You are on page 1of 67

CIVIL LAW REVIEW 2 Notes [ATTY. CRISOSTOMO A. URIBE] I. OBLIGATIONS [June 18 2!!8] A. IN GENERAL" 1. #E$INITION" A%t&'(e 11)*.

+n o,(&-+t&on &s + .u%&/&'+( ne'ess&t0 to -&1e to /o o% not to /o. #e2&nes CIVIL 34 5JURI#. NECESSITY6 7+8es &t en2o%'e+,(e ,0 'ou%t +'t&on4 B+(+ne: Book IV starts w/ an inaccuracy. It gives the impression that obligations & contracts are of the same status, w/c they are not. A contract is only one of the sources of obligations. Book IV shoul have been simply title !"bligations.! Et07o(o-0 9 two #atin wor s, ligare, meaning !to bin ! & ob w/c is a proposition use to intensify a verb. #iterally obligare means !to ,&n/ se'u%e(0.! To(ent&no" the juridical tie between two or more persons, by virtue of which one of them, the creditor or oblige, has the right to demand of the other, the debtor or obligor, a definite prestation. M+n%es+" legal relation established between one party and another whereby the latter is bound to the fulfillment of a prestation which the former may demand of him. A%&+s R+7os" $more complete efinition, acc g to %, whch gives the element of responsibility essential to an &' An 3 is a juridical relation whereby a person (called the creditor) may demand from another (called the debtor) the observance of a determinate conduct, and in case of breach, may obtain satisfaction from the assets of the latter. Where there is a right or power to demand, there is a correlative 3 or an imposition upon a person of a definite conduct.

Both parties are etermine at the time of the e+ecution of the obligation. one party is etermine at the constitution of the obligation & the other to be etermine subse-uently in accor ance w/ a criteria that is previously establishe . the sub(ect is etermine in accor ance w/ his relation to a thing & therefor it changes where the thing passes fr. one person to another. %his is a <%o<e%t0@(&n8e/ o,(&-+t&on.

:A= Object of the obligation - the con uct or activity that must be observe by the ebtor, this is always an activity or con uct, the <%est+t&on. ReBu&s&tes o2 +n o,.e't" It must be licit. It must be possible. It must be eterminate or eterminable. It must have pecuniary value so that if not performe it is converte into amages. :C= inculum juris , the legal tie, whereby upon efault or refusal of the ebtor to perform, the cre itor can go to court. 0hen a person says !I promise to pay you when I like to,! there is no obligation here bec. there is no vinculum juris. Ju%&/&'+( t&e the efficient cause establishe by the various sources of 3Ds 1 by virtue of which the ebtor is boun in favor of the cre itor to perform the prestation. E22&'&ent '+use E vinculum may either be relation establishe by: 2. #aw )e.g. marital relation giving rise to 3 for support3 4. Bilateral acts )e.g. contracts give rise to the 3s stipulate therein* 5. 6nilateral acts )e.g. crimes an -uasi, elicts* 77 All the above 5/8 elements are agree upon by commentators as essential elements. %he following two are being ebate . :&= !ausa debendi" obligationes :C+st+n= 9 %his is what makes the obligation eman able. %his is the pro+imate why of an obligation. :&&= #orm , %his is controversial. %his is acceptable only if form means some manifestation of the intent of the parties. [TOLENTINO" 3 5to -&1e6 prestation consists in the elivery of a movable or an immovable thing in or er to create a real right, orfor the use of the recipient, or for possession, or to return to its owner3 e.g. 3 to eliver the thing in a 9 of sale, eposit, lease, antichresis, ple ge an onation. 3 5to /o6 incl. all kin s of Fo%8 o% se%1&'es. :.g. 9 of employment or professional services. 3 5not to /o6 consists in abstaining from some act, e.g. uty not to create a nuisance3 ReBu&s&tes o2 + <%est+t&on" 2. it must be possible, physically an (uri ically 4. it must be eterminate, or atleast eterminable3 an 5. it must have a positive e-uivalent in money. )susceptible of pecuniary appreciation* ?os&t&1e L+F 9 vali legislative epartment3 legal laws enacte by the

B+(+ne" A better efinition woul be, An obligation is a juridical relation :,e'. t;e%e +%e 2 <+%t&es= whereby a person should engage or refrain fr. engaging in a certain activity for the satisfaction of the private interests of another, who in case of non-fulfillment of such duty may obtain fr. the patrimony of the former through proper judicial proceedings the very prestation due or in default thereof, the economic equivalent :/+7+-es= that it represents. :#&+> ?&e%o.= O,(&-+t&on :3= 9 is a (uri ical relation whereby a person )calle the cre itor* may eman from another ) ebtor* the observance of eterminate con uct, an in case of breach, may obtain satisfaction from the assets of the latter. C;+%+'te%&st&'s o2 +n O,(&-+t&on" It represents an e+clusively private interest It creates ties that are by nature transitory It involves the power to make the (uri ical tie effective in case of non,fulfillment through an economic e-uivalent obtaine fr. the ebtor.s patrimony.

Essent&+( E(e7ents o2 +n O,(&-+t&on" :1= Active Subject / %his refers to the cre itor or the obligee. A '%e/&to% generally use in an obligation to give while o,(&-ee is use in an obligation to do :2= Passive Subject / %his refers to the ebtor or the obligor. /e,to% is use in an obligation to give while o,(&-o% is use in an obligation to do %he first two elements must be /ete%7&n+te or /ete%7&n+,(e. %he following are possible combinations:

N+tu%+( 3 / not sanctione by any action but have a relative (uri ical effect3 o not grant the right of action to enforce their performance but after voluntary fulfillment by their obligor, they authori;e the retention of what has been elivere or ren ere by reason thereof )A%t. 1C2A*3 2. GIN#S O$ OBLIGATIONS AS TO BASIS H EN$ORCEABILITY

:+= NATURAL OBLIGATIONS Article 2845. "bligations are civil or natural. C&1&( o,(&-+t&ons give a right of action to compel their performance. N+tu%+( o,(&-+t&ons, not being base on positive law but on e-uity an natural law, o not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authori;e the retention of what has been elivere or ren ere by reason thereof. <ome natural obligations are set forth in the following articles. )Arts. 2845 / 285= not e+clusive enumeration3 some others>* ReBu&s&tes o2 N+tu%+( 3" 2. there is a (uri ical tie between two persons 4. the tie is not given effect by law an 3 w/o a sanction, susceptible of voluntary performance, but not thru compulsion by legal means. Vo(unt+%0 2u(2&((7ent 9 may be un erstoo as spontaneous, free from frau or coercion or it may be un erstoo as meaning without knowle ge or free from error3 , w/knowle ge that he cannot be compelle to pay 34 RATIO" ?reputation@ )clan* N+tu%+( 3 1s. Mo%+( 3" N+tu%+( 3 :+ists legal fulfillment of an 3 Mo%+( 3 none act of pure liberality which springs from bloo , affection or benevolence entirely omain of morals moral uty is ine+istent in the (uri ical point of view

F;&'; est+,(&s;es t;e74 +n/ +s to F;+t ;+s not ,een 2o%eseen ,0 t;e <%o1&s&ons o2 t;&s Boo8. +n +-%ee7ent &s not ne'ess+%0 &n o%/e% t;+t + <+%t0 7+0 /e7+n/ 2%o7 +not;e% t;e 2u(2&((7ent o2 +n 3 arising from the application of a law in the circumstances3

B+(+ne" L+F +s + sou%'e o2 o,(&-+t&on / It is my opinion that there is an overlap in the enumeration bec. all obligations arise fr. law. #aw is the only source of obligation, in the ultimate sense. But, as a pro+imate source, there are five sources of obligations. #aw is both the ultimate & a pro+imate source of obligations. Sou%'es o2 O,(&-+t&ons +''o%/&n- to S+n';e> Ro7+n.@@ #aw & Acts. %he latter are further classifie , as follows: )2* licit acts create by concurrence of wills )contracts*3 )4* licit acts either voluntary or involuntary w/o concurrence of wills )-uasi,contract*3 )5* illicit acts of civil character w/c are not punishable, voluntary or involuntary )torts & all amages arising fr. elay*3 )8* illicit acts w/c are voluntary & are punishable by law )crimes* Baviera: 0hen the source of the obligation is #aw, there is no nee for an act or omission for the obligation to arise. CA<:: SA%&A'A O&'() S. )A!O!O *+, P -./0 Dlaintiff owne ispute property in Dan acan, Ela whc was ac-uire uring the Fapanese occupation by %aiwan %ekkosho with %C%. 0hen BD was ce e to 6<A, the same was entruste to Alien Droperty Custo ian, ADC by the 6< govt. ADC took possession, control an custo y un er the %ra ing with the :nemy Act. ADC allowe Copra :+port Eanagement Co. to occupy the property for a fee. BD later ma e representation with ADC to use the same property with warehouse. %he warehouse was repaire by GAC"C" an was lease to Hioscoro <arile. %he latter faile to pay rentals on the property. In an action to recover possession of the property, the court nullifie the sale to %.%ekkosho an cancelle its %C% an or ere reversion of title to plaintiff, an right of recovery from GAC"C" of rentals to the property. ISSUE" WON NACOCO &s (&+,(e to <+0 ,+'8 %ent+(sL I:#H: I2 /e2.@+<<e((+nt :N+CoCo= &s (&+,(e +t +(( &ts o,(&-+t&ons 7ust +%&se 2%. +n0 o2 t;e C sou%'es o2 o,(&-+t&ons n+7e(0 (+F 'ont%+'t o% Bu+s& 'ont%+'t '%&7e o% ne-(&-en'e. :A%t. 1!8M OCC.= As to '%&7es: Hef.,appellant is not guilty of any offense at all, bec. it entere into the premises & occupie it w/ the permission of the entity w/c ha the legal control & a min. thereof, the Alien Drop. A min. )ADA* As to K#: Geither was there any negligence on its part. As to Cont%+'t: %here was also no privity )of contract or obligation* bet. the ADA & %aiwan %ekkosho, w/c ha secure the possession of the prop. fr. the pltff,appellee by the use of uress, such that the Alien Drop. Custo ian or its permittee ) ef.,appellant* may be hel responsible for the suppose illegality of the occupation of the prop. by sai %ekkosho. %he ADA ha the control & a min. of the prop. not as successor to the interests of the enemy hol er of the title, the %. %ekkosho, but by e+press provision of law. Geither is it a trustee of the former owner, the pltff,appellee herein, but a trustee of the 6< Jovt., in its own right, to the e+clusion of, & against the claim or title of, the enemy owner. Arom Aug. 2K8L, when ef.,appellant took possession, to the ate of the (u gment on 4/4M/8M, the ADA ha the absolute control of the prop. as trustee of the 6< Jovt., w/ power to ispose of it by sale or otherwise, as though it were the absolute owner.

Ju%&/&'+( t&e ?e%2o%7+n'e ,0 /e,to%

B+s&s o2 eI&sten'e o2 3 En2o%'e+,&(&t0

0ithin the omain of law %rue 3 but for certain causes cannot be enforce by law EI+7<(es o2 n+tu%+( 3Ds" <upport of a natural chil In emnification of a woman se uce <upport of relatives, by consanguinity or affinity CIVIL 3Ds

Sou%'e o2 ,&n/&n2o%'e H e22e't

Arom positive law can be enforce by court action or the coercive power of public authority

En2o%'e+,&(&t0

NATURAL 3Ds from e-uity an natural (ustice cannot be compelle by court action but epen s upon goo conscience of the ebtor

I((&'&t 3Ds 3Ds which are contrary to morals an goo customs o not constitute natural 3Ds whatver is pai un er such 3Ds can be recovere , )apply Art. 2828, 2822, 2824.* :,= CIVIL OBLIGATIONS" A%t&'(e 11)J. O,(&-+t&ons +%&se 2%o7" :1= L+F4 :3Ds e$ lege= :2= Cont%+'ts4 :A= Ku+s&@'ont%+'ts4 :C= A'ts o% o7&ss&ons <un&s;e/ ,0 (+F4 +n/ :)= Ku+s&@/e(&'ts. <"6BC:< "A 3Ds" 1. LAW" A%t&'(e 11)8. O,(&-+t&ons /e%&1e/ 2%o7 (+F +%e not <%esu7e/. On(0 t;ose eI<%ess(0 /ete%7&ne/ &n t;&s Co/e o% &n s<e'&+( (+Fs +%e /e7+n/+,(e +n/ s;+(( ,e %e-u(+te/ ,0 t;e <%e'e<ts o2 t;e (+F

%herefore, even if ef. were liable to the ADA for rentals, these woul not accrue to the benefit of the pltff., the ol owner, but the 6< Jovt. B+(+ne" Is t;e enu7e%+t&on &n A%t. 11)J eI'(us&1e o% 7e%e(0 &((ust%+t&1eL #o't%&ne" T;e sense t;+t t;e '+se o2 S+-%+/+ O%/en te((s us &s t;+t t;e enu7e%+t&on &s eI'(us&1e. In resolving the issue of whether the ef. shoul be liable to pay rentals, the <C use the process of e+clusion. Aor there to be an obligation to pay rentals, that obligation must arise fr. either of the five )N* sources of obligations. If it oes not, then there is no obligation. T;e '(e+% &7<(&'+t&on o2 t;&s %u(&n- &s t;+t t;ese 2&1e :)= +%e t;e on(0 sou%'es o2 o,(&-+t&ons. %he problem w/ Art. 22NO is that it might not cover all situations. Aor e+ample: Carale uses Hove as his soap. Ie then hears an a vertisement fr. Droctor & Jamble that it is offering a nice tumbler for those who can collect 5= wrappers of %i e before Aeb. 4K, 2KKL. <o, Carale stoppe using Hove & starte using %i e. Ie was able to consume all 5= wrappers on Aeb. 4K, 2KKL. Ie then went to Droctor & Jamble )D & J* to e+change the 5= %i e wrappers for a tumbler. But D & J tol Carale that their tumblers run out of stock. Carale contracte a skin allergy as a result of using %i e in taking a bath. %he -uestion is: Hoes D & J have any obligation to Carale. If we look at Art. 22NO, this situation oes not fall in any of the five sources. <o, we know have a problem. %he Jerman Civil Co e )BJB* covers this situation. %he BJB has a si+th source of obligation, the Auslobung, w/c means a un&(+te%+( o22e%. 2. CONTRACTS" 9 A%t&'(e 11)M. O,(&-+t&ons +%&s&n- 2%o7 'ont%+'ts ;+1e t;e 2o%'e o2 (+F ,etFeen t;e 'ont%+'t&n<+%t&es +n/ s;ou(/ ,e 'o7<(&e/ F&t; &n -oo/ 2+&t;. A%t&'(e 1A!). A 'ont%+'t &s + 7eet&n- o2 7&n/s ,etFeen tFo <e%sons F;e%e,0 one ,&n/s ;&7se(2 F&t; %es<e't to t;e ot;e% to -&1e so7et;&n- o% to %en/e% so7e se%1&'e. Ne-ot&+t&on o2 9 is initiate by an "AA:B3 Autonomy of 1ill supposing the contract is vali an enforceable, the terms of 9 not contrary to law, morals, JC, DD or D", the stipulations therewith sh be given effect. )one of fun amental principles of 9Ps* B+(+ne: %here are two parts in Art. 22NK. obligations erive fr. contract has the force of law bet. the contracting parties )jus civili * there must be compliance in goo faith ) jus gentium.*

)4* Vo(unt+%0 / thus ifferent from -uasi, elict which is base on fault or negligence or lack of foresight3 )5* Un&(+te%+( / thus ifferent from contract, in which parties agree. e.-. &n ne-ot&o%u7 -est&o" Benefits Conferre Voluntarily Aor preservation of Droperty or Business ENTRA@CONTRACTUAL OBLIGATIONS :3s F&t;out +n +-%ee7ent E ,+se/ &n IM?LIE# CONSENT= K" OOW MANYL A" In NCC 2 no7&n+te +n/ 5so7e6 &nno7&n+te KCDs +. Ku+s&@'ont%+'ts A%t&'(e 21C2. Certain lawful, voluntary an unilateral acts give rise to the (uri ical relation of -uasi,contract to the en that no one shall be un(ustly enriche or benefite at the e+pense of another. A%t&'(e 21CA. %he provisions for -uasi,contracts in this Chapter o not e+clu e other -uasi,contracts which may come within the purview of the prece ing article. ,. )egotiorum %estio A%t&'(e 21CC. 0hoever voluntarily takes charge of the agency or management of the business or property of another, without any power from the latter, is oblige to continue the same until the termination of the affair an its inci ents, or to re-uire the person concerne to substitute him, if the owner is in a position to o so. T;&s .u%&/&'+( %e(+t&on /oes not +%&se &n e&t;e% o2 t;ese &nst+n'es" ELEMENTS 9 )2* 0hen the property or business is not neglecte or aban one 3 )4* If in fact the manager has been tacitly authori;e by the owner. In the first case, the provisions of articles 252O, 28=5, Go. 2, an 28=8 regar ing unauthori;e contracts shall govern. In the secon case, the rules on agency in %itle Q of this Book shall be applicable. NEGOTIORUM GESTIO / (uri ical relation which arises whenever a person voluntarily takes charge of an agency or management of the business or property of another without any power or authority from the latter.

CASE" P(OP2(3S !A& S. !O44A)'O S(!5&678 *-, S!&A 9.0

Dltff. )Deople.s Car* was in law liable to its customers for the amages cause the customer.s car, w/c ha been entruste into its custo y. Dltff. therefore was in law (ustifie in making goo such amages & relying in turn on ef.)Comman o <ecurity* to honor its contract & in emnify it for such un ispute amages, w/c ha been cause irectly by the unlawful & wrongful acts of ef..s security guar in breach of their contract. 0"G comman o security is liable to amages in accor ance w/ provisions of 9/ whc provision/ A. KUASI@CONTRACTS" A%t&'(e 11*!. O,(&-+t&ons /e%&1e/ 2%o7 Bu+s&@ 'ont%+'ts s;+(( ,e su,.e't to t;e <%o1&s&ons o2 C;+<te% 1 T&t(e NVII o2 t;&s Boo8. KUASI@CONTRACT is a (uri ical relation which arises from certain unlawful, voluntary an unilateral acts, to the en that no one may be un(ustly enriche or benefite at the e+pense of another.

'. Solutio indebiti A%t&'(e 21)C. I2 so7et;&n- &s %e'e&1e/ F;en t;e%e &s no %&-;t to /e7+n/ &t +n/ &t F+s un/u(0 /e(&1e%e/ t;%ou-; 7&st+8e t;e o,(&-+t&on to %etu%n &t +%&ses. SOLUTIO IN#EBITI 9 (uri ical relation which arise whenever person un uly elivers a thing through or by mistake of another who has no right to eman it.

C. ACTS OR OMISSIONS ?UNISOE# BY LAW :#ELICT o% CRIMES ,ut not $e(on0 F;' &s (t/. To t;ose <un&s;e/ un/e% R?C =" A%t&'(e 11*J. I2 + <e%son o,(&-e/ to /o so7et;&n2+&(s to /o &t t;e s+7e s;+(( ,e eIe'ute/ +t ;&s 'ost. T;&s s+7e %u(e s;+(( ,e o,se%1e/ &2 ;e /oes &t &n 'ont%+1ent&on o2 t;e teno% o2 t;e o,(&-+t&on. $u%t;e%7o%e &t 7+0 ,e /e'%ee/ t;+t F;+t ;+s ,een <oo%(0 /one ,e un/one.

T;e +'t 7ust ,e" )2* L+F2u( / thus unlawful3

ifferent from

elict which is

B+(+ne: C%&7e +s + sou%'e o2 o,(&-+t&on 9 %here are many crimes fr. w/c, civil liability arises in their commission, in a ition to the criminal penalty attache to them. %his un erlines the two aspects in a crime: one, as +n o22ense +-+&nst t;e st+te , & two as +n o22ense +-+&nst t;e 1&'t&7. It is in the latter case that civil liability is recoverable. As 2+% +s '%&7e &s 'on'e%ne/ '&1&( (+F &s not 'on'e%ne/ FE t;e <en+( (&+,&(&t0 ,ut on(0 FE t;e '&1&( (&+,&(&t0.

?e%2o%7+n'e +t /e,to%Ds 'ost non,compliance with & to o, cre itor may o it himself or get a 5r person at the e+pense of the ebtor3 when & to o can only be performe by ebtor he cannot compelle to o so by force, the only reme y is amages3 A%t&'(e 21JJ. Besponsibility for fault or negligence un er the prece ing article is entirely separate an istinct from the civil liability arising from negligence un er the Denal Co e. But the plaintiff cannot recover amages twice for the same act or omission of the efen ant. TITLE V @ C&1&( L&+,&(&t0 R?C" COA?TER ONE @ ?e%sons C&1&((0 L&+,(e 2o% $e(on&es A%t&'(e 1!!. ivil liability of a person guilty of felony. :very person criminally liable for a felony is also civilly liable. [COA?TER 2 R?C" W;+t C&1&( L&+,&(&t0 In'(u/es] A%t&'(e 1!C. 1hat is included in civil liability . ! %he civil liability establishe in articles 2==, 2=2, 2=4, an 2=5 of this Co e inclu es: 1. Rest&tut&on4 2. Re<+%+t&on o2 t;e /+7+-e '+use/4 A. In/e7n&2&'+t&on 2o% 'onseBuent&+( /+7+-es. Baviera: Be-uisites of enforcing the subsi iary obligation of the employer un er the BDC: criminal case was file against the :: the act or negligence arose uring or in connection w/ the performance of the latterPs employment the :: is foun guilty of criminal negligence a writ of e+ecution has been returne unsatisfie , i.e. :: has been foun to be insolvent. %here is no res (u icata as regar s the :B as there is a ifference in the C"A. Ruasi, elict )RH* iffers fr. an action base on elict on the following groun s: R6A<I H:#IC% H:#IC% it is subsi iary )impute * :BPs liability is primary in BDC Hiligence of goo father of the In BDC, such efense of JAA family may be set up by the is not available :B as a efense A <e%son F;&(e not '%&7&n+((0 (&+,(e 7+0 st&(( ,e '&1&((0 (&+,(e Aailure of the plaintiff to reserve in the criminal case his right to file a separate civil action is not fatal to the civil action after the ac-uittal of the accuse . 0hen the ac-uittal is base on groun that the guilt of the accuse has not been prove beyon reasonable oubt, plaintiff has the right to institute a civil action for amages )culpa aquiliana*.

Aor e+ample, Alinea is the owner of a bus co., the Alinea Bus Co., Eolina is a river of one of the buses of Alinea Bus Co. #ag ameo ro e the bus being riven by Eolina. As a result of the reckless riving of Eolina, #ag ameo suffere in(uries. In this case, #ag ameo has a choice,, he can sue on either contract, -uasi, elict or on crime. If he eci e to sue on the breach of the contract of carriage, all he has to prove is the )e+istence of the contract* & that it was not performe . In this case, he can sue the common carrier but not the river bec. he has no contract w/ the river. If he sues on -uasi, elict, he can sue both the common carrier & the river. %he efense of the river woul be iligence in riving )or fortuitous event.* %he efense of the common carrier woul be iligence in the selection & supervision of employees. If he sues un er crime, he has to sue the river. In case the river is convicte & has been sentence to pay civil liability, the employer )Alinea Bus Co.* is subsi iarily liable. If Eolina is insolvent, Alinea Bus Co. will pay. Gotice that the choice of cause of action will etermine three things: the theory of the plaintiff, the efense of the ef. & the -uestion of whom to sue. Again, remember that in this case, the victim has a choice. Drovi e that he is consistent w/ his theory & provi e , further, that ;e '+nnot %e'o1e% /+7+-es tF&'e 2o% t;e s+7e &n.u%0.

Baviera: %he terms of the contract cannot be against man atory & prohibitive laws. An if the contract is vali , it shall have the force of law between the contracting parties. ). KUASI@#ELICTS" :culpa aquiliana E ne-(&-en'e E to%tsP= [NCC COA?TER 2 @ Ku+s&@/e(&'ts] A%t&'(e 21J*. 1hoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pree$isting contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this !hapter. :memori;e<= A%t&'(e 11*2. O,(&-+t&ons /e%&1e/ 2%o7 Bu+s&@ /e(&'ts s;+(( ,e -o1e%ne/ ,0 t;e <%o1&s&ons o2 C;+<te% 2 T&t(e NVII o2 t;&s Boo8 +n/ ,0 s<e'&+( (+Fs. P To%ts &s se(/o7 use/ ,0 SC &n .u%&s. &t &s ,%o+/e% te%7 2o% +'t&on+,(e F%on- F;' 7+0 not ,e ne-(&-en'e 7+0 ,e 7+(&'&ous to%tuous +'t F;' &s not +n07o%e K#. KUASI@#ELICTS / the fault or negligence of a person who, by his act or omission connecte or not with, but in epen ent from any contractual relation, causes amage to another person3 %he omission to o something which or inarily reasonable men gui e by those consi erations whch or inarily regulate the con uct of human affairs, woul o3 or oing something which pru ent an reasonable men woul not o. #iability on RH is base on :-uity, man is responsible not only for acts conscious an intentional acts but also for his lack of foresight, care an iligence which may cause harm to another. ELEMENTS" :1= A /ut0 on t;e <+%t o2 t;e /e2en/+nt to <%ote't t;e <(+&nt&22 2%o7 t;e &n.u%0 o2 F;&'; t;e (+tte% 'o7<(+&ns4 :2= A 2+&(u%e to <e%2o%7 t;+t /ut0 +n/ :A= An &n.u%0 to t;e <(+&nt&22 t;%ou-; su'; 2+&(u%e. TEST O$ NEGLIGENCE" 0oul a pru ent man, in the position of the person on who negligence is attribute , foresee harm to the person in(ure as a reasonable conse-uence of the course about to be pursue T GIN#S O$ NEGLIGENCE"

K" Is &t <oss&,(e t;+t e1en &2 t;e%e &s + 'ont%+'t ,et. t;e <+%t&es + Bu+s&@/e(&'t '+n st&(( ,e 'o77&tte/ ,0 one +-+&nst t;e ot;e% %e-+%/&n- t;e +%e+ 'o1e%e/ ,0 t;e 'ont%+'tL A" Ses, accor ing to the case of A%+net+ 1. /e Jo0+ )J SCRA )M. %he same act can give rise to obligations arising fr. ifferent sources.

)2* !ulpa aquiliana, also known as culpa e$tracontractual, or ne-(&-en'e as a source of &, KUASI@#ELICT3 Joverne by Arts. 42OL,42K8 G" contractual relation at all )4* !ulpa contractual, or negligence in the performance of a contractual &. Joverne by Art. 11JM )common carrier*, & all on contracts D:B<"G< #IAB#:: )IED6%:H/vicarious #IABI#I%S, 42M=* 2. father / mother 4. guar ians 5. owners/managers 8. employers N. the <tate L. teachers %he responsibility shall cease if they can prove that they have observe /&(&-en'e o2 -oo/ 2+t;e% o2 t;e 2+7&(0 to <%e1ent /+7+-e4

FE' -&1es %&se to t;e .u%&/&'+( t&e. #iability & (uri ical tie are simultaneous. Contracts & -uasi, elicts create two concentric circles w/ -uasi, elict as the bigger circle. $)ote: %here is a little mistake in Cangco. %he <C sai that the river can be sue un er culpa contractual. %his is wrong. %he river cannot be sue as he has no privity of contract w/ the passenger.' AAC%<: Cangco was an :: of EBB Co. Ie takes the train going home from work. %hat ay he alighte from the train while it was still slightly in motion. Ie lan e on the elevate platform on top of some sacks of watermelon which ma e him fall violently, rolle away from the platform un er the moving train where he ba ly crashe an lacerate his right arm. It happene at night bet O,Mpm an station was poorly lit. CangcoPs arm was amputate twice. %he seriousness of his in(ury ma e him file a case for amages vs EBB Co. I:#H: It can not be oubte that the employees of the railroa company were guilty of negligence in piling these sacks on the platform in the manner above state 3 that their presence cause the plaintiff to fall as he alighte from the train3 an that they therefore constitute an effective legal cause of the in(uries sustaine by the plaintiff. It necessarily follows that the efen ant company is liable for the amage thereby occasione un(ess %e'o1e%0 &s ,+%%e/ ,0 t;e <(+&nt&22Qs oFn 'ont%&,uto%0 ne-(&-en'e. It is important to note that the foun ation of the legal liability of the efen ant is the 'ont%+'t o2 '+%%&+-e, an that the obligation to respon for the amage which plaintiff has suffere arises, if at all, from the breach of that contract by reason of the failure of efen ant to e+ercise ue care in its performance. %hat is to say, its (&+,&(&t0 &s /&%e't +n/ &77e/&+te, iffering essentially, in legal viewpoint from that presumptive responsibility for the negligence of its servants, $&(SPO)'(A7 S5P(&6O&0, which can be rebutte by proof of the e+ercise of ue care in their selection an supervision. )presumption juris tantum, rebuttable*. Impute liability in GCC is not applicable to o,(&-+t&ons +%&s&n- e$ contractu, but only to e+tra,contractual obligations, or to use the technical form of e+pression, that article relates only to culpa +Bu&(&+n+ an not to culpa contractual. :very legal obligation must of necessity be e+tra, contractual or contractual. EIt%+@'ont%+'tu+( o,(&-+t&on ;+s &ts sou%'e &n t;e ,%e+'; o% o7&ss&on o2 t;ose 7utu+( /ut&es F;&'; '&1&(&>e/ so'&et0 &7<oses u<on &t 7e7,e%s , or which arise from these relations, other than contractual, of certain members of society to others, generally embrace in the concept of status. %he fun amental istinction between obligations of this character an those which arise from contract, rests upon the fact that in cases of non,contractual obligation &t &s t;e F%on-2u( o% ne-(&-ent +'t o% o7&ss&on &tse(2 F;&'; '%e+tes t;e vinculum juris whereas in contractual relations the vinculum e+ists in epen ently of the breach of the voluntary uty assume by the parties when entering into the contractual relation. T;e 'ont%+'t o2 /e2en/+nt to t%+ns<o%t <(+&nt&22 '+%%&e/ F&t; &t ,0 &7<(&'+t&on t;e /ut0 to '+%%0 ;&7 &n s+2et0 +n/ to <%o1&/e s+2e 7e+ns o2 ente%&n- +n/ (e+1&n- &ts t%+&ns )contract of carriage*. %hat uty, being contractual, was irect an imme iate, an its non,performance coul not be e+cuse by proof that the fault was morally imputable to efen ant.s servants. %he railroa company.s efense involves the assumption that even granting that the negligent con uct of its servants in placing an obstruction upon the platform was a breach of its contractual obligation to maintain safe means of approaching an leaving its trains, t;e /&%e't +n/ <%oI&7+te '+use o2 t;e &n.u%0 su22e%e/ ,0 <(+&nt&22 F+s ;&s oFn 'ont%&,uto%0 ne-(&-en'e in failing to wait until the train ha come to a

REKUISITES O$ LIABILITY :IM?UTE#=" 2. the fault of negligence of the efen ant 4. the amage suffere or incurre by the plaintiff 5. the relation of the fault or negligence an amage incurre by the plaintiff B+(+ne" %he Co e Commission i not choose to use tort. %his is bec. tort oes not e+actly have the same meaning as -uasi, elict. To%t [BROA#ER] 'o1e%s &ntent&on+( to%ts w/c in -uasi, elict is consi ere as civil liability arising fr. acts or omissions punishable by law. %here are some RH w/c are not covere by tort. Hean Bocobo suggeste the ancient term culpa aquiliana. But this i not merit the approval of the Co e Commission. A TORT is a '&1&( F%on- )an actionable wrong= consisting of a violation of a right or a breach of uty for which the law grants a reme y in amages or other relief. %he right is create by law in favor of a person calle a cre itor to compel another calle a ebtor to observe uty or a prestation either to ren er what is ue him or to refrain from causing him in(ury. C(+sses o2 To%ts A''o%/&n- to M+nne% o2 Co77&ss&on 1. Intent&on+( To%ts a. tortfeasor esires to cause the conse-uences of his act, or b. tortfeasor believes that the conse-uences are substantially certain to result from it c. e+. Art. 4L, 54 & 55 )CC* 2. Ne-(&-ent To%ts" . tortfeasorPs con uct merely creates a forseeable risk of harm which may or may not occur e. Art. 42OL )CC* A. St%&'t L&+,&(&t0 To%ts" f. e+. Art. 42M5 & 42MO )CC* K" I2 t;e%e &s + 'ont%+'t ,et. t;e <+%t&es '+n t;e%e ,e + Bu+s&@/e(&'t 'o77&tte/ ,0 one +-+&nst t;e ot;e% %e-+%/&nt;e +%e+ 'o1e%e/ ,0 t;e 'ont%+'tL A" If you look at Art. 42OL, you get the impression that if there is a contract bet. the parties, they cannot be liable for -uasi, elict on an area covere by the contract. %he case of Cangco has not really resolve this controversy. C+se" !A)%!O S. 4A)62A &A62&OA' !O. */> P ?@>0 B+(+ne: %here are two important principles that we learn fr. this case: %he ifference in concept bet. contract & -uasi, elict is that in a contract, t;e%e &s + <%e@eI&st&n- .u%&/&'+( t&e ,et. t;e <+%t&es. Violation of the contract gives rise to liability but not to the (uri ical tie. Furi ical tie is not borne by a violation. In -uasi, elict, it is precisely t;e F%on-2u( +'t

complete stop before alighting )#o't%&ne o2 'o7<+%+t&1e ne-(&-en'e, "a#es octrine*. If the acci ent was cause by plaintiff.s own negligence, no liability is impose upon efen ant.s negligence an plaintiff.s negligence merely contribute to his in(ury, the amages shoul be apportione . It is, therefore, important to ascertain if efen ant was in fact guilty of negligence. T;e test ,0 F;&'; to /ete%7&ne F;et;e% t;e <+ssen-e% ;+s ,een -u&(t0 o2 ne-(&-en'e &n +tte7<t&n- to +(&-;t 2%o7 + 7o1&n- %+&(F+0 t%+&n &s t;+t o2 o%/&n+%0 o% %e+son+,(e '+%e. It is to be consi ere F;et;e% +n o%/&n+%&(0 <%u/ent <e%son o2 t;e +-e seI +n/ 'on/&t&on o2 t;e <+ssen-e% Fou(/ ;+1e +'te/ +s t;e <+ssen-e% +'te/ un/e% t;e '&%'u7st+n'es /&s'(ose/ ,0 t;e e1&/en'e. %his care has been efine to be, not the care which may or shoul be use by the pru ent man generally, but the care which a man of or inary pru ence woul use un er similar circumstances, to avoi in(ury.! )%hompson, Commentaries on Gegligence, vol. 5, sec. 5=2=.* B6#IGJ: >that the train was barely moving when plaintiff alighte is shown conclusively by the fact that it came to stop within si+ meters from the place where he steppe from it. %housan s of person alight from trains un er these con itions every ay of the year, an sustain no in(ury where the company has kept its platform free from angerous obstructions. %here is no reason to believe that plaintiff woul have suffere any in(ury whatever in alighting as he i ha it not been for efen ant.s negligent failure to perform its uty to provi e a safe alighting place. CASE" W;e%e t;e%e 'ou(/ st&(( ,e K# e1en F;en t;e%e &s 'ont%+'t o2 '+%%&+-e 9 %576(&&(A S. %576(&&(A *-@ P ,??0 AAC%<: A truck an a car colli e on a narrow bri ge. A passenger of the truck was in(ure an file a case. %he owner of the truck was ma e efen ant although his river was riving the truck at that time an he was not a passenger of the truck. %he owner of the car was also ma e efen ant although the river of the car at the time of the collision was his son, 2M yrs. of age, w/ other members of the family accommo ate therein, but not the car owner. OEL#" %he court foun both rivers negligent. %he owner of the truck was ma e liable for culpa contractual, un er the contract of carriage. %he owner of the car was ma e liable un er Art. 42M=, impute liability for culpa aquiliana. $RAU# dolo &n1o(1es F&((2u(ness o% /e(&,e%+te &ntent to '+use /+7+-e o% &n.u%0 to +not;e% t;e +'t &tse(2 NEGLIGENCE !ulpa 7e%e F+nt o2 '+%e o% /&(&-en'e not 1o(unt+%0 +'t o% o7&ss&on

(&+,&(&t0 L&+,&(&t0 2o% #+7+-e s $o%7 o2 Re/%ess Ku+ntu 7 o2 E1&/en' e Co7<%o 7&se

every RH gives rise to liability for amages reparation for in(ury suffere /in emnification/co mpensation prepon erance

there are crimes without civil liability punishment/fine/impr isonment beyon oubt reasonable

can be compromise

criminal liability can never be compromise

REKUISITES $OR LIABILITY" :onus= :1= W%on-2u( +'t o% o7&ss&on &7<ut+,(e to t;e /e2en/+nt ,0 %e+son o2 ;&s 2+u(t o% ne-(&-en'e4 :2= #+7+-e o% &n.u%0 <%o1en ,0 t;e <e%son '(+&7&n%e'o1e%04 :A= A /&%e't '+us+( 'onne't&on ,etFeen t;e ne-(&-ent +'t +n/ t;e &n.u%0. #OCTRINE O$ ?RONIMATE CAUSE is that which, in natural an continuous se-uence, unbroken by any efficient intervening cause, pro uces in(ury an without which the result woul not have occurre . %he e+emplification by the Court in one case is simple an e+plicit3 vi;: !)%*he <%oI&7+te (e-+( '+use is that acting first an pro ucing the in(ury, either imme iately or by setting other events in motion, all constituting a natural an continuous chain of events, each having a close causal connection with its imme iate pre ecessor, the final event in the chain imme iately affecting the in(ury as a natural an probable result of the cause which first acte un er such circumstances that the person responsible for the first event shoul , as an or inarily pru ent an intelligent person, have reasonable groun to e+pect at the moment of his act or efault that an in(ury to some person might probably result therefrom.! C. COM?LIANCE WITO OBLIGATIONS" A%t&'(e 1M. :very person must, in the e+ercise of his rights an in the performance of his uties, +'t F&t; .ust&'e -&1e e1e%0one ;&s /ue +n/ o,se%1e ;onest0 +n/ -oo/ 2+&t;. A%t&'(e 11*A. :very person oblige to give something is also oblige to take care of it with the <%o<e% /&(&-en'e o2 + -oo/ 2+t;e% o2 + 2+7&(0 , unless the law or the stipulation of the parties re-uires another stan ar of care. A%t&'(e 11*C. %he cre itor has a %&-;t to t;e 2%u&ts o2 t;e t;&n- from the time the obligation to eliver it arises. Iowever, he shall ac-uire no real right over it until the same has been /e(&1e%e/ to him. A%t&'(e 11*). 0hen what is to be elivere is a /ete%7&n+te t;&n-, the cre itor, in a ition to the right grante him by article 11J!, may compel the ebtor to make the elivery. If the thing is &n/ete%7&n+te o% -ene%&', he may ask that the obligation be complie with at the e+pense of the ebtor. If the o,(&-o% /e(+0s , or has promise to eliver the same thing to two or more persons who o not have the same interest, he shall be responsible for any 2o%tu&tous e1ent until he has effecte the elivery.

N+tu%e o2 A't

G&1es %&se to 3

t;e F+nt o% '+%e o% /&(&-en'e A s&n-(e +'t may be a crime an a RH at the same time3 )Art. 2==, BDC* In(ure party cannot recover amages twice for the same act or omission of efen ant3 )must choose 2 Bem.* CRIME <u,(&' %&-;t

As to n+tu%e o2 R&-;t 1&o(+te/ Is + W%on+-+&nst C%&7&n+( Intent Le-+( B+s&s 2o%

KUASI@#ELICT <%&1+te %&-;t

the in ivi ual not nee e Broa

the <tate Gecessary penal law necessary

A%t&'(e 11**. %he obligation to give a eterminate thing inclu es that of elivering all its +''ess&ons +n/ +''esso%&es, even though they may not have been mentione . B+(+ne" T;%ee t0<es o2 o,(&-+t&ons.@@ )2* obligation to give3 )4* obligation to o3 & )5* obligation not to o. I. "bligation to give A. <pecific thing B. Jeneric thing II. %o o III. Got to o )this inclu es all negative obligations like obligation not to give.* G&n/s o2 <e%2o%7+n'e.@@ 2. specific performance @ performance by the ebtor himself ) applies only to & to give * 4. 5. substitute performance @ performance at the e+pense of the ebtor equivalent performance @ grant of amages

In all these cases, the cre itor has the option of %eso(ut&on o% %es'&ss&on un/e% A%t. 11M1 . In a ition, he can also claim /+7+-es.

A%t&'(e 12CC. %he ebtor of a thing cannot compel the cre itor to receive a ifferent one, although the latter may be of the same value as, or more valuable than that which is ue. In obligations to o or not to o, an act or forbearance cannot be substitute by another act or forbearance against the obligee.s will. A%t&'(e 12C). #+t&on &n <+07ent , whereby property is alienate to the cre itor in satisfaction of a ebt in money, shall be governe by the law of sales. A%t&'(e 12C*. 0hen the obligation consists in the elivery of an in eterminate or generic thing, whose -uality an circumstances have not been state , the cre itor cannot eman a thing of superior -uality. Geither can the ebtor eliver a thing of inferior -uality. %he purpose of the obligation an other circumstances shall be taken into consi eration. A%t&'(e 1C*!. A thing is eterminate when it is particularly esignate or physical segregate from all others of the same class. %he re-uisite that a thing be eterminate is satisfie if at the time the contract is entere into, the thing is capable of being ma e eterminate without the necessity of a new or further agreement between the parties A%t&'(e CC2. N+tu%+( 2%u&ts are the spontaneous pro ucts of the soil, an the young an other pro ucts of animals. In/ust%&+( 2%u&ts are those pro uce kin through cultivation or labor. by lan s of any

A%t&'(es 11*A @ 11** cover obligation to give. T;%ee A''esso%0 O,(&-+t&ons" 1. A%t. 11*A.@@ To t+8e '+%e o2 t;e t;&n- FE t;e /&(&-en'e o2 + -oo/ 2+t;e% o2 + 2+7&(0 unt&( +'tu+( /e(&1e%0. 2. A. B+(+ne: Arom the time the obligation arises, the cre itor has a <e%son+( %&-;t against the ebtor as to the fruits. But he has no real right over them unt&( +'tu+( /e(&1e%0. Re+( %&-;t &s + %&-;t FE' &s en2o%'e+,(e +-+&nst t;e F;o(e Fo%(/. Ie has only the personal right against the ebtor w/ regar to the un elivere fruits. %his is bec. of the principle )on nudis pactis, sed traditione, dominia rerum transferentur )It is not by mere agreement, but by elivery, is ownership transferre .* Dersonal right arises fr. the time the obligation to eliver arises whereas the real right oes not arise until actual elivery. A%t. 11*C.@@ To /e(&1e% t;e 2%u&ts to t;e '%e/&to% :2%u&ts <%o/u'e/ +2te% o,(&-+t&on to /e(&1e% +%&ses.= A%t. 11**.@@ To /e(&1e% +''ess&ons H +''esso%&es.

C&1&( 2%u&ts are the rents of buil ings, the price of leases of lan s an other property an the amount of perpetual or life annuities or other similar income NATURE AN# E$$ECTS O$ 3Ds OBJECT O$ TOE 3" 1. to give real 3 /ete%7&n+te :s<e'&2&'= o% &n/ete%7&n+te :-ene%&'= 2. to /o 3. not to /o <e%son+( 3 <os&t&1e :to /o= o% ne-+t&1e :not to /o= REAL 3" +. #ETERMINATE 3 9 particularly esignate from a particular class3 ?RINCI?AL 3 9 to give )to eliver* a eterminate thing3 ACCESSORY 3 / e+ists even when not e+pressly stipulate 3 :1= A%t. 11*A 9 to take care of the thing with proper iligence of a goo father of the family3 :2= A%t. 11*C / to eliver the fruits3 )882* natural / in ustrial / civil the & to eliver arises only if the cre itor is entitle 3 :A= A%t. 11** / elivery of the accessions an of the accessories )Art 88=*3 ,. GENERIC TOING is one that is in icate only by its kin s, without being istinguishe from others of the same kin . )&n/ete%7&n+te= In an & to eliver a generic thing, the ob(ect is /ete%7&n+,(e4 F;en /e(&1e%e/ &t ,e'o7es /ete%7&n+te. #ELIMITE# GENERIC not totally generic nor specific3 oblig. %o eliver one of <:V:BA# things3 oes not have esignation nor physical segregation3 Bule re Aortuitous :vents still apply. #ETERMINATION O$ #ILIGENCE REKUIRE#"

A%t&'(es 11*) @ 11*J.@@ Re7e/&es A1+&(+,(e to t;e C%e/&to% )specific performance, substitute performance, e-uivalent performance.* A. In o,(&-+t&ons to give 2. A /ete%7&n+te thing a. <pecific performance b. :-uivalent performance 4. A -ene%&' thing, all reme ies are available

B. In +n o,(&-+t&on to do 7+8e + /&st&n't&on" In obligation to do, w/c is purely personal only e-uivalent performance is available In an obligation to do w/c is not personal: a. substitute performance b. e-uivalent performance Note" In o,(&-+t&ons to /o s<e'&2&' <e%2o%7+n'e &s not +1+&(+,(e. %he reason for this is that specific performance will give rise to involuntary servitu e. C. O,(&-+t&on not to do 2. substitute performance 4. e-uivalent performance.

:1= LAW e.g. e+tra or inary iligence re-uire in Common carriers :2= St&<u(+t&on o2 ?+%t&es :A= ?%esu7e/" iligence of a Joo father of the Aamily if none is specifie /e+presse by law or agreement. REAL RIGOT is the power by a person over a specific thing, susceptible of being e+ercise against the whole worl . ?ERSONAL RIGOT belongs to a person who may eman from another, as a efinite passive sub(ect, the fulfillment of a prestation. Arom the moment the & to eliver a eterminate thing arises, the cre itors earns a personal right over the thing an its fruits, but only /e(&1e%0 o% t%+/&t&on transfers ownership that is a real right over the thing against the whole worl . Aor failure to eliver, the cre itorPs reme y is not reivindicacion but specific performance. [COA?TER 2" R&-;t o2 A''ess&on 9 GENERAL ?ROVISIONS] A%t&'(e CC!. %he ownership of property gives the right by accession to everything which is pro uce thereby, or which is incorporate or attache thereto, either naturally or artificially. G&n/s o2 $%u&ts4 1= CIVIL 9 erive by virtue of (uri ical relation 4* N+tu%+( / spontaneous pro ucts of the soil an the young an other pro ucts of animals3 5* In/ust%&+( / pro uce by lan s of any kin through cultivation or labor or by reason of human labor. #. GIN#S O$ CIVIL OBLIGATIONS" 1. AS TO ?ER$ECTION H ENTINGUISOMENT" +. ?URE 9 :COA?TER A= #&22e%ent G&n/s o2 O,(&-+t&ons SECTION 1 @ ?u%e +n/ Con/&t&on+( O,(&-+t&ons A%t&'(e 11JM. :very obligation whose performance oes not epen upon a future or uncertain event, or upon a past event unknown to the parties, &s /e7+n/+,(e +t on'e. :very obligation which contains a %eso(uto%0 con ition shall also be eman able, without pre(u ice to the effects of the happening of the event. A%t&'(e 11MJ. If the obligation oes not fi+ a perio , but from its nature an the circumstances it can be inferre that a perio was inten e , the courts may fi+ the uration thereof. %he courts shall also fi+ the uration of the perio when it epen s upon the will of the ebtor. In every case, the courts shall etermine such perio as may un er the circumstances have been probably contemplate by the parties. "nce fi+e by the courts, the perio cannot be change by them. A <u%e o,(&-+t&on &s one FE' &s not su,.e't to + 'on/&t&on o% + te%7.

2/5=/N4, this petition was file . %he efense interpose was <%es'%&<t&on. Its merit is rather obvious. A%t. 11JM <+%. 1 s+0s so. III T;e o,(&-+t&on ,e&n- /ue H /e7+n/+,(e :bec. "f the phrase ?upon eman @* &t Fou(/ +<<e+% t;+t t;e 2&(&n- o2 t;e su&t +2te% 1) 0%s. F+s 7u'; too (+te. D6B: & eman able at once running of B+.p . starts imme iately upon creation of the &3 A%t&'(e 11JM. :very obligation whose performance oes not epen upon a future or uncertain event, or upon a past event unknown to the parties, is eman able at once. K" #oes t;e ;+<<en&n- o2 + 'on/&t&on -&1e %&se to t;e &T A: Got necessarily, only if suspensive con i.3 if resolutory con i, the happening e+ctinguishes the &3 R: In an & with a %:BE will the answer above be the sameT A: ,. CON#ITIONAL A%t&'(e 1181. In 'on/&t&on+( obligations, the ac-uisition of rights, as well as the e+tinguishment or loss of those alrea y ac-uire , shall epen upon the happening of the event which constitutes the con ition. A%t&'(e 1182. 0hen the 2u(2&((7ent o2 t;e 'on/&t&on /e<en/s u<on t;e so(e F&(( o2 t;e /e,to% , the con itional obligation shall be 1o&/. If it epen s upon chance or upon the will of a thir person, the obligation shall take effect in conformity with the provisions of this Co e. B+(+ne: 0e are talking here of a suspensive con ition. $&%st senten'e o2 A%t. 1182.@@ T;e 'on/&t&on 7ust ,e sus<ens&1e <otest+t&1e H /e<en/s on t;e so(e F&(( o2 t;e /e,to%. :QAED#:: !I promise to sell you my car for D2.== whenever I like.! K" W;0 /oes &t 7+8e t;e o,(&-+t&on 1o&/L A: Bec. such an obligation lacks one of the essential elements of an obligation, the vinculum juris, the bin ing force,, the means by w/c it is enforceable in court. In this case, there is no bin ing force. %here is no obligation. It is a (oke. ?otest+t&1e Con/&t&on is one w/c epen s solely on the will of either one party. :QAED#:: ! I will give you my plantation in Havao provi e you resi e in Havao permanently.! C+su+( Con/&t&on is one where the con ition is ma e to epen upon a thir person or upon chance. :QAED#:: !I will give you my lan in Alori ablanca if Et. Dinatubo erupts this year.! M&Ie/ Con/&t&on is one w/c epen s partly upon the will of one of the parties & partly on either chance or the will of a thir person. K" W;+t &2 t;e 'on/&t&on &s sus<ens&1e <otest+t&1e H /e<en/s so(e(0 on t;e F&(( o2 t;e '%e/&to% &s t;e 'on/&t&on+( o,(&-+t&on 1+(&/L A: Yes. In fact, the obligation is not even a con ition obligation. It is a <u%e o,(&-+t&on, bin ing at once. CASE" the term whc parties attempte to fi+ were so uncertain it must be regar e as con ition

CASE" %e A%t. 11JM <+%. 2 ?AY V. ?ALANCA $NO <CBA L2M' Arom the manner in w/c the D/G was e+ecute , it woul appear that petitioner was hopeful that the satisfaction of his cre it coul be reali;e either through the ebtor sue receiving cash payment fr. the estate of the late Carlos Dalanca presumptively as one of the heirs, or, as e+presse therein, Ru<on /e7+n/.R :ALTERNATIVE 3= %here is nothing in the recor that woul in icate whether or not the first alternative was fulfille . 0hat is un eniable is that on M/4L/LO, 7o%e t;+n 1) 0%s. +2te% t;e eIe'ut&on o2 t;e ?EN on

SMITO BELL V. SOTELO MATTI $88 D MO8' W;e%e t;e 2u(2&((7ent o2 t;e 'on/&t&on /oes not /e<en/ on t;e F&(( o2 t;e o,(&-o% ,ut on t;+t o2 + A%/ <e%son F;o '+n &n no F+0 ,e 'o7<e((e/ to '+%%0 &t out t;e o,(&-o%Qs <+%t o2 t;e 'ont%+'t &s 'o7<(&e/ FE &2 ;e /oes +(( t;+t &s &n ;&s <oFe% H &t t;en ,e'o7es &n'u7,ent u<on t;e ot;e% 'ont%+'t&n- <+%t0 to 'o7<(0 FE t;e te%7s o2 t;e 'ont%+'t. bet. Dlaintiff Corp. as seller an

$ACTS" 3s &n Ss entere efen ant as buyer:

9 constitute on August 2K2M: 4 steel tanks 42U to be shippe fr GS elivere to Ela ?w/in 5 or 8 mos.@ )Helivere 3 April 4O, 2K2K* %wo e+pellers 2K2M* 4 electric motors 4U ea 4NUea to be shippe fr <A in <ept.2K2M or A<AD )Helivere :"ct. 4L. ?Appro+. elivery w/in K= ays / %his is not guarantee .@ )Aeb.

In + -%+tu&tous /&s<os&t&on +s &n + /on+t&on o% test+7ent+%0 /&s<os&t&on +n &7<oss&,(e 'on/&t&on +tt+';e/ to t;e /&s<os&t&on &s s&7<(0 'ons&/e%e/ +s not &7<ose/.

R: 0hy is there a ifferenceT A: Bec. in a onation as well as in a testamentary isposition, the causa or consi eration is the liberality of the onor or testator, as the case may be. :ven if you take away the impossible con ition, there is still a reason for the isposition to e+ist,, liberality. %hey ) onation & testamentary isposition* have both their un erpinnings, liberality. But in an onerous transaction, since an onerous prestation w/c is reciprocal re-uires concomitant performances, that impossible con ition becomes part of the causa. %herefore, if the con ition is impossible, there is failure of causa. In no causa, there is also no contract. ?+%+s" ?os&t&1e sus<ens&1e 'on/&t&on to /o +n &7<oss&,(eE &((e-+( t;&n- %he obligation is voi )Art. 22M5, par. 2.* A ne-+t&1e 'on/&t&on :not to /o +n &7<oss&,(e t;&n-= Fust isregar the con ition )Art. 22M5, par. 4.* A 'on/&t&on not to /o +n &((e-+( t;&n- :ne-+t&1e= %his is not e+pressly provi e for in the provision but is implie . %he obligation is 1+(&/. :QAED#:: !I will sell you a piece of lan provi e you o not plant mari(uana on it.! A%t&'(e 118C. T;e 'on/&t&on t;+t so7e e1ent ;+<<en +t + /ete%7&n+te t&7e s;+(( eIt&n-u&s; t;e o,(&-+t&on +s soon +s t;e t&7e eI<&%es o% &2 &t ;+s ,e'o7e &n/u,&t+,(e t;+t t;e e1ent F&(( not t+8e <(+'e. B+(+ne: %his article refers to suspensive con itions. con ition is resolutory, the effect is the opposite. If the

4O, 2K2K* efen ant refuse to accept an pay eliveries b/c of elay I:#H: At the constitution of the 9, the 2 st 0.0ar was still ongoing an the 6< govt was rigi on e+portation of machinery such as the sub(ects of this 93 t;e te%7 F;' <+%t&es +tte7<te/ to 2&I Fe%e so un'e%t+&n &t 7ust ,e %e-+%/e/ +s 'on/&t&on t;e&% 2u(2&((7ent /e<en/e/ not on(0 u<on t;e e22o%t o2 <(+&nt&22 Co. ,ut u<on t;+t o2 t;e US -o1t o% A %/ <e%son F;o 'ou(/ &n no F+0 ,e 'o7<e((e/ to &ssue 'e%t&2&'+te o2 <%&o%&t0 +n/ <e%7&ss&on. %hus the obligor will be eeme to have sufficiently fulfille his part of the & if he has one all that is in his power even if con i.,in reality was not fulfille . An when time of elivery is not fi+e , state in general terms or is in efinite, time is not of the essence, elivery must be ma e w/in a reasonable time. Becor shows that plaintiff i all w/in its power to have machinery arrive in Ela. A<AD, an notifie efen ant of such arrival <%A%, court consi ere such as reasonable time. Dlaintiff was or ere to pay. A%t&'(e 118A. I7<oss&,(e 'on/&t&ons, those contrary to goo customs or public policy an those prohibite by law shall +nnu( t;e o,(&-+t&on which epen s upon them. If the obligation is /&1&s&,(e, that <+%t thereof which is not affecte by the impossible or unlawful con ition shall be 1+(&/. T;e 'on/&t&on not to /o +n &7<oss&,(e t;&n- s;+(( ,e 'ons&/e%e/ +s not ;+1&n- ,een +-%ee/ u<on. B+(+ne" T;&s %e2e%s to + sus<ens&1e 'on/&t&on. T;e%e +%e 2 '(+sses o2 &7<oss&,(e 'on/&t&ons" 1. I7<oss&,(e &n 2+'t :QAED#:: !I promise to sell my car to Er. E for D4 if he can swim across the Dacific "cean for 4 hours.!

A%t&'(e 118). %he con ition that some event will not happen at a eterminate time shall ren er the obligation effective from the moment the time in icate has elapse , or if it has become evi ent that the event cannot occur. If no time has been fi+e , the con ition shall be eeme fulfille at such time as may have probably been contemplate , bearing in min the nature of the obligation. B+(+ne: %his article refers to a suspensive con ition. A%t&'(e 118*. T;e 'on/&t&on s;+(( ,e /ee7e/ 2u(2&((e/ F;en t;e o,(&-o% 1o(unt+%&(0 <%e1ents &ts 2u(2&((7ent. B+(+ne: %his article refers to a suspensive con ition.

2. I7<oss&,(e &n (+F or one w/c attaches an illegal con ition :QAED#:: !I promise to sell my car to Er. E for D4 on con ition that he burns the College of #aw.! E22e't o2 I7<oss&,(e Con/&t&on It annuls the obligation w/c epen s upon them. %he entire (uri ical tie is tainte by the impossible con ition. Correlate this w/ A%t&'(es J2J H 8JA. A%t. J2J. I((e-+( o% &7<oss&,(e 'on/&t&ons &n s&7<(e H %e7une%+to%0 /on+t&ons s;+(( ,e 'ons&/e%e/ +s not &7<ose/. A%t. 8JA. I7<oss&,(e 'on/&t&ons H t;ose 'ont%+%0 to (+F o% -oo/ 'usto7s s;+(( ,e 'ons&/e%e/ +s not &7<ose/ H s;+(( &n no 7+nne% <%e.u/&'e t;e ;e&% e1en &2 t;e test+to% s;ou(/ ot;e%F&se <%o1&/e. To(ent&no: In 'ont%+'ts +n &7<oss&,(e 'on/&t&on +nnu(s t;e 'ont%+'t. In -%+tu&tous /&s<os&t&ons t;e &7<oss&,(e 'on/&t&on &s s&7<(0 /&s%e-+%/e/. B+(+ne: %he first statement is inaccurate bec. onation is a contract & in a onation, the impossible con ition oes not annul the contract. It is simply isregar e . %he proper way to say it is that: In +n one%ous t%+ns+'t&on +n &7<oss&,(e 'on/&t&on +nnu(s t;e 'on/&t&on o,(&-+t&on.

#o't%&ne o2 Const%u't&1e Co7<(&+n'e %here are three re-uisites in or er that this article may apply: 1. Intent on t;e <+%t o2 t;e o,(&-o% to <%e1ent 2u(2&((7ent o2 t;e 'on/&t&on. T;e &ntent /oes not ;+1e to ,e 7+(&'&ous. 2. A'tu+( <%e1ent&on o2 'o7<(&+n'e :,0 t;e o,(&-o%= A. Const%u't&1e 'o7<(&+n'e '+n ;+1e +<<(&'+t&on on(0 &2 t;e 'on/&t&on &s <otest+t&1e. It '+n +(so +<<(0 to M&Ie/ 'on/&t&on +s to t;+t <+%t FE' t;e o,(&-o% s;ou(/ <e%2o%7. G&n/s o2 Con/&t&on+( O,(&-+t&ons" +. Sus<ens&1e Con/&t&on :Con/&t&on <%e'e/ent= A%t&'(e 118J. %he effects of a con itional obligation to -&1e, once the con ition has been fulfille , s;+(( %et%o+'t to t;e /+0 o2 t;e 'onst&tut&on o2 t;e o,(&-+t&on. Gevertheless, when the obligation imposes %e'&<%o'+( <%est+t&ons upon the parties, the fruits an interests uring the pen ency of the con ition shall be eeme to have been 7utu+((0 'o7<ens+te/. If the

obligation is un&(+te%+(, the ebtor shall appropriate the fruits an interests receive , unless from the nature an circumstances of the obligation it shoul be inferre that the intention of the person constituting the same was ifferent. In o,(&-+t&ons to /o +n/ not to /o t;e 'ou%ts s;+(( /ete%7&ne &n e+'; '+se t;e %et%o+'t&1e e22e't o2 t;e 'on/&t&on t;+t ;+s ,een 'o7<(&e/ F&t;.

A%t&'(e 11M!. W;en t;e 'on/&t&ons ;+1e 2o% t;e&% <u%<ose t;e eIt&n-u&s;7ent o2 +n o,(&-+t&on to -&1e t;e <+%t&es u<on t;e 2u(2&((7ent o2 s+&/ 'on/&t&ons s;+(( %etu%n to e+'; ot;e% F;+t t;e0 ;+1e %e'e&1e/. In '+se o2 t;e (oss /ete%&o%+t&on o% &7<%o1e7ent o2 t;e t;&n- t;e <%o1&s&ons F;&'; F&t; %es<e't to t;e /e,to% +%e (+&/ /oFn &n t;e <%e'e/&n- +%t&'(e s;+(( ,e +<<(&e/ to t;e <+%t0 F;o &s ,oun/ to %etu%n. As 2o% t;e o,(&-+t&ons to /o +n/ not to /o t;e <%o1&s&ons o2 t;e se'on/ <+%+-%+<; o2 +%t&'(e 118J s;+(( ,e o,se%1e/ +s %e-+%/s t;e e22e't o2 t;e eIt&n-u&s;7ent o2 t;e o,(&-+t&on. B+(+ne: A condition is a 2utu%e & un'e%t+&n event upon w/c an obligation or provision is ma e to epen . To(ent&no" +++ $utu%&t0 H un'e%t+&nt0 7ust 'on'u% +s ';+%+'te%&st&'s o2 t;e e1ent. A <+st t;&n- '+n ne1e% ,e + 'on/&t&on. A 'on/&t&on &s +(F+0s 2utu%e H un'e%t+&n.

B+(+ne" %his article refers to suspensive con ition. %his article sets forth the rule of retroactivity in an obligation to give. %his rule is logical but impractical. Eany mo ern Civil Co es have iscar e it. No Ret%o+'t&1&t0 +s to t;e $%u&ts Gotice that there is no retroactivity w/ respect to the fruits. %he fruits are eeme to cancel out each other. If only one of the thing pro uces fruits, there is no obligation to eliver the fruits. A%t&'(e 1188. %he cre itor may, before the fulfillment of the con ition, bring the appropriate actions for the preservation of his right. %he ebtor may recover what uring the same time he has <+&/ ,0 7&st+8e in case of a sus<ens&1e con ition. B+(+ne" %his article refers to suspensive con itions. B%&n- t;e +<<%o<%&+te +'t&ons Accor ing to FB# Beyes, the phrase !7+0 III ,%&n- t;e +<<%o<%&+te +'t&ons! is inaccurate. %o bring action is to file a suit. But t;e '%e/&to% &s not %est%&'te/ to 2&(&n- + su&t. %he proper verb is not !bring! but !take.! Aor e+ample, in a sale of lan sub(ect to suspensive con ition, the cre itor shoul have the suspensive con ition annotate on the title of the lan . %his is not bringing an appropriate action but taking an appropriate action. %he principle in this article is: igilantibus et non dormientibus jura subveniunt w/c means that t;e (+Fs +&/ t;ose F;o +%e 1&-&(+nt not t;ose F;o s(ee< u<on t;e&% %&-;ts. K" W;0 /oes A%t. 1188 -&1e t;e '%e/&to% + %e'ou%se +(t;ou-; te';n&'+((0 t;e '%e/&to% st&(( ;+1e no %&-;tL A: Bec. as a matter of fact, although technically the cre itor still have no right, he is alrea y e+pecting a right. Sou cannot let the cre itor sit & fol his arms & wait for his right of e+pectancy to be ren ere illusory. A%t&'(e 118M. W;en t;e 'on/&t&ons ;+1e ,een &7<ose/ F&t; t;e &ntent&on o2 sus<en/&n- t;e e22&'+'0 o2 +n o,(&-+t&on to -&1e t;e 2o((oF&n- %u(es s;+(( ,e o,se%1e/ &n '+se o2 t;e &7<%o1e7ent (oss o% /ete%&o%+t&on o2 t;e t;&n- /u%&n- t;e <en/en'0 o2 t;e 'on/&t&on" :1= I2 t;e t;&n- &s (ost F&t;out t;e 2+u(t o2 t;e /e,to% t;e o,(&-+t&on s;+(( ,e eIt&n-u&s;e/4 :2= I2 t;e t;&n- &s (ost t;%ou-; t;e 2+u(t o2 t;e /e,to% ;e s;+(( ,e o,(&-e/ to <+0 /+7+-es4 &t &s un/e%stoo/ t;+t t;e t;&n- &s (ost F;en &t <e%&s;es o% -oes out o2 'o77e%'e o% /&s+<<e+%s &n su'; + F+0 t;+t &ts eI&sten'e &s un8noFn o% &t '+nnot ,e %e'o1e%e/4 :A= W;en t;e t;&n- /ete%&o%+tes F&t;out t;e 2+u(t o2 t;e /e,to% t;e &7<+&%7ent &s to ,e ,o%ne ,0 t;e '%e/&to%4 :C= I2 &t /ete%&o%+tes t;%ou-; t;e 2+u(t o2 t;e /e,to% t;e '%e/&to% 7+0 ';oose ,etFeen t;e %es'&ss&on o2 t;e o,(&-+t&on +n/ &ts 2u(2&((7ent F&t; &n/e7n&t0 2o% /+7+-es &n e&t;e% '+se4 :)= I2 t;e t;&n- &s &7<%o1e/ ,0 &ts n+tu%e o% ,0 t&7e t;e &7<%o1e7ent s;+(( &nu%e to t;e ,ene2&t o2 t;e '%e/&to%4 :*= I2 &t &s &7<%o1e/ +t t;e eI<ense o2 t;e /e,to% ;e s;+(( ;+1e no ot;e% %&-;t t;+n t;+t -%+nte/ to t;e usu2%u'tu+%0. :1122= :,= Reso(uto%0 Con/&t&on :Con/&t&on su,seBuent= B+(+ne: Art. 22K= refers to resolutory con itions. %his is (ust the opposite of Art. 22MK.

?+st e1ent un8noFn to t;e <+%t&es It is really the knowle ge of the event w/c constitutes the future. It is the knowle ge w/c is future & uncertain. :QAED#:: ! I will treat you for lunch if you get the highest score in the Civil #aw Ainal :+ams )on the assumption that Drof. Balane has alrea y finishe checking the papers.*! Iere, the event )getting the highest score* is alrea y a past event, yet the knowle ge is future & uncertain. Con/&t&on 'o7<+%e/ to + te%7 As to element of futurity in the aspect of certainty Con/&t&on <ame, may be past event unknown to parties un'e%t+&n Te%7 <ame, future 'e%t+&n always

Con/&t&ons '+n e&t;e% ,e" 2. Sus<ens&1e 'on/&t&on :'on/&t&on <%e'e/ent= wherein the happening of the event gives birth to an obligation Reso(uto%0 'on/&t&on :'on/&t&on su,seBuent= wherein the happening of the event will e+tinguish the obligation.

4.

10

'. WITO A TERM OR ?ERIO#" A%t&'(e 118!. 0hen the ebtor bin s himself to pay when his means permit him to o so, the obligation shall be eeme to be one with a perio , sub(ect to the provisions of article 22KO. B+(+ne: A term is a 2utu%e an 'e%t+&n event upon w/c the eman ability )or e+tinguishment* of an obligation epen s. To(ent&no" <oss&,(e. Derio must be :1= 2utu%e :2= 'e%t+&n +n/ :A=

As to debtor

will

of

a con ition w/c epen s e+clusively on the will of the ebtor annuls the obligation

a perio left to the ebtor.s will merely empowers the court to fi+ such perio

B+(+ne: In a )suspensive* term, the obligation has alrea y arisen e+cept that it is not yet eman able. A%t&'(e 11MC. In '+se o2 (oss /ete%&o%+t&on o% &7<%o1e7ent o2 t;e t;&n- ,e2o%e t;e +%%&1+( o2 t;e /+0 'e%t+&n t;e %u(es &n +%t&'(e 118M s;+(( ,e o,se%1e/. B+(+ne" T;e%e +%e t;%ee %eBu&s&tes &n o%/e% 2o% A%t. 118M to +<<(0@@ 1. 2. A. C. T;e%e &s (oss /ete%&o%+t&on o% /e(+0 T;e%e &s +n o,(&-+t&on to /e(&1e% + /ete%7&n+te t;&n:on t;e <+%t o2 t;e /e,to%= T;e%e &s (oss /ete%&o%+t&on o% &7<%o1e7ent ,e2o%e t;e ;+<<en&n- o2 t;e 'on/&t&on. T;e 'on/&t&on ;+<<ens.

A te%7 '+n e&t;e% ,e" 2. sus<ens&1e te%7 :e$ die @@ 2%. t;e /+0= or one the arrival of w/c will make the obligation eman able3 4. %eso(uto%0 te%7 :in die @@ &nto t;e /+0= or one the arrival of w/c will e+tinguish the obligation. %he perio after which the performance must terminate.

Te%7s '(+ss&2&e/ +''/- to sou%'e4 2. Le-+( perio fi+e by law 4. 1o(unt+%0 stipulate by parties 5. .u/&'&+( fi+e /allowe by courts Eay also be, )a* eI<%ess specifie )b* t+'&t, e.g. stipulate to o some work may only be one at a particular

whc season. O% 2. original perio 4. grace perio , e+tension fi+e by parties O%

A%t&'(e 11M). An0t;&n- <+&/ o% /e(&1e%e/ ,e2o%e t;e +%%&1+( o2 t;e <e%&o/ t;e o,(&-o% ,e&n- un+F+%e o2 t;e <e%&o/ o% ,e(&e1&n- t;+t t;e o,(&-+t&on ;+s ,e'o7e /ue +n/ /e7+n/+,(e 7+0 ,e %e'o1e%e/ F&t; t;e 2%u&ts +n/ &nte%ests. 22KN applies only in & to give3

a. /e2&n&te, fi+e known ate or time, b. &n/e2&n&te event will happen but not known when

B+(+ne" M&st+8en ?%e7+tu%e #e(&1e%0 %his article assumes 4 things: :1= t;e /e(&1e%0 F+s ,0 7&st+8e4 :2= t;e 7&st+8e F+s /&s'o1e%e/ ,e2. t;e te%7 +%%&1es. Both the things & the fruits can be recovere .

E22e't o2 ?e%&o/" & with term are eman able only when ay fi+e for performance arrive3 Bt. "f A+n arises only when ate fi+e arrives3 A%t&'(e 11MA. O,(&-+t&ons 2o% F;ose 2u(2&((7ent + /+0 'e%t+&n ;+s ,een 2&Ie/ s;+(( ,e /e7+n/+,(e on(0 F;en t;+t /+0 'o7es. O,(&-+t&ons F&t; + %eso(uto%0 <e%&o/ t+8e e22e't +t on'e ,ut te%7&n+te u<on +%%&1+( o2 t;e /+0 'e%t+&n. A /+0 'e%t+&n &s un/e%stoo/ to ,e t;+t F;&'; 7ust ne'ess+%&(0 'o7e +(t;ou-; &t 7+0 not ,e 8noFn F;en. I2 t;e un'e%t+&nt0 'ons&sts &n F;et;e% t;e /+0 F&(( 'o7e o% not t;e o,(&-+t&on &s 'on/&t&on+( +n/ &t s;+(( ,e %e-u(+te/ ,0 t;e %u(es o2 t;e <%e'e/&n- Se't&on. MANRESA" A term or perio is an interval of time, w/c, e+erting an influence on an obligation as a conse-uence of a (uri ical act, e&t;e% sus<en/s &ts /e7+n/+,&(&t0 o% <%o/u'es &ts eIt&n-u&s;7ent. #&st&n-u&s;e/ 2%. Con/&t&on" CON#ITION As to fulfillment uncertain event TERM E ?ERIO# an event that must necessarily come, whether on a ate known before han or at a time w/c cannot be pre etermine has no effect upon the e+istence of obligations, but only their eman ability or performance G" retroactive effect, e+cept when there is a special agreement always refer to the future

If the term has alrea y arrive , the -uestion is moot & aca emic. But can he recover the fruits pro uce uring the meantimeT It epen s on what school of thought you follow: To(ent&no : Accor ing to one school of thought, the ebtor is entitle to the fruits pro uce in the meantime. C+-u&o+ " Accor ing to another school of thought, all the fruits receive uring the pen ency of the term belong to the cre itor. W;en 2%u&ts H &nte%ests '+nnot ,e %e'o1e%e/ notFEst+n/&n<%e7+tu%e /e(&1e%0" 1. 2. A. 8. W;en t;e o,(&-+t&on &s %e'&<%o'+( H t;e%e ;+s ,een <%e7+tu%e <e%2o%7+n'e :,0 ,ot; <+%t&es=4 W;en t;e o,(&-+t&on &s + (o+n &n FE' t;e /e,to% &s ,oun/ to <+0 &nte%est4 W;en t;e <e%&o/ &s 2o% t;e '%e/&to%Qs eI'(us&1e ,ene2&t4 W;en t;e /e,to% &s +F+%e o2 t;e <e%&o/ H <+0s +n0F+0. :GnoF(e/-e tacit waiver of benefit of term=

2. ?%esu7e/ 2o% F;ose ,ene2&t" BOTO A%t&'(e 11M*. W;ene1e% &n +n o,(&-+t&on + <e%&o/ &s /es&-n+te/ &t &s <%esu7e/ to ;+1e ,een est+,(&s;e/ 2o% t;e ,ene2&t o2 ,ot; t;e '%e/&to% +n/ t;e /e,to% un(ess 2%o7 t;e teno% o2 t;e s+7e o% ot;e% '&%'u7st+n'es &t s;ou(/ +<<e+% t;+t t;e <e%&o/ ;+s ,een est+,(&s;e/ &n 2+1o% o2 one o% o2 t;e ot;e%. B+(+ne" Gene%+( %u(e: If a perio is attache in an obligation, the presumption is that it is for the benefit of ,ot; <+%t&es. %he conse-uence is that the cre itor cannot compel the performance before the arrival of the term3 the ebtor cannot compel acceptance bef. the arrival of the term.

As to influence on the obligation

a con ition gives rise to an obligation or e+tinguishes one alrea y e+isting Eay have retroactive effect may refer to a past event unknown to the parties

(ffect

I2 t;e te%7 &s 2o% t;e ,ene2&t o2 t;e '%e/&to% %he cre itor can eman performance anytime3 but the ebtor cannot insist on payment bef. the perio . I2 t;e te%7 &s 2o% t;e ,ene2&t o2 t;e /e,to% %he cre itor cannot eman performance anytime3 but the ebtor can insist on performance anytime.

As to time

11

:QAED#:: !I promise to pay w/in L= ays.! %his is a term for the benefit of the ebtor. !I promise to pay Clara the sum of D2==,=== on or before "ct. 52, 2KKL.! %his is a term for the benefit of the ebtor. In 9 of #oan, without interest, term is usually for benefit of ebtor, thus he may pay in a vance3 If there is stipulation as to interest, perio is generally for both parties, ebtor cannot pay in a vance vs. will of cre itor3 unless he also pays interest in full. A. W;en NO <e%&o/ &s 2&Ie/ B+(+ne" C+ses F;e%e t;e Cou%ts 7+0 2&I + <e%&o/ 1. A%t. 11MJ <+%. 1 A%t&'(e 11MJ. I2 t;e o,(&-+t&on /oes not 2&I + <e%&o/ ,ut 2%o7 &ts n+tu%e +n/ t;e '&%'u7st+n'es &t '+n ,e &n2e%%e/ t;+t + <e%&o/ F+s &nten/e/ t;e 'ou%ts 7+0 2&I t;e /u%+t&on t;e%eo2. T;e 'ou%ts s;+(( +(so 2&I t;e /u%+t&on o2 t;e <e%&o/ F;en &t /e<en/s u<on t;e F&(( o2 t;e /e,to%. In e1e%0 '+se t;e 'ou%ts s;+(( /ete%7&ne su'; <e%&o/ +s 7+0 un/e% t;e '&%'u7st+n'es ;+1e ,een <%o,+,(0 'onte7<(+te/ ,0 t;e <+%t&es. On'e 2&Ie/ ,0 t;e 'ou%ts t;e <e%&o/ '+nnot ,e ';+n-e/ ,0 t;e7. EI'e<t&ons" :+= A%t. 1*82 A%t&'(e 1*82. T;e (e+se o2 + <&e'e o2 %u%+( (+n/ F;en &ts /u%+t&on ;+s not ,een 2&Ie/ &s un/e%stoo/ to ;+1e ,een 7+/e 2o% +(( t;e t&7e ne'ess+%0 2o% t;e -+t;e%&n- o2 t;e 2%u&ts FE' t;e F;o(e est+te (e+se/ 7+0 0&e(/ &n one 0e+% o% FE' &t 7+0 0&e(/ on'e +(t;ou-; tFo o% 7o%e 0e+%s 7+0 ;+1e to e(+<se 2o% t;e <u%<ose. A%t&'(e 1*8J. I2 t;e <e%&o/ 2o% t;e (e+se ;+s not ,een 2&Ie/ &t &s un/e%stoo/ to ,e 2%. 0e+% to 0e+% &2 t;e %ent +-%ee/ u<on &s +nnu+(4 2%. 7ont; to 7ont; &2 &t &s 7ont;(04 2%. Fee8 to Fee8 &2 t;e %ent &s Fee8(04 H 2%. /+0 to /+0 &2 t;e %ent &s to ,e <+&/ /+&(0. III A%t. 1*!* &n <+'to /e %et%o s+(e F;e%e t;e <e%&o/ &s not s<e'&2&e/ ,0 t;e <+%t&es A%t. 1*!*. T;e %&-;t %e2e%%e/ to &n +%t&'(e 1*!1 :t;e %&-;t o2 'on1ent&on+( %e/e7<t&on on t;e <+%t o2 t;e 1en/o% + %et%o= &n t;e +,sen'e o2 +n eI<%ess +-%ee7ent s;+(( (+st 2ou% 0e+%s 2%. t;e /+te o2 t;e 'ont%+'t. NNN 'ont%+'t o2 se%1&'es 2o% +n &n/e2&n&te te%7 :,e'. 2&I&n- o2 + <e%&o/ ,0 t;e 'ou%ts 7+0 +7ount to &n1o(unt+%0 se%1&tu/e=

to ,e one FE + <e%&o/ su,.e't to t;e <%o1&s&ons o2 +%t&'(e 11MJ. CA<:: 1here obligation does not fi$ a periodB 1hen fi$ing a period is mere formality T COAVEU V. GONUALES $54 <CBA N8O' , Hef. virtually a mitte non,performance by returning the typewriter he was oblige to repair in a non,working con ition, w/ essential parts, missing. Dlaintiff ha the thing fi+e by another an later eman e fr. Hef. payment of actual, compensatory, temperate an moral amages. I<<6:: 0"G Hef. may not be hel liable b/c 9 i not contain a perio . I:#H: Ie cannot invoke Art. 22KO of the GCC. %he time for compliance having evi ently e+pire , & there being a breach of contract by non,performance, it was aca emic for the pltff. to have first petitione the court to fi+ a perio for the performance of the contract before filing his complaint in this case. T;e 2&I&n- o2 + <e%&o/ Fou(/ t;us ,e + 7e%e 2o%7+(&t0 H Fou(/ se%1e no <u%<ose t;+n to /e(+0. ENCARNACION V. BAL#OMAR $OO D 8O=' , Dlaintiff was owner of a house in #egar a, Eanila lease to efen ant on month,to,month basis with rental of D5N. After the was plainitiff eman e ef. to vacate b/c he nee e it /t estruction of his office. 0"G: ef may continue to occupy in efinitely as long as he pays rentals I:#H: T;e 'ont&nu+n'e H 2u(2&((7ent o2 t;e 'ont%+'t o2 (e+se '+nnot ,e 7+/e to /e<en/ so(e(0 H eI'(us&1e(0 u<on t;e 2%ee H un'ont%o((e/ ';o&'e o2 t;e (essees ,et. 'ont&nu&n<+0&n- t;e %ent+(s o% not 'o7<(ete(0 /e<%&1&n- t;e oFne% o2 +(( s+0 &n t;e 7+tte%. Aor if this were allowe , so long as efs. electe to continue the lease by continuing the payment of the rentals the owner woul never be able to iscontinue it3 conversely, although the owner shoul esire the lease to continue, the lessees coul effectively thwart his purpose if they shoul prefer to terminate the contract by the simple e+pe ient of stopping payment of the rentals. %his, of course, is prohibite by A%t. 12)* NCC. ELEIUEUI V. LAWN TENNIS CLUB $4 D5=K' , H"C%BIG:: T;e te%7 o2 + (e+se F;ose te%7&n+t&on &s eI<%ess(0 (e2t to t;e F&(( o2 t;e (essee 7ust ,e 2&Ie/ ,0 t;e 'ou%ts +''o%/&n- to t;e ';+%+'te% H 'on/&t&ons o2 t;e 7utu+( un/e%t+8&n-s &n +n +'t&on ,%ou-;t 2o% t;+t <u%<ose III. %he herein Contract of #ease was ma e to en ure at the will of the lessee who is e+presse ly authori;e to make improvements upon the sub(ect lan by erecting buil ings therein, perm or temp, making fills, lay pipes, make such other improvements at his own convenience. Go perio was fi+e for the e+istence of the 9. I:#H: It is evi ent that the lessors i not inten to reserve to themselves the right to rescin that which they have e+pressly conferre to lessee whc is e+clusively in favor of the latter. ?OILBANGING V. LUI SOE $42 <CBA N5' , H"C%BIG:: A (e+se to +n +(&en 2o% + %e+son+,(e <e%&o/ &s 1+(&/. on Govember 2N, 1M)J, the parties entere into the (e+se 'ont%+'t 2o% )! 0e+%s : that ten ays after, that is on Govember 4N, they amen e the contract so as to make it cover the entire property of Fustina <antos3 that on Hecember 42, less than a month after, they entere into another 'ont%+'t -&1&n- Won- Oent;e o<t&on to ,u0 t;e (e+se/ <%e7&ses s;ou(/ ;&s <en/&n- <et&t&on 2o% n+tu%+(&>+t&on ,e -%+nte/ 3 that on Govember 2M, 2KNM, after failing to secure naturali;ation an after fin ing that a option oes not confer the citi;enship of the a opting parent on the a opte , the parties entere into two other contracts eIten/&n- t;e (e+se to MM 0e+%s +n/ 2&I&n- t;e <e%&o/ o2 t;e o<t&on to ,u0 +t )! 0e+%s. which in ubitably emonstrate that each of the contracts in -uestion was esigne to carry out Fustina <antos. e+presse wish to give the lan to 0ong an thereby in effect place its ownership in alien han s,2 about which we shall have something more to say towar the en of this resolution. We

A%t. 11MJ. NII T;e 'ou%ts s;+(( +(so 2&I t;e /u%+t&on o2 t;e <e%&o/ F;en &t /e<en/s u<on t;e F&(( o2 t;e /e,to%. A%t. 11M1. NII t;e 'ou%t s;+(( /e'%ee t;e %es'&ss&on '(+&7e/ un(ess t;e%e ,e .ust '+use +ut;o%&>&n- t;e 2&I&n- o2 + <e%&o/. A%t. 1*8J. III OoFe1e% e1en t;ou-; + 7ont;(0 %ent &s <+&/ H no <e%&o/ 2o% t;e (e+se ;+s ,een set t;e 'ou%ts 7+0 2&I + (on-e% te%7 2o% t;e (e+se +2te% t;e (essee ;+s o''u<&e/ t;e <%e7&ses 2o% o1e% one 0e+%. I2 t;e %ent &s Fee8(0 t;e 'ou%ts 7+0 (&8eF&se /ete%7&ne + (on-e% <e%&o/ +2te% t;e (essee ;+s ,een &n <ossess&on 2o% o1e% s&I 7ont;s. In '+se o2 /+&(0 %ent t;e 'ou%ts 7+0 +(so 2&I + (on-e% <e%&o/ +2te% t;e (essee ;+s st+0e/ &n t;e <(+'e 2o% o1e% one 7ont;. A%t. 118!. W;en t;e /e,to% ,&n/s ;&7se(2 to <+0 F;en ;&s 7e+ns <e%7&t ;&7 to /o so t;e o,(&-+t&on s;+(( ,e /ee7e/

12

'on'(u/e/ t;+t R+s t;e (e+se 'ont%+'t F+s <+%t o2 + s';e7e to 1&o(+te t;e Const&tut&on &t su22e%s 2%o7 t;e s+7e &n2&%7&t0 t;+t %en/e%s t;e ot;e% 'ont%+'ts 1o&/ +n/ '+n no 7o%e ,e s+1e/ 2%o7 &((e-+(&t0 t;+n t;e %est o2 t;e 'ont%+'ts.R LIM V. ?EO?LE $255 <CBA 555' , It is clear in the agreement that the procee s of the sale of the tobacco shoul be turne over to the complainant as soon as the same was sol , or, that the obligation was imme iately eman able as soon as the tobacco was ispose of. Ience, Art. 22KO of the GCC, w/c provi es that the courts may fi+ the uration of the obligation if it oes not fi+ a perio , oes not apply. #IE propose to sell AyrosoPs tobacco for her at a price, in consi eration that the markup woul be hers. %hey agree that procee s of the tobacco sale sh be turne over as soon as sol , or eman able imme iately after all the tobacco was ispose of. Aor failure to remit all the sales, lower court convicte #im of estafa. I<<6:: 0"G court may fi+ perio of & un er Art. 22KO I:#H: 22KO oes not apply in this case. %he agreement bet. %hem was one of agency with the & to return the unsol tobacco an the procee s of the sale eman able stat. MILLARE V. OERNAN#O $2N2 <CBA 8M8' , AAC%<: Dacifica Eillare, lessor an spouses Co lessee in a N,yr 9 of lease of DeoplePs Besto3 at last wk of N,yr perio , lessor offere to e+ten lease if spouses Co will agree to increase rental from D5N= to D24== a mo.3 spouses counter,offere pO==3 iscussion was set asi e3 later a eman letter was issue by lessor to vacate premises w/o renewal of e+pire 93 lessor isagree an file an e(ectment case3 spouses Co file a separate case for the court to or er renewal of 9 an fi+ rental at pO== a mo. <pouses eposite monthly rental in court3 plaintiff file E4H for lack of (uPs &no C"A3 E4H enie 3 I<<6:: 0"G spouses Co have vali C"A in claiming renewal of lease 9 I:#H: S:<. %here was implie renewal of lease 9 but only on a month,4,mo. Basis, not for another Nyrs3 Dar. 2 of Art. 22KO is clearly inapplicable, since the Contract of #ease i in fact fi+ an original perio of N yrs., w/c ha e+pire . It is also clear fr. par. 25 of the contract that the parties reserve to themselves the faculty of agreeing upon the perio of the renewal contract. %he 4n par. of Art. 22KO is e-ually inapplicable since the uration of the renewal perio was not left to the will of the lessee alone, but rather to the will of both the lessor & the lessee. Eost importantly, Art. 22KO applies only where a contract of lease clearly e+ists. Iere, the contract was not renewe at all, there was in fact no contract at all the perio of w/c coul have been fi+e . SC -%+nte/ TRO +n/ &n.un't&on.

t;&n- &n &ts ste+/ o% /e7+n/ &77e/&+te <+07ent o2 t;e <%&n'&<+( o,(&-+t&on. :T;e s&It; -%oun/ F+s +//e/ ,0 ?%o2. B+(+ne.= E22e'ts o2 Loss o2 Te%7 :11M8=" 3 ,e'o7es &77e/&+te(0 /ue H /e7+n/, e1en &2 <e%&o/ ;+s not 0et eI<&%e/. 3 &s 'on1e%te/ to + <u%e 3 Inso(1en'0 o2 #EBTOR 9 nee not be (u icially eclare 3 state of financial ifficulty is enough. B+(+ne: In number one, factual insolvency is enough. A (u icial eclaration of insolvency is not re-uire . [TOUS AGAINV ] #I$$ERENT GIN#S O$ 3s" ?URE AN# CON#ITIONAL 3s 9 when the 3 contains no terms or con itions3 CON#ITIONAL 3s 9 one which is sub(ect to con ition3 CON#ITION 9 every future an uncertain event upon which an 3 or provision is ma e to epen 3 $UTURE H UNCERTAIN EVENT 9 the ac-uisition or resolution of the rights is ma e to epen by those who e+ecute the (uri ical act3 CLASSI$ICATION O$ CON#ITIONS" 2. SUS?ENSIVE / the happening of the former gives rise to an 34 4. RESOLUTORY 9 the happening of the latter e+tinguishes rights alrea y e+isting. PAS7 C57 5)D)O1) / a con ition may refer to past event unknown to the parties3 64POSS6C2( !O)'676O): 2. DIS<ICA##S IED"<<IB#: / when it is contrary to law of nature3 4. F6HICIA##S IED"<<IB#: / when contrary to law, morals, goo customs an public safety ?URE 3s when it is not sub(ect to a term, perio an no con ition3 , eman able at once , its imme iate eman ability, give time for ebtor to comply ?ERIO# W is an event that is future but certain )just a matter of time*3 e.-. passing this class )oblicon* ?AST EVENT 9 cannot be future event, cannot be consi ere uncertain3

A%t. 118!. W;en t;e /e,to% ,&n/s ;&7se(2 to <+0 F;en ;&s 7e+ns <e%7&t ;&7 to /o so t;e o,(&-+t&on s;+(( ,e /ee7e/ to ,e one FE + <e%&o/ su,.e't to t;e <%o1&s&ons o2 +%t&'(e 11MJ.

SUS?ENSIVE CON#ITION" 7 rights are ac-uire , upon the happening of a con i. A%t. 1181 9 3 create upon the happening of a con ition RESOLUTORY @ e+tinguishe , or loss of e+isting rts, upon the happening of a con i. 7 %hus a contract may be perfecte suspen e . but its eman ability only to

C. W;en /e,to% (oses t;e ,ene2&t o2 <e%&o/ A%t&'(e 11M8. T;e /e,to% s;+(( (ose e1e%0 %&-;t to 7+8e use o2 t;e <e%&o/" :1= W;en +2te% t;e o,(&-+t&on ;+s ,een 'ont%+'te/ ;e ,e'o7es &nso(1ent un(ess ;e -&1es + -u+%+nt0 o% se'u%&t0 2o% t;e /e,t4 :2= W;en ;e /oes not 2u%n&s; to t;e '%e/&to% t;e -u+%+nt&es o% se'u%&t&es F;&'; ;e ;+s <%o7&se/4 :A= W;en ,0 ;&s oFn +'ts ;e ;+s &7<+&%e/ s+&/ -u+%+nt&es o% se'u%&t&es +2te% t;e&% est+,(&s;7ent +n/ F;en t;%ou-; + 2o%tu&tous e1ent t;e0 /&s+<<e+% un(ess ;e &77e/&+te(0 -&1es neF ones eBu+((0 s+t&s2+'to%04 :C= W;en t;e /e,to% 1&o(+tes +n0 un/e%t+8&n- &n 'ons&/e%+t&on o2 F;&'; t;e '%e/&to% +-%ee/ to t;e <e%&o/4 :)= W;en t;e /e,to% +tte7<ts to +,s'on/. :*= A%t. 21!M @ I2 t;e '%e/&to% &s /e'e&1e/ on t;e su,st+n'e o% Bu+(&t0 o2 t;e t;&n- <(e/-e/ ;e 7+0 e&t;e% '(+&7 +not;e%

A%t. 118* 9 eeme constructively fulfille 3 applie suspensive not to resolutory con i.

A%t. 118J 9 effects of con itional 3 to give3 :+. A sol a house&lot to B, 2E Con ition: if B will pass the bar e+am %erm: effect retroacts after the passing is announce on April3 $an.%&&' perfection (ept. %&&' )ct.&' )w/o con i./ Dure* Apr.&* con i.

$2N88' Betroactive effect A%t. 1188 9 preserve his interest ?ROTECT OIS EN?ECTANCY 2. Begister with the Begistry of Droperty

13

4. 5. 4.

witness possession in goo faith In(unction if the sell was not consummate or not for sale

RESOLUTORY CON#ITION A%t. 11M! 9 no e+ception, walang matitira SUS?ENSIVE CON#I 9 upon the happening of the con i., the 3 e+ists )?e+istence of 3 is affecte * CLASSI$ICATION O$ CON#ITION" 2. ?OTESTATIVE / when the fulfillment of the con i. epen s upon the will of the party to the 34 4. CAUSAL / epen s upon chance 4n or 5r person 5. MINE# 9 epen s partly upon the will of the party & partly upon chance or a 5r person A%t. 1182" ?otest+t&1e 9 sole will of the ebtor ?otest+t&1e sus<ens&1e &s VOI#. :+. A will give NV commission to B, but it epen s on the will of A, voi 3 All other potestative con itions, vali . A%t. 118A 9 &7<oss&,(e 'on/&t&on 1. <;0s&'+( &7<oss&,&(&t0 2. (e-+( &7<oss&,&(&t0 A%t. 8JA 9 impossible testamentary con itions isregar :+. A%t. J2J 9 onation !O)'676O) 2. future&uncertain event 4. suspensive con ition 5. resolutory con ition P(&6O' " 7(&4 2. future&certain 4.suspensive perio /? eman ability@ 5. resolutory perio

:2= ;e /oes not 2u%n&s; to t;e '%e/&to% t;e -u+%+nt&es o% se'u%&t&es F;&'; ;e ;+s <%o7&se/4 :A= ,0 ;&s oFn +'ts ;e ;+s &7<+&%e/ s+&/ -u+%+nt&es o% se'u%&t&es +2te% t;e&% est+,(&s;7ent +n/ F;en t;%ou-; + 2o%tu&tous e1ent t;e0 /&s+<<e+% un(ess ;e &77e/&+te(0 -&1es neF ones eBu+((0 s+t&s2+'to%04 :C= t;e /e,to% 1&o(+tes +n0 un/e%t+8&n- &n 'ons&/e%+t&on o2 F;&'; t;e '%e/&to% +-%ee/ to t;e <e%&o/4 :)= t;e /e,to% +tte7<ts to +,s'on/. R: Iow cu there be guaranty when ebtor is insolventT A: 5r person )surety* R: when is & ue& eman b even if perio has e+pire T A: if ebtor has lost rt. to make use of such perio )22KM* #. :2= O,(&-+t&ons +''o%/&n- to <(u%+(&t0 o2 o,.e'ts" A. S&7<(e B. Mu(t&<(e C. Con.un't&1e where the ebtor must perform more than one prestation K" A promise to eliver to B his carabao, og & goat. 0hat kin of & is thisT A: con(unctive H. A(te%n+t&1e O,(&-+t&ons where the ebtor must perform any of several prestations when several ob(ects ue, the fulfillment of one is sufficient, generally the ebtor chooses which one. :. $+'u(t+t&1e where only one thing is ue but the ebtor has reserve the right to substitute it w/ another )Art. 24=L* election here is never grante to cre itor

SUS?ENSIVE ?ERIO# 9 prior to the perio , there is alrea y an 3 but it is suspensive by the perio 3 A%t. 11*C @ the 3 to eliver arises upon the perfection of the contract if sub(ect to suspensive perio & not suspensive con i. RESOLUTORY ?ERIO# 9 ?terminate @ but the effects that accrue in the past will remain3 RESOLUTORY CON#ITION 9 ?e+tinguishes@ as if nothing happens3 retroactive effect of 34 E$$ECTS O$ $ORTUITOUS EVENT IN ?ERIO# E TERM" , the contract shall be eeme suspen e but the A.:. shall not stop the running of the term or perio agree upon3 A%t. 11M) 9 a vance payment A%t. 11M* 9 ?%esu7<t&on 9 if the perio is esignate , the benefit is for both the cre itor & ebtor :+ception: the tenor of the same or other circumstances, it shoul appear that the perio has been establishe in favor of one or the other3 A%t. 11MJ 9 A %e+sons F;0 t;e 'ou%t F&(( 2&I t;e <e%&o/" 2. if the 3 oes not fi+ a perio , but from its nature & circumstances it can be inferre that a perio was inten e by the parties3 4. in the uration of the time epen s upon the will of the ebtor 5. if the ebtor bin s himself to pay when his means permit him to o so A%t. 11M8 9 7e7o%&>eV A%t&'(e 11M8. %he ebtor shall lose every right to make use of the perio 0I:G: :1= +2te% t;e o,(&-+t&on ;+s ,een 'ont%+'te/ ;e ,e'o7es &nso(1ent un(ess ;e -&1es + -u+%+nt0 o% se'u%&t0 2o% t;e /e,t4

R: In con(unctive, right to choose is always with ebtorT A: G". Go right to choose b/c all must be performe . R: in Alternative, rt. %o choose can be given to 5r personT A: S:<. )Art. 2===* as long as it is not contrary to law, morals, D", DD, etc. R: In an agreement where there is no stipulation as to who has rt. to chooseT A: It epen s. If Alternative, generally ebtor chooses3 if facultative, only with ebtor R: 0hat if ebtor has rt. to choose an he elaysT A: rt. is not lost by mere elay3 )before cre itor files his action* )b* Alternative "bligations A%t. 11MM. A <e%son +(te%n+t&1e(0 ,oun/ ,0 /&22e%ent <%est+t&ons s;+(( 'o7<(ete(0 <e%2o%7 one o2 t;e7. T;e '%e/&to% '+nnot ,e 'o7<e((e/ to %e'e&1e <+%t o2 one H <+%t o2 t;e ot;e% un/e%t+8&n-. To(ent&no: %he characteristic of alternative obligations is that, several ob(ects being ue, the fulfillment of one is sufficient +++. A%t. 12!!. T;e %&-;t o2 ';o&'e ,e(on-s to t;e /e,to% un(ess &t ;+s ,een eI<%ess(0 -%+nte/ to t;e '%e/&to%. T;e /e,to% s;+(( ;+1e no %&-;t to ';oose t;ose <%est+t&ons FE' +%e &7<oss&,(e un(+F2u( o% FE' 'ou(/ not ;+1e ,een t;e o,.e't o2 t;e o,(&-+t&on. B+(+ne" K" To F;o7 /oes t;e %&-;t o2 ';o&'e ,e(on-L A" Gene%+( %u(e" To t;e /e,to% :A%t. 12!!.= EI'e<t&on: 0hen e+pressly grante to the cre itor )cannot be implie *

14

7 %here is a thir possibility where the choice may be ma e by a thir person upon agreement of the parties. )e+presse * K" W;+t &s t;e te';n&'+( te%7 o2 t;e +'t o2 7+8&n- + ';o&'e &n +(te%n+t&1e o,(&-+t&onsL A: Concentration. %he right to choose is in ivisible ebtor cant choose part of one prestation an part of another3 Iere, plaintiffPs action must be in alternative form3

g. If all but one are lost through the fault of the ebtor & the last one was lost through fortuitous event, the obligation is e+tinguishe . 2. C;o&'e &s t;e '%e/&to%Qs A%t. 12!). W;en t;e ';o&'e ;+s ,een eI<%ess(0 -&1en to t;e '%e/&to% t;e o,(&-+t&on s;+(( 'e+se to ,e +(te%n+t&1e 2%. t;e /+0 F;en t;e se(e't&on ;+s ,een 'o77un&'+te/ to t;e /e,to%. Unt&( t;en t;e %es<ons&,&(&t0 o2 t;e /e,to% s;+(( ,e -o1e%ne/ ,0 t;e 2o((oF&n- %u(es" :1= I2 one o2 t;e t;&n-s &s (ost t;%ou-; + 2o%tu&tous e1ent ;e s;+(( <e%2o%7 t;e o,(&-+t&on ,0 /e(&1e%&n- t;+t FE' t;e '%e/&to% s;ou(/ ';oose 2%. +7on- t;e %e7+&n/e% o% t;+t FE' %e7+&ns &2 on(0 one su,s&sts4 :2= I2 t;e (oss o2 one o2 t;e t;&n-s o''u%s t;%ou-; t;e 2+u(t o2 t;e /e,to% t;e '%e/&to% 7+0 '(+&7 +n0 o2 t;ose su,s&st&n- o% t;e <%&'e o2 t;+t FE' t;%ou-; t;e 2+u(t o2 t;e 2o%7e% ;+s /&s+<<e+%e/ FE + %&-;t to /+7+-es4 :A= I2 +(( t;e t;&n-s +%e (ost t;%ou-; t;e 2+u(t o2 t;e /e,to% t;e ';o&'e ,0 t;e '%e/&to% s;+(( 2+(( u<on t;e <%&'e o2 +n0 one o2 t;e7 +(so FE &n/e7n&t0 2o% /+7+-es. T;e s+7e %u(es s;+(( ,e +<<(&e/ to o,(&-+t&ons to /o o% not to /o &n '+se one so7e o% +(( o2 t;e <%est+t&ons s;ou(/ ,e'o7e &7<oss&,(e. +. I2 one o% so7e +%e (ost t;%ou-; 2o%tu&tous e1ent t;e '%e/&to% 7+0 ';oose 2%. t;ose %e7+&n&n-.,, Art. 24=N )2* ,. I2 one o% so7e +%e (ost t;%ou-; t;e /e,to%Qs 2+u(t , the cre itor has choice fr. the remain er or the value of the things lost plus amages.,, Art. 24=N )4*, supra. c. If all are lost through the ebtor.s fault, the choice of the cre itor shall fall upon the price of any of them, w/ in emnity for amages.,, Art. 24=N )5*, supra. . If some are lost through the cre itor.s fault, the cre itor may choose fr. the remain er. e. I2 +(( +%e (ost t;%ou-; 2o%tu&tous e1ent t;e o,(&-+t&on &s eIt&n-u&s;e/. 2. I2 +(( +%e (ost t;%ou-; t;e '%e/&to%Qs 2+u(t t;e o,(&-+t&on &s eIt&n-u&s;e/. #&st&n-u&s;e/ 2%. $+'u(t+t&1e o,(&-+t&ons" A%t. 12!*. W;en on(0 one <%est+t&on ;+s ,een +-%ee/ u<on ,ut t;e o,(&-o% 7+0 %en/e% +not;e% &n su,st&tut&on t;e o,(&-+t&on &s '+((e/ 2+'u(t+t&1e. T;e (oss o% /ete%&o%+t&on o2 t;e t;&n- &nten/e/ +s + su,st&tute t;%ou-; t;e ne-(&-en'e o2 t;e o,(&-o% /oes not %en/e% ;&7 (&+,(e. But on'e t;e su,st&tut&on ;+s ,een 7+/e t;e o,(&-o% &s (&+,(e 2o% t;e (oss o2 t;e su,st&tute on +''ount o2 ;&s /e(+0 ne-(&-en'e o% 2%+u/. To(ent&no" $+'u(t+t&1e 1s. A(te%n+t&1e @ As to 'ontents o2 t;e o,(&-+t&on A(te%n+t&1e 3 there are various prestations all of w/c constitute parts of the obligation $+'u(t+t&1e 3 only "G: principal prestation constitutes the obligation, the accessory being only a means to facilitate payment. the nullity of the principal prestation invali ates the obligation & the cre itor cannot eman the substitute even when this is vali only the ebtor can choose the

A%t. 12!1. T;e ';o&'e s;+(( <%o/u'e no e22e't eI'e<t 2%. t;e t&7e &t ;+s ,een 'o77un&'+te/. B+(+ne" ReBu&%e7ent o2 Co77un&'+t&on o2 ';o&'e If the choice belongs to the cre itor, of course, he has to communicate his choice to the ebtor. %he ebtor is not a prophet. Go re-uire form may be "BA#, IG 0BI%IGJ, %ACI%#S, "B "%I:B 6G:R6IV"CA# E:AG<. K" I2 t;e ';o&'e ,e(on-s to t;e /e,to% F;0 %eBu&%e 'o77un&'+t&on ,e2o%e <e%2o%7+n'e &2 t;e ';o&'e ,e(on-s to ;&7 +n0F+0L A: %o give the cre itor an opportunity to consent to the choice or impugn it. )"ng v. <empio,Hy, 8L D NK4.* B6% how can the cre itor impugn it if the choice belongs to the ebtor. %he better reason woul be to give the cre itor a chance to prepare for the performance. Not CONSENT" only eclaration of choice ma e, communicate to the other party, unilateral ecal.of will3 A%t&'(es 12!2 to 12!) talk of the loss of some of the prestations before performance.

1. I2 t;e ';o&'e &s /e,to%Qs +. W;en on(0 one <%est+t&on &s (e2t )whether or not the rest of the prestations have been lost through fortuitous event or through the fault of the ebtor*, the ebtor may perform the one that is left.,, Art. 24=4. A%t. 12!2. T;e /e,to% s;+(( (ose t;e %&-;t o2 ';o&'e F;en +7on- t;e <%est+t&ons F;e%e,0 ;e &s +(te%n+t&1e(0 ,oun/ on(0 one &s <%+'t&'+,(e. ,. I2 t;e ';o&'e &s (&7&te/ t;%ou-; t;e '%e/&to%Qs oFn +'ts t;e /e,to% '+n +s8 2o% %eso(ut&on <(us /+7+-es.,, A%t. 12!A. I2 t;%ou-; t;e '%e/&to%Qs +'ts t;e /e,to% '+nnot 7+8e + ';o&'e +''o%/&n- to t;e te%7s o2 t;e o,(&-+t&on t;e (+tte% 7+0 %es'&n/ t;e 'ont%+'t FE /+7+-es. '. I2 e1e%0t;&n- &s (ost t;%ou-; t;e /e,to%Qs 2+u(t t;e (+tte% &s (&+,(e to &n/e7n&20 t;e '%e/&to% 2o% /+7+-es.@@ A%t. 12!C. T;e '%e/&to% s;+(( ;+1e + %&-;t to &n/e7n&t0 2o% /+7+-es F;en t;%ou-; t;e 2+u(t o2 t;e /e,to% +(( t;e t;&n-s FE' +%e +(te%n+t&1e(0 t;e o,.e't o2 t;e o,(&-+t&on ;+1e ,een (ost o% t;e 'o7<(&+n'e o2 t;e o,(&-+t&on ;+s ,e'o7e &7<oss&,(e. T;e &n/e7n&t0 s;+(( ,e 2&Ie/ t+8&n- +s + ,+s&s t;e 1+(ue o2 t;e (+st t;&n- FE' /&s+<<e+%e/ o% t;+t o2 t;e se%1&'e FE' (+st ,e'+7e &7<oss&,(e. #+7+-es ot;e% t;+n t;e 1+(ue o2 t;e (+st t;&n- o% se%1&'e 7+0 +(so ,e +F+%/e/. . If some things are lost through the ebtor.s fault, the ebtor can still choose fr. those remaining. e. If all are lost through fortuitous event, the obligation is e+tinguishe . f. If all prestations but one are lost through fortuitous event, & the remaining prestation was lost through the ebtor.s fault, the latter is liable to in emnify the cre itor for amages.

As to nu((&t0

the nullity of one prestation oes not invali ate the obligation, w/c is still in force w/ respect to those w/c have no vice the right to choose may be given to

As to ';o&'e

15

the cre itor As to e22e't o2 (oss only the impossibility of all the prestations ue w/o fault of the ebtor e+tinguishes the obligation

substitute prestation. the impossibility of the principal prestation is sufficient to e+tinguish the obligation, even if the substitute is possible

B+(+ne: $+'u(t+t&1e o,(&-+t&ons +(F+0s &n1o(1e ';o&'e ,0 t;e /e,to%. In theory, it is easy to istinguish a facultative obligation fr. an alternative one. But in practice, it is ifficult to istinguish the two. Sou (ust have to fin out what the parties really inten e . On(0 One prestation is H6: an enforceable by the cre itor at the time of choice3 if the substitute becomes impossible /t fault of ebtor the & is not affecte , thus no amages3 If after choosing the substitute an choice is communicate to cre itor, the principal prestation becomes impossible, & is not e+tinguishe but has become a simple & that must be performe 3 an he will be liable for amages in elay, neglect or ba faith. If principal & becomes impossible by fault or negligence of cre itor, ebtor cannot be compelle to perform the substitute )no more substitute, becomes simple* / e+tinguishe .

16

[JULY A 2!!8 CLASS] A. AS TO RIGOTS H 3Ds O$ MULTI?LE ?ARTIES" [Jo&nt H So(&/+%0 O,(&-+t&ons A%ts. 12!J@1222] a. Jo&nt O,(&-+t&ons B+(+ne: A joint obligation is one in w/c each of the ebtors is liable only for a proportionate part of the ebt or each cre itor is entitle only to a proportionate part of the cre it. In (oint obligations, there are as many obligations as there are ebtors multiplie by the number of cre itors. T;e%e +%e t;%ee 8&n/s o2 .o&nt o,(&-+t&ons" 1) A't&1e .o&nt where the obligation is (oint on the cre itor.s si e3 2) ?+ss&1e .o&nt where the obligation is (oint on the ebtor.s si e3 & 3) Mu(t&<(e Jo&nt where there are multiple parties on each si e of a (oint obligation. To(ent&no" %he (oint obligation has been variously terme mancomunada or mancomunada simple or pro rata3 In D/G the phrase !0e promise to pay,! use by 4 or more signers, creates a pro rata liability )F"IG%*3 0hile ?I promise to pay@ followe by signatures of 4 or more persons / soli ary3 in ivi ually an collectively3 in ivi ually an (ointly. JOINT ';+%+'te% &s ?RESUME#" 0I:G no stipulation as to liability of several ebtors, presumption is (oint, an each is liable only for his proportionate part of the &3 JE$O o2 'ou%t as to several efen ants when soli arity has not been specifie , the liability of the efen ants in (oint3 court cannot amen . E22e'ts o2 Jo&nt L&+,&(&t0" 2. %he eman by one cre itor upon one ebtor, pro uces the effects of efault only w/ respect to the cre itor who eman e & the ebtor on whom the eman was ma e, but not w/ respect to the others3 4. %he interruption of prescription by the (u icial eman of one cre itor upon a ebtor, oes not benefit the other cre itors nor interrupt the prescription as to other ebtors. "n the same principle, a partial payment or acknowle gement ma e by one of several (oint ebtors oes not stop the running of the statute of limitations as to the others3 5. %he vices of each obligation arising fr. the personal efect of a particular ebtor or cre itor oes not affect the obligation or rights of the others3 8. %he insolvency of a ebtor oes not increase the responsibility of his co, ebtors, nor oes it authori;e a cre itor to eman anything fr. his co,cre itors3 N. In the (oint ivisible obligation, the efense of res judicata is not e+ten e fr. one ebtor to another. )M+n%es+* A%t. 12!8. I2 2%. t;e (+F o% t;e n+tu%e o% t;e Fo%/&n- o2 t;e o,(&-+t&ons to FE' t;e <%e'e/&n- +%t&'(e %e2e%s t;e 'ont%+%0 /oes not +<<e+% t;e '%e/&t o% /e,t s;+(( ,e <%esu7e/ to ,e /&1&/e/ &nto +s 7+n0 eBu+( s;+%es +s t;e%e +%e '%e/&to%s o% /e,to%s t;e '%e/&ts o% /e,ts ,e&n- 'ons&/e%e/ /&st&n't 2%. one +not;e% su,.e't to t;e Ru(es o2 Cou%t -o1e%n&n- t;e 7u(t&<(&'&t0 o2 su&ts. #&s.un't&1e 3" not covere by GCC3 there are 4 or more cre itors an 4 or more ebtors but they are name is(unctively as ebtors an cre itors in the alternative. 7 rules on soli ary &s must apply b/c if rules on alternative &s will be applie then the ebtor will generally be given the choice to whom shall he give payment. :+ample: A bin s himself to pay D2== either to Q or S A or B will pay 2== to Q. ,. In/&1&s&,(e O,(&-+t&ons A%t. 12!M. I2 t;e /&1&s&on &s &7<oss&,(e t;e %&-;t o2 t;e '%e/&to%s 7+0 ,e <%e.u/&'e/ on(0 ,0 t;e&% 'o((e't&1e +'ts H t;e /e,t '+n ,e en2o%'e/ on(0 ,0 <%o'ee/&n- +-+&nst +(( t;e

/e,to%s. I2 one o2 t;e (+tte% s;ou(/ ,e &nso(1ent t;e ot;e% s;+(( not ,e (&+,(e 2o% ;&s s;+%e. A%t. 121!. T;e &n/&1&s&,&(&t0 o2 +n o,(&-+t&on /oes not ne'ess+%&(0 -&1e %&se to so(&/+%&t0. No% /oes so(&/+%&t0 o2 &tse(2 &7<(0 &n/&1&s&,&(&t0. t;e 3 ;e%e &s .o&nt e1en &2 t;e <e%2o%7+n'e &s &n/&1&s&,(e4 Jo&nt In/&1&s&,(e 3" there are several ebtors or cre itors but the prestation is in ivisible :+. Helivery of a house or a eterminate thing3 fulfillment re-uires the concurrence of A## ebtors, although they are each for his part3 an on si e of cre itors, collective action re-uire for acts whc may be pre(u icial3 Consent re-uire , must still communicate choice after consensus IN#IVISIBILITY Re2e%s to t;e <%est+t&on F;' &s not '+<+,(e o2 <+%t&+( <e%2o%7+n'e E22e'ts to Jo&nt '%e/&to%s E22e'ts to /e,to%s .o&nt E+'; '+nnot /e7+n/ 7o%e t;+n ;&s s;+%e E+'; &s not (&+,(e 2o% 7o%e t;+n ;&s s;+%e SOLI#ARITY Re2e%s to t;e (e-+( t&e o% 1&n'u(u7 /e2&n&nt;e eItent o2 (&+,&(&t0 E+'; 7+0 /e7+n/ t;e 2u(( <%est+t&on E+'; ;+s t;e /ut0 to 'o7<(0 F&t; ent&%e <%est+t&on

A%t. 122C. A .o&nt &n/&1&s&,(e o,(&-+t&on -&1es %&se to &n/e7n&t0 2o% /+7+-es 2%. t;e t&7e +n0one o2 t;e /e,to%s /oes not 'o7<(0 FE ;&s un/e%t+8&n-. T;e /e,to%s F;o 7+0 ;+1e ,een %e+/0 to 2u(2&(( t;e&% <%o7&ses s;+(( not 'ont%&,ute to t;e &n/e7n&t0 ,e0on/ t;e 'o%%es<on/&n- <o%t&on o2 t;e <%&'e o2 t;e t;&n- o% o2 t;e 1+(ue o2 t;e se%1&'e &n FE' t;e o,(&-+t&on 'ons&sts. If there is <(u%+(&t0 o2 '%e/&to%s to only one ebtor, )JB* the & can be performe by elivery of the ob(ect to all the cre itors (ointly3 Helivery to only one cre itor makes the ebtor liable for amages to the other ebtors for non,performance, unless they have authori;e this one cre itor to collect in their behalf3 If only one or some, not all cre itors eman fulfillment the ebtor may refuse to eliver an insist that all the cre itors together receive the thing, if not consignation to the court may be ha 3 In non,performance, ebtor is liable for amages here w/respect to amages, the prestation becomes ivisible, each cre itor may recover proportionately. R: Is an &,not do ivisible or notT Go )%olentino* A: &,not do when there are several ebtors, is a (oint in ivisible &. '. So(&/+%0 o,(&-+t&ons B+(+ne" A so(&/+%0 o,(&-+t&on is one in w/c the ebtor is liable for the entire obligation or each cre itor is entitle to eman the whole obligation. +f there is only one obligation, it is a solidary obligation. T;e%e +%e t;%ee 8&n/s o2 so(&/+%&t0" )2* A't&1e so(&/+%&t0 where there are several cre itors w/ one ebtor in a soli ary obligation3 )4* ?+ss&1e so(&/+%&t0 where there is one cre itor w/ several ebtors soli ary boun 3 )5* M&Ie/ So(&/+%&t0 where there are several cre itors & several ebtors in a soli ary obligation. To(ent&no"

17

<oli ary obligations may also be referre to as mancomunada solidaria or .o&nt H se1e%+( or in solidum. It has also been hel that the terms Ejuntos o separadamenteE in a promissory note creates a soli ary responsibility3 0here there are no wor s use to in icate the character of a liability, the phrase !I promise to pay,! followe by the signatures of 4 or more persons, gives rise to an in ivi ual or soli ary responsibility. %he wor s !&n/&1&/u+((0 H 'o((e't&1e(0! also create a soli ary liability. <o oes an agreement to be !&n/&1&/u+((0 (&+,(e! or !&n/&1&/u+((0 H .o&nt(0 (&+,(e.!

)<imilar to Art. 2==N where bros.&sisters of ece ent inherit in their own rt. per capita while nephews & nieces, per stirpes by rt. of representation.*

4.

5. 8.

:ach cre itor represents others in the act of re-uiring payment, & in all other acts w"c tend to secure the credit or maFe it more advantageous. Ience, if he receives only a partial payment, he must ivi e it among the other cre itors. Ie can interrupt the perio of prescription or ren er the ebtor in efault, for the benefit of all other cre itors3 A cre it once pai is share e-ually among the cre itors unless a ifferent intention appears3 Hebtor may pay any of the cre itors but if any eman , (u icial or e+tra(u icial is ma e on him, he must pay only to the one eman ing payment )Art. 2428*3 "ne cre itor oes not represent the others in such acts as no1+t&on, 'o7<ens+t&on H %e7&ss&on )even if the cre it becomes more a vantageous*. In these cases, even if the ebtor is release , the other cre itors can still enforce their rights against the cre itor who ma e the novation, compensation or remission3 .ach creditor may renounce his right even against the will of the debtor, / the latter need not thereafter pay the obligation to the former.

'.1. A't&1e So(&/+%&t0 A%t. 1211. So(&/+%&t0 7+0 eI&st +(t;ou-; t;e '%e/&to%s H t;e /e,to%s 7+0 not ,e ,oun/ &n t;e s+7e 7+nne% H ,0 t;e s+7e <e%&o/s H 'on/&t&ons. A%t. 12!J. T;e 'on'u%%en'e o2 tFo o% 7o%e '%e/&to%s o% o2 tFo o% 7o%e /e,to%s &n one H t;e s+7e o,(&-+t&on /oes not &7<(0 t;+t e+'; one o2 t;e 2o%7e% ;+s + %&-;t to /e7+n/ o% t;+t e+'; one o2 t;e (+tte% &s ,oun/ to %en/e% ent&%e 'o7<(&+n'e FE t;e <%est+t&on. T;e%e &s so(&/+%0 (&+,&(&t0 on(0 F;en t;e o,(&-+t&on eI<%ess(0 so st+tes o% F;en t;e (+F o% t;e n+tu%e o2 t;e o,(&-+t&on %eBu&%es so(&/+%&t0. B+(+ne" R: 0hen is an obligation w/ several parties on either si e Foint or <oli aryT A: %he presumption is that an obligation is (oint ,e'. + .o&nt o,(&-+t&on &s (ess one%ous t;+t + so(&/+%0 one. T;e%e &s so(&/+%0 o,(&-+t&on &n t;e 22." )2* F;en t;e o,(&-+t&on eI<%ess(0 so st+tes 9 stipulation by parties3 )4* when a will e+pressly makes charging or a con ition in solidum, (3) F;en t;e (+F %eBu&%es crimes, conspiracy, act or 2 is act of all3 in torts / (oint tortfeasors %he liability of (oint tortfeasors, w/c inclu e all persons who comman , instigate, promote, encourage, a vise, countenance, cooperate in, ai or abet the commission of a tort, or who approve of it, after it is one, if one for their benefit. )%olentino* )8* n+tu%e o2 t;e o,(&-+t&on %eBu&%es so(&/+%&t0 / Art. 2K,44, GCC3 a moral wrong cannot be ivi e into parts, thus must be soli ary3 a#in to RH/RC )42M5 & 42MO* #iability may arise fr. the provisions of articles 2K to 44 of the GCC. If 4 or more persons acting (ointly become liable un er these provisions, their liability shoul be soli ary bec. of the nature of the obligation. +++ %he acts giving rise to liability un er these articles have a common element,, they are morally wrong. A%t. 1! R?C4 A%t. 21MC H A%t. 21)J NCC 0. N.

-.

C;+%+'te%&st&'s o2 ?+ss&1e So(&/+%&t0 :so(&/+%0 /e,to%s=" ESSENCE ea ebtor can be ma e to answer for the others, w/resulting right to the ebtor,payor to recover fr others their respective shares, akin to 7utu+( -u+%+nt0 :M+n%es+=" 2. :ach ebtor may be re-uire to pay the entire obligation but after payment, he can recover fr. the co, ebtors their respective shares )this is something similar to su,%o-+t&on*3 Interruption of prescription as to one ebtor affects all the others3 but the renunciation by one debtor of prescription already had does not prejudice the others, bec. the e$tinguishment of the obligation by prescription e$tinguishes also the mutual representation among the solidary debtors. 1he debtor who is re2uired to pay may set up by way of compensation his own claim against the creditor, in this case, the effect is the same as that of payment, 1he total remission of the debt in favor of a debtor releases all the debtors, but when this remission affects only the share of one debtor, the other debtors are still liable for the balance of the obligation. All the debtors are liable for the loss of the thing due, even if such loss is caused by the fault of only one of them, or by fortuitous event after one of the debtors has incurred in delay, 1he interests due by reason of the delay of one of the debtors are borne by all of them.

4.

'.

*.

-.

Le-+( Bon/s in soli arity may be uniform o% variedG 5niform when ebtors are boun by same con itions an clauses3 aried where obligors, although liable for the same prestation, are nevertheless not sub(ect to same terms an con itions3 before fulfillment of such con ition or arrival of such term, an action may be brought vs.such ebtor or any other soli ary ebtor for recovery of the entire &, minus the portion correspon ing to the ebtor affecte by the varie con ition or term3 upon happening however, this portion may be claime by cre itor from any of the ebtors. when one of soli ary ebtors is boun by varie terms an con itions, for instance a suspensive con ition or a suspensive perio , cre itors may still eman for fulfillment of the whole prestation prior to the happening of the con ition or arrival of the term, minus the share of this ebtor boun by varie con ition/term. T;&s (+tte% <o%t&on 7+0 ,e /e7+n/e/ 2%o7 +n0one o2 t;e /e,to%s soon +s t;e te%7 +%%&1es o% 'on/&t&on ;+<<ens. EN. Is sureties who are soli arily liable w/other ebtors but bin s themselves to varie con itions istinct fr the principal ebtors3 B6%, the & of surety may not be greater than that of ea principal ebtor, nor more bur ensome.

)N* &7<ose/ ,0 2&n+( .u/-7ent u<on se1e%+( /e2en/+nts / must be e+presse in the FA", cannot be amen e after finality. C;+%+'te%&st&'s o2 A't&1e So(&/+%&t0 :so(&/+%0 '%e/&to%s=" )%olentino* :<<:GC: 7utu+( +-en'0, or mutual representation, whc consists in the authority of ea cre itor to claim & enforce the rts. "f all, w/ resulting & to pay ea one what belongs to him. 2. <ince it is a reciprocal agency, the eath of a soli ary cre itor oes not transmit the soli arity to each of his heirs but to all of them taken together3

18

An 3 to <+0 su7 o2 7one0 &s not no1+te/ &n + neF &nst%u7ent F;e%e&n t;e o(/ &s %+t&2&e/ ,0 ';+n-&n- on(0 t;e te%7s o2 <+07ent +n/ +//&n- ot;e% 3s not &n'o7<+t&,(e FEt;e o(/ one. $+nchausti / o. v. 3ulo, 58 Dhil KOM, 2K=M' CASE" An +-%ee7ent to ,e 5&n/&1&/u+((0 (&+,(e6 o% 5&n/&1&/u+((0 +n/ .o&nt(06 (&+,(e /enotes + so(&/+%0 o,(&-+t&on not + .o&nt (&+,&(&t0. RONKUILLO V. CA $254 < 4O8, <ept. 4M, 2KM5' AAC%<: 2 cre itor )Antonio <o* an 8 ebtors )Bon-uillo, et.al.* Collection for sum of money In an 'o7<%o7&se +-%ee7ent approve by the court, the efen ants obligate themselves to pay R&n/&1&/u+((0 H .o&nt(0.R Bon-uillo an %an were alrea y trying to pay their share of the &, in accor w/ compromise agreement, but the cre itor refuse , asking for full payment3 I:#H: Clearly then, by the e+press term of the compromise agreement & the ecision base upon it, the efs. obligate themselves to pay their obligation !in ivi ually & (ointly.! %he term !&n/&1&/u+((0! has the same meaning as !'o((e't&1e(0,! !se<+%+te(0,! !/&st&n't&1e(0,! !%es<e't&1e(0! or !se1e%+((0.! An agreement to be !individually liable! un oubte ly creates a several obligation, & a !several obligation! is one by w/c one in ivi ual bin s himself to perform the whole obligation. III [T];e <;%+se juntos o% separadamente use/ &n t;e ?EN &s +n eI<%ess st+te7ent 7+8&n- e+'; o2 t;e <e%sons F;o s&-ne/ &t individually liable 2o% t;e <+07ent o2 t;e 2u(( +7ount o2 t;e o,(&-+t&on 'ont+&ne/ t;e%e&n. +++ In the absence of a fin ing of facts that the efen ants ma e themselves in ivi ually liable for the ebts incurre , they are each liable only for 2/4 of sai amount. T;e o,(&-+t&on &n t;e '+se +t ,+% ,e&n- /es'%&,e/ +s R&n/&1&/u+((0 H .o&nt(0 R t;e s+7e &s t;e%e2o%e en2o%'e+,(e +-+&nst one o2 t;e nu7e%ous o,(&-o%s. CASE #OCTRINE" T;e /&%e't (&+,&(&t0 o2 t;e &nsu%e% un/e% &n/e7n&t0 'ont%+'ts +-+&nst T?L /oes not 7e+n t;+t t;e &nsu%e% '+n ,e ;e(/ so(&/+%&(0 (&+,(e FE t;e &nsu%e/ HE o% t;e ot;e% <+%t&es 2oun/ +t 2+u(t. MALAYAN INSURANCE V. CA $2LN < N5L' , AAC%<: Collision of a Feep an a Dantranco Dassenger B6< F::D: river / Campollo is an :: of <an #eon Bice Eill, Inc. "wner of (eep is <io Choy Insurer of (eep )%D#* is Ealayan B6<: passenger VA##:F"< was in(ure an sues for amages I:#H: 0hile it is true that where the insurance contract provi e for in emnity against liability to 5r persons, such 5r persons can irectly sue the insurer, however, t;e /&%e't (&+,&(&t0 o2 t;e &nsu%e% un/e% t;e &n/e7n&t0 'ont%+'ts +-+&nst T?L /oes not 7e+n t;+t t;e &nsu%e% '+n ,e ;e(/ so(&/+%&(0 (&+,(e FE t;e &nsu%e/ &/ or the other parties foun at fault. %he liability of the insurer is base on contract3 that of the insure is base on tort. #iability of Ealayan / culpa contractual )liability is irect but not soli ary* #iability of Feep Hriver RH3 an his :B, vicarious )4 principal tortfeasors*

A'ts <%e.u/&'&+(" soli ary cre itor cannot o anything pre(u icial to the others, like remission, novation, compensation, merger or confusion but such provision in 2424 conflicts w/ 242N3 To(ent&no" Iarmoni;e 2424 & 242N by such acts of e+tinguishment, whc is pre(u icial to co,cre itors, will be vali so as to e+tinguish the claim vs. ebtors, but not w/respect to the rts.of co,cre itors whc subsists an may be enforce vs such cre itor who performe the act alone. B+(+ne" %here is an apparent conflict bet. Art. 2424 & 242N. Art. 2424 states that the agency e+ten s only to things w/c will benefit all co,cre itors. But not anything w/c is pre(u icial to the latter. In Art. 242N, he can o an acts pre(u icial to the other cre itors, like remission for instance. A%t. 121A. A so(&/+%0 '%e/&to% '+nnot +ss&-n ;&s %&-;ts FEo t;e 'onsent o2 t;e ot;e%s. A%t. 121C. T;e /e,to% 7+0 <+0 +n0 one o2 t;e so(&/+%0 '%e/&to%s4 ,ut &2 +n0 /e7+n/ .u/&'&+( o% eIt%+.u/&'&+( ;+s ,een 7+/e ,0 one o2 t;e7 <+07ent s;ou(/ ,e 7+/e to ;&7. To(ent&no" Mutu+( +-en'0 whc is the essence of active soli arity, implies mutual confi ence, thus one cre itor cannot assign/transfer his rts to another w/o consent of the others. E22e'ts o2 Un+ut;o%&>e/ T%+ns2e%" no effect, no rts. transferre 3 assignee oes not become soli ary cre itor, co, cre itors an ebtor/s not boun by such transfer3 payment ma e by this assignee will not e+tinguish &3 suit file by him may not interrupt B+. :QC:D%, if the assignee is also one of the co, cre itors, b/c mutual confi ence is incumbent. Just&'e JBL REYES" Art. 2425 places un(ustifiable an unnecessary bur en on the rts of soli ary cre itors upon his own share. %he article sh have rea as: A solidary creditor who assigns his rts w4o the consent of his co-creditors shall answer subsidiarily for any prejudice caused by the assignee in connection w4 d credit assigned. #iability was compare to agent&principal3 B+(+ne" Gene%+( Ru(e A ebtor may pay any of the soli ary cre itors. EI'e<t&on If eman is ma e by one cre itor upon the ebtor, in w/c case the latter must pay the eman ing cre itor only. To(ent&no" Ju/&'&+( #e7+n/ when such is ma e by one of soli ary cre itors, t+'&t 7utu+( %e<%esent+t&on &s /ee7e/ %e1o8e/. Hefen ant, ebtor sh pay to plaintiff,cre itor to effect e+tinguishment3 payment to any of other cre itors who i not sue woul be eeme payment to a 5r person. plaintiff,cre itor merely consoli ates in himself the representation of all the others, but the essence of soli arity of cre itors sh not be nullifie 3

Aor if petitioner,insurer were soli arily liable w/ sai 4 respon ents by reason of the in emnity contract, against 5r party liability,, un er w/c an insurer can be irectly sue by a 5r party,, this will result in a violation of the principles un erlying soli ary obligations & insurance contracts. A%t. 1212. E+'; one o2 t;e so(&/+%0 '%e/&to%s 7+0 /o F;+te1e% 7+0 ,e use2u( to t;e ot;e%s ,ut not +n0t;&n- FE' 7+0 ,e <%e.u/&'&+( to t;e (+tte%. A'ts ,ene2&'&+(" each soli ary ebtor may, interrupt prescription, constitute a ebtor in efault, bring suit so that & may pro uce interest

EIt%+@.u/&'&+( #e7+n/ same as above3 eman by several cre itors separately, ebtor sh pay the one who notifie him 2st 3 if they eman at same time, or collectively, ebtor may choose to whom to pay. Ot;e% Inst+n'es: #e,to% u<on F;o7 /e7+n/ F+s 7+/e <+0s to + '%e/&to% ot;e% t;+n t;e one F;o 7+/e t;e /e7+n/ &n 1&o(+t&on o2 A%t. 121C %his is consi ere payment to a thir person )Art. 2482, par. 4* & the ebtor can still be ma e to pay the ebt. %he only concession given to the ebtor is that he is allowe to e uct the share of the receiving cre itor fr. the total amount ue even if he pai the entire amount ue to that cre itor. C%e/&to% A 7+8es /e7+n/ on /e,to% Y Hoes it mean that he cannot pay the share pertaining to cre itor BT

19

A:

Accor ing to commentators he can. But this is angerous bec. there may alrea y be an agreement on the part of the cre itors.

%olentino warns that to make the ebtors pay for the whole amount to the eman ing cre itor even if partial payment has alrea y been ma e to another cre itor might amount to un(ust enrichment. %his rule/restriction has alrea y been scrappe in some mo ern civil co es allowing free om of choice to the ebtor even after eman . K" T;e%e +%e t;%ee '%e/&to%s A, B & C & there are three ebtors Q, S & W. A makes a eman on S. Q pays B. A: T;&s &s not 'o1e%e/ ,0 A%t. 121C.

K" I2 + .u/-7ent 7+/e &n +n +'t&on ,%ou-;t ,0 + so(&/+%0 '%et/&to% 1s + so(&/+%0 /e,to% F&(( &t ,e res judicata 1s t;e 'o@/e,to%sL A: A favorable (u gment that inures to the benefit of the co, cre itors will be res judicata as to the latter3 An a verse (u gment woul have the same effect if the action of the plaintiff,cre itor is not foun e on a cause personal to him, but actually consoli ates in him all the rts.as well of his co, cre itors. )%olentino* similarly translate as to co, ebtors3 <ince in soli arity, there is unity of notwithstan ing plurality of sub(ects3 A (u gment that eclares the & oes e+tinguishe the & the efen ant, ebtor, ecision inures to the benefit of co, ebtors, cause is personal to the ef, ebtor. ?ASSIVE SOLI#ARITY <oli ary ebtors whole & legal tie, not e+ist an such unless the

A%t. 121). No1+t&on 'o7<ens+t&on 'on2us&on o% %e7&ss&on o2 t;e /e,t 7+/e ,0 +n0 o2 t;e so(&/+%0 '%e/&to%s o% FE +n0 o2 t;e so(&/+%0 /e,to%s s;+(( eIt&n-u&s; t;e o,(&-+t&on FEo <%e.u/&'e to t;e <%o1&s&ons o2 +%t&'(e 121M. T;e '%e/&to% F;o 7+0 ;+1e eIe'ute/ +n0 o2 t;ese +'ts +s Fe(( +s ;e F;o 'o((e'ts t;e /e,t s;+(( ,e (&+,(e to t;e ot;e%s 2o% t;e s;+%e &n t;e o,(&-+t&on 'o%%es<on/&n- to t;e7. A%t. 121M. T;e %e7&ss&on 7+/e ,0 t;e '%e/&to% o2 t;e s;+%e FE' +22e'ts one o2 t;e so(&/+%0 /e,to%s /oes not %e(e+se t;e (+tte% 2%. ;&s %es<ons&,&(&t0 toF+%/s t;e 'o@/e,to%s &n '+se t;e /e,t ;+/ ,een tot+((0 <+&/ ,0 +n0one o2 t;e7 ,e2o%e t;e %e7&ss&on F+s e22e'te/. A%t. 1M1). I2 tFo o% 7o%e <e%sons ;+1e +<<o&nte/ +n +-ent 2o% + 'o77on t%+ns+'t&on o% un/e%t+8&n- t;e0 s;+(( ,e so(&/+%&(0 (&+,(e to t;e +-ent 2o% +(( t;e 'onseBuen'es o2 t;e +-en'0. To(ent&no" No1+t&on A soli ary ebtor bin s himself alone, assumes the ebt, releases the other ebtors. But this ebtor cannot bin himself to a new ebt w/o the consent of others. If cre itor makes the novation w/one ebtor an oes not secure consent of other ebtors, the latter is release . %he new contract bin s only the ebtor who secure the novation. Eere e+tension of time given by cre itor to a soli ary oes not release others from the & no novation here. ebtor

SURETY soli ary guaranty only to the e+tent of contract stipulations/as e+presse <ubsi iary releases the surety

:+tent of #iability

#iability :ffects of :+tension of time grante by cre itor

Drimary soli ary & remains

CASE" 6f one of the alleged solidary debtor dies during the pendency of the collection case, the court where said case is pending retains jurisdiction to continue hearing the charge as against the surviving defendants. :121*= ?NB V. IN#E?EN#ENT ?LANTERS $244 <CBA 225' , AAC%<: DGBPs complaint vs.several soli ary ebtors for collection of sum of money3 one of efen ants )Ceferino Valencia* ie uring the pen ency of the caase after plaintiff ha presente its evi ence3 Hefs. Eove to ismiss the money claim in accor w/ Bule ML B"C, sec.L <oli ary & of ece ent / where irects that the claim sh be file vs the estate of the ece ent, ebtor w/o pre(u ice to rt. of estate to go vs the other ebtors for reimbursement. I<<6:: 0"G eath of one soli ary ebtor, efen ant eprives the court of (uPs to procee w/ case vs. surviving efs., being a money,claim base on 9T Iel : It is crystal clear that Art. 242L is the applicable provision in this matter. <ai provision gives the cre itor the <6B<%AG%IV: right to procee against anyone of the soli ary ebtors or some or all of them simultaneously. 7he choice is undoubtedly left to the solidary creditor to determine against whom he will enforce collection. In case of the eath of the soli ary ebtors, he )the cre itor* may, if he so chooses, procee against the surviving soli ary ebtors w/o necessity of filing a claim in the estate of the ecease ebtors. 6t is not mandatory for him to have the case dismissed against the surviving debtors H file its claim in the estate of the deceased solidary debtor. Ru(es o2 ?%o'e/u%e '+nnot <%e1+&( o1e% su,st+nt&1e (+F.,, If <ec. L, Bule ML, B"C were applie literally, Art. 242L woul , in effect, be repeale since un er the B"C, petitioner has no choice but to procee against the estate of Eanuel Barre o only. "bviously, this provision iminishes the Bank.s right un er the GCC to procee against any one, some or all of the soli ary ebtors. <uch a construction is not sanctione by the principle +++ that a substantive law cannot be amen e by a proce ural law. "therwise state , <ec. L of Bule ML cannot be ma e to prevail over Art. 242L, the former being merely proce ural, while the latter, substantive. To(ent&no" Dassive <oli arity vs. <uretyship / <imilarity: )2* both stan s for some other person3 )4* both may re-uire reimbursement

#+t&on &n <+07ent by one ebtor e+tinguishes as in payment if ma e imme iately, otherwise if promise only, this is a novation. 0hen 7e%-e% H 'o7<ens+t&on is total there is e+tinguishment of the &s3 only reimbursements remain3 if partial tho, applic. "f payments sh govern3 A su%et0 who is boun in solidum will be release by any material alteration in the principal contract ma e w/o knowle ge & consent of surety, e.g. e+tension of time, unless suretyPs liability is varie , as in installment payments. 0hen 2 cre itor makes a %e7&ss&on the e+tent of that particular & is e+tinguish, this cre itor is liable to co,cre itors for their shares. 0hen remission favors only one ebtor, in full share, this ebtor is release fr soli ary &, if partial, he retains the soli ary & & becomes a surety of the whole &3 $+'to%s to 'ons&/e% &n E22e'ts o2 A'ts un/e% 121)" 2. the relation bet. Cre itors an that of ebtors3 4. the relation among co, ebtors themselves. B+1&e%+: ?%&n'&<+(s +%e +(F+0s (&+,(e so(&/+%&(04 A-ents +%e not (&+,(e so(&/+%&(0 un(ess eI<%ess(0 st&<u(+te/ )res inter alios acta*

,. ?+ss&1e So(&/+%&t0 A%t. 121*. T;e '%e/&to% 7+0 <%o'ee/ +-+&nst +n0 one o2 t;e so(&/+%0 /e,to%s o% so7e o% +(( o2 t;e7 s&7u(t+neous(0. T;e /e7+n/ 7+/e +-+&nst one o2 t;e7 s;+(( not ,e +n o,st+'(e to t;ose FE' 7+0 su,seBuent(0 ,e /&%e'te/ +-+&nst t;e ot;e%s so (on- +s t;e /e,t ;+s not ,een 2u((0 'o((e'te/.

If surety bin s itself in solidum, cre itor may go vs. anyone of them. ?+ss&1e So(&/+%&t0 <oli ary ebtor is Su%et0s;&< liable only as to his

#&st&n't&ons

20

:+tension of %ime given by cre itor

liable for his own & & that of his co, ebtorsP Drimary liability oes not release a soli ary ebtor )novation*

own & <ubsi iary liability releases a soli ary guarantor or surety )e+tinguishment*

su<<ose to %e&7,u%se ;&7 A!!! e+ Y 'ou(/ ,e 'o7<e((e/ to 'ont%&,ute 1!!! +s to t;e &nso(1en'0 o2 N.

A%t. 121J. ?+07ent 7+/e ,0 one o2 t;e so(&/+%0 /e,to%s eIt&n-u&s;es t;e o,(&-+t&on. I2 tFo o% 7o%e so(&/+%0 /e,to%s o22e% to <+0 t;e '%e/&to% 7+0 ';oose FE' o22e% to +''e<t. Oe F;o 7+/e t;e <+07ent 7+0 '(+&7 2%. ;&s 'o@/e,to%s on(0 t;e s;+%e FE' 'o%%es<on/s to e+'; FE t;e &nte%est 2o% t;e <+07ent +(%e+/0 7+/e. I2 t;e <+07ent &s 7+/e ,e2o%e t;e /e,t &s /ue no &nte%est 2o% t;e &nte%1en&n- <e%&o/ 7+0 ,e /e7+n/e/. W;en one o2 t;e so(&/+%0 /e,to%s '+nnot ,e'. o2 ;&s &nso(1en'0 %e&7,u%se ;&s s;+%e to t;e /e,to% <+0&n- t;e o,(&-+t&on su'; s;+%e s;+(( ,e ,o%ne ,0 +(( ;&s 'o@/e,to%s &n <%o<o%t&on to t;e /e,t o2 e+';. A%t. 1218. ?+07ent ,0 + so(&/+%0 /e,to% s;+(( not ent&t(e ;&7 to %e&7,u%se7ent 2%. ;&s 'o@/e,to%s &2 su'; <+07ent &s 7+/e +2te% t;e o,(&-+t&on ;+s <%es'%&,e/ o% ,e'o7e &((e-+(. A%t. 121M. T;e %e7&ss&on 7+/e ,0 t;e '%e/&to% o2 t;e s;+%e FE' +22e'ts one o2 t;e so(&/+%0 /e,to%s /oes not %e(e+se t;e (+tte% 2%. ;&s %es<ons&,&(&t0 toF+%/s t;e 'o@/e,to%s &n '+se t;e /e,t ;+s ,een tot+((0 <+&/ ,0 +n0one o2 t;e7 ,e2o%e t;e %e7&ss&on F+s e22e'te/. To(ent&no: Dayment by one soli ary ebtor in whole / e+tinguishes the & an releases the cre it gives rise to a new & for reimbursement by the other ebtors to this one ebtor who pai )F"IG% &*3 plaintiff cre itor may be properly substitute by the ebtor who pai 3 :QC:D%: If payment was ma e after the & prescribe or become illegal )mistake or not*. )242M* After the & has prescribe or becomes illegal, it is no longer ue & eman able. Gone of the soli ary ebtors can be compelle by the cre itors to pay. %hus, if one ebtor pays, he cannot reimburse fr his co, ebtors b/c his action will not revive the ine+istent &3 Jenerally, neither coul he recover fr the cre itor to whom he pai )Art. 2848*3 e+cept perhaps un er solutio indebiti. B+(+ne" E22e't o2 Re7&ss&on.@@ Droblem: <oli ary ebtors 0, Q, S & W are in ebte to A for D24,===. A remits the share of S )D5,===* K" C+n Y ,e sue/L A: Ses, for the DK,=== )D24,=== less D5,=== share of S* his share was remitte but not the soli ary & K" Su<<os&n- N &s &nso(1entL A: S can still be ma e to contribute. Bemission will benefit S only in so far as his share is concerne . Iis liability in case of insolvency of one co,cre itor is not affecte . K" C+n A /e7+n/ t;e ?M !!! 2%. YL A: Ses. But he can recover the same fr. 0, Q & W. K" I2 W <+&/ t;e F;o(e /e,t ,e2o%e A %e7&ts YDs s;+%e 7+0 W st&(( /e7+n/ %e&7,u%se7ent o2 YDs s;+%eL A" Yes Art. 242K, S will not be release from his soli ary &. 6pon 0Ps full payment the entire & was e+tinguishe , therePs nothing more to remit in SPs favor. K" A2te% A %e7&ts s;+%e o2 Y W <+0s &n 2u(( t;e %e7+&n&n12 !!!. N t;en ,e'o7es &nso(1ent. M+0 Y ,e 'o7<e((e/ to 'ont%&,ute to t;e s;+%e o2 NL A" Yes :M+n%es+ +n/ To(ent&no= -%+tu&tous +'ts s;/ ,e 'onst%ue/ %est%&'t&1e(0 +s to <e%7&t t;e (e+st t%+ns7&ss&on o2 %ts :A%t.1AJ8=. T;us &2 W <+&/ M !!! +n/ N +n/ U Fe%e

A%t. 122!. T;e %e7&ss&on o2 t;e F;o(e o,(&-+t&on o,t+&ne/ ,0 one o2 t;e so(&/+%0 /e,to%s /oes not ent&t(e ;&7 to %e&7,u%se7ent 2%. ;&s 'o@/e,to%s. A%t. 1221. I2 t;e t;&n- ;+s ,een (ost o% &2 t;e <%est+t&on ;+s ,e'o7e &7<oss&,(e FEo t;e 2+u(t o2 t;e so(&/+%0 /e,to%s t;e o,(&-+t&on s;+(( ,e eIt&n-u&s;e/. I2 t;e%e F+s 2+u(t on t;e <+%t o2 +n0 one o2 t;e7 +(( s;+(( ,e %es<ons&,(e to t;e '%e/&to% 2o% t;e <%&'e H t;e <+07ent o2 /+7+-es H &nte%est FEo <%e.u/&'e to t;e&% +'t&on +-+&nst t;e -u&(t0 o% ne-(&-ent /e,to%. I2 t;%ou-; + 2o%tu&tous e1ent t;e t;&n- &s (ost o% t;e <e%2o%7+n'e ;+s ,e'o7e &7<oss&,(e +2te% one o2 t;e so(&/+%0 /e,to%s ;+s &n'u%%e/ &n /e(+0 t;%ou-; t;e .u/&'&+( o% eIt%+.u/&'&+( /e7+n/ u<on ;&7 ,0 t;e '%e/&to% t;e <%o1&s&ons o2 t;e <%e'e/&n- <+%+-%+<; s;+(( +<<(0. A%t. 18M). I2 so(&/+%&t0 ;+s ,een +-%ee/ u<on e+'; o2 t;e +-ents &s %es<ons&,(e 2o% t;e non@2u(2&((7ent o2 t;e +-en'0 H 2o% t;e 2+u(t o% ne-(&-en'e o2 ;&s 2e((oF +-ents eI'e<t &n t;e (+tte% '+se F;en t;e 2e((oF +-ents +'te/ ,e0on/ t;e s'o<e o2 t;e&% +ut;o%&t0. A%t. 1222. A so(&/+%0 /e,to% 7+0 &n +'t&ons 2&(e/ ,0 t;e '%e/&to% +1+&( ;&7se(2 o2 +(( /e2enses FE' +%e /e%&1e/ 2%. t;e n+tu%e o2 t;e o,(&-+t&on H o2 t;ose FE' +%e <e%son+( to ;&7 o% <e%t+&n to ;&s oFn s;+%e. W&t; %es<e't to t;ose FE' <e%son+((0 ,e(on- to t;e ot;e%s ;e 7+0 +1+&( ;&7se(2 t;e%eo2 on(0 +s %e-+%/s t;+t <+%t o2 t;e /e,t 2o% FE' t;e (+tte% +%e %es<ons&,(e. :ffects of 2442 limite to non,performance b/c of loss of thing or impossibility of prestation thatPs ue if such is /t A:, w/o fault or elay on any ebtor, then & is e+tinguishe 3 no ebtor is liable. If ebtor is at fault on the loss/impossibility3 "r if in elay even b8 loss/impossibility the & is converte to in emnification )of the price, amages & interests*. If guilty ebtor is ma e to pay by eman of cre itor, he cannot recover fr his co, ebtors )if there was loss/imp*, he will shoul er the whole amount of the loss thing X in emnity3 If another co, ebtor pays the whole amount he coul recover fr his co, ebtors3 In case of non@<e%2o%7+n'e F&t;out (oss o2 t;e t;&n-E;+s not ,e'o7e &7<oss&,(e" but there is elay, frau , fault or negligence, or some other breach of &, cre itor may also recover amages3 here, if guilty ebtor pays, he will not shoul er the whole amount, his co, ebtors will pay him their e-uivalent share in the original &. Juilty ebtor shoul ers the amount of amages though.

B+(+ne" T;%ee #e2enses o2 So(&/+%0 #e,to%" 2. %hose /e%&1e/ 2%. t;e n+tu%e o2 t;e o,(&-+t&on is a total efense3 e.g., prescription, illegality of obligation )illicit ob(ect*3 vitiate consent3 unenforceability un er the <tatute of Arau s3 non,happening of con ition3 arrival of resolutory perio 3 e+tinguishe & /t payment, remission3 %hose /e2enses <e%son+( to t;e /e,to%@/e2en/+nt3 e.g., insanity If it involves vitiation of consent, total efense. If it involves a special term or a con ition, a partial efense. %hose /e2enses <e%son+( to ot;e% 'o@/e,to%s3

4.

5.

21

e.g., efense as to the share correspon ing to other ebtors is a partial efense, i.e. suspensive con ition or perio as to the & of one co, ebtor. C. AS TO ?ER$ORMANCE O$ ?RESTATION +. #&1&s&,(e O,(&-+t&ons A%t. 122A. T;e /&1&s&,&(&t0 o% &n/&1&s&,&(&t0 o2 t;e t;&n-s t;+t +%e t;e o,.e't o2 o,(&-+t&ons &n FE' t;e%e &s on(0 one /e,to% H on(0 one '%e/&to% /oes not +(te% o% 7o/&20 t;e <%o1&s&ons o2 C;+<te% 2 o2 t;&s T&t(e :N+tu%e H E22e't o2 O,(&-+t&ons=. B+(+ne" %his kin of obligations has something to o w/ the performance of the prestation, & not to the thing. %he thing may be ivisible but the & may still be in ivisible, e.g. & to eliver 2== sacks of (asmine rice foun in 0arehouse of specific a ress on a fi+e ate ) eterminate &*3 "r thing is in ivisible but performance is ivisible, i.e. stage,by,stage construction of a public roa where obligor may eliver every 2NV of work one an collect its proportionate cost from govt agency concerne , performance bon s here may also be terme as such. 'ivisible obligation is one susceptible of partial performance. An indivisible obligation is one that must be performe in one act. Test o2 #&1&s&,&(&t0: 0"G it is susceptible of partial performance. Gene%+( %u(e: O,(&-+t&on &s &n/&1&s&,(e FE' 7e+ns t;+t &t ;+s to ,e <e%2o%7e/ &n one +'t s&n-(0. W;0L Bec. the law provi es so: 6nless there is an e+press stipulation to that effect, the cre itor cannot be compelle partially to receive the prestations in w/c the obligation consists. Geither may the ebtor be re-uire to make partial payments. +++ )Art. 248M, par. 2.* To(ent&no" W;en /&1&s&on Fou(/ /&7&n&s; t;e 1+(ue o2 t;e F;o(e KUALITATIVE when the thing is not really homogeneous, i.e. inheritance3 KUANTITATIVE, when the thing ivi e is homogeneous an may be separate into parts if movable, or limits may be set if immovable3 I#EAL, when parts are not separate materially, but assigne to several persons, as in pro-indiviso co, owners3 T;%ee EI'e<t&ons to t;e Ru(e on In/&1&s&,&(&t0" 2. 0hen the parties so provi e. )Art. 248M, par. 2.* 4. 5. 0hen the nature of the obligation necessarily entails performance in parts. 0here the law provi es otherwise.

W;en t;e o,(&-+t&on ;+s 2o% &ts o,.e't t;e eIe'ut&on o2 + 'e%t+&n nu7,e% o2 /+0s o2 Fo%8 t;e +''o7<(&s;7ent o2 Fo%8 ,0 7et%&'+( un&ts o% +n+(o-ous t;&n-s FE' ,0 t;e&% n+tu%e +%e sus'e<t&,(e o2 <+%t&+( <e%2o%7+n'e &t s;+(( ,e /&1&s&,(e. OoFe1e% e1en t;ou-; t;e o,.e't o% se%1&'e 7+0 ,e <;0s&'+((0 /&1&s&,(e +n o,(&-+t&on &s &n/&1&s&,(e &2 so <%o1&/e/ ,0 (+F o% &nten/e/ ,0 t;e <+%t&es. In o,(&-+t&ons not to /o /&1&s&,&(&t0 o% &n/&1&s&,&(&t0 s;+(( ,e /ete%7&ne/ ,0 t;e ';+%+'te% o2 t;e <%est+t&on &n e+'; <+%t&'u(+% '+se. TOLENTINO" To en2o%'e + Jo&nt In/&1&s&,(e 3 A%t. 12!M ;+s est+,(&s;e/ t;e ne'ess&t0 o2 COLLECTIVE $UL$ILLMENT an the action must be against all the ebtors. in case of non,performance by any of the ebtors, the & is converte into liability for losses & amages Y HIVI<IB#:. %I6<, if one ebtor is insolvent, or fails to pay his share, the other ebtors will no longer be liable for his share. %he entire liability for all amages is shoul ere by the efaulting ebtor. So(&/+%&t0 1s. In/&1&s&,&(&t0" So(&/+%&t0 Befers to vinculum, an principally to the sub(ects of & Be-uires plurality of sub(ects <oli arity remains even in case of breach of one, they all remain liable for in emnity Heath of ebtor terminates soli arity In/&1&s&,&(&t0 refers to the prestation or the ob(ect of the & plurality not re-P when & is converte to liability for amages, the in ivisibility ceases to e+ist, each ebtor becomes liable for his part of in emnity in ivisibility affects the heirs of a ece ent ebtor, they remain to be boun to perform the same prestation

$+'to%s to #ete%7&ne W;et;e% 3 &s #&1&s&,(e o% not" 2. 4. 5. 8. will or intention of the parties, whc may be e+presse or presume 3 ob(ective or purpose of stipulate prestation3 nature of the thing3 provisions of law affecting the prestation In &s to give, in ivisibility is presume 3 e+cept: 2. when work is agree to be by units of time or measure3 4. or otherwise susceptible of partial performance Y ivisible

#&1&s&,&(&t0 o2 O,(&-+t&on /&st&n-u&s;e/ 2%. /&1&s&,&(&t0 o2 o,.e't" Hivisibility of obligation or prestation oes not necessarily mean a ivisible obligation. Hivisibility of ob(ect is not the same as ivisibility of obligation. But the reverse is not the same. In ivisibility of ob(ect means an in ivisible obligation.

A%t. 122C. A .o&nt &n/&1&s&,(e o,(&-+t&on -&1es %&se to &n/e7n&t0 2o% /+7+-es 2%. t;e t&7e +n0one o2 t;e /e,to%s /oes not 'o7<(0 FE ;&s un/e%t+8&n-. T;e /e,to%s F;o 7+0 ;+1e ,een %e+/0 to 2u(2&(( t;e&% <%o7&ses s;+(( not 'ont%&,ute to t;e &n/e7n&t0 ,e0on/ t;e 'o%%es<on/&n- <o%t&on o2 t;e <&e'e o2 t;e t;&n- o% o2 t;e 1+(ue o2 t;e se%1&'e &n FE' t;e o,(&-+t&on 'ons&sts. A%t. 122). $o% t;e <u%<oses o2 t;e <%e'e/&n- +%t&'(es o,(&-+t&ons to -&1e /e2&n&te t;&n-s H t;ose FE' +%e not sus'e<t&,(e o2 <+%t&+( <e%2o%7+n'e s;+(( ,e /ee7e/ to ,e &n/&1&s&,(e.

In in ivisible &, partial performance is e-ual to non, performance. %hus, partial payment base on 2uantum meruit is not availe . :A%ts. 12AA +n/ 12C8 2o%,&/s <+%t&+( 2u(2&((7ent= 5Wor# half done is worst than wor# undone67 EI'e<t&ons: (1) & has been su,st+nt&+((0 <e%2o%7e/ &n -oo/ 2+&t; ebtor may recover as if there ha been complete performance, minus the amages suffere by cre itor3 (2) C%e/&to% +''e<ts /es<&te <+%t&+( <e%2o%7+n'e, with knowle ge of incompleteness, without protest & is eeme fully performe . Consi eration Drestation/s 0hen a part is illegal "ne voi whole 9 unenforceable voi 9 :G%IB: 9 single <:V:BAB#: 9 apportione )e+pressly/implie * several, istinct, separate items partly enforceable if not illegal, then

22

un ertaking 8i9. <tatute of Arau s must be in writing

vali covenants may be enforce if separate chattels may be sol below limits set by <tatute of Arau s, even when the sumtotal e+cee s, 9 not affecte

A%t. 1*1A. In t;e '+se o2 t;e <%e'e/&n- +%t&'(e t;e 1en/ee 7+0 /e7+n/ o2 +(( t;e 1en/o%s o% 'o@;e&%s t;+t t;e0 'o7e to +n +-%ee7ent u<on t;e %e<u%';+se o2 t;e F;o(e t;&nso(/4 +n/ s;ou(/ t;e0 2+&( to /o so t;e 1en/ee '+nnot ,e 'o7<e((e/ to 'onsent to + <+%t&+( %e/e7<t&on. A%t. 12C8. Un(ess t;e%e &s +n eI<%ess st&<u(+t&on to t;+t e22e't t;e '%e/&to% '+nnot ,e 'o7<e((e/ <+%t&+((0 to %e'e&1e t;e <%est+t&ons &n FE' t;e o,(&-+t&on 'ons&sts. Ne&t;e% 7+0 t;e /e,to% ,e %eBu&%e/ to 7+8e <+%t&+( <+07ents. OoFe1e% F;en t;e /e,t &s &n <+%t (&Bu&/+te/ H &n <+%t un(&B@ u&/+te/ t;e '%e/&to% 7+0 /e7+n/ H t;e /e,to% 7+0 e22e't t;e <+07ent o2 t;e 2o%7e% FEo F+&t&n- 2o% t;e (&Bu&/+t&on o2 t;e (+tte%. A%t. 1)8A. Un(ess ot;e%F&se +-%ee/ t;e ,u0e% o2 -oo/s &s not ,oun/ to +''e<t /e(&1e%0 t;e%eo2 ,0 &nst+((7ents. W;e%e t;e%e &s + 'ont%+'t o2 s+(e o2 -oo/s to ,e /e(&1e%e/ ,0 st+te/ &nst+((7ents FE' +%e to ,e se<+%+te(0 <+&/ 2o% H t;e se((e% 7+8es /e2e't&1e /e(&1e%&es &n %es<e't o2 one o% 7o%e &nst+((7ents o% t;e ,u0e% ne-(e'ts o% %e2uses FEo .ust '+use to t+8e /e(&1e%0 o2 o% <+0 2o% one o% 7o%e &nst+((7ents &t /e<en/s &n e+'; '+se on t;e te%7s o2 t;e 'ont%+'t H t;e '&%'u7st+n'es o2 t;e '+se F;et;e% t;e ,%e+'; o2 'ont%+'t &s so 7+te%&+( +s to .ust&20 t;e &n.u%e/ <+%t0 &n %e2us&n- to <%o'ee/ 2u%t;e% H su&n- 2o% /+7+-es 2o% ,%e+'; o2 t;e ent&%e 'ont%+'t o% F;et;e% t;e ,%e+'; &s se1e%+,(e -&1&n- %&se to + '(+&7 2o% 'o7<ens+t&on ,ut not to + %&-;t to t%e+t t;e F;o(e 'ont%+'t +s ,%o8en.

,. In/&1&s&,(e O,(&-+t&ons A%t. 12!M. I2 t;e /&1&s&on &s &7<oss&,(e t;e %&-;t o2 t;e '%e/&to%s 7+0 ,e <%e.u/&'e/ on(0 ,0 t;e&% 'o((e't&1e +'ts H t;e /e,t '+n ,e en2o%'e/ on(0 ,0 <%o'ee/&n- +-+&nst +(( t;e /e,to%s. I2 one o2 t;e (+tte% s;ou(/ ,e &nso(1ent t;e ot;e%s s;+(( not ,e (&+,(e 2o% ;&s s;+%e. A%t. 121!. T;e &n/&1&s&,&(&t0 o2 +n o,(&-+t&on /oes not ne'ess+%&(0 -&1e %&se to so(&/+%&t0. No% /oes so(&/+%&t0 o2 &tse(2 &7<(0 &n/&1&s&,&(&t0. EI+7<(es o2 In/&1&s&,(e O,(&-+t&ons" :1= B0 1&%tue o2 &ts o,.e't A%t. *18. E+se7ents +%e &n/&1&s&,(e. I2 t;e se%1&ent est+te &s /&1&/e/ ,etFeen tFo o% 7o%e <e%sons t;e e+se7ent &s not 7o/&2&e/ H e+'; o2 t;e7 7ust ,e+% &t on t;e <+%t FE' 'o%%es<on/s to ;&7. I2 &t &s t;e /o7&n+nt est+te t;+t &s /&1&/e/ ,etFeen tFo o% 7o%e <e%sons e+'; o2 t;e7 7+0 use t;e e+se7ent &n &ts ent&%et0 FEo ';+n-&n- t;e <(+'e o2 &ts use o% 7+8&n- &t 7o%e ,u%/enso7e &n +n0 ot;e% F+0. :2= EI<%ess <%o1&s&on o2 (+F

:A= EI<%ess +-%ee7ent A%t. 2!8M. A <(e/-e o% 7o%t-+-e &s &n/&1&s&,(e e1en t;ou-; t;e /e,t 7+0 ,e /&1&/e/ +7on- t;e su''esso%s &n &nte%est o2 t;e /e,to% o% o2 t;e '%e/&to%. T;e%e2o%e t;e /e,to%Qs ;e&% F;o ;+s <+&/ + <+%t o2 t;e /e,t '+nnot +s8 2o% t;e <%o<o%t&on+te eIt&n-u&s;7ent o2 t;e <(e/-e o% 7o%t-+-e +s (on- +s t;e /e,t &s not 'o7<(ete(0 s+t&s2&e/. Ne&t;e% '+n t;e '%e/&to%Qs ;e&% F;o %e'e&1e/ ;&s s;+%e o2 t;e /e,t %etu%n t;e <(e/-e o% '+n'e( t;e 7o%t-+-e to t;e <%e.u/&'e o2 t;e ot;e% ;e&%s F;o ;+1e not ,een <+&/. $%o7 t;ese <%o1&s&ons &t &s eI<e'te/ t;e '+se &n FE' t;e%e ,e&n- se1e%+( t;&n-s -&1en &n 7o%t-+-e o% <(e/-e e+'; one o2 t;e7 -u+%+ntees on(0 + /ete%7&n+te <o%t&on o2 t;e '%e/&t. T;e /e,to% &n t;&s '+se s;+(( ;+1e + %&-;t to t;e eIt&n-u&s;7ent o2 t;e <(e/-e o% 7o%t-+-e +s t;e <o%t&on o2 t;e /e,t 2o% FE' e+'; t;&n- &s s<e'&+((0 +nsFe%+,(e &s s+t&s2&e/. A%t. 2!M!. T;e &n/&1&s&,&(&t0 o2 + <(e/-e o% 7o%t-+-e &s not +22e'te/ ,0 t;e 2+'t t;+t t;e /e,to%s +%e not so(&/+%&(0 (&+,(e. A%t. 1*12. I2 se1e%+( <e%sons .o&nt(0 H &n t;e s+7e 'ont%+'t s;ou(/ se(( +n un/&1&/e/ &77o1+,(e FE + %&-;t o2 %e<u%';+se none o2 t;e7 7+0 eIe%'&se t;&s %&-;t 2o% 7o%e t;+n ;&s %es<e't&1e s;+%e. T;e s+7e %u(e s;+(( +<<(0 &2 t;e <e%son F;o so(/ +n &77o1+,(e +(one ;+s (e2t se1e%+( ;e&%s &n FE' '+se e+'; o2 t;e (+tte% 7+0 on(0 %e/ee7 t;e <+%t FE' ;e 7+0 ;+1e +'Bu&%e/. A%t. 1J1C. I2 t;e 'ont%+'to% +-%ees to <%o/u'e t;e Fo%8 2%. 7+te%&+( 2u%n&s;e/ ,0 ;&7 ;e s;+(( /e(&1e% t;e t;&n<%o/u'e/ to t;e e7<(o0e% H t%+ns2e% /o7&n&on o1e% t;e t;&n-. T;&s 'ont%+'t s;+(( ,e -o1e%ne/ ,0 t;e 2o((oF&n+%t&'(es +s Fe(( +s ,0 t;e <e%t&nent <%o1&s&ons on F+%%+nt0 o2 t&t(e H +-+&nst ;&//en /e2e'ts H t;e <+07ent o2 <%&'e &n + 'ont%+'t o2 s+(e.

). AS TO TOE ?RESENCE O$ AN ACCESSORY UN#ERTAGING IN CASE O$ BREACO" +. O,(&-+t&ons FE + ?en+( C(+use A%t. 122*. In o,(&-+t&ons FE + <en+( '(+use t;e <en+(t0 s;+(( su,st&tute t;e &n/e7n&t0 2o% /+7+-es H t;e <+07ent o2 &nte%ests &n '+se o2 non@'o7<(&+n'e &2 t;e%e &s no st&<u(+t&on to t;e 'ont%+%0. Ne1e%t;e(ess /+7+-es s;+(( ,e <+&/ &2 t;e o,(&-o% %e2uses to <+0 t;e <en+(t0 o% &s -u&(t0 o2 2%+u/ &n t;e 2u(2&((7ent o2 t;e o,(&-+t&on. T;e <en+(t0 7+0 ,e en2o%'e/ on(0 F;en &t &s /e7+n/+,(e &n +''o%/+n'e FE t;e <%o1&s&ons o2 t;&s Co/e. B+(+ne: Articles 244L to 245= on obligation w/ a penal clause is the same as li-ui ate amages foun in Articles 444L to 444M by authority of #ambert v. Ao+, 4L Dhil. NMM. :To(ent&no= ?en+( C(+use.@@ A penal clause is an accessory un ertaking to assume greater liability in case of breach. %he purpose is to strengthen the coercive force of the obligation. 0hen a penal clause is present, amages o not have to be prove . %hus, H6A# A6GC%I"G "A D:GA# C#A6<:: )2* %o provi e for li-ui ate amages )4* %o strengthen the coercive force of the & by threat of greater resp.in case of breach. C;+%+'te%&st&'s o2 ?en+( C(+use"

23

2. Subsidiary )also calle +(te%n+t&1e* upon non, performance, only the penalty may be eman e . :+ception: 0here penalty is .o&nt :'u7u(+t&1e* , where both the principal un ertaking & penalty may be eman e ,, Art. 244O, secon sentence: !+++ un(ess t;&s %&-;t ;+s ,een '(e+%(0 -%+nte/ ;&7.R Gotice the wor clearly )not e+plicitly* w/c means that the right can be clearly grante by implication. 4. ($clusive penal clause is 2o% %e<+%+t&on. It takes the place of amages. :+ception: 0hen it is 2o% <un&s;7ent in w/c case both penalty & amages may be eman e , namely,, If there is a stipulation that both penalty & amages are recoverable in case of breach If the obligor refuses to pay the penalty If the obligor is guilty of frau in the fulfillment of his obligation. B+(+ne: %he <C consi ere the 8V interest as not a penal clause bec. it oes not strengthen the coercive force of the obligation. ROBES@$RANCISCO V. C$I $ML < NK' AAC%<: In Eay 2KL4, Detitioner Bealty Corp. sol to #olita Eillan a parcel of lan in Camarin, Caloocan on installment basis. Eillan complie w/her si e of the & an finishe paying in full on Hec. 2KO2, incl. interests an e+penses for registration of title. %hus, Eillan eman e from the Corp. e+ecution of final ee of sale an issuance of her %C%. Hee of sale was e+ecute in Ear. 2KO5, wherein V:GH"B warrants that it shall issue %C% w/in L mos.,, s;ou(/ t;e 1en/o% 2+&( to &ssue t;e TCT FE&n * 7os. 2%. t;e /+te o2 2u(( <+07ent &t s;+(( %e2un/ to t;e 1en/ee t;e tot+( +7ount <+&/ 2o% FE &nte%est +t t;e %+te o2 CX <.+. Aailing to o so, Eillan file a case of specific performance an amages vs. Bobes in CAI. "n trial it was foun that Corp. faile to eliver the %C% b/c such was mortgage w/J<I<. Corp. was foun guilty of /e(+0 +7ount&n- to non@<e%2o%7+n'e o2 3, thus A%t. 11J! F+s +<<(&e/. Detitioner here invokes Art. 244L, that in lieu of the contract Eillan sh be allowe to recover amages more than what was agree upon. I<<6:: 0"G awar improper. by CAI of nominal amages of D4=U

carrying vessels@3 &that upon breach, aggrieve collect li-ui ate amages of php 2=U.

party may

Damintuan ma e incomplete eliveries, aske the presi ent of the Co. for cash payment an a (ustments in price, which the co.agree to. 0hen Damintuan refuse to complete his eliveries, he invoke that the 9 was novate an Co. faile to comply thereto. Co. file for amages vs. Damintuan. #ower court awar e actual amages, li-ui ate amages as stipulate , an moral amages. Damintuan appeale . CA foun Damintuan guilty of frau , an sustaine the #C. I<<6::0"G the Co. is entitle only to li-ui ate appearing in the contract of saleT amages as

0e hol that appellant.s contention cannot be sustaine bec. the secon sentence of A%t. 122* itself provi es that Rne1e%t;e(ess /+7+-es s;+(( ,e <+&/ &2 t;e o,(&-o% III &s -u&(t0 o2 2%+u/ &n t;e 2u(2&((7ent o2 t;e o,(&-+t&on.R +++ %he trial court & the CA foun that Damintuan was guilty of frau bec. he i not make a complete elivery of the plastic sheeting & he overprice the same. +++ Penalty H 2iquidated damages= %here is no (ustification for the GCC to make an apparent istinction bet. penalty & li-ui ate amages bec. the settle rule is that there is no ifference bet. penalty & li-ui ate amages insofar as legal results are concerne & either may be recovere w/o the necessity of proving actual amages & both may be re uce when proper. Q++ 0e further hol that (ustice woul be a e-uately one in this case by allowing Su Ding Uun Co., Inc. to recover only the actual amages proven, & not to awar to it the stipulate li-ui ate amages of D2=,=== for any breach of the contract. 1he proven damages supersede the stipulated li2uidated damages. %his view fin s support in the opinion of Eanresa that in cases of frau the ifference bet. the proven amages & the stipulate penalty may be recovere .

I(2': %he foregoing argument of petitioner is totally evoi of merit. 0e woul agree w/ petitioner if the clause in -uestion were to be consi ere as a penal clause. Gevertheless, for very obvious reasons, sai clause oes not convey any penalty, for even w4o it, pursuant to A%t. 22!M of the GCC, the ven ee woul be entitle to recover the amount pai by her w/ legal rate of interest w4c is even more than the ': provided for in the clause. Ven ee failing to present evi ence of actual amages, she is atleast entitle to nominal amages, whc is not in emnification but recognition of a right violate )A%t. 2221E2222= CASE #OCTRINES" 1he theory that penal and li2uidated damages are the same cannot be sustained where obligor is guilty of fraud in fulfillment of ;, 1he penalty clause does not parta#e of the nature of li2uidated damages. <arty to a contract whc was breached by the other, may be given the rt. to recover actual damages instead of stipulated li2uidated damages. A creditor, in case of fraud by the obligor is entitled to stipulated penalty plus the difference bet.the proven damages / such stipulated penalty. ?AMINTUAN V. CA $K8 < NNL' , AAC%<: B:: Becovery of compensatory amages for breach of 9 of sale in a ition to li-ui ate amages. In 2KL=, EABIAG" C. DAEIG%6AG, w/his barter license, was authori;e to e+port to Fapan 2=== m.%ons of white flint corn value Z6<H 8OU, in e+change for collateral importation of plastic sheetings of e-ual value. As such he entere into 9 w/ %"US" E:GUA UAI<IA, #%H. "f "<AUA, FADAG. Ie also 9Ps %" <:## the plastic sheetings to S6 DIGJ U6G, C"., IGC. for Dhp 4LNU, thus the latter un ertook to open an irrevocable omestic letter of cre it in favor of Damintuan. Aurther agree that Damintuan woul eliver the D< to bo egas of Su Ding in Eanila an suburbs ?within 2month upon arrival of

Le-+(&t0 o2 ?en+( '(+use" not contrary lo law, morals, public or er )e.g. usurious, immoral, un(ust, merciless* OoF 'onst%ue/" strictly construe , in accor w/stipulation, )effecting minimal rts* W;en t;e%e 'ou(/ ,e /+7+-es +s&/e 2%o7 ?en+(t0" )2* :+press provision: e+. ?legal interest of 24V p.a. asi e fr penalty may be ha , plus attorneyPs fees of 4=V@ )4* Hebtor refuse to pay penalty )5* %herePs frau in ebtorPs non,performance Gon,performance gives rise to <%esu7<t&on o2 2+u(t ebtor has bur en of proof: efenses may be force ma(eure, or act of cre itor himself3 CASE" BACORACO V. ES?IRITU $N4 D 58L' B:: Chattel Eortgage with D:GA# C#A6<: AAC%<: Aaustino :spiritu purchase from Bachrach Eotor in F6#S,2K4N, a 4,ton white,truck on installment basis. %his truck was mortgage , incl. two other white trucks owne by efen ant whc are fully pai for, to secure the loan. In A:B. 2K4N ef. also purchase another 2,ton white truck fr same plaintiff corp. w/ ownp , balance on installment basis also, placing this truck on mortgage for security an incl the 4 above mortgage trucks also. Again, ef. faile to pay this ebt. In both sales, a 24V p/a/ interest was agree upon the unpai portion of the 9s, an upon maturity, when ue, non,payment of total remaining ebt woul give rise to 4NV penalty3 asi e fr mortgage ee , there was a DG, co,signe by ef.brother soli arily. %hus, Bosario appeare as intervenor in the collection suits alleging to be the sole owner of the two other trucks mortgage . Ie allege that he i not sign the mortgage an i not consent to the inclusion of his two trucks therein. 0hile the cases were pen ing in lower court, the trucks were sol by virtue of the mortgage an brought in a net sum not enough to settle the ebts ue3 #ower court irecte payments of all the sums ue an in both two cases or ere the payment of 24V interest p.a. until fully pai an a penalty of 4NV in

24

a ition as appearing in the contracts. %o these matters the efs. Allege that these amounts to usury. I<<6:: 0"G the 24V interest p.a. plus a itional penalty of 4NV makes the contract usuriousT I:#H: Art. 22N4 of the "CC permits the agreement upon a penalty apart fr. the interest. <houl there be such an agreement, the penalty +++ oes not inclu e the interest, & as such the two are ifferent & istinct things w/c may be eman e separately. %he penalty is not to be a e to the interest for the etermination of whether the interest e+cee s the rate fi+e by law, since sai rate was fi+e only for the interest. BUT 'ons&/e%&n- <+%t&+( <e%2o%7+n'e SC %e/u'e/ <en+(t0 to 1!X &n +''o%/ F&t; A%t. 11)C. :A%t. 122M NCC= A%t. 122J. T;e /e,to% '+nnot eIe7<t ;&7se(2 2%. t;e <e%2o%7+n'e o2 t;e o,(&-+t&on ,0 <+0&n- t;e <en+(t0 s+1e &n t;e '+se F;e%e t;&s %&-;t ;+s ,een eI<%ess(0 %ese%1e/ 2o% ;&7. Ne&t;e% '+n t;e '%e/&to% /e7+n/ t;e 2u(2&((7ent o2 t;e o,(&-+t&on H t;e s+t&s2+'t&on o2 t;e <en+(t0 +t t;e s+7e t&7e un(ess t;&s %&-;t ;+s ,een '(e+%(0 -%+nte/ ;&7. OoFe1e% &2 +2te% t;e '%e/&to% ;+s /e'&/e/ to %eBu&%e t;e 2u(2&((7ent o2 t;e o,(&-+t&on t;e <e%2o%7+n'e t;e%eo2 s;ou(/ ,e'o7e &7<oss&,(e FEo ;&s 2+u(t t;e <en+(t0 7+0 ,e en2o%'e/. GR" #e,to% '+nnot +1o&/ <e%2o%7+n'e ,0 <+0&n- t;e <en+(t04 eI'e<t F;en eI<%ess(0 -%+nte/ to /e,to%. GR +s to '%e/&to%" 7+0 not /e7+n/ ,ot; 2u(2&((7ent +n/ <+07ent o2 <en+(t0 +t t;e s+7e t&7e4 eI'e<t &2 su'; %t. &s -%+nte/ '(e+%(0. +s to t;e (+st senten'e F;en &t ,e'o7es &7<oss&,(e FEo '%e/&to%Ds 2+u(t F&(( ;+<<en on(0 &2 t;%u /e,to%Ds 2+u(t o% /e(+0 2o% <en+(t0 to ,e'o7e en2o%'e+,(e4 ,E' &2 t;%u $E FEo '%e/oto%Ds no% /e,to%Ds 2+u(t <%&n'&<+( 3 Fou(/ ,e eIt&n-u&s;e/ +n/ so F&(( t;e <en+( '(+use. A%t. 1228. ?%oo2 o2 +'tu+( /+7+-es su22e%e/ ,0 t;e '%e/&to% &s not ne'ess+%0 &n o%/e% t;+t t;e <en+(t0 7+0 ,e /e7+n/e/. Baviera: Courts enforce contracts accor ing to their terms A%t. 122M. T;e .u/-e s;+(( eBu&t+,(0 %e/u'e t;e <en+(t0 F;en t;e <%&n'&<+( o,(&-+t&on ;+s ,een <+%t(0 o% &%%e-u(+%(0 'o7<(&e/ FE ,0 t;e /e,to%. E1en &2 t;e%e ;+s ,een no <e%2o%7+n'e t;e <en+(t0 7+0 +(so ,e %e/u'e/ ,0 t;e 'ou%ts &2 &t &s &n&Bu&tous o% un'ons'&on+,(e. A%t. 12A!. T;e nu((&t0 o2 t;e <en+( '(+use /oes not '+%%0 FE &t t;+t o2 t;e <%&n'&<+( o,(&-+t&on. T;e nu((&t0 o2 t;e <%&n'&<+( o,(&-+t&on '+%%&es FE &t t;+t o2 t;e <en+( '(+use. ?+%t&+( ?e%2o%7+n'e refers to e+tent or -uantity of fulfillment I%%e-u(+% ?e%2o%7+n'e refers to the form #o't%&ne o2 St%&'t Const%u't&on will apply as against the enforcement of the penalty in its entirety, when the clause is clearly punitive, not when it is implie ly inten e as li-ui ate amages3 %hus penalty is mitigate in: 2. partial or irregular performance 4. ini-uitous or unconscionable penalty 1. #&st&n-u&s;e/ 2%. 3 F&t; sus<ens&1e 'on/&t&on" Iappening of the con ition gives rise to the &3 in penal there is alrea y a principal & %he principal & itself is epen ent upon a future an uncertain event3 in penal, only the accessory & )the penalty* epen s upon non,performance or breach. 2. #&st&n-u&s;e/ 2%. +(te%n+t&1e o,(&-+t&ons A%t. 122J. T;e /e,to% '+nnot eIe7<t ;&7se(2 2%. t;e <e%2o%7+n'e o2 t;e o,(&-+t&on ,0 <+0&n- t;e <en+(t0 s+1e &n t;e '+se F;e%e ;&s %&-;t ;+s ,een eI<%ess(0 %ese%1e/ 2o%

;&7. Ne&t;e% '+n t;e '%e/&to% /e7+n/ t;e 2u(2&((7ent o2 t;e o,(&-+t&on H t;e s+t&s2+'t&on o2 t;e <en+(t0 +t t;e s+7e t&7e un(ess t;&s %&-;t ;+s ,een '(e+%(0 -%+nte/ ;&7. OoFe1e% &2 +2te% t;e '%e/&to% ;+s /e'&/e/ to %eBu&%e t;e 2u(2&((7ent o2 t;e o,(&-+t&on t;e <e%2o%7+n'e t;e%eo2 s;ou(/ ,e'o7e &7<oss&,(e FEo ;&s 2+u(t t;e <en+(t0 7+0 ,e en2o%'e/. A%t. 12!!. T;e %&-;t o2 ';o&'e ,e(on-s to t;e /e,to% un(ess &t ;+s ,een eI<%ess(0 -%+nte/ to t;e '%e/&to%. T;e /e,to% s;+(( ;+1e no %&-;t to ';oose t;ose <%est+t&ons FE' +%e &7<oss&,(e un(+F2u( o% FE' 'ou(/ not ;+1e ,een t;e o,.e't o2 t;e o,(&-+t&on. ALTERNATIVE 3 4 or more &s are ue but performance of 2 is enough Impossibility of one of &s, the other/s subsists Hebtor can choose whc prestation to fulfill Q oblige to eliver a horse to S or pay him DN== 3 WE?ENAL CLAUSE therePs only 2 principal &, only in case of non,performance shall the penal clause be enforceable impossibility of principal &, penal clause e+tinguishe ebtor cannot choose to pay penalty to avoi performance, unless e+presse Q oblige to eliver a horse to S. if he fails he will pay him DN==

2. #&st&n-u&s;e/ 2%. $+'u(t+t&1e o,(&-+t&ons A%t. 12!*. W;en on(0 one <%est+t&on ;+s ,een +-%ee/ u<on ,ut t;e o,(&-o% 7+0 %en/e% +not;e% &n su,st&tut&on t;e o,(&-+t&on &s '+((e/ 2+'u(t+t&1e. T;e (oss o% /ete%&o%+t&on o2 t;e t;&n- &nten/e/ +s + su,st&tute t;%ou-; t;e ne-(&-en'e o2 t;e o,(&-o% /oes not %en/e% ;&7 (&+,(e. But on'e t;e su,st&tut&on ;+s ,een 7+/e t;e o,(&-o% &s (&+,(e 2o% t;e (oss o2 t;e su,st&tute on +''ount o2 ;&s /e(+0 ne-(&-en'e o% 2%+u/. A%t. 122J. T;e /e,to% '+nnot eIe7<t ;&7se(2 2%. t;e <e%2o%7+n'e o2 t;e o,(&-+t&on ,0 <+0&n- t;e <en+(t0 s+1e &n t;e '+se F;e%e t;&s %&-;t ;+s ,een eI<%ess(0 %ese%1e/ 2o% ;&7. Ne&t;e% '+n t;e '%e/&to% /e7+n/ t;e 2u(2&((7ent o2 t;e o,(&-+t&on H t;e s+t&s2+'t&on o2 t;e <en+(t0 +t t;e s+7e t&7e un(ess t;&s %&-;t ;+s ,een '(e+%(0 -%+nte/ ;&7. OoFe1e% &2 +2te% t;e '%e/&to% ;+s /e'&/e/ to %eBu&%e t;e 2u(2&((7ent o2 t;e o,(&-+t&on t;e <e%2o%7+n'e t;e%eo2 s;ou(/ ,e'o7e &7<oss&,(e FEo ;&s 2+u(t t;e <en+(t0 7+0 ,e en2o%'e/. $ACULTATIVE 3 Hebtor has power to make substitution Cre itor cannot eman both prestations GUARANTY Is a 9 by whc virtue, a 5r person )guarantor* oblige himself to fulfill prestation in lieu of ebtorPs non, performance Inten e to insure performance of principal & Accessory & subsi iary & Drincipal ebtor cannot be guarantor <ubsists even when principal & is voi able or unenforceable 3 FE ?ENAL CLAUSE JB, none3 e+cept when e+presse such right to eman both may be given 3 FE ?ENAL CLAUSE & to pay penalty is ifferent fr the principal &, but also pai in lieu of ebtorPs non, performance Inten e to insure performance of principal & Accessory & subsi iary & both &s can be assume by one person penalty is e+tinguishe in such case, unless assume by 5r person

K" W;en /oes /e(+0 set &nL A: Helay sets,in in the following manner: 1. $o% Re'&<%o'+( s&7u(t+neous o,(&-+t&ons

25

by the rea iness of one of the parties to perform & his letting the other party know3 & the other party is not rea y to comply in a proper manner w/ what is incumbent upon him. 2. $o% Re'&<%o'+( o,(&-+t&ons FE' +%e not s&7u(t+neous Jen. Bule: Heman is necessary )Art. 22LK, par. )2* %his is calle mora solvendi e$ persona. :+ception: 0hen eman is not necessary )the e+ceptions are foun in Art. 22 LK, par. 4.* %his is calle mora solvendi e$ re K" W;+t 8&n/ o2 /e7+n/ &s ne'ess+%0L A" Fu icial or e+tra,(u icial EI'e<t&ons" 1hen the obligation or the law e$pressly so declare.-- when the contract says that w/o the necessity of eman , efault sets in upon the failure of the obligor to perform on ue ate. %here must be something in the contract w/c e+plicitly states that the eman is not necessary in or er that elay may set in. 1hen fr. the nature H 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. Illustration: Bong Baylon is getting marrie in Valentines .KL. Inno <otto was suppose to make :lla.s )the bri e* we ing gown. Aeb. 28 comes , no gown was elivere . :lla gets marrie in blue (eans & %,shirt. Ainally, on Aeb. 2N, Inno elivers the gown. +++ :lla sues Inno for breach. Inno says there was no eman . In this case, eman is not necessary in or er that elay may e+ist. 1hen demand would be useless, as when the obligor has rendered it beyond his power to perform.-- EI+7<(e &s t;e '+se o2 C;+1e> 1. Gon>+(es infra.

26

Fuly K, 4==M E. BREACO O$ OBLIGATIONS :ART. 11J!= A%t. 11J!. T;ose F;o &n t;e <e%2o%7+n'e o2 t;e&% o,(&-+t&on +%e -u&(t0 o2 2%+u/ ne-(&-en'e o% /e(+0 H t;ose F;o &n +n0 7+nne% 'ont%+1ene t;e teno% t;e%eo2 +%e (&+,(e 2o% /+7+-es. I%%e-u(+%&t0 o2 ?e%2o%7+n'e $Articles 22LK , 22O8' A%t. 11*M. T;ose o,(&-e/ to /e(&1e% o% to /o so7et;&n- &n'u% &n /e(+0 2%. t;e t&7e t;e o,(&-ee .u/&'&+((0 o% eIt%+.u/&'&+((0 /e7+n/s 2%. t;e7 t;e 2u(2&((7ent o2 t;e&% o,(&-+t&on. OoFe1e% t;e /e7+n/ ,0 t;e '%e/&to% s;+(( not ,e ne'ess+%0 &n o%/e% t;+t /e(+0 7+0 eI&st" W;en t;e o,(&-+t&on o% t;e (+F eI<%ess(0 so /e'(+%e4 W;en 2%. t;e n+tu%e H t;e '&%'u7st+n'es o2 t;e o,(&-+t&on &t +<<e+%s t;+t t;e /es&-n+t&on o2 t;e t&7e F;en t;e t;&n- &s to ,e /e(&1e%e/ o% t;e se%1&'e &s to ,e %en/e%e/ F+s + 'ont%o((&n- 7ot&1e 2o% t;e est+,(&s;7ent o2 t;e 'ont%+'t4 W;en /e7+n/ Fou(/ ,e use(ess +s F;en t;e o,(&-o% ;+s %en/e%e/ &t ,e0on/ ;&s <oFe% to <e%2o%7. In %e'&<%o'+( o,(&-+t&ons ne&t;e% <+%t0 &n'u%s &n /e(+0 &2 t;e ot;e% /oes not 'o7<(0 o% &s not %e+/0 to 'o7<(0 &n + <%o<e% 7+nne% FE F;+t &s &n'u7,ent u<on ;&7. $%o7 t;e 7o7ent one o2 t;e <+%t&es 2u(2&((s ;&s o,(&-+t&on /e(+0 ,0 t;e ot;e% ,e-&ns. B+(+ne" TFo C(+sses o2 I%%e-u(+%&t0 o2 ?e%2o%7+n'e" 1. Att%&,ut+,(e to t;e /e,to% A. Arau B. Gegligence C. Helay 2. Not +tt%&,ut+,(e to t;e /e,to% A. Aortuitous event. :1= $%+u/ A%t. 11J1. Res<ons&,&(&t0 +%&s&n- 2%. 2%+u/ &s /e7+n/+,(e &n +(( o,(&-+t&ons. An0 F+&1e% o2 +n +'t&on 2o% 2utu%e 2%+u/ &s 1o&/. A%t&'(e 1AA8. %here is frau wor s or machinations of parties, the other is in uce which, without them, he woul when, through insi ious one of the contracting to enter into a contract not have agree to.

:vasion of a legit.& for benefits a mitte ly receive constitutes un(ust enrichment.

K" W;+t &s + s0non07 2o% 2%+u/ +s use/ &n A%t. 11J!L A: Ealice. E22e'ts o2 $%+u/" 1. C%e/&to% 7+0 &ns&st on <e%2o%7+n'e su,st&tute :A%t. 12AA.= 2. C%e/&to% 7+0 %eso(1eE %es'&n/ :A%t. 11M1.= A. #+7+-es &n e&t;e% '+se :A%t. 11J!.= :2= Ne-(&-en'e A%t. 11J1. Res<ons&,&(&t0 +%&s&n- 2%. 2%+u/ &s /e7+n/+,(e &n +(( o,(&-+t&ons. An0 F+&1e% o2 +n +'t&on 2o% 2utu%e 2%+u/ &s 1o&/. A%t. 11J2. Res<ons&,&(&t0 +%&s&n- 2%. ne-(&-en'e &n t;e <e%2o%7+n'e o2 e1e%0 8&n/ o2 o,(&-+t&on &s +(so /e7+n/+,(e ,ut su'; (&+,&(&t0 s;+(( 7+0 ,e %e-u(+te/ ,0 t;e 'ou%ts +''o%/&n- to t;e '&%'u7st+n'es. A%t. 11JA. T;e 2+u(t o% ne-(&-en'e o2 t;e o,(&-o% 'ons&sts &n t;e o7&ss&on o2 t;+t /&(&-en'e FE' &s %eBu&%e/ ,0 t;e n+tu%e o2 t;e o,(&-+t&on H 'o%%es<on/s FE t;e '&%'u7st+n'es o2 t;e <e%sons o2 t;e t&7e H o2 t;e <(+'e. W;en ne-(&-en'e s;oFs ,+/ 2+&t; t;e <%o1&s&ons o2 +%t&'(es 11J1 H 22!1 <+%+-%+<; 2 s;+(( +<<(0. Ne-(&-en'e is the absence of something that shoul be there ue iligence. s<e'&2&' o%

Me+su%e o2 #ue #&(&-en'e.@@ %here are two gui es: 2. 4. Hiligence eman e by circumstances of person, place & time Care re-uire of a goo father of a family )fictional bonus pater familias who was the embo iment of care, caution & protection in Boman law.*

In 'o77on (+F, the egree of care re-uire is the /&(&-en'e o2 + <%u/ent ,us&ness7+n. %his is actually the same as the iligence of a goo father of a family. E22e'ts o2 Ne-(&-en'e" 2. Cre itor may insist on performance, specific or substitute )Art. 2455.* 4. Cre itor may resolve/ rescin )Art. 22K2.* 5. Hamages in either case )Art. 22O=.* Arom 22O5 Y culpa contractual from 42OL Y culpa a2uiliana or e@tra-contractual AA +n both cases, for liability to attach, such negligence must be the pro@imate cause of the injury to plaintiff. :A= #e(+0 See A%t. 11*M. W /e2+u(t E mora &n t;e 2u(2&((7ent o2 3s4 REKUISITES to ,e In #e2+u(t" 3 &s /e7+n/+,(e +n/ (&Bu&/+te/ /e,to% /e(+0s <e%2o%7+n'e '%e/&to% %eBu&%es <e%2o%7+n'e .u/ o% eIt%+.u/ /e7+n/ A%t. 11*). III. I2 t;e o,(&-o% /e(+0s o% ;+s <%o7&se/ to /e(&1e% t;e s+7e t;&n- to tFo o% 7o%e <e%sons F;o /o not ;+1e t;e s+7e &nte%est ;e s;+(( ,e %es<ons&,(e 2o% +n0 2o%tu&tous e1ent unt&( ;e ;+s e22e'te/ t;e /e(&1e%0. A%t&'(e 1J8*. :very partner is a ebtor of the partnership for whatever he may have promise to contribute thereto. Ie shall also be boun for warranty in case of eviction with regar to specific an eterminate things which he may have contribute to the partnership, in the same cases an in the same manner as the ven or is boun with respect to the ven ee. Ie shall also be

A%t&'(e 1ACC. In or er that frau may make a contract voi able, it shoul be serious an shoul not have been employe by both contracting parties. Inci ental frau only obliges the person employing it to pay amages. B+(+ne: Is it correct to say that frau in Art. 22O= means eceit or insi ious machinationsT Go. LEGAS?I OIL VS. CA $448 < 425' , >efinition of ?raud.- In general, frau may be efine as the 1o(unt+%0 eIe'ut&on o2 + F%on-2u( +'t o% F&((2u( o7&ss&on 8noF&n- H &nten/&n- t;e e22e'ts FE' n+tu%+((0 H ne'ess+%&(0 +%&se 2%. su'; +'t o% o7&ss&on3 %he frau referre to in Art. 22O= is the deliberate H intentional evasion of the normal fulfillment of obligation3 It is istinguishe fr. negligence by the presence of eliberate intent, w/c is lacking in the latter. $%+u/ as use in A%t. 11J! is ifferent fr. frau as a cause for vitiation of consent in contracts )more properly calle eceit w/c prevents the contract fr. arising3 this is foun in Art. 25M=, et se-.* 2%+u/ as referre here is the eliberate an intentional evasion of normal fulfillment of &s3 thus, as groun for amages fr this article, implies some kin of 7+(&'e o% /&s;onest0 whc oes not cover mistake, erros of (u gment ma e in JA.

27

liable for the fruits thereof from the time they shoul have been elivere , without the nee of any eman . A%t&'(e 1J88. A partner who has un ertaken to contribute a sum of money an fails to o so becomes a ebtor for the interest an amages from the time he shoul have complie with his obligation. %he same rule applies to any amount he may have taken from the partnership coffers, an his liability shall begin from the time he converte the amount to his own use. A%t&'(e 18M*. T;e +-ent oFes &nte%est on t;e su7s ;e ;+s +<<(&e/ to ;&s oFn use 2%o7 t;e /+0 on F;&'; ;e /&/ so +n/ on t;ose F;&'; ;e st&(( oFes +2te% t;e eIt&n-u&s;7ent o2 t;e +-en'0. A%t&'(e 1MC2. %he bailee is liable for the loss of the thing, even if it shoul be through a fortuitous event: )2* If he evotes the thing to any purpose ifferent from that for which it has been loane 3 )4* If he keeps it longer than the perio stipulate , or after the accomplishment of the use for which the commo atum has been constitute 3 )5* If the thing loane has been elivere with appraisal of its value, unless there is a stipulation e+empting the bailee from responsibility in case of a fortuitous event3 )8* If he len s or leases the thing to a thir person, who is not a member of his househol 3 :)= I2 ,e&n- +,(e to s+1e e&t;e% t;e t;&n- ,o%%oFe/ o% ;&s oFn t;&n- ;e ';ose to s+1e t;e (+tte%. :OBLIGATIONS O$ TOE BAILEE= #e(+0 is the non,fulfillment of the obligation w/ respect to time. G&n/s o2 #e(+0" 2. Mo%+ So(1en/& ,, part of the ebtor*3 elay in the performance )on the elay in the acceptance )on

to be sure, the uty of the J<I<, as seller, to eliver the thing sol in a con ition suitable for its en(oyment by the buyer for the purpose contemplate , in other wor s, to eliver the house sub(ect of the contract in a reasonably livable state. %his it faile to o. Agcaoili coul not stay in the haus whc was only a shell, It i not have a ceiling, stairs, ouble walling, lights, water, CB, rainage. Ie aske a homeless frien instea to stay an watch over the property. After paying 2st installment &other fees, refuse to make further payments until J<I< wu make haus habitable. Instea , J<I< cancelle the 9 an eman e Agcaoili to vacate. Agcaoili file w/CAI case for specific performance an won. %hus J<I<P appeal must fail. +++ <ince J<I< i not fulfill that obligation, & was not willing to put the house in habitable state, it cannot invoke Agcaoili.s suspension of payment of amorti;ation as cause to cancel the contract bet. them. It &s +I&o7+t&' t;+t R:&=n %e'&<%o'+( o,(&-+t&ons ne&t;e% <+%t0 &n'u%s &n /e(+0 &2 t;e ot;e% /oes not 'o7<(0 o% &s not %e+/0 to 'o7<(0 &n + <%o<e% 7+nne% FE F;+t &s &n'u7,ent u<on ;&7. WON A-'+o&(& ,%e+';e/ t;e S ,0 2+&(&n- to o''u<0 t;e ;ouse FE&n A /+0s +s st&<u(+te/L NO +%-u7ent o2 GSIS /e1o&/ o2 7e%&t. 7here being a perfected J of sale, it was the duty of %S6S as seller to deliver the thing sold in a condition suitable for enjoyment by the buyer for the purpose contemplated. CASE #OCTRINE" One who assumes a contractual obligation H fails to perform the same on account of his inability to meet certain banF requirements w"c inability he Fnew H was aware of when he entered into the contract, should be held liable in damages for breach of contract. A&&6(7A S. )A&6! *,. S ?+0 AAC%<: )Da; Arrieta vs. Gational Bice & Corn Corp.* "n Eay 2KN4, Arrieta took part in public bi ing by GABIC to supply 4=U m.%ons of Burmese rice, being the lowest bi er she was awar e the contract. In the 9 of sale, ArrietaPs & was to eliver the rice at price of her bi , while GABICPs & was to pay her in #"C, irrevocable, confirme an assignable, in 6<H in favor of Arrieta or supplier in Burma, ?&77e/&+te(0.@ GABIC knew that it i not have enough eposit in DGB to cover the &, thus it wrote a letter of re-uest to accom. the applic for #"C espite such fact in lieu of this 9 w/Arrieta. %his applic. 0as ma e by DGB on Fuly 5=, 2KN4, a month after it entere in the 9 w/Arrieta an promise to open the #"C ?imme iately.@ By this time Arrieta has ma e a NV ten er to her supplier in Burma, whc will be confiscate if the re-uire #"C will not be receive before August 8, 2KN4. <uch fact was apprise by Arrieta to GABIC in a letter thru counsel. DGB re-uire GABIC to make a marginal eposit of N=V of the amount of #"C before such will be release in favor of ArrietaPs supplier in Burma. <uch con ition GABIC is not in any financial position to meet. DGB conse-. Approve &release the #"C 4, mos. In elay. %he Burmese supplier has cancelle the or er on Aug. 4=, 2KN4, an forfeite the NV ten er of Arrieta amounting to D4==U. GABIC an DGB i not even make the 2N, ay grace perio given by the supplier. Arrieta en eavore to restore to no avail. It offere to substitute w/%hailan rice, GABIC re(ecte . %hus, Arrieta eman e for payment of amages of 6<H 4MLU representing unreali;e profits. Again re(ecte . %hus, this case. 0"G GABIC was in breach of contractT S:<1 GABICPs culpability arises from its F&((2u( +n/ /e(&,e%+te +ssu7<t&on o2 SD+( 3s e1en +s &t F+s Fe(( +F+%e o2 &ts oFn 2&n+n'&+( &n'+<+'&t0 to un/e%t+8e t;e <%est+t&on. Un/e% A%t. 11J!, not on(0 /e,to%s -u&(t0 o2 2%+u/ ne-(&-en'e o% /e2+u(t ,ut +(so e1e%0 /e,to% &n -ene%+( F;o 2+&(s t;e <e%2o%7+n'e o2 ;&s o,(&-+t&on &s ,oun/ to &n/e7n&20 2o% t;e (osses H /+7+-es '+use/ t;e%e,0. 4eaning of phrase Ein any manner contravene the tenorE of the obligation in Art. BBC& %he phrase inclu es any illicit task w/c impairs the strict & faithful fulfillment of the obligation, or every kin of efective performance. CalaneG %his phrase is a '+t';@+(( <%o1&s&on. At worst, it is a su<e%2(u&t0. At best, there is a safety net (ust in case there is a culpable irregularity of performance w/c is not covere by frau , negligence or elay. In this case, the <C was apparently not sure as to what category the breach fell. %his phrase is not really an in epen ent groun .

4. Mo%+ A''&<&en/& ,, the part of the cre itor*3

5. Co7<ens+t&on Mo%+e ,, mutual elay A%t. 22!1. III :2= In 'ont%+'ts H Bu+s&@'ont%+'ts t;e /+7+-es 2o% FE' t;e o,(&-o% F;o +'te/ &n -oo/ 2+&t; &s (&+,(e s;+(( ,e t;ose t;+t +%e t;e n+tu%+( H <%o,+,(e 'onseBuen'es o2 t;e ,%e+'; o2 t;e o,(&-+t&on H FE' t;e <+%t&es ;+1e 2o%eseen o% 'ou(/ ;+1e %e+son+,(0 2o%eseen +t t;e t&7e t;e o,(&-+t&on F+s 'onst&tute/. In '+se o2 2%+u/ ,+/ 2+&t; 7+(&'e o% F+nton +tt&tu/e t;e o,(&-o% s;+(( ,e %es<ons&,(e 2o% +(( /+7+-es FE' 7+0 ,e %e+son+,(0 +tt%&,ute/ to t;e non@<e%2o%7+n'e o2 t;e o,(&-+t&on. :C= ANY OTOER MANNER O$ CONTRAVENTION" inclu es any illicit acts which impair the strict an faithful fulfillment of &, or every kin of efective performance3 CASE" ?in any manner contravene the tenor of contract@

A%!AO626 S. %S6S *,@- S ,0 AAC%<: J<I< approve applic. "f Artemio Agcaoili for purchase of I&# in Earikina, sub(c.to con ition that latter sh forthwith occupy the house: ?If you fail to occupy the same w/in 5 ays fr receipt of this notice, ur applic. 0ill be consi ere automatically isapprov & sai I&# will be awar e to another.@ %here was then a perfecte contract of sale bet. the parties3 there ha been a meeting of the min s upon the purchase by Agcaoili of a eterminate house & lot in the J<I< Iousing Dro(ect at Gangka, Earikina, Bi;al, at a efinite price payable in amorti;ations at D52.NL per mo., & fr. the moment the parties ac-uire the right to reciprocally eman performance. It was,

28

K 764( 6S O# 7I( (SS()!(L TELE$AST VS. CASTRO $2NM s 88N' , AAC%<: <ofiaPs mother ie while they were here in BD visiting..her father siblings were all abroa . %hus, that same ay she sent a telegram to her father in the 6<A via %:#:AA<%. Ier mother was interre w/o her father nor siblings in atten ance. 0hen <ofia went back to the 6<A she learne that her telegram never reache her father. I:#H: Detitioner & private respon ent <ofia C. Crouch entere into a contract whereby, for a fee, petitioner un ertook to sen sai private respon ent.s message overseas by telegram. %his, petitioner i not o, espite performance by sai pvt. resp. of her obligation by paying the re-uire charges. Detitioner was therefore guilty of contravening its obligation to sai private respon ent & is thus liable for amages. I<<6:30"G there was here breach of contract, an 0"G only actual amages are ueT YES A%t. 11J! A#<" Art. 42OL applie . 7his liability is not limited to actual or quantified damages. 7o sustain petitionerMs contention and award actual damages only would be iniquitous such that he would be liable only for the cost of that telegram paid for /. yrs ago.

PS+2et0 #e<os&t BoI" If the (ewelry insi e a <HB was stolen, rules on eposit will not apply bec. the contract governing the transaction is #:A<: of safety eposit bo+. B+&(ee &n Co77o/+tu7 A%t. 1MC2. T;e ,+&(ee &s (&+,(e 2o% t;e (oss o2 t;e t;&n- e1en &2 &t s;ou(/ ,e t;%ou-; + 2o%tu&tous e1ent" :1= I2 ;e /e1otes t;e t;&n- to +n0 <u%<ose /&22e%ent 2%. t;+t 2o% FE' &t ;+s ,een (o+ne/4 :2= I2 ;e 8ee<s &t (on-e% t;+n t;e <e%&o/ st&<u(+te/ o% +2te% t;e +''o7<(&s;7ent o2 t;e use 2o% FE' t;e 'o77o/+tu7 ;+s ,een 'onst&tute/4 I2 t;e t;&n- (o+ne/ ;+s ,een /e(&1e%e/ FE +<<%+&s+( o2 &ts 1+(ue un(ess t;e%e &s + st&<u(+t&on eIe7<t&n- t;e ,+&(ee 2%. %es<ons&,&(&t0 &n '+se o2 + 2o%tu&tous e1ent4 I2 ;e (en/s o% (e+ses t;e t;&n- to + t;&%/ <e%son F;o &s not + 7e7,e% o2 ;&s ;ouse;o(/4 :)= I2 ,e&n- +,(e to s+1e e&t;e% t;e t;&n- ,o%%oFe/ o% ;&s oFn t;&n- ;e ';ooses to s+1e t;e (+tte%. In Ne-ot&o%u7 Gest&o A%t. 21CJ. T;e o22&'&ous 7+n+-e% s;+(( ,e (&+,(e 2o% +n0 2o%tu&tous e1ent" :1= I2 ;e un/e%t+8es %&s80 o<e%+t&ons FE' t;e oFne% F+s not +''usto7e/ to e7,+%8 u<on4 :2= I2 ;e ;+s <%e2e%%e/ ;&s oFn &nte%est to t;+t o2 t;e oFne%4 :A= I2 ;e 2+&(s to %etu%n t;e <%o<e%t0 o% ,us&ness +2te% /e7+n/ ,0 t;e oFne%4 :C= I2 ;e +ssu7e/ t;e 7+n+-e7ent &n ,+/ 2+&t;. A%t. 21C8. EI'e<t F;en t;e 7+n+-e7ent F+s +ssu7e/ to s+1e t;e <%o<e%t0 o% ,us&ness 2%. &77&nent /+n-e% t;e o22&'&ous 7+n+-e% s;+(( ,e (&+,(e 2o% 2o%tu&tous e1ents" :1= I2 ;e &s 7+n&2est(0 un2&t to '+%%0 on t;e 7+n+-e7ent4 :2= I2 ,0 ;&s &nte%1ent&on ;e <%e1ente/ + 7o%e 'o7<etent <e%son 2%. t+8&n- u< t;e 7+n+-e7ent. ?+0ee &n So(ut&o In/e,&t& A%t. 21)M. W;oe1e% &n ,+/ 2+&t; +''e<ts +n un/ue <+07ent s;+(( <+0 (e-+( &nte%est &2 + su7 o2 7one0 &s &n1o(1e/ o% s;+(( ,e (&+,(e 2o% 2%u&ts %e'e&1e/ o% FE' s;ou(/ ;+1e ,een %e'e&1e/ &2 t;e t;&n- <%o/u'es 2%u&ts. Oe s;+(( 2u%t;e%7o%e ,e +nsFe%+,(e 2o% +n0 (oss o% &7<+&%7ent o2 t;e t;&n- 2%. +n0 '+use H 2o% /+7+-es to t;e <e%son F;o /e(&1e%e/ t;e t;&n- unt&( &t &s %e'o1e%e/. Lessee A%t. 1*C8. E1e%0 (e+se o2 %e+( est+te 7+0 ,e %e'o%/e/ &n t;e Re-&st%0 o2 ?%o<e%t0. Un(ess + (e+se &s %e'o%/e/ &t s;+(( not ,e ,&n/&n- u<on t;&%/ <e%sons. A%t. 1*J1. I2 t;e (essee 'ont&nues en.o0&n- t;e t;&n- +2te% t;e eI<&%+t&on o2 t;e 'ont%+'t o1e% t;e (esso%Qs o,.e't&on t;e 2o%7e% s;+(( ,e su,.e't to t;e %es<ons&,&(&t&es o2 + <ossesso% &n ,+/ 2+&t;. A%t. ))2. III. A <ossesso% &n ,+/ 2+&t; s;+(( ,e (&+,(e 2o% /ete%&o%+t&on o% (oss &n e1e%0 '+se e1en &2 '+use/ ,0 + 2o%tu&tous e1ent. In/e<en/ent Cont%+'to% A%t. 1J2J. T;e 'ont%+'to% &s %es<ons&,(e 2o% t;e Fo%8 /one ,0 <e%sons e7<(o0e/ ,0 ;&7. A%t. 1J28. T;e 'ont%+'to% &s (&+,(e 2o% +(( t;e '(+&7s o2 (+,o%e%s H ot;e%s e7<(o0e/ ,0 ;&7 H o2 t;&%/ <e%sons 2o% /e+t; o% <;0s&'+( &n.u%&es /u%&n- t;e 'onst%u't&on. Co77on C+%%&e% A%t. 1J*A. A 'o77on '+%%&e% &s %es<ons&,(e 2o% &n.u%&es su22e%e/ ,0 + <+ssen-e% on +''ount o2 t;e F&((2u( +'ts o% ne-(&-en'e o2 ot;e% <+ssen-e%s o% o2 st%+n-e%s &2 t;e

ENCUSE $OR NON@?ER$ORMANCE" 1. Loss /ue to $o%tu&tous E1ents A%t. 11JC. EI'e<t &n '+ses eI<%ess(0 s<e'&2&e/ ,0 (+F o% F;en &t ot;e%F&se /e'(+%e/ ,0 st&<u(+t&on o% F;en t;e n+tu%e o2 t;e o,(&-+t&on %eBu&%es t;e +ssu7<t&on o2 %&s8 no <e%son s;+(( ,e %es<ons&,(e 2o% t;ose e1ents FE' 'ou(/ not ,e 2o%eseen o% FE' t;ou-; 2o%eseen Fe%e &ne1&t+,(e. To 'onst&tute + '+so 2o%tu&to that will e+empt a person fr. responsibility, it is necessary that: $Austria vs. Abad,Fune 2=, 2KO2' 2. the event must be in epen ent of human will3 4. the occurrence must ren er it impossible for the ebtor to fulfill the obligation in a normal manner3 5. that the obligor must be free of participation in, or aggravation of, the in(ury to the cre itor. B+(+ne" Gene%+( Ru(e: T;e ;+<<en&n- o2 + 2o%tu&tous e1ent eIone%+tes t;e /e,to% 2%. (&+,&(&t0. ENEM?TIONS $ROM A??LICATION O$ G.R. ON $.E." 2. 4. 5. 0hen the law so specifies.,, e.g., if the ebtor is alrea y in elay )Art. 22LN, par. 5.* 0hen the parties so agree 0hen the nature of the obligation re-uires the assumption of risk, e.g., an insurance contract.

ENAM?LES O$ BY EI<%ess ?%o1&s&on o2 L+F" IN #e<os&t+%0 A%t. 1MJM. T;e /e<os&t+%0 &s (&+,(e 2o% t;e (oss o2 t;e t;&nt;%ou-; + 2o%tu&tous e1ent" :1= I2 &t &s so st&<u(+te/4 :2= I2 ;e uses t;e t;&n- FEo t;e /e<os&to%Qs <e%7&ss&on4 :A= I2 ;e /e(+0s &ts %etu%n4 :C= I2 ;e +((oFs ot;e%s to use &t e1en t;ou-; ;e ;&7se(2 7+0 ;+1e ,een +ut;o%&>e/ to use t;e s+7e. K" W;+t &2 + /e<os&to% F+s &n t;e <%e7&ses o2 t;e ,+n8 H F+s %o,,e/ o2 ;&s 7one0 FE' ;e F+s +,out to /e<os&tL A: Bank cannot be hel liable for fortuitous event )robbery* esp in CAB where the money has not yet been actually eposite . A%t. 1MJM provi es for instances wherein epositary is still liable even in cases of fortuitous event. K" W;+t 8&n/ o2 /&(&-en'e &s %eBu&%e/ o2 + /e<os&t+%0L A: "r inary Hiligence.

29

'o77on '+%%&e%Qs e7<(o0ees t;%ou-; t;e eIe%'&se o2 t;e /&(&-en'e o2 + -oo/ 2+t;e% o2 + 2+7&(0 'ou(/ ;+1e <%e1ente/ o% sto<<e/ t;e +'t o% o7&ss&on. :2= 5F;en &t &s ot;e%F&se /e'(+%e/ ,0 st&<u(+t&on6 :11JC= EI<%ess +-%ee7ent A%t. 1A!*. %he contracting parties may establish such stipulations, clauses, terms & con itions as they may eem convenient, provi e they are not contrary to law, morals, goo customs, public or er, or public policy.

imme iate cause of the amage was the act of Jo . 7o be e$empt fr. liability for loss bec. of an act of %od, he must be free fr. any previous negligence or misconduct by w"c the loss or damage may have been occasioned. :2= ACT O$ CRE#ITOR CASE" ity of Fla. failed to e@ercise the diligence of a good father of a family w4c is a defense in 2uasi-delict. JIMENEU 1s. CITY O$ MANILA $2N= < N2=' AAC%<: Bernar ino Fimene; went to <ta. Ana Dublic market to buy ?bagoong@ when his left foot fell in an open hole that was hi en by mu y rainwater in the floo e market. Iis left leg was stuck by a rusty 8,in nail. Iis leg later on swelle an he was brought for treatment to VeteranPs EI. Ie walke aroun w/crutches for 2N ays, unable to work, force to hire a temp. river for his sch.bus bi;.. %hus, he sue the City of Ela. Aor amages, an the Asiatic Integ. Corp. )AIC* who ha the managing an operating 9 to that market. #ower court ismisse his complaint for insuff. "f evi . %he appellate court foun in his favor an place sole liability on AIC. I<<6:: 0"G the City of Eanila sh be hel soli arily liable w/ Asiatic integ. Corp. for in(uries suffere by petitionerT I:#H: As a efense against liability on the basis of -uasi, elict, one must have e+ercise the iligence of a goo father of a family. )A%t. 11JA NCC* %here is no argument that it is the uty of the City of Ela. to e+ercise reasonable care to keep the public market reasonably safe for people fre-uenting the place for their marketing nee s. 0hile it may be conce e that the fulfillment of such uties is e+tremely ifficult uring storms & floo s, it must, however, be a mitte that or inary precautions coul have been taken uring goo weather to minimi;e the angers to life & limb un er those ifficult circumstances. Aor instance, the rainage hole coul have been place un er the stalls instea of on the passage ways. :ven more important is the fact, that the City shoul have seen to it that the openings were covere . <a ly, the evi ence in icates that long before petitioner fell into the opening, it was alrea y uncovere , & N mos. after the inci ent happene , the opening was still uncovere . Eoreover, while there are fin ings that uring floo s the ven ors remove the iron grills to hasten the flow of water, there is no showing that such practice has ever been prohibite , much less penali;e by the City of Ela. Geither was it shown that any sign ha been place thereabouts to warn passers,by of the impen ing anger. Aor liability un er Art. 42MK GCC to attach, it is not necessary that the efective public works belong to the #J6 concerne . 0hat is re-P is ?control or supervision.@ CASE" &equisites for e$emption fr. liability due to an Eact of %od.E Ju+n $. NAG?IL H SONS 1s. CA $288 < NKL' , "ctober 5, 2KML To eIe7<t t;e o,(&-o% 2%. (&+,&(&t0 un/e% A%t. 11JC 2o% + ,%e+'; o2 +n o,(&-+t&on /ue to +n R+'t o2 Go/ R t;e 2o((oF&n7ust 'on'u%" 1. 2. t;e '+use o2 t;e ,%e+'; o2 t;e o,(&-+t&on 7ust ,e &n/e<en/ent o2 t;e F&(( o2 t;e /e,to%4 t;e e1ent 7ust ,e e&t;e% un2o%esee+,(e o% un+1o&/+,(e4 :'= t;e e1ent 7ust ,e su'; +s to %en/e% &t &7<oss&,(e 2o% t;e /e,to% to 2u(2&(( ;&s o,(&-+t&on &n + no%7+( 7+nne%4 H t;e /e,to% 7ust ,e 2ee 2%. +n0 <+%t&'&<+t&on &n o% +--%+1+t&on o2 t;e &n.u%0 to t;e '%e/&to%.

:A= 5F;en t;e n+tu%e o2 t;e 3 %eBu&%es t;e +ssu7<t&on o2 %&s8s6 A(e+to%0 Cont%+'t A%t. 2!1!. B0 +n +(e+to%0 'ont%+'t one o2 t;e <+%t&es o% ,ot; %e'&<%o'+((0 ,&n/ t;e7se(1es to -&1e o% to /o so7et;&n- &n 'ons&/e%+t&on o2 F;+t t;e ot;e% s;+(( -&1e o% /o u<on t;e ;+<<en&n- o2 +n e1ent FE' &s un'e%t+&n o% FE' &s to o''u% +t +n &n/ete%7&n+te t&7e. A%t. 11J). Usu%&ous t%+ns+'t&ons s;+(( ,e -o1e%ne/ ,0 s<e'&+( (+Fs. To(ent&no" Usu%0.@@ 6sury is the contracting for or receiving something in e+cess of the amount allowe by law for the loan or forbearance or money, goo s or chattels. S<e'&+( (+F on usu%0.@@ %he 6sury #aw was Act Go. 4LNN. %his law was repeale uring the perio of martial law, leaving parties free to stipulate higher rates. [[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[ [[[[[[ CASES" B+(+ne: <ome of the elements were present in this case. 0hat was absent was the last element. N?C VS. CA $2L2 < 558' , )P! cannot escape liability bec. its negligence was the pro$imate cause of the loss H damage even though the typhoon was an act of %od. AAC%<: T0<;oon 51elmingL Dlaintiff :CI ):ngr.Constr+,Inc* entere 9 w/GA0A<A on Aug.2KL8, to construct ipo,Bicti %unnel in Gor;a.,Bul. w/in M== ays3 It has finishe 2st stage of the e+cavation works an was alrea y on the Ipo site phase when typhoon ?0elming@ came in <ept. 2KLO. it was pre icte that 0elming wu pass through GDCPs Angat Iy roelectric Dro(ect an Ham at Ipo. Conse-uent to the heavy ownpour, the am reache anger height of 424 m. above sea level causing the GDC to eci e to open spillway gates at that point. %hus, the e+traor inary large volume of water rushe out of the gates an hit the installations an const+ wor+ of :CI at Ipo <ite w/terrific impact washing away an /or estroying supplies an e-uipment of :CI. It is clear fr. the appellate court.s ecision that base on its fin ings of fact & that of the trial court.s, petitioner GDC was un oubte ly negligent bec. it opene the spillway gates of the Angat Ham only at the height of typhoon !0elming! when it knew very well that it was safer to have opene the same gra ually & earlier, as it was also un eniable that GDC knew of the coming of the typhoon at least 8 ays bef. it actually struck. An even though the typhoon was an act of Jo or what we may call force majeure, GDC cannot escape liability bec. its negligence was the pro+imate cause of the loss & amage. As we have sai in $uan Da#pil / (ons vs. A, B'' ( "A *E-, %hus, if upon the happening of a fortuitous event or an act of Jo , there concurs a 'o%%es<on/&n- 2%+u/ ne-(&-en'e /e(+0 o% 1&o(+t&on o% 'ont%+1ent&on &n +n0 7+nne% o2 t;e teno% o2 t;e o,(&-+t&on +s <%o1&/e/ 2o% &n A%t. 11J!, w/c %esu(ts &n + (oss o% /+7+-e, the o,(&-o% '+nnot es'+<e (&+,&(&t0. %he principle embo ie in the +'t o2 Go/ /o't%&ne strictly re-uires that the act must be one occasioned e$clusively by the violence of nature H human agencies are to be e$cluded fr. creating or entering into the cause of the mischief . 0hen the effect, the cause of w/c is to be consi ere , is foun to be in part the result of the participation of man, whether it be fr. active intervention or neglect, or failure to act, the whole occurrence is thereby humani;e , as it was, & remove fr. the rules applicable to the acts of Jo . %hus, it has been hel that when the negligence of a person concurs w/ an act of Jo in pro ucing a loss, such person is not e+empt fr. liability by showing that the

A.

AAC%<: Construction of the office buil ing of Dlaintiff Dhil. Bar Assoc. )DBA* in Intramuros was un ertaken by 6nite Constr+. Inc. on an ?a ministration@ basis on suggestion of 6nite Dres. Fuan Carlos. <uch was approve by DBA Boar , & Dres. Boman ";aeta. Dlans an specs were one by Fuan f. Gakpil & <ons. Bl g. was complete Fune 2KLL. August 2KLM an unusually strong earth-uake hit Eanila. %he DBA bl g.sustaine ma(or amage, tenants ha to vacate. %emp. rem. 0or+ one by 6nite cost D25UX Gov. 2KLM DBA file action to recover amages vs. 6nite , &Fuan Carlos, as ef, alleging that the amage to the bl g. was ue to breach by ef. of the terms of 9 an failure to follow the plan&specs. Hef. file 5r party complaint vs.the architects, petitioner herein. FAG&sons stipulate in writing that it not be implea e by amen ment of complaint. %hat in case court fin s it liable, it woul be as if it was uly implea e therein.

30

April 5=, 2KOK, bl g. ispute was authori;e to be emolishe at e+pense of plaintiff, after further earth-uakes cause further amage to the bl g3 ISSUE: 0"G AG AC% "A J"H 0IC CA6<:H HAEAJ: %" %II< B#HJ, :Q:ED%< AB #IABI#I%S, DAB%I:< 0I" AB: "%I:B0I<: #IAB#: B/C "A G:J#IJ:GC:T ART. 1J2A To eIe7<t o,(&-o% 2% (&+,&(&t0 un/e% A%t. 11JC $E4 o% 2o% + ,%e+'; o2 3 /Et +n +'t o2 Go/ t;e 22. 7ust 'on'u%" 2. cause of the breach of & must be in epen ent of the will of the ebtor3 4. the event must be either unforeseeable or unavoi able 5. the event must be such as to ren er it impossible for ebtor to fulfill & in normal manner3 8. ebtor must be free from any participation in, or aggravation of the in(ury to the cre itor. %hus, if upon the happening of a A: or an A"J, there concurs a correspon ing frau , negligence, elay or violation or contravention in any manner of the tenor of the & as provi e in A%t. 11J!, whc results in loss or amage, the obligor cannot escape liability. %o be an A"J, the event must be occasione e+clusively by violence of nature an all human agencies are e+clu e from creating or entering into the cause of mischief. 0ith participation of man, whether active or neglect or failure to act, the occurrence is humani;e , an remove from the octrinePs application. Ain ings of lower court an IAC were both beyon ispute that 6nite an FAGakpil &<ons were both liable. %he efects in the plans&specs were pro+imate cause, the eviations of 6nite fr the specs an failure to observe re-uire workmanship & egree of supervision on both makes them liable. CASE #OCTRINE: EOne who negligently creates a dangerous condition cannot escape liability for the natural H probable consequences thereof, although the act of a third person, or an act of %od for w"c he is not responsible, intervenes to precipitate the loss.E :citing 7ucFer v. 4ilan, 9+ O% 9/?+, 9/>..= NAG?IL H SONS VS. CA $2L= < 558' , ADBI# 2N, 2KMM AAC%<: E.B. on the above ecision I<<6:< BAI<:H "G %II< EB: )2* %hat the buil ing i not collapse on earth-uake of 8/4/LM, thus the premise of the #C fin ings is negate , Art. 22O5 cannot apply I:#H: it is not the fact of collapse that was the premise on applying Art. 22O5 but on who sh be responsible for the e+treme amage to the bl g. whc inevitably le to its collapse, or emolition. %rial court correctly foun efs. #iable3 )4* %hat court faile to impute liability on DBA or on ";aeta for failure to provi e legal uty to supervise, as owner I:#H: no legal nor contractual basis. DBA sought technical e+pertise of both 6nite & FAG&sons for such costs on this purpose. It was even FAG who suggeste a ministration basis. )5* %hat fin ings of ba faith ha no factual anchor I:#H: 0anton negligence of both 6nite & FAG&sons in effecting plans, specs, & constr+ esigns is e-uivalent to BA in performance of their resp. uties3 )8* Awar of NE ha no basis, CommissionerPs report est.only 2.2E such initial report was base on the partial collapse only, after 8/4/LM :R, for repairs3 but after total collapse almost 4= yrs later, unreali;e rentals an ma(or reconstr+ makes even NE a very conservative est. )N* As to awar of attys fees & amages was court iscretion )L* 24V interest p.a. acc g to CB Circular 82L )DH 22L* applies only to :1= (o+ns4 :2= 2o%,e+%+n'e o2 7one0 -oo/s o% '%e/&t4 :A= %+te +((oFe/ &n J$ODs &n1o(1&n- 1 H 2. I:#H: %rue, but, 24V is imposable only when there is elay in payment of (u gment after its finality. )penalty, not really interest* N?C VS. CA $444 < 82N' Detitioners cannot be hear to invoke the act of Jo or force majeure to escape liability for the loss or amage sustaine by the pvt. respon ents since they, the petitioners, were guilty of negligence. %he event then was not occasione e+clusively by an act of Jo or force majeure3 a human factor,, negligence or impru ence,, ha intervene . %he effect then of the force majeure in -uestion may be eeme to have, even if only partly, resulte fr. the participation of man. %hus, the whole occurrence was thereby humani;e , as it were, & remove fr. the rules applicable to acts of Jo . N?C VS. CA $445 < L8K' Detitioners have raise the same issues & efenses as in the 4 other eci e cases therein

mentione . Dre ictably therefore, this petition must perforce be ismisse bec. the losses & amages sustaine by the private resp..s ha been pro+imately cause by the negligence of the petitioners, although the typhoon w/c prece e the floo ing coul be consi ere as a force majeure.

$. REME#IES $OR BREECO O$ OBLIGATIONS" A%t&'(e 11*). 0hen what is to be elivere is a eterminate thing, the cre itor, in a ition to the right grante him by article 22O=, may compel the ebtor to make the elivery. If the thing is in eterminate or generic, he may ask that the obligation be complie with at the e+pense of the ebtor. If the obligor elays, or has promise to eliver the same thing to two or more persons who o not have the same interest, he shall be responsible for any fortuitous event until he has effecte the elivery. A%t&'(e 11**. %he obligation to give a eterminate thing inclu es that of elivering all its accessions an accessories, even though they may not have been mentione . A%t&'(e 11*J. If a person oblige to o something fails to o it, the same shall be e+ecute at his cost. %his same rule shall be observe if he oes it in contravention of the tenor of the obligation. Aurthermore, it may be ecree that what has been poorly one be un one. A%t&'(e 11*8. 0hen the obligation consists in not oing, an the obligor oes what has been forbi en him, it shall also be un one at his e+pense. A%t&'(e 11J!. %hose who in the performance of their obligations are guilty of frau , negligence, or elay, an those who in any manner contravene the tenor thereof, are liable for amages. A%t&'(e 11JJ. %he cre itors, after having pursue the property in possession of the ebtor to satisfy their claims, may e+ercise all the rights an bring all the actions of the latter for the same purpose, save those which are inherent in his person3 they may also impugn the acts which the ebtor may have one to efrau them. A%t&'(e 11J8. <ub(ect to the laws, all rights ac-uire in virtue of an obligation are transmissible, if there has been no stipulation to the contrary. A%t&'(e 11M1. %he power to rescin obligations is implie in reciprocal ones, in case one of the obligors shoul not comply with what is incumbent upon him. %he in(ure party may choose between the fulfillment an the rescission of the obligation, with the payment of amages in either case. Ie may also seek rescission, even after he has chosen fulfillment, if the latter shoul become impossible. %he court shall ecree the rescission claime , unless there be (ust cause authori;ing the fi+ing of a perio . %his is un erstoo to be without pre(u ice to the rights of thir persons who have ac-uire the thing, in accor ance with articles 25MN an 25MM an the Eortgage #aw. A%t&'(e 11M2. In case both parties have committe a breach of the obligation, the liability of the first infractor shall be e-uitably tempere by the courts. If it cannot be etermine which of the parties first violate the contract,

31

the same shall be eeme bear his own amages.

e+tinguishe , an

each shall

four months prece ing the levy as are necessary for the support of his family3 #ettere gravestones3 Eonies, benefits, privileges, or annuities accruing or in any manner growing out of any life insurance3 %he right to receive legal support, or money or property obtaine as such support, or any pension or gratuity from the Jovernment3 Droperties specially e+empte by law.

A%t&'(e 22A*. %he ebtor is liable with all his property, present an future, for the fulfillment of his obligations, sub(ect to the e+emptions provi e by law. ) Con'u%%en'e H ?%e2e%en'e o2 C%e/&ts* A%t&'(e A!2. Geither the right to receive legal support nor any money or property obtaine as such support or any pension or gratuity from the government is sub(ect to attachment or e+ecution. )Su<<o%t* A%t&'(e 1J!8. %he laborer.s wages shall not be sub(ect to e+ecution or attachment, e+cept for ebts incurre for foo , shelter, clothing an me ical atten ance. )Cont%+'t L+,o%* $AMILY CO#E" A%t. 1)A. T;e 2+7&(0 ;o7e is eeme constitute on a house an lot from the time it is occupie as a family resi ence. Arom the time of its constitution an so long as any of its beneficiaries actually resi es therein, the family home continues to be such an is e+empt from e+ecution, force sale or attachment e+cept as hereinafter provi e an to the e+tent of the value allowe by law. A%t. 1)). %he family home shall be e+empt from e+ecution, force sale or attachment e+cept: )2* Aor nonpayment of ta+es3 )4* Aor ebts incurre prior to the constitution of the family home3 )5* Aor ebts secure by mortgages on the premises before or after such constitution3 an )8* Aor ebts ue to laborers, mechanics, architects, buil ers, materialmen an others who have ren ere service or furnishe material for the construction of the buil ing. R.O.C. RULE AM SEC. 1A" Se't&on 1A. <roperty e@empt from e@ecution. :+cept as otherwise e+pressly provi e by law, the following property, an no other, shall be e+empt from e+ecution: %he (u gment obligor.s family home as provi e by law, or the homestea in which he resi es, an lan necessarily use in connection therewith3 "r inary tools an implements personally use him in his tra e, employment, or livelihoo 3 by

But no article or species of property mentione in this section shall be e+empt from e+ecution issue upon a (u gment recovere for its price or upon a (u gment of foreclosure of a mortgage thereon. To(ent&no: B: 22LN REME#IES O$ CRE#ITOR" Aor failure of ebtor to comply, 2. S?ECI$IC ?ER$ORMANCE to obtain compliance of the prestations, whether eterminate or generic3 this action implies a contractual relation3 2. TO RESCIN# OR RESOLVE TOE 3 3. AN ACTION $OR #AMAGES e+clusively or in a ition to 2 & 4. Constitutional prohibition vs. imprisonment for ebt applies, e+cept in subsi iary imprisonment when civil liability arising from crime is not pai 3 or in contempt3 :+ception to e+ception on the JB re A:: Hebtor in efault may still prove that he is not liable for A: bco; even if he ha not performe , the loss wu still have occurre in the same manner. B: 22LO ?e%2o%7+n'e o2 3 ,0 +not;e% +t '%e/&to%Ds ';o&'e +H +t /e,to%Ds 'ost 9 court may not by iscretion merely awar amages to Cr. 0hen the & may be one in spite of ebtorPs refusal to o so3 But, law may not 'o7<e( o% 2o%'e /e,to% to 'o7<(0 FE 3 if to o, woul amount to invol. <erv., if ebt, no imprisonment. If & can only be one by ebtor, then only rem is amages. B: 22LM & G"% %" H" was one may compel ebtor to 6GH"3 but if impossible to un o, rem is amages. B: 22O= B:C"V:BAB#: HAEAJ:< Y when the & is to o something other than the payment of money3 If & is payment of money, 44=K is the rule re amages when ebtors incurs in elay, is payment of interest if w/o stipulation to the contrary, as agree upon, if if no agreement, the legal interest. B: 22OO RIGOTS O$ CRE#ITORS" 2. To (e10 ,0 +tt+';7ent H eIe'ut&on upon all the property of ebtor e+cept if e+empt by law3 4. to e+ercise all the rights an actions of the ebtor, e+cept those inherently personal to him3 accion subrogatoriaB prior court approval is not re-uire . %his sh concur w/ ff. re-uisites: a. Cr. Ias interest in the rt. or a+n. Got only bco; of his cre it but /t insolvency of ebtor3 b. Ealicious or negligent inaction of ebtor at level whc en anger claim of Cr3 c. HebtorPs rt. vs. 5r person must be patrimonial, or susceptible of being transforme to patrim.value. 5. ask for %es'&ss&on of 9s ma e by ebtor in frau of Cr.Ps rts.

%hree horses, or three cows, or three carabaos, or other beasts of bur en, such as the (u gment obligor may select necessarily use by him in his or inary occupation3 Iis necessary clothing an articles for or inary personal use, e+clu ing (ewelry3 Iousehol furniture an utensils necessary for housekeeping, an use for that purpose by the (u gment obligor an his family, such as the (u gment obligor may select, of a value not e+cee ing one hun re thousan pesos3 Drovisions for in ivi ual or family use sufficient for four months3 %he professional libraries an e-uipment of (u ges, lawyers, physicians, pharmacists, entists, engineers, surveyors, clergymen, teachers, an other professionals, not e+cee ing three hun re thousan pesos in value3 "ne fishing boat an accessories not e+cee ing the total value of one hun re thousan pesos owne by a fisherman an by the lawful use of which he earns his livelihoo 3 <o much of the salaries, wages, or earnings of the (u gment obligor for his personal services within the

B+(+ne" K" A-+&nst F;+t '+n t;e o,(&-ee /e7+n/ <e%2o%7+n'eL A: Against non,e+empt properties of the ebtor.,, %he ebtor is liable w/ all his property, present & future, for the fulfillment of his obligations, sub(ect to the e+emptions provi e by law. )A%t. 22A*.*

32

If number one is not enough, the cre itor goes to any claims w/c the ebtor may have against thir persons. %his is calle accion subrogatoria, wherein the cre itor is subrogate in the rights of the ebtor. ?e%son+( %ts. O2 /e,to%" 2. Bt. to subsistence, support he receives e+empt 4. Dublic rts3 5. Bts. Dertaining to honor 8. Bt. to use remaining powers available to him, e.g. <DA of agency or eposit3 a ministrator3 to accept a9 N. Gon,patrimonial rts / estab. <tatus, legit or illegit chil 3 annulment of marriage, legal sep., those arising fr, DAB3 L. Dersonal rts. Arising fr. Datrimonial source, e.g. to revoke a onation /t ingratitu e, to eman e+clusion of an unworthy heir3 Accion pauliana )Articles 25M=,MK*.,, %his is the right of cre itors to set asi e frau ulent transfers w/c the ebtor ma e so much of it as is necessary to pay the ebts. pertains to acts whc ebtor may have one in frau of Cr. :.g. alienation of property, renunciation of inheritance or rt. of usufruct, assgnmnt of cre it, remission of ebts. :1= ENTRAJU#ICIAL REME#IES" :+= EN?RESSLY GRANTE# BY LAW :,= STI?ULATE# BY TOE ?ARTIES :+= EN?RESSLY GRANTE# BY LAW eIt%+.u/&'&+( %e7. :In O,(&-+t&ons o2 t;e ?+%tne%s= A%t&'(e 1J8*. :very partner is a ebtor of the partnership for whatever he may have promise to contribute thereto. Ie shall also be boun for warranty in case of eviction with regar to specific an eterminate things which he may have contribute to the partnership, in the same cases an in the same manner as the ven or is boun with respect to the ven ee. Ie shall also be liable for the fruits thereof from the time they shoul have been elivere , without the nee of any eman . A%t&'(e 1J88. A partner who has un ertaken to contribute a sum of money an fails to o so becomes a ebtor for the interest an amages from the time he shoul have complie with his obligation. %he same rule applies to any amount he may have taken from the partnership coffers, an his liability shall begin from the time he converte the amount to his own use. :In #e(&1e%0 o2 t;e T;&n- So(/= A%t&'(e 1)2*. <ub(ect to the provisions of this %itle, notwithstan ing that the ownership in the goo s may have passe to the buyer, the unpai seller of goo s, as such, has: )2* A lien on the goo s or right to retain them for the price while he is in possession of them3 )4* In case of the insolvency of the buyer, a right of stopping the goo s in transitu after he has parte with the possession of them3 )5* A right of resale as limite by this %itle3 )8* A right to rescin the sale as likewise limite by this %itle. 0here the ownership in the goo s has not passe to the buyer, the unpai seller has, in a ition to his other reme ies a right of withhol ing elivery similar to an coe+tensive with his rights of lien an stoppage in transitu where the ownership has passe to the buyer. :2= JU#ICIAL REME#IES" :+= ?RINCI?AL REME#Y 11M1 E 11J! :,= SUBSI#IARY REM 1A8! E11JJ :'= ANCILLARY REM %he Bules of Court :+= ?RINCI?AL REME#Y 11M1 E 11J!

A%t&'(e 11M1. %he power to rescin obligations is implie in reciprocal ones, in case one of the obligors shoul not comply with what is incumbent upon him. %he in(ure party may choose between the fulfillment an the rescission of the obligation, with the payment of amages in either case. Ie may also seek rescission, even after he has chosen fulfillment, if the latter shoul become impossible. %he court shall ecree the rescission claime , unless there be (ust cause authori;ing the fi+ing of a perio . %his is un erstoo to be without pre(u ice to the rights of thir persons who have ac-uire the thing, in accor ance with articles 25MN an 25MM an the Eortgage #aw. Notes on 11M1" %wo reme ies are alternative & not cumulative, sub(ect to the e+ception in par. 4 where he may also seek rescission even after he has chosen fulfillment if the latter shoul become impossible A%t. 11J!. T;ose F;o &n t;e <e%2o%7+n'e o2 t;e&% o,(&-+t&on +%e -u&(t0 o2 2%+u/ ne-(&-en'e o% /e(+0 H t;ose F;o &n +n0 7+nne% 'ont%+1ene t;e teno% t;e%eo2 +%e (&+,(e 2o% /+7+-es. :,= SUBSI#IARY REM 1A8! E11JJ A%t&'(e 1A8!. Contracts vali ly agree upon may be rescin e in the cases establishe by law. )Res'&ss&,(e Cont%+'ts= A%t&'(e 11JJ. %he cre itors, after having pursue the property in possession of the ebtor to satisfy their claims, may e+ercise all the rights an bring all the actions of the latter for the same purpose, save those which are inherent in his person3 they may also impugn the acts which the ebtor may have one to efrau them. @@@ Bescission in reciprocal & in Art. 22K2 is not i entical to Bescission of 9s in Art. 25M=X. ReBu&s&tes o2 Rsn o2 + G :1A8!=" a rescissible U, e+. un er Art. 25M2 & 25M4 no other legal means to obtain reparation for amages )Art. 25M5* person eman ing Bsn must be able to return whatever he may be oblige to restore if Bsn grante )Art. 25MN* ob(ects of U must not have passe legally to possPn of 5 r p. in JA )Art. 25MN* A+n for Bsn brought w/in 8 years )Art. 25MK* Bescin able Us are vali until voi e & canPt be attacke collaterally as in a lan registration procee ing. Hirect procee ing necessary. Bsn only for legal cause, as those in Art. 25M2 & 25M4 ?#esion@ un er Art. 25M2 par. 2 & 4, to give rise to Bsn, must be known or coul have been known at the time of making the U, & not ue to circs subse- thereto or unknown to the parties. Accion Dauliana: A+n to set asi e Us in frau of Crs. )Art. 25M2 par. 5* ReBu&s&tes 2o% A''&on ?+u(&+n+" 2. Dff. Asking for Bsn has a cre it prior to alienation, though eman able later 4. Hbt has ma e a subse-uent U conveying a patrimonial benefit to 5r p. 5. Cr,Dff has no other legal reme y to satisfy his claim 8. Act being impugne is frau ulent N. 5r p. who receive prop., if by onerous title, is accomplice in the frau Bsn. is a su,s&/&+%0 +In, w/c <%esu<<oses t;+t t;e C% ;+s eI;+uste/ t;e <%o<. o2 t;e #,. Arau ulent conveyance must be shown. Test" WON 'on1e0+n'e ,0 /,to% + ,on+ 2&/e t%+nsIn B+/-esE S&-ns o2 $%+u/" 2. consi eration of conveyance is ina e-uate 4. transfer ma e by Hb after suit has begun & while pen ing v. him 5. a sale upon cre it by insolvent Hb 8. evi ence of large in ebte ness or complete insolvency

33

N. L. O. M. K.

transfer of all or nearly all of prop of Hb who is insolvent or greatly embarrasse financially transfer is ma e between father & son failure of ven ee to take e+clusive possPn of prop If alienation is gratuitous, JA of transferee oes G"% protect him ".0. 6n(ust enrichment If alienation is by onerous title, transferee must be a party to the frau , to have Bsn

6ssues: 0/G %olentino can compel specific performance. 0/G %olentinoPs liability to pay the D2O,=== covere promissory note subsists.

by the

As a rule, Bsn benefits only Cr who obtaine Bsn. An the e+tent of revocation is only to the amount of pre(u ice suffere by Cr. As to the e+cess, the alienation is maintaine AIn 2o% Rsn 7+0 ,e ,%ou-;t ,0" )2* the person in(ure by the Bescue U, )4* heirs of this person, & )5* their Crs by virtue of rt grante un er Art. 22OO. Rt. o2 t%+ns2e%ee to %et+&n <%o<. epen s upon the nature of the transfer & upon the complicity of the former in the frau . 0hen U canPt be rescin e bec. 5 r p. is in JA, the party who cause the loss is liable for the amages Ba ges of frau , & Art. 25MO: Dresumptions. Eay be rebutte by satisfactory & convincing evi ence. Art. 25MM: Cr. 0ith a+n only v. subse-uence transferees only when an a+n lies v. 2st transferee. If 2st %fee in JA, no liability. If 2st %fee in BA, the rescissible char. "f 4 n alienation epen s upon how 4n %fee ac-uire the thing. A%t. 11M1. T;e <oFe% to %es'&n/ o,s. Is &7<(&e/ &n %e'&<%o'+( ones &n '+se on o2 t;e o,(&-o%s s;ou(/ not 'o7<(0 FE F;+t &s &n'u7,ent u<on ;&7. T;e &n.u%e/ <+%t0 7+0 ';oose ,etFeen t;e 2u(2&((7ent H t;e %es'&ss&on o2 t;e /s. FE t;e <+07ent o2 /+7+-es &n e&t;e% '+se. Oe 7+0 +(so see8 %es'&ss&on e1en +2te% ;e ;+s ';osen 2u(2&((7ent &2 t;e (+tte% s;ou(/ ,e'o7e &7<oss&,(e. T;e 't. s;+(( /e'%ee t;e %es'&ss&on '(+&7e/ un(ess t;e%e ,e .ust '+use +ut;o%&>&n- t;e 2&I&n- o2 + <e%&o/. T;&s &s un/e%stoo/ to ,e FEo <%e.u/&'e to t;e %ts o2 t;&%/ <e%sons F;o ;+1e +'Bu&%e/ t;e t;&n- &n +''o%/+n'e FE A%ts. 1A8) H 1A88 H t;e Mo%t-+-e L+F. A%t. 11M2. In '+se ,ot; <+%t&es ;+1e 'o77&tte/ + ,%e+'; o2 t;e o,(&-+t&on t;e (&+,&(&t0 o2 t;e 1st &n2%+'to% s;+(( ,e eBu+((0 te7<e%e/ ,0e t;e 'ts. I2 &t '+nnot ,e /et. W;&'; o2 t;e <+%t&es 1st 1&o(+te/ t;e S t;e s+7e s;+(( ,e /ee7e/ eIt&n-u&s;e/ H e+'; s;+(( ,e+% ;&s oFn /+7+-es. To(ent&no" S&7&(+%&t&es between Bsn un er Art. 22K2 & Art. 25M=X: )2* both presuppose 9s vali ly entere into & e+isting, & )4* both re-uire mutual restitution when eclare proper. #&22e%en'es: )2* Bsn un er 22K2 may be eman e only by party to the 9, un er 25M=X by 5r p. pre(u ice by the 93 )4* Bsn un er 22K2 may be enie when there is sufficient reason to (ustify e+tension of time to perform, un er 25M=X such reason oes G"% affect rt. to ask for Bsn3 )5* Gon,perf. is the only gr . for Bsn un er 22K2, while there are various reasons of e-uity as gr s. un er 22K2 applies only to recip. s. where one party has not performe , while un er 25M=)X* & may be unilateral or reciprocal & even when 9 has been fulfille . !()7&A2 CA)D S. !A :,+>-= #acts: Islan s <avings Bank approve the loan application of %olentino for DM=,===. %o secure the loan, %olentino e+ecute a real estate mortgage on his 2==,hectare lan . "nly D2O,=== was release by the Bank, for w/c %olentino e+ecute a promissory note payable w/in 5 years. %he balance was not release . In 2KLN, the Eonetary Boar of the Central Bank issue Besolution Go. 2=8K prohibiting the Bank fr. oing business in the Dhilippines. %he Bank file an application for e+tra(u icial foreclosure of the real estate mortgage of %olentino for non, payment of the promissory note for D2O,===. In turn, %olentino file an action for in(unction, specific performance or rescission, alleging that the Bank faile to fulfill its obligation to len the balance of DL5,===.

Ield: G". %he agreement is a loan agreement, w/c is a reciprocal obligation. In reciprocal obligations, the obligation or promise of each party is the consi eration for that of the other3 & when one party has performe or is rea y & willing to perform his part of the contract, the other party who has not performe or is not rea y & willing to perform incurs in elay. %he promise of %olentino to pay was the consi eration for the obligation of the Bank to furnish the DM=,===. 0hen %olentino e+ecute a real estate mortgage, he signifie his willingness to pay the loan. Arom such ate, the obligation of the Bank to furnish the DM=,=== accrue . %he BankPs elay starte in 2KLN, laste for 5 years or when the Eonetary Boar issue Besolution Go. KLO in 2KLM, w/c prohibite the Bank fr. oing further business. Besolution Go. 2=8K cannot interrupt the efault of the Bank in releasing the DL5,=== bec. sai resolution merely prohibite the Bank fr. making new loans. <ince the Bank was in efault in fulfilling its reciprocal obligation un er the loan agreement, %olentino may choose between specific performance or rescission w/ amages in either case. But since the Bank is now prohibite fr. oing further business, the Court cannot grant specific performance. Bescission is the only alternative reme y left. Iowever, rescission is only for the DL5,=== balance, bec. the bank is in efault only insofar as such amount is concerne . %he promissory note gave rise to %olentinoPs reciprocal obligation to pay the D2O,=== loan when it falls ue. Art. 22K4 provi es that in case both parties have committe a breach of their reciprocal obligations, the liability of the first infractor shall be e-uitably tempere by the Court. %he liability of the Bank for amages in not furnishing the entire loan is offset by the liability of %olentino for amages, in the form of penalties & surcharges for not paying his over ue D2O,=== ebt. @@@ CASES" UNIVERSAL $OO# COR?. 1s. CA" :1MJ!= $ACTS" M+-/+(o V. $%+n'&s'o, <r. DA%:G%:: or owner an author of the formula for MA$RAN SAUCE, manufacture an istribute by U$C, file with the CAI,Eanila, an action for rescission of a contract entitle !B&(( o2 Ass&-n7ent .! %he plaintiffs praye the court to a (u ge the efen ant as without any right to the use of the Eafran tra emark an formula, an or er the latter to restore to them the sai right of user3 to or er 6AC to pay Eag alo his unpai salary from Hecember 2, 2KL=, as well as amages in the sum of D8=,===, an to pay the costs of suit. Detitioner 6AC conten s that the CA erre in granting above prayers of plaintiff, hol ing that right to specific performance is not con(unctive with the right to rescin a reciprocal contract3 that a plaintiff cannot ask for both reme ies3 that the appellate court awar e the respon ents both reme ies as it hel that the respon ents are entitle to rescin the Bill of Assignment an also that the respon ent patentee is entitle to his salary aforesai 3 that this is a gross error of law. Certain provisions of the Bill of Assignment woul seem to support the petitioner.s position that the respon ent patentee ce e an transferre to the petitioner the formula for Eafran sauce. Iowever, a perceptive analysis of the entire instrument an the language employe therein woul lea one to the conclusion that what was actually ce e an transferre was only the use of the Eafran sauce formula. %his was the precise intention of the parties: )2* 4V B"SA#%S3 provisions to preserve utmost secrecy an monopoly of the formula by the patentee3 etc.. I<<6:: 0"G the rescission of the Bill of Assignment by the CA is properT

34

In this connection, we -uote for rea y reference the following articles of the new Civil Co e governing rescission of contracts: ART. ,,+,. T;e <oFe% to %es'&n/ o,(&-+t&ons &s &7<(&e/ &n %e'&<%o'+( ones &n '+se one o2 t;e o,(&-o%s s;ou(/ not 'o7<(0 F&t; F;+t &s &n'u7,ent u<on ;&7. T;e &n.u%e/ <+%t0 7+0 ';oose ,etFeen t;e 2u(2&((7ent +n/ t;e %es'&ss&on o2 t;e o,(&-+t&on F&t; t;e <+07ent o2 /+7+-es &n e&t;e% '+se. Oe 7+0 +(so see8 %es'&ss&on e1en +2te% ;e ;+s ';osen 2u(2&((7ent &2 t;e (+tte% s;ou(/ ,e'o7e &7<oss&,(e. T;e 'ou%t s;+(( /e'%ee t;e %es'&ss&on '(+&7e/ un(ess t;e%e ,e .ust '+use +ut;o%&>&n- t;e 2&I&no2 + <e%&o/. T;&s &s un/e%stoo/ to ,e F&t;out <%e.u/&'e to t;e %&-;ts o2 t;&%/ <e%sons F;o ;+1e +'Bu&%e/ t;e t;&n- &n +''o%/+n'e F&t; +%t&'(es 1A8) +n/ 1A88 o2 t;e Mo%t-+-e L+F. ART. 1A8A. T;e +'t&on 2o% %es'&ss&on &s su,s&/&+%04 &t '+nnot ,e &nst&tute/ eI'e<t F;en t;e <+%t0 su22e%&n- /+7+-e ;+s no ot;e% (e-+( 7e+ns to o,t+&n %e<+%+t&on 2o% t;e s+7e. ART. 1A8C. Res'&ss&on s;+(( ,e on(0 to t;e eItent ne'ess+%0 to 'o1e% t;e /+7+-es '+use/. OEL#" T;e <oFe% to %es'&n/ o,(&-+t&ons &s &7<(&e/ &n %e'&<%o'+( ones &n '+se one o2 t;e o,(&-o%s s;ou(/ not 'o7<(0 F&t; F;+t &s &n'u7,ent u<on ;&7. T;e &n.u%e/ <+%t0 7+0 ';oose ,etFeen 2u(2&((7ent +n/ %es'&ss&on o2 t;e o,(&-+t&on F&t; <+07ent o2 /+7+-es &n e&t;e% '+se. In this case before us, there is no controversy that the provisions of the Bill of Assignment are reciprocal in nature. %he petitioner corporation violate the Bill of Assignment, specifically paragraph N,)a* an )b*, by terminating the services of the respon ent patentee Eag alo V. Arancisco, <r., without lawful an (ustifiable cause. T;e -ene%+( %u(e &s t;+t %es'&ss&on o2 + 'ont%+'t F&(( not ,e <e%7&tte/ 2o% + s(&-;t o% '+su+( ,%e+'; ,ut on(0 2o% su'; su,st+nt&+( +n/ 2un/+7ent+( ,%e+'; +s Fou(/ /e2e+t t;e 1e%0 o,.e't o2 t;e <+%t&es &n 7+8&n- t;e +-%ee7ent . %he -uestion of whether a breach of a contract is substantial epen s upon the atten ant circumstances. %he petitioner conten s that rescission of the Bill of Assignment shoul be enie , because un er article 25M5, rescission is a su,s&/&+%0 %e7e/0 which cannot be institute e+cept when the party suffering amage has no other legal means to obtain reparation for the same. Iowever, in this case the ismissal of the respon ent patentee Eag alo V. Arancisco, <r. as the permanent chief chemist of the corporation is a fun amental an substantial breach of the Bill of Assignment. Ie was ismisse without any fault or negligence on his part. %hus, apart from the legal principle that t;e o<t&on to /e7+n/ <e%2o%7+n'e o% +s8 2o% %es'&ss&on o2 + 'ont%+'t ,e(on-s to t;e &n.u%e/ <+%t0 , the fact remains that the respon ents,appellees ha no alternative but to file the present action for rescission an amages. It is to be emphasi;e that the respon ent patentee woul not have agree 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 <econ Vice,Dresi ent an Chief Chemist on a permanent basis3 that in the manufacture of Eafran sauce an other foo pro ucts he woul have !absolute control an supervision over the laboratory assistants an personnel an

in the purchase an safeguar ing of sai pro ucts3! an that only by all these measures coul the respon ent patentee preserve effectively the secrecy of the formula, prevent its proliferation, en(oy its monopoly, an , in the process affor an secure for himself a lifetime (ob an stea y income. %he salient provisions of the Bill of Assignment, namely, the transfer to the corporation of only the use of the formula3 the appointment of the respon ent patentee as <econ Vice,Dresi ent an chief chemist on a permanent status3 the obligation of the sai respon ent patentee to continue research on the patent to improve the -uality of the pro ucts of the corporation3 the nee of absolute control an supervision over the laboratory assistants an personnel an in the purchase an safekeeping of the chemicals an other mi+tures use in the preparation of sai pro uct all these provisions of the Bill of Assignment are so inter epen ent that violation of one woul result in virtual nullification of the rest. Se<+%+te O<&n&on" REYES J.B.L. N., concurring: I concur with the opinion penne by Er. Fustice Are Bui; Castro, but I woul like to a that the argument of petitioner, that t;e %es'&ss&on /e7+n/e/ ,0 t;e %es<on/ent@+<<e((ee M+-/+(o $%+n'&s'o s;ou(/ ,e /en&e/ because un er A%t&'(e 1A8A NCC rescission can not be eman e e+cept when the party suffering amage has no other legal means to obtain reparation, is pre icate on a failure to istinguish between a rescission for breach of contract un er Article 22K2 of the Civil Co e an a rescission by reason of lesion or economic pre(u ice, un er Article 25M2, et se-. :%es'&ss&on 2o% ,%e+'; o2 'ont%+'t un/e% A%t&'(e 11M1 = %he rescission on account of breach of stipulations is not pre icate on in(ury to economic interests of the party plaintiff but on the breach of faith by the efen ant, that violates the reciprocity between the parties. It &s not + su,s&/&+%0 +'t&on, an Article 22K2 may be scanne without isclosing anywhere that the action for rescission thereun er is subor inate to anything other than the culpable breach of his obligations by the efen ant. %his rescission is in <%&n'&<+( +'t&on %et+(&+to%0 &n ';+%+'te% &t ,e&n- un.ust t;+t + <+%t0 ,e ;e(/ ,oun/ to 2u(2&(( ;&s <%o7&ses F;en t;e ot;e% 1&o(+tes his. As e+presse in the ol #atin aphorism: GDon servanti fidem, non est fides servanda.G Ience, the reparation of amages for the breach is purely secon ary. :Res'&ss&on ,0 %e+son o2 (es&on o% e'ono7&' <%e.u/&'e un/e% A%t&'(e 1A81 et seB. = "n the contrary, in the rescission by reason of lesion or economic pre(u ice, the cause of action is subor inate to the e+istence of that pre(u ice, because it is the raison dHetre as well as the measure of the right to rescin . Ience, where the efen ant makes goo the amages cause , the action cannot be maintaine or continue , as e+pressly provi e in Articles 25M5 an 25M8. But the operation of these two articles is limite to the cases of rescission for lesion enumerate in Article 25M2 of the Civil Co e of the Dhilippines, an oes not, apply to cases un er Article 22K2. It is probable that the petitioner.s confusion arose from the efective techni-ue of the new Co e that terms both instances as rescission without istinctions between them3 unlike the previous <panish Civil Co e of 2MMK, that ifferentiate !resolution! for breach of stipulations from !rescission! by reason of lesion or damage. 1 But the terminological vagueness oes not (ustify confusing one case with the other, consi ering the patent ifference in causes an results of either action. 4A%'A2()A (S7A7(S S. 2O56S 48&6!D :,+9,= #A!7S: Eag alena :state, Inc., sol to #ouis F. Eyrick Darcel of lots in <an Fuan <ub ivision, <an Fuan Bi;al, with contract of sale provi ing for the price which shall be payable in 24= e-ual monthly installments of each on the 4n ay of ea.mo. fr. the ate of e+ecution of the agreement. <imultaneously, the ven ee e+ecute an elivere to the ven or a DG for the whole purchase price. Eyrick ma e several installment

35

payments the last being "ct. 2K5=, but was in Eay payment.

efault as to

%hus, ven or notifie the ven ee that, in view of his inability to comply with the terms of their contract, sai agreement ha been cancelle as of that ate, thereby relieving him of any further obligation thereun er, an that all amounts pai by him ha been forfeite in favor of the ven or, who assumes the absolute right over the lots in -uestion. %o this communication, the ven ee i not reply, an it appears likewise that the ven or thereafter i not re-uire him to make any further isbursements on account of the purchase price. Eyrick, respon ent herein, commence the present action in CAI,Albay, against E:I for the sum of D4,NKL.=M with legal interest thereon from the filing of the complaint until its payment, an for costs of the suit. #ower court grante , CA affirme w/mo if. %hat legal interest sh be compute fr ate of the cancellation of the 9. %hus this petition. I<<6:: 0"G petitionerPs contention is correct, that a bilateral contract may be resolve or cancelle only by the prior mutual agreement of the parties, which is approve by the (u gment of the proper court3 an that the letter of E:I was not assente to by the respon ent, an therefore, cannot be eeme to have pro uce a cancellation, even if it ever was inten e . I:#H: 0here the terms of a writing are clear, positive an unambiguous, the intention of the parties shoul be gleane from the language therein employe , which is conclusive in the absence of mistake. %he letter sai ?cancelle @ an it was une-uivocal. %he fact that the contracting parties herein i not provi e for resolution is now of no moment, for the reason that the obligations arising from the contract of sale being reciprocal, such obligations are governe by article 2248 of the Civil Co e which eclares that the power to resolve, in the event that one of the obligors shoul not perform his part, is implie . 6pon the other han , where, as in this case, the petitioner cancelle the contract, a vise the respon ent that he has been relieve of his obligations thereun er, an le sai respon ent to believe it so an act upon such belief, the petitioner may not be allowe , in the language of section 555 of the Co e of Civil Droce ure )now section LM )a* of Bule 245 of the Gew Bules of Court*, in any litigation the course of litigation or in ealings in nais, be permitte to repu iate his representations, or occupy inconsistent positions, or, in the letter of the <cotch law, to !approbate an reprobate.! 5.P. S. '(2OS A)%(2(S :,+?.= In the provincesof #aguna & Rue;on, #an Jrants were segregate from the public omain an given as an en owment to 6D, to be operate an evelope for the purpose of raising a itional income for its support, pursuant to Act 5L=M3 In 2KL=, 6D an A#6EC" )Assoc. #umber Eanuf. Co* entere into a logging agreement un er which the latter was grante e+clusive authority, for a perio starting from the ate of the agreement to 52 Hecember 2KLN, e+ten ible for a further perio of five )N* years by mutual agreement, to cut, collect an remove timber from the #an Jrant, in consi eration of payment to 6D of royalties, forest fees, etc.3 A#6EC" cut an remove timber therefrom but, as of M Hecember 2KL8, it ha incurre an unpai account of D42K,5L4.K8, which, espite repeate eman s, it ha faile to pay. After it ha receive notice that 6D woul rescin or terminate the logging agreement, A#6EC" e+ecute an instrument, entitle !Acknowle gment of Hebt an Dropose Eanner of Dayments,! ate K Hecember 2KL8, which was approve by the presi ent of 6D, an which stipulate the following: 5. In the event that the payments calle for in Gos. 2 an 4 of this paragraph are not sufficient to li-ui ate

the foregoing in ebte ness of the H:B%"B in favor of the CB:HI%"B, the balance outstan ing after the sai payments have been applie shall be pai by the H:B%"B in full no later than Fune 5=, 2KLN3 N. In the event that the H:B%"B fails to comply with any of its promises or un ertakings in this ocument, the H:B%"B agrees without reservation that the CRE#ITOR s;+(( ;+1e t;e %&-;t +n/ t;e <oFe% to 'ons&/e% t;e Lo--&n- A-%ee7ent /+te/ #e'e7,e% 2 1M*! +s %es'&n/e/ F&t;out t;e ne'ess&t0 o2 +n0 .u/&'&+( su&t +n/ t;e CRE#ITOR s;+(( ,e ent&t(e/ +s + 7+tte% o2 %&-;t to $&2t0 T;ous+n/ ?esos :?)! !!!.!!= ,0 F+0 o2 +n/ 2o% (&Bu&/+te/ /+7+-es4 A#6EC" continue its logging operations, but again incurre an unpai account, for the perio from K Hecember 2KL8 to 2N Fuly 2KLN, in the amount of DL2,255.O8, in a ition to the in ebte ness that it ha previously acknowle ge . %hus, 6D informe A#6EC" that it ha , as of that ate, consi ere as rescin e an of no further legal effect the logging agreement that they ha entere in 2KL=3 an 6D file a complaint vs. A#6EC", at CAI,Bi;al, for the 'o((e't&on o% <+07ent of sums of money w/ prayer for in(unction. But before pre.in(unction may be issue , 6D ha taken steps to have another concessionaire take over the logging operation, by a vertising an invitation to bi 3 that bi ing was con ucte , an the concession was awar e to St+. C(+%+ Lu7,e% Co7<+n0 In'.3 the logging contract was signe on 2L Aebruary 2KLL. A#6EC" ha file several motions to ischarge the writs of attachment an preliminary in(unction but were enie by the court. %hus, A#6EC" file a petition to en(oin petitioner 6niversity from con ucting the bi ing & for preliminary in(unction. Bespon ent (u ge issue the first of the -uestione or ers, en.o&n&n- U? 2%o7 +F+%/&n- (o--&n%&-;ts o1e% t;e 'on'ess&on to +n0 ot;e% <+%t0. 6D receive the %B" after it ha conclu e its contract with <ta. Clara, an sai company ha starte logging operations. "n motion, A#6EC" an one Jose R&'o, the court, eclare petitioner U? &n 'onte7<t o2 'ou%t an <ta. Clara #umber to refrain from e+ercising logging rights or con ucting logging operations in the concession. 6DPs EB was enie . I<<6:: whether petitioner 6.D. can treat its contract with A#6EC" rescin e , an may isregar the same before any (u icial pronouncement to that effect. In the first place, 6D an A#6EC" ha e+pressly stipulate that, upon efault by the ebtor A#6EC", the cre itor )6D* has !the right an the power to consi er, the #ogging Agreement as rescin e without the necessity of any (u icial suit.! As to such special stipulation, an in connection with Article 22K2 of the Civil Co e, this Court state in ?roilan vs. <an )riental (hipping o., et al., #,22MKO, 52 "ctober 2KL8, 24 <CBA 4OL: there is nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the contract woul cause cancellation thereof, even without court intervention. In other wor s, &t &s not +(F+0s ne'ess+%0 2o% t;e &n.u%e/ <+%t0 to %eso%t to 'ou%t 2o% %es'&ss&on o2 t;e 'ont%+'t. "f course, it must be un erstoo that the act of party in treating a contract as cancelle or resolve on account of infractions by the other contracting party 7ust ,e 7+/e 8noFn to t;e ot;e% an is always provisional, being ever sub(ect to scrutiny an review by the proper court. I2 t;e ot;e% <+%t0 /en&es t;+t %es'&ss&on &s .ust&2&e/ &t &s 2%ee to %eso%t to .u/&'&+( +'t&on &n &ts oFn ,e;+(2 +n/ ,%&n- t;e 7+tte% to 'ou%t. %hen, shoul the court, after ue hearing, eci e that

36

the resolution of the contract was not F+%%+nte/ t;e %es<ons&,(e <+%t0 F&(( ,e senten'e/ to /+7+-es4 &n t;e 'ont%+%0 '+se t;e %eso(ut&on F&(( ,e +22&%7e/ +n/ t;e 'onseBuent &n/e7n&t0 +F+%/e/ to t;e <+%t0 <%e.u/&'e/. In other wor s, t;e <+%t0 F;o /ee7s t;e 'ont%+'t 1&o(+te/ 7+0 'ons&/e% &t %eso(1e/ o% %es'&n/e/ +n/ +'t +''o%/&n-(0 F&t;out <%e1&ous 'ou%t +'t&on , but it proceeds at its own ris#. Aor it is only the final (u gment of the correspon ing court that will conclusively an finally settle whether the action taken was or was not correct in law. But the law efinitely oes not re-uire that the contracting party who believes itself in(ure must first file suit an wait for a (u gment before taking e+tra(u icial steps to protect its interest. "therwise, the party in(ure by the other.s breach will have to passively sit an watch its amages accumulate uring the pen ency of the suit until the final (u gment of rescission is ren ere when the law itself re-uires that he shoul e+ercise ue iligence to minimi;e its own amages )Civil Co e, Article 22!A*. 0e see no conflict between this ruling an the previous (urispru ence of this Court invoke by respon ent eclaring that (u icial action is necessary for the resolution of a reciprocal obligation, 1 since in every case where the e+tra(u icial resolution is conteste only the final awar of the court of competent (uris iction can conclusively settle whether the resolution was proper or not. It is in this sense that (u icial action will be necessary, as without it, the e+tra(u icial resolution will remain contestable an sub(ect to (u icial invali ation, un(ess +tt+'8 t;e%eon s;ou(/ ,e'o7e ,+%%e/ ,0 +'Bu&es'en'e esto<<e( o% <%es'%&<t&on. A525(7A S. 4A&6A)O $ACTS" Detitioner Fose C. Wulueta is the registere owner of a resi ential house an lot situate within the Antonio <ub ivision, Dasig, Bi;al. "n Govember L, 2KL8, petitioner Wulueta an private respon ent #amberto Avellana, a movie irector, entere into a !Contract to <ell! the aforementione property for DON,===.== payable in twenty years with respon ent buyer assuming to pay a own payment of DN,===.== an a monthly installment of DL5=.== payable in a vance before the Nth ay of the correspon ing month, starting with Hecember, 2KL8 / 0I%I A6B%I:B <D:CIAIC <%ID6#A%I"G< IG CA<: "A BB:ACI "A <6CI 9. Avellana occupie the property but title remaine with petitioner Wulueta. 6pon the allegation that respon ent ha faile to comply with the monthly amorti;ations stipulate in the contract, espite eman s to pay an to vacate the premises, an that t;e%e,0 t;e 'ont%+'t F+s 'on1e%te/ &nto one o2 (e+se, petitioner, commence an :(ectment suit against respon ent before the E%C,Dasig. Bespon ent controverte by conten ing that the Eunicipal Court ha no (uris iction over the nature of the action as it involve the interpretation an /or rescission of the contract3 an ma e some affirmative efenses an counterclaim. #ower court foun in favor of plaintiff, aske ef. to vacate & pay back rentals,etc. CA reverse & rule vs. (uPs of muni.court fin ing the case as one of interpretation & rescission of 9 b/c 9 to sell was converte to 9 of lease. EB enie . I<<6:: 0"G the original 9 to sell was rescin e /t the automatic resc.clause in the 9, thus the case was unlawful etainer cogni;able by the E%C or one of (u icial rescission of 9 cogni;able by then CAIT I:#H: %hus, the basic issue is not possession but one of rescission or annulment of a contract, which is beyon the (uris iction of the Eunicipal Court to hear an etermine. A violation by a party of any of the stipulations of a contract on agreement to sell real property woul entitle the other party to resolve or rescin it. An allegation of such violation in a etainer suit may be prove by competent evi ence. An if prove a

(ustice of the peace court might make a fin ing to that effect, but it certainly cannot eclare an hol that the contract is resolve or rescin e . It is beyon its power so to o. An as the illegality of the possession of realty by a party to a contract to sell is premise upon the resolution of the contract, it follows that an allegation an proof of such violation, a con ition prece ent to such resolution or rescission, to ren er unlawful the possession of the lan or buil ing erecte thereon by the party who has violate the contract, cannot be taken cogni;ance of by a (ustice of the peace court. ... %rue, the contract between the parties provi e for e+tra(u icial rescission. %his has legal effect, however, where the other party oes not oppose it. 0here it is ob(ecte to, a (u icial etermination of the issue is still necessary. A stipulation entitling one party to take possession of the lan an buil ing if the other party violates the contract oes not e@ proprio vigore confer upon the former the right to take possession thereof if ob(ecte to without (u icial intervention an . etermination. But while respon ent Fu ge correctly rule that the Eunicipal Court ha no (uris iction over the case an correctly ismisse the appeal, he erre in assuming original (uris iction, in the face of the ob(ection interpose by petitioner. <ection 22, Bule 8=, leaves no room for oubt on this point: <ection 22. Iac# of jurisdiction A case trie by an inferior court without (uris iction over the sub(ect matter shall be ismiss on appeal by the Court of Airst Instance. But instea of ismissing the case, the Court of Airst Instance may try the case on the merits, if the parties therein file their plea ings an go to trial without any ob(ection to such (uris iction. %here was no other recourse left for respon ent Fu ge, therefore, e+cept to ismiss the appeal. If an inferior court tries a case without (uris iction over the sub(ect,matter on appeal, the only authority of the CAI is to eclare the inferior court to have acte without (uris iction an ismiss the case, unless the parties agree to the e+ercise by the CAI of its original (uris iction to try the case on the merits. C %he foregoing premises consi ere , petitioner.s prayer for a 0rit of :+ecution of the (u gment of the Eunicipal Court of Dasig must perforce be enie . ?ALAY INC. 1s. CLAVE :1M8A= AAC%<: Detitioner Dalay, Inc., through its Dresi ent, Albert "nstott e+ecute in favor of private respon ent, Ga;ario Humpit, a Contract to <ell a parcel of #an of the Crestview Ieights <ub . in Antipolo, Bi;al, owne by sai corporation. %he sale price was D45,5==.== with KV interest p.a., payable with a ownpayment of D8,LL=.== an monthly installments of D48L.84 until fully pai . Contract provi e for +uto7+t&' eIt%+.u/&'&+( %es'&ss&on upon efault in payment of any monthly installment after the lapse of K= ays from the e+piration of the grace perio of one month, without nee of notice an with forfeiture of all installments pai . Bespon ent Humpit pai the ownpayment an several installments amounting to D25,O44.N=. %he last payment was ma e on Hecember N, 2KLO for installments up to <eptember 2KLO. Almost si+ )L* years later, private respon ent wrote petitioner offering to up ate all his over ue accounts with interest, an seeking its written consent to the assignment of his rights to a certain #our es Hi;on. Beplying petitioners informe respon ent that his Contract to <ell ha long been rescin e an the lot ha alrea y been resol .

37

Ruestioning the vali ity of the rescission of the contract, respon ent file a letter complaint with the Gational Iousing Authority )GIA* for reconveyance with an altenative prayer for refun . GIA, fin ing the rescission 1o&/ in the absence of either (u icial or notarial eman , or ere Dalay, Inc. an Alberto "nstott, (ointly an severally, to refun imme iately to Humpit the amount of D25,O44.N= with 24V interest from the filing of the complaint. Detitioners. EB was enie . Appeal to the "D was also enie . OEL#: 0ell settle is the rule, as hel in previous (urispru ence, that .u/&'&+( +'t&on 2o% t;e %es'&ss&on o2 + 'ont%+'t &s not ne'ess+%0 F;e%e t;e 'ont%+'t <%o1&/es t;+t &t 7+0 ,e %e1o8e/ +n/ '+n'e((e/ 2o% 1&o(+t&on o2 +n0 o2 &ts te%7s +n/ 'on/&t&ons. Iowever, even in the cite cases, there was at least a written notice sent to the efaulter informing him of the rescission. As stresse in Jniversity of the <hilippines vs. Walfrido de los Angeles t;e +'t o2 + <+%t0 &n t%e+t&n- + 'ont%+'t +s '+n'e((e/ s;ou(/ ,e 7+/e 8noFn to t;e ot;e%. A)%(2(S S !A2ASA)A AAC%<: 6rsula %orres Calasan; an %omas Calasan; an plaintiffs,appellees Buenaventura Angeles an %eofila Fuani entere into a contract to sell a piece of lan locate in Cainta, Bi;al for the amount of D5,K4=.== plus OV interest per annum. %he plaintiffs,appellees ma e a ownpayment of D5K4.== upon the e+ecution of the contract. %hey promise to pay the balance in monthly installments of D 82.4= until fully pai , the installments being ue an payable on the 2Kth ay of each month. %he plaintiffs,appellees pai the monthly installments until Fuly 2KLL, when their aggregate payment alrea y amounte to D8,N55.5M. "n numerous occasions, the efen ants,appellants accepte an receive elaye installment payments from the plaintiffs,appellees. "n Hecember O, 2KLL, the efen ants,appellants wrote the plaintiffs,appellees a letter re-uesting the remittance of past ue accounts. "n Fanuary 4M, 2KLO, the efen ants,appellants cancelle the sai contract because the plaintiffs,appellees faile to meet subse-uent payments. %he plaintiffs. letter with their plea for reconsi eration of the sai cancellation was enie by the efen ants,appellants. %he plaintiffs,appellees file with CAI,Bi;al to compel the efen ants,appellants to e+ecute in their favor the final ee of sale alleging inter alia that after computing all subse-uent payments for the lan in -uestion, they foun out that they have alrea y pai the total amount of D8,N55.5M inclu ing interests, realty ta+es an inci ental e+penses for the registration an transfer of the lan . %he efen ants,appellants allege in their answer that the complaint states no cause of action an that the plaintiffs, appellees violate paragraph si+ )L* of the contract to sell when they faile an refuse to pay an /or offer to pay the monthly installments correspon ing to the month of August, 2KLL for more than five )N* months, thereby constraining the efen ants,appellants to cancel the sai contract. %he lower court ren ere appellees. EB enie . (u gment in favor of the plaintiffs,

efeat the very ob(ect of the parties in making the agreement. )<ong Ao & Co. v. Iawaiian,Dhilippine Co., 8O Dhil. M42, M4O* %he -uestion of whether a breach of a contract is substantial epen s upon the atten ant circumstances. T;e ,%e+'; o2 t;e 'ont%+'t +/1e%te/ to ,0 t;e /e2en/+nts@ +<<e((+nts &s so s(&-;t +n/ '+su+( when we consi er that apart from the initial ownpayment of D5K4.== the plaintiffs, appellees ha alrea y pai the monthly installments for a perio of almost nine )K* years. In other wor s, in only a short time, the entire obligation woul have been pai . A%t&'(e 12AC If the obligation has been substantially performe in goo faith, the obligor may recover as though there ha been a strict an complete fulfillment, less amages suffere by the obligee. 0e agree with the observation of the lower court to the effect that: Although the primary ob(ect of selling sub ivi e lots is business, yet, it cannot be enie that this sub ivision is likewise purposely one to affor those lan less, low income group people of reali;ing their ream of a little parcel of lan which they can really call their own. %he contract to sell entere into by the parties has some characteristics of a contract of a hesion. %he efen ants, appellants rafte an prepare the contract. %he plaintiffs, appellees, eager to ac-uire a lot upon which they coul buil a home, affi+e their signatures an assente to the terms an con itions of the contract. %hey ha no opportunity to -uestion nor change any of the terms of the agreement. It was offere to them on a !take it or leave it! basis. %he contract to sell, being a contract of a hesion, must be construe against the party causing it. 0e agree with the observation of the plaintiffs,appellees to the effect that !the terms of a contract must be interprete against the party who rafte the same, especially where such interpretation will help effect (ustice to buyers who, after having investe a big amount of money, are now sought to be eprive of the same thru the praye application of a contract clever in its phraseology, con emnable in its lopsi e ness an in(urious in its effect which, in essence, an in its entirety is most unfair to the buyers.! CO8SA1 S 6)7(&PI62 AAC%<: <olomon Boysaw an his then Eanager, 0illie Uetchum, signe with Interphil Dromotions, Inc. represente by #ope <arreal, <r., a contract to engage G+,%&e( R$(+s;R E(o%/e in a bo+ing contest for the (unior lightweight championship of the worl . It was stipulate that the bout woul be hel at the Bi;al Eemorial <ta ium in Eanila on <eptember 5=, 2KL2 or not later than thirty $5=' ays thereafter shoul a postponement be mutually agree upon, an that Boysaw woul not, prior to the ate of the bo+ing contest, engage in any other such contest without the written consent of Interphil Dromotions, Inc. Uetchum on his own behalf assigne to F. Ama o Araneta the managerial rights over <olomon Boysaw, presumably in preparation for his engagement with :lor e. %hen, Araneta assigne to Alfre o F. Sulo, Fr. the managerial rights over Boysaw. %he ne+t ay, Boysaw wrote #ope <arreal, <r. informing him of his arrival an presence in the Dhilippines. Sulo, Fr. wrote to <arreal informing him of his ac-uisition of the managerial rights over Boysaw an in icating his an Boysaw.s rea iness to comply with the bo+ing contract of Eay 2, 2KL2. "n the same ate, on behalf of Interphil, <arreal wrote a letter to the James an Amusement Boar $JAB' e+pressing concern over reports that there ha been a switch of managers in the case of Boysaw, of which he ha not been formally notifie , an re-uesting that Boysaw be calle to an in-uiry to clarify the situation.

I<<6:: 0"G the contract to sell has been automatically an vali ly cancelle by the efen ants,appellants I:#H: %he right to rescin the contract for non,performance of one of its stipulations, therefore, is not absolute. In Jniversal ?ood orp. v. ourt of Appeals )55 <CBA 2* the Court state that %he general rule is that rescission of a contract will not be permitte for a slight or casual breach, but only for such substantial an fun amental breach as woul

38

%he JAB calle a series of conferences & change the sche ule the :lor e,Boysaw fight. %he 6<A Gational Bo+ing Association which has supervisory control of all worl title fights approve the ate set by the JAB. Sulo, Fr. refuse to accept the change in the fight ate. %he fight never materiali;e . %hus, Boysaw an Sulo, Fr. sue Interphil, <arreal, & Gieto in CAI,Bi;al for amages. T;e <oFe% to %es'&n/ o,(&-+t&ons &s &7<(&e/ &n %e'&<%o'+( ones &n '+se one o2 t;e o,(&-o%s s;ou(/ not 'o7<(0 F&t; F;+t &s &n'u7,ent u<on ;&7. [?+%t 1 A%t. 11M1 C&1&( Co/e]. %here is no oubt that the contract in -uestion gave rise to reciprocal obligations. !Re'&<%o'+( o,(&-+t&ons +%e t;ose F;&'; +%&se 2%o7 t;e s+7e '+use +n/ &n F;&'; e+'; <+%t0 &s + /e,to% +n/ + '%e/&to% o2 t;e ot;e% su'; t;+t t;e o,(&-+t&on o2 one &s /e<en/ent u<on t;e o,(&-+t&on o2 t;e ot;e%. T;e0 +%e to ,e <e%2o%7e/ s&7u(t+neous(0 so t;+t t;e <e%2o%7+n'e o2 one &s 'on/&t&one/ u<on t;e s&7u(t+neous 2u(2&((7ent o2 t;e ot;e%R [To(ent&no] T;e <oFe% to %es'&n/ &s -&1en to t;e &n.u%e/ <+%t0. !Where the plaintiff is the party who did not perform the underta#ing 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 ! $<eva vs. Alfre o Berwin 8M Dhil. NM2'. Another violation of the contract in -uestion was the assignment an transfer, first to F. Ama o Araneta, an subse-uently, to appellant Sulo, Fr., of the managerial rights over Boysaw without the knowle ge or consent of Interphil. %he assignments, from Uetchum to Araneta, an from Araneta to Sulo, were in fact novations of the original contract which, to be vali , shoul have been consente to by Interphil. No1+t&on F;&'; 'ons&sts &n su,st&tut&n- + neF /e,to% &n t;e <(+'e o2 t;e o%&-&n+( one 7+0 ,e 7+/e e1en F&t;out t;e 8noF(e/-e o% +-+&nst t;e F&(( o2 t;e (+tte% but not without the consent of the creditor. [A%t. 12MA] !reditor not bound to deal w"unilaterally substituted debtor - 6n er the law when a contract is unlawfully novate by an applicable an unilateral substitution of the obligor by another, the aggrieve cre itor is not boun to eal with the substitute. %he consent of the cre itor to the change of ebtors, whether in e@promision or delegacion is an, in ispensable re-uirement . . . <ubstitution of one ebtor for another may elay or prevent the fulfillment of the obligation by reason of the inability or insolvency of the new ebtor, hence, the cre itor shoul agree to accept the substitution in or er that it may be bin ing on him. %hus, in a contract where + is the cre itor an y is the ebtor, if y enters into a contract with ;, un er which he transfers to ; all his rights un er the first contract, together with the obligations thereun er, but such transfer is not consente to or approve by +, there is no novation. Q can still bring his action against y for performance of their contract or amages in case of breach. $%olentino' Arom the evi ence, it is clear that the appellees, instea of availing themselves of the options given to them by law of rescission or refusal to recogni;e the substitute obligor Sulo, really wante to postpone the fight ate owing to an in(ury that :lor e sustaine in a recent bout. %hat the appellees ha the (ustification to renegotiate the original contract, particularly the fight ate is un eniable from the facts aforestate . 6n er the circumstances, the appellees. esire to postpone the fight ate coul neither be unlawful nor unreasonable. 0e uphol the appellees. contention that since all the rights on the matter reste with the appellees, an appellants. claims, if any, to the enforcement of the contract hung entirely upon the former.s pleasure an sufferance, the JAB i not act arbitrarily in acce ing to the appellee.s re-uest to reset the fight ate to Govember 8, 2KL2. It must be note that appellant Sulo ha earlier agree to abi e by the JAB ruling.

P626P6)AS CA)D S. 6.A.!. AAC%<: Iacien a Benito, Inc. )petitioner.s pre ecessor,in, interest* as ven or, an private respon ents, Fose 0. Hiokno an Carmen I. Hiokno, as ven ees e+ecute a Contract to <ell over a parcel of lan in Victoria Valley <ub ivision in Antipolo, Bi;al, sub(ect to terms an con itions as stipulate . At ven eesP failure to pay, ven or sent several eman s for the former to settle arrearages, re-uests for e+tensions were give, further eman was again given several times, until a Gotice of rescission was given to Carmen Hiokno after she informe the Corp that she wante an au ience with the Dres. b/c she ha a prospective buyer of the property. %hus, private respon ents file Complaint for <pecific Derformance with Hamages to compel petitioner to e+ecute a ee of sale in their favor, an to eliver to them the title of the lot in -uestion. Detitioner file an Answer with counterclaim for amages in the form of attorney.s fees, claiming that Contract to <ell has been automatically rescin e or cancelle by virtue of private respon ents. failure to pay the installments ue in the contract un er the automatic rescission clause. After trial, the lower court ren ere a ecision in private respon ents. favor, hol ing that petitioner coul not rescin the contract to sell, because: )a* petitioner waive the automatic rescission clause by accepting payment on <eptember 2KLO, an by sen ing letters a vising private respon ents of the balances ue, thus, looking forwar to receiving payments thereon3 )b* in any event, until Eay 2M, 2KOO )when petitioner ma e arrangements for the ac-uisition of a itional MO= s-uare meters* petitioner coul not have elivere the entire area contracte for, so, neither coul private respon ents be liable in efault, citing A%t. 118M, GCC. CA affirme . I<<6:: 0"G the Contract to <ell was rescin e or cancelle , un er the automatic rescission clause containe therein. I:#H: 0e fin the petition meritless. 0hile it is true that + 'ont%+'tu+( <%o1&s&on +((oF&n- R+uto7+t&' %es'&ss&onR :F&t;out <%&o% nee/ o2 .u/&'&+( %es'&ss&on %eso(ut&on o% '+n'e((+t&on= &s VALI# t;e %e7e/0 o2 one F;o 2ee(s +--%&e1e/ ,e&n- to -o to Cou%t 2o% t;e '+n'e((+t&on o2 t;e %es'&ss&on &tse(2 &n '+se t;e %es'&ss&on &s 2oun/ un.ust&2&e/ un/e% t;e '&%'u7st+n'es, still in the instant case t;e%e &s + '(e+% WAIVER o2 t;e st&<u(+te/ %&-;t o2 R+uto7+t&' %es'&ss&on R +s e1&/en'e/ ,0 t;e many e$tensions -%+nte/ private respon ents by the petitioner. In all these e+tensions, the petitioner never calle attention to the proviso on !automatic rescission.! !()7&A2 CA)D S. !A :,+>-= #acts: Islan s <avings Bank approve the loan application of %olentino for DM=,===. %o secure the loan, %olentino e+ecute a B:E on his 2==,hectare lan . "nly D2O,=== was release by the Bank, for w/c %olentino e+ecute a DG payable w/in 5 years. %he balance was not release . In 2KLN, the Eonetary Boar of the Central Bank issue Beso.Go. 2=8K prohibiting the Bank fr. oing business in BD. %he Bank file an application for e+tra(u icial AB:E vs. %olentino for non,payment of the DG. In turn, %olentino file an action for in(unction, specific performance or rescission, alleging that the Bank faile to fulfill its obligation to len the balance of DL5,===. 6ssues: 0/G %olentino can compel specific performance. 0"G %olentino is entitle to rescission. Ield: G". %he agreement is a loan agreement, w/c is a reciprocal obligation. In reciprocal obligations, the obligation or promise of each party is the consi eration for that of the other3 & when one party has performe or is rea y & willing to perform his part of the contract, the other party who has not performe or is not rea y & willing to perform incurs in elay. %he promise of %olentino to pay was the consi eration for the obligation of the Bank to furnish the DM=,===. 0hen %olentino e+ecute a real estate mortgage, he signifie his willingness to pay the loan. Arom such ate, the obligation of the Bank to furnish the DM=,=== accrue . %he BankPs elay starte in 2KLN, laste for 5 years or when the Eonetary Boar issue Besolution Go. KLO in 2KLM, w/c prohibite the Bank fr. oing further business.

39

Besolution Go. 2=8K cannot interrupt the efault of the Bank in releasing the DL5,=== bec. sai resolution merely prohibite the Bank fr. making new loans. <ince the Bank was in efault in fulfilling its reciprocal obligation un er the loan agreement, %olentino may choose between specific performance or rescission w/ amages in either case. But since the Bank is now prohibite fr. oing further business, the Court cannot grant specific performance. Bescission is the only alternative reme y left. Iowever, rescission is only for the DL5,=== balance, bec. the bank is in efault only insofar as such amount is concerne . %he promissory note gave rise to %olentinoPs reciprocal obligation to pay the D2O,=== loan when it falls ue. Art. 22K4 provi es that in case both parties have committe a breach of their reciprocal obligations, the liability of the first infractor shall be e-uitably tempere by the Court. %he liability of the Bank for amages in not furnishing the entire loan is offset by the liability of %olentino for amages, in the form of penalties & surcharges for not paying his over ue D2O,=== ebt.

40

$OR JULY 1* 2!!8" G. MO#ES O$ ENTINGUISOMENT O$ OBLIGATIONS A%t. 12A1. O,(&-+t&ons +%e eIt&n-u&s;e/ BY" :1= ?+07ent o% ?e%2o%7+n'e4 :2= Loss o2 t;e t;&n- /ue4 :A= Con/on+t&on o% Re7&ss&on o2 t;e /e,t4 :C= Con2us&on o% Me%-e% o2 t;e %&-;ts o2 '%e/&to% H /e,to%4 :)= Co7<ens+t&on4 :*= No1+t&on. Ot;e% '+uses o2 eIt&n-u&s;7ent o2 o,(&-+t&ons su'; +s +nnu(7ent %es'&ss&on 2u(2&((7ent o2 + %eso(uto%0 'on/&t&on H <%es'%&<t&on +%e -o1e%ne/ e(seF;e%e &n t;&s Co/e. B+(+ne" Art. 2452 gives us ten mo es of e+tinguishing an obligation. "ne of the mo es mentione is rescission. But it oes not tell us whether this is rescission un er Art. 22K2 )%eso(ut&on* or rescission un er Art. 25M=, et. se-. If it means both, then we have eleven mo es of e+tinguishing an obligation un er Art. 2452. )<imilar to %olentinoPs* T;&s enu7e%+t&on &s not eI'(us&1e.

CASE" SAURA IM?ORT H EN?ORT BANG VS. #B? [CC S CC)] AAC%<: Dlaintiff <aura, Inc. applie to the Behabilitation Ainance Corporation )BAC*, before its conversion into HBD, for an in ustrial loan of DN==,===.==, to be use as follows: D4N=,===.== for the construction of a factory buil ing )for the manufacture of (ute sacks*3 D48=,K==.== to pay the balance of the purchase price of the (ute mill machinery an e-uipment3 an DK,2==.== as a itional working capital. %he (ute mill machinery ha alrea y been purchase by <aura on the strength of a #"C by DB%C. BAC approve the loan secure by a first mortgage on the factory buil ing to be constructe , the lan site thereof, an the machinery an e-uipment to be installe , an the loan to be release at the iscretion of BAC, sub(ect to availability of fun s, &as the construction of the factory buil ings progresses, to be certifie to by an appraiser of BAC. China :ngineers, #t . ha again agree to act as co, signer for the loan. 0hen the BAC Boar later eci e to ecrease the loan fr. N==U to 5==U, China :ng signifie to with raw as co,maker. %hus, when <aura re-ueste for the release of the N==U loan, BAC signifie that the #oan Agreement has been cancelle . <aura, Inc. oes not eny that the factory he was buil ing in Havao was for the manufacture of bags from local raw materials, a Kenaf mill plant, to manufacture copra an corn bags, runners, floor mattings, carpets, raperies3 out of 2==V local raw materials. 0hen negotiations came to a stan still. <aura, Inc. i not pursue the matter further. Instea , it re-ueste BAC to cancel the mortgage which BAC i . It appears that the cancellation was re-ueste to make way for the registration of a mortgage contract, e+ecute over the same property in favor of DB%C, un er which contract <aura, Inc. ha up to Hecember 52 of the same year within which to pay its obligation on the trust receipt heretofore mentione . It appears further that for failure to pay the sai obligation DB%C sue <aura. GIG: SB< #A%:B, <aura commence the present suit for amages, alleging failure of BAC /HBD to comply with its obligation to release the procee s of the loan applie for an approve , thereby preventing the plaintiff from completing or paying contractual commitments it ha entere into, in connection with its (ute mill pro(ect. %he trial court ren ere (u gment for the plaintiff. ISSUE: 0"G the & of BAC to <aura in the perfecte loan 9 subsists 0hen BAC turne own the re-uest of <aura, the negotiations which ha been going on for the implementation of the loan agreement reache an impasse. <aura, Inc. obviously was in no position to comply with BAC.s con itions. <o instea of oing so an insisting that the loan be release as agree upon, <aura, Inc. aske that the mortgage be cancelle , which was one by BAC. %he action thus taken by both parties was in the nature of 7utu+( /es&st+n'e , what Eanresa terms as !7utuo /&senso! @ which is a mo e of e+tinguishing obligations. It is a concept that erives from the <%&n'&<(e t;+t s&n'e 7utu+( +-%ee7ent '+n '%e+te + 'ont%+'t 7utu+( /&s+-%ee7ent ,0 t;e <+%t&es '+n '+use &ts eIt&n-u&s;7ent. ($tinguishment of Os by mutual desistance 0here after approval of his loan, the borrower, instea of insisting for its release, aske that the mortgage given as security be cancelle & the cre itor acce e thereto, the action taken by both parties was in the nature of mutual esistance , what Eanresa terms !mutuo isenso! , w/c is a mo e of e+tinguishing obligations. It is a concept that erives fr. the principle that since mutual agreement can create a contract, mutual isagreement by the parties can cause its e+tinguishment.

Ot;e% 7o/es o2 eIt&n-u&s;&n- +n o,(&-+t&on +%e t;e 2o((oF&n-" 1. #e+t; particularly where the obligation is purely personal, e.g., eath of one partner issolves the partnership/agency3 4. 5. 8. N. L. O. Benunciation by the cre itor Compromise Arrival of Besolutory %erm / fulfillment of reso.con i. Eutual Hesistance or mutuo disenso )S+u%+ 1. #B?* In some cases, 6nilateral 0ith rawal, e.g., in partnership, any partner can w/ raw any time fr. the partnership. In some cases, change of civil status, e.g., if marriage is annulle , it e+tinguishes obligations like the obligation to give support, among others.

8. Un2o%eseen E1ents )rebus sic stantibus* )Art. 24LO.* 9. W+nt o2 Inte%est JB: Go, but there are certain cases: if it is e-uitable to eem the & e+tinguishe interest of Cr in the fulfillment of such &. /t want of

10. A,+n/on7ent o2 t;e t;&n- as in Art. LL4, partywall3 "r aban .of a vessel un er Co e of Comm. 22. Inso(1en'0 o2 /e,to% (u icially eclare & ischarge . I((ust%+t&on: Carale owns a restaurant. Ie hires Eolina as a chef. In the contract of employment, there was a stipulation that if Eolina resigns fr. Carale.s restaurant, he cannot seek employment fr. another restaurant for a perio of five years. <ubse-uently, Eolina resigns fr. Carale.s restaurant & wants to apply to Eil o.s Iouse of Chicken. In this case, Eolina cannot work w/ Eil o.s bec. of the stipulation in the contract he signe w/ Carale. <uppose, however, Carale, closes own his restaurant & engages in a totally ifferent business, a construction business, for e+ample, Eolina can apply for work at Eil o.s even before the lapse of the five year prohibitive perio . In this case, Eolina can make out a case of e+tinguishment of obligation on the groun of want of interest. %he obvious purpose of the stipulation is to prevent unfair competition.

41

.he delivery of !romissory notes !ayable to order# or bills of e,"han$e or other mer"antile do" ments shall !rod "e the effe"t of !ayment only &hen they have been "ashed# or &hen thro $h the fa lt of the "reditor they have been im!aired. (n the meantime# the a"tion derived fr. the ori$inal obli$ation shall be held in abeyan"e. Art. 125". (n "ase an e,traordinary inflation or deflation of the " rren"y sti! lated sho ld s !ervene# the val e of the " rren"y at the time of the establishment of the obli$ation shall be the basis of !ayment# nless there is an a$reement to the "ontrary. Art. 1251. Payment shall be made in the !la"e desi$nated in the obli$ation. .here bein$ no e,!ress sti! lation ) if the nderta+in$ is to deliver a determinate thin$# the !ayment shall be made &herever the thin$ mi$ht be at the moment the obli$ation &as "onstit ted. (n any other "ase the !la"e of !ayment shall be the domi"ile of the debtor. (f the debtor "han$es his domi"ile in bad faith or after he has in" rred in delay# the additional e,!enses shall be borne by him. .hese !rovisions are &'o !re- di"e to ven e nder the : les of ;o rt. Arti'(e 13"2. (t is !res med that there is le$al s bro$ation7 1) *hen a "reditor !ays another "reditor &ho is !referred# even &itho t the debtor0s +no&led$e8 *hen a third !erson# not interested in the obli$ation# !ays &ith the e,!ress or ta"it a!!roval of the debtor8 *hen# even &itho t the +no&led$e of the debtor# a !erson interested in the f lfillment of the obli$ation !ays# &itho t !re- di"e to the effe"ts of "onf sion as to the latter0s share

A. ?+07ent o% ?e%2o%7+n'e
PERTINENT PROVISIONS/ reading matters: Art. 1232. Payment means not only the delivery of money b t also the !erforman"e# in any other manner# of an obli$ation. Art. 1233. % debt shall not be nderstood to have been !aid nless the thin$ or servi"e in &'" the obli$ation "onsists has been "om!letely delivered or rendered# as the "ase may be. Art. 1234. (f the obli$ation has been s bstantially !erformed in $ood faith# the obli$or may re"over as tho $h there had been a stri"t ) "om!lete f lfillment# less dama$es s ffered by the obli$ee. Art. 1235. *hen the obli$ee a""e!ts the !erforman"e# +no&in$ its in"om!leteness or irre$ larity# ) &'o e,!ressin$ any !rotest or ob-e"tion# the obli$ation is deemed f lly "om!lied &'. Art. 1236. .he "reditor is not bo nd to a""e!t !ayment or !erforman"e by a third !erson &ho has no interest in the f lfillment of the obli$ation# nless there is a sti! lation to the "ontrary. *hoever !ays for another may demand fr. the debtor &hat he has !aid# e,"e!t that if he !aid &'o the +no&led$e or a$ainst the &ill of the debtor# he "an re"over only insofar as the !ayment has been benefi"ial to the debtor. Art. 1237. *hoever !ays on behalf of the debtor &'o the +no&led$e or a$ainst the &ill of the latter# "annot "om!el the "reditor to s bro$ate him in his ri$hts# s "h as those arisin$ fr. a mort$a$e# $ aranty# or !enalty. Art. 123 . Payment made by a third !erson &ho does not intend to be reimb rsed by the debtor is deemed to be a donation# &'" re/ ires the debtor0s "onsent. 1 t the !ayment is in any "ase valid as to the "reditor &ho has a""e!ted it. Art. 123!. (n obli$ations to $ive# !ayment made by one &ho does not have the free dis!osal of the thin$ d e ) "a!a"ity to alienate it shall not be valid# &'o !re- di"e to the !rovisions of arti"le 1427 nder the .itle on 23at ral 4bli$ations.2 Art. 124". Payment shall be made to the !erson in &hose favor the obli$ation has been "onstit ted# or his s ""essor in interest# or any !erson a thori5ed to re"eive it. Art. 1241. Payment to a !erson &ho is in"a!a"itated to administer his !ro!erty shall be valid if he has +e!t the thin$ delivered# or insofar as the !ayment has been benefi"ial to him. Pa#ment made t$ a t%ird &ers$n shall also be valid insofar as it has redo nded to the benefit of the "reditor. 6 "h benefit to the "reditor need not be !roved in the follo&in$ "ases7 (1) (2) (3) (f after the !ayment# the third !ersons a"/ ires the "reditor0s ri$hts8 (f the "reditor ratifies the !ayment to the third !erson8 (f by the "reditor0s "ond "t# the debtor has been led to believe that the third !erson had a thority to re"eive the !ayment.

2)

3)

Re&*+(i' A't N$. 52!, as amended +# R.A. N$. 41"", &r$-ides: SE.TION 1. =very !rovision "ontained in# or made &ith res!e"t to# any domesti" obli$ation to &it# any obli$ation "ontra"ted in the Phili!!ines &hi"h !rovision ! r!orts to $ive the obli$ee the ri$ht to re/ ire !ayment in $old or in a !arti" lar +ind of "oin or " rren"y other than Phili!!ine " rren"y or in an amo nt of money of the Phili!!ines meas red thereby# be as it is hereby de"lared a$ainst ! bli" !oli"y# and n ll# void# and of no effe"t# and no s "h !rovision shall be "ontained in# or made &ith res!e"t to# any obli$ation hereafter in" rred. .he above !rohibition shall not a!!ly to (a) transa"tions &here the f nds involved are the !ro"eeds of loans or investments made dire"tly or indire"tly# thro $h bona fide intermediaries or a$ents# by forei$n $overnments# their a$en"ies and instr mentalities# and international finan"ial ban+in$ instit tions so lon$ as the f nds are identifiable# as havin$ emanated from the so r"es en merated above8 (b) transa"tions affe"tin$ hi$h>!riority e"onomi" !ro-e"ts for a$ri" lt ral# ind strial and !o&er develo!ment as may be determined by the 3ational ="onomi" ;o n"il &hi"h are finan"ed by or thro $h forei$n f nds8 (") for&ard e,"han$e transa"tions entered into bet&een ban+s or bet&een ban+s and individ als or - ridi"al !ersons8 (d) im!ort>e,!ort and other international ban+in$# finan"ial investment and ind strial transa"tions. *ith the e,"e!tion of the "ases en merated in items (a)# (b)# (") and (d) in the fore$oin$ !rovision# in &hi"h "ases the terms of the !arties? a$reement shall a!!ly# every other domesti" obli$ation heretofore or hereafter in" rred# &hether or not any s "h !rovision as to !ayment is "ontained therein or made &ith res!e"t thereto# shall be dis"har$ed !on !ayment in any "oin or " rren"y &hi"h at the time of !ayment is le$al tender for ! bli" and !rivate debts. Provided# .hat if the obli$ation &as in" rred !rior to the ena"tment of this %"t and re/ ired !ayment in a !arti" lar +ind of "oin or " rren"y other than Phili!!ine " rren"y# it shall be dis"har$ed in Phili!!ine " rren"y# meas red at the !revailin$ rates of e,"han$e at the time the obli$ation &as in" rred# e,"e!t in "ase of a loan made in a forei$n " rren"y sti! lated to be !ayable in the same " rren"y in &hi"h "ase the rate of e,"han$e !revailin$ at the time of the sti! lated date of !ayment shall !revail. %ll "oin and " rren"y# in"l din$ ;entral 1an+ notes# heretofore or hereafter iss ed and de"lared by the @overnment of the Phili!!ines shall be le$al tender for all debts# ! bli" and !rivate. Pertinent &$rti$n $/ Re&*+(i' A't N$. 1 3 states: SE.TION 1. %ll monetary obli$ations shall be settled in the Phili!!ine " rren"y &hi"h is le$al tender in the Phili!!ines. <o&ever# the !arties

Art. 1242. Payment made in $ood faith to any !erson in !ossession of the "redit shall release the debtor. Art. 1243. Payment made to the "reditor by the debtor after the latter has been - di"ially ordered to retain the debt shall not be valid. Art. 1244. .he debtor of a thin$ "annot "om!el the "reditor to re"eive a different one# altho $h the latter may be of the same val e as# or more val able than that &'" is d e. (n obli$ations to do or not to do# an a"t or forbearan"e "annot be s bstit ted by another a"t or forbearan"e a$ainst the obli$ee0s &ill. Art. 1246. *hen the obli$ation "onsists in the delivery of an indeterminate or $eneri" thin$# &hose / ality ) "ir" mstan"es have not been stated# the "reditor "annot demand a thin$ of s !erior / ality. 3either "an the debtor deliver a thin$ of inferior / ality. .he ! r!ose of the obli$ation ) other "ir" mstan"es shall be ta+en into "onsideration. Art. 1247. 9nless it is other&ise sti! lated# the e,tra- di"ial e,!enses re/ ired by the !ayment shall be for the a""o nt of the debtor. *ith re$ard to - di"ial "osts# the : les of ;o rt shall $overn. Art. 124 . 9nless there is an e,!ress sti! lation to that effe"t# the "reditor "annot be "om!elled !artially to re"eive the !restations in &'" the obli$ation "onsists. 3either may the debtor be re/ ired to ma+e !artial !ayments. <o&ever# &hen the debt is in !art li/ idated ) in !art nli/ idated# the "reditor may demand ) the debtor may effe"t the !ayment of the former &'o &aitin$ for the li/ idation of the latter. Art. 124!. .he !ayment of debts in money shall be made in the " rren"y sti! lated# ) if it is not !ossible to deliver s "h " rren"y# then in the " rren"y &'" is le$al tender in the Phili!!ines.

42

may a$ree that the obli$ation or transa"tion shall be settled in any other " rren"y at the time of !ayment. SE.. 2. R.A. N$. 52!# as amended# entitled 2An A't t$ Ass*re t%e 0ni/$rm Va(*e $/ P%i(i&&ine .$in and .*rren'#2 is hereby re!ealed. (%!!roved on 1*ne 11, 1!!6) .he re&ea( $/ R.A. N$. 52! +# R.A. N$. 1 3 has the effe"t of rem$-ing t%e &r$%i+iti$n $n t%e sti&*(ati$n $/ '*rren'# $t%er t%an P%i(i&&ine '*rren'#, s*'% t%at $+(igati$ns $r transa'ti$ns ma# n$2 +e &aid in t%e '*rren'# agreed *&$n +# t%e &arties . A st li+e :.%. 3o. 529# ho&ever# the ne& la& d$es n$t &r$-ide /$r t%e a&&(i'a+(e rate $/ e3'%ange /$r t%e '$n-ersi$n $/ /$reign '*rren'# in" rred obli$ations in their !eso e/ ivalent. (t follo&s# therefore# that the - ris!r den"e established in :.%. 3o. 529 re$ardin$ the rate of "onversion remains a!!li"able. .h s# in Asia World Recruitment, Inc. v. National Labor Relations Commission,13 the ;o rt# a!!lyin$ :.%. 3o. 8183# s stained the r lin$ of the 3B:; that $+(igati$ns in /$reign '*rren'# ma# +e dis'%arged in P%i(i&&ine '*rren'# +ased $n t%e &re-ai(ing rate at t%e time $/ &a#ment.

A. In/&1&s&,&(&t0 II. Re" T;e <+%t&es 1. ?+0o%E o,(&-o%E /e,to% 2. ?+0eeE o,(&-eeE '%e/&to% III. Re" T&7e H <(+'e

Hiscussion: I. W&t; %es<e't to <%est+t&on" 1. 6dentity If specific prestation, this re-uisite means that the very thing or service must be elivere . )Art. 2488.* If generic, the re-uisite re-uires the elivery of something of neither inferior or superior -uality )Art. 248L*. It must be something in the mi le. In '+se o2 7one0 t;e%e +%e s<e'&+( %u(es"

Go1e%n&n- %u(e" RA )2M +s +7en/e/ ,0 RA C1!! In '+se o2 7one0 /e,ts 0ou F&(( ;+1e to <+0 &n (e-+( ten/e% &n t;e ?;&(&<<&nes. T;&s (+F su<e%se/es A%t. 12CM. If the parties stipulate that payment will be ma e in foreign currency, the obligation to pay is vali but the obligation to pay in foreign currency is voi . Dayment will be ma e in Dhil. currency.

CONCE?T O$ ?AYMENT A%t. 12A2. ?+07ent 7e+ns not on(0 t;e /e(&1e%0 o2 7one0 ,ut +(so t;e <e%2o%7+n'e &n +n0 ot;e% 7+nne% o2 +n o,(&-+t&on. it is the fulfillment of the prestation ue whc e+tinguishes the & by the reali;ation of the purposes for whc it was constitute . it is a (uri ical act whc is 1o(unt+%0, (&'&t an ma e F&t; t;e &ntent to e+ting. &3 it is ma e not only by 2 who owes money but also by 2 boun to o something or to refrain fr oing %hus, Dayment is i entical w/ Aulfillment.

LEGAL TEN#ER 9 means such currency whc in a given (uPs can be use for payment of ebts public & priv, &whc cannot be refuse by Cr. In the BD the ff are legal ten er: )se'. )C RA 2*)* 2. BD silver peso & half peso for ebts of any amount, BD subsi iary silver coins 4= \& 2= \ for up to D4= ebts, an BD minor nickel &copper coins for up to D4.== ebts3 4. BD %reasury certs., new Victory series ):" 4N, s. 2K88, alrea y w/ rawn fr circ* 5. A(( notes +n/ 'o&ns &ssue/ ,0 CB. PG Iow do you convertQ A: In case of an obligation w/c is not a loan in foreign currency, if incurre bef. BA N4K, conversion must be as of the time the obligation was incurre . If incurre after BA N4K became effective, the conversion must be as of the time the obligation was incurre )Dalalo v. 2u;* If the loan is in foreign currency, the conversion is as of the time of payment. )BA N4K.* ?+07ent &n ne-ot&+,(e <+<e% %his may be refuse by the cre itor. Dayment in manager.s check or certifie check is not payment in legal ten er. %he ruling in Seneris has been reverse in the case of Cishop of 4alolos. %he 4alolos ruling is better. I foun it har to accept that manager.s check or certifie check is goo as legal ten er. %here are always risks to w/c cashier.s checks are sub(ect. 0hat if after having issue a cashier.s check, the rawee, bank closes, what happens to your cashier.s checkT In any event, payment by check can be refuse by the cre itor. An even if payment by check is accepte by the cre itor, the acceptance is only a provisional payment until the check is :+= en'+s;e/ o% :,= F;en t;%ou-; t;e 2+u(t o2 t;e '%e/&to% t;e0 ;+1e ,een &7<+&%e/. %he case of )amarco v. #ederation, 8K <CBA 45M, interprets the phrase !F;en t;%ou-; t;e 2+u(t o2 t;e '%e/&to% t;e0 ;+1e ,een &7<+&%e/! as to apply only to a check use in payment if issue by a person other than the ebtor. 0hyT Bec. if the check was issue by the ebtor himself, all that the ebtor have to o is to issue another check. Re1+(u+t&on &n '+se o2 eIt%+o%/&n+%0 &n2(+t&on o% /e2(+t&on :A%t. 12)!= %his rule has never been use . It was only uring the Fapanese occupation that there was a recognition of e+traor inary inflation in this country. EI'e<t&ons to t;e %eBu&%e7ent o2 &/ent&t0 )i* >acion en pago )Art. 248N.*

ReBu&s&tes o2 ?+07ent o% ?e%2o%7+n'e" $%"#:G%IG"' 1. the person who pays must have re-uisite capacity 2. the person to whom payment is ma e ? 3. the thing to be pai in accor ance w/ the & 8. the manner, time an place of payment, etc. payment sh be ma e by the ebtor to the cre itor at the right time an place. GIN#S: 1. NORMAL when Hb voluntarily performs 2. ABNORMAL when Hb is force by (u icial procee ing B+(+ne" Dayment or Derformance are use interchangeably. technically, Dayment in obligations to give, Derformance in obligations to o. But

Dayment/ performance is the para igmatic mo e of e+tinguishment of an obligation. It is the only normal way of e+tinguishing an obligation. A%t. 12AA. A /e,t s;+(( not ,e un/e%stoo/ to ;+1e ,een <+&/ un(ess t;e t;&n- o% se%1&'e &n FE' t;e o,(&-+t&on 'ons&sts ;+s ,een 'o7<(ete(0 /e(&1e%e/ o% %en/e%e/ +s t;e '+se 7+0 ,e. To(ent&no" %his art. <tates %wo re-uisites for Dayment: )2* I entity, of the prestation, & the very thing or service ue must be elivere or release 3 )4* its integrity prestation must be fulfille completely Aor BA#AG:: Art. 2455 states these re-uisites of payment / I. Re" T;e <%est+t&on 1. I/ent&t0 2. Inte-%&t0

43

)ii* Govation In both cases, there is a voluntary change in the ob(ect. 2. 6ntegrity %here must be elivery of the entire prestation ue. )Art. 2455* or completely fulfille 3 T;e eI'e<t&ons to t;e %eBu&%e7ent o2 &nte-%&t0 +%e" 2. In case of substantial performance in goo faith )Art. 2458.* %his is an e-uity rule. 4. In case of waiver of obligee/ cre itor )Art. 245N.* 5. In case of application of payments if several ebts are e-ually onerous )Art. 24N8, par. 4.* A. 6ndivisibility %his means that the obligor must perform the prestation in one act & not in parts. )Art. 248M.* T;e%e +%e se1e%+( eI'e<t&ons to t;&s %eBu&%e7ent" 2. In case or e+press stipulation. )Art. 248M.* 4. In case of prestations w/c necessarily entail partial performance. )Art. 244N, par. 4* 5. If the ebt is li-ui ate in part & unli-ui ate in part. )Art. 248M.* 8. In case of (oint ivisible obligations )Art. 24=M.* N. In soli ary obligations when the ebtors are boun un er ifferent terms & con itions. )Art. 2422.* L. In compensation when a balance is left. )Art. 24K=.* O. If the work is to be elivere partially, the price or compensation for each part having been fi+e . )Art. 2O4=.* M. In case of several guarantors who eman the right of ivision. )Art. 4=LN.* K. In case of impossibility or e+treme ifficulty of single performance. II. W&t; %es<e't to t;e <+%t&es T;e%e +%e tFo <+%t&es &n1o(1e/" 2. Dayor/ obligor/ ebtor 4. Dayee/ obligee/ cre itor ReBu&%e7ents" 1. A%t. 122* @ 12A8. W;o s;ou(/ t;e <+0o% ,e" +. W&t;out nee/ o2 t;e '%e/&to%Qs 'onsent 2. %he ebtor himself 4. Iis heirs or assigns 5. Iis agent 8. Anyone intereste in the fulfillment of the obligation, e.g., a guarantor ,. W&t; t;e '%e/&to%Qs 'onsent @@ An0one. %his is a eparture fr. the rule in the "l Civil Co e w/c i not re-uire consent on the part of the cre itor. '. E22e't o2 <+07ent ,0 + t;&%/ <e%son" 2. If the payment was w/ the ebtor.s consent, he becomes the agent of the ebtor. %he effect is subrogation )Articles 245L,245O.* :+ception: If the person paying inten e it to be a onation. )Art. 245M.* If payment was w/o the ebtor.s consent, the thir person may eman repayment to the e+tent that the ebtor has been benefite . )Art. 245L, par. 4.*

?%&7+%0 %u(e" As st&<u(+te/ Se'on/+%0 %u(e" Dlace where the thing was at the time the obligation was constitute if the obligation is to eliver a eterminate thing. Te%t&+%0 %u(e" At the ebtor.s omicile B+(+ne" PP ?+07ent o% &nte%';+n-e+,(0. ?e%2o%7+n'e +%e use/

But technically, payment is use in obligations to give whereas performance is use in obligations to o. Dayment/ performance is the para igmatic mo e of e+tinguishment of an obligation. It is the only normal way of e+tinguishing an obligation.
Art. 1234. (f the obli$ation has been s bstantially !erformed in $ood faith# the obli$or may re"over as tho $h there had been a stri"t ) "om!lete f lfillment# less dama$es s ffered by the obli$ee.

Su,st+nt&+( ?e%2o%7+n'e" 2. an attempt in JA to perform, w/o any willful or intentional eparture fr it 4. eviation fr perf. of & must be slight, & omission or efect must be so technical & unimpt, & must not perva e the whole, must not be so material to the achievement of the very purpose of the parties3 5. party claiming substantial perf. must show attempt in JA CASES on ?+07ent" J.M. TUASON V. JAVIER $52 < M4K' , 6n the interest of justice H equity, court may grant the vendee a new term where he substantially performed in good faith according to Art. ,R/9, regardless of Art. ,-+R of the same !ode. $ACTS" Contract to <ell bet. Dlaintiff FE %ua;on an ef. #igaya Favier on a parcel of lan in <ta. Esa Its. <ub . "n installment w/ own & interest of 2=V p.a. Hef. took possPn of prop. After payment of 2st installment on e+ecution of 9 in <ept. 2KN8 & p . Eo.installmts until Fan. 2KL4. After subse-. Hefault by ef. of monthly inst. Dlaintf informe her that 9 has been rescin e . But ef. refuse to vacate. %hus, pltff file case w/CAI,Bi;al for (u icial rescission of 9 an payment of arrears. Base on A%t. 1)M2, CAI foun in favor of ef. but ma e the latter pay arrears w/in L= ays, plus interests, attys fees, an that title sh be transferre after such payment w/costs at the e+pense of ef. A%t&'(e 1)M2. In t;e s+(e o2 &77o1+,(e <%o<e%t0 e1en t;ou-; &t 7+0 ;+1e ,een st&<u(+te/ t;+t u<on 2+&(u%e to <+0 t;e <%&'e +t t;e t&7e +-%ee/ u<on t;e %es'&ss&on o2 t;e 'ont%+'t s;+(( o2 %&-;t t+8e <(+'e t;e 1en/ee 7+0 <+0 e1en +2te% t;e eI<&%+t&on o2 t;e <e%&o/ +s (on- +s no /e7+n/ 2o% %es'&ss&on o2 t;e 'ont%+'t ;+s ,een 7+/e u<on ;&7 e&t;e% .u/&'&+((0 o% ,0 + not+%&+( +'t. A2te% t;e /e7+n/ t;e 'ou%t 7+0 not -%+nt ;&7 + neF te%7. %hus pltff appeale for erroneous applic of 2NK4 b/c this is a 9 %" <ell not "A <ale. I<<6:: 0"G CAI erre in G"% eclaring herewith 9 rescin e . I:#H: G". 0hat applies here is A%t. 12AC" A%t. 12AC. I2 t;e o,(&-+t&on ;+s ,een su,st+nt&+((0 <e%2o%7e/ &n -oo/ 2+&t; t;e o,(&-o% 7+0 %e'o1e% +s t;ou-; t;e%e ;+/ ,een + st%&'t H 'o7<(ete 2u(2&((7ent (ess /+7+-es su22e%e/ ,0 t;e o,(&-ee. LEGAR#A OERMANOS V. SAL#ANA $NN < 548' , %he Court.s octrine in F.E. %uason v. Favier is fully applicable to the present case, B: Substantial performance of J O in %#, Art. ,R/9. AAC%<: Contract to <ell bet. Dlaintiff ven ee, Aelipe <al ana an Hef.ven or, #egar a Iermanos, sub ivision,owner, on 4 written 9Ps, payable for 2=yrs, 24= e-ual monthly installments w/ 2=V interst p.a., fr. Eay 2K8M resp. <al ana faithfully p . Aor M,yrs about KN,mos.instalmnts out of 24=3 he stoppe paying fr. Ailing of this case w/CAI,Eanila in 2KL23 after his 2 st Nyrs of paying, resp. calle attention of ven ors that he wante to buil a house on his lot but they have to start improvements on sub , e.g. roa s. Instea , he was informe of cancellation of 9 for failure to pay as stipulate , the 24=installments an his payments were to be treate as rents. 1 #C ismisse resp.Ps complaint, uphel the cancellation of the 9. Appellate court reverse , an or ere the conveyance of one of the 4 lots to efs. At the latterPs choice. It was foun that the lots cu not be elivere bco; they were still submerge in

4.

2. W;o 7+0 ,e t;e <+0eeL 2. 4. 5. C. %he obligee proper )Articles 248=, 2L4L.* Iis successor or transferee )Art. 248=.* Iis agent )ibi .* An0 t;&%/ <e%son su,.e't to t;e 2o((oF&nBu+(&2&'+t&ons" a. provi e it re oun e to the obligee.s benefit & only to the e+tent of such benefit. )Art. 2482, par. 4.* b. If it falls un er Art. 2482, par. 4 nos. 2, 4 & 5, benefit is eeme to be total. An0one &n <ossess&on o2 t;e '%e/&t. :A%t. 12C2.=

).

In all these five )N* cases, it is re-uire that the ebt shoul not have been garnishe . )Art. 2485.* III. W&t; %es<e't to t;e t&7e H <(+'e o2 <+07ent" 2. 0hen payment to be ma e: 0hen ue 4. Dlace )Art. 24N2.*

44

water an justice*

there were no roa s in the sub v. )for e2uity and

Castane a & Eanuel s-uarely falls upon itself by its own action & cannot be passe by it to petitioners as innocent parties. PPP It &s e(e7ent+%0 t;+t <+07ent 7+/e ,0 + .u/-7ent /e,to% to + F%on- <+%t0 '+nnot eIt&n-u&s; t;e .u/-7ent o,(&-+t&on o2 su'; /e,to% to &ts '%e/&to%. III A payment in order to be effective to discharge an obligation must be made to the proper parties.--

I<<6:: 0"G cancellation here was properT I:#H: G". Applying Hoctrine in FE %ua;on v. Favier

AUCONA V. JAMAN#RE $2N2 < 52O' , AAC%<: J6I##:BE" AWC"GA lease M= Ia. "ut of his 2N= Ia pro-indiviso share in ;+'&en/+ St+. 2e in :scalante, Gegros "cc. %o CIBI#" FAEAGHB:, ece ent rep.by A ministrator to his :state3 1 Searly rental agree : DO,4== for 5,agri.years fr. 2KL=, e+ten ible to 2KLN at lesseePs option. 2 st annual rental ue on Ear. 2KL=3 but resp. i not pay for failure of Det. %o eliver possn of the prop. %o him until he p in "ct. 2KL= of DO===3 1 In April 2KL2, Det. Gotifie Besp. that 9 is eeme cancelle for failure to comply w/con itions therein3 1 resp. file complaint, ef. file counterclaim3 both were ismisse by %C for pari de licto, I<<6:: 0"G the payment of DO===, lacking of 4== fr the agree annual rental of O4==, amounts to elay an groun for rescission I:#H: Go. the receipt showe full payment as per contract3 no mention of the short of 4==3 whc means that rental was re uce , perhaps b/c of the re uction of the M=Ia. By 2LIa. 6se by Det. As gra;ing lan . But the rest of the 9 subsists. +++ If the petitioner is fussy enough to invoke it now, it stan s to reason that he woul have fusse it too in the receipt he willingly signe after accepting, w/o reservation & apparently w/o protest only DO,===. A%t. 12A) is applicable. Detitioner says that he coul not eman payment of the balance of D4== on 2=/4L/L=, ate of receipt bec. the rental for the crop year 2KL2,2KL4 was ue on or before 2/5=/L2. But this woul not have prevente him fr. reserving in the receipt his right to collect the balance when it fell ue. Eoreover, there is evi ence in the recor that when the ue ate arrive , he ma e any eman , written or verbal, for the payment of that amount. A%t. 12A). W;en t;e o,(&-ee +''e<ts t;e <e%2o%7+n'e 8noF&n- &ts &n'o7<(eteness o% &%%e-u(+%&t0 H FEo eI<%ess&n- +n0 <%otest o% o,.e't&on t;e o,(&-+t&on &s /ee7e/ 2u((0 'o7<(&e/ FE.

In general, a payment, in or er to be effective to ischarge an obligation, must be ma e to the proper person. %hus, payment must be ma e to the obligee himself or to an agent having authority, e+press or implie , to receive the particular payment. ?+07ent 7+/e to one ;+1&n- +<<+%ent +ut;o%&t0 to %e'e&1e t;e 7one0 F&(( +s + %u(e ,e t%e+te/ +s t;ou-; +'tu+( +ut;o%&t0 ;+/ ,een -&1en 2o% &ts %e'e&<t. #ikewise, if payment is ma e to one who by law is authori;e to act for the cre itor, it will work a ischarge. %he receipt of money ue on a (u gment by an officer authori;e by law to accept it will, therefore satisfy the ebt. III T;e t;eo%0 &s F;e%e + <+07ent &s 7+/e to + <e%son +ut;o%&>e/ H %e'o-n&>e/ ,0 t;e '%e/&to% t;e <+07ent to su'; + <e%son so +ut;o%&>e/ &s /ee7e/ <+07ent to t;e '%e/&to%. III 5nless authori;ed by law or by consent of the obligee, a public officer has no authority to accept anything other than money in payment of an obligation under a judgment being e$ecuted.

In the absence of an agreement, either e+press or implie , payment means the ischarge of a ebt or obligation in money & unless the parties so agree, a ebtor has no rights, e+cept at his own peril, to substitute something in lieu of cash as me ium of payment of his ebt. Conse-uently, 6nless authori;e by law or by consent of the obligee, a public officer has no authority to accept anything other than money in payment of an obligation un er a (u gment being e+ecute . <trictly speaking, the acceptance by the sheriff of the petitioner.s checks, in the case at bar, oes not, per se, operate as a ischarge of the (u gment ebt. $?AL V. CA )2M2 < NNO*' To(ent&no" Aut;o%&t0 to %e'e&1e" LEGAL o% CONVENTIONAL Le-+(: conferre by law, such as authority of guar ian to inc. cre itor )Cr*, or the a mPr of estate Con1ent&on+(: autho. Ar. Cr himself, as when agent is appte . %o collect fr. Hebtor )Hr* ?+07ent to F%on- <+%t0 /oes NOT eIt&n-u&s; o,(&- to C% if there is no fault or negligence w/c can be impute to the latter, even when Hb acte in utmost JA & by mistake as to the person of his Cr, or thru error in uce by frau of 5D, :QC:D% A< DB"V. IG AB%. 12C1 #e<os&t ,0 #, &n ,+n8 &n t;e n+7e o2 H to t;e '%e/&t o2 C% FEo (+tte%Ds +ut;o. #oes NOT 'onst&tute <+07ent3 but when the Cr cannot be foun in the place of payment, such eposit may be a vali e+cuse for not hol ing the Hb in efault

1. To F;o7 <+07ent s;ou(/ ,e 7+/e A%t. 12C!. ?+07ent s;+(( ,e 7+/e to t;e <e%son &n F;ose 2+1o% t;e o,(&-+t&on ;+s ,een 'onst&tute/ o% ;&s su''esso% &n &nte%est o% +n0 <e%son +ut;o%&>e/ to %e'e&1e &t. ARAYAS V. TUTAAN $24O < M4M' Payment by judgment debtor to the wrong party does not e$tinguish judgment debt. ?A 1(= CAI,Bi;al,Rue;on eclare petitioner,plaintiff sps. Ara]as as owner of 8== shares of stocks in 6niversal %e+tile Eills, Inc. 6%:Q, whc the Corp, efen ant issue to co, ef. Jene Eanuel an BB Castane a, incl. stock ivi en s whc accrue to sai shares. %his court a -uo ren ere ecision in August 2KO2. 6%:Q ma e a motion for clarification an such was answere in 2KO4 clearly irecting 6%:Q to pay sps.petitioners as rightful owners of all accruing ivi en s from their stocks fr after the (u gment by the court, an for the transfer of the ispute shares of stocks to the names of petitioner,sps. In lieu of the appeal file by Eanuel an Castane a, 6%:Q faile to transfer the names of the shares an pay the ivi en s to petitioners. %hus, sps,pet aske for a writ of e+ecution fr court a -uo for payment of cash ivi en s fr 2KO4,2KOK w/interest an to effect the transfer of the shares to them. #ower court grante such or er but absolve 6%:Q of payment of cash ivi en s whc they have alrea y pai to Eanuel an Castane a on the groun of e-uity. I<<6:: 0"G 6%:Q sh be ma e to pay sps.Ara]as the cash ivi en s fr 2KO4,2KOK w/interests, after it has alrea y pai the same to Eanuel an Casta]e a, espite knowle ge of the courtPs ecision otherwise. I:#H: %he bur en of recovering the suppose payments of the cash ivi en s ma e by 6%:Q to the wrong parties

GR" Cons&-n+t&on &n 't. o2 t;&n- o% +7t. /ue F;en <%o<e%(0 7+/e F&(( eIt. o,(&-. A%t. 12C1. ?+07ent to + <e%son F;o &s &n'+<+'&t+te/ to +/7&n&ste% ;&s <%o<e%t0 s;+(( ,e 1+(&/ &2 ;e ;+s 8e<t t;e t;&n- /e(&1e%e/ o% &nso2+% +s t;e <+07ent ;+s ,een ,ene2&'&+( to ;&7. ?+07ent 7+/e to + t;&%/ <e%son s;+(( +(so ,e 1+(&/ &nso2+% +s &t ;+s %e/oun/e/ to t;e ,ene2&t o2 t;e '%e/&to%. Su'; ,ene2&t to t;e '%e/&to% nee/ not ,e <%o1e/ &n t;e 2o((oF&n- '+ses" :1= I2 +2te% t;e <+07ent t;e t;&%/ <e%sons +'Bu&%es t;e '%e/&to%Qs %&-;ts4 :2= I2 t;e '%e/&to% %+t&2&es t;e <+07ent to t;e t;&%/ <e%son4 :A= I2 ,0 t;e '%e/&to%Qs 'on/u't t;e /e,to% ;+s ,een (e/ to ,e(&e1e t;+t t;e t;&%/ <e%son ;+/ +ut;o%&t0 to %e'e&1e t;e <+07ent.

45

Baviera: Gumber three is :stoppel in <ais To(ent&no" 2. 4. 0hen Cr is incapacitate , payment must be ma e to his legal rep. or eliver the thing to ct. for consignation ff. Art. 24NL Daymt. to Incap. Cr shall be vali only insofar as it accrue to his benefit. Absence of benefit, Hb may be ma e to pay again by Cr when he attains capacity, or his legal rep uring the inc. <ame principles are applicable to paymt ma e to 5D, but person who pai has right to recover fr. 5D In 22. C+ses <+07t. To A? %e(e+ses #," )a* when w/o notice to assngmt. of cre it, he pays to original Cr $A%t. 1*2*' & )b* when in JA he pays to one in possPn of cre it $A%t. 12C2' N. If mistake of Hb ue to fault of Cr, then Cr cannot eman anew

Dmt to Cr after the cre it has been attache or garnishe is 1o&/ +s to t;e <+%t0 F;o o,t+&ne/ t;e +tt+';7t o% -+%n&s;7t, to the e+tent of the amt of ( gmt in his favor3 Hb can therefor be ma e to pay again to the party who secure the attachtmt or garnishmt, but he can recover the same to the e+tent of what he has p to his Cr

5. C.

A%t. 12CC. %he ebtor of a thing cannot compel the cre itor to receive a ifferent one, although the latter may be of the same value as, or more valuable than that w/c is ue. In obligations to o or not to o, an act or forbearance cannot be substitute by another act or forbearance against the obligee.s will.

To(ent&no" Hefects of the thing elivere may be waive by the Cr, if he e+pressly so eclares, or if, w/ knowle ge thereof, he accepts the thing w/o protest or isposes of it or consumes it

A%t. 12C2. Dayment ma e in goo faith to any person in possession of the cre it shall release the ebtor. :Ass&-n7ent o2 C%e/&ts H Ot;e% In'o%<o%e+( R&-;ts= A%t. 1*2*. %he ebtor who, before having knowle ge of the assignment, pays his cre itor shall be release fr. the obligation. 2. W;o s;+(( 7+8e <+07ent A%t. 12A*. %he cre itor is not boun to accept payment or performance by a thir person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary. 0hoever pays for another may eman fr. the ebtor what he has pai , e+cept that if he pai w/o the knowle ge or against the will of the ebtor, he can recover only insofar as the payment has been beneficial to the ebtor. A%t. 12AJ. 0hoever pays on behalf of the ebtor w/o the knowle ge or against the will of the latter, cannot compel the cre itor to subrogate him in his rights, such as those arising fr. a mortgage, guaranty, or penalty. A%t. 12A8. Dayment ma e by a thir person who oes not inten to be reimburse by the ebtor is eeme to be a onation, w/c re-uires the ebtor.s consent. But the payment is in any case vali as to the cre itor who has accepte it. A%t. 21JA. 0hen a thir person, w/o the knowle ge of the ebtor, pays the ebt, the rights of the former are governe by articles 245L & 245O. )"ther Ruasi,Contracts* A%t. 12AM. In obligations to give, payment ma e by one who oes not have the free isposal of the thing ue & capacity to alienate it shall not be vali , w/o pre(u ice to the provisions of article 284O un er the %itle on !Gatural "bligations.! A%t. 1C2J. 0hen a minor between eighteen & twenty,one years of age, who has entere into a contract w/o the consent of the parent or guar ian, voluntarily pays a sum of money or elivers a fungible thing in fulfillment of the obligation, there shall be no right to recover the same fr. the obligee who has spent or consume it in goo faith. )O7(: age of ma(ority is now 2M.

A%t. 12C). #+t&on &n <+07ent whereby property is alienate to the cre itor in satisfaction of a ebt in money, shall be governe by the law of sales. A%t. 12C*. 0hen the obligation consists in the elivery of an in eterminate or generic thing, whose -uality & circumstances have not been state , the cre itor cannot eman a thing of superior -uality. Geither can the ebtor eliver a thing of inferior -uality. %he purpose of the obligation & other circumstances shall be taken into consi eration. To(ent&no" Cr or Hb may waive the benefit of this Art. Cr may re-uire a thing of inferior -lty & Hb may eliver a thing of superior -lty, unless the price to be p in the latter case is epen ent upon the -lty A%t. 12CJ. 6nless it is otherwise stipulate , the e+tra(u icial e+penses re-uire by the payment shall be for the account of the ebtor. 0ith regar to (u icial costs, the Bules of Court shall govern. A%t. 12C8. 6nless there is an e+press stipulation to that effect, the cre itor cannot be compelle partially to receive the prestations in w/c the obligation consists. Geither may the ebtor be re-uire to make partial payments. Iowever, when the ebt is in part li-ui ate & in part unli-ui ate , the cre itor may eman & the ebtor may effect the payment of the former w/o waiting for the li-ui ation of the latter. BALANE CASE" A%t. 12CM. %he payment of ebts in money shall be ma e in the currency stipulate , & if it is not possible to eliver such currency, then in the currency w/c is legal ten er in the Dhilippines. %he elivery of promissory notes payable to or er, or bills of e+change or other mercantile ocuments shall pro uce the effect of payment only when they have been cashe , or when through the fault of the cre itor they have been impaire . In the meantime, the action erive fr. the original obligation shall be hel in abeyance. 76CAN6A . !A :,++/=
#acts: In a suit for collection of a sum of money, : en %an obtaine (u gment against Detitioners, spouses Gorberto %iba(ia, Fr. an Carmen %iba(ia. %he ecision having become final, : en %an file motion for e+ecution an the garnishe fun s which by then were on eposit with the cashier of the B%C,Dasig were levie upon. %iba(ia spouses elivere to Heputy <heriff : uar o Bolima the total money (u gment in Cashier.s Check D4L4,ON=.==, an in Cash 25N,O55.O= Y %otal D5KM,8M5.O=. %an, refuse to accept such payment an instea insiste that the garnishe fun s eposite with

To(ent&no" 0here the person paying has no capacity to make the pymt, the Cr cannot be compelle to accept it. ConsignPn will not be proper. In case Cr accepts, the pymt will not be vali , e+cept in the case provi e in A 1C2J. A%t. 12CA. Dayment ma e to the cre itor by the ebtor after the latter has been (u icially or ere to retain the ebt shall not be vali . To(ent&no"

46

B%C,Dasig be with rawn to satisfy the (u gment obligation. Hefen ant spouses )petitioners* file a motion to lift the writ of e+ecution on the groun that the (u gment ebt ha alrea y been pai . %rial court enie on the groun that payment in cashier.s check is not payment in legal ten er an that payment was ma e by a thir party other than the efen ant. EB was enie . CA affirme , hol ing that payment by cashier.s check is not payment in legal ten er as re-uire by BA Go. N4K. EB enie again. I<<6:: whether or not payment by means of check )even by cashier.s check* is consi ere payment in legal ten er as re-uire by the Civil Co e, Bepublic Act Go. N4K, an the Central Bank Act. %he provisions of law applicable to the case at bar are the following: +. A%t&'(e 12CM o2 t;e C&1&( Co/e F;&'; <%o1&/es" A%t. 12CM. %he payment of ebts in money shall be ma e in the currency stipulate , an if it is not possible to eliver such currency, then in the currency which is legal ten er in the Dhilippines. %he elivery of promissory notes payable to or er, or bills of e+change or other mercantile ocuments shall pro uce the effect of payment only when they have been cashe , or when through the fault of the cre itor they have been impaire . In the meantime, the action erive from the original obligation shall be hel in abeyance.3 ,. Se't&on 1 o2 Re<u,(&' A't No. )2M <%o1&/es" +s +7en/e/ F;&';

Ualalo in his complaint against #u; allege that for services ren ere in connection with the ifferent pro(ects there was ue him fees in 6<^, e+clu ing interests, of which some were pai , thus leaving unpai the balance plus prayer for conse-uential an moral amages, as well as moral amages, attorney.s fees an e+penses of litigation3 an actual amages. #u; a mitte that appellee ren ere engineering services, as allege , but averre that some were not in accor ance with the agreement an such claims were not (ustifie by the services actually ren ere , an that the aggregate amount actually ue was on(0 ?8! AA*.2M o2 F;&'; ?*M CJ).21 ;+/ +(%e+/0 ,een <+&/, thus leaving a balance of only ?1! 8*1.!8. #u; enie liability for any amage claime by appellee to have suffere , as allege in the secon , thir an fourth causes of action. Appellant also set up affirmative an special efenses, alleging that appellee ha no cause of action, that appellee was in estoppel because of certain acts, representations, a missions an /or silence, which le appellant to believe certain facts to e+ist an to act upon sai facts, that appellee.s claim regar ing the Een;i pro(ect was premature because appellant ha not yet been pai for sai pro(ect, an that appellee.s services were not complete or were performe in violation of the agreement an /or otherwise unsatisfactory. Appellant also set up a counterclaim for actual an moral amages for such amount as the court may eem fair to assess, an for attorney.s fees. %C authori;e the case to be hear before a Commissioner. %he Commissioner ren ere a report which, in resume, states that the amount ue to appellee was 6<^4MU as his fee in the IBBI Dro(ect, an DN2,N5K.K2 for the other pro(ects, less the sum of DLK,8ON.8L which was alrea y pai by the appellant. %he Commissioner also recommen e the payment to appellee of the sum of DN,===.== as attorney.s fees. Both ha no ob(ection to the fin ings of fact of the Commissioner containe in the Beport I<<6:: 0"G the recommen ation in the Beport that the payment of the amount ue to the plaintiff in ollars was legally permissible, an if not, at what rate of e+change it shoul be pai in pesos. I:#H: 6n er the agreement, :+hibit A, appellee was entitle to 4=V of ^28=,===.==, or the amount of ^4M,===.==. Appellee, however, cannot oblige the appellant to pay him in ollars, even if appellant himself ha receive his fee for the IBBI pro(ect in ollars. %his payment in ollars is prohibite by Re<u,(&' A't )2M F;&'; F+s en+'te/ on June 1* 1M)!. S+&/ +'t <%o1&/es +s 2o((oFs"
SECTION 1. :very provision containe in, or ma e with respect to, any obligation which provision purports to give the obligee the right to re-uire payment in gol or in a particular kin of coin or currency other than Dhilippine currency or in an amount of money of the Dhilippines measure thereby, be as it is hereby eclare against public policy, an null, voi an of no effect, an no such provision shall be containe in, or ma e with respect to, any obligation hereafter incurre . :very obligation heretofore or here after incurre , whether or not any such provision as to payment is containe therein or ma e with respect thereto, shall be ischarge upon payment in any coin or currency which at the time of payment is legal ten er for public an private ebts: <rovided, %hat, ) a* if the obligation was incurre prior to the enactment of this Act an re-uire payment in a particular kin of coin or currency other than Dhilippine currency, it shall be ischarge in Dhilippine currency measure at the prevailing rate of e+change at the time the obligation was incurre , )b* e+cept in case of a loan ma e in a foreign currency stipulate to be payable in the same currency in which case the rate of e+change prevailing at the time of the stipulate ate of payment shall prevail. All coin an currency, inclu ing Central Bank notes, heretofore or hereafter issue an eclare by the Jovernment of the Dhilippines shall be legal ten er for all ebts, public an private.

<ec. 2. :very provision containe in, or ma e with respect to, any obligation which purports to give the obligee the right to re-uire payment in gol or in any particular kin of coin or currency other than Dhilippine currency or in an amount of money of the Dhilippines measure thereby, shall be as it is hereby eclare against public policy null an voi , an of no effect, an no such provision shall be containe in, or ma e with respect to, any obligation thereafter incurre . :very obligation heretofore an hereafter incurre , whether or not any such provision as to payment is containe therein or ma e with respect thereto, shall be ischarge upon payment in any coin or currency which at the time of payment is legal ten er for public an private ebts. '. Se't&on *A o2 Re<u,(&' A't No. 2*) +s +7en/e/ :Cent%+( B+n8 A't= F;&'; <%o1&/es" <ec. L5. Iegal character Checks representing eposit money o not have legal ten er power an their acceptance in the payment of ebts, both public an private, is at the option of the cre itor: Drovi e , however, that a check which has been cleare an cre ite to the account of the cre itor shall be e-uivalent to a elivery to the cre itor of cash in an amount e-ual to the amount cre ite to his account. Arom the afore-uote must fail. provisions of law, it is clear that this petition

A ';e'8 F;et;e% + 7+n+-e%Qs ';e'8 o% o%/&n+%0 ';e'8 &s not (e-+( ten/e% +n/ +n o22e% o2 + ';e'8 &n <+07ent o2 + /e,t &s not + 1+(&/ ten/e% o2 <+07ent +n/ 7+0 ,e %e2use/ %e'e&<t ,0 t;e o,(&-ee o% '%e/&to%.

GALALO V. LUU $58 < 55O' , 6n er BA N4K, if the obligation was incurre prior to the enactment in a particular kin of coin or currency other than the Dhil. currency the same shall be ischarge in Dhil. currency measure at the prevailing rate of e+change at the time the obligation was incurre . BA N4K oes not provi e for the rate of e+change for the payment of the obligation incurre after the enactment of sai Act. %he logical conclusion is that the rate of e+change shoul be that prevailing at the time of payment for such contracts. AAC%<:
"ctavio UA#A#", a license civil engineer oing business un er the firm name of ". A. Ualalo an Associates, entere into an agreement with Alfre o #6W, a license architect, oing business un er firm name of A. F. #u; an Associates, whereby the former was to ren er engineering esign services to the latter for fees, as stipulate in the agreement. %he services inclu e esign computation an sketches, contract rawing an technical specifications of all engineering phases of the pro(ect esigne by ". A. Ualalo an Associates bill of -uantities an cost estimate, an consultation an a vice uring construction relative to the work. %he fees agree upon were percentages of the architect.s fee.

Un/e% t;e +,o1e@Buote/ <%o1&s&on o2 Re<u,(&' A't )2M &2 t;e o,(&-+t&on F+s &n'u%%e/ prior to the enactment o2 t;e A't +n/ %eBu&%e <+07ent &n + <+%t&'u(+% 8&n/ o2 'o&n o% 'u%%en'0 ot;e% t;+n t;e ?;&(&<<&ne 'u%%en'0 t;e s+7e s;+(( ,e /&s';+%-e/ &n ?;&(&<<&ne 'u%%en'0 7e+su%e/ +t t;e <%e1+&(&n- rate of e$change at the time the obligation was incurred. As Fe ;+1e +/1e%te/ to Re<u,(&' A't )2M F+s en+'te/ on June 1* 1M)!. In the case now before us the obligation of appellant to pay appellee the 4=V of ^28=,===.==, or the sum of ^4M,===.==, accrue on August 4N, 2KL2, or after the enactment of Bepublic Act N4K. It follows that the provision of Bepublic Act N4K which re-uires payment at the prevailing rate of e+change when the obligation was incurre cannot be applie . Bepublic Act N4K oes not provi e for the rate of e+change for the payment of obligation incurre after the enactment of sai Act. T;e (o-&'+( 'on'(us&on t;e%e2o%e &s t;+t t;e %+te o2 eI';+n-e s;ou(/ ,e t;+t <%e1+&(&n- +t t;e t&7e o2 <+07ent.

47

%his view fin s support in the ruling of this Court in the case of .ngel vs. 8elasco / o. where this Court hel that even if the obligation assume by the efen ant was to pay the plaintiff a sum of money e+presse in American currency, the in emnity to be allowe shoul be e+presse in Dhilippine currency at the rate of e+change at the time of (u gment rather than at the rate of e+change prevailing on the ate of efen ant.s breach. %his is also the ruling of American court as follows: T;e 1+(ue &n /o7est&' 7one0 o2 + <+07ent 7+/e &n 2o%e&-n 7one0 &s 2&Ie/ F&t; %es<e't to t;e %+te o2 eI';+n-e +t t;e t&7e o2 <+07ent.

?ONCE V. CA $K= < N55' , It is to be note that while an agreement to pay in ollars is eclare as null & voi & of no effect, what the law specifically prohibits is payment in currency other than legal ten er. It oes not efeat a cre itor.s claim for payment, as it specifically provi es that !every other omestic obligation +++ whether or not any such provision as to payment is containe therein or ma e w/ respect thereto, shall be ischarge upon payment in any coin or currency w/c at the time of payment is legal ten er for public & pvt. use.! A contrary rule woul allow a person to profit or enrich himself ine-uitably at another.s e+pense. AAC%<:

etermine by the Gational :conomic Council which are finance by or through foreign fun s3 )c* forwar e+change transactions entere into between banks or between banks an in ivi uals or (uri ical persons3 ) * import,e+port an other international banking financial investment an in ustrial transactions. 0ith the e+ception of the cases enumerate in items )a* )b*, )c* an ) * in the foregoing provision, in, which cases the terms of the parties. agreement shall apply, every other domestic obligation heretofore or hereafter incurred whether or not any such provision as to payment is contained therein or made withrespect thereto, shall be discharged upon payment in any coin or currency which at the time of payment is legal tender for public and private debtsG ?%o1&/e/ T;+t &2 t;e o,(&-+t&on F+s &n'u%%e/ <%&o% to t;e en+'t7ent o2 t;&s A't +n/ %eBu&%e/ <+07ent &n + <+%t&'u(+% 8&n/ o2 'o&n o% 'u%%en'0 ot;e% t;+n ?;&(&<<&ne 'u%%en'0 &t s;+(( ,e /&s';+%-e &n ?;&(&<<&ne 'u%%en'0 7e+su%e/ +t t;e <%e1+&(&n- %+tes o2 eI';+n-e +t t;e t&7e t;e o,(&-+t&on F+s &n'u%%e/ eI'e<t &n '+se o2 + (o+n 7+/e &n 2o%e&-n 'u%%en'0 st&<u(+te/ to ,e <+0+,(e &n t;e 'u%%en'0 &n F;&'; '+se t;e %+te o2 eI';+n-e <%e1+&(&n- +t t;e t&7e o2 t;e st&<u(+te/ /+te o2 <+07ent s;+(( <%e1+&( A(( 'o&n +n/ 'u%%en'0 &n'(u/&nCent%+( B+n8 notes ;e%eto2o%e +n/ ;e%e+2te% &ssue/ +n/ / ,0 t;e Go1e%n7ent o2 t;e ?;&(&<<&nes s;+(( ,e (e-+( ten/e% 2o% +(( /e,ts <u,(&' +n/ <%&1+te. :As +7en/e/ ,0 RA C1!! Se't&on 1 +<<%o1e/ June 1M 1M*C=

"n Fune 5, 2KLK, private respon ent Fesusa B. Afable, together with Aelisa #. Een o;a an Ea. Aurora C. Hi]o e+ecute a promissory note in favor of petitioner Gelia J. Donce in the sum of DM28,MLM.84, Dhilippine Currency, payable, without interest, on or before Fuly 52, 2KLK. It was further provi e therein that shoul the in ebte ness be not pai at maturity, it shall raw interest at 24V per annum, without eman 3 that shoul it be necessary to bring suit to enforce pay ment of the note, the ebtors shall pay a sum e-uivalent to 2=V of the total amount ue for attorney.s fees3 an , in the event of failure to pay the in ebte ness plus interest in accor ance with its terms, the ebtors shall e+ecute a first mortgage in favor of the cre itor over their properties or of the Carmen Dlanas Eemorial, Inc. Aor failure to comply w/&, a Complaint was file by D"GC: at CAI, Eanila for the recovery of the principal sum of DM28,MLM.84, plus interest an amages. %rial Court ren ere (u gment or ering respon ent Afable an her co, ebtors, Aelisa #. Een o;a an Ea. Aurora C. Hi]o , to pay petitioners, (ointly an severally, the sum of DM28,MLM.84, plus 24V interest per annum from Fuly 52, 2KLK until full payment, an a sum e-uivalent to 2=V of the total amount ue as attorney.s fees an costs. Arom sai Hecision, by respon ent Afable appeale to the Court of Appeals. <he argue that the contract un er consi eration involve the payment of 6< ollars an was, therefore, illegal3 an that un er the in pari delicto rule, since both parties are guilty of violating the law, neither one can recover. It is to be note that sai efense was not raise in her Answer. CA affirme %C. EB enie . CAPs hol ing: the agreement is null an voi an of no effect un er Bepublic Act Go. N4K. 6n er the octrine of pari elicto, no recovery can be ma e in favor of the plaintiffs for being themselves guilty of violating the law. I<<6:: 0"G the sub(ect matter is illegal an against public policy, thus, octrine of pari delicto applies. I:#H: 0: HI<AJB::. It is to be note that while an agreement to pay in ollars is eclare as null an voi an of no effect, F;+t t;e (+F s<e'&2&'+((0 <%o;&,&ts &s <+07ent &n 'u%%en'0 ot;e% t;+n (e-+( ten/e%. It oes not efeat a cre itor.s claim for payment, as it specifically provi es that !every other omestic obligation ... whether or not any such provision as to payment is containe therein or ma e with respect thereto, shall be ischarge upon payment in any coin or currency which at the time of payment is legal ten er for public an private ebts.! A contrary rule woul allow a person to profit or enrich himself ine-uitably at another.s e+pense. Se't&on 1 o2 Re<u,(&' A't No. )2M F;&'; F+s en+'te/ on June 1* 1M)!"
Se't&on 1. :very provision containe in, or ma e with respect to, any omestic obligation to wit, any obligation contracte in the Dhilippines which provision purports to give the obligee the right to require payment in gold or in a particular Find of coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby, be as it is hereby declared against public policy, and null and void and of no effect and no such provision shall be contained in, or made with respect to, any obligation hereafter incurred. %he above prohibition shall not apply to )a* transactions were the fun s involve are the procee s of loans or investments ma e irectly or in irectly, through bona fi e interme iaries or agents, by foreign governments, their agencies an instrumentalities, an international financial an banking institutions so long as the fun s are I entifiable, as having emanate from the sources enumerate above3 )b* transactions affecting high priority economic pro(ects for agricultural in ustrial an power evelopment as may be

NEW ?ACI$IC TIMBER V. SENERIS $2=2 < LML' , AAC%<: 6pon a compromise (u gment against petitioner, an for the latterPs failure to comply, CAI,Wambo issue a writ of e+ec. <heriff levie on personal properties or pet. An set such for auction sale. Drior to whc ate of auction, pet. Heposite w/clerk of court, e+,officio sheriff, the payment of the (u gment & consisting of cash an checks. Driv. resp., Bicar o %"GJ refuse to accept an re-ueste the auction to procee . %ong was the highest bi er in the auction, for total amount short of the (u g. ebt. I<<6:: 0"G (u ge erre in not issuing a cert. of satisfaction of (u gment after priv.resp. refuse to accept payment in checks an cash. I:#H: It is to be emphasi;e that the check eposite by the petitioner in the amount of DN=,=== is not an or inary check but a C+s;&e%Qs ';e'8 of the :-uitable Banking Corp., a bank of goo stan ing & reputation. It was even a certifie crosse check. It is well known & accepte practice in the business sector that a ashierHs chec# is deemed as cash. Eoreover, since the sai check has been certifie by the rawee bank, by the certification, the fun s represente by the check are transferre fr. the cre it of the maker to that of the payee or hol er, & for all intents & purposes, the latter becomes the epositor of the rawee bank, w/ rights & uties of one in such situation. W;e%e + ';e'8 &s 'e%t&2&e/ ,0 t;e ,+n8 on FE' &t &s /%+Fn t;e 'e%t&2&'+t&on &s eBu&1+(ent to +''e<t+n'e. <ai certification !&7<(&es t;+t t;e ';e'8 &s /%+Fn u<on su22&'&ent 2un/s &n t;e ;+n/s o2 t;e /%+Fee t;+t t;e0 ;+1e ,een set +<+%t 2o%t &ts s+t&s2+'t&on H t;+t t;e0 s;+(( ,e so +<<(&e/ F;ene1e% t;e ';e'8 &s <%esente/ 2o% <+07ent. It is an un erstan ing that the check is goo then, & shall continue to be goo , & this agreement is as bin ing on the bank as its notes in circulation, a certificate of eposit payable to the or er of the epositor, or any other obligation it can assume. %he ob(ect of certifying a check, as regar s both parties, is to enable the holder to use it as money .! 0hen the hol er procures the check to be certifie , !the check operates as an assignment of a part of the fun s to the cre itors.! Ience, the e+ception to the rule enunciate un er Se'. *A o2 t;e CB A't shall apply in this case: Se'. *A. Le-+( C;+%+'te% / Checks representing eposit o not have legal ten er power an their acceptance in payment of ebts, both pub & priv, is at the option of the Cr. ?%o1&/e/ ;oFe1e% t;+t + ';e'8 FE' ;+s ,een '(e+%e/ H '%e/&te/ to t;e +''ount o2 t;e '%e/&to% s;+(( ,e eBu&1+(ent to + /e(&1e%0 to t;e '%e/&to% &n '+s; &n +n +7ount eBu+( to t;e +7ount '%e/&te/ to ;&s +''ount. BISOO? O$ MALOLOS V. IAC $2K2 < 822' AAC%<: Detitioner is ven or of parcels of lan in Bulacan to ven ee Bobes,Arancisco Bealty Corp. w/ ownpym of 4=UX an bal of 2==U payable w/in 8yrs w/24V int. p.a. fr e+ec. "f 9 on Fuly O, 2KON, w/forfeiture clause in case ven ee fails to pay in 8yrs. "n Fuly 2O, 2KON, ven ee wrote a letter re-uesting for e+tension an allowance to pay in installment w/in Lmos w/interests. Detitioner enie , grante only N ays grace perio . Be-uest for 5=, ays grace on the 8th ay was also enie by pet. Driv. resp. later purports ten er of payment )in check* on Nth ay was refuse by pet. %C favore pet. IAC reverse after fin ing that resp. ha sufficient fun s at the time of ten er of check payment to pet. "n the Nth ay of the grace perio , an conclu e that there was vali ten er of paymnt. I<<6:: 0"G offer of check is vai ten er of pymnt of & un er a 9 whc stipulates that consi . "f sale is in Dhil. CurrencyT I:#H:

48

Ain ing of suff.avail.fun s by CA ten er of pymnt. )non se2uitur*

oes not constitute proof of

Ten/e% o2 ?+07ent involves a positive & uncon i. Act by the obligor of offering legal ten er currency as payment to oblige for the & & eman ing that the latter accept the same. <ince a negotiable instrument is only a substitute for money & not money, the elivery of such an instrument oes not, by itself, operate as payment. A chec#, whether a managerHs chec# or ordinary chec#, is not legal tender , & an offer of a check in payment of a ebt is not a vali ten er of payment & may be refuse receipt by the obligee or cre itor. To(ent&no" Le-+( ten/e%: such currency w/c in a given (uris iction can be use for the pmts of ebts, public & private, & w/c cannot be refuse by the Cr <ince pmt must be in money that is legal ten er, pmt in check even when goo may be vali ly refuse by Cr Dymt by Check: 0"G EgrC or or inary is G"% a vali ten er of pmt

COMMISSIONER O$ ?UBLIC OIGOWAYS V. BURGOS $KL < M52' , AAC%<:


Victoria Amigable is the owner of parcel of lan in Cebu whc the Jovernment took for roa ,right,of,way purpose in 1M2C. %he lan ha since become streets known as Eango Avenue an Joror o Avenue. In 1M)M, Amigable file in CAI,Cebu a complaint, to recover ownership an possession of the lan , an for amages in the sum of DN=,===.== for the allege illegal occupation of the lan by the Jovernment, moral amages in the sum of D4N,===.==, an attorney.s fees in the sum of DN,===.==, plus costs of suit. In its answer, the Bepublic allege , among others, that the lan was either onate or sol by its owners to the province of Cebu to enhance its value, an that in any case, the right of the owner, if any, to recover the value of sai property was alrea y barre by estoppel an the statute of limitations, efen ants also invoking the non, suability of the Jovernment. Dlaintiff.s complaint was ismisse on the groun s relie upon by the efen ants therein. <C reverse , an the case was reman e to the court of origin for the etermination of the compensation to be pai the plaintiff,appellant as owner of the lan , inclu ing attorney.s fees, also irecte the etermination of (ust compensation on the basis of the price or value thereof at the time of the taking. I<<6:: 0"G Article 24N= applicable in etermining F6<% compensation payable to Amigable fr taking in 2K48.

A%t. 12)!. In case an e+traor inary inflation or eflation of the currency stipulate shoul supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary. Baviera: %his article applies to contracts only. :Q%BA"BHIGABS means unusual or beyon the common fluctuation, not foreseen To(ent&no: Hoes G"% apply where oblig to pay arises fr law, in epen ent of Us, like the taking of private prop by the govt in the e+ercise of its pwr of emt omain #62. P6P( H #O5)'&8 !O&P. . )A1ASA #actsG In PL2 G0< entere 9 w/ADAC for supply of cast iron pressure pipes for the constr+n of the 0aterwor+ Esbate & <amar. G0< pai in installments. #eaving a bal. X unp .interests. thus, fpfc file a colle+n case vs G0< in CAI,Ela In PLO, CAI or ere GA0A<A to pay ADAC the balance IG G0< negotiable bon s,re eemable in 2=yrs w/LVp.a. int..G0< faile to pay, neither elivere bon s. In PO2, ADAC file another complaint seeking an a (ustment of the unpai balance /t change in value of (u gment in peso in PLO to _O2. %C ismisse the complaint hol ing that the inflation was a worl wi e occurrence & that there was no proof of e+traor inflation in the sense contemplate by Art. 24N=. 6ssueG 0"G there was e+traor inflation to apply Art 24N= IeldG Gone. EIt%+o%/. &n2(+t&on e+ists when there is a ecrease or increase in the purchasing pwr of the Dhil currency w/c is unusual or beyon the common fluctuation value of the sai currency, & such ec or inc cu not have been reasonably foreseen or was manifestly beyon the contemplation of the parties at the time of the estab of the obligation. %he ecline of the purchasing pwr of the currency cannot be consi ere e+traor . It was ue to oil embargo crisis the effect of w/c was worl wi e. VELASCO V. MERALCO $84 < NNL' AAC%<: VelascoPs EB3 <C ecision incorrectly re uce amt of amages ue him base only his BIB assesse income not consi his un eclare source of income whc he i not isclose. Ie now urges that amages awar e him was ina e- consi present hi cost of living, applying Art 24N=. I:#H: Arom the employment of the wor s !e+traor inary inflation or eflation of the currency stipulate ! in Art. 24N=, it can be seen that the same en1&s+-es 'ont%+'tu+( o,(&-+t&ons where a specific currency is selecte by the parties as the me ium of payment3 hence &t &s &n+<<(&'+,(e to o,(&-+t&ons +%&s&n- 2%. to%t H not 2%. 'ont%+'t . Besi es, there is no showing that the factual assumption of sai article has come into e+istence.

Art. 24N= oes applies only to cases where a contract or agreement is involve . It oes not apply where the obligation to pay arises fr. law, in epen ent of contracts. %he taking of private property by the govt in the e+ercise of its power of eminent omain oes not give rise to a contractual obligation. #EL ROSARIO V. SOELL $2L8 < NNL' AAC%<: HB lease to <hell his lan in #igao, Albay at 4N=/mo. w/stipulation on currency a (ustment acc g to inflation. An :" was promulgate by Dres H. Eacapagal prompting HB to eman for increase in rental fr <hell whc the latter refuse to pay. %hus HB file w/CAI,Ela whc was ismisse . I<<6:: 0"G the effect of :" 2KN is official evaluation of peso as contemplate in the #ease Contract I:#H: In the case at bar, while no e+press reference has been ma e to metallic content, there nonetheless is a re uction in par value or in the purchasing power of Dhil. currency. :ven assuming there has been no official evaluation as the term is technically un erstoo , the fact is that there has been a iminution or lessening in the purchasing power of the peso, thus there has been a ! epreciation! )opposite of !appreciation.!* Eoreover, when laymen unskille in the semantics of economics use the terms ! evaluation! or ! epreciation! they certainly mean them in their or inary signification,, ecrease in value. Ience, as contemplate by the parties herein in their lease agreement, the term ! evaluation! may be regar e as synonymous w/ ! epreciation,! for certainly both refer to a decrease in the value of the currency. %he rentals shoul therefore, by their agreement, be proportionately increase . A%t. 12)1. Dayment shall be ma e in the place esignate in the obligation. %here being no e+press stipulation & if the un ertaking is to eliver a eterminate thing, the payment shall be ma e wherever the thing might be at the moment the obligation was constitute . In any other case the place of payment shall be the omicile of the ebtor. If the ebtor changes his omicile in ba faith or after he has incurre in elay, the a itional e+penses shall be borne by him. %hese provisions are w/o pre(u ice to venue un er the Bules of Court.

49

$ou% S<e'&+( G&n/s o2 ?+07ents" 1. 2. A. C. 'acion en pago :A%t. 12C).= A<<(&'+t&on o2 <+07ents :Su,se't&on 1.= ?+07ent ,0 'ess&on :Su,se't&on 2.= Cons&-n+t&on :Su,se't&on A.=

ISSUE" WON t;e %etu%n o2 7o%t-+-e/ 1e;&'(e to +<<e((ee ,0 1o(unt+%0 su%%en/e% ,0 +<<e((+nt tot+((0 eIt&n-u&s;e/ t;e 3 +s &n /+'&on en <+-oL I:#H: 0e fin appellant.s contention evoi of persuasive force. %he mere return of the mortgage motor vehicle by the mortgagor, the herein appellant, to the mortgagee, the herein appellee, oes not constitute ation in payment in the absence, e+press or implie of the true intention of the parties. %he eman for return merely showe appelleePs interest to secure the value of the vehicle an prevent loss, amage, estruction or frau ulent transfer to 5D, as shown in the oc, ?Vol. <urr. w/<DA %o <ell@ whc never sai that such return is in full satisfaction of the mortgage ebt. %he conveyance was as to rts only, ownership never left the mortgagor, as such bur ens on the property sh still be shoul ere by him. >acion en pago, accor ing to Eanresa, is the transmission of the ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of an obligation. In dacion en pago, as a special mo e of payment, the ebtor offers another thing to the cre itor who accepts it as e-uivalent of payment of an outstan ing ebt. 'acion en pago in the nature of sale.-- %he un ertaking really partakes in one sense of the nature of sale, that is, the cre itor is really buying the thing or property of the ebtor, payment for w/c is to be charge against the ebtor.s ebt. As such, the essential elements of a contract of sale, namely, consent, ob(ect certain, & cause or consi eration must be present. 'acion en pago in its modern concept.-- In its mo ern concept, what actually takes place in dacion en pago is an o,.e't&1e no1+t&on o2 t;e o,(&-+t&on where the thing offere as an accepte e-uivalent of the performance of an obligation is consi ere as the ob(ect of the contract of sale, while the ebt is consi ere as the purchase price. In any case, common consent is an essential prere-uisite, be it sale or novation, to have the effect of totally e+tinguishing the ebt or obligation. CITIUENS SURETY V. CA $2L4 < O5M' BA%I": 7here is no dation in payment when there is no obligation to be e$tinguished AAC%<: Det. Issue 4 surety bon s to Dascual Dere; to guarantee his compliance in a Contract of <ale of Joo s he entere w/<inger <awing Eachine Co. Dere; in turn e+ecute a ee of assignment of its stock of lumber to pet. An a 4n B:E to guaranty reimbursement of whatever liability it will be ma e to pay in the future on Dere;Ps liabilities. Dere; faile to comply. <inger ma e pet. Day Dere;Ps &s. Dascual faile to reimburse pet. %hus pet. Aile a claim vs the estate of Gicasia <armiento whc was being a ministere by Dere;. Dere; averre that his liability to the surety has been e+tinguishe by the ee of assgnmnt of the lumber. %C hel Dere; an the estate of <armiento soli arily liable to Citi;ens <urety. CA reverse an ismisse Citi;ensP claim vs the estate of <armiento. ISSUE" WON CA e%%e/ &n 'on'(u/&n- t;e%e F+s /+t&on &n <+07ent ,0 t;e eIe'ut&on o2 t;e #ee/ o2 Ass-7entL I:#H: %he transaction coul not be ation in payment. +++ $0'hen the ee of assignment was e+ecute on 24/8/NK, the obligation of the assignor to refun the assignee ha not yet arisen. In other wor s, there was no obligation yet on the part of the petitioner, Citi;ens. to pay <inger <ewing Eachine Co. %here was nothing to be e+tinguishe on that ate, hence, there coul not have been a ation in payment. 4GH <D:CIA# UIGH "A DASE:G%: Payment [B+(+ne] A<<(&'+t&on o2 <+07ent :6mputacion in <panish* is the esignation of a ebt w/c is being pai by the ebtor who has several obligations of the same kin in favor of the cre itor to whom the payment is ma e. Ru(es F;e%e t;e +7ount sent ,0 t;e /e,to% to t;e '%e/&to% &s (ess t;+n +(( t;+t &s /ue" )o.,G Apply in accor ance w/ the agreement. Application of

A%t. 12C). #+t&on &n <+07ent F;e%e,0 <%o<e%t0 &s +(&en+te/ to t;e '%e/&to% &n s+t&s2+'t&on o2 + /e,t &n 7one0 s;+(( ,e -o1e%ne/ ,0 t;e (+F o2 s+(es. $%olentino' #+t&on &n <+07ent is the /e(&1e%0 H t%+ns7&ss&on o2 oFne%s;&< of a thing by the Hb to the Cr as an accepte e-uivalent of perf. of &3 It may be a t;&n- o% + %e+( %t )i.e. usufruct*, or of + '%e/&t vs a 5D3 :Q: assgmnt by an heir,Hb of his interests in <+ to the Cr, ma e after eath of ece ent, e+tinguishes &. E22e't on 3 e+tinguishe to the e+tent of the value of thng elivere Hb oes not have to be insolvent, agreement only betw parties makes ation possible. W;en <e%son+( <%o< &s /e(&1e%e/ &t &s ?LE#GE not /+t&on, unless parties clearly stipulate, but in oubt, the presumption is ple ge, w/lesser transmission of rts. W+%%+nt&es o2 #, Hation is an onerous transmission or 9 of alienation, provision in <ales Be warranty vs eviction & vs hi en efects of thing applies, Hb is ven or, Cr is ven ee3 If Cr is evcte , original & is not revive , but Cr is entitle to recover fr breach of warranty in Art. 2NNN. [B+(+ne' 'acion en pago, in Boman law, calle !datio in solutum!, in Arench, !dation en paiement,! in <panish, !dacion en pago.!* Hation in payment &s <oss&,(e on(0 &2 t;e%e &s + /e,t &n 7one0. Inste+/ o2 7one0 + t;&n- &s /e(&1e%e/ &n s+t&s2+'t&on o2 t;e /e,t &n 7one0. :Hation en pago is e+plaine in the case of #ilinvest v. Phil Acetylene=. %here are two ways at looking at dacion en pago: 1. C(+ss&'+( F+0 where dacion en pago is treate as a sale. 2. Mo/e%n 'on'e<t w/c treats dacion en pago as a novation. C+st+n ;+s +not;e% 1&eF Both are wrong. 7 A dacion en pago is not a sale bec. there is no intention to enter into a contract of sale. 7 It is not also a novation bec. in novation, the ol obligation is e+tinguishe & a new obligation takes its place. 77 But here, the ol obligation is e+tinguishe . 0hat takes its placeT Gothing. <o what is itT It &s + s<e'&+( 2o%7 o2 <+07ent FE' %ese7,(es + s+(e. T;e%e +%e tFo 7o%e t;&n-s to %e7e7,e% &n t;e '+ses o2 $&(&n1est 1. ?;&(. A'et0(ene su<%+. H Lo<e> 1. CA 11C SCRA *J1" >acion en pago can take place only if both parties consent.

R: To F;+t eItent &s t;e o,(&-+t&on eIt&n-u&s;e/L Answer: 6p to the value of the thing given )the thing must be appraise * unless the parties agree on a total e+tinguishment. :2ope;. v. !A, supra.= $ILINVEST V. ?OIL. ACETYLENE $222 < 842' AAC%<: Dhil. Acetylene Co. purchase fr Ale+an er #IE w/Hee of <ale, a Chevrolet 2KLK mo el w/ ownp , an balance payable for 58 mos. w/24V int.p.a. reflecte in a DG, w/chattel mortgage as security in #imPs favor. #im assigne to Ailinvest Ainance Corp. his interests in the DG an Chattel m. After efaulting in K installments, Ailinvest sent eman letter to DAC, to pay or return the vehicle. DAC returne the car but Ailinvest cannot sell the car /t unpai ta+es thereon incurre by DAC. Ail offere to eliver back the car to Dac, the latter refuse . Ail thus file a complaint for collection of money w/ amages in CAI,Ela. DAC averre that Ail has no C"A vs DAC b/c when the car was returne after the eman letter, the & was e+tinguishe .

)o.RG Hebtor may apply the amount )an obvious limitation bec. of the principles of in ivisibility & integrity* where there woul be partial payment. )o./= Cre itor can make the application.

)o.9= Apply to the most onerous ebt. )Art. 24N4, par. 2.* K4 W;+t +%e t;e %u(es to /ete%7&ne FE' &s t;e 7ost one%ous /e,tL A: )24N4*

50

2. 4. 5.

If one is interest paying & the other is not, the ebt w/c is interest paying is more onerous. If one is a secure ebt & the other is not, the secure ebt is more onerous If both are interest free, one is ol er than the first, the newer one is more onerous bec. prescription will take longer w/ respect to the newer ebt. Droportional application if the ebts are e-ually

Ct; S?ECIAL $ORM O$ ?AYMENT" Ten/e% o2 ?+07ent H Cons&-n+t&on A%t. 12)*. If the cre itor to whom ten er of payment has been ma e refuses w/o (ust cause to accept it, the ebtor shall be release fr. responsibility by the consignation of the thing or sum ue. Cons&-n+t&on +(one s;+(( <%o/u'e t;e s+7e e22e't &n t;e 2o((oF&n- '+ses" 2. 0hen the cre itor is absent or unknown, or oes not appear at the place of payment3 4. 0hen he is incapacitate to receive the payment at the time it is ue3 5. 0hen, w/o (ust cause, he refuses to give a receipt3 8. 0hen two or more persons claim the same right to collect3 N. 0hen the title of the obligation has been lost. [B+(+ne] 5Su,se't&on A.@@ Ten/e% o2 ?+07ent H Cons&-n+t&on6 %he title of the subsection is wrong. It s;ou(/ ;+1e ,een Cons&-n+t&on on(0 bec. that is the special mo e of payment & not the ten er of payment. It is a special mo e of payment bec. payment is ma e not to the cre itor but to the court. Cons&-n+t&on &s +n o<t&on on t;e <+%t o2 t;e /e,to% bec. consignation assumes that the cre itor was in mora accipiendi )when the cre itor w/o (ust cause, refuses to accept payment.* ConseBuen'e F;en t;e '%e/&to% FEo .ust '+use %e2uses to +''e<t <+07ent %he ebtor may (ust elay payment. But something still hangs above his hea . Ie is therefore, given the option to consign. Histinguish this fr. BJB )Jerman Civil Co e* w/c states that mora accipiendi eIt&n-u&s;es t;e o,(&-+t&on. [To(ent&no] %en er of pmt b8 consigPn is re-uire by the present Art only in case where the Cr refuses to accept it w/o (ust cause E22e't on INTEREST" 0hen ten er is ma e in a form that Cr cl have imm tly reali;e pymt )cash*, followe by a prompt attempt of the Hb to make consignPn., the accrual of interest will be suspen e fr. the ate of such ten er. But when ten er is not accompanie by means of pmt, & the Hb i not take any imm te step to consign, then interest is not suspen e fr. the time of such ten er. CASES" SOCO V. MILITANTE 'ons&-nDn $245 < 2L=' , ReBu&%e7ts o2

-th &ule= onerous.

A%t. 12)2. Ie who has various ebts of the same kin in favor of one & the same cre itor, may eclare at the time of making the payment, to w/c of them the same must be applie . 6nless the parties so stipulate, or when the application of payment is ma e by the party for whose benefit the term has been constitute , application shall not be ma e as to ebts w/c are not yet ue. If the ebtor accepts fr. the cre itor a receipt in w/c an application of the payment is ma e, the former cannot complain of the same, unless there is a cause for invali ating the contract. [To(ent&no] Gecessary that &s must all be ue "nly in case of mutual agreement, or upon consent of the party in whose favor the term was estab, that pmts may be applie to &s w/c have not yet mature A%t. 12)A. If the ebt pro uces interest, payment of the principal shall not be eeme to have been ma e until the interests have been covere . A%t. 12)C. 0hen the payment cannot be applie in accor ance w/ the prece ing rules, or if application can not be inferre fr. other circumstances, the ebt w/c is most onerous to the ebtor, among those ue, shall be eeme to have been satisfie . If the ebts ue are of the same nature & bur en, the payment shall be applie to all of them proportionately. [B+1&e%+] %he ff. Are the rules for applicPn of pmts: 2 , %he first choice belongs to the Hb 4 , If the Hb i not choose, the Cr may choose, w/c he will manifest in a receipt. 5 , If neither specifie the applicPn, pmt shall be ma e to the most onerous ebt. A%/ S?ECIAL $ORM O$ ?+07ent 9 ,0 Cess&on [B+(+ne] Droperty is turne over by the ebtor to the cre itor who ac-uires the right to sell it & ivi e the net procee s among themselves. K" W;0 &s payment by cession + s<e'&+( 2o%7 o2 <+07entL@@ A: Bec. there is no completeness of performance )re: integrity.* In most cases, there will be a balance ue. K" #&22e%en'e ,etFeen dacion en pago H payment by cessionG In dacion en pago, there is a transfer of ownership fr. the ebtor to the cre itor. In payment by cession, there is no transfer of ownership. %he cre itors simply ac-uire the right to sell the properties of the ebtor & apply the procee s of the sale to the satisfaction of their cre it. K" #oes payment by cession te%7&n+te +(( /e,ts /ueL@ A: Jenerally, G", only to the e+tent of the net procee s. %he e+tinguishment of the obligation is pro tanto. :+c. In Le-+( 'ess&on where the e+tinguishment of the obligation is total. #egal cession is governe by the Insolvency #aw. A%t. 12)). %he ebtor may ce e or assign his property to his cre itors in payment of his ebts. %his cession, unless there is stipulation to the contrary, shall only release the ebtor fr. responsibility for the net procee s of the thing assigne . %he agreements w/c, on the effect of the cession, are ma e between the ebtor & his cre itors shall be governe by special laws.

$ACTS" Hispute here is ecision of lower court in an 6H case file by lessor <"#:HAH <"C" vs. private resp. B:JIG" ABAGCI<C" FB. lessee of a buil ing owne by <oco, whose payments of rentals were consi ere vali an effective, ismisse the 6H case an ma e lessor pay moral & e+emp. Hamages, attys fees, hol ing there was substantial compliance in the w/ re-uisites of consignation.
Arancisco an <oco entere into a Contract of #ease for a monthly rental of D M==.== for a perio of 2= years renewable for another 2= years at the option of the lessee. Arancisco sublease the bl g for a rental of 5,===/month. Unowing this, <oco apparently stoppe accepting rental payments of Arancisco an later eman e him to vacate the bl g. an file for rescission/annulment of #ease Contract w/CAI,Cebu.

ISSUE" WON t;e <%o1&s&ons &n A%ts. 12)*@12*1 NCC %e %Bu&s&tes o2 Cons&-n+t&on 7ust ,e 'o7<(&e/ FE2u((0 H st%&'t(0 7+n/+to%&(0 / i the lower ct. err in ruling substantial compliance theretoT
I:#H: 0e o not agree with the -uestione ecision. 0e hol that the essential re-uisites of a vali consignation 7ust ,e 'o7<(&e/ F&t; 2u((0 +n/ st%&'t(0 &n +''o%/+n'e F&t; t;e (+F , Articles 24NL to 24L2, Gew Civil Co e. %hat these Articles must be accor e a man atory construction is clearly evi ent an plain from the very language of the co al provisions themselves which re-uire absolute compliance with the essential re-uisites therein provi e . <ubstantial compliance is not enough for that woul ren er only a irectory construction to the law. %he use of the wor s !shall! an !must! which are imperative, operating to impose a uty which may be enforce , positively in icate that all the essential re-uisites of a vali consignation must be complie with. %he Civil Co e Articles e+pressly an e+plicitly irect what must be essentially one in or er that consignation shall be vali an effectual.

51

A%t. 12)M. %he e+penses of consignation, when properly ma e, shall be charge against the cre itor. !onsignation 'efinedG Cons&-n+t&on &s t;e +'t o2 /e<os&t&n- t;e t;&n- /ue FE t;e 'ou%t o% .u/&'&+( +ut;o%&t&es F;ene1e% t;e '%e/&to% :1= '+nnot +''e<t o% :2= %e2uses to +''e<t <+07ent H &t -ene%+((0 %eBu&%es + <%&o% ten/e% o2 <+07ent. &equisites of alid !onsignationG
In or er that consignation may be effective, the ebtor must first comply with certain re-uirements prescribe by law. %he ebtor must show

[ To(ent&no] Droper when 2. Cr accepts consignPn after eposit w/o protest though Hb faile to comply w/ re-s. "r 4. Ct. eclares consigPn as vali ly ma e A%t. 12*!. "nce the consignation has been uly ma e, the ebtor may ask the (u ge to o%/e% t;e '+n'e((+t&on o2 t;e o,(&-+t&on. Before the cre itor has accepte the consignation, or before a (u icial eclaration that the consignation has been properly ma e, the ebtor may w/ raw the thing or the sum eposite , allowing the obligation to remain in force. [To(ent&no] E22e'ts o2 Cons&-n+t&on" 2. 4. 5. 8. SC" Hb is release in the same manner as if he ha performe the oblig Accrual of IG%:B:<% is suspen e Heterioration or loss of thing or amt consigne w/o fault of Hb must be borne by Cr Any increment or increase in value of thing inures to the benefit of Cr 0hen money is eposite in ct un er the provs of the law on consigPn, &t &s &n custodia legis & therefore e+empt fr. Attachmt & e+ecution )Fanejero v. Iampa*

1. 2.

that there was a debt due; that the consignation of the obligation had been made because the creditor to whom tender of payment was made refused to accept it, or because he was absent or incapacitated, or because several persons claimed to be entitled to receive the amount due (Art. 1176, !!"; that previous notice of the consignation had been given to the person interested in the performance of the obligation (Art. 1177, !!"; that the amount due was placed at the disposal of the court (Art. 117%, !!"; and that after the consignation had been made the person interested was notified thereof (Art. 117%, !!".
Aailure in any of these re-uirements is enough groun to ren er a consignation ineffective. )Fose Donce e #eon vs. <antiago <y(uco, Inc., K= Dhil. 522*. W&t;out <%&o% not&'e, a consignation is 1o&/ as payment. )#imkako vs. %eo oro, O8 Dhil 525* In o%/e% to ,e 1+(&/ t;e ten/e% o2 <+07ent 7ust ,e 7+/e &n (+F2u( 'u%%en'0. 0hile payment in check by the ebtor may be acceptable as vali , if no prompt ob(ection to sai payment is ma e )Hesbarats vs. V a. e Eortera, #,8K2N, Eay 4N, 2KNL* T;e 2+'t t;+t &n <%e1&ous 0e+%s <+07ent &n ';e'8 F+s +''e<te/ /oes not <(+'e &ts '%e/&to% &n esto<<e( 2%o7 %eBu&%&n- t;e /e,to% to <+0 ;&s o,(&-+t&on &n '+s; )<y vs. :ufemio, #,2=NO4, <ept. 5=, 2KNM*. T;us t;e ten/e% o2 + ';e'8 to <+0 2o% +n o,(&-+t&on &s not + 1+(&/ ten/e% o2 <+07ent t;e%eo2 )Hesbarats vs. V a. e Eortera, supra*. Ten/e% o2 <+07ent 7ust ,e /&st&n-u&s;e/ 2%o7 'ons&-n+t&on / Ten/e% &s t;e +nte'e/ent o2 'ons&-n+t&on, that is, an act preparatory to the consignation, which is the principal, an from which are erive the imme iate conse-uences which the ebtor esires or seeks to obtain.

#.

$. &.

A%t. 12*1. If, the consignation having been ma e, the cre itor shoul authori;e the ebtor to w/ raw the same, he shall lose every preference w/c he may have over the thing. %he co, ebtors, guarantors & sureties shall be release . [B+1&e%+] K" W;en &s t;e%e + nee/ to ten/e% <7tL A: )a* upon eman & )b* when ebt is ue K" T;e%e +%e 2 o% 7o%e '(+&7s. 'ons&-n+t&onL A: Aile IG%:BD#:AH:B. W;+t F&(( #, /o +2te%

K" W;0 ten/e% 2&%stL A: _Co; no nee to consign if Cr accept pymt. 0e can only know this through ten er. ):QIA6<%I"G "A :Q%BAF6HICIA# E:AG<* K" BC H +2te% 'ons&-nDn t;e%e &s + nee/ to not&20 t;e C%. W;0 &s t;&sL A: <o that the Cr can get the money fr. the Clerk of ct & avoi costs of litigation. K" #, 'ons&-ns. Oe+%&n-ZBC t;e 't '(/ +<<%o1e t;e C&t0 O+(( ,u%ne/ [ 7one0. S;(/ #, <+0 +-+&nL A: Go. 0hen money is consigne , it is no longer generic. It becomes specific. Cr bears the loss bec. although it was ue to a fortuitous event, there was elay on his part when he refuse to accept pymt. K" G o2 S+(e FE <+'to /e %et%o. T;e 1en/o% ten/e%e/ <7t FE&n t;e A@0% </ ,ut 1en/ee %e2use/ to +''e<t. AIn 2o% s<e' <e%2 ,0 V%. A''/- to Ve s&n'e 7one0 F+s not 'ons&-ne/ V% '+nnot '(+&7 %t o2 %e<u%';+se. Ten+,(e +%-u7entL A: Go. As long as there was ten er, no nee to consign. But in one case of a co,owner wanting to re eem at reasonable price )was e+orbitant*, the court hel that reasonable price is et acc g to the circums. <o if you want to re eem, consign the full amt in ct & ask it to fi+ the reasonable compensation.
IMMACULATA V. NAVARRO $2L= < 422' , 0e hereby grant sai alternative cause of action or prayer. 0hile the sale was originally e+ecute in Hec. 2KLK, it was only on Aeb. 5, 2KO8 when, as praye for by prvt. res, & as or ere by the court a -uo, a ee of conveyance was formally e+ecute . <ince the offer to re eem was ma e on 5/48/ON, this was clearly w/in the )@0%. <e%&o/ o2 (e-+( %e/e7<t&on +((oFe/ ,0 t;e ?u,(&' L+n/ A't.

Ten/e% o2 <+07ent &s eIt%+.u/&'&+(, while consignation is necessarily (u icial, an the priority of the first is the attempt to make a private settlement before procee ing to the solemnities of consignation. :8 M+n%es+ A2)=.

A%t. 12)J. In or er that the consignation of the thing ue may release the obligor, it must first be announce to the persons intereste in the fulfillment of the obligation. %he consignation shall be ineffectual if it is not ma e strictly in consonance w/ the provisions w/c regulate payment. A%t. 12)8. Consignation shall be ma e by epositing the things ue at the isposal of (u icial authority, before whom the ten er of payment shall be prove , in a proper case, & the announcement of the consignation in other cases. %he consignation having been ma e, the intereste parties shall also be notifie thereof. [To(ent&no] Not&'e: %he re-mt is fulfille by the service of summons upon the Hef together w/ copy of complaint

52

AAC%<: A previous complaint, for annulment of (u gment an ee of sale with reconveyance of real property allege that Fuanito Victoria, with the cooperation of efen ant Fuanita Gaval an others succee e in causing plaintiff #auro Immaculata, petitioner herein, to e+ecute a Hee of Absolute <ale in favor of Fuanito Victoria, by un uly taking a vantage of the mental illness an /or weakness of petitioner an thru eceit an frau ulent means, purporte ly ispose of by way of absolute sale, a ) !!!@sB.7.<+%'e( o2 (+n/ FETCT, for D NMU, which petitioner suppose ly receive , but in truth an in fact i not3 Fus of the court over the person of the efen ant was also -uestione but such was uphel thru vali service of summons to the guardian ad litem an also later thru voluntary appearance in lieu of plea ings asking for e+ercise of (us by the same court. Accor ingly, respon ent Court irecte the respon ent <heriff to e+ecute the ee of conveyance praye for by Fuanito Victoria, by reason of which, without the knowle ge an consent of petitioner, a new %C% was issue in favor of Fuanito Victoria3 that the sai %C% is null an voi having been base on voi procee ings3 777 that, in the +(te%n+t&1e, petitioner prays that he be allowe to %e<u%';+se t;e <%o<e%t0 F&t;&n 2&1e :)= 0e+%s 2%o7 t;e t&7e .u/-7ent &s %en/e%e/ by the respon ent court uphol ing the vali ity of the procee ings an the sale since the lan in -uestion was originally covere by a Aree Datent title3 Bespon ent Court ismisse the complaint on the groun of res judicata. In this present EB, the pet. Eerely asks of this Court to consi er a point ina vertently misse / the matter of LEGAL RE#EM?TION, whc has remaine unresolve . %he bar of res jud is as to -uestions on the vali ity of the sale. An offer to re eem was ma e clearly within the N,yr,perio allowe by law, Dublic #an Act. )Se'. 11M CA No. 1C1* I<<6:: 0"G offer to re eem was insincere in the absence of consignation of such amount in CourtT OEL#" NO. T;e %&-;t to %e/ee7 &s + RIGOT NOT AN 3 t;us no 'ons&-n+t&on &s %eBu&%e/. To <%ese%1e t;e %&-;t to %e/ee7 'ons&-n+t&on &s not %eBu&%e/. But to +'tu+((0 %e/ee7 t;e%e 7ust o2 'ou%se ,e <+07ent o% 'ons&-n+t&on :/e<os&t= &tse(2.

If the thing is in eterminate or generic, he may ask that the obligation be complie w/ at the e+pense of the ebtor. If the obligor elays, or has promise to eliver the same thing to two or more persons who o not have the same interest, he shall be responsible for any fortuitous event until he has effecte the elivery. A%t. 11J!. %hose who in the performance of their obligations are guilty of frau , negligence, or elay, & those who in any manner contravene the tenor thereof are liable for amages. A%t. 12**. %he ebtor in obligations to o shall also be release when the prestation becomes legally or physically impossible w/o the fault of the obligor. [B+(+ne] O,.e't&1e H Su,.e't&1e I7<oss&,&(&t0" In o,.e't&1e &7<oss&,&(&t0, the act cannot be one by anyone. %he effect of ob(ective impossibility is to e+tinguish the &. In su,.e't&1e &7<oss&,&(&t0, the & becomes impossible only w/ respect to the obligor. T;e%e +%e A 1&eFs +s to t;e e22e't o2 + su,.e't&1e &7<oss&,&(&t0: 2. "ne view hol s that the & is not e+tinguishe . %he obligor shoul ask another to o the &. 4. Another view hol s that the & is e+tinguishe . 5. A thir view istinguishes one prestation w/c is very personal & one w/c are not personal such that sub(ective impossibility is a cause for e+tinguishes a very personal &, but not an & w/c is not very personal. CASES" ?EO?LE V. $RANGLIN $5K < 5L5' , AAC%<: Appellant, A<IAG <6B:%S & IG<.C".IGC. conten s that the CAI,DAEDAGJA erre in forfeiting its bail bon for the provisional release of GA%IVIHAH ABAGU#IG, it conten s that lower court shoul have release it fr. all liability un er the bail bon bec. its failure to pro uce & surren er the accuse was ue to the negligence of the Dhil. Jovt itself in issuing a passport to sai accuse , thereby enabling her to leave the country. In support of this contention, the provisions of Art. 24LL are invoke . I<<6:: 0"G <urety sh be hel liableT I(2'G Art. B%--, D bond does not apply to a surety upon a bail

:2n/ MO#E O$ ENTINGUISOEMENT= 2OSS O# 7I( 7I6)% '5( O& 64POSS6C62678 O# P(&#O&4A)!( A%t. 12*2. An obligation w/c consists in the elivery of a eterminate thing shall be e+tinguishe if it shoul be lost or estroye w/o the fault of the ebtor, & before he has incurre in elay. 0hen by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing oes not e+tinguish the obligation, & he shall be responsible for amages. %he same rule applies when the nature of the obligation re-uires the assumption of risk. B+(+ne" A%t. 12*2 &s t;e s+7e +s 2o%tu&tous e1ent &n A%t. 11JC. %he effect is the same: %he & is e+tinguishe if the & is to eliver a eterminate thing. If the & is to eliver a generic thing, the & is not e+tinguishe . [GR] Lenus nun2uam perit )!Jenus never perishes.! * But what is not covere by this rule is an & to eliver a limite generic / something in bet. specific & generic thing, e.g., !Aor D5,===, I promise to eliver to you one of my watches.! %his & oes not really fall un er either Art. 24L4 or Art. 24L5. But this & really falls un er Art. 24L4. In this case, the & may be e+tinguishe by the loss of all the thing through A:. A%t. 12*A. In an obligation to eliver a generic thing, the loss or estruction of anything of the same kin oes not e+tinguish the obligation. A%t. 12*C. %he courts shall etermine, whether, un er the circumstances, the partial loss of the ob(ect of the obligation is so important as to e+tinguish the obligation. A%t. 12*). 0henever the thing is lost in the possession of the ebtor, it shall be presume that the loss was ue to his fault, unless there is proof to the contrary, & w/o pre(u ice to the provisions of article 22LN. %his presumption oes not apply in case of earth-uake, floo , storm, or other natural calamity. A%t. 11*). 0hen what is to be elivere is a eterminate thing, the cre itor, in a ition to the right grante him by article 22O=, may compel the ebtor to make the elivery.

Art. 24LL oes not apply to a surety upon a bail bon , as sai Art. speaks of a relation bet. a ebtor & cre itor, w/c oes not e+ist in the case of a surety upon a bail bon , on one han , & the <tate, on the other. Aor while sureties upon a bail bon )or recogni;ance* can ischarge themselves fr. liability by surren ering their principal, sureties on or inary bon s or commercial contracts, as a general rule, '+n on(0 ,e %e(e+se/ ,0 <+07ent o2 t;e /e,t o% <e%2o%7+n'e o2 t;e +'t st&<u(+te/.
It is clear, therefore, that in the eyes of the law a surety becomes the legal custo ian an (ailer of the accuse , thereby assuming the obligation to keep the latter at all times un er his surveillance, an to pro uce an surren er him to the court upon the latter.s eman . %hat the accuse in this case was able to secure a Dhilippine passport which enable her to go to the 6nite <tates was, in fact, ue to the surety company.s fault because it was its uty to o everything an take all steps necessary to prevent that eparture. %his coul have been accomplishe by seasonably informing the Hepartment of Aoreign Affairs an other agencies of the government of the fact that the accuse for whose provisional liberty it ha poste a bail bon was facing a criminal charge in a particular court of the country. Ia the surety company one this, there can be no oubt that no Dhilippine passport woul have been issue to Gativi a Aranklin.

NOTES" #iability of <ureties on a bail bon is con itione upon appearance of accuse t time set for arraignment or trial or any other time as fi+e by court, the bondsman being the jailer of the accused and absolutey responsible for his custody, w4duty at all times to #eep him under surveillance. <urety will be e+onerate where the perf. of con i. "f bail bon is ren ere &7<oss&,(e ,0 +'t o2 Go/ :e.-.

53

eath of accuse * o2 t;e o,(&-ee )arreste by govt*, o% t;e (+F )law punishing him is repeale *. O% +(so un/e% Ru(e 11C se'. 1*. A%t. 12*J. 0hen the service has become so ifficult as to be manifestly beyon the contemplation of the parties, the obligor may also be release therefr., in whole or in part. [B+1&e%+' "r inarily, on a U for a piece of work, an increase in prices will not relieve the UPor bec. such circum. was alrea y consi ere by the parties when they entere into the U. BAB K" 0hat if the prices rose so high as to be beyon the contemplation of the parties ue to the oil crisisT Answer: Belease . B+(+ne" &ebus sic stantibus.-- #iterally means !things as they stan .! It is short for clausula rebus sic stantibus )!agreement of things as they stan .!* %his is a principle of international law w/c hol s that when 4 countries enter into a treaty, they enter taking into account the circumstances at the time it was entere into & shoul the circumstances change as to make the fulfillment of the treaty very ifficult, one may ask for a termination of the treaty. %his principle of international law has spille over into Civil law. T;&s /o't%&ne &s +(so '+((e/ t;e /o't%&ne o2 eIt%e7e /&22&'u(t0 H 2%ust%+t&on o2 'o77e%'&+( o,.e't. It has four )8* re-uisites: 2. 4. 5. 8. %he event or change coul not have been foreseen at the time of the e+ecution of the contract3 %he event or change makes the performance e+tremely ifficult but not impossible3 %he event must not be ue to an act of either party3 %he contract is for a future prestation. If the contract is of imme iate fulfillment, the gross ine-uality of the reciprocal prestation may involve lesion or want of cause.

PPP ?e%2o%7+n'e &s not eI'use/ ,0 su,seBuent &n+,&(&t0 to <e%2o%7 ,0 un2o%eseen /&22&'u(t&es ,0 unusual or une$pected e$penses ,0 /+n-e% ,0 &ne1&t+,(e +''&/ent ,0 t;e ,%e+8&n- o2 7+';&ne%0 ,0 st%&8es ,0 s&'8ness ,0 failure of a party to avail himself of the benefits to be had under the contract, by weather conditions, by financial stringency, or by stagnation of business. )either is performance e$cused by the fact that the contract turns out to be hard H improvident, unprofitable or impracticable, &((@ +/1&se/ o% e1en 2oo(&s; o% less profitable, or une$pectedly burdensome. OCCENA V. JABSON $O5 < L5O' AAC%<: %ropical I"E:< IGC, file complaint for mo ification of %erms & Con i of sub v. 9 w/pet. "ccena, lan owners of ispute lan s in Havao, citing Art. 24LO, an the worl wi e increases in prices. T;e NCC +ut;o%&>es t;e %e(e+se o2 +n o,(&-o% F;en t;e se%1&'e ;+s ,e'o7e so /&22&'u(t +s to ,e 7+n&2est(0 ,e0on/ t;e 'onte7<(+t&on o2 t;e <+%t&es. I<<6:: 0"G the above art. Jives the court the authority to conse-uently mo ify the contents of the contract I:#H: Bespon ent.s complaint seeks not release fr. the sub ivision contract but that the court !ren er (u gment mo ifying the terms & con itions of the contract... by fi+ing the proper shares that shoul pertain to the herein parties out of the gross procee s fr. the sales of sub ivi e lots of sub(ect sub ivision.! Art. 24LO /oes not -%+nt t;e 'ou%ts t;&s +ut;o%&t0 to %e7+8e 7o/&20 o% %e1&se t;e 'ont%+'t o% to 2&I t;e /&1&s&on o2 s;+%es bet. the parties as contractually stipulate w/ the force of law bet. the parties, so as to substitute its own terms for those covenante by the parties themselves. B+(+ne" In this case the interpretation of the court is too literal. Accor ing to the court, it can release a ebtor fr. the obligation but it cannot make the obligation lighter. But if you look at Art. 24LO, partial release is permitte . NAGA TELE?OONE V. CA $45= < 5N2' , 1he term GserviceG should be understood as referring to the GperformanceG of the obligation.,, Art. 24LO speaks of !service! w/c has become so ifficult. %aking into consi eration the rationale behin this provision, the term !service! shoul be un erstoo as referring to the !performance! of the obligation. In the present case, the obligation of prvt. resp. consists in allowing petitioners to use its posts in Gaga City, w/c is the service contemplate in sai article. Aurthermore, a bare rea ing of this article reveals that it is not a re-uirement thereun er that the contract be for future service w/ future unusual change. Acc g. to %olentino, Art. 24LO states in our law the octrine of unforeseen events. %his is sai to be base on the iscre ite theory of rebus sic stantibus in public international law3 un er this theory, the parties stipulate in the light of certain prevailing con itions, & once these con itions cease to e+ist the contract also ceases to e+ist. Consi ering practical nee s & the eman s of e-uity & goo faith, the isappearance of the basis of a contract gives rise to a right to relief in favor of the party pre(u ice . B+(+ne: %he Court went too far in this case. It even went to the e+tent of stipulating for the parties in the name of e-uity. A%t. 12*8. 0hen the ebt of a thing certain & eterminate procee s fr. a criminal offense, the ebtor shall not be e+empte fr. the payment of its price, whatever may be the cause for the loss, unless the thing having been offere by him to the person who shoul receive it, the latter refuse w/o (ustification to accept it. A%t. 12*M. %he obligation having been e+tinguishe by the loss of the thing, the cre itor shall have all the rights of action w/c the ebtor may have against thir persons by reason of the loss. [To(ent&no' 0hen Hb ten ers pmt & Cr refuses to accept w/o (ust cause, Hb has 4 alternatives: :1= to 'ons&-n or :2= to .ust 8ee< t;e t;&n- &n ;&s <ossDn, w/ the oblig to use ue iligence, sub( to the gen rules of &s, but no longer to the spec liab un er Article 12*8. ART. 118M 11JC 11*) 12*8 1MC2 1MJM 21)M" A%t. 118M. 0hen the con itions have been impose w/ the intention of suspen ing the efficacy of an obligation to give, the following rules shall be observe in case of the improvement,

In the case of )aga, the court i not consi er the 8th element as an element. %he attitu e of the courts on this octrine is very strict. %his principle has always been strictly applie . %o give it a liberal application is to un ermine the bin ing force of an obligation. :very obligation is ifficult. %he performance must be e+tremely ifficult in or er for rebus sic stantibus to apply.

CASES" LAGUNA V. MANABAT $NK < LN=' AAC%<: #:A<: 9 was e+ecute betw. B%C an #%B, w/monthly rental of Dhp 4N== of CDC,)cert. of public conv.* provisionally approve by the D<C, public service comm. #ater, B%C was eclare insolvent an ABAGCI<C" EAGABA% was appointe as assignee. Bentals were still pai , until strikes by ::s of B%C cause them some further losses. %hus they aske for permission of D<C to suspen operation of the CDC also in lieu of low passenger trafc on these lines an high cost of operation. Eanabat oppose the (uPs of D<C to suspen the lease 9 being an impairment of &. D<C conten e that it ha the power to suspen , as it i so, as a conse-uence of its power to issue the same CDC, an not as an interpretation of the prov. "f the #ease 9,whc is a f+n of reg.courts. I<<6:: 0"G petitioners may ask D<C for re uction of rentals in lieu of such suspension an ecl. of insolvency of the corp. citing Art. 2LM=. I:#H: Art. 2LM=, it will be observe is a special provision for leases of rural lan s. Go other legal provision makes it applicable to or inary leases. +++ :ven if the cite article were a general rule on lease, its provisions nevertheless o not e+ten to petitioners. One o2 t;e %eBu&s&tes &s t;+t t;e '+use o2 t;e (oss o2 t;e 2%u&ts o2 t;e (e+se/ <%o<. 7ust ,e +n ReIt%+o%/&n+%0 H un2o%eseen 2o%tu&tous e1ent.! %he circumstances of the case fail to satisfy such re-uisite. +++ $%'he allege causes for the suspension of operations on the lines lease , namely, the high prices of spare parts & gasoline & the re uction of the ollar allocations )by the CB Eonetary B*, !alrea y e+iste when the contract of lease was e+ecute .! %he cause of petitioners. inability to operate on the lines cannot, therefore, be ascribe to A: or circumstances beyon their control, but to their own voluntary esistance.

54

loss or eterioration of the thing uring the pen ency of the con ition. 2. If the thing is lost w/o the fault of the ebtor, the obligation shall be e+tinguishe 3 4. If the thing is lost through the fault of the ebtor, he shall be oblige to pay amages3 it is un erstoo that the thing is lost when it perishes, or goes out of commerce, or isappears in such a way that its e+istence is unknown or it cannot be recovere 3 5. 0hen the thing eteriorates w/o the fault of the ebtor, the impairment is to be borne by the cre itor3 8. If it eteriorates through the fault of the ebtor, the cre itor may choose between the rescission of the obligation & its fulfillment, w/ in emnity for amages in either case: N. If the thing is improve by its nature, or by time, the improvement shall inure to the benefit of the cre itor3 L. If it is improve at the e+pense of the ebtor, he shall have no other right than that grante to the usufructuary. [B+(+ne] T;e%e +%e t;%ee %eBu&s&tes &n o%/e% 2o% A%t. 118M to +<<(0@@ 2. %here is loss, eterioration or improvement before the happening of the con ition. 4. %here is an obligation to eliver a eterminate thing )on the part of the ebtor* 5. %he con ition happens. A%t. 11JC. :+cept in cases e+pressly specifie by law, or when it otherwise eclare by stipulation, or when the nature of the obligation re-uires the assumption of risk, no person shall be responsible for those events w/c coul not be foreseen, or w/c ,though foreseen, were inevitable. A%t. 11*). 0hen what is to be elivere is a eterminate thing, the cre itor, in a ition to the right grante him by article 22O=, may compel the ebtor to make the elivery. If the thing is in eterminate or generic, he may ask that the obligation be complie w/ at the e+pense of the ebtor. If the obligor elays, or has promise to eliver the same thing to two or more persons who o not have the same interest, he shall be responsible for any fortuitous event until he has effecte the elivery. A%t. 12*8. 0hen the ebt of a thing certain & eterminate procee s fr. a criminal offense, the ebtor shall not be e+empte fr. the payment of its price, whatever may be the cause for the loss, unless the thing having been offere by him to the person who shoul receive it, the latter refuse w/o (ustification to accept it. A%t. 1MC2. %he bailee is liable for the loss of the thing, even if it shoul be through a fortuitous event: 2. If he evotes the thing to any purpose ifferent fr. that for w/c it has been loane 3 4. If he keeps it longer than the perio stipulate , or after the accomplishment of the use for w/c the commo atum has been constitute 3 5. If the thing loane has been elivere w/ appraisal of its value, unless there is a stipulation e+empting the bailee fr. responsibility in case of a fortuitous event3 8. If he len s or leases the thing to a thir person, who is not a member of his househol 3 N. If, being able to save either the thing borrowe or his own thing, he chooses to save the latter. A%t. 1MJM. %he epositary is liable for the loss of the thing through a fortuitous event: )2* If it is so stipulate 3 )4* If he uses the thing w/o the epositor.s permission3 )5* If he elays its return3 )8* If he allows others to use it, even though he himself may have been authori;e to use the same. K" W;+t &2 + /e<os&to% F+s &n t;e <%e7&ses o2 t;e ,+n8 H F+s %o,,e/ o2 ;&s 7one0 FE' ;e F+s +,out to /e<os&tL A: Bank cannot be hel liable for fortuitous event )robbery* esp in CAB where the money has not yet been actually eposite .

A%t. 1MJM provi es for instances wherein epositary is still liable even in cases of fortuitous event.

K" W;+t 8&n/ o2 /&(&-en'e &s %eBu&%e/ o2 + /e<os&t+%0L A: "r inary Hiligence. PS+2et0 #e<os&t BoI" If the (ewelry insi e a <HB was stolen, rules on eposit will not apply bec. the contract governing the transaction is #:A<: of safety eposit bo+. In Ne-ot&o%u7 Gest&o A%t. 21CJ. %he officious manager shall be liable for any fortuitous event: )2* If he un ertakes risky operations w/c the owner was not accustome to embark upon3 )4* If he has preferre his own interest to that of the owner3 )5* If he fails to return the property or business after eman by the owner3 )8* If he assume the management in ba faith. ?+0ee &n So(ut&o In/e,&t& A%t. 21)M. 0hoever in ba faith accepts an un ue payment, shall pay legal interest if a sum of money is involve , or shall be liable for fruits receive or w/c shoul have been receive if the thing pro uces fruits. Ie shall furthermore be answerable for any loss or impairment of the thing fr. any cause, & for amages to the person who elivere the thing, until it is recovere .

A%/ MO#E O$ ENTINGUISOMENT O$ 3" CON#ONATION O$ REMISSION O$ TOE #EBT [B+(+ne] Con/on+t&on o% %e7&ss&on &s +n +'t o2 (&,e%+(&t0 by virtue of w/c, w/o receiving any e-uivalent, the cre itor renounces enforcement of an obligation w/c is e+tinguishe in whole or in part. T;&s ;+s 2ou% :C= %eBu&s&tes" 2. Hebt that is e+isting. Sou can remit a ebt even before it is ue. 4. Benunciation must be gratuitous. If renunciation is for a consi eration, the mo e of e+tinguishment may be something else. It may be novation, compromise of dacion en pago. 5. Acceptance by the ebtor 8. Capacity of the parties. %he form of onation must be observe . If the con onation involves 7o1+,(es +<<(0 A%t. JC8. If it &n1o(1es &77o1+,(es +<<(0 A%t. JCM. But note that the cre itor may (ust refuse to collect )w/o observing any form.* In this case, the & will be e+tinguishe not by virtue of con onation but by waiver un er Art. L. A%t. 12J!. Con onation or remission is essentially gratuitous, & re-uires the acceptance by the obligor. It may be ma e e+pressly or implie ly. "ne & the other kin shall be sub(ect to the rules w/c govern inofficious onations. :+press con onation shall, furthermore, comply w/ the forms of onation. $ORMS o2 Con/on+t&on" +. B0 + W&(( A%t. MA). %he legacy of a cre it against a thir person or of the remission or release of a ebt of the legatee shall be effective only as regar s that part of the cre it or ebt e+isting at the time of the eath of the testator. In the first case, the estate shall comply w/ the legacy by assigning to the legatee all rights of action it may have against the ebtor. In the secon case, by giving the legatee an ac-uittance, shoul he re-uest one. In both cases, the legacy shall comprise all interests on the cre it or ebt w/c may be ue the testator at the time of his eath.

55

A%t. MA*. %he legacy referre to in the prece ing article shall lapse if the testator, after having ma e it, shoul bring an action against the ebtor for payment of his ebt, even if such payment shoul not have been effecte at the time of his eath. %he legacy to the ebtor of the thing ple ge by him is un erstoo to ischarge only the right of ple ge. ,. B0 A-%ee7ent A%t. 12J!. Con onation or remission is essentially gratuitous, & re-uires the acceptance by the obligor. It may be ma e e+pressly or implie ly. "ne & the other kin shall be sub(ect to the rules w/c govern inofficious onations. :+press con onation shall, furthermore, comply w/ the forms of onation. A%t. JC*. Acceptance must be ma e uring the lifetime of the onor & of the onee. A%t. J)2. %he provision of article ON= notw/stan ing, no person may give or receive, by way of onation, more than he may give or receive by will. %he onation shall be inofficious in all that it may e+cee this limitation. A%t. J)!. %he onation may comprehen all the present property of the onor, or part thereof, provi e he reserves, in full ownership or in usufruct, sufficient means for the support of himself, & of all relatives who, at the time of the acceptance of the onation are by law entitle to be supporte by the onor. 0ithout such reservation, the onation shall be re uce on petition of any person affecte . A%t. JC8. %he onation of a movable may be ma e orally or in writing. An oral onation re-uires the simultaneous elivery of the thing or of the ocument representing the right onate . If the value of the personal property onate e+cee s five thousan pesos, the onation & the acceptance shall be ma e in writing. "therwise, the onation shall be voi . A%t. JCM. In or er that the onation of an immovable may be vali , it must be ma e in a public ocument, specifying therein the property onate & the value of the charges w/c the onee must satisfy. %he acceptance may be ma e in the same ee of onation or in a separate public ocument, but it shall not take effect unless it is one uring the lifetime of the onor. If the acceptance is ma e in a separate instrument, the onor shall be notifie thereof in an authentic form, & this step shall be note in both instruments. ?%esu7<t&on IN Con/on+t&on" A%t. 12J1. %he elivery of a private ocument, evi encing a cre it, ma e voluntarily by the cre itor to the ebtor, implies the renunciation of the action w/c the former ha against the latter. If in or er to nullify this waiver it shoul be claime to be inofficious, the ebtor & his heirs may uphol it by provi ing that the elivery of the ocument was ma e in virtue of payment of the ebt. '(alane:] Articles 1271 & 1272 refer to a kind of implied renunciation when the creditor divests himself of the proof credit. According to De Diego, this provision is abs rd & immoral in that it a thori!es the debtor & his heirs to prove that the" paid the debt, when the provision itself assumes that there has been a remission, w)c is gratuitous. '*olentino+ *his is ,imited to -rivate .ocument Art. 1271 has no application to p blic doc ments bec. there is alwa"s a cop" in the archives w#c can be sed to prove the credit. $rivate doc ment refers to the original in order for Art. 1271 to appl". %&rans'$acific. v. (A, s pra.)

CASE" TRANS@?ACI$IC V. CA $458 < 8K8' I:#H: It may not be amiss to a that Art. 24O2 raises a presumption, not of payment, but of the renunciation of the cre it where more convincing evi ence woul be re-uire than what normally woul be calle for to prove payment. T;e %+t&on+(e 2o% +((oF&n- t;e <%esu7<t&on o2 %enun'&+t&on &n t;e /e(&1e%0 o2 + private instrument &s t;+t un(&8e t;+t o2 + <u,(&' &nst%u7ent t;e%e 'ou(/ ,e .ust one 'o<0 o2 t;e e1&/en'e o2 '%e/&t. 0here several originals are ma e out of a private ocument, the inten ment of the law woul thus be to refer to the elivery only of the original rather than to the original duplicate of w/c the ebtor woul normally retain a copy. It woul thus be absur if Art. 24O2 were to be applie ifferently. A%t. 12J2. 0henever the private ocument in w/c the ebt appears is foun in the possession of the ebtor, it shall be presume that the cre itor elivere it voluntarily, unless the contrary is prove . Ru(e 1A1 Se'. ) :,= :.= :8= Ru(es o2 Cou%t 'isputable presumptions.-- %he following presumptions are satisfactory if uncontra icte , but may be contra icte & overcome by other evi ence: +++ )b* %hat an unlawful act was one w/ an unlawful intent3 +++ )(* %hat a person foun in possession of a thing taken in the oing of a wrongful act is the taker & oer of the whole act3 otherwise, that things w/c a person possesses, or e+ercises acts of ownership over, are owne by him3 :8= T;+t + <e%son &n <ossess&on o2 +n o%/e% on ;&7se(2 2o% t;e <+07ent o2 7one0 o% t;e /e(&1e%0 o2 +n0t;&n- ;+s <+&/ t;e 7one0 o% /e(&1e%e/ t;e t;&n- +''o%/&n-(04 +++ Un/e% t;e 1M8) Ru(es o2 Cou%t +s +7en/e/" Ru(e 1A1 Se'. A. 'isputable presumptions.@@ %he following presumptions are satisfactory if uncontra icte , but may be contra icte & overcome by other evi ence: +++ )c* %hat a person inten s the or inary conse-uences of his voluntary act3 +++ )f* %hat money pai by one to another was ue to the latter3 )g* %hat a thing elivere by one to another belonge to the latter3 :;= T;+t +n o,(&-+t&on /e(&1e%e/ u< to t;e /e,to% ;+s ,een <+&/4 )i* %hat prior rents or installments ha been pai when a receipt for the later ones is pro uce 3 )k* %hat a person in possession of an or er on himself for the payment of they money, or the elivery of anything, has pai the money or elivere the thing accor ingly3 +++ (2AS!O . 4ASA #acts: Velasco file a complaint for the recovery of a sum of money he gave to Easa as a loan, as containe in a private oc. V claims that while he was imprisone uring the Fap occupation, E coerce & tricke VPs wife into surren ering the oc to E. V file a crim case b8 v. E w/c was ismisse for lack of (uris. E conten s that oc was voluntarily elivere to him through "smena. %C ismisse the a+n. 6ssue: 0"G there was con onation

56

Ield: Ses. Go satisfactory proof as to allegation of coercion & trickery on VPs wife. It is an un-uestionable fact that the instru proving the ebt now claime passe to the possession of the Hr. Aor this reason, unless the contrary is proven, it must be presume that in acc ance w/ the provisions of the law, that elivery was voluntarily ma e. %his fact implies a renunciation of the a+n w/c Cr ha for the recovery of his cre it. It shl be note that the oc is of a private nature, the only case sub( to the provs of Articles 22MO to 22MK "CC, so that a tacit renunciation of the ebt may be presume , in the absence of proof that the oc was elivere for some other reason than the gratuitous waiver of the ebt & the complete e+tinction of the oblig to pay.

R+t&on+(e Sou become your own cre itor or you become your own ebtor. <o how can you sue yourself. W;+t 7+0 '+use + 7e%-e% o% 'on2us&onL )2* <uccession, whether compulsory, testamentary or intestate3 )4* Honation3 )5* Gegotiation of a negotiable instrument. Because of its nature, confusion/ merger may overlap w/ other causes of e+tinguishment.

Aor e+ample, I owe Es. "lores D2==,===. <he be-ueath to me that cre it. An then she ie . In this case, there is e+tinguishment both by merger. But in this case, merger coul overlap w/ payment. Art. 24OL ) below* is perfectly in consonance w/ Art. 24ON.

E22e't o2 ?+%t&+( Re7&ss&on" A%t. 12JA. %he renunciation of the principal ebt shall e+tinguish the accessory obligations3 but the waiver of the latter shall leave the former in force. A%t. 2!J*. %he obligation of the guarantor is e+tinguishe at the same time as that of the ebtor, & for the same causes as all other obligations. A%t. 2!8!. %he guarantors, even though they be soli ary, are release fr. their obligation whenever by some act of the cre itor they cannot be subrogate to the rights, mortgages, & preferences of the latter. :?%o1&s&ons Co77on to ?(e/-e H Mo%t-+-e= A%t. 2!8). %he following re-uisites are essential to the contracts of ple ge & mortgage: )2* %hat they be constitute to secure the fulfillment of a principal obligation3 +++ A%t. 12JC. It is presume that the accessory obligation of ple ge has been remitte when the thing ple ge , after its elivery to the cre itor, is foun in the possession of the ebtor, or of a thir person who owns the thing. '(alane] &he accesor" obligation of pledge is e*ting ished bec. pledge is a possessor" lien. &he pres mption in this case is that the pledgee has s rrendered the thing pledged to the pledgor. &his is not a concl sive pres mption according to Art. 211+, par. 2. A%t. 2!MA. In a ition to the re-uisites prescribe in article 4=MN, it is necessary, in or er to constitute the contract of ple ge, that the thing ple ge be place in the possession of the cre itor, or of a thir person by common agreement. A%t. 21!). %he ebtor cannot ask for the return of the thing ple ge against the will of the cre itor, unless & until he has pai the ebt & its interest, w/ e+penses in a proper case. CTO MO#E O$ ENTINGUISOMENT" Con2us&on o% Me%-e% o2 R&-;ts A%t. 12J). %he obligation is e+tinguishe fr. the time the characters of cre itor & ebtor are merge in the same person. [B+(+ne] Confusion is the meeting in one person of the -ualities of the cre itor & ebtor w/ respect to the same obligation. T;e%e +%e tFo :2= %eBu&s&tes" 2. It must take place between the cre itor & the principle ebtor )Art. 24OL.* 4. %he very same obligation must be involve . +. ?%&n'&<+( ?+%t&es A%t. 12J*. Eerger w/c takes place in the person of the principal ebtor or cre itor benefits the guarantors. Confusion w/c takes place in the person of any of the latter oes not e+tinguish the obligation. [To(ent&no] :+tinguishment of the principal oblig through confusion releases the guarantors, whose oblig is merely accessory 0hen merger takes place in the person of the guarantor, oblig is G"% e+tinguishe . ,. A7on- -u+%+nto%s :E22e'ts o2 Gu+%+nt0 +s BetFeen Co@Gu+%+nto%s= A%t. 2!JA. 0hen there are two or more guarantors of the same ebtor & for the same ebt, the one among them who has pai may eman of each of the others the share w/c is proportionally owing fr. him. If any of the guarantors shoul be insolvent, his share shall be borne by the others, inclu ing the payer, in the same proportion. %he provisions of this article shall not be applicable, unless the payment has been ma e in virtue of a (u icial eman or unless the principal ebtor is insolvent. '. Jo&nt O,(&-+t&ons A%t. 12JJ. Confusion oes not e+tinguish a (oint obligation e+cept as regar s the share correspon ing to the cre itor or ebtor in whom the two characters concur. /. So(&/+%0 O,(&-+t&ons A%t. 121). Govation, compensation, confusion or remission of the ebt, ma e by any of the soli ary cre itors or w/ any of the soli ary ebtors, shall e+tinguish the obligation, w/o pre(u ice to the provisions of article 242K. %he cre itor who may have e+ecute any of these acts, as well as he who collects the ebt, shall be liable to the others for the share in the obligation correspon ing to them. A%t&'(e 121M. %he remission ma e by the cre itor of the share w/c affects one of the soli ary ebtors oes not release the latter fr. his responsibility towar s the co, ebtors, in case the ebt ha been totally pai by anyone of them before the remission was effecte . A%t. 121*. %he cre itor may procee against any of one of the soli ary ebtors or some or all of them simultaneously. %he eman ma e against one of them shall not be an obstacle to those w/c may subse-uently be irecte against the others, so long as the ebt has not been fully collecte .

57

A%t. 121J. Dayment ma e by one of the soli ary ebtors e+tinguishes the obligation. If two or more soli ary ebtors offer to pay, the cre itor may choose w/c offer to accept. Ie who ma e the payment may claim fr. his co, ebtors only the share w/c correspon s to each, w/ the interest for the payment alrea y ma e. If the payment is ma e before the ebt is ue, no interest for the intervening perio may be eman e . 0hen one of the soli ary ebtors cannot, bec. of his insolvency, reimburse his share to the ebtor paying the obligation, such share shall be borne by all his co, ebtors, in proportion to the ebt of each. e. In/&1&s&,(e O,(&-+t&ons A%t. 12!M. If the ivision is impossible, the right of the cre itors may be pre(u ice only by their collective acts, & the ebt can be enforce only by procee ing against all the ebtors. If one of the latter shoul be insolvent, the others shall not be liable for his share. A%t. 122C. A (oint in ivisible gives rise to in emnity for amages fr. the time anyone of the ebtors oes no comply w/ his un ertaking. %he ebtors who may have been rea y to fulfill their promises shall not contribute to the in emnity beyon the correspon ing portion of the price of the thing or of the value of the service in w/c the obligation consists. )TO MO#E O$ ENTINGUISOMENT" Co7<ens+t&on A%t. 12J8. Compensation shall take place when two persons, in their own right, are cre itors & ebtors of each other. [B+(+ne] Compensation is a mo e of e+tinguishing, to the concurrent amount, the obligations of those persons who in their own right are reciprocally ebtors & cre itors of each other. $Castan' Derhaps, ne+t to payment, compensation is the most common mo e of e+tinguishing an obligation.

I:#H: %he insuperable obstacle to the success of DGB.s cause is the factual fin ing of the IAC that it has not proven by competent evi ence that it is a cre itor of I<AB:#A. %he only evi ence presente by DGB towar s this en consists of 4 ocuments marke in its behalf. But as the IAC has cogently observe , these ocuments o not prove any in ebte ness of I<AB:#A to DGB. All they o prove is that a letter of cre it might have been opene for I<AB:#A by DGB, but not that the cre it was ever availe of $by I<AB:#A.s foreign correspon ent )EAG*', or that the goo s thereby covere were in fact shippe , & receive by I<AB:#A. $RANCIA V. IAC $2L4 < ON5' BA%I": *70here can be no off-setting of ta$es against the claims that the ta$payer may have against the govt. AAC%<: :GJBACI" ABAGCIA is reg owner of lot & 4storey house in Dasay City, a portion of whc lot was sub(ect of e+prop by BD, w/ (ust comp compute at assesse value. Ar 2KL5, to 2KOO Arancia has not pai B:%s on the prop. %hus, such was sol on public auction by the City %reas of Dasay City pursuant to sec. O5 DH 8L8 Beal Drop.%a+ Co e to satisfy his elin-uency. Io Aernan e; was the highest bi er. In POK Arancia receive notice that Io wants %C% transferre to him after a Ainal Bill of <ale was issue to him. Arancia file a complaint to annul the auction sale. Ie was in Iligan at that time, but such was ismisse & court or ere BH to effect the transfer of title, an for him to pay Io attyPs fees. IAC affirme . I<<6:: 0"G AranciaPs ta+ elin-uency of 48== has been set,off by the govtPs in ebte ness to him of 822L after apportion of his lot was e+propriate . I:#H: G". Circumstances o not satisfy re-uirements of Art. 24OK. A person cannot refuse to pay a ta+ on the groun that the govt owes him an amount e-ual to or greater than the ta+ being collecte . %he collection of a ta+ cannot await the results of a lawsuit against the govt. A claim for ta+es is not such a ebt, eman , contract or (u gment as is allowe to be set,off +++ T;e -ene%+( %u(e ,+se/ on -%oun/s o2 <u,(&' <o(&'0 &s Fe((@ sett(e/ t;+t no set@o22 +/7&ss&,(e +-+&nst /e7+n/s 2o% t+Ies (e1&e/ 2o% -ene%+( o% (o'+( -o1e%n7ent+( <u%<oses. %he reason on w/c the gen. rule is base , is that t+Ies +%e not &n t;e n+tu%e o2 'ont%+'ts ,et. t;e <+%t0 H <+%t0 ,ut -%oF out o2 /ut0 to H +%e t;e <os&t&1e +'ts o2 t;e -o1t to t;e 7+8&n- H en2o%'&n- o2 FE' t;e <e%son+( 'onsent o2 &n/&1&/u+( t+I<+0e%s &s not %eBu&%e/. +++ )"epublic v. Fambulao Iumber.) In ordero v. Londa, we hel that: !+++ &nte%n+( %e1enue t+Ies '+n not ,e t;e su,.e't o2 'o7<ens+t&on" Re+son" -o1t H t+I<+0e% Q+%e not 7utu+((0 '%e/&to%s H /e,to%s o2 e+'; ot;e% un/e% A%t. 12J8 H + R'(+&7 2o% t+Ies &s not su'; + /e,t /e7+n/ 'ont%+'t o% .u/-7ent +s &s +((oFe/ to ,e set@o22. A%t. 128*. Compensation takes place by operation of law, even though the ebts may be payable at ifferent places, but there shall be an in emnity for e+penses of e+change or transportation to the place of payment. A. #&22e%ent G&n/s o2 Co7<ens+t&on: 2egal !ompensation )Articles 24OK, 24K=* w/c takes place automatically by operation of law once all the re-uisites are present. A%t. 12JM. In or er that compensation may be proper, it is necessary: )2* %hat each one of the obligors be boun principally, & that he be at the same time a principal cre itor of the other3 )4* %hat both ebts consist in a sum of money, or if the things ue are consumable, they be of the same kin , & also of the same -uality if the latter has been state 3 )5* %hat the two ebts be ue3 )8* %hat they be li-ui ate & eman able3 )N* %hat over neither of them there by any retention or controversy, commence by thir persons & communicate in ue time to the ebtor. [B+(+ne] ReBu&s&tes un/e% A%t. 12JM" 1. 4utual 'ebtors H !reditors %he parties must be mutually ebtors & cre itors )2* in their own right, & )4*

#&st&n-u&s;e/ 2%. Con2us&on In compensation, there are 4 parties & 4 ebts, whereas in confusion, there are 4 ebts & only 2 party. CASES" GAN TION 1s. CA $4M < 45N, 2KLK' / Award of attyMs fees is proper subject of legal compensation. AAC%<: "ng 0an <ieng was a tenant in certain premises owne by Jan %ion. Jan file e(ectment case vs. "ng in 2KL2 for non,payment of rents for 4 mos. %otal of D5L=. "ng enie an sai that agree rental was not 2M= but 2L= whc he offere but was refuse by Jan. %rial court favore plaintiff. Appellate ct reverse & or ere plaintiff to pay AttyPs fees of DN==. %his became final. 0hen "ng obtaine writ of e+ec, Jan %ion went to the appellate ct. an plea e legal compensation averring that "ng owe him more than D8U in rentals fr Aug PL2 to "ct. PL5. Appel. Ct sai that attyPs fees may not be legally compensate b/c such constitute trust fun for benefit of lawyer. An the re-uisites of Art. 24OM not complie with. I<<6:: 0"G there was legal compensation bet. Det Jan %ion an resp. "ng 0an <ieng. I:#H: Ses. %he awar of attyPs fees is in favor of litigant not of his counsel, thus litigant is (u gment Cr who may enforce (u gment by e+ecution. <uch is cre it therefore whc can be proper sub(ect of legal compensation. ?NB V. ONG ACERO $28M < 2LL, 2KMO' BA%I": 7here is no compensation where the parties are not creditors H debtors of each other. AAC%<: <avings account of I<AB:#A Constr+ & Hevt Corp with the DGB of D4E is sub(ect of 4 conflicting claims / that of the Aceros, (u gment Cr of I<AB:#A an of DGB as Cr of the epositor /t a loan or cre it agreement by I<AB:#A w/DGB the eposit being the collateral. IAC eci e vs DGB. I<<6:: 0"G by operation of Art. 24OM, where DGB an I<AB:#A has become here ebtors an cre itors of each other

58

as principals. %here can be no compensation if 2 party occupies only a representative capacity. #ikewise, there can be no compensation if in one obligation, a party is a principal obligor & in another obligation, he is a guarantor. 2. #ungible 7hings 'ue %he wor consumable is wrong. 6n er Art. 82M, consumable things are those w/c cannot be use in a manner appropriate to their nature w/o their being consume . In a reciprocal obligation to eliver horses, the things ue are not consumable3 yet there can be compensation. )%olentino.* %he proper terminology is !fungible! w/c refers to things of the same kin w/c in payment can be substitute for another. 3. 4aturity of 'ebts Both ebts must be ue to permit compensation. 4. 'emandable H 2iquidated 'ebts %olentino: Heman able means that the ebts are enforceable in court, there being no apparent efenses inherent in them. %he obligations must be civil obligations, e+clu ing those that are purely natural. +++ Before a (u icial ecree of rescission or annulment, a rescissible or voi able ebt is vali & eman able3 hence, it can be compensate .

ispute . But, if the claim is un ispute , as in the case at bar, the statement is sufficient & no other proof may be re-uire . +++ SOLINA? V. #EL ROSARIO $245 < L8=' BA%I": !ompensation cannot taFe place where one3s claim against the other is still the subject of court litigation. 6t is a requirement, for compensation to taFe place, that the amount involved be certain H liquidated. AAC%<: <D< %IB6BCI" #6%:B" & A<6GCI"G EAJA#"GA, owners of Iacien a %ambal, lease such to #"%:B" <"#IGAD for 2=yrs w/ rental of DN=U/yr, further agree that half of annual rental woul be pai by <olinap to DGB as amort.on in ebte ness of sps.#utero. 0hen %iburcio ie , testate est. procee ings was institute at CAI,Iloilo whc authori;e the a ministrator of est., Fu ge Gicolas #utero, gran son of ece ent, to take fr the heirs an pay rising &s of the est.w/DGB w/ rts of subrogation. After compliance, the heirs who pai sub(ugate to the DGBs claim vs lessee <olinap for payment of rentals. <olinap institute separate action vs. sps. #utero, the a ministrator, who allege ly owe <olinap DO2U w/B:E as security. In this case sps #utero setup a counterclaim of D24NU in unpai rentals of pet.on Iacien a %ambal. I<<6:: 0"G %C erre in not hol ing that legal compensation has taken place in these cases by operation of Art. 24OM.

A /e,t &s (&Bu&/+te/ F;en &ts eI&sten'e H +7ount +%e /ete%7&ne/. +++ An a ebt is consi ere li-ui ate , not only when it is e+presse alrea y in efinite figures w/c o not re-uire verification, but also when the etermination of the e+act amount epen s only on a simple arithmetical operation. +++ 7he debt must not have been garnished. )a re-uirement* itional

!ompensation is not prohibited by any provision of law (&8e A%t&'(es 128J 1288 H 1JMC. A%t. 128J. Compensation shall not be proper when one of the ebts arises fr. a epositum or fr. the obligations of a epositary or of a bailee in commo atum. Geither can compensation be set up against a cre itor who has a claim for support ue by gratuitous title, w/o pre(u ice to the provisions of paragraph 4 of article 5=2. A%t. 1288. Geither shall there be compensation if one of the ebts consists in civil liability arising fr. a penal offense. A%t. 1JMC. :very partner is responsible to the partnership for amages suffere by it through his fault, & he cannot compensate them w/ the profits & benefits w/c he may have earne for the partnership by his in ustry. Iowever, the courts may e-uitably lessen this responsibility if through the partner.s e+traor inary efforts in other activities of the partnership, unusual profits have been reali;e . CASES" RE?UBLIC V. #E LOS ANGELES $KM < 2=5' BA%I": !ompensation of debts arising even w"o proof of liquidation of claim is allowable where the claim is undisputed. AAC%<: <ps AABIG got a loan fr EABC:#" <%::# C"BD of pL==k & i a B:E of their lot in RC as security in favor of EABC:#" <%::#. A yr later EABC:#" <%::# aske sheriff assist in e+tra(u AB:E of such lot. <ps Aarin file for in(unction an succee e . %hus, EABC:#" <%::# invoke par. N in the mortgage 9 an aske the court instea to compel the lessees of ?Hona Detra Bl g@ situate on the mortgage lot, incl the Bice & Corn A min )BCA*, to irect their rental payments to EABC:#" <%::#. <uch an or er was issue by the court. BCA file an EB praying to be e+clu e fr such or er b/c sps Aarin has a stan ing & w/BCA whc sh be setoff w/ their rental &s, thus rents of BCA has been previously assigne by sps Aarin to Vi al %an. <ps Aarin also file EB asking court to e+clu e lessees of the bl g fr such or er as they are not parties to the case. %C enie both EBs. %C grante motion of sps. Aarin for BCA to release rentals incurre for repair of the bl g. %C ratiocinate that BCA never presente any proof of AarinPs in ebte ness whc it wants to offset w/its rentals. I<<6:: 0"G resp. Fu ge erre in enying claim of BCA that compensation of ebts has taken place b/c recor s showe no proof of plaintiffsP in ebte ness to BCA. I:#H: S:<. Droof of the li-ui ation of a claim, in or er that there be compensation of ebts, is proper if such claim is

I:#H: Detitioner conten s that respon ent (u ge gravely abuse her iscretion in not eclaring the mutual obligations of the parties e+tinguishe to the e+tent of their respective amounts. Ie relies on Art. 24OM to the effect that compensation shall take place when 4 persons, in their own right, are cre itors & ebtors of each other. T;e +%-u7ent 2+&(s to 'ons&/e% A%t. 12JM FE' <%o1&/es t;+t 'o7<ens+t&on '+n t+8e <(+'e on(0 &2 ,ot; o,(&-+t&ons +%e (&Bu&/+te/. In the case at bar, the petitioner.s claim against the resp. #uteros is still pen ing etermination by the court. 0hile it is not for 6s to pass upon the merits of the pltff.s cause of action in that case, it appears that the claim asserte therein is ispute by the #uteros on both factual & legal groun s. Eore, the counterclaim interpose by them, if ultimately foun to be meritorious, can efeat petitioner.s eman . 6pon this premise, his claim in that case cannot be categori;e as li-ui ate cre it w/c may properly be set,off against his obligation. !ompensation cannot taFe place where one3s claim against the other is still the subject of court litigation. 6t is a requirement, for compensation to taFe place, that the amount involved be certain H liquidated. SYCI? V . CA $258 < 52O' BA%I": !ompensation cannot taFe place where, w" respect to the money involved in the estafa case, the complainant was merely acting as agent of another. 6n set-off the two persons must in their own right be creditor H debtor of each other AAC%<: F"<: #AD6W receive fr A#B:B% <EI%I 4=== shares of stock of B:D6B#IC A#"6B EI##< in the name of Hwight Hill who left for Ionolulu. Fose was suppose to sell his shares at market value fr whc he wu get commission. Acc g to Fose, <ycip approache him an volunteere to sell the shares. <DA was grante by Hill to #apu;, the latter transacte w/<ycip. <eries of their transactions were uly pai for an transferre . But the later payments were pockete by <ycip. I<<6:: 0"G CA erre in not applying Art. 24OM,OK evi ence showing #apu;P in ebte ness to pet. <ycip. espite

I:#H: Detitioner conten s that resp. CA erre in not applying the provisions on compensation or setting,off ebts un er Art. 24OM & 24OK, espite evi ence showing that Fose #apu; still owe him an amount of more than DN,=== & in not ismissing the appeal consi ering that the latter is not legally the aggrieve party. %his contention is untenable. Compensation cannot take place in this case since the evi ence shows that Fose L+<u> &s on(0 +n +-ent o2 A(,e%t S7&t; HE o% #%. #F&-;t #&((. Compensation takes place only when two persons in their own right are cre itors & ebtors of each other, & that each one of the obligors is boun principally & is at the same time a principal cre itor of the other. Eoreover, +++ L+<u> /&/ not 'onsent to t;e o22@ sett&n- o2 ;&s o,(&-+t&on FE <et&t&one%Qs o,(&-+t&on to <+0 2o% t;e )!! s;+%es. COM?ANIA MARITIMA 1. CA $25N < NK5' BA%I": !ompensation cannot taFe place where one of the debts is not liquidated as when there is a running interest still to be paid thereon. AAC%<:

59

A:BGAGH" AB"I#AG purchase fr <IIDDIGJ AHEIG a boat for 4==U, p own of N=U, constitute a mortgage on the vessel for the unpai balance. BD Dres. Approve the contract. Aroilan efaulte in payment of the balance an interests as well as insurance premiums on the vessel whc was pai for by the <I.AHEIG. %hus, <h.AH. took imme.possn of the vessel as well as its cargoes, w/claim that the vessel is not repossesse but its ownership is retransferre to the <h.A ./govt. DAG "BI:G%A# offere to charter the same vessel w/monthly rental of 5U, govt agree w/further stipulation that charterer will pay cost of labor, ry ocking an repairs, incl spareparts nee e . Aroilan proteste to the Dres this charter agreement. Before formal bareboat charter was to be approve by JE of <h.A . a Cabinet resolution was issue revoking the cancellation of the 9 of <ale to Aroilan, restore him to all his rts., on con ition he will pay at least 2=U to settle partially his outstan ing accounts, reimburse Dan "riental of its e+penses incurre , an file a bon to cover the rest of his un ertaking w/govt. After posting his bon , court or ere to restore AroilanPs possPn of the vessel. Dan "riental resiste . C"EDAGIA EABI%IEA as purchaser of the vessel fr Aroilan was allowe to be intervenor. I<<6:: 0"G the Court erre in hol ing that Aroilan, Compania an rp sh pay pan oriental reimbursements of its legitimate e+penses w/legal int. 2%o7 t;e t&7e o2 /&s,u%se7ent, instea of 2%. T;e /+te o2 /&s<ossess&on failing to consi er legal compensation betwn. BD an Dan ". I:#H: Eore, the legal interest payable fr. 4/5/N2 on the sum of D8=,OKO.N8, representing useful e+penses incurre by DAG, "BI:G%A#, is also still unli-ui ate since interest oes not stop accruing !until the e+penses are fully pai .! %hus, we fin w/o basis B:D6B#IC.s allegation that DAG,"BI:G%A#.< claim in the amount of D8=,OKO.N8 was e+tinguishe by compensation since the rentals payable by DAG,"BI:G%A# amount to DNK,N== while the e+penses reach only D8=,OKO.N8. He ucting the latter amount fr. the former, B:D6B#IC claims that D2M,O=4.8L woul still be owing by DAG,"BI:G%A# to B:D6B#IC. %hat argument loses sight of the fact that to the sum of D8=,OKO.N8 will still have to be a e the legal rate of interest !fr. Aeb. 5, 2KN2 until fully pai .! INTERNATIONAL COR?ORATE BANG V. IAC $2L5 < 4KL' , &equisite of legal compensation under Art. ,R?+.@@ AAC%<: GA%IVIHAH DAFABH" secure from Investment 6n erwiriting an A%BI6E Capital, pre ecessors of ICB, a loan of DN=E, whc she secure w/B:E of her properties in Ruiapo & Bulacan w/total market value of 22=E. "nly 4=E of the loan was approve for release. 0hc same amount went to pay her stan ing &s w/ same bank, thus she i not receive the same amt. <he also ma e a money,market placement w/A%BI6E of more than D2E Z2OV int.p.a. for 54 ays. At maturity, procee s of such was not release to her but instea allege ly applie to her mortgage in ebte ness whc she faile to pay. Ier properties were auctione an Atrium being the sole bi er, ac-uire them only at 4=E in all. At the en she is still in ebte in the amt of DL.M2E. <he thus file a complaint w/%C for annulment of the sheriffPs sale of her mortgage properties the ebt not yet being ue & eman able, the release of the balance of her loan of D5=E, an recovery of the procee s of her money,market investments. %he IAC or ere ICB to pay plaintiff Da(ar o the procee s of her money,market investments. CA affirme . "n e+ecution, ICBPs 4= motor vehicles were levie upon, an upon motion by plaintiff, its branches were or ere to pay. Detitioner conten s that after foreclosing the mortgage, there is still ue fr. prvt. resps as eficiency the amount of DL.M2 million against w/c it has the right to apply or set off prvt. respon ent.s money market claim of D2,=L4,=L5.M5. I<<6:: 0"G there was legal compensation in this case, that after Det. Aoreclose the mortgage, upon the eficiency amount, it has the right to setoff plaintiffPs money,market investments procee s. I:#H: %he argument is w/o merit. Compensation shall take place when two persons, in their own right are cre itors & ebtors of each other. 0hen all the re-uisites mentione in Art. 24OK are present, compensation takes effect by operation of law, even w/o the consent or knowle ge of the ebtors. )Art. 24K=.* Art. 24OK re-uires among others, that &n o%/e% t;+t (e-+( 'o7<ens+t&on s;+(( t+8e <(+'e Qt;e tFo /e,ts ,e /ueQ H Qt;e0 ,e (&Bu&/+te/ H /e7+n/+,(e.Q Compensation is not proper where the claim of the person asserting the set,off against the other is not clear nor li-ui ate 3 compensation cannot e+ten to unli-ui ate , ispute claim arising fr. breach of contract.

%here can be no oubt that petitioner is in ebte to prvt resp. in the amount of D2,=L4,=L5.M5 representing the procee s of her money market investment. %his is a mitte . But whether prvt. resp is in ebte to petitioner in the amount of DL.M2 million representing the eficiency balance after the foreclosure of the mortgage e+ecute to secure the loan e+ten e to her, is vigorously ispute . %his circumstance prevents legal compensation fr. taking place. A%t. 128!. Gotw/stan ing the provisions of the prece ing article, the guarantor may set up compensation as regar s what the cre itor may owe the principal ebtor. A%t. 128A. If one of the parties to a suit over an obligation has a claim for amages against the other, the former may set it off by proving his right to sai amages & the amount thereof.

Effect of Legal Compensation:


A%t. 128M. If a person shoul have against him several ebts w/c are susceptible of compensation, the rules on the application of payments shall apply to the or er of the compensation. A%t. 12M!. 0hen all the re-uisites mentione in article 24OK are present, compensation takes effect by operation of law, & e+tinguishes both ebts to the concurrent amount, even though the cre itors & ebtors are not aware of the compensation. A%t. 12JM. In or er that compensation may be proper, it is necessary: )2* %hat each one of the obligors be boun principally, & that he be at the same time a principal cre itor of the other3 )4* %hat both ebts consist in a sum of money, or if the things ue are consumable, they be of the same kin , & also of the same -uality if the latter has been state 3 )5* %hat the two ebts be ue3 )8* %hat they be li-ui ate & eman able3 )N* %hat over neither of them there by any retention or controversy, commence by thir persons & communicate in ue time to the ebtor. MIN#ANAO ?ORTLAN# CEMENT V. CA $24= < K5=' AAC%<: Atty. #a-uihon, in behalf of 5D ef. Dacwel <teel Corp file a Eotion to irect payment of attyPs fees to counsel@ invoking the fact that Det.EDCC was a (u ge to pay Dacwel 2=U in attyPs fees. EDCC oppose this motion stating that such amt is compensate w/ an e-ual amt it is entitle fr Dacwel after the latter is also a (u ge by same CAI,Ela in another case to pay to EDCC. Court issue the motion of Atty. #a-uihon. Henie EB of EDCC. I<<6:: 0"G %C erre in not hol ing the 4 (u gment ebts of the 4 corps. vs ea other mutually compensate I:#H: It is clear fr. the recor that both corporations, petitioner Ein anao Dortlan Cement Corp. )appellant* & resp. Dacwel <teel Corp. )appellee*, were cre itors & ebtors of each other, their ebts to each other consisting in final & e+ecutory (u gements of the CAI in 4 separate cases, or ering the payment to each other of the sum of D2=% by way of attorney.s fees. %he 4 obligations, therefore, respectively offset each other, compensation having taken effect by operation of law & e+tinguishe both ebts to the concurrent amount of D2=%, pursuant to the provisions of Art. 24OM, 24OK & 24K=, since all the re-uisites provi e in Art. 24OK 2o% +uto7+t&' 'o7<ens+t&on Re1en t;ou-; t;e '%e/&to%s H /e,to%s +%e not +F+%e o2 t;e 'o7<ens+t&onR Fe%e /u(0 <%esent. Auto7+t&' 'o7<ens+t&on %eBu&s&tes o2 <%esent :+tinguishment of two ebts arising fr. final & e+ecutory (u gments ue to compensation by operation of law. $+'u(t+t&1e Co7<ens+t&on w/c takes place when compensation is claimable by only one of the parties but not of the other, e.g., Articles 24MO, 24MM. A%t. 128J. Compensation shall not be proper when one of the ebts arises fr. a epositum or fr. the obligations of a epositary or of a bailee in commo atum. Geither can compensation be set up against a cre itor who has a claim for support ue by gratuitous title, w/o pre(u ice to the provisions of paragraph 4 of article 5=2.

60

A%t. A!1. %he right to receive support cannot be renounce 3 nor can it be transmitte to a thir person. Geither can it be compensate w/ what the recipient owes the obligor. Iowever, support in arrears may be compensate & renounce , & the right to eman the same may be transmitte by onerous or gratuitous title. [B+1&e%+' Gote that Art. 5=2 of the GCC is not foun in AC. $utu%e su<<o%t '+nnot ,e 'o7<ens+te/. %hus, a father who pai amages for sonPs -, elict cannot claim comp by not giving support to his son. Iowever un er 5=2, support IG ABB:AB< may be compensate & renounce & the rt to eman the same may be transmitte by onerous or gratuitous title. [B+(+ne' %he epositary cannot set up compensation w/ respect to the things eposite to him. But the epositor can set up the compensation. A%t. 1288. Geither shall there be compensation if one of the ebts consists in civil liability arising fr. a penal offense. '(aviera] &he oblig of the depositar" to ret rn a spec thing cannot be compensated or s bstit ted b" deliver" of a thing of the same kind. /0 1f there is an oblig of the depositary to the depositor for damages(already li2uidated 3 demandable" in case of negligence 3 if the depositor owes the depositary a sum of money, can there be set4off5 A: ,o since it arose o t of a deposit. ,ot allowed b" law. (ld be a wa" of (r to collect a bad debt. A%t. 1JMC. :very partner is responsible to the partnership for amage suffere by it through his fault, & he cannot compensate them w/ the profits & benefits w/c he may have earne for the partnership by his in ustry. Iowever, the courts may e-uitably lessen this responsibility if through the partnerPs e+traor inary efforts in other activities of the partnership, unusual profits have been reali;e . Contractual/ Conventional compensation w#c takes place when parties agree to set'off even if the re- isites of legal compensation are not present, e.g., Art. 12.2. % /aviera 01: 2. (omp 1. 3inds a. 4ol ntar") A%t. 1282. %he parties may agree upon the compensation of ebts w/c are not yet ue. [To(ent&no' 2. oluntary !ompensation is not limite to obligations w/c are not yet ue. %he parties may compensate by agreement any obligations, in w/c the ob(ective re-uisites provi e for legal compensation are not present. ++ 4. Nudicial !ompensation when ecree by the court in a case where there is a counterclaim, such as that provi e in Art. 24M5. )Baviera "#: A. Comp 2. Uin s b. Fu icial*

If the cre itor communicate the cession to him but the ebtor i not consent thereto, the latter may set up the compensation of ebts previous to the cession, but not of subse-uent ones. If the assignment is ma e w/o the knowle ge of the ebtor, he may set up the compensation of all cre its prior to the same & also later ones until he ha knowle ge of the assignment. [B+(+ne] T;e%e +%e A s&tu+t&ons 'o1e%e/ &n t;&s +%t&'(e" 2. 4. 5. Assignment w/ the ebtor.s consent3 Assignment w/ the ebtor.s knowle ge but w/o his consent3 & Assignment w/o the ebtor.s knowle ge )& obviously w/o his consent.*

Ru(es" Assignment w" the debtor3s consent Hebtor cannot set up compensation at all unless the right is reserve . Assignment w" the debtor3s Fnowledge but w"o his consent %he ebtor can set up compensation w/ a cre it alrea y e+isting at the time of the assignment. Assignment w"o the debtor3s Fnowledge Hebtor can set up as compensation any cre it e+isting at the time he ac-uire knowle ge even if it arose after the actual assignment. A%t. 128C. 0hen one or both ebts are rescissible or voi able, they may be compensate against each other before they are (u icially rescin e or avoi e . *TO MO#E O$ ENTINGUISOMENT" )ovation A%t. 12M1. "bligations may be mo ifie by: )2* Changing their ob(ect or principal con itions3 )4* <ubstituting the person of the ebtor3 )5* <ubrogating a thir person in the rights of the cre itor. [TOLENTINO]

Govation is the e+tinguishment of an obligation by the substitution or change of the obligation by a subse-uent one w/c e+tinguishes or mo ifies the first, either by changing the ob(ect of principal con itions, or by substituting the person of the ebtor, or by subrogating a thir person in the rights of the cre itor. )Eanresa.*

Govation is the most unusual mo e of e+tinguishing an obligation. It is the only mo e whereby an obligation is e+tinguishe & a new obligation is create to take its place. %he other mo es of e+tinguishing an obligation are absolute in the sense that the e+tinguishment of the obligation is total )w/ the e+ception of compromise.* Govation, on the other han , is a relative mo e of e+tinguishing an obligation. C(+ss&2&'+t&on o2 No1+t&on" 2. Subjective (<ersonal) or novation by a change of sub(ect Active subjective or a change of cre itor3 also known as subrogation. Passive subjective or a change of ebtor Objective ("eal) or novation by change in the ob(ect or in the principal con itions. Govation by a change in the principal con itions is the most problematic kin of novation bec. you have to etermine whether or not the change in the con itions is principal or merely inci ental.

A%t. 128A. If one of the parties to a suit over an obligation has a claim for amages against the other, the former may set it off by proving his right to sai amages & the amount thereof. [B+1&e%+` W;+t &s t;e &/e+ ,e;&n/ (e-+( 'o7<L %o facilitate coll+n of money. Aor e+pe iency. E22e't o2 Ass&-n7ent o2 C%e/&t" A%t. 128). %he ebtor who has consente to the assignment of rights ma e by a cre itor in favor of a thir person, cannot set up against the assignee the compensation w/c woul pertain to him against the assignor, unless the assignor was notifie by the ebtor at the time he gave his consent, that he reserve his right to the compensation.

4. 5. 8.

61

Aor e+ample, a change fr. straight terms to installment terms & a change fr. non,interest bearing obligation to an interest bearing one are changes in the principal con itions.

N.

4i$ed novation w/c is a combination of both sub(ective & ob(ective novation.

ReBu&s&tes o2 No1+t&on" 2. 4. 5. 8. N. %here must be a previous vali obligation3 Agreement of the parties to create the new obligation3 :+tinguishment of the ol obligation. )I woul consi er this an effect, rather than a re-uisite of novation,, Balane*3 Vali ity of the new obligation. )%iu <iuco v. Iabana, 8N D O=O.* %here must be C"G<:G% of all the parties to the substitution, resulting in the e+tinction of the ol obligation & the creation of a vali one.

AAC%<: Dets., 4 constr+ co.Ps, Integrate , an :ngPrg, sue the E0<<, formerly GA0A<A, at CAI,Ela. %he Arbitration Boar ren ere ecision,awar whc became final & e+ec, or ere E0<< t pay pets. Dets. <ubse-. Agree to give E0<< some iscounts, %&C f whc was approve by E0<< Boar . Aailing therefrom, pets. Eove for :+ecution of (u gment vs E0<<, the court enie /t novation. I:#H: 0hile the tenor of the subse-uent letter,agreement in a sense novates the (u gment awar there being a shortening of the perio within which to pay )Uabangkalan <ugar Co. vs. Dacheco, NN Dhil. NNN*, the suspensive an con itional nature of the sai agreement )making the novation con itional* is e+pressly acknowle ge an stipulate in the 28th whereas clause of E0<<. Besolution. E0<<. failure to pay within the stipulate perio remove the very cause an reason for the agreement, ren ering some ineffective. Detitioners, therefore, were remitte to their original rights un er the (u gment awar . As to whether or not petitioners are now in estoppel to -uestion the subse-uent agreement, suffice it to state that petitioners never acknowle ge full payment3 on the contrary, petitioners refuse E0<<. re-uest for a conforme or -uitclaim. )p. 24N, Bollo* Accor ingly, the awar is still sub(ect to e+ecution by mere motion, which may be availe of as a matter of right any time within )N* years from entry of final (u gment in accor ance with <ection N, Bule 5K of the Bules of Court.

A%t. 12M2. In or er that an obligation may be e+tinguishe by another w/c substitute the same, it is imperative that it be so eclare in une-uivocal terms, or that the ol & the new obligations be on every point incompatible w/ each other. [TOLENTINO] No1+t&on &s NEVER <%esu7e/. It 7ust ,e est+,(&s;e/ t;+t 2. the ol & the new contracts are incompatible in all points, 4. or that the will to novate appear by e+press agreement of the parties 5. or in acts of e-uivalent import. IM?LIE# NOVATION %here is no specific form re-uire for an implie novation. All that is re-uire is IGC"EDA%IBI#I%S between the original & the subse-uent contracts. A mere e+tension of the term of payment oes not result in novation, for the perio affects only the performance, not the creation of the obligation

!O!I6)%8A) S. & H C S5&(78 *,-, S //+0 Dovation defined. #A!7S: DAJBIC" )D* submitte a surety bon issue by B & B surety in favor of DGB. 6n er the bon , DGB ha the right to procee irectly against B&B w/o going after D. In turn, 4 in emnity agreements were entere into w/ B&B by CCE & Foseph Cochingyan in his capacity as CCE pre+y & in his personal capacity3 & by D, DAC"C", Fose Villanueva as DPs manager & in his personal capacity, #iu %ua Beth, as DAC"C" pre+y, & in his personal capacity. 4 years after the e+ecution of these ocuments, a %B6<% AJB::E:G% was entere into bet. Fose & <usana Cochingyan, %omas Besa, a DGB officer, as trustee3 & DGB was the beneficiary. %he trust agreement e+pressly provi e that it shall not, in any manner release B&B fr. their respective liabilities un er the bon . 0hen D faile to pay, DGB eman e payment fr. BVB. B&B in turn eman e reimbursement fr. Foseph Cochingyan & Fose V. who refuse to pay on the groun that the trust agreement ha e+tinguishe their oblig un er the In emnity Agreements. I(2': No1+t&on &s t;e eIt&n-u&s;7ent o2 +n o,(&-+t&on ,0 t;e su,st&tut&on o% ';+n-e o2 t;e o,(&-+t&on ,0 + su,seBuent one FE' te%7&n+tes &t e&t;e% ,0 ';+n-&n- &ts o,.e't o% <%&n'&<+( 'on/&t&ons o% ,0 su,st&tut&n- + neF /e,to% &n <(+'e o2 t;e o(/ one o% ,0 su,%o-+t&n- + t;&%/ <e%son to t;e %&-;ts o2 t;e '%e/&to%. Govation through a change of the ob(ect or principal con itions of an e+isting obligation is referre to as objective :or real= novation. Govation by the change of either the person of the ebtor or of the cre itor is escribe as subjective :or personal= novation. Govation may also be both ob(ective & sub(ective )7&Ie/* at the same time. In both ob(ective & sub(ective novation, a ual purpose is achieve an obligation is e+tinguishe & a new one is create in lieu thereof. )ovation is never presumed.,, If ob(ective novation is to take place, it is imperative that the new obligation e+pressly eclare that the ol obligation is thereby e+tinguishe , or that the new obligation be on every point incompatible w/ the ol one. Govation is never presume 3 it must be establishe either by the ischarge of the ol ebt by the e+press terms of the new

CASES" 4622A& S. !O5&7 O# APP(A2S #A!7S: Eillar obtaine a (u gment against Jabriel. A writ of e+ecution was issue , on the basis of w/c JPs W&((0Ds $o%/ Jee< was sei;e . <ubse-uently, J plea e w/ E to release the (eep un er an agreement whereby J woul mortgage the (eep in favor of E to secure the payment of the (u gment ebt. %he chattel mortgage re uce the amount to be pai by J. %he %C sai there was no novation bec. the mortgage was e+ecute only to secure the (u gment. I<<6:: 0"G the mortgage U novate the (u gment ebt. I:#H: W;e%e t;e neF o,(&-+t&on 7e%e(0 %e&te%+tes o% %+t&2&es t;e o(/ 3 +(t;ou-; t;e 2o%7e% e22e'ts ,ut 7&no% +(te%+t&ons o% s(&-;t 7o/&2&'+t&ons FE %es<e't to t;e '+use o% o,.e't o% 'on/&t&ons o2 t;e (+tte% su'; ';+n-es /o not e22e'tu+te +n0 su,st+nt&+( &n'o7<+t&,&(&t0 ,et. t;e 2 3 s. "nly those essential & principal changes intro uce by the new 3 pro ucing an alteration or mo ification of the essence of the ol 3 result in implie novation. In the case at bar, the mere re uction of the amount ue in no sense constitutes a sufficient in icium of incompatibility, especially in the light of )a* the e+planation by the petitioner that the re uce in ebte ness was the result of the partial payments ma e by the resp. before the e+ecution of the chattel mortgage agreement, & )b* the latter.s a missions bearing thereon.

6)7(%&A7(' !O)S7&5!76O) S. &(2O A, [1C* SC A*!] )ovationB 1hile the tenor of the subsequent letteragreement in a sense novates the judgment award there being a shortening of the period within which to pay, the failure of the party to comply w"d suspensive H conditional nature of d agreement, remitted the parties to their original rights under the judgment award.

62

agreement, or by the acts of the parties whose intention to issolve the ol obligation as a consi eration of the emergence of the new one must be clearly iscernible. 6f old debtor is not released, no novation occurs H the third person who assumed the obligation becomes a co-debtor or surety or a co-surety . Again, if sub(ective novation by a change in the person of the ebtor is to occur, it is not enough that the (uri ical relation bet. the parties to the original contract is e+ten e to a thir person. It is essential that the ol ebtor be release fr. the obligation, & the thir person or new ebtor take the place in the new relation. IA the ol ebtor is not release , no novation occurs & the thir person who has assume the obligation of the ebtor becomes merely a co, ebtor or surety or a co,surety. )ovation is not implied when the parties to the new obligation e$pressly negated the lapsing of the old obligation. Geither can the petitioners anchor their efense on implie novation. Absent an une-uivocal eclaration of e+tinguishment of a pre,e+isting obligation, a showing of complete incompatibility bet. the ol & the new obligation )& nothing else* woul sustain a fin ing of novation by implication. But where, as in this case, the parties to the new obligation e+pressly recogni;e the continuing e+istence & vali ity of the ol one, where, in other wor s, the parties e+pressly negate the lapsing of the ol obligation, there can be no novation. %he issue of implie n ovation is not reache at all.

un er the appellate court.s (u gment. A itionally, to sustain novation necessitates that the same be so /e'(+%e/ &n uneBu&1o'+( te%7s '(e+%(0 H un7&st+8+,(0 s;oFn by the e+press agreement of the parties or by acts of e-uivalent import or that there is complete & substantial incompatibility bet. the 4 obligations. Becor showe that ef attempte to rebuil the irrigation canal but not in the original imensions, whc was not ispute by both parties. <uch partial recons oes not constitute substantial compliance. %hus <C reman e case to %C for ocular on the (ob one & if ef refuses to complete to ask another to o the work at the e+pense of ef. )P! S. 'A8&67 *,R- S >9+0 BA%I": )ovation is never presumed but must be e$plicitly statedB )o novation in the absence of e$plicit novation or incompatibility on every point between the old H the new agreements of the parties. AAC%<: HAGI:# :. B"QA<, oing business un er the name an style of 6nite Veterans <ecurity Agency an Aoreign Boats 0atchmen, sue the GA%I"GA# D"0:B C"BD"BA%I"G )GDC* an two of its officers in Iligan City. %he purpose of the suit was to compel the GDC to restore the contract of Bo+as for security services which the former ha terminate . %he parties rafte a Compromise Agreement which the %C approve . %he agreement consiste of GDC paying plaintiff sum of money, plaintiff will pay or return materials lost & foun by his agency, the 9 for security services w/GDC will remain, an they both waive other claims & counter,c w/ea other. GDC subse-. Contracte another security agency. %hus, plntf aske court a -uo for writ of e+ec whc was grante . GDC appeale claiming that (u gment was novate thus e+tinguishe ,nothing more to e+ec. I<<6:: 0"G novation of (u gment by subse- agreement of parties e+tinguishe & of GDC to sustain the security 9 w/plantff I:#H: It &s e(e7ent+%0 t;+t no1+t&on &s ne1e% <%esu7e/4 it must be e+plicitly state or there must be manifest incompatibility between the ol an the new obligations in every aspect. %hus the Civil Co e provi es: A%t. 12M2. In or er that an obligation may be e+tinguishe by another which substitutes the same, it is imperative that it be so eclare in une-uivocal terms, or that the ol an the new obligations be on every point incompatible with each other. In the case at bar, there is nothing in the Eay 28, 2KM4 agreement w/c supports the petitioner.s contention. %here is neither e+plicit novation nor incompatibility on every point bet. the !ol ! & the !new! agreements>sai contract was e+ecute precisely to implement the compromise agreement for which reason there was no novation. CA262A . 6A! *,-- S R@R0 BA%I": Subsequent mutual agreements H actions of petitioners H private respondents allowing the former e$tension of time to pay their obligations H in installments novated H amended the period of payment decreed by the trial court in its judgement by compromise. AAC%<: Amicable settlement of this ispute was arrive at an ma e basis of ecision of %C. Hefen ants a mitte !having sol un er a pacto de retro sale the parcels of lan C escribe in the complaint in the amount of DM8,===.==! an that they !hereby promise to pay the sai amount within the perio of four )8* months but not later than Eay 2N,2KM2. <ubse-, priv.resp.Gu+/+(u<e V/+. /e /e( C+st&((o , rep.by her son W+(/o /e( C+st&((o as for +tto%ne0@&n@2+'t, accepte payments from petitioners an gave petitioners several e+tensions of time to pay their remaining &s. I<<6:: 0"G ecision of trial court in its (u gment by compromise was novate an amen e by the subse-uent mutual agreements an actions of petitioners an private respon ents I:#H: %he fact therefore remains that the amount of DM8,=== payable on or before Eay 2N, 2KM2 ecree by the trial court in its (u gment by compromise F+s no1+te/ H +7en/e/ ,0 t;e su,seBuent 7utu+( +-%ee7ents H +'t&ons o2 <et&t&one%s H <%1t. %es<s. Detitioners pai the aforestate amount on an installment basis & they were given by prvt. resps no less than M e+tensions of time to pay their obligation. %hese transactions took place uring the pen ency of the motion for recon. of the or er of the trial court ate 8/4L/M5, uring the pen ency of the petition for certiorari before the IAC & after the filing of the petition bef. 6s. %his answers the claim of the resps. on the failure of the petitioners to present evi ences or proofs of payment in the lower court & the appellate court.

#5A S. 8AP *?9 P R>?0 )O A76O) C8 S5CS(P5()7 A%&((4()7 AAC%<: Aua Cam #u, (u gment,Cr of Sap Aauco an Sap <ingco, agree subse-uently to e+ecution of a mortgage in his favor by the Saps of a camarin plus re uction of ebt to 2,4== payable in 8 installments3 that in case of efault they wu pay balance plus the iscounte amount an 2=V attys fees. I(2': %he SapPs liability un er the (u gment has been e+tinguishe by the new agreement. Although the mortgage i not e+pressly cancel the ol obligation, this was implie ly novate by reason of incompatibility resulting fr. the fact that, whereas the (u gment was for D2,N5M.=8 payable at one time, i not provi e for attorney.s fees, & was not secure , the new obligation is for D24== payable in installments, stipulates for attorney.s fees & is secure by a mortgage. %he later agreement i not merely e+ten the time to pay the (u gment, bec. it was therein recite that appellants promise to pay D2,4== to appellee as a settlement of the sai (u gment. <ai (u gment cannot be sai to have been settle , unless it was e+tinguishe . 77 Aoreclosure of such new mortgage un er the (u gment in the ol & was V"IH. SA)'6!O S. P6%56)% *9R S /RR0 AAC%<: <ps. <an ico an %imbol as rep of :st of <i+ta Daras obtaine (u gment in their favor against Hesi erio Daras for the recog of easement an payment of amages3 the (u gment ebt was later on agree by them to be re uce an was subse- pai by ef. 0hen the sps eman e for performance of the part of (u gment abt the recof of easement, they eman e that ef rebuil & reconstruct the irrigation canal in its original imensions. 0hen ef,refuse , sps.aske court a -uo in a motion for e+ec 4compel them or hol them in contempt.Alias writ of e+ec was issue whc was later on appeal was or ere -uashe by the CA bec. %he parties ?novate by subse-. Agreement@ the (u gment in -uestion, thus there is nothing more to be e+ecute . I<<6:: 0"G CA erre in -uashing the alias writ of e+ec /t its interpret. %hat the subse- agreement e+tingusih efPs & on (u gment of court a -uo I:#H: G". CA was not in grave abuse of isc. No1+t&on %esu(ts &n 2 st&<u(+t&ons )2* to e+tinguish an e+isting obligation, an )4* to substitute a new one in its place. Aun amental it is that novation effects a substitution or mo ification of an obligation by another or an e+tinguishment of one obligation by the creation of another. In the case at han , we fail to see what new or mo ifie obligation arose out of the payment by the resp. of the re uce amount of D8,=== & substitute the monetary liability for DL,=== of the sai resp.

63

P(OP2(3S CA)D S. S8 (23S *,@9 S R9?0 BA%I": 1hen does novation taFe placeB )ovation is never presumed. Absence of e$istence of an e$plicit novation nor incompatibility between the old H the new agreements. )ovation was not intended in the case at bar as the &(4 was taFen as additional security for the performance of the contract. +f objective novation is to ta#e place, it is essential that the new obligation e@pressly declare that the old obligation is to be e@tinguished or that the new obligation be on every point incompatible w4 the old one. +++ AAC%<: Action for foreclosure of chattel mortgage e+ecute in favor of the plaintiff by the ef. <yvel.s Inc. on its stocks of goo s, personal properties an other materials owne by it an locate at its stores or warehouses. %his chattel mortgage was uly registere in BH of Eanila an Dasay City, in connection with a '%e/&t 'o77e%'&+( (&ne in the amount of ?M!!G grante to <yvelPs3 efen ants Antonio & Angel V. <yyap guarantee absolutely an uncon itionally an without the benefit of e+cussion the full an prompt payment of any in ebte ness to be incurre on account of the sai cre it line. 1 failure of <yvelsP to pay in accor w/terms an con itions of the Co77e%'&+( C%e/&t A-%ee7ent bank starte to foreclose e+tra(u icially the chattel mortgage but was not pushe thru after <yvelPs attempte to settle. As no payment was ma e, this case was file in Court. Huring its pen ency, <yyap propose to have the case settle amicably an to that en a conference was hel in which Er. Antonio e las Alas, Fr., VD of the Bank, plaintiff, efen ant Antonio V. <yyap an Atty. Een o;a were present. Er. <yyap re-ueste that the plaintiff ismiss this case because he i not want to have the goo will of <yvel.s Incorporate impaire , an offere to e+ecute a B:E on his property in Bacoor. Er. He las Alas consente , an so the B:E. I<<6:: 0"G on the groun that by the e+ecution of sai real estate mortgage, the obligation secure by the chattel mortgage sub(ect of this case was novate , an therefore, appellee.s cause of action thereon was e+tinguishe . OEL#" No1+t&on t+8es <(+'e F;en t;e o,.e't o% <%&n'&<+( 'on/&t&on o2 +n o,(&-+t&on &s ';+n-e/ o% +(te%e/. It &s e(e7ent+%0 t;+t no1+t&on &s ne1e% <%esu7e/4 &t 7ust ,e eI<(&'&t(0 st+te/ o% t;e%e 7ust ,e 7+n&2est &n'o7<+t&,&(&t0 ,et. t;e o(/ H t;e neF o,(&-+t&ons &n e1e%0 +s<e't. In the case at bar, there is nothing in the B:E w/c supports appellants. submission. %he contract on its face oes not show the e+istence of an e+plicit novation nor incompatibility on every point bet. the ol & the new agreements as the secon contract evi ently in icates that the same was e+ecute as new a itional security to the CE previously entere into by the parties. Becor s show that in the real estate mortgage, appellants agree that the chattel mortgage !shall remain in full force an shall not be impaire by this )real estate* mortgage.! It is clear, therefore, that a novation was not inten e . %he real estate mortgage was evi ently taken as a itional security for the performance of the contract ,. $ORMS O$ NOVATION" A%t. 1281. Compensation may be total or partial. 0hen the two ebts are of the same amount, there is a total compensation. )Classmates, I think there was a typo error in EaPam BubblesP outline. I think this shoul have been Art. 24K2, repro uce below* 1. Su,st&tut&on o2 /e,to%@@ A%t. 12A*. %he cre itor is not boun to accept payment or performance by a thir person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary. 0hoever pays for another may eman fr. the ebtor what he has pai , e+cept that if he pai w/o the knowle ge or against the will of the ebtor, he can recover only insofar as the payment has been beneficial to the ebtor. A%t. 12AJ. 0hoever pays on behalf of the ebtor w/o the knowle ge or against the will of the latter, cannot compel the cre itor to subrogate him in his rights, such as those arising fr. a mortgage, guaranty, or penalty. A%t. 18A) se'on/ <+%+-%+<;

A partner is ischarge fr. any e+isting liability upon issolution of the partnership by an agreement to that effect between himself, the partnership cre itor & the person or partnership continuing the business3 & such agreement may be inferre fr. the course of ealing between the cre itor having knowle ge of the issolution & the person or partnership continuing the business. P)C S. 4A22A&6 #A!7S: Hef borrowe fr. DGB & this loan was secure by a chattel mortgage on his stan ing crop. Eallari efaulte so the sacks of rice eposite in a warehouse were attache . Juan;on, efen antPs :r, offere to pay the obli of the latter. %his was accepte by DGB so the attachment was later lifte . Juan;on efaulte in his payment so DGB sue the ef on the same obligation. %he #C ismisse the comp on the groun that there was novation brought about by the alteration of the principal con itions of the original obli & the substitution of a news ebtor. I(2': %he acceptance of DGB of the offer of J to pay un er the terms specifie by him constitute not only a substitution of the ebtor but an alteration or mo ification of the terms & con itions of the original U. E22e't o2 &nso(1en'0 o2 neF /e,to%@@ A%t&'(e 12MC. If the substitution is w/o the knowle ge or against the will of the ebtor, the ebtorPs insolvency or non,fulfillment of the obligation shall not give rise to any liability on the part of the original ebtor. A%t. 12M). %he insolvency of the new ebtor, who has been propose by the original ebtor & accepte by the cre itor, shall not revive the action of the latter against the original obligor, e+cept when sai insolvency was alrea y e+isting & of public knowle ge, or known to the ebtor, when he elegate his ebt. 2. C;+n-e o2 ?%&n'&<+( Con/&t&on o% O,.e't A. Su,%o-+t&onESu,.e't&1e No1+t&on +. In '+se o2 +'t&1e su,.e't&1e no1+t&on A%t. 1A!!. <ubrogation of a thir person in the rights of the cre itor is either legal or conventional. %he former is not presume , e+cept in cases e+pressly mentione in this Co e3 the latter must be clearly establishe in or or er that it may take effect. Le-+( :A%t. 1A!2* In all cases of Art. 25=4, subrogation takes place by operation of law. A%t. 1A!2. It is presume that there is legal subrogation: )2* 0hen a cre itor pays another cre itor who is preferre , even w/o the ebtor.s knowle ge3 )4* 0hen a thir person, not intereste in the obligation, pays w/ the e+press or tacit approval of the ebtor3 )5* 0hen, even w/o the knowle ge of the ebtor, a person intereste in the fulfillment of the obligation pays, w/o pre(u ice to the effects of confusion as to the latter.s share3 !onventional) !ontractual (Art. 1#61" (onsent of the 5 parties %old creditor, debtor & new creditor) are re- ired. A%t. 1A!1. Conventional subrogation of a thir person re-uires the consent of the original parties & of the thir person. K" Is &t <oss&,(e 2o% + '%e/&to% to t%+ns2e% ;&s '%e/&t FEo 'onsent o2 t;e /e,to%L A: Ses. But this is not novation but an assignment of rights un er Art. 2L48. Assignment is also a novation but much simpler. But is not subrogation.

64

GIN#S O$ NOVATION" +. Le-+( A%t. 1A!2. It is presume that there is legal subrogation: :1= W;en + '%e/&to% <+0s +not;e% '%e/&to% F;o &s <%e2e%%e/ e1en FEo t;e /e,to%Qs 8noF(e/-e4 :2= W;en + t;&%/ <e%son not &nte%este/ &n t;e o,(&-+t&on <+0s FE t;e eI<%ess o% t+'&t +<<%o1+( o2 t;e /e,to%4 :A= W;en e1en FEo t;e 8noF(e/-e o2 t;e /e,to% + <e%son &nte%este/ &n t;e 2u(2&((7ent o2 t;e o,(&-+t&on <+0s FEo <%e.u/&'e to t;e e22e'ts o2 'on2us&on +s to t;e (+tte%Qs s;+%e4 A%t. 11JJ. %he cre itors, after having pursue the property in possession of the ebtor to satisfy their claims, may e+ercise all the rights & bring all the actions of the latter for the same purpose, save those w/c are inherent in his person3 they may also impugn the acts w/c the ebtor may have one to efrau them. :Con1ent&on+( Re/e7<t&on= A%t. 1*1!. %he cre itors of the ven or cannot make use of the right of re emption against the ven ee, until after they have e+hauste the property of the ven or. A%t. 1J2M. %hose who put their labor upon or furnish materials for a piece of work un ertaken by the contractor have an action against the owner up to the amount owing fr. the latter to the contractor at the time the claim is ma e. Iowever, the following shall not pre(u ice the laborers, employees & furnishers of materials: )2* Dayments ma e by the owner to the contractor before they are ue3 )4* Benunciation by the contractor of any amount ue him fr. the owner. T;&s +%t&'(e &s su,.e't to t;e <%o1&s&ons o2 s<e'&+( (+Fs" :Ass&-n7ent o2 C%e/&ts H Ot;e% In'o%<o%e+( R&-;ts= A%t. 1*2M. In case the assignor in goo faith shoul have ma e himself responsible for the solvency of the ebtor, & the contracting parties shoul not have agree upon the uration of the liability, it shall last for one year only, fr. the time of the assignment if the perio ha alrea y e+pire . If the cre it shoul be payable w/in a term or perio w/c has not yet e+pire , the liability shall cease one year after the maturity. A%t. 22!J. If the plaintiff.s property has been insure , & he has receive in emnity fr. the insurance company for the in(ury or loss arising out of the wrong or breach of contract complaine of, the insurance company shall be subrogate to the rights of the insure against the wrong oer or the person who has violate the contract. If the amount pai by the insurance company oes not fully cover the in(ury or loss, the aggrieve party shall be entitle to recover the eficiency fr. the person causing the loss or in(ury. 2. E22e't" A%t. 1A!C. A cre itor, to whom partial payment has been ma e, may e+ercise his right for the remain er, & he shall be preferre to the person who has been subrogate in his place in virtue of the partial payment of the same cre it. A%t. 1A!A. <ubrogation transfers to the person subrogate the cre it w/ all the rights thereto appertaining, either against the ebtor or against thir persons, be they guarantors or possessors of mortgages, sub(ect to stipulation in a conventional subrogation. ,. ?+ss&1e Su,.e't&1e No1+t&on :Su,st&tut&on o2 t;e /e,to%= A%t. 12MA. Govation w/c consists in substituting a new ebtor in the place of the original one, may be ma e even w/o the knowle ge or against the will of the latter, but not w/o the

consent of the cre itor. Dayment by the new ebtor gives him the rights mentione in articles 245L & 245O. A%t. 12A*. %he cre itor is not boun to accept payment or performance by a thir person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary. 0hoever pays for another may eman fr. the ebtor what he has pai , e+cept that if he pai w/o the knowle ge or against the will of the ebtor, he can recover only insofar as the payment has been beneficial to the ebtor. A%t. 12AJ. 0hoever pays on behalf of the ebtor w/o the knowle ge or against the will of the latter, cannot compel the cre itor to subrogate him in his rights, such as those arising fr. a mortgage, guaranty or penalty. &O'&6%5(A . &(8(S I(2': By buying the property covere by %C% Go. 8MKOK w/ notice that it was mortgage , resp. Hualan only un ertook either to pay or else allow the lan .s being sol if the mortgage cre itor coul not or i not obtain payment fr. the principal ebtor when the ebt mature . Gothing else. Certainly, the buyer i not obligate himself to replace the ebtor in the principal obligation, & he coul not o so in law w/o the cre itor.s consent. )Art. 24K5* %he obligation to ischarge the mortgage in ebte ness therefore, remaine on the shoul ers of the original ebtors & their heirs, petitioners herein, since the recor is evoi of any evi ence of contrary intent. +++ A%t. 18A). III A partnership is ischarge fr. any e+isting liability upon issolution of the partnership by an agreement to that effect between himself, the partnership cre itor & the person or part, nership continuing the business3 & such agreement may be inferre fr. the course of ealing between the cre itor having knowle ge of the issolution & the person or partnership continuing the business. [B+(+ne] ?+ss&1e Su,.e't&1e No1+t&on@@ A%t&'(es 12MA H 12M) Art. 24K5 talks of e$promission )not upon the ol ebtor.s initiative. It coul be upon the initiative of the cre itor or of the new ebtor.* Art. 24KN talks of delegacion )change at the ol ebtor.s initiative.* In e@promission, the change in the person of the ebtor is not upon the initiative of the ol ebtor, whether or not he gave his consent. As soon as a new ebtor & cre itor agree, novation takes place. In both cases, the intent of the parties must be to release the ol ebtor.

W;+t &s t;e /&22e%en'e &n e22e't ,etFeen e$promission H delegacionQ In e$promission, the release of the ol ebtor is absolute )even if it turns out that the new ebtor is insolvent.* In delegacion, the release of the ol ebtor is not absolute. Ie may be hel liable )2* if the new ebtor was alrea y insolvent at the time of the delegacion3 & )4* such insolvency was either known to the ol ebtor or of public knowle ge.

Cases of e@promission are -uite rare. E22e't o2 No1+t&on A%t. 12M*. 0hen the principal obligation is e+tinguishe in conse-uence of a novation, accessory obligations may subsist only insofar as they may benefit thir persons who i not give their consent. [B+(+ne] E22e't o2 no1+t&on +s to +''esso%0 o,(&-+t&ons Accessory obligations may subsist only insofar as they may benefit thir persons who i not give their consent, e.g., stipulation pour atrui

65

Gene%+( %u(e: In a novation, the accesory obligation is e+tinguishe . EI'e<t&on: In an active sub(ective novation, the guarantors, ple gors, mortgagors are not release . #ook at Art. 25=5, accessory obligations are not e+tinguishe . <o there is a conflict. OoF /o 0ou %eso(1eL Accor ing to commentators, Art. 25=5 is an e+ception to Art. 24KL. A%t. 12MJ. If the new obligation is voi , the original one shall subsist, unless the parties inten e that the former relation shoul be e+tinguishe in any event. A%t. 12M8. %he novation is voi if the original obligation was voi , e+cept when annulment may be claime only by the ebtor, or when ratification vali ates acts w/c are voi able. A%t. 12MM. If the original obligation was sub(ect to a suspensive or resolutory con ition, the new obligation shall be un er the same con ition, unless it is otherwise stipulate .

A%t. 1M*!. If the borrower pays interest when there has been no stipulation therefor, the provisions of this Co e concerning solutio in ebiti, or natural obligations, shall be applie , as the case may be. A%t. 1M)*. Go interest shall be ue unless it has been e+pressly stipulate in writing.

VILLAROEL 1. ESTRA#A

ANSAY 1. N#C

O. NATURAL OBLIGATIONS 9 ARTS. 1C2A@1CA!. 11)) A%t. 1C2A. "bligations are civil or natural. Civil obligations give a right of action to compel their performance. Gatural obligations, not being base on positive law but on e-uity & natural law, o not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authori;e the retention of what has been elivere or ren ere by reason thereof. <ome natural obligations are set forth in the following articles. A%t. 1C2C. 0hen a right to sue upon a civil obligation has lapse by e+tinctive prescription, the obligor who voluntarily performs the contract cannot recover what he has elivere or the value of the service he has ren ere . A%t. 1C2). 0hen w/o the knowle ge or against the will of the ebtor, a thir person pays a ebt w/c the obligor is not legally boun to pay bec. the action thereon has prescribe , but the ebtor later voluntarily reimburses the thir person, the obligor cannot recover what he has pai . A%t. 1C28. 0hen, after an action to enforce a civil obligation has faile , the efen ant voluntarily performs the obligation, he cannot eman the return of what he has elivere or the payment of the value of the service he has ren ere . A%t. 1C2M. 0hen a testate or intestate heir voluntarily pays a ebt of the ece ent e+cee ing the value of the property w/c he receive by will or by the law of intestacy fr. the estate of the ecease , the payment is vali & cannot be rescin e by the payer. A%t. 1CA!. 0hen a will is eclare voi bec. it has not been e+ecute in accor ance w/ the formalities re-uire by law, but one of the intestate heirs, after the settlement of the ebts of the ecease , pays a legacy in compliance w/ a clause in the efective will, the payment is effective & irrevocable.

#B? 1. CON$ESSOR"

66

67