Master Digest Oblicon 1
Master Digest Oblicon 1
Master Digest Oblicon 1
Obligations]: Tanguilig v. CA 1.) The deep-well wasn’t part of the contract even though
deep-well and deep-well pumps were mentioned in the
Basic Story: Tanguilig was under a contract to build a windmill for contract, because, in their context, they were just used
Herce Jr., for 60K pesos with a one-year guarantee to account for descriptions for the specs of the windmill.
the windmill after its delivery and acceptance. After the delivery of 2.) Herce Jr. should’ve paid to Tanguilig, and not Pili. The
the windmill, Herce Jr. still had an outstanding balance of 15K deep-well was a separate agreement with Pili, not with
pesos. Moreover, the windmill was destroyed after a “strong Tanguilig.
wind” occurred (or a “typhoon” as alleged by Tanguilig). 3.) Tanguilig failed to prove that there was an actual typhoon.
4.) Tanguilig is still liable for repairing the windmill because
Herce Jr. said that he’s not obligated to pay the remaining 15K the contract contained a 1-year guarantee. Thus, Herce Jr.
because it was supposed to be credited when he paid Pili to cannot be said to be in default according to the last
construct a deep-well necessary for the windmill. Also, Herce paragraph of A1169: “neither party incurs in delay if the
should be made accountable for the broken windmill. other does not comply or is not ready to comply.” In his
case, Tanguilig still hasn’t complied with his obligation to
Tanguilig defended himself saying that it was not agreed upon in take care of the windmill as stipulated in the one-year
the contract that the deep-well was part of the 60K payment; and guarantee.
that the windmill broke because of a fortuitous event which
absolves him from liability after the windmill was already delivered Doctrine: Elements of a Fortuitous Event
(also stating that since Herce was in default, he should carry the four (4) requisites must concur:
liability of taking care of the windmill). a) the cause of the breach of the obligation must be
independent of the will of the debtor;
b) the event must be either unforeseeable or unavoidable;
c) the event must be such as to render it impossible for the
debtor to fulfill his obligation in a normal manner; and
d) the debtor must be free from any participation in or
aggravation of the injury to the creditor.
PBA now are seeking relief against United and Nakpil & Sons for Doctrine:
the payment of the entire building and lost profit, stating that the It is not enough that an Act of God occurred. It must be shown
building wouldn’t have incurred such damages if it were not for that the debtor must be free from any participation in or
the inadequacies and deviations of the plans and specifications of aggravation of the injury to the creditor.
the building.
See Also: Article 1723 Liability of Contractors, Engineers, and
United and Nakpil defended themselves that there are no settled Architects.
practice in the field of engineering and architecture to determine
which plans and specifications could mitigate the eventuality of
earthquakes. The minor defects could not have been a proximate
cause of the damages.
[Fortuitous Event, Force Majeure merits either suspension of the Ruling:
enforceable obligation or Termination of Contract, Effect of 1.) Recognizing the attempts of Cosmos in allowing Ace-Agro
Suspension is not Extension of Period to Deliver Prestation; A1231 to continue its service, the Court agrees with the CA that
Extinguishing of Obligations]: Ace-Agro v. CA the facts of the case did not merit a Termination of
Contract since there were still wood shells left to be
Basic Facts: Cosmos Bottling Corporation entered a contract with repaired.
Ace-Agro Development Corporation to clean soft drink bottles and 2.) What actually occurred is a suspension of the enforceable
repair wooden shells for the period of January 1, 1990 to obligation; and Cosmos didn’t have the obligation to
December 31, 1990. Ace-Agro had its operations based inside extend the period of their original contract beyond
Cosmos’s plant. But on April 1990 a fire broke out in Ace-Agro’s December 31.
plant, destroying Ace-Agro’s place of work as well as the bottles 3.) It was actually the fault of Ace-Agro that it incurred losses
and wooden shells to be worked on. because of its insistent refusal to continue its obligation in
the service contract.
Alleging that the object of the prestation was essentially rendered
impossible to continue, Cosmos terminated its contract with Ace- Doctrine:
Agro.
The stipulation that in the event of a fortuitous event or force
Ace-Agro asked Cosmos to continue their contract. Since Cosmos majeure the contract shall be deemed suspended during the said
took much time before it could reply, Ace-Agro laid off its workers period does not stop the running of the period the contract has
in the meantime. Cosmos eventually agreed to continue their been agreed upon to run.
contract as previously stipulated, with the exemption that ace-
Agro operate outside the plant. This was refuted by Ace-Agro It only relieves the parties from the fulfillment of their respective
because basing their operations elsewhere would lead to obligations during that time.
transportation costs that diminish their already minute profits.
Finally, Cosmos agreed to continue their contract as previously For Example: If during six of the thirty years fixed as the duration
stipulated back in the plant. Still, Ace-Agro refused in hopes of of a contract, one of the parties is prevented by force majeure to
actually extending their contract beyond December 31, 1990. perform his obligation during those years, he cannot after the
expiration of the thirty-year period, be compelled to perform his
Ace-Agro eventually brought this case against Cosmos for a breach obligation for six more years to make up for what he failed to
of contract when it illegally and arbitrarily terminated its service perform during the said six years, because it would in effect be all
contract – stating that the force majeure wasn’t enough to merit extension of the term of the contract. The contract is stipulated to
the contract to be extinguished. Cosmos on the other hand, run for thirty years, and the period expires on the thirtieth year;
defended that the termination of contract was valid because the the period of six years during which performance by one of the
object of their agreement had already been lost and destroyed. parties is prevented by force majeure cannot be deducted from
the period stipulated.
Class Notes:
“But don’t let this case confuse you. The AFC should’ve met all the
elements of a fortuitous event. But the Court didn’t want that to
be a precedent (which would then be available to other parties).
In this case, the COS were of the mistaken belief that CUSTODIO
had lost her "option" over the Beata property when she failed to
pay the remaining balance of $70,000.00 pursuant to their August
8, 1986 letter. In the absence of an express stipulation authorizing
the sellers to extrajudicially rescind the contract of sale, the COS
cannot unilaterally and extrajudicially rescind the contract of sale.
Suria v. IAC: “(Note the parties here had a Deed of Sale with
Mortgage.)
The Sellers have already parted with the title as evidenced by the
transfer certificate of title in the Buyer’s petitioners' name. The
buyer, in turn, fulfilled his end of the bargain when he executed
the deed of mortgage. The payments on an installment basis
secured by the execution of a mortgage took the place of a cash
payment.
Basic Facts: Pryce v. PAGCOR: (Note we first saw A1659 in the case of Chua v.
Victorio in holding that this article allows extrajudicial rescission)
PPC made representations with PAGCOR for the establishment of a
casino in Pryce Plaza Hotel in Cagayan de Oro City. After PAGCOR MAIN ISSUE: Did the Honorable Court of Appeals commit grave
determined that there would not be an unsurmountable aversion and reversible error by holding that Pryce was not entitled to
coming from the locals and LGU officials, they entered into a future rentals or lease payments for the unexpired period of the
Contract of Lease with PPC for 3 years. Contract of Lease between Pryce and PAGCOR?
The public was enraged and rallied against the casino. The 1. Were the provisions of Sections 20(a) and 20(c) of the
Sanguniang Panglungsod of CDO released two ordinances asserting Contract of Lease relative to the right of PRYCE to
a policy against casinos, and providing for the cancellation of terminate the Contract for cause and to moreover collect
business permits for such with violations for non-compliance. The rentals from PAGCOR corresponding to the remaining
Supreme Court later found these ordinances to be term of the lease valid and binding?
unconstitutional. 2. Did not Article 1659 of the Civil Code supersede Sections
20(a) and 20(c) of the Contract, PRYCE having 'rescinded'
Yet although PAGCOR still continued its operations for a while, the Contract of Lease?
they eventually had to stop after the advice of the Office of the
President and the continuing rallies against the casino. After PPC “The termination of a contract is not equivalent to its rescission.
sent PAGOCR on its intent to collect the full payment of rentals,
PAGCOR replied on Sept 20 that PAGCOR was no longer 1. When an agreement is terminated, it is deemed valid at
amendable for the full payment of rentals after it had no other inception. Prior to termination, the contract binds the
alternative but to TERMINATE the lease agreement due to the parties, who are thus obliged to observe its provisions.
vehement opposition to the casino – also they asked for a refund (Think Valid until Declared Void)
on the reimbursable rental deposits and the permanent (i) However, when it is rescinded, it is deemed
improvement on the Hotel parking lots. inexistent, and the parties are returned to their
status quo ante. Hence, there is mutual restitution
On Nov 25, PPC informed PAGCOR that PPC was terminating the of benefits received, in order to bring back the
contract of lease due to PAGCOR's continuing breach of the parties to their original situation prior to the
contract and further stated that it was exercising its rights under inception of the contract. (Think Void ab Initio)
the contract of lease pursuant to Article 20 (a) and (c). (think: “no
no no, you’re not quiting, I’m firing you” kind of situation) 2. The consequences of termination may be anticipated and
provided for by the contract. As long as the terms of the
contract are not contrary to law, morals, good customs,
public order or public policy, they shall be respected by
courts. The judiciary is not authorized to make or modify
contracts; neither may it rescue parties from
disadvantageous stipulations.
(ii) Courts, however, are empowered to reduce
iniquitous or unconscionable liquidated damages,
indemnities and penalties agreed upon by the
parties.
Solid Homes sold a subdivision lot to Spouses Tan. But when See also Issue on Prescription for Specific Performance:
Spouses Tan saw the land, there were a dire lack of basic utilities Article 1144 -- The following actions must be brought within ten
and there were nearby squatters. They went to HLURB to ask for years from the time the right of action accrues:
the specific performance to Solid Homes for the development of 1. (1) Upon a written contract;
the subject lot. But the Spouses Tan were given an option as well 2. (2) Upon an obligation created by law;
to have the Contract Resolved instead. If there was resolution, 3. (3) Upon a judgment (Emphasis supplied)
there would be mutual restitution.
In law, a cause of action exists when the following requisites
The contention is at what price should be used as the basis for the concur, to wit:
mutual restitution – purchase price with interest, fair market 1. ( 1 ) a right in favor of the plaintiff by whatever means and
value, or current market value. Spouses Tan was contesting that under whatever law it arises or is created;
Article 1385 should be applied instead, rather than Article 1190 for 2. (2) an obligation on the part on the defendant to respect
Resolutions. If you follow Article 1190, what’s supposed to be paid such right; and
is the Purchase Price – in which case Spouses Tan would be “lugi”. 3. (3) an act or omission on the part of such defendant
violative of the right of the plaintiff
It is only upon the happening of the last element when it can be
said that a cause of action has arisen. Under Article 1169 of the
Code, a party who is under obligation to do something incurs
delay only from the time that the obligee demands, either
judicially or extrajudicially, for the fulfillment of the obligation.
Hence, absent any demand from the obligee, the obligor does
not incur delay. And so long as the obligor does not incur in delay,
he cannot be said to be guilty of some omission violative of the
obligee's rights. Consequently, as long as the obligor is not guilty
of some omission violative of the obligee's rights, the latter has no
cause of action against the former. As a result, the prescriptive
period within which the obligee may bring an action against the
obligor does not commence to run until a demand is made.
RULE: The Court says that ALTHOUGH Article 1190 should apply
with a rescission in Article 1191, …
EXEMPTION: … IT WILL NOT BE APPLIED WHEN it will operate
unjustly, lead to absurd results, or contradict the evident meaning
of the statute taken as a whole.
Class Notes: The Court could’ve achieved the same fair ends
without breaking the rules of the Civil Code if they just awarded
the proper amount of Damages.
This contention is untenable. The act of leaving blank the due date
of the first installment did not necessarily mean that the debtors
were allowed to pay as and when they could. On the contrary, the
(A) Note expressly stipulated that the debt should be amortized
monthly in installments of P11,579 for twelve consecutive
months. While the specific date on which each installment would
be due was left blank, the Note clearly provided that each
installment should be payable each month.
Class Notes:
For tests, always know the magic words (“the stipulation would be
a purely potestative condition dependent solely to the will of the
debtor”)
In the case of UP, Tan, Co, and Nissan: the burden of the COST of
initial litigation is what’s important.
In a case where there’s a JVA between A (to give land) and B (to
fund for development) to create a township. B defaults,
considered as substantial breach.
In
1207 – Marsman Drysdale v. Philippine Geoanalytics In re: Relativity of Contracts; A1207 and A1208; Joint Liability
1222 BASIC FACTS:
Marsman Drysdale entered into a joint venture with Gotesco. Under relativity of contracts, what governs this issues is NOT the
Marsman provides the property lot, while Gotesco pays for the Joint Venture Agreement between Drysdale and Gotesco, but the
cash contribution. The JV then employed Phil Geo under technical Technical Service Contract entered by them jointly with Phil Geo.
service contract to perform geotechnical engineering (subsurface Thus, A1207 and A1208 says that absent any specifications, it is
soil exploration drilling). But the drilling could not be completely presumed in joint liability that the obligations are divided equally.
done because Drysdale didn’t clear out the debris from the site.
See also: A1797 (Joint Venture; Partnership Liability in Loss)
Phil Geo demanded their payment, but the JV still refused.
Drysdale said that it was Gotesco who is responsible for the cash
contributions. Gotesco says that it was Drysdale’s fault that Phil
Geo couldn’t do its job properly.
Always make sure that you take note of the words used in the
agreement. For example, using “I”, “each”, or “individually” would
indicate solidary liability (see p90)
Lafarge Cement v. Continental Cement In re: Obligations Arising from Tort; A1211
Basic Facts:
Continental filed for writ of attachment based on groundless Obligations may be classified as either joint or solidary. "Joint" or
claims, which compelled Lafarge to file a counterclaim (thereby "jointly" or "conjoint" means mancum or mancomunada or pro
spending money). Now Lafarge is seeking for damages. rata obligation; on the other hand, "solidary obligations" may be
used interchangeably with "joint and several" or "several." Thus,
petitioners' usage of the term "joint and solidary" is confusing and
ambiguous.
The general rule is that joint tort feasors are all the persons who
command, instigate, promote, encourage, advise, countenance,
cooperate in, aid or abet the commission of a tort, or who
approve of it after it is done, if done for their benefit. They are
each liable as principals, to the same extent and in the same
manner as if they had performed the wrongful act themselves.
Joint tort feasors are jointly and severally liable for the tort which
they commit. The persons injured may sue all of them or any
number less than all. Each is liable for the whole damages caused
by all, and all together are jointly liable for the whole damage.
Class Notes:
1. Tort is always solidary because Bad Faith is difficult to
apportion the degrees of liability between different
parties.
2. The defense of one solidary debtor can be used by the
other solidary debtors.
Boston Equity Resources v. CA In re: Jurisdiction; A1216 – Death of one Solidary Debtor
BASIC FACTS: Ruling:
1.) Motion to Dismiss was filed out of time. Lolita only filed
The contract between petitioner, and respondent and such 6 years and 5 months after submitting her Answer.
respondent's husband, states: FOR VALUE RECEIVED, I/We jointly Moreover, such motion was filed already after the
and severally (in solemn) promise to pay BOSTON EQUITY presentation of evidence. Lastly, this was her second
RESOURCES, INC. the sum of (P1,400,000.00). The provisions and motion to dismiss but on a different ground. In summary,
stipulations of the contract were then followed by the respective she is conducting dilatory tactics
signatures of respondent as "MAKER" and her husband as "CO- 2.) Yet, Lolita was not estopped from questioning the
MAKER." jurisdiction of the court.
a. P: There are Four Aspects of Jurisdiction:
Boston Equity filed a complaint for Sum of Money and Preliminary (i) Jurisdiction over Subject Matter
Attachment against Spouses Manuel and Lolita Toledo. At that (ii) Jurisdiction over the Parties
time, Manuel Toledo was already dead. So, the RTC granted (iii) Jurisdiction over the Issues of the Case
Boston’s plea to substitute Manuel with his children as heirs of his (iv) Jurisdiction over the Thing subject of Litigation
estate. Lolita, however, filed to dismiss the case on the ground b. R: Only issues of the (i) jurisdiction of subject matter
that: may be prone to estoppel.
(1) petitioner failed to implead an indispensable party (Estate c. A: In this case, what respondent was questioning in her
of Manuel) motion to dismiss was that court's jurisdiction over the
(2) the court did not acquire jurisdiction over Manuel person of defendant Manuel. The principles relating to
(3) the court erred in substituting Manuel with his children (ii) jurisdiction over the person of the parties are
RTC and CA granted the motion to dismiss, stating that: “courts pertinent herein. Thus, she is not estopped.
acquire jurisdiction over the person of the defendant . . . only 3.) Jurisdiction over the person of a defendant is acquired
when the latter voluntarily appeared or submitted to the court or through a valid service of summons; trial court did not
by coercive process issued by the court to him” – in this case acquire jurisdiction over the person of Manuel Toledo,
Manuel was already dead by the time Boston filed its complaint; since there was no valid service of summons upon him,
Manuel’s Estate should’ve been the one impleaded, not just the precisely because he was already dead even before the
wife. Also, issues of jurisdiction can be raised at any time during complaint against him and his wife was filed in the trial
the proceedings. court.
4.) R: An indispensable party is one who has such an interest
in the controversy or subject matter of a case that a final
adjudication cannot be made in his or her absence,
without injuring or affecting that interest.
a. C: The estate of Manuel is not an indispensable party
to the collection case, for the simple reason that the
obligation of Manuel and his wife, respondent herein,
is solidary.
b. F: The contract between petitioner, and respondent
and respondent's husband, states:
(i) FOR VALUE RECEIVED, I/We jointly and
severally 46 (in solemn) promise to pay
BOSTON EQUITY RESOURCES, INC. the sum of
(P1,400,000.00)
c. F: The provisions and stipulations of the contract were
then followed by the respective signatures of
respondent as "MAKER" and her husband as "CO-
MAKER."
d. LEGAL BASIS: Pursuant to Article 1216 of the Civil
Code, petitioner may collect the entire amount of the
obligation from respondent only.
(i) “The creditor may proceed against any one of
the solidary debtors or some or all of them
simultaneously. The demand made against one
of them shall not be an obstacle to those which
may subsequently be directed against the
others, so long as the debt has not been fully
collected."
DOCTRINE:
Article 1216 of the New Civil Code 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 debtors, he
(the creditor) may, if he so chooses, proceed against the surviving
solidary debtors without necessity of filing a claim in the estate of
the deceased debtors. It is not mandatory for him to have the
case dismissed as against the surviving debtors and file its claim
against the estate of the deceased solidary debtor.
Class Notes:
Filinvest entered into an agreement with Pacific Equipment W/N the liquidated damages agreed upon by the parties should
Corporation, to have the latter develop the former’s residential be reduced considering that:
subdivision consisting of two parcels of land. To ensure faithful a.) time is of the essence of the contract;
compliance, Pacific posted two Surety Bonds issued by Philippine b.) the liquidated damages was fixed by the parties to serve
American General Insurance. not only as penalty in case Pacific fails to fulfill its
obligation on time, but also as indemnity for actual and
Pacific failed to finish the contracted works despite being given anticipated damages which Filinvest may suffer by reason
three extensions. Filinvest wrote to Pacific that it intends to take of such failure; and
over the project itself, and that they will hold Pacific liable for c.) the total liquidated damages sought is only 32% of the
damages. total contract price (P12.47 Million) , and the same was
freely and voluntarily agreed upon by the parties.
Thus, Filinvest submitted its claim from Philamgen the bonds, but
the latter refused to acknowledge liability because Pacific still has Ruling:
not acknowledged liability therefore.
1. A penal clause is an accessory undertaking to assume
Pacific claims that its failure to finish was: greater liability in case of breach. It has a double function:
1.) inclement weather a. to provide for liquidated damages, and
2.) refusal of Filinvest to accept and pay for some of the b. to strengthen the coercive force of the obligation by
finished works the threat of greater responsibility in the event of
Further, Pacific alleged that Filinvest has already waived its right to breach.
claim damages when it gave extensions three times, and that it 2. Article 1226 of the Civil Code provides for such.
was estopped since they themselves didn’t want to pay the 3. General Rule: Courts are not at liberty to ignore the
progressing bills. freedom of the parties to agree on such terms and
conditions as they see fit as long as they are not contrary
After an ocular by an architect in the site, and review of the to law, morals, good customs, public order or public policy.
construction documents, the court found that: a. Exemption: Article 1229 of the Civil Code – courts may
1.) The work by Pacific, already paid by Filinvest, amounted to equitably reduce a stipulated penalty in the contract in
P11.8 Million two instances:
2.) The work left unpaid amounted to P1.94 Million, plus (i) if the principal obligation has been partly or
additional work done left unpaid amounted to P475K (total irregularly complied; and
P2.4 Million) (ii) even if there has been no compliance if the
3.) The work left to be done (repairs too) amounts to P532K penalty is iniquitous or unconscionable
Thus Net Dues to Pacific is: P1.88 Million 4. Application: Reduction is warranted because…
a. The project was already 94.53% complete and
Despite the dues, Pacific was still in delay. But the court however, b. Filinvest did agree to extend the period three times for
finds the claim of P3,990,000.00 in the form of penalty by reason completion of the project, which extensions Filinvest
of delay (P15,000.00/day from April 25, 1979 to Jan. 15, 1980) to included in computing the amount of the penalty
be excessive. 5. There are two types of Penalties in cases where there has
been neither partial nor irregular compliance with the
Thus, the court, the forfeiture of the amount due defendant from terms of the contract.
plaintiff appears to be already a reasonable penalty for the delay – a. Penalty in case of Breach (Up to Court Adjustment)
considering: b. Penalty imposed as Indemnity (Strict Enforcement of
1.) the amount of work already performed and Stipulation)
2.) the fact that plaintiff consented to three prior extensions. 6. But…
3.) P15,000 per day is an unconscionable penalty Art. 2226. Liquidated damages are those agreed upon by
the parties to a contract to be paid in case of breach
thereof.
Art. 2227. Liquidated damages, whether intended as an
indemnity or a penalty, shall be equitably reduced if they
are iniquitous or unconscionable..
(A sad twist in this case for Manuel was that he could not avail of
consignation to extinguish his obligation to MTLC, as PNB would
not release the proceeds of the loan unless and until Ester had
signed the deed of release/cancellation of mortgage, which she
unjustly refused to do. Hence, to compel Ester to accept the loan
proceeds and to prevent their mortgaged properties from being
foreclosed, the spouses Go Cinco found it necessary to institute
the present case for specific performance and damages.)
A1234- International Hotel Corporation v. Joaquin In re: Sources of Obligation to Pay Partial Fulfillment of Debtor’s
1235 Prestation; A1186, A1234, or Quantum Meruit?
BASIC FACTS: IHC argues that it should not be held liable because:
Francisco Joaquin entered into an agreement with the a. (a) it was Joaquin who had recommended Barnes; and
International Hotel Corporation for him to render technical b. (b) IHC's negotiation with Barnes had been neither
assistance in securing a foreign loan for the construction of a hotel, intentional nor willfully intended to prevent Joaquin from
to be guaranteed by the Development Bank of the Philippines. complying with his obligations.
After DBP approved the IHC’s application, Joaquin asked the IHC Ruling/Doctrine:
for a P500,000 payment for the services he had rendered and will
render, or alternatively 17,000 shares of stocks. The latter option Article 1186 and Article 1234 of the Civil Code cannot be the
was approved, with a P90K payment for the past services. source of IHC's obligation to pay respondents
Joaquin recommended Materials Handling Corp (principal Barnes Article 1186. The condition shall be deemed fulfilled when the
International) to the IHC as a foreign financer. While negotiations obligor voluntarily prevents its fulfillment.
ensued with Barnes, Joaquin and the Executive Director of IHC
negotiated with Weston International for financing as well. Rule: This article talks about constructive fulfillment of a
suspensive condition, whose application calls for two requisites,
But since Barnes failed to deliver the needed loan, IHC told DBP namely:
would instead submit Weston. Thus, DBP cancelled its previous a. (a) the intent of the obligor to prevent the fulfillment of
guarantee. the condition, and
b. (b) the actual prevention of the fulfillment.
Due to Joaquin’s failure to secure Barnes, IHC opted to cancel the
17,000 stock supposed to be in favor to Joaquin. Joaquin argues Application: Evidently, IHC only relied on the opinion of its
that this is improper since he was unable to fulfill 70% (phases 1-5 consultant in deciding to transact with Materials Handling and,
of 6) of his obligations fully only because the IHC was intruding in later on, with Barnes. In negotiating with Barnes, IHC had no
the negotiations with Barnes; and that they opted to submit intention, willful or otherwise, to prevent Joaquin and Suarez from
Barnes instead of Weston. meeting their undertaking
Article 1234.If the obligation has been substantially performed in
good faith, the obligor may recover as though there had been a
strict and complete fulfillment, less damages suffered by the
obligee.
Class Notes:
If you have an option that says, it is subject to negotiable terms
and conditions, then it’s not really a purely potestative stipulation.
The lessor cannot refuse the renewal of the term. The only thing
he can do is negotiate terms. But the exercise of option by the
lessor must follow the conditions to its exercise (ex. Periods to
exercise the right).
Rough Notes:
“The following actions must be brought within ten (10) years from
the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.“ (Art. 1144.)
“The following actions must be commenced within six (6) years: (1)
Upon an oral contract;
(2) Upon a quasi-contract.“ (Art. 1145.)
“The following actions must be instituted within four (4) years: (1)
Upon an injury to the rights of the plaintiff;
(2) Upon a quasi-delict.’’ (Art. 1146.)
Note: the “loan” here is (1) Carandang was not able to pay
plaintiff the agreed amount of the lease for a number of months
forcing the plaintiff to terminate lease; and (2) payment of
Carandang’s shares [The plaintiff owned the franchise, the radio
transmitter, the antenna tower, the building containing the radio
transmitter and other equipment. Verily, he would be placed in a
great disadvantage if he would still have to personally pay for the
shares of defendant Arcadio M. Carandang.]
The RTC and the Court of Appeals correctly ruled that the
petitioner's obligation has not been extinguished. The petitioner's
obligation consists of payment of a sum of money. In order for
petitioner's payment to be effective in extinguishing its obligation,
it must be made to the proper person. When payment is made to
the wrong party the obligation is not extinguished as to the
creditor who is without fault or negligence even if the debtor
acted in utmost good faith and by mistake as to the person of
the creditor or through error induced by fraud of a third person.
The respondent was able to establish that the LBP check was not
received by her or by her authorized personnel. The PNP's own
records show that it was claimed and signed for by Cruz.
Class Notes:
The lesson here is that the creditor has the option to go after
either the debtor for the payment, or the 3 rd party who received
the wrong payment
A1249
Tibajia v. Court of Appeals Issue:
W/N payment by means of check (even by cashier's check) is
BASIC FACTS: considered payment in legal tender as required by the Civil Code,
Republic Act No. 529, and the Central Bank Act
A suit for Collection of Sum of Money was rendered in favor of
Eden Tan against Spouses Tibajia for a total amount of Ratio:
P398,483.70, to which P442,750 was deposited as a bond with the
RTC (P300,000 of which was paid by Eden Tan). The latter then 1.) No. A check, whether a manager's check or ordinary check,
delivered to the Deputy Sheriff the total money via: is not legal tender, and an offer of a check in payment of a
1. P262,750 in cashier’s check of BPI, and debt is not a valid tender of payment and may be refused
2. P135,483.70 in cash. receipt by the obligee or creditor
a. LEGAL BASIS:
Eden Tan refused to accept the payment made by the Tibajia i. Article 1249.
spouses and instead insisted that the garnished funds deposited …The delivery of promissory notes payable to
with the cashier of the RTC be withdrawn to satisfy the judgment order, or bills of exchange or other mercantile
obligation. documents shall produce the effect of payment
only when they have been cashed, or when
Spouses Tibajia filed a motion to lift the writ of execution on the through the fault of the creditor they have been
ground that the judgment debt had already been paid. The motion impaired…
was denied by the trial court on the ground: ii. Section 1 of Republic Act No. 529
1. that payment in cashier's check is not payment in legal iii. Section 63 of Republic Act No. 265 (Central
tender, and Bank Act)
2. that payment was made by a third party other than the
defendant. ______
A1245 Luzon Development Bank v. Enriquez; and In re: PD 957 Protection of Tenants and Subdivision Buyers;
Delta Development and Management Services, Inc v. Enriquez and Dacion en Pago;
Luzon Development Bank Issues:
1.) W/N the Mortgage Contract is Valid – NO.
BASIC FACTS: 2.) W/N the Contract to Sell Conveys Ownership – NO.
3.) W/N the dacion en pago extinguished the loan obligation,
Luzon Development Bank (BANK) is a domestic financial such that DELTA has no more obligations to the BANK
corporation that extends loans to subdivision developers/owners. 4.) W/N the BANK is entitled to damages
4.) The real estate should subsist until full and final settlement
of such obligation pursuant to the guidelines set forth in
this Decision. Thereafter, the parties are free to negotiate
a renewal of either or both contracts, or to end any and all
of their contractual relations.
Class Note:
For a proper tender of payment, you should also (1) SHOW the
cash to (2) pay IMMEDIATELY.
State Investment House, Inc. v. CA In re: A2209; A1256; Monetary Interest runs until you properly
Consign
BASIC FACTS:
Issue:
Spouses RR Aquino are involved in three loans with State 1. W/N Spouses RR Aquino should pay the loan together
Investment House, Inc: with its interest, penalties, and other charges.
1.) Spouses RR Aquino, as an accommodation party, with
Spouses JM Aquino signed an Agreement (Account No. IF- Ruling:
82-1375-AA) with State Investment House for the purchase 1. It must be assumed that the lower court judge acted in
of Spouses JM Aquino of receivables amounting to accordance with the law. Thus:
P375,000.00. a. R1: A2209 of the Civil Code provides that the
2.) Spouses RR Aquino pledged shares to State Investment appropriate measure for damages in case of delay in
House to secure a loan of P120,000.00 (Account No. IF-82- discharging an obligation consisting of the payment of
0631-AA) a sum or money, is:
a. When it became due, Spouses RR Aquino paid the same i. the payment of penalty interest at the rate
partly with their own funds and partly from the agreed upon; and in the absence of a
proceeds of another loan which they obtained also stipulation of a particular rate of penalty
from petitioner State designated as Account No. IF-82- interest,
0904-AA. then the payment of additional interest at a
i. This new loan was secured by the same pledge rate equal to the regular monetary interest; and
agreement executed in relation to Account No. if no regular interest had been agreed upon,
IF-82-0631-AA. ii. then payment of legal interest
ii. This new loan had three components: b. R2: A1256 of the Civil Code provides that where the
(i) (a) principal of the loan in the amount of creditor unjustly refuses to accept payment, the
P110,000.00; debtor desirous of being released from his obligation
(ii) (b) regular interest in the amount of 17% must comply with two conditions in order to effect
per annum; and payment:
(iii) (c) additional or penalty interest in case i. (a) tender of payment; and
of non-payment at maturity, at the rate ii. (b) consignation of the sum due.
of 2% per month or 24% per annum. c. A: The fact that the respondent Aquino spouses were
not in default DID NOT mean that they, as a matter of
When the Account No. IF-82-0904-AA matured, State demanded law, were relieved from the payment not only of
payment. penalty interest but also of monetary interest.
1.) Spouses RR Aquino expressed their willingness to pay, and i. The monetary interest continued to accrue
requested that upon payment, the pledged shares would under the terms of the relevant promissory
be released note until actual payment is effected.
a. State refused the request on the ground that Account
No. IF-82-1375-AA remains unpaid. While they are properly regarded as having made a
i. A notice was then sent to Spouses RR Aquino written tender of payment to petitioner State, failed
that their pledged shares would be sold at a to consign in court the amount due at the time of the
public auction. maturity.
(i) Thus, Spouses RR Aquino filed a case
with the court alleging that the For the respondent spouses to continue in possession
foreclosure sale is illegal because: of the principal of the loan amounting to P110,000.00
1. State unjustly refused their payment and to continue to use the same after maturity of the
when they were able and willing to loan without payment of regular or monetary interest,
pay would constitute unjust enrichment
2. The pledged shares do not cover
Account No. IF-82-1375-AA d. C: Since Spouses RR Aquino were held NOT TO BE IN
3. State should release the shares upon DELAY, then they are only liable for:
payment of the Account No. IF-82- i. (a) the principal of the loan or P110,000.00; and
0904-AA without any interest, ii. (b) regular or monetary interest in the amount
penalties or other charges, since of 17% per annum.
Spouses RR shouldn’t be said to have iii. They ARE NOT liable for penalty interest
been in delay
The lower courts rendered their decision affirming Spouses RR’s Class Note: Relate this to case about the mortgage thing na may
contentions. But there was an ambiguity on what charges must be special power of attorney that allows the creditor to get the
paid based on the judge’s dispositive portion saying: payment of the loan if they release the mortgage – that case kasi
1.) “Ordering defendants to immediately release the pledge was PECULIAR. They said there that interest does not run – for
on, and to deliver to plaintiffs, the shares of stocks… upon some reason.
payment of plaintiffs loan”
Before the end of the period, Legaspi offered P25,000.00 again to Ruling/Doctrine:
repurchase the lots. 1. YES, Legaspi properly exercised his right to repurchase.
The tender of payment was refused by Salcedo saying that a. R: Consignation is not required to preserve the right of
he should be paid a higher amount because of the repurchase. A mere valid tender of payment is enough
devaluation of the currency. if made on time as a basis for an action to compel the
vendee to resell the property.
[1970] Legaspi consigned to the Court the sum of money on the b. A: The facts show that the right of repurchase was
last day of the period (October 15). Still, Salcedo refuses. seasonably exercised.
i. (1) Legaspi was able to make a valid tender of
payment during the redemption period by
offering personally the amount of P25,000.00
to the Legaspi who refused to accept it claiming
that the money was devalued.
ii. (2) Legaspi informed Salcedo that he will be
depositing the sum to the court
Heirs of Bacus v. CA In re: Option to Buy; Reciprocal Obligations; Debt must be due,
before Consignment is required; Consignment not yet needed in
BASIC FACTS: an Option to Buy where the other party is not ready to deliver his
Bacus leased to Duray a parcel of a 3000 sqm. agricultural land in reciprocal obligation.
Cebu. The lease stipulated that:
o The lease would last for six years Issue:
o The lessee had the right to purchase 2000 sqm. of the land 1. W/N there was a valid exercise of the option to buy the
within 5 years for P200 per sqm, adjusted to peso rate subject property – YES
against US Dollar.
Bacus died. Ruling:
1. YES
Before the expiration of the period, Duray informed Heirs of Bacus a. R: Given a reciprocal obligation, in an option to buy,
that they were willing and ready to purchase the property. the payment of the purchase price by the creditor is
o Heirs of Bacus first asked Duray to pay the purchase price contingent upon the execution and delivery of a deed
in full of P700,000.00 before they execute a deed of sale of sale by the debtor.
But Duray did not deposit the money i. SR1: When the lessee opts to buy the property,
Instead, Duray presented a <Bank Certification> his obligation is only to advise the lessors of
from the manager of Standard Chartered Bank – his decision and his readiness to pay the price.
Cebu, showing that arrangements were already Only upon the lessor's (now seller) actual
being made to borrow funds for the full execution and delivery of the deed of sale is
purchase the lessee (now buyer) required to pay.
THUS, Heirs of Bacus refused, saying that it ii. SR2: Consequently, since the obligation was not
was not legal tender. yet due (given that it’s a reciprocal obligation),
consignation in court of the purchase price was
THUS, Duray filed a complaint with the court for <Specific not yet required, nor would the prospective
Performance> against Heirs of Bacus asking that he be allowed to buyer be in delay.
purchase the lot specifically referred to in the lease contract with b. A: Duray already communicated his willingness to
option to buy. exercise the option to buy, and he even evidenced his
o Later on, Duray presented to the Court a cashier’s check for readiness to buy by showing the bank certificate. But
P650,000.00 ready upon demand Heirs of Bacus did not want to execute a deed of sale
before they receive payment. Thus, Duray had a valid
The lower courts rendered a decision: exercise of the option, and Heirs of Bacus cannot
1. That Duray validly and effectively exercised the option to require consignment first.
buy the subject property. The readiness and preparedness
of Duray is manifested by his cautionary letters and the Class Notes: An option is a complete outstanding offer. (D1) Offer
prepared bank certification. i.e. Stipulation of the option in the contract, (D2) Notice to accept
the offer i.e. Notice to exercise the option, (D3) Execute Deed of
Sale
Also Note: The creditor takes the payment on the 2 nd notice, the
burden will be by agreement.
A1262 Naga Telephone Co. v. CA In re: A1267, not creating a New Contract but merely Avoiding
– Unjust Enrichment; A1144 Prescription and Rise of Cause of
A1269 BASIC FACTS: Action; Potestative Condition
1. Naga Telephone Co. –
a telephone company rendering local as well as long Issues:
distance service in Naga City. 1. W/N Article 1267 should apply – YES
2. Camarines Sur II Electric Cooperative, Inc. – 2. W/N the period to file a complaint has passed – NO
a private corporation established for the purpose of 3. W/N the period of the contract is potestative – NO
operating an electric power service in Naga City.
Ruling:
NATELCO entered into a contract with CASURECO for the use of 1. Article 1267 should apply
the latter’s electric light posts (back then only) in Naga City for the a. The term “service” in A1267 means the performance of
former’s telephone service (think phone booths). the obligation, not simply a personal prestation or
o In exchange, NATELCO agreed to install, free of charge, ten rendition of service.
(10) telephone connections for the use by CASURECO in b. A bare reading of the article shows that it is not a
several areas. requirement that the contract be for future services.
o The contract also provided that: c. A1267 does not concern the modification of the terms
(1) the term or period of this contract shall be as long as of the contract, but rather the extinguishment of the
the NATELCO has need for the electric light posts obligation
(2) contract shall terminate when for any reason d. R: Article 1267 states in our law the doctrine of
whatsoever, CASURECO is forced to stop, abandoned unforeseen events.
its operation as a public service and it becomes i. This is said to be based on the discredited
necessary to remove the electric light post theory of rebus sic stantibus in public
international law; under this theory, the parties
After 11 years of enforcement, CASURECO filed a complaint stipulate in the light of certain prevailing
against NATELCO for <Reformation of Contract, and Damages>, on conditions, and once these conditions cease to
the ground that justice and equity demand that the contract be exist the contract also ceases to exist.
reformed to abolish the inequities by the fact that: Considering practical needs and the demands of
(1) The contract is too one-sided to the benefit of NATELCO equity and good faith, the disappearance of the
(2) National Electrification Administration directs that the basis of a contract gives rise to a right to relief
reasonable compensation for the use of the post is P10 per in favor of the party prejudiced.
post per month e. A: we agree with respondent court that the allegations
(3) The telephone cables have become heavier with the in private respondent's complaint and the evidence it
increase in the volume of their subscribers, has presented sufficiently made out a cause of action
a. worsened by the fact that their linemen bore holes under Article 1267. We, therefore, release the parties
through the posts, at which points those posts were from their correlative obligations under the contract.
broken during typhoons i. BUT, the disposition of the controversy does
(4) A post now costs as much as P2,630.00 not end there.
(5) [2nd Cause of Action] NATELCO unduly extended its use to a. GIVEN THAT: There are possible adverse
319 posts outside of Naga City consequences of merely releasing the
(6) [3rd Cause of Action] The poor servicing by NATELCO of the parties from the contract:
ten (10) telephone units which had caused it great (1) Removal of the telephone wires/cables
inconvenience and damages to the tune of not less than in the posts of private respondent,
P100,000.00 resulting in disruption of their essential
service to the public; and
Several fucking witnesses testified to support the claims of (2) Return all the telephone units to
CASURECO that NATELCO is providing shitty service and that the NATELCO, causing prejudice to its
intent of the parties in drafting the contract was that the business.
operations of CASURECO would only be in Naga City – especially b. THEN: We FURTHER require, as ordered by
given that the Board of Directors of CASURECO were the trial court:
inexperienced with the business – and that there were huge (1) NATELCO to pay CASURECO for the use
escalation of costs in the operations of CASURECO in maintaining of its posts in Naga City and in the towns
the posts (which would now outweigh the benefits of the already where petitioners use CASURECO’s
faulty phone services of NATELCO). posts;
(i) and the sum of ten (P10.00)
The lower court held that the contract cannot be reconstituted, pesos per post, per month,
but it is held to be void because: beginning January, 1989 (filing of
1. Article 1267 of the Civil Code applies the complaint); and
2. That the contract is potestative (2) CASURECO to pay NATELCO the
monthly dues of all its telephones at the
Still, NATELCO defended that: Article 1267 of the New Civil Code is same rate being paid by the public
not applicable primarily because the contract does not involve the beginning January, 1989 (filing of the
rendition of service or a personal prestation and it is not for future complaint)
service with future unusual change.
In affirming said ruling, we are not making a
new contract for the parties herein, but we
find it necessary to do so in order not to disrupt
the basic and essential services being rendered
by both parties herein to the public and to
avoid unjust enrichment by appellant at the
expense of plaintiff