Sie sind auf Seite 1von 22

OBLIGATIONS & CONTRACTS Arts.

1163-1164
46

I l
i CHAPTER 4: REAL AND PE~SONAL OBLIGATIONS
,Ii
1. (KiNDS OF OBLIGATIONS)
'I
I
'II
I Chapter 2
NATURE AND EFFECT OF OBLIGATIONS

Art. 1163. Every person obliged to give something is also


obliged to take care of it with the proper diligence of a good father
of a family, unless the law or the stipulation of the parties requires
!'
another standard of care. (1094a)
Art. 1164. The creditor has a right to the fruits of the thing
from .the time the obligation to delive,r it arises. However, he shall
acquire no real right over it until the same has been delivered to
him. (1095)

§18. Real and Personal Obligations


From the point of view of its object o:r prestation, obligations
are classified into real and personal. The·obligation is a real one if
it consists in giving; it is personal, if it consists in either doing or
I not doing. As explained in supra § 2.2, in obligatioiis to give (or real
,I obligations), compliance with the obligation is intimately connected
·j
I with the thing to b~ delivered.. In obligations to do or not to do
f I
{
I
(or personal obligations), on the other hand, compliance with the
obligation is incumbent upon the person obliged.
An obligation ·"to give" involves the delivery of a movable or
an immovable thing in order to create a· real right, or for the use
of the recipient, or for its simple possession, or in order to return
it to its owner. 183 An obligation "to.do" includes all kinds of work or
service; 184 while an obligation "not to do" consists in abstaining from
such acts. 185 Note that the obligation to pay a sum in money, such as
the obligation tq pay rentals, falls within the prestation to give. 186

183
Philippine National Construction Corp. v. CA, G.R. No. 116896, May 5, 1997,
272 SCRA 183, 191, citing IV Tolentino, Civil Code of the Philippines, 1991 Ed., 57.
184Jd• .
185
IV Tolentino, Civil Code of the Philippines, 1991 Ed., 57.
186
Philippine National Construction Corp. v. CA, supra.

D
Arts. 1163-1164
Title I. - OBLIGATIONS 47
Chapter 2
NATURE AND EFFECT OF OBLIGATIONS
§19. Specific and Generic Obligations

A :eal obligation, on the other hand, may either be specific (or


deter~unate) or generic (or indeterminate), depending on the nature
of thing to be delivered. If the obligation to give consists in the
delivery ~fa specific or determinate thing, the obligation is classified
as a specific or determinate obligation. But if the obligation consists
merely in that of delivering any member of the genus or class, the
same is classified as a generic or indeterminate obligation.
I

A thing is considered determinate or specific when it is


particularly designated or physically segregated from all others of
the same class. 187 A thing is indeterminate .or generic, on the other
hand, when only the genus or class has been determined, without
the same being designated and distinguished from all others of the
same class. For example, if the debtor has five cars but he committed
to deliver one of them, specifying the engine and plate numbers,
the thing becomes determinate or specific. Howevel'., if he commits
to deliver only a car, the thing to be delivered is indeterminate or
generic. But if the debtor commits to deliver one of his five cars, in
which case the selection is limited to the cars owned by the debtor
and he cannot deliver any other car not owned by him, the obligation
becomes a limited generic obligation. 188 ·

§20. Positive and Negative Personal Obligations


· A personal obligation may either be positive or negative. An
obligation "to do" is a positive personal obligation, while an obligation
"not to do" is a negative personal obligation.

§21. Accessory Obligations in Determinate (~pe~ific) Obligations


The debtor always has three . accessory obligations in
determinate obligations. Of course, the principai obligation of the
debtor is to deliver the specific thing due. But in addit~on to such
principal obligation, he acquires three additio~al obligations, even
if he and the creditor did not expressly proVIde for them. These
accessory obligations are the following:
1) The obligation to preserve the thing to·be delivered; 189

187Art. 1460, par. 1, NCC.


188See IV Tolentino, Civil Code of the Philippines, 1991 Ed., 91.
189
Art. 1163, NCC.
48 · OBLIGATIONS -& CONTRACTS Arts. 1163-1164

2) The obligation to .deliver the fruits, if the creditor is


already.entitled to thetri; 10O and
3) : · The obligation to deliver the accessions _a nd accessories. 1s1

[21.1) •Duty to Preserve ·S'.l)eciftc Thing Due


. The only way by which the ·debtor may be .able to comply with
j I (, • ' ' ,

his determinate obligation 'is by delivering the··exact thing which


is
is due. There no other way. Thus, Article 1244-of the Civil Code
of
provides th'at '1t]he debtor a 'thing ·canrio't ·compel .th~ ·creditor to
recefoe a-d1,fferent one, although the latter .may be··of lhe same value
as, or more valuable. than that which .is due:·,, To ensure therefore
the ~fficacy and·performance o(a:n ·obligation to deliver ~ specific or
determinate t~ng, it' i~ but logi~~rto :~~quire' the debtor to preserve
the thing to he 'deliv~red while '.t he .s~ine 'is, ~till in:his -p~ssession,
otherwise, ·such •kind or' obligation ·_. would . be '. IJlusory. 192 ·. Taking
this into ·consid~r~tion, our· Civil Code p~ovides :for 'this acGessory
ob~gation in·Article ii63; · ' _'. .._._, . ' : : .':· ., -· . . · _._,
..

While Article 1163 9oes not:say e·x:plicitly-that-the obligation ,t o


preserve applie~ only _to an obHga~iQn to give..a .detE~_r_mina,te thing, it
is quite obvious tha.t such accessory.obligatio11, tinds;_no application,to ·
an oblig~tfoµ .to. giv~ an inµetermJ:r,i~te thing. l:p. ·a gen~ric obligation,
the debtor may comply. with his.o~1jgijt1ori ~y <;J.elive);!ing ~ny meml1er~
of the genus ~o much so _that.even -1f he has in his.possession things ,
belonging to the said .genus, . h,e is not re~urr¢d 'to deliver any of
those. He may, if he chooses, deljy~~·~ny othe~. ~e~ber of the genus
not found in his ·p ossession by procuring the same. . ·

[a.] ·Degree ·of Diligence Required


As a rule, the debtor in 'a determinate obligation is bound to
obse~e the ''proper diligence of a good father of a family" in taking
care of the thing to·be delivered; This is the -bonus paterfamilias rule
in-the Ro·m an.law, which is the most common standard of conduct.
But what is •exactly meant by the phrase "good fa.the! of a family'?
When the law requires the observance·of the "proper diligence of a
good father of a family," the law is simply referring to the diligence

190Art.1164, NCC. .
191Art.1166, NCC.
1928 Manresa, 35-36. -
Arts. 1163-1164 Title I. -OBLIGATIONS 49
Chapter 2
NATURE AND EFFECT OF OBLIGATIONS

required of a reasonably prudent person,198 As such, to determine


the diligence which must be ordinarily required of the debtor in
a determinate obligation, we use as basis the abstract average
standard corresponding to a normal orderly person.104
Ordinarily, the bonus paterfamilias rule applies in determining
the diligence required of the debtor in fulfilling his obligation to
preserve the determinate thing due. Howe~er, this rule does not
apply when the law or the stipulat~on of the parties requires another
standard of care. An example of a situation where the law requires
another standard of care in. the preservation of the determinate
t_h ing due is when the debtor is already guilty of delay or if he has
p~oipised to d~liver the same thing to two or more persons w~o do
not have the same interest. In such a situation, the obserya:q.ce of the
proper diligence of a good father of a family i~ po longer sufficient
because the debtor shall already be responsible for fortuitous evep.t
until he has effected the delivery. This ·rule is empodied in the last
paragraph of Article 1165 of the Civil Code which states that "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
r.esponsible for any fortuitous event until he has effected the delivery."
Going now to the 'agree~e~t -~r stipulation of the parties
requiring · another ·'standard of care, it · may be asked/ Can the
parties validly agree on ·a standard .of care lower than that of the
,.,good father of a family? Following tne··~ul~ that the agreement of
the parties is the law betwee:µ the~, 195 it appe~r~; that the partjes
can validly agree even .o:n a stand~rd of ca~~ lowie:r} '4.a ~ that of the
bonus pater familias, i.e., an agr_e ement p~ovidi~g' only for slight
care. However, the parties may not validly agree to make the debtor
absolutely exempt from any liability even from those arising from
his ~wn negligence. In the latter situation, the freedom to contr~ct
bows down to public policy. While the parties have the Freedom to
enter into any .k ind .of stipulation, it is necessary that the same
must :riot be contrary to lavy, morals, g~od customs, public order, or
public poli~y. 196. As such, tµe agree;ment is void for being contrary to
.Public policy. On the other hand, it shall be lawful for the pa.r ties·to

193
Francisco v. Chemical Bulle Carriers, Incorporated, G.R. No. 193577, Sept.
7, 2011.
194
1d., citing IV Tolentino, Civil Code of the Philippines, 1991 Ed., 125.
195
Art. 1159, NCC.
196
Art. 1306, NCC.
50 OBLIGATIONS & CONTRACTS Arts. 1163-1164

require a degree of diligence higher than that of the good father of


a family, such as extraordinary care and even for liability by reason
· of fortuitous event. The latter situation is ~xplicitly authorized
by Article 1174 of the Civil Code which says 'that the parties may
declare in their agreement that a person ~hall still be liable for a
fortuitous event. This principle will be discussed extensively in
subsequent sections of this Book.

[21.2] Duty to Deliver Fruits


[a.] When Creditor Acquire.s Rights Over Fruits
In determinate obligations, is the ·debtor bound to deliver the
fruits of the determinate thing due? The answer is inthe affirmative
if the creditor already acquired a right over the fruits. Hence, it is
necessary to determine' the exact time when a creditor acquires !a
I·I' right over the fruits of the determinate thing due. This particular
·problem is governed by Article 1164 of the Civil Code.
It is dear from Article 1164 that the creditor shall acquire
a right over the fruits of the determinate thing .due only from the
time the obligation to deliver said thing arises. But when is. such
time? When is the obligation to deliver the determinate thing due
deemed to have arisen? This period varies depending on the source
of the obligation. In obligations arising from law, quasi-contracts,
quasi-delicts and delicts, the sped.fie provisions applicable :to
them determine the time when the obligation to deliver arises. In
obligations arising from contracts, on the other hand, the obligation
. to deliver genera:lly arises upon the perfection of the contract because
at such time, "the· parties are bound not only to the fulfillment of
what has been_expressly stipulated but also to all' the 'consequences
which, according to their nature, may be in keeping with good faith,
usage and law." 197 In a contract of sale, for ~xample, the law provides
I
11 that "all the fruits shall pertain to the vendee from the day on which
l'.i
the.contract was perfected;"19s The only possible exception to this rule
I
11 is when the obligation to deliver has been subjected to a suspensive
II
11 condition, in which case, the obligation does not come into existence
until after the' condition is fulfilled. But if the obligation has been
subjected merely to a suspensive term or period, . such as when
another date for delivery has been stipulated upon, the obligation
to deliver immediately arises upon the perfection of the contract

197
Art. 1315, NCC.
198
Art. 1537, par. 2, NCC.
Arts. 1163-1164 Title I. - OBLIGATIONS 51
Chapter 2
NATURE AND EFFECT OF OBLIGATIONS

although it becomes demandable only upon the arrival of the period


or term agreed upon.
While there is a view that the obligation to deliver arises only
upon expiration of the term or period agreed upon when there is a
suspensive term or period for the performance of the obligation,199
it must be noted that the provision (Article 1164) speaks only of
the "time the obligation to . deliver (the determinate thing due)
arises." Stated otherwise, the provision speaks only of the birth of
the obligation and not its demandability. It is in this light that the
provision must be understood in reiation to the right of the creditor
to the fruits. Such right begins from the moment the vinculum
attaches, even when another date has been fixed for the delivery of
the thing. 200 This view is supported by the provisions of the second
paragraph of Article 1537 earlier discussed and Article 1315 of the
Civil Code, quoted as follows:
Art. 1537. The vendor is bound to deliver the thing sold
and its accessions and accessories in the condition in which they
were upon the perfection of the contract.
All the fruits shall pertain to the vendee ·from the day on
which the contract was perfected.
Art. 1315. Contracts are perfected by mere consent,
and from that moment the parties are bound not only to the ·
fulfillment of what has been expressly stipulated but also to all
the consequences which, according to their nature, may be in
keeping with good faith, usage and law.

[b.] When Creditor Acquires Real Right


A personal right is the power of one person to demand of an-
other, 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 over a specific thing, without a passive subject
in~vidually determined, against whom such right may be person-
ally exercised. 201 Now, let us relate these concepts to the right of the
creditor over the.fruits which, as discussed earlier, exists from the
time the obligation to deliver the determinate thing due arises. Ar-
ticle 1164 of the Civil Code provides further that the creditor "shall

199See IV Tolentino, Civil Code of the Philippines, 1991 Ed., 94.


200
See IV Francisco, Civil Code of the Philippines, p. 50.
201Adorable v. CA, 319 SCRA 200 (1999).
OBLIGATIONS & CONTRACTS Arts. 1163-1164
52

acquire no real right over it until the same has been deliver~d to him."
This is further supported by the second paragraph of Article 712 of
the same Code which says that "ownership and other real rights over
property are acquired and transmitted by law, by don~tion, ~y testate
and intestate succession, and in consequence of certain contracts, by
traditi<1n. ;, Stated otherwise, the creditor acquires a real right over
a thing only upon its delivery and this principle applies not only to
-the specific thirlg due, but also to its fruits. This rule is in confo~-
mity with the well-known doctrine of law that non nudis pactis, sed
traditione dominia rerum transferuntur (the ownership of things is
transferred not by mere agreement, but by tradition or delivery). 202
An example of a real right is ownership. 203 Following the
provisions of Articles 1164 and 712 of the Civil Code, this right is
acquired only upon delivery of the thing to the creditor. In a contract
of sale, for example, the law explicitly provides that the ownership
of the thing sold is acquired by the vendee only from the moment
it is delivered to him in any ,of the ways specified in Article 1497 to
1501 of the Civil Oode. 204 Therefore, sale·by itself does not transfer or
Ii'
I affect ownership; the most that sale does is ·to create the obligation
to transfer ownership. It is tradition or d~livery, as a consequence of
sale, that actually transfers ownership. 2Q5 Prior to delivery, therefore,
the right of the creditor over the determinate thing·due and its fruits
is merelr a personal right '_ which· is simply the right to demand
from the debtor the delivery ~f the determinate thing due and its
fruits., in proper cases. But after delivery, the creditor shall acquire
ownership over the thing delivered. .

[21.3] Duty to Delive:r the Accessions •and Accessories


The accessory obligation to deliver the accessions and
accessories is provided in Article 1166 of the Civil Code, as follows:
Art. 1-166. 'rhe .obligation to give a d~ter~inate thlng
includes that of delivering all its accessions and· accessories~
even though they may not have been mentioned.

202
Fidelity and Deposit Co. v. Wilso~, 8 Phil. 51 (1907). .· - '
203
Equatorial Realty Development, Inc. v. Mayfair Th,eater, Inc., G.R. No.
133879, Nov. 21, 2001. ·
204
S~e Art. 1495, NCC.
205
_ San Lorenzo Develo~ment. Corporation v. CA, G.R. No. 124242, Jan. 21,
2005
Arts. 1165-1167 Title 1.-OBLIGATIONS 53
Chapter 2
NATURE AND EFFECT OF OBLIGATIONS

The term "accessories" in the articlt3 is used in its ordinary or


popular sense; to refer to those things which, being intended for the
ornamentation, use or preservation of another of more importance,
have for their object the completion of the latter for which they are
indispensable or convenient. 206 For example, the machinery in a
factory are accessories; in the case of a machine,. the spare parts
and tools that serve for the minor and us-µal repairs thereof, or for
mounting or dismounting it; the keys, in the case· of a house, etc.
The term "accessions," on the other hand, must be understoo~
in relation to Chapter 2,' Title II of :Book II of the Civil Code (Articles
440-4 75). While the concept · of accession in Book II, specifically
Article 440 of the Civil Code, incl~des the fruits of the thing, the
term '~accessions" in Article .1166_of the Civil Code has' reference
only to accessions other than the fruits because with respect to
the latter, the governing provision is Article 1164 .and not Article
1166. Hence, the term "accessions"· in Article 1166 includes cases
of natural accessions, such as alluvium, avulsion and formation of
islands, and cases of_ industriaJ accessions, in the form of building,
planting and sowing.

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 indeterm'inate 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 even~ until he has effected
the delivery. (1096)
Art. 1166. The obligation to give a determinate thing-includes
that of delivering all its accessions-and accessories, even though
they may not have been mentioned-. (1097a) ·.
Art. 1167. If a person obliged to do something fails to do it,
the same shall be executed at his cost.
This 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. (1098)

2061V Francisco, Civil Code of the Philippines, p. 60.


54 OBLIGATIONS & CONTRACTS Arts. 1165-1168

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. (1099a)

§22. Remedies of Creditor in Case of Breach of Obligation


(22.1] {il General
The classification of obligations into real and personal is also
important for purposes of determining the remedies available to the
creditor in case of breach of the obligation.

(22.2] Breach of Determinate Obligations


A determinate obligation can only be complied with by
delivering th~ determinate thing which is due. In fact, the debtor
cannot compel
. the creditor to receive a different one, although
. the
latter may be of the same value as, or more valuable than that which
is due. 207 In case of breach of the obligation, therefore, the creditor
can compel his debtor to make the delivery. This is expressed in
the provision of the first paragraph of Article 1165 .of the _Civil Code
which states: "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."
The action by the creditor against his debtor to compel the
latter to deliver the thing due is one for specific performance, 208 if the
source of obligation is contract. However, if the action is not based
on any contractual relation between the parties, the term "specific
performance" is not appropriate, 209 as the term is applicable only to
obligations which are contractual in nature.
In addition to his right to compel delivery, the creditor can also
recover damages against the debtor. Such right is expressly granted
to him in the first paragraph of Article 1165. But even without such
express grant in said article, the creditor still has the right to recover
damages from the debtor by virtue of the·basic rule on liability for
damages by reason of non-fulfillment of obligations expressed in
Article 1170 of the Civil Code. ·
The rights to compel delivery and to recover damages are
cumulative and not alternative. But if the first remedy is no longer

207
Art. 1244, par. 1, NCC.
208Gutierrez Repide v. Afzelius, 39 Phil. 90 (1918).
209])iokno v. Rehabilitation Finance Corp., 48 O.G. 7, 2717.
Arts. 1165-1168 Title I. -OBLIGATIONS 55
Chapter 2
NATURE AND EFFECT OF OBLIGATIONS

available, as when the determinate thing is already in the legal


possession of a third person who did not act in bad faith, the action
that can be maintained by the creditor against the debtor is only for
recovery of damages.
If the source of obligation is contract, the creditor has an
alternative remedy aside from an action for specific performance. ·In
proper cases, he may cause the rescission of the contract in case of
breach of the obligation, in addition to his right to recover damages.
Those proper cases where rescission can be resorted to by the
creditor shall be discussed in subsequent sections under Contracts.

[22.3] Breach of Generic Obligations


A generic obligation can be complied with by delivering any
member of the genus or class, even if what is,to be delivered is not
one of those which the debtor owns or possesses. This is the reason·
why one of the remedies available to the creditor, as expressly
mentioned in the second paragraph of .Article 1165, is to "compel
the performance of the obligation at the expense of the obligor."
Under this remedy, the delivery shall be done by someone else and
not by the debtor himself, but the expenses that will be incurred
in performing the obligation shall be borne by the latter. As an
alternative remedy, the creditor may compel the debtor himself to
make the delivery. Even if this remedy is not expressly provided by
law, the law's silence does not preclude the credi_tor to resort to this
remedy. Since the obligation is a real one, the creditor can compel
the debtor himself to make the delivery.
Note that the action to compel delivery is still denominated
as one for specific performance even if what ts to be delivered is a
generic thing. Therefore, whether the thing due is determinate or
generic, the action to compel delivery is for specific performance.
The only difference being that in determinate obligations the debtor
may not compel the creditor to accept a different one other than
what is due, while in generic obligations, the delivery of any member
of the genus or class will suffice. As a consequence in the latter, if the
debtor does not make the delivery, the obligation inay be performed
by someone else at his expense.
While the second paragraph of Article 1165 does not expressly
grant the creditor the right to recover damages, unlike in the first
paragraph of the same article in relation to determinate obligations,
the creditor still has the right to recover the same from the debtor

OBLIGATIONS & CONTRACTS Arts. 1165-1168
56

by virtue of the basic rule on liability for damages by reas~n_of non-


fulfillment of obligations expressed in Article 1170 of the Civil Code.

[22.4] Breach of Positive Personal Obligations·


An obligation "to do" is considered breached not only when it
is not performed, but also,when ,t he .performance is either poor or in
contravention of the tenor of the obligation. In either case, however,
the debtor cann~t be compelle~, against his will, to execute t~e act
which he bound himself to do. Stated otherwise, the coercive power
of the State e·xercised through our courts, cannot be invoked to force
the debtor to execute an act against his will; otherwise, this will
amount to involuntary servitude, which is prohibited by the present
Constitution in Section 18, Article III thereof, quoted as follows:
Sec. 18. (1) No·person shall be detained solely by reason of
his political beliefs an,d aspirations.
(2) No 'involuntary servitude in '. any form shall exist
except as·a punishment .for a crime whereof the party shall have
been duly convicted.
I. . .
Since .the .law cannot force the .debtor to do an act against
his will, it offers ·an alternative .mode of fulfilling the obligation in
case the debtor refuses to comply with his undertaking. The law
authorizes the creditor to have the act ,executed by himself or by
another at the expe~se of the debtor, in addition to his right to
recover damages. This remedy is provided for in Article 1167 of the
Civil Code which states that "if a person obl~ged to do something

r fails to do it, the same shall be executed at his cost." This remedy
presupposes that_the act may be done by persons other than the
debtor. It does not apply therefore when the personal qualifications
of the debtor are the determining factors in the constitution of the
obligation. Here, the only rem:edy of the creditor is an action for
damages against the -debtor. ·
As earlier adverted to, an obligation "to do" is also considered
breached even when there is performance, jf the obligation was don'.~ ·
either poorly or in contravention of the tenor thereof. If this is the
reason for the breach of tlie obligation, the law grants the creditor an
additional right to demand for the undoing of what has been done, at
the ·expense of the -debtor. ·This remedy ·is sap.ctioned by the second
paragraph of Article 1167. Note that if the act was executed poorly
or contrary to the tenor of the obligation, the creditor may also have
the act executed by another person. But before he can resort to such
Art. 1H;l9 Title I. - OBLIGATIONS 57
Chapter 2
NATURE AND EFFECT OF OBLIGATIONS

remedy, it is necessary first to undo what has been done poorly or


( done in contravention of the tenor of the .obligation.

(22.5] Breach of Negative Personal Obligations


In obligations "not to do," so long as the prohibited act is not
done the obligation is being complied with. Therefore, an obligation
"not to do" is considered breached when the debtor does what has
been forbidden him. And in case of such breach, the remedy of the
creditor is to demand for the undoing of what has been done, at
the debtor's expense, in addition· to his right to recover damages.
This remedy is expressly granted in Article 1168 of the Civil Code
which states that "when the obligati~n consists in not doing, and the
obligor does what has been forbidden him; it shall also be undone at
his e~pense. "
However, when the undoing of what has been dorie in violation
of the prohibition already becomes-impossible, either physically or
legally, the only feasible remedy of the creditor is to recover damages
from the debtor.

I· CHAPTER 5: BREACH OF OBLIGATION

Art. 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 ~y
the creditor s)lall 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 whe~ 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)
OBLIGATIONS & CONTRACTS Art. 1170
58

Art. 1170. Those who in the performance of their obligations


are guilty of fraud, negligence, or .delay, and those who In any
I manner contravene the tenor thereof; are liable for damages. (1101)
I
I:
§23. 1n General
I At this point, a discussion of the concept of breach of obligation
is imperative since the concept was barely discussed in the preceding
Chapter. When is there a breach of the obligation? There is breach
of an obligation not only when it is not performed, but also when
it is performed in contravention of its tenor. If the non-fulfillment
of the obligation is not due to the debtor's fault but by reason of
a fortuitous event, the debtor, as a rule, is not liable. This will be
discussed further in subsequent sections of this Chapter. But if the
non-fulfillment of the obligation is due to the fault of the debtor
because he is guilty of delay, fraud, negligence, or he contravenes
in any manner the tenor thereof, he becomes liable to the creditor
for damages. This principle is embodied in Article 1170 of the Civil
Code.
Article 11 70 lays down the basic rule on liability for damages
by reason of non-fulfillment of ob~igations due to fraud, negligence,
delay or contravention of the tenor of the obligation.

§24. Delay or Default (Mora)


[24.1) Co~cept and Kinds
To be in "default" is different from "mere delay'' in the
( grammatical sense, because it involves · the beginning of a special
condition or status which has its own peculiar effects or results.lll 0
f But in our Civil Code, the word "delay'' in Article 1169 is synonymous
I to default or mora, 211 which means delay in the fulfillment of
obligations. 212 Delay or default, therefore, is the non-fulfillment of

21
°Maybank Philippines, Inc. (formerly PNB-Republic Bank) v. Tarrosa, 772
SCRA 670 (2015), citing SSS v. Moonwalk Development and Housing Corporation,
221 SCRA 119 (1993). .
211
Note that the word "delay"in Art. 1169 is used in the same concept as that
of "default."
212
Santos Ventura Hocorma Foundation, Inc. v. Santos, G.R. No. 163004, Nov.
5, 2004, 484 Phil. 447, citing IV Tolentino, Civil Code of the Philippines, 1987 Ed.,
p. 101.
Art. 1170 Title I. - OBLIGATIONS 59
Chapter 2
NATURE AND EFFECT OF OBLIGATIONS

the obligation with respect to time. 213 Stated otherwise, the debtor
violates the obligation in point of time if there is mora or delay. 214
There are three kinds of mora: (1) mora solvendi, or default
on the part of the debtor to perform, which may either be (a) mora
solvendi ex re, referring to obligations to give, or (b) mora solvendi
ex persona, referring to obligations to do; (2) mora .accipiendi, or
default on the part of the,creditor to receive; and (3) compensatio
morae, which is default of both parties in reciprocal obligations.

[24.2] Mora Solvendi


[a.] Concept
Mora solvendi or debtor's default is defined as a delay in the
fulfillment of an obligation, by reason of a cause imputable to the
debtor, 215 or because oLdolo (malice) or culpa ,(negligence).ll1~ The
delay in the performance of the obligation must be either malicious or
negligent, otherwise, the debtor cannot be held liable for damages. 217
The concept of mora solvendi is embodied in, and governed by, the
first and second paragraphs of Article 1169 of the Civil Code.
It is clear from paragraph 1 of Article 1169 that delay may
occur only in obligations which are positive (to give and tu do), but
not in obligations not to do, for in the latter the debtor is fulfilling
the obligation by not doing what is forbidden him.

[b.] Requisites
In order that the debtor may be in default it is necessary that
the following requisites must 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

213Santos Ventura Hocorma Foundation, Inc. v. Santos, supra.


214S8S v. Moonwalk Development and Housing Corporation, supra.
216Raquel-Santos v. CA, 592 SCRA 169 (2009). See also J Plus Asia Develop-

ment Corp. v. Utility Assurance Corp., 700 SCRA 134 (2013); Selegna Management
and Development Corp. v. UCPB, 489 SCRA 125 (2006) and Philippine Export and
Foreign Loan Guarantee Corporation v. V.P. Eusebio Construction, Inc., 478 Phil.
269 (2004).
216Titan-Ikeda Construction & Development Corp. v. Primetown Property

Group, Inc., 544 SCRA 466 (2008).


217RCBC v. CA, 305 SCRA 449,456 (1999).
OBLIGATIONS & CONTRACTS Art. 1170
60

I ·i
'
judicially or extrajudicially. 218 A debtor is deemed to have violat~d
,i
his obligation ·to the creditor from the time the latter· ~ak~s: a
t demand.21a Once the creditor makes a demand, whether Judieia:l
220
or extra-judicial, the debtor incii_rs ·mor:a
?r del~y. T~e _de!11~nd
required in Article 1169 may be in any form', proV'ldedthat 1t·_ean be
221
proved, and the proof of this demand lies upon th~ creditor. Hence,
absent any demand from the obligee, oral or .w nften, the effects:of
default do not arise222 and the obligor does not incur delay, 223· as, a
rule. ·,,·
[c.] Exceptions to Requiremen~ ~fDemand
The rule, as discussed above, is that default generally begins
from the moment the creditor demands the performance of the
obligation, 224 · whether such demand is'-judicial ·or extra-judicial. 2~5
By way of exceptions, the debtor incurs mora or delay, -e ven in the
absence of a demand, .in the following instance~: ·
(l) _ . When the obligation :e ~pressly so de~
c lares; . · .•
I

I I
r

:

.(2) When the law expressly so declares; _,."
(3) When from the nature and the .circumstances ,,of lhe
obligatio:n it ~ppears thflt the designation of the time
when the thing is .to be delivered or theservice to is td.Qe
rendered was a controlling motive for the establish~ent
of the contract; or .
(4) When demand would be useless, as when the obligor has
rendered it beyond his power to perform:226

218Maybank Philippines, Inc. (formerly PNB-Republic Bank) v..Tarrosa, supra;


Solante v. COA, 733 SCRA 266 (2014); J Plus Asia Development Corp. v. Utility
Assurance Corp., 700 SCRA 134 (2013); Cruz v. Gruspe, 693 SCRA 415 (2013); Social
Security System v. Moonwalk Development and Housing Corp., supra; Selegna
Management and Development Corp. v. UCPB, supra; Pantaleon v. Ame~c~n
I Express International, Inc., 587 SCRA 551 (2008); Raquel-Santos v.' CA, 592 SCRA
I 169 (2009). · '
I 219Titan-Ikeda Construction and Development Corp. v. Primetown Pro~erty
j1
Group, Inc., supra. · · · · . , · ·;
220Id. See also Art. 1169.
221 Cetus Development, Inc. v. CA, 176 SCRA 72, 81 (1989).
222Id. ,. ,. I ,

223Solid Homes, Inc. v. Tan, 465 SCRA 137 (2005).


224 Cruz v. Gruspe, supra; Social Security System v. Moonwalk Development
and Housing Corp., swpra.
225Art. 1169, par. 1, NCC.
226Art. 1169, par. 2, NCC.
Art. 1170 Title I. - OBLIGATIONS 61
Chapter 2
NATURE AND EFFECT OF OBLIGATIONS

With respect to the ,first two exceptions, it is not enough that


the law .or the agreement of the parties fixes a date for performance;
it.must further state expressly that .a fter the period lapses, default
will commence. 227 In one case, 228 fo:r example, both the RTG and,the
CA reckoned the accrual of the bank's cause of action to foreclose the
real estate mortgage over the subject property from the maturity of
the -Second loan. The CA further held that demand was unnecessary
for the ac_crual of the cause of action in light of paragraph 5 t~e or
real estate mortgage, which pertinently provides: "5. In the event
that t~e Mortgagor herein should fail or refuse to pay any of the
sums of money s~cured by this .moi:tgage, or any part thereof, in
ac~ordance with the terms and conditions·herein set forth, or should
he/it fail to perform any of the condition~ stipulated.her~in, then a11:d
in ·a ny such case, the Mortgagee shall have the right, at its election
to foreclose this mortgage. [x x' x]" The Supreme Court ruled,
however, that said.provision merely articulated the bank's right to
elect foreclosure upon the debtor's failure or refusal to comply with
the obligation secured but it did not affect the general parameters ·o f
default, particularly the need of prior demand under Article 1169 of
the· Civil Code, "considering that' it did not expressly declare: (a) that
demand shall not be necessary in order that the mortgagor may be in
default; or (b) that default shall commence upon mere failure to pay
on the.maturity date ofthe loan." · · · · ·
An example of a situatiQn ,where the law declares the d,ebtor to
a
be in. default .without need of demand is in, the .case of a partner
who has undertaken to contribute a.sum of money and fails to do so.
In such a case, the iaw expressly says that the': pai-tner concerned
thereby becomes a debtor of the partnership for the interest and
damages from the time he should have complied with his obligation.229
With respect to the third e~ception, it ,is es·s ential that time
is the controlling motive for the esta~lishment of the ~_ontract. 230
But in determining whether time is of the essence in a contract,
the ultimate criterion is the actual or apparent intention of the
parties and before time may be so regarded by a court, there must
be a sufficient manifestation, either in the contract itself or the

227Maybank Philippines, Inc. (formerly PNB-Republic Bank) v. Tarrosa, 772


SCRA 670 (2015); 8 Manresa 62.
228Jd.
229See Art. 1788, NCC.
2soArt. 1169, par. 2, NCC.
- 62 OBLIGATIONS & CONTRACTS Art. 1170

surrounding circumstances of that intention. 2111 For example, time


is of the essence in exchange contracts because of the speculative
and fluctuating value of stocks.282 However; even where time is of
the essence, a hreaoh of the contract in that respect by one of the
parties may be waived by the other party's subsequently treating
the contract as still in force. 288
Anent the last exception, it is but logical that when the debtor
has rendered the obligation beyond his power to perform demand is
no longer necessary, as the same would only be a useless formality.
For example, a seller sold the same thing (a movable property) to
two persons but he delivered the thing sold to the second buyer
, '
who had no knowledge of the existence of the first sale. Under our
law· on double sale, 234 it is the second buyer who acted in good faith
who will acquire ownership over the thing sold but the first buyer
can hold the seller liable for damages for breach of the obligation.
In this case, the seller shall incur in delay immediately after the
lapse of the period agreed upon for the delivery of the thing sold to
the first buyer as demand would already be useless considering that
the seller has rendered the oblig~ti9n beyond' his power to perform.

[d.] Effects of Mora Solvendi


The debtor renders himself liable to the creditor for damages in
case of default. 235 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 ·t he 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, whether or not the
obligation is one constituting a loan or forbearance of money. 236
In addition, the debtor remains liable for the loss of the thing
due after he has incurred in delay even such loss was without his
fault 237 or by reason of a fortuitous event. 238 This is expressly provided

23
lLorenzo Shipping Corp. v. BJ Marthe! International, Inc., 443 SCRA 163•
174 (2004).
232
Lopez, Locsin, Ledesma & Co., Inc. v. CA, 168 SCRA 276 (1988).
233
Lorenzo Shipping Corp. v. BJ Marthe} International, Inc., supra.
II I' 234
Art. 1544, NCC.
235
Art. 1170, NCC.
236
Art. 2209, NCC; Eastern Shipping Lines, Inc. v. CA, 234 SCRA 78, as modi·
fled by BSP Circular No. 799, Series of 2013, effective July 1, 2013.
237
Art. 1262, 1st par., NCC.
,, 238
Art. 1165, last par., NCC.
)
1I
I
Art. 1170 Title I. - OBLIGATIONS 63
Chapter 2
NATURE AND EFFECT OF OBLIGATIONS

for in the last paragraph of Article 1165 and in the first paragraph
of Article 1262 of the Civil Code, quoted as follows:
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.
,I f 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.
Art. 1262. An obligation which consists in the delivery of
a determinate tl_ling shall be extinguished if it should be lost
or destroyed without the fault of the debtor, and before he has
incurred in delay.
When by law or stipulation, the obligor is liable even for
fortuitous events, the lo_ss of the thing does not extinguish the
obligation, and he shall be responsible for damages. The same
rule applies when the nature .of the obligation requir~s the
assumption of risk.

In the case of Solid Homes, Inc. v. Tan, 239 the Court ruled
that the prescriptive period within w4ich the obligee may bring an
action against the obligor does not commence to run until a demand
is made. The Court explained:
Parenthetically, and as we have said in Social Security
System vs. Moonwalk Development and Housing Corporation,
et al., an obligor violates his obligation to the obligee from the
time the latter made a demand,for performance, which demand
also marks the point of time when the former incurs mora or
delay:
The debtor, therefore, violates the obligation in point of
time if there is mora or delay. Now, there is no mora or delay
unless there is a demand. It is noteworthy that in the present
case during all the period when the principal obligation was
still subsisting, although there were late amortizations there
was no demand made by the creditor, plaintiff-appellant for the
payment of the penalty. Therefore up to the time of the letter of
plaintiff-appellant there was no demand for the payment of the

239465 SCRA 137 (2005).


64 OBLIGATIONS & CONTRACTS Art. 1170

penalty, hence, the debtor was not in mora in the payment of


the penalty.
I

1 Hence, absent any demand from the obligee, the obligor


i, does not incur del1;1y. And Sb long as the ohligor does not incur in
·i delay, he ca1:i11ot be said to b~ guilty of some omission vio,lative
J
of the obligee's, rights. Consequently, as long as the obligor is
IiI
:'
I
not guilty of some omission violative of the obligee's rights, the
latter has no cause of action against the· former. As a ,result,
the pr~scriptive period within which the obligee may bring an
action against- the obligor does not commence to run until a
demand is made.

, I
,
However, the rule for counting the prescriptive embodied
'! J
in Article 1150 of the Civil -Code simply states that "the time for
prescription for all kinds of actions, when there is no special provision
which ordains otherwise, ·shall be counted from the ·dfl,y they may be
brought." Hence, the Court enunciated the principle ·that it is the
legal possibility of bringing the action,which determines the star.ting
point for the computation of the prescriptive period for the action, 240
'I l
,-:1
and not . necessarily the time of the· making of··an extrajudicial
j
I demand. Indeed, unless stipulated · 'otherwis'e, ·an extrajudiciai
I

demand is not required before a judicial demand, i.e., filing a civil


case for collection, can be resorted .to. 24 ~ As further explained in
I
Autocorp Group v. Intr~ Strata A~stirance· ·c orpo_r ati~n, 242 a
·, l
)
<
. ''demand, whether judicial or extrajudicial,· is not ·required before an
, f. f , • ' L • •

obligation becomes due and de,mandable. Jt is only necessary in order


I
I ,
to put an obligor in a due anddemandable obligation in delay, which
in turn is for the purpose of mak/n,g the obligor liable for interests or
damages for the period of delay."

[24.3] Compensatio Morae


[a.] Concept
Compensatio morae is the delay or default on the part of both
parties because neither has completed their part, in their reciprocal

240Anchor,Savin~s Bank v. Furigay, G.R. No. 191178, Ma_rch 13, 2013; Central
Philippine University v. CA, G.R. No. 112127, July 17, 1995; a,:qd Al~~J1tara v.
Amoran~, G.R. No . .1:-12493, Feb. 29, 1960, citing :roleJ;1two's y ivil , ~Jc;,de, Vol. IV,
p. 39, further citing Sentencia of May 8, 1903 and ly.lanresa 896.
241Autocorp Group v. Intra Strata Assurance Corporation, 556 SCRA 250

(2008).
242
Supra.
-
Art. 1170 Title !.-OBLIGATIONS 65
Chapter 2
NATURE AND EFFECT OF OBLIGATIONS
243
obligations. Reciprocal obligations, in turn, are those arising from
the same cause, and wherein 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. 244 They are to be performed simultaneously,
so that the performance of one is conditioned upon the simultaneous
fulfillment of the other. 245 Stated otherwise, in reciprocal obligations,
before a party can demand the performance of the obligation of the
other, the former must also perform its own obligation. 246 Hence, the
mutual inaction of the parties gives ris•e to compensatio mora~, where
the mutual delay of the parties cancels out the effects of default, 247
such that it is as if no one is guilty of delay. 248 This principle is
~x:pr_essed in Article 1169, last paragraph of the Civil Code,, which
states that "in reciprocal obligations, neither party incurs in delay if
th_e.other does no.t comply or is not ready to comply in a manner with
what is incumbent upon him."
·· ':_· .. in .recip:i,ocal obligations, delay by·the other.begins only from
the moment one· of the parties fulfills his qbligation. 249 Hence, any
claini of ·delay or non-performance against the other could prosper
only if the complaining party had faithfuily complied with its own
correlative
: ,,. ...,
,
obligation. 250 .
r 1- ..• .

·· [b.] Requirement of Demand in Reciprocal


. Obligations
In reciprocal obligations, as in a contract of sale, the general
rule is that the fulfillment of the .parties' :respective obligations
should be simultaneous. Hence, no demand is generally necessary
because, once a party fulfills his obligation and the other party

24acortes v. CA, G.R. No. 126083, July 12, 2006.


, .. 244M orld Properties and Holdings, Inc. v. Majestic Finance and Invest-
. · t G' Iegaw777 SCRA · 37 (2015); Con~oh'dated In dustr1a. 1 Gases, I nc. v. Ala b ang
Mldicaice:~:r, 709 SCRA 409 (2013); MBTC v. Chiok, 742 SCRA 435 (2014); Heirs
of Ramon C. Ga1·te v. The Plaza, Inc·• 640 SCRA 576 (2011); Cortes v. CA, G.R. No.
126083, July 12, 2006; Casio, Jr. v. CA, G.R. No. 133803, Sept. 16, 2005.
mli .
246Consolidated Industrial Gases, Inc. v. Alabang Medical Center, supra.
. 247Cortes v. CA, supra.
24BJd., citing Paras, Civil Code, Book IV, 14th Ed., p. 123.
249Art 1169, last par., NCC. . . .
; ·
250Megaworld p ropert1e
· s and Holdings, Inc. v. MaJestic Finance and Invest-
ment Co., Inc., supra.
66 OBLIGATIONS & CONTRACTS Art. U71

does not fulfill his, the latter automatically incurs in delay. 25.1 But
when different dates for performance of the obligations are fixed,
the default for each obligation must be deterniined by the rules
given in the first paragraph of Article 1169 of the Civil Code, that
is, the other party would incur in delay only from the moment the .
other party demands fulfillment of the former's obligation. 262 Thus,
even in reciprocal obligations, if the period for the fulfillment of
the obligation is fixed, demand upon the obligee _is still necessary
before the obligor can be considered in default and before a cause of,
actio,n for rescission, for example, will accrue. 263 Without a preYiious
demand for the (ulfillment of the obligation, there is. no cause · o(
action yet for rescission against the other party as the latter will.n9t .
yet be considered in breach of its contractu_a l obligation. 264

[24.4] Mora Accipiendi


Mora accipiendi relates t<;> the delay on the part of the .obligee
in accepting the performance .of'die obligation by the obligor. 265
The requisites of niora accipiendi ~re the f~llowing: (1) ·an offer of
performance by the debtor who has the required capacity; (2) the offer
must be to comply with the p:restation as it should be performed;,.and
(3) the creditor refuses the performance without just cause. 256 The
concept and effects of mora accipiendi will be di_scussed thoroughly
in the chapter dealing with tender of p~yment and consignation in
Chapter 12 of this Book. ·

Art. 1171. Responsibility.arising from fraud is demandable in


all obligations. Any waiver of an· action for future fraud is void ..
(1102a)

§25. Fraud (Dolo)


[25.1] Concept
One of the parties may resort to dolo or fraud only during
the fulfillment of the obligation or for the purpose of induci'.ng

251 Solar Harvest, Inc. v. Davao Corrugated Carton Corp., G.R. No. 176868,
July 26, 2010. .
2s2Id.
253/d.
254/d.
265 Pantaleon v. American Express International, Inc., 587 SCRA 551 (2009).

256/d.
Art. 1171
Title I. - OBLIGATIONS 67
Chapter 2
NATURE AND EFFECT OF OBLIGATIONS
an~ther to enter ~nto a contract. In the first, the obligation already
masts and fraud 1s committed only during its performance. In the
second, .however, it is fraud which gives rise to the obligation. As a
consequence, the first kind of fraud merely gives rise to an action
for damages while the second kind of fraud is a ground to seek the
annulment of the contract.
The fraud referred to in Article 11 70 of the Civil Code is the
deliberate and intentional ·evasion of the normal fulfillment of
257
obligation. It exists only during the performance 'of an already
existing obligation; hence, it merely gives rise to an action for
damages. The other kind of fraud which is employed to induce
another to enter into a contract and which is a ground to annul the
same is discussed in Article 1338 of the Civil Code. This kind of
fraud will be discussed in Chapte.r 18 of this Book.

[25.2] Criticism on Use of the Term ."Fraud" in Article


1170
The eminent Civilist and jurist, Mr. Justice J.B.L. Reyes,
criticizes the use of the word "fra'Ud" in Article 11 70 of the Civil Code
as lacking in precision~ He commented:
The Code uses the word fraud in two differ~nt senses: (a)
Meaning malice or bad faith as in Art. 1170; (b) Meaning deceit
(dolo) as in Art. 1338, and Art. 895 (5). , .: , .
The two significations are by no means identical. They
differ in time (for deceit exists ahead'of the'contractual obligation
between the parties, and can only oe found in contracts and
wills, while bad faith or malice refers to the performance of an
obligation already in existence), and in effects (bad faith giving
rise to damages or rescission, while deceit produces nullity).
Such being the .case, the general use of the term "fraud" is
equivocal and lacks precisi~n. It seems ~~ch pref~rable to use
the ·term ''bad faith" (or malice) and deceit m the proper cases. 258

[25.3] No Waiver of Action for Future Fraud


Apart from declaring that responsibility arising from fraud_is
demandable in all obligations, the law further prohibits any waiver
of an action for future fraud. Such waiver is void. These principles
are expressed in Article 11 70 of the Civil Code quoted above.

251Legaspi Oil Co., Inc. v. CA, G.R. No. 96505, July 1, 1993.
258XVI Lawyer's Journal 47, Jan. 31, 1951.