOCTRINES: The theory that penal and liquidated damages are the same cannot be
1. Subsidiary (also called alternative)  upon non-performance, only the penalty may be sustained where obligor is guilty of fraud in fulfillment of OBLIGATION;
demanded.  The penalty clause does not partake of the nature of liquidated damages.
 Party to a contract which was breached by the other, may be given the right to recover
Exception: Where penalty is joint (cumulative), where both the principal undertaking & penalty actual damages instead of stipulated liquidated damages.
may be demanded under Article 1227, second sentence: "xxx unless this right has been clearly  A creditor, in case of fraud by the obligor is entitled to stipulated penalty plus the
granted him." difference between the proven damages & such stipulated penalty.
PAMINTUAN V. CA [94 SCRA 556]
Notice the word clearly (not explicitly) which means that the right can be clearly granted by FACTS: This is a case for Recovery of compensatory damages for breach of contract of sale in addition to
implication. liquidated damages.
In 1960, MARIANO C. PAMINTUAN, with his barter license, was authorized to export to Japan 1000 metric
2. Exclusive  penal clause is for reparation. It takes the place of damages. tons of white flint corn valued at USD 47K, in exchange for collateral importation of plastic sheetings of equal
value. As such he entered into contract with TOKYO MENKA KAISHA, LTD. of OSAKA, JAPAN. He also
entered into a contract TO SELL the plastic sheetings to YU PING KUN, CO., INC. for Php 265K, thus the latter
Exception: When it is for punishment  in which case both penalty & damages may be demanded,
undertook to open an irrevocable domestic letter of credit in favor of Pamintuan.
namely--
 If there is a stipulation that both penalty & damages are recoverable in case of breach It was further agreed that Pamintuan would deliver the plastic sheetings to bodegas of Yu Ping in Manila and
 If the obligor refuses to pay the penalty suburbs ―within one month upon arrival of carrying vessels‖; & that upon breach, aggrieved party may collect
 If the obligor is guilty of fraud in the fulfillment of his obligation. liquidated damages of Php 10K.

Balane: The SC considered the 4% interest as not a penal clause because it does not strengthen Pamintuan made incomplete deliveries, and then asked the President of the Co. for cash payment and adjustments
in price, which the company agreed to. When Pamintuan refused to complete his deliveries, he invoked that the
the coercive force of the obligation. contract was novated and Co. failed to comply thereto.
ROBES-FRANCISCO V. CFI [86 SCRA 59]
Amen | Compiled Notes
Co. filed for damages against Pamintuan. The lower court awarded actual damages, liquidated damages as FACTS: Faustino Espiritu purchased from Bachrach Motor in JULY 1925 a two-ton White truck on installment
stipulated, and moral damages. basis. This truck was mortgaged, including two other white trucks owned by defendant which are fully paid for, to
Pamintuan appealed and assert that Yu Ping is only entitled to recover liquidated damages. CA found Pamintuan secure the loan.
guilty of fraud, and sustained the Lower court.
In FEBRUARY 1925 defendant also purchased another one-ton white truck from same plaintiff corp. with down-
ISSUE: Whether or not the Co. is entitled only to liquidated damages as appearing in the contract of sale. payment balance on installment basis also, placing this truck on mortgage for security and including the 2 above
HELD: We hold that appellant's contention cannot be sustained because the second sentence of Article 1226 mortgaged trucks also. Again, defendant failed to pay this debt.
itself provides that "nevertheless, damages shall be paid if the obligor xxx is guilty of fraud in the fulfillment
of the obligation." xxx The trial court & the CA found that Pamintuan was guilty of fraud because he did not In both sales, a 12% annual interest was agreed upon the unpaid portion of the contracts, and upon maturity, when
make a complete delivery of the plastic sheeting & he overpriced the same. Xxx There is no justification for the due, non-payment of total remaining debt would give rise to 25% penalty; aside from mortgage deed, there was a
Civil Code to make an apparent distinction between penalty and liquidated damages because the settled rule is that Promissory Note, co-signed by defendant brother Rosario Espiritu solidarily. Thus, Rosario appeared as intervenor
there is no difference between penalty and liquidated damages insofar as legal results are concerned and that either in the collection suits alleging to be the sole owner of the two other trucks mortgaged. He alleged that he did not
may be recovered without the necessity of proving actual damages and both may be reduced when proper (Arts.
1229, 2216 and 2227, Civil Code. See observations of Justice J.B.L. Reyes, cited in 4 Tolentino's Civil Code, p. sign the mortgage and did not consent to the inclusion of his two trucks therein.
251). The penalty clause is strictly penal or cumulative in character and does not partake of the nature of
liquidated damages (pena sustitutiva) when the parties agree "que el acreedor podra pedir, en el supuesto While the cases were pending in lower court, the trucks were sold by virtue of the mortgage and brought in a net
incumplimiento o mero retardo de la obligacion principal, ademas de la pena, los danos y perjuicios. Se habla en sum not enough to settle the debts due. The Lower court directed payments of all the sums due and in both two
este caso de pena cumulativa, a differencia de aquellos otros ordinarios, en que la pena es sustitutiva de la cases ordered the payment of 12% interest p.a. until fully paid and a penalty of 25% in addition as appearing in the
reparacion ordinaria." (Ibid, Castan Tobenas, p. 130). contracts. To these matters the defendants alleged that these amounts to usury.
After a conscientious consideration of the facts of the case, as found by Court of Appeals and the trial court, and
after reflecting on the/tenor of the stipulation for liquidated damages herein, the true nature of which is not easy to ISSUE: Whether or not the 12% interest p.a. plus additional penalty of 25% makes the contract usurious?
categorize, we further hold that justice would be adequately done in this case by allowing Yu Ping Kun Co., Inc. HELD: NO. Article 1152 of the Old Civil Code permits the agreement upon a penalty apart from the interest.
to recover only the actual damages proven and not to award to it the stipulated liquidated damages of ten thousand
pesos for any breach of the contract. The proven damages supersede the stipulated liquidated damages. Should there be such an agreement, the penalty xxx does not include the interest, & as such the two are different
This view finds support in the opinion of Manresa (whose comments were the bases of the new matter found in & distinct things which may be demanded separately. The penalty is not to be added to the interest for the
article 1226, not found in article 1152 of the old Civil Code) that in case of fraud the difference between the determination of whether the interest exceeds the rate fixed by law, since said rate was fixed only for the interest.
proven damages and the stipulated penalty may be recovered (Vol. 8, part. 1, Codigo Civil, 5th Ed., 1950, p. 483).
Hence, the damages recoverable by the firm would amount to ninety thousand five hundred fifty-nine pesos and BUT, considering partial performance, SC reduced penalty to 10% in accord with Article 1154. (Article
twenty-eight centavos (P90,559.28), with six percent interest a year from the filing of the complaint. 1229, NCC)

Penalty & Liquidated damages: Article 1227. The debtor cannot exempt himself from the performance of the obligation by paying the penalty,
 There is no justification for the NCC to make an apparent distinction between penalty & save in the case where this right has been expressly reserved for him. Neither can the creditor demand the
liquidated damages because the settled rule is that there is no difference between penalty & fulfillment of the obligation & the satisfaction of the penalty at the same time, unless this right has been clearly
liquidated damages insofar as legal results are concerned & either may be recovered granted him. However, if after the creditor has decided to require the fulfillment of the obligation, the
performance thereof should become impossible without his fault, the penalty may be enforced.
without the necessity of proving actual damages & both may be reduced when proper. Xxx
 We further hold that justice would be adequately done in this case by allowing Yu Ping  General Rule: Debtor cannot avoid performance by paying the penalty; except when expressly granted to
Kun Co., Inc. to recover only the actual damages proven, & not to award to it the stipulated debtor.
liquidated damages of P10,000 for any breach of the contract. The proven damages
supersede the stipulated liquidated damages.  General Rule as to creditor: may not demand both fulfillment and payment of penalty at the same time; except
 This view finds support in the opinion of Manresa that in cases of fraud the difference if such right is granted clearly.
between the proven damages & the stipulated penalty may be recovered.
 As to the last sentence, when it becomes impossible without creditor’s fault  it will happen only if through
debtor’s fault or delay, for penalty to become enforceable; because if through fortuitous event without creditor’s
Legality of Penal clause: not contrary lo law, morals, public order nor debtor’s fault, principal OBLIGATION would be extinguished and so will the penal clause.
(e.g. usurious, immoral, unjust, merciless)
How construed: strictly construed, in accord with stipulation. (effecting minimal rights) Article 1228. Proof of actual damages suffered by the creditor is not necessary in order that the penalty may be
When there could be damages aside from Penalty: demanded.
(1) Express provision: ex. ―legal interest of 12% p.a. aside from penalty may be had, plus
attorney’s fees of 20%‖ Baviera: Courts can enforce contracts according to their terms.
(2) Debtor refused to pay penalty
(3) There’s fraud in debtor’s non-performance Article 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or
 Non-performance gives rise to presumption of fault, debtor has burden of irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced
by the court if it is iniquitous or unconscionable.
proof: defenses may be force majeure, or act of creditor himself;
CASE: Article 1230. The nullity of the penal clause does not carry with it that of the principal obligation.
BACHRACH V. ESPIRITU [52 Phil. 346] The nullity of the principal obligation carries with it that of the penal clause.
RE: Chattel Mortgage with PENAL CLAUSE
Amen | Compiled Notes
Partial Performance  refers to extent or quantity of fulfillment
Irregular Performance  refers to the form FACULTATIVE OBLIGATION OBLIGATION with PENAL CLAUSE
 Doctrine of Strict Construction will apply as against the enforcement of the penalty in its Debtor has power to make substitution General Rule, none; except when expressed
entirety, when the clause is clearly punitive, not when it is impliedly intended as liquidated Creditor cannot demand both such right to demand both may be given
damages; prestations
 Thus penalty is mitigated in:
GUARANTY OBLIGATION with PENAL CLAUSE
1. partial or irregular performance
Is a contract by which virtue, a 3rd OBLIGATION to pay penalty is different from the principal
2. iniquitous or unconscionable penalty person (guarantor) obliged himself to OBLIGATION, but also paid in lieu of debtor’s non-
fulfill prestation in lieu of debtor’s performance
1. Distinguished from OBLIGATION with suspensive condition: non-performance
 Happening of the condition gives rise to the OBLIGATION; in penal there is already a Intended to insure performance of Intended to insure performance of principal OBLIGATION
principal OBLIGATION principal OBLIGATION
 The principal OBLIGATION itself is dependent upon a future and uncertain event; in Accessory & subsidiary Accessory & subsidiary OBLIGATION
penal, only the accessory OBLIGATION (the penalty) depends upon non-performance or OBLIGATION
breach. Principal debtor cannot be guarantor both OBLIGATIONS can be assumed by one person
Subsists even when principal penalty is extinguished in such case, unless assumed by 3rd
OBLIGATION is voidable or person
2. Distinguished from alternative OBLIGATIONS unenforceable
Article 1227. The debtor cannot exempt himself from the performance of the obligation by paying the penalty,
save in the case where his right has been expressly reserved for him. Neither can the creditor demand the
Q: When does delay set in?
fulfillment of the obligation & the satisfaction of the penalty at the same time, unless this right has been clearly A: Delay sets-in in the following manner:
granted him. However, if after the creditor has decided to require the fulfillment of the obligation, the performance
thereof should become impossible without his fault, the penalty may be enforced. 1. For Reciprocal simultaneous OBLIGATIONS
 By the readiness of one of the parties to perform & his letting the other party know; & the other
Article 1200. The right of choice belongs to the debtor, unless it has been expressly granted to the creditor. party is not ready to comply in a proper manner with what is incumbent upon him.
The debtor shall have no right to choose those prestations which are impossible, unlawful or which could not have
2. For Reciprocal OBLIGATIONS which are not simultaneous
been the object of the obligation.
 General Rule: Demand is necessary (Article 1169, par.
(1) This is called mora solvendi ex persona.
ALTERNATIVE OBLIGATION OBLIGATION WITHPENAL CLAUSE
2 or more OBLIGATIONS are due there’s only 1 principal OBLIGATION, only in case of non-
Exception: When demand is not necessary (the exceptions are found in Article 11 69, par. 2.) This
but performance of 1 is enough performance shall the penal clause be enforceable is called mora solvendi ex re.
Impossibility of one of impossibility of principal OBLIGATION, penal clause
OBLIGATIONS, the other/s subsists extinguished Q: What kind of demand is necessary?
Debtor can choose which prestation to debtor cannot choose to pay penalty to avoid performance, A: Judicial or extra-judicial
fulfill unless expressed Exceptions:
X obliged to deliver a horse to Y or X obliged to deliver a horse to Y. if he fails he will pay him When the obligation or the law expressly so declare. When the contract says that without the
pay him P500 P500 necessity of demand, default sets in upon the failure of the obligor to perform on due date.
There must be something in the contract which explicitly states that the demand is not necessary
2. Distinguished from Facultative OBLIGATIONS in order that delay may set in.
Article 1206. When only one prestation has been agreed upon, but the obligor may render another in substitution, When from the nature & the circumstances of the obligation it appears that the designation of the
the obligation is called facultative.
time when the thing is to be delivered or the service is to be rendered was a controlling motive
The loss or deterioration of the thing intended as a substitute, through the negligence of the obligor does not render for the establishment of the contract.
him liable. But once the substitution has been made, the obligor is liable for the loss of the substitute on account of Illustration: Bong Baylon is getting married in Valentines '96. Inno Sotto was supposed to make
his delay, negligence or fraud. Ella's (the bride) wedding gown. Feb. 14 comes, no gown was delivered. Ella gets married in blue
jeans & T-shirt. Finally, on Feb. 15, Inno delivers the gown. xxx Ella sues Inno for breach. Inno
Article 1227. The debtor cannot exempt himself from the performance of the obligation by paying the penalty, says there was no demand. In this case, demand is not necessary in order that delay may exist.
save in the case where this right has been expressly reserved for him. Neither can the creditor demand the
fulfillment of the obligation & the satisfaction of the penalty at the same time, unless this right has been clearly When demand would be useless, as when the obligor has rendered it beyond his power to perform.
granted him. However, if after the creditor has decided to require the fulfillment of the obligation, the performance
Example is the case of Chavez v. Gonzales, infra.
thereof should become impossible without his fault, the penalty may be enforced.
Amen | Compiled Notes
Illustrations: enrich himself.
1. ROBLES-FRANCISCO vs. CFI CASE: This case would tell you the nature of a penal clause. 2. Refuses to pay penalty this is consistent with Delay, therefore he will be liable for other amounts
Spouses bought a parcel of land payable in instalment and in the contract it was stipulated that if like by way of interest. If there’s compliance, like an obligation to deliver a horse, with the penalty
despite full payment Robles-Francisco the (developer) would not be able to give to the partners the of 300k in case of non-compliance and on the day that the obligation is due, the debtor failed to
certificate of title over the land the seller is obliged to return all the amounts paid plus four percent deliver the horse. Would specific performance be the proper remedy? YES. As long as the debtor is
interest. Now when the spouses were already paid of the entire amount of the purchase price, still in the position to deliver the horse he can still be compelled to deliver such. But can the
Robles-Francisco could not deliver the certificate of title over such parcel of land because the creditor recover both the horse and the penalty? Ordinarily, NO, it is either the demand for the
mother title was being mortgaged with the GSIS, hence, the condition cannot be satisfied, and horse or just the recovery of the penalty because that is the rule. Except: unless the recovery of
that’s why the spouses filed this case to recover all the amounts paid plus 4% interest plus both is CLEARLY GRANTED TO HIM. “clearly granted to him” under the law it says, it need
damages. Actual amount paid + 4% + nominal damages. But Robles-Francisco would question not be stipulated as long as it can be shown that it is clearly the right of the creditor to have both
this decision claiming that, the 4% interest stipulation is a penal clause and under the law the or recover both penalty and the horse then the creditor can do so.
clause shall substitute the indemnity for damages and the payment of interest. In other words, the 3. E.g. in a real estate contract, if the obligation to build a building is for the period of 365 days, and if
court should have not awarded the nominal damages in addition to the penalty. Is the ruling in after the period has already expired, and the project would not have been completed, the contractor
Robles-Francisco correct? WRONG. Because the 4% interest stipulation said the court cannot be would be liable to developer for 50k per every date of delay. The period of 365 days have already
considered as a penal clause; because a penal clause by its nature should provide for a greater lapsed or expired, can the creditor still compel the debtor to perform? Of course if he refuses he
liability in case of non-performance and even under the law at that time, if a person fails to pay a cannot, the demand will be a valid demand, but he cannot be compelled to continue because it is
sum of money it is already in delay, he will be liable for interest, if you have any agreement as to an obligation to do. Plus is he entitled to the penalty? Yes even if it was not stipulated as it is clear
the rate it would have to be 6% at that time, now 12%, if by law you will be liable for 6% and by here that he has a right to recover. He has the right to demand the performance of both.
stipulation only 4%, how could that be considered a penal clause? When again a penal clause 4. E.g. With that example of the horse with a penalty of 300k. The debtor said here is the 300k which
should provide for a greater liability. So what happened? The trial court then ruled that Robles- we agreed as the penalty, I would not deliver the horse anymore, I will just pay you the penalty
Francisco should return all the amount received plus 4% penalty plus nominal damages. However, I instead. Can the creditor be compelled to accept? NO, unless this time the debtor reserves such
said as a rule that penalty shall substitute as indemnity for damages and payment of interest as this right to himself. If it is clear that instead of performing the obligation he can just pay the penalty
admits exceptions. In other words, aside from the penalty agreed upon, the debtor may be held then such it is possible. Otherwise, he would still be compelled to deliver the horse.
liable for other amounts. 3 reasons: 5. LAST, if the principal obligation is void, can the debtor be compelled to pay penalty? NEVER.
a. Because it is so stipulated. E.g. Credit cards agreement. In other words here, penalty Penal clause is just an accessory clause. The payment of the penalty is just an accessory therefore
shall not be a substitute for indemnity for damages and the payment of interest. May if the principal obligation is void then the penalty will also be void. But if the penal clause is void
interest ka na, may penalty ka pa. Which was in the ruling in the case of Bachrach vs. would that affect the obligation? NO. E.g. A promise to deliver B his horse, if he fails to do so he
Espiritu – stipulated penalty of 25% there is still an interest of 12% although if you read would have to give B 3 kilos of shabu. Void is the penal clause, but the principal obligation still
the case, ordinarily are courts bound to the penalty agreed upon by the parties? YES subsists.
because it is so stipulated. But of course there are exceptions, there are instances when 6. If the principal obligation is void, may that give rise to the enforcement of the penal clause? YES. If
the court would have the power to reduce the penalty agreed upon: it is clear in the agreement that if it is a void obligation then one of the parties will be liable to pay a
i. there was irregular in the performance (Bachrach vs. Espiritu; Macalinao vs. sum of money the other parties. This can easily be understood in relation to contracts entered into
BPI); by a Filipino and a foreigner. Because if the negotiation of the contract would be made in the
ii. when the penalty is unconscionable. When will it be unconscionable? A 25% Philippines, and if the project would have to be performed here in the Philippines, that’s why the
penalty would have been unconscionable? Not necessarily, it would depend foreigner would always demand that if this contract or there would be a stipulation that if the
on the principal amount involved. contract would be declared void or the contract in general declared void by our courts, the other
b. Fraud. Instead of just penalty the person liable of fraud can be held liable of other party, the Filipino would be liable for 10M. Can the Filipino be held liable? Yes if it was declared
amounts for damages suffered by the other party. Problem: Spouses BK ordered from a void and it is reasonable because in the negotiation the foreigners has already incurred expenses
furniture company set of furniture and it was so agreed upon that these sets of furniture like the plane fare and for hotel accommodations.
would be made of Narra and this furniture company delivered furniture sets not made of
Narra to spouses BK. In that contract it was stipulated that in case of non-performance, E. BREACH OF OBLIGATIONS (ARTICLE 1170)
will be liable for penalty of 100k. Spouses BK filed an action claiming for the 100k by
way of stipulated penalty plus 300k for actual damage suffered by them. Is he correct in Article 1170. Those who in the performance of their obligation are guilty of fraud, negligence or delay, & those
claiming such? He would have been correct if Betty’s furniture xxxx with qualification, who in any manner contravene the tenor thereof, are liable for damages.
in a way partially correct, in that the furniture company committed fraud in delivering
the sets of furniture not made of Narra, but did the company commit fraud already when Irregularity of Performance [Articles 1169 - 1174]
they delivered the furniture? No. Just because that the furniture delivered were not made
of Narra it is already fraud, it could have been that it was made by mistake. Fraud is Article 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or
not presumed. Good faith is presumed. Unless the circumstance warrants that fraud extrajudicially demands from them the fulfillment of their obligation.
was committed by making it appear that the furniture was made of Narra when it was However, the demand by the creditor shall not be necessary in order that delay may exist:
not. Then fraud is committed. Why did I say only partially correct lang si Mr. BK? When the obligation or the law expressly so declare;
Because in Pamintuan case, there was fraud that is why creditor was able to recover an When from the nature & the circumstances of the obligation it appears that the designation of the time when the
amount greater than the amount they have agreed upon. Back to the problem, assuming thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the
there was fraud, is Mr. BK right in claiming both the penalty and the actual amount? contract;
NO. If he would have recovered already the penalty the actual amount will be minus When demand would be useless, as when the obligor has rendered it beyond his power to perform.
to the penalty. Hindi pwede penalty + actual amount, because if ganito, Mr. BK would
Amen | Compiled Notes
In reciprocal OBLIGATIONS, neither party incurs in delay if the other does not comply or is not ready to comply
in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, LEGASPI OIL VS. CA [224 SCRA 213] - Definition of Fraud.--
delay by the other begins.  In general, fraud may be defined as the voluntary execution of a wrongful act, or willful
omission, knowing & intending the effects which naturally & necessarily arise from
Balane: Two Classes of Irregularity of Performance: such act or omission;
1. Attributable to the debtor  The fraud referred to in Article 1170 is the deliberate & intentional evasion of the normal
A. Fraud fulfillment of obligation;
B. Negligence  It is distinguished from negligence by the presence of deliberate intent, which is lacking in
C. Delay the latter.
2. Not attributable to the debtor
A. Fortuitous event Fraud as used in Article 1170 is different from fraud as a cause for vitiation of consent in contracts
(more properly called deceit which prevents the contract from arising; this is found in Article 1380, et
Illustrations: seq.)
22. If there is an obligation, does it mean that one of the parties would be liable for the damages?
Common answer: YES and this is VERY WRONG. Just because there’s an obligation one will be
liable for damages because the best scenario is both parties did not comply with their respective  Fraud as referred here is the deliberate and intentional evasion of normal fulfillment of
obligations if this is reciprocal obligation. Who would be liable? No one. But if one of the parties OBLIGATIONS; thus, as ground for damages from this article, implies some kind of malice or
failed to perform therefore liable for damages? Not necessarily because there are EXCUSES to dishonesty, which does not cover mistake, errors of judgment made in good faith.
non-performance. Fail to perform – easiest reason: because it was the fault of the creditor. But
this scenario is not usual.  Evasion of a legitimate OBLIGATION for benefits admittedly received constitutes unjust
23. Usual defense in real life and in bar exam: FORTUITOUS EVENT. I fail to perform my enrichment.
obligation because of this Fortuitous event (FE). Under the law, FE could not have been foreseen or
though foreseen it is inevitable.
a. Robbery is it unforeseen? If your business is pawnshop, robbery is not a FE.
Q: What is a synonym for fraud as used in Article 1170?
b. Typhoon is FE, though foreseen it is inevitable. A: Malice.
c. Asian Financial Crisis in the case of Filinvest: Spouses bought a condo unit in a pre-
selling stage, but even after the full payment of the price still there was no condo. So the Effects of Fraud:
spouses sued Filinvest, Filinvest in its defense was FE. They were not able to complete 1. Creditor may insist on performance, specific or substitute (Article 1233.)
the project because of FE that’s why we cannot be held liable. Was Filinvest’s 2. Creditor may resolve/ rescind (Article 1191.)
contention is correct? NO, because the Asian financial crisis is not a fortuitous event. 3. Damages in either case (Article 1170.)
This is because it is man-made. There is a financial crisis because of the greed of the
people, so this is man-made. But even if the reason was due to Fortuitous event can it be
possible that the debtor will still be liable? YES. In other words there are exceptions as (2) Negligence
to the general rule that in case of fortuitous event the debtor may not be held liable.
These are: Article 1171. Responsibility arising from fraud is demandable in all OBLIGATIONS. Any waiver of an action
i. Because it is so stipulated. – e.g. depositarium for future fraud is void.
ii. Because the law so provides – e.g. 1165. The obligation to give a
determinate thing, if the loss due to the debtors fault can still be held liable to Article 1172. Responsibility arising from negligence in the performance of every kind of obligation is also
thing lost if at that time of the lost he was already in delay. Or before the lost demandable, but such liability shall may be regulated by the courts, according to the circumstances.
he promised to deliver such thing to two or more persons and after it was lost
xxxxx, liable because the law so provides. e.g. commodatum Article 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by
the nature of the obligation & corresponds with the circumstances of the persons, of the time & of the place. When
negligence shows bad faith, the provisions of articles 1171 & 2201, paragraph 2, shall apply.
MANNER OF BREACH
 Negligence is the absence of something that should be there  due diligence.
(1) Fraud
Article 1171. Responsibility arising from fraud is demandable in all OBLIGATIONS. Any waiver of an action
for future fraud is void. Measure of Due Diligence
There are two guides:
Article 1338. There is fraud when, through insidious words or machinations of one of the 1. Diligence demanded by circumstances of person, place & time
contracting parties, the other is induced to enter into a contract which, without them, he would not 2. Care required of a good father of a family (fictional bonus pater familias who was the
have agreed to. embodiment of care, caution & protection in Roman law.)
Article 1344. In order that fraud may make a contract voidable, it should be serious and should not
have been employed by both contracting parties. In common law, the degree of care required is the diligence of a prudent businessman. This is
Incidental fraud only obliges the person employing it to pay damages.
actually the same as the diligence of a good father of a family.
Balane: Is it correct to say that fraud in Article 1170 means deceit or insidious machinations? No.
Amen | Compiled Notes
 (2) In contracts & quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be
Effects of Negligence: those that are the natural & probable consequences of the breach of the obligation, & which the parties have
1. Creditor may insist on performance, specific or substitute (Article 1233.) foreseen or could have reasonably foreseen at the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may
2. Creditor may resolve/ rescind (Article 1191.)
be reasonably attributed to the non-performance of the obligation.
3. Damages in either case (Article 1170.)
(4) ANY OTHER MANNER OF CONTRAVENTION:
 From 1173 = culpa contractual
 from 2176 = culpa aquiliana or extra-contractual
 Includes any illicit acts which impair the strict and faithful fulfillment of OBLIGATION, or every
kind of defective performance;
** In both cases, for liability to attach, such negligence must be the proximate cause of the injury
to plaintiff.
CASE: “in any manner contravene the tenor of contract”
(3) Delay
AGCAOILI VS. GSIS [165 SCRA 1]
 See Article 1169.
= default / mora, in the fulfillment of OBLIGATIONS; FACTS: GSIS approved application of Marcelo Agcaoili for purchase of House and Lot in Marikina, subject to
the condition that latter should forthwith occupy the house.
REQUISITES to be in Default: “If you fail to occupy the same within 3 days from receipt of this notice, your application will be considered
OBLIGATION is demandable and liquidated automatically disapproved & said House & Lot will be awarded to another.”
debtor delays performance Agcaoili could not stay in the house which was only a shell. It did not have a ceiling, stairs, double walling, lights,
creditor requires performance, judicial or extrajudicial demand water, CR, drainage. He asked a homeless friend instead to stay and watch over the property. After paying 1st
installment & other fees, he refused to make further payments until GSIS would make d house habitable. Instead
Article 1165. xxx. If the obligor delays, or has promised to deliver the same thing to two or more persons who of heeding to Agcaoli’s condition, GSIS cancelled the contract and demanded Agcaoili to vacate.
do not have the same interest, he shall be responsible for any fortuitous event until he has effected the delivery. Agcaoili filed a case for specific performance and won. Thus GSIS’ appeal must fail.
Article 1786. Every partner is a debtor of the partnership for whatever he may have promised to xxx
contribute thereto. Since GSIS did not fulfill that obligation, & was not willing to put the house in habitable state, it cannot invoke
He shall also be bound for warranty in case of eviction with regard to specific and determinate Agcaoili's suspension of payment of amortization as cause to cancel the contract between them. It is axiomatic
things which he may have contributed to the partnership, in the same cases and in the same manner that "In reciprocal OBLIGATIONS, neither party incurs in delay if the other does not comply or is not
as the vendor is bound with respect to the vendee. He shall also be liable for the fruits thereof from ready to comply in a proper manner with what is incumbent upon him.‖
the time they should have been delivered, without the need of any demand. ISSUE: Whether or not Agcaoili breached the contract by failing to occupy the house within 3 days as stipulated?
Article 1788. A partner who has undertaken to contribute a sum of money and fails to do so HELD: NO, argument of GSIS is devoid of merit. There being a perfected contract of sale, it was the duty of
becomes a debtor for the interest and damages from the time he should have complied with his GSIS as seller to deliver the thing sold in a condition suitable for enjoyment by the buyer for the purpose
obligation. contemplated. There was then a perfected contract of sale between the parties; there had been a meeting of the
The same rule applies to any amount he may have taken from the partnership coffers, and his minds upon the purchase by Agcaoili of a determinate house & lot in the GSIS Housing Project at Nangka,
liability shall begin from the time he converted the amount to his own use. Marikina, Rizal, at a definite price payable in amortizations at P31.56 per mo., & from the moment the parties
Article 1896. The agent owes interest on the sums he has applied to his own use from the day on which he did so, acquired the right to reciprocally demand performance. It was, to be sure, the duty of the GSIS, as seller, to deliver
and on those which he still owes after the extinguishment of the agency. the thing sold in a condition suitable for its enjoyment by the buyer for the purpose contemplated, in other words,
Article 1942. The bailee is liable for the loss of the thing, even if it should be through a fortuitous to deliver the house subject of the contract in a reasonably livable state. This it failed to do.
event:
(1) If he devotes the thing to any purpose different from that for which it has been loaned;
(2) If he keeps it longer than the period stipulated, or after the accomplishment of the use for which
the commodatum has been constituted; CASE DOCTRINE: One who assumes a contractual obligation & fails to perform the same on
(3) If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation account of his inability to meet certain bank requirements which inability he knew & was aware
exempting the bailee from responsibility in case of a fortuitous event;
of when he entered into the contract, should be held liable in damages for breach of contract.
(4) If he lends or leases the thing to a third person, who is not a member of his household;
(5) If, being able to save either the thing borrowed or his own thing, he chose to save the latter.
(OBLIGATIONS OF THE BAILEE) ARRIETA VS. NARIC [10 SCRA 79] (PAZ ARRIETA AND VITALIADO ARRIETA VS.
NATIONAL RICE & CORN CORP.)
Delay is the non-fulfillment of the obligation with respect to time. FACTS: On May 1952, Arrieta took part in public bidding called by NARIC to supply 20K metric tons of
Burmese rice, being the lowest bidder she was awarded the contract. In the contract of sale, Arrieta’s
OBLIGATION was to deliver the rice at the price of her bid, while NARIC’s OBLIGATION was to pay her in
Kinds of Delay: letter of credit, irrevocable, confirmed and assignable, in USD in favor of Arrieta and/or supplier in Burma,
1. Mora Solvendi- delay in the performance (on the part of the debtor); ―immediately.‖
2. Mora Accipiendi- delay in the acceptance (on the part of the creditor);
3. Compensation Morae- mutual delay NARIC knew that it did not have enough deposit in PNB to cover the OBLIGATION, thus it wrote a letter of
Article 2201. xxx request to accommodate the application for Letter Of Credit despite such fact in lieu of this contract with Arrieta.
Amen | Compiled Notes
This application was made by PNB on July 30, 1952, a month after it entered in the contract with Arrieta and Article 1174. Except in cases expressly specified by law, or when it otherwise declared by stipulation, or when
promised to open the Letter Of Credit ―immediately.‖ By this time Arrieta has made a 5% tender to her supplier the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which
in Burma, which will be confiscated if the required Letter Of Credit will not be received before August 4, 1952. could not be foreseen, or which , though foreseen, were inevitable.
Such fact was apprised by Arrieta to NARIC in a letter through counsel.
PNB required NARIC to make a marginal deposit of 50% of the amount of Letter Of Credit before such will be To constitute a caso fortuito that will exempt a person from responsibility, it is necessary that:
released in favor of Arrieta’s supplier in Burma. Such condition NARIC is not in any financial position to meet. [Austria vs. Abad, June 10, 1971]
PNB consequently approved & released the LOC 2-months in delay. The Burmese supplier had cancelled the
1. the event must be independent of human will;
order on Aug. 20, 1952, and forfeited the 5% tender of Arrieta amounting to P200K. NARIC and PNB did not
even make the 15-day grace period given by the supplier. Arrieta endeavored to restore to no avail. It offered to 2. the occurrence must render it impossible for the debtor to fulfill the obligation in a normal
substitute with Thailand rice, but NARIC rejected. Thus, Arrieta demanded for payment of damages of USD manner;
286K representing unrealized profits. Again rejected. Thus, this case. 3. that the obligor must be free of participation in, or aggravation of, the injury to the creditor.

ISSUE: WON NARIC was in breach of contract? Balane:

General Rule: The happening of a fortuitous event exonerates the debtor from liability.
HELD: YES. NARIC’s culpability arises from its willful and deliberate assumption of contractual
OBLIGATIONS even as it was well aware of its own financial incapacity to undertake the prestation.
EXEMPTIONS FROM APPLICATION OF General Rule ON Fortuitous Event:
Under Article 1170, not only debtors guilty of fraud, negligence or default but also every debtor, in general, 1. When the law so specifies. E.g., if the debtor is already in delay (Article 1165, par. 3.)
who fails the performance of his obligation is bound to indemnify for the losses & damages caused thereby. 2. When the parties so agree
3. When the nature of the obligation requires the assumption of risk, e.g., an insurance
Meaning of phrase "in any manner contravene the tenor" of the obligation in Article 1170  The phrase contract.
includes any illicit task which impairs the strict & faithful fulfillment of the obligation, or every kind of defective
performance. EXAMPLES OF By Express Provision of Law:
 IN Depositary
Balane: This phrase is a catch-all provision. At worst, it is a superfluity. At best, there is a safety
net just in case there is a culpable irregularity of performance which is not covered by fraud, Article 1979. The depositary is liable for the loss of the thing through a fortuitous event:
negligence or delay. In this case, the SC was apparently not sure as to what category the breach fell. (1) If it is so stipulated;
This phrase is not really an independent ground. (2) If he uses the thing without the depositor's permission;
(3) If he delays its return;
(4) If he allows others to use it, even though he himself may have been authorized to use the same.
“TIME IS OF THE ESSENCE”
Q: What if a depositor was in the premises of the bank & was robbed of his money which he was
TELEFAST Communications/Phil. Wireless, Inc. VS. IGNACIO CASTRO [158 SCRA 445] about to deposit?
FACTS: Consolacion Bravo-Castro, the wife of herein respondent Ignacio died in Lingayen, Pangasinan. Thus,
A: Bank cannot be held liable for fortuitous event (robbery) especially in case where the money has
that same day, her daughter Sofia sent a telegram to her father in the USA via TELEFAST. Her mother was
interred without her father nor siblings in attendance. When Sofia went back to the USA she learned that her not yet been actually deposited.
telegram never reached her father. She sued TELEFAST for damages due to breach of contract. While
TELEFAST’s defense was technical and atmospheric factor beyond its control. Article 1979 provides for instances wherein depositary is still liable even in cases of fortuitous event.
ISSUE: Whether or not TELEFAST is liable only for P31.92 (fee) and not for damages.
HELD: YES, Article 1170, and also under Article 2176 applied. This liability is not limited to actual or Q: What kind of diligence is required of a depositary?
quantified damages. To sustain petitioner’s contention and award actual damages only would be iniquitous A: Ordinary Diligence.
such that he would be liable only for the cost of that telegram paid for 30 yrs ago. Also, Article 2217 is *Safety Deposit Box: If the jewelry inside a Safety Deposit Box was stolen, rules on deposit will
applicable since Petitioner’s act or omission amounted to gross negligence which was precisely the cause of the
not apply because the contract governing the transaction is LEASE of safety deposit box.
suffering of herein private respondents.
Petitioner & private respondent Sofia C. Crouch entered into a contract whereby, for a fee, petitioner undertook to
send said private respondent's message overseas by telegram. This, petitioner did not do, despite performance by Bailee in Commodatum
said private respondent of her obligation by paying the required charges. Petitioner was therefore guilty of
contravening its obligation to said private respondent & is thus liable for damages. Article 1942. The bailee is liable for the loss of the thing, even if it should be through a fortuitous event:
(1) If he devotes the thing to any purpose different from that for which it has been loaned;
(2) If he keeps it longer than the period stipulated, or after the accomplishment of the use for which the
commodatum has been constituted;
EXCUSE FOR NON-PERFORMANCE If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation exempting the bailee
from responsibility in case of a fortuitous event;
1. Loss due to Fortuitous Events If he lends or leases the thing to a third person, who is not a member of his household;
(5) If, being able to save either the thing borrowed or his own thing, he chooses to save the latter.

Amen | Compiled Notes

In Negotiorum Gestio Aleatory Contract

Article 2147. The officious manager shall be liable for any fortuitous event: Article 2010. By an aleatory contract, one of the parties or both reciprocally bind themselves to give or to do
(1) If he undertakes risky operations which the owner was not accustomed to embark upon; something in consideration of what the other shall give or do upon the happening of an event which is uncertain,
(2) If he has preferred his own interest to that of the owner; or which is to occur at an indeterminate time.
(3) If he fails to return the property or business after demand by the owner;
(4) If he assumed the management in bad faith. Article 1175. Usurious transactions shall be governed by special laws.

Article 2148. Except when the management was assumed to save the property or business from imminent danger, Tolentino:
the officious manager shall be liable for fortuitous events:
Usury is the contracting for or receiving something in excess of the amount allowed by law for the
(1) If he is manifestly unfit to carry on the management;
(2) If by his intervention he prevented a more competent person from taking up the management. loan or forbearance or money, goods or chattels.
Special law on usury
Payee in Solutio Indebiti -The Usury Law was Act No. 2655. This law was repealed during the period of martial law, leaving
parties free to stipulate higher rates.
Article 2159. Whoever in bad faith accepts an undue payment, shall pay legal interest if a sum of money is ______________________________________________________
involved, or shall be liable for fruits received or which should have been received if the thing produces fruits. CASES:
He shall furthermore be answerable for any loss or impairment of the thing from any cause, & for damages to the Balane: Some of the elements were present in this case. What was absent was the last element.
person who delivered the thing, until it is recovered.
National Power Corporation vs. CA and Engineering Construction Inc. [161 SCRA 334] NPC
Lessee cannot escape liability because its negligence was the proximate cause of the loss & damage even
Article 1648. Every lease of real estate may be recorded in the Registry of Property. Unless a lease is recorded, it
though the typhoon was an act of God.
shall not be binding upon third persons.
FACTS:
Article 1671. If the lessee continues enjoying the thing after the expiration of the contract, over the lessor's Typhoon ―Welming”
objection, the former shall be subject to the responsibilities of a possessor in bad faith. Plaintiff ECI entered contract with NAWASA on Aug.1964, to construct Ipo-Bicti Tunnel, Intake and Outlet
Structures at Norzagaray, Bulacan within 800 days from receipt of notice to proceed. It has finished 1st stage of the
Article 552. xxx. excavation works and was already on the Ipo site phase when typhoon ―Welming‖ came in November 4, 1967 and
A possessor in bad faith shall be liable for deterioration or loss in every case, even if caused by a fortuitous event. hit Central Luzon passing through Angat Dam. Consequent to the heavy downpour, the dam reached danger
height of 212 m. above sea level causing the NPC to decide to open spillway gates at that point. Thus, the
extraordinary large volume of water rushed out of the gates and hit the installations and construction work of ECI
Independent Contractor at Ipo Site with terrific impact washing away and/or destroying supplies and equipment of ECI.
Article 1727. The contractor is responsible for the work done by persons employed by him. ECI then sued NPC for damages.
ISSUE: Whether or not NPC is liable for damages.
Article 1728. The contractor is liable for all the claims of laborers & others employed by him, & of third persons HELD: It is clear from the appellate court's decision that based on its findings of fact & that of the trial court's,
for death or physical injuries during the construction. petitioner NPC was undoubtedly negligent because it opened the spillway gates of the Angat Dam only at the
height of typhoon "Welming" when it knew very well that it was safer to have opened the same gradually &
Common Carrier earlier, as it was also undeniable that NPC knew of the coming of the typhoon at least 4 days before it actually
struck. And even though the typhoon was an act of God or what we may call force majeure, NPC cannot escape
Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts liability because its negligence was the proximate cause of the loss & damage. As we have said in Juan Nakpil &
or negligence of other passengers or of strangers, if the common carrier's employees through the exercise of the Sons vs. CA, 144 SCRA 596,
diligence of a good father of a family could have prevented or stopped the act or omission.
Thus, if upon the happening of a fortuitous event or an act of God, there concurs a corresponding fraud,
(2) ―when it is otherwise declared by stipulation‖ (Article 1174) negligence, delay or violation or contravention in any manner of the tenor of the obligation as provided for
in Article 1170, which results in a loss or damage, the obligor cannot escape liability. The principle embodied
Express agreement in the act of God doctrine strictly requires that the act must be one occasioned exclusively by the violence of
nature & human agencies are to be excluded from creating or entering into the cause of the mischief. When
the effect, the cause of which is to be considered, is found to be in part the result of the participation of man,
Article 1306. The contracting parties may establish such stipulations, clauses, terms & conditions as
whether it be from active intervention or neglect, or failure to act, the whole occurrence is thereby humanized, as it
they may deem convenient, provided they are not contrary to law, morals, good customs, public order,
was, & removed from the rules applicable to the acts of God. Thus, it has been held that when the negligence of a
or public policy.
person concurs with an act of God in producing a loss, such person is not exempt from liability by showing that
the immediate cause of the damage was the act of God. To be exempt from liability for loss because of an act of
(3) ―when the nature of the OBLIGATION requires the assumption of risks‖ God, he must be free from any previous negligence or misconduct by which the loss or damage may have been
occasioned.
Amen | Compiled Notes
 Hence, PBA filed action to recover damages against UCI while the latter sued Nakpil for damages due to defects
(2) ACT OF CREDITOR on the plans and specifications.

ISSUE: WON AN ACT OF GOD WHICH CAUSED DAMAGE TO THIS BLDG, EXEMPTS FROM
CASE: City of Manila failed to exercise the diligence of a good father of a family which is a LIABILITY, PARTIES WHO ARE OTHERWISE LIABLE BECAUSE OF NEGLIGENCE?
defense in quasi-delict.
HELD:
BERNARDINO JIMENEZ vs. CITY OF MANILA [150 SCRA 510]
FACTS: Bernardino Jimenez went to Sta. Ana Public market to buy ―bagoong‖ when his left foot fell in an open ARTICLE 1723
hole that was hidden by muddy rainwater in the flooded market when the latter was flooded with ankle-deep To exempt obligor from liability under Article 1174, fortuitous events; or for a breach of OBLIGATION
rainwater. His left leg was stuck by a rusty 4-inch nail. His leg later on swelled and he was brought for treatment due to an act of God, the following: must concur:
to Veteran’s Memorial Hospital. He walked around with crutches for 15 days, unable to work, forced to hire a 1. cause of the breach of OBLIGATION must be independent of the will of the debtor;
temporary driver for his school bus he is operating. Thus, he sued the City of Manila for damages, and the Asiatic 2. the event must be either unforeseeable or unavoidable
Integrated Corp. (AIC) who had the managing and operating contract to that market. Lower court dismissed his 3. the event must be such as to render it impossible for debtor to fulfill OBLIGATION in normal manner;
complaint for insufficiency of evidence. The appellate court found in his favor and placed sole liability on AIC. 4. debtor must be free from any participation in, or aggravation of the injury to the creditor.
ISSUE: WON the City of Manila should be held solidarily liable with Asiatic Integrated Corp. for injuries
suffered by petitioner. Thus, if upon the happening of a fortuitous event or an Acts Of God, there concurs a corresponding fraud,
HELD: YES. As a defense against liability on the basis of quasi-delict, one must have exercised the diligence of negligence, delay or violation or contravention in any manner of the tenor of the OBLIGATION as provided in
a good father of a family. (Article 1173, NCC) Article 1170, which results in loss or damage, the obligor cannot escape liability.
There is no argument that it is the duty of the City of Manila to exercise reasonable care to keep the public market
reasonably safe for people frequenting the place for their marketing needs. While it may be conceded that the To be an Act Of God, the event must be occasioned exclusively by violence of nature and all human agencies are
fulfillment of such duties is extremely difficult during storms & floods, it must, however, be admitted that excluded from creating or entering into the cause of mischief. With participation of man, whether active or neglect
ordinary precautions could have been taken during good weather to minimize the dangers to life & limb under or failure to act, the occurrence is humanized, and removed from the doctrine’s application.
those difficult circumstances. For instance, the drainage hole could have been placed under the stalls instead of
on the passage ways. Even more important is the fact, that the City should have seen to it that the openings were Findings of lower court and IAC were both beyond dispute that United and Juan F. Nakpil & Sons were both
covered. Sadly, the evidence indicates that long before petitioner fell into the opening, it was already liable. The defects in the plans & specifications were proximate cause, the deviations of United for the specs and
uncovered, & 5 mos. after the incident happened, the opening was still uncovered. Moreover, while there are failure to observe required workmanship & degree of supervision on both makes them liable.
findings that during floods the vendors remove the iron grills to hasten the flow of water, there is no showing
that such practice has ever been prohibited, much less penalized by the City of Manila. Neither was it shown CASE DOCTRINE: "One who negligently creates a dangerous condition cannot escape liability
that any sign had been placed thereabouts to warn passers-by of the impending danger.
for the natural & probable consequences thereof, although the act of a third person, or an act of
For liability under Article 2189 NCC to attach, it is not necessary that the defective public works belong to the God for which he is not responsible, intervenes to precipitate the loss." (Citing Tucker v. Milan,
LGU concerned. What is required is ―control or supervision.‖ 49 OG 4379, 4380.)

CASE: Requisites for exemption from liability due to an "act of God." NAKPIL & SONS VS. CA [160 SCRA 334] - APRIL 15, 1988

Juan F. NAKPIL & SONS vs. CA [144 SCRA 596]- October 3, 1986 FACTS: UCI filed a Motion for Reconsideration on the decision previously disposed of the SC on
Oct. 3, 1986 pointing out that it was PBA’s legal duty to provide full-time and active supervision in
To exempt the obligor from liability under Article 1174, for a breach of an obligation due to an "act
the construction of the subject building. Also, UCI points out that bad faith was not established.
of God," the following must concur:
ISSUES RAISED ON THIS MR:
1. the cause of the breach of the obligation must be independent of the will of the debtor;
(1) That the building did not collapse on the earthquake of 4/2/68, thus the premise of the LC
2. the event must be either unforeseeable or unavoidable; (c) the event must be such as to
findings is negated, Article 1173 cannot apply
render it impossible for the debtor to fulfill his obligation in a normal manner; &
HELD: It is not the fact of collapse that was the premise on applying Article 1173 but on who
3. the debtor must be fee from any participation in, or aggravation of the injury to the
should be responsible for the extreme damage to the bldg. which inevitably led to its
creditor.
collapse, or demolition. Trial court correctly found defendants liable;
FACTS: Construction of the office building of Plaintiff Phil. Bar Assoc. (PBA) in Intramuros, Manila was
(2) That court failed to impute liability on PBA or on Ozaeta for failure to provide legal duty to
undertaken by United Construction Inc. on an ―administration‖ basis on suggestion of United President Juan supervise, as owner.
Carlos. Such was approved by PBA Board, & Pres. Roman Ozaeta. Plans and specifications were done by Juan HELD: There is no legal nor contractual basis. PBA sought technical expertise of both United & JFN
Nakpil & Sons. The Bldg. was completed on June 1966. & sons for such costs on this purpose. It was even JFN who suggested administration
basis.
On August 2, 1968 an unusually strong earthquake hit Manila. The PBA bldg. sustained major damage, in which (3) That findings of bad faith had no factual anchor.
tenants had to vacate. The building was shored up by UCI at the cost of P13,661.28. HELD: Wanton negligence of both United & JFN & sons in effecting plans, specs, & constructions
designs is equivalent to Bad Faith in performance of their respective duties;
(4) Award of 5M had no basis, Commissioner’s report estimated only 1.1M.
Amen | Compiled Notes
HELD: Such initial report was based on the partial collapse only, after the 4/2/68 earth quake, for God in producing damage and injury to another; nonetheless, showing that the immediate or proximate cause
repairs; but after total collapse almost 20 yrs later, unrealized rentals and major of the damage or injury was a fortuitous event would not exempt one from liability. When the effect is found
reconstructions makes even 5M a very conservative estimate. to be partly the result of a person's participation -- whether by active intervention, neglect or failure to act --
the whole occurrence is humanized and removed from the rules applicable to acts of God. 26
(5) As to award of atty.’s fees & damages.
Petitioner Sicam had testified that there was a security guard in their pawnshop at the time of the robbery. He
HELD: It was court discretion. likewise testified that when he started the pawnshop business in 1983, he thought of opening a vault with the
(6) 12% interest p.a. according to CB Circular 416 (PD 116) applies only to (1) loans; (2) nearby bank for the purpose of safekeeping the valuables but was discouraged by the Central Bank since
forbearance of money, goods or credit; (3) rate allowed in JFO’s involving 1 & 2. pawned articles should only be stored in a vault inside the pawnshop. The very measures which petitioners had
HELD: True, but, 12% is imposable only when there is delay in payment of judgment after its allegedly adopted show that to them the possibility of robbery was not only foreseeable, but actually foreseen
finality. (penalty not really interest) and anticipated. Petitioner Sicam’s testimony, in effect, contradicts petitioners’ defense of fortuitous event.
Moreover, petitioners failed to show that they were free from any negligence by which the loss of the pawned
NPC VS. CA [222 S 415]  Petitioners cannot be heard to invoke the act of God or force jewelry may have been occasioned.
Robbery per se, just like carnapping, is not a fortuitous event. It does not foreclose the possibility of
majeure to escape liability for the loss or damage sustained by the private respondents since they, the
negligence on the part of herein petitioners. In Co v. Court of Appeals,27 the Court held:
petitioners, were guilty of negligence. The event then was not occasioned exclusively by an act of It is not a defense for a repair shop of motor vehicles to escape liability simply because the damage
God or force majeure; a human factor-- negligence or imprudence-- had intervened. The effect then or loss of a thing lawfully placed in its possession was due to carnapping. Carnapping per se cannot
of the force majeure in question may be deemed to have, even if only partly, resulted from the be considered as a fortuitous event. The fact that a thing was unlawfully and forcefully taken
participation of man. Thus, the whole occurrence was thereby humanized, as it were, & removed from another's rightful possession, as in cases of carnapping, does not automatically give rise
from the rules applicable to acts of God. to a fortuitous event. To be considered as such, carnapping entails more than the mere
NPC VS. CA [223 S 649]  Petitioners have raised the same issues & defenses as in the 2 other forceful taking of another's property. It must be proved and established that the event was an
decided cases therein mentioned. Predictably therefore, this petition must perforce be dismissed act of God or was done solely by third parties and that neither the claimant nor the person
alleged to be negligent has any participation. In accordance with the Rules of Evidence, the
because the losses & damages sustained by the private respondent's had been proximately caused by
burden of proving that the loss was due to a fortuitous event rests on him who invokes it —
the negligence of the petitioners, although the typhoon which preceded the flooding could be which in this case is the private respondent. However, other than the police report of the alleged
considered as a force majeure. carnapping incident, no other evidence was presented by private respondent to the effect that the
incident was not due to its fault. A police report of an alleged crime, to which only private
Case: Roberto Sicam and Agencia de R.C. Sicam Inc. Vs. Lulu Jorge and Cesar Jorge, August 8, 2007. respondent is privy, does not suffice to establish the carnapping. Neither does it prove that there
Facts: On October 19, 1987, two armed men entered the pawnshop and took away whatever cash and jewelry was no fault on the part of private respondent notwithstanding the parties' agreement at the pre-trial
were found inside the pawnshop unit. Such incident was entered in police blotter in Paranaque. Sicam then that the car was carnapped. Carnapping does not foreclose the possibility of fault or negligence on
sent letter to Lulu informing the latter of the loss of her jewelry due to the robbery. However, Lulu wrote a the part of private respondent.28
letter expressing her disbelief and asking the return of her jewelry instead. But Sicam failed to return the same. Just like in Co, petitioners merely presented the police report of the Parañaque Police Station on the robbery
Hence, Lulu and husband filed a complaint seeking indemnification for the loss of pawned jewelry. RTC committed based on the report of petitioners' employees which is not sufficient to establish robbery. Such
dismissed the complaint since Sicam cannot be made personally liable for an incident which is in relation to report also does not prove that petitioners were not at fault.
corporate transaction and so as the corporation because the loss was occasioned by a fortuitous event. CA On the contrary, by the very evidence of petitioners, the CA did not err in finding that petitioners are guilty of
reversed the RTC and held Sicam liable together with the corporation. concurrent or contributory negligence as provided in Article 1170 of the Civil Code, to wit:
Issue: Whether or not the robbery in pawnshop resulting to the loss of pawned jewelry can be considered as Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or
fortuitous event thereby excusing liability of Sicam and Corporation. delay, and those who in any manner contravene the tenor thereof, are liable for damages.29
Held: NO. Article 1174 of the Civil Code provides: Article 2123 of the Civil Code provides that with regard to pawnshops and other establishments which are
Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by engaged in making loans secured by pledges, the special laws and regulations concerning them shall be
stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be observed, and subsidiarily, the provisions on pledge, mortgage and antichresis.
responsible for those events which could not be foreseen or which, though foreseen, were The provision on pledge, particularly Article 2099 of the Civil Code, provides that the creditor shall take care
inevitable. of the thing pledged with the diligence of a good father of a family. This means that petitioners must take care
Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It is therefore, not of the pawns the way a prudent person would as to his own property.
enough that the event should not have been foreseen or anticipated, as is commonly believed but it must be one In this connection, Article 1173 of the Civil Code further provides:
impossible to foresee or to avoid. The mere difficulty to foresee the happening is not impossibility to foresee Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is
the same. 22 required by the nature of the obligation and corresponds with the circumstances of the persons, of
To constitute a fortuitous event, the following elements must concur: (a) the cause of the unforeseen and time and of the place. When negligence shows bad faith, the provisions of Articles 1171 and 2201,
unexpected occurrence or of the failure of the debtor to comply with obligations must be independent of paragraph 2 shall apply.
human will; (b) it must be impossible to foresee the event that constitutes the caso fortuito or, if it can be If the law or contract does not state the diligence which is to be observed in the performance, that
foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it impossible for which is expected of a good father of a family shall be required.
the debtor to fulfill obligations in a normal manner; and, (d) the obligor must be free from any We expounded in Cruz v. Gangan30 that negligence is the omission to do something which a reasonable man,
participation in the aggravation of the injury or loss. 23 guided by those considerations which ordinarily regulate the conduct of human affairs, would do; or the doing
The burden of proving that the loss was due to a fortuitous event rests on him who invokes it. 24 And, in of something which a prudent and reasonable man would not do. 31 It is want of care required by the
order for a fortuitous event to exempt one from liability, it is necessary that one has committed no circumstances.
negligence or misconduct that may have occasioned the loss. 25 A review of the records clearly shows that petitioners failed to exercise reasonable care and caution that an
It has been held that an act of God cannot be invoked to protect a person who has failed to take steps to ordinarily prudent person would have used in the same situation.
forestall the possible adverse consequences of such a loss. One's negligence may have concurred with an act of
Amen | Compiled Notes
Case: Manila Electric Company vs. Matilde Ramoy, March 4, 2008. each. The agreement was not reduced into writing. To get the production underway, the petitioner deposited to
Facts: In 1987, NPC filed with MTC of Quezon City a case for ejectment against several persons allegedly respondent’s dollar account with Westmont Bank, as full payment. However, despite payment, petitioner did
illegally occupying its properties in Baesa, QC. Among the defendants were the Ramoys. The MTC ordered not receiver any boxes. Petitioner wrote demand letter for reimbursement from respondent. On February 19,
the demolition of the buildings and structures. On June 20, 1990, NPC wrote Meralco requesting the latter to 2001, respondent replied that the boxes had been completed as early as April 3, 1998 and that petitioner failed
immediately disconnect electric power supply to all residential and commercial establishments in the subject to pick them up from the former’s warehouse 30 days from completion, as agreed upon. Respondent
land. Hence, Meralco comply with the same. In due time, the electric service connection of the plaintiffs was mentioned that petitioner even placed an additional order of 24,000 boxes, out of which, 14,000 had been
disconnected. Upon the conduct of disconnection, respondents herein were contesting that the property were manufactured without any advanced payment from petitioner. Respondent then demanded petitioner to remove
not under NPC properties. The same lead the respondents to vacate the premises. However, during ocular the boxes from the factory and to pay the balance of US$15,400.00 for the additional boxes and P132,000.00
inspection ordered by the court, it was found out that the residence of the Ramoy’s were outside NPC’s as storage fee. On August 17, 2001, petitioner filed a Complaint for sum of money and damages against
properties. RTC dismiss complaint for damages against Meralco but instead ordered the latter to restore respondent. RTC ruled that respondents did not commit any breach of faith that would justify rescission of the
electric power supply to respondents. Hence, respondents appealed to CA. CA held Meralco liable for contract and the consequent reimbursement. CA denied the appeal of petitioner.
damages. Issue: Whether or not the respondent is liable for reimbursement of the payment made by petitioner.
Issue: Whether Meralco is held liable for damages to the Respondents. Held: NO. Petitioner’s claim for reimbursement is actually one for rescission (or resolution) of contract under
Held: YES. MERALCO admits6 that respondents are its customers under a Service Contract whereby it is Article 1191 of the Civil Code, which reads:
obliged to supply respondents with electricity. Nevertheless, upon request of the NPC, MERALCO Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should
disconnected its power supply to respondents on the ground that they were illegally occupying the NPC's right not comply with what is incumbent upon him.
of way. Under the Service Contract, "[a] customer of electric service must show his right or proper interest The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of
over the property in order that he will be provided with and assured a continuous electric damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should
service."7 MERALCO argues that since there is a Decision of the Metropolitan Trial Court (MTC) of Quezon become impossible.
City ruling that herein respondents were among the illegal occupants of the NPC's right of way, MERALCO The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
was justified in cutting off service to respondents. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in
Clearly, respondents' cause of action against MERALCO is anchored on culpa contractual or breach of accordance with Articles 1385 and 1388 and the Mortgage Law.
contract for the latter's discontinuance of its service to respondents under Article 1170 of the Civil Code which The right to rescind a contract arises once the other party defaults in the performance of his obligation. In
provides: determining when default occurs, Art. 1191 should be taken in conjunction with Art. 1169 of the same law,
Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and which provides:
those who in any manner contravene the tenor thereof, are liable for damages. Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or
In Radio Communications of the Philippines, Inc. v. Verchez,8 the Court expounded on the nature of culpa extrajudicially demands from them the fulfillment of their obligation.
contractual, thus: However, the demand by the creditor shall not be necessary in order that delay may exist:
"In culpa contractual x x x the mere proof of the existence of the contract and the failure of its compliance (1) When the obligation or the law expressly so declares; or
justify, prima facie, a corresponding right of relief. The law, recognizing the obligatory force of contracts, (2) When from the nature and the circumstances of the obligation it appears that the designation
will not permit a party to be set free from liability for any kind of misperformance of the contractual of the time when the thing is to be delivered or the service is to be rendered was a controlling
undertaking or a contravention of the tenor thereof. A breach upon the contract confers upon the injured party motive for the establishment of the contract; or
a valid cause for recovering that which may have been lost or suffered. The remedy serves to preserve the (3) When demand would be useless, as when the obligor has rendered it beyond his power to
interests of the promissee that may include his "expectation interest," which is his interest in having the benefit perform.
of his bargain by being put in as good a position as he would have been in had the contract been performed, or In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in
his "reliance interest," which is his interest in being reimbursed for loss caused by reliance on the contract by a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation,
being put in as good a position as he would have been in had the contract not been made; or his "restitution delay by the other begins.
interest," which is his interest in having restored to him any benefit that he has conferred on the other party. In reciprocal obligations, as in a contract of sale, the general rule is that the fulfillment of the parties’
Indeed, agreements can accomplish little, either for their makers or for society, unless they are made the basis respective obligations should be simultaneous. Hence, no demand is generally necessary because, once a party
for action. The effect of every infraction is to create a new duty, that is, to make recompense to the one who fulfills his obligation and the other party does not fulfill his, the latter automatically incurs in delay. But when
has been injured by the failure of another to observe his contractual obligation unless he can show extenuating different dates for performance of the obligations are fixed, the default for each obligation must be determined
circumstances, like proof of his exercise of due diligence x x x or of the attendance of fortuitous event, to by the rules given in the first paragraph of the present article, 19 that is, the other party would incur in delay
excuse him from his ensuing liability.9 (Emphasis supplied) only from the moment the other party demands fulfillment of the former’s obligation. Thus, even in reciprocal
Article 1173 also provides that the fault or negligence of the obligor consists in the omission of that diligence obligations, if the period for the fulfillment of the obligation is fixed, demand upon the obligee is still
which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the necessary before the obligor can be considered in default and before a cause of action for rescission will
time and of the place. The Court emphasized in Ridjo Tape & Chemical Corporation v. Court of Appeals10 that accrue.
"as a public utility, MERALCO has the obligation to discharge its functions with utmost care and diligence."11 Evident from the records and even from the allegations in the complaint was the lack of demand by
The Court agrees with the CA that under the factual milieu of the present case, MERALCO failed to petitioner upon respondent to fulfill its obligation to manufacture and deliver the boxes. The Complaint
exercise the utmost degree of care and diligence required of it. To repeat, it was not enough for only alleged that petitioner made a "follow-up" upon respondent, which, however, would not qualify as
MERALCO to merely rely on the Decision of the MTC without ascertaining whether it had become final a demand for the fulfillment of the obligation. Petitioner’s witness also testified that they made a follow-
and executory. Verily, only upon finality of said Decision can it be said with conclusiveness that up of the boxes, but not a demand. Note is taken of the fact that, with respect to their claim for
respondents have no right or proper interest over the subject property, thus, are not entitled to the reimbursement, the Complaint alleged and the witness testified that a demand letter was sent to
services of MERALCO. respondent. Without a previous demand for the fulfillment of the obligation, petitioner would not have a
cause of action for rescission against respondent as the latter would not yet be considered in breach of
Case: Solar Harvest, Inc. vs. Davao Corrugated Carton Corporation, July 26, 2010. its contractual obligation.
Facts: In the first quarter of 1998, Petitioner entered into an agreement with Davao Corp. for the purchase of
corrugated carton boxes specifically designed for petitioner’s business of exporting fresh bananas at US1.10
Amen | Compiled Notes
Even assuming that a demand had been previously made before filing the present case, petitioner’s were issued by NGSC, duly signed by the ship's checker and a representative of private respondent. When
claim for reimbursement would still fail, as the circumstances would show that respondent was not Semirara inspected the shipment at house, it discovered that the bundle of PC8U blades was missing. From
guilty of breach of contract. those facts, the Court observed:
The existence of a breach of contract is a factual matter not usually reviewed in a petition for review under x x x The relationship therefore between the consignee and the arrastre operator must be examined. This
Rule 45.20 The Court, in petitions for review, limits its inquiry only to questions of law. After all, it is not a relationship is much akin to that existing between the consignee or owner of shipped goods and the common
trier of facts, and findings of fact made by the trial court, especially when reiterated by the CA, must be given carrier, or that between a depositor and a warehouseman [22 ]. In the performance of its obligations, an arrastre
great respect if not considered as final.21 In dealing with this petition, we will not veer away from this doctrine operator should observe the same degree of diligence as that required of a common carrier and a
and will thus sustain the factual findings of the CA, which we find to be adequately supported by the evidence warehouseman as enunciated under Article 1733 of the Civil Code and Section 3(b) of the Warehouse
on record. Receipts Law, respectively. Being the custodian of the goods discharged from a vessel, an arrastre
As correctly observed by the CA, aside from the pictures of the finished boxes and the production report operator's duty is to take good care of the goods and to turn them over to the party entitled to their
thereof, there is ample showing that the boxes had already been manufactured by respondent. possession. (Emphasis supplied)
There is a distinction between an arrastre and a stevedore. Arrastre, a Spanish word which refers to hauling of
Case: Mindanao Terminal and Brokerage Service, Inc. vs. Phoenix Assurance Company of New cargo, comprehends the handling of cargo on the wharf or between the establishment of the consignee or
York/MCGEE & Co., Inc., May 8, 2009. shipper and the ship's tackle. The responsibility of the arrastre operator lasts until the delivery of the cargo to
Facts: Del Monte Philippines, Inc. (Del Monte) contracted petitioner Mindanao Terminal and Brokerage the consignee. The service is usually performed by longshoremen. On the other hand, stevedoring refers to the
Service, Inc. (Mindanao Terminal), a stevedoring company, to load and stow a shipment of 146,288 cartons of handling of the cargo in the holds of the vessel or between the ship's tackle and the holds of the vessel. The
fresh green Philippine bananas and 15,202 cartons of fresh pineapples belonging to Del Monte Fresh Produce responsibility of the stevedore ends upon the loading and stowing of the cargo in the vessel.
International, Inc. (Del Monte Produce) into the cargo hold of the vessel M/V Mistrau. The vessel was docked It is not disputed that Mindanao Terminal was performing purely stevedoring function while the private
at the port of Davao City and the goods were to be transported by it to the port of Inchon, Korea in favor of respondent in the Summa case was performing arrastre function. In the present case, Mindanao Terminal, as a
consignee Taegu Industries, Inc. Del Monte Produce insured the shipment under an "open cargo policy" with stevedore, was only charged with the loading and stowing of the cargoes from the pier to the ship’s cargo hold;
private respondent Phoenix Assurance Company of New York (Phoenix), a non-life insurance company, and it was never the custodian of the shipment of Del Monte Produce. A stevedore is not a common carrier for it
private respondent McGee & Co. Inc. (McGee), the underwriting manager/agent of Phoenix. Mindanao does not transport goods or passengers; it is not akin to a warehouseman for it does not store goods for profit.
Terminal loaded and stowed the cargoes aboard the M/V Mistrau. The vessel set sail from the port of Davao The loading and stowing of cargoes would not have a far reaching public ramification as that of a common
City and arrived at the port of Inchon, Korea. It was then discovered upon discharge that some of the cargo carrier and a warehouseman; the public is adequately protected by our laws on contract and on quasi-delict.
was in bad condition. Del Monte Produce filed a claim under the open cargo policy for the damages to its The public policy considerations in legally imposing upon a common carrier or a warehouseman a higher
shipment. RTC dismissed the complaint. CA reversed. The same court ordered Mindanao Terminal to pay degree of diligence is not present in a stevedoring outfit which mainly provides labor in loading and stowing of
Phoenix and McGee "the total amount of $210,265.45 plus legal interest from the filing of the complaint until cargoes for its clients.
fully paid and attorney’s fees of 20% of the claim."11 It sustained Phoenix’s and McGee’s argument that the In the third issue, Phoenix and McGee failed to prove by preponderance of evidence25 that Mindanao Terminal
damage in the cargoes was the result of improper stowage by Mindanao Terminal. It imposed on Mindanao had acted negligently. Where the evidence on an issue of fact is in equipoise or there is any doubt on which
Terminal, as the stevedore of the cargo, the duty to exercise extraordinary diligence in loading and stowing the side the evidence preponderates the party having the burden of proof fails upon that issue. That is to say, if the
cargoes. It further held that even with the absence of a contractual relationship between Mindanao Terminal evidence touching a disputed fact is equally balanced, or if it does not produce a just, rational belief of its
and Del Monte Produce, the cause of action of Phoenix and McGee could be based on quasi-delict under existence, or if it leaves the mind in a state of perplexity, the party holding the affirmative as to such fact must
Article 2176 of the Civil Code. fail.26
Issue: Whether or not Mindanao Terminal is liable for damages for its failure to exercise extraordinary It was further established that Mindanao Terminal loaded and stowed the cargoes of Del Monte Produce
diligence in loading and stowing the cargoes. aboard the M/V Mistrau in accordance with the stowage plan, a guide for the area assignments of the goods in
Held: NO. We adopt the findings of the RTC, which are not disputed by Phoenix and McGee. The only the vessel’s hold, prepared by Del Monte Produce and the officers of M/V Mistrau.
participation of Mindanao Terminal was to load the cargoes on board M/V Mistrau. It was not disputed by
Phoenix and McGee that the materials, such as ropes, pallets, and cardboards, used in lashing and rigging the Illustrations:
cargoes were all provided by M/V Mistrau and these materials meets industry standard. 1. Why would a party to an obligation be liable? If there was FRAUD, NEGLIGENCE, DELAY or
The resolution of the two remaining issues is determinative of the ultimate result of this case. ANY OTHER MATTER OF CONTRAVENTION.
Article 1173 of the Civil Code is very clear that if the law or contract does not state the degree of a. ARRIETA vs. NARIC: As long as there is contravention of the tenor even there was
diligence which is to be observed in the performance of an obligation then that which is expected of a no fraud, negligence or delay there is liability. But is it correct to say that only debtors
good father of a family or ordinary diligence shall be required. Mindanao Terminal, a stevedoring may be held liable for damages? No, even creditors may be held liable. In Article 1170,
company which was charged with the loading and stowing the cargoes of Del Monte Produce aboard M/V the law says that those who are guilty of fraud. It did not say that debtors who are
Mistrau, had acted merely as a labor provider in the case at bar. There is no specific provision of law that guilty of fraud. In fact, in the past bar exams, there was a problem where the creditor
imposes a higher degree of diligence than ordinary diligence for a stevedoring company or one who is was in delay and this is known as mora accipiende. How could the creditor be in delay?
charged only with the loading and stowing of cargoes. It was neither alleged nor proven by Phoenix and He is not the one to perform the obligation? Because if he refuses to accept without just
McGee that Mindanao Terminal was bound by contractual stipulation to observe a higher degree of diligence cause – this can be considered in delay. So what would the damages be suffered by the
than that required of a good father of a family. We therefore conclude that following Article 1173, Mindanao debtor? Plenty of reasons. In keeping the thing, in preserving the thing, in the transport
Terminal was required to observe ordinary diligence only in loading and stowing the cargoes of Del Monte of the thing if it needs to be delivered.
Produce aboard M/V Mistrau. The case of Summa Insurance Corporation v. CA, which involved the issue of b. FRAUD – A sold to B bottles of liquor which appears to be Fundador but in reality it is
whether an arrastre operator is legally liable for the loss of a shipment in its custody and the extent of its originally a Matador Brandy inside the bottle of Fundador. Was there fraud? YES. But is
liability, is inapplicable to the factual circumstances of the case at bar. Therein, a vessel owned by the National this fraud under under Article 1171? NO. This is not, because the fraud here speaks of
Galleon Shipping Corporation (NGSC) arrived at Pier 3, South Harbor, Manila, carrying a shipment consigned in the performance of the obligation. In the contract there is no fraud, but in the
to the order of Caterpillar Far East Ltd. with Semirara Coal Corporation (Semirara) as "notify party." The performance of the obligation there is fraud. In this problem, this is what you call
shipment, including a bundle of PC 8 U blades, was discharged from the vessel to the custody of the private CAUSAL FRAUD. Dolo Causante under Article 1338. Article 1344 – incidental
respondent, the exclusive arrastre operator at the South Harbor. Accordingly, three good-order cargo receipts
Amen | Compiled Notes
 fraud. As to the nature of this fraud- Article 1170, I would not use dolo here, because branch in the PBC. How did she do it? She filled up the original copy but the
DOLO is fraud in on obtaining consent, that pertains to deceit. Article 1170 – bad duplicate original has no account name, but the account number of the
faith/ malice. husbands’’ was there. Original was fully filled up with her husband’s account
i. The EFFECT OF FRAUD: name and number. So the bank would accept the amount of money for the
1. Article 1170 – would result in liability for damages. account of the husband and give back the duplicate original copy to the
2. Article 1338 – would result in the contract being considered to be secretary. Then the secretary allegedly would now fill up the original
VOIDABLE because there’s vitiation of consent but the injured duplicate and fill the account name with the name of the company to make it
party may be entitle to damages as well. appear that it was deposited in the account of the company. This happened
3. Article 1334 – would not result into a voidable contract but would several times not only once. Until the company discovered that their account
only result in the entitlement of the injured party to damages. was empty and so they sued the bank. Obviously it was the negligence of the
ii. Another example for fraud: bank officers that’s why the company suffered damages. Negligence in not
4. If A filed an action against B for damages, claiming that B insuring that the deposit slips were not fully filled up. Whose negligence is
committed fraud upon him causing damaged upon him, however, the proximate cause, whether it was the negligence if the officer of the bank
if B was able to prove to the court that A executed this document in accepting slips which are not fully filled up? In this case there was a
where he basically would say that ―I will not hold B liable for defense raised among other defenses, that the company had the last clear
whatever damage may be cause to me by B‖ – waiver. If there is chance in preventing this injury have they only exercised the diligence.
such a waiver proven. Will the action still prosper? It depends. If Why? The banks would give us monthly statement of accounts. The bank
the waiver was executed before the fraudulent act, that’s a said that if they only bothered to open their statement if accounts they would
waiver as to future frauds and such waiver is a void waiver and have notice that the money was not deposited to their account therefore there
can still recover. But if the waiver was executed after the would be no subsequent acts that followed causing them further injury. SC:
fraudulent act was committed with knowledge of the fraudulent The majority held the bank liable holding that it was the bank’s negligence
act, this of course would amount to condonation. How would you through its officers which is the direct and proximate cause except of one
know if this is a waiver as to future frauds? See the dates as to the justice who supported the doctrine of the last clear chance. I agree with the
date of the commission of the fraud and the date when the waiver majority only for one reason = because the banks are required to exercise the
was executed. highest degree of diligence in the performance of their obligations.
c. NEGLIGENCE- another name ―fault‖ which is really wrong. Article 2176- quasi- vii. Who else are required to exercise not the ordinary diligence or the diligence
delict is fault or negligence. So fault is different from negligence. Negligence is by of a good father of a family? Anyone if it is so stipulated. If not under the
omission. Fault may have intention. law, aside from banks, are common carriers. Doctors, public utilities like
i. ―CULPA ACQUILIANA or Quasi-delict‖ = CULPA is a broad term Meralco. In one case it was held that: Public utilities should exercise or are
covering broad term including fault and negligence. required to exercise the highest degree of diligence. But the recent rulings
ii. CULPA = is not intentional. There are four kinds of culpa. It can be on realty companies: are now required to exercise highest degree of
intentional or non-intentional. diligence.
iii. How would we know if an act is a negligent act or not? Negligence – Article viii. Degree of diligence corresponding to the circumstances of the person’s
1173. Parameters are there as to whether the act is negligent or not. The time and of the place. MUST REMEMEBER!! The best case: Cangco vs.
degree of diligence which should be observed in the performance of the MRR. Alighting from the moving vehicle was not a negligent act according
obligation. to the SC. Majority ruled it was not a negligent act. I agree with the majority
iv. If a person is invoking fortuitous event, for it to be a valid defense, there considering the circumstances as to the person, the time, and the place. Why?
must not be a concurrent negligence on his part. SC ruled that Cangco because he was at his prime, he was just around 20’s, it
v. Telefast vs. Castro Case – This involves negligence because the heirs are is okay for him to jump from the train even when the train is still running.
claiming moral damages, but this is a contract, the sending of the telegram And not only that, he was every much familiar with the train and train station
which was not received by the heirs, but for moral damages to be awarded for he was riding it every day for years. Here the time mattered, as to the
resulting from a contract; breach of contract, the law requires for one to negligence f the employees because it turned out that it was the negligence
disregard the obligations. Telefast: we are not negligent because the failure of the employees of the MRR is the approximate and direct cause. Why?
of sending the telegram was not due to our fault but due to a fortuitous event, Because they placed sacks of melon in the platform of the station near the
it was due to atmospheric pressure and its beyond are control. SC: Telefast doors where the trains are stopping for the passengers to alight that is why
failed to notify Sophia, the one who sent the telegram. The failure to do so Cangco slipped and one of his hand went under the train. Cangco wasn’t able
was a gross negligence act. And in our jurisprudence, gross negligence act to see the sacks of melon because the station was not well lit. But there was
amounts to bad faith. Hence, there is already a ground for the award of moral proof here presented by Cangco that, (On its face the dissenting opinion
damages. You have to determine the degree of negligence whether it is seems to be correct that alighting from a moving train per se is a negligent
only a simple negligence or a grossly negligent act in relation to act, because the argument, had he not alighted while the train was moving
liabilities. and waited for the train to go to a full stop then he would not have been
vi. Negligence in torts and damages is still the same in Article 1173. In the case injured, parang tamang argument dba? But I think this argument is wrong. It
of Philippine Bank of Commerce vs. CA: This plaintiff company authorize was not a scenario that the train was at a full stop, the scenario is that the
a secretary to deposit a sum of money to its account in a branch of the PBC. train was still moving so given the scenario, was the act a negligent act? No.
Now, the secretary is not an executive secretary just an ordinary one, Why? Another passenger alighted the train ahead of Cangco, the train was
however, instead of depositing the money to the account of the company, the still moving faster even when the train was moving fast, was this passenger
secretary deposited the sum of money to her husband’s account in the same injured? No. So that was not the reason, alighting form the moving vehicle
Amen | Compiled Notes
 per se. It was the negligence of the employees of the MRR who put the
sacks of melon in the platform which resulted from injury. Cangco was also
a male, has he been a female then that would be a negligent act because of
the clothes the women wear at that time are kimonos.
ix. Stevedoring company, is it required to exercise? Only Ordinary Diligence.
d. DELAY – is also called mora, default. Delay on the part of both parties, AGCAOILI
CASE – even assuming in delay na si Agcaolli because he refused to accept, GSIS was
also in delay because it failed to deliver habitable house. He was asked to deliver a
house, but instead he delivered a structure with a roof. The court did not agree even in
the agreement it was said ―a house‖, it should be a habitable house. Even assuming that
Agcaoilli was in delay, in contemplation of the law no one was in delay, so was the
GSIS correct in cancelling the contract? No, because Agcaoilli was not in delay.
x. When would there be delay? As a rule when there is already DEMAND. NO
DEMAND NO DELAY. But there are Exceptions:
5. If so stipulated. E.g. credit card agreement. Without need of
demand. For a demand to be valid the demand must be made
when the obligation is already due. If you demand when the
obligation is not yet due – not a proper demand because the
obligation is not yet due and demandable. No particular form as
to how to make a demand. But lawyers will never make a demand
verbally because of evidentiary purposes. Follow-up – is it a
valid demand? NO. Demand is where you require the
performance not just a follow-up. Request – not a demand as
well.
6. The law so provides. E.g. Agency. Like if the agent
misappropriated a sum of money, will he be liable already for
interest? From the time he misappropriated or from the time the
demand was made? From the time he misappropriated because
the law so provides. Even there was not yet any demand.
7. Demand will be useless due to the fault of the debtor. Due to the
fault of the debtor, in order for the demand not necessary so that
delay will not set in.
8. In reciprocal obligations, the last paragraph Article 1169, ―one of
the parties had already complied and the other had not complied,
and the one who had not complied will already be considered in
delay even if there was no demand‖ having said that, do not read
it literally. SC has held that, this is subject to the stipulation of
the parties.
a. Like in a sale, obligations of the parties are reciprocal,
the seller has already delivered and the buyer has not
yet paid, does it mean that the buyer is already in
delay? Not necessarily, they may have agreed that the
buyer will only pay after the period of one year. So
before that, you cannot be considered in delay. This is
one of the exceptions in the rule to demand under
Article 1169.

Amen | Compiled Notes