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OBLIGATIONS
WHAT IS AN OBLIGATION?
An obligation is a juridical necessity to give, to do or not to do. (1156) Manresa defines it as the legal relation between one party and another, the latter being bound to the fulfill ent of a prestation which the for er ay de and of hi
Ang Yu Asuncion v. CA !laintiffs were tenants of the private respondents in "inondo. !laintiff Asuncion et al. are suing #u $njieng for reneging on an offer to sell of the for ers% dwelling. #u $njieng sold such to "uen &ealty and 'evelop ent #orporation, which then de anded herein respondents to vacate pre ises. &(# and #A held that Ang )u Asuncion had right of first refusal. *ssue+ ,-. the decision is subject to writ of e/ecution 0eld+ .o. 'ishonoring right of first refusal is only subject to a separate proceeding for da ages rather than a writ of e/ecution. Right of first refusal is not a perfected contract therefore not sub ect to an action for specific perfor!ance" ..". 1oo2 for essential ele ents below for an obligation to arise. *n this case, there was no obligation because there was no contract or vinculu juris, thus an action for perfor ance is not tenable. 3upre e #ourt spelled out the ele ents of an obligation+ a) #inculu! $uris 4the legal tie or efficient cause, which binds the parties to the obligation, and is established by law, contracts, 5uasi6contracts, delicts and 5uasi6delicts. (juridical tie) b) Ob ect 4 prestation or conduct re5uired in the perfor ance of the obligation, and ay consist of giving, doing, or not doing a thing c) Sub ect%persons 4 as according to de andability+ 1. Obligee 4 creditor, active, i.e. one who is entitled to de and the fulfill ent of the obligation. 7. Obligor 4 debtor, passive, i.e. one upon who de and is ade, who is bound to the fulfill ent of an obligation
&IN'S O( OBLIGATIONS
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#ie)point of sanction a. *i+il obligations% give a right of action to co pel their perfor ance b. Natural obligations6 not being based on positive law but on e5uity and natural law, do not grant a right of action to enforce their perfor ance8 but after voluntary fulfill ent by the obligor, they authori9e the retention of what has been delivered or rendered by reason thereof (1:7;) c. ,oral obligation6 those that cannot be enforced by action but which is binding on the party who a2es it in conscience and natural law8 now erged with natural obligations. #ie)point of perfor!ance a. -ositi+e % to give or to do b. Negati+e 6 not to do #ie)point of sub ect !atter a. Real obligation 6 to give b. -ersonal obligation 6 to do or not to do
SO.R*/S
-bligations arise fro + law, contracts, 5uasi6contracts, delicts, 5uasi6delicts (115<) A" LAW The law establishes the obligation and provides for the conditions or circumstances constituting the hypothesis, the fulfillment of which determines the birth of the obligation.
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G/N/RAL R.L/ obligations derived fro law are not presu ed8 only those e/pressly deter ined in this #ode or in special laws are de andable, and shall be regulated by the precepts of the law which establishes the 8 and as to what has not been foreseen, by the provisions of this "oo2 (115D) this is so because obligations constitute a limitation upon individual property freedom and by the due process clause, no person shall be deprived of property without due process; the obligation and corresponding consequences for non-performance should be clearly stated in law and not merely presumed B" *ONTRA*TS 'efinition3 a contract is a eeting of inds between two persons whereby one binds hi self, with respect to the other, to give so ething or to render so e service (1;E5) characteristics of a contract (1) binding force (2) autonomy (3) mutuality (4) relativity (5) consensuality G/N/RAL R.L/3 the contracting parties ay establish such stipulations, clauses, ter s and conditions as they ay dee convenient, provided they are not contrary to law, orals, good custo s, public order and public policy (1;E6) o contrary to law: renouncing action for future fraud o contrary to morals: free domestic service o contrary to good customs: trial marriage o contrary to public order: providing that in case of failure to pay rent agreed upon, the landlord may dispossess by force the tenant from the leased premise o contrary to public policy: agreement intended to prevent or stifle prosecution for a public crime G/N/RAL R.L/3 *ontracts as force of la) bet)een parties 6 obligations arising fro contracts have the force of law between the contracting parties and should be co plied with in good faith (115F)8 *o!pellabilit0 6 liable for da ages anAor co pliance o a contract is an agreement that is effective to give rise to a civil obligation; hence, not all agreements are contracts T4-/S O( *ONTRA*TS3 (11 Inno!inate contracts those which are not specifically governed by any provision in the #ivil #ode or 3pecial 1aw but which li2ewise involve the fulfill ent or acco plish ent of so e prestations. Regulated b03 1 1 stipulations of the parties 1 1 pro+isions of (itle * and ** of this "oo2 1 1 rules governing the ost analogous no!inate contracts 1 1 custo!s of the place (1;E<) innominate contracts may take any of the ff forms: o I give that you may give o I do that you may give o I give that you may do o I do that you may do
(11 No!inate contracts3 3pecifically provided for by law, as follows+
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contract of sale3 deter!inate thing for price" one of the contracting parties obligates hi self to transfer the ownership of and to deliver a deter inate thing, and the other to pay therefore a price certain in oney or its e5uivalent (1:5D) contract of barter or e2change3 one thing for pro!ise of another" one of the parties binds hi self to give one thing in consideration of the other%s pro ise to give another thing (16;D) contract for a piece of )or53 )or5 for price or co!pensation" the contractor binds hi self to e/ecute a piece of wor2 for the e ployer, in consideration of a certain price or co pensation. (he contractor ay either e ploy only his labor or s2ill, or also furnish the aterial (1<1;) co!!on carriers3 carriage and transportation for price" persons, corporations, fir s or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for co pensation, offering their service to the public (1<;7) contract of partnership3 !ultiple parties contribute" two or ore persons bind the selves to contribute oney, property, or industry to a co on fund, with the intention of dividing the profits a ong the selves8 two or ore persons ay also for a partnership for the e/ercise of a profession (1<6<) contract of agenc03 acting on behalf of the other" a person binds hi self to render so e service or to do so ething in representation or on behalf of another, with the consent or authority of the latter (1D6D) contract of loan3 1 1 *o!!odatu! not consu!able but used6 gratuituous6 no transfer of o)nership b. ,utuu! or si!ple loan !one0 or consu!able6 gratuituous or )ithout interest6 transfer of o)nership one of the parties delivers to another, either so ething not consu able so that the latter ay use the sa e for a certain ti e and return it, in which case the contract is called a co odatu 8 or oney or other consu able thing, upon the condition that the sa e a ount of the sa e 2ind and 5uality shall be paid, in which case the contract is si ply called a loan or utuu 8 co odatu is essentially gratuitous8 si ple loan ay be gratuitous or with a stipulation to pay interest8 in co odatu the bailor retains the ownerships of the thing loaned, while in si ple loan, ownership passes to the borrower (1F;;) D. deposit3 deli+er0 for safe5eeping onl0" constituted fro the o ent a person receives a thing belonging to another, with the obligation of safely 2eeping it and of returning the sa e. *f the safe2eeping of the thing delivered is not the principal purpose of the contract, there is no deposit but so e other contract (1F67) aleator0 contract3 one for another at an uncertain condition or ti!e" one of the parties or both reciprocally bind the selves to give or to do so ething in consideration of what the other shall give or do upon the happening of an event which is uncertain, or which is to occur at an indeter inate ti e (7E1E)
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1E. guarant03 subsidiar0 liabilit0 suret03 solidar0 guarant0 a person, called the guarantor, binds hi self to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so8 if a person binds hi self solidarily with the principal debtor, the provisions of 3ection :, #hapter ;, (itle * of this "oo2 shall be observed8 in such case the contract is called a suretyship (7E:<) 11. contracts of pledge and !ortgage a. b. re7uisites3 As securit0 % they be constituted to secure the fulfill ent of a principal obligation8 Absolute o)nership 6 that the pledgor or ortgagor be the absolute owner of the thing pledged or ortgaged8
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(ree disposal % that the persons constituting the pledge or ortgage have the free disposal of their property, and in the absence thereof, that they be legally authori9ed for the purpose8 8rd person !a0 put up securit0 % (0*&' persons who are not parties to the principal obligation ay secure the latter by pledging or ortgaging their own property8 thing pledged ust be placed in the possession of the creditor, or of a third person by co on agree ent (7ED5) 'ifference3 Ob ects a. (or ,ortgage3 1.) I!!o+ables 7.) !o+ables that are registered in *hattel ,ortgage Register chattel ortgage+ personal property is recorded in the #hattel Mortgage &egister as a security for the perfor ance of an obligation. *f the ovable, instead of being recorded, is delivered to the creditor or a third peron, the contract is a pledge and not a chattel ortgage (71:E) ;.) alienable real rights only the following property ay be the object of a contract of ortgage+ (1) i ovables8 (7) alienable real rights in accordance with the laws, i posed upon i ovables8 nevertheless, ovables ay be the object of a chattel ortgage (717:) b. (or -ledge3 ,o+ables 1.) not recorded in *hattel ,ortgage Register 7.) deli+ered to creditor or third part0" 17. contract of antichresis3 fruits of i!!o+able to appl0 to debt" (he creditor ac5uires the right to receive the fruits of an i ovable of his debtor, with the obligation to apply the to the pay ent of the interest, if owing, and thereafter to the principal of his credit. (71;7)
Perla Compania de Seguros, Inc. v. CA *n a bus accident in #avite, herein plaintiff is the insurance co pany. (he court ruled that the ter s of the contract constitute the easure of the insurer%s liability and co pliance therewith is a condition precedent to the insured%s right of recovery fro the insurer. *n the case at bar, the insurance policy with regards to third party injuries is only !hp 17,EEE which is in accordance with ini u prescribed by law !.'. 1:6E. Gurther ore, the insured was stipulated to ac5uire written per ission fro the insurer as regards to settle ent with injured third parties. 3ince such was not co plied with, the insured #ayas is precluded fro see2ing rei burse ent. ..". ontracts as law between the parties. !hat has been agreed upon governs as long as it is not contrary to law, morals, good customs, public order, and public policy "
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9.ASI%*ONTRA*TS 'efinition3 *t is the juridical relation resulting fro lawful, voluntary, and unilateral acts by virtue of which the parties beco e bound to each other to the end that no one shall be unjustly enriched or benefited at the e/pense of another (71:7) -bligations derived fro 5uasi6contracts shall be subject to the provisions of #hapter 1, (itle HB** of this "oo2 (116E) -rincipal 5inds of 7uasi%contract3 :" Negotioru! gestio3 ,hoever voluntarily ta2es charge of the agency or anage ent of the business or property of another, without any power for the latter, is obliged to continue the sa e until the ter ination of the affair and its incidents, or to re5uire the person concerned to substitute hi , if the owner is in a position to do so. (his juridical relation does not arise in either of these instances+ a. when the property or business is not neglected of abandoned b. if in fact the anager has been tacitly authori9ed by the owner (71::) ;" Solutio indebiti3 *f so ething is received when there is no right to de and it, and it was unduly delivered through ista2e, the obligation to return it arises (715:)
I#" '/LI*TS
#ivil obligations arising fro cri inal offenses shall be governed by the penal laws, subject to the provisions of Article 71<<, and of the pertinent provisions of #hapter 7, !reli inary (itle on 0u an &elations, and of (itle HB*** of this "oo2, regulating da ages (1161) 'elicts are acts or o issions punishable by law. Ivery person cri inally liable for a felony is also civilly liable (&!#, 1EE) R.L/S3 1. (ees and inde!nities in udicial proceedings3 costs shall include fees and inde nities in the course of the judicial proceedings, whether they be fi/ed or unalterable a ounts previously deter ined by law or regulations in force, or a ounts not subject to schedule (&!#, ;<) 7. (orfeiture of proceeds< instru!ents< tools of felon03 every penalty i posed for the co ission of a felony shall carry with it the forfeiture of the proceeds of the cri e and the instru ents or tools with which it was co itted (&!#, :5) 8" 'e!andabilit03 b0 final udge!ent .o penalty shall be e/ecuted e/cept by virtue of a final judg ent8 A penalty shall not be e/ecuted in any other for than that prescribed by law, nor with any other circu stances or incidents than those e/pressly authori9ed thereby (&!#, <D) G/N/RAL R.L/3 Satisf0 ci+il liabilit0 e+en )hen cri!inal liabilit0 is e2tinguished b03 11 'eath #ri inal liability is totally e/tinguished by the death of the convict, as to the personal penalties8 and as to pecuniary penalties, liability therefore is e/tinguished only when the death of the offender occurs before final judg ent (&!#, DF) 1 1 Ser+ice of sentence 1 1 A!nest0< -ardon< *o!!utation of Sentence (he offender shall continue to be obliged to satisfy the civil liability resulting fro the cri e co itted by hi , notwithstanding the fact that he has served his sentence consisting of deprivation of liberty or other rights, or has not been re5uired to serve the sa e by reason of a nesty, pardon, co utation of sentence or any other reasons (&!#, 11;) 11 Sub ect to succession to heirs of both sides3 -bligation devolves upon the heirs of the person liable, action to de and li2ewise descends to the heirs of the person injured (&!#, 1ED) *i+il liabilit0 includes3 restitution, reparation of the da age caused, inde nification of conse5uential da ages (&!#, 1E:)8 1 1 restitution3 ust be ade, whenever possible with allowance for any deterioration, or di inution of value as deter ined by the court8 the thing itself shall be restored, even though it be found in the possession of a third person who ac5uired it by lawful eans, saving to the latter his action against the proper person who ay be liable to hi 8 this provision is not applicable in a case in which the thing has been ac5uired by the third person in the anner and under the re5uire ents which, by law, bar an action for its recovery (&!#, 1E5) 1 1 reparation3 the court shall deter ine the a ount of da age, ta2ing into consideration the price of the thing, whenever possible, and its special senti ental value to the injured party, and reparation shall be ade accordingly (&!#, 1E6) 1 1 inde!nification3 inde nification of conse5uential da ages shall include not only those caused the injured party, but also those suffered by his fa ily or by a third person by reason of he cri e (&!#, 1E<) 1 1 Solidarit0 a!ong felons in a felon03 1.) as to share3 if there are two or ore persons civilly liable for a felony, the courts shall deter ine the a ount for which each ust respond (&!#, 1EF)8 2.) as to participation3 (he principals, acco plices and accessories, each within their respective class, shall be liable severally (in solidum) among themselves for their uotas, and subsidiarily for those of the other persons liable 8 the subsidiary liability shall be enforced, first against the property of the principals8 ne/t, against that of the acco plices8 and lastly against that of the accessories8 whenever the liability in solidu of the subsidiary liability has been enforced, the person by who pay ent has been ade shall have a right of action against the others for the a ount of their respective shares (&!#, 11E)
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#" 9.ASI%'/LI*TS 'efinition3 act or o whoever by act or o pay for the da age between the parties,
ission with fault or negligence causing da age to another8 no cri e nor contract ission causes da age to another, there being fault or negligence, is obliged to done. 3uch fault or negligence, if there is no pre6e/isting contractual relation is called a 5uasi6delict and is governed by the provisions of this #hapter (71<6)
"or e#ample: manufacturers and processors of foodstuffs, drinks, toilet articles and similar goods shall be liable for death or in$uries caused by any no#ious or harmful substances used, although no contractual relation e#ists between them and the consumers %&'()*
two species of the fault or negligence in &')+: culpa aquiliana, culpa contractual a. culpa a uiliana! no pre-e#isting contractual relation between parties; called a quasi-delict and is a source of obligations; negligence is substantive, direct and independent of any pree#isting obligation; the defense of having e#ercised the diligence of a good father of a family is available b. culpa contractual! not a source of obligations, merely makes the debtor liable for damages, in view of his having fulfilled his pre-e#isting obligation with negligence; there is a pree#isting contractual relation between the parties, whether e#press or implied; negligence is merely negligence in the performance of a pre-e#isting obligation; the defense of having e#ercised the diligence of a good father of a family is not available (itle HB**
Go+erned b03 1. obligations derived fro 5uasi6delicts shall be governed by the provisions of #hapter 7, of this "oo2, and by special laws (1167) 7. (itle HB*** on da ages ;. Articles 1F6;6 on hu an relations
G/N/RAL R.L/3 'ut0 to others" Art. 1F. Ivery person ust, in the e/ercise of his rights and in the perfor ance of his duties, act with justice, give everyone his due, and observe honesty and good faith. -rinciples3 1. *ourts !ust protect disad+antage" Art. 7:. *n all contractual, property or other relations, when one of the parties is at a disadvantage on account of his oral dependence, ignorance, indigence, ental wea2ness, tender age or other handicap, the courts ust be vigilant for his protection.
e"g" Thoughtless e2tra+agance Art. 75. (houghtless e/travagance in e/penses for pleasure or display during a period of acute public want or e ergency ay be stopped by order of the courts at the instance of any govern ent or private charitable institution.
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.n ust enrich!ent Art. 77. Ivery person who through an act of perfor ance by another, or any other eans, ac5uires or co es into possession of so ething at the e/pense of the latter without just or legal ground, shall return the sa e to hi .
Who are liable for 'a!ages3 1. Inde!nif0 da!ages Art" ;=" Ivery person who, contrary to law, wilfully or negligently causes da age to another, shall inde nify the latter for the sa e. 7. *o!pensate da!ages Art" ;:" Any person who wilfully causes loss or injury to another in anner that is contrary to orals, good custo s or public policy shall co pensate the latter for the da age. ;. Beneficiar0 to cause of da!age Art" ;8" Iven when an act or event causing da age to anotherJs property was not due to the fault or negligence of the defendant, the latter shall be liable for inde nity if through the act or event he was benefited. :. Bus0%bod0 neighbors and other persons Art" ;>" Ivery person shall respect the dignity, personality, privacy and peace of ind of his neighbors and other persons. (he following and si ilar acts, though they ay not constitute a cri inal offense, shall produce a cause of action for da ages, prevention and other relief+ . !rying into the privacy of anotherJs residence+
Meddling with or disturbing the private life or fa ily relations of another8 *ntriguing to cause another to be alienated fro his friends8 Be/ing or hu iliating another on account of his religious beliefs, lowly station in life, place of birth, physical defect, or other personal condition. aisa dc 5. .n ust Refusal or neglect of -ublic official of his dut0 Art" ;?" Any person suffering aterial or oral loss because a public servant or e ployee refuses or neglects, without just cause, to perfor his official duty ay file an action for da ages and other relief against he latter, without prejudice to any disciplinary ad inistrative action that ay be ta2en. f" .n ust< oppressi+e< high%handed !easure Art" ;@" $nfair co petition in agricultural, co ercial or industrial enterprises or in labor through the use of force, inti idation, deceit, achination or any other unjust, oppressive or highhanded ethod shall give rise to a right of action by the person who thereby suffers da age. g" -olice refusal or failure to gi+e aid or protection Art" 8A" ,hen a e ber of a city or unicipal police force refuses or fails to render aid or protection to any person in case of danger to life or property, such peace officer shall be pri arily liable for da ages, and the city or unicipality shall be subsidiarily responsible therefor. (he civil action herein recogni9ed shall be independent of any cri inal proceedings, and a preponderance of evidence shall suffice to support such action. h" #iolator of rights and liberties Art" 8;" Any public officer or e ployee, or any private individual, who directly or indirectly obstructs, defeats, violates or in any anner i pedes or i pairs any of the following rights and liberties of another person shall be liable to the latter for da ages+ (1) Greedo or religion8 (7) Greedo of speech8 (;) Greedo to write for the press or to aintain a periodical publication8 (:) Greedo fro arbitrary or illegal detention8 (5) Greedo of suffrage8 (6) (he right against deprivation of property without due process of law8 (<) (he right to a just co pensation when private property is ta2en for public use8 (D) (he right to the e5ual protection of the laws8 (F) (he right to be secure in oneJs person, house, papers, and effects against unreasonable searches and sei9ures8 (1E) (he liberty of abode and of changing the sa e8 (11) (he privacy of co unication and correspondence8 cd (17) (he right to beco e a e ber of associations or societies for purposes not contrary to law8 (1;) (he right to ta2e part in a peaceable asse bly to petition the Covern ent for redress of grievances8 (1:) (he right to be a free fro involuntary servitude in any for 8 (15) (he right of the accused against e/cessive bail8 (16) (he right of the accused to be heard by hi self and counsel, to be infor ed of the nature and cause of the accusation against hi , to have a speedy and public trial, to eet the witnesses face to face, and to have co pulsory process to secure the attendance of witness in his behalf8 (1<) Greedo fro being co pelled to be a witness against oneJs self, or fro being forced to confess guilt, or fro being induced by a pro ise of i unity or reward to a2e such confession, e/cept when the person confessing beco es a 3tate witness8 (1D) Greedo fro e/cessive fines, or cruel and unusual punish ent, unless the sa e is i posed or inflicted in accordance with a statute which has not been judicially declared unconstitutional8 and (1F) Greedo of access to the courts. *n any of the cases referred to in this article, whether or not the defendantJs act or o ission constitutes a cri inal offense, the aggrieved party has a right to co ence an entirely separate and distinct civil action for da ages, and for other relief. 3uch civil action shall proceed independently of any cri inal prosecution (if the latter be instituted), and ay be proved by a preponderance of evidence. (he inde nity shall include oral da ages. I/e plary da ages ay also be adjudicated. (he responsibility herein set forth is not de andable fro a judge unless his act or o ission constitutes a violation of the !enal #ode or other penal statute. Separabilit0 of *ri!inal and *i+il action6 :" Be0ond reasonable doubt +s" preponderance of e+idence Art. 7F. ,hen the accused in a cri inal prosecution is ac5uitted on the ground that his guilt has not been proved beyond reasonable doubt, a civil action for da ages for the sa e act or o ission ay be instituted. 3uch action re5uires only a preponderance of evidence. $pon otion of the defendant, the
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court ay re5uire the plaintiff to file a bond to answer for da ages in case the co plaint should be found to be alicious. *f in a cri inal case the judg ent of ac5uittal is based upon reasonable doubt, the court shall so declare. *n the absence of any declaration to that effect, it ay be inferred fro the te/t of the decision whether or not the ac5uittal is due to that ground. Art. ;E. ,hen a separate civil action is brought to de and civil liability arising fro a cri inal offense, and no cri inal proceedings are instituted during the pendency of the civil case, a preponderance of evidence shall li2ewise be sufficient to prove the act co plained of. ;" Independence of ci+il fro! cri!inal action Art" 8:" ,hen the civil action is based on an obligation not arising fro the act or o ission co plained of as a felony, such civil action ay proceed independently of the cri inal proceedings and regardless of the result of the latter. 8" /+en if cri!inal proceedings is dis!issed Art" 8B" ,hen a person, clai ing to be injured by a cri inal offense, charges another with the sa e, for which no independent civil action is granted in this #ode or any special law, but the justice of the peace finds no reasonable grounds to believe that a cri e has been co itted, or the prosecuting attorney refuses or fails to institute cri inal proceedings, the co plaint ay bring a civil action for da ages against the alleged offender. 3uch civil action ay be supported by a preponderance of evidence. $pon the defendantJs otion, the court ay re5uire the plaintiff to file a bond to inde nify the defendant in case the co plaint should be found to be alicious. *f during the pendency of the civil action, an infor ation should be presented by the prosecuting attorney, the civil action shall be suspended until the ter ination of the cri inal proceedings. A" -re udicial 7uestions !a0 proceed" Art" 8>" !rejudicial 5uestions, which ust be decided before any cri inal prosecution ay be instituted or ay proceed, shall be governed by rules of court which the 3upre e #ourt shall pro ulgate and which shall not be in conflict with the provisions of this code. e"g"3 *ases of 'efa!ation< (raud< and -h0sical In uries Art" 88" *n cases of defa ation, fraud, and physical injuries a civil action for da ages, entirely separate and distinct fro the cri inal action, ay be brought by the injured party. 3uch civil action shall proceed independently of the cri inal prosecution, and shall re5uire only a preponderance of evidence. /((/*TS O( OBLIGATIONS3 a" :" In obligations to gi+e3 'iligence re7uire!ent< if no stipulation or la)3 Good father of a fa!il0 (116;) Ivery person obliged to give so ething is also obliged to ta2e care of it with the proper diligence of a good father of a fa ily, unless the law or the stipulation of the parties re5uires another standard of care (116;) b. the word ,something- indicates a determinate thing, that which is segregated from all others of a particular kind c. the diligence of a good father of the family is the legal standard of diligence. It is ordinary diligence. This standard means hemust take care of the thing as if he is the real owner. Another diligence re7uire!ent3 e2traordinar0 for co!!on carriers % fro the nature of their business and for reasons of public policy, are bound to observe e/traordinary diligence in the vigilance over the goods and for the safety of the passengers transported by the , according to all the circu stances of each case. 3uch e/traordinary diligence in vigilance over the goods is further e/pressed in Articles 1<;:, 1<;5 and 1<:5 .os. 5, 6 and < while the e/traordinary diligence for the safety fo the passengers is further set forth in Articles 1<55 and 1<56 (1<;;) b" *o!pel co!pliance3 i" If deter!inate< co!pel deli+er0 C::>BD ,hen what is to be delivered is a deter inate thing, the creditor, in addition to the right granted hi by article 11<E, ay co pel the debtor to a2e the delivery8 (1165) 6 a thing is deter inate when it is particularly designated or physically segregated fro all others of the sa e class8 the re5uisite that a thing be deter inate is satisfied if at the ti e the contract is entered into, the thing is capable of being ade deter inate without the necessity of a new or further agree ent between the parties (1:6E)
% All3 principal< accession< accessories (1166) % At their state at ti!e of perfection of contract (15;<) 6 the obligation to give a deter inate thing includes that of delivering all its accessions and accessories, even though they ay not have been entioned (1166) 6 (he vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which they were upon the perfection of the contract (15;<) Accession3 the ownership of property gives the right by accession to everything which is produced thereby, or which is incorporated or attached thereto, either naturally or artificially (::E) T)o o)ners of an inseparable thing3 o)ner of principal ac7uires pa0ing the other whenever two ovable things belonging to different owners are, without bad faith, united in such a way that they for a single object, the owner of the principal thing ac5uires the accessory, inde nifying the for er owner thereof for its value (:66) It is a basic principle in la" on property that the accessory follo"s the principal accessories! #hose things "hich are used for the embellishment, use, or preservation of another thing of more importance. $%! &eys to a house, strings and bo" of a violin, spare tires and repair tool of an automobile accessions! $verything "hich is produced by a thing, incorporated or attached thereto, either naturally or scientifically. $%! improvements on a land, house on a land, formation of an island, plant, alluvion ii" If indeter!inate< co!pliance at e2pense of debtor (1165) *f the thing is indeter inate or generic, he ay as2 that the obligation be co plied with at the e/pense of the debtor8 (1165) c" Include (ruits (116:) E natural< industrial< and ci+il fruits (::1) 6-ersonal right at ti!e of de!andabilit0< real right at deli+er0 (he creditor has a right to the fruits of the thing fro the ti e the obligation to deliver it arises. 0owever, he shall ac5uire no real right over it until the sa e has been delivered to hi . (116:)8 All the fruits shall pertain to the vendee fro the day on which the contract was perfected (15;<) (o the owner belongs+(1)the natural fruits, (7)the industrial fruits, (;)the civil fruits (::1) NOT/3 "efore delivery of the fruits 4 #reditor%s right is personal or jus in persona , a right which is enforceable only against a definite passive subject, the debtor. After delivery 4 #reditor now has a real right over the fruits fro the ti e of delivery and beco es enforceable against the whole world. *n short, it gives a person a direct and i ediate juridical power over a thing,which can be e/ercised not only against a definite passive subject but against the whole world. K*.'3 -G G&$*(3+ %'* .atural fruits 4 spontaneous products of the soil without the intervention of hu an labor, and the young and other product of ani als with or without the intervention of hu an labor, such as forest products. %&* *ndustrial fruits 4 products of the soil through cultivation or hu an labor, such as palay and vegetables planted by far ers. %.* #ivil fruits 4 fruits as a result of civili9ation or fruits arising out of a juridical relation, such as rent of lands, apart ents and buildings.
Pornellosa v. 'and #enure Administration !laintiffs bought a house fro Bicenta 3an @ose in a private docu ent. (he lot on which the house was situated was e/propriated by Covern ent as part of the 3ta. #lara estate. (he said lot was divided into two. -ne part was awarded to Cu9 an. !etitioners want to co pel sale of the entire lot to the by the 1(A. 0eld+ 'eed of 3ale is conclusive on the house erected thereon but not on the land. 3uch acts and contracts on concerning real rights ust be in public docu ent. "esides, deed of sale has no ention of sale of land.
..". Accessories, accessions, fruits follow the principal but not vice versa. Irgo, in this case, the sale of house does not include the lot, since the latter would be the principal.
10
d. &ight to da ages i. Gortuitous events, only if+ 1. delay C::>BD 7. pro ise to 7 rently interested persons C::>BD *f the obligor delays, or has pro ised to deliver the sa e thing to two or ore persons who do not have the sa e interest, he shall be responsible for any fortuitous event until he has effected the delivery (1165) ;. law, stipulated, ris2y nature C::?AD
ii. Graud, delay, contravention of the tenor of obligation C::?=D (hose who in the perfor ance of their obligations are guilty of fraud, negligence, delay and those who in any anner contravene the tenor thereof, are liable for da ages (11<E) a. the fraud referred to above is incidental fraud %dolo incidenti*, that is fraud in the performance of the obligation as distinguished from dolo causante %causal fraud* which is fraud in getting one/s consent to a contract b. incidental fraud merely gives rise to an action for damages while causal fraud renders a contract voidable c. negligence %culpa* is unintentional, while fraud %dolo* is intentional. In fraud, there is intent to evade the normal fulfillment of the obligation and to cause damage, while in negligence there is no such intention. 0egligence is carelessness or lack of diligence. It consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. !hen negligence shows bad faith, it is considered equivalent to fraud. ((#a&e note of further discussions of this article under obligations not to do) iii" Act or o!issions )ith fault or negligence (71<6) % O!ission of re7uired diligence3 good father of fa!il0< or )hat the la) or stipulation pro+ides (11<;) ,hoever by act or o ission causes da age to another, there being fault or negligence, is obliged to pay for the da age done. (71<6) the fault or negligence of the obligor consists in the o ission of that diligence which is re5uired by the nature of the obligation and corresponds with the circu stances of the persons, of the ti e and of the place. ,hen negligence shows bad faith, the provisions of articles 11<1 and 77E1 paragraph 7 shall apply. *f the law or contract does not state the diligence which is to be observed in the perfor ance, that which is e/pected of a good father of a fa ily shall be re5uired (11<;) - There may be negligence attended with bad faith amounting to fraud, such as wanton attitude, which should be governed by the rules on fraud. B" In obligations to do3 a" If failure to do or contra+ention of tenor3 i" /2ecution at debtorFs cost (116<) ii" -oorl0 done be undone (116<) *f a person obliged to do so ething fails to do it, the sa e shall be e/ecuted at his cost. (his sa e rule shall be observed if he does it in contravention of the obligation. Gurther ore, it ay be decreed that what has been poorly done be undone (116<) The creditor may demand that the obligation be performed by the debtor himself or by a third person at the e#pense of the debtor. 1owever, in cases where the personal qualifications of the debtor are taken into account, the only remedy of the creditor is an action for damages.
In the 2alane notes, there is no action for compliance for an obligation to do because such would be involuntary servitude which is prohibited by the constitution. b" Liabilit0 for 'a!ages arises for i" (raud (11<E) ii" Negligence iii" 'ela0 i+" *ontra+ention to the tenor thereof (3a e as discussion below+ liability for da ages for obligations not to do) *" In obligations not to do3 a" 'oing )hat he !ust ha+e not done3 i" .ndone at his e2pense (116D) ,hen the obligation consists in not doing, and the obligor does what has been forbidden hi , it shall also be undone at his e/pense (116D) ii" 'a!ages According to @urado, da ages also if+ %'* possible to undo but results are contrary to obligation/s ob$ectives %remedy is action for damages* %&* actually or legally impossible to do b" Liabilit0 for 'a!ages arises for (11<E) (hose who in perfor ance of their obligations are guilty of fraud, negligence, or delay, and those who in any anner contravene the tenor thereof, are liable for da ages. (11<E) i" (raud % responsibility arising fro fraud de andable in all obligations (incidental fraud)8 waiver of action for future fraud void for being contrary to law and public policy8 (11<1) ii" Negligence % responsibility arising fro negligence also de andable, but liability ay be regulated by the courts according to the circu stances (11<7) 'istinction between fault and negligence+ Ile ent of bad faith. (11<;) Gault or negligence of the obligor consists in the o ission of that diligence re5uired by the nature of the obligation and corresponds with circu stances of persons, of ti e and of place8 when negligence shows bad faith, provisions of article 11<1 (fraud) and 77E1, par. 7 shall apply. (11<;) iii" 'ela0 3 discussion below i+" *ontra+ention to the tenor thereof -in cases where the personal qualifications of the debtor are taken into account, the only remedy of the creditor is an action for damages %since no one else can do it* '/LA4 C)oraD * +efault of non*fulfillment of an obligation "ith respect to time. :st G/N/RAL R.L/3 occurs fro! the ti!e of creditorFs udicial or e2tra udicial de!and I/ception+ 'e and is not necessary to incur in delay when+ C:D obligation or la) e2pressl0 declares C;D ti!e is a controlling !oti+e C8D de!and )ould be useless ;nd G/N/RAL R.L/3 in Reciprocal obligations3 dela0 happens fro! the !o!ent one part0 fulfills" (116F) If neither part0 perfor!s his underta5ing< neither incurs dela0 (hose obliged to deliver or do so ething incur in delay fro the ti e the obligee judicially or e/trajudicially de ands fro the the fulfill ent of their obligation. 0owever, de and by creditor shall not be necessary in order that delay ay e/ist+ (1) when the obligation or law e/pressly so declares
11
(7) when fro the nature of the obligation it appears that the designation of the ti e when the thing is to be delivered or the service is to be rendered is a controlling otive for the establish ent of the contract8 or (;) ,hen de and would be useless, as when the obligor has rendered it beyond his power to perfor . *n reciprocal obligations, neither party incurs in delay if the other does not co ply or is not ready to co ply in a proper anner with what is incu bent upon hi . Gro the o ent one of the parties fulfills his obligation, delay by other begins. (116F) K*.'3+ (1) !ora sol+endi E b0 debtor ,e uisites! d. (he obligation ust be li5uidated, due and de andable. e. (he debtor is guilty of non6perfor ance. f. (here was de and ade judicially or e/tra6judicially. $ffects "hen these elements are present! a. (he creditor ay as2 for da ages. b. (he debtor is liable even if the loss is due to fortuitous events. c. (he debtor shall bear the ris2 of loss. Instance "hen there is no default or mora solvendi 1. *n negative obligations, because one can never be late in not doing or not giving so ething. 7. *n natural obligations, because the perfor ance is optional or voluntary on the part of the debtor.
12
(2) !ora accipiendi E b0 creditor a. ,e uisites! a. -ffer of perfor ance by the debtor. b. &efusal of the creditor to accept without just cause.
;. :. 5.
b. $ffects! #reditor shall bear the ris2 of loss. All e/penses for the preservation of the thing after the delay shall be borne by the creditor. #reditor is liable for da ages.
(3) co!pensation !orae E b0 the parties /ffect3 Liabilit0 for da!ages (11<E) /2e!ption3 caso fortuito (11<:) ii" prior to dela0< i"e" dela0 has not set in (1165) iii" )ithout a pro!ise to gi+e to t)o differentl0 interested parties (1165) i+" no la) or stipulation !andates liabilit0 for such (11<:) v. not ris50 nature (11<:) 'ela0 in pa0!ent of !one0 is inde!nified through interest unless a gratuitous !utuu! or si!ple loan" If no stipulated interest< default interest is C>GD si2 percent" (77EF) *f obligation consists in pay ent of a su of oney, and debtor incurs in delay, the inde nity for da ages, there being no stipulation to the contrary, shall be the pay ent of the interest agreed upon, and in the absence of stipulation, the legal interest, which is si/ percent per annu . (77EF) .-(I+ When there is dela0< the in ured part0 !a0 as5 for da!ages" But this benefit arising fro! ,ora< default or dela0 !a0 cease upon3 a" b" c" Renunciation of the creditor -rescription of action /2tension of ti!e for the fulfill!ent of the obligation
Chave- v. .on-ales Repairer of the t0pe)riter< after se+eral de!ands of the o)ner< returned such )ith !issing parts and )ithout ha+ing it repaired" The o)ner had another co!pan0 fi2 the t0pe)riter< S* ruled that the original repairer can be held liable not onl0 for the !issing parts but also for cost of the e2ecution of the obligation of repairing the t0pe)riter b0 another co!pan0" Repairer is liable under article ::>? and ::?=" SSS v. )oon"al& +evelopment and /ousing Corporation SSS filed a co!plaint against ,oon)al5 alleging error in co!putation of :;G interest due to dela0 in pa0!ent thus affecting the total a!ount the latter had to pa0" 0eld+ on the clai for penalties, it is e/tinguished since a penal clause is an accessory penalty, which necessarily follows the loan that has already been paid. Gurther ore, nowhere in the case did it appear that 333 de anded pay ent fro Moonwal2 of its onthly a orti9ations. (here was ere atte pt at foreclosure at first, and at the ti e of issuing of state ent of account, Moonwal2 paid its obligation in full. 0ence there was no delay. *n turn, penalty never beca e de andable. Aside+ the court distinguished this case fro #hristian Missionary 3ociety v. 3ocial 3ervice #o ission by stating that penalty therein was provided by law not by ere agree ent of the parties. Re7uisites of 'efault3 aD Obligation be due and de!andable and alread0 li7uidated bD 'ebtor dela0s perfor!ance or is guilt0 of non%perfor!ance cD *reditor re7uires perfor!ance udiciall0 and e2tra% udiciall0 ..". *n this case, the third re5uisite was absent thus there was no delay. (hey did not de and for interests. I/tinguish ent of principal carries with it the accessory penalty. Application of pay ent ust be ade first to the interest. *n pay ent of principal, there is presu ption of e/tinguish ent of the interest already. 1i2ewise, receipt of later install ent of debts without reservation for prior ones shall also raise presu ption that prior install ents have already been paid. C::?>D
13
2arga4a v.
A contract )as entered into for deli+er0 of !aterials on 'ec" ;;< :HH= in ti!e for the aggrie+ed part0Fs )ife )ho e2pressl0 )ished that she be buried before *hrist!as da0< and )here< despite 5no)ing this ti!etable and ha+ing paid for the !aterials< the supplier failed to !a5e the deli+er0 despite pleas and earnest follo)%ups b0 the )ido)er< Supre!e *ourt ruled that ti!e )as of the essence of such contract and the supplier should be liable for the dela0 and breach" ..". I/a ple of incurring delay without judicial or e/trajudicial de and. (L7)(i e is of the essence. #ontract was entered into in view of burial before #hrist as.
5gcaoili v. 67I7 The parties entered into a contract of sale of a go+ern!ent housing unit on the condition that Agcaoili should occup0 the sa!e )ithin three da0s fro! the receipt of notice" (ailure to i!!ediatel0 occup0 contractuall0 allo)ed GSIS to ter!inate the contract" Agcaoli upon receipt of notice< i!!ediatel0 )ent to the place and found a house in a state of inco!pleteness that ci+iliIed occupation )as not possible" He !ade the first !onthl0 install!ent but refused to !a5e further pa0!ents until and unless GSIS co!pleted the housing unit" GSIS cancelled the a)ard and re7uired Agcaoili to +acatethe pre!ises" Held3 GSIS had no right to rescind sale" *n reciprocal obligations, neither party incurs in delay if the other does not co ply or is not ready to co ply in a proper anner with what is incu bent upon hi . (116F, par. 6)
C&-$.'3 G-& 1*A"*1*() (- !A) 'AMACI3
14
"859: ;8 :;<;
(raud !a0 be defined as the +oluntar0 e2ecution of a )rongful act< or a )illful o!ission< 5no)ing and intending the effects )hich )ill arise fro! such act or o!ission" This is distinguished fro! negligence in the sense that in fraud there is intentional e+asion of the nor!al fulfill!ent of the obligations" This fraud is called incidental fraud or dolo incidente< co!!itted in the perfor!ance of the obligation or after the contract is alread0 perfected"
The other fraud referred to in the *i+il la) is pro+ided in Article :88@< and this is co!!itted before or at the !o!ent of creating the obligation< or dolo causante.
Kinds+ 'olo causante 4 fraud in obtaining consent 'olo incidente 4 fraud in perfor ing the contract
&enunciation of Graud+ :" (uture fraud cannot be renounced because the ad+ance renunciation of the creditor )ould practicall0 lea+e the obligation )ithout effect" ;" -ast fraud can be renounced" The fraud referred to is fraud in Article ::?=< )hich is the !alice or bad faith in the perfor!ance of the obligation"
0=6<I6=0 =>
9<?5> "59<T
This fault or negligence is called culpa contractual and not culpa aquiliana or culpa e2tra% contractual" *ulpa contractual is the fault or negligence of the debtor as an incident in the fulfill!ent of an obligation< )hile culpa a7uiliana is the fault or negligence )hich constitutes an independent source of an obligation bet)een parties not pre+iousl0 bound"
(est of .egligence+ 'id the actor in doing the alleged negligent act use the reasonable care and caution )hich anordinaril0 prudent person )ould ha+e used in the sa!e situation? If not< then he is guilt0 of negligence"
#ulpa A5uiliana vs. #ulpa #ontractual In ** there is a pre%e2isting contractual relation bet)een the parties6 )hile in *A there is none" In ** the negligence of the actor is !erel0 an incident in the perfor!ance of the obligation6 )hile in *A it is substanti+e and independent" In ** the source of liabilit0 of the actor is the breach of contract6 )hile in *A it is the negligent act or the o!ission itself" In ** the proof of contract and the breach is sufficient proof to )arrant reco+er0 of da!ages6 )hile in *A the negligence of the actor !ust be pro+ed"
:=<5@ or A;85 %discussed above*
;0T85B=0TI;0 ;" T1= T=8A ;" T1= 568==A=0T
15
In general< e+er0 debtor )ho fails in the perfor!ance of his obligation is bound to inde!nif0 for the losses and da!ages caused thereb0" B0 the phrase Jin an0 !anner contra+enes the tenorK !eans an0 illicit act< )hich i!pairs the strict and faithful fulfill!ent of the obligation< or e+er0 5ind of defecti+e perfor!ance" It is therefore i!!aterial )hether or not the actor is in bad faith or negligent< )hat is re7uired is that it is his fault or the act done contra+enes their agree!ent"
CAS0 10,#2I#0 'efinition3 e+ents )hich could not be foreseen< or )hich though foreseen are ine+itable" (11<:) Art. 11<: I/cept in cases e/pressly specified by law, or when it is otherwise declared by stipulation, or when the nature of the obligations re5uires assu ption of ris2, no person shall be responsible for for those events which, could not be foreseen, or which though foresee, are inevitable. An act of God is defined as an accident< due directl0 and e2clusi+el0 to natural causes )ithout hu!an inter+ention< )hich b0 no a!ount of foresight< pains or care< reasonabl0 to ha+e been e2pected< could ha+e been pre+ented" CNa5pil +" *AD In contrast< force !a eure is a superior or irresistible force< )hich is essentiall0 an act of !an< such as )ars< stri5es< riots< acts of robbers< pirates< and brigands" /ffects of fortuitous e+ents in the perfor!ance of an obligation3 ,hen a debtor is unable to fulfill his obligation because of fortuitous events or force obligation to co ply is e/tinguished subject to the following e/ceptions+ I/ception to e/e ption fro /23 responsibility+ C:D cases e2pressl0 specified b0 la) Art. 1165 6 *f the debtor delays or has pro ised to deliver the sa e thing to two or ore persons who do not have the sa e interest, he shall be responsible for any fortuitous event until he has effected the delivery. Art. 176D 4 ,hen the debt of a thing certain and deter inate proceeds fro a cri inal offense, the debtor shall not be e/e pted fro the pay ent of the price, whatever ay be the cause for the loss, unless there is refusal without justification on the part of the creditor to accept the thing. Art. 1F:7 par 1 4 (he bailee is liable for the loss of the thing even if it should be through a fortuitous event, if he devotes the thing to any purpose different fro that for which it has been loaned. C;D declared b0 stipulation C8D nature of the obligation re7uires the assu!ption of ris5 C::?AD ajeure, his
Re7uisites for e2e!ption3 C:D cause of e+ent or debtorFs failure independent of hu!an )ill C;D i!possible to foresee or a+oid C8D i!possible for debtor to fulfill in nor!al !anner CAD debtor free for! participation in the aggra+ation of the in ur0 to the creditor CNa5pil +" *AD 3. 4a&pil and Sons v. CA! (he building of the !hilippine "ar Association collapsed during an earth5ua2e. *t was not held to be a fortuitous event because e/perts were able to show inferiority in the structure as regards to the plans and 5uality of structure. "esides, there were other buildings surrounding the area that withstood such an earth5ua2e.
N"B" One )ho negligentl0 creates a dangerous situation cannot escape liabilit0 for the natural and probable conse7uences thereof although an act of God inter+ened to precipitate the loss" There !ust be no fraud< negligence< dela0 or +iolation or contra+ention in an0 !anner of the tenor of the obligation"
16
A**ION S.BROGATORIA and A**ION -A.LIANA RIGHTS O( *R/'ITOR AGAINST '/BTOR %'* %&* %.* %C* A. (o de and fulfill ent of the obligation or specific perfor ance. (o attach the properties of the debtor, e/cept those e/e pt by law fro Accion subrogatoria Accion !auliana e/ecution.
Accion subrogatoria3 No+ation +ia change of creditor (17F1, no. ;)
'efinition3 in+ol+es the right of the creditor to e2ercise all of the rights and bring all of the actions )hich the debtor !a0 ha+e against third persons" Re7uisite conditions3 a) 'ebtor to )ho! the right or action properl0 pertains !ust be indebted to the creditor" b) *reditor is pre udiced b0 inaction or failure of the debtor to proceed against the third person" c) *reditor !ust first pursue and e2haust all properties of the debtor not e2e!pted fro! e2ecution" B" Accion -auliana3 Rescission
'efinition3 in+ol+es the right of the creditor to attac5 or i!pugn b0 !eans of a rescissor0 action an0 act of the debtor )hich is in fraud and to the pre udice of his rights as creditor" :" Subsidiar03 6in character since it can only be availed of in the absence of other legal re edies for reparation for the injury. (17F:) 6after having pursued the property in possession of the debtor to satisfy their clai s (11<<) ;" *reditor !a0 e2ercise all the rights Ce2cept those inherent in the personD 8" Bring all the actions of the debtors for the sa!e purpose Cto satisf0 clai!sD A" I!pugn the act< )hich the debtor !a0 ha+e done to defraud the! C::??D :ebtor liable to creditors with all his property and rights, e#cept those e#empt by law from attachment or e#ecution such as right to ask for legal support, right to public office, parents/ right of usufruct over the property of their minor children,family home until ?hp .DD,DDD* *reditors are protected in cases of contracts intended to defraud the! C:8:8D Rule 8H E udicial procedure for accion pauliana< accion subrogatoria 3ec. 17+ (he levy on e/ecution shall create a lien in favor of the judg ent obligee over the right, title and interest of the judg ent obligor in such property at the ti e of the levy, subject to liens and encu brances then e/isting 3ec. ;<+ judg ent re ains unsatisfied and a person is indebted to the obligor M court ay re5uire person to appear before the court and be e/a ined M service of order binds all credits and all oney and property M court ay also re5uire notice of proceedings to any party 3ec. ;F+ after writ of e/ecution, person indebted to obligor ay pay sheriff, sheriff%s receipt shall be sufficient discharge for the a ount so paid or directed to be credited by the judg ent obligee on the e/ecution
3ec. :E+ (he court ay order any property of the judg ent obligor, or oney due hi , not e/e pt fro e/ecution, in the hands of either hi self or another person, to be applied to the satisfaction of the judg ent, subject to any prior rights over such property. *f upon investigation of his current inco e and e/penses, it appears that the earnings of the judg ent obligor for his personal services are ore than necessary for the support of his fa ily, the court ay order that he pay the judg ent in fi/ed onthly install ents TRANS,ISSIBILIT43 CI.I&A1 &$1I+ all rights ac7uired +ia an obligation are trans!issible /2cept3 stipulations< la) and nature of right pro+ide other)ise /2ceptions to trans!issibilit03 C:D )hen prohibited b0 la)< C;D )hen prohibited b0 stipulation of the parties< C8D )hen prohibited b0 reason of the nature of the right< such as )hen the right is personal" 6subject to the laws, all rights ac5uired in virtue of an obligation are trans issible, if there has been no stipulation to the contrary (11<D) 6#ontracts ta2e effect only as between the parties, their assigns and heirs, e/cept where the rights and obligations arising fro the contract are not trans issible+ $state of 5. /emady v. 'u-on Surety Co. 3upre e #ourt recogni9ed 1u9on 3urety #o.%s right to go after the estate of 0e ady on account of different inde nity agree ents, or counter bonds. Girst, although the heirs% responsibility is li ited to the a ount they inherited, they succeed both rights and obligations of the deceased. "y nature, the counterbond e/pects rei burse ent to 1u9on 3urety regardless of whether it was to be ade by 0e ady or his heirs. *ntrans issibility according to stipulation cannot also hold as there is no e/press provision in the agree ents. 1astly, there is no law e/tinguishing suretyship or guaranty upon death of one of the parties. "ut there is a law li iting the heirs liability to what they have inherited. &IN'S O( OBLIGATIONS3 Primary Classification according to the Civil Code! %'* !ure and conditional %&* ,ith a period or with a ter %.* Alternative and facultative %C* @oint and solidary %E* 'ivisible and indivisible %+* ,ith a penal clause Secondary Classification according to the Civil Code! %'* $nilateral and bilateral %&* &eal and personal %.* 'eter inate and indeter inate %C* !ositive and negative %E* 1egal and conventional %+* #ivil and natural
17
-ure and *onditional Obligations a. b. -ure E not dependent upon a future or uncertain event, or past un2nown to parties, is de!andable at once. *onditional E dependent upon a future or uncertain event, or past un2nown to parties. 'e andability depends on whether it is suspensive or resolutory. i. Suspensi+e E give rise to de andability of obligation ii. Resolutor0 E ter inates obligation
18
*ertain *ondition3 Ter! % A day certain is understood to be that which ust necessarily co e, although it ay not be 2nown when. 'e andability also depends on whether it is suspensive or resolutory. 'ifference bet)een conditional and those )ith a ter!3 uncertaint0 or certaint0 of a da0 *f the uncertainty consists in whether the day will co e or not, the obligation is conditional, and it shall be regulated by the rules of the preceding section. (11F;) A" -.R/ OBLIGATIONS3 de!andable at once Ivery obligation whose perfor ance does not depend upon a future or uncertain event, or upon a past event un2nown to the parties, is de andable at once. Ivery obligation which contains a resolutory condition shall also be de andable, without prejudice to the effects of the happening of the event (11<F) -a0 +" #iuda de -alanca The debtor issued a pro!issor0 note to the creditor to pa0 a su! of !one0 pa0able upon receipt of a particular su! of !one0 fro! the estate of a certain deceased person upon de!and< and )here the case for collectionon the basis of said not )as filed :B 0ears after e2ecution of pro!issor0 note< the Supre!e *ourt ruled that< since the prescripti+e period for filing the action )as := 0ears and considering that the pro!issor0 noteFs pa0!ent constituted a pure obligation and therefore de!andable at once< the action to collect could no longer prosper" It )as dee!ed pure since satisfaction of credit could be realiIed either through debtor sued recei+ing cash pa0!ent fro! the estate of the deceased or Jupon de!andK" (ifteen 0ears fro! issuance of pro issory note is uch too long. B" *ON'ITIONAL OBLIGATIONS3 /ffects3 :" ac7uisition of rights or ter!ination of rights (11D1) *n conditional obligations, the ac5uisition of rights, as well as the e/tinguish ent or loss of those already ac5uired, shall depend upon the happening of the event which constitutes the condition (11D1) There are principally two kinds of conditions: %'* a suspensive condition suspends the acquisition of rights until the conditions is fulfilled; that is, until the happening of the event which constitutes the condition %&* a resolutory condition causes the e#tinguishment or loss of rghts already acquired upon the fulfillment of the condition, that is, the happening of the event which constitutes the condition ;" When !eans per!its is dee!ed a period sub ect to court deter!ination" ,hen the debtor binds hi self to pay when his eans per it hi to do so, the obligation shall be dee ed to be one with a period, subject to the provisions of article 11F< (11DE) *f debtor will pay when his eans per it hi to do so, or words of si ilar i port, such as, ,hen * can afford ,hen * a able to ,hen * have oney (he obligation is not conditional but with a period. (he pay ent here does not depend upon the will of the debtor, it is only the ti e when pay ent is to be ade. 3ince we are referring to the ti e of effectivity, we consider it a ter or a period. 3ince the ti e for pay ent depends upon the will of the debtor, i ediate perfor ance cannot be enforced, the right of the creditor is to go to court and let the court fi/ the date of pay ent. 8" &inds of conditions under Art" ::@;3 !otestative 4 one which depend upon the will of one of the partiesN (facultative condition) #asual 4 one which depends e/clusively upon chance Mi/ed 4 one which depends upon the will of one of the contracting parties and partly upon chance or the will of a third person
A" I!possible Cph0sicall0 and logicall0D and illegal conditions3 *f the condition is to do an i possible or illegal thing, both the condition and the obligation are void. *f the condition is negative, that is, not to do an illegal thing, both the condition and the obligation are valid. *f the condition is negative, that is, not to do the i possible, just disregard the condition, but the obligation re ains. B" Resolutor0 condition3 e+ent happens at deter!inate ti!e< or indubitabl0 )ill not happen" the condition that so e event happen at a deter inate ti e shall e/tinguish the obligation as soon as the ti e e/pires or if it has been indubitable that the event will not ta2e place (11D:) >" Suspensi+e condition3 e+ent )ill not happen at deter!inate ti!e< e+ident that such cannot occur" the condition that so e event will not happen at a deter inate ti e shall render the obligation effective fro the o ent the ti e indicated has elapsed, or if it has beco e evident that the event cannot occur. *f no ti e has been fi/ed, the condition shall be dee ed fulfilled at such ti e as ay have probably been conte plated, bearing in ind the nature of the obligation (11D5) ?" 'ee!ed fulfilled )hen obligor pre+ents such" (he condition shall be dee ed fulfilled when the obligor voluntarily prevents its fulfill ent (11D6) (constructive or presumed fulfillment) @" Resolutor0 condition3 each returns )hat each has recei+ed fro! another" when the conditions have for their purpose the e/tinguish ent of an obligation to give, the parties, upon the fulfill ent of said conditions, shall return to each other what they have received. *n case of the loss, deterioration or i prove ent of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article shall be applied to the party who is bound to return (11FE) These rules apply if the resolutory condition takes place, creating the original creditor/s obligation to return the thing received. ?" Retroacti+it0 of effect of conditional obligations a" To gi+e3 i" Retroact to da0 of obligation" ii" ,utual co!pensation in reciprocal obligations" %see!ingl0 conte!plates a si!ultaneous perfor!ance of prestations because other)ise< the fruits and interests )ould not be able to offset the other iii" If unilateral< debtor shall appropriate fruits and interests recei+ed unless intention constituting such )as different" % Since debtor still has possession of thing to be gi+en he has control< and po)er to appropriate such but sub ect to accounting per de!and b0 the creditor as pro+ided for b0 :B8? )herein all fruits pertain to the +endee fro! the ti!e of perfection of the contract" This is in accordance to ::>A )herein there is alread0 personal right at perfection of contract but real right +ests onl0 upon deli+er0" (he effect of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. .evertheless, when the obligation i poses reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall be dee ed to have been utually co pensated. *f the obligation is unilateral, the debtor shall appropriate the fruits and interests received, unless fro the nature and circu stances of the obligation it should be inferred that the intention of the person constituting the sa e was different. *n obligations to do and not to do, the courts shall deter ine, in each case, the retroactive effect of the condition that has been co plied with (11D<) o To do or not to do % *ourt deter!ines e2tent of retroacti+it0"
19
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*n obligations to do and not to do, the courts shall deter ine, in each case, the retroactive effect of the condition that has been co plied with (11D<) Furado %'*!hyG 2ecause a condition is a mere accidental provision in the obligation, which is constituted by the consent of the parties. Therefore, the effects of the conditional obligation, whose efficacy is merely suspended by the condition, once the condition is fulfilled, must retroact to the time of consent, for it was at this moment that the contract was perfected and the obligation arising therefrom established. 1ence, if the thing is improved by nature or by time, the improvement shall inure to the benefit of the creditor. %&*The purpose of this rule is to avoid the necessity of mutual accounting for the fruits and interests received. %.*6iving to the debtor the fruits or interests received in case of unilateral obligations is $ust because the creditor does not acquire a right to the thing until the condition is fulfilled and the debtor does not receive any valuable consideration from him. ;f course, if the debtor/s intention is otherwise, it must govern, as where it is provided, or inferable that he is to account for the fruits or interests received during the pendency of the condition. %C*In obligations to do or not to do, the power of the courts to determine, in the case of one or the other, the retroactive effect of the suspensive condition which has been fulfilled includes fi#ing the date of such retroactive effect. The principle is applicable to resolutory conditions as regards the e#tinguishment of the obligation. o the creditor has a right to the fruits of the thing fro the ti e the obligation to deliver it arises. 0owever, he shall ac5uire no real right over it until the sa e has been delivered to hi (116:) o the vendor is bound to deliver the thing sold and its accessions and accessories in the condition in which they were upon the perfection of the contract all the fruits shall pertain to the vendee fro the ti e day on which the contract was perfected (15;<) -L'T + $eturian Before the )ar< -L'T established a pension plan for its e!plo0ees" After the )ar< -L'T abolished such due to )ar losses" >= e!plo0ees filed this action for !onetar0 benefits under the pension plan" The e!plo0ees )ere dee!ed entitled to the said pension plan" Although the0 ha+e not reached the suspensi+e condition of age and 0ears of ser+ice< the e!plo0ees ha+e ac7uired an e2pectanc0 that is +aluable )hich the la) protects" The0 !a0 ta5e action as !a0be appropriate to preser+e their conditional right"
I4#$,I) 06'I.A#I04S A" TO GI#/ Suspensi+e conditions3 a" /2ercise due diligence6 other)ise< responsibilit0 for loss< deterioration (11DF) I!pro+e!ent inures to creditor< if at e2pense of debtor onl0 usufructuar0 right (11DF) o when the conditions have been i posed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the i prove ent, loss or deterioration of the thing during the pendency of the condition+ (1) if the thing is lost without the fault of the debtor, the obligation shall be e/tinguished (7) if the thing is lost through the fault of the debtor, he shall be obliged to pay da ages8 it is understood that the thing is lost when it perishes or goes out of co erce, or disappears in such a way that its e/istence is un2nown or it cannot be recovered8 (:) when the thing deteriorates without the fault of the debtor, the i pair ent is to be borne by the creditor8
(5) if it deteriorates through the fault of the debtor, the creditor ay choose between the rescission of the obligation and its fulfill ent, with inde nity for da ages in either case8 (6) if the thing is i proved by its nature, or by ti e, the i prove ent shall inure to the benefit of the creditor8 (<) if it is i proved at the e/pense of the debtor, he shall have no other right than that granted to the usufructuary (11DF) Resolutor0 *onditions3 a" Obligation to return )hat has been recei+ed (11FE) 6 when the conditions have for their purpose the e/tinguish ent of an obligation to give, the parties, upon the fulfill ent of said conditions, shall return to each other what they have received.(11FE) b" /2ercise due diligence6 other)ise< responsibilit0 for loss< deterioration (11FE in relation to 11DF) I!pro+e!ent inures to creditor< if at e2pense of debtor onl0 usufuctuar0 right (11DF) in case of the loss, deterioration or i prove ent of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article shall be applied to the party who is bound to return. B" TO 'O or NOT TO 'O A" *ourt deter!ination of retroacti+e effect of obligation (11FE in relation to 11DF) as for obligations to do and not to do, the provisions of the second paragraph of article 11D< shall be observed as regards the effect of the e/tinguish ent of the obligation (11FE) INT/RI, R/,/'I/S Onl0 for Suspensi+e *onditions3 no pendency in resolutory since it is i ediately de andable
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a. *reditor !a0 bring appropriate action for preser+ation of right (11DD) creditor ay, before fulfill ent of condition bring the appropriate actions for the preservation of his right. (11DD) b. reco+er0 of pa0!ent b0 !ista5e (11DD) the debtor ay recover what during the sa e ti e he has paid by ista2e in case of a suspensive condition (11DD) In an obligation sub$ect to a suspensive condition, the creditor does not acquire a right until the happening of the event which constitutes the condition. 0evertheless, he has an e#pectancy and in that sense, he has a right which he is entitled to preserve by means of an appropriate action. "or e#ample, in a contract of sale sub$ect to a suspensive condition, in case the seller is about to sell the thing to another vendee, the first vendee may bring an action to en$oin the second sale. !here the thing was paid voluntarily and without mistake before the fulfillment of the condition, there must have been a novation or some other cause for payment. 1ence, the right to recover is limited to payment by mistake before the fulfillment of the suspensive condition, for in such case there was payment of what was not due. I,-LI/' *ON'ITION3 A" *o!pliance b0 the other3 )ith the duties incu!bent upon hi! as part0 to the debt in reciprocal obligations< a part0 cannot de!and unless he co!plies or is read0 to co!pl0 )ith obligations" (inferred fro 116F) sub ect to sa!e rules on interi! obligations and interi! re!edies when the conditions have been i posed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the i prove ent, loss or deterioration of the thing during the pendency of the condition+ (1) if the thing is lost without the fault of the debtor, the obligation shall be e/tinguished (7) if the thing is lost through the fault of the debtor, he shall be obliged to pay da ages8 it is understood that the thing is lost when it perishes or goes out of co erce, or disappears in such a way that its e/istence is un2nown or it cannot be recovered8
(;) when the thing deteriorates without the fault of the debtor, the i pair ent is to be borne by the creditor8 (:) if it deteriorates through the fault of the debtor, the creditor ay choose between the rescission of the obligation and its fulfill ent, with inde nity for da ages in either case8 (5) if the thing is i proved by its nature, or by ti e, the i prove ent shall inure to the benefit of the creditor8 (6) if it is i proved at the e/pense of the debtor, he shall have no other right than that granted to the usufructuary (11DF) ,hen the conditions have for their purpose the e/tinguish ent of an obligation to give, the parties, upon the fulfill ent of said conditions, shall return to each other what they have received. *n case of the loss, deterioration or i prove ent of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article shall be applied to the party who is bound to return. As for obligations to do and not to do, the provisions of the second paragraph of article 11D< shall be observed as regards the effect of the e/tinguish ent of the obligation (11FE) B" Non%co!pliance :" B0 one part03 R/SOL.TION3 a" in Reciprocal Obligations< and the other does not co!pl0 i" -o)er to Rescind plus da!ages ii" *o!pel fulfill!ent and then rescind if such beco!es i!possible b" *ourt decrees rescission unless ust cause for authoriIing a period c" Without pre udice to third persons (he power to rescind obligation is i plied in reciprocal ones, in case one of the obligors should not co ply with what is incu bent upon hi 8 (he injured party ay choose between the fulfill ent and the rescission of the obligation, with the pay ent of da ages in either case. 0e ay also see2 rescission, even after he has chosen fulfill ent, if the latter should beco e i possible. (he court shall decree the rescission clai ed, unless there be just cause authori9ing the fi/ing of a period. (his is understood to be without prejudice to the rights of third persons who have ac5uired the thing, in accordance with articles 1;D5 and 1;DD and the Mortgage 1aw. (11F1) ;" B0 both parties3 (11F7) a" Rule against first infractor< as te!pered b0 courts b" If first infractor cannot be deter!ined< obligation e2tinguished in case both parties have co itted a breach of the obligation, the liability of the first infractor shall be e5uitably te pered by the courts. *f it cannot be deter ined which of the parties first violated the contract, the sa e shall be dee ed e/tinguished, and each shall bear his own da ages.(11F7) Songcuan +" IA* Alviar sold property to 3ongcuan. (he contract included a right of rede ption plus costs of i prove ents within ten years. (here was also a stipulation wherein on such occasion 3ongcuan was entitled to beco e a lessee of the said land. (he case involves two obligations+ reconveyance and lease. (he obligation of reconveyance does not depend on the obligation to lease, rather, obligation to lease arises only after reconveyance. 3ongcuan%s re edy is that for specific perfor ance. -nly the area actually used by 3ongcuan was andatorily leased to hi 8 only 1A; of the area in 5uestion. N"B" here is an e2a!ple of a conditional obligation"
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-hilippine A!use!ent /nterprises< inc" +" Nati+idad ?laintiffs leased a $ukebo# to 0atividad as owner of Irene/s refreshment ?arlor in :avao. 0atividad wanted to return said $ukebo# since the coins always got stuck in the slot. They stopped operating said machine and bought their own $ukebo#. The 7upreme ourt ruled against the defendants ordering the return of the $ukebo# and payment of liquidated damages. 4.6. ,escission should be done 7udicially unless stipulated in the contract. ,escission "ill only be granted if breach of the obligation is substantial and not mere occasional malfunction of the machine "ithout even an allegation of loss of income. 0ce7o v. International 6an&ing Corp. *hua Teng *hong e2ecuted a pro!issor0 note to the Ban5 )ith B<=== piculs of sugar as securit0" Oce o then enters a deal )ith Teng *hong for a sale of sugar" The ban5 then finds out that Teng *hong originall0 had onl0 :@== piculs and proceeded to clai! 8<;== of the sugar recentl0 deli+ered b0 Oce o to Teng *hong< )hich the latter also refused to pa0 for" In short< Teng *hong )as an asshole to both parties in+ol+ed" (he 3upre e #ourt ruled+ a" the title of sugar did pass fro! Oce o to Teng *hong upon deli+er0" It )as not a cash sale re7uiring si!ultaneous pa0!ent" If it )ere other)ise< there )ould be business repercussions E sale to third part0 )ould be +oid< plus the fact that the bu0er !ust bear the conse7uences should the thing perish" b. -cejo has the power to rescind but only through the courts in proper proceedings. c" Ban5 did not ha+e right to the sugar in contro+ers0 as it )as a different set fro! that )hich )as pledged as securit0" Ho)e+er< the ban5 has a right of action against the propert0 of Teng *hong" 1anlon v. 1aussermann The parties in+ol+ed agreed to ha+e a flotation proposition to help rehabilitate Benguet ,ining *o" Hanlon and Sellner )ere to pro+ide for ?B thousand in e2change for shares in the co!pan0" Ho)e+er< the > !onth period has elapsed )ithout the said pa0!ent b0 Hanlon" Supre!e *ourt held that Hanlon did not ha+e a right to Hauser!ann et al"Fs shares as the si/ onth period was a resolutory condition after which default of either party discharged the obligation of the other. Although one contract did not ha+e a resolutor0 condition< it is dee!ed that ti!e )as of the essence gi+en that the agree!ent )as in the for! of an option< and that the sub ect !atter< )hich is ,ining propert0 had speculati+e and fluctuating +alue" After the >%!onth period had lapsed< Hausser!ann had the right to loo5 after the interest of the co!pan0 as its officers and stoc5holders" It does not appear that defendants ac7uired an0 special 5no)ledge or feasibilit0 of reconstruction of the !ine b0 reason of their relation )ith Hanlon" ..". -cejo doctrine of judicial rescission does not hold as there is no sale of goods that has been fully perfor ed through delivery8 i.e. no oney was given by 0anlon in consideration of the stoc2s. (he contract here was e/ecutory on both sides up until the e/tinguish ent of the 6 onth resolutory period. 9? v de los 5ngeles $! was given a land grant by law to provide for its additional inco e. *t entered a contract with A1$M#to log ti ber fro said property. (he latter then beca e deficient in its pay ent, but entered into another agree ent with $! providing the anner of pay ent. .ote that the parties stipulated rescission of logging agree ents without the need for any judicial pronounce ent. A1$M#- then beca e deficient in pay ent of its accounts again. $! conducted a bidding and awarded logging rights to 3ta. #lara lu ber hardware after infor ing A1$M#- that $! is rescinding their contract. 3# held $! had a right to do so. N"B" $udicial pronounce!ent )as unnecessar0 as it )as clearl0 e2pressed in their contract" No la) prohibits parties fro! entering agree!ents )herein +iolation of the ter!s of contract )ould cause cancellation e+en )ithout court inter+ention" Rescission on account of infractions b0 the other part0 b0 one of the parties !ust be !ade 5no)n to that other part0 )ho in turn can see5 for udicial re!ed0 should he feel that rescission is un ustified" ;" *entral -hilippine .ni+ersit0 +" *A 'on &a on 1ope9 donated land to #!$ with the condition that a edical college would be established upon it. After 5E years, the heirs want to judicially rescind donation for non6co pliance with the said condition. (he condition is dee ed resolutory, i.e. the school has obligation to set up edical college
23
building the o ent it accepted the donation with said condition. (he deed of donation did not specify a period. Article 11F< provides that courts ay fi/ the duration wherein it can be inferred fro its nature and circu stances that a period was intended. 0owever, the court said that 5E years is sufficient ti e for #!$ to have fulfilled its obligation of establishing a edical college. Art. 11F1 provides that when one of the obligors cannot co ply, obligee ay see2 rescission and the court shall decree the sa e unless there is just cause to fi/ a period. #!$ has slept on its obligation for an unreasonable length of ti e, donation ust be rescinded. N"B" We ha+e to clarif0 the difference bet)een an onerous and gratuituous title since the !a orit0 opinion !entioned that the donation )as both gratuituous and onerous as pointed out b0 'a+ideFs dissent" Note that the +ote here is 8 to ;" The case illustrates discretion on the part of the courts in rescinding contracts"
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OBLIGATIONS R/N'/R/' #OI' B4 */RTAIN *ON'ITIONS Annulling conditions3 a" -otestati+e E onl0 if suspensi+e condition dependent solel0 on )ill of debtor when the fulfill ent of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. *f it depends upon chance or upon the will of a third person, the obligation shall ta2e effect in confor ity with the provisions of this #ode. (11D7) b" I!possible *onditions (11D;) c" those contrar0 to la)< good custo!s< !orals< public order or public polic0 (11D;) % separable if di+isible (11D;) * possible conditions, those contrary to good custo s or public policy and those prohibited by law shall annul the obligation which depends upon the . *f the obligation is divisible, the part thereof which is not affected by the i possible or unlawful condition shall be valid. (11D;) d" Not to do an i!possible thing E not agreed upon (he condition not to do an i possible thing shall be considered as not having been agreed upon
(11D;)
Lao Li! +" *A (he stipulation that the lessee has the right to renew contract of lease as long as he needs the pre ises and he can pay for the sa e is invalid. *t would leave the lessee, 'y the sole power to deter ine whether the lease should continue or not. A general covenant to renew is dee ed satisfied by one renewal unless provision is clearly and e/pressly ade for further renewals. 1ease contract dee ed e/tinguished at the end of a year, subject to renewal via new agree ent but the lessor did not want to renew. Irgo, no ore lease. Os!ena +" Ra!a To!as Os!ena )as gi+en b0 Rafols all the rights the latter inherited fro! #ictoriano Os!ena to clai! pa0!ent fro! Ra!a on account of a loan the0 contracted" To!as Os!ena presented contracts to Ra!a for pa0!ent< )hich she ac5no)ledged" The0 e2ecuted another contract )herein she pro!ised to pa0 once her house in -agina )as sold" The Supre!e *ourt ruled the condition as in+alid as it )as dependent on the sole )ill of Ra!a< Her ac5no)ledge!ent< therefore< is absolute and sufficient to pre+ent the statute of li!itation fro! barring action upon the original contract" Her defense of prescription cannot hold" Ro!ero +" *A Ro!ero and foreign partners )anted to set up a )arehouse in ,etro ,anila" The0 bought land fro! spouses (lores" There )as a acontract of sale )ith the condition that s7uatters )ould be re!o+ed fro! the propert0 after >= da0s" (ailure to do so )ould !ean returning the do)n pa0!ent to the +endee" There )as a court order e+icting the s7uatters but such )as handed do)n be0ond the >= da0 !ar5" (lores then offered to return do)n pa0!ent as the0 could not get rid of the s7uatters" The Supre!e *ourt ruled that onl0 the in ured part0 could ha+e an action for rescission" Onl0 the +endee has the option to proceed )ith agree!ent or )ai+ing the said condition" Rescission under Art" ::H: is predicated on a breach of faith b0 the other part0 that +iolates the reciprocit0 bet)een the!" N"B" In short< this case sho)s that one cannot rescind a contract on account of oneFs o)n failure to fulfill an obligation"
25
8" Naga Tel" *o" +" *A NAT/L*O entered a contract )ith *AS/R/*O )herein the for!er )as allo)ed the use of electric post" NAT/L*O installed ten phone lines for *AS/R/*OFs use free of charge" After := 0ears< *AS/R/*O )ants to refor! the contract< as it )as one%sided % the0 )ere un ustl0 co!pensated< and the phone lines ha+e beco!e hea+0 and their installation ha+e )ea5ened the said posts due to holes that ha+e to be !ade" Supre!e *ourt allo)ed for refor!ation as an increase in phone subscribers necessitate an increase in co!pensation for the use of electrical posts" NAT/L*OFs un ust enrich!ent !ust not be allo)ed at *AS/R/*OFs e2pense" There is no prescription as it could onl0 be counted fro! the ti!e the contract beca!e disad+antageous" (urther!ore< there is a potestati+e condition dependent on the )ill of NAT/L*O< )hich !ust be declared in+alid" The pro+ision that the contract shall be +alid as long as NAT/L*O needed the electric posts is untenable" ..". &efor ation of contract is not a new contract but is an action to a2e instru ent to e/press the parties% real agree ent. -nly the instru ent of the contract is changed. (his case is another e/a ple of an invalid potestative condition. A" 'ucusin +" *A A contract of lease for a one%door apart!ent )as entered into" It pro+ided that the ter! of the contract shall be on a !onth%to%!onth basis co!!encing on (eb" :H< :H?B< until ter!inated b0 !utual agree!ent or ter!inated b0 the lessor on the ground that his children need the pre!ises for their o)n use" The Supre!e *ourt held such a condition to be +alid as the second condition depended on the )ill of third persons E that of the children of the lessor" N"B" Onl0 that )hich is dependent on the sole )ill of the debtor is in+alid" No one is supposed to ha+e sole po)er" OBLIGATIONS WITH A T/R,3 a" Ac7uisition of rights for suspensi+e ter!s L ter!ination of right for resolutor0 ter!s3 % AT A 'A4 */RTAIN -bligations for whose fulfill ent a day certain has been fi/ed, shall be de andable only when that day co es. -bligations with a resolutory period ta2e effect at once, but ter inate upon arrival of the day
certain.
A day certain is understood to be that which ust necessarily co e, although it ay not be 2nown when. *f the uncertainty consists in whether the day will co e or not, the obligation is conditional, and it shall be regulated by the rules of the preceding section. (11F;) A period is a certain length of ti e, which deter ines the effectivity or the e/tinguish ent of an obligation. A period or ter consists in a space of ti e, which has an influence on obligations as a result of a juridical act and either suspends their de andableness, or produces their e/tinguish ent. In par. ', the period is suspensive %e# die*. In par.&, the period is resolutory %in diem*. =#ample of paragraph .H5 promises to give ?E,DDD to 2 when I dies. The death of I must necessarily come although it is not known when. =#ample of paragraph C-- 5 promises to give 2 the amount of ?',DDD if the horse 0apoleon owned by should die in .D days. It is not certain whether the day of the horse/s death will come or not in .D days. &inds of period3 (1) According to source a. 1egal 4 fi/ed by law b. Boluntary 4 fi/ed by the parties c. @udicial 4 fi/ed by the court (2) According to effect
a. b. (3) a. b.
I/6die 4 period ust lapse before the obligations can be de anded. *n6die 4 period after which the obligation is e/tinguished According to definiteness 'efinite 4 refers to a fi/ed 2nown date or ti e *ndefinite 4 refers to an event which will necessarily happen but the date of its happening is not 2nown. of -eriod3 *t ust refer to the future. *t ust be certain. *t ust be possible.
26
Re7uisites %'* %&* %.*
-eriod distinguished fro! a condition3 %'* As to fulfill!ent E a period is a certain event, which ust happen sooner or later at a date 2nown beforehand or at a ti e, which cannot be deter ined8 while a condition is an uncertain event. %&* As to ti!e E a period refers only to the future, while a condition ay also refer to a past event un2nown to the parties. %.* As to influence on the obligation Ea period erely fi/es the ti e for the efficaciousness of the obligation. -n the other hand, a condition causes an obligation to arise or to cease. (Art. 11F;) /ffect of pa0!ent before the arri+al of the period3 (he debtor ay recover what he has paid including the fruits and interest if he is unaware of the period. *f he paid voluntarily 2nowing that the obligation is not yet due, he cannot recover what he has paid. b" Interi! obligations *n case of loss, deterioration or i prove ent of the thing before the arrival of the day certain, the rules in article 11DF shall be observed. i" /2ercise due diligence6 other)ise< responsibilit0 for loss< deterioration (11DF) ii" I!pro+e!ent inures to creditor< if at e2pense of debtor onl0 usufructuar0 right (11DF) ,hen the conditions have been i posed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the i prove ent, loss or deterioration of the thing during the pendency of the condition+ 1. if the thing is lost without the fault of the debtor, the obligation shall be e/tinguished 2. if the thing is lost through the fault of the debtor, he shall be obliged to pay da ages8 it is understood that the thing is lost when it perishes or goes out of co erce, or disappears in such a way that its e/istence is un2nown or it cannot be recovered8 3. when the thing deteriorates without the fault of the debtor, the i pair ent is to be borne by the creditor8 4. if it deteriorates through the fault of the debtor, the creditor ay choose between the rescission of the obligation and its fulfill ent, with inde nity for da ages in either case8 5. if the thing is i proved by its nature, or by ti e, the i prove ent shall inure to the benefit of the creditor8 6. if it is i proved at the e/pense of the debtor, he shall have no other right than that granted to the usufructuary (11DF) iii" Reco+er0 pa0!ent or deli+er0 before due and de!andabilit0 Anything paid or delivered before the arrival of the period, the obligor being unaware of the period or believing that the obligation has beco e due and de andable, ay be recovered, with the fruits and interest. (11F5) c" Benefit of the period
i" -resu!ption3 benefit for both ,henever in an obligation a period is designated, it is presu ed to have been established for the benefit of both the creditor and the debtor, unless fro the tenor of the sa e or other circu stances it should appear that the period has been established in favor of one or of the other. (11F6) *f the period is for the benefit of both parties, the creditor ay not, before the e/piration of the period, de and fulfill ent8 neither ay the debtor fulfill. *f the period has been established solely for the benefit of the creditor, he ay de and fulfill ent when he pleases but the debtor ay not oblige hi to accept before the arrival of the period. *f teh period has been established solely for the benefit of the debtor, he ay, use it to oppose a pre ature de and, or renounce it and pay in advance of aturity.
27
Abesamis v. 8oodcraft 8or&s, Inc. (he contract provided that the appellant shall a2e ship ent before the end of @uly, but will not co ence earlier than April with the option to a2e partial ship ent depending on the availability of logs and vessels. (he 3upre e #ourt, in deciding who was to bear the loss as a result of the typhoon in a contract for delivery of logs, ruled that the 5uoted provision provides for a period. (he designated ti e was calculated to avoid typhoons. -n May 5, 1F51 the appellant failed to send a vessel to pic2 up the logs, which were conse5uently swept away by a typhoon. 3ince the said date was within the period prescribed, none could incur delay nor de and perfor ance. (he loss should be shouldered by the appellee or the logger.
d" (i2ing of a period I" i" In the follo)ing cases< the court !a0 fi2 a period3 (11F<) C:D No stipulation< but period is intended as inferred fro! the nature and circu!stances of the obligation C;D If the duration depends upon the )ill of the debtor C8D If the debtor pro!ises to pa0 )hen his !eans per!it ii" Once fi2ed b0 the court< the period cannot be changed b0 such court but the parties !a0 al)a0s change the period b0 !utual agree!ent" C::H?D *f the obligation does not fi/ a period, but fro its nature and the circu stances it can be inferred that a period was intended, the courts ay fi/ the duration thereof. (he courts shall also fi/ the duration of the period when it depends upon the will of the debtor. *n every case, the courts shall deter ine such period as ay under the circu stances have been probably conte plated by the parties. -nce fi/ed by the courts, the period cannot be changed by the . (11F<) iii" Instances )hen the court !a0 not fi2 the ter! or period ,hen no ter has been specified by the parties because no ter which case it is considered a pure obligation. ,hen the obligation is payable on de and. ,hen specified period is provided by law. was ever intended, in
.regorio Araneta, Inc. v. Philippine sugar $states +evelopment Co., 'td. T)o 0ear period set b0 the lo)er court )as struc5 do)n for being arbitrar0" The court !ust deter!ine that the obligation does not fi2 a period but fro! the nature and circu!stances it can be inferred that a period )as intended" (ro! the facts of the case< it can be inferred that the parties intended to defer perfor!ance of obligations until after the s7uatters )ere dul0 e+icted" Both of the parties 5ne) that there )ere s7uatters in the propert0" No specific period can be !ade as e+iction consists of legal processes< )hich ta5e an indefinite a!ount of ti!e" Although it )as indefinite< such )as the intention of the parties and courts could not ust assign a period out of thin air"
..". &e5uisites and guidelines for setting a period+ there is no period specified but such was intended. #ourts should just fi/ a period, which the parties could have intended.
28
8oman v.
Saranga0a and Ro!an entered a contract for the sale of B parcels of land" It pro+ided that Ro!an )ould pa0 Saranga0a )ithin si2t0 da0s after the latter has secured titles for the said lots" Other)ise the +endees )ould be liable for -hp B=<=== in li7uidated da!ages" Saranga0a )as able to obtain titles but the +endees )ere not able to pa0 hi! )ithin the prescribed period" Trial court ruled that Ro!an should purchase the land at its settled purchase price< and pa0 for legal costs and attorne0Fs fees" Reliance )as !ade on Article ::H:" The Supre!e *ourt ruled that the lo)er court erred in fi2ing a period" -urchase offer and counter%offers )ere alread0 abandoned b0 the parties and thus ad udication on the said bases )as i!proper" The Trial *ourt did not fi2 a period )ithin )hich Ro!an could co!pl0 )ith the obligation but !erel0 ordered the purchase to push through" (urther!ore< there is no ust cause as re7uired b0 art" ::H:" It is un ust to grant an e2tension of > 0ears< done b0 ordering the purchase< for Ro!an to co!pl0 )ith his obligation" Ro!an could ust ha+e purchased the land after being ser+ed the su!!ons"
e" Losing the right to use a period i" Grounds3 :" insol+enc0< unless guarant0 or securit0 ;" does not furnish pro!ised guaranties or securities 8" %i!paired established guaranties or securities %loss of such thru fortuituous e+ent< unless replace )ith ne) ones satisfactoril0 A" +iolation of consideration of )hich the creditor agreed to the period B" atte!pt to abscond
(he debtor shall lose every right to a2e use of the period+ (1) when after the obligation has been contracted, he beco es insolvent, unless he gives a guaranty or security for the debt (7) when he does not furnish to the creditor the guaranties or securities which he has pro ised (;) when by his own acts he has i paired said guaranties or securities after their establish ent, and when through a fortuitous event they disappear, unless he i ediately gives new ones e5ually satisfactory (:) when the debtor violates any underta2ing in consideration of which the creditor agreed to the period (5) when the debtor atte pts to abscond (11FD) In all the cases abo+e< the obligation despite the fact that the period has not 0et lapsed< shall beco!e i!!ediatel0 pa0able or de!andable" The word ,insolvent- does not require a $udicial decree of insolvency. It should be understood in its ordinary meaning which may embrace different degrees of financial embarrassment. The insolvency must have occurred after the obligation was constituted. In 0o. . it is sufficient that the guaranties are impaired by the acts of the debtor but in case of fortuitous event, it is required that the guaranties disappear. The word ,disappear- should not be understood in its literal sense but in its legal sense. Gaite +" (onacier -a0!ent of obligation )as secured b0 t)o suret0 bonds3 one fro! a !ining co!pan0 and its stoc5holders and the other fro! a bonding co!pan0" The obligor )as obliged to pa0 the indebtedness fro! the ti!e it recei+ed the proceeds of the sale of iron ore< the Supre!e *ourt ruled that the obligor in this case lost its right to the period" (ailure to rene) an e2pired suret0 )ith the bonding co!pan0 constituted an i!pair!ent of the securities or guaranties" Thus<
(onacier lost his right to the period< i"e" ti!e to sell the iron ore< unless he i!!ediatel0 gi+es ne) ones e7uall0 satisfactor0"
29
/ffect of Loss of right to ter!3 'e!andabilit0 % references of dela0 and liabilit0 A" 'ela0 starts fro! ti!e of udicial or e2tra udicial de!and .nless3 obligation or la) e2pressl0 declares ti!e is a controlling !oti+e de!and )ould be useless Reciprocal obligations3 dela0 happens fro! the !o!ent one part0 fulfills C::>HD 5inds3 !ora sol+endi * delay of obligor or debtor !ora accipiendi 9 delay by obligee or creditor co!pensation !orae E delay of parties in reciprocal obligations B" *o!pel co!pliance3 responsibilit0 for loss< deterioration< or i!pro+e!ent (11DF) ,hen the conditions have been i posed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the i prove ent, loss or deterioration of the thing during the pendency of the condition+ a. if the thing is lost without the fault of the debtor, the obligation shall be e/tinguished b. if the thing is lost through the fault of the debtor, he shall be obliged to pay da ages8 it is understood that the thing is lost when it perishes or goes out of co erce, or disappears in such a way that its e/istence is un2nown or it cannot be recovered8 c. when the thing deteriorates without the fault of the debtor, the i pair ent is to be borne by the creditor8 d. if it deteriorates through the fault of the debtor, the creditor ay choose between the rescission of the obligation and its fulfill ent, with inde nity for da ages in either case8 e. if the thing is i proved by its nature, or by ti e, the i prove ent shall inure to the benefit of the creditor8 f. if it is i proved at the e/pense of the debtor, he shall have no other right than that granted to the usufructuary (11DF)
h" i" "
'I#ISIBILIT4 O( RIGHT TO '/,AN' OR OBLIGATION TO -/R(OR, CSINGL/ #/RS.S ,.LTI-L/ -ARTI/SD II" $OINT OBLIGATIONS
a" 'efinition @- is one where the whole liability is to be paid or fulfilled proportionately by the different debtors andAor is to be de anded also proportionately by the different creditors. Also called pro6rata, proportionate, anco unada, anco unada si ple. In case there are t)o or !ore debtors or creditors< the la) presu!es a oint liabilit0" (17E<) (he concurrence of two or ore creditors or of two or ore debtors in one and the sa e obligation does not i ply that each one of the for er has a right to de and, or that each one of the latter is bound to render entire co pliance with the prestation. (here is a solidary obligation only when the obligation e/pressly so states, or when the law or the nature of the obligation re5uires solidarity. (17E<) Solidarit0 e2ists onl03 (1) When stipulated. ,hen stipulated by the parties using such words li2e Ojointly and severally,P Oin solidu ,P O* pro ise to payP in a note signed by two or ore debtors, or si ilar words8 (7) -ro+ided b0 la)" ,hen solidary liability is provided for by law. (hus, civil liability arising fro cri es, negotioru gestio, co odatu or 5uasi6delict shall be solidary8 b.
(;) According to its nature" ,hen the nature of the obligation re5uires solidarity. -resu!ed e7ual di+ision according to parties< credits and debts being distinct fro! the other" (17ED) *f fro the law, or the nature of the wording of the obligations to which the preceding article refers the contrary does not appear, the credit or debt shall be presu ed to be divided into as any e5ual shares as there are creditors or debtors, the credits or debts being considered distinct fro one another, subject to the &ules of #ourt governing the ultiplicity of suits. (17ED) Furado : In a $oint obligation, each debtor shall be liable only for his part of the debt presumed to be eaual with the other debtors. The above provision is consistent with the rule that a $oint obligation is presumed in case of plurality of debtors or creditors for solidary obligation e#ists only when the law so provides, when e#pressly stipulated by the parties or when called for by the nature of the obligation. d" So!e feature of oint liabilit0 *nsolvency of one debtor does not a2e the others liable. Bitiated consent on the part of one debtor does not affect the others. 'e and ade to one of the debtors is not a de and to all because the debt of one is distinct fro the others. c.
30
Philippine 4ational 6an& v. Sta. )aria (he principal, in a special power of attorney, erely e powered his agent to borrow oney and deliver ortgages of real estate to the creditor and where the said agent indeed borrowed oney but e/ecuted a ortgage not on the account of his principal but in his own na e. (he 3upre e #ourt applying Art. 17E< ruled that the ortgage was not joint and several because the special power of attorney did not grant the authority to bind her solidarily with hi on any loan he ight secure thereunder. N"B" There )as no e2press state!ent in the obligation< nor )as there a la) or nature of the obligation re7uiring solidarit0" 3aucian v. :uerol *n -ctober, 1FED, 1ino 'ayandante and 0er enegilda &ogero e/ecuted a private writing in which they ac2nowledged the selves to be indebted to &o an @aucian in the su of !1;,;;7.;;. 0er enegilda &ogero signed this docu ent in the capacity of surety for 1ino 'ayandante8 but as clearly appears fro the instru ent itself, both debtors bound the selves jointly and severally to the creditor, and there is nothing in the ter s of the obligation itself to show that the relation between the two debtors was that of principal and surety. 0er enegilda &ogero died, and her estate is now ad inistered by Querol. (he 3upre e #ourt held that @aucian%s clai against the estate is not contingent but absolute, the latter being solidarily liable. 0is clai did not depend on whether or not @aucian e/hausts all the property of 'ayandante in satisfying his clai , but rather as a solidary co6debtor, the for er can go after &ogero%s estate. 'ayandante was declared insolvent as he could not satisfy his debt to @aucian as decreed by the court, regardless of such, @aucian can still go after &ogero%s estate. (he #ivil #ode a2e it clear that 0er enegilda &ogero was liable absolutely and unconditionally for the full a ount of the obligation without any right to de and the e/haustion of the property of the principal debtor previous to its pay ent. 0er position so far as the creditor was concerned was e/actly the sa e as if she had been the principal debtor. (he opinion contains an e/position of the difference between the juridical conceptions of liability incident to ultiple obligations, as e bodied in the civil law and co on law respectively8 and the civil law distinction is noted between the apportionable joint obligation and the solidary joint obligation. At co on law each of the debtors in a ultiple obligation is liable in solidu for the whole, the obligation not being apportionable a ong the debtors. N"B" In a gi+en contract< )herein a part0 signs as a suret0 but the agree!ent states oint and se+eral liabilities< there is a solidar0 obligation"
$OINT IN'I#ISIBILIT4 A 7oint indivisible obligation is one in "hich the ob7ect or prestation is indivisible, not susceptible of division; "hile the tie bet"een the parties is 7oint, that is, liable only to a proportionate share. -re udiced onl0 b0 collecti+e acts of ALL creditors (17EF) /nforced against ALL debtors (17EF) If the division is impossible, the rights of the creditors may be pre$udiced only by their collective acts, and the debt can be enforced only by proceeding against all the debtors. If one of the latter should be insolvent, the others shall not be liable for his share. %'&DJ* (he above article conte plates an obligation which is joint as to the parties but indivisible as to co pliance. (he concurrence of all the creditors is necessary for de anding co pliance due to the indivisibility of the obligation. (he sa e is inversely true as regards the debtors. (he concurrence of all the creditors is also necessary for acts which are prejudicial. "ut an act beneficial to al li2e interruption of prescription ay be perfor ed by one of the creditor. Indi+isibilit0 is not necessaril0 solidar0 (171E) (he indivisibility of an obligation does not necessarily give rise to solidarity. .or does solidarity of itself i ply indivisibility. (171E) Characteristics! %'* 'e and ust be ade to all the joint debtors. %&* (he creditor ust proceed against all the joint debtors, because the co pliance of the obligation is possible only if all of the joint debtors would act together. %.* *f one of the debtors is insolvent, the other shall not be liable for his share. %C* *f one of the debtors cannot co ply, the obligation is converted into onetary consideration. -ne who is ready and willing to co ply will pay his proportionate share, and the other not willing shall pay his share plus da ages when his financial condition will i prove. %E* *f there is ore than one creditor, delivery ust be ade to all, unless one is authori9ed to receive for the others. SOLI'AR4 OBLIGATIONS a" 'efinition 3- is one where each of the debtors is bound to render co pliance of the entire obligation andAor each one of the creditors has a right to de and entire co pliance of the prestation. Also called in solidu , jointly and severally, individually and collectively, and anco unada solidaria. Ne+er presu!ed3 e2pressl0 stipulated< pro+ided b0 la)< re7uired b0 nature of obligation (here is a solidary obligation only when the obligation e/pressly so states, or when the law or the nature of the obligation re5uires solidarity. (17E<) 3olidarity e/ists only+ when stipulated by the parties using such words li2e Ojointly and severally,P Oin solidu ,P O* pro ise to payP in a note signed by two or ore debtors, or si ilar words8 when solidary liability is provided for by law. (hus, civil liability arising fro cri es, negotioru gestio, solutio indebiti, co odatu or 5uasi6delict shall be solidary8 when the nature of the obligation re5uires solidarity. c. Solidarit0 does not i!pl0 indi+isibilit0 (171E) (he indivisibility of an obligation does not necessarily give rise to solidarity. .or does solidarity of itself i ply indivisibility. (171E) (his is so because indivisibility refers to the object of the obligation which is capable of partial perfor ance while solidarity refers to the liability of one debtor to answer not only for his share of the obligation but also for the shares of the other debtors. ,ithout solidary liability b"
31
of the debtors, the obligation is joint, and if its object is indivisible, it is a joint and indivisible obligation. d. 3olidarity e/ists even if bound by different+ MA..I&, !I&*-', #-.'*(*-.3 C:;::D Solidarit0 !a0 e2ist although the creditors and the debtors !a0 not be bound in the sa!e !anner and b0 the sa!e periods and conditions" C:;::D e. f. -bligation ay be joint on the side of the creditors and solidary on the side of the debtors or vice6versa. Kinds of solidarity+ Acti+e E solidarit0 a!ong creditors -assi+e E solidarit0 a!ong debtors ,i2ed E solidarit0 on the part of creditors and debtors
32
,on uillo v. CA Ron7uillo )as one of four debtors" The co!pro!ise agree!ent sa0ing Jindi+iduall0K and J ointl0K indicates solidar0 liabilit0" B" InchaustiMco +" 4ulo Si2 brothers and sisters ad!itted solidar0 liabilit0" Gregorio 4ulo )as sued for pa0!ent of entire indebtedness" Ho)e+er< solidar0 debtors (rancisco< ,anuel and *ar!en entered into a co!pro!ised agree!ent )ith plaintiff" S* ruled3 Gregorio can be sued for the entire indebtedness plus interest" -artial re!ission granted to the three debtors also benefited hi!" 'efense of non%!aturit0 of his other co%debtors solidar0 liabilit0 is a defense to allo) for !ere partial pa0!ent" Gregorio )as ordered to pa0 the part of the reduced indebtedness< onl0 insofar as such is de!andable" Greg 4ulo )as solidaril0 liable< he benefited fro! re!ission< but not e2tension of the period for pa0!ent for his o)n part< thus there )as partial de!andabilit0" g" 'ebtorL passi+e solidarit0 distinguished fro! suret0ship3
B0 guarant0 a person< called the guarantor< binds hi!self to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so" A solidar0 guarant0 is suret0ship" Suret0ship 4 *f a person binds hi self solidarily with the principal debtor, the provisions of 3ection :, #hapter ;, (itle * of this "oo2 shall be observed. *n such case the contract is called a suretyship. (7E:<) @urado distinguishes a solidary debtor fro a surety. "oth are solidarily liable but+ A surety does not have an actual loan of his own, solidary debtor is also liable for his own debt in addition to that of others. After paying the debt, a surety has right to collect fro principal debtor, while a solidary debtor has right to collect fro solidary co6debtor. Most i portantly, an e/tension of ti e would benefit the surety and such would not benefit solidary co6debtors who did not 2now or consent to an e/tension of ti e. (Billa v. Carcia "os5ue) h" Rights of solidar0 creditorLs
'o onl0 )hat is useful to others< not an0thing pre udicial . %'&'&* Iach on of the solidary creditors ay do whatever ay be useful to the others, but not anything which ay be prejudicial to the latter. (1717) No assign!ent )ithout consent of others C:;:8D A solidary creditor cannot assign his rights without the consent of the others. (171;) Furado: The consent of the other co-solidary creditors is necessary because they may not trust the new creditor who would thereby be entitled to collect the entire debt. An0one has right to recei+e pa0!ent6 but first to first one to de!and" (171:) (he debtor ay pay any one of the solidary creditors8 but if any de and, judicial or e/trajudicial, has been ade by one of the , pay ent should be ade to hi . (171:)
Furado: ?ayment made by the debtor to any one of the solidary creditors e#tinguishes the obligation. If one of the solidary creditors demands payment of the debt, he has the right to do so and payment must be made to him. :uiombing v. CA -nly one of the solidary creditors filed a suit for collection against the solidary debtors. (he debtors oved for the dis issal of the suit on the ground that the other solidary creditors should have been included in the case. (he 3upre e #ourt rejected the dis issal of the suit invo2ing Art. 1717 and stated that recovery of the contract price was surely a useful act and can be done even by one solidary creditor. Gurhter ore, the 5uestion as to who should sue was a personal issue a ong the solidary creditors. N"B" As to )ho sues for reco+er0 of the obligation should not !atter to the debtors as the0 are )holl0 obligated to either one of the solidar0 creditors" Action against and pa0!ent b0 solidar0 debtor o -roceed against an0one< so!e< or all of the! si!ultaneousl0 (1716) o 'e!and against one3 not obstacle for de!and against another< unless paid (1716) (he creditor ay proceed against any one of the solidary debtors or so e or all of the si ultaneously. (he de and ade against one of the shall not be an obstacle to those which ay subse5uently be directed against the others, so long as the debt has not been fully collected. (1716) o -a0!ent b0 an0one e2tinguishes< if t)o or !ore pa0ors< creditor chooses (171<) !ay ent ade by one of the solidary debtors e/tinguishes the obligation. *f two or ore solidary debtors offer to pay, the creditor ay choose which offer to accept. (171<) Loss or i!possibilit0 i" )ithout fault of debtors3 /2tinguish!ent *f the thing has been lost or if the prestation has beco e i possible without the fault of the solidary debtors, the obligation shall be e/tinguished. (1771) ii" )ith fault of an0 of the debtors3 all responsible )ith right against negligent debtor iii" fortuitous e+ent< but )ith dela03 all responsible )L right of action +s" negligent debtor *f there was fault on the part of any one of the all shall be responsible to the creditor, for the price and the pay ent of da ages and interest, without prejudice to their action against the guilty or negligent debtor. (1771) *f through a fortuitous event, the thing is lost or the perfor ance has beco e i possible after one of the solidary debtors has incurred in delay through the judicial or e/trajudicial de and upon hi by the creditor, the provisions of the preceding paragraph shall apply. (1771) *n the last two paragraphs above, fault or the delay of one debtor is the fault or delay of all the solidary debtors as far as the creditor is concerned. "ut as a ong the debtors, the one at fault or in delay shall alone bear the da ages aside for his share. i" Rights of Solidar0 'ebtor
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Set up all defenses (1777) o those deri+ed fro! nature of obligation o those personal to hi! ot to his share o those personal to tohers< onl0 insofar as their share A solidary debtor ay, in actions filed by the creditor, avail hi self of all defenses which are derived fro the nature of the obligation and of those which are personal to hi , or pertain to his own share. ,ith respect to those which personally belong to the others, he ay avail hi self thereof only as regards that part of the debt for which the latter are responsible. (1777) (he defenses available to a solidary debtor when sued are+ (1) defenses derived fro the nature of the obligation which is available to all debtors as a defense to co pliance with the entire obligation8
(7) defenses personal to the debtor li2e inority, insanity, civil interdiction, etc. 'efenses personal to the debtor are not available to the other debtors so as to free the latter fro their liability for their own shares in the obligation8 (;) defenses that pertain to his co6debtor or co6debtors, li2e the e/istence of a period or condition for as already stated, solidarity ay e/ist even if the debtors are bound under different periods or conditions. Imperial Insurance, inc. v. +avid 0usband and wife bound the selves solidarily in favor of obligee for a su of oney and when the husband died, the obligee de anded pay ent fro the wife who resisted pay ent, clai ing that the obligee%s clai is barred by it%s failure to file a clai in the intestate proceeding of the deceased husband. (he 3upre e #ourt ruled that the obligee can properly clai fro the wife as the nature of the obligation is solidary. N"B" If obligation )ere solidar0< the entire obligation is de!andable fro! an0one of the solidar0 obligors" Right of action against solidar0 co%debtors o
34
pa0or of obligation !a0 clai! fro! each co%debtor their share of the debt (171<) o )ith interest< unless paid before debt is due or de!andable 0e who ade the pay ent ay clai fro his co6debtors only the share which corresponds to each, with the interest for the pay ent already ade. *f the pay ent is ade before the debt is due, no interest for the intervening period ay be de anded. (171<) o loss of share b0 insol+enc0 of a solidar0 co%debtor is borne proportionatel0 b0 each (171<) ,hen one of the solidary debtors cannot, because of his insolvency, rei burse his share to the debtor paying the obligation, such share shall be borne by all his co6debtors, in proportion to the debt of each. (171<) o After prescription or if illegal3 No rei!burse!ent (171D) !ay ent by a solidary debtor shall not entitle hi to rei burs ent fro his co6debtors if such pay ent is ade after the obligation has prescribed or beco e illegal. (171D) @urado+ After the obligation has prescribed or beco e illegal, it is no longer due8 hence, there should be no rei burse ent fro the co6debtors. If !ade subse7uent to total pa0!ent3 Re!ission does not release fro! responsibilit0 other co%debtors (he re ission ade by the creditor of the share which affects one of the solidary debtors does not release the latter fro his responsibility towards the co6debtors, in case the debt had been totally paid by anyone of the before the re ission was effected. (he above article is intended to prevent fraud whereby to favor a particular debtor, the creditor re its his share, after another has fully paid the obligation. o Total re!ission obtained b0 one solidar0 debtor3 NO R/I,B.RS/,/NT (he re ission of the whole obligation, obtained by one of the solidary debtors, does not entitle hi to rei burse ent fro his co6debtors. (177E) #he remission of the "hole debt is a donation to all the debtors; hence, all are <=benefited and no reimbursement is authori-ed by la". 4ote ho"ever that if remission is only made to one of the solidary debtors, the latter can still be held liable for the share of the other co*debtor. o 'I#ISIBILIT4 O( -R/STATION $ffects on obligations under >4ature and $ffects of 0bligations?! Rules for di+isibilit0 onl0 appl0 to !ultiple debtorsLcreditors as to the perfor!ance not those onl0 one debtor and onl0 one creditor" (177;)
(he divisibility or indivisibility of the things that are the object of obligation in which there is only one debtor and only one creditor does not alter or odify the provisions of #hapter 7 of this (itle. (177;) The divisibility or indivisibility refers to the performance, not to the thing which is the ob$ect of the obligation. 5lthough a thing is by its nature physically divisible, the obligation is indivisible if full compliance is intended by the parties or is so provided by law. Indi+isibilit0 is not solidar0< +ice +ersa" (171E) (he indivisibility of an obligation does not necessarily give rise to solidarity. .or does solidarity of itself i ply indivisibility. (171E) (his is so because indivisibility refers to the object of the obligation which is capable of partial perfor ance while solidarity refers to the liability of one debtor to answer not only for his share of the obligation but also for the shares of the other debtors. ,ithout solidary liability of the debtors, the obligation is joint, and if its object is indivisible, it is a joint and indivisible obligation. -resu!ptions3
35
Indi+isible3 definite things< not partial perfor!ance
Gor the purposes of the preceding articles, obligations to give definite things and those which are not susceptible of partial perfor ance shall be dee ed to be indivisible. (1775)
'i+isible3 partial perfor!ance6 b0 da0s of )or5< !etrical units< or analogous things
,hen the obligation has for its object the e/ecution of a certain nu ber of days of wor2, the acco plish ent of wor2 by etrical units, or analogous things which by their nature are susceptible of partial perfor ance, it shall be divisible. (1775)
-h0sicall0 di+isible3 sub ect to la) or )hat is intended b0 the parties ay be physically divisible, an obligation is indivisible
0owever, even though the object or service if so provided by law or intended by the parties.
Not to do3 deter!ined b0 character of prestation
*n obligations not to do, divisibility or indivisibility shall be deter ined by the character of the prestation in each particular case. (1775) Indivisibility of an obligation may be: %a* by law, as when ta#es are to be paid in full because the law does not permit paying the same by installments; %b* by stipulation of the parties or intention by them to treat the things as indivisible even if they are actually divisible; %c* by the nature of the obligation;
Indi+isibilit0 is not solidarit0< +ice +ersa" C:;:=D (he indivisibility of an obligation does not necessarily give rise to solidarity. .or does solidarity of itself i ply indivisibility. (171E) (his is so because indivisibility refers to the object of the obligation which is capable of partial perfor ance while solidarity refers to the liability of one debtor to answer not only for his share of the obligation but also for the shares of the other debtors. ,ithout solidary liability of the debtors, the obligation is joint, and if its object is indivisible, it is a joint and indivisible obligation.
:uantum )eriut Principle!

'*B*3*"1I -"1*CA(*-.+ *f only partially perfor ed, the obligor can enforce his right in proportion to the services perfor ed. *.'*B*3*"1I -"1*CA(*-.+ *f obligor fails to perfor the wor2 co pletely, he cannot recover on this principle because in indivisible obligations, partial perfor ance is e5uivalent to non6perfor ance.
(his principle allows recovery of the reasonable value of the wor2 done regardless of any agree ent as to the value. *t entitles the party to Oas uch as he reasonably sRdeservesP as distinguished fro 5uantu valebant or Oto as uch as what is reasonably worthP. (he selle ent of clai under this principle re5uires application of judg ent and discretion and cannot be adjusted by si ple arith etical process. (G.G. Manocop v. #A, C& 1771F6, @an. 15, 1FF<)
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3oint Indivisibility!

pre udiced onl0 b0 collecti+e acts of ALL creditors (17EF)
enforced against ALL debtors (17EF) *f the division is i possible, the rights of the creditors ay be prejudiced only by their collective acts, and the debt can be enforced only by proceeding against all the debtors. *f one of the latter should be insolvent, the others shall not be liable for his share. (17EF) The above article contemplates an obligation which is $oint as to the parties but indivisible as to compliance. The concurrence of all the creditors is necessary for demanding compliance due to the indivisibility of the obligation. The same is inversely true as regards the debtors. The concurrence of all the creditors is also necessary for acts which are pre$udicial. 2ut an act beneficial to al like interruption of prescription may be performed by one of the creditor.
Indi+isibilit0 is not necessaril0 solidar0 (171E) (he indivisibility of an obligation does not necessarily give rise to solidarity. .or does solidarity of itself i ply indivisibility. (171E)
R.L/S3 %'* Gi+es rise to inde!nit0 for da!ages3 non%co!pliance )ith underta5ing (177:) %&* 'ebtors read0 to fulfill shall not be liable (177:) A joint indivisible obligation gives rise to inde nity for da ages fro the ti e anyone of the debtors does not co ply with his underta2ing. (he debtors who ay have been ready to fulfill their pro ises shall not contribute to the inde nity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation consists. (177:) 5s already stated in a $oint indivisible obligation, a suit for specific performance must be directed against all the debtors and if any one of them is not willing to fulfill, the action shall be converted into one for damages where the debtors shall be liable for their respective shares while the unwilling debtor shall pay his share plus damages for he alone shall be liable for damages, the other debtors being willing to deliver. %.* -re udiced onl0 b0 collecti+e acts of ALL creditors A enforced against ALL debtors (17EF) If the division is impossible, the rights of the creditors may be pre$udiced only by their collective acts, and the debt can be enforced only by proceeding against all the debtors. If one of the latter should be insolvent, the others shall not be liable for his share. %'&DJ* (he above article conte plates an obligation which is joint as to the parties but indivisible as to co pliance. (he concurrence of all the creditors is necessary for de anding co pliance due to the indivisibility of the obligation. (he sa e is inversely true as regards the debtors. (he concurrence of all the creditors is also necessary for acts which are prejudicial. "ut an act beneficial to al li2e interruption of prescription ay be perfor ed by one of the creditor. Solidary Invisibility -roceed against an0 or so!e or all of the!" (he creditor ay proceed against any one of the solidary debtors or so e or all of the si ultaneously. (he de and ade against one of the shall not be an obstacle to those
which ay subse5uently be directed against the others, so long as the debt has not been fully collected. (1716) Alternati+e Obligations An alternative obligation is one "herein, out of t"o or more prestations, "hich may be given, only one is due. In short, there are several things due but the delivery of one is sufficient to e%tinguish the obligation. G/N/RAL R.L/S3 A" As to perfor!ance< perfor!ance !ust be3 a" *o!plete% creditor cannot be co!pelled to recei+e part of one and another (11FF) b" -ossible< la)ful< and )hich could ha+e been the ob ect of the obligation (17EE) Art. 11FF. A person alternatively bound by different prestations shall co pletely perfor the . (he creditor cannot be co pelled to receive part of one and part of the other underta2ing. one of
37
B" As to effect3 /ffect fro! ti!e of *o!!unication of *hoice b0 the one gi+en such Art. 17E1. (he choice shall produce no effect e/cept fro the ti e it has been co unicated. (11;;) *" *HOI*/3 'ebtor Art. 17EE. (he right of choice belongs to the debtor, unless it has been e/pressly granted to the creditor. (he debtor shall have no right to choose those prestations which are i possible, unlawful or which could not have been the object of the obligation. (11;7) /2ception3 e2pressl0 granted to *reditor *reditorFs choice3 rules pending co!!unication of choice in to gi+e< to do< or not a"
to do
If fortuituous< debtor is not liable for loss< thus creditor chooses fro! an0 of the re!aining" (17E5, no.1) b" If fault of debtor< debtor replaces such )ith a price< creditor chooses fro! re!ainder plus the price )ith the right to da!ages (17E5, no. 7) c" If all things are lost< creditor chooses fro! an0one of their prices plus da!ages as replaced b0 debtor" (17E5, no. ;) 4.6. Creditor must not be deprived of choice through fault of debtor. 'oss is replaced by price. Art. 17E5. ,hen the choice has been e/pressly given to the creditor, the obligation shall cease to be alternative fro the day when the selection has been co unicated to the debtor. $ntil then the responsibility of the debtor shall be governed by the following rules+ (1) *f one of the things is lost through a fortuitous event, he shall perfor the obligation by delivering that which the creditor should choose fro a ong the re ainder, or that which re ains if only one subsists8 cd i (7) *f the loss of one of the things occurs through the fault of the debtor, the creditor ay clai any of those subsisting, or the price of that which, through the fault of the for er, has disappeared, with a right to da ages8 (;) *f all the things are lost through the fault of the debtor, the choice by the creditor shall fall upon the price of any one of the , also with inde nity for da ages. (he sa e rules shall be applied to obligations to do or not to do in case one, so e or all of the prestations should beco e i possible. (11;6a) '" As to loss3 :" *hoice belongs to the debtor3 a" Loss is due to fortuitous e+ent If all are lost< obligation is e2tinguished" If ; or !ore of the ob ects re!ain< the debtor can deli+er an0 of the t)o re!aining If onl0 one re!ains< a pure and si!ple obligation e2ists"
Loss is due to the debtorFs fault If all are lost< the obligation is con+erted into !onetar0 consideration as inde!nit0 for the da!ages ta5ing into consideration the +alue of the last thing lost plus da!ages" If ; or !ore ob ects re!ain< the debtorcan choose )hich one to deli+er bet)een the t)o< but )ithout da!ages" If onl0 one re!ains< there is no !ore alternati+ce obligation but a pure and si!ple obligation" What he should deli+er is the re!aining ob ect )ithout da!ages" ;" *hoice belongs to the creditor a" If the loss is due to a fortuitous e+ent< the effects are the sa!e as )here the right of choice belongs to the debtor" b" Loss is due to debtorFs fault If none re!ains< the obligation is con+erted into !onetar0 consideration ta5ing into account the +alue of an0 of the ob ects chosen b0 the creditor< plus da!ages" 'a!ages are a)arded because the creditor )as depri+ed of his right to choose" If t)o or !ore re!ain< the obligation is still alternati+e" The right of the creditor is to choose bet)een the t)o re!aining ob ects )ith da!ages" If he chooses the lost ob ect< the debtor is liable for the +alue plus da!ages" If onl0 one re!ains< the obligation is con+erted into a si!ple one" The creditor !a0 choose the re!aining ob ect )ith da!ages" If he chooses an0one of the t)o )hich )ere lost< the debtor !ust pa0 the +alue plus da!ages" Art. 17E7. (he debtor shall lose the right of choice when a ong the prestations whereby he is alternatively bound, only one is practicable. Art. 17E;. *f through the creditorJs acts the debtor cannot a2e a choice according to the ter s of the obligation, the latter ay rescind the contract with da ages. (n) Art. 17E:. (he creditor shall have a right to inde nity for da ages when, through the fault of the debtor, all the things which are alternatively the object of the obligation have been lost, or the co pliance of the obligation has beco e i possible. (he inde nity shall be fi/ed ta2ing as a basis the value of the last thing which disappeared, or that of the service which last beca e i possible. 'a ages other than the value of the last thing or service ay also be awarded. *n su ary+ Alternative obligations are converted to si ple obligations when+ The debtorFs choice is co!!unicated to the creditor" The creditor co!!unicated his choice to the debtor< if gi+en the right to choose" Onl0 one of the prestations due is practicable"
b"
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(acultati+e3 Substitution of -restations C:;=>D G/N/RAL R.L/3 Loss or deterioration of substitute in case of dela0< fraud< or negligence" No liabilit0 unless it has been substituted as !ain prestation" (17E6) 4.6. one is primary, other is merely contingent. If both "ere primary, it "ould not be facultative but rather alternative Art. 17E6. ,hen only one prestation has been agreed upon, but the obligor ay render another in substitution, the obligation is called facultative. (he loss or deterioration of the thing intended as a substitute, through the negligence of the obligor, does not render hi liable. "ut once the substitution has been ade, the obligor is liable for the loss of the substitute on account of his delay, negligence or fraud. (n) Alternati+e +s" (acultati+e *n A, there are different prestations, but the debtor shall co pletely perfor one of the , while in G, there is only one prestation but the debtor ay perfor another in substitution.
*n A, if it is i possible to give all e/cept one, the last one ust still be given8 while in G, if it is i possible to give the principal, the substitute does not have to be given8 and if it is i possible to give the substitute, the principal ust still be given. *n A, the right to choose ay be given either to the debtor or creditor8 while in G, the right to choose is given only to the debtor.
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/ffect of the Loss of the Thing3 6efore substitution! *f the principal is lost due to fortuitous event, obligation is e/tinguished8 if due to debtor%s fault, he is liable for da ages. *f the thing intended as a substitute is the one which was lost, with or without debtor% fault, the obligation to deliver the substitute is e/tinguished because what is to be delivered is the principal object and not the substitute. (he loss of this substitute is i aterial. After substitution! *f the principal thing is lost, the debtor is no longer liable whatever be the cause of the loss, because it is no longer due. *f the substitute is lost due to fortuitous event, the obligation is e/tinguished8 if due to debtor%s fault, he is liable for da ages. -/NAL *LA.S/S In an obligation "ith a penal clause, the penalty shall substitute the indemnity for damages and the payment of interest in case of non*compliance, if there is no stipulation to the contrary. A penal clause is an accessory underta&ing to assume greater liability in case of breach. -urposes3

(o ensure perfor ance of the obligation. (o substitute a penalty for the inde nity of da ages and the pay ent of interest in case of non6co pliance. (o punish the debtor for the non6fulfill ent of his obligation.
SS "asically to provide for li5uidated da ages, while strengthening the coercive force of the obligation by the threat of greater responsibility in the event of breach. /2ceptions )hen da!ages and interest !a0 be de!andable b0 the creditors aside fro! penalt03 ,hen it is stipulated. ,hen the debtor is guilty of fraud. ,hen the debtor refuses to pay the penalty. A" Rules in non%e2istence of -enal *lause3 6 'a!ages 6 (hose who in the perfor ance of their obligations are guilty of fraud, negligence, or delay, and those who in any anner contravene the tenor thereof, are liable for da ages. (11<E) 6 ActualL*o!pensator0 'a!ages3 pro+ed %I/cept as provided by law or by stipulation, one is entitled to an ade5uate co pensation only for such pecuniary loss suffered by hi as he has duly proved. 3uch co pensation is referred to as actual or co pensatory da ages. (71FF) 6 Actual #alue and -rofits 6 *nde nification for da ages shall co prehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain. (77EE) % Good (aith obligor3 natural< probable< and foreseeable da!ages 6 *n contracts and 5uasi6 contracts, the da ages for which the obligor who acted in good faith is liable shall be those that are the natural and probable conse5uences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the ti e the obligation was constituted. (77E1) % Bad (aith obligor3 all da!ages reasonabl0 attributed 6 *n case of fraud, bad faith, alice or wanton attitude, the obligor shall be responsible for all da ages which ay be reasonably attributed to the non6perfor ance of the obligation. (77E1) ". &ules in e/istence of !enal #lause+
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a" Substitute for da!ages and interest 6 'a!ages 6(hose who in the perfor ance of their obligations are guilty of fraud, negligence, or delay, and those who in any anner contravene the tenor thereof, are liable for da ages. (11<E) 6 Substitute and basis for da!ages 6 *n obligations with a penal clause, the penalty shall substitute the inde nity for da ages and the pay ent of interests in case of nonco pliance, if there is no stipulation to the contrary. .evertheless, da ages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfill ent of the obligation. (he penalty ay be enforced only when it is de andable in accordance with the provisions of this #ode. (1776) % -roof not needed 6 !roof of actual da ages suffered by the creditor is not necessary in order that the penalty ay be de anded. (177D) b" Not an alternati+e or facultati+e obligation (he debtor cannot e/e pt hi self fro the perfor ance of the obligation by paying the penalty, save in the case where this right has been e/pressly reserved for hi . .either can the creditor de and the fulfill ent of the obligation and the satisfaction of the penalty at the sa e ti e, unless this right has been clearly granted hi . 0owever, if after the creditor has decided to re5uire the fulfill ent of the obligation, the perfor ance thereof should beco e i possible without his fault, the penalty ay be enforced. (177<) .nless other)ise stipulated3 Li!itation on debtor3 pay ent of penalty does not e/tinguish obligation Li!itation on creditor3 cannot de and perfor ance and penalty Ho)e+er+ *f creditor chooses perfor ance of obligation, and such beco es i possible without his fault, penalty aybe enforced. /7uitable reduction of penal clause When3 part or irregular co!pliance of obligation ini7uitous or unconscionable (he judge shall e5uitably reduce the penalty when the principal obligation has been partly or irregularly co plied with by the debtor. Iven if there has been no perfor ance, the penalty ay also be reduced by the courts if it is ini5uitous or unconscionable. (177F) Nullit0 of penal clause penal clause as an accessor0 obligation (he nullity of the penal clause does not carry with it that of the principal obligation. (he nullity of the principal obligation carries with it that of the penal clause. (17;E)
c"
d"
*ONTRA*TS3 A contract is a 7uridical convention manifested in legal form, by virtue of "hich, one or more persons bind themselves in favor of another or others, or reciprocally, to the fulfillment of a prestation to give, to do, or not to do. Art" :8:@" There is no contract unless the follo)ing re7uisites concur3 (1) *onsent of the contracting parties8 cdtai (7) Ob ect certain which is the subject atter of the contract8 (;) *ause of the obligation which is established. (1761) 7tages in the <ife of a ontract:
-reparation or conception E bargaining point
-erfection or birth E the !eeting of !inds regarding the sub ect !atter and the cause of the contract" *onsu!!ation or death E parties ha+e perfor!ed their respecti+e obligations and the contract is put to an end"
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2asic principles: (1) (reedo! or libert0 to stipulate E autono!0 of contracts3 parties !a0 establish such stipulations< clauses< ter!s< and conditions as the0 !a0 dee! con+enient< pro+ided the0 are not contrar0 to la)< !orals< good custo!s< public order< or public polic0" (2) Obligator0 force and co!pliance in good faith (3) -erfection b0 !ere consent E e2cept if real contracts Cb0 deli+er0D< or for!al Cspecial for! re7uiredD (4) Both parties are !utuall0 bound (5) Relati+it03 binding bet)een the parties onl0< their assigns and heirs C:8::D /2ceptions3 Obligations arising fro! contract )hich are not trans!issible b0 their nature< stipulation< or pro+ision of la)" Stipulation -our Autrui o Stipulation in fa+or of a third person o The parties clearl0 and deliberatel0 conferred the fa+or to the third person" o The stipulation !ust be a part of the contract" o The acceptance of the third person !ust be co!!unicated to the parties of the contract" When a third person induces another to +iolate his contract" C:8:AD The right of a creditor to sue on a contract entered into b0 his debtor" C:8:8D Kinds of ontracts:
(@) a" b" (A) a" b" c" (<) a" b" c" (=) a" b" (B) a" b" c"
According to perfection *onsensual Real According to degree of i!portance -rincipal E can stand alone Accessor0 E dependent upon another contract as to e2istence and +alidit0 -reparator0 E !eans through )hich other contracts !a0 be !ade6 /2" Agenc0 According to sub ect !atter In+ol+ing things< such as sale or barter In+ol+ing rights or credits< such as usufruct or assign!ent of credits In+ol+ing ser+ices such as agenc0< carriage< etc" According to na!e No!inate E special na!e< such as pledge< !ortgage< etc" Inno!inate According to cause Onerous E e2change of considerations Gratuitous E no consideration recei+ed in e2change for )hat has been gi+en Re!unerator0 E so!ething is gi+en for a benefit or ser+ice perfor!ed )ithout an0 legal obligation to do so (C) According to nature of obligation produced or nu!ber of parties obligated a" .nilateral E /2" *o!!odatu! and ,utuu! b" Bilateral or sinalag!atico (D) According to ris5 a" *o!!utatit+e E )here e7ui+alent +alues are gi+en b0 both parties< such as sale< barter and lease
b"
Aleator0 E )here fulfill!ent of the contract is dependent upon chance< such as insurance *R/ATION AN' R/9.ISIT/S O( *ONTRA*TS A" *ONS/NT3 :st Re7uisite CArt" :8:@D
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6#ertain offer T Absolute acceptance8 if 5ualified, counter6offer. *onsent is !anifested b0 the !eeting of the offer and the acceptance upon the thing and the cause )hich are to constitute the contract" The offer !ust be certain and the acceptance absolute" A 7ualified acceptance constitutes a counter%offer" C:8:HD
6by 1etter or (elegra + when and where binding% Acceptance !ade b0 letter or telegra! does not bind the offerer e2cept fro! the ti!e it ca!e to his 5no)ledge" The contract< in such a case< is presu!ed to ha+e been entered into in the place )here the offer )as !ade" C:8:HD

/2pedition Theor0 E contract is perfected fro! the !o!ent the acceptance is declared or !ade e+en if not !ade 5no)n to the offeror" *ognition Theor0 E perfected fro! the !o!ent the acceptance co!es to the 5no)ledge of the offeror6 adopted in -hilippines Re+ocation of Acceptance3 The acceptance b0 the offeree !a0 be re+o5ed before reaching the 5no)ledge of the offeror" If it is re+o5ed< the contract is not perfected if the notice of re+ocation reaches the offeror before the letter of acceptance is recei+ed" In unilateral pro!ises< )hen offer is !ade to the public< specific acceptance is not re7uired to bind the obligor" ay be e/press or i plied. (1;7E)
% /2press or i!plied acceptance3 An acceptance
6 Mode of acceptance as stipulation 6 The person !a5ing the offer !a0 fi2 the ti!e< place< and !anner of acceptance< all of )hich !ust be co!plied )ith" C:8;:D 6Agent as offerer3 An offer co unicated to hi . (1;77) ade through an agent is accepted fro the ti e acceptance is
%#alidit0 of Offer3 An offer beco es ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed. (1;7;) 6 Withdra)al of offer3 ,hen the offerer has allowed the offeree a certain period to accept, the offer ay be withdrawn at any ti e before acceptance by co unicating such withdrawal, e/cept when the option is founded upon a consideration, as so ething paid or pro ised. (1;7:) 6 e.g. -ption oney 4 based on a separate option contract8 reservation oney+ forfeited in case transaction does not ta2e place A'#/RTIS/,/NTS3 6 As in+itations6 not definite offers % $nless it appears otherwise, business advertise ents of things for sale are not definite offers, but ere invitations to a2e an offer. (1;75) %(or bidders are !ere in+itations for proposals % Advertise ents for bidders are si ply invitations to a2e proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears. (1;76) IN*A-A*ITAT/'3 (1;7<) (he following cannot give consent to a contract+ (1) .ne!ancipated !inors8 (i.e. below 1D years old) C;D *nsane or de ented persons, and deaf6 utes who do not 2now how to write. C:8;?D
6 Lucid inter+al6 drun5enness and h0pnosis 6 #ontracts entered into during a lucid interval are valid. #ontracts agreed to in a state of drun2enness or during a hypnotic spell are voidable. (1;7D) 6 (he incapacity declared in article 1;7< is subject to the odifications deter ined by law, and is understood to be without prejudice to special dis5ualifications established in the laws. (1;7F) #OI'ABL/ % A contract where consent is given through or fraud is voidable. (1;;E) ista2e, violence, inti idation, undue influence,
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a. ,ista5e3 substance of ob ect< principal conditions % *n order that ista2e ay invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally oved one or both parties to enter into the contract. (1;;1) 6As to identit0 or 7ualifications3 Mista2e as to the identity or 5ualifications of one of the parties will vitiate consent only when such identity or 5ualifications have been the principal cause of the contract. 6*orrection onl0 if3 A si ple ista2e of account shall give rise to its correction. (1;;1) %/rror !ust be e2cusable< not caused b0 negligence %/rror !ust be a !ista5e of fact< not of la) /2ceptions on ,ista5e3 a" Illiterate part03 ,hen one of the parties is unable to read, or if the contract is in a language not understood by hi , and ista2e or fraud is alleged, the person enforcing the contract ust show that the ter s thereof have been fully e/plained to the for er. (1;;7) b" &no)ledge of doubt< contingenc0< ris53 (here is no ista2e if the party alleging it 2new the doubt, contingency or ris2 affecting the object of the contract. (1;;;) c" ,utual error3 Mutual error as to the legal effect of an agree ent when the real purpose of the parties is frustrated, ay vitiate consent. (1;;:) b" #iolence3 (here is violence when in order to wrest consent, serious or irresistible force is e ployed. (1;;5) !hysical contact or physical coercion c" Inti!idation+ (here is inti idation when one of the contracting parties is co pelled by a reasonable and well6grounded fear of an i inent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent. (1;;5) Mental or oral coercion 6 (o deter ine the degree of inti!idation, the age, se/ and condition of the person shall be borne in ind. (1;;5) 6 /+en if b0 third part03 Biolence or inti idation shall annul the obligation, although it ay have been e ployed by a third person who did not ta2e part in the contract. (1;;6) /2ception3 co!petent authorit0< ust and legal clai!" (hreat to enforce oneJs clai through co petent authority, if the clai is just or legal, does not vitiate consent. (1;;5) d" .ndue Influence3 (here is undue influence when a person ta2es i proper advantage of his power over the will of another, depriving the latter of a reasonable freedo of choice. 6 (he following circu stances shall be considered+ the confidential, fa ily, spiritual and other relations between the parties, or the fact that the person alleged to have been unduly influenced was suffering fro ental wea2ness, or was ignorant or in financial distress. (1;;<) e" (raud3 (here is fraud when, through insidious words or achinations of one of the contracting parties, the other is induced to enter into a contract which, without the , he would not have agreed to. (1;;D) ('olo #ausante) 6 (ailure to disclose facts, when there is a duty to reveal the , as when the parties are bound by confidential relations, constitutes fraud. (1;;F) /2ceptional *ases+ not fraud unless +olo Causante or substantialA principal condition
a" usual e2aggerations in trade , when the other party had an opportunity to 2now the facts, are not in the selves fraudulent. (1;:E) o #aveat I ptor 4 dealer%s tal2, buyer beware b" opinions+ A ere e/pression of an opinion does not signify fraud, unless ade by an e/pert and the other party has relied on the for erJs special 2nowledge. (1;:1) c" ,isrepresentation b0 a third person does not vitiate consent, unless such isrepresentation has created substantial ista2e and the sa e is utual. (1;:7) d" ,isrepresentation !ade in good faith is not fraudulent but ay constitute error. (1;:;) G/N/RAL R.L/ ON (RA.'3 S/RIO.S AN' -ARTI/S NOT -ARI '/LI*TO % *n order that fraud ay a2e a contract voidable, it should be serious and should not have been e ployed by both contracting parties. (1;::) (here ust be a deliberate intent to deceive or to induce. (he other party relied on this untrue state ent. *ncidental fraud only obliges the person e ploying it to pay da ages. (1;::)
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Si!ulated *ontracts3
3i ulation is the declaration of a fictitious intent anifested deliberately and by agree ent by the parties in order to produce, for the purpose of deceiving others, the appearance of a transaction which does not e/ist or which is different fro the true agree ent. &inds3 3i ulation of a contract ay be absolute or relati+e. (he for er ta2es place when the parties do not intend to be bound at all8 the latter, when the parties conceal their true agree ent. (1;:5) /ffects+ An absolutely si ulated or fictitious contract is void. A relative si ulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, orals, good custo s, public order or public policy binds the parties to their real agree ent. (1;:6) B" OB$/*T3 ;nd re7uisite CArt" :8:@D ,hatU Article 1;:< All things )hich are not outside the co!!erce of !en< including future things< !a0 be the ob ect of a contract" All rights which are not intrans issible ay also be the object of contracts. (1;:<)
Re7uisites3 :" )ithin the co!!erce of !en /2" Of outside co!!erce of !en3 personal rights< status< capacit0 of persons public offices political rights propert0 of the public do!inion sacred or co!!on things li5e the air ;" trans!issible 8" licit A" possible B" deter!inate *annot be Ob ects3
a" (uture inheritance E )here source of propert0 is still ali+e C:8A?D b" Those contrar0 to la) !orals< good custo!s< public order< and public polic0 No contract !a0 be entered into upon future inheritance e2cept in cases e2pressl0 authoriIed b0 la)" All services which are not contrary to law, be the object of a contract. (1;:<) c. orals, good custo s, public order or public policy ay li2ewise
45
I!possible things or ser+ices cannot be the ob ect of contracts. (1;:D)
Ob ect Re7uire!ent3 '/T/R,INAT/ or '/T/R,INABILIT4 % (he object of every contract ust be deter inate as to its 2ind. (he fact that the 5uantity is not deter inate shall not be an obstacle to the e/istence of the contract, provided it is possible to deter ine the sa e, without the need of a new contract between the parties. (1;:F) *" *A.S/3 8rd re7uisite Cart" :8:@D
(he cause of the contract is the OwhyP of the contract, the essential reason which i pels the contracting parties to enter into the contract. Re7uisites3 It !ust e2ist" It !ust be real< that is< true" It !ust be la)ful" *auses according to t0pe of contract3 a" Onerous contracts3 prestation or pro!ise of a thing b" Re!unerator0 contracts3 ser+ice or benefit re!unerated c" -ure beneficence3 liberalit0 of contract Art. 1;5E. *n onerous contracts the cause is understood to be, for each contracting party, the prestation or pro ise of a thing or service by the other8 in re uneratory ones, the service or benefit which is re unerated8 and in contracts of pure beneficence, the ere liberality of the benefactor. (17<:) *A.S/ IS NOT ,OTI#/ Art" :8B:" The particular !oti+es of the parties in entering into a contract are different fro! the cause thereof" )otive is the psychological, individual, and personal reason, "hich induces a party to enter into a contract. #ause is the i ediate, direct, and ost pro/i ate reason8 while otive is the indirect and re ote reason. #ause is the objective, intrinsic reason8 otive is the individual and purely personal reason of the contract. (he otive ay be un2nown to the other, the cause is always 2nown. (he otive ay be lawful or unlawful, the cause ust always be lawful. When *ause Renders *ontract #oid3 a. absenceL unla)ful % #ontracts without cause, or with unlawful cause, produce no effect whatever. (he cause is unlawful if it is contrary to law, orals, good custo s, public order or public policy. (1;57) b. false unless pro+e another cause 6 (he state ent of a false cause in contracts shall render the void, if it should not be proved that they were founded upon another cause which is true and lawful. (1;5;) ,ant of #ause 4 (here is a total lac2 or absence of consideration. *llegal #ause 4 (he cause is contrary to law, orals, good custo , public order, or public policy.
Galse #ause 4 (he cause is stated but that cause is not true.
46
When *ause Renders *ontract #oidable3 a" lesion L inade7uac0 6 I/cept in cases specified by law, lesion or inade5uacy of cause shall not invalidate a contract, unless there has been fraud, ista2e or undue influence. (1;55) !resu ption of #ause+ 1A,G$1 6 Although the cause is not stated in the contract< it is presu!ed that it e2ists and is la)ful< unless the debtor pro+es the contrar0" C:8BAD
(OR, O( *ONTRA*TS3 A. 3!*&*($A1*() !&*.#*!1I
CI.I&A1 &$1I+ Balid and enforceable in whatever for , even if orally entered into, as long as re5uisites are present. I/cept+ ,hen re5uired by law Art" :8B>" #ontracts shall be obligatory, in whatever for they ay have been entered into, provided all the essential re5uisites for their validity are present. 0owever, when the law re5uires that a contract be in so e for in order that it ay be valid or enforceable, or that a contract be proved in a certain way, that re5uire ent is absolute and indispensable. *n such cases, the right of the parties stated in the following article cannot be e/ercised. (17<Da) 6*f no for but perfected contract, co pel observance of for 4 If the la) re7uires a docu!ent or other special for!< as in the acts and contracts enu!erated in the follo)ing article< the contracting parties !a0 co!pel each other to obser+e that for!< once the contract has been perfected" This right !a0 be e2ercised si!ultaneousl0 )ith the action upon the contract" C:8B?D B" (OR,3 WH/N R/9.IR/' B4 LAW (or +alidit0 of the contract< e+en bet)een the parties" 'onation of real property ust be in a public instru ent, otherwise, void. 'onation of personal property e/ceeding !5,EEE ust be in writing, otherwise void. #ontribution of a partner of i ovable property in a partnership, ust be in writing, otherwise void. Authority of agent to sell land ust be in writing, otherwise sale is void. (or +alidit0 against third persons E (or! is re7uired in order to !a5e effecti+e the rights against third person" Ho)e+er< as bet)een the parties< it is no longer necessar0 because the la) allo)s the! to co!pel each other to put it in the proper for!" :" Art" :8B? and :8B@ do not re7uire a particular for! to +alidate or enforce a contract< onl0 to ensure its efficac0< so that after its e2istence ha+e been ad!itted< the part0 bound !a0 be co!pelled to e2ecute necessar0 docu!ent" C'ie+as +" AcunaD ;" /+en )here the contract has not been reduced to the re7uired for!< it is still +alid and binding as far as contracting parties are concerned" *onse7uentl0 both presuppose the e2istence of a +alid and enforceable contract" CSolis +" BarrosoD 8" (ro! the !o!ent one of the contracting parties in+o5es the pro+isions of Article :8B? and :8B@< the effect is to place the +er0 e2istence of the contract in issue< )hich !ust be resol+ed b0 ordinar0 rules of e+idence" CRodrigueI +" -a!intuanD A" Article :8B? does not re7uire that an action to co!pel the e2ecution of necessar0 docu!ent !ust precede the action upon the contract" As a !atter of fact< both !a0be e2ercised si!ultaneousl0"
:" ;" 8" A" B"
>"
B" Ho)e+er< although the pro+isions of Art" :8B?< in connection )ith art" :8B@< do not operate against the +alidit0 of the contract nor the +alidit0 of the acts +oluntaril0 perfor!ed b0 the parties for the fulfill!ent thereof< 0et fro! the !o!ent )hen an0 of the contracting parties in+o5es said pro+isions< it is e+ident that under the! the e2ecution of the re7uired docu!ent !ust precede the deter!ination of the other obligations deri+ed fro! the contract" (or enforceabilit03
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3(A($(I -G G&A$'3+ Article 1:E;, paragraph 7 (in relation to article 1:E5)
(7) (hose that do not co ply with the 3tatute of Grauds as set forth in this nu ber. *n the following cases an agree ent hereafter ade shall be unenforceable b0 action, unless the sa e, or so e note or e orandu , thereof, be in writing, and subscribed by the party charged, or by his agent8 evidence, therefore, of the agree ent cannot be received without the writing, or a secondary evidence of its contents+ (a) An agree ent that by its ter s is not to be perfor!ed )ithin a 0ea r fro the a2ing thereof8 (b)A special pro!ise to ans)er for the debt< default< or !iscarriage of another8 (c)An agree ent ade in consideration of !arriage, other than a utual pro ise to arry8 (d)An agree!ent for the sale of goods< chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or so e of the , of such things in action or pay at the ti e so e part of the purchase oney8 but when a sale is !ade b0 auction and entr0 is !ade b0 the auctioneer in his sales boo5, at the ti e of the sale, of the a ount and 2ind of property sold, ter s of sale, price, na es of the purchasers and person on whose account the sale is ade, it is a sufficient e orandu 8 (e) An agree ent of the leasing for a longer period than one 0ear , or for the sale of real propert0 or of an interest therein8 (f) A representation as to the credit of a third person" &A(*G*#A(*-. -G 3(A($(I -G G&A$'3+ !rove by oral evidence C:A=BD" *ontracts infringing the Statute of (rauds< referred to in No" ; of article :A=8< are ratified b0 the failure to ob ect to the presentation of oral e+idence to pro+e the sa!e< or b0 the acceptance of benefit under the!"
#.
G-&M3 (0A( A&I &IQ$*&I'+
i. !$"1*# '-#$MI.(+ The follo)ing !ust appear in a public docu!ent3 C:8B@D
(1) Real rights o+er i!!o+able propert0< sales of real propert0 6 Acts and contracts which have for their object the creation, trans ission, odification or e/tinguish ent of real rights over i ovable property8 sales of real property or of an interest therein a governed by articles 1:E;, .o. 7, and 1:E58 C;D Hereditar0 rights and con ugal propert0 of gains % (he cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains8 C8D -o)er to ad!inister propert0< other po)ers to act< pre udice 8 rd persons 6 (he power to ad inister property, or any other power which has for its object an act appearing or which should appear in a public docu ent, or should prejudice a third person8 (:) *ession of actions fro! public docu!ents % (he cession of actions or rights proceeding fro an act appearing in a public docu ent.
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ii" At least a -RI#AT/ 'O*.,/NT3 6 a. b. c. d. e. All other contracts where the a!ount in+ol+ed e2ceeds fi+e hundred pesos !ust appear in )riting< e+en a pri+ate one" "ut sales of goods< chattels or things in action are go+erned b0 articles< :A=8< No" ; and :A=B" (1;5D) 'onations e2ceeding fi+e thousand pesos (Art. <:D) Gi+ing authorit0 to an agent for the Sale of land" (Art. 1D<:) Agree!ents on pa0!ent of interests on contracts of loan (art. 1F56) Antichresis (Art. 71;:) erce Act
iii. Ilectronic #o
% actuall0 a!ends Art" :A=8 b0 including co!puters and their net)or5s as !eans against frauds and proof of contracts % e2pressl0 pro+ides for the application of the sa!e principles as nor!al contracts but adds !ore presu!ptions )herein such should be 5no)n b0 both parties" -resu!ptions fro! rules of court and doctrines as applied to e%!ail< internet< and net)or5s3 a" Receipt of letter E presu!ed to co!e to 5no)ledge regardless of actual reading b" Regular functions ha+e been carried out regularl0 Ho)e+er< special presu!ptions for co!puters )as !ade into la) b0 the e%co!!erce act" In I2A v. 7ec. ;f <abor, the Supre!e *ourt ruled that Local Area Net)or5 or LAN is not sufficient notice for firing an e!plo0ee since there )as still no la) pro+iding for such presu!ptions" Re!e!ber that presu!ptions facilitate transactions and rules of e+idence b0 being prag!atic about it" Other)ise< pro+ing the propositions as found in the presu!ptions )ould be i!possible and uncertain" /"g" no one can reall0 pro+e that person A read his e%!ail< thus it is !ore practical to presu!e that he had done so gi+en proof of his recei+ing such e%!ail"
!rovision of the e6co
erce act+
% present la)s appl0< electronic docu!ents are +alid li5e ordinar0 ones" % In using AT, of net)or5 ban5s< transaction is final at actual debiting" -resu!ption of authorit0 upon the holder of the AT, card" % /lectronic de+ices are +alid % ,essage fro! originator presu!ed to be !ade b0 the o)ner thereof regardless of )ho actuall0 t0ped it" There !ust be e2press state!ent that he Co)nerD )ould be held liable for that I'" Recei+er has right to assu!e his actual authorship" % On agree!ents of ac5no)ledge!ent of receipt< such as actual repl0 of the recei+er< or notice b0 the ser+er" If no repl0 or ac5no)ledge!ent< presu!ption that it )as not sent" % As to ti!e< presu!ption is at the ti!e such )as recei+ed b0 the designated infor!ation s0ste! or ser+er< or that of the recei+er" This also re7uires a s0ste! of ac5no)ledge!ent of receipt" % Web sites E re7uire proof or ac5no)ledge!ent of +isiting the site" This is usuall0 done b0 pre% progra! procedure li5e re7uire!ent of registration before being gi+en access" % On securit0 of signature E electronic i!prints< identification s0ste!s< and codes % Tip3 al)a0s ha+e hard cop0 bac5%up '. A#(3 &IQ$*&I' G-& (0I !I&GI#(*-. -G #I&(A*. #-.(&A#(3+
i. &IC*3(&A(*-.+ a. #hattel Mortgages (art. 71:E) b. 3ales or (ransfers of 1arge #attle (#attle &egistration act)
49
ii. 'I1*BI&) -G (0I (0*.C (for &eal contracts)
a. !1I'CI % In addition to the re7uisites prescribed in article ;=@B< it is necessar0< in order to constitute the contract of pledge< that the thing pledged be placed in the possession of the creditor< or of a third person b0 co!!on agree!ent" C;=H8D b. 'I!-3*(6 A deposit is constituted fro! the !o!ent a person recei+es a thing belonging to another< )ith the obligation of safel0 5eeping it and of returning the sa!e" If the safe5eeping of the thing deli+ered is not the principal purpose of the contract< there is no deposit but so!e other contract" C:H>;D
R/(OR,ATION O( INSTR.,/NTS3
8eformation is that remedy in equity by means of which a written instrument is made or construed so as to e#press or conform to the real intention of the parties when some error or mistake has been committed.
&IQ$*3*(I3 G-& &IG-&MA(*-.+ (1;5F)
a. Meeting of inds. b. (rue intention not e/pressed within the instru ent. c. 1etter b is caused by ista2e, fraud, ine5uitable conduct, or accident. d. (here is clear and convincing proof ,hen, there having been a eeting of the inds of the parties to a contract, their true intention is not e/pressed in the instru ent purporting to e body the agree ent, by reason of ista2e, fraud, ine5uitable conduct or accident, one of the parties ay as2 for the refor ation of the instru ent to the end that such true intention ay be e/pressed. (1;5F) If !ista5e< fraud< ine7uitable conduct< or accident has prevented a !eeting of the !inds of the parties< the proper re!ed0 is not refor!ation of the instru!ent but annul!ent of the contract" C:8BHD
3!I#*A1 #A3I3+ c":" ,utual !ista5e % ,hen a utual ista2e of the parties causes the failure of the instru ent to disclose their real agree ent, said instru ent ay be refor ed. (1;61) c";" ,ista5en part0< not fraudulent % *f one party was ista2en and the other acted fraudulently or ine5uitably in such a way that the instru ent does not show their true intention, the for er ay as2 for the refor ation of the instru ent. (1;67) c.;. Mista2en party, other 2new of ista2e and non6confor ity of instru ent % When one part0 )as !ista5en and the other 5ne) or belie+ed that the instru!ent did not state their real agree!ent< but concealed that fact fro! the for!er< the instru!ent !a0 be refor!ed" C:8>8D" c.:. ignorance, lac2 of s2ill, negligence, or bad faith of drafter, cler2, typist of instru ent % When through the ignorance< lac5 of s5ill< negligence or bad faith on the part of the person drafting the instru!ent or of the cler5 or t0pist< the instru!ent does not e2press the true intention of the parties< the courts !a0 order that the instru!ent be refor!ed" C:8>AD
c.5. agree ent on pledge or ortgage but with instru ent on sale % If t)o parties agree upon the !ortgage or pledge of real or personal propert0< but the instru!ent states that the propert0 is sold absolutel0 or )ith a right of repurchase< refor!ation of the instru!ent is proper" C:8>BD Art. 1;6E. (he principles of the general law on the refor ation of instru ents are hereby adopted insofar as they are not in conflict with the provisions of this #ode. (1;6E). NO R/(OR,ATION ALLOW/' CArt" :8>>"D (here shall be no refor ation in the following cases+ (1) Si!ple donations inter vivos wherein no condition is i posed8 (7) Wills8 (;) ,hen the real agree!ent is +oid. %Action to /nforce bars subse7uent action to Refor!3 ,hen one of the parties has brought an action to enforce the instru ent, he cannot subse5uently as2 for its refor ation. (1;6<) % STAN'ING3 &efor ation ay be ordered at the instance of+ a.) either part0 or his successors in interest< if the !ista5e )as !utual8 otherwise, b.) upon petition of the in ured part0< or his heirs and assigns" (1;6DD
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6 0-,+ &ules of #ourt. The procedure for the refor!ation of instru!ent shall be go+erned b0 rules of court to be pro!ulgated b0 the Supre!e *ourt" C:8>HD
INT/R-R/TATION O( *ONTRA*TS3
1*(I&A1 MIA.*.C -G #1IA& (I&M3. If the ter!s of a contract are clear and lea+e no doubt upon the intention of the contracting parties< the literal !eaning of its stipulations shall control" C:8?=D
IB*'I.( *.(I.(*-. !&IBA*13 -BI& 1I((I&. If the )ords appear to be contrar0 to the e+ident intention of the parties< the latter shall pre+ail o+er the for!er" C:8?=D *ONT/,-ORAN/O.S AN' S.BS/9./NT A*TS *ONSI'/R/'" *n order to judge the intention of the contracting parties, their conte poraneous and subse5uent acts shall be principally considered. (1;<1) G/N/RAL T/R,S IN A**OR'AN*/ TO INT/NTION" 0owever general the ter s of a contract ay be, they shall not be understood to co prehend things that are distinct and cases that are different fro those upon which the parties intended to agree. (1;<7) INT/R-R/T TO /((/*T.AT/" *f so e stipulation of any contract should ad it of several eanings, it shall be understood as bearing that i port which is ost ade5uate to render it effectual. (1;<;) R/A' AS A WHOL/" (he various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which ay result fro all of the ta2en jointly. (1;<:) WOR'S IN NAT.R/ AN' OB$/*T O( *ONTRA*T" ,ords which ay have different significations shall be understood in that which is ost in 2eeping with the nature and object of the contract. (1;<5)
*.STO,S (A*ILITAT/ INT/R-R/TATION" (he usage or custo of the place shall be borne in ind in the interpretation of the a biguities of a contract, and shall fill the o ission of stipulations which are ordinarily established. (1;<6) OBS*.R/ WOR'S (OR NON%OBS*.R/RS" (he interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. (1;<<) 'O.BTS3 a" 'O.BTS WRT IN*I'/NTAL *IR*.,STAN*/S3 ,hen it is absolutely i possible to settle doubts by the rules established in the preceding articles, and the doubts refer to incidental circu stances of a gratuitous contract, the least trans ission of rights and interests shall prevail. *f the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests. (1;<D) b" 'O.BTS WRT -RIN*I-AL OB$/*T+ *f the doubts are cast upon the principal object of the contract in such a way that it cannot be 2nown what ay have been the intention or will of the parties, the contract shall be null and void. (1;<D) Art. 1;<F. (he principles of interpretation stated in &ule 17; of the &ules of #ourt shall li2ewise be observed in the construction of contracts. (n)
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+$1$C#IE$ C04#,AC#S! ,$SCISSI6'$ C04#,AC#S ,escission is a process to render inefficacious a contract validly entered into, and normally binding, by reason of e%ternal conditions, causing an economic pre7udice to a party or his creditor. According to the SC, it is a relief to protect one of the parties or a third person from all in7ury and damages "hich the contract may cause, to protect some preferential right. ,e uisites! Art. 1;DE. GRO.N'S3 Art. 1;D1. (he following contracts are rescissible+ *ontract is essentiall0 +alid" There is lesion or pecuniar0 pre udice" #ontracts validly agreed upon ay be rescinded in the cases established by law. (17FE)
(1) B4 G.AR'IANS -R/$.'I*IAL TO WAR'S B4 ,OR/ THAN N" (hose which are entered into by guardians whenever the wards who they represent suffer lesion by ore than one6fourth of the value of the things which are the object thereof8 (7) B4 G.AR'IANS O( ABS/NT//S< ,OR/ THAN N" (hose agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding nu ber8 (;) IN (RA.' O( *R/'ITORS CAS S.BSI'IAR4 ,/ANS TO R/*O#/RD" (hose underta2en in fraud of creditors when the latter cannot in any other anner collect the clai s due the 8 (:) THINGS .N'/R LITIGATION" (hose which refer to things under litigation if they have been entered into by the defendant without the 2nowledge and approval of the litigants or of co petent judicial authority8 (5) OTH/RS 6 All other contracts specially declared by law to be subject to rescission. (1;D1)
a. b.
c"
d.
e.
f.
g.
h.
-A4,/NT ,A'/ B4 INSOL#/NT !ay ents ade in a state of insolvency for obligations to whose fulfill ent the debtor could not be co pelled at the ti e they were effected, are also rescissible. (1;D7) -ARTITION WITH L/SION TO H/IRS B4 AT L/AST N Art. 1EFD. A partition, judicial or e/tra6judicial, ay also be rescinded on account of lesion, when any one of the co6heirs received things whose value is less, by at least one6fourth, than the share to which he is entitled, considering the value of the things at the ti e they were adjudicated. (1E<:a) aisa dc '/T/RIORATION B/*A.S/ S.S-/NSI#/ *ON'ITION '/BTORFS (A.LT Art. 11DF. ,hen the conditions have been i posed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the i prove ent, loss or deterioration of the thing during the pendency of the condition+ /// (:) *f it deteriorates through the fault of the debtor, the creditor ay choose between the rescission of the obligation and its fulfill ent, with inde nity for da ages in either case8 .N-AI' S/LL/R ,A4 R/S*IN' Art. 15;:. An unpaid seller having the right of lien or having stopped the goods in transitu, ay rescind the transfer of title and resu e the ownership in the goods, where he e/pressly reserved the right to do so in case the buyer should a2e default, or where the buyer has been in default in the pay ent of the price for an unreasonable ti e. (he seller shall not thereafter be liable to the buyer upon the contract of sale, but ay recover fro the buyer da ages for any loss occasioned by the breach of the contract. (he transfer of title shall not be held to have been rescinded by an unpaid seller until he has anifested by notice to the buyer or by so e other overt act an intention to rescind. *t is not necessary that such overt act should be co unicated to the buyer, but the giving or failure to give notice to the buyer of the intention to rescind shall be relevant in any issue involving the 5uestion whether the buyer had been in default for an unreasonable ti e before the right of rescission was asserted. (n) SAL/ O( OB$/*T WHI*H IS IN(/RIOR B4 ,OR/ THAN := G" Art. 15;F. (he obligation to deliver the thing sold includes that of placing in the control of the vendee all that is entioned in the contract, in confor ity with the following rules+ *f the sale of real estate should be ade with a state ent of its area, at the rate of a certain price for a unit of easure or nu ber, the vendor shall be obliged to deliver to the vendee, if the latter should de and it, all that ay have been stated in the contract8 but, should this be not possible, the vendee ay choose between a proportional reduction of the price and the rescission of the contract, provided that, in the latter case, the lac2 in the area be not less than one6tenth of that stated. (he sa e shall be done, even when the area is the sa e, if any part of the i ovable is not of the 5uality specified in the contract. (he rescission, in this case, shall only ta2e place at the will of the vendee, when the inferior value of the thing sold e/ceeds one6tenth of the price agreed upon. .evertheless, if the vendee would not have bought the i ovable had he 2nown of its s aller area of inferior 5uality, he ay rescind the sale. SAL/ O( LAN' (OR LA*& O( ,/AS.R/,/NT Art.15:7N but if, besides entioning the boundaries, which is indispensable in every conveyance of real estate, its area or nu ber should be designated in the contract, the vendor shall be bound to deliver all that is included within said boundaries, even when it e/ceeds the area or nu ber specified in the contract8 and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lac2ing in the area or nu ber, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated. SAL/ B/*A.S/ O( LOSS O( I,-ORTANT -ART THRO.GH /#I*TION Art. 1556. 3hould the vendee lose, by reason of the eviction, a part of the thing sold of such i portance, in relation to the whole, that he would not have bought it wAo said part, he ay de and the rescission of the contract8 but with the obligation to return the thing wAo other encu brances that those which it had when he ac5uired it. SAL/ O( ANI,ALS WL R/'HIBITOR4 '/(/*TS % Art. 15DE. *n the sale of ani als with redhibitory defects, the vendee shall also enjoy the right entioned in article 156<8 but he ust a2e use thereof within the sa e period which has been fi/ed for the e/ercise of the redhibitory action. (1:FF)
52
i.
j.
WARRANT4 #S" HI''/N (A.LTS M '/(/*TS 6 Art. 156<. *n the cases of articles 1561, 1567, 156:, 1565 and 1566, the vendee ay elect between withdrawing fro the contract and de anding a proportionate reduction of the price, with da ages in either case. (1:D6a) L/AS/ 6 *f the lessor or the lessee should not co ply with the obligations set forth in articles 165: and 165<, the aggrieved party ay as2 for the rescission of the contract and inde nification for da ages, or only the latter, allowing the contract to re ain in force. (165F) Art" :>BA" The lessor is obliged3 (1) (o deliver the thing which is the object of the contract in such a condition as to render it fit for the use intended8 (7) (o a2e on the sa e during the lease all the necessary repairs in order to 2eep it suitable for the use to which it has been devoted, unless there is a stipulation to the contrary8 (;) (o aintain the lessee in the peaceful and ade5uate enjoy ent of the lease for the entire duration of the contract. (155:a) Art. 165<. (he lessee is obliged+ (1) (o pay the price of the lease according to the ter s stipulated8 C;D To use the thing leased as a diligent father of a fa!il0< de+oting it to the use stipulated6 and in the absence of stipulation< to that )hich !a0 be inferred fro! the nature of the thing leased< according to the custo! of the place6 (;) (o pay e/penses for the deed of lease. (1555)
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III" 'ISTIN*TION (RO, R/S*ISSION IN ART" ::H: OR R/SOL.TION (note leading case of $G# Ketchup) %reasons hereof are internal to a contract< )hile in rescission such is pri!aril0 on account of pre udice to a third part0" Art" ::H:" The po)er to rescind obligations is i!plied in reciprocal ones< in case one of the obligors should not co!pl0 )ith )hat is incu!bent upon hi!" (he injured party ay choose between the fulfill ent and the rescission of the obligation, with the pay ent of da ages in either case. 0e ay also see2 rescission, even after he has chosen fulfill ent, if the latter should beco e i possible. (he court shall decree the rescission clai ed, unless there be just cause authori9ing the fi/ing of a period. (his is understood to be without prejudice to the rights of third persons who have ac5uired the thing, in accordance with articles 1;D5 and 1;DD and the Mortgage 1aw. (117:) OBLIGATION TO R/T.RN IN R/S*ISSION &escission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest8 conse5uently, it can be carried out only when he who de ands rescission can return whatever he ay be obliged to restore. (1;D5) /OT/NT N/*/SSAR4 &escission shall be only to the e/tent necessary to cover the da ages caused. (1;D:) WH/N NOT ALLOW/'3 a" When there are other !eans % (he action for rescission is subsidiary8 it cannot be instituted e/cept when the party suffering da age has no other legal eans to obtain reparation for the sa e (1;D;) b" When he )ho de!ands rescission has no abilit0 to restore" (1;D5) c" In possession of 8rd person in good faith % .either shall rescission ta2e place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith. *n this case, inde nity for da ages ay be de anded fro the person causing the loss. (1;D5) d" Nos" : M ; of art" :8@< if *ourt appro+ed 6 &escission referred to in .os. 1 and 7 of article 1;D1 shall not ta2e place with respect to contracts approved by the courts. (1;D6)
!&I3$M!(*-.3 -G G&A$'3
") C&A($*($-$3 (*(1I All contracts b0 +irtue of )hich the debtor alienates propert0 b0 gratuitous title are presu!ed to ha+e been entered into in fraud of creditors< when the donor did not reserve sufficient property to pay all debts contracted before the donation. ON/RO.S TITL/ Alienations by onerous title are also presu ed fraudulent when ade b0 persons against )ho! so!e udg!ent has been issued. (he decision or attach ent need not refer to the property alienated, and need not have been obtained by the party see2ing the rescission. *n addition to these presu ptions, the design to defraud creditors ay be pro+ed in an0 other !anner recogniIed b0 the la) of e+idence. (1;D<) &IQ$*3*(I3 G-& &I3#*33*-. -G #-.(&A#(3 *. G&A$' -G #&I'*(-&3+ :" ;" 8" &IMI'*I3+ 1. 7. ;. A" The e2istence of a credit" *redit !ust be prior to the contract to be rescinded" /2istence of fraud or bad faith on the part of the debtor )hich can either be presu!ed or pro+ed" *reditors cannot reco+er their credits in an0 other !anner"
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Crant rescission E onl0 to e2tent necessar06 no other !eans6 abilit0 to restore6 no ac7uirer in good faith6 nos" : and ; are not court appro+ed -rder return E abilit0 to restore6 ob ect of contract or its price< together )ith fruits< plus interests 'a ages3 Who are liable? a" Art. 11DF 4 rules on i prove ent, loss, or deterioration
b" Ac5uirer in bad faith. Whoe+er ac7uires in bad faith the things alienated in fraud of creditors< shall inde!nif0 the latter for da!ages suffered b0 the! on account of the alienation< )hene+er< due to an0 cause< it should be i!possible for hi to return the . (1;DD) If there are two or more alienations, the first acquirer shall be liable first, and so on successively. %'.((* c. One )ho alienates to ac7uirer in good faith (1;D5, par. ;) -R/S*RI-TION General rule3 (he action to clai rescission ust be co enced within four years. (or persons under guardianship and absentees + Gor persons under guardianship and for absentees, the period of four years shall not begin until the ter ination of the for erJs incapacity, or until the do icile of the latter is 2nown. (17FF) -/RSONS WHO *AN BRING A*TION (OR R/S*ISSION3 1. the injured party 7. his heirs ;. creditor, if transaction is fraudulent. ,escission! 1rame"or& of Analysis! :uestions to as&, things to loo& for! @. grounds 9 determine "hether rescissible, void, voidable, unenforceable A. party 9 determine capacity to sue! in7ured or not <. prescription period 9 = years ; general or incapacitatedF absentee =. ratification 9 there is no provision but such is implicit B. presumptions of fraud 9 gratuituous or onerous C. a. readiness for compliance b. e%haustion of principal remedies c. readiness to return d. possession of third persons! good faith or bad faith e. "hether or not contract is approved by court D. e%tent necessary +amages 9 art. @@GH, ac uirer in bad faith, one "ho alienates to ac uirer in good faith
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#OI'ABL/ *ONTRA*TS Eoidable Contracts are those "hich possess all the essential re uisites of a valid contract but either on of the grounds under @<HI is present. 4ullity is that imperfection of a contract derived from the determinate vices of capacity or of consent of the parties, "hich gives rise to an action that if e%ercised successfully produces the destruction of the act "ith retroactive effect. GRO.N'S3 Art. 1;FE. (he following contracts are voidable or annullable, even though there ay have been no da age to the contracting parties+ (1) (hose where one of the parties is incapable of gi+ing consent to a contract8 (7) (hose where the consent is +itiated b0 !ista5e< +iolence< inti!idation< undue influence or fraud. (hese contracts are binding, unless they are annulled by a proper action in court. (hey are susceptible of ratification. (n) -R/S*RI-TION3 A 0ears Art. 1;F1. (he action for annul ent shall be brought within four years. (his period shall begin+ *n cases of inti idation, violence or undue influence, fro the ti e the defect of the consent ceases. *n case of ista2e or fraud, fro the ti e of the discovery of the sa e. And when the action refers to contracts entered into by inors or other incapacitated persons, fro ti e the guardianship ceases. (1;E1a)
the
RATI(I*ATION3 /ffects3 Art. 1;F7. &atification e/tinguishes the action to annul a voidable contract. (1;EFa) Art. 1;F6. Retroacti+it0 % &atification cleanses the contract fro all its defects fro the o ent it was constituted. (1;1;) (or!3 Art. 1;F;. /2press or Tacit 6 &atification ay be effected e/pressly or tacitly. *t is understood that there is a tacit ratification if, with 2nowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invo2e it should e/ecute an act which necessarily i plies an intention to waive his right. (1;11a) Who !a0 ratif03 Art. 1;F:. &atification ay be effected by the guardian of the incapacitated person . (n) Art. 1;F5. &atification does not re7uire the confor!it0 of the contracting part0 )ho has no right to bring the action for annul!ent. (1;17) Re7uisites3 #ontract ust be voidable. !erson ratifying 2new the reason why the contract is voidable. (he ratification ust have been ade e/pressly or i pliedly. (he ratification is ade by the injured party. STAN'ING3 Art. 1;F<. (he action for the annul ent of contracts ay be instituted by all who are thereby obliged principally or subsidiarily. 0owever, persons who are capable cannot allege the incapacity of those with who they contracted8 nor can those who e/erted inti idation, violence, or undue influence, or e ployed fraud, or caused ista2e base their action upon these flaws of the contract ( ,ercado +" /spiritu). (1;E7a) /((/*TS O( ANN.L,/NT O( #OI'ABL/ *ONTRA*T3
Art. 1;FD. R/STOR/ 6 An obligation having been annulled, the contracting parties shall restore to each other the things which have been the subject atter of the contract, with their fruits, and the price with its interest, e/cept in cases provided by law. *n obligations to render service, the value thereof shall be the basis for da ages. (1;E;a) Art. 1;FF. Onl0 in so far benefited CBraganIa +" #illa AbrilleD % ,hen the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to a2e any restitution e/cept insofar as he has been benefited by the thing or price received by hi . (1;E:)
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IN *AS/S O( LOSS IN OBLIGATION TO R/T.RN3 'A,AG/S OR NIL< depending on )ho caused the loss
Art. 1:EE. ,henever the person obliged by the decree of annul ent to return the thing can not do so because it has been lost through his fault, he shall return the fruits received and the value of the thing at the ti e of the loss, with interest fro the sa e date. (1;E<a) Art. 1:E1. (he action for annul ent of contracts shall be e/tinguished when the thing which is the object thereof is lost through the fraud or fault of the person who has a right to institute the proceedings. *f the right of action is based upon the incapacity of any one of the contracting parties, the loss of the thing shall not be an obstacle to the success of the action, unless said loss too2 place through the fraud or fault of the plaintiff. (1;1:a) Art. 1:E7. As long as one of the contracting parties does not restore what in virtue of the decree of annul ent he is bound to return, the other cannot be co pelled to co ply with what is incu bent upon hi . (1;ED) R/,/'I/S3 :" ;" 8" 'eclare +oid restore thing E i" if other part0 can restore ii" if incapacit0< onl0 to the e2tent benefitted 'a!ages3 )ho are liable a" Art" ::@H E rules on i!pro+e!ent< loss< deterioration b" Who cannot return E fruits< +alue of thing lost< plus interest therein c" Nobod0 E if loss b0 one )ho has right to institute proceeding< or b0 the incapacitated
Eoidable 1rame"or& of Analysis! :uestions to as&, things to loo& for! @. grounds 9 determine "hether rescissible, void, voidable, unenforceable A. party 9 standing; obliged principally or subsidiarily <. prescription period =. ratification 9 e%press or tacit; effects, forms, "ho may ratify B. a. readiness for compliance c. readiness to return 9 if incapacity, only to e%tent benefitted d. effect of loss 9art. @@GH, "ho cannot return, "hose fault .N/N(OR*/ABL/ *ONTRA*TS #hose that cannot be enforced in court or sued upon by reason of defects provided by la" until and unless they are ratified according to la". GRO.N'S3
Art. 1:E;.
(he following contracts are unenforceable, unless they are ratified+
(1) )Lo or in e2cess of authorit0 % (hose entered into in the na e of another person by one who has been given no authority or legal representation, or who has acted beyond his powers8 (7) Statute of (rauds3 those that do not co ply with the 3tatute of Grauds as set forth in this nu ber. *n the following cases an agree ent hereafter ade shall be unenforceable by action, unless the sa e, or so e note or e orandu , thereof, be in writing, and subscribed by the party charged, or by his agent8 evidence, therefore, of the agree ent cannot be received without the writing, or a secondary evidence of its contents+ (a) An agree ent that by its ter s is not to be perfor!ed )ithin a 0ear fro the a2ing thereof8 Ce2ecutor0 contractsD (b) A special pro!ise to ans)er for the debt< default< or !iscarriage of another8 (c) -ropter nuptias 6 An agree ent ade in consideration of arriage, other than a utual pro ise to arry8 (d) Sale of at least -hp B==< unless partial co!pliance L Auction entr0 in sales boo5 sufficient 6 An agree ent for the sale of goods, chattels or things in action, at a price not less than five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or the evidences, or so e of the , of such things in action or pay at the ti e so e part of the purchase oney8 but when a sale is ade by auction and entry is ade by the auctioneer in his sales boo2, at the ti e of the sale, of the a ount and 2ind of property sold, ter s of sale, price, na es of the purchasers and person on whose account the sale is ade, it is a sufficient e orandu 8 (e) An agree ent of the leasing for a longer period than one 0ear< or for the sale of real propert0 or of an interest therein8 (f) A representation as to the credit of a third person" (;) (hose where both parties are incapable of gi+ing consent to a contract"
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PP Note that a !utual pro!ise to !arr0 e+en if oral< is enforceable" Ho)e+er< parties cannot co!pel each other to !arr0 because of the pro!ise" The onl0 right of the in ured part0 is to as5 for da!ages because of the breach< not specific perfor!ance"
Art" :A=A" $nauthori9ed contracts are go+erned b0 article 1;1< and the principles of agenc0 in Title O of this Boo5" Art. 1;1< .o one ay contract in the na e of another without being authori9ed by the latter, or unless he has by law a right to represent hi . A contract entered into in the na e of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable< unless it is ratified< e2pressl0 or i!pliedl0< b0 the person on )hose behalf it has been e2ecuted< before it is re+o5ed b0 the other contracting part0. (175Fa)
RATI(I*ATION3 Art. 1;1<. Ratification3 )Lo or in e2cess of authorit0 6 .o one ay contract in the na e of another without being authori9ed by the latter, or unless he has by law a right to represent hi . A contract entered into in the na e of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified, e/pressly or i pliedly, by the person on whose behalf it has been e/ecuted, before it is revo2ed by the other contracting party. (175Fa) Art. 1:E5. Ratification3 Statute of (rauds 6 #ontracts infringing the 3tatute of Grauds, referred to in .o. 7 of article 1:E;, are ratified by the failure to object to the presentation of oral evidence to prove the sa e, or by the acceptance of benefit under the . Art. 1:E<. Ratification3 ,utual incapacit0 6 *n a contract where both parties are incapable of giving consent, e/press or i plied ratification by the parent, or guardian, as the case ay be, of one of the contracting parties shall give the contract the sa e effect as if only one of the were incapacitated. *f ratification is ade by the parents or guardians, as the case ay be, of both contracting parties, the contract shall be validated fro the inception.
(OR,3 Art. 1:E6. *o!pel for!3 pri+ate into public docu!ent 6 ,hen a contract is enforceable under the 3tatute of Grauds, and a public docu ent is necessary for its registration in the &egistry of 'eeds, the parties ay avail the selves of the right under Article 1;5<. STAN'ING3 Art. 1:ED. $nenforceable contracts cannot be assailed by third persons.
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R/,/'I/S3 :" ratification i" )Lo or in e2cess of authorit0 E a" e2press6 b" i!pliedl03 act constituting )ai+er of right of action ii" statute of frauds E a" unob ected oral e+idence6 b" receipt of benefit iii" !utual incapacit0 E b0 parents and guardians ;" co!pel for! E article :8B?< to beco!e public docu!ent for registration 2nenforceable contracts! 1rame"or& of Analysis! :uestions to as&, things to loo& for! @. A. <. =. grounds 9 determine "hether rescissible, void, voidable, unenforceable party 9 cannot be assailed by third persons prescription period 9 oral contract!C years, default period! B years ratification 9 i. "Fo or in e%cess of authority 9 a. e%press; b. impliedly! act constituting "aiver of right of action ii. statute of frauds 9 a. unob7ected oral evidence; b. receipt of benefit iii. mutual incapacity 9 by parents and guardians 1orm i. statute of fraud compliance can be compelled to be public document for registration ii. oral evidence, receipt of benefit may be ac&no"ledged in "ritten form in accordance "ith statute of frauds iii. e%press ratification maybe "ritten
B.
#OI' AN' IN/OIST/NT *ONTRA*TS #hese are contracts "hich have absolutely no force and effect and are ine%istent from the beginning. #he ma%im is >no contract at all?.
GRO.N'S3
Art. 1:EF. (he following contracts are ine/istent and void fro the beginning+ (1) (hose whose cause, object or purpose is contrar0 to la)< !orals< good custo!s< public order or public polic06 (1;:< par. ;, 1;57) (7) (hose which are absolutel0 si!ulated or fictitious8 (1;:6) (;) (hose whose cause or ob ect did not e2ist at the ti!e of the transaction8 (1;1D) (:) (hose whose ob ect is outside the co!!erce of !en8 (1;:<, par. 1) (5) (hose which conte plate an i!possible ser+ice8 (1;:D) (6) (hose where the intention of the parties relati+e to the principal ob ect of the contract cannot be ascertained6 (1;<D) C?D (hose e/pressly prohibited or declared void by law. (1;:<, par. ;) I#" 1. 7. BASI* &IN'S3 *ne/istent ones. Gor alities re5uired by law are not *llegal or illicit ones. et. #ontract has no effect at all.
*HARA*T/RISTI*S3 1. 'efense of illegality cannot be waived. 7. (hey are not subject to ratification. ;. (he action to declare the contract ine/istent does not prescribe. :. Cenerally, no action to declare the void is needed. 5. (he defense of illegality of contracts is not available to third persons whose interests are not directly affected. #I" RATI(I*ATION3 NON/ (hese contracts cannot be ratified. .either can the right to set up the defense of illegality be waived. (1:EF) #II" -R/S*RI-TION3 NON/ Art. 1:1E. (he action or defense for the declaration of the ine/istence of a contract does not prescribe. /((/*TS3 a" Nullit0 b" (orfeiture E )hether or not a cri!e c" Reco+er0 E depending on fault< innocent or in ured part0 G/N/RAL R.L/3 -ARI '/LI*TO Art. 1:11. *RI,INAL O((/NS/ 6 ,hen the nullity proceeds fro the illegality of the cause or object of the contract, and the act constitutes a cri inal offense, both parties being in pari delicto, they shall have no action against each other, and both shall be prosecuted. Moreover, the provisions of the !enal #ode relative to the disposal of effects or instru ents of a cri e shall be applicable to the things or the price of the contract. (his rule shall be applicable when only one of the parties is guilty8 but the innocent one ay clai what he has given, and shall not be bound to co ply with his pro ise. (1;E5) -eople +" Ouano 4 forfeiture to the govern ent for violation of achinations in public auction prohibition. Art. 1:17. NON%*RI,INAL O((/NS/ 6 *f the act in which the unlawful or forbidden cause consists does not constitute a cri inal offense, the following rules shall be observed+ (1) ,hen the fault is on the part of both contracting parties, neither ay recover what he has given by virtue of the contract, or de and the perfor ance of the otherJs underta2ing8 (7) ,hen only one of the contracting parties is at fault, he cannot recover what he has given by reason of the contract, or as2 for the fulfill ent of what has been pro ised hi . (he other, who is not at fault, ay de and the return of what he has given without any obligation to co ply his pro ise. (1;E6) G/N/RAL R.L/3 NO R/*O#/R4 (OR -ARI '/LI*TO .NL/SS *O#/R/' B4 :A:8 % :A:H #III" /O*/-TIONS3 )here pari delicto does not appl0 Art. 1:1;. .S.RIO.S INT/R/ST6 reco+er0 plus interest 6*nterest paid in e/cess of the interest allowed by the usury laws ay be recovered by the debtor, with interest thereon fro the date of the pay ent. Angel 3ose 8arehousing Co. v. Chelda *n an action for recovery of an unpaid loan, the 3upre e #ourt declared that what is illegal is not the principal debt but the usurious interest. $sing art. 1:7E, only the usurious interest was declared void and the principal debt ust still be paid with the 6 V interest allowed by law. (here is no conflict between the #ivil #ode and the $sury 1aw. "oth pertain to the whole usurious interest, but article 1:1; only provides for an additional interest fro the date of pay ent of the whole usurious interest. &ecovery of principal loan is allowed as an e/ception to the pari delicto rule, and an application of the unjust enrich ent rule. 3a e principles were applied in Briones +" *a!!a0o" Art. 1:1:. Repudiation prior to illicitness or pre udice 6 ,hen oney is paid or property delivered for an illegal purpose, the contract ay be repudiated by one of the parties before the purpose has been acco plished, or before any da age has been caused to a third person. *n such case, the courts ay, if the public interest will thus be subserved, allow the party repudiating the contract to recover the oney or property.
#"
59
Art. 1:15. If there is incapacit0 6 ,here one of the parties to an illegal contract is incapable of giving consent, the courts ay, if the interest of justice so de ands allow recovery of oney or property delivered by the incapacitated person. Art. 1:16. -rohibition for protection 4 ,hen the agree ent is not illegal per se but erely prohibited, and the prohibition by the law is designated for the protection of the plaintiff, he ay, if public policy is thereby enhanced, recover what he has paid or delivered. Angeles v. Court of Appeals A sale of ho estead within five year prohibitive period is void but in pari delicto does not apply because of public policy. 0owever, recovery does not e/tend to products or fruits of the land, and the i prove ents ade by the other party. (he unjust enrich ent principle ust apply as to the recovery of the price paid. Philippine 6an&ing Corp. v. 'ui She A virtual sale through a very long6ter lease of 5E years was dee ed void for its contravention to the prohibition on foreign ownership. 0owever, since the prohibition was only for protection and security of Gilipino ownership of land, applying article 1:16, pari6delicto does not apply. Art. 1:1<. /2cess of !a2i!u! price 6 ,hen the price of any article or co odity is deter ined by statute, or by authority of law, any person paying any a ount in e/cess of the a/i u price allowed ay recover such e/cess. Art. 1:1D. Additional pa0 for o+er)or5 6 ,hen the law fi/es, or authori9es the fi/ing of the a/i u nu ber of hours of labor, and a contract is entered into whereby a laborer underta2es to wor2 longer than the a/i u thus fi/ed, he ay de and additional co pensation for service rendered beyond the ti e li it. cdt Art. 1:1F. Additional pa0 for underpa0 6 ,hen the law sets, or authori9es the setting of a ini u wage for laborers, and a contract is agreed upon by which a laborer accepts a lower wage, he shall be entitled to recover the deficiency. STAN'ING3 all those directl0 affected Art. 1:71. (he defense of illegality of contract is not available to third persons whose interests are not directl0 affected. S/-ARABILIT43 Art. 1:7E. *n case of a divisible contract, if the illegal ter s can be separated fro latter ay be enforced. As applied in+ Angel $ose +" *helda and Briones +" *a!!a0o #OI' GI#/ RIS/ TO #OI'3 Art. 1:77. A contract which is the direct result of a previous illegal contract, is also void and ine/istent. EoidF Ine%istent Contracts! 1rame"or& of Analysis! :uestions to as&, things to loo& for! @. grounds 9 determine "hether rescissible, void, voidable, unenforceable A. party 9 standing; anyone "hose interests are directly affected <. prescription period 9 not possible =. ratification 9 not possible B. separability 9 partly or "holly invalid C. ,ecovery or demand i. Criminal 9 pari delicto!forfeiture to the government ; in7uredF innocent party may recover ii. 4on*criminal 9 pari delicto! nobody can recover ; in7uredF innocent party may recover the legal ones, the
60
/OTING.ISH,/NT O( OBLIGATIONS
Art. 17;1. -bligations are e/tinguished+ (1) "y pa0!ent or perfor!ance+ (7) "y the loss of the thing due+ (;) "y the condonation or re!ission of the debt8 (:) "y the confusion or !erger of the rights of creditor and debtor8 (5) "y co!pensation8 (6) "y no+ation. -ther causes of e/tinguish ent of obligations, such as annul ent, rescission, fulfill ent of a resolutory condition, and prescription, are governed elsewhere in this #ode. (1156a) OTH/R ,O'/S3 1. 'eath of a party in case the obligation is personal. 7. Mutual 'esistance. ;. #o pro ise. :. * possibility of fulfill ent. 5. 0appening of fortuitous event -a0!ent or -erfor!ance Art. 17;7. -a0!ent or -erfor!ance can e2tinguish . !ay ent eans not only the delivery of oney but also the perfor ance, in any other anner, of an obligation. (n) Art. 17:5. /2a!ple3 'ation en pago" 'ation in pay ent, whereby property is alienated to the creditor in satisfaction of a debt in oney, shall be governed by the law of sales. (n) R/9.ISIT/S IN -A4,/NT3 A" -a0orL debtor rules (ree disposal and capacit0 to alienate" Art. 17;F. *n obligations to give, pay ent ade by one who does not have the free disposal of the thing due and capacity to alienate it shall not be valid, without prejudice to the provisions of article 1:7< under the (itle on W.atural -bligations.W (116Ea) $udicial order Art. 17:;. !ay ent ade to the creditor by the debtor after the latter has been judicially ordered to retain the debt shall not be valid. (1165) B" -a0ee L creditor rules :" G/N/RAL R.L/ % pa0 to3 person obligationsF benefactor< or successorFs interest" Art. 17:E. !ay ent shall be ade to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authori9ed to receive it. (1167a) S-/*IAL *AS/S3 (17:1) a" Incapacitated E insofar as beneficial b" 8rd persons E insofar benefit has redounded to benefit of creditor -ro+e benefit unless3 C:DIf after the pa0!ent< the third person ac7uires the creditorQs rights6 C;DIf the creditor ratifies the pa0!ent to the third person6 C8DIf b0 the creditorQs conduct< the debtor has been led to belie+e that the third person had authorit0 to recei+e the pa0!ent" C::>8aD Art. 17:1. !ay ent to a person who is incapacitated to ad inister his property shall be valid if he has 2ept the thing delivered, or insofar as the pay ent has been beneficial to hi . !ay ent ade to a third person shall also be valid insofar as it has redounded to the benefit of the creditor. 3uch benefit to the creditor need not be proved in the following cases+ (1) *f after the pay ent, the third person ac5uires the creditorJs rights8 (7) *f the creditor ratifies the pay ent to the third person8 (;) *f by the creditorJs conduct, the debtor has been led to believe that the third person had authority to receive the pay ent. (116;a) ;" GOO' (AITH -A4,/NT" Art. 17:7. !ay ent ade in good faith to any person in possession of the credit shall release the debtor. (116:)
61
62
,O'/S O( -A4,/NT3 A" B4 '/LI#/R4 O( ,ON/43 R.L/S a" Identit0 Art. 17::. (he debtor of a thing cannot co pel the creditor to receive a different one, although the latter ay be of the sa e value as, or ore valuable than that which is due. b" integrit0 G/N/RAL R.L/3 *o!plete pa0!ent Art. 17:D. $nless there is an e/press stipulation to that effect, the creditor cannot be co pelled partially to receive the prestations in which the obligation consists. .either ay the debtor be re5uired to a2e partial pay ents. /2ception3 partial pa0!ent allo)ed if onl0 partiall0 li7uidated" 0owever, when the debt is in part li5uidated and in part unli5uidated, the creditor ay de and and the debtor ay effect the pay ent of the for er without waiting for the li5uidation of the latter. (17:D) c" *urrenc0
Stipulated (17:F) -hilippine legal tender" (he pay ent of debts in oney shall be ade in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the !hilippines. (17:F) ,ercantile docu!ents< pa0able to order3 onl0 )hen cashed or i!paired b0 creditor . (he delivery of pro issory notes payable to order, or bills of e/change or other ercantile docu ents shall produce the effect of pay ent only when they have been cashed, or when through the fault of the creditor they have been i paired. (17:F) PPPI!pair!ent conte!plates an issuance b0 a third part0< other)ise< creditor can ust as5 fro! creditor again but )ithout interest as there )as no dela0" (@urado, "alane, and a%a 3ereno) 'uring encash!ent3 action in abe0ance" *n the obligation shall be held in the abeyance. (11<E) d" /2traordinar0 inflationL deflation eanti e, the action derived fro the original
Stipulation (175E) *urrenc0 +alue at ti!e of agree!ent" *n case an e/traordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the ti e of the establish ent of the obligation shall be the basis of pay ent, unless there is an agree ent to the contrary. (175E) e. /2penses3 Art. 17:<. $nless it is otherwise stipulated, the e/trajudicial e/penses re5uired by the pay ent shall be for the account of the debtor. ,ith regard to judicial costs, the &ules of #ourt shall govern. (116Da)
B" B4 -/R(OR,AN*/3 R.L/S a" Identit0 % *o!pel onl0 the agreed thing or prestation< regardless of +alue . (he debtor of a thing cannot co pel the creditor to receive a different one, although the latter ay be of the sa e value as, or ore valuable than that which is due. (17::) *n obligations to do or not to do, an act or forbearance cannot be substituted by another act or forbearance against the obligeeJs will. (1166a) %Generic thing3 sa!e 5ind< 7ualit0 and circu!stances" ,hen the obligation consists in the delivery of an indeter inate or generic thing, whose 5uality and circu stances have not been stated, the creditor cannot de and a thing of superior 5uality. .either can the debtor deliver a thing of inferior 5uality. (he purpose of the obligation and other circu stances shall be ta2en into consideration. (17:6) b" Integrit0
G/N/RAL R.L/3 *o!plete deli+er0 or rendering" A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been co pletely delivered or rendered, as the case ay be. (17;;) /2ceptions3 i. Substantial perfor!ance3 total +alue less da!ages . Art. 17;: *f the obligation has been substantially perfor ed in good faith, the obligor ay recover as though there had been a strict and co plete fulfill ent, less da ages suffered by the obligee. (n) ii. Acceptance as full co!pliance regardless of co!pleteness" Art. 17;5 ,hen the obligee accepts the perfor ance, 2nowing its inco pleteness or irregularity, and without e/pressing any protest or objection, the obligation is dee ed fully co plied with. (n) c" /2penses Art. 17:<. $nless it is otherwise stipulated, the e/trajudicial e/penses re5uired by the pay ent shall be for the account of the debtor. ,ith regard to judicial costs, the &ules of #ourt shall govern. (116Da)
63
R.L/S ON THIR' -ART43 A" 8rd part03 AS -A4OR :" G/N/RAL R.L/3 *reditor not bound to accept" Art. 17;6. (he creditor is not bound to accept pay ent or perfor ance by a third person who has no interest in the fulfill ent of the obligation, unless there is a stipulation to the contrary. I/ceptions+ a" Stipulation" (17;6) b" *reditorFs option (17;6) 6 he%s not bound but nothing stops hi fro accepting ;" Rights of third part0 if pa0!ent !ade b0 such3 a" With 5no)ledge and consent of debtor % To de!and fro! debtor entire pa0!ent. (17;6) b" Without 5no)ledge or against the )ill of debtor % To de!and fro! debtor onl0 e2tent of benefit (17;6) ,hoever pays for another ay de and fro the debtor what he has paid, e/cept that if he paid without the 2nowledge or against the will of the debtor, he can recover only insofar as the pay ent has been beneficial to the debtor. (17;6) 6 *annot co!pel subrogation to creditorFs rights< i"e" !ortgage< guarant0< penalt0" ,hoever pays on behalf of the debtor without the 2nowledge or against the will of the latter, cannot co pel the creditor to subrogate hi in his rights, such as those arising fro a ortgage, guaranty, or penalty. (17;<) c" As 'onation< +alid as to creditors< but needs debtorFs consent" !ay ent ade by a third person who does not intend to be rei bursed by the debtor is dee ed to be a donation, which re5uires the debtorJs consent. "ut the pay ent is in any case valid as to the creditor who has accepted it. (17;D) B" 8rd part03 AS -A4// :" G/N/RAL R.L/3 In so far as it has redounded to benefit as pro+en" !ay ent ade to a third person shall also be valid insofar as it has redounded to the benefit of the creditor. (17:1) /2ception3 3uch benefit to the creditor need not be pro+ed in the follo)ing cases+ C:DIf after the pa0!ent< the third person ac7uires the creditorQs rights 8 C;DIf the creditor ratifies the pa0!ent to the third person6 C8DIf b0 the creditorQs conduct< the debtor has been led to belie+e that the third person had authorit0 to recei+e the pa0!ent" C:;A:D
64
-LA*/3 R.L/S a" b" c" StipulationL place designated Where+er the deter!inate thing is at ti!e of perfection of contract 'o!icile of debtor i. good faith ii. bad faith or after incurring dela0< debtor bears additional e2penses
Art. 1751. !ay ent shall be ade in the place designated in the obligation. (here being no e/press stipulation and if the underta2ing is to deliver a deter inate thing, the pay ent shall be ade wherever the thing ight be at the o ent the obligation was constituted. *n any other case the place of pay ent shall be the do icile of the debtor. *f the debtor changes his do icile in bad faith or after he has incurred in delay, the additional e/penses shall be borne by hi . (hese provisions are without prejudice to venue under the &ules of #ourt. (11<1a) SP$CIA' )0+$S 01 PAY)$4#! Application or i!putation of pa0!ent *ession of pa0!ent or assign!ent 'ation in pa0!ent Tender and consignation Application of -a0!ents It is the designation of the debt to "hich should be applied a payment made by a debtor "ho o"es several debts in favor of the same creditor. #he purpose is to &no" "hich debt out of t"o or more debts o"ing the creditor should be e%tinguished. Re7uisites3 T)o or !ore debts Of the sa!e 5ind One debtor and one creditor All debts are due Tendered pa0!ent is not sufficient to e2tinguish all obligations :" #arious debts of sa!e 5ind to one creditor3 :" 'ebtor choice of application C:;B;D ;" 'ue or de!andable 8" Not due or de!andable< i" onl0 if parties stipulate ii" suspensi+e ter! is for pa0orFs benefit ;" Receipt of application of pa0!ent is conclusi+e unless in+alid" C:;B;D Art. 1757. 0e who has various debts of the sa e 2ind in favor of one and the sa e creditor, ay declare at the ti e of a2ing the pay ent, to which of the the sa e ust be applied. $nless the parties so stipulate, or when the application of pay ent is ade by the party for whose benefit the ter has been constituted, application shall not be ade as to debts which are not yet due. *f the debtor accepts fro the creditor a receipt in which an application of the pay ent is ade, the for er cannot co plain of the sa e, unless there is a cause for invalidating the contract. (11<7a) 8" Interests !ust be paid first (175;) Art. 175;. *f the debt produces interest, pay ent of the principal shall not be dee ed to have been ade until the interests have been covered. (11<;) -resu!ption3 pa0!ent of principal presu!es pa0!ent of interest" (11<6) Art. 11<6, par. 1. &eceipt of principal by creditor without reservation with respect to the interest, shall give rise to presu ption that said interest has been paid.
A" 'efault rules< i.e. when preceding rules does not apply, nor inference fro circu stances (175:) :" ,ost onerous !ust first be satisfied factors to consider3 i" age of obligation ii" e2istence of interest iii" role of third part0 E secured ones are !ore onerous i+" principal or subsidiar0 liabilit0 +" being a solidar0 debtor is !ore onerous +i" in solidar0 debts< o)n part is !ore onerous +ii" inde!nit0 is !ore onerous than penalt0 +iii" Li7uidated debt ;" If sa!e nature and burden< appl0 proportionatel0 Art. 175:. ,hen the pay ent cannot be applied in accordance with the preceding rules, or if application can not be inferred fro other circu stances, the debt which is ost onerous to the debtor, a ong those due, shall be dee ed to have been satisfied. *f the debts due are of the sa e nature and burden, the pay ent shall be applied to all of the proportionately. (11<:a) IO" -a0!ent b0 *ession It is the process by "hich a debtor transfers all the properties not sub7ect to e%ecution in favor of his creditors so that the latter may sell them and apply the proceeds to their credits. R/9.ISIT/S3 1. More than one debt. 7. More than one creditor ;. #o plete or partial insolvency of the debtor :. Abandon ent of all debtor%s properties not e/e pt fro
65
e/ecution.
Art. 1755. (he debtor ay cede or assign his property to his creditors in pay ent of his debts. (his cession, unless there is stipulation to the contrary, shall only release the debtor fro responsibility for the net proceeds of the thing assigned. (he agree ents which, on the effect of the cession, are ade between the debtor and his creditors shall be governed by special laws. (11<5a) &IN'S3 $udicial or *ontractual 'istinguish fro! 'ation en -ago C:;ABD :" Here< there is pluralit0 of creditors ;" Here< there is financial difficult0 8" There< particular ob ect is e7ui+alent of perfor!ance6 here< it is the uni+ersalit0 of debtorF properties A" There< the ob ect or propert0 is full or partial pa0!ent6 here< it is the fruits< or net proceeds that are such" Tender of -a0!ent and *onsignation #ender of payment is the act, on the part of the debtor, of offering to the creditor the thing due or amount due. #he debtor must sho" that he has in his possession the thing or money to be delivered at the time of the offer. Consignation is the act of depositing the thing or amount due "ith the proper court "hen the creditor does not desire or cannot receive it, after complying "ith the formalities re uired by the la". 'I((/R/N*/3 %Tender of pa0!ent as preparator0 act of consignation %Tender of pa0!ent is e2tra udicial )hile *onsignation is udicial
R/9.ISIT/SL-RO*/SS :" There )as a debt due 7. 8" General Re7uisites3 Tender of -a0!ent in accordance )ith rules of pa0!ent3 i"e"< it )ould ha+e been a +alid pa0!ent< hadnFt it been for the situation in no" 8" (175D) Legal causes of *onsignation A. Tender of -a0!ent )as un ustl0 refused b0 creditor6 or B. There is no need for tender of pa0!ent due to circu!stances )hich !a5e tender of pa0!ent i!possible or inad+isable % *ases )here consignation alone shall e2tinguish obligation3 (1756) a" When the creditor is absent or un5no)n< or does not appear at the place of pa0!ent6 b" When he is incapacitated to recei+e the pa0!ent at the ti!e it is due6 c" When< )ithout ust cause< he refuses to gi+e a receipt6 d" When t)o or !ore persons clai! the sa!e right to collect6 e" When the title of the obligation has been lost" -re+ious notice )as gi+en to person interested in perfor!ance of the obligation (175<) *onsignation proper % A!ount due )as placed at the proper disposal of the court (175D) second notice )as !ade to person interested (175D) debtor !a0 as5 udge for e2tinguishing obligation (176E) %But debtor still has option to )ithdra)3 a" before udicial declaration of proper consign!ent b" before creditor accepts consign!ent c" if creditor consents
66
:. 5. 6. <.
WITH'RAWAL O( *ONSIGNATION3 1. at debtorFs instance E obligation re!ains in force (176E) 7. )ith creditorFs consent (1761) a" creditor loses preference o+er the thing b" solidar0 co%debtors< sureties< guarantors are released" /O-/NS/S3 *harge to creditor (175F) WH/N *ONSIGNATION ALON/ WITHO.T T/N'/R /OTING.ISH/S OBLIGATION Art. 1756. *f the creditor to who tender of pay ent has been ade refuses without just cause to accept it, the debtor shall be released fro responsibility by the consignation of the thing or su due. #onsignation alone shall produce the sa e effect in the following cases+ (1),hen the creditor is absent or un2nown, or does not appear at the place of pay ent8 (7),hen he is incapacitated to receive the pay ent at the ti e it is due8 (;),hen, without just cause, he refuses to give a receipt8 (:),hen two or ore persons clai the sa e right to collect8 (5),hen the title of the obligation has been lost. (11<6a) Art. 175<. *n order that the consignation of the thing due ay release the obligor, it ust first be announced to the persons interested in the fulfill ent of the obligation. (he consignation shall be ineffectual if it is not ade strictly in consonance with the provisions which regulate pay ent. Art. 175D. #onsignation shall be ade by depositing the things due at the disposal of judicial authority, before who the tender of pay ent shall be proved, in a proper case, and the announce ent of the consignation in other cases. (he consignation having been ade, the interested parties shall also be notified thereof. (11<D) Art. 175F. (he e/penses of consignation, when properly ade, shall be charged against the creditor. (11<D) /((/*TS I( *ONSIGNATION -RO-/RL4 ,A'/3
Art. 176E. -nce the consignation has been duly ade, the debtor ay as2 the judge to order the cancellation of the obligation. "efore the creditor has accepted the consignation, or before a judicial declaration that the consignation has been properly ade, the debtor ay withdraw the thing or the su deposited, allowing the obligation to re ain in force. (11DE) 1. &unning of interest is also suspended. R/L/AS/ O( *O%'/BTORS< G.ARANTORS AN' S.R/TI/S Art. 1761. *f, the consignation having been ade, the creditor should authori9e the debtor to withdraw the sa e, he shall lose every preference which he ay have over the thing. (he co6debtors, guarantors and sureties shall be released. (11D1a) Loss of the Thing 'ue There is loss )hen3 The thing perishes Goes out of co!!erce 'isappears in such a )a0 that its e2istence is un5no)n or cannot be reco+ered" &inds of i!possibilit0 of perfor!ance3 -h0sical i!possibilit0 Legal ,oral Re7uisites for e2tinguish!ent due to loss3 (1767) a" b" c" d" e. f. g. )ithout fault of debtor no dela0 incurred no la) or stipulation !a5ing obligor liable no ris5 in nature of obligation debt of thing certain and deter!inate does not proceed fro! a cri!inal offense (176D) not a generic thing (176;) if onl0 partial< but deter!ined as i!portant to the obligation (176:)
67
Art. 1767. An obligation which consists in the delivery of a deter inate thing shall be e/tinguished if it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay. ,hen by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing does not e/tinguish the obligation, and he shall be responsible for da ages. (he sa e rule applies when the nature of the obligation re5uires the assu ption of ris2. (11D7a) T4-/S O( LOSS/S 1. Loss of generic thing3 loss does not e2tinguish< since replaceable of sa!e 5ind and 7ualit0. Art. 176;. *n an obligation to deliver a generic thing, the loss or destruction of anything of the sa e 2ind does not e/tinguish the obligation. -artial loss3 e2tinguish!ent depends on courts deter!ination of its i!portance Art. 176:. (he courts shall deter ine whether, under the circu stances, the partial loss of the object of the obligation is so i portant as to e/tinguish the obligation. (n) Loss in to do e2tinguishes< if3 a. I!possibilit0 6 Art. 1766. (he debtor in obligations to do shall also be released when the prestation beco es legally or physically i possible without the fault of the obligor. (11D:a) b. Too difficult 6 Art. 176<. ,hen the service has beco e so difficult as to be anifestly beyond the conte plation of the parties, the obligor ay also be released therefro , in whole or in part. (n) 'ebts arising fro! *ri!inal Offense3 loss does not e2tinguish (176D) a" restitution b" reparation
;"
8"
:.
c" inde!nification .nless3 he has alread0 offered such to creditor< and latter un ustl0 refuses Art. 176D. ,hen the debt of a thing certain and deter inate proceeds fro a cri inal offense, the debtor shall not be e/e pted fro the pay ent of its price, whatever ay be the cause for the loss, unless the thing having been offered by hi to the person who should receive it, the latter refused without justification to accept it. -R/S.,-TION3 loss during possession of debtor is )ith fault /2ception3 ti!es of cala!it0 Art. 1765. ,henever the thing is lost in the possession of the debtor, it shall be presu ed that the loss was due to his fault, unless there is proof to the contrary, and without prejudice to the provisions of article 1165. (his presu ption does not apply in case of earth5ua2e, flood, stor , or other natural cala ity. R/,/'4 O( *R/'ITOR3 .se rights of action of debtor against third persons (e.g. insurance) Art. 176F. (he obligation having been e/tinguished by the loss of the thing, the creditor shall have all the rights of action which the debtor ay have against third persons by reason of the loss. O" *ondonation or Re!ission of the 'ebt
68
It is the gratuitous abandonment by the creditor of his right. There !ust be an agree!ent" The parties !ust be capacitated" There !ust be a sub ect !atter" The cause or consideration is generosit0" Obligation is de!andable at the ti!e of re!ission" Re!ission !ust not be inofficious" R/9.ISIT/S of *ondonation or Re!ission to e2tinguish debt A" confor!it0 )ith the Rules of 'onation Cinferred :;?=D 1. 2. acceptance b0 obligor C:;?=D rules on inofficious donations C:;?=D a" donations onl0 insofar as not to depri+e donor of sufficient !eans of usufruct b" not future propert0 c" not !ore than he !a0 gi+e or recei+e b0 )ill< but those )ithin !eans are effecti+e d" not bet)een husband and )ife if e2press donation< co!pliance )ith for!s of donation a" !o+able propert0 !a0be oral or in )riting i" oral donation re7uire si!ultaneous deli+er0 of donated thing ii" oral donation !ust not e2ceed -hp B<===6 such +alue should be )ritten b" I!!o+able i" public docu!ent specif0ing propert0 donated and its +alue ii" acceptance in the sa!e or separate public docu!ent )ithin lifeti!e of iii" acceptance of donation !ust be 5no)n to donor Art. 17<E. #ondonation or re ission is essentially gratuitous, and re5uires the acceptance by the obligor. *t ay be ade e/pressly or i pliedly. -ne and the other 2ind shall be subject to the rules which govern inofficious donations. I/press condonation shall, further ore, co ply with the for s of donation. B" ,ust relate to principal debt3 other)ise< partial
3.
donor
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Art. 17<;. (he renunciation of the principal debt shall e/tinguish the accessory obligations8 but the waiver of the latter shall leave the for er in force. (11FE) T4-/S3 R.L/S of i!plied and e2press condonation or re!ission :" i!plied
a" 'eli+er0 of pri+ate docu!ent of debt i!plies re!ission b" If deli+er0 contended as inofficious< pro+e deli+er0 as pa0!ent of debt Art. 17<1. (he delivery of a private docu ent evidencing a credit, ade voluntarily by the creditor to the debtor, i plies the renunciation of the action which the for er had against the latter. *f in order to nullify this waiver it should be clai ed to be inofficious, the debtor and his heirs ay uphold it by proving that the delivery of the docu ent was ade in virtue of pay ent of the debt. (11DD) c" -resu!ption3 debtor has pri+ate docu!ent of debt R +oluntar0 deli+er0 b0 creditor Art. 17<7. ,henever the private docu ent in which the debt appears is found in the possession of the debtor, it shall be presu ed that the creditor delivered it voluntarily, unless the contrary is proved. (11DF) d" -ledge3 presu!e re!itted if pledged ob ect in debtorFs possession Art. 17<:. *t is presu ed that the accessory obligation of pledge has been re itted when the thing pledged, after its delivery to the creditor, is found in the possession of the debtor, or of a third person who owns the thing. (11F1a) ;" e2press % relate to +alidit0 of contracts3 a" proper re7uisites C:8:@D b" confor!it0 )ith re7uire!ents of donation being a gratuituous title c" not against la)< !orals< good custo!s< public order< and public polic0 C:8=>D *onfusion or ,erger of Rights It is the meeting in one person of the obligation. ualities of creditor and debtor "ith respect to the same
Re7uisites3 a" )hen creditor and debtor are !erged in the sa!e person Art. 17<5. (he obligation is e/tinguished fro the ti e the characters of creditor and debtor are erged in the sa e person. (11F7a) b" the0 are principal parties to a debt6 not !ere guarantors" Art. 17<6. Merger which ta2es place in the person of the principal debtor or creditor benefits the guarantors. #onfusion which ta2es place in the person of any of the latter does not e/tinguish the obligation. (11F;) R.L/ IN $OINT OBLIGATIONS3 confusion onl0 to share of person )ho is creditor and debtor . Art. 17<<. #onfusion does not e/tinguish a joint obligation e/cept as regards the share corresponding to the creditor or debtor in who the two characters concur. (11F:) *o!pensation It is the e%tinguishment to the concurrent amount of the debts of t"o persons "ho, in their o"n rights are debtors and creditors of each other. R/9.ISIT/S3
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:" T)o persons are creditor and debtor of each other Art. 17<D. #o pensation shall ta2e place when two persons, in their own right, are creditors and debtors of each other. 7. In order that co!pensation !a0 be proper< it is necessar03 (17<D) C:D That each one of the obligors be bound principall0< and that he be at the sa!e ti!e a principal creditor of the other6 C;D That both debts consist in a su! of !one0< or if the things due are consu!able< the0 be of the sa!e 5ind< and also of the sa!e 7ualit0 if the latter has been stated6 a" . B.T NOT 9.ANTIT43 *o!pensation !a0 be total or partial" When the t)o debts are of the sa!e a!ount< there is a total co!pensation" C:;@:D C8D CAD due" C:;@;D That the t)o debts be due6 That the0 be li7uidated and de!andable6 a" B.T3 parties !a0 agree upon co!pensation of debts )hich are not 0et
CBD That o+er neither of the! there be an0 retention or contro+ers0< co!!enced b0 third persons and co!!unicated in due ti!e to the debtor" C::H>D R.L/3 B4 O-/RATION O( LAW Art. 17FE. ,hen all the re5uisites entioned in article 17<F are present, co pensation ta2es effect by operation of law, and e/tinguishes both debts to the concurrent a ount, even though the creditors and debtors are not aware of the co pensation. (17E7a) % /#/N AT 'I((/R/NT -LA*/S6 /O-/NS/S OR TRANS-ORTATION IN'/,NIT4 Art. 17D6.#o pensation ta2es place by operation of law, even though the debts ay be payable at different places, but there shall be an inde nity for e/penses of e/change or transportation to the place of pay ent. (11FFa) 8" NOT IN#OL#ING TH/ (OLLOWING OBLIGATIONS3 a" 'epositar0 in 'epositu! b" Bailee in *o!!odatu! c" Support< e2cept those in arrears Cpar";< art" 8=:D d" *i+il liabilit0 out of ci+il offense Art. 17D<. #o pensation shall not be proper when one of the debts arises fro a depositu or fro the obligations of a depositary or of a bailee in co odatu . .either can co pensation be set up against a creditor who has a clai for support due by gratuitous title, without prejudice to the provisions of paragraph 7 of article ;E1. (17EEa) Art. 17DD. .either shall there be co pensation if one of the debts consists in civil liability arising fro a penal offense. (n)
A" #ALI' OBLIGATIONS3 NOT 4/T A#OI'/' OR R/S*IN'/'< also not +oid ab initio (17D:) Art. 17D:. ,hen one or both debts are rescissible or voidable, they ay be co pensated against each other before they are judicially rescinded or avoided. (n) S-/*IAL SIT.ATIONS3 rules a" Guarantors !a0 in+o5e )hat creditor !a0 o)e the principal debtor Art. 17DE. .otwithstanding the provisions of the preceding article, the guarantor ay set up co pensation as regards what the creditor ay owe the principal debtor. (11F<) b" *o!pensate da!ages3 Art. 17D;. *f one of the parties to a suit over an obligation has a clai for da ages against the other, the for er ay set it off by proving his right to said da ages and the a ount thereof. (n) c" Se+eral debts3 applications of pa0!ent Art. 17DF. *f a person should have against hi several debts which are susceptible of co pensation, the rules on the application of pay ents shall apply to the order of the co pensation. (17E1)
d" *reditorL assignor6 assignee6 Rules #alid co!pensation bet)een debtor and creditorLassignor as defense against assignees clai!3 notification to creditorLassignor that he reser+ed his right to co!pensate if debtor does not consent to assign!ent b0 creditor< co!pensation +alid prior< not subse7uent to disappro+al 8" if debtor does not 5no)< co!pensation +alid prior to 5no)ledge of assign!ent" Art. 17D5. (he debtor who has consented to the assign ent of rights ade by a creditor in favor of a third person, cannot set up against the assignee the co pensation which would pertain to hi against the assignor, unless the assignor was notified by the debtor at the ti e he gave his consent, that he reserved his right to the co pensation. *f the creditor co unicated the cession to hi but the debtor did not consent thereto, the latter ay set up the co pensation of debts previous to the cession, but not of subse5uent ones. casia *f the assign ent is ade without the 2nowledge of the debtor, he ay set up the co pensation of all credits prior to the sa e and also later ones until he had 2nowledge of the assign ent. (11FDa) OI" OII" No+ation It is the e%tinction of an obligation through the creation of a ne" one "hich substitutes the old one. R/9.ISIT/S3 a" pre+ious +alid obligation (17FD) Art. 17FD. (he novation is void if the original obligation was void, e/cept when annul ent ay be clai ed only by the debtor or when ratification validates acts which are voidable. (17EDa) b" agree!ent to ne) obligation c" e2tinguish!ent of old contract i" preser+e accessor0 obligations insofar non%consenting 8 rd part0 benefactors are benefited" Art. 17F6. ,hen the principal obligation is e/tinguished in conse5uence of a novation, accessory obligations ay subsist only insofar as they ay benefit third persons who did not give their consent. (17E<) d" +alidit0 of ne) contract i" If ne) obligation is +oid< original is re+i+ed Art. 17F<. *f the new obligation is void, the original one shall subsist, unless the parties intended that the for er relation should be e/tinguished in any event. (n) AS /OTING.ISH,/NT3 T4-/S (17F7) a" b" /2press E une7ui+ocal ter!s I!plied E inco!patibilit0 Art. 17F7. *n order that an obligation ay be e/tinguished by another which substitute the sa e, it is i perative that it be so declared in une5uivocal ter s, or that the old and the new obligations be on every point inco patible with each other. (17E:) :" ;"
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AS ,O'I(I*ATION3 Obligations !a0 be !odified b03 (17F1) C:D *hanging their ob ect or principal conditions6
contract
% unless stipulated< suspensi+e and resolutor0 conditions appl0 to ne) Art. 17FF. *f the original obligation was subject to a suspensive or resolutory condition, the new obligation shall be under the sa e condition, unless it is otherwise stipulated. (n) cd
72
C;D
Substituting the person of the debtor6 A" *onsent of *reditor is essential< not that of the original debtor" B" Rights of ne) debtor3 a" )ith 5no)ledge< de!and all fro! debtor6 (17;6) b" )Lo 5no)ledge or against )ill< onl0 insofar beneficial (17;6) c" )Lo 5no)ledge or against )ill< no action for !ortgage< guarant0< penalt0 C:;8?D Art. 17F;. .ovation, which consists in substituting a new debtor in the place of the original one ay be ade even without the 2nowledge or against the will of the latter, but not without the consent of the creditor. !ay ent by the new debtor gives hi the rights entioned in articles 17;6 and 17;<. (17E5a) *" Original debtor is not liable for insol+enc0 or non%fulfill!ent b0 ne) debtor a" Original debtor had no 5no)ledge or consent (17F:) b" -roposed and accepted b0 original debtor and creditor (17F5) %e2cept )hen insol+enc0 is alread0 e2isting at ti!e of
delegation3
i" public 5no)ledge ii" 5no)n to the debtor Art. 17F:. *f the substitution is without the 2nowledge or against the will of the debtor, the new debtorJs insolvency or non6fulfill ent of the obligations shall not give rise to any liability on the part of the original debtor. (n) Art. 17F5. (he insolvency of the new debtor, who has been proposed by the original debtor and accepted by the creditor, shall not revive the action of the latter against the original obligor, e/cept when said insolvency was already e/isting and of public 2nowledge, or 2nown to the debtor, when the delegated his debt. (17E6a) C8DSubrogating a third person in the rights of the creditor"
S.BROGATION3 *hange in creditor Art. 1;EE. 3ubrogation of a third person in the rights of the creditor is either legal or conventional. (he for er is not presu ed, e/cept in cases e/pressly entioned in this #ode8 the latter ust be clearly established in order that it ay ta2e effect. (17EFa) T0pes3 A" Legal E not presu!ed< unless pro+ided for in the ci+il code It is presu!ed that there is legal subrogation3 C:8=;D C:D When a creditor pa0s another creditor )ho is preferred< e+en )ithout the debtorQs 5no)ledge6 C;D When a third person< not interested in the obligation< pa0s )ith the e2press or tacit appro+al of the debtor6 C8D When< e+en )ithout the 5no)ledge of the debtor< a person interested in the fulfill!ent of the obligation pa0s< )ithout pre udice to the effects of confusion as to the latterQs share" B" *on+entional E !ust be clearl0 established a" consent of original parties and third person
Art. 1;E1. #onventional subrogation of a third person re5uires the consent of the original parties and of the third person. (n) /ffects3 A" Transfer of rights of creditor3 to the principal< guarantors< posessors of !ortgages" /2cept3 a. if sipulated (1;E;) b. third part0 pa0or )ithout consent of debtor has no right to)ards guarant< penalt0< !ortgages" (17;<) Art. 1;E;. 3ubrogation transfers to the persons subrogated the credit with all the rights thereto appertaining, either against the debtor or against third person, be they guarantors or possessors of ortgages, subject to stipulation in a conventional subrogation. (1717a) B" But the original creditor is preferred o+er subrogated part0 b0 +irtue of partial pa0!ent Art. 1;E:. A creditor, to who partial pay ent has been ade, ay e/ercise his right for the re ainder, and he shall be preferred to the person who has been subrogated in his place in virtue of the partial pay ent of the sa e credit. (171;) ,agdalena /states Inc" +s Spouses RodrigueI 3pouses &odrigue9 purchased a property fro Magdalena wherein a balance of !5EEE was left unpaid and a pro issory note was ade to secure pay ent subject to a FV interest de andable wAin 6E days. *n further co pliance, a bond of !5EEE was e/ecuted by the spouses and the 1u9on 3urety #o. to secure pay ent. ,hen the obligation was already due, 1u9on paid Magdalena the !5EEE. (hen the latter also de anded fro the spouses the accu ulated interest but they refused to pay saying that by virtue of the bond which was ade to guarantee pay ent of the !5EEE, there was already a novation. (hus, the interest can no longer be de anded. *ssue+ ,as there a .-BA(*-. considering that a bond was e/ecuted by the spouses and 1u9on 3urety a2ing the not liable for the interestsU 0eld+ .o. .ovation cannot be presu ed in the instant case since there was no inconsistency (i.e. i plied novation) with regard to the pro issory note e/ecuted. (he bond was only ade to further guarantee co pliance with the obligation. (he fact that Magdalena accepted the !5EEE does not e/tinguish the spousesJ liability as to the interests. (he ere fact that the creditor accepts pay ents fro a third person who agreed to assu e the obligation, when there is no agree ent that the first debtoer shall be released fro the responsibility does not constitute obligation. &aban5alan Sugar *o"< Inc C&aban5alanD +s $osefa -acheco C$osefaD @osefa had a debt incurred with a fir 1edes a 0er anos and to co ply with her obligation to the fir , on .ov. 1, 1F7E, she entered into a contract with Kaban2alan that the latter shall assu e her obligation with the fir as well as pay the ta/es of her 0ilabangan Istate and in return, she will deliver 15V of all the sugar obtained fro the estate every year. 1i9arraga, acting as anager of Kaban2alan, agreed with @osefa that in addtion to the delivery, a right of way is granted to Kaban2alan within the estate for a period of 7E years. 0owever, on 3ep. 7F, 1F77, the parties agreed to change the ter for only < years starting fro 1F77. A new anager too2 over Kaban2alan which co pelled @osefa to e/ecute in a public docu ent the stipulation that was agreed upon on .ov. 1, 1F7E and not on 3ep 7F, 1F77 covering a 7E year period. *ssue+ ,as there a novation U 0eld+ )es. ,hen an ease ent of right of way is one of the principal conditions of a contract, and the duration of said ease ent is specified, the reduction of said period in a subse5uent contract, wherein the sa e obligation is one of the principal conditions, constitutes a novation and to that e/tent e/tinguishes the for er contract. 4nchaustiMco +" 4ulo
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Si2 brothers and sisters ad!itted solidar0 liabilit0" Gregorio 4ulo )as sued for pa0!ent of entire indebtedness" Ho)e+er< solidar0 debtors (rancisco< ,anuel and *ar!en had alread0 entered into a co!pro!ised agree!ent )ith plaintiff" S* ruled3 Gregorio can be sued for the entire indebtedness plus interest" There )as no no+ation in an e2tension of ter!s< thus Greg 4uloFs liabilit0 is not e2tinguished" He is onl0 affected insofar as the agree!ent reduced the debt" -artial re!ission granted to the three debtors should also benefitted hi!" The ne) ter! of de!andabilit0 in the subse7uent agree!ent bet)een his siblings and the creditor onl0 gi+es rise to defense of non%!aturit0 of his other co%debtorsF solidar0 liabilit0" Such is a defense to allo) for !ere partial pa0!ent" Gregorio )as ordered to pa0 the part of the reduced indebtedness< onl0 insofar as such is de!andable" N"B" Solidar0 debtors can onl0 act to benefit the other solidar0 debtors" Ho)e+er< e2tension of ter!s li5e period of pa0!ent does not auto!aticall0 appl0 to e+er0one e2cept insofar as the de!andabilit0 of eachFs share" This can be understood b0 Art" :;:: pro+iding that solidarit0 !a0 e2ist although creditors and debtors !a0 not be bound in the sa!e !annerand b0 the sa!e periods and conditions" *astan states that No+ation occurs3 a" clear case of inco!patibilit0 b" change in obligator0 relation bet)een the parties )hich alter the essence of the obligation NAT.RAL OBLIGATIONS 'istinctions3 Natural Obligations +s" *i+il Obligations C:A;8D a" Right of retention onl0 +s" right to co!pel perfor!ance b" After +oluntar0 fulfill!ent +s" after constitution of obligation c" /7uit0 and Natural La) +s" -ositi+e La) (eatures3 a" b" c" d" e" no positi+e la) gi+ing right of action no right of action to enforce perfor!ance +oluntar0 fulfill!ent of obligation b0 obligor authoriIe retention of )hat has been fulfilled6 no right to reco+er< or de!and return of )hat has been fulfilled
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Art. 1:7;. -bligations are civil or natural. #ivil obligations give a right of action to co pel their perfor ance. .atural obligations, not being based on positive law but on e5uity and natural law, do not grant a right of action to enforce their perfor ance, but after voluntary fulfill ent by the obligor, they authori9e the retention of what has been delivered or rendered by reason thereof. 3o e natural obligations are set forth in the following articles. (ollo)ing are natural obligations3 a" -rescribed action of obligee" (1:7:) Art. 1:7:. ,hen a right to sue upon a civil obligation has lapsed by e/tinctive prescription, the obligor who voluntarily perfor s the contract cannot recover what he has delivered or the value of the service he has rendered. b" -rescribed action of 8rd person pa0or )ithout 5no)ledge and consent of debtor against the latter" (1:75) N"B" Relate to rights of 8rd part0 pa0ors in Art" :;8> and :;8? Art. 1:75. ,hen without the 2nowledge or against the will of the debtor, a third person pays a debt which the obligor is not legally bound to pay because the action thereon has prescribed, but the debtor later voluntarily rei burses the third person, the obligor cannot recover what he has paid. c. Annulled contract of :@%;: !inor )ithout consent of parents" (1:76, 1:7<) i" returns )hole thing or price he has recei+ed N"B" Relate to Art" :;A:< Jonl0 insofar benefitedK ii" fulfills obligation< and good faith consu!!ation and spending of )hat has been deli+ered N"B" Relate to Art" :8;?< une!ancipated !inors cannot gi+e consent to contracts"
:@
PPPHo)e+er< ta5e these articles in light of RA >@=H< lo)ering age of !inorit0 to Art. 1:76. ,hen a inor between eighteen and twenty6one years of age who has entered into a contract without the consent of the parent or guardian, after the annul ent of the contract voluntarily returns the whole thing or price received, notwithstanding the fact the he has not been benefited thereby, there is no right to de and the thing or price thus returned. Art. 1:7<. ,hen a inor between eighteen and twenty6one years of age, who has entered into a contract without the consent of the parent or guardian, voluntarily pays a su of oney or delivers a fungible thing in fulfill ent of the obligation, there shall be no right to recover the sa e fro the obligee who has spent or consu ed it in good faith. (116EA) (ailed action to enforce contract Art. 1:7D. ,hen, after an action to enforce a civil obligation has failed the defendant voluntarily perfor s the obligation, he cannot de and the return of what he has delivered or the pay ent of the value of the service he has rendered. Successions3 i" Heirs pa0ing decedentFs debt be0ond )hat he has recei+ed ii" Will +oided b0 lac5 of for!alities< intestate heir pa0s a legac0 Art. 1:7F. ,hen a testate or intestate heir voluntarily pays a debt of the decedent e/ceeding the value of the property which he received by will or by the law of intestacy fro the estate of the deceased, the pay ent is valid and cannot be rescinded by the payer. Art. 1:;E. ,hen a will is declared void because it has not been e/ecuted in accordance with the for alities re5uired by law, but one of the intestate heirs, after the settle ent of the debts of the deceased, pays a legacy in co pliance with a clause in the defective will, the pay ent is effective and irrevocable. OIII" /STO--/L
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d"
e"
/stoppel3 ad!ission or representation conclusi+e upon person !a5ing such6 cannot be denied or dispro+ed Art. 1:;1. (hrough estoppel an ad ission or representation is rendered conclusive upon the person a2ing it, and cannot be denied or disproved as against the person relying thereon. Art. 1:;7. (he principles of estoppel are hereby adopted insofar as they are not in conflict with the provisions of this #ode, the #ode of #o erce, the &ules of #ourt and special laws. G/N/RAL R.L/3 /ffecti+e onl0 bet)een parties thereto or successors in interest Art. 1:;F. Istoppel is effective only as between the parties thereto or their successors in interest. T0pes b0 !eans3 Art. 1:;;. Istoppel ay in pais or by deed. A" B0 *onduct Cin paisD E intentional and culpable negligence ele!ents3 a" acts inducing another to belie+e certain facts to e2ist b" )ith intent or culpable negligence c" the other part0 rightfull0 relies and acts on such belief d" other part0 )ould be pre udiced if the guilt0 part0 is allo)ed to den0 facts first represented b0 hi! t0pes3 a" b0 silence b" b0 acceptance of benefits c" b0 acts E representations or ad!issions B" B0 'eed % cannot 7uestion ad!ission in docu!ent or deeds B0 Record E cannot 7uestion e2ecuti+e and legislati+e records B0 $udge!ent E no denial of ad udicated facts b0 co!petent court *" B0 laches CTi a! +" Sibonghano0D
a" situation gi+ing right of faction b" dela0 in asserting co!plainantsF rights c" lac5 of 5no)ledge or notice that co!plainant )ould assert his rights d" in ur0 or pre udice )ould arise if relief is granted The follo)ing are /stopped a. in sales3 o)nership transfers to bu0er i" Seller or grantor )ho is not o)ner at ti!e of sale but he later ac7uires o)nership of such Art. 1:;:. ,hen a person who is not the owner of a thing sells or alienates and delivers it, and later the seller or grantor ac5uires title thereto, such title passes by operation of law to the buyer or grantee. ii" Seller represents o)ner in a sale6 cannot contest title of o)nership of bu0er Art. 1:;5. *f a person in representation of another sells or alienates a thing, the for er cannot subse5uently set up his own title as against the buyer or grantee. b" Lessee or bailee cannot clai! o)nership of thing leased or recei+ed against lessor or bailor Art. 1:;6. A lessee or a bailee is estopped fro asserting title to the thing leased or received, as against the lessor or bailor. c" ,isleader in 8rd part0 contracts on i!!o+able propert0 re7uisites3 On guilt0 part03 a" His fraudulent representationL )rongful conceal!ent b" Intent other part0 to act upon facts !isrepresented Other part03 a" does not 5no) facts b" acted in accordance )ith !isrepresentations Pnotice3 no re7uire!ent for pre udice or in ur0 if relief is granted Art. 1:;<. ,hen in a contract between third persons concerning i ovable property, one of the is isled by a person with respect to the ownership or real right over the real estate, the latter is precluded fro asserting his legal title or interest therein, provided all these re5uisites are present+ (1)(here ust be fraudulent representation or wrongful conceal ent of facts 2nown to the party estopped8 (7)(he party precluded ust intend that the other should act upon the facts as isrepresented8 (;)(he party isled ust have been unaware of the true facts8 and (:)(he party defrauded ust have acted in accordance with the isrepresentation. d" In a pledge3 o)ner allo)ing another to feign o)nership< cannot clai! o)nership as defense against pledge" Art. 1:;D. -ne who has allowed another to assu e apparent ownership of personal property for the purpose of a2ing any transfer of it, cannot, if he received the su for which a pledge has been constituted, set up his own title to defeat the pledge of the property, ade by the other to a pledgee who received the sa e in good faith and for value. OI#" O#" TR.STS -arties3 1. Trustor % establish 2. Trustee E trusted< gi+en confidence 3. Beneficiar0 E recei+er of benefit of trust Art. 1::E. A person who establishes a trust is called the trustor8 one in who confidence is reposed as regards property for the benefit of another person is 2nown as the trustee8 and the person for whose benefit the trust has been created is referred to as the beneficiary. T0pes3 /2press and I!plied Art. 1::1. (rusts are either e/press or i plied. I/press trusts are created by the intention of the trustor or of the parties. * plied trusts co e into being by operation of law. Art. 1::7. (he principles of the general law of trusts, insofar as they are not in conflict with this #ode, the #ode of #o erce, the &ules of #ourt and special laws are hereby adopted.
76
a"
$JP,$SS #,2S#S ,e uirements3 (or!3 i" (or i!!o+able properties3 e2pressl0 )ritten< not parol or oral e+idence6 Art. 1::;. .o e/press trusts concerning an i ovable or any interest therein ay be proved by parol evidence. Other)ise3 i!plied trust Art. 1:5<. An i plied trust ay be proved by oral evidence. ii" No particular for!3 Intent for trust is clear Art. 1:::. .o particular words are re5uired for the creation of an e/press trust, it being sufficient that a trust is clearly intended.
77
c" Beneficiar0 !ust accept3 Art. 1::6. Acceptance by the beneficiary is necessary. .evertheless, if the trust i poses no onerous condition upon the beneficiary, his acceptance shall be presu ed, if there is no proof to the contrary. d" .nless stipulated< acceptance b0 trustee is not needed Art. 1::5. .o trust shall fail because the trustee appointed declines the designation, unless the contrary should appear in the instru ent constituting the trust. I)P'I$+ #,2S# G/N/RAL R.L/3 B0 parole e+idence Art. 1:5<. An i plied trust ay be proved by oral evidence. The (ollo)ing are e2a!ples of i!plied trusts3 Cnot the onl0 ones aroundD Art. 1::<. (he enu eration of the following cases of i plied trust does not e/clude others established by the general law of trust, but the li itation laid down in article 1::7 shall be applicable. A" -ropert0 paid for b0 another part0 to ha+e a beneficial interest E Trustor3 -a0or< Trustee3 Holder of legal estate< Beneficiar03 pa0or Art. 1::D. (here is an i plied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. (he for er is the trustee, while the latter is the beneficiary. 0owever, if the person to who the title is conveyed is a child, legiti ate or illegiti ate, of the one paying the price of the sale, no trust is i plied by law, it being disputably presu ed that there is a gift in favor of the child. B" 'onation )here donee has to ha+e no or !ere partial beneficial interest" Trustor3 donor< Trustee3 donee< Beneficiar03 donor Art. 1::F. (here is also an i plied trust when a donation is ade to a person but it appears that although the legal estate is trans itted to the donee, he nevertheless is either to have no beneficial interest or only a part thereof. *" Securit0 of debt to pa0 price of sale3 propert0 ac7uired b0 loan in na!e of creditor Trustor3 debtorLlendee< Trustee3 Lender< Beneficiar03 debtorL lendee Art. 1:5E. *f the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is ade to the lender or payor to secure the pay ent of the debt, a trust arises by operation of law in favor of the person to who the oney is loaned or for who its is paid. (he latter ay redee the property and co pel a conveyance thereof to hi . '" Succession to an heir but put in na!e of another" Trustor3 heir< Trustee3 )hose na!e is in legal title< Beneficiar03 heir Art. 1:51. ,hen land passes by succession to any person and he causes the legal title to be put in the na e of another, a trust is established by i plication of law for the benefit of the true owner. /" ,ultiple purchasers< but in na!e of onl0 one Trustor3 non%no!inate purchaser< Trustee3 no!inate purchaser insofar as the otherFs share< Beneficiar03 non%no!inate purchaser
Art. 1:57. *f two or ore persons agree to purchase property and by co on consent the legal title is ta2en in the na e of one of the for the benefit of all, a trust is created by force of law in favor of the others in proportion to the interest of each. (" Grant in reliance of declaration to be a !ere holder or conduit for grantor or third person Trustor3 grantor< Trustee3 declarer of intention to hold it for 8rd person< Beneficiar03 grantor or 8rd part0 Art. 1:5;. ,hen property is conveyed to a person in reliance upon his declared intention to hold it for, or transfer it to another or the grantor, there is an i plied trust in favor of the person whose benefit is conte plated. G" Absolute con+e0ance to creditor for securit0 of an obligation6 recon+e0ance upon fulfill!ent Trustor3 debtor< trustee3 creditor< beneficiar03 Art. 1:5:. *f an absolute conveyance of property is ade in order to secure the perfor ance of an obligation of the grantor toward the grantee, a trust by virtue of law is established. *f the fulfill ent of the obligation is offered by the grantor when it beco es due, he ay de and the reconveyance of the property to hi . H" Ob ects ac7uired or con+e0ed b0 use of trust funds< Trustor3 O)ner of trust fund< Trustee3 trustee of trust funds or 8 rd person recei+er of con+e0ance< Beneficiar03 O)ner of trust fund Art. 1:55. ,hen any trustee, guardian or other person holding a fiduciary relationship uses trust funds for the purchase of property and causes the conveyance to be ade to hi or to a third person, a trust is established by operation of law in favor of the person to who the funds belong. I" Ac7uisition b0 !ista5e or fraud Trustor3 con+e0or< Trustee3 ac7uirer b0 !ista5e or fraud< Beneficiar03 con+e0or Art. 1:56. *f property is ac5uired through ista2e or fraud, the person obtaining it is, by force of law, considered a trustee of an i plied trust for the benefit of the person fro who the property co es. (abian +" (abian Gour children inherited a land fro their father who died in 1F7D. (hrough fraudulent eans, a daughter and a niece was able to secure titles to the land in 1F;<. "y 1F:5, they subdivided the lot into two. *n 1F6E, the other heirs of the father applied for reconveyance on the ground of i plied trust. 0eld+ #onstructive or i plied trusts aybe barred by statute of li itations unli2e e/pressed ones. (heir action has both prescribed and laches has already set in. !rescription of ten years for constructive or i plied prescription runs fro date of constructive notice to the world, i.e. fro issuance of new certificate of title. ..". *n the for er, there is an open, continuous, and uninterrupted possession. *n the latter there is none of such, but an ad ission of non ownership or ownership by another. *araga0%La0no +" *A #lai ant whose property has been wrongfully registered in the na e of another, but which has not passed to a third party, can properly see2 reconveyance. Action to 5uiet title or render it undisputable is i prescriptible since such property has been in clai ant%s open possession. (ra!e)or53 7uestions to as5 to deter!ine I!plied obligations3 :" )ho are3 trustor< trustee< beneficiar0 ;" Was there genuine transfer of o)nership? a" -urpose of transaction< con+e0ance b" Is there a no!inate o)ner? %legal title< li!ited use or benefit c" Is there a substantial o)ner? i" o)nership b0 )hat +irtue? %pa0!ent< purchase< succession< donation ii" )ho actuall0 benefits? iii" actual use of propert0 Insight3 The difference bet)een an e2pressed and i!plied trust is not ust li!ited to for! )ith the for!er )ritten and the other is not" Their difference e2tends to the relationship bet)een
78
the trustor and the trustee" In i!plied trusts< agree!ent bet)een the! is not essential" All that is necessar0 is for the circu!stances surrounding each situation be present< and then such )ould be dee!ed a trust" The sa!e !ust be the reason the0 also call such as constructi+e trusts"
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OBLIGATIONS

(11 No!inate contracts3 3pecifically provided for by law, as follows+

C&-$.'3 G-& 1*A"*1*() (- !A) 'AMACI3

:=<5@ or A;85 %discussed above*

;0T85B=0TI;0 ;" T1= T=8A ;" T1= 568==A=0T

Accion subrogatoria3 No+ation +ia change of creditor (17F1, no. ;)

Re7uisites %'* %&* %.*

h" i" "

Indi+isible3 definite things< not partial perfor!ance

'i+isible3 partial perfor!ance6 b0 da0s of )or5< !etrical units< or analogous things

Not to do3 deter!ined b0 character of prestation

:uantum )eriut Principle!

pre udiced onl0 b0 collecti+e acts of ALL creditors (17EF)

-reparation or conception E bargaining point

% /2press or i!plied acceptance3 An acceptance

I!possible things or ser+ices cannot be the ob ect of contracts. (1;:D)

(OR, O( *ONTRA*TS3 A. 3!*&*($A1*() !&*.#*!1I

:" ;" 8" A" B"

3(A($(I -G G&A$'3+ Article 1:E;, paragraph 7 (in relation to article 1:E5)

G-&M3 (0A( A&I &IQ$*&I'+

i. !$"1*# '-#$MI.(+ The follo)ing !ust appear in a public docu!ent3 C:8B@D

!rovision of the e6co

ii. 'I1*BI&) -G (0I (0*.C (for &eal contracts)

&IQ$*3*(I3 G-& &IG-&MA(*-.+ (1;5F)

(he following contracts are unenforceable, unless they are ratified+

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C&-$.'3 G-& 1A"1*() (- !A) 'AMACI3

(OR, O( ONTRATS3 A. 3!&($A1() !&.#*!1I

ii. 'I1BI&) -G (0I (0.C (for &eal contracts)

&IQ$3(I3 G-& &IG-&MA(*-.+ (1;5F)