You are on page 1of 11

1

2014-2015 Cases
Obligations & Contracts
Atty. Crisostomo A. Uribe

Obligations
I.

In General
A.
B.
C.
D.

Definition
Kinds of Obligations as to basis & enforceability
Essential Elements
Sources of Civil Obligations

THE METROPOLITAN BANK AND TRUST COMPANY, Petitioner vs.


ANA GRACE ROSALES AND YO YUK TO, Respondents.
G.R. No.183204 January 13, 2014 Del Castillo, J.
Authority to Withhold, Sell and/or Set Off:
The Bank is hereby authorized to withhold as security for any and all obligations with
the Bank, all monies, properties or securities of the Depositor now in or which may
hereafter come into the possession or under the control of the Bank,
Issue:
Whether respondents have an obligation to the bank for the Hold Out clause to apply.
Ruling: The "Hold Out" clause applies only if there is a valid and existing obligation
arising from any of the sources of obligation enumerated in Article 115779 of the Civil
Code, to wit: law, contracts, quasi-contracts, delict, and quasi-delict. In this case,
petitioner failed to show that respondents have an obligation to it under any law, contract,
quasi-contract, delict, or quasi-delict.
CBK POWER COMPANY LIMITED, Petitioner vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
G.R. Nos. 198729-30 January15, 2014 Sereno, CJ
Issue :
Whether the principle of solutio indebiti is applicable in the case, thus entitling petitioner
to its claim.
Ruling: Also devoid of merit is the applicability of the principle of solutio indebiti to the
present case. According to this principle, if something is received when there is no right
to demand it, and it was unduly delivered through mistake, the obligation to return it

arises. In that situation, a creditor-debtor relationship is created under a quasi-contract,


whereby the payor becomes the creditor who then has the right to demand the return of
payment made by mistake, and the person who has no right to receive the payment
becomes obligated to return it.21 The quasi-contract of solutio indebiti is based on the
ancient principle that no one shall enrich oneself unjustly at the expense of another.

II.

Kinds of Civil Obligations


A.

As to Perfection & Extinguishment

B.

As to plurality of prestations

ARCO PULP AND PAPER CO., INC. and CANDIDA A. SANTOS, Petitioners, vs.
DAN T. LIM, doing business under the name and style of QUALITY PAPERS &
PLASTIC PRODUCTS ENTERPRISES, Respondent.
G.R. No. 206806
June 25, 2014
Leonen, J.
The parties allegedly agreed that Arco Pulp and Paper would either pay Dan T. Lim the
value of the raw materials or deliver to him their finished products of equivalent value.
Issue: Whether or not petitioner the obligation is alternative. Whether or not the
obligation had already been converted to a simple obligation.
Ruling: By agreement, petitioner Arco Pulp and Paper, as the debtor, had the option to
either (1) pay the price or(2) deliver the finished products of equivalent value to
respondent.35
The appellate court, therefore, correctly identified the obligation between the parties as an
alternative obligation, whereby petitioner Arco Pulp and Paper, after receiving the raw
materials from respondent, would either pay him the price of the raw materials or, in the
alternative, deliver to him the finished products of equivalent value.
When petitioner Arco Pulp and Paper tendered a check to respondent in partial payment
for the scrap papers, they exercised their option to pay the price. Respondents receipt of
the check and his subsequent act of depositing it constituted his notice of petitioner Arco
Pulp and Papers option to pay.
This choice was also shown by the terms of the memorandum of agreement, which was
executed on the same day. The memorandum declared in clear terms that the delivery of
petitioner Arco Pulp and Papers finished products would be to a third person, thereby
extinguishing the option to deliver the finished products of equivalent value to
respondent.

C.

As to liability of multiple parties

SPOUSES RODOLFO BEROT AND LILIA BEROT, Peitioners v. FELIPE C.


SIAPNO, Respondent.
G.R. No. 188944 July 9, 2014 Sereno, C.J.
Issue : Whether the loan obligation contracted by petitioners is joint or solidary.
Ruling: Art. 1207. The concurrence of two or more creditors or of two or more debtors in
one and the same obligation does not imply that each one of the former has a right to
demand, or that each one of the latter is bound to render, entire compliance with the
prestations. There is a solidary liability only when the obligation expressly so states, or
when the law or the nature of the obligation requires solidarity.
Ruks Konsult and Construction vs. Adworld Sign and Advertising Corporation and
Transworld Media Ads
G.R. No. 204866 January 21, 2015 J. Perlas-Bernabe
Issue : Whether petitioner is jointly or solidarily liable with Transworld.
Ruling: As joint tortfeasors, therefore, they are solidarily liable to Adworld. Verily,
"[j]oint tortfeasors are those who command, instigate, promote, encourage, advise,
countenance, cooperate in, aid or abet the commission of a tort, or approve of it after it is
done, if done for their benefit. They are also referred to as those who act together in
committing wrong or whose acts, if independent of each other, unite in causing a single
injury. Under Article 219429 of the Civil Code, joint tortfeasors are solidarily liable for the
resulting damage. In other words, joint tortfeasors are each liable as principals, to the
same extent and in the same manner as if they had performed the wrongful act
themselves."
D.
E.

As to performance of obligations
As to the presence of an accessory undertaking in case of breach
-Obligation with a Penal Clause

LEONARDO C. CASTILLO, Petitioner, v. SECURITY BANK CORPORATION, JRC POULTRY FARMS


OR SPOUSES LEON C. CASTILLO, JR., AND TERESITA FLORES-CASTILLO, Respondents.
G.R. No. 196118
July 30, 2014
PERALTA, J.

Issue: Whether the interest and penalty charges imposed by SBC are just, and not
excessive or unconscionable.
Ruling: SBC's 16% rate of interest is not computed per month, but rather per annum or
only 1.33% per month. In Spouses Bacolor v. Banco Filipino Savings and Mortgage
Bank, Dagupan City Branch,29 the Court held that the interest rate of 24% per annum on a

loan of P244,000.00 is not considered as unconscionable and excessive. As such, the


Court ruled that the debtors cannot renege on their obligation to comply with what is
incumbent upon them under the contract of loan as they are bound by its stipulations.
Also, the 24o/o per annum rate or 2% per month for the penalty charges imposed on
account of default, cannot be considered as skyrocketing.

III.

Specific circumstances affecting obligations in general


[Breach of Obligations/Excuse for Nonperformance : Fortuitous Event]
Fraud, Negligence, Delay

Rodrigo Rivera vs. Spouses Salvador and Violeta Chua


G.R. No. 184458 January 14, 2015 J. Perez
PROMISSORY NOTE
120,000.00
FOR VALUE RECEIVED, I, RODRIGO RIVERA promise to pay spouses SALVADOR
C. CHUA and VIOLETA SY CHUA, the sum of One Hundred Twenty Thousand
Philippine Currency (P120,000.00) on December 31, 1995.
It is agreed and understood that failure on my part to pay the amount of (120,000.00) One
Hundred Twenty Thousand Pesos on December 31, 1995. (sic) I agree to pay the sum
equivalent to FIVE PERCENT (5%) interest monthly from the date of default until the
entire obligation is fully paid for. xxx
Issue: Whether or not demand is necessary for Rivera to be in delay.
Ruling: No, The PN expressly provided that after 31 December 1995, default
commences and the stipulation on payment of interest starts.
Art. 1169. Those obliged to deliver or to do something incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their
obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation it appears that the
designation of the time when the thing is to be delivered or the service is to be rendered
was a controlling motive for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his
power to perform.
In reciprocal obligations, neither party incurs in delay if the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him. From the
moment one of the parties fulfills his obligation, delay by the other begins. (Emphasis
supplied)

GILAT SATELLITE NETWORKS, LTD., Petitioner, v. UNITED COCONUT


PLANTERS BANK GENERAL INSURANCE CO., INC., Respondent.
G.R. No.189563 April 7, 2014 Sereno, C.J.
Issue:
Whether petitioner deserves to be paid legal interest for the delay incurred by respondent
in the payment of the latters obligation
Ruling: Article 2209 of the Civil Code is clear: "[i]f an obligation consists in the
payment of a sum of money, and the debtor incurs a delay, the indemnity for damages,
there being no stipulation to the contrary, shall be the payment of the interest agreed
upon, and in the absence of stipulation, the legal interest.
Delay arises from the time the obligee judicially or extrajudicially demands from the
obligor the performance of the obligation, and the latter fails to comply. Delay, as used in
Article 1169, is synonymous with default or mora, which means delay in the fulfilment of
obligations.51 It is the nonfulfillment of an obligation with respect to time.
FIL-ESTATE PROPERTIES, INC. AND FIL-ESTATE NETWORK INC., Petitioners vs.
SPOUSES CONRADO AND MARIA VICTORIA RONQUILLO, Respondents.
G.R. No. 185798 January 13, 2014 PEREZ, J.
Issue:
Whether or not the Asian financial crisis constitute a fortuitous event which would justify
delay by petitioners in the performance of their contractual obligation.
Ruling: Also, we cannot generalize that the Asian financial crisis in 1997 was
unforeseeable and beyond the control of a business corporation. It is unfortunate that
petitioner apparently met with considerable difficulty e.g. increase cost of materials and
labor, even before the scheduled commencement of its real estate project as early as 1995.
However, a real estate enterprise engaged in the pre-selling of condominium units is
concededly a master in projections on commodities and currency movements and
business risks. The fluctuating movement of the Philippine peso in the foreign exchange
market is an everyday occurrence, and fluctuations in currency exchange rates happen
everyday, thus, not an instance of caso fortuito.16
IV.

Remedies for Breach of Obligations : Rescission

Swire Realty Devt Corp. vs. Jayne Yu


G.R. No. 207133
March 9, 2015 J. Peralta
Issue: Whether or not rescission of Contract to Sell was proper.
Ruling: Yes. Basic is the rule that the right of rescission of a party to an obligation under
Article 1191 of the Civil Code is predicated on a breach of faith by the other party who

violates the reciprocity between them. The breach contemplated in the said provision is
the obligors failure to comply with an existing obligation. When the obligor cannot
comply with what is incumbent upon it, the obligee may seek rescission and, in the
absence of any just cause for the court to determine the period of compliance, the court
shall decree the rescission.
OLIVAREZ REALTY CORPORATION and DR. PABLO R. OLIVAREZ,
Petitioners, v. BENJAMIN CASTILLO, Respondent.
G.R. No. 196251 July 9, 2014
Leonen, J.
Issue:
Whether Castillo is entitled to rescind the contract of conditional sale which is actually
a Contract to sell.
Ruling: No, rescission is not an appropriate remedy but cancellation of the contract.
In both contracts to sell and contracts of conditional sale, title to the property remains
with the seller until the buyer fully pays the purchase price. Both contracts are subject to
the positive suspensive condition of the buyers full payment of the purchase price.
In a contract of conditional sale, the buyer automatically acquires title to the property
upon full payment of the purchase price. This transfer of title is "by operation of law
without any further act having to be performed by the seller."
In a contract to sell, transfer of title to the prospective buyer is not automatic. "The
prospective seller [must] convey title to the property [through] a deed of conditional
sale."
V.

Modes of Extinguishment of Obligations


A.

Payment or performance/fulfillment

LEONARDO BOGNOT, Petitioner, v. RRI LENDING CORPORATION,


REPRESENTED BY ITS GENERAL MANAGER, DARIO J. BERNARDEZ,
Respondent.
G.R. No. 180144 September 24, 2014 Brion, J.
Issue: Who has the burden of proving payment.
Ruling: Jurisprudence tells us that one who pleads payment has the burden of proving
it;the burden rests on the defendant to prove payment, rather than on the plaintiff to prove
non-payment. Indeed, once the existence of an indebtedness is duly established by
evidence, the burden of showing with legal certainty that the obligation has been
discharged by payment rests on the debtor.

National Power Corporation vs. Lucman M. Ibrahim, et al.


G.R. No. 175863
February 18, 2015
J. Perez
Issue: Whether or not NPC can be held liable to the Ibrahims and Maruhoms despite
having paid Mangondato already.
Ruling: No. Article 1242 of the Civil Code reads:
"Payment made in good faith to any person in possession of the credit shall release the
debtor." Article 1242 of the Civil Code is an exception to the rule that a valid payment of
an obligation can only be made to the person to whom such obligation is rightfully owed.
A finding of bad faith, thus, usually assumes the presence of two (2) elements: first, that
the actor knew or should have known that a particular course of action is wrong or illegal,
and second, that despite such actual or imputable knowledge, the actor, voluntarily,
consciously and out of his own free will, proceeds with such course of action. Only with
the concurrence of these two elements can we begin to consider that the wrong
committed had been done deliberately and, thus, in bad faith.

Payment of debts in money


Special Forms of Payment
PHILIPPINE NATIONAL BANK, Petitioner, vs. TERESITA TAN DEE,
ANTIPOLO PROPERTIES, INC., now PRIME EAST PROPERTIES, INC.) and
AFP-RSBS, INC., Respondents.
G.R. No. 182128
February 19, 2014
Reyes, J.
Issue:
Whether the execution of the dation in payment effectively extinguished respondent
PEPIs loan obligation to the petitioner insofar as it covers the value of the property
purchased by Dee
Ruling: Dacion en pago or dation in payment is the delivery and transmission of
ownership of a thing by the debtor to the creditor as an accepted equivalent of the
performance of the obligation. It is a mode of extinguishing an existing obligation and
partakes the nature of sale as the creditor is really buying the thing or property of the
debtor, the payment for which is to be charged against the debtors debt.
Dation in payment extinguishes the obligation to the extent of the value of the thing
delivered, either as agreed upon by the parties or as may be proved, unless the parties by
agreement express or implied, or by their silence consider the thing as equivalent to
the obligation, in which case the obligation is totally extinguished.

ELIZABETH DEL CARMEN, Petitioner, v. SPOUSES RESTITUTO SABORDO


AND MIMA MAHILUM-SABORDO, Respondents.
G.R. No. 181723 August 11, 2014 Peralta, J.
Issue:
Whether petitioner and her co-heirs are excused from complying with the requirement of
prior tender of payment in order for the consignation made by them to be considered as
payment
Ruling: No. It is settled that compliance with the requisites of a valid consignation is
mandatory.Failure to comply strictly with any of the requisites will render the
consignation void. One of these requisites is a valid prior tender of payment.
Under Article 1256, the only instances where prior tender of payment is excused are:
(1) when the creditor is absent or unknown, or does not appear at the place of
payment;
(2) when the creditor is incapacitated to receive the payment at the time it is due;
(3) when, without just cause, the creditor refuses to give a receipt;
(4) when two or more persons claim the same right to collect; and
(5) when the title of the obligation has been lost.
None of these instances are present in the instant case. Hence, the fact that the subject lots
are in danger of being foreclosed does not excuse petitioner and her co-heirs from
tendering payment to respondents, as directed by the court.

B.
C.
D.
E.

Loss of the thing due


Condonation
Confusion
Compensation
Kinds of Compensation as to nature or cause of extinguishment
1.
legal
2.
conventional/voluntary
facultative
3.
judicial

UNION BANK OF THE PHILIPPINES, Petitioner, vs. DEVELOPMENT BANK


OF THE PHILIPPINES, Respondent.
G.R. No.191555 January 20, 2014 PERLAS-BERNABE, J.
Issue:
Whether the obligations of the parties, who are debtors and creditors of each other, were
extinguished by legal compensation.

Ruling: No, because requisites 3 & 4 are not present.


Art. 1279 of the Civil Code provides that in order that compensation may be proper, it is
necessary:
(1) That each one of the obligors be bound principally, and that he be at the same time
a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they
be of the same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
F.

Novation
Kinds of Novation as to object or purpose
1.
2.
3.

Subjective or personal
Objective or real
Mixed

ARCO PULP AND PAPER CO., INC. and CANDIDA A. SANTOS, Petitioners, vs.
DAN T. LIM, doing business under the name and style of QUALITY PAPERS &
PLASTIC PRODUCTS ENTERPRISES, Respondent.
G.R. No. 206806
June 25, 2014
Leonen, J.
Issue:
Whether the memorandum of agreement executed by the parties constituted a novation of
the original contract.
Ruling: No. Article 1293. Novation which consists in substituting a new debtor in the
place of the original one, may be made even without the knowledge or against the will of
the latter, but not without the consent of the creditor. Payment by the new debtor gives
him the rights mentioned in Articles 1236 and 1237. (1205a)
For novation to take place, the following requisites must concur:
1) There must be a previous valid obligation.
2) The parties concerned must agree to a new contract.
3) The old contract must be extinguished.
4) There must be a valid new contract.

10

Contracts
I.

In General
A.
B.

II.

Definition
Auto-contracts
Elements

Fundamental Characteristics/Principles of Contracts


A. Autonomy of Contracts
Escalation clause
Non-involvement clause
B. Consensuality of Contracts
Contract of Adhesion

Ejercito, et.al, Petitioners, vs. Oriental Assurance Corp., Respondent.


G.R. No. 192099 July 8, 2015 Sereno, C.J.
RENEWALS ALTERATIONS AND SUBSTITUTIONS: - the undersigned hereby
empower and authorize the company to grant or consent to the granting of any extension
continuation increase modifications change alteration and/or renewal of the original bond
herein referred to and to execute or consent to the execution of any substitution for said
bond with the same or different conditions and parties and the undersigned hereby hold
themselves jointly and severally liable to the company for the original bond hereinabove
mentioned or for any extension, continuation, increase, modification, change, alteration,
renewal or substitution thereof until the full amount including principal interests
premiums costs and other expenses due to the company thereunder is fully paid up.
Issues:
Whether petitioners gave their consent to the renewal of the surety bond.
Whether or not the Deed of Indemnity is a contract of adhesion, hence, void.
Ruling: Yes. With regard to the contention that the Deed of Indemnity is a contract of
adhesion, the Court has consistently held that contracts of adhesion are not invalid per se
and that their binding effects have been upheld on numerous occasions.
C. Mutuality of Contracts
D. Obligatory Force of Contracts

11

New World Developers and Management, Inc., Petitioner, vs. AMA Computer
Learning Center, Respondent.
G.R. No. 187930 February 23, 2015 Sereno, C.J.
Issue: Whether or not AMA is liable to pay six months worth of rent as liquidated damages.
Ruling: Yes.
Art. 1159. Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.
Art. 1306. The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy.
E. Relativity of Contracts
General Rule: Privity of Contract
III.

Classification of Contracts: Effects


A.
B.

According to degree of dependence upon another contract


According to perfection or formation

IV.

Stages of Contracts
Contract of Option.

V.

Essential Elements of Contracts


A.
consent of the contracting parties
B.
object certain which is the subject matter of the contract
C.
cause of the obligation which is established

VI.

Form of Contracts

VII.

Reformation of Instruments

VIII. Interpretation of Contracts


IX.

Defective/Void Contracts
A.
B.
C.
D.

1August2016cau

Rescissible Contracts
Voidable Contracts
Unenforceable Contracts
Void or Inexistent Contracts