OBLIGATIONS AND CONTRACTS

CY 2022
PRELIMINARY EXAMINATION
MARCH 19, 2022 ( 8:30AM TO 10:30AM)
________________________________________________________________

INSTRUCTIONS

1. This Questionnaire contains SEVEN (7 ) pages including this page. Check the number
of pages and their proper sequencing. Read each question very carefully and write your
answers on your blank answer sheets in the same order as the questions. Example: Q1.
Q2. , etc.

This is a long exam but there are no surprise questions. Everything is in the outline (
cases, lecture, code, textbook). There are 20 questions in this exam for 120 minutes.
Manage your time wisely. Each question weighs 5 points. Stay calm. Read the
questions first.

2. Write your answers on a clean word format . Do not copy the questions. Note well
the allocated percentage points for each question or sub-question. In your answers, use
the numbering system in the questionnaire.

2. Answer the questions legibly, clearly, and concisely. When asked to enumerate, give
answers in a sentence form.

3. Your answer should demonstrate your ability to analyze the facts, apply the pertinent
laws and jurisprudence, and arrive at a sound or logical conclusion. Always support
your answer with the pertinent laws, rules, and/or jurisprudence.

A MERE "YES" OR "NO" ANSWER WITHOUT ANY CORRESPONDING EXPLANATION

OR DISCUSSION WILL NOT BE GIVEN FULL CREDIT.

THUS, ALWAYS BRIEFLY BUT FULLY EXPLAIN YOUR ANSWERS ALTHOUGH THE
QUESTION DOES NOT EXPRESSLY ASK FOR AN EXPLANATION. DO NOT REWRITE
OR REPEAT THE QUESTION ON YOUR NOTEBOOK.

4. Convert to PDF and turn-in to classwork page in the google classroom.

1
OBLIGATIONS AND CONTRACTS
CY 2022
PRELIMINARY EXAMINATION
MARCH 19, 2022 ( 8:30AM TO 10:30AM)
________________________________________________________________

Petitioner is a member of the national and cultural community belonging to the tribe
of Pagudpod and the registered owner of Lot 5 covered by Transfer Certificate of Title
(TCT) No. T-3653, with an area of 20,030 square meters.

Sometime in 1962, a two-hectare portion of the property was sold by the petitioner to
the Municipality of Pagudpod, through then Mayor Datu Aceron under a Deed of Sale
executed on July 18, 1962, which states:

“That for and in consideration of the sum of THREE THOUSAND PESOS (P3,000.00),
Philippine Currency, value to be paid and deliver to me, and receipt of which shall
be acknowledged by me to my full satisfaction by the MUNICIPAL GOVERNMENT
OF PAGUDPOD, represented by the Municipal Mayor, Datu Aceron, hereinafter
referred to as the VENDEE, I hereby sell, transfer, cede, convey and assign as by
these presents do have sold, transferred, ceded, conveyed and assigned, an area
of TWO (2) hectares, more or less, to and in favor of the MUNICIPAL GOVERNMENT
OF PAGUDPOD, his heirs, assigns and administrators to have and to hold forever
and definitely, which portion shall be utilized purposely and exclusively as a
GOVERNMENT CENTER SITE .

The respondent immediately took possession of the property and began construction
of the municipal building.

Thirty-nine (39) years later or on October 26, 2001, the petitioner filed a civil action for
Recovery of Possession of Subject Property and/or Quieting of Title thereon and
Damages against the respondent, represented by its Municipal Mayor, et al.

In his complaint, the petitioner alleged, among others, that the agreement was one to
sell, which was not consummated as the purchase price was not paid. In its answer,
the respondent denied the petitioner’s allegations, claiming, among others: that the
petitioner’s cause of action was already barred by laches and by prescription since it
has been in open, continuous and exclusive possession of the property for forty (40)
years.

Q1. Is the respondent correct? Answer with legal basis.

Yes, Respondent is correct to contend claim that Petitioner’s action has been barred by
laches .

In the similar case of Akang v. Municipality of Isulan, it has been discussed by the
Court that estoppel by laches is not to punish neglect of someone who sleeps on their
right but rather is to not recognized such when to do so would result to inequitable
situations.

In this case, Petitioner erred in his contention as it can be inferred from the wording of
the document that it is one of sale, they voluntarily entered into. More importantly,
even assuming Petitioner is correct in his contention, laches as a principle of equity
should attach in favor of Respondent for the unreasonable delay that it took Petitioner
to bring the suit before the courts.

Hence, Respondent is correct to assert that Petitioner’s cause of action is barred by

laches.

Q2. Distinguish Prescription from Laches.

In the case of Narciso v. Buenaventura, the Court has discussed how Prescription
differs from Laches.

Prescription is concerned with the Fact of Time or period by which one losses a right to
bring forth a cause of action, while laches deals with the effect of the lapse of time.

Prescription is statutory; its basis can be found in law, while laches is not; it is a
principle of equity that is to be adjudged or decided by the courts on a case to case
basis. In other words, Prescription is fixed, while laches is not.

II

The case originated from a complaint for acknowledgment and partition filed on
September 8, 1960 with the then Court of First Instance of Manila by the herein private
respondent, a minor, 18 years of age, assisted by his mother, Andrea Jongco, as his
natural guardian, against the herein petitioners.

In the Complaint, private respondent alleged, in substance, that in 1941 his alleged
father, Antonio C. Alberto, and his mother, Andrea Jongco, lived together as husband
and wife and as a result of which, he was born on September 10, 1942; that on or about
the year 1944, his father and mother separated, and subsequently, his father married
herein petitioner Natividad del Rosario; As a result of the marriage, two (2) children were
born herein petitioners Lourdes Alberto and Antonio Alberto, Jr.

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OBLIGATIONS AND CONTRACTS
CY 2022
PRELIMINARY EXAMINATION
MARCH 19, 2022 ( 8:30AM TO 10:30AM)
________________________________________________________________

On July 3, 1949, his father died, and without notice to him, petitioner Natividad del
Rosario Vda. de Alberto, on July 17, 1949, instituted before the Court an intestate
proceedings for the estate of his deceased father.

In the said intestate proceedings, petitioners deliberately omitted him as one of the heirs.
Accordingly, he prays that the petitioners be ordered to acknowledge him as the natural
child of Antonio C. Alberto; that his one-fourth share be turned over to him; and that
petitioners be sentenced to pay him the sum of P5,000.00 as attorney's fee and the cost
of suit

On September 21, 1960, petitioners filed a Motion to Dismiss on the ground that the
cause of action is already barred by the statute of limitation.

Q3. Does prescription run against the respondent in the case despite his
minority? Rule with reason.

Yes, prescription runs against the minor respondent.

Art 1108 of the Civil Code provides that prescription does not run against minors and
incapacitated persons. However, it also provides for the qualifier that it shall, if the
minor has a parent or administrator or legal representative. In the case of Vda. De
Alberto v. CA, the Court ruled that the cause of action of the minor respondent is
barred by prescription and laches because of the inaction of his mother for years.

With the exception provided by law that prescription runs against minors with parents,
the unreasonable delay in filing this cause of action by the minor and Andrea, should
not prosper.

Q4. Distinguish between acquisitive and extinctive prescription.

The following are distinctions between acquisitive and extinctive prescription:

Acquisitive prescription is acquiring ownership or other real rights through the lapse of
time and satisfying the conditions laid down by law, which are that the possession is in
the concept of an owner, public, peaceful, uninterrupted and adverse. In this mode of
prescription it is also important to note the other requisites which are the capability of
one to acquire, and of one to lose through prescription, the object being subject to
prescription, and of course, lapse of period required.

On the other hand, extinctive prescription, also known as statute of limitations is

where one loses right to bring cause of action for the lapse of time within which certain
actions may be brought before courts.

III-A

Respondents Ayala Land, Robinsons, and Shangri-la maintain and operate shopping
malls in various locations in Metro Manila. Respondent SM Prime constructs, operates,
and leases out commercial buildings and other structures. The shopping malls operated
or leased out by respondents have parking facilities for all kinds of motor vehicles for a
fee.

Respondent SM Prime thereafter received information that, pursuant to Senate

Committee Report No. 225, the DPWH Secretary and the local building officials of
Manila, Quezon City, and Las Piñas intended to institute, through the OSG, an action
to enjoin respondent SM Prime and similar establishments from collecting parking fees,
and to impose upon said establishments penal sanctions under Presidential Decree No.
1096, otherwise known as the National Building Code of the Philippines (National
Building Code), and its Implementing Rules and Regulations.

Respondent argued there is nothing in the law cited which even pertain to the collection
or non-collection of parking fees. In fact, the term parking fees cannot even be found at
all in the entire National Building Code and its IRR. So what is provided there is just for
the size of parking area and that there should be one parking slot for every 100 sqm.

Q5. Decide with reason whether the respondents have the obligation to provide
free parking spaces to their customers.

No, Respondents are not in any obligation to provide free parking spaces to their
customers.

In the similar case of OSG v. Ayala Corp et. al., the Court in ruling so explains that Art
1157 of the Civil Code provides for the sources of Obligations, to wit; Law, Contract,
Quasi-contract, Delict and Quasi-delict. In this case, this is to be read with Art. 1158
that obligations from law are not be presumed. Absent any expressed provision, the
OSG cannot compel them to provide free parking spaces to their customers, lest it
becomes unlawful or forcible taking of property.

To stress, Respondents have a cannot be compelled to provide parking spaces to

customers, as this alleged obligation is not found in any recognized sources of
obligation.
 III-B

Taxi driver D, driving recklessly, killed pedestrian P and his passenger Y.

Q6 : Discuss the source of obligation of D and of his employer to P and Y, and the
defense available to the employer.

The heirs of the killed pedestrian may claim damages through delict or quasi-delict.

If they choose through delict, it would be under the provisions of the Revised Penal
Code in relation with Reckless Imprudence resulting to homicide. Should this yield a
verdict of guilty, they are entitled to civil liability. Here, the employer does not have the
defense that he exercised due diligence of a good father of a family in selecting and
supervising his employees, his liability is primary. He is deemed to be liable for the
actions of his employee, and the obligations it incurs, predicated there is a final
judgment of conviction and that the driver is insolvent.

If through quasi-delict, all the heirs have to establish is that there is negligence on the
part of the driver. Through this source, the employer incurs vicarious liability. Under
Art 2180, CC, employers are liable for the negligence of their employees, with the
defense of due diligence of a good father of a family being available to him.

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OBLIGATIONS AND CONTRACTS
CY 2022
PRELIMINARY EXAMINATION
MARCH 19, 2022 ( 8:30AM TO 10:30AM)
________________________________________________________________

IV

Accused-appellant Benjamin Dela Cruz was tried and eventually convicted of five counts
of rape by the Regional Trial Court (RTC), Branch 25, in Naga City. The dispositive
portion reads as follows:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered finding,

the accused guilty beyond reasonable doubt in five (5) counts of rape, namely,
Crim. Cases Nos. 2004-0034, 2004-0035, 2004-0036, 2004-0037 and 2004-0038,
and hereby sentences him to suffer the penalty of Reclusion Perpetua and to pay
the complainant the sum of Php 50,000.00 as civil indemnity, Php 50,000.00 as
moral damages and Php 50,000.00 as exemplary damages, for each count.

The CA also affirmed the decision of the RTC. Accused appealed the decision before the
Supreme Court. While the appeal was still pending, the Court, on 24 April 2012, received
a Notice from the Bureau of Corrections advising it that accused-appellant had died at
the New Bilibid Prison Hospital.

Q7: Rule on the effect of the death of the accused as to the civil liability arising
from delict.

The civil liability of the accused arising from delict shall be extinguished.

In the similar case of People v. Galicia, the Court held that death extinguishes criminal
and civil liability ex-delicto of an accused upon his death during pendency of trial. If
there is a separate and distinct civil case against the accused, that could still continue
against the Accused’s heirs or state.
To be clear, death extinguishes the criminal and civil liability ex-delicto of an accused
upon his death.

Q8: Assuming the accused was acquitted, what is the effect of the acquittal of the
accused in so far as to his civil liability arising from the crime is concerned?

As further expounded by the Supreme Court in the same preceding case, assuming the
accused was acquitted because he is not the perpetrator of the act/omission
complained of, or should there be a categorical statement from the Court’s decision
that there is no civil liability, then no civil liability is incurred by defendant.

Should the acquittal be based on the fact that the evidence presented do not produce
proof beyond reasonable doubt, then the civil aspect of the case may still prosper, with
only mere preponderance of evidence required.

Plaintiffs and defendants entered into compromise agreement, where defendant would
pay the plaintiffs the amount of P 35,000 within 70 days from August 30, 1953. The
money to be paid would be from the sale or mortgage of the property co-owned by the
plaintiffs and defendants, 86% of the property owned by the plaintiffs and the remaining
14% is owned by the defendants. They agree that 36% of the property would be sold and
the proceeds will go to the plaintiffs or as payment of the defendants to the plaintiffs.

But after the lapse of 70 days defendants were not able to pay and they were not also
able to sell or mortgage the property because there was the plaintiffs who owned 86% of
the subject property did not execute the necessary authority.

Plaintiffs claims that defendants were already in default and moves for the execution of
the compromise agreement. Plaintiff alleged that the defendants did not ask from them
the authorization which constitute neglect and therefore, they are already in default of
their agreement.

Q9: Rule with reason whether the defendants were already in default of the
seventy (70) day period stipulated in the compromise agreement?

No, Defendants are not to be held in default.

Art 1169 (2) of the Civil Code, in reciprocal obligations, the party does not incur in
delay when the other does not comply or is not ready to comply in a proper manner
with what is incumbent upon him. From the moment the other party fulfills his
obligation, delay by the other begins.

As stated from the facts, the plaintiffs who owned 86% of the subject property did not
execute the necessary authority. Clearly, because of their non-compliance of the
necessary authority, the period of 70 days has not yet commenced, and so defendants
are not in default.

Q10: When does default begin?

Pursuant to the provisions of Art 1169 (2) of the Civil Code, in reciprocal obligations,
the party does not incur in delay when the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. From the moment the
other party fulfills his obligation, delay by the other begins.

VI
 4
OBLIGATIONS AND CONTRACTS
CY 2022
PRELIMINARY EXAMINATION
MARCH 19, 2022 ( 8:30AM TO 10:30AM)
________________________________________________________________

The Spouses Respondent bought a condominium unit from Petitioner and paid the
down payment and monthly amortizations. The total purchase price was P5,174,000.
The Spouses have already paid P2,198,000 when the construction works had stopped.
So the Spouses also stopped paying the monthly amortizations. Eventually, the
Spouses filed a case to recover what they have paid- for a refund of the payment. As a
matter of defense, the Petitioner attribute the delay to the 1997 Asian financial crisis
that befell the real estate industry, invoking Article 1174 . They maintained that they
cannot be held liable for a fortuitous event .

Q11. Decide with legal basis whether the Asian Financial Crisis constitute a
fortuitous event which would justify delay by Petitioners in the performance of
their contractual obligation.

No, the 1997 Asian Financial Crisis does not constitute a fortuitous event.

As held by the Court in the case of Fil-Eastern v, Sps Ronquillo, and as provided for by
Art 1174 CC, a fortuitous event which justifies delay is one that cannot be foreseen, or
if foreseen, is inevitable. Such economically unfortunate event cannot be considered as
a fortuitous event, as upon the nature of its industry, there’s assumption of risk.

Therefore, they must be held civilly liable for the delay they incurred.

Q12. Discuss the rule regarding fortuitous event and what conditions or
requisites must concur for such rule to apply?

In the case of Fil-Eastern v, Sps Ronquillo, the Court has discussed that a fortuitous
event is one which cannot be foreseen, or if foreseen, is inevitable. In cases of loss or
delay upon such events, the obligation shall be deemed fulfilled. These events are
usually Acts of God, Force de Majeure, or war.

The requisites that must concur for it to apply are the following:

1. That the event cannot be foreseen

2. That if foreseen, cannot be avoided.
3. Independent of any participation from the other party
4. Must render the condition impossible to e fulfilled.

VII

This controversy arose from a Complaint for Damages and Injunction with Preliminary
Injunction/Restraining Order4 filed on December 10, 1990 by herein respondent
Angel , with the RTC, Branch 27, Lapu-lapu City, Cebu, docketed as Civil Case No.
2365-L against the spouses Agapita and Jose the parents of petitioners.

On April 23, 1990, Agapita, with the consent of her husband Jose, entered into a
Contract to Sell with respondent Angel. Subsequently, the Contract to Sell was
purportedly "upgraded" into a Conditional Deed of Sale dated July 26, 1990 between the
same parties. Both the Contract to Sell and the Conditional Deed of Sale were annotated
on the title.

The provisions of the Conditional Deed of Sale pertinent to the present dispute are
quoted below:

1. The VENDOR for and in consideration of the sum of TWENTY[-]FIVE MILLION

PESOS (P25,000,000.00) payable as follows:

a. FIVE HUNDRED THOUSAND PESOS (P500,000.00) down payment upon the

signing of this agreement, receipt of which sum is hereby acknowledged in full from
the VENDEE.

b. The balance of TWENTY[-]FOUR MILLION FIVE HUNDRED THOUSAND PESOS

(P24,500,000.00) shall be payable in five separate checks, made to the order of
JOSE, the first check shall be for FOUR MILLION FIVE HUNDRED THOUSAND
PESOS (P4,500,000.00) and the remaining balance to be paid in four checks in the
amounts of FIVE MILLION PESOS (P5,000,000.00) each after the VENDEE has
successfully negotiated, secured and provided a Road Right of Way consisting of
12 meters in width cutting across Lot 10884 up to the national road, either by
widening the existing Road Right of Way or by securing a new Road Right of Way
of 12 meters in width. If however said Road Right of Way could not be negotiated,

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OBLIGATIONS AND CONTRACTS
CY 2022
PRELIMINARY EXAMINATION
MARCH 19, 2022 ( 8:30AM TO 10:30AM)
________________________________________________________________

the VENDEE shall give notice to the VENDOR for them to reassess and solve the
problem by taking other options and should the situation ultimately prove futile, he
shall take steps to rescind or cancel the herein Conditional Deed of Sale.

c. That the access road or Road Right of Way leading to Lot 10963 shall be the
responsibility of the VENDEE to secure and any or all cost relative to the acquisition
thereof shall be borne solely by the VENDEE. He shall, however, be accorded with
enough time necessary for the success of his endeavor, granting him a free hand
in negotiating for the passage.

BY THESE PRESENTS, the VENDOR do hereby agree to sell by way of herein

CONDITIONAL DEED OF SALE to VENDEE, his heirs, successors and assigns, the
real property described in the Original Certificate of Title No. 105 x x x.

5. That the VENDEE has the option to rescind the sale. In the event the VENDEE
exercises his option to rescind the herein Conditional Deed of Sale, the VENDEE
shall notify the VENDOR by way of a written notice relinquishing his rights over the
property.

Since Angel was not able to secure the road right of way the Spouses unilaterally rescind
the contract. Angel filed before the trial court an injunction against the Spouses. The
Spouses said that the obligation is void since it is based on the potestative condition
dependent on the part of the debtor to secure a real right of way.

Q13: Discuss with legal basis the contention of the Spouses.

The spouses erred in contending that the obligation is void as it is not a potestative
condition, but a mixed condition.

A potestative condition is one which is dependent purely on the will of the debtor, and
is therefore, void, as per Art 1182 of the Civil Code. In this case, the condition is to
secure a road right of way. This is not solely dependent on the will of the debtor alone,
as there are 3rd parties involved, who are the owners of the adjacent lot.

Since this is neither potestative, nor void, the spouses cannot unilaterally rescind the
contract.

Q14. Give the effects of potestative, casual and mixed conditions upon the
obligation.

A potestative condition is one which is solely dependent on the will of the debtor, and is
void. A Casual condition is void, as it is dependent on the will of 3rd parties; people npt
party to the contract. A mixed obligation is valid, and is dependent on the will of the
debtor and that of a third party.

VIII

Q15. Suppose that an obligation is subject to suspensive condition, but before the
fulfillment of the condition the object of the obligation was lost or it has
deteriorated, or improvements were made thereon, what is the effect of such loss,
or deterioration, or improvement if the condition is finally fulfilled?

If before the fulfillment of the condition, the object was lost:

a. without the fault of the debtor- the obligation shall be extinguished

b. through the fault of the debtor- he is obliged to pay damages

If before the fulfillment of the condition, the object deteriorates:

a. without the fault of the debtor- the impairment shall be borne by the creditor
b. through the fault of the debtor- the creditor may choose between rescission or
fulfillment plus damages in either case

If before the fulfillment of the condition, the object improves:

a. by time and its nature- the benefits inure to the creditor

b. with participation of debtor- no additional rights granted other than those granted by
usufructuary.

Q16. Distinguish between a condition and a term or period.

A condition is an event that must happen, while a period is date that must arrive.

A condition is uncertain, while a period is fixed.

 IX

A sold a parcel of land to B for P20,000. In the deed of sale, there is a stipulation that
the purchase price shall be paid on a certain date and that in case of failure to pay on
such a date, A can rescind the contract.

Q17. Suppose that B fails to pay on the date stipulated in the contract, is Article
1191 of the NCC applicable? Why?

Yes, A can rescind the contract.

In reciprocal obligations, the right to rescind may not attach if not for substantial
causes. But failure to pay consideration upon which the agreement is based upon
constitutes a substantial cause. However, note that in Tan v. CA, the Court held that
this shall be done with judicial declaration as one party alone cannot decide if there
really had been substantial cause for rescission.

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OBLIGATIONS AND CONTRACTS
CY 2022
PRELIMINARY EXAMINATION
MARCH 19, 2022 ( 8:30AM TO 10:30AM)
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Q18. What are the limitations to a tacit resolutory condition referred to in Art.
1191? State at least three (3).

The following are the limitations to a tacit resolutory condition:

1. Those the obligation or law expressly declares so

2. Those stipulated in the contract

X-A

A executed in favor of B a promissory note for P10,000, payable after two years, secured
by a mortgage on a certain building valued at P20,000. One year after the execution of
the note, the mortgaged building was totally destroyed by fire of accidental origin.

Q19. Can B demand from A the payment of the value of the note immediately
after the burning without waiting for the expiration of the term? Reasons.
Yes, Art 1198(5) of the NCC provides that obligations shall be demandable at once, in
cases of fortuitous events.

X-B

A sold his entire interest in 24,000 tons of iron ore to B for P75,000, P10,000 of which
was actually paid upon the signing of the contract. With respect to the balance of the
P65,000, it was agreed that it “will be paid from the first amount derived from the sale
of the ore.”

To insure payment thereof, B delivered to A a surety bond which provided that the
liability of the surety liability would automatically expire after the lapse of two years.
Inasmuch as the ore had not yet been sold and the surety bond had expired without
being renewed and the balance had not yet been paid un spite of repeated demands, A
finally brought an action against B for the recovery of said balance. B, however,
interposed the defense that his obligation to pay is conditional and that inasmuch as
the condition has not yet been fulfilled, therefore, it is not yet due and demandable.

Q20. Is this defense tenable?

No, his defense is not tenable.

In Gaite v. Fonacier, the Court held that the obligation was not of condition but of a
term. In 1198 of the NCC, a person loses his right to make use of a term if he fails to
furnish required securities and guaranties, or by his own acts impairs such securities
and guaranties.

Due to the expiration of the surety bond B initially secured, and the fact that he did
not furnish a new one, he can no longer make use of a term, and therefore, the
obligation is deemed to be demandable at once.

-END-