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Non Ducor Duco


Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
Annotations. Cases are chosen under the wisdom of Atty.

1. It must be physically possible

2. Determinate or determinable
3. Must have its equivalent in money
(includes sanctions for violations of
rights i.e. Nominal or moral damages)


4. Juridical Tie

(Vinculum/Legal Tie)

-Object which binds the Parties

Sources of Juridical Tie:
1. Law
2. Unilateral Acts i.e. Quasi-Delict, Crime
3. Bi-Lateral Acts


-Civil Obligation

Civil Law the Branch of law which deals with the

relationship of its citizen to one another (PARAS

-Also known as Perfected Obligations, those

which are enforceable in Courts of Law


-Natural Obligations

A. Definition of Obligation

-Those which are not being based on positive

law but on equity and natural law, do not grant a right of
action to enforce their performance, but after voluntary
fulfilment by the obligor, they authorize retention of what
has been delivered by reason thereof.

A juridical necessity to give, to do, or not to do

(Art. 1156)
A juridical relation whereby a person may
demand from another, the observance of a determinate
conduct and in case of breach may demand satisfaction
from another
(a complete definition as it emphasizes the right
of the active subject and the obligation of the passive

-Natural obligations (i.e. obligations which has

prescribed) is a sufficient consideration to bind a person
under a contract
ANSAY vs. NDC G.R. No. 13667

B. Elements of an Obligation
1. Active Subject (Obligee/Payee/Creditor)

Plaintiffs prayed that the court order their employers to

give them a 20% Christmas bonus all the while
recognizing that it is not legally bound to do so

- Possessor of the right to demand


-The one who can enforce the obligation in court

An element of natural obligation before it can be

cognizable by the court is voluntary fulfillment by the
obligor. Certainly retention can be ordered but only after
there has been voluntary performance. But here there
has been no voluntary performance. In fact, the court
cannot order the performance.

2. Passive Subject (Obligor/Payor/Debtor)

-Has the duty to give, to do or not to do
-The one against whom the obligation may be enforced
3. Prestation (Object/Fact)
- The subject matter of the obligation
- The conduct necessary of the debtor
(Tolentino: It is only conduct as the oblige does
not enforce ownership over the subject but instead the
specific performance of delivering to him the subject
Requirements of Prestation:

Development Bank of the Philippines vs. Confessor G.R.

No. L-48889 May 11, 1989
Respondents executed a promissory note in 1940 in
payment of their loan. As the obligation remained unpaid
in 10 years Respondent once again issued a secondary
promissory note expressly acknowledging the said loan
and promising to pay the same before 1961

Non Ducor Duco


Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim

I. Negotorium Gestio Unauthorized Management

There is no doubt that prescription has set in as to the

first promissory note of February 10, 1940. However,
when respondent Confesor executed the second
promissory note on April 11, 1961 whereby he promised
to pay the amount covered by the previous promissory
note on or before June 15, 1961, and upon failure to do
so, agreed to the foreclosure of the mortgage, said
respondent thereby effectively and expressly renounced
and waived his right to the prescription of the action
covering the first promissory note.
A new express promise to pay a debt barred will take the
case from the operation of the statute of limitations as this
proceeds upon the ground that as a statutory limitation
merely bars the remedy and does not discharge the debt,
there is something more than a mere moral obligation to
support a promise, to wit a pre-existing debt which is a
sufficient consideration for the new the new promise;
upon this sufficient consideration constitutes, in fact, a
new cause of action.
Positive- Negative
Real- Personal
Principal- Accessory
Unilateral- Bi-Lateral

1. Law
-Rule of conduct, promulgated by competent authority for
the common good of the people

II. Solutio Indebiti Mistake in Payment


- A meeting of the minds between two parties whereby

one binds himself, with respect to the other, to give
something, or to render some service
-Stipulations have the force of law between the parties
and must be complied with in good faith
3. Quasi- Contracts
-Juridical relations arising from Lawful, Voluntary and
Unilateral acts, by virtue of which the parties become
bound to each other, based on the principle that no one
shall be unjustly enriched at the expense of the other
-Its characteristics distinguishes itself from other sources
of obligation, Lawful distinguishes itself from Crime,
Voluntary distinguishes itself from Quasi-Delict and
Unilateral distinguishes itself from Contracts
Kinds of Quasi- Contracts

When a person unduly delivers a thing

through mistake whereby the latter has no
right to demand it

III. Other Quasi-Contracts

i. Payment by a third person of:
-Debts without the knowledge of the
-Funeral expenses
-Services of physician during an
accident or illness
-In cases of emergency when he
saves the property of another
-expenses of another as a measure of
protection against lawlessness, or other
calamity in a small community
ii. Payment of services to the government upon
assumption during the failure of a person to render the
necessary works under health or safety regulations
concerning property
iii.. Commingling of property during an accident
or fortuitous event
iv. Rights of a finder of lost property

-Are not presumed and must be clearly expressed

(Necessarily presents a burden thus the Bill of Rights
shall apply)
2. Contracts

Juridical relations which arise whenever a

person voluntarily takes charge of the
management of another persons property
without his authority (There must
necessarily be abandonment by the owner)

v. Rights of a possessor in good faith

Cruz vs. Tuazon & Co. G.R. No. L-23749 April 29, 1977
Plaintiff seeks to reimburse himself of the
permanent improvement on a 50 hectare land that it has
made upon request of the Deudor family, which land is
now owned by the defendant. Defendant claims that it is
not a privy to the contract thus the action should not be
directed to him but to the Duedor instead. Plaintiff
however contends that it is benefitting from the
improvement it has made and thus is unjustly enriching
himself and thus based his action on Quasi-Contract
A presumed quasi-contract cannot emerge as
against one party when the subject matter thereof is
already covered by an existing contract with another
party. Predicated on the principle that no one should be
allowed to unjustly enrich himself at the expense of
another, Article 2124 creates the legal fiction of a quasi-

Non Ducor Duco


Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
contract precisely because of the absence of any actual
agreement between the parties concerned.
The act is voluntary because the actor in quasi-contracts
is not bound by any pre-existing obligation to act. It is
unilateral, because it arises from the sole will of the actor
who is not previously bound by any reciprocal or bilateral

was in doubt whether the debt was due, he may recover if

he proves that it was not due" (Art. 2156, NCC).
Petitioner had duly proved that taxes were not lawfully
due. There is, therefore, no doubt that the provisions of
solutio indebtiti, the new Civil Code, apply to the admitted
facts of the case.

Adille vs. C.A.

The plaintiffs mother sold a piece of land on a
pacto de retro sale. After her death defendant redeemed
the land and executed an affidavit representing himself to
be the sole heir. Plaintiffs heirs of the deceased mother
filed the present case for partition claiming that defendant
acted only as an implied trustee, thus they too shall
receive a part of the land claimed. Defendant claims that
in claiming the land he acted as an inofficious manager
under negotorium Gestio
In order to constitute Negotorium Gestio the act must be
for the benefit of others. He cannot be said to have
assumed the management of the property abandoned by
the others
Andres vs. Mantrust

4. Delicts
-Governed by Penal Laws, Art. 2177, and Chapter on
Art. 100 Every person criminally liable shall also be
civilly liable
Exception: Crimes with no offended parties such
as Contempt, Treason, Rebellion
Pre-Contractual Obligation- A breach of promise shall
be actionable under Art. 19 for damages
-Offer must be clear and definite
- Offeree in good faith incurs expenses in
expectation of the promise
-Withdrawal must be without any legitimate

Due to the delay of the receipt of payment

private respondent bank mistakenly order a secondary
payment of the amount of P10,000 which the petitioner
refuses to return the amount claiming that the petitioners
client is still indebted to him thus he is not unjustly

-Fault or negligence of a person, arising from his acts or

omission, independent from any pre-existing contractual
relations, which causes damage to another


-Governed by chapter on Quasi-Delict and Special Laws

Private respondent has a right to be reimbursed

the amount mistakenly credited to Petitioner. The
requisites of Mistake of payment are (1) that he who paid
was not under obligation to do so; and, (2) that payment
was made by reason of an essential mistake of fact. The
private respondent is not privy between Petitioners client
and the petitioner as it is merely a bank which was
ordered to reimburse money. Even if the transaction was
attendant with negligence a common law rule that the
negligence must be borne by its actor cannot be applied
when there is an express law covering the transaction.

5. Quasi- Delicts

Requisites of Quasi-Delict:
-Wrongful act or omission brought
about by Fault or negligence
-Damage suffered or incurred
-Relation of cause and effect
A. Fault
-wilfulness or deliberate intent to cause damage
or injury to another,

Puyat & Sons vs. Manila G.R. No. L-17447 April 30,

B. Negligence

Petitioner seeks to reimburse himself the tax erroneously

payed as it later found out that it was exempt from the
payment of retail taxes

-Failure to observe for the protection of the

interests of another person, that degree of care,
precaution and vigilance which the circumstances justly
demand whereby such other persons suffer injury

Petitioner categorically stated that the payment
was not voluntarily made, but on the erroneous belief,
that they were due. Under this circumstance, the amount
paid, even without protest is recoverable. "If the payer

-Simply, Failure to observe the diligence

required by law
Requirement of Negligence:

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
1. Duty on the part of the defendant to protect
the plaintiff from the injury complained of
2. Failure to perform that duty
3. Injury was brought about by such failure

Non Ducor Duco


Breach of Contract
Pre-existing Contract

Proximate Cause
-that cause, which in the natural and continuous
sequence unbroken by any efficient intervening cause
produces the injury and without which the results would
not have occurred
Concurrent cause
-If two causes operate at the same time to
produce to produce a result which might be produced by
either independently of the other = both of them are
equally liable
- If the two causes are successive and unrelated
in their operation, one of them must be proximate and the
other is remote = One is the proximate cause and the
other is remote
- If the two causes unrelated in their operation
both contribute to the injury, one of them as a direct
cause and the other merely furnishing the condition or
giving rise to the occasion by which the injury was made
possible = The former alone is liable

Question of Negligence depends upon the circumstances

Picart vs. Smith
Would a reasonable man, in the position of the person to
whom negligence is attributed, foresee harm to the
person injured as a reasonable consequence of the
course about to be pursued?

Civil liability in injuries may come from Criminal liability

under Art. 100 of the RPC or from Quasi-Delict

Defense is only limited to

Fortuitous event or
negligence of the plaintiff
No proof of negligence or
fault is required. Only
required proof is that the
Contract exists and it
was not fulfilled
-Public Interest
-Correctional &
-Scope is only those
defined as crimes
-Criminal intent is
necessary in almost all
-Not all crimes have civil
-Proof beyond
Reasonable Doubt

Fault of Negligence
resulting in Quasi-Delict
No pre-existing contract
but the breach of a
contract may amount to a
quasi-delict if with fault or
Defense of proper
diligence of a good father
in Selection and
Supervision applies
Plaintiff has the burden of
proof in proving
negligence or fault.
Presumption of
Negligence of employer
-Private Concern
-Indemnification and
-Includes all acts of fault
& negligence
-No intent necessary

-Civil liability always

-Mere preponderance of

Culpa Aquiliana Negligence as a source of obligation

Culpa Contractual Negligence in the performance of
Saludaga vs. FEU G.R. No 179337 April 30, 2008

Employers Liability for acts of his employee (Art. 2180)


Civil liability of employer

in Criminal Liability

Civil liability of employer

in Quasi-Delict

-Proceeds from
conviction if the
Employee is insolvent
-Applies only to
employees in Business
or industry only
-Defence of proper
diligence of a good
father in Selection and
supervision does not

-Applies after finding of
-Applies in all cases of
fault or negligence
- Defence of proper
diligence of a good
father in Selection and
supervision applies

Petitioner filed a complaint against the

respondent on grounds that they breached their
obligation to provide students with a safe and secure
environment and an atmosphere conducive to learning
due to an accidental shooting which resulted in injuries to
the petitioner.
Institutions of learning must also meet the
implicit or "built-in" obligation of providing their students
with an atmosphere that promotes or assists in attaining
its primary undertaking of imparting knowledge.
Necessarily, the school must ensure that adequate steps
are taken to maintain peace and order within the campus
premises and to prevent the breakdown thereof
When petitioner was shot inside the campus by
no less the security guard who was hired to maintain

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
peace and secure the premises, there is a prima facie
showing that respondents failed to comply with its
obligation to provide a safe and secure environment to its
students. Having failed to exercise due diligence in
selecting their security guards, they failed to prove that
they ensured that the guards assigned in the campus met
the requirements stipulated in the Security Service
Agreement they are liable to petitioner. Their defense of
Fortuitous event cannot be appreciated absent any proof
that they are not negligent. Furthermore, when the effect
is found to be partly the result of a person's participation whether by active intervention, neglect or failure to act the whole occurrence is humanized and removed from
the rules applicable to acts of God
Orden vs. NACOCO No. L-3756, June 30, 195
Plaintiffs land was acquired by the Japanese
and subsequently acquired by respondent through a
concession granted by the U.S. The land was acquired by
the latter through the Trading with the enemy act. Plaintiff
brought this action in order to recover rentals from the
time defendant occupied the said land.
Plaintiffs claim for rentals before it reclaimed the
land may not be predicated on any negligence or offense
of the defendant-appellant, or any contract, express or
implied. Defendant is neither negligent nor privy to any
contract between petitioner. Neither is it a successor in
interest, having derived its title from law nor is it a trustee
of the plaintiff, as it is a trustee of the government.
Peoples car vs. Commando Security G.R. No. L-12191
October 14, 1918
Plaintiff was a clerk of the Manila Railroad
company. One day when plaintiff was alighting from the
train as it was slowing down one or both of his feet came
in contact with a sack of watermelons with the result that
his feet slipped from under him and he fell violently on the
platform. His body at once rolled from the platform and
was drawn under the moving car, where his right arm was
badly crushed and lacerated. It occurred during night time
as the station was dimly lighted. Defendant claimed that it
was the customary season for harvesting these melons
and a large lot had been brought to the station for the
shipment to the market. He filed the present action
claiming that it was negligent for defendant to place the
watermelons as it posed a menace to passengers
alighting from the train.
A master who exercises all possible care in the
selection of his servant, taking into consideration the
qualifications they should possess for the discharge of
the duties which it is his purpose to confide to them, and
directs them with equal diligence, thereby performs his
duty to third persons to whom he is bound by no
contractual ties, and he incurs no liability whatever if, by
reason of the negligence of his servants, even within the
scope of their employment, such third person suffer
damage. This rule however only holds in liability in quasi-

Non Ducor Duco


delict, the legal liability of the defendant is the contract of

The liability of masters and employers for the
negligent acts or omissions of their servants or agents,
when such acts or omissions cause damages which
amount to the breach of a contact, is not based upon a
mere presumption of the master's negligence in their
selection or control, and proof of exercise of the utmost
diligence and care in this regard does not relieve the
master of his liability for the breach of his contract.
Gutierrez vs. Gutierrez G.R. No. 34840 September 23,
A passenger truck and an automobile of private
ownership collided while attempting to pass each other.
At the time of the collision, the father was not in the car,
but the mother, together will several other members of the
Gutierrez family, seven in all, were accommodated
therein. A passenger in the autobus, by the name of
Narciso Gutierrez, was en route from San Pablo, Laguna,
to Manila. Plaintiff sues both the car driver and the owner
of the truck
The head of a house, the owner of an
automobile, who maintains it for the general use of his
family is liable for its negligent operation by one of his
children, whom he designates or permits to run it, where
the car is occupied and being used at the time of the
injury for the pleasure of other members of the owner's
family than the child driving it.
The liability of Saturnino Cortez, the owner of
the truck, and of his chauffeur Abelardo Velasco rests on
a different basis, namely, that of contract
Mindanao Terminal v. Phoenix Assurance, G.R. No.
162467 May 8, 2009
Del Monte contracted the services of petitioner,
a stevedoring company, to load and stow a shipment of
cartons of bananas and pineapples owned by Del Monte
Produce (different from Del Monte) which was insured.
Upon arrival at the port of Korea it was found that the
Cargo was in bad condition. Respondent insurer filed this
claim for reimbursement
It is the Courts consistent ruling that the act that breaks
the contract may be also a tort. In fine, a liability for tort
may arise even under a contract, where tort is that which
breaches the contract. In the present case, Phoenix and
McGee are not suing for damages for injuries arising from
the breach of the contract of service but from the alleged
negligent manner by which Mindanao Terminal handled
the cargoes belonging to Del Monte Produce. Despite the
absence of contractual relationship between Del Monte
Produce and Mindanao Terminal, the allegation of
negligence on the part of the defendant should be
sufficient to establish a cause of action arising from

Non Ducor Duco


Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
In the absence of any higher degree of diligence
stipulated, it is clear that Mindanao Terminal had duly
exercised the required degree of diligence in loading and
stowing the cargoes, which is the ordinary diligence of a
good father of a family. The loss was shown to be due to
the storm and improper storage wherein it was shown
that there were no spaces between the cargoes.


more importance have for their object the completion of

the latter for which they are indispensable or convenient
Accessions Everything which is produced by a
thing, or which is incorporated or attached thereto, either
naturally or artificially
-Includes only Accession Continua,
Accession Industrial


1. Positive Obligations


1. Generic objects
-Object is designated by its genus only without particular
Delivery of anything belonging to the species
stipulated will be sufficient and he cannot avoid the
obligation by paying damages
-The thing delivered must be neither superior of
inferior quality but acceptance of the creditor shall bind

2. Determinate Objects
- Object is physically segregated from all others of the
same class

Obligation to Give

Obligation to Do

-includes Limited Genus i.e. one of the horses in

As stable
Accessory Obligations:
i. Obligation to preserve the thing/ to take care of
it with the proper diligence of a good father of a family
(Art. 1163)
-Other standards of care
ii. Obligation to deliver the Fruits
Right of the Obligee prior to delivery Personal Right
(Jus in Personam)
-The power belonging to one person to demand
of another, as a definite passive subject, the fulfilment of
a prestation to give to do or not to do

Specific Performance
To rescind or resolve the obligation
Action for damages if specific

To have the obligation performed at the

debtors expense if it is not performed or
even if it is done in contravention of the
tenor of the obligation either by himself or
by a third person (SUBSTITUTE
TO ask that what has been done poorly be
IF the qualifications of the debtor was the
primary consideration of the contract i.e.
Singing- the debtor may only be obliged to
play damages
The court cannot compel the debtor to
perform the work under the penalty of law
as it would amount to INVOLUNTARY
SERVITUDE violative of personal liberty

i.e. A contracted B to fix his laptop, however upon return

of the laptop, it substantially remained unfixed. A has an
option of asking a third person fix the laptop and ask
reimbursement from B for the expenses that he incurred
2. Negative Obligations
Obligation not to do

For the act to be undone at the obligors

expense or damages
There is no delay in Obligation not to do
because Duh
i.e. Obligation not to build a fourth floor

Right of the Obligee after delivery Real right (Jus in Re)

-the power belonging to a person over a specific
thing, without a passive subject individually determined,
against whom such right may be personally exercised
-Direct and enforceable against the whole world

C. Breach of an Obligation Art. 1170

-entitles the offended party to damages
Voluntary Breach

iii. Obligation to deliver the accessions and


I.. Default/Mora Art. 1169

Accessories Those things which, destined for

embellishment, use or preservation of another thing of

-Delay which amounts to non-fulfilment of an


Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
-The demand contemplated by law is such which
shows that the creditors forbearance has ended. Thus, a
mere reminder or a follow up is not an effective demand

Kinds of Delay:
i. Mora solvendi default on the part of the
ii. Mora Accipiendi default on the part of the
creditor or unjust refusal of payment The
remedy is consignation
iii. Compensatio Mora default on both parties
in cases of reciprocal obligations

-Effects: (1) Obligor is liable for the loss of the

thing even in cases of Fortuitous Event (2) He becomes

One where the fulfilment of an obligation by one

party depends upon the fulfilment of the
obligation by the other
One party incurs in delay from the moment the
other party fulfils his obligation
The default of one party compensates the other
- Except when the parties has
set different
dates for their
The Default of one party entitles the party
demanding the obligation to RESCIND or
DEMAND FULFILLMENT of the obligation with
DAMAGES in either case.
- The right to rescind is implied
in reciprocal obligation, such that the party need
not stipulate in their agreement the availment of
such right.
- The right to rescind cannot be
availed of in cases of slight or casual breach as
the law contemplates non-fulfilment of the
The right to rescind (Also called Resolution)
obliges the party to return to each other what
the party may receive by virtue of the obligation
as if the obligation has never existed
Differentiate this from Economic Rescission
which is based on economic damage, under the
Chapter of rescission in CONTRACTS

Non Ducor Duco


-Delay is generally necessary even if a period

has been fixed in the obligation
-Absent any stipulation an obligation is due and
demandable within a reasonable period after the
execution of the contract
Exceptions when Demand is not needed to constituted
i. When there is an express stipulation
ii. Where the law provides i.e. Taxes
iii. From the Nature and Circumstances of the
obligation it appears that the designation of
time was a controlling motive for the
establishment of the obligation
i.e. Wedding Dress, Flowers for Valentine,
Christmas tree, A loan constituted to fulfil another
iv. When demand would be useless, as when
the obligor has rendered it beyond his power
to perform
i.e. A bound himself to deliver to B a car 3 years
from today. A knowingly destroyed the car he was
supposed to deliver to B. B is not obliged to wait for the 3
year period in order to bring an action for damages
Cases for Rescission:

liable for damages

Requisites of Delay:
i. the obligation is due and demandable
ii. There is a judicial or extra-judicial demand
iiil Obligor fails to comply with the obligation
despite demand
-Fruits which arise after delay is owned by the creditor
A obliged himself to deliver a cow on June 1 to B. On
June 2. The cow produces an offspring. B demanded on
June 3 that the cow be delivered to him together with the
cow. Is B correct?
No, B cannot compel A to deliver the offspring of
the cow. Delay only arises once there has been a judicial
or extra-judicial demand which in this case was only
made on July 3, a day after the offspring was produced.

Cases for Rescission:

Unlad vs. Dragon G.R. No. 149338 July 25, 2008
Plaintiffs-Respondent and petitioner entered into
a Memorandum of Agreement wherein respondent shall
allow petitioner to invest 4.8M in their rural bank and pay
up immediately the amount of 1.2M. Respondents filed
for rescission for the return of control of the rural bank.
They claim that the action for rescission has already
prescribed because it is not the general rule on
prescription which should apply but instead Art. 1389 on
the chapter on rescission
This is an erroneous proposition. Article 1389
specifically refers to rescissible contracts as, clearly, this
provision is under the chapter entitled "Rescissible
Contracts." It applies to rescissible contracts, as

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim

Non Ducor Duco


enumerated and defined in Articles 1380 and 1381. We

must stress however, that the "rescission" in Article 1381
is not akin to the term "rescission" in Article 1191 and
Article 1592. In Articles 1191 and 1592, the rescission is a
principal action which seeks the resolution or cancellation
of the contract while in Article 1381, the action is a
subsidiary one limited to cases of rescission for lesion as
enumerated in said article.

court that will conclusively and finally settle whether the

action taken was or was not correct in law. But the law
definitely does not require that the contracting party who
believes itself injured must first file suit and wait for a
judgment before taking extrajudicial steps to protect its

Article 1144 specifically provides that the 10year period is counted from "the time the right of action
accrues." The right of action accrues from the moment
the breach of right or duty occurs.


Magdalena vs. Myrick G.R. No. L-47774 March 14, 1941

Petitioner sold to respondent a piece of land for
a sum of money to which respondent issued a promissory
note. Due to the inability of the respondent to pay the
sum of instalment, the petitioner notified him that they are
cancelling the contract. Defendant filed an action for the
return of his money already paid to which Petitioner
avered that the contract was still in effect thus,
respondent should be made to pay the unpaid balance.
Petitioner states that the cancelation was just a mere
notification and that cancellation to produce any effect
must be agreed upon by both parties.
The contract of sale, contract SJ-639, contains
no provision authorizing the vendor, in the event of failure
of the vendee to continue in the payment of the stipulated
monthly installments, to retain the amounts paid to him on
account of the purchase price. The claim, therefore, of
the petitioner that it has the right to forfeit said sums in its
favor is untenable. Under article 1124 of the Civil Code,
however, he may choose between demanding the
fulfillment of the contract or its resolution. These
remedies are alternative and not cumulative, and the
petitioner in this case, having to cancel the contract,
cannot avail himself of the other remedy of exacting
performance. Petitioner choosing to rescind the contract,
he cannot now enforce its performance simply because
there is no more contract to enforce
U.P. vs. De Los Angeles G.R. No. L-28602 September
29, 1970
Petitioner and ALUMCO entered into an a
logging agreement, the respondent failed to pay the
amount stated and upon request by the UP for rescission,
it executed an acknowledgment of its debt which stated
therein that the contract may be rescinded without the
necessity of judicial suit. UP informed the respondent of
its decision to rescind the contract upon its failure to
further pay its obligation. Respondent cited jurisprudence
that a rescission may only be decreed by the Court
the party who deems the contract violated may
consider it resolved or rescinded, and act accordingly,
without previous court action, but it proceeds at its own
risk. For it is only the final judgment of the corresponding

Palay vs. Clave G.R. No. L-56076 September 21, 1983

Petitioner executed a contract to sell in favour of

private respondent wherein it was stipulated that the
contract shall be automatically extra judicially rescinded
upon default in payment of any instalment upon the lapse
of 90 days of the grace period of one month, without need
of notice and with full forfeiture.
Well settled is the rule, as held in previous
jurisprudence, that judicial action for the rescission of a
contract is not necessary where the contract provides that
it may be revoked and cancelled for violation of any of its
terms and conditions. However, even in the cited cases,
there was at least a written notice sent to the defaulter
informing him of the rescission.
The act of a party in treating a contract as
cancelled should be made known to the other. The
contention that private respondent had waived his right to
be notified under paragraph 6 of the contract is neither
meritorious because it was a contract of adhesion, a
standard form of petitioner corporation, and private
respondent had no freedom to stipulate. A waiver must be
certain and unequivocal, and intelligently made; such
waiver follows only where liberty of choice has been fully
accorded. Moreover, it is a matter of public policy to
protect buyers of real estate on installment payments
against onerous and oppressive conditions. Waiver of
notice is one such onerous and oppressive condition to
buyers of real estate on installment payments.
Furthermore, It would be most inequitable if
petitioners were to be allowed to retain private
respondent's payments and at the same time appropriate
the proceeds of the second sale to another.
Angeles vs. Calasanz G.R. No. L-42283 March 18, 1985
Apellants entered into a contract to sell in favour
of the Apellee. Apellants accepted and received on
numerous occasions delayed instalment payments from
the plaintiffs. Defendants demanded the remittance of
the past due accounts and upon failure thereof
demanded cancellation of the contract.
The breach of the contract adverted to by the
defendants-appellants is so slight and casual when we
consider that apart from the initial downpayment of
P392.00 the plaintiffs-appellees had already paid the
monthly installments for a period of almost nine (9) years.
In other words, in only a short time, the entire obligation
would have been paid. Furthermore, although the
principal obligation was only P 3,920.00 excluding the 7

Non Ducor Duco


Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
percent interests, the plaintiffs- appellees had already
paid an aggregate amount of P 4,533.38. To sanction the
rescission made by the defendants-appellants will work
injustice to the plaintiffs- appellees. It would unjustly
enrich the defendants-appellants.
When the defendants-appellants, instead of
availing of their alleged right to rescind, have accepted
and received delayed payments of installments, though
the plaintiffs-appellees have been in arrears beyond the
grace period mentioned in paragraph 6 of the contract,
the defendants-appellants have waived and are now
estopped from exercising their alleged right of rescission.

-Entitles the party to Damages

III. Negligence
-Omission or absence of due care required by
the parties
-In the absence of any stipulation by the parties,
the standard of care shall be Diligence of a good father of
a family. Other standards of care:
Utmost diligence Banking transactions
Extraordinary diligence Contract of Carriage

Pilipinas Bank vs. IAC G.R. No. L-67881 June 30, 1987
Petitioner sold to Private respondents a piece of
land covered by a contract to sell wherein the contract
was to be rescinded automatically upon failure to pay
three monthly instalments. The respondents were in
arrears for 19 months to which petitioners simply sent a
demand letter. Upon the arrear of 20 months petitioner
stated that it shall be constrained to avail of the automatic
rescission clause. Respondent payed after the demand,
but after some time failed again to pay its arrears. After
almost three years, petitioner wrote to the respondent
reminding him of his liability. And after two years
thereafter, it wrote a letter to respondent informing them
that the contract has been rescinded.

In cases of:
Bad faith
-liable for all damages attributed to
Good faith
-liable only for natural and probable
consequences which could be foreseen
IV. Loss
-A thing is lost when it perishes, goes out of
commerce, or disappears in such a manner that its
existence is unknown or it cannot be recovered
V. Contravenes in any manner the tenor of the obligation

While it is true that a contractual provision
allowing "automatic rescission" (without prior need of
judicial rescission, resolution or cancellation) is VALID,
the remedy of one who feels aggrieved being to go to
Court for the cancellation of the rescission itself, in case
the rescission is found unjustified under the
circumstances, still in the instant case there is a clear
WAIVER of the stipulated right of "automatic rescission,"
as evidenced by the many extensions granted private
respondents by the petitioner. In all these extensions, the
petitioner never called attention to the proviso on
"automatic rescission."


II. Fraud
-Voluntary execution of a wrongful act, or a wilful
omission, knowing and intending the effects which
naturally and necessarily arise from such act or omission
-Any voluntary act which prevents the normal
realization of the prestation. It must be voluntary thus,
good faith is a defense
-Future fraud may not be waived by the parties
as it goes against public policy. But once an action for
Fraud accrues it may then be waived by the offended
Kinds of Fraud
1. During the constitution
-Contract becomes voidable *See chapters on Contract
2. During performance of the obligation

Any illicit act which impairs the strict and

faithful fulfilment of the obligation, or every
kind of defective performance

An event which could not be foreseen or

which although foreseen was inevitable
Mere inconvenience, unexpected
impediments or increased expenses will not
relieve a party from his obligation
Extinguishes totally the obligation
Mere proof of a fortuitous event does not
relieve liability. It must be proven that the
debtor was free from any negligence or lack
of foresight, otherwise the whole event will
be deemed humanized (Sicam vs. CA)

A. Kinds of fortuitous event:

Proper- Acts of God and independent of human
Force Majeure Arises from legitimate
illegitimate acts of persons other than obligor
Extraordinary Could be reasonably foreseen,
but inevitable
B. Requisites of Fortuitous event

Non Ducor Duco


Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
1. Event must be independent of the will of the

I. Enforce against the properties and to exhaust

all his properties

2. Must be unforeseen or even if foreseen is


II. Exercise the right to bring the actions which

the debtor may have (Accion Subrogatoria)

3. Event must render it impossible for the

obligor to fulfil his obligation in a normal manner
4. Obligor must be free from any participation in
any aggravation of any injury of the creditor

-Contemplates a malicious or negligent

inaction of the debtor.
-The debt must be certain, demandable
and liquidated.

C. Exceptions: Circumstances where a party

may be liable for Fortuitous events:

i.e. To substitute him in his action to

recover money against another person

1. Law

III. Impugn acts which debtor may have done to

defraud his creditors (Rescission)

2. Stipulation of the parties

i.e. To invalidate a contract of sale

may fraudulently to conceal properties

3. Obligation is generic (under the principle that

the genus does not perish GENUS NUNQUAM PERIT)
4. Nature of the obligation requires risks
-A contracted B to build a windmill. B
was able to complete the job without any defect but
during a typhoon the windmill was broken. A cannot sue B
because the nature of the windmill building is that it is
built to withstand strong winds
5. When the Loss is due partly to the fault of the
- A obliged himself to deliver B a car in
his garage. A hurricane came and swept the whole
neighbourhood but I was found during the trial that A
failed to store the car in his garage on that day. A is still
6. Obligation arises from the crime
- A stole Bs watch as a result of which
A was convicted of Theft. A was obliged by the court to
return the watch to B but it was lost due to Fortuitous
event. A is still liable to indemnify B
7. When the debtor promised to deliver the
same thing to two or more persons who do not have the
same interest (Art. 1165 Par. 3)
8. Loss occurs after delay

Rights does not cover those which are

personal, non-patrimonial, exempted from execution and
those of public or honorary character.
Sicam vs. CA G.R. No. 159617

August 8, 2007

Respondent pawned her jewellery with petitioner
corporation, which was later on robbed by two armed
men. She filed for indemnification of damages
representing the value of her jewelries to which petitioner
interposed Caso fortuito as a defense
A robbery per se is not a fortuitous event as it
does not foreclose the possibility of negligence. It is
incumbent upon the party interposing such defense that
he did was not negligent. In this case petitioner failed to
prove that he employed the services of a security guard
knowing at the time of 1987 robbery was already
The diligence with which the law requires the
individual at all times to govern his conduct varies with
the nature of the situation in which he is placed and the
importance of the act which he is to perform

D. Instances when there is no liability even if

there is a breach of obligation:
1. Fortuitous event

Solar Harvest, Inc. v. Davao Corrugated Carton Corp.,

G.R. No. 176868 July 26, 2010

2. When the Creditor prevents fulfilment


3. When the Creditor waives the liability

Petitioner entered into an agreement with the

respondent for the production of corrugated carbon
boxes, specifically designed for petitioner. Petitioner
deposited his partial payment. After having been paid,
petitioner claimed that despite his follow-ups he did not
receive the boxes thus he wrote a letter for
reimbursement of his amount. Respondent claimed that
the boxes were already finished and that it was petitioner
who was supposed pick up the boxes in their warehouse.

-Taking of more interest than the Law allows
-Currently suspended

E. Remedy of Creditors

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
In reciprocal obligations, as in a contract of sale,
the general rule is that the fulfillment of the parties
respective obligations should be simultaneous. Hence, no
demand is generally necessary because, once a party
fulfills his obligation and the other party does not fulfill his,
the latter automatically incurs in delay. But when different
dates for performance of the obligations are fixed, the
default for each obligation must be determined by the
rules given in the first paragraph of the present article,19
that is, the other party would incur in delay only from the
moment the other party demands fulfillment of the
formers obligation. Thus, even in reciprocal obligations, if
the period for the fulfillment of the obligation is fixed,
demand upon the obligee is still necessary before the
obligor can be considered in default and before a cause
of action for rescission will accrue.
Evident from the records and even from the
allegations in the complaint was the lack of demand by
petitioner upon respondent to fulfill its obligation to
manufacture and deliver the boxes. The Complaint only
alleged that petitioner made a "follow-up" upon
respondent, which, however, would not qualify as a
demand for the fulfillment of the obligation. Without a
previous demand for the fulfillment of the obligation,
petitioner would not have a cause of action for rescission
against respondent as the latter would not yet be
considered in breach of its contractual obligation.
Even assuming that a demand had been
previously made before filing the present case,
petitioners claim for reimbursement would still fail, as the
circumstances would show that respondent was not guilty
of breach of contract.
Agcaoili vs .GSIS, 165 SCRA 1, G.R. No. L-30056
August 30, 1988
Petitioner applied for a purchase of a house and lot which
was approved by respondent. The approval was subject
to the condition to occupy the house which he found to be
completely uninhabitable. The ceiling, stairs, double
walling, lighting facilities, water connection, bathroom,
toilet kitchen, drainage, were inexistent. Petitioner
refused to make any further payment until GSIS
completed the house.
Under the circumstances there can hardly be
any doubt that the house contemplated was one that
could be occupied for purposes of residence in
reasonable comfort and convenience. There would be no
sense to require the awardee to immediately occupy and
live in a shell of a house. Since GSIS did not fulfill that
obligation, and was not willing to put the house in
habitable state, it cannot invoke Agcaoili's suspension of
payment of amortizations as cause to cancel the contract
between them. It is axiomatic that "(i)n reciprocal
obligations, neither party incurs in delay if the other does
not comply or is not ready to comply in a proper manner
with what is incumbent upon him."
The completion of the unfinished house so that it
may be put into habitable condition, as one form of relief
to the plaintiff Agcaoili, no longer appears to be a feasible

Non Ducor Duco


option in view of the not inconsiderable time that has

already elapsed. That would require an adjustment of the
price of the subject of the sale to conform to present
prices of construction materials and labor. It is more in
keeping with the realities of the situation, and with
equitable norms, to simply require payment for the land
on which the house stands, and for the house itself, in its
unfinished state, as of the time of the contract. (rescission
is a relief for equity)

Telefast vs. Castro G.R. No. 73867 February 29, 1988

The wife and mother of respondent passed
away, on the same day one of the daughters sent a
telegram to his father informing him of his death. The
telegram was not, however, sent. Thus it was only the
daughter who was present during her interment. She thus
filed a suit for damages
Art. 1170 of the Civil Code provides that "those
who in the performance of their obligations are guilty of
fraud, negligence or delay, and those who in any manner
contravene the tenor thereof, are liable for damages." Art.
2176 also provides that "whoever by act or omission
causes damage to another, there being fault or
negligence, is obliged to pay for the damage done."

In the case at bar, petitioner and private respondent Sofia

C. Crouch entered into a contract whereby, for a fee,
petitioner undertook to send said private respondent's
message overseas by telegram. This, petitioner did not
do, despite performance by said private respondent of
her obligation by paying the required charges. Petitioner
was therefore guilty of contravening its obligation to said
private respondent and is thus liable for damages.
We find Art. 2217 of the Civil Code applicable to the case
at bar. It states: "Moral damages include physical
suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock,
social humiliation, and similar injury. Though incapable of
pecuniary computation, moral damages may be
recovered if they are the proximate results of the
defendant's wrongful act or omission."
NPC vs. CA G.R. Nos. 103442-45 May 21, 1993
Plaintiffs sought to recover actual damages for a
flood caused by the negligent release of defendant of a
water dam through the spillways of Angat Dam. That
even with knowledge of the impending typhoon petitioner
failed to exercise due diligence and as a consequence
thereof the town was inundated causing member of the
household, their furniture and animals to drown.
Petitioner as a defense contends that it gave written
notice and that their loss was due to fortuitous event

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
defendants-appellees maintained a reservoir
water elevation even beyond its maximum and safe level,
thereby giving no sufficient allowance for the reservoir to
contain the rain water that will inevitably be brought by
the coming typhoon.
Said notice is ineffectual, insufficient and
inadequate for purposes of the opening of the spillway
gates at midnight It did not prepare or warn the persons
so served, for the volume of water to be released, which
turned out to be of such magnitude, that residents near or
along the Angat River, even those one (1) kilometer away,
should have been advised to evacuate. Said notice was
not thus addressed and delivered to the proper and
responsible officials who could have disseminated the
warning to the residents directly affected.
Thus it has been held that when the negligence of a
person concurs with an act of God in producing a loss,
such person is not exempt from liability by showing that
the immediate cause of the damage was the act of God.
To be exempt from liability for loss because of an act of
God, he must be free from any previous negligence or
misconduct by which that loss or damage may have been
Jimenez vs. City of Manila G.R. No. 71049 May 29, 1987
Petitioner went to Sta. Ana market which was
ankle deep in flood at the time. Thereupon, he was struck
by a nail in an uncovered opening, which he could not
see due to the dirty rain water and caused a one and a
half-inch penetration. He turned ill and was sent to the
hospital where he stayed sick for 20 days due to high
fever. He was confined to crutches for 15 days and even
had to hire a third person to operate his school bus. Thus,
he filed this suit against Respondent City and Asiatic
Integrated Corporation for the injuries petitioner suffered.

Non Ducor Duco


The Philippine Bar Associations contracted the

services of petitioner for the creation of specifications,
plans and designs of their new building which in turn
contracted United Construction for the erection of the
building. HEHE. The building was completed but two
years after a strong earthquake hit and it sustained major
damages unlike its surrounding buildings. Thus, PBA filed
a complaint
The court holding that Petitioner as the architect
was liable stated One who negligently creates a
dangerous condition cannot escape hability for the
natural and probable consequences thereof, although the
act of a third person, or an act of God for which he is not
responsible, intervenes to precipitate the loss.

I. Pure Obligations
- One whose effectivity does not depend upon a
condition or a term
- Immediately demandable or within a
reasonable time (Art. 19)

-One whose effectivity depends upon a future
and uncertain event including past and unknown event
(the future and uncertain event in such case is the
acquisition of knowledge by the parties of the past event)
-i.e. upon marriage of A to B, upon the

Article 2189 of the Civil Code of the Philippines
which provides that:
Provinces, cities and municipalities shall be liable for
damages for the death of, or injuries suffered by any
person by reason of defective conditions of roads,
streets, bridges, public buildings and other public works
under their control or supervision.
It is not necessary for the liability therein established to
attach, that the defective public works belong to the
province, city or municipality from which responsibility is
exacted. What said article requires is that the province,
city or municipality has either "control or supervision" over
the public building in question.
Petitioner had the right to assume that there were no
openings in the middle of the passageways and if any,
that they were adequately covered. Had the opening
been covered, petitioner could not have fallen into it.
Nakpil & Sons vs. C.A. G.R. No. L-47851 April 15, 1988

I. Suspensive Conditions
-the happening of an event gives rise to an
-if the event does not happen the obligation
does not come into existence
II. Resolutory Conditions
-the happening of an event extinguishes the
-immediately demandable but once the condition
occurs the right over the prestation terminates
III. Potestative Conditions
-One which depends upon the will of one of the
contracting parties
They may either be:

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
i. mixed potestative condition those
which depend upon the will of the
debtor but subject to external acts
i.e. I will pay my loan if the house I live in is sold. In this
case the condition does not depend exclusively upon the
will of the debtor but is subject also to circumstances
beyond his power or control. The condition states implies
the obligor had already decided to sell his house
i.e. I promise to pay the purchase price as soon as the
inhabitants have been vacated by the inhabitants and the
purchaser undertakes to do the same. It is not dependent
solely upon the will of the debtor as the creditor in cases
of inaction of the debtor may choose to file a suit for
ejection or the inhabitants may voluntarily leave the
premises (JACINTO vs. CHUA)
ii. casual condition one which
depends exclusively upon chance or other
factors or third persons
iii. purely potestative condition one
which depends solely on the will of the contracting parties
it is not only the condition that is void but the whole
obligation under Art. 1182 as it is merely an illusory
obligation except when it is resolutory
i.e. I will lend you P100 if I feel like it
IV. Impossible Conditions (Art. 1183)
-Impossible conditions, those contrary to good customs or
public policy and those prohibited by law shall annul the
obligation which depends upon them.
- does not apply to donations and to
testamentary dispositions as they shall be merely
considered as unwritten
-If the obligation is divisible, that part thereof which is not
affected by the impossible or unlawful condition shall be
Kinds of Impossible Conditions:
i. Physically impossible
-when it is contrary to the laws of
ii. Juridical impossibility
-when contrary to law, morals, good
customs and public policy


-those which are contrary to law, good customs,
public policy
-those which are not capable of realization
-Condition to do an impossible thing
-Conditions which depend upon the sole will of
the debtor except when they are resolutory

Non Ducor Duco

-Condition not to do shall be deemed unwritten

-Impossible or unlawful conditions shall void the

obligation to which they depend. An exception is when
the obligation is given through a will
The Condition is extinguished and the obligation
becomes immediately demandable or extinguished when:
1) It becomes indubitable that the event will
not happen or cannot anymore occur
2) expiration of time for the condition to
-If no time has been fixed by the
parties, the condition shall be deemed
fulfilled at such time as may have probably
been contemplated by the parties, bearing
in mind the nature of the obligation
i.e. I promise to pay X the amont of
P30,000 if he does marries Cynthia within
two years. I will pay X if (1) he does not
marry Cynthia within 2 years or (2) If either
Cynthia or X marry another person the
condition becoming impossible
3) If the creditor voluntarily prevents its
fulfilment the condition is deemed
completed through the acts of the creditor.
Exception is when the act of the creditor is
in exercise of a lawful right
-I.e. D obliged himself to C to build a
house. C files a case of rape against D,
thus rendering D unable to fulfil his
obligation. D is still liable for his unfulfilled
4) If the debtor has done all in his power to
fulfil the obligation (Smith vs. Matti)
-The condition having been fulfilled shall retroact
to the date when the obligation was constituted
-The interest and fruits shall be deemed
mutually compensated in a bilateral obligation. In
unilateral obligations the debtor shall appropriate the
fruits and interests received. In obligations to do and not
to do, the courts shall decide.
i.e. A bound himself to give a piece of land to B
conditioned upon his passing the bar. After B
passes the bar, Bs title to the land shall be
deemed to retroact from the date the obligation
was constituted. Prior to B passing the bar, the
right to the fruits and interests of the piece of
land shall be appropriated by A, notwithstanding
its retroactivity
-This is relevant in cases of Prior right to a title
of land under the principle of First in Time, First in Right
-i.e. in the above condition, if A sells the piece of
land to C. B is still entitled to the land without
prejudice to the right of C as a purchaser in
good faith in case there is delivery

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
-If prior to the fulfillment of the condition, the
obligee alienates the prestation. The fulfillment of the
condition serves to perfect the subsequent obligation. In
effect the oblige is alienating/selling his interest thereon
which is deemed an assignment
-i.e. Prior to passing the bar B mortagages the
land to D. Upon passing the bar the mortgage is deemed
Preservation of right
The creditor, prior to the fulfillment of the
condition, bring the appropriate actions for the
preservation of his right which includes:
i. Restrict acts of alienation by the debtor
ii. Prevent concealment

Non Ducor Duco


-If an obligation does not fix a period but from its nature
and the circumstances it can be inferred that a period
was intended, the courts may fix the duration thereof

-The obligor shall file an action asking the courts to fix a

period for the obligation which shall be included in the
-The court cannot in the exercise of its power create a
period out of thin air nor create a period when a
period has been stipulated
-Once a period has been fixed by the courts it cannot
anymore be changed by it. But the parties may do so
by waiving the benefit of a period or agreeing to a
new period

iii. Demand security

The obligor loses his right to a period when: (Art. 1198)

One for whose fulfillment a day certain has been fixed

A day certain is understood to be that which must
necessarily come, although it may not be known when
An obligation is deemed to be with a period when its
fulfillment is made to depend on Future and Certain
There is no Retroactivity in an obligation with a period
since the obligation is already deemed effective but the
right to demand performance is merely suspended
In cases of mistake of payment the debtor may recover
the amount paid along with interest and fruits from the
time of payment until the arrival of the period
Kinds of Period:
i. Conventional that agreed upon by the parties
ii. Legal That which is fixed by the courts when
the parties did not stipulate a period but from the nature
and circumstances it may be inferred that a period was
-Death of a party
-When the debtor binds himself to pay when his
means permit him to do so
-Contract of lease where the extinguishment has
been left to the will of the lessee or when the lessee
deems it fit to use. In this circumstance the court cannot
fix a period but instead shall determine the period
probably contemplated by the parties bearing in mind the
nature and the circumstances of the obligation
-As soon as possible
-Within a reasonable period

i. When after the obligation has been contracted,

he becomes insolvent, unless he gives a
guaranty or security
ii. When he does not furnish to the creditor the
guaranties or securities which he has promised
iii. Where by his own acts he has impaired said
guaranties or securities after their establishment,
and when through a fortuitous event they
disappear, unless he immediately gives new
ones equally satisfactory
-Impairment is any reduction in value
which does not amount to loss
-i.e. A obtained a loan payable in 2
years, by which he mortgaged a house as
security. If he mortgages or alienates his house
to another person, the obligation shall be
demandable at once
iv. When the debtor violates any undertaking in
consideration of which the creditor agreed to the
v. When the debtor attempts to abscond
- A period is presumed to be for the benefit of the party
unless from the tenor of the obligation or other
circumstances it should appear that the period has been
established in favour of one or of the other.
-In such case neither may demand the obligation
prematurely nor can either force the other to accept
fulfillment of the obligation
-The creditor may not want to receive the money to avoid
the fluctuations of the exchange rates or he wants to
keep the money safe, on the other hand The debtor is
given time to perform the obligation or to raise money to
deliver the price of the contract

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
-i.e. A contract of loan wherein the debtor is to
pay on or about 2 years from the date of execution. The
period is for the benefit of the Debtor. Thus the debtor
may compel the creditor to accept payment prior to the
expiration of 2 years yet the Creditor may not compel the
debtor to perform his obligation until after the expiration of
two years. KAPISH MOFO
HSBC vs. Broqueza
Petitioner-Defendant were employees of HSBC
and were entitled to a retirement plant provided by the
latter. Both defendants obtained loans, one for a car
loand and the other for emergency, where were paid by
automatic salary deduction. A labor dispute arose and as
a result thereof they were both dismissed and could not
pay the monthly amortization for the loan. Plaintiffs filed a
case for recovery of the sum of money
As may be gleaned from the promissory note of
the loan issued, the obligation does not contain any
period for payment, thus it is demandable at once. The
payroll deduction is merely a convenient mode of
payment and not the sole source of payment for the
loans. HSBC never agreed that the loans will be paid only
through salary deductions. Neither did HSBC agree that if
defendants ceases to be an employee of HSBC, her
obligation to pay the loans will be suspended. HSBC can
immediately demand payment of the loans at anytime
because the obligation to pay has no period. Thus upon
demand of HSBC after the dismissal of the defendants,
the whole obligation became due
Pay vs. Vda De Palanca G.R. No. L-29900 June 28,
Petitioner is a creditor of the defendants father.
The claim of the petitioner is based on a promissory note
dated 15 years ago, whereby the deceased promised to
pay either upon receipt by him of his share from a certain
estate or upon demand.
The obligation being due and demandable, it
would appear that the filing of the suit after fifteen years
was much too late. For again, according to the Civil
Code, the prescriptive period for a written contract is that
of ten years.
Smith vs. Matti No. 16570, March 09, 1922
Plaintiff corporation and the defendant, entered
into contracts whereby the former obligated itself to sell,
and the latter to purchase from it, two steel tanks, the
same to be shipped from New York and delivered at
Manila "within three or four months;" subject to
contingencies, two expellers, which were to be shipped
from San Francisco in the month of September, 1918, or
as soon as possible; and two electric motors, as to the

Non Ducor Duco


delivery of which stipulation was made, couched in these

words: "Approximate delivery within ninety days. This
is not guaranteed." Defendant refused to receive the said
goods on grounds that the delivery took too long.
At the time of the execution of the contracts, the
parties were not unmindful of the contingency of the
United States Government not allowing the export of the
goods, nor of the fact that the other foreseen
circumstances therein stated might prevent it.
Considering these contracts in the light of the civil law, we
cannot but conclude that the term which the parties
attempted to fix is so uncertain that one cannot tell just
whether, as a matter of fact, those articles could be
brought to Manila or not. If that is the case, as we think it
is, the obligations must be regarded as conditional. As it
was dependent not only upon the effort of the herein
plaintiff, but upon the will of third persons who could in no
way be compelled to fulfill the condition. In cases like this,
which are not expressly provided for, but impliedly
covered, by the Civil Code, the obligor will be deemed to
have sufficiently performed his part of the obligation, if he
has done all that was in his power, even if the condition
has not been fulfilled in reality.
Chavez vs. Gonzales No. 27454, April 30, 1970
Plaintiff contracted the service of defendant for
cleaning and servicing of his typewriter. After demands by
the plaintiff, defendant asked further for the sum of P6 for
further repairs. But after nearly two months the plaintiff,
exasperated asked for the return of the typewriter which
was given back to the plaintiff in shambles with parts
missing. The defendant returned the sum of P6 and the
missing parts and the plaintiff contracted the service of a
third person to fix his typewriter. He then filed a complaint
for a recovery of sum of money
It is clear that the defendant-appellee
contravened the tenor of his obligation because he not
only did not repair the typewriter but returned it "in
shambles". The defendant should thus be liable for the
cost of executing his obligation in the proper manner. The
cost of the execution of the obligation in this case should
be the cost of the labor or service expended in the repair
of the typewriter.
Encarnacion vs. Baldomar G.R. No. L-264 October 4,
After the war, plaintiff asked the defendants to
vacate the leased lot as they entended to use the same
due to the destruction of their office building. The
defendats refused and upon filling of a case for ejection
they contend that the contract which they had celebrated
with plaintiff since the beginning authorized them to
continue occupying the house indefinitely and while they
should faithfully fulfill their obligations as respects the
payment of the rentals

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
the defense thus set up by defendant Lefrado
Fernando would leave to the sole and exclusive will of
one of the contracting parties (defendants in this case)
the validity and fulfillment of the contract of lease, within
the meaning of article 1256 of the Civil Code, since the
continuance and fulfillment of the contract would then
depend solely and exclusively upon their free and
uncontrolled choice between continuing paying the
rentals or not, completely depriving the owner of all say in
the matter. If this defense were to be allowed, so long as
defendants elected to continue the lease by continuing
the payment of the rentals, the owner would never be
able to discontinue it; conversely, although the owner
should desire the lease to continue, the lessees could
effectively thwart his purpose if they should prefer to
terminate the contract by the simple expedient of
stopping payment of the rentals. This, of course, is
prohibited by the aforesaid article of the Civil Code.

Elezegui vs. Manila Lawn Tennis Club G.R. No. 967

May 19, 1903
Plaintiff and defendant entered into a contract of
lease which is terminable upon one month notice of the
lessee and where it was stipulated that it may be leased
for all the time the members may desire to use it and as
long as they shall see fit, even if the estate is sold.
The judgement of the lower court ruling in favour
of the plaintiff presupposes that there is a legal term
which may only be applied by the court in absence of a
stipulation of the parties with regards to a period. It
cannot be said that there is no stipulation with respect to
the duration of the lease. It cannot, however, be said to
last perpetually. If an usufruct may last for a lifetime how
then may a lease last perpetually. By its very nature a
lease is for a determinate period. The only action which
can be maintained under the terms of the contract is that
by which it is sought to obtain from the judge the
determination of this period which must be determined
from the circumstances present
PBC vs. Lui She G.R. No. L-17587, September 12, 1967
A will was executed wherein a lease for a period
of 99 years was created between the deceased and
respondent with an option to buy for a period of 50 years,
conditioned upon his acquisition of a Filipino Citizenship.
Petitioner assails the validity of the clause which allows
the lessee to withdraw at any time as it is violative of the
principle that contracts must bind both party
Such a stipulation, as can be readily seen, does
not make either the validity or the fulfillment of the
contract dependent upon the will of the party to whom is
conceded the privilege of cancellation; for where the
contracting parties have agreed that such option shall

Non Ducor Duco


exist, the exercise of the option is as much in the

fulfillment of the contract as any other act which may
have been the subject of agreement. Indeed, the
cancellation of a contract in accordance with conditions
agreed upon beforehand is fulfillment
Lim vs. People
Petitioner proposed to sell the tobacco of
complainant wherein she was to be entitled to the
overprice thereof, to which she agreed. A promissory note
was executed to that effect, which however bounced.
Bounce. Bounce. Petitioner claimed that it was erroneous
for the lower court to find that the promissory note was
immediately demandable
The proceeds of the sale of the tobacco should
be turned over to the complainant as soon as the same
was sold, or, that the obligation was immediately
demandable as soon as the tobacco was disposed of.
Hence, Article 1197 of the New Civil Code, which
provides that the courts may fix the duration of the
obligation if it does not fix a period, does not apply.
Araneta vs. Phil Sugar Estate
Petitioner sold a tract of land to respondent with
stipulation that respondent shall build the Sto. Domingo
Church and that the Petitioner will construct roads to
surround the building. Petitioner was unable to comply
with his obligation as there was a third-party occupying a
part thereof and who refuses to vacate. Plaintiff moved to
reconsider the decision which gave a period of two years
to comply with the obligation as he claimed that the
pleadings did not authorize the fixing of the period
The only thing the pleadings of the plaintiff
provided was that it gave the defendant a reasonable
period to comply with his obligation. If the contract so
provided, then there was a period fixed, a "reasonable
time;" and all that the court should have done was to
determine if that reasonable time had already elapsed
when suit was filed if it had passed, then the court should
declare that petitioner had breached the contract, as
averred in the complaint, and fix the resulting damages.
On the other hand, if the reasonable time had not yet
elapsed, the court perforce was bound to dismiss the
action for being premature. But in no case can it be
logically held that under the plea above quoted, the
intervention of the court to fix the period for performance
was warranted, for Article 1197 is precisely predicated on
the absence of any period fixed by the parties.
Fixing a date involves a two-step process. The
Court must first determine that "the obligation does not fix
a period" but from the nature and the circumstances it
can be inferred that a period was intended" The second
step, is that the court must decide what period was
"probably contemplated by the parties" So that, ultimately,
the Court fix a period merely because in its opinion it is
or should be reasonable, but must set the time that the

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
parties are shown to have intended. As the record stands,
the trial Court appears to have pulled the two-year period
set in its decision out of thin air, since no circumstances
are mentioned to support it. Plainly, this is not warranted
by the Civil Code. The time set by the court was until the
squatters has been evicted


Rules in case of Loss, Deterioration and Improvements:
Loss: a thing is deemed lost when it (a) perishes, (b)
goes out of commerce or (c) disappears in such a way
that its existence is unknown or it cannot be recovered
-The loss of the thing shall extinguish the
obligation unless it is with the fault of the debtor. In which
case he shall pay damages

Impairment is to be borne by the creditor

unless it is with the fault of the debtor in
which case, the creditor may choose
between fulfillment or rescission

Right of Choice:
Right of choice, in default of an agreement is
with the debtor.
The right of choice is made effective upon its
communication to the creditor. The act of Delivery of the
prestation is equivalent to its exercise by the debtor and
the creditor cannot refuse to accept it
The communication once made to the other
party converts the obligation into a simple one. Thus, any
loss after the communication converts the action into one
for a sum of money and the creditor cannot compel the
debtor to deliver the other prestation which was due prior
to the communication.
In cases of plurality of debtors, the choice binds
only the debtor who made the communication or to whom
the communication was made, in case the right of choice
is with the creditor. i.e. If A, B, and C bind themselves to
deliver a table or a chair to D and A communicated his
choice to deliver a table to D, B and C may still deliver a
chair or table to D.
Effect of Loss:
If the choice is with the Debtor-


Non Ducor Duco


Any improvement shall accrue to the benefit

of the creditor unless it was improved at the
expense of the debtor, in which case he
shall have the rights of an usufructuary (he
may remove the improvement unless it will
cause damage to the principal thing)

In case there is both deterioration and improvement each

may set off each other so far as they may be equal in



The loss of one thing obliges the debtor to

choose between the things which are not lost.
In case all is lost the action shall be converted
into a sum of money representing the value of the lost
thing which disappeared
If the choice is with the Creditor
The loss of one thing obliges the creditor to
choose between the things which are not lost or the price
of the object which was lost
In case all is lost the action shall be converted
into a sum of money for the value of any one of them with
indemnity for damages

-One where the debtor has to perform several
prestations and may be extinguished only by the
performance of all of them
Right of Choice:
No right of choice as the fulfilment requires that
all of the object of the obligation be delivered
Effect of Loss:
Loss of one thing converts the prestation into a
sum of money unless it is susceptible of partial
performance, in such case the debtor shall deliver the
thing which is not loss and a sum of money representing
the object lost

-One where several objects are due and the
fulfillment of one is sufficient to extinguish the obligation

One where only one thing is due, but the debtor may
substitute the thing with another at his election
Right of Choice:
Always with the debtor and he may substitute
the principal for any cause
Effect of Loss:
Loss of the principal thing obliges him to deliver
the substitute but the nullity of the obligation to deliver the
principal thing invalidates also the delivery of substitute
following the principle of the accessory follows the
principal thing
Loss of the substitute prior to substitution does
not make the debtor liable. He shall deliver the thing
which is the principal object

Non Ducor Duco


Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
Loss of the substitute after substitution renders
him for the loss of the substitute



-Beneficial acts to bring suit, stop

prescription, to put debtor in delay
-Prejudicial acts Remission, prevent
fulfilment of the condition

The right to demand exists in each one of

the creditors. But upon judicial demand the
right to demand is consolidated into one
creditor. An action which is dismissed,
however, shall bind the co-creditors unless
the cause of dismissal is personal to the

Remission of a Solidary Creditor entitles his

co-creditors, who did not concur with such
remission, from reimbursement. However,
remission after payment of the whole
obligation does not exempt him from
reimbursing his share to the co-debtor who

Solidarity in Debtors (Passive Solidarity)

obliges each of the solidary debtors to fulfil
the whole obligation

Payment by one of the solidary debtors

entitle him to reimbursement from his codebtors. Their liability to the paying debtor
shall be joint.

Reimbursement may be made in whole to

one of the solidary debtor when one of them
is responsible for the loss or impossibility of
performance. In case there is fault,
negligence or delay, after payment the
share of the co-debtors representing
indemnity shall be recovered in whole from
the party in fault

-The issue of whether an obligation is joint or solidary is

relevant in determining the extent of the liability of debtors
and whether or not payment extinguished the whole
I. Joint Obligations

One where the credit or debt shall be

presume to be divided into as many equal
shares as there are creditors or debtors, the
credits or debt being considered distinct
from one another

Each obligors answers only for a part of the

whole liability and to each oblige belongs
only the right to his share

Remission and Insolvency does not affect

any of the co-debtors as the status of one
debtor cannot serve to enlarge nor even
affect their obligation to the creditor
It is erroneous to state that there is a
presumption of Joint obligations as the law
merely shifts the burden of evidence to
prove that the obligation is joint. It is more
proper to use the term the obligation is
Joint, in the absence of proof to the

II. Solidary Obligations


Solidarity exists when

1) Law provides
-Liability of Joint tortfeasors
and partners in a partnership, and also
a husband and wife in cases specified in the
family Code are solidary
2) Nature of the obligation requires
-Liability of an owner of the
vehicle and his driver adjudged by the Court
as solidary
3) Stated by the parties
-Jointly and individually, Joint
and several, Collectively

Each one of the creditor has a right to

demand, and each one of the debtor is
bound to render, the entire obligation

Solidary in Creditors (Active Solidarity)

creates a mutual representation between
and among the creditors, and the their
beneficial acts will inure to others but not
those acts which are prejudicial

-Void obligation/Prescription
applicable to all
-Fraud and Force affecting consent of
one co-debtor/Minority/Remission Total if
raised by the minor/remitted party, partial if
raised by the co-debtors
-Insolvency is not a defense. The codebtor shall shoulder the insolvent parties

I.e mixture of Total and Partial Defense

A B C and D are solidary debtors to E for

the sum of P400. C is insolvent and E
condones the share of D. E may demand
from A B and C the whole amount of P300
representing the amount after the
condonation. If A pays the whole obligation
he may thereafter seek reimbursement from
B of the amount of P133 and E the amount
of P33. E although condoned from the
obligation is still liable for the share borne
by the co-debtors due to insolvency.

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
F. Divisible and Indivisible Obligations
-Divisibility and Indivisibility is an issue only when there is
two or more parties to the obligation
-Indivisibility does not necessarily gives rise to solidarity
as the determining factor of indivisibility is whether or not
the prestation may be performed partially or not
Issue is the vinculumn
which ties the parties
In case of loss, upon
conversion into one to
pay damages the
solidarity remains
In case of death,
solidarity does not bound
the heirs

Issue is the prestation of
the obligation
In case of loss, upon
conversion into one to
pay damages the
indivisibility ceases
In case of death, the
object is still indivisible

I. Indivisible Obligations
-One incapable of partial performance
-In case of non-compliance, the obligation is
converted into a monetary obligation which shall be
In cases of:
-to give definite things
-provided by law
-intention of the parties
- Generally in obligations to do

II. Divisibility

One capable of partial performance

In cases of:
-Execution of a certain number of days
of work
-accomplishment of work by metrical
-Obligation to pay certain amounts in
-A contract to do several things at
several times
-Intention of the parties always prevails
-In case the parties stipulate that an obligation to do is
indivisible, there is no such thing as payment for the work
already done of for quantum meruit. Partial performance
is equivalent to non-performance in indivisible obligations

Joint Indivisible Obligations

Non Ducor Duco


-All debtors must comply with the obligation, in

case any of the parties does not comply, it shall give rise
to damages but the debtors who may have been ready to
fulfil their promises shall not contribute to the indemnity
beyond the portion of the price of the thing

Calang and Philtranco vs. People, G.R. No. 190696
August 3,2010
Due to a motor vehicle accident, the petitioner
was charged with Reckless imprudence resulting in
homicide and serious physical injuries and ordered the
petitioner to pay indemnity jointly and severally with
respondent for failing to prove that it had exercised the
diligence of a good father of the family to prevent the
accident. Respondent moved to reconsider as it claims it
was never a party to the criminal complaint filed
We emphasize that Calang was charged
criminally before the RTC. Undisputedly, Philtranco was
not a direct party in this case. Since the cause of action
against Calang was based on delict, both the RTC and
the CA erred in holding Philtranco jointly and severally
liable with Calang, based on quasi-delict. Articles 2176
and 2180 of the Civil Code pertain to the vicarious liability
of an employer for quasi-delicts that an employee has
committed. Such provision of law does not apply to civil
liability arising from delict. If at all, Philtrancos liability
may only be subsidiary. The provisions of the Revised
Penal Code on subsidiary liability Articles 102 and 103
are deemed written into the judgments in cases to
which they are applicable.
Ronquillo vs. CA, 132 SCRA 274, G.R. No. L-55138
September 28, 1984
Petitioner along with three other defendants in
the lower court, issued a check in payment of foodstuff
which was dishonoured by the drawee bank. Judgement
was entered based on compromise wherein they were
held liable individually and jointly. Upon their failure to
pay, the defendants offered to pay their pro rata share
which was refused by the plaintiff, demanding the full
Clearly then, by the express term of the
compromise agreement and the decision based upon it,
the defendants obligated themselves to pay their
obligation "individually and jointly".The term "individually"
has the same meaning as "collectively", "separately",
"distinctively", respectively or "severally". An agreement
to be "individually liable" undoubtedly creates a several
obligation, and a "several obligation is one by which one
individual binds himself to perform the whole obligation.

Non Ducor Duco


Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
Malayan Insurance Co., Inc. vs. Court of Appeals, 165
SCRA 536 , G.R. No. L-36413 September 26, 1988
A jeepney driven by respondent SAN LEON
figured in an accident with respondent PATRANCO during
the effectivity of an insurance contract. Respondent
Vallejo, a passenger of the jeepney sustained injuries and
filed a complaint against petitioner, the owner of the jeep,
and PATRANCO for a sum of money. The owner of the
jeep also filed a cross-claim against petitioner for his
insurance claim. Petitioner filed a third-party claim against
SAN LEON for liabilities arising out of its employeremployee relationship. Judgement was thereby rendered
wherein it was held that SAN LEON, the owner of the
jeep and petitioner was jointly and severally liable. Upon
appeal, the judgement was modified holding that SAN
LEON has no obligation to reimburse petitioner as it was
not privy to the contract of insurance
It is only respondents Sio Choy the owner of the
jeep and San Leon Rice Mill, Inc, (to the exclusion of the
petitioner) that are solidarily liable to respondent Vallejos
for the damages awarded to Vallejos. Respondents Sio
Choy and San Leon Rice Mill, Inc. are the principal
tortfeasors who are primarily liable to respondent
Vallejos. The law states that the responsibility of two or
more persons who are liable for a quasi-delict is solidarily.
While it is true that where the insurance contract
provides for indemnity against liability to third persons,
such third persons can directly sue the insurer, however,
the direct liability of the insurer under indemnity contracts
against third party liability does not mean that the insurer
can be held solidarily liable with the insured and/or the
other parties found at fault. The liability of the insurer is
based on contract; that of the insured is based on tort. To
hold otherwise would result in a violation of the principles
underlying solidary obligation and insurance contracts. In
solidary obligation, the creditor may enforce the entire
obligation against one of the solidary debtors. The
qualification made in the decision of the trial court to the
effect that petitioner is sentenced to pay up to P20,000.00
only when the obligation to pay P29,103.00 is made
solidary, is an evident breach of the concept of a solidary
Petitioner, upon paying respondent Vallejos the
amount of riot exceeding P20,000.00, shall become the
subrogee of the insured, the respondent Sio Choy; as
such, it is subrogated to whatever rights the latter has
against respondent San Leon Rice Mill, Inc. Article 1217
of the Civil Code gives to a solidary debtor who has paid
the entire obligation the right to be reimbursed by his codebtors for the share which corresponds to
each.Petitioner, upon payment to respondent Vallejos and
thereby becoming the subrogee of solidary debtor Sio
Choy, is entitled to reimbursement from respondent San
Leon Rice Mill, Inc.
To recapitulate then: We hold that only respondents Sio
Choy and San Leon Rice Mill, Inc. are solidarily liable to
the respondent Martin C. Vallejos for the amount of
P29,103.00. Vallejos may enforce the entire obligation on

only one of said solidary debtors. If Sio Choy as solidary

debtor is made to pay for the entire obligation
(P29,103.00) and petitioner, as insurer of Sio Choy, is
compelled to pay P20,000.00 of said entire obligation,
petitioner would be entitled, as subrogee of Sio Choy as
against San Leon Rice Mills, Inc., to be reimbursed by the
latter in the amount of P14,551.50 (which is 1/2 of
Philippine National Bank vs. Independent Planters
Association, Inc., 122 SCRA 113 , No. L-28046, May
16, 1983
During a collection case, one of the solidary
debtors died and the lower court dismissed the
complaints contending that the complaint should be
prosecuted in the testate or intestate proceedings of the
It is now settled that the quoted Article 1216
grants the creditor the substantive right to seek
satisfaction of his credit from one, some or all of his
solidary debtors, as he deems fit or convenient for the
protection of his interests; and if, after instituting a
collection suit based on contract against some or all of
them and, during its pendency, one of the defendants
dies, the court retains jurisdiction to continue the
proceedings and decide the case in respect of the
surviving defendants. A cursory perusal of Section 6,
Rule 86 of the Revised Rules of Court reveals that
nothing therein prevents a creditor from proceeding
against the surviving solidary debtors. A contrary ruling
would in effect repeal Art. 1216

G. obligations with a PENAL clause


Encourages the party to comply with the

obligation and ensures its performance

A substitute for damages for future noncompliance which represents liquidation

and does proof of loss or damage suffered.
The amount represents the amount of
damage suffered by the parties by such
non-compliance and the debtor cannot
avoid the penalty by proving that the
damages the creditor suffered is less than
such amount suffered

Constitutes punishment for non-compliance

and the amount constitutes indemnity

Interests and Penalty are not inconsistent

with each other but may be reduced in
cases of partial fulfilment

When the breach of the contract commited

by the defendant is not the one
contemplated by the parties in agreeing
upon the liquidated damages, the law shall

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
determine the nature of the damages and
not the stipulation (Art. 2228)
-Enforceable only in case of breach
-Both principal and accessory
undertaking may be enforced
Damages may be awarded even with such stipulations in
cases of:
-stipulation to that effect
-Debtor refuses to pay the penalty
-Guilty of fraud in the fulfilment of the
obligation (Future fraud may not be waived)
No penalty in cases of:

Breach is creditors fault

Fortuitous event

Acessory object only in
cases of non-fulfillment
Creditor can demand
both prestations if given
the right

Substitution may be
made at any time
Creditor can never
demand both prestations

Bachrach Motor Co. vs. Espiritu, 52 Phil. 346 , No.
28497, No. 28498, November 06, 1928
The defendant contends that the 25 per cent
penalty upon the debt, in addition to the interest of 12 per
cent per annum, makes the contract usurious.
Article 1152 of the Civil Code permits the
agreement upon a penalty apart from the interest. Should
there be such an agreemnet, the penalty, as was held in
the case of Lopez vs. Hernaez (32 Phil., 631), does not
include the interest, and which may be demamded
separetely. According to this, the penalty is not to be
added to the interest for the determination of whether the
interest exceeds the rate fixed by the law, since said rate
was fixed only for the interest. But considering that the
obligation was partly performed, and making use of the
power given to the court by article 1154 of the Civil Code,
this penalty is reduced to 10 per cent of the unpaid debt.
Robes-Francisco v. CFI, 86 SCRA 59, G.R. No. 72182
November 25, 1986

Non Ducor Duco


The adjudgment of damages appears to be quite

excessive in the premises. The grant of P50,000.00 as
actual damages is made to rest on nothing more
substantial than the sworn declarations of the private
Furthermore, while no proof of pecuniary loss is
necessary in order that moral damages may be awarded,
the amount of indemnity being left to the discretion of the
Court (Art. 2216), it is, nevertheless, essential that the
claimant satisfactorily prove the existence of the factual
basis of the damages (Art. 2217) and its causal relation to
defendant's acts. This is so because moral damages
though incapable of pecuniary estimation, are in the
category of an award designed to compensate the
claimant for actual injury suffered and not to impose a
penalty on the wrongdoer (Algara vs. Sandejas, 27 Phil.
284). The trial court and the Court of Appeals both seem
to be of the opinion that the mere fact that respondents
were sued without any legal foundation entitled them to
an award of moral damages, hence they made no definite
finding as to what the supposed moral damages suffered
consist of. Such a conclusion would make of moral
damages a penalty, which they are not, rather than a
compensation for actual injury suffered, which they are
intended to be. Moral damages, in other words, are not
corrective or exemplary damages.
Nor was there error in the appealed decision in
denying moral damages, not only on account of the
plaintiff's failure to take the witness stand and testify to
her social humiliation, wounded feelings, anxiety, etc., as
the decision holds, but primarily because a breach of
contract like that of defendant, not being malicious or
fraudulent, does not warrant the award of moral damages
under Article 2220 of the Civil Code.
Neither may private respondent recover exemplary
damages since he is not entitled to moral or
compensatory damages, and again because the
petitioner is not shown to have acted in a wanton,
fraudulent, reckless or oppressive manner.
Upon the same consideration, and absent any proof that
petitioner refused in gross and evident bad faith to satisfy
the private respondent's claim. no counsel fees should be
Pamintuan v. CA, 94 SCRA 556, G.R. No. 113605
November 27, 1998
Three functions of PENAL clause:
1) to encourage performance
2) represents damages in the future for
3) punishment
ALSO PENAL clause may be ignored if there is fraud in
the nonfulfillment of the obligation COZ ACCORDING TO
THE concurring opinion of sumone future fraud cannot be
waived RIGHT?

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim

Non Ducor Duco


*Promissory notes shall not produce the effect of

payment until they have been encashed or impaired by
the creditor through his fault
Modes of Extinguishment
1) Payment or performance
2) Loss of the thing due
3) Condonation or Remission
4) Confusion or Merger
5) Compensation
6) Novation
-Annulment of the contract
-Fulfilment of Resolutory Condition
-Death in cases of personal obligations
-Mutual dissent
-Unilateral waiver by the creditor
-Compromise by the parties
-Impossibility of the fulfilment
-Fortuitous event

I. Payment
Requisites of a valid payment:
1. Identity The thing which should be delivered
should be the thing constituting the obligation
2. Integrity A creditor cannot be compelled to
accept partial payment nor may he require the debtor to
do so unless:
i. there is a contrary stipulation
ii. payment is subjected to different condition
terms or conditions
iii. when a debit is in part liquidated and
iv. Joint obligations as to the whole
3. Indivisibility
-Payment shall also be made at the currency stipulated, if
it is not possible to do so it shall be made at the currency
which is the legal tender in the Philippines
Legal Tender All notes and coins issued by the Central
Bank of the Philippines

Coins shall be legal tender in amounts One

thousand pesos (P1,000.00) for denominations
of 1-Piso, 5-Piso and 10-Piso coins; and


One hundred pesos (P100.00) for

denominations of 1-sentimo, 5-sentimo, 10sentimo, and 25-sentimo coins. (Circular No.
537-2006 of the BSP)

-In cases of extraordinary inflation or deflation, the

currency at the time of the constitution of the obligation
shall apply. Applies only to contracts

Acts which produce payment:

-Delivery of money or performance, in any

manner, of an obligation
-Substantial performance in good faith, less
damage suffered by the oblige
-Acceptance by the creditor with knowledge of
its incompleteness or irregularity without any protest or
-Payment after judicial order to retain the debt is void. In
cases of Garnishment, Interpleader and Injunction
i.e. D owes C a sum of money in the amount of P500.
C in turn owes A a sum of money in the amount of P500. If upon
failure of C to pay, A garnished the debot of D to C. Any payment
made by D to C during the garnishment shall be void as to C and
in case his suit against A prospers, D shall be liable again to pay
the amount of P500 to A. He may however, recover the amount
paid to C.


Payment must be made to/Persons constituted

as Creditors:
-Persons in whose favour the obligation was
-His successors in interest
-Agent of the creditor or any person authorized
to receive it
-Any person in the possession of the credit,
made in good faith (must not merely be a person in
possession of a document evidencing credit)
-A third person provided it is proved that it
redounded to his benefit
Benefit to the creditor need not be
proved when:
i. After payment, the third person acquired the
creditors rights
ii. Creditor ratifies payment
iii. By the creditors conduct, the debtor has been
led to believe that the third person is authorized
to receive payment
Payment made to a person incapacitated to administer
his property shall only be valid if 1) he has kept the thing
or 2) payment has been beneficial to him
When two or more payment claims to be the creditor the
remedy of the debtor is either consignation or to file a suit
for interpleader against the two creditors
Whom: Payment shall be made by:

Non Ducor Duco


Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
-The debtor

-The delivery of another thing in substitution of

the original prestation, in satisfaction of a debt
due in money

-A Third person who does not intend to be

reimbursed in which case it shall be deemed a donation
which requires the debtors consent. But the payment
shall be valid in any case as to the creditor who consents
to the payment

-applies only to a pre-existing debt in money

-It is in reality a novation of the object. The law
of sales shall apply by analogy because the
transaction is akin to a sale whereby the preexisting debt shall constitute the price

-A Third person who does not have any interest

in the fulfilment of the obligation in which he shall have a
right to be reimbursed by he debtor
If with the knowledge and consent of
the debtor: Only up to the extent that
he was benefitted by the payment
i.e. D owes C the amount of P500. T a person
without interest in the obligation pays C the
whole amount of Ds obligation. If it turns out
that C partially remitted the amount of P200 of
Ds obligation. T is only entitled to be reimbursed
the amount of P300 which benefitted D and he
may claim from D the amount of P200 which
shall be deemed a mistake in payment
If with the knowledge and consent of
the debtor. The third person shall be
subrogated in the rights of the creditor,
thus he is entitled to full reimbursement
and those arising from mortgage,
guaranty or penalty shall benefit him
which is in the nature of a novation
-A Third person who has an interest in the
fulfilment of the obligation in which case there
shall be legal subrogation, even without the
knowledge and consent of the debtor
-A person who has an interest in the
obligation is one who is benefitted by its extinguishment.
i.e. surety, guaranty
-Payment made by one who does not have free disposal
of the thing and capacity to alienate it shall not be valid.
In such cases payment shall be made thru his legal
guardian. Payment by his agent shall not be valid
because incapacity of the principal shall also mean
incapacity of the agent.
Where: Place of Payment:
-The place designated
-Wherever the thing might be at the moment the
obligation was constituted, if a determinate thing
-Domicile of the debtor

2.) Application of payment

-Designation of debt to which payment ust be
applied when the debtor has several obligations
of the same kind in favour of the same creditor
i. There must be two or more debts
ii. Debt must be in money or of the same kind
iii. Debt must be due or the period is for the
benefit of the debtor unless it is agreed upon by
the parties
iv. There is only one debtor and creditor
v. Payment is not enough to extinguish all debts
i. Application of payment is made by the
declaration of the debtor at the time of his payment. In
case he fails to do so the creditor may apply the payment
thru the issuance of a receipt. The debtor if he fails to
apply payment, cannot complain of the same by the
creditor unless he has cause for invalidating the contract
ii. If the parties fail to do so and the
circumstances fails to show the intention of the parties, it
shall be applied to the most onerous debt, if all debts are
of the same nature and burden, it shall be applied to all
-A debt may be onerous according to
the presence or absence of: 1.) Interest payments 2.)
Security 3.) Penalty clause
iii. The creditor cannot be compelled to accept
partial extinguishment of a debt
iv. The debts must be liquidated
3.) Payment by Cession

-it is the duty of the creditor to collect

payment from the debtor, thus in a contract of lease the
lessee has the right to wait for the lessor or his agent to
collect payment at the place of rent

- The process by which a debtor transfers all the

properties not subject to execution in favour of
his creditors, so they may sell them to satisfy
their debts

-A change in domicile in bad faith or

after delay shall entitle the creditor to reimbursement of
additional expenses

-The creditor merely becomes assignees with

authority to sell and the net proceeds shall be
applied to their respective debts, unless there is
a stipulation which states its extinguishment

Special Modes of payment:

1.) Dacion en Pago

i. More than one debt

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
ii. More than one creditor
iii. Abandonment of all property not exempt from
iv. Acceptance or consent of the creditor
-Insolvency is not required, as it is by mere agreement of
the parties (but check prescribed books of your professor)
-In case one of the creditor shall refuse the assignment,
the debtor may file for insolvency instead and ask for a
discharge of his obligations
4.) Tender of payment and consignation

Non Ducor Duco


-Expenses of consignation shall be borne by the creditor

-The procedure for consignation must be strictly complied

with and substantial compliance is not enough
Exercise of redemption
-A delivery of check is enough to exercise the right of
redemption, but will not produce payment until it is
-A valid tender of payment without need of
consignation is sufficient to exercise the right, since it
not made in extinguishment of an obligation

i. Tender of payment was refused by the creditor
without just cause
-Tender is the act of offering the creditor what is
due to him with a demand that he accept the
same. Refusal of the creditor puts him in delay
as otherwise known as Mora accipiendi
Tender of payment is not required when:
-Creditor is absent or unknown or does
not appear at the place of payment
-Creditor is incapacitated to receive
payment at the time it is due
-When without just cause, creditor
refuses to give a receipt
-When two or more person claims the
right to collect
-When the title of the obligation has
been lost
-When the creditor notifies the debtor
that he would not accept payment,
without waiving the obligation
ii. Prior notice of consignation
iii. Actual Consignation
-Consists in the deposit by the debtor of the
thing due, to the court
-The thing shall be considered as in custodia
legis and is exempt from execution by other courts
iii. Subsequent Notice to all interested parties
iv. Order of consignation
-It is the order of consignation or acceptance by
the creditor prior to the order that extinguishes the
obligation. Prior to that the debtor may withdraw the thing
as he still has ownership over the thing
-The creditor may either 1.) accept the thing, in
which case the ownership over the thing shall retroact
from the date it is deposited 2.) contest the consignation
3.) Authorize the debtor to withdraw the thing, in which
case he shall lose every preference or security over the

J.M. Tuason vs. Javier No. L-28569. February 27, 1970.
Plaintiff-Apellant executed a contract to sell with
the defendant a piece of land with an automatic
rescission clause. After religiously paying for the past 8
years the defendant failed to pay thus plaintiff filed this
According to Art. 1234 of said Code:If the
obligation has been substantially performed in good faith,
the obligor may recover as though there had been a strict
and complete fulfillment, less damages suffered by the
obligee. Respondent is granted a grace period of 60
days to complete payment
Hermosa vs. Saldana G.R. No. L-26578 January 28,
Plaintiff-private respondent entered into a written
contract with the defendant-petitioner whereby the latter
agreed to sell to him two lots payable in 10 years. Plaintiff
paid religiously for 8 years, but upon default thereof the
petitioner cancelled the contract.
Applying fairness and justice, the Court awarded
the title to one of the lots, since even prior to the default
the payment received by petitioner already exceeded the
payment of one of the lots and should thus be considered
fully paid. Thus, the cancellation of one of the lot was
awarded to petitioner together with the right to retain the
interest on both lots.
Azcona vs. Jamandre G.R. No. L-30597 June 30, 1987
Petitioner leased an 80 hectare land to
respondent where the agreed rental was fixed at P7,200.
Upon entry of the respondent of the piece of land, he paid
the amount of P7,000 which was covered by a receipt. A
year after, the petitioner notified the respondent of its
decision to cancel the agreement claiming that there was
default in the amount of P200, which respondent argues
that the receipt represented an express reduction of the

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
stipulated rental in consideration of his allowing the use of
16 hectares of the leased area by the petitioner as
grazing land for his cattle.
The signing of the receipt by the petitioner and
its acceptance by the respondent manifested their
agreement on the reduction, which modified the lease
contract as to the agreed consideration while leaving the
other stipulations intact. It seems to us that this meaning
was adequately conveyed in the acknowledgment made
by the petitioner that this was "payment for the rental
corresponding to crop year 1961-62" and "corresponds to
the rentals due on or before January 30, 1961, as per
contract." On the other hand, if this was not the intention,
the petitioner does not explain why he did not specify in
the receipt that there was still a balance of P200.00 and,
to be complete, the date when it was to be paid by the
respondent. Under Art. 1235. When the obligee accepts
the performance, knowing its incompleteness or
irregularity, and without expressing any protest or
objection, the obligation is deemed fully complied with.
Aranas vs. Tutaan G.R. No. L-52807. February 29, 1984
If UTEX nevertheless chose to pay the wrong
parties, notwithstanding its full knowledge and
understanding of the final judgment, that it was liable to
pay all dividends after the trial courts judgment in 1971 to
petitioners as the lawfully declared owners of the
questioned shares of stock (but which could not be
enforced against it pending the outcome of the appeal
filed by the co-defendants Castaeda and Manuel in the
Court of Appeals), it only had itself to blame therefor.
Roman Catholic vs. IAC G.R. No. 72110. November 16,
Petitioner failed to pay his balance on a contract
of sale. A grace period was provided to petitioner and on
the last day he tendered a check for the whole amount
which was refused.
A certified personal check which is not legal
tender nor the currency stipulated, and therefore, can not
constitute valid tender of payment. Since a negotiable
instrument is only a substitute for money and not money,
the delivery of such an instrument does not, by itself,
operate as payment. the subsequent consignation did
not operate to discharge the former from its obligation to
the latter.
Commissioner of Public Highway vs. Burgos G.R. No. L36706 March 31, 1980
The determination of this issue lies in whether
extraordinary inflation should be taken into account in
Just Compensation

Non Ducor Duco


Under art. 1250, it is clear that the foregoing

provision applies only to cases where a contract or
agreement is involved. It does not apply where the
obligation to pay arises from law, independent of contract.
The taking of private property by the Government in the
exercise of its power of eminent domain does not give
rise to a contractual obligation. In the absence of any
agreement to the contrary, even assuming that there has
been an extraordinary inflation within the meaning of
Article 1250 of the New Civil Code,the value of the peso
at the time of the establishment of the obligation, which in
the instant case is when the property was taken
possession of by the Government, must be considered
for the purpose of determining just compensation.

Filinvest vs. Acetylene G.R. No. L-50449 January 30,
Respondent purchased from petitioner a
Camaro, as security a chattel mortgage was executed
therein. Respondent failed to pay 9 of his instalment,
which was demanded by the petitioner. Petitioner sent a
letter to the effect that he will return the mortgage
property pursuant to Art. 1484 and in full satisfaction
thereof together with a Voluntary Surrender with SPA to
W.O.N. there is dacion en pago
NO, The mere return of the mortgaged motor
vehicle by the mortgagor, the herein appellant, to the
mortgagee, the herein appellee, does not constitute
dation in payment or dacion en pago in the absence,
express or implied of the true intention of the
parties. Dacion en pago, according to Manresa, is the
transmission of the ownership of a thing by the debtor to
the creditor as an accepted equivalent of the performance
of obligation. The undertaking really partakes in one
sense of the nature of sale, that is, the creditor is really
buying the thing or property of the debtor, payment for
which is to be charged against the debtor's debt. As such,
the essential elements of a contract of sale, namely,
consent, object certain, and cause or consideration must
be present. In its modern concept, what actually takes
place in dacion en pago is an objective novation of the
obligation where the thing offered as an accepted
equivalent of the performance of an obligation is
considered as the object of the contract of sale, while the
debt is considered as the purchase price. In any case,
common consent is an essential prerequisite, be it sale or
innovation to have the effect of totally extinguishing the
debt or obligation.
Soco vs. Militante G.R. No. L-58961 June 28, 1983
Respondent entered into a contract of lease with
petitioner over a commercial building and lot. After some

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
time the collector of petitioner stopped collecting the rent,
allegedly due to the fact that respondent was sub-leasing
the premises to another at a higher price, therefore,
respondent sent his payment of rentals by check to
petitioner. The petitioner ordered the respondent to
vacate and the payment of rentals was thus consigned to
the court. The lower court declared the consignation valid
on grounds of substantial compliance
W.O.N. there is valid consignation
NO, There should be notice to the creditor prior
and after consignation as required by the Civil Code. The
reason for this is obvious, namely, to enable the creditor
to withdraw the goods or money deposited. Indeed, it
would be unjust to make him suffer the risk for any
deterioration, depreciation or loss of such goods or the
essential requisites of a valid consignation must be
complied with fully and strictly in accordance with the law,
Articles 1256 to 1261, New Civil Code. That these Articles
must be accorded a mandatory construction is clearly
evident and plain from the very language of the codal
provisions themselves which require absolute compliance
with the essential requisites therein provided. Substantial
compliance is not enough for that would render only a
directory construction to the by reason of lack
of knowledge of the consignation."
Immaculata vs. Navarro

Non Ducor Duco

of the constitution of the obligation and not those
which may be reasonably anticipated such as
increase in taxes, business losses or increase in
price of goods

-Loss in an obligation to deliver a generic thing shall not

extinguish the obligation unless it goes out of commerce
or has become unlawful
-When the prestation becomes legally or physically
impossible without the fault of the debtor, it shall
extinguish the obligation. I.e. death in personal
-loss of those which proceeds from a crime shall not
extinguish the obligation unless the party to whom it is
due refuses to accept it without justification
-Loss shall be presumed to be the fault of the debtor
when it is lost while in his possession unless there was at
that time a natural calamity
-The creditor shall have all the right of action which the
debtor may have against third persons by reason of the
loss (subrogation)
i.e. D owes C a certain laptop. If T a friend of D
breaks the laptop, C may file an action against T for

Laguna vs. Manabat G.R. No. L-23546 August 29, 1974

Petitioner obtained a free patent which it sold to
respondent. He sold the land and offered to redeem such
but the tender was not accepted. The respondent
contends that tender alone is not sufficient
W.O.N. consignation is necessary
NO, The right to redeem is a RIGHT, not an
obligation, therefore, there is no consignation required
to preserve the right to redeem

II. Loss of the thing due

-A thing is lost when it perishes, goes out of commerce or
disappears in a way that its existence is unknown or
cannot be recovered
-Partial loss shall not extinguish the obligation unless it is
so important as to extinguish the whole
-When the service has become so difficult, but not
impossible, as to be manifestly beyond the contemplation
of the parties, the obligor may be released in whole or in
part. Also known as Doctrine of Unforseen Risks
-Contemplates extraordinary difficulties,
and must be beyond contemplation at the time

Respondents assignor Binan transport leased
their certificate of public convenience to petitioner for a
period of 5 years. Some time thereafter the assignor
became insolvent and the lessee reduced the amount of
rentals paid. A complaint was filed and petitioner prayed
for the suspension of the lease until the operating
expenses were back to normal on grounds of fluctuation
of the market and a reduction of rentals
Where a person by his contract charges himself with an
obligation possible to be performed, he must perform it,
unless the performance is rendered impossible by the act
of God, by the law, or by the other party, it being the rule
that in case the party desires to be excused from the
performance in the event of contingencies arising, it is his
duty to provide therefor in his contract. Hence,
performance is not excused by subsequent inability to
perform, by unforeseen difficulties, by unusual or
unexpected expenses,

Occena vs. Jabson No. L-443349, October 29, 1976

Private respondent filed for the modification of
the terms and contracts of its subdivision contracts on
account of alleged increase in prices of oil and
concomitant spiralling of prices as it would result in an

Non Ducor Duco


Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
unjust enrichment on the part of the petitioner citing
article 1267

i.e. D owes C the sum of P500. If C

assigns his right to E pursuant to a debt and E
assigns his right to D, also in pursuant to a debt.
Confusion shall take place in the person of D.

The cited article does not grant the courts this
authority to remake, modify or revise the contract or to fix
the division of shares between the parties as
contractually stipulated with the force of law between the
parties, so as to substitute its own terms for those
covenanted by the parties themselves. Respondent's
complaint for modification of contract manifestly has no
basis in law and therefore states no cause of action.
Under the particular allegations of respondent's complaint
and the circumstances therein averred, the courts cannot
even in equity grant the relief sought.

-If the confusion is of a temporary nature, the obligation

shall be revived
V. Compensation
-Extinguishment in the amount of the obligation of those
persons reciprocally creditors and debtors
-May be total or partial compensation/extinguishment
-Takes place by operation of law at the time the two debts
arises, although the right thereof must be proven as a
i.e. D owes C a sum of P700 while C
owes D the sum of P500. C filed an action to
recover the sum of P700. D must set up the
defense of compensation which if proven shall
be deemed to have taken effect at the time the
two debts has arisen, in order to lessen his

III. Condonation or Remission

-Gratuitous abandonment by the Creditor of his right
-Governed by the law on Donations, thus:
-Movables must be accepted by the
creditor either orally or written, unless if the
amount exceeds P5,000 in which case it shall be
made in a written instrument

1. Each one of the obligors must be bound

-Immovables must be made by the

creditor and accepted by the debtor in a public

2. Must be in a sum of money or must be a thing

of the same kind and quality

Implied Condonations:

3. Must be due unless agreed upon by the


-Voluntary delivery of a private document

evidencing a credit by the creditor to the debtor

4. Mus be liquidated and demandable.

-May be rebutted by claiming it is

inofficous, in which case the debtor and his heirs
may further rebut the presumption by proving it
was made in payment of the credit
-Presumed to be made voluntarily
- Destruction of evidence of credit
-If the thing pledged is found in possession of
the debtor or a third person who owns the thing, the
accessory obligation of pledge shall be presumed to have
been remitted. Furthermore, (S)ince, by the lease, the
lessee was to have the advantage of casual profits of the
leased premises, he should run the hazard of casual
losses during the term and not lay the whole burden upon
the lessor
-Renunciation of the accessory shall not extinguish the
IV. Confusion or Merger of rights
-The meeting in one person of the qualities of creditor
and debtor
i.e. Father is the creditor of the son. In
case the father dies and the son inherits all, the
credit of the father shall be inherited by the son
in which case confusion takes effect. It will not
apply if the Father is the debtor since debts are
not transmitted to the heirs

5. There must be no retention or controversy,

commenced by a third party and communicated
in due time to the debtor
1. Legal Compensation
2. Conventional Compensation when one of
the requisites is missing and the parties agree to
do so
3. Judicial Compensation/ Set-Off When one
party has a claim for damages and the other
counter-claims also for damages
4. Facultative Compensation when only one of
the parties can set up the compensation.
-In cases of debts arising from a depositum or
from the obligations of a depositary or of a bailee in
commodatum. In these cases only the person constituting
the obligation may set up compensation due to the nature
of trust reposed by the depositor or bailor
-Support is not subject to compensation due to its nature
and it being equivalent to the right to life. Neither in civil
liability arising from a crime
-Voidable or Recissible contracts may be compensated
before an action to annul or rescind the contract. In case

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
it is voided or rescinded the parties shall return to each
other what they have received
-In cases of assignment, compensation shall take effect
and only those constituted before the notice of the
assignment was given to the other. Those constituted
after shall not be subject to compensation unless the
debtor reserves his right to compensation
-The guarantor may set up the compensation of the
principal debtor in whose favour the guaranty was
BPI vs. C.A. G.R. No. 136202 January 25, 2007
A bank generally has a right of set-off over the
deposits therein for the payment of any withdrawals on
the part of a depositor. The right of a collecting bank to
debit a client's account for the value of a dishonored
check that has previously been credited has fairly been
established by jurisprudence. To begin with, Article 1980
of the Civil Code provides that "[f]ixed, savings, and
current deposits of money in banks and similar
institutions shall be governed by the provisions
concerning simple loan."
Hence, the relationship between banks and
depositors has been held to be that of creditor and
debtor. Thus, legal compensation under Article 1278 of
the Civil Code may take place "when all the requisites
mentioned in Article 1279 are present,"
PNB vs. Acero G.R. No. L-69255 February 27, 1987
Isabella Corporation had a deposit with
petitioner bank which had two controverting claims.
Respondent Acero claim is founded upon a notice of
garnishment served with petitioner while the latters claim
is based upon an alleged credit agreement between him
and Isabella Corporation
Petitioner failed to adduce proof that it is a
creditor of Isabella. Even if it be assumed that such an
assignment had indeed been made, and PNB had been
really authorized to apply the P2M deposit to the
satisfaction of ISABELA's indebtedness to it,
nevertheless, since the record reveals that the application
was attempted to be made by PNB only on a prior date
that essayed application was ineffectual and futile
because at that time, the deposit was already in custodia
legis, notice of garnishment thereof having been served
on PNB
Francia vs. IAC G.R. No. L-67649 June 28, 1988
Petitioner was delinquent in his payment of real
estate taxes. He contends that legal compensation
should take effect as the government owes him money
from an expropriation of his property

Non Ducor Duco


By legal compensation, obligations of persons,
who in their own right are reciprocally debtors and
creditors of each other, are extinguished We have
consistently ruled that there can be no off-setting of taxes
against the claims that the taxpayer may have against the
government. A person cannot refuse to pay a tax on the
ground that the government owes him an amount equal
to or greater than the tax being collected. The collection
of a tax cannot await the results of a lawsuit against the
"The general rule based on grounds of public
policy is well-settled that no set-off admissible against
demands for taxes levied for general or local
governmental purposes. The reason on which the general
rule is based, is that taxes are not in the nature of
contracts between the party and party but grow out of
duty to, and are the positive acts of the government to the
making and enforcing of which, the personal consent of
individual taxpayers is not required. ..."

Solinap vs. Del Rosario G.R. No. L-50638 July 25, 1983
Respondent as heirs of the deceased and
Petitioner entered into a contract of lease wherein the
rentals were to be applied to their indebtedness. In order
to reduce the interest payable on the estate respondents
paid the rentals due to the PNB and sought
reimbursement from petitioner. Before the issue was
resolved, the petitioner filed a separate action against
respondent in their personal capacity for collection of their
loan in which the respondents sought counterclaim for the
rentals payable to the estate.
Petitioner's claim against the respondent
Luteros is still pending determination by the court. The
counterclaim interposed by them, if ultimately found to be
meritorious, can defeat petitioner's demand. Upon this
premise, his claim in that case cannot be categorized as
liquidated credit which may properly be set-off against his
obligation. Compensation cannot take place where one's
claim against the other is still the subject of court
litigation. It is a requirement, for compensation to take
place, that the amount involved be certain and
Sycip vs. C.A. G.R. No. L-38711, January 31, 1985
A certain Lapuz was to sold the shares of stocks
of another for which he was to get a commission.
Accused appellant was entrusted the sale by Lapuz to
which he issued a check which was dishonoured. Lapuz
filed for a case of estafa
Compensation cannot take place in this case
since Lapuz is only an agent. Compensation takes place
only when two persons in their own right are creditors and

Non Ducor Duco


Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
debtors of each other, and that each one of the obligors is
bound principally and is at the same time a principal
creditor of the other.
Cia Maritima vs. IAC G.R. No. L-51438 April 9, 1985
For compensation to take place, one of the
elements necessary is that the debts be liquidated. The
amount expended for repairs and improvements had yet
to be determined by the Trial Court. Rentals for the use of
the vessel by PAN- ORIENTAL were neither due and
demandable at the time of dispossession but only after
this Court had issued its Resolution

-Novation is never presumed

iii. Capacity to contract by the parties and
consent by all of them
-The parties who do not consent
thereto may enforce the original obligation
iv. The new contract must be valid
3. Kinds of Novation:
I. Objective Novation- Change in the object or
principal condition:
II. Subjective Novation
A. Substituting the person of the debtor

VI. Novation

Substitution or change of an obligation

by another


Incompatibility of the terms and

condition or in every point of the new
and old obligations such that the two
obligations cannot stand independently
of each other
1. Effects:
i. Extinguishment of the old obligation
ii. Creation of a new obligation between the
parties in lieu of the old

-If the new obligations is void, the original shall

subsist, unless the intention of the parties state that it will
be extinguished at any event
-If the new obligation is conditional it shall only take effect
upon the happening of the condition, and non-compliance
will remit the parties to their old obligation
-Conditions shall be deemed attached to the new
obligations unless expressly stated
-Accessory Obligations shall be deemed extinguished
except as to third person who did not give their consent
and is benefited therefrom
-Slight modifications do not effect novation, such as
change in the mode of payment, additional security
2. Elements:
i. A subsisting valid obligation
-Novation is void if the original
obligation is void, unless when annulment may
only be claimed by the debtor or there is
ratification (The ratification of the new obligation
is considered a waiver of the grounds for
ii. The new contract must clearly show the
intention of the parties to discharge the prior obligation
-No novation can be claimed if the new
obligation expressly acknowledges the old
obligation. It shall be merely suppletory

-substitution of the debtor without the consent or
against the will of the debtor but with consent of
the creditor
-The old debtor is not liable for insolvency or non
-substitution of the debtor with consent of the
debtor and the creditor
-The old debtor shall be liable in case the new
debtor is insolvent at the time of substitution, it
being known to him or is of public knowledge
B. Subrogating a third person in the

rights of the

-Subrogation transfers to the person subrogated

the credit with all the rights thereto including
accessory obligations of penalty and security
-Conventional Subrogation
-Change in the creditor with the consent of the
original parties and the third person
-The debtor who did not consent may enforce
the obligation against the old creditor
-Legal Subrogation
Presumed when:
a. There are two creditors of the same debtor,
and a creditor pays the other creditor who is preferred
b. A third person without interest in the obligation
pays with the consent, express or implied, of the debtor
c. When a person interested in the fulfillment of
the obligation pays the creditor, even without the consent
of the debtor
-i.e. insurance contracts
d. Payment by a solidary creditor
-In case the debtor has insufficient funds, the old debtor
shall be preferred for the remainder

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
Japan Airlines vs. Simangan G.R. No. 170141
April 22, 2008
Respondent booked a flight to the US with
petitioner. Petitioners employee bumped off respondent
contending that he was only using his flight as a pretext
to stay in Japan. He was made to wait and upon finding
out that his travel information was in order, he was
refunded his ticket and was offered to be rebooked the
next day. That act as petitioner claims amounted to a
novation, therefore no breach of contract of carriage may
be found
Considering that respondent was forced to get out of the
plane and left behind against his will, he could not have
freely consented to be rebooked the next day. In short, he
did not agree to the alleged novation. Since novation
implies a waiver of the right the creditor had before the
novation, such waiver must be express.
Salazar vs. JY Brothers G.R. No. 171998
October 20, 2010
In payment of its obligation petitioner indorsed a
check a Prudential Bank account which, upon dishonor it
replaced with a cross Solid Bank check.
Novation is done by the substitution or change of the
obligation by a subsequent one which extinguishes the
first, either by changing the object or principal conditions,
or by substituting the person of the debtor, or by
subrogating a third person in the rights of the creditor.

Non Ducor Duco


Art. 1302. It is presumed that there is legal

subrogation (2) When a third person, not interested in the
obligation, pays with the express or tacit approval of the
debtor; Metrobank was a third party to respondent and
central banks agreement and the facts show that
respondent agreed to Metrobanks payment to the
Centralbank. As the entity against which the collection
was enforced, Metrobank was subrogated to the rights of
Central Bank and has a cause of action to recover from
RBG the amounts it paid to the Central Bank.(What would
happen if Respondent did not approve? Solutio Indebitii)
Sandico vs. Piguing G.R. No. L-26115 November 29,
Petitioners obtained a favourable judgment and
moved for the issuance of a writ of execution. Petitioner
agreed to reduce the amount which respondent failed in
Fundamental it is that novation effects a substitution or
modification of an obligation by another or an
extinguishment of one obligation in the creation of
another. In the case at hand, we fail to see what new or
modified obligation arose out of the payment by the
respondent of the reduced amount of P4,000 and
substitute the monetary liability for P6,000 of the said
respondent under the appellate court's judgment.
Additionally, to sustain novation necessitates that the
same be so declared in unequivocal terms clearly and
unmistakably shown by the express agreement of the
parties or by acts of equivalent import or that there is
complete and substantial incompatibility between the two
Integrated Construction vs. Relova G.R. No. L-41117
December 29, 1986

The obligation to pay a sum of money is not novated by

an instrument that expressly recognizes the old, changes
only the terms of payment, adds other obligations not
incompatible with the old ones or the new contract merely
supplements the old one. The change in the mode of
paying the obligation was not a change in any of the
objects or principal condition of the contract for novation
to take place.

Petitioner and private respondent entered into

an agreement which however amounted to a breach of
contract. An arbitration agreement was made but the
parties made a subsequent agreement. Upon failure to
comply, petitioner filed for a motion for execution on the
previous judgment, which respondent judge however,
refused to issue on grounds of novation due to the
subsequent agreement.

Metropolitan Bank and Trust vs. Rural Bank of Gerona

G.R. No. 159097
July 5, 2010


Central Bank and respondent entered into an
agreement wherein Metrobank would be the depository
and the former would receive the advance released by
the former as proceeds of the loan. Upon failure of the
agreement, Central bank debited Metrobank who in turn
debited respondent although it was insufficient. Thus a
claim was filed.

The tenor of the subsequent letter-agreement in

a sense novates the judgment award there being a
shortening of the period within which to pay the
suspensive and conditional nature of the said agreement
(making the novation conditional) is expressly
acknowledged and stipulated in the MWSS' Resolution
MWSS' failure to pay within the stipulated period
removed the very cause and reason for the agreement,
rendering some ineffective. Petitioners, therefore, were
remitted to their original rights under the judgment award.
Cochingyan vs. R&B Surety G.R. No. L-47369 June 30,

Lex Leonum Fraternitas Notes (Private)

Mohammad Fyzee P. Alim
If subjective novation by a change in the person
of the debtor is to occur, it is not enough that the juridical
relation between the parties to the original contract is
extended to a third person. It is essential that the old
debtor be released from the obligation, and the third
person or new debtor take his place in the new relation. If
the old debtor is not released, no novation occurs and the

Non Ducor Duco


third person who has assumed the obligation of the

debtor becomes merely a co-debtor or surety or a cosurety.
Where, as in this case, the parties to the new
obligation expressly recognize the continuing existence
and validity of the old one, where, in other words, the
parties expressly negated the lapsing of the old
obligation, there can be no novation.