OBLIGATIONS AND CONTRACTS ATTY. BYRON FERNANDEZ Article 1156. An obligation is a juridical necessity to give, to do or not to do. 1.

Concept of Obligation a) Esential Elements/Requisites of Obligation: i. Ang Yu Asuncion vs. CA, GR No. 109125 December 2, 1994 An obligation is constituted upon the concurrence of the essential elements thereof,viz (a) The vinculum juris or judicial tie which is the efficient cause established by the various sources of obligations; (b) the object which is the prestation or conduct, required to be observed (to give, to do or not to do); and (c) the subject-persons who viewed from the demandability of the obligation, are the active (obligee) and the passive (obligor) subjects. b) Civil Obligation distinguished from Natural Obligation i. Agoncillo vs. Javier 38 Phil 424 Facts: Petitioners and respondents signed a contract that if the respondent will not able to pay before the maturity the house shall be transferred to the petitioner. A partial payment was made before the death of the respondent. Issue: May the petitioner avail the transfer of property to her Ruling: The contract now under consideration is not suspectible of the interpretation that the title to the house and lot in question was to be transferred to the creditor ipso facto upon the mere failure of the debtors to pay the debt at its maturity. The obligation assumed by the debtors were alternative, and they had the right to elect which they would perform (civil code, art. 1132). The conduct of the parties (Civil Code, art. 1782) shows that it was not their understanding that the right to discharge the obligation by the payment of money was lost to the debtors by their failure to pay debt at its maturity. The plaintiff accepted a partial payment from Anastasio Alano in 1908, several years after the debt matured. The prayer of the complaint is that the defendants be required to execute a conveyance of the house and lot, after its appraisal, unless the defendants pay the plaintiff the debt which is the subject of this action. ii. Villaroel vs. Estrada 71 Phil 140 Facts: The sole heir/son of the debtor assumed a debt of his mother from the respondents. After learning that the debt is payable only in 7 years and the debt has prescribed he petition for the desolution of assumed obligation. Issue: Is the petition meritorious? Ruling: No action is based on the present obligation arises, contracted by the mother of the defendant-petitioner, but there are already prescribed in which the defendant contracted on 9th of August 1930 which is to take their compliance with those obligations, a prescribed. Being a sole heir of the original debtor, with a right to suceed her inheritance in it, not that debt incurred legally but lost his mothers now lost their effectiveness by prescription. However for a moral obligation it is considerable enough to create and make effective and enforceable if obligation is voluntarily contracted on 9th of August 1930.

c) Classification of Obligations: a. As to juridical quality

b. As to parties c. As to objects d. As to perfection and extinguishment Article 1157. Obligations arise from: 1) Law 2) Contracts 3) Quasi-Contracts 4) Acts or Omissions punished by law; and 5) Quasi-delicts 1. Sources of Obligation a) Leung vs. OBrien, 38 Phil 182 It will be observed that according to the Civil Code (article 1089) obligations are supposed to be derived either from (1) the law, (2) contracts and quasi-contracts, (3) illicit acts and ommissions, or (4) acts in which some sort of blame or negligence is present. Article 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of this Book. 1. LAW a) Leung vs. OBrien, 38 Phil 182 It will be observed that according to the Civil Code (article 1089) obligations are supposed to be derived either from (1) the law, (2) contracts and quasi-contracts, (3) illicit acts and ommissions, or (4) acts in which some sort of blame or negligence is present. This enumeration of the sources of obligations supposes that the quasi-contractual obligation and the obligations imposed by law are of different types. The learned Italian jurist, Jorge Giorgi, criticises this assumption and says that the classification embodied in the code is theoretically erroneous. His conclusion is that one or the other of these categories should have been suppressed and merged in the other. The validity of this critism is, we think selfevident; and it is of interest to note that the commonlaw makes no distinction between the two sources of liablity. The obligations which in the Code are indicated as quasi-contracts, as well as those arising ex lege, are in the common law system merged into the category of obligations imposed by law, and all are denominated implied contracts. b) Pelayo vs. Lauron 12 Phil 453 According to article, 1089 of the Civil Code, law, creates obligations by contracts, by quasicontracts, and by illicit acts and ommissions or by those in which any kind of fault or negligence occurs. Obligations arising from law are not presumed. Those expressly determined in the code or in special laws, etc., are the only demandable ones. Obligations arising from contracts have legal force between the contracting parties and must be fulfilled in accordance with their stipulations (arts. 1090 and 1091). The rendering of medical assistance in case of illness is comprised among the mutual obligations to which spouses are bound by way of mutual support. (Arts. 142 and 143). c) Bautista vs. Borromeo 35 SCRA 119

Issue: In a vehicular accident, one of the respondents employee died. The petitioner paid the funeral expenses of his employee and since it is the petitioners fault the respondent ask for reimbursement of cost. Issue: May the respondent have the action to reimburse the said funeral cost to the petitioner? Ruling: Borromeo paid the widow of its employee, Quintin delgado, compensation and funeral expenses for the latters death while in the course of employment. This obligation arises from law-Section 2 of the Workmens Compensation Act. The same law in its Section 6 also provides that in case an employee suffers an injury for which compensation is d ue under this Act by any other person for damages, accordance with law; and in case compensation is claimed and allowed in accordance with this Act, the employer who paid such compensation or was found liable to pay the same, shall succeed the injured employee to the right of recovering from such person what he paid: xxx. It is evident from the foregoing that if compensation is claimed and awarded and the employer becomes subrogated to and acquires, by operation of law, the workers rights against the tortfeasor. No need then there is to establish any contractial relationship between the deceased and the petitioner. Indeed, there is none. The cause of action of respondent corporation is one which does not spring from a creditor-debtor relationship. It arises by virtue of its subrogation to the right of the deceased to sue the guilty party. Such subrogation is sanctioned by the Workmens Compensation Law aforesaid. It is as a subrogee tot eh rights of is deceased employee, that the Respondent filed a suit against Petitioners. Article 1159. Obligations arising from contracts have the force of the law between the contracting parties and should be complied with in good faith. 1. CONTRACTS a) Tiu Peck vs. CA 221 SCRA 618 There is no question that petitioners and the private respondents voluntarily entered into the agreement to apportion or divide their businesses, whether as partners or co-owners. That agreement is the law between them. Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present. The fact that after signing the agreement both parties immediately took possession of their respective shares is the most compelling evidence that there was indeed a binding partition of the properties. Contracts, once perfected, have the force of law between the parties who are bound to comply therewith in good faith, and neither one may, without the consent of the other, renege therefrom. b) Royal Lines, Inc. vs. CA 143 SCRA 608 Issue: May a second contract be considered as stipulated if it is not reduced to writing but merely only verbal? Ruling: A contract is a meeting of minds between the parties and is perfected by mere consent except in the case of certain agreement like deposit, pledge and commodatum. It may be entered into in whatever form save where the law requires a document or other special form as in the contracts enumerated in Article 1388 of the Civil Code. As a general rule, therefore, the contract may be oral or written. In stipulating that any modification, change and/or extra work shall besubject of another contract. The contracting parties did not necessarily or explicitly agree that the second

contract should be in writing. The second contract could be merely verbal, as in fact it was, and was binding on the parties as long as it represented as meeting of minds between them. We are satisfied with the finding of the Court of Appeals that Victorino Estrella and Steve Pierre were sent by petitioner to the NASSCO shipyard in Mariveles while the M/V Sea Belle was being repaired and that they represented said petitioner when they requested the extra work that was subsequently done on the vessel. This second contract was not reduced to writing, but it was nonethless as binding between the parties as the first written contract. Article 1160. Obligations derived from quasi-contracts shall be subjects to the provisions of Chapter 1, Title XVII, of this Book. 1. QUASI CONTRACTS a) Philippine National Bank vs. CA, Gr No. 97995, January 21, 1993 Originally, under the Spanish Civil Code, there were only two kinds of quasi contracts: Negotiorum gestio and solutio indebiti. But the Code Commission, mindful of the position of the eminent Spanish jurist, Manresa, that the number of quasi -contracts may be indefinite, added Section 3 entitled Other Quasi-Contracts. Moreover, even as Article 2142 of the Civil Code defines as quasi-contract, the succeeding article provides that: The Provisions for quasi-contracts in this Chapter do not exlude other quasi-contracts which may come within the purview of the preceding article. Indubitably, the Civil Code does not confine itself exclusively tot eh quasi-contracts enumerated from Articles 2144 to 2175 but is open to the possibility that, absent a preexisting relationship, there being neither crime nor quasi-delict, a quasi-contractual relation may be forced upon the parties to avoid a case of unjust enrichement. There being no express consent, in the sense of a meeting minds between the parties, there is no contract to speak of. However, in view of the peculiar circumstances or factual environment, consent is presumed to the end that a recipient of benefits or favors resulting from lawful, voluntary and unilateral acts of another may not be unjustly enriched at the expense of another. b) Negotiorum Gestio i. Adille vs. CA 157 SCRA 455 The original owner sold her property retro de pacto, however she died before she repurchase her property. Her first child assumed the obligation of buying back their property, however he also assumed all the ownership of the land. Issue: May he be considered as the sole owner in respect that there are also other heirs? Ruling: The Petitioner must then be said to be a trustee of the property on behalf of the private respondents. We agree with the respondent Court of Appeals that fraud attended the registration of the property. The Petitioners pretension that he was the sole of the land in the affidavit of extrajudicial settlement he executed preliminary to the registration thereof betrays a clear effort on his part to defraud his brothers and sisters and to exercise sole dominion over the property. It is the view of the respondent Court that the petitioner in taking over the property, did so either on behalf of his co-heirs, in which event, he had constituted himself a negotiorum gestor under Article 2144 of the Civil code, or for his exclusive benefit, in which case, he is guilty of fraud, and must act as trustee, the private respondents being the beneficiaries, under the Article 1456. The evidence, of course, points to the second alternative, the petitioner having asserted claims of exclusive ownership

over the property abondoned by his co-heirs, the situation Article 2144 of the Code contemplates. In any case, as the respondent Court itself affirms, the result would be the same whether it is one or the other. The petitioner would remain liable to the private respondents, his co-heirs. c) Solutio Indebiti i. Power Commercial Industrial vs. CA 274 SCRA 597 Solutio Indebiti applies where: [1] a payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment, and [2] the payment is made through mistake, and not through liberality or some other cause. Quasi-contract of solutio indebiti is one of the concrete manifestations of the ancient principle that no one shall enrich himself unjustly at the expense of another. ii. Andres vs. Manufacturers Trust Corp. 177 SCRA 618 Facts: The petitioner received 2 remittance of $10,000 out from a mistake. The respondent tries to retrieved one of the $10,000 remmittance but the petitioner contends that it is negligence of the employees thus the second remmitance is valid. Issue: Whether the private respondent has a right to recover the second remittance that was mistakenly delivered to the petitioner? Ruling: The resolution of this issue would hinge on the applicability of Art. 2154 of the New Civil Code. Xxx for this article to apply the following requisites must concur: (1) that he who paid was not under obligation to do so; and, (2) that payment was made by reason of an essential mistake of fact. The contract of petitoner, as regards the sale of garments and other textile products, was with FACETS. It was the latter and not the private respondent, which was indebted to petitioner. On the other hand, the contract for the transmittal of dollars from the United States to petitioner was entered into private respondent with FNSB. Petitioner, although named as the payee was not privy to the contract of remmittance of dollars. Neither was private respondent to a party to the contract of sale between them, petitioner has no right to apply the second $10,000 remittance delivered by mistake by private respondent to the outstanding accounts FACETS. On mistake, It is evident that the claim of petitioner is anchored on the appreciation of the attendant facts which petitioner would have this Court Review. The Court holds that the finding by the Court of Appeals that the second $10,000 remittance was made by mistake. The rule on substantial evidence, is final and conclusive. Globe Mackay Cable vs. NLRC 163 SCRA 71 Issue: Whether a monthly paid worker is entitled to all days of the month ECOLA? Ruling: The labot arbiter in determining the hourly rate of monthly paid employees for purposes of computing overtime pay, the monthly wage is divided by the numer of actual days in a month and then, by eight working hours. If a monthly-paid employee renders overtime work, he is paid his basic salary rate plus on-half thereof. For example, after examining the specimen payroll of employee Jesus Santos, the Labor arbiter found: the employee Jesus Santos, who worked on Saturdays and Sunday was paid base plus 10% premium. This is over and above his monthly basic pay as supported by the fact that base pay was paid. If the 6th and 7th

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days of the week are deemed paid even if unworked and included in the monthly salary, Santos should not have been paid his base pay for Saturday and Sunday but should received only the 50% premium. Article 1161. Civil obligatioons arising from offenses shall be governed by the penal laws, sunject to the provisions of Article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on Human Relations, and of Title XVIII of this Book, regulating damages. 1. DELICTS a) Civil Liability arising from Criminal Offense i. Article 100-103 Revised Penal Code Art. 100. Civil liability of a person guilty of felony. Every person criminally liable for a felony is also civilly liable. Art. 101. Rules regarding civil liability in certain cases. The exemption from criminal liability established in subdivisions 1, 2, 3, 5 and 6 of Article 12 and in subdivision 4 of Article 11 of this Code does not include exemption from civil liability, which shall be enforced subject to the following rules: First. In cases of subdivisions 1, 2, and 3 of Article 12, the civil liability for acts committed by an imbecile or insane person, and by a person under nine years of age, or by one over nine but under fifteen years of age, who has acted without discernment, shall devolve upon those having such person under their legal authority or control, unless it appears that there was no fault or negligence on their part. Should there be no person having such insane, imbecile or minor under his authority, legal guardianship or control, or if such person be insolvent, said insane, imbecile, or minor shall respond with their own property, excepting property exempt from execution, in accordance with the civil law. Second. In cases falling within subdivision 4 of Article 11, the persons for whose benefit the harm has been prevented shall be civilly liable in proportion to the benefit which they may have received. The courts shall determine, in sound discretion, the proportionate amount for which each one shall be liable. When the respective shares cannot be equitably determined, even approximately, or when the liability also attaches to the Government, or to the majority of the inhabitants of the town, and, in all events, whenever the damages have been caused with the consent of the authorities or their agents, indemnification shall be made in the manner prescribed by special laws or regulations. Third. In cases falling within subdivisions 5 and 6 of Article 12, the persons using violence or causing the fears shall be primarily liable and secondarily, or, if there be no such persons, those doing the act shall be liable, saving always to the latter that part of their property exempt from execution. Art. 102. Subsidiary civil liability of innkeepers, tavernkeepers and proprietors of establishments. In default of the persons criminally liable, innkeepers, tavernkeepers, and any other persons or corporations shall be civilly liable for crimes committed in their establishments, in all cases where a violation of municipal ordinances or some general or special police regulation shall have been committed by them or their employees. Innkeepers are also subsidiarily liable for the restitution

of goods taken by robbery or theft within their houses from guests lodging therein, or for the payment of the value thereof, provided that such guests shall have notified in advance the innkeeper himself, or the person representing him, of the deposit of such goods within the inn; and shall furthermore have followed the directions which such innkeeper or his representative may have given them with respect to the care and vigilance over such goods. No liability shall attach in case of robbery with violence against or intimidation of persons unless committed by the innkeeper's employees. Art. 103. Subsidiary civil liability of other persons. The subsidiary liability established in the next preceding article shall also apply to employers, teachers, persons, and corporations engaged in any kind of industry for felonies committed by their servants, pupils, workmen, apprentices, or employees in the discharge of their duties.

b) Basis of Civil Liability i. Banal vs. Tadeo Jr. 156 SCRA 325 Generally, the basis of civil liability arising from crime is the fundamental postulate of our law that Every man criminally liable is also civilly liable (Art. 100, The revised Penal Code). Underlyng this legal principe is the traditional theory that when a man commits a crime he offends two entities namely (1) the society in which he lives in or the political entity called the state whose law he had violated; and (2) the individual member of that society whose person, right, honor, chastity or property was actually or directly injured or damaged by the same punishable act or ommission. However, this rather broad and general provision is among the most complex and controversial topics in criminal procedure. It can be misleading in its implications especially where the same act or ommission may be treated as a crime in one instance and as a tort in another or where the law allows a separate civil action to proceed independently of the course of the criminal prosecution with which it is intimately intercourse of the criminal prosecution with which it is intimately intertwined. Many legal scholars treat as misconception or fallacy the generally accepted notion that the civil liability actually arises from the crime when, in the ultimate analysis, it does not. While an act or omission is felonious because it is punishable by law, it gives rise to civil liability not so much, because it is a crime but because it cause damage to another. Viewing things pragmatically, we can readily see that what gives rise to the civil liability is really the obligation and the moral duty of everyone to repair or make whole the damage caused to another by reason of his own act or omission, done intentianally or negligently, whether or not the same be punishable by law. In other words, criminal liability will give rise to civil liability only if the same felonious act or ommission results in damage or injury to another and is the direct and proximate cause thereof. Damage or injury to another is evidently the foundation of the civil action. Such is not the case in criminal actions for, to be criminally liable, it is enough that the act or omission complained of is punishable, regardless of whether or not it also causes material damage to another. ii. Occena vs. Icamina 181 SCRA 328

Facts: The petitioner filed a civil damage against the private respondent for uttering in public malicious and defamatory statements against him. The trial court renders judgement of sentencing the private respondent of only a fine of 50 pesos. In the appeal, the RTC denied the motion. Issue: Whether the petitioner deserve a payment for civil damage Ruling: In the case at bar, private respondent is found guilty of slight oral defamation and sentenced to a fine of P50.00 with subsidiary imprisonment in case of insolvency, but no civil liability arising from the felonious act of the accused was adjudged. This is erroneous. As a General rule, a person found to be criminally liable offends two (2) entities: The state or society in which he lives and the individual member of the society or private person who was injured or damaged by the punishable act or ommission. The offense of which private respondent was found guilty is not one of those felonies where no civil liability results because either there is no offended party or no damage was caused to a private person. There is here an offended party, whose main contention precisely is that he suffered damages in view of the defamatory words and statements utttered by private respondent, in the amount of P 10,000 as moral damages and the further sum of P 10,000 as exemplary damages. c) Implied Institution of Civil Action i. Sec. 1, Rule 111, 2000 Rules of Criminal Procedure When a criminal action is instituted, the civil action for the recovery of civil liability is impliedly instituted with the criminal action, unless the offended party waives the civil acion, reserves his right to institutes the civil action prior to the criminal action. Such civil action includes recovery of indemnity uner the RPC, and damages uncer Article 32, 33, 32 and 2176 of the Civil Code of the Philippines arising from the same act or omissionof the accused. A waiver of any of the civil actions extinguishes the others. The institution of, or the reservation of the right to file, any of said civil actions separately waives the others. The reservation of the right to institute the separate civil actions shall be made before the prosecution starts to present its evidence and under circumstances affording the offended party a reasonable opportunity to make such reservation. In no case may the offended party recover damages twice for the same act or omission of the accused. When the offended party seeks to enforce civil liability against the accsed by way of moral, nominal, temperate or exemplary damages the filing fees for such civil action as provided in these Rules shall constitute lien on the judgement except in an award for actual damages. In cases wherein the amount of damages, other then actual, is alleged in the complaint or information, the corresponding filing fees shall be paid by the offended party upon the filing thereof in court for trial. d) Dual Concept of Civil Liability i. Elcano vs. Hill 77 SCRA 98 Facts the respondent an unemancipated minor was aquitted in killing the petitioners son after finding out that he has no intent. Issue: Wether the respondent is still civilly liable after his aquittal

Ruling: Alhough, again this article 2177 does seem to literally refer to only acts of negligence, the same argument of Justice Bocobo about construction that upholds The spirit that giveth life rather than that which is literal that killeth te intent of the lawmaker should be observed in applying the same. And considering that the preliminary chapter on human relations of the new Civil Code definitely establishes the seperability and independence of liability in a civil responsibility arising from crime fixed by Article 100 of the revised penal code, and, in a sese, the Rules of Court, under Sections 2 and 3 (c), Rule 111, contelmplate also the same separability, it is more congruent with the law, equity and justice, and more in harmony with modern progress, to borrow the felicitous relevant language in Rakes vs Atlantic. Gulf and Pacific Co., 7 phil 359, to hold, as We do hold, that Article 2176, where it refers It fault or negligence, covers not only acts not punishable by law but also acts criminal in character, whether intentional and voluntary or negligent. Consequently, a separate civil action lies against the offender in a criminal act, whether or not he is criminally prosecuted and found guilty or acquitted, provided that the offended party is not allowed, if he is actually charged also criminally, to recover damages on both scores, and would be entitled in such eventuality only to the bigger award of the two, assuming the awards mede in the two cases vary. In other words, the extinction of civil liability referred to in Par. (e) of Section 2, rule 111, referes exclusively to civil liability founded on Article 100 of the Revised Penal Code, whereas the civil liability for the same act charged has not happened or has not been committed by the accused. Briefly stated, We here hold, in reiteration of Garcia, that culpa aquiliana includes voluntary and negligent acts which may be punishable by law. It results, therefore, that the acquittal of Reginal Hill in the criminal case has not extinguished his liability for quasi-delict, hence that acquittal is not a bar to the instant action against him. ii. Jarantilla vs. CA 171 SCRA 429 Issue: Whether the private respondent, who was the complainant in the criminal action for Physical injuries thru reckless imprudence and who participated in the prosecution thereof without reserving the civil action arising from the act or omission complained of, can file a separate action for civil liabiliyt arisin from the same act or omission where the herein petitioner was acquitted in the criminal action on reasonable doubt and no civil liability was adjudicated or awarded in the judgement of acquittal. Ruling: Apropos to such resolution is the settled rule that the same act or omission (in the case, the negligent sideswiping of private respondent) can create two kinds of civil liability on the part of the offender, that is, civil liability ex delicto and civil liability ex quasi delicto. Sonce the same negligence can giver rise either t a delict or crime or to a quasi-delict or tort, either of these two types of civil liability may be inforced against the culprit, subjet to the caveat under Article 2177 of the Civil Code that the offended party cannot recover damages under both types of liability. Another consideration in favor of private respondent is the doctrine that the failure of the court to make any pronouncement, favorable or unfavorable, as to the civil liablity of the accused amounts to a reservation of the right to have the civil liability litigated and determined in a separate action. The rules nowhere provide that if the court fails to determine the civil liability it becomes no longer enforceable.

e) Two kinds of Aquittal i. Manantan vs. CA 350 SCRA 387 Our law recognizes two kinds of aquittal, with different effects on the civil liability of the accused- (a) first is an aquittal on the ground that the accused is not the author of the act or omission complained of and this instance closes the door to civil liability, and (b) second is an aquittal based on reasonable doubt on the guilt of the accused, in which case even if the guilt of the accused has not been satisfactorily established, he is not exempt from civil liability which may be proved by preponderance of evidence only. ii. Aquittal based on reasonable ground a. Castillo vs. CA 176 SCRA 591 Facts: A collision between the petitioner and private respondent occur which resulted to damage and Physical Injury. The petitioner filed complaint and seek for damages. The court finds out that the proximate cause is the negligent driving of the petitoner. Issue: May the petitioner still ask for damage Ruling: But where the judgement of aquittal contained in a declaration that no negligence can be attributed to the accused and that the fact from which the civil action might arise did not exist, such aquittal in the criminal action carried it extinction of civil responsibility arising therefrom. But this rule is not without exception. Thus, Section 2 (c) of Rule 111 of the Rules of Court provides Extinction of the penal codes does not carry with it extinction of the civil, unless the extinction proceeds from a declaration from a final judgement that the fact from which the civil action might arise did not exist. Xxx Negligence, being the source and foundation of actions of quasi-delicts is the basis of recovery of damages. In the case at bar, the Court of Appeals, find out that the defendant to warrant an award of damages to the petitioners committed no negligence. Respondent Appellate Court states: In aquitting defendant-appellee, this court held that the collission was not due to the negligence of the Appellee but it was petitioners own act of driving the jeep to the shoulder of the collision. With this finding, this court actually exoneraed appellee from civil liability. Since Plaintiffs civil action is predicated upon defendants alleged negligence which does not exist, it follows that his acquittal in the criminal action, which is already final, carried with it the exinction of civil responsibility arising therefrom. Aquittal based on reasonable ground that Accused is not the Author of Act or Ommission a. (Sec. 2, Rule 111, 2000 Rules of Crim. Pro.) Institution of separate civil action.Except in the cases provided for in Section 3 hereof, after the criminal action been commenced, the civil action which has been reserved connot be instituted until final judgement has been rendered in the final action. (a) Whenever the offended party shall have instituted the civil action as provided for in the first paragraph of Section 1 hereof before the filing of the criminal action and the criminal action is subsequently commenced, the pending civil action shall be suspended, in whatever stage before final

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judgement it may be found until final judgement in the criminal action. If the applicactio if granted, the evidence presented and admitted in the civil action shall be deemed automatically reproduced in the criminal action, without prejudice to the admission of additional evidence that any party may wish to present. In case of consolidation, both the criminal and the civil actions shall be tried and decided jointly. (b) Extinction of the penal action does not carry with it extinction of the civil unless the extinction proceeds from a declaration in final judgement that the fact from which the civil might arise did not exist. b. Ching vs. Nicdao 522 SCRA 316 In sapiera v CA, 314 SCRA 370, the court enunciated that the civil liability is not extinguished by aquittal: (a) where the aquittal is based in reasonable doubt; (b) where the court expressly declares that the liability of the accused is not crimnal but only civil in nature; and (c) where the civil liability is not derived from or based on the criminal act of which the accused is acquitted. Thus, under Article 29 of the Civil Code when the accused in a criminal prosecution is aquitted on the ground that his guilt has not been proved beyond reasonable doubt, a civil action for damages for the same act or ommission may be instituted. Such action requires only a preponderance of evidence. Upon motion of defendant, the court may require the plaintiff to file a bond to be malicious. If in a criminal case the judgement of acquittal is based upon reasonable doubt, the court shall so declare. In the absense of any declaration to that effect, it may be inferred from the text of the decision whether or not the acquittal is due to that ground. iv. Independent Civil Action a. Madeja vs. Caro Facts: The husband of the petitioner died after the alleged negligence of the respondent who is the attending doctor on the apendectomy of the deceased. The petitioner demand damages. The respondent judge dismissed the criminal case against the respondent. Issue: May the petitioner file a separate Civil action Ruling: Section 2, Rule 111 of the Rules of Court in relation to Article 33 of the Civil Code is the applicable provision. The two enactments are quoted herein below: Sec. 2. Independent civil action.- In the cases provided for in Articles 31, 32, 33, 34 and 2177 of the Civil Code of the Philippines, an independent civil action entirely separate and distinct from the criminal action, may be brought by the injured party during the pendency of the criminal case, provided the right is reserved as required in the preceding section. Such civil action shall proceed independently of the criminal prosecution, and shall require only a preponderance of evidence. Article 33. In cases of defamation, fraud and physical injuries, a civil action for damages, entirely separate and distinct from the criminal action for damages, entirely separate and distinct from the criminal action may be brought by the injured party. Such civil action shall proceed independently of the criminal prosecution, and shall require only a preponderance of evidence. (civil code)

Tolentino: The general rule is that when a criminal action is intituted, the civil action for recovery of civil liability arising from the offense charged is impliedy instituted with the criminal action, unless the offended party reserves his right to institute it separately; and after a criminal action has been commenced, no civil action arising from same offense can be prosecuted. The present articles creates an exception to this rule when the offense is defamation, fraud, or physical injuries. In these cases, a civil action may be filed independently of the criminal action, even of there has been no reservation made by the injured party; the law itself in this article makes such reservation; but the claimant is not given the right to determine whether the civil action should be scheduled or suspended until the criminal action has been terminated. The result of the civil action is thus independent of the result of the criminal action. Article 1162. Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVII of the Book and by Special laws. 1. QUASI-DELICT a) Barredo vs. Garcia and Almario 73 Phil 607 A head on collision between a taxi and a carretela resulted in the death of a 16 year old boy, one of the passengers of the caretela. A criminal action was filed against the taxi driver and he was convicted and sentenced accordingly. The court in criminal case granted the petition that the right to bring a separate civil action has been reserved. Thereafter the parents of the deceased brought suit for damages against the propietor of the taxi, the employer of the taxi driver, under article 1903 of the civil code. Issue: Whether the employer is the direct liable in the give case. Ruling: That this separate civil action lies, the employer being primarily and directly responsible in damages under articles 1902 and 1903 of the Civil code. A quasi delict or Culpa aquiliana is a separate l egal institution under the civil code, with a substantivity all its own, and individuality that is entirely apart and independent from a delict or crime. Upon this principle, and on the wording and spirit of article 1903 of the Civil Code the primary and direct responsibility of employers may be safely anchored. b) Phil. Bank of Commerce vs. CA 269 SCRA 695 Facts: The private respondents secretary fraudulently deposit the companys money in the name of her husband. She use a trick of filling two receipts which is negligently signed by the banks counter. Issue: Who held the liability for damage There are three element of quasi-delict: (a) damages suffered by the plaintiff; (b) fault or negligence of the defendant, or some other person for whose acts he must respond; and (c) the connection of cause and effect between the fault or negligence of the defendant and the damages incurre by the plaintiff. The proximate cause which is determined on the facts of each case upon mixed considerations of logic, common sense, policy and pecedent. In this case, absent the act of Ms. Mabayad in negligently validating the incomplete duplicate copy of the deposit slp. Ms. Irene Yabut would not have the facility with which to perpetrate her fraudelent scheme with impunity.

c) Janssen Pharmaceutica vs. Silayro, G.R. No. 1725528, February 26, 2008 Employers prerogative in discplining its employee as a guideline of being a good father to his employee. The employers prerogative to discipline its employee must be exercised without abuse of discretion. Its implementation should be tempered with compassion and understanding. While an employer has the inherent right to discipline its employees, we have always held that this right must be held that this tight must be always exercised humanely, and the penalty it must impose should be commensurate to the offese involved and to the degree of its infraction. The employer should bear in mind that, in the exercise of such right, what is at stake is not the employees position but her livelihood as well. The law regards the wrokers with compassion. Even where a worker has committed an infracton, a penalty less punitive may suffice, whatever missteps may be committed by labor ought not to be visited with a consequence so severe. This is not only the laws concern for workingman. There is, in addition, his or her family to consider. Unemplyemnt brings untold hardships and sorrows upon those dependent on the wage-earner. d) First Philippine International Bank vs. CA, GR No. 115849, January 24, 1996 The authority of a corporate officer in dealing with third persons may be actual or apparent. The doctrine of apparent authority, with special reference to banks, was laid out in prudential bank vs. CA, where it was held that Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by the agent. The agents apparent representation yields to the principals true representation and the contract is considered as entered into between the principal and the third person. A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the officers in their representative capacity but not for acts outside the scope of their authority. A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent scope of their employement; not will it be permitted to shirk its responsibility for such frauds, even though no benefit may accrue to the bank therefrom. Accordingly, a banking corporation is liable to innocent third persons where the representation is made in the course if its business by an agent acting within the general scope of his authority even though, in the particular case, the agent is secretly abusing his authority and attempting to perpetrate fraud upon his principal or some other person, for his own ultimate benefit. e) Sps. Batal vs. Sps. Tominaga, GR No. 164601, September 27, 2006 Culpa or negligence, may be understood in two different senses: either as culpa aquiliana, which is the wrongful or negligent act or omission which creates a vinculum juris and gives rise to an obligation between persons not formally bound by any other obligation, or as culpa contractual, which is the fault or negligence incident in the performance of an obligation which already existed, and which increases the liability form such already existing obligation.

f)

Culpa Contractual a. Air France vs. Carrascoso, 18 SCRA 155 Passengers do not contract merely for transportation. They have right to be treated by the carriers employees with kindness, respect, courtesy and due consideration. They are entitiled to be protected against personal misconduct, injurious language, indignities

and abuses from such employees. So it is, that any rule or discourteous conduct on the part of employees towards a passenger gives the latter an action for damages against the carrier. Thus, where a steamship company had accepted a passengers check, it was a breach of contract or tort, giving a right of action for its agent in the presence of third persons to falsely notify her that the check was worthless and demand payment under threat of ejection, though the language used was not insulting and she was not ejected. And this, because, although the relation of passenger and carrier is Contractual in both origin and nature neverthless the act that breaks the contract may be also a tort. And in another case, Where a passenger on a railroad train, when the conductor came to collect his fare tendered him the cash fare to a point where the train was scheduled not to stop, and told him that as soon as the train reached such point he would pay the cash fare from that point to destination, there was nothing in the conduct of the passenger which justified the conduct or in using insulting language to him, as by calling him a lunatic, and the Supreme court of South Carolina there held that carrier liable for the mental suffering of said passenger. b. Manlilic vs. Calaunan, GR No. 150157, January 25, 2007 Vicarious liability; Under Article 2180 of the New Civil Code, when an injury is caused by the negligence of the employee, there instantly arises a presumption of law that there was negligence on the part of the master or employer either in the selection of the servat or employee, or in the supervision over him after selection or both. Nature and Effects of OBLIGATIONS I. Obligation to give A. Obligation TO GIVE A DETERMINATE THING Article. 1163-1166 Art. 1163. Every person obliged to give something is also obliged to take care of it with proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care. Art. 1164. The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acuire no real right over it until the same has been delivered to him. Art. 1165. When what is to be delivered is a determinate thing, the creditor, in addition, to the right granted him by Article 1170, may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest he shall be responsible for any fortuitous event until he has effected the delivery. Article. 1166. The Obligation to give a determinate thing includes that of delivering all its accessories, even though they may not have been mentioned. a. Seven Brothers Shipping Corp. vs CA, Gr No. 109573, July 13, 1995 What will happen to a tort in a determinate judicial sale? When a judicial sale is voided without fault of the purchaser, the later is entitled to reimbursement of the purchase money paid by him sunject to setoffs for benefits enyoyed while he had possession of the property. The party, who questions the

sale, will not ordinarily be permitted to retain any benefit therefrom at the expense of the bona fide purchaser. As a General Rule, a judicial sale can only be set aside upon the return to the buyer of the purchase price with simple interes, together with all sums paid out by him in improvements introduced on the property, taxes, and other expenses incurred by him. Where a purchaser at a judicial sale is entitled to reimbursement of his purchase money and other sums that he has expended because of a void or ineffectial sale, he is ordinarily entitiled to alien on the property until he is repaid whatever may be due to him. If the property purchased has disappeared or is brought out of the territiorial jurisdiction of the Philippines, the purchase price should be returned. b. Spouses Adorable vs. CA GR No. 119466, November 25, 1999 Facts: The petitioner lessee of the private respondent file a motion to annul a sale between the respondent and a third person. Contending that the sale is void due to the fact that the Private respondent owes them a loan. They further contend that the land they lease must be only sold in their favor. Issue: Whether their contention is meritourrous A personal right is the power of one person to demand of another, as a definite passive subject, the fulfillment of a prestation to give, to do, or not to do. On the other hand, a real right is the power belonging to a person belonging to a person over a specific thing, without a passive subject individually determined, against whom such right may be personally exercised. In this case while petitioners have an interest in securing payment of loan they extended, their right to seek payment does not in any manner attach to a particular portion of the patrimony of their debtor, Francisco Bareng. B. OBLIGATION TO GIVE AN INDETERMINATE THING Art. 1165. When what is to be delivered is a determinate thing, the creditor, in addition, to the right granted him by Article 1170, may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest he shall be responsible for any fortuitous event until he has effected the delivery. II. Obligation to do and not to do Article 1167-1168 Art. 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost. The same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone. Art. 1168. When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense. A. Fajardo Jr. vs Freedom to build, Inc., GR No. 134692, August 1, 2000 Facts: The petitioner buy a house and lot to the respondent. The contract stipulated an express limitation on the construction of any extension. The petitioner did not follow

the given guidelines and proceed on constructing their extension. The respondents file a petition, which the court granted. On appeal the petitioner contends that the enforcement of prohibition does not rest now on the developers but on the Homeowners association even though there is a conract. Issue: Whether the contract stipulated is still enforceable even thought the regulation is now transmitted to the homeowners association Ruling: Petitioners rais the issue of the personality of the respondent to enforce the provisions of the covenant. Broadly speaking, a suit for equitable enforcement of a restrictive covenant can only be made by one for whose benefit it is intended. It is not thus normally enforceable by one who has no right or interest in the land for the benefit of which the restriction has been imposed. Thus, a developer of a subdivision can enforce restrictions, even as agasint remote grantees of lots, only if he retains part of the land. There would have been merit in the argument of the petitioners-that respondent, having relingquished ownership of the subdivision to the hom-owners, is precluded from claiming any right or interest on the same property- had not the homeowners association, confirmed by its board of directors, allowed respondent to enforce the provisions of the restrictive covenant. III. Transmissibility of obligations A. General Rule Article 1178. Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary. B. Exceptions Article 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. (1257a) a. Estate of Hemady vs. Luzo Surety Co., Inc. 100 phil 388 Issue: Whether a death of a loan garantor, his liability also terminated and therefore in the absence of a showing that a loss or damage was suffered the claim cannot be considered contingent The binding effect of contracts upon the heirs of the deceased party is not altered by the provision in our rules of court that money debts of a deceased must be liquidated and paid from his estate before the residue is distributed among said heirs (Rule 89). The reason is that whatever payment is thus made from the estate is ultimateky a payment by the heirs and distributees, since the amount of the paid claim in fact diminishes or reduces the shares that the hiers would have been entitled ro receive. Under our law, therefore, the general rule is that a partys contractial rights and obligations are transmissible tot eh successors. The rule is a consequence of the

progressive depersonalization of patrimonial rights and duties that, as observed by Victoria Polacco, has characterized the history of these institutions. From the Roman concept of a relation from person to person, the obligations has evolved into a relation from patrimony to patrimony, with the persons occupying only a representative position, barring those rare cases whre the obligation is strictly personal, i.e., is contracted intuitu personae, in consideration of its performance by a specific person and by no other. The transition is marked by the disappearance of the imprisonment for debt. IV. Perfomance of Obligations A. General Rule Article 1233. A debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be. (1157) B. Receipt of Principal Article 1176. The receipt of the principal by the creditor, without reservation with the respect to the interest, shall giverise to the presumption that said interest has been paid. The receipt of a later installment of a debt without reservation as to prior installments, shall likewise raise that presumption that such installments have been paid. C. Receipt of later installement Article 1176. The receipt of the principal by the creditor, without reservation with the respect to the interest, shall giverise to the presumption that said interest has been paid. The receipt of a later installment of a debt without reservation as to prior installments, shall likewise raise that presumption that such installments have been paid. D. Usurious Transactions Article 1175. Usurious transaction shall be governed by Special laws. a. Circular No. 905 of the Central Bank b. Medel vs. CA, GR. No. 131622 Issue: Whether or not the stipulated rate of interest at 5.5% per month on the loan on the sum of P500,000 that plaintiffs extended to the defendant is usurious. In other words is the usury law still effective, or has it been repealed by Central Bank Circular No. 905? Ruling: We agree with petitioners that the stipulard rate of interst at 5.5% per month on the P500,000.00 loan is excessive, iniquitous, unconscionable and exorbitant. However, we can not consider the reat usurious because this Court as consistently held that Circular No. 905 of the Central Bank, adopted on December 22, 1982, has expressly removed the interest ceilings prescribed by the Usury Law and that the Usury Law is now Legally inexistent In Security Bank and Trust Company vs. RTC of Makati, Branch 61 the Court held that CB Circular No. 905 did not repeal nor in any way amed the Usury Law but simply suspended the latters effectivity. Indeed, we have held that a Cetral Bank Circular can not repeal a law. Only a law can repeal another law. In the recent case of Florend vs. Court of appeals the cort reiterated the ruling that by virtue of CB

Circuler 905, the usury law has been rendered ineffective. Usury has been legally non-existent in our jurisdiction. Interest can now be carged as lender and borror may agree upon. Neverthless, we fin the interest at 5.5% per month, or 66% per annum, stipulated upon by the parties in the promisory note iniquitous or unconscionable, and, hence, contrary to morals (conta bonus mores), if not against the law. The stipulation is void. The courts shall reduce equitably liquidated damages, whether intended as an indemnity or a penalty of they are iniquitous or unconscionable. c. Dino vs. Jardines G.R. No. 145871 Facts: Petitioner and respondent enter into a pacto de retro contract of a P1.5 million property located in Baguio for a loan total of P165,000 at 9% interest payable within six months. The respondent did pay a total of P55,000 and agreed to settle the remaining unpaid. The petitioner filed for consolidation of ownership at RTC Baguio for the said property contending that the period of redemption has already expired. Issue: Whether the consolidation of ownership is warranted Ruling: Applying the afore-cited rulings to the instantt case, the inescapable conclusion is that the agreed interest rate of 9% per month or 108% per annum, as claimed by respondent; or 10% per month or 120% per annum, as claimed by petitioner, is clearly excessive, iniquitous, unconscionable and exorbitant. Although respindent admitted that, she agreed to the interest rate of 9% which she believed was exorbitant, she explained that the time. As declared in the Medel case, 299 SCRA 481, and Imperial vs. Juacion, 427 SCRA 517, iniquitous and unconscionable stipulations on interest rates, penalties and attorneys fees are contrary to morals. Thus, in the present case, the rate of interest being charged on the principal loan of P165,000.00, be it 9% or 10% per month, is void. The CA correctly reduced the exhorbitant rate to legal interest V. Non performance fo Obligaton (Breach or Default) Article 1170 Arrieta vs. National Rice and Corn Corp., 10 SCRA 79 Facts: Appellee entered into a contract with the appellant for the importation of rice. The appellant delayed in presenting a letter of credit securing the funds for importation in effect the appelle lost the secured rice from its supplier causing a lost in realized profit. Issue: Whether the obligee may held liable for the lost of appellees realized profit Ruling: One who assumes a contractual obligation and fails to perform the same on account of his inability he knew and was aware of when he entered into the contract, should be held liable in damages for breach of contract. Under Article 1170 of The Civil Code not only debtors guilty of fraud, negligence or default but also every debtor, in general, who fails in the performance of his obligations is bound to infemnify for the losses and damages caused thereby.

A. Delay or Mora Article. 1169, 1165, 2209 Article 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist: (1) When the obligation or the law expressly so declare; or (2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or (3) When demand would be useless, as when the obligor has rendered it beyond his power to perform. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. (1100a) Article 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by article 1170, may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected the delivery. (1096) Article 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum. (1108) a. Requisites; In order that the debtor may be in default it is necessary that the following requisites be present: i. That the obligation be demandable and already liquidated ii. That the debtor delays performance and; iii. That the creditor requires the performance judicially and extra judicially. b. Exceptions; There are only threee instances when demand is not necessary to render the obligor in default. These are the following: i. When the Obligation or the law expressly so declares; ii. When from the nature and circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or iii. When the demand would be useless, as when the obligor has rendered it beyond his power to perform. c. Demand, when necessary i. SSS vs. Moonwalk Development and Housing Corporation GR. No. 73345, April 7, 1993 Issue: Is the penalty demandable even after the extinguishment of principal obligation?

Ruling: To be in default, xxx is different from mere delay in grammatical sense, because it involves the beginning of a special condition or status which has its own peculiar effects or results. In order that the debtor may be in default it is necessary that the following requisites be present: (1)That the obligation be demandable and already liquidated; (2)That the debtor delays performance and; (3)That the creditor requires the performance judicially and extra judicially. Default generally begins from the moment the creditor demands the perfromance of the obligation. Nowhere in this case did it appear that SSS demanded from Moonwalk the payment of its monthly amortizations. Neither did it show that petitioner demaded the payment of the stipulated penalty upon the failure of Moonwalk to meet its monthly amortization. What the complaint itself showed was that SSS tried to enforce the obligation sometime in September 1977 by foreclosing the real estate mortgages executed by Moonwalk in favor of SSS. But this foreclosure did not push though upon Moonwalks requests and promises to pay in full. The next demand for payment happened on October 1979 when SSS issued a Statement of Account to Moonwalk. And in accordance with said statement, Moonwalk paid its loan in full. What is clear, therefore, is that Moonwalk was never in default, because SSS never compelled performance. ii. Malayan Insurance Co. Inc. vs. CA, GR No. L-59919, November 26, 1986 Facts: Plaintiffs car were in a machanic shop when the shops employees drives out the vehicle one night and involve it in an accident. The plaintiff ask for the release of insurance, but the insurance company decline as the case is not under their insurance policy. On the Court of Appeals the court made a decision in favor of the plaintiff, and award damages with interest starting from the start of filing by the petitioner to the company. The petitioner contends that the interest due must start from the finality of the courts decision. Issue: Whether the interest due must start from the finality of Courts decision. Ruling: Respondent has sufficiently established his demand for the award and damages plus interest as sanctioned under Arts. 1169, 1170 and 2209 of the Civil Code. Thus, a debtor who is in delay (default) is liable for damages (Art. 1170) generally from extrajudicial and judicial demand (Art. 1169) in the form of interest. (Art. 2209, Civil Code). United Coconut Planters Bank vs Spouses Beluso, GR No. 159912, August 17, 2007 As regards the attorneys fees, the spouses Beluso can actually be liable therefor even if there had been no demand. Filing a case in court is the judicial demand referred to in Article 1169 of the Civil Code which would put the obligor in delay. The RTC, however, also held UCPB liable for attorneys fees inthis case as the spouses Beluso were forced to litigate the issue on the illegality of the interest rate provision of the promissory notes. The award of attorneys fees, it must be recalled, falls under the

iii.

sound discretion of the court. Since both parties were forced to litigate to protect to protect their respective rights, and both are entitled to the award of attorneys fees. Therefore, instead of awarding attorneys fees in favor of petitioner, we shall merely affirm the deletion of the award of attorneys fees to the spouses Beluso. iv. Maersk Line vs. CA, GR No. 94761, May 17, 1993 Issue: Whether the absence in the bill of lading of a stipulation on the period of delivery would result to damages resulting from a delay. While it is true tha common carriers are not obligated by law to carry ad to deliver merchandise, and persons are not vested with the right to prompt delivery, unless such common carriers previously assume the obligation to deliver at a given date or time, delivery of shpment or cargo shoul at least be made within a reasonable time.

d. Creditors default i. Vda. De Villaruel vs. Manila Motors Co. Inc. 104 Phil 926 Facts: The lessee was ousted from the building they are renting during the war. After the war the lessee went back to the building. The lessor demand that the lessee should pay the rent during the years when they are ousted, contending in pursuance of their contract. The lessee decline stated that they did not enjoy or use the property during those years. The lessor further damands a raise in rent, declining the payment given by the lessee. A fire wreck havoc to the property during a pendancy of the case complained by the lessor. Issue: Who must held in default? Ruling: Since the lessee was exempt from paying the rents for the period of its ouster, the insistence of the lessors to collect the rental corresponding to said period was unwarranted and their refusal to accept the current rents tendered by the lessee was unjustified. Such refusal places the lessors in default and they must shoulder the subsequent accidental loss of the premises leased. e. Reciprocal Obligations, Concept of Delay i. Boysaw vs. Interphil Promotions Inc. 148 SCRA 643 There is no doubt that the contract in question gave rise to reciprocl obligations. Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be conditioned upon the simultaneous fulfillment of the other The power to rescind is given to the injured party. Where the plaintiff is the party who did not perform the undertaking which he was bound by the terms of the agreement to perform, he is not entitled to insist upon the performance of the contract by the defendant, or recover damages by reason of his own breach. On the validity of fight postponement, the violations of the terms of the original contract by the appellants vested the appelless with the right to

rescind and repudiate such contract altogether. That they sought to seek an adjustment of one particular covenant of the contract, is under the circumstances, within the appellees right. B. Fraud Article 1170. Those who are in the performance of their obligations are guilty of fraud, negligence or delay, and those who are in any manner contravene the tenor thereof, are liable for damages. Article 1171. Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for future fraud is void. Phil. Commercial Bank vs. CA, GR No. 97785, March 29, 1996 Having established that petitioner acted fraudelently and in bad faith, we find it implausible to absolve petitioner from its wrongful acts on account of the assailed provision exempting it from any liability. In Geraldez vs. Court of Appeals, it was unequivocally declared that notwithstanding the enforceability of a contractual limitation, responsibility arising from a fraudulent act cannot be exculpated because the same is contrary to public policy. Indeed, Article 2 of the Civil Code is quite explicit in providing that any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. Freedom of contact is subject to the limitation that the agreement must not be against public policy and any agreement or contract made in violation of this rule is not binding and will not be enforced. C. Negligence Article 1172. Responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability ma be regulated byt the courts, according to the circumstances. Article 1173. The fault or negligence of the obligaor consists in the ommission 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. When negligence shows bad faith, the provisions of Articles 1171 and 2201, paragraph 2, shall apply. If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. a. Spouses Batal vs. Spouses Tominaga, GR No. 164601, September 27, 2006 Culpa or Negligence, may be understood in two different senses: either as culpa aquiliana, which is the wrongful or negligent act or ommission which creates a vinculum juris and give rise to an obligaton between two persons not formally bound by any other obligation, or as culpa contractual, which is the fault or negligence incident in the performance of an obligation which already existed, and which increases the liability from sch already existing obligation. Culpa aquiliana is governed by Article 2176 of the Civil Code and the immediately following articles; while culpa contractual is governed by Articles 1170 to 1174 of the same Code. b. Nakpil & Sons vs. CA, GR No. L-47851, October 3, 1986 Issue: Whether or not an act of God,- an unusually strng earthquake-which caused the failure of the building, exempts from liability, parties who are otherwise liable because of their negligence. Ruling: The negligence of the defendant and the third-party defendants petitioner was established beyond dispute both in the lower court and in the Intermediate Appellate

court. Defendant United Constructions C., Inc. was found to have a substantial deviations from the plans and specifications, and to have failed to observe the requisite workmanship in the construction as well as to exercise the requisite degree of supervision; while the third party defendants were found to be have inadequacies or defects in theplans and specifications prepared by them. As correctly assessed by both courts, the defects in the construction and in the plans and specifications were the proximate causes that rendered the PBA building unable to withstand the earthquake of August 2, 1968. For this reason, the defendant and third party defendants cannot claim exemption from liability. Thus, it has been held that when the negligence of a person concurs with an act of God in producing a loss, such person is not exempt from liability by showing that the immediate cause of the damage was the act of God. To be exempt from liability for loss because of an act of God, he must be free from any previous negligence or misconduct by which that loss or damage may have been occasioned. c. Jarco Marketing Corp. vs CA, GR No. 129792, December 21, 1999 The test in determining negligence is enunciated in the landmark case of picart vs. Smith, thus: Did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If no, then he is guilty of negligence.

D. Other Violations of the Obligation VI. Excude for Non-performance: A. Fortuitous event article 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which, could not be foreseen, or which, thoug foreseen, were inevitable. a. Act of God & Act of Man i. Requisites: Nakpil & Sons vs. CA Requisites for exemption from liability due to an act of God To exempt the obligor from liability under Article 1174 of the Civil Code, for a breach of an obligation due to an act of God, the following must concur: (a) the cause of breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforceable or unavoidable; (c) the evebt must be such as to render it impossible for the debtor to fullfill his obligation in normal manner; and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor. ii. Exceptions a) Austria vs. CA, GR No. L-29640, June 10, 1971 Petitioner entrusted a diamond jewellry to the private respondent, the private respondent was robbed while walking home, taking away his belongings plus the said jewellry. Issue: Whether the private respondent must not be held liable since it is a fortuitous event. Ruling: It may be noted the reform that the emphais of the provision is on the events, not on the against or factors responsible for them. To avail of the exemption granted in the law, it is not necessary that the

persons responsible for the occurrence should be found or punished; it would onlybe sufficient to establish that the unforseeable event, the robbery in this case did take place without any concurrent fault on the debtors part, and this can be done by preponderant evidence. To require in the present action for recovery the prior conviction of the culprits in the criminal case, in order tho establish the robery as a fact, would be to demand proof beyond reasonable doubt to prove a fact in a civil case. It is undeniable that in order to completely exonerate the debtor for reason of a fortuitous event, such debtor must, in addition to the casus itself, be free of any concurrent or contrinbutory fault or neglligence. b) Nakpil & Sons vs. CA Thus, it has been held that when the negligence of a person concurs with an act of God in producing a loss, such person is not exempt from liability by showing that the immediate cause of the damage was the act of God. To be exempt from liability for loss because of an act of God, he must be free from any previous negligence or misconduct by which that loss or damage may have been occasioned. c) Co vs. CA, GR NO. 12922, June 22, 1998 Facts: Petitioner entrusted his car to a car repairshop. The repairshop got delayed on delivering his car. When the petitioner sought to reclaim his car the private respondent told him that the car was carnapped during its test drive. Issue: May the Private respondent be held liable for this fortuitous event? Ruling: it must likewise be emphasized that pursuant to Article 1174 and 1262 of the New Civil code, liability attaches event of the loss was due to a fortuitous event if the nature of the obligation requires the assumption of risk Carnapping is a normal business risk for those engaged in the repair of motor vehicles. For just as the owner of the car is exposed so is the repair shop since the car was entrusted to it. That is why, repair shops are required to first register with DTO and to secure an insurance policy for the shop covering the property entrusted by its customer for repair, service or maintenance as a prerequisite for such registration/accreditation. Violation of this statutory duty constitutes negligence per se. B. Remedies a. Principal Remedies i. Performance Article. 1165. When what is to be delivered is a determinate thing, the creditor, in addition, to the right granted him by Article 1170, may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor.

If the obligor delays, oe has promised to deliver the same thing to two or more persons who do not have the same interest he shall be responsible for any fortuitous event until he has effected the delivery. Article 1167. If a person obliged to do something fails to do it the same shall be executed at his cost. The same rull shall be observed of he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone. Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fullfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with article 1385 and 1388 and the Mortgage Law. ii. Damages Article 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.

b. Satisfaction of claims Article 1177. The creditors, having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in his person; they may also impugn the acts which the debtors may have done to defraud them. Adorable vs. CA, GR No. 119466, November 25, 1999 Indeed, an action for rescission is a subsidiary remedy; it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. Thus, Art. 1380 of the Civil Code provides: The following contracts are rescissible: . (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due to them. C. Remedies in Breach of Reciprocal Obligations a. Recission (Resolution) Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured part may choose between the fulfillment and the rescission of the obligation, with payment of damages in either case. He may also seek i.

rescission, even after he has chosen fullfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there bu just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law. Leonardo vs. Maravilla Since in this jurisdiction it is a fundamental and elementary principle that ownership does not pass by mere stipulation but only by delivery (Civil Code, Art. 1095; Fidelity and Surety Co. v. Wilson, 8 Phil. 51), and the execution of a public document does not constitute sufficient delivery where the property involved is in the actual and adverse possession of third persons (Addison v. Felix, 38 Phil. 404; Masallo v. Cesar, 39 Phil. 134), it becomes incontestable that even if included in the contract, the ownership of the property in dispute did not pass... Not having become the owner for lack of delivery, [one] cannot presume to recover the property from its present possessors. [The] action, therefore, is not one of revindicacion, but one against [the] vendor for specific performance of the sale. Universal Food Corporation vs. CA Issue: whether a breach of a contract is substantial depends upon the attendant circumstances. Ruling: The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement. The question of whether a breach of a contract is substantial depends upon the attendant circumstances. The petitioner contends that rescission of the Bill of Assignment should be denied, because under article 1383, rescission is a subsidiary remedy which cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. However, in this case the dismissal of the respondent patentee Magdalo V. Francisco, Sr. as the permanent chief chemist of the corporation is a fundamental and substantial breach of the Bill of Assignment. He was dismissed without any fault or negligence on his part. Thus, apart from the legal principle that the option to demand performance or ask for rescission of a contract - belongs to the injured party, the fact remains that the respondents-appellees had no alternative but to file the present action for rescission and damages. It is to be emphasized that the respondent patentee would not have agreed to the other terms of the Bill of Assignment were it not for the basic commitment of the petitioner corporation to appoint him as its Second Vice-President and Chief Chemist on a permanent basis; that in the manufacture of Mafran sauce and other food products he would have "absolute control and supervision over the laboratory assistants and personnel and in the purchase and safeguarding of said products;" and that only by all these measures could the respondent patentee preserve effectively the secrecy of the formula, prevent its proliferation, enjoy its monopoly, and, in the process afford and secure for

himself a lifetime job and steady income. The salient provisions of the Bill of Assignment, namely, the transfer to the corporation of only the use of the formula; the appointment of the respondent patentee as Second Vice-President and chief chemist on a permanent status; the obligation of the said respondent patentee to continue research on the patent to improve the quality of the products of the corporation; the need of absolute control and supervision over the laboratory assistants and personnel and in the purchase and safekeeping of the chemicals and other mixtures used in the preparation of said product - all these provisions of the Bill of Assignment are so interdependent that violation of one would result in virtual nullification of the rest. Cruz vs. IAC Facts: Petitioner enters into a lease contract by the private respondent, where he pays for month to month basis. The petitioner got a notice to vacate as the contract will expire within a month, but a rental for next month was already paid and the respondent accepts it. Issue: Is there a breach of contract after the respondent entered into a new contract with third party on the month that is already paid? Ruling: In the case at bar, Ricardo Cruz does not refute, and in fact he even admits, that a notice to vacate was issued to him on April 18, 1977 by Roman Legarda So informing him that their lease contract would expire on April 30, 1977. Although payment of rental was made for the month of May, 1977 and accepted by Roman Legarda So, this does not by itself curtail the latter's right to terminate the lease contract at the end of every succeeding month. Besides, the lessor is entitled to payment for the occupancy of his premises even after the contract has expired. Secondly, without explicitly admitting the breach, Cruz offers the flimsy and unsubstantiated excuse that there is a pre-existing remittance arrangement between the parties over the settlement of his rental arrearages and erroneously postulates that, by virtue of said arrangement, he cannot now be considered as in default. 10 For all intents and purposes, the fact remains that the failure of Cruz to pay the rents when due constitutes a breach of the contract of lease which gives rise to So's right of rescission under Article 1191 of the Civil Code which states: Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

We are convinced that So acted well within his rights in terminating his contract with Cruz and in entering into a new one with third persons, without need of resorting to judicial action. This finds support in our ruling in the case of University of the Philippines vs. De los Angeles, etc., et al . 11 which involved the question of whether the injured party may consider the contract as rescinded even before any judicial pronouncement has been made to that effect. This Court, in holding in the affirmative, ruled that: Of course, it must be understood that the act of a party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional, being ever subject to scrutiny and review by the proper court. If the other party denies that rescission is justified, it is free to resort to judicial action in its own behalf, and bring the matter to court. Then, should the court, after due hearing, decide that the resolution of the contract was not warranted, the responsible party will be sentenced to damages; in the contrary case, the resolution will be affirmed, and the consequent indemnity awarded to the party prejudiced. In other words, the party who deed the contract violated may consider it resolved or rescinded, and act accordingly, without previous court action, but it proceeds at its own risk. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law. But the law definitely does not require that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest. Otherwise, the party injured by the other's breach will have to passively sit and watch its damages accumulate during the pendency of the suit until the final judgment of rescission is rendered when the law itself requires that he should exercise due diligence to minimize its own damages (Civil Code, Article 2203). We see no conflict between this ruling and the previous jurisprudence of this Court invoked by respondent declaring that judicial action is necessary for the resolution of a reciprocal obligation, since in every case where the extrajudicial resolution is contested only the final award of the court of competent jurisdiction can conclusively settle whether the resolution was proper or not. It is in this sense that judicial action will be necessary, as without it, the extrajudicial resolution will remain contestable and subject to judicial invalidation, unless attack thereon should become barred by acquiescence, estoppel or prescription. (Emphasis supplied)

D. SPECIFIC PERFORMANCE a. Ong vs. CA, 310 SCRA 1 Rescission, as contemplated in Articles 1380, et seq., of the New Civil Code, is a remedy granted by law to the contracting parties and even to third persons, to secure the reparation of damages caused to them by a contract, even if this should

be valid, by restoration of things to their condition at the moment prior to the celebration of the contract. It implies a contract, which even if initially valid, produces a lesion or a pecuniary damage to someone. On the other hand, Article 1191 of the New Civil Code refers to rescission applicable to reciprocal obligations. Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. Rescission of reciprocal obligations under Article 1191 of the New Civil Code should be distinguished from rescission of contracts under Article 1383. Although both presuppose contracts validly entered into and subsisting and both require mutual restitution when proper, they are not entirely identical. While Article 1191 uses the term "rescission," the original term which was used in the old Civil Code, from which the article was based, was "resolution. " Resolution is a principal action which is based on breach of a party, while rescission under Article 1383 is a subsidiary action limited to cases of rescission for lesion under Article 1381 of the New Civil Code, which expressly enumerates the following rescissible contracts: 1. Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one fourth of the value of the things which are the object thereof; 2. Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number; 3. Those undertaken in fraud of creditors when the latter cannot in any manner collect the claims due them; 4. Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority; 5. All other contracts specially declared by law to be subject to rescission. We are not persuaded. Article 1292 of the New Civil Code states that, "In order that an obligation may be extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other." Novation is never presumed, it must be proven as a fact either by express stipulation of the parties or by implication derived from an irreconcilable incompatibility between the old and the new obligation. Petitioner cites the following instances as proof that the contract was novated: the retrieval of the transformers from petitioner's custody and

their sale by the respondents to MERALCO on the condition that the proceeds thereof be accounted for by the respondents and deducted from the price of the contract; the take-over by the respondents of the custody and operation of the rice mill; and the continuous and regular withdrawals by respondent Miguel Robles of installment sums per vouchers (Exhs. "8" to "47") on the condition that these installments be credited to petitioner's account and deducted from the balance of the purchase price. E. Damages a. Ong vs. Bognalbal, GR No. 149140, September 12, 2006 The power to rescind obligations is implied in reciprocal ones in case one of the obligors should not comply with what is incumbent upon him x x x. However, it is equally settled that, in the absence of a stipulation to the contrary, this power must be invoked judicially; it cannot be exercised solely on a party's own judgment that the other has committed a breach of the obligation. Where there is nothing in the contract empowering [a party] to rescind it without resort to the courts, [such party's] action in unilaterally terminating the contract x x x is unjustified. Care must, however, be judiciously taken when applying Article 1192 of the Civil Code to contracts such as this where there has been partial performance on the part of either or both reciprocal obligors. Article 1192, in making the first infractor liable for mitigated damages and in exempting the second infractor from liability for damages, presupposes that the contracting parties are on equal footing with respect to their reciprocal principal obligations. Actual damages representing deficiencies in the performance of the principal obligation should be taken out of the equation. KINDS OF OBLIGATION A. Pure and Conditional Kinds of Conditional Obligation i. Postetative ii. Suspensive B. Obligations with period