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CONFUSION OR MERGER OF

RIGHTS
ESTATE OF MOTA V SERRA
G.R.No. 22825 February 14, 1925

FACTS:

On February 1, 1919, plaintiffs and defendant entered into a contract


of partnership, marked Exhibit A, for the construction and exploitation of a
railroad line from the "San Isidro" and "Palma" centrals to the place known
as "Nandong". The original capital stipulated was P150,000. It was
covenanted that the parties should pay this amount in equal parts and the
plaintiffs were entrusted with the administration of the partnership.
January 29, 1920, the defendant entered into a contract of sale with
Venancio Concepcion, Phil. C. Whitaker, and Eusebio R. de Luzuriaga,
whereby he sold to the latter the estate and central known as "Palma" with
its running business, as well as all the improvements, machineries and
buildings, real and personal properties, rights, choses in action and interests,
including the sugar plantation of the harvest year of 1920 to 1921, covering
all the property of the vendor. Before the delivery to the purchasers of the
hacienda thus sold, Eusebio R. de Luzuriaga renounced all his rights under
the contract of January 29, 1920, in favor of Messrs. Venancio Concepcion
and Phil. C. Whitaker.
Afterwards, on January 8, 1921, Venancio Concepcion and Phil. C. Whitaker
bought from the plaintiffs the one half of the railroad line pertaining to the
latter executing therefor the document Exhibit 5. The price of this sale was
P237,722.15, excluding any amount which the defendant might be owing to
the plaintiffs.

ISSUE:

Whether or not there was confusion of the rights of the creditor and
debtor

RULING:

The purchasers, Phil. C. Whitaker and Venancio Concepcion, to


secure the payment of the price, executed a mortgage in favor of the plaintiffs
on the same rights and titles that they had bought and also upon what they
had purchased from Mr. Salvador Serra. In other words, Phil C. Whitaker
and Venancio Concepcion mortgaged unto the plaintiffs what they had
bought from the plaintiffs and also what they had bought from Salvador
Serra. If Messrs. Phil. C. Whitaker and Venancio Concepcion had purchased
something from Mr. Salvador Serra, the herein defendant, regarding the
railroad line, it was undoubtedly the one-half thereof pertaining to Mr.
Salvador Serra. This clearly shows that the rights and titles transferred by
the plaintiffs to Phil. C. Whitatker and Venancio Concepcion were only those
they had over the other half of the railroad line. Therefore, as already stated,
since there was no novation of the contract between the plaintiffs and the
defendant, as regards the obligation of the latter to pay the former one-half
of the cost of the construction of the said railroad line, and since the plaintiffs
did not include in the sale, evidenced by Exhibit 5, the credit that they had
against the defendant, the allegation that the obligation of the defendant
became extinguished by the merger of the rights of creditor and debtor by
the purchase of Messrs. Phil. C. Whitaker and Venancio Concepcion is
wholly untenable.

YEK TON LIN V YUSINGCO


G.R.No. 43608 July 20, 1937

FACTS:

Defendant Pelagio Yusingco was the owner of the steamship Yusingco


and, as such, he executed, on November 19, 1927, a power of attorney in
favor of Yu Seguioc to administer, lease, mortgage and sell his properties,
including his vessels or steamship. Yu Seguioc mortgaged to the plaintiff
Yek Tong Lin Fire & Marine Insurance Co., Ltd., with the approval of the
Bureau of Customs, the steamship Yusingco belonging to the defendant.
One year and some months later, the steamship Yusingco needed some
repairs which were made by the Earnshaw Docks & Honolulu Iron Works.
The repairs were made upon the guaranty of the defendant and appellant
Vicente Madrigal at a cost of P8,244.66. When neither A. Yusingco
Hermanos nor Pelagio Yusingco could pay said sum to the Earnshaw Docks
& Honolulu Iron Works, the defendant and appellant Vicente Madrigal had to
make payment thereof with the stipulated interest thereon, which was at the
rate of 9 per cent per annum, on March 9, 1932, because he was bound
thereto by reason of the bond filed by him, the payment then made by him
having amounted to P8,777.60. When said defendant discovered that he
was not to be reimbursed for the repairs made on the steamship Yusingco,
he brought an action against his codefendant Pelagio Yusingco and A.
Yusingco Hermanos to compel them to reimburse, thereby giving rise to civil
case No. 41654 of the Court of First Instance of Manila, entitled "Vicente
Madrigal, plaintiff, vs. Pelagio Yusingco and A. Yusingco Hermanos,
defendants" which resulted in a judgment favorable to him and adverse to
the Yusingcos.

ISSUE:

Whether or not obligations were extinguished by reason of the merger


of the rights of the debt or and creditor?

RULING:

After the steamship Yusingco had been sold by virtue of the judicial
writ issued in civil case No. 41654 for the execution of the judgment rendered
in favor of Vicente Madrigal, the only right left to the plaintiff was to collect its
mortgage credit from the purchaser thereof at public auction, inasmuch as
the rule is that a mortgage directly and immediately subjects the property on
which it is imposed, whoever its possessor may be, to the fulfillment of the
obligation for the security of which it was created (article 1876, Civil code);
but it so happens that it can not take such steps now because it was the
purchaser of the steamship Yusingco at public auction, and it was so with full
knowledge that it had a mortgage credit on said vessel. Obligations are
extinguished by the merger of the rights of the creditor and debtor (articles
1156 and 1192, Civil Code).

MINDANAO SAVINGS AND LOAN ASSOCIATION INC. V. EDWARD


WILLKOM
GR No. 178618; October 11, 2010
FACTS:

The First Iligan Savings and Loan Association, Inc. (FISLAI) and
the Davao Savings and Loan Association, Inc. (DSLAI) banks that entered
into a merger, with DSLAI as the surviving corporation. The articles of merger
were not registered with the SEC but when DSLAI changed its corporate
name to MSLAI the amendment was approved by the SEC.Meanwhile, the
Board of Directors of FISLAI passed a resolution, assigning its assets in favor
of DSLAI which in turn assumed the former’s liabilities.The business of
MSLAI, however, failed was ordered its closure and placed under
receivership.
Prior to the closure of MSLAI, Uy filed an action for collection of sum
of money against FISLAI. The RTC issued a summary decision in favor of
Uy, directing defendants therein (which included FISLAI) to pay the former
the sum of P136, 801.70. Therafter,sheriff Bantuas levied on six (6) parcels
of land owned by FISLAI and Willkom was the highest bidder. New
certificates of title covering the subject properties were issued in favor of
Willkom who sold one of the subject parcels of land to Go.
MSLAI, represented by PDIC, filed a complaint forAnnulment of
Sheriff’s Sale, Cancellation of Title and Reconveyance of Properties against
respondents. Therespondents averred that MSLAI had no cause of action
against them or the right to recover the subject properties because MSLAI is
a separate and distinct entity from FISLAI as the merger did not take effect.

ISSUE:

Whether or not there was novation of the obligation by substituting


the person of the debtor

RULING:

It is a rule that novation by substitution of debtor must always be


made with the consent of the creditor. Article 1293 of the Civil Code is
explicit, thus:
Art. 1293. Novation which consists in substituting a new debtor in the
place of the original one, may be made even without the knowledge or
against the will of the latter, but not without the consent of the creditor.
Payment by the new debtor gives him the rights mentioned in Articles 1236
and 1237.
In this case, there was no showing that Uy, the creditor, gave her
consent to the agreement that DSLAI (now MSLAI) would assume the
liabilities of FISLAI. Such agreement cannot prejudice Uy. Thus, the assets
that FISLAI transferred to DSLAI remained subject to execution to satisfy
the judgment claim of Uy against FISLAI. The subsequent sale of the
properties by Uy to Willkom, and of one of the properties by Willkom to Go,
cannot, therefore, be questioned by MSLAI.
The consent of the creditor to a novation by change of debtor is as
indispensable as the creditor’s consent in conventional subrogation in order
that a novation shall legally take place. Since novation implies a waiver of
the right which the creditor had before the novation, such waiver must be
express.

CEREZO VS. TUAZON


GR No. 141538 March 23, 2004

FACTS:

Country Bus Lines passenger bus collided with a tricycle. Tricycle


driver Tuazon filed a complaint for damages against Mrs. Cerezo, as owner
of the bus line, her husband Attorney Juan Cerezo, and bus driver Danilo
A. Foronda.

After considering Tuazon’s testimonial and documentary evidence,


the trial court ruled in Tuazon’s favor. The trial court made no
pronouncement on Foronda’s liability because there was no service of
summons on him. The trial court did not hold Atty. Cerezo liable as Tuazon
failed to show that Mrs. Cerezo’s business benefited the family, pursuant to
Article 121(3) of the Family Code. The trial court held Mrs. Cerezo solely
liable for the damages sustained by Tuazon arising from the negligence of
Mrs. Cerezo’s employee, pursuant to Article 2180 of the Civil Code.

ISSUE:
Whether petitioner is solidarily liable.

RULING:
Contrary to Mrs. Cerezo’s assertion, Foronda is not an indispensable
party to the case. An indispensable party is one whose interest is affected
by the court’s action in the litigation, and without whom no final resolution of
the case is possible. However, Mrs. Cerezo’s liability as an employer in an
action for a quasi-delict is not only solidary, it is also primary and direct.
Foronda is not an indispensable party to the final resolution of Tuazon’s
action for damages against Mrs. Cerezo.
The responsibility of two or more persons who are liable for a quasi-
delict is solidary. Where there is a solidary obligation on the part of debtors,
as in this case, each debtor is liable for the entire obligation. Hence, each
debtor is liable to pay for the entire obligation in full. There is no merger or
renunciation of rights, but only mutual representation. Where the obligation
of the parties is solidary, either of the parties is indispensable, and the
other is not even a necessary party because complete relief is available
from either. Therefore, jurisdiction over Foronda is not even necessary as
Tuazon may collect damages from Mrs. Cerezo alone.
Moreover, an employer’s liability based on a quasi-delict is primary
and direct, while the employer’s liability based on a delict is merely
subsidiary. The words “primary and direct,” as contrasted with “subsidiary,”
refer to the remedy provided by law for enforcing the obligation rather than
to the character and limits of the obligation. Although liability under Article
2180 originates from the negligent act of the employee, the aggrieved party
may sue the employer directly.
When an employee causes damage, the law presumes that the
employer has himself committed an act of negligence in not preventing or
avoiding the damage. This is the fault that the law condemns. While the
employer is civilly liable in a subsidiary capacity for the employee’s criminal
negligence, the employer is also civilly liable directly and separately for his
own civil negligence in failing to exercise due diligence in selecting and
supervising his employee. The idea that the employer’s liability is solely
subsidiary is wrong.
To hold the employer liable in a subsidiary capacity under a
delict, the aggrieved party must initiate a criminal action where the
employee’s delict and corresponding primary liability are established. If the
present action proceeds from a delict, then the trial court’s jurisdiction over
Foronda is necessary.
However, the present action is clearly for the quasi-delict of Mrs.
Cerezo and not for the delict of Foronda.
Thus, the petition was denied ordering the defendant Hermana
Cerezo to pay the plaintiff.

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