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1. Q: Popoy, Arvin, and Migs are jointly liable to deliver Grace a truck worth P750,000. On the date of delivery, Popoy and Arvin are willing to
deliver but Migs is not. (Subject Head)

Can Grace compel Migs to deliver the truck?

A: No. Grace has no cause of action against Migs for the delivery the truck because, as a joint-debtor, assuming that their shares are equal,
Migs is liable only for the proportionate part of the obligation which is P250,000. Since the truck is indivisible, the debt can only be enforced
by proceeding against all the debtors for compliance is not possible unless they act together.

2. Q: Popoy, Arvin, and Migs are jointly liable to deliver Grace a truck where she paid them P750,000. On the date of delivery, Popoy and Arvin
are willing to deliver but Migs is not. Grace opted to rescind the contract. Determine the respective liabilities of Popoy, Arvin, and Migs.
(Subject Head)

A: Assuming that their shares are equal, Popoy and Arvin must return Php 250,000 each as the amount they received in advance. Migs on the
other hand, is also liable to return the Php 250,000 received in advance plus damages for having violated the obligation.

This is in applying Article 1224 of the Civil Code which provides that a joint indivisible obligation gives rise to indemnity for damages from the
time anyone of the debtors does not comply with his undertaking. The debtors who may have been ready to fulfill their promises shall not
contribute to the indemnity beyond the corresponding portion of the price of the thing or of the value of the service in which the obligation

3. Q: Explain the Rule on pari delicto on contracts and enumerate the exceptions (Subject Head/ Commissioner’s Notes):

A: Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because they are deemed in
pari delicto or "in equal fault." In pari delicto is "a universal doctrine which holds that no action arises, in equity or at law, from an illegal
contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money
agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will be given to one
against the other."

This rule, however, is subject to exceptions that permit the return of that which may have been given under a void contract to: (a) the
innocent party (Arts. 1411-1412, Civil Code); (b) the debtor who pays usurious interest (Art. 1413, Civil Code); (c) the party repudiating the
void contract before the illegal purpose is accomplished or before damage is caused to a third person and if public interest is subserved by
allowing recovery (Art. 1414, Civil Code); (d) the incapacitated party if the interest of justice so demands (Art. 1415, Civil Code); (e) the party
for whose protection the prohibition by law is intended if the agreement is not illegal per se but merely prohibited and if public policy would
be enhanced by permitting recovery (Art. 1416, Civil Code); and (f) the party for whose benefit the law has been intended such as in price
ceiling laws (Art. 1417, Civil Code) and labor laws (Arts. 1418-1419, Civil Code). (Hulst vs. PR Builders, Inc. 532 SCRA 74)

4. Q: W together with her husband H opened a joint and/or time deposit account at X bank. The deposit were subject to several condition on of
which was “Endorsement and Presentation of the Certificate of Deposit is necessary for the renewal or termination of the Deposit”. (Dean

Later on, W came to X bank to pre-terminate the said accounts. She brought with her the certificates of time deposit and the passbook and
presented them to the bank. The manager however refused to pre-terminate the accounts insisting that they contact the husband first per
their standard operating protocol.

As soon as W left the bank, H arrived and likewise requested the pre-termination of the time deposit account. H claimed that he lost the
certificates of deposit that W presented to them earlier. The manager, believing on H’s claim, acceded to the pre-termination request and
requested him to execute a pro-forma affidavit of loss.

The money deposited was released to him.

It appears however that 2 days after, W filed an action to declare nullity of the marriage between her and H.

It appears that W never received her proportionate share of the pre-terminated deposits prompting her to demand X bank from the amounts
due to her. When the amount remained unheeded she filed a suit for damages against X bank. X bank on the other hand opposes this on the
ground that when they released the fund to H on an “and/or” account, their obligation was extinguished.

If you were the judge, what would be your ruling?

A: I would rule in favor of W.

An AND/OR account indicate an active solidarity thus entitled any of the account holders to demand payment of their proceeds. Article 1214
of the New Civil Code provides that the debtor may pay any one of the solidary creditors; but if any demand judicial or extrajudicial, has been
made by one of them, payment should be made to him.

In this case, since W made the first demand upon X bank, the payment should be made to her being the demanding creditor.

(SH: Read BPI vs. Fernandez G.R No. 173134, Sept 02, 2015 which is the basis of this question as it also explains how the bank was not in
good faith despite H issuing an affidavit of loss)

1 Examples of pertinent illustrations were taken from De Leon’s Comments and Cases, Obligations and Contracts, 2010 Edition
5. Q: Explain the principle of relativity of contracts and enumerate its exceptions (Subject Head):

A: The basic principle of relativity of contracts is that contracts can only bind the parties who entered into it, and cannot favor or prejudice a
third person, even if he is aware of such contract and has acted with knowledge thereof. "Where there is no privity of contract, there is
likewise no obligation or liability to speak about." (PNB vs. Teresita Tan Dee, G.R. No. 182128, February 19,2014)

There are cases however when third persons may be affected by a contract. They are the following: 2

1. In contracts containing a stipulation in favor of a third person (stipulation pour autri);

2. In contracts creating real rights;
3. In contracts entered into to defraud creditors;
4. In contracts which have been violated at the inducement of the third person;
5. In contracts creating “status” (e.g. the resulting status of marriage must be respected, even by strangers, while the contract is in
6. In the quasi-contract of negotiorum gestio, the owner is bound in proper case, by contracts entered into by the “gestor”
(unauthorized manager);
7. In “collective contracts” where the majority rules over the minority (e.g., collective bargaining contracts which affect even non-
union members; “suspension of payments” and “composition” under the Insolvency Law, where creditors are bound by contracts of
the majority); and
8. Where the situation contemplated in Article 1729 obtains. The intention of this article is to protect the laborers and the materialmen
from being taken advantage of by unscrupulous contractors and from possible connivance between owners and contractors. Thus, a
constructive vinculum or contractual privity is created by the provision, by way of exception to the principle underlying Article 1311
between the owner, on the one hand, and those who furnish labor and/or materials, on the other”

(SH Note: I have underlined for emphasis 4 points which I think are very important.)

6. Q: Distinguish compensation and confusion (subject head):

A: The differences between compensation and confusion are:

1. In confusion, there is only one person who is a creditor and debtor of himself, while in compensation, there are two persons
involved, each of whom is a debtor and a creditor of each other
2. In confusion, there is but one obligation, while in compensation, there are two obligations; and
3. In confusion, there is impossibility of payment, while in compensation, there is indirect payment.

7. Q: Provide obligations that cannot be compensated? (subject head)

A: Obligations that cannot be compensated are:

1. Obligation for payment of taxes as a general rule
2. Where debt arises from a depositum or commodatum under Article 1287 of the Civil Code
3. Obligation for Future Support
4. When one of the debts consists in civil liability arising from a penal clause pursuant to Article 1288 of the Civil Code

8. Q: Dodoy and Fanshen entered in a joint venture agreement to put up a food business named Hiwalay Corporation. The proposed
capitalization of such venture was agreed to be P 100 million, with Dodoy and Fanshen contributing P50 million each and Dodoy would
facilitate for putting up the business. Fanshen gave 10 million for the endeavor. After some time, as the business has not yet been put-up,
Fanshen made up her mind and wrote Dodoy to return the money she contributed. She demanded that the 10 Million she supposedly
advanced be returned and that damages be paid her since the business has not been put-up. Dodoy however contends that he cannot be
compelled to return the money claiming that Fanshen in-fact failed to provide her complete share of P50 million which caused the business
not to be put-up. Rule on the legal consequences for Fanshen. (Dean Paguirigan)

A: While Fanshen has a right to have her money returned by way of rescission, she cannot claim for damages. Pursuant to Article 1191 of the
Civil Code, when there is delay on the part of both parties, the court will determine which of the parties first violated the contract and if it
cannot be determined, the contract shall be deemed cancelled and each will bear his own damages. In this case, it is established that both
parties are at fault. However, it cannot be established who first violated the contract. It could either be Dodoy who failed to incorporate the
business or it could be Fanshen who failed to give the whole P50 Million. Thus, rescission is proper to prevent Dodoy from being unjustly
enriched with the P10 million advanced but Fanshen on the other hand cannot claim damages as she will have to bear the cost of not fully
providing the amount she obligated herself with.

Doctrine: When there is delay on the part of both, the court will determine which of the parties first violated the contract and if it cannot be
determined, the contract shall be deemed cancelled and each will bear his own damages. (Fong vs. Duenas, G.R. No. 185592, June 15, 2015/
Article 1191 NCC)

9. Q: On November 10, 1990, Crystal owed Helen P100,000 and agreed to pay the sum with 1% monthly interest or 12% per annum.
Subsequently, on January 1, 1991, Crystal, thinking that her obligation is due paid the sum and the interest. May Crystal recover the amount
paid? (SH, Civil Law Commissioner’s Notes)

A: Yes. Since Crystal was unaware of the period, she can recover the interest paid because Article 1195 of the NCC provides that anything
paid or delivered before the arrival of the period, the obligor being unaware of the period or believing that the obligation has become due and
demandable, may be recovered, with fruits and interest.

10. Q: Apple was an employee of BPI. During the course of employment, Apple obtained a car loan. While the promissory note on the car loan
states no period, payments for the said loan were deducted from Apple’s salary. Later however, Apple was terminated from his work. As such,

2 De Leon and De Leon, Comments and Cases: Obligations and Contracts, 2010 Edition, pp 475-476
BPI asked for the payment of the full loan. Apple refused contending that since his previous payment scheme was through salary deduction,
his loan is demandable in installment and thus, not all of the balance in it is due. Does BPI have a right to claim from Apple the entire amount
of the car loan? (Dean Paguirigan)

A: Yes. The obligation to pay the car loan is a pure obligation since the promissory note does not contain a period. Pure obligations are ruled
to be immediately demandable.

Doctrine: In HSBC vs. Sps. Broqueza (G.R. No. 178610, November 10, 2010), an obligation payable through salary deduction is a pure
obligation and is immediately demandable upon termination of employment.

11. Q: The Government through NAPOCOR occupied a parcel of land in Marawi City believing it was owned by ISKO. Due to the importance of
said land, the government decided to exercise its power of expropriation to acquire it. Thus, NAPOCOR filed an expropriation case before RTC
branch 8 in Marawi City. Later on RTC Branch 8 in Marawi City granted the expropriation case and ordered compensation and other sum due
to ISKO.

While the appeal was pending, MANNY filed a complaint in RTC Branch 10 in Marawi against both NAPOCOR and ISKO. Manny claimed that
the right to the land belongs to him and it is he who should be paid the compensation. Meanwhile, the appealed case between ISKO and
NAPOCOR became final and executory. Subsequently, the RTC Branch 8 ordered the issuance a writ of execution in favor of ISKO and a notice
of garnishment to NAPOCOR’s bank accounts.

The RTC Branch 10 in the separate case declared Manny as the true owner of the land. The RTC Branch 10 likewise ruled that it is MANNY
who is entitled to sum granted with regard to the land. NAPOCOR appealed on the ground that it cannot be held solidarily liable with ISKO on
the sum due. Is NAPOCOR’s contention correct? (Dean Paguirigan)

A: Yes. Pursuant to Article 1242 of the New Civil Code, a payment is valid if made to person in possession of the credit. In this case,
NAPOCOR’s previous payment to ISKO of the sum judged pursuant to the final and executory judgment can be considered to have
extinguished NAPOCOR’s obligation regardless of who was the owner. (Concept from: NAPOCOR vs. Ibrahim, G.R. No. 175863, February 18,

12. Q: Gen Anyo bought a subdivision lot in Pasig from Rockwill Corp. through a loan from Pagibig. In the agreement, the said property was
mortgaged in favor of Rockwill Corp. Unfortunately, Gen. Anyo’s loan from Pagibig was denied. Subsequently, Rockwill Corp made written
demands and foreclosed the said subdivision lot. Gen Anyo then consigned his payment in court but without a valid tender and asked for the
cancellation of the mortgage. Is there a valid consignation even if no tender of payment was made and that Rockwill holds the loan
document? (Civil Law Commissioner/ Vice Chair Mariano del Castillo Case)

A: The consignation is valid. Article 1256 of the NCC authorizes consignation, without need of prior tender of payment where the ground for
consignation is that the creditor is unknown. In this case, there is a doubt as to who the real creditor is between Pagibig or Rockwill. (Concept
from: Cacayorin vs. Armed Forces and Police Mutual Benefit Association, Inc, G.R. No. 171298, April 15, 2013)

13. Q: Applying the same facts in #12, one of the contention of Rockwill was that since it involves the sale of a subdivision lot, the RTC in the
consignation case is without jurisdiction and it should be filed at the HLURB. Is Rockwill’s contention correct?

A: No. Article 1258 of the NCC provides that consignation of the thing shall be made by depositing the thing to the disposal of a judicial
authority. Hence, said provision precludes consignation in other venues other than the courts. (Concept from: Cacayorin vs. Armed Forces and
Police Mutual Benefit Association, Inc, G.R. No. 171298, April 15, 2013)

14. Q: What is the doctrine of unforeseen event? (Subject Head)

A: The doctrine of unforeseen event is found in Article 1267 of the NCC which provides that when the service has become so difficult as to be
manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part.

15. Q: Spouses Mac entered into a Conditional Deed of Sale with Robert to buy a lot. The condition was that the obligation to pay the balance
would only arise if Robert was able to negotiate and secure access to the road. Subsequently, the spouses Mac requested for an advance on
the purchase prize but Robert decline stating that he is liable to pay the balance after he negotiate and obtain access to the road. Then, the
spouses rescinded that contract to the objection of Robert. Robert contends that the spouses act was unjustified. The spouses Mac on the
other hand their Conditional Deed of Sale violated the principle of mutuality under article 1308 of the Civil Code. Is the conditional deed of
sale between them a potestative condition? (Dean Paguirigan)

A: No. Potestative condition is one which is dependent solely upon the will of one of the contracting party. If it is potestative on part of the
creditor, it is valid. If it is potestative solely on the part of the debtor, the conditional obligation shall be void. But the provision of 1182 will
only apply if the potestive obligation will give rise to the obligation. If the obligation is pre-existing and the payment of which or performance
of which is subject to a condition that is potestative on the part of the debtor, the obligation is valid but the condition is void. (Concept from:
Catungal-Wessel vs. Rodriguez, G.R. No. 146839, March 23, 2011)