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Obligations & Contracts - Jurado PDF
Obligations & Contracts - Jurado PDF
TITLE I — OBLIGATIONS
CHAPTER 1
GENERAL PROVISIONS
1
New provision.
2
4 Sanchez Roman 53.
3
8 Manresa, 5th Ed., Bk. 1, p. 21.
4
Art. 1423, Civil Code.
1
Art. 1156 OBLIGATIONS
5
3 Bouvier’s Law Dictionary, 2394-2395.
6
Art. 1144, Civil Code.
7
Agoncillo vs. Javier, 38 Phil. 424; Villaroel vs. Estrada, 71 Phil. 40.
8
Art. 1423, Civil Code.
9
Giorgi, Teoria de las Obligaciones, Vol. 1, p. 13; 3 Castan, 7th Ed., p. 20.
2
GENERAL PROVISIONS Art. 1156
10
Art. 748, Civil Code.
11
Art. 1874, Civil Code.
12
Art. 1956, Civil Code.
13
Art. 2134, Civil Code.
14
Art. 749, Civil Code.
15
Arts. 1771, 1773, Civil Code.
16
Art. 2140, Civil Code.
17
Sec. 22, Act No. 1147; Art. 1581, Civil Code.
3
Art. 1156 OBLIGATIONS
18
Arts. 1158-1162, Civil Code.
19
Arts. 1163-1168, Civil Code.
20
Arts. 1163-1166, Civil Code.
21
Arts. 1167-1168, Civil Code.
22
Arts. 1169-1191, Civil Code.
23
Arts. 1207, 1223, Civil Code.
24
Arts. 1166, 1226, et seq., Civil Code.
25
8 Sanchez Roman 20-40.
4
GENERAL PROVISIONS Art. 1156
2. As to parties:
(a) Unilateral and bilateral — unilateral, where only
one party is bound, and bilateral, where both parties are mu-
tually or reciprocally bound.
(b) Individual and collective — individual, where there
is only one obligor, and collective, where there are several ob-
ligors. The latter may be joint, when each obligor is liable only
for his proportionate share of the obligation, or solidary, when
each obligor may be held liable for the entire obligation.
3. As to object:
(a) Determinate and generic — determinate, when the
object is specific; generic, when the object is designated by its
class or genus.
(b) Simple and multiple — simple, when there is only
one undertaking; multiple, when there are several undertak-
ings. Multiple obligations may be conjunctive, when all of the
undertakings are demandable at the same time, or distribu-
tive, when only one undertaking out of several is demandable.
Distributive obligations, on the other hand, may be alterna-
tive, when the obligor is allowed to choose one out of several
obligations which may be due and demandable, or facultative,
when the obligor is allowed to substitute another obligation for
one which is due and demandable.
(c) Positive and negative — positive, when the obligor
is obliged to give or do something; negative, when the obligor
must refrain from giving or doing something.
(d) Real and personal — real, when the obligation con-
sists in giving something; personal, when the obligation con-
sists in doing or not doing something.
(e) Possible and impossible — possible, when the ob-
ligation is capable of fulfillment in nature as well as in law;
impossible, when the obligation is not capable of fulfillment
either in nature or in law.
(f) Divisible and indivisible — divisible, when the obli-
gation is susceptible of partial performance; indivisible, when
the obligation is not susceptible of partial performance.
5
Art. 1157 OBLIGATIONS
26
Art. 1089, Spanish Civil Code, in amended form.
27
8 Manresa, 5th Ed., Bk. 1, p. 35.
28
Art. 1157, Civil Code.
6
GENERAL PROVISIONS Art. 1158
29
Leung Ben vs. O’Brien, 38 Phil. 182.
30
Art. 1090, Spanish Civil Code.
31
Art. 1158, Civil Code.
7
Art. 1159 OBLIGATIONS
itself is the source of the obligation; however, when the law merely
recognizes or acknowledges the existence of an obligation generated
by an act which may constitute a contract, quasi-contract, criminal
offense or quasi-delict and its only purpose is to regulate such
obligation, then the act itself is the source of the obligation and not
the law.32 Thus, if A loses a certain amount to B in a game of chance,
according to Art. 2014 of the Civil Code, the former may recover his
loss from the latter, with legal interest from the time he paid the
amount lost. It is evident that in this particular case the source of
the obligation of B to refund to A the amount which he had won from
the latter is not a contract, quasi-contract, criminal offense or quasi-
delict, but the law itself.33 The same can also be said with regard to
the obligation of the spouses to support each other,34 the obligations
of employers under the Labor Code,35 the obligations of the owners of
the dominant and servient estates in legal easements,36 and others
scattered in the Civil Code and in special laws.
32
8 Manresa, 5th Ed., Bk. 1, p. 48.
33
Leung Ben vs. O’Brien, 38 Phil. 182.
34
Art. 291, Civil Code; Pelayo vs. Lauron, 12 Phil. 453.
35
Bautista vs. Borromeo, 35 SCRA 119.
36
Arts. 634, 687, Civil Code.
37
Art. 1091, Spanish Civil Code, in modified form.
38
Art. 1305, Civil Code.
39
Art. 1315, Civil Code.
8
GENERAL PROVISIONS Art. 1160
40
Art. 1316, Civil Code.
41
Art. 1306, Civil Code.
42
Art. 1305, et seq., Civil Code.
43
New provision.
9
Art. 1161 OBLIGATIONS
44
Art. 2142, Civil Code.
45
Art. 2144, Civil Code.
46
Art. 2154, Civil Code.
47
Art. 2144, Civil Code.
48
Ibid.
49
Arts. 2144-2152, Civil Code.
50
Art. 2154, Civil Code.
51
Ibid.
10
GENERAL PROVISIONS Art. 1161
52
Art. 1092, Spanish Civil Code, in amended form.
53
Art. 100, Revised Penal Code. This rule, however, is subject to the rules stated
in Arts. 101, 102 and 103, Revised Penal Code.
11
Art. 1161 OBLIGATIONS
12
GENERAL PROVISIONS Art. 1161
13
Art. 1161 OBLIGATIONS
14
GENERAL PROVISIONS Art. 1161
54
Art. 29, Civil Code.
55
Ibid.
56
Sec. 3(c), Rule 111, New Rules of Court.
57
Sec. 3(b), Rule 111, New Rules of Court.
58
Arts. 31, 177, Civil Code.
59
Arts. 32, 33, 34, Civil Code.
15
Art. 1161 OBLIGATIONS
With regard to the first, it must be noted that where the civil
action is based on an obligation not arising from the act or omission
complained of as a criminal offense or felony, such action may
proceed independently of the criminal action and regardless of the
result of the latter.60 It is evident that in such case the basis of the
civil action may be an obligation arising from the law, contract,
quasi-contract, or quasi-delict. Thus, a postmaster, who has been
charged criminally for malversation of government funds under
his custody, may still be made a defendant in a civil case for the
recovery of the funds, not on the ground of malversation, but on
the ground that under Sec. 633 of the Revised Administrative Code,
he can be held accountable therefor.61 The basis of the civil action
in such case is not the obligation arising from the criminal offense
of malversation, but the obligation arising from the law. Similarly,
if a passenger in a certain bus institutes a civil action to recover
damages from the operator of the bus line for injuries sustained in
an accident, such action is separate and distinct from the criminal
prosecution of the driver for criminal negligence and may, therefore,
be continued regardless of the result of the latter. Consequently,
he can still recover damages even if the driver is acquitted in the
criminal action, because it is clear that the action in such case is
based on culpa contractual and not on the act or omission of the
driver complained of as felony.62 The same principle is also applicable
if the offense charged constitutes what is known as culpa aquiliana
or quasi-delict under the Civil Code.63 In such case, the injured party
can always institute a civil action to recover damages independently
of the criminal action and regardless of the result of the latter. This
is so even granting that the accused is acquitted in the criminal
action either on the ground of reasonable doubt or on the ground
that he did not commit the offense charged. The reason for this is
that the basis of the civil action is no longer the criminal liability of
the defendant, but a quasi-delict or tort.64
60
Art. 31, Civil Code.
61
Tolentino vs. Carlos, 39 Off. Gaz., No. 6, p. 121.
62
San Pedro Bus Line vs. Navarro, 94 Phil. 840; Bernaldes vs. Bohol Land Trans.
Co., 7 SCRA 276.
63
Art. 2176, et seq., Civil Code.
64
Art. 2177, Civil Code; Barredo vs. Garcia and Almario, 73 Phil. 607; Dyogi vs.
Yatco, 100 Phil. 1095; Calo vs. Peggy, 103 Phil. 1112; Stanvac vs. Tan, 107 Phil. 109.
16
GENERAL PROVISIONS Art. 1161
65
Art. 32, Civil Code.
66
Art. 33, Civil Code.
67
Ibid.
68
Ibid.
69
Art. 34, Civil Code.
70
Arts. 32, 33, 34, Civil Code.
71
52 SCRA 420. This case was also cited and quoted in Mendoza vs. Arrieta, 91
SCRA 113.
17
Art. 1161 OBLIGATIONS
72
57 SCRA 106.
73
77 SCRA 98.
18
GENERAL PROVISIONS Art. 1162
74
91 SCRA 113.
75
Art. 1093, Spanish Civil Code, in amended form.
76
In Spanish law, “cuasi-delitos’’ is sometimes known as “culpa aquiliana’’ or
“culpa extra-contractual.’’
19
Art. 1162 OBLIGATIONS
77
Report of the Code Commission, p. 161.
78
See Elcano and Elcano vs. Hill and Hill, 77 SCRA 98.
79
Art. 2176, Civil Code.
80
Art. 2180, Civil Code.
20
GENERAL PROVISIONS Art. 1162
81
Ibid.
82
Taylor vs. Manila Electric Co., 16 Phil. 8.
83
Barredo vs. Garcia and Almario, 73 Phil. 607.
21
Art. 1162 OBLIGATIONS
22
GENERAL PROVISIONS Art. 1162
84
66 SCRA 485.
85
77 SCRA 98.
23
Art. 1162 OBLIGATIONS
86
91 SCRA 113.
24
GENERAL PROVISIONS Art. 1162
25
Art. 1162 OBLIGATIONS
26
GENERAL PROVISIONS Art. 1162
27
Art. 1162 OBLIGATIONS
28
GENERAL PROVISIONS Art. 1162
29
Art. 1162 OBLIGATIONS
30
GENERAL PROVISIONS Art. 1162
which was enacted after the Garcia doctrine, no longer uses the
term, “not punishable by law,’’ thereby making it clear that the
concept of culpa aquiliana includes acts which are criminal in
character or in violation of the penal law, whether voluntary or
negligent. Thus, the corresponding provision to said Article 1093
in the new code, which is Article 1162, simply says, “Obligations
derived from quasi-delicts shall be governed by the provisions
of Chapter 2, Title XVII of this Book (on quasi-delicts), and by
special laws.’’ More precisely, a new provision, Article 2177 of
the new code provides:
31
Art. 1162 OBLIGATIONS
congruent with the spirit of law, equity and justice, and more
in harmony with modern progress,’’ to borrow the felicitous
relevant language in Rakes vs. Atlantic Gulf and Pacific Co., 7
Phil. 359, to hold, as We do hold, that Article 2176, where it refers
to “fault or negligence,’’ covers not only acts “not punishable by
law’’ but also acts criminal in character, whether intentional
and voluntary or negligent. Consequently, a separate civil action
lies against the offender in a criminal act, whether or not he is
criminally prosecuted and found guilty or acquitted, provided
that the offended party is not allowed, if he is actually charged
also criminally, to recover damages on both scores, and would
be entitled in such eventuality only to the bigger award of the
two, assuming the awards made in the two cases vary. In other
words, the extinction of civil liability referred to in Par. (e) of
Section 3, Rule III, refers exclusively to civil liability founded on
Article 100 of the Revised Penal Code, whereas the civil liability
for the same act considered as a quasi-delict only and not as a
crime is not extinguished even by a declaration in the criminal
case that the criminal act charged has not happened or has not
been committed, by the accused. Briefly stated, We here hold, in
reiteration of Garcia, that culpa aquiliana includes voluntary
and negligent acts which may be punishable by law.
It results, therefore, that the acquittal of Reginald Hill in
the criminal case has not extinguished his liability for quasi-
delict, hence that acquittal is not a bar to the instant action
against him.
Coming now to the second issue about the effect of
Reginald’s emancipation by marriage on the possible civil
liability of Atty. Hill, his father, it is also Our considered opinion
that the conclusion of appellees that Atty. Hill is already free
from responsibility cannot be upheld.
While it is true that parental authority is terminated upon
emancipation of the child (Article 327, Civil Code), and under
Article 397, emancipation takes place “by the marriage of the
minor (child),” it is, however, also clear that pursuant to Article
399, emancipation by marriage of the minor is not really full
or absolute. Thus “Emancipation by marriage or by voluntary
concession shall terminate parental authority over the child’s
person. It shall enable the minor to administer his property as
though he were of age, but he cannot borrow money or alienate
or encumber real property without the consent of his father or
mother, or guardian. He can sue and be sued in court only with
the assistance of his father, mother or guardian.’’
32
GENERAL PROVISIONS Art. 1162
33
Art. 1162 OBLIGATIONS
34
GENERAL PROVISIONS Art. 1162
35
Art. 1162 OBLIGATIONS
36
GENERAL PROVISIONS Art. 1162
37
Art. 1162 OBLIGATIONS
there was no need for petitioner to have reserved his right to file
a separate civil action as his action for civil liability was deemed
impliedly instituted in Criminal Case No. SM-228.
“Neither would an independent civil action lie. Noteworthy
is the basis of the acquittal of jeep-owner-driver Salazar in the
criminal case, expounded by the Trial Court in this wise:
“In view of what has been proven and established
during the trial, accused Freddie Montoya would be held
liable for having bumped and hit the rear portion of the
jeep driven by the accused Rodolfo Salazar.
“Considering that the collision between the jeep
driven by Rodolfo Salazar and the car owned and driven
by Edgardo Mendoza was the result of the hitting on the
rear of the jeep by the truck driven by Freddie Montoya,
this Court believes that accused Rodolfo Salazar cannot
be held liable for the damages sustained by Edgardo
Mendoza’s car.”
“Crystal clear is the trial court’s pronouncement that
under the facts of the case, jeep-owner-driver Salazar cannot
be held liable for the damages sustained by petitioner’s car. In
other words, “the fact from which the civil might arise did not
exist.’’ Accordingly, inasmuch as petitioner’s cause of action
as against jeep-owner-driver Salazar is ex-delictu, founded on
Article 100 of the Revised Penal Code, the civil action must be
held to have been extinguished in consonance with Section 3(c),
Rule 111 of the Rules of Court which provides:
38
GENERAL PROVISIONS Art. 1162
39
Art. 1162 OBLIGATIONS
only to the civil liability arising from the offense charged. The
employer may no longer be held civilly liable for quasi-delict in
the criminal action as ruled in Maniago (infra.); San Ildefonso
Lines (infra.) and the pro hac vice decision in Rafael Reyes
Trucking Corporation (infra.), and all other similar cases, since
quasi delict is not deemed instituted with the criminal. If at
all, the only civil liability of the employer in the criminal action
would be his subsidiary liability under the Revised Penal Code.
The rule has also done away with third-party complaints and
counterclaims in criminal actions. These claims must have to be
ventilated in a separate civil action.’’
The Revised Rules of Criminal Procedure 2000 “is similar
to the original rule in Rule 107 of the Rules of Court.’’
40
GENERAL PROVISIONS Art. 1162
civil liability referred to in par. (c), Sec. 2 of Rule 111, refers ex-
clusively to civil liability arising from crime; whereas, the civil
liability for the same act considered as a quasi-delict only and
not as a crime is not extinguished even by a declaration in the
criminal case that the criminal act charged has not happened or
has not been committed by the accused. Both actions may pro-
ceed separately; the only limitation is the prohibition to recover
damages twice based on the same act or omission.’’
41
OBLIGATIONS
CHAPTER 2
NATURE AND EFFECT OF OBLIGATIONS
1
Art. 1094, Spanish Civil Code, in modified form.
2
Art. 1095, Spanish Civil Code.
3
Art. 1096, Spanish Civil Code, in modified form.
4
Art. 1097, par. 1, Civil Code.
42
NATURE AND EFFECT OF OBLIGATIONS Arts. 1163-1166
5
Art. 1460, par. 1, Civil Code.
6
Soriano vs. De Leon, 48 Off. Gaz. 2245; 8 Manresa, 5th Ed., Bk. 1, p. 102.
7
Art. 1244, Civil Code.
8
Art. 1246, Civil Code.
43
Arts. 1163-1166 OBLIGATIONS
the condition in which they were upon the perfection of the contract.
According to Manresa, the principle declared in Art. 1164 is merely
an extension of that declared in Art. 1537 considering the fact that
an obligation arising from a contract of sale is the prototype of all
contractual obligations.9 Generalizing the provision of the latter
article, we can, therefore, say that the obligor or debtor is bound to
deliver the thing which is the object of the obligation as well as the
fruits thereof from the moment the contract is perfected. In other
words, with respect to the thing itself, the obligation to deliver arises
from the time of perfection of the contract; with respect to the fruits,
the obligation to deliver also arises from the time of the perfection
of the contract. It must be noted, however, that these rules are not
absolute in character. In case there is a contrary stipulation of the
parties with respect to the time when the thing or fruits shall be
delivered, such stipulation shall govern. Hence, if the obligation
is subject to a suspensive condition, the obligation to deliver the
thing as well as the fruits shall arise only from the moment of the
fulfillment of the condition, and if it is subject to a suspensive term
or period, the obligation to deliver arises only upon the expiration of
the designated term or period.
If the creditor has a right to the thing as well as to the fruits
thereof from the time the obligation to deliver it arises, what is the
nature of such right? Before answering this question, we must first
know the meaning of personal and real right. According to an eminent
Spanish commentator, a personal right is “a right pertaining to a
person to demand from another, as a definite passive subject, the
fulfillment of a prestation to give, to do or not to do.’’ It is a jus ad
rem, a right enforceable only against a definite person or group of
persons, such as the right of a creditor to demand from the debtor
the delivery of the object of the obligation after the perfection of the
contract. A real right, on the other hand, is a “right pertaining to a
person over a specific thing, without a passive subject individually
determined against whom such right may be personally enforced.’’10
It is a jus in re, a right enforceable against the whole world, such
as the right of ownership, possession, usufruct or easement. It is
clear from these definitions that before delivery, the creditor, in
obligations to give, has merely a personal right against the debtor
9
8 Manresa, 5th Ed., Bk. 1, pp. 97-98.
10
3 Sanchez 6-8.
44
NATURE AND EFFECT OF OBLIGATIONS Arts. 1163-1166
— a right to ask for delivery of the thing and the fruits thereof. Once
the thing and the fruits are delivered, then he acquires a real right
over them, a right which is enforceable against the whole world.
This explains why according to Art. 1164 of the Code, although the
creditor acquires a right to the fruits of the thing from the time the
obligation to deliver it arises, he does not acquire any real right over
it until the same has been delivered to him. Thus, if A and B enter
into a written agreement whereby the former promises to deliver a
parcel of land to the latter for a price of P100,000, the obligations
to deliver the land on the part of the former and the purchase price
of P100,000 on the part of the latter arise only from the moment of
the perfection of the contract. As far as B is concerned, although
he is entitled to all of the fruits of the land from the moment of the
perfection of the contract, at most, he has only a personal right to
compel A to deliver the land and such fruits in case he, himself, is
also ready to comply with what is incumbent upon him.11 In other
words, he does not acquire a real right or right of ownership over the
land and over the fruits thereof, until the same have been delivered
to him. That is why, according to Art. 1477 of the Civil Code, the
ownership of the thing sold shall be transferred to the vendee only
upon the actual or constructive delivery thereof.
Idem; Rights of creditor in determinate obligations. — If
the obligation to give is determinate, the rights of the creditor are as
follows:
(1) To compel specific performance. This right is expressly
recognized by the first paragraph of Art. 1165 of the Code which
states that the creditor may compel the debtor to make the delivery.
It is complemented by the first paragraph of Art. 1244 which states
that the debtor of a thing cannot compel the creditor to receive a
different one, although the latter may be of the same value as, or more
valuable than that which is due. Consequently, if the debtor does not
comply with his obligation at the time when the obligation to deliver
arises or if he insists on delivering a different one, the remedy of
the creditor is to file an action against the debtor to compel specific
performance. In such case, the debtor cannot even plead pecuniary
impossibility of performance. It is an undisputed principle of equity
11
Cruzado vs. Bustos and Escaler, 34 Phil. 17; see also Fidelity and Deposit Co.
vs. Wilson, 8 Phil. 51; Garchitorena vs. Almeda, CA, 48 Off. Gaz. 3432; Lundberg vs.
Gancayco, CA, 50 Off. Gaz. 172.
45
Arts. 1163-1166 OBLIGATIONS
12
Gutierrez Repide vs. Afzelius, 39 Phil. 190.
13
Arts. 1165, par. 1, and 1170, Civil Code.
14
8 Manresa, 5th Ed., Bk. 1, p. 103.
15
Art. 1246, Civil Code.
16
Art. 1165, par. 2, Civil Code.
46
NATURE AND EFFECT OF OBLIGATIONS Arts. 1163-1166
17
8 Manresa, 5th Ed., Bk. 1, p. 104.
18
Art. 1244, Civil Code.
19
2 De Diego 65.
47
Arts. 1163-1166 OBLIGATIONS
20
Art. 1163, Civil Code; see Bishop of Jaro vs. De la Peña, 26 Phil. 144.
21
Art. 440, Civil Code.
22
8 Manresa, 5th Ed., Bk. 1, pp. 109-110.
48
NATURE AND EFFECT OF OBLIGATIONS Arts. 1163-1166
23
Capistrano, Civil Code, 1950 Ed., Vol. 3, p. 2.
24
Art. 1174, Civil Code.
49
Arts. 1163-1166 OBLIGATIONS
destroyed before the date of the delivery, the obligor or debtor shall
be liable to the creditor.
Idem; Obligations of debtor in generic obligations. — If
the obligation to give is innominate or generic, the obligations of the
debtor are as follows:
(1) To deliver a thing which is neither of superior nor inferior
quality.25 Consequently, the creditor cannot demand a thing of
superior quality; neither can the debtor deliver a thing of inferior
quality. However, in the determination of the quality of the thing
which is to be delivered, the purpose of the obligation and other
circumstances shall have to be taken into consideration.26
(2) To be liable for damages in case of breach of the obligation
by reason of delay, fraud, negligence or contravention of the tenor
thereof.27 This liability includes the obligation to reimburse all
expenses incurred by the creditor in those cases where the latter
avails himself of the right to ask a third person to perform the
obligation at the expense of the debtor.28 It must be noted, however,
that the doctrine enunciated in Art. 1174 of the Code, by virtue of
which the obligation is extinguished in case the object thereof is lost
or destroyed through a fortuitous event, is not applicable to this
type of obligation. This is clearly deducible from the provision of Art.
1263 of the Civil Code which states that in an obligation to deliver
a generic thing, the loss or destruction of anything of the same
class or genus as that which constitutes the object thereof shall not
extinguish the obligation. This precept is based on the maxim that
the genus of a thing can never perish (genus nunquam peruit). Thus,
if a certain company agreed to pay a pension to any of its employees
who may have completed 20 years of service and who may have
attained the age of 50, the fact that heavy losses were incurred by
said company during the war does not exempt it from liability on the
ground that such obligation to pay is generic and, consequently, is
not extinguished.29 Similarly, if a certain person promised to deliver
25
Art. 1246, Civil Code.
26
Ibid.
27
Art. 1170, Civil Code.
28
Art. 1165, par. 2, Civil Code.
29
Philippine Long Distance Co. vs. Jeturian, 97 Phil. 78; see also Reyes vs. Cal-
tex, 47 Off. Gaz. 1193.
50
NATURE AND EFFECT OF OBLIGATIONS Arts. 1163-1166
30
Soriano vs. De Leon, 48 Off. Gaz. 2245.
51
Art. 1167 OBLIGATIONS
31
Art. 1098, Spanish Civil Code.
32
Art. 1167, par. 2, Civil Code.
33
Art. 1170, Civil Code.
34
Woodhouse vs. Halili, 93 Phil. 526, quoting 19 Scaevola 428, 431-432.
35
8 Manresa, 5th Ed., Bk. 2, pp. 116-117.
52
NATURE AND EFFECT OF OBLIGATIONS Art. 1167
36
Ibid.
37
Art. 1167, par. 1, Civil Code.
38
Art. 1167, par. 2, Civil Code.
39
Art. 1170, Civil Code.
53
Art. 1168 OBLIGATIONS
40
Art. 1099, Spanish Civil Code, in modified form.
54
NATURE AND EFFECT OF OBLIGATIONS Art. 1169
41
8 Manresa, 5th Ed., Bk. 1, pp. 121-122.
42
Ibid., p. 123.
55
Arts. 1170-1173 OBLIGATIONS
43
Art. 1100, Spanish Civil Code, in amended form.
44
Art. 1101, Spanish Civil Code.
45
Art. 1102, Spanish Civil Code, in modified form.
46
Art. 1103, Spanish Civil Code.
56
NATURE AND EFFECT OF OBLIGATIONS Arts. 1170-1173
47
Art. 1104, Spanish Civil Code, in amended form.
48
Art. 1170, Civil Code.
49
Art. 1174, Civil Code.
50
8 Manresa, 5th Ed., Bk. 1, p. 125.
57
Arts. 1170-1173 OBLIGATIONS
51
Art. 1169, par. 1, Civil Code.
52
Compania General de Tabacos vs. Araza, 7 Phil. 55; Veloso vs. Fontanosa, 13
Phil. 79; Bayala vs. Silang Traffic Co., 73 Phil. 557; Adiarte vs. Court of Appeals, 49
Off. Gaz. 1421.
58
NATURE AND EFFECT OF OBLIGATIONS Arts. 1170-1173
Bayala vs. Silang Traffic Co., 73 Phil. 557; Adiarte vs. Court of Appeals, 49 Off.
54
59
Arts. 1170-1173 OBLIGATIONS
promised to contribute but also for interest and damages from the
time he should have complied with his obligation.
(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.55 The basis
of this exception is the fact that the designation of the time is of
such fundamental importance in the fulfillment of the obligation
that it would be logical to assume that the intention of the parties
was to make fulfillment of the obligation upon the arrival of such
designated time an essential part of the contract. In other words, the
time element for the fulfillment of the obligation is of the essence of
the contract. Therefore, it must be established that the designation
of the time when the obligation shall be fulfilled was a controlling
motive for the execution of the contract. This can be inferred from
the nature and circumstances of the obligation.56 Thus, where in
the contract of sale entered into between plaintiff and defendant
there is a stipulation that the machinery which is the object of the
sale was already on the way from the United States to Manila, but
it is established that it was actually shipped several days after
the execution of the contract and, as a consequence, plaintiff was
unable to deliver it within a reasonably short time to the defendant,
it was held that the plaintiff has already incurred in delay since,
undoubtedly, the representation that such machinery was already
on the way was one of the determining elements of the contract.
Consequently, the subsequent refusal of the defendant to accept the
delivery is justified.57
(3) When demand would be useless, as when the obligor has
rendered it beyond his power to perform.58 Thus, if A, for instance,
has promised to deliver his automobile to B on the 15th day of
November, 1980, but a few days before such date, the automobile
was completely destroyed through his fault, and the fact of its
destruction was known to B, demand by the latter would be useless.
55
Art. 1169, par. 2, No. 2, Civil Code.
56
8 Manresa, 5th Ed., Bk. 1, pp. 127-128.
57
Soler vs. Chesley, 43 Phil. 529. To the same effect: Hanlon vs. Hausserman and
Beam, 40 Phil. 795.
58
Art. 1169, par. 2, No. 3, Civil Code.
60
NATURE AND EFFECT OF OBLIGATIONS Arts. 1170-1173
In such case, A will incur in delay without the need of any demand
from B.
Idem; Default in negative obligations. — The obligor can
not possibly incur in delay in negative obligations (not to do). Ac-
cording to Manresa, these obligations have a peculiarity of their own
which the law does not show but which is evident from their spe-
cial nature. Fulfillment and violation are possible, but not default or
mora. This peculiarity is what differentiates this class of obligations
from positive obligations (to give and to do).59
Idem; Default in reciprocal obligations. — Reciprocal obli-
gations are those which are created or established at the same time,
out of the same cause, and which result in mutual relationships of
creditor and debtor between the parties. These obligations are con-
ditional in the sense that fulfillment of an obligation by one party
depends upon the fulfillment of the obligation by the other. Thus, in
a contract of sale of an automobile for P54,000, the vendor is obliged
to deliver the automobile to the vendee, while the vendee is obliged
to pay the price of P54,000 to the vendor. It is clear that the vendor
will not deliver the automobile to the vendee unless the latter will
pay the price, while the vendee will not pay the price to the vendor
unless the latter will deliver the automobile. Hence, in reciprocal ob-
ligations, the general rule is that fulfillment by both parties should
be simultaneous or at the same time. There are, however, cases in
which different dates for performance or fulfillment of the recipro-
cal obligations may be fixed by the parties, in which case, the rule
stated in the first paragraph in Art. 1169 shall apply.60
The rule then is that in reciprocal obligations, one party incurs
in delay from the moment the other party fulfills his obligation,
while he himself does not comply or is not ready to comply in a
proper manner with what is incumbent upon him.61 If neither party
complies or is ready to comply with what is incumbent upon him,
the default of one compensates for the default of the other. In such
case, there can be no legal delay. These rules may be illlustrated
by the following example: A sold his automobile to B for P30,000.
They agreed that delivery and payment shall be made on the 15th
59
8 Manresa, 5th Ed., Bk. 1, p. 127.
60
Ibid., pp. 133-134.
61
Art. 1169, par. 3, Civil Code.
61
Arts. 1170-1173 OBLIGATIONS
62
For illustrative cases — see Martinez vs. Cavives, 25 Phil. 581; Causing vs.
Bencer, 37 Phil. 417.
63
Art. 1170, Civil Code.
64
Art. 1165, par. 3, Civil Code.
65
Art. 2209, Civil Code, see Reforma vs. Tomol, 139 SCRA 260, with regard to the
meaning of legal interest.
66
Art. 2212, Civil Code.
62
NATURE AND EFFECT OF OBLIGATIONS Arts. 1170-1173
67
8 Manresa, 5th Ed., Bk. 1, p. 168.
68
Arts. 1170, 1171, Civil Code.
69
Arts. 1338-1344, Civil Code.
70
Guzman vs. Behn, Meyer & Co., 9 Phil. 112.
63
Arts. 1170-1173 OBLIGATIONS
insurance company which will entitle the latter to ask for annulment
of the contract.71
Idem; Effect of fraud. — If there is a breach or non-fulfill-
ment of the obligation by reason of fraud or dolo on the part of the
obligor or debtor, he can be held liable for damages. As a ground
for damages, malice or dishonesty is implied. It cannot cover cas-
es of mistake and errors of judgment made in good faith. Fraud or
dolo is synonymous to bad faith. (O’leary Macondray & Co., 45 Phil.
812 [1924].) The liability is expressly recognized by the provisions
of Arts. 1170 and 1171 of the Code. It is also a rule that the liabil-
ity cannot be waived or renounced. It must be noted, however, that
what is prohibited is the waiver or renunciation which is made in
advance or in anticipation of the fraud, and not that which is made
after the fraud has already been committed. In other words, under
Art. 1171, what is prohibited is the renunciation of the action for a
fraud which has not yet been committed.72
Thus, waiver for future fraud is contrary to law and public
policy. As such, said waiver is void. But waiver for a past fraud is
valid since such waiver can be deemed an act of generosity. Further,
what is renounced is the effect of fraud, more particularly the right
of the party to indemnity.
What is the extent of damages which the obligee or creditor can
recover from the obligor or debtor in case of breach or nonfulfillment
of the obligation by reason of fraud or dolo? According to the law on
damages in the Civil Code, it shall comprehend all damages which
may be reasonably attributed to the breach or nonfulfillment of the
obligation, regardless of whether such consequences are natural or
unnatural, probable or improbable, foreseeable or unforeseeable.73
In addition to such damages, the obligee or creditor can also recover
moral and exemplary damages.74 Moral damages may be recovered
in addition to other damages. (Far East Bank & Trust Co. vs. Court
of Appeals, 59 SCAD 253, 241 SCRA 671 [1995].)
Voluntary Breach Through Negligence or Culpa. — The
third kind of voluntary breach of an obligation regulated by the Civil
71
Eguaras vs. Great Eastern Life Ass. Co., 33 Phil. 263.
72
8 Manresa, 5th Ed., Bk. 1, p. 176.
73
Art. 2201, par. 2, Civil Code.
74
Arts. 2220 and 2232, Civil Code.
64
NATURE AND EFFECT OF OBLIGATIONS Arts. 1170-1173
75
Art. 1173, Civil Code.
76
Picart vs. Smith, 37 Phil. 809.
77
U.S. vs. Juanillo, 23 Phil. 212.
78
Picart vs. Smith, 37 Phil. 809.
79
Ibid.
65
Arts. 1170-1173 OBLIGATIONS
66
NATURE AND EFFECT OF OBLIGATIONS Arts. 1170-1173
67
Arts. 1170-1173 OBLIGATIONS
80
8 Manresa, 5th Ed., Bk. 1, p. 180.
81
Art. 1173, par. 1, Civil Code.
82
Picart vs. Smith, 37 Phil. 809; Cangco vs. Manila Railroad Co., 38 Phil. 768.
68
NATURE AND EFFECT OF OBLIGATIONS Arts. 1170-1173
69
Arts. 1170-1173 OBLIGATIONS
83
Art. 1170, Civil Code; Baer, Senior & Co. vs. Compania Maritima, 6 Phil. 215;
Guzman vs. Behn, Meyer & Co., 9 Phil. 112.
84
San Pedro Bus Lines vs. Navarro, 94 Phil. 846; see Art. 31, Civil Code.
85
Art. 1733, Civil Code; see also Arts. 1745, 1749, 1750, Civil Code.
86
42 Phil. 205. This excerpts from Heacock vs. Macondray is now modified by the
provisions of Arts. 1749 to 1750 of the New Civil Code.
70
NATURE AND EFFECT OF OBLIGATIONS Arts. 1170-1173
87
Art. 2201, par. 1, Civil Code; De Guia vs. Manila Electric Co., 40 Phil. 706.
71
Arts. 1170-1173 OBLIGATIONS
88
Art. 2201, par. 2, Civil Code.
89
Art. 1171, Civil Code.
90
Rakes vs. Atlantic, Gulf and Pacific Co., 7 Phil. 359; Cangco vs. Manila Rail-
road Co., 36 Phil. 766; Borromeo vs. Manila Railroad Co., 44 Phil. 165; Del Prado vs.
Manila Electric Co., 52 Phil. 900.
72
NATURE AND EFFECT OF OBLIGATIONS Arts. 1170-1173
broke, the car canted, the rails slid off and caught the plaintiff,
breaking his leg, which was afterwards amputated at about the
knee. The cause of the sagging of the track is admitted to be the
dislodging of the crosspiece under the stringer by the water of
the bay raised by a recent typhoon. The superintendent of the
company attributed it to the giving way of the block laid in the
sand. No effort was made to repair the injury at the time of the
occurrence. According to the plaintiff’s witnesses, a depression
of the track was apparent to the eye, and a fellow workman of
the plaintiff swears that the day before the accident he called the
attention of the foreman to it and asked him to have it repaired.
It is also admitted that there was a prohibition imposed by the
defendant company against walking by the side of the car and
that the plaintiff was walking by the side of the car when the
rails slid off. The question now is — what effect is to be given to
such act of contributory negligence?
Held: “Difficulty seems to be apprehended in deciding
which acts of the injured party shall be considered immediate
causes of the accident. The test is simple. Distinction must be
made between the accident and the injury, between the event
itself, without which there could have been no accident, and
those acts of the victim not entering into it, but contributing
to his own proper hurt. For instance, the cause of the accident
under review was the displacement of the crosspiece or the
failure to replace it. This produced the event giving occasion for
damages that is the sinking of the track and the sliding of the
iron rails. To this event, the act of the plaintiff in walking by
the side of the car did not contribute although it was an element
of the damage which came to himself. Had the crosspiece been
out of place wholly or partly through his act or omission of duty,
that would have been one of the determining causes of the
event or accident, for which he would have been responsible.
Where he contributes to the principal occurrence, as one of its
determining factors, he cannot recover. Where, in conjunction
with the occurrence, he contributes only to his own injury, he
may recover the amount that the defendant responsible for the
event should pay for such injury, less a sum deemed a suitable
equivalent for his own imprudence.
“Accepting, though with some hesitation, the judgment
of the trial court, fixing the damage incurred by the plaintiff
at 5,000 pesos, the equivalent of 2,500 dollars, United States
money, we deduct therefrom 2,500 pesos, the amount fairly
attributed to his negligence, and direct judgment to be entered
in favor of the plaintiff for the resulting sum of 2,500 pesos, with
73
Art. 1174 OBLIGATIONS
costs to both instances and ten days thereafter let the case be
remanded to the court below for proper action.”
91
Art. 2215, Civil Code.
92
Arrieta vs. National Rice and Corn Corp., 10 SCRA 79.
93
Art. 106, Spanish Civil Code, in amended form.
74
NATURE AND EFFECT OF OBLIGATIONS Art. 1174
clear from this definition that the presence of either the element
of unforeseability or inevitability would be sufficient to classify
the event as fortuitous in character. Hence, even if the event was
not inevitable if it could not have been foreseen, or even if it could
have been foreseen if it was inevitable, it would be considered as a
fortuitous event. It is evident, therefore, that the definition is broad
enough to comprehend “acts of God” or those which are absolutely
independent of human intervention, such as rains, typhoons, floods,
cyclones, earthquakes or any other similar calamity brought about
by natural forces. It is also broad enough to include force majeure
or events which arise from legitimate or illegitimate acts of persons
other than the obligor, such as commotions, riots, wars, robbery, and
similar acts.
The antecedent of fortuitous event or caso fortuito is found
in the Partidas which defines it as “an event which takes place by
accident and could not have been foreseen.’’ Escriche elaborates it as
“an unexpected event or act of God which could neither be foreseen
nor resisted.’’ Civilist Arturo M. Tolentino adds that “[f]ortuitous
events may be produced by two general causes: (1) by nature, such as
earthquakes, storms, floods, epidemics, fires, etc. and (2) by the act
of man, such as an armed invasion, attack by bandits, governmental
prohibitions, robbery, etc.’’ (Southeastern College, Inc. vs. Court of
Appeals, July 10, 1998, 292 SCRA 422.)
Classification. — Fortuitous events may be classified into
fortuitous event proper (act of God) and force majeure (fuerza mayor)
depending upon whether there is human intervention or not. The
first refers to an event which is absolutely independent of human
intervention, while the second refers to an event which arises from
legitimate or illegitimate acts of persons other than the obligor.94
The distinction, however, is merely technical. Essentially, there is
no substantial difference between the two; both refer to an event or
cause which is independent of the will of the obligor.95
As to foreseeability, fortuitous events may also be classified into
ordinary and extraordinary fortuitous event. The first refers to an
event which usually happens or which could have been reasonably
foreseen, while the second refers to an event which does not usually
94
8 Manresa, 5th Ed., Bk. 1, p. 205.
95
University of Santo Tomas vs. Descals, 38 Phil. 267.
75
Art. 1174 OBLIGATIONS
happen and which could not have been reasonably foreseen, such as
fire, war, pestilence, unusual flood, locust, earthquake, and others of
a similar nature.96
Effect upon Obligation. — If the obligor is unable to comply
with his obligation by reason of a fortuitous event, the general rule is
that he is exempted from any liability whatsoever.97 In other words,
his obligation is extinguished.98
Thus, where the obligor is unable to surrender his revolver to
the government upon demand because it was lost during a storm,99
or to return some photographic negatives that were entrusted to him
by the obligee because of a fire of accidental origin which destroyed
his place of business,100 or to deliver certain animals which he had
contracted to give to the obligee at a specified date because they dies
of natural causes or were killed during an epidemic before he could
deliver them to such obligee,101 it was held that since the breach of
the obligation is due to a fortuitous event, it is thereby extinguished;
consequently, he cannot be held liable for damages.
The application of this rule is even more evident in motor ve-
hicle accidents. Thus, where it was established that the defendant’s
bus was bumped by another bus which caused the driver to swerve it
to the left so as to prevent it from falling into a canal and as a result
it struck a tree, which led the bus to skid and capsize, it was held
that since the injury can be attributed or imputed only to an inevi-
table accident and not the misconduct or negligence of the operator
or of the driver, there can be no possible recovery of damages.102 But
where the accident is due to a defect of an equipment or of an appli-
ance purchased from a manufacturer, it is clear that such a defect
cannot be considered a fortuitous event within the meaning of the
law. This doctrine is very well illustrated in the case of Necesito vs.
Paras.103 In this case, it was proved that the bus, where one of the
96
Art. 1680, Civil Code.
97
Art. 1174, Civil Code.
98
See Arts. 1262, 1266, Civil Code.
99
Government vs. Bingham, 13 Phil. 185 but see Government vs. Amechazurra,
10 Phil. 637.
100
Brown vs. Robert, 40 Phil. 990; Lizares vs. Hernaez, 40 Phil. 981.
101
Palacio vs. Sudario, 7 Phil. 275; Crame vs. Gonzaga, 10 Phil. 646.
102
Ampang vs. Guinco Trans. Co., 92 Phil. 1085.
103
104 Phil. 75.
76
NATURE AND EFFECT OF OBLIGATIONS Art. 1174
plaintiffs and his mother were riding as passengers, was on its regu-
lar run when all of a sudden the steering knuckle broke, as a result
of which the driver lost control of the wheel, causing the bus to fall
into a ditch. The aforesaid plaintiff was injured, while his mother
was killed. Subsequently, an action to recover damages was brought
directly against the operator of the bus. Defendant now claims that
the cause of the accident is a fortuitous event. Refusing to accept
this defense, the Supreme Court declared:
77
Art. 1174 OBLIGATIONS
104
17 SCRA 23.
105
Rodriguez vs. Red Line Trans. Co., CA, 51 Off. Gaz. 3006.
106
La Mallorca vs. De Jesus, 17 SCRA 23.
78
NATURE AND EFFECT OF OBLIGATIONS Art. 1174
79
Art. 1174 OBLIGATIONS
107
The cases follow: People vs. Hatton, CA-GR No. 8310-R, Feb. 11, 1953; Peo-
ple vs. Oligan, CA-G.R. No. 05583-CR, Aug. 17, 1967; People vs. Palapal, CA-G.R.
No. 18480-Cr., June 27, 1958; People vs. Bandonil, CA-G.R. No. 25513-R, May 25,
1959; People vs. Aralar, CA-GR No. 01451-Cr., November 29, 1963; and People vs.
Buenaventura, CA-G.R. No. 00626-Cr., April 30, 1964.
108
L-31589, July 31, 1970, 34 SCRA 98.
109
Ibid., 107. The opinion of Justice Laurel in People vs. Vera, 65 Phil. 56 (1937)
was cited.
80
NATURE AND EFFECT OF OBLIGATIONS Art. 1174
110
Ibid., Justice J.B.L. Reyes spoke thus in Albert vs. Court of First Instance of
Manila (Br. VI), L-26364, May 29, 1968, 23 SCRA 948, 961.
111
45 Phil. 657.
112
Ibid., 661-662.
113
94 Phil. 892 (1954).
114
104 Phil. 75 (1958).
81
Art. 1174 OBLIGATIONS
82
NATURE AND EFFECT OF OBLIGATIONS Art. 1174
83
Art. 1174 OBLIGATIONS
The fact that the right rear tire exploded, despite being
brand new, constitutes a clear case of caso fortuito which
can be a proper basis for exonerating the defendants from
liability. x x x’’
The Court of First Instance relied on the ruling of the
Court of Appeals in Rodriguez vs. Red Line Transportation
Co., CA-G.R. No. 8136, December 29, 1954, where the Court of
Appeals ruled that:
84
NATURE AND EFFECT OF OBLIGATIONS Art. 1174
While it may be true that the tire that blewout was still
good because the grooves of the tire were still visible, this fact
alone does not make the explosion of the tire a fortuitous event.
No evidence was presented to show that the accident was due to
adverse road conditions or that precautions were taken by the
jeepney driver to compensate for any conditions liable to cause
accidents. The sudden blowing out, therefore, could have been
caused by too much air pressure injected into the tire coupled
by the fact that the jeepney was overloaded and speeding at the
time of the accident.
In Lasam vs. Smith (45 Phil. 657), we laid down the
following essential characteristics of caso fortuito:
xxx xxx xxx
x x x ‘In a legal sense and, consequently, also in
relation to contracts, a caso fortuito presents the following
essential characteristics: (1) The cause of the unforeseen
and unexpected occurrence, or of the failure of the debtor
to comply with his obligation, must be independent of the
human will; (2) It must be impossible to foresee the event
which constitutes the caso fortuito, or if it can be foreseen,
it must be impossible to avoid; (3) The occurrence must be
such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and (4) The obligor (debtor)
must be free from any participation in the aggravation
of the injury resulting to the creditor.’ (5 Encyclopedia
Juridica Española, 309.)’’
In the case at bar, the cause of the unforeseen and
unexpected occurrence was not independent of the human will.
The accident was caused either through the negligence of the
driver or because of mechanical defects in the tire. Common
carriers should teach their drivers not to overload their vehicles,
not to exceed safe and legal speed limits, and to know the
correct measures to take when a tire blows out thus insuring
the safety of passengers at all times. Relative to the contingency
of mechanical defects, we held in Necesito, et al. vs. Paras, et al.
(102 Phil. 75), that:
“x x x The preponderance of authority is in favor of
the doctrine that a passenger is entitled to recover damages
from a carrier for an injury resulting from a defect in an
appliance purchased from a manufacturer, whenever it
appears that the defect would have been discovered by the
carrier if it had exercised the degree of care which under
the circumstances was incumbent upon it, with regard to
85
Art. 1174 OBLIGATIONS
86
NATURE AND EFFECT OF OBLIGATIONS Art. 1174
87
Art. 1174 OBLIGATIONS
115
See supra.
116
Reyes vs. Caltex, 47 Off. Gaz. 1193; Philippine Long Distance Co. vs. Jeturian,
97 Phil. 781.
117
Soriano vs. De Leon, 48 Off. Gaz. 2245.
118
Yu Tek Co. vs. Gonzales, 29 Phil. 384; Lacson vs. Diaz, 47 Off. Gaz. 337.
119
Bunje Corp. vs. Elena Camenforte & Co., 48 Off. Gaz. 3377.
120
5 Encyclopedia Juridica Española, 309 cited in Lasam vs. Smith, 45 Phil. 990.
88
NATURE AND EFFECT OF OBLIGATIONS Art. 1174
121
32 Phil. 152.
122
34 Phil. 597.
89
Art. 1174 OBLIGATIONS
Co., 43 Mo., 421, Wagner, J., said: ‘The act of God which excuses
the carrier must not only be the proximate cause of the loss; the
better opinion is that it must be the sole cause. And where the
carrier mingles with it as an active and cooperative cause, he is
still responsible.’ (Ames vs. Stevens, 1 Stra., 128.)”
90
NATURE AND EFFECT OF OBLIGATIONS Art. 1174
91
Art. 1174 OBLIGATIONS
92
NATURE AND EFFECT OF OBLIGATIONS Art. 1174
123
Lasam vs. Smith, 45 Phil. 657, 661 (1924); Austria vs. Court of Appeals, 39
SCRA 527 (1971).
93
Art. 1174 OBLIGATIONS
In the language of the law, the event must have been impossible
to foresee, or if it could be foreseen, must have been impossible
to avoid.124 There must be an entire exclusion of human agency
from the cause of injury or loss.125
Turning to this case, before they sailed from the port of
Manila, the officers and crew were aware of typhoon “Klaring’’
that was reported building up at 260 kms. east of Surigao. In
fact, they had lashed all the cargo in the hold before sailing in
anticipation of strong winds and rough waters.126 They proceeded
on their way, as did other vessels that day. Upon reaching
Romblon, they received the weather report that the typhoon
was 154 kms. east southeast of Tacloban and was moving west
northwest.127 Since they were still not within the radius of
the typhoon and the weather was clear, they deliberated and
decided to proceed with the course. At Jintotolo Island, the
typhoon was already reported to be reaching the mainland of
Samar.128 They still decided to proceed noting that the weather
was still “good’’ although, according to the Chief Forecaster of
the Weather Bureau, they were already within the typhoon
zone.129 At Tanguingui Island, about 2:00 A.M. of May 16, 1966,
the typhoon was in an area quite close to Catbalogan, placing
Tanguingui also within the typhoon zone. Despite knowledge of
that fact, they again decided to proceed relying on the forecast
that the typhoon would weaken upon crossing the mainland
of Samar.130 After about half an hour of navigation towards
Chocolate Island, there was a sudden fall of the barometer
accompanied by heavy downpour, big waves, and zero visibility.
The Captain of the vessel decided to reverse course and face the
waves in the open sea but because the visibility did not improve
they were in total darkness and, as a consequence, the vessel
ran aground a reef and sank on May 16, 1966 around 12:45 P.M.
near Malapascua island somewhere north of the island of Cebu.
Under the circumstances, while, indeed, the typhoon was
an inevitable occurrence, yet, having been kept posted on the
course of the typhoon by weather bulletins at intervals of six
hours, the captain and crew were well aware of the risk they
124
Art. 1174, Civil Code; Lasam vs. Smith, 45 Phil. 657 (1924).
125
Tolentino, Commentaries on the Civil Code, Vol. V, p. 252.
126
T.s.n, August 8, 1967, p. 22.
127
Domestic Bulletin No. 16 of the Weather Bureau.
128
Domestic Bulletin, No. 17.
129
T.s.n., December 15, 1967, p. 21.
130
Domestic Bulletin, No. 18.
94
NATURE AND EFFECT OF OBLIGATIONS Art. 1174
131
Arts. 1755, 1756, Civil Code.
132
Art. 1733, Ibid.
133
Art. 1756, Ibid.
134
“Art. 587. The ship agent shall also be civilly liable for the indemnities in fa-
vor of third persons which may arise from the conduct of the captain in the vigilance
over the goods which the vessel carried; but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the freight he may have earned
during the voyage.’’
95
Art. 1174 OBLIGATIONS
135
Art. 1174, Civil Code.
136
Prosser on Torts, pp. 377-378.
137
Art. 1733, et seq., Civil Code.
138
4 Tolentino, Civil Code, 1956 Ed., p. 123.
96
NATURE AND EFFECT OF OBLIGATIONS Art. 1174
of fortuitous event, but the former contends: (a) that the defense
of fortuitous event is untenable because there was negligence on
the part of the defendant; and (b) that if the defense is tenable,
nevertheless, there must be a prior conviction for robbery before
it can be availed of. Decide the case.
Answer — The factual setting of the above problem is
identical to that of Austria vs. CA 39 SCRA 527. In that case,
the Supreme Court held that defendant is not liable.
To constitute a caso fortuito that would exempt a person
from responsibility, it is necessary: (1) that the event must
be independent of the will of the debtor; (2) that it must be
either unforeseeable or unavoidable; (3) that the occurrence
must render it impossible for the debtor to fulfill the obligation
in a normal manner; and (4) that the debtor must be free of
participation in, or aggravation of the injury to the creditor.
All of the above requisites or conditions are present in
this case. It is undeniable that in order to completely exonerate
the debtor by reason of a fortuitous event, such debtor must,
in addition to the casus itself, be free of any concurrent or
contributory fault or negligence. We believe, however, that
her act in travelling alone in the evening, carrying jewelry of
considerable value, cannot be considered as either concurrent or
contributory negligence. While it may be so considered now, we
are not persuaded that the same rule should obtain ten years
previously when the robbery in question took place, for at that
time criminality had not by far reached the levels attained in
the present day.
There is likewise no merit in the contention that to allow
the fact of robbery to be recognized in this case before conviction
is secured in the criminal action, would prejudice the latter case,
or would result in inconsistency should the accused obtain an
acquittal or should the criminal case be dismissed. It must be
realized that a court finding that a robbery has happened would
not necessarily mean that those accused in the criminal action
would be found guilty of the crime; nor would a ruling that those
actually accused did not commit the robbery be inconsistent
with a finding that a robbery did take place. The evidence to
establish these facts would not necessarily be the same.
Problem — A barge belonging to the Luzon Stevedoring
Corporation, while passing under the Nagtahan Bridge in
Manila, rammed the bridge supports causing damage thereto.
In this action for damages instituted by the Government against
the defendant corporation, the latter interposed the defense
97
Art. 1174 OBLIGATIONS
that there was no negligence or fault on its part and that the
proximate cause of the accident was a fortuitous event. Decide
the case.
Answer — As far as the negligence of the defendant
corporation is concerned, it is clear that the doctrine of res ipsa
loquitur is applicable. It is undeniable that the unusual event
that the barge, exclusively controlled by defendant, rammed the
bridge supports raises a presumption of negligence on the part
of defendant or its employees manning the barge or the tugs
that towed it. In the ordinary course of events, such a thing does
not happen if proper care is used.
As far as the defense of fortuitous event is concerned, caso
fortuito by definition refers to those extraordinary events not
foreseeable or avoidable, “events that could not be foreseen,
or which though foreseen, were inevitable.” (Art. 1174, NCC.)
It is, therefore, not enough that the event could not have been
foreseen or anticipated, as is commonly believed, but it must
be one impossible to foresee or to avoid. The mere difficulty to
foresee the happening is not impossible to foresee the same.
Hence, the proximate cause of the accident cannot be classified
as a fortuitous event. Consequently, defendant is liable. (Rep. of
the Phil. vs. Luzon Stevedoring Corp., 21 SCRA 279.)
Problem — A was injured while he was a passenger in
a bus operated by X Co. The proximate cause of the accident
was the failure of the steering knuckle to work causing the
driver to lose control of the wheel as a result of which the bus
fell into a ditch. Can the operator now relieve itself of liability
by claiming that the real cause of the accident was a fortuitous
event? Suppose that the proximate cause of the accident was a
tire blowout, would that make a different in your answer?
Answer —The operator cannot relieve itself of liability by
claiming that the real cause of the accident was a fortuitous
event. The weight of authority sustains the view that a
passenger is entitled to recover damages from the carrier for
an injury resulting from a defect in an equipment purchased
from a manufacturer, unless extraordinary diligence has
been exercised with regard to inspection and application
of the necessary tests. For the purpose of this doctrine, the
manufacturer is considered in law the agent of the carrier. The
rationale of the carrier’s liability is that the passenger has no
privity with the manufacturer and, therefore, has no remedy
whatever against him, while the carrier usually has. (Necesito
vs. Paras, 104 Phil. 75.) If the proximate cause of the accident
98
NATURE AND EFFECT OF OBLIGATIONS Art. 1174
99
Art. 1174 OBLIGATIONS
100
NATURE AND EFFECT OF OBLIGATIONS Art. 1175
139
New Provision.
140
Tolentino vs. Gonzales, 50 Phil. 558.
141
See comments under Art. 1413, infra.
101
Art. 1176 OBLIGATIONS
Art. 1253, Civil Code; Hill vs. Veloso, 31 Phil. 160; Vda. de Ongsiaco vs. Cabat-
143
102
NATURE AND EFFECT OF OBLIGATIONS Art. 1177
144
Art. 1111, Spanish Civil Code.
103
Art. 1177 OBLIGATIONS
145
Castan, 7th Ed., pp. 173-174; 2 De Diego 35.
146
2 De Diego, 35-36; 3 Castan, 7th Ed., pp. 175-176.
147
3 Castan, 7th Ed., p. 174; 8 Manresa, 5th Ed., Bk. 1, p. 272.
104
NATURE AND EFFECT OF OBLIGATIONS Art. 1178
er, subject to one very important exception. Rights which are purely
personal in the sense that they are inherent in the person of the
debtor, such as rights arising from purely personal or family rela-
tions or those which are public or honorary in character, cannot be
included within the scope of this remedy.148
Idem; Accion pauliana. — Another method by which the
debtor may defeat the right of the creditor is by means of a positive act
whereby the latter is defrauded or prejudiced. This may be illustrated
by alienations or conveyances of property made by the debtor to
third persons in fraud of creditors. According to Art. 1177, such acts
can be impugned or attacked directly by means of a rescissory action
at the instance of the creditors who are prejudiced.149 This action is
sometimes known as accion pauliana in Spanish law. As in the case
of accion subrogatoria, it is based on the principle that the property
of the debtor, whether present or future, stands as a guaranty for
the payment of the obligation or credit. Accion pauliana, therefore,
refers to the right available to the creditor by virtue of which he can
secure the rescission of any act of the debtor which is in fraud and
to the prejudice of his rights as a creditor. By its very nature, it is
subsidiary in character.150 In other words, it can only be availed of
in the absence of any other legal remedy to obtain reparation for the
injury.151
148
8 Manresa, 5th Ed., Bk. 1, p. 267.
149
This rescissory action is regulated by Arts. 1380-1389, Civil Code.
150
Art. 1383, Civil Code.
151
2 Diego, 37-38.
152
Art. 1112, Spanish Civil Code.
105
Art. 1178 OBLIGATIONS
153
Arts. 1178, 1311, Civil Code.
154
Estate of Hernandez vs. Luzon Surety Co., 100 Phil. 388.
106
CHAPTER 3
1
Art. 1113, Spanish Civil Code.
2
New provision.
3
3 Castan, 7th Ed., p. 104.
107
Arts. 1179-1180 OBLIGATIONS
4
8 Manresa, 5th Ed., Bk 1, pp. 305-306.
5
Floriano vs. Delgado, 11 Phil. 154; for other cases — see People’s Bank vs.
Odom, 64 Phil. 128; Galar vs. Isasi; Aberri vs. Galar, CA, 47 Off. Gaz. 6241.
6
8 Manresa, 5th Ed., Bk 1, p. 309.
7
Ibid., pp. 309-310.
108
DIFFERENT KINDS OF OBLIGATIONS Arts. 1179-1180
Pure and Conditional Obligations
This is not, however, accurate. The event itself can never constitute
a condition because in order that it can be classified as such, the
requisites of futurity and uncertainty must be present. But the proof
or ascertainment of the fact or event, as distinguished from the fact
or event itself, may constitute either a condition or a term depending
upon the circumstances of each case.
Thus, if the proof or ascertainment of the fact or event will
surely come to pass, although it may not be known when, it is clear
that it constitutes a term or period, such as when A promises to pay
B a certain sum of money if the latter can prove by proper authorities
that the Civil Code of the Philippines took effect on Aug. 30, 1950. In
such case, the requisites of futurity and certainty in order that a fact
or event shall constitute a term or period are certainly present. On
the other hand, if the past event is unknown to the parties as well as
to the whole world, so that the proof or ascertainment thereof may or
may not happen or come to pass, it is also clear that it constitutes a
condition, such as when A promises to pay B a certain sum of money
if the latter can prove by proper evidence that Rizal did not retract
Freemasonry, or that a priest broke the seal of the confessional in
order to reveal the secret of the Katipunan.
However, when the debtor binds himself to pay when his means
permit him to do so, the obligation shall be deemed to be one with
a period, subject to the provisions of Art. 1197.8 Consequently, the
courts shall determine such period as may under the circumstances
have been probably contemplated by the parties. Once fixed by the
courts, the period cannot be changed by them.9 Thus, it has been
held that if it is stipulated by the contracting parties that the debtor
shall pay “as soon as he has the money,” the creditor’s remedy is
to resort to the courts for the determination of the duration of the
period in accordance with the provisions of Art. 1197 of the Code.10
Idem; Classification of conditions. — Conditions are
traditionally classified as follows:
8
Art. 1197, Civil Code.
9
Art. 1180, Civil Code.
10
Patente vs. Omega, 49 Off. Gaz. 4846.
109
Arts. 1179-1180 OBLIGATIONS
11
8 Manresa, 5th Ed., Bk. 1, pp. 323-324.
110
DIFFERENT KINDS OF OBLIGATIONS Art. 1181
Pure and Conditional Obligations
12
Art. 1114, Spanish Code.
111
Art. 1181 OBLIGATIONS
condition that the City shall transform it into a public park within
a period of one year from the time of the perfection of the donation,
the condition which is imposed is resolutory in character. If the City
fails to transform the land into a public park within the stipulated
period, the rights which it acquired over the land as a result of the
donation are resolved or extinguished altogether. The same is true
in case a person sells a parcel of land with right of repurchase. Once
the sale with pacto de retro is perfected, the vendee a retro becomes
the owner of the property. However, his right is not absolute in
character because it may be extinguished or lost if the vendor a
retro exercises his right of repurchase within the legal or stipulated
period of redemption.
Idem; Effects. — It is, therefore, clear from what had been
stated that if an obligation is subject to a suspensive condition, the
acquisition of rights shall depend upon the happening or fulfillment
of the fact or event which constitutes the condition.13 In other words,
the obligation shall become effective only upon the fulfillment of
the condition. Consequently, what is acquired by the obligee or
creditor upon the constitution of the obligation is only a mere hope
or expectancy. Unlike other hopes or expectancies, however, it is
protected by the law.14
On the other hand, if the obligation is subject to a resolutory
condition, it becomes demandable immediately after its establishment
or constitution. This is evident from the provision of the second
paragraph of Art. 1179. Consequently, unlike an obligation with a
suspensive condition, rights arising out of the obligation are acquired
immediately and vested in the obligee or creditor.15 However, this
is without prejudice to the happening or fulfillment of the event
which constitutes the condition. In other words, although rights are
immediately vested in the obligee or creditor upon the constitution of
the obligation, such rights are always subject to the threat or danger
of extinction. Thus, in the case of a sale with pacto de retro, the
vendee a retro becomes the owner of the property which is sold once
it is delivered to him. This right of ownership, however, is subject
13
Art. 1181, Civil Code; for illustrative cases, see Wise & Co. vs. Kelly, 37 Phil.
696; Santiago vs. Millar, 68 Phil. 39; Phil. Nat. Bank vs. Phil. Trust Co., 68 Phil. 48;
Panganiban vs. Batangas Trans. Co., CA, 46 Off. Gaz. 3167.
14
Art. 1188, Civil Code; Phil. Long Distance Co. vs. Jeturian, 97 Phil. 981.
15
Art. 1181, Civil Code.
112
DIFFERENT KINDS OF OBLIGATIONS Art. 1181
Pure and Conditional Obligations
16
Art. 1601, et seq., Civil Code.
113
Art. 1181 OBLIGATIONS
17
8 Manresa, 5th Ed., Bk. 1, p. 311.
114
DIFFERENT KINDS OF OBLIGATIONS Art. 1182
Pure and Conditional Obligations
18
For a similar case, see Prieto vs. Quezon City, 99 Phil. 1059.
19
Art. 1115, Spanish Civil Code.
115
Art. 1182 OBLIGATIONS
20
8 Manresa, 5th Ed., Bk. 1, p. 327.
21
Art. 1182, Civil Code.
22
8 Manresa, 5th Ed., Bk. 1, p. 324.
23
Trillana vs. Quezon Colleges, 93 Phil. 383.
24
Art. 1190, Civil Code.
116
DIFFERENT KINDS OF OBLIGATIONS Art. 1182
Pure and Conditional Obligations
25
43 Phil. 873.
117
Art. 1182 OBLIGATIONS
26
In Hermosa vs. Longara (93 Phil. 971), a much more recent case, the Supreme
Court declared that the above ruling was merely an assumption and the same was
not the actual ruling of the case.
27
Art. 1182, Civil Code.
118
DIFFERENT KINDS OF OBLIGATIONS Art. 1182
Pure and Conditional Obligations
28
Jacinto vs. Chua Leng, CA, 45 Off. Gaz. 2919.
29
Hermosa vs. Longara, 93 Phil. 971.
30
Ibid.
119
Art. 1182 OBLIGATIONS
120
DIFFERENT KINDS OF OBLIGATIONS Art. 1182
Pure and Conditional Obligations
because its fulfillment depends not only upon the will of the
debtor but also upon the concurrence of other factors, such as
the acceptability of the price and other conditions of the sale,
as well as the presence of a buyer, ready, able and willing to
purchase the property.
Problem — Suppose that in the above problem, the debtor
promised to pay his obligation if a house belonging to him is
sold, will that make a difference in your answer?
Answer — It will not make a difference in my answer.
The condition is still mixed because its fulfillment depends not
only upon the will of the debtor but also upon the concurrence
of other factors, such as the acceptability of the price and other
conditions of the sale, as well as the presence of a buyer, ready,
able and willing to purchase the property.
True, apparently, in Osmeña vs. Rama (14 Phil. 99), the
Supreme Court declared that the above condition is potestative
with respect to the debtor, but a closer perusal of the case
will show that the declaration or statement was merely an
assumption and the same was not the actual ruling. (Hermosa
vs. Longara.)
Hence, the condition is valid. And it cannot be said that if
the debtor so desires, he can always prevent the sale. According
to the NCC (Art. 1186.), if he prevents the consummation of the
sale voluntarily, the condition would be deemed or considered
complied with. (Ibid.)
Problem — Suppose that in the above problem, the debtor
promised to pay his obligation as soon as he has received the
funds derived from the sale of the property if he finally decides
to sell it, will that make a difference in your answer?
Answer — Yes. In such case, it is evident that the condition
is potestative with respect to the debtor because its fulfillment
would then depend exclusively upon his will. Consequently, the
condition is void. (Hermosa vs. Longara.) The validity of the
obligation is, of course, not affected, because the rule stated
in Art. 1182 of the NCC to the effect that when the fulfillment
of the condition depends upon the sole will of the debtor, the
conditional obligation itself shall be void, is applicable only
when the obligation shall depend for its perfection upon the
fulfillment of the condition and not when the obligation is a pre-
existing one. (See Trillana vs. Quezon Colleges, 93 Phil. 383.)
Problem — Art. 1182 of the New Civil Code declares that
when the fulfillment of the condition depends upon the sole will
121
Art. 1183 OBLIGATIONS
31
Art. 1116, Spanish Civil Code, in modified form.
122
DIFFERENT KINDS OF OBLIGATIONS Art. 1183
Pure and Conditional Obligations
32
Luneta Motor Co. vs. Abad, 67 Phil. 23; Reyes vs. Gonzales, CA, 45 Off. Gaz.
831; Theater’s Supply Corp. vs. Malolos, CA, 48 Off. Gaz. 1803; Santos vs. Sec. of
Agriculture, 48 Off. Gaz. 3367.
33
Art. 1183, Civil Code.
34
Ibid.
123
Arts. 1184-1185 OBLIGATIONS
35
Ibid.
36
Art. 727, Civil Code.
37
Art. 873, Civil Code.
38
Art. 1117, Spanish Civil Code.
39
Art. 1118, Spanish Civil Code.
40
Art. 1184, Civil Code.
124
DIFFERENT KINDS OF OBLIGATIONS Art. 1186
Pure and Conditional Obligations
41
Art. 1185, Civil Code.
42
Art. 1119, Civil Code.
43
Phil. Long Distance Co. vs. Jeturian, 97 Phil. 981.
125
Arts. 1187-1188 OBLIGATIONS
44
Taylor vs. Uy Tieng, 43 Phil. 760.
45
Art. 1120, Spanish Civil Code.
46
Art. 1121, Spanish Civil Code, in modified form.
126
DIFFERENT KINDS OF OBLIGATIONS Arts. 1187-1188
Pure and Conditional Obligations
47
Art. 1188, par. 2, Civil Code.
127
Arts. 1187-1188 OBLIGATIONS
admitting that they have, they are not entitled to such benefits
until after the conditions are fulfilled; and (3) that war losses
had extinguished the Company’s obligation to proceed with the
pension plan. If you are the judge, how will you decide the case?
Reasons.
Answer — The facts of the above problem are exactly the
same as those in the case of PLDT Co. vs. Jeturian, et al., 97
Phil. 981, where the Supreme Court decided in favor of the
plaintiffs. For purposes of clarity, let us take up the defenses
advanced by the defendant company separately.
(1) The 1st defense is untenable. While it is true that
when an obligation is subject to a suspensive condition, what
is acquired by the creditor is only a mere hope or expectancy,
nevertheless, it is a hope or expectancy that is protected by the
law. According to Art. 1188 of the NCC, the creditor may, before
the fulfillment of the condition, bring the appropriate actions for
the preservation of his right.
(2) The second defense is untenable. According to Art.
1186 of the NCC, the condition shall be deemed fulfilled when
the obligor voluntarily prevents its fulfillment. The act of the
Board of Directors of the Phil. Long Distance Co. in abrogating
the pension plan certainly falls within the sphere or purview of
this rule.
(3) The third defense is also untenable. This is so
because the defense of fortuitous event is available only if the
obligation is determinate and not if the obligation is generic.
Here, the obligation is clearly generic since it involves the
payment of money.
From the foregoing, it is clear that the case should be
decided in favor of the plaintiffs.
128
DIFFERENT KINDS OF OBLIGATIONS Arts. 1187-1188
Pure and Conditional Obligations
48
Art. 1187, Civil Code, pp. 334-335.
49
8 Manresa, 5th Ed., Bk. 1, p. 33.
50
7 Planiol and Ripert 353-354.
129
Art. 1189 OBLIGATIONS
51
8 Manresa, 5th Ed., Bk. 1, pp. 334-335.
52
Ibid., p. 335.
53
Ibid.
130
DIFFERENT KINDS OF OBLIGATIONS Art. 1189
Pure and Conditional Obligations
54
Art. 1122, Spanish Civil Code.
55
Art. 1189, No. 2, Civil Code.
131
Art. 1189 OBLIGATIONS
56
Art. 579, Civil Code.
57
Art. 546, Civil Code.
58
Art. 579, Civil Code.
59
Art. 580, Civil Code.
132
DIFFERENT KINDS OF OBLIGATIONS Art. 1190
Pure and Conditional Obligations
60
Art. 1123, Spanish Civil Code.
133
Art. 1190 OBLIGATIONS
61
8 Manresa, 5th Ed., Bk. 1, p. 346.
62
Ibid.
134
DIFFERENT KINDS OF OBLIGATIONS Art. 1190
Pure and Conditional Obligations
63
Ibid., pp. 345-346.
64
Ibid., p. 346.
135
Art. 1191 OBLIGATIONS
65
Art. 1124, Spanish Civil Code, in modified form.
136
DIFFERENT KINDS OF OBLIGATIONS Art. 1191
Pure and Conditional Obligations
66
8 Manresa, 5th Ed., Bk 1, pp. 348-349.
67
Mateos vs. Lopez, 6 Phil. 206; Bosque vs. Yu Chipeco, 14 Phil. 95.
68
Guevara vs. Pascual, 12 Phil. 311; Escueta vs. Pando, 76 Phil. 256; Republic of
the Phil. vs. Hospital San Juan de Dios and Burt, 47 Off. Gaz. 1833.
69
Escueta vs. Pando, 76 Phil. 256.
70
Ocejo, Perez & Co. vs. International Banking Corp., 37 Phil. 631.
71
Ibid.
137
Art. 1191 OBLIGATIONS
72
Hanlon vs. Hausermann and Beam, 40 Phil. 796; De la Rama Steamship Co.
vs. Tan, 99 Phil. 1034.
73
De la Rama Steamship Co. vs. Tan, 99 Phil. 1034.
74
See also Froilan vs. Pan Oriental Shipping Co., 12 SCRA 276.
75
Sancho vs. Lizarraga, 55 Phil. 601.
138
DIFFERENT KINDS OF OBLIGATIONS Art. 1191
Pure and Conditional Obligations
Code), while the second is governed by the Maceda Law (Rep. Act
No. 6552).
Idem; Nature of Breach. — What must be the nature of
the breach which will entitle the injured party to file an action
for the rescission of the obligation? This question was answered
by the Supreme Court in the case of Song Fo & Co. vs. Hawaiian-
Philippine Co.76 The facts of this case are as follows: Plaintiff and
defendant had entered into a contract whereby the latter bound
itself to deliver to the former 300,000 gallons of molasses within a
certain period, payment to be made upon presentation of accounts
at the end of each month. It appears that a request for payment of
accounts for molasses delivered was sent to the plaintiff in January,
1923. Instead of paying at the end of said month, plaintiff defaulted
and paid only on February 20, 1923. Thereupon, defendant gave
notice to the plaintiff rescinding the contract for failure to pay at the
stipulated date. Subsequently, the plaintiff commenced this action
to recover damages from the defendant for breach of contract. The
question, therefore, which must be resolved is whether the defendant
company had the right to rescind the contract or not. The Supreme
Court held:
76
47 Phil. 821. See also Villanueva vs. Yulo, G.R. No. L-12985, Dec. 29, 1959;
Universal Food Corp. vs. Court of Appeals, 33 SCRA 1.
139
Art. 1191 OBLIGATIONS
with the contract. Thereafter, Song Fo & Co. was not in default
in payment so that the Hawaiian-Philippine Co. had in reality
no excuse for writing its letter of April 2, 1923, cancelling the
contract.
“We rule that the appellant has no legal right to rescind
the contract of sale because of the failure of Song Fo & Co. to pay
for the molasses within the time agreed upon by the parties.”
In Delta Motor Corp. vs. Gentino (170 SCRA 29), the Supreme
Court reiterated the rule that rescission will be ordered only where
the breach complained of is substantial as to defeat the object of
the parties in entering into the agreement. It will not be granted
where the breach is slight or casual. Thus, in a subsequent case of
Ang vs. CA (170 SCRA 2863) it was held that while it is true that in
reciprocal obligation, such as the contract of purchase and sale, the
power to rescind is implied and any of contracting parties may, upon
non-fulfillment by other party of his part of the obligation, resolve
the contract, rescission will not be permitted for a slight casual
breach of the contract.
Idem; Alternative remedies of injured party. — In case
one of the parties should not comply with what is incumbent upon
him, the injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either
case. These remedies are alternative, not cumulative; in other
words, the injured party cannot seek both.77 Thus, in a case where
the lessee was unable to pay rentals for two months, holding that
the lessor has the right to rescind the contract of lease, the Supreme
Court declared:
77
San Juan vs. Cotay, 26 Phil. 328; Rios vs. Jacinto, 49 Phil. 9; Heacock vs. Butal
Manufacturing Co., 66 Phil. 245; Magdalena Estate, Inc. vs. Myrick, 71 Phil. 344;
Ramirez vs. Court of Appeals, 52 Off. Gaz. 779; Castro vs. Lim, CA, 52 Off. Gaz. 2056;
Albert vs. Univ. Publishing Co., 104 Phil. 1054.
140
DIFFERENT KINDS OF OBLIGATIONS Art. 1191
Pure and Conditional Obligations
with the rights and obligations of lessors and lessees. In the first
paragraph of Article 1555 (now Art. 1657), it is declared to be
the duty of the lessee to pay the price of the lease in the manner
agreed upon. In Article 1556 (now Art. 1659), the failure of the
lessee to comply with this obligation is declared to be a found for
the rescission of the contract and the recovery of damages, or
the latter only, leaving the contract in force. It will thus be seen
that the lessor is permitted to elect between the two remedies
of (1) rescission, or resolution, with damages and (2) specific
performance, with damages.’’78
78
Rios vs. Jacinto, et al., 49 Phil. 1.
79
Art. 1191, par. 2, Civil Code.
80
4 Tolentino, Civil Code, 1956 Ed., p. 172.
81
Mindanao Prospecting Ass. Inc. vs. Golden Gate Mining Co., CA, 48 Off. Gaz.
3955.
82
Art. 1191, par. 2, Civil Code.
83
Rios vs. Jacinto, et al., 49 Phil. 7.
141
Art. 1191 OBLIGATIONS
the price agreed upon for the resolution or rescission of the contract
has the effect of destroying the obligation to pay the price. Similarly,
in case of the rescission of a contract of lease, the lessor is entitled
to be restored to the possession of the leased premises but he cannot
have both the possession of the leased premises and the rent which
the other party had contracted to pay. The termination of the lease
has the effect of destroying the obligation to pay rent for the future.84
Idem; Judicial discretion to decree rescission. — Accord-
ing to the third paragraph of Art. 1191, the court shall decree the
rescission claimed, unless there is a just cause authorizing the fix-
ing of a period. It is clear from this provision that the right of the
injured party in reciprocal obligations to rescind in case of failure of
the other to comply with what is incumbent upon him is not absolute
in character. This is so because the court is given the discretionary
power to fix a period within which the obligor in default may be
permitted to comply with what is incumbent upon him.85 It must be
noted, however, that this rule cannot be applied to reciprocal obliga-
tions arising from a contract of lease. This is so because such obliga-
tions are governed by the provisions of Art. 1659 of the Code and not
by those of Art. 1191, and although Art. 1659 is practically a restate-
ment of Art. 1191, and there is, however, a difference, for whereas
under Art. 1191 courts have the discretionary power to refuse the
rescission of contracts if in their judgment the circumstances of the
case warrant the fixing of a term within which the obligor or debtor
may fulfill his obligation, under Art. 1659 there is no such discre-
tionary power granted to courts.86
Idem; Effect of rescission. — When an obligation has been
rescinded or resolved, it is the duty of the court to require the parties
to surrender whatever they may have received from the other; in
other words, the parties must be placed as far as practicable in
their original situation.87 This should, however, be understood to
be without prejudice to the liability of the party who was unable
to comply with what was incumbent upon him for damages.
Thus, where a contract of sale of a certain lot was rescinded by
84
Ibid.
85
Ocejo, Perez & Co. vs. International Banking Corp., 37 Phil. 361; Kapisanan
Banahaw vs. Dejarme, 55 Phil. 338; Puerto vs. Go Ye Pin, 47 Off. Gaz. 264.
86
Mina and Bacalla vs. Rodriguez, CA, 40 Off. Gaz. 65.
87
Po Pauco vs. Singuenza, 49 Phil. 404.
142
DIFFERENT KINDS OF OBLIGATIONS Art. 1191
Pure and Conditional Obligations
the vendor because of the failure of the vendee to pay for several
monthly installments, it was held that since the contract contains
no provision authorizing the vendor, in the event of the failure of
the vendee to continue in the payment of the stipulated monthly
installments, to retain the amounts already paid to him, the parties
should be restored as far as practicable to their original situation
which can be approximated only by ordering the return of the things
which are the object of the contract with their fruits and of the price
with its interests computed from the date of the institution of the
action.88 The rescission, however, may be partial in character.89
Idem; id. — Effect upon third persons. — According to
the fourth paragraph of Art. 1191, the decree of rescission shall be
understood to be without prejudice to the rights of third persons who
have acquired the thing in accordance with Arts. 1385 and 1388 and
the Mortgage Law. Consequently, the rescission of a contract can
no longer be demanded when he who demands it is no longer in a
position to return whatever he may be obliged to restore; neither can
it be demanded when the thing which is the object of the contract is
already legally in the possession of a third person who did not act in
bad faith.90 In such case, the only remedy of the injured party is to
proceed against the party responsible for the transfer or conveyance
for damages.91 However, if the third person had acquired the thing
in bad faith, the injured party can still go after the property. If for
any cause the thing can no longer be recovered, the only remedy of
the injured party is to proceed against the third person who had
acted in bad faith for damages.92
88
Magdalena Estate, Inc. vs. Myrick, 71 Phil. 344.
89
Tan Guat vs. Pamintuan, CA, 37 Off. Gaz. 2494.
90
Art. 1385, Civil Code.
91
Ibid.
92
Art. 1388, Civil Code.
143
Art. 1191 OBLIGATIONS
144
DIFFERENT KINDS OF OBLIGATIONS Art. 1191
Pure and Conditional Obligations
145
Arts. 1192-1193 OBLIGATIONS
93
New provision.
94
Report of the Code Commission, p. 130.
95
Art. 1125, Spanish Civil Code, in amended form.
96
8 Manresa, 5th Ed., Bk. 1, p. 370.
146
DIFFERENT KINDS OF OBLIGATIONS Arts. 1192-1193
Obligations with a Period
97
Ibid., p. 370.
98
Ibid., p. 371.
99
Arts. 1197, 1182, Civil Code.
147
Arts. 1192-1193 OBLIGATIONS
100
Art. 1193, par. 3, Civil Code.
101
Art. 1193, par. 4, Civil Code.
148
DIFFERENT KINDS OF OBLIGATIONS Arts. 1192-1193
Obligations with a Period
the date of the termination of the war may be uncertain yet there
is no question that the termination of the war must necessarily
come.102 However, if the obligor or debtor binds himself to perform
his obligation as soon as he has obtained a loan of P400,000 from a
certain bank, it is clear that the granting of such loan is not definite.
Consequently, it cannot be considered a day certain, for it may or it
may not happen, the obligation is conditional.103
Effects of Term or Period. — If the term or period is sus-
pensive, the fulfillment or performance of the obligation is demand-
able only upon the arrival of the day certain or the expiration of the
term.104 What is therefore suspended by the term is not the acquisi-
tion of the right or the effectivity of the obligation but merely its de-
mandability. In other words, the obligation itself becomes effective
upon its constitution or establishment, but once the term or period
expires it becomes demandable. However, if the term or period is
resolutory, the fulfillment or performance of the obligation is de-
mandable at once, but it is extinguished or terminated upon the ar-
rival of the day certain or the expiration of the term.105
102
Nepomuceno vs. Narciso, 84 Phil. 542.
103
Berg vs. Magdalena Estate, 92 Phil. 110; see also Smith, Bell & Co. vs. Sotelo
Matti, 44 Phil. 874.
104
Art. 1193, par. 1, Civil Code.
105
Art. 1193, par. 2, Civil Code.
149
Arts. 1192-1193 OBLIGATIONS
106
Victoria Planters vs. Victorias Milling Co., 97 Phil. 318.
150
DIFFERENT KINDS OF OBLIGATIONS Arts. 1194-1195
Obligations with a Period
107
New Provision.
108
Art. 1126, Spanish Civil Code, in amended form.
151
Art. 1196 OBLIGATIONS
It is obvious that the above article (Art. 1195) can only apply
to obligations to give. It is also obvious that before the rule can be
applied the payment or delivery must have been made by the debtor
either because he was unaware of the period or he believed that the
obligation had become due and demandable. Consequently, if the
payment or delivery was made voluntarily or with knowledge of the
period or of the fact that the obligation has not yet become due and
demandable, there can be no right of recovery whatsoever.
109
Report of the Code Commission, pp. 130-131.
110
Art. 1227, Spanish Civil Code.
152
DIFFERENT KINDS OF OBLIGATIONS Art. 1196
Obligations with a Period
111
8 Manresa, 5th Ed., Bk. 1, p. 381; Sarmiento vs. Javellana, 38 Phil. 880.
112
Nicolas vs. Matias, 89 Phil. 126; De Leon vs. Syjuco, 90 Phil. 311; Osorio vs.
Salutillo, 48 Off. Gaz. 103; Garcia vs. De los Santos, 49 Off. Gaz. 4830; Ochoa vs.
Lopez, CA, 50 Off. Gaz. 5890.
113
90 Phil. 311.
114
Ponce de Leon vs. Syjuco, 90 Phil. 311.
115
Nicolas vs. Matias, 89 Phil. 126.
153
Art. 1197 OBLIGATIONS
Art. 1197. If the 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 courts shall also fix the duration of the period when
it depends upon the will of the debtor.
In every case, the courts will determine such period as
may under the circumstances have been probably contem-
plated by the parties. Once fixed by the courts, the period
cannot be changed by them.119
116
8 Manresa, 5th Ed., Bk. 1, pp. 381-382.
117
Sia vs. Court of Appeals, 48 Off. Gaz. 5259.
118
Garcia vs. De los Santos, 49 Off. Gaz. 4830.
119
Art. 1128, Spanish Civil Code, in amended form.
154
DIFFERENT KINDS OF OBLIGATIONS Art. 1197
Obligations with a Period
120
Art. 1197, Civil Code.
121
Art. 1180, Civil Code.
122
Art. 1197, par. 1, Civil Code.
123
Barretto vs. City of Manila, 7 Phil. 416.
124
Concepcion vs. People of the Phil. 74 Phil. 163.
155
Art. 1197 OBLIGATIONS
125
Barretto vs. Santa Marina, 26 Phil. 440.
126
People’s Bank vs. Odom, 64 Phil. 126.
127
8 Manresa 158, quoted in Patente vs. Omega, 49 Off. Gaz. 4846.
128
Art. 1197, par. 2, Civil Code.
129
Levy Hermanos vs. Paterno, 18 Phil. 353.
130
Seone vs. Franco, 24 Phil. 309.
131
Gonzales vs. Jose, 66 Phil. 369.
132
Patente vs. Omega, 49 Off. Gaz. 4846.
156
DIFFERENT KINDS OF OBLIGATIONS Art. 1197
Obligations with a Period
depend exclusively upon the will of the lessee.133 And where there is
an agreement between the employer and the union representatives
representing its employees and laborer regarding the payment
of salary differentials which had remained unpaid because of the
exhaustion of the funds appropriated for the purpose, the obligation
to pay said salary differentials may be considered as one with a
term whose duration has been left to the will of the debtor, so that
pursuant to Art. 1197 of the Code, the remedy of the employees
and laborers is to ask the courts to fix the duration of the term, it
being admitted that in a going concern the availability of funds for
a particular purpose is a matter that does not necessarily depend
upon the cash position of the company but rather upon the judgment
of its board of directors.134
133
Eleizegui vs. Manila Lawn Tennis Club, 2 Phil. 309.
134
Tiglao vs. Manila Railroad Co., Off. Gaz. 179.
157
Art. 1197 OBLIGATIONS
158
DIFFERENT KINDS OF OBLIGATIONS Art. 1197
Obligations with a Period
From what has been stated, it is quite clear that the effect of a
potestative term or period is very different from that of a potestative
condition. The latter cannot be left to the will of the debtor because
it affects the very existence of the obligation itself, since what is
delegated to the debtor is the power to determine whether or not
the obligation shall be fulfilled; the former, on the other hand, can
159
Art. 1197 OBLIGATIONS
be left to the will of the debtor because its influence does not go as
far as to determine the existence of the obligation, since what is
delegated to the debtor is merely the power to determine when the
obligation shall be fulfilled, but in order to prevent the obligation
contracted from becoming ineffective by nonfulfillment the courts
must fix the duration of the term or period.135
This article also applies to a lease agreement, where a contract
of lease clearly exists. Thus, the SC in the case of Millare vs.
Hernando (151 SCRA 484), it held that the first paragraph of Article
1197 is clearly inapplicable, since the Contract of Lease did in fact
fix an original period of five years, which had expired. It is also clear
from paragraph 13 of the Contract of Lease that the parties reserved
to themselves the faculty of agreeing upon the period of the renewal
contract. The second paragraph of Article 1197 is equally clearly
inapplicable since the duration of the renewal period was not left to
the will of the lessee alone, but rather to the will of both the lessor
and the lessee. Most importantly, Article 1197 applies only where a
contract of lease clearly exists. Here, the contract was not renewed
at all, there was in fact no contract at all the period of which could
have been fixed.
Idem; Nature of action. — The only action that can be
maintained under Art. 1197 is an action to ask the court to fix the
duration of the term or period. It is only after the duration has
been fixed by a proper court that any other action involving the
fulfillment or performance of the obligation can be maintained.136
Thus, an action brought purely for the collection of a debt which falls
within the purview of the article is obviously improper, because the
fulfillment of the obligation itself cannot be demanded until after
the court has fixed the period for its compliance and such period has
expired.137 Consequently, so long as such period has not yet been
fixed by the court, legally, there can be no possibility of any breach of
contract or of failure to perform the obligation, and if it so happens
that this point was never raised before the trial court, the creditor
cannot be allowed to raise it for the first time on appeal.138
135
8 Manresa 158, quoted in Patente vs. Omega, 49 Off. Gaz. 4846.
136
Eleizegui vs. Manila Lawn Tennis Club, 2 Phil. 309; Seone vs. Franco, 24 Phil.
309; Gonzales vs. Jose, 66 Phil. 369.
137
Ungson vs. Lopez, CA, 50 Off. Gaz. 4297, citing Gonzales vs. Jose, 66 Phil. 369,
and Concepcion vs. People of the Phil., 74 Phil. 62.
138
Pages vs. Basilan Lumber Co., 104 Phil. 882.
160
DIFFERENT KINDS OF OBLIGATIONS Art. 1197
Obligations with a Period
139
Schenker vs. Gemperle, 5 SCRA 1042.
140
Gonzales vs. Jose, 66 Phil. 369.
141
Art. 1197, par. 3, Civil Code.
142
Barretto vs. City of Manila, 11 Phil. 624.
161
Art. 1197 OBLIGATIONS
Problem — “M’’ and “N’’ were very good friends. “N’’ bor-
rowed P10,000.00 from “M.” Because of their close relationship,
the promissory note executed by “N’’ provided that he would pay
the loan “whenever his means permit.” Subsequently, “M’’ and
“N’’ quarelled. “M” now asks you to collect the loan because he is
in dire need of money.
What legal action, if any, would you take in behalf of “M”?
(1980 Bar Problem)
Answer — “M” must bring an action against “N’’ for the
purpose of asking the court to fix the duration of the term or
period for payment. According to the Civil Code, when the
debtor binds himself to pay when his means permit him to do so,
the obligation shall be deemed to be one with a period, subject
to the provisions of Art. 1197. In other words, it shall be subject
to those provisions of the Code with respect to obligations with a
term or period which must be judiciary fixed. Thus, in the instant
case, the court shall determine such period as may under the
circumstances have been probably contemplated by the parties.
Once determined or fixed, it becomes a part of the covenant
of the two contracting parties. It can no longer be changed by
them. If the debtor defaults in the payment of the obligation
after the expiration of the period fixed by the court, the creditor
can then bring an action against him for collection. Any action
for collection brought before that would be premature. This is
well-settled.
(Note: The above answer is based on Arts. 1180 and
1197 of the Civil Code and on Gonzales vs. Jose, 66 Phil. 369;
Concepcion vs. People of the Phil. 74 Phil. 62; Pages vs. Basilan,
104 Phil. 882, and others.)
Alternative Answer — Normally, before an action for
collection may be maintained by “M” against “N,’’ the former
must first bring an action against the latter asking the court to
fix the duration of the term or period of payment. However, an
action combining such action with that of an action for collection
may be allowed if it can be shown that a separate action for
collection would be a mere formality because no additional proofs
other than the admitted facts will be presented and would serve
no purpose other than to delay. Here, there is no legal obstacle
to such course of action.
(Note: The above alternative answer is based on Borromeo
vs. Court of Appeals, 47 SCRA 65.
Probably, if we combine the two answers given above, the
result would be a much more impressive answer.)
162
DIFFERENT KINDS OF OBLIGATIONS Art. 1198
Obligations with a Period
Art. 1198. The debtor shall lose every right to make use
of the period:
(1) When after the obligation has been contracted, he
becomes insolvent, unless he give a guaranty or security for
the debt;
163
Art. 1198 OBLIGATIONS
143
Art. 1129, Spanish Civil Code, in modified form.
144
8 Manresa, 5th Ed., Bk. 1, p. 388.
145
Daguhoy Enterprises, Inc. vs. Ponce, 50 Off. Gaz. 5267. To the same effect
Laplana vs. Garchitorena, 48 Phil. 163.
164
DIFFERENT KINDS OF OBLIGATIONS Art. 1198
Obligations with a Period
The fourth and fifth cases are new provisions. Whether the
debtor violates any undertaking, in consideration of which the credi-
tor agreed to the period, or he attempts to abscond, the rule that he
shall lose his right to the benefits of the period is proper.
165
Art. 1198 OBLIGATIONS
166
DIFFERENT KINDS OF OBLIGATIONS Art. 1198
Alternative and Facultative Obligations
146
8 Manresa, 5th Ed., Bk. 1, p. 393; 3 Castan, 7th Ed., pp. 75-76.
147
Ibid.
148
Art. 1206, Civil Code.
167
Arts. 1199-1200 OBLIGATIONS
149
Art. 1131, Spanish Civil Code.
150
Art. 1132, Spanish Civil Code.
151
Art. 1200, Civil Code.
152
Agoncillo and Marino vs. Javier, 38 Phil. 244.
153
Art. 1200, par. 1, Civil Code.
168
DIFFERENT KINDS OF OBLIGATIONS Art. 1201
Alternative and Facultative Obligations
have been the object of the obligation. “Prestations which could not
have been the object of the obligation” refer to those undertakings
which are not included among those from which the obligor may
select, or to those which are not yet due and demandable at the
time the selection is made, or to those which, by reason of accident
or some other cause, have acquired a new character distinct or
different from that contemplated by the parties when the obligation
was constituted.154 It must be noted that what is contemplated by
the provision of the second paragraph of Art. 1200 is a case in which
the right to choose or select is not lost or extinguished altogether,
because there are still other objects or prestations from which the
debtor can choose or select.
154
8 Manresa, 5th Ed., Bk. 1, p. 398.
155
Art. 1133, Spanish Civil Code.
156
8 Manresa, 5th Ed., Bk. 1, p. 399.
169
Art. 1202 OBLIGATIONS
impugn the election made by the debtor and only after said notice
shall the election take legal effect when consented to by the creditor,
or if impugned by the latter, when declared proper by a competent
court.’’157 It is, however, submitted that this doctrine is not sound.
Consent or concurrence of the creditor to the choice or selection
made by the debtor is not necessary before the choice or selection
can produce effect. To hold otherwise would destroy the very nature
of the right to select and the alternative character of the obligation
for that matter. Thus, according to Dean Capistrano: “The law does
not require the creditor’s concurrence to the choice; if it did, it would
have destroyed the very nature of alternative obligations, which
empowers the debtor to perform completely one of them.’’158
Idem; Effect upon obligation. — Once the choice is made
by the debtor (or by the creditor or by a third person as the case
may be), the obligation ceases to be alternative from the moment
the selection has been communicated to the other party. From
that moment, both debtor and creditor are bound by the selection.
In other words, the debtor can only comply with his obligation
by performing the prestation which has been selected, while the
creditor can only demand compliance in accordance there with. “An
election once made is binding on the person who makes it, and he
will not therefore be permitted to renounce his choice and take an
alternative which was at first opened to him.”159
Art. 1202. The debtor shall lose the right of choice when
among the prestations whereby he is alternatively bound,
only one is practicable.160
When Only One Prestation Is Practicable. — According
to the above article, when among several prestations whereby the
debtor is alternatively bound, only one prestation can be performed
because all of the others are impracticable, the debtor loses his right of
choice altogether. In other words, the obligation loses its alternative
character; it becomes a simple obligation. The provision of the above
article, however, must be distinguished from the provision of the
157
Ong Guan Can vs. Century Insurance Co., 46 Phil. 592.
158
3 Capistrano, Civil Code, 1950 Ed., p. 131. To the same effect — 4 Tolentino
Civil Code, 1956 Ed., p. 196.
159
Reyes vs. Martinez, 55 Phil. 492.
160
Art. 1134, Spanish Civil Code.
170
DIFFERENT KINDS OF OBLIGATIONS Arts. 1203-1205
Alternative and Facultative Obligations
second paragraph of Art. 1200. Under the first, there is only one
prestation which can be performed; under the second, there are still
two or more which can be performed. Under the first, the obligation
is converted into a simple one because the debtor loses his right of
election; under the second, the obligation is still alternative because
the debtor can still exercise his right of election.
161
New provision.
162
Art. 1135, Spanish Civil Code, in modified form.
171
Arts. 1203-1205 OBLIGATIONS
163
Art. 1136, Spanish Civil Code, in modified form.
172
DIFFERENT KINDS OF OBLIGATIONS Art. 1206
Alternative and Facultative Obligations
that which remains; and if all of the things are lost or all of the
prestations cannot be performed by reason of a fortuitous event, the
debtor is released from the obligation.
But if the loss or impossibility is due to the fault of the debtor,
then the provisions of Art. 1204 are applicable. Consequently, if all
of the things are lost or all of the prestations cannot be performed
due to the fault of the debtor, the creditor shall have a right to
indemnity for damages. Such indemnity shall be fixed taking as a
basis the value of the last thing to be lost or that of the service which
last became impossible. However, if one, or more, but not all, of the
things are lost or one or some, but not all, of the prestations cannot
be performed due to the fault of the debtor, the creditor cannot hold
the debtor liable for damages. This is so because the debtor can still
comply with his obligation.
Idem; If right of choice belongs to creditor. — If the right
of choice belongs to the creditor and the loss or impossibility is due to
a fortuitous event, then the provisions of Arts. 1174, 1262 and 1266,
which are reiterated in No. 1 of the second paragraph of Art. 1205,
are applicable. The debtor cannot be held liable. Consequently, what
had been stated in the preceding section can also be applied here.
But if the loss or impossibility is due to the fault of the debtor,
then the provisions of Nos. 2 and 3 of the second paragraph of Art.
1205 are applicable. Consequently, if all of the things are lost or all
of the prestations cannot be performed due to the fault of the debtor,
the creditor may claim the price or value of any one of them with
indemnity for damages. However, if one or some, but not all, of the
things are lost, or one or some, but not all, of the prestations cannot
be performed due to the fault of the debtor, the creditor may claim
any of those subsisting without any liability on the part of the debtor
for damages or the price or value of that, which through the fault of
the former, was lost or could not be performed, with indemnity, for
damages.
173
Art. 1206 OBLIGATIONS
render him liable. But once the substitution has been made,
the obligor is liable for the loss of the substitute on account
of his delay, negligence or fraud.164
Nature of Facultative Obligations. — According to the
above article, a facultative obligation is defined as an obligation
wherein only one object or prestation has been agreed upon by the
parties to the obligation, but which may be complied with by the
delivery of another object or the performance of another prestation
in substitution. It is evident that the characteristic feature of this
type of obligation is that only one object or prestation is due, but if
the obligor fails to deliver such object or to perform such prestation,
he can still comply with his obligation by delivering another object
or performing another prestation in substitution. Thus, where the
debtor executed a promissory note promising to pay his indebtedness
to the creditor at a specified date and in case of failure to do so, he
shall execute a deed of mortgage over a certain property belonging
to him in favor of the creditor, it was held that the obligation is
facultative.165 Consequently, the provisions of Art. 1206 of the Civil
Code may be applied.
Idem; Distinguished from alternative obligations. —
Facultative obligations may be distinguished from alternative obli-
gations in the following ways:
(1) As to objects due: In facultative obligations only one object
is due, while in alternative obligations several objects are due.
(2) As to compliance: Facultative obligations may be complied
with by the delivery of another object or by the performance of
another prestation in substitution of that which is due, while
alternative obligations may be complied with by the delivery of one
of the objects or by the performance of one of the prestations which
are alternatively due.
(3) As to choice: In the first, the right of choice pertains only
to the debtor, while in the second, the right of choice may pertain
even to the creditor or to a third person.
(4) As to the effect of fortuitous loss: In the first, the loss or
impossibility of the object or prestation which is due without any
164
New provision.
165
Quizana vs. Redugerio, 50 Off. Gaz. 2444.
174
DIFFERENT KINDS OF OBLIGATIONS Art. 1206
Alternative and Facultative Obligations
166
Art. 1206, par. 2, Civil Code.
167
3 Capistrano, Civil Code, 1950, Ed., p. 135.
175
Art. 1206 OBLIGATIONS
Once the substitution has been made, however, the debtor shall
be liable for the loss or deterioration of the substitute on account of
his delay, negligence or fraud.168 This rule is logical because once
the substitution is made, the obligation is converted into a simple
one with the substituted thing or prestation as the object of the
obligation.
168
Art. 1206, par. 2, Civil Code.
169
Art. 1207, Civil Code; 3 Castan, 7th Ed., pp. 65-66.
170
38 Phil. 707.
176
DIFFERENT KINDS OF OBLIGATIONS Art. 1206
Joint and Solidary Obligations
177
Art. 1207 OBLIGATIONS
171
Art. 1137, Spanish Civil Code, in modified form.
178
DIFFERENT KINDS OF OBLIGATIONS Art. 1207
Joint and Solidary Obligations
172
Pimentel vs. Gutierrez, 14 Phil. 49; White vs. Enriquez, 15 Phil. 113; Agoncillo
vs. Javier, 38 Phil. 424; Ramos vs. Gibbon, 67 Phil. 371; Inciong, Jr. vs. Court of Ap-
peals, June 26, 1996, 257 SCRA 580.
173
Art. 1297, Civil Code.
174
Art. 1208, Civil Code.
175
Art. 1207, Civil Code.
176
Art. 1216, Civil Code.
177
Gonzales vs. La Previsora Filipina, 74 Phil. 165.
179
Art. 1207 OBLIGATIONS
ever, necessary that the agreement shall employ precisely the word
“solidary” in order that the obligation will be so; it is enough that
the agreement will say, for example, that each one of them can be
obligated for the aggregate value of the obligation.178 Thus, where
the debtors agreed to pay the obligation “jointly and severally,”179
or “individually and collectively”180 everyone of them can be held re-
sponsible for the payment of the entire obligation. Another example
is where the promissory note expressly states that the three signato-
ries therein are “jointly and severally liable.’’ Any one, some or all of
them may be proceeded against for the entire obligation. The choice
is left to the solidary creditor to determine against whom he will
enforce collection. (Inciong, Jr. vs. Court of Appeals, June 26, 1996,
257 SCRA 580.)
Examples of the second exception are those provided for in
Arts. 927, 1824, 1911, 1915, 2146, 2157, and 2194 of the Civil Code.
Another example would be that provided for in Art. 110 of the Revised
Penal Code regarding the liability of principals, accomplices, and
accessories of a felony.
Examples of the third exception are obligations arising from
criminal offenses and torts. The responsibility of two or more
persons guilty of a criminal offense or liable for a tort is solidary.
This is so because of the very nature of the obligation itself. It must
be noted, however, that under Art. 110 of the Revised Penal Code, it
is expressly stated that the responsibility of principals, accomplices,
and accessories, each within their respective class, is solidary, and
under Art. 2194 of the Civil Code, it is also expressly stated that
the responsibility of two or more persons liable for a quasi-delict is
solidary. Apparently, the obligations comprehended by the exception
on which we are commenting are also included within the scope of
the second exception. There are, however, some torts which cannot
be classified as quasi-delicts because the element of negligence
does not enter as an essential requisite, such as interferences with
human relations, nuisances, infringements of copyrights, patent or
trademark, unfair competition and several others. Responsibility of
joint tortfeasors in such cases is solidary because the nature of the
178
Ysmael & Co. vs. Salinas and Delgado, 73 Phil. 601.
179
Parot vs. Gemora, 7 Phil. 24.
180
Oriental Commercial Co. vs. La Fuente, CA, 38 Off. Gaz. 947.
180
DIFFERENT KINDS OF OBLIGATIONS Art. 1208
Joint and Solidary Obligations
181
Worcester vs. Ocampo, 22 Phil. 42. To the same effect: Verzosa vs. Lim, 45
Phil. 416; Torebillas vs. Soques, CA, 46 Off. Gaz. 5618; Padilla vs. Hipomia, CA, G.R.
No. 4272-R, Feb. 17, 1951.
182
Art. 1138, Spanish Civil Code, in modified form.
183
Art. 1207, Civil Code.
184
Art. 1208, Civil Code.
181
Art. 1208 OBLIGATIONS
185
Moller’s Ltd. vs. Sarile, 97 Phil. 985.
186
8 Manresa, 5th Ed., Bk. 1, p. 425.
187
Agoncillo vs. Javier, 38 Phil. 424.
188
8 Manresa 182, cited in Agoncillo vs. Javier, 38 Phil. 424.
182
DIFFERENT KINDS OF OBLIGATIONS Art. 1208
Joint and Solidary Obligations
183
Art. 1209 OBLIGATIONS
are the parties in each obligation and for how much? Why?
(1971 Bar Problem)
Answer — There are six obligations in the above case. The
parties and the amount of each obligation are:
(1) X as debtor for P2,000 in favor of A as creditor;
(2) X as debtor for P2,000 in favor of B as creditor;
(3) Y as debtor for P2,000 in favor of A as creditor;
(4) Y as debtor for P2,000 in favor of B as creditor;
(5) Z as debtor for P2,000 in favor of A as creditor;
(6) Z as debtor for P2,000 in favor of B as creditor.
The above answers are clearly deducible from Art. 1208
of the Civil Code which declares that if the obligation is joint,
the credit or debt shall be presumed to be divided into as many
equal shares as there are creditors or debtors, the credits or
debts being considered as distinct from one another, subject
to the Rules of Court governing the multiplicity of suits. Take
the credit of P12,000 for instance. Since there are two creditors
there will also be two credits of P6,000 for each creditor. In the
case of the debt of P12,000, since there are three debtors there
will also be three debts of P4,000 against each debtor. Now, as
far as A, the first creditor, is concerned, if he wants to collect his
credit of P6,000, he must proceed against all the debtors. Thus
he will be able to collect P2,000 from X, P2,000 from Y, another
P2,000 from Z. The same is true in the case of B, the second
creditor.
189
Art. 1139, Spanish Civil Code.
184
DIFFERENT KINDS OF OBLIGATIONS Art. 1209
Joint and Solidary Obligations
190
Manresa, 5th Ed., Bk. 1, pp. 422, 466.
191
Art. 1209, Civil Code.
192
Art. 1224, Civil Code.
185
Art. 1209 OBLIGATIONS
193
Art. 1209, Civil Code.
194
Ibid.
195
Art. 1224, Civil Code.
196
Ibid.
197
Art. 1209, Civil Code.
198
8 Manresa, 5th Ed., Bk. 1, pp. 446-467.
199
4 Tolentino, Civil Code, 1956, pp. 213-214, citing De Buen and others.
186
DIFFERENT KINDS OF OBLIGATIONS Arts. 1210-1211
Joint and Solidary Obligations
200
New provision.
201
8 Manresa, 5th Ed., Bk. 1, p. 469.
202
Art. 1140, Spanish Code.
203
4 Sanchez Roman 50; Giorgi, Teoria de las Obligaciones, Vol. 1, p. 89.
187
Arts. 1210-1211 OBLIGATIONS
204
Giorgi, Teoria de las Obligaciones, Vol. 1, pp. 90, 115.
205
8 Manresa, 5th Ed., Bk. 1, pp. 431-432.
206
3 Castan, 7th Ed., p. 73.
188
DIFFERENT KINDS OF OBLIGATIONS Arts. 1210-1211
Joint and Solidary Obligations
207
Inchausti & Co. vs. Yulo, 34 Phil. 978.
208
Villa vs. Garcia Bosque, 49 Phil. 126; Stevenson vs. Climaco, CA 36 Off. Gaz.
1571.
189
Arts. 1210-1211 OBLIGATIONS
209
4 Sanchez Roman 50.
210
Inchausti & Co. vs. Yulo, 34 Phil. 978.
190
DIFFERENT KINDS OF OBLIGATIONS Arts. 1210-1211
Joint and Solidary Obligations
191
Arts. 1210-1211 OBLIGATIONS
192
DIFFERENT KINDS OF OBLIGATIONS Arts. 1210-1211
Joint and Solidary Obligations
193
Arts. 1210-1211 OBLIGATIONS
194
DIFFERENT KINDS OF OBLIGATIONS Art. 1212
Joint and Solidary Obligations
211
Art. 1141, Spanish Civil Code, in modified form.
212
Art. 1212, Civil Code.
213
rts. 1214, 1216, Civil Code.
214
Art. 1215, par. 2, Civil Code.
215
3 Castan, 7th Ed., p. 72.
216
8 Manresa, 5th Ed., Bk. 1, pp. 432-433.
195
Arts. 1213-1214 OBLIGATIONS
Art. 1214. 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.218
Effect of Demand by a Creditor. — Any solidary creditor
may demand the payment or performance of the obligation from one,
some or all of the debtors. This is, of course, a logical consequence
217
New provision.
218
Art. 1142, Spanish Civil Code, in modified form.
196
DIFFERENT KINDS OF OBLIGATIONS Art. 1215
Joint and Solidary Obligations
of the rule stated in Art. 1212 that each creditor may do what is
beneficial to the others. Such a demand may be either judicial or
extrajudicial. In such case, payment shall be made only to the
creditor who made the demand and to no other. However, in the
absence of any judicial or extrajudicial demand, payment may be
made by the debtor to anyone of the solidary creditors.219
In case of mixed solidarity, a judicial or extrajudicial demand
would prohibit the debtor upon whom the demand is made from
making a payment to any creditor other than to the one who made
the demand. This prohibition, however, does not extend to the other
debtors upon whom no demand has been made and so each of such
debtors can still validly tender payment to a creditor other than to
the creditor who made the demand.220
219
Art. 1214, Civil Code.
220
8 Manresa, 5th Ed., Bk. 1, p. 437.
221
Art. 1143, Spanish Civil Code.
222
8 Manresa, 5th Ed., Bk. 1, p. 751.
197
Art. 1215 OBLIGATIONS
223
Ibid., pp. 444-445.
224
Art. 1222, Civil Code; Inchausti & Co. vs. Yulo, 34 Phil. 978.
225
Art. 2079, Civil Code; Asiatic Petroleum Co. vs. Hizon, 45 Phil. 532; National
Bank vs. Veraguth, 50 Phil. 253.
198
DIFFERENT KINDS OF OBLIGATIONS Art. 1215
Joint and Solidary Obligations
226
Villa vs. Garcia Bosque, 49 Phil. 126.
227
8 Manresa, 5th Ed., Bk. 1, p. 713.
228
4 Sanchez Roman 421.
229
8 Manresa, 5th Ed., Bk. 1, pp. 443-444.
230
Ibid., p. 673.
199
Art. 1215 OBLIGATIONS
231
Ibid., pp. 440-443.
232
Ibid.
233
Art. 1222, Civil Code; Inchausti & Co. vs. Yulo, 34 Phil. 978.
200
DIFFERENT KINDS OF OBLIGATIONS Art. 1216
Joint and Solidary Obligations
234
Art. 1219, Civil Code.
235
8 Manresa, 5th Ed., Bk. 1, pp. 442-443.
236
Art. 1215, par. 2, Civil Code.
237
Art. 1444, Spanish Civil Code, in modified form.
238
Art. 1216, Civil Code.
239
Ibid.
201
Art. 1216 OBLIGATIONS
240
La Yebana vs. Valenzuela, 67 Phil. 482.
241
Phil. Nat. Bank vs. Confesor, CA, 37 Off. Gaz. 3295.
202
DIFFERENT KINDS OF OBLIGATIONS Art. 1216
Joint and Solidary Obligations
203
Art. 1217 OBLIGATIONS
obligee’s action or suit filed before the court, which is not then acting
as a probate court.
As provided in the case of Stronghold Insurance Company
Inc vs. Republic-Asahi Glass Corporation, whatever monetary
liabilities or obligations the deceased Jose Santos (the proprietor
of JDS Construction which executed a performance bond jointly
and severally with petitioner-surety) had under his contracts
with respondent Republic-Asahi were not intransmissible by their
nature, by stipulation or by provision of law. Hence,death did not
result in the extinguishment of those obligations or liabilities, which
merely passed on to the estate of Santos. Death is not a defense that
he or his estate can set up to wipe out the obligations under the
performance bond. Consequently, the petitioner as surety cannot use
his death to escape its monetary obligation under its performance
bond. As a surety, petitioner is solidarily liable with Santos in
accordance with Art. 2017, in relation to Art. 1216 of the New Civil
Code. The surety’s obligation is not an original and direct one for the
performance of his own act, but merely accessory or collateral to the
obligation contracted by the principal. Nevertheless, although the
contract of a surety is in essence secondary only to a valid principal
obligation, his liability to the creditor or promisee of the principal is
said to be direct, primary and absolute; In other words, he is directly
and equally bound with the principal.
The death of the principal debtor will not work to convert,
decrease or nullify the substantive right of the solidary creditor.
Despite the death of the principal debtor, respondent may still
sue petitioner alone, in accordance with the solidary nature of the
latter’s liability under the performance bond. Under the law and
jurisprudence, respondent may sue, separately or together, the
principal debtor and the petitioner , in view of the solidary nature
of their liability (Stronghold Insurance Company Inc. vs. Republic-
Asahi Glass Corporation, supra).
204
DIFFERENT KINDS OF OBLIGATIONS Art. 1218
Joint and Solidary Obligations
242
Art. 1145, Spanish Civil Code, in modified form.
243
New provision.
244
Art. 1217, par. 2, Civil Code.
245
Art. 1218, Civil Code.
246
Art. 1217, par. 2, Civil Code.
205
Art. 1218 OBLIGATIONS
247
Wilson vs. Berkenkotter, 49 Off. Gaz. 1410.
206
DIFFERENT KINDS OF OBLIGATIONS Art. 1218
Joint and Solidary Obligations
the case of Wilson vs. Berkenkotter that in a case of this sort there is no real case of
subrogation. It is submitted, however, that when the Court held that “the executrix
was subrogated to the rights of the original plaintiff,’’ it was only referring, not to sub-
rogation in its technical sense, but to substitution of parties in its procedural sense.
207
Arts. 1219-1220 OBLIGATIONS
249
Art. 1146, Spanish Civil Code, in modified form.
250
New provision.
208
DIFFERENT KINDS OF OBLIGATIONS Art. 1221
Joint and Solidary Obligations
251
Art. 1147, Spanish Civil Code, in modified form.
209
Art. 1222 OBLIGATIONS
only for the price or value of the thirty cavans of rice, but even for
damages. However, once A has settled his obligation to X, he can
then proceed against the guilty debtor, C, for reimbursement of the
entire amount which he has paid to X, plus interest.
(3) If the loss or impossibility is due to a fortuitous event
after one of the debtors had already incurred in delay, again the
obligation is converted into an obligation of indemnity for damages,
but the solidary character of the obligation remains. Anyone, or
some, or all of the debtors can be held responsible for the price, plus
damages but without prejudice to the right of action of the debtor or
debtors who paid to proceed against the debtor responsible for the
delay.
252
Art. 1148, Spanish Civil Code, in modified form.
253
Art. 1222, Civil Code; Narvaez vs. De Leon, CA, 47 Off. Gaz. 160.
254
Chinese Chamber of Commerce vs. Pua Te Ching, 16 Phil. 405.
210
DIFFERENT KINDS OF OBLIGATIONS Art. 1222
Joint and Solidary Obligations
255
Braganza vs. Villa Abrille, 105 Phil. 456.
256
Inchausti & Co. vs. Yulo, 34 Phil. 978; Narvaez vs. De Leon, CA, 47 Off. Gaz.
160.
211
Art. 1222 OBLIGATIONS
257
3 Castan, 7th Ed., p. 92.
258
Art. 1225, Civil Code.
212
DIFFERENT KINDS OF OBLIGATIONS Arts 1223-1224
Divisible and Indivisible Obligations
into parts, its essence is not changed or its value is not decreased
disproportionately, because each of the parts into which it is divided
are homogenous and analogous to each other as well as to the thing
itself. Hence, it is an essential condition, in order that a thing shall
be considered divisible, that it must be possible to reconstruct the
thing itself into its condition prior to the division by uniting the dif-
ferent parts into which it had been divided. There are three kinds of
division. They are quantitative, qualitative and ideal or intellectual.
The division is quantitative when the thing can be materially di-
vided into parts and such parts are homogenous to each other, such
as when the parts are actually separated from each other as in the
case of movables, or when the limits of the parts are fixed by metes
and bounds as in the case of immovables. The division is qualita-
tive when the thing can be materially divided, but the parts are not
exactly homogenous, such as in the partition of an inheritance. The
division is ideal or intellectual when the thing can only be separated
into ideal or undivided parts, not material parts, as in the case of
co-ownership.259
259
4 Sanchez Roman 93-94.
260
Art. 1149, Spanish Civil Code.
261
Art. 1150, Spanish Civil Code.
213
Art. 1225 OBLIGATIONS
262
Art. 1248, Civil Code.
263
Ibid., 8 Manresa, 5th Ed., Bk. 1, pp. 363-365.
264
See Art. 1209, Civil Code.
265
Art. 1224, Civil Code.
266
8 Manresa, 5th Ed., Bk. 1, p. 469; 3 Castan, 7th Ed., p. 92.
214
DIFFERENT KINDS OF OBLIGATIONS Art 1225
Divisible and Indivisible Obligations
267
Art. 1151, Spanish Civil Code, in modified form.
268
4 Sanchez Roman 95.
269
Ibid.
215
Art. 1225 OBLIGATIONS
270
Art. 1225, par. 1, Civil Code.
271
Art. 1225, par. 3, Civil Code.
272
8 Manresa, 5th Ed., Bk. 1, pp. 472-473.
273
Art. 1225, par. 1, Civil Code.
216
DIFFERENT KINDS OF OBLIGATIONS Art 1225
Obligations with a Penal Clause
274
Art. 1225, par. 3, Civil Code.
275
Art. 1225, par. 4, Civil Code.
276
3 Castan, 7th Ed., p. 97; 8 Manresa, 5th Ed., Bk. 1, pp. 477-478.
217
Art. 1226 OBLIGATIONS
277
3 Castan, 7th Ed., pp. 100-101.
278
Art. 1152, Spanish Civil Code, in modified form.
218
DIFFERENT KINDS OF OBLIGATIONS Art 1226
Obligations with a Penal Clause
279
8 Manresa, 5th Ed., Bk. 1, pp. 480-481.
280
Manila Racing Club vs. Manila Jockey Club, 69 Phil. 55. For other cases il-
lustrating the general rule — see Palacios vs. Mun. of Cavite, 12 Phil. 140; Navarro
vs. Mallari, 45 Phil. 242; Araneta vs. Paterno, 49 Off. Gaz. 45.
219
Art. 1226 OBLIGATIONS
220
DIFFERENT KINDS OF OBLIGATIONS Art 1226
Obligations with a Penal Clause
281
Art. 1226, par. 1, Civil Code.
282
Bachrach Motor Co. vs. Espiritu, 52 Phil. 346; Government vs. Lim, 61 Phil.
737; Luneta Motor Co. vs. Moral 73 Phil. 80; Cabarroguis vs. Vicente, 107 Phil. 340;
De Venecia vs. del Rosario, 18 SCRA 792.
221
Art. 1226 OBLIGATIONS
222
DIFFERENT KINDS OF OBLIGATIONS Art 1226
Obligations with a Penal Clause
223
Art. 1227 OBLIGATIONS
283
Yu Tek & Co. vs. Gonzales, 29 Phil. 384; Ibarra vs. Aveyro, 37 Phil. 273;
Bachrach vs. Golingco, 39 Phil. 138; Manila Racing Club vs. Manila Jockey Club, 69
Phil. 55.
284
Reyes vs. Formoso, CA, 46 Off. Gaz. 5621.
285
Art. 1153, Spanish Civil Code, in modified form.
286
Art. 1227, Civil Code.
287
Ibid.
224
DIFFERENT KINDS OF OBLIGATIONS Art 1228
Obligations with a Penal Clause
288
Ibid.
289
Art. 1226, 2nd sentence, Civil Code.
290
New provision.
225
Art. 1229 OBLIGATIONS
291
To the same effect: Palacios vs. Mun. of Cavite, 12 Phil. 140; Manila Racing
Club vs. Manila Jockey Club, 69 Phil. 55. See Arts. 2226, et seq., for “liquidated dam-
ages.’’
292
Art. 1154, Spanish Civil Code, in amended form.
226
DIFFERENT KINDS OF OBLIGATIONS Art 1229
Obligations with a Penal Clause
293
8 Manresa, 5th Ed., Bk. 1, p. 491; see Laureano vs. Kilayco, 32 Phil. 850; Chua
Gui Seng vs. Gen. Sales Supply Co., 91 Phil. 153; Ramos vs. Salcedo, CA, 48 Off. Gaz.
729.
227
Art. 1229 OBLIGATIONS
294
Manila Trading Co. vs. Tamarao Plantation Co., 47 Phil. 513; Tan Tua Sia vs.
Yu Biao, 56 Phil. 707; Turner vs. Casabar, 65 Phil. 490.
295
Bachrach vs. Golingco, 39 Phil. 138.
228
DIFFERENT KINDS OF OBLIGATIONS Art 1230
Obligations with a Penal Clause
Art. 1230. The nullity of the penal clause does not carry
with it that of the principal obligation.
The nullity of the principal obligation carries with it
that of the penal clause.296
296
Art. 1155, Spanish Civil Code.
297
Art. 1230, Civil Code.
298
Ibid.
229
OBLIGATIONS
CHAPTER 4
EXTINGUISHMENT OF OBLIGATIONS
General Provisions
1
Art. 1156, Spanish Civil Code, in modified form.
2
8 Manresa, 5th Ed., Bk. 1, pp. 501-503; 3 Castan, 7th Ed., pp. 235-236.
230
EXTINGUISHMENT OF OBLIGATIONS Arts. 232-1235
Payment or Performance
3
New provision.
4
3 Castan, 7th Ed., p. 236.
5
Art. 1232, Civil Code.
6
Art. 1157, Spanish Civil Code.
7
New provision.
8
New provision.
231
Art. 1236 OBLIGATIONS
9
Art. 1234, Civil Code.
10
Ibid.
11
Report of the Code Commission, p. 131.
12
Art. 1235, Civil Code; Joe’s Radio & Electrical Supply vs. Alto Electronics
Corp., 104 Phil. 333.
13
3 Capistrano, Civil Code, 1950 Ed., p. 167.
232
EXTINGUISHMENT OF OBLIGATIONS Arts. 1237-1238
Payment or Performance
14
Art. 1158, Spanish Civil Code, in amended form.
15
Art. 1159, Spanish Civil Code, in modified form.
16
New provision.
17
15 Gonzaga vs. Garcia, 27 Phil. 7.
233
Arts. 1237-1238 OBLIGATIONS
18
Report of the Code Commission, p. 132.
234
EXTINGUISHMENT OF OBLIGATIONS Arts. 1237-1238
Payment or Performance
There are, however, two exceptions to the rule that the creditor is
not bound to accept payment or performance by a third person. They
are:
(1) When it is made by a third person who has an interest in
the fulfillment of the obligation,19 such as a joint debtor, guarantor
or surety. Thus, where payment is made by a joint debtor in excess
of what he should pay for the benefit of his co-debtor, such payment
cannot be considered as a payment unduly made under Art. 2154
of the Civil Code, but as one made by a person interested in the
fulfillment of the obligation in accordance with the provision of Art.
1236 of the said Code.20
(2) When there is a stipulation to the contrary.21 In this case,
the creditor is deemed to have waived his right to refuse to deal with
strangers to the obligation.
Idem; id. — Rights of third person. — If a third person
pays the obligation with the knowledge and consent of the debtor,
there are two rights which are available to him. In the first place, he
can recover from the debtor the entire amount which he has paid;22
and in the second place, he is subrogated to all of the rights of the
creditor.23 However, if the payment is made without the knowledge
or against the will of the debtor, there is only one right which is
available to him; he can recover only insofar as the payment has
been beneficial to the said debtor.24
Idem; id.; id. — Right of reimbursement. — Whether the
payment is effected with the knowledge and consent of the debtor
or without his knowledge or even against his will, the third person
who made the payment is entitled to reimbursement. The extent or
amount of recovery, however, is different in either case.
If the payment was effected with the knowledge and consent
of the debtor, the third person can recover from the latter the entire
amount which he has paid.25 Thus, if D is indebted to C for P10,000,
19
Art. 1236, par. 1, Civil Code.
20
Monte de Piedad vs. Rodrigo, 63 Phil. 312.
21
Art. 1236, par. 1, Civil Code.
22
Art. 1236, par. 2, Civil Code.
23
Art. 1302, No. 2, Civil Code.
24
Art. 1236, par. 2, Civil Code.
25
Ibid.
235
Arts. 1237-1238 OBLIGATIONS
26
See De Guzman vs. Santos, 68 Phil. 371.
27
Art. 1236, Civil Code.
28
Art. 2154, Civil Code.
29
RFC vs. Court of Appeals, 50 Off. Gaz. 2467.
236
EXTINGUISHMENT OF OBLIGATIONS Arts. 1237-1238
Payment or Performance
30
Art. 1237, Civil Code.
31
Arts. 1302, No. 2, 1303, 1304, Civil Code.
237
Arts. 1237-1238 OBLIGATIONS
32
Art. 1236, par. 1, Civil Code.
33
Arts. 1302, No. 2, 1303, Civil Code.
34
Art. 1236, par. 2, Civil Code.
35
Art. 1237, Civil Code.
36
Art. 2154, Civil Code.
37
Art. 1238, Civil Code.
38
Arts. 734, 745, Civil Code.
39
Art. 1238, Civil Code.
238
EXTINGUISHMENT OF OBLIGATIONS Arts. 1237-1238
Payment or Performance
40
Art. 1160, Spanish Civil Code, in modified form.
41
Art. 1239, Civil Code.
42
Art. 1162, Spanish Civil Code, in modified form.
239
Arts. 1237-1238 OBLIGATIONS
43
8 Manresa, 5th Ed., Bk 1, p. 536; Tuazon and San Pedro vs. Zamora & Sons,
2 Phil. 305.
44
Haw Pia vs. China Banking Corp., 80 Phil. 604.
45
8 Manresa, 5th Ed., Bk. 1, p. 537.
46
80 Phil. 604.
240
EXTINGUISHMENT OF OBLIGATIONS Arts. 1237-1238
Payment or Performance
47
To the same effect: Everett Steamship Corp. vs. Bank of P.I., 47 Off. Gaz. 165;
Hodges vs. Gay, 48 Off. Gaz. 136; Winship vs. Phil. Trust Co., 90 Phil. 744; Bay Boul-
evard vs. Sycip, 92 Phil. 508.
48
Keleer Electric Co. vs. Rodriguez, 44 Phil. 19.
49
Ormachea vs. Triliana, 13 Phil. 194.
50
Crisol vs. Claveron, CA, 3 Off. Gaz. 3734.
241
Art. 1241 OBLIGATIONS
the name of the vendor when he could not locate the latter because
of the conditions then existing in January, 1945, when the payment
became due.51 Although the payment is not valid because it is not
made to a person authorized to receive it in accordance with the
provision of Art. 1240 of the Code, nevertheless it is clear that the
vendee had acted in good faith; he cannot, therefore, be said to
have incurred in delay; consequently, the vendor cannot ask for the
rescission of the contract.52
Idem; id. — Exceptions. — There are, however, two excep-
tions to the rule that payment made to a person other than those
enumerated in Art. 1240 is not valid. They are: first, payment made
to a third person, provided that it has redounded to the benefit of the
creditor,53 and second, payment made to the possessor of the credit,
provided that it was made in good faith.54
51
Arcache vs. Lizares & Co., 91 Phil. 348.
52
Ibid.
53
Art. 1241, par. 2, Civil Code.
54
Art. 1242, Civil Code.
55
Art. 1163, Spanish Civil Code, in modified form.
242
EXTINGUISHMENT OF OBLIGATIONS Art. 1241
Payment or Performance
56
8 Manresa, 5th Ed., Bk. 1, p. 540.
57
Art. 1241, par. 2, Civil Code.
58
Panganiban vs. Cuevas, 7 Phil. 477.
243
Art. 1243 OBLIGATIONS
59
Ibid.
60
Art. 1164, Spanish Civil Code.
61
8 Manresa, 5th Ed., Bk. 1, pp. 545-546.
62
Art. 1165, Spanish Civil Code.
244
EXTINGUISHMENT OF OBLIGATIONS Arts. 1244-1246
Payment or Performance
63
Sec. 8, Rule 57, New Rules of Court.
64
Art. 1166, Spanish Civil Code, in modified form.
65
New provision.
66
Art. 1167, Spanish Civil Code, in modified form.
245
Arts. 1244-1246 OBLIGATIONS
67
Art. 1245, Civil Code.
68
8 Manresa, 5th Ed., Bk. 1, p. 610.
69
Ibid., pp. 610-611.
246
EXTINGUISHMENT OF OBLIGATIONS Arts. 1247-1248
Payment or Performance
70
Ibid., pp. 552-553.
71
Art. 1168, Spanish Civil Code, in modified form.
72
Art. 1169, Spanish Civil Code, in modified form.
73
Arts. 1244, 1245, 1246, 1249, Civil Code.
247
Art. 1249 OBLIGATIONS
74
Arts. 1233, 1234, 1235, Civil Code.
75
Art. 1248, Civil Code.
76
Arts. 1207, et seq., Civil Code.
77
8 Manresa, 5th Ed., Bk. 1, pp. 563-564.
78
Art. 1170, Spanish Civil Code.
248
EXTINGUISHMENT OF OBLIGATIONS Art. 1249
Payment or Performance
which the payment shall be made, the payment shall still be made
in legal tender of the Philippines.
Thus, the Supreme Court in the case of Zagala vs. Jimenez, it
held that “a judgment awarding an amount in U.S. dollar may be
paid with its equivalent amount in local currency in the conversion
rate prevailing at the time of payment. If the parties cannot agree
on the same, the trial court should determine such conversion rate.
Needless to say, the judgment debtor may simply satisfy said award
by paying in full the amount in U.S. dollars. Therefore, when the
petitioners, in this case, filed their motion to fix the peso value
of the judgment in dollars, they only intended to exercise a right
granted to them by the present jurisprudence — that the trial court
shall determine or fix the conversion rate prevailing at the time of
payment.’’
Idem; Effect of Rep. Act Nos. 529 and 4100. — However, in
order to assure the stability of the Philippine currency the Congress
passed a law entitled “An Act To Assure the Uniform Value of
Philippine Coins and Currency” (Rep. Act No. 529) which took effect
on June 16, 1949. Under this Act, the rule in the Civil Code that
payment of debts in money shall be made in the currency stipulated
was completely abrogated. Thus, Sec. 1 of this Act provides:
79
See Eastboard Navigation Co. vs. Ysmael Co., 102 Phil. 1; Arrieta vs. Nat. Rice
and Corn Corp., 10 SCRA 79.
249
Art. 1249 OBLIGATIONS
80
Sec. 1, Rep. Act No. 4100.
250
EXTINGUISHMENT OF OBLIGATIONS Art. 1249
Payment or Performance
until the purchase price has been paid by “B,” the end result
will still be the same. Since, evidently, the purpose is to secure
performance by the buyer of his obligation to pay the purchase
price, by express mandate of the law, the fortuitous loss of the
car shall be assumed by “B.’’
(Note: The above answer is based on Art. 1504 of the Civil
Code.)
Question No. 2 — May seller “S’’ demand payment in U.S.
dollar? Why? (1981 Bar Problem)
Answer — The seller “S’’ cannot demand payment in U.S.
dollars. According to the law, an agreement that payment shall
be made in currency other than Philippine currency is void
because it is contrary to public policy. That does not mean,
however, that “S” cannot demand payment from “B.” He can
demand payment, but not in American dollars. Otherwise,
there would be unjust enrichment at the expense of another.
Payment, therefore, should be made in Philippine currency.
(Note: The above answer is based on R.A. No. 529 and on
Ponce vs. Court of Appeals, 90 SCRA 533.)
81
Sec. 54, Rep. Act No. 265; Sec. 1, Rep. Act No. 529.
82
Ibid.
251
Art. 1249 OBLIGATIONS
83
Legarda vs. Carrascoso, 81 Phil. 450.
84
Hillado vs. De la Costa, 46 Off. Gaz. 5472. To the same effect: Haw Pia vs.
China Banking Corp., 80 Phil. 604; Del Rosario vs. Sandico, 47 Off. Gaz. 2866; Sori-
ano vs. Abalos, 47 Off. Gaz. 2894.
85
Hernaez vs. McGrath, 48 Off. Gaz. 2868.
86
Phil. Trust Co. vs. Araneta, 46 Off. Gaz. 4254; Larraga vs. Bañez, 47 Off. Gaz.
696; Compania General de Tabacos vs. Araneta, 96 Phil. 971.
87
Haw Pia vs. China Banking Corp., 80 Phil. 604.
88
Valdeabella vs. Marquez, 48 Off. Gaz. 719.
252
EXTINGUISHMENT OF OBLIGATIONS Art. 1249
Payment or Performance
judicial notice must be taken of the fact that in 1943, they had as
much purchasing power, if not more, than the victory notes of 1945
— at least as regards local foodstuffs and products.89
Idem; Payments with emergency notes. — What had been
stated regarding payments with Japanese military notes can also
be applied to a certain extent to payments made with emergency
notes which were issued either by the Commonwealth government
during the invasion or by recognized guerrilla governments during
the occupation. This is so because undoubtedly these emergency
notes must be considered as legal tender but only in those places
which were under the control of either the Commonwealth or of the
guerrilla government issuing the notes.90 Consequently, where the
defendant borrowed P3,130 in emergency notes from the plaintiff
in 1942, he cannot now contend that the sum of money delivered
to him consisted of valueless notes which were not legal tender.
These emergency notes which the officers of the Commonwealth
were authorized by President Quezon to issue before he left the
Philippines were then valid and legal tender.91
Idem; Payments with negotiable paper. — Since negotiable
papers or mercantile documents, such as promissory notes payable
to order or bills of exchange, are not legal tender, it is logical that the
delivery of such papers or documents by the debtor to the creditor
shall not produce the effect of payment. Consequently, if the debtor
tenders a check to the creditor as payment of an obligation, the latter
has a perfectly valid right to refuse it, even if the check may be good.
In such case, the tender shall not produce the effect of payment.92 This
is true even if the refusal of the creditor is followed by consignation
whether the check is an ordinary check or a manager’s check.93
89
Aurreocoecha vs. Kabankalan Sugar Co., 81 Phil. 476.
90
Rep. Act Nos. 22 and 368, applied in Donasco vs. Serra, CA, G.R. No. 7046-R,
Sept. 30, 1953.
91
Phil. National Bank vs. Teves, 100 Phil. 491.
92
Belisario vs. Natividad, 60 Phil. 156; Phil. National Bank vs. Relativo, 92 Phil.
203.
93
Villanueva vs. Santos, 67 Phil. 648; Cuaycong vs. Ruiz, 47 Off. Gaz. 6125; CFI
of Tarlac vs. Court of Appeals, 91 Phil. 912; Hidalgo vs. Heirs of Tuason, 104 Phil.
336.
253
Art. 1249 OBLIGATIONS
254
EXTINGUISHMENT OF OBLIGATIONS Art. 1249
Payment or Performance
255
Art. 1249 OBLIGATIONS
256
EXTINGUISHMENT OF OBLIGATIONS Art. 1249
Payment or Performance
257
Art. 1249 OBLIGATIONS
258
EXTINGUISHMENT OF OBLIGATIONS Art. 1249
Payment or Performance
259
Art. 1249 OBLIGATIONS
94
Compania General vs. Molina, 5 Phil. 142.
260
EXTINGUISHMENT OF OBLIGATIONS Art. 1250
Payment or Performance
credit of the Provincial Treasurer, it was held that the effect of these
facts, in contemplation of law, was the same as if the aforementioned
amount had been deposited in cash with the Clerk of Court, for said
sum thereby became available to him in cash.95
(2) When it had been impaired through the fault of the
creditor. This is applicable only to a paper or document executed
by a third person and delivered by the debtor to the creditor.96
Thus, where a bill of exchange was delivered to the plaintiff by
the defendant, and subsequently, upon maturity it was dishonored
by the drawee because the signature thereto was a forgery, the
negligence of the plaintiff in not protesting the nonpayment resulted
in the impairment of the value of the bill of exchange because of the
loss of the right to proceed against other parties who might be held
liable; consequently, the defendant can no longer be held liable.97
95
Golez vs. Camara, 101 Phil. 363.
96
Compania General vs. Molina, 5 Phil. 142.
97
Quiros vs. Tan Guinlay, 5 Phil. 675.
98
New provision.
99
3 Capistrano, Civil Code, 1950 Ed., p. 189; Report of the Code Commission,
pp. 132-133.
100
Art. 1250, Civil Code.
261
Art. 1250 OBLIGATIONS
262
EXTINGUISHMENT OF OBLIGATIONS Art. 1250
Payment or Performance
263
Art. 1250 OBLIGATIONS
101
Estrada vs. Noble, CA, 49 Off. Gaz. 139.
264
EXTINGUISHMENT OF OBLIGATIONS Art. 1250
Payment or Performance
1941 1944
December P1.00 January P4.00
1942 P1.00 February 5.00
1943 March 6.00
January 1.05 April 9.00
February 1.10 May 12.00
March 1.15 June 15.00
April 1.20 July 20.00
May 1.25 August 25.00
June 1.30 September 30.00
July 1.40 October 40.00
August 1.50 November 60.00
September 1.60 December 90.00
October 1.70 1945
November 1.80 January 120.00
December 2.50 February None
102
Barcelon vs. Arambulo, CA, 48 Off. Gaz. 3976.
265
Art. 1250 OBLIGATIONS
103
See Jimenez vs. Bucoy, 103 Phil. 40; Valero vs. Sycip, 103 Phil. 1150; Fernan-
dez, et al. vs. Nat. Ins. Co. of the Phil., 105 Phil. 59.
104
Ang Lam vs. Peregrina, 92 Phil. 506. To the same effect: Hilado vs. De la
Costa, 46 Off. Gaz. 5472; Soriano vs. Abalos, 47 Off. Gaz. 168; De Asis vs. Agdamag,
90 Phil. 249; Samson vs. Andal, 94 Phil. 402; Aguilar vs. Miranda, 113 Phil. 515;
Server vs. Car, 18 SCRA 728.
105
Roño vs. Gomez, 46 Off. Gaz. 339; Gomez vs. Tabia, 47 Off. Gaz. 339; Garcia
vs. De los Santos, 49 Off. Gaz. 4830; Yay vs. Boltron, 100 Phil. 47; Stemberg vs. Solo-
mon, 102 Phil. 995; Dizon vs. Arrastia, 113 Phil. 476; Quiogue vs. Bautista, Generosa
vs. Court of Appeals, 12 SCRA 619; Server vs. Car, 18 SCRA 728.
266
EXTINGUISHMENT OF OBLIGATIONS Art. 1251
Payment or Performance
(Sec. 91-A, Insurance Law.) Here, the policy matured upon the
death of the insured in 1944, and the obligation of the insurer
to pay arose as of that date. The sixty-day period fixed by law
within which to pay is merely procedural in nature. It is the
happening of the suspensive condition of death that matures
a life insurance policy and not the filing of the proof of death.
Since the insured died during the Japanese occupation, the
proceeds of his policy should, therefore, be adjusted accordingly,
for ‘the rule is already settled that where the debtor could have
paid his obligation at any time during the Japanese occupation,
payment after liberation must be adjusted in accordance with
the Ballantyne Schedule.’ ’’
106
Art. 1171, Spanish Civil Code, in modified form.
107
Art. 1251, Civil Code.
267
Art. 1252 OBLIGATIONS
108
Ibid.
109
Art. 1172, Spanish Civil Code, in modified form.
110
Under the Civil Code, there are actually four special forms of payment. They
are: (1) application of payment (Arts. 1252-1254); (2) dation in payment (Art. 1245);
(3) payment by cession (Art. 1255); and (4) tender of payment and consignation (Arts.
1256-1261). Strictly speaking, however, application of payment, by its very nature, is
not a special form of payment.
111
8 Manresa, 6th Ed., Bk. 1, p. 598.
268
EXTINGUISHMENT OF OBLIGATIONS Art. 1252
Application of Payment
the solidary debtor who paid may have obligations other than the
solidary obligation in favor of the creditor to whom payment is made.
Neither does the requirement that there must be only one creditor
militate against extending the rules on application of payment to a
case in which a person is indebted at the same time in separate and
demandable sums to a partnership and to the managing partner of
the partnership. As a matter of fact, Art. 1792 provides:
112
Socony Vacuum Corp. vs. Miraflores, 67 Phil. 304.
269
Art. 1252 OBLIGATIONS
113
8 Manresa, 5th Ed., Bk. 1, pp. 598-599.
114
Art. 1252, par. 1, Civil Code.
270
EXTINGUISHMENT OF OBLIGATIONS Art. 1252
Application of Payment
115
8 Manresa, 5th Ed., Bk. 1, pp. 599-600.
116
Art. 1252, par. 2, Civil Code.
117
Garcia vs. Enriguez, 71 Phil. 423.
118
Bachrach vs. Golingco, 39 Phil. 912; Powell vs. Phil. National Bank, 54 Phil.
34.
271
Arts. 1253-1254 OBLIGATIONS
119
8 Manresa, 5th Ed., Bk. 1, p. 600.
120
Art. 1173, Spanish Civil Code.
121
8 Manresa, 5th Ed., Bk. 1, p. 601.
122
Baltazar vs. Lingayen Gulf Elec. Power Co.; Rose vs. Lingayen Elec. Power
Co., Baltazar vs. Acena, 14 SCRA 522; Magdalena Estate, Inc. vs. Rodriguez, 18
SCRA 967.
123
Art. 1174, Spanish Civil Code, in modified form.
272
EXTINGUISHMENT OF OBLIGATIONS Arts. 1253-1254
Application of Payment
one of the debts has been demanded or if different places for payment
have been designated in the contract and payment has been made in
one of those places, it is evident that an application can be deduced
or inferred, in which case, the article is not applicable.124
Idem; When debts are not of same burden. — When the
debts due are not of the same burden, the rule is that the debt
which is most onerous to the debtor shall be deemed to have been
satisfied.125 From judicial decisions and works of commentators, the
following rules may, therefore, be stated:
(1) Where there are various debts which are due and they
were incurred at different dates, the oldest are more onerous to the
debtor than the more recent ones.126
(2) Where one debt bears interest and the other does not,
even if the latter was incurred at an earlier date, the first is more
onerous to the debtor.127 As between two debts which bear interest,
the debt with a higher rate of interest is more onerous to the debtor.
(3) Where one debt is secured and the other is not, the first is
more onerous to the debtor.128 However, “where in a bond the debtor
and surety have bound themselves solidarily, but limiting the
liability of the surety to a lesser amount than that due the principal
debtor, any such payment as the latter may have made on account
of such obligation must be applied first to the unsecured portion of
the debt, for, as regards the principal debtor, the obligation is more
onerous as to the amount not secured.’’129
(4) Where the debtor is bound as principal in one obligation
and as guarantor or surety in another, the former is more onerous to
him.
(5) When the debtor is bound as a solidary debtor in one
obligation and as the sole debtor in another, the former is more
onerous to him.
124
3 Capistrano, Civil Code, 1950 Ed., p. 193.
125
Art. 1254, par. 1, Civil Code.
126
Philippine National Bank vs. Veraguth, 50 Phil. 353.
127
Menzi & Co. vs. Quing Chuan, 69 Phil. 46.
128
Sanz vs. Lavin, 6 Phil. 299; Traders Insurance & Surety Co. vs. Dy Eng Giok,
104 Phil. 806.
129
Hongkong & Shanghai Bank vs. Aldanese, 48 Phil. 390.
273
Arts. 1253-1254 OBLIGATIONS
130
8 Manresa, 5th Ed., Bk. 1, pp. 602-604; 4 Tolentino, Civil Code, 1956 Ed., pp.
293-294.
131
Art. 1254; par. 2, Civil Code.
274
EXTINGUISHMENT OF OBLIGATIONS Art. 1255
Payment by Cession
132
Art. 1175, Spanish Civil Code, in modified form.
133
8 Manresa, 5th Ed., Bk. 1, p. 606.
134
Ibid., pp. 605-606.
135
Act No. 1956, as amended.
275
Art. 1256 OBLIGATIONS
136
8 Manresa, 5th Ed., Bk. 1, pp. 611-612; 3 Castan, 7th Ed., p. 257.
137
3 Castan, 7th Ed., p. 255.
276
EXTINGUISHMENT OF OBLIGATIONS Arts. 1257-1258
Tender of Payment and Consignation
138
Art. 1176, Spanish Civil Code, in modified form.
139
Art. 1177, Spanish Civil Code.
140
Art. 1178, Spanish Civil Code.
141
3 Castan, 7th Ed., p. 252.
277
Arts. 1257-1258 OBLIGATIONS
the principal act which will produce the effects of payment of the
obligation.142 Thus, according to the Supreme Court:
142
8 Manresa, 5th Ed., Bk. 1, p. 620.
143
Phil. National Bank vs. Relativo, 92 Phil. 203.
144
8 Manresa, 5th Ed., Bk. 1, p. 620.
145
Ibid., pp. 628-630.
278
EXTINGUISHMENT OF OBLIGATIONS Arts. 1257-1258
Tender of Payment and Consignation
person who pays, the person to whom payment is made, the object
of the obligation which must be paid or performed, and the time
when payment or performance becomes demandable; the second, on
the other hand, refers to the five requirements which are prescribed
by Art. 1256 to Art. 1258 of the Civil Code. Since consignation is a
special form of payment, it is but logical, in order that it will produce
all the effects of payment, that it must conform not only with all
of the special requirements prescribed by law, but also with all of
the requisites of a valid payment. Hence, according to the second
paragraph of Art. 1258: “The consignation shall be ineffectual if
it is not made in consonance with the provisions which regulate
payment.” Thus, where the amount remitted to the Clerk of Court
is in the form of a cashier’s check, the consignation must be deemed
invalid, since the law requires that in order that consignation shall
produce the effect of a valid payment, it must conform to the rules
regulating payment, and one such rule is that payment should be
made in legal tender.146
146
Villanueva vs. Santos, 67 Phil. 648; Arambulo vs. Court of Appeals, 97 Phil.
965.
147
Art. 1256, Civil Code.
148
Art. 1257, Civil Code.
149
Art. 1258, par. 1, Civil Code.
279
Arts. 1257-1258 OBLIGATIONS
(5) That after the consignation had been made, the persons
interested in the fulfillment of the obligation had been notified
thereof.150
Idem; First requisite. — Before consignation can produce
the effect of payment, it is essential that there must be a debt which
is due.151 Thus, where the plaintiff and defendant entered into a
contract whereby the latter was given the right to cancel the contract
upon payment of a certain sum, and subsequently, the latter tried
to avail himself of such right by making a formal tender of the
amount, it was held that it was not necessary for him to deposit the
amount with the Clerk of Court, since there is no debt which is due.
Consequently, the tender made by the defendant in good faith was
sufficient to cancel the contract.152
Idem; Second requisite. — In order that the consignation
will be effective, the general rule is that there must have been a
tender of payment made by the debtor to the creditor. It is, however,
required: (1) that the tender of payment must have been made prior
to the consignation; (2) that it must have been unconditional; and (3)
that the creditor must have refused to accept the payment without
just cause.153 The first requirement is self-explanatory; the second
and third, however, require some explanation. It is a rule that
the tender of payment, in order to constitute a valid tender, must
be unconditional in character. Thus, where the debtor tendered
a check for P5,000 to the creditor as payment of a debt of P600,
but the payee of said check was a third person who accompanied
him, it was held that the tender did not constitute a valid tender of
payment because it was conditional in the sense that, in offering the
check, the defendant-debtor practically told the plaintiff-creditor —
“Here is P600, but you must pay the remainder of P4,400 to the
payee.”154 Similarly, where the debtor tendered a check for P3,250 to
the creditor as payment of a debt conditioned upon the signing by
the latter of a motion to dismiss a complaint for legal separation, it
was also held that such tender of payment is not valid.155 However,
150
Art. 1258, par. 2, Civil Code.
151
Ponce de Leon vs. Syjuco, 90 Phil. 311.
152
Asturias Sugar Central vs. Pure Cane Molasses Co., 60 Phil. 255.
153
8 Manresa, 5th Ed., Bk. 1, pp. 620-621.
154
Phil. National Bank vs. Relativo, 92 Phil. 203.
155
Sy vs. Eufemio, 104 Phil. 1056.
280
EXTINGUISHMENT OF OBLIGATIONS Arts. 1257-1258
Tender of Payment and Consignation
Sy vs. Eufemio
104 Phil. 1056 (unrep.)
156
Araneta vs. Uy Tek, CA, 40 Off. Gaz. 28.
157
8 Manresa, 5th Ed., Bk. 1, pp. 620-621.
281
Arts. 1257-1258 OBLIGATIONS
158
For application of these exceptions — see Panganiban vs. Cuevas, 7 Phil. 477;
Banahaw vs. Dejarme, 55 Phil. 338; Salvante vs. Ubi Cruz, 88 Phil. 236.
159
Art. 1256, par. 2, Civil Code.
160
Phil. Nat. Bank vs. Relativo, 92 Phil. 203.
282
EXTINGUISHMENT OF OBLIGATIONS Arts. 1257-1258
Tender of Payment and Consignation
form. Good faith of the debtor should in simple justice excuse him
from paying interest after the offer was rejected.161
Idem; Third requisite. — It is also essential in order that the
consignation shall be effective that previous notice thereof had been
given to the persons interested in the fulfillment of the obligation.162
This requirement is separate and distinct from tender of payment
which precedes it. Tender of payment is a friendly and private act
manifested only to the creditor which by itself does not suggest
consignation which follows in case of unjust refusal of the creditor to
accept the payment; previous notice, on the other hand, is a formal
act manifested not only to the creditor, but also to other persons
interested in the fulfillment of the obligation directly announcing
the consignation which will be made as a result of the unjust refusal
of the creditor to accept the payment. Although separate and distinct
from each other, the procedure, as far as the debtor is concerned,
can be simplified by combining the two in a single act, which would
include principally the tender of payment and subsidiarily the
notice of consignation, unless the creditor accepts the payment.163
Even in this case it is necessary that notice shall be made to the
other parties interested in the fulfillment of the obligation, such as
a surety or guarantor or a solidary co-debtor.
Idem; Fourth requisite. — It is, of course, essential that
the thing or amount due must be placed at the disposal of judicial
authority.164 This requirement is complied with if the debtor
deposits the thing or amount, which the creditor had refused or
had been unable to accept, with the Clerk of Court. Normally, this
requirement is accompanied by the filing of the complaint itself
which is sometimes denominated as an action for consignation, but
which is in reality an action for specific performance of the obligation
or an action for cancellation of the obligation.
Idem; Fifth requisite. — After the consignation had been
made, the persons interested in the fulfillment of the obligation must
be notified thereof.165 This notification is separate and distinct from
161
Araneta vs. Tuason de Paterno, 49 Off. Gaz. 45. But see Llamas vs. Abaya, 60
Phil. 502.
162
Art. 1256, par. 1, Civil Code; Bellis vs. Imperial, 52 Phil. 530.
163
8 Manresa, 5th Ed., Bk. 1, pp. 627-628.
164
Art. 1258, par. 1, Civil Code.
165
Art. 1258, par. 2, Civil Code.
283
Arts. 1257-1258 OBLIGATIONS
166
G.R. No. L-10927, Oct. 30, 1958.
167
3 Castan, 7th Ed., pp. 253-254; 8 Manresa, 5th Ed., Bk. 1, pp. 635-636.
284
EXTINGUISHMENT OF OBLIGATIONS Arts. 1257-1258
Tender of Payment and Consignation
168
See also Limkako vs. Teodoro, 74 Phil. 313.
285
Arts. 1259-1261 OBLIGATIONS
169
3 Castan, 7th Ed., p. 252; see Arts. 538, 2005, et seq., Civil Code.
170
Art. 1179, Spanish Civil Code.
171
Art. 1180, Spanish Civil Code.
286
EXTINGUISHMENT OF OBLIGATIONS Arts. 1259-1261
Loss of the Thing Due
172
Art. 1181, Spanish Civil Code, in modified form.
173
Art. 1260, par. 2, Civil Code.
174
Art. 1261, Civil Code.
175
Art. 1260, par. 2, Civil Code.
176
Art. 1261, Civil Code.
177
Art. 1189, No. 2, Civil Code.
287
Art. 1262 OBLIGATIONS
178
4 Sanchez Roman 442.
179
Ibid. For extended discussion — see 8 Manresa, 5th Ed., Bk. 1, pp. 650-652.
180
Art. 1182, Spanish Civil Code, in modified form.
181
For illustrative cases — see Crame vs. Gonzaga, 10 Phil. 646; Insular Govern-
ment vs. Bingham, 13 Phil. 558; Bishop of Jaro vs. De la Peña, 26 Phil. 144; Lizares
vs. Hernaez, 40 Phil. 98; Obejera vs. Iga Sy, CA, 43 Off. Gaz. 121; Cruz vs. Valero, 89
Phil. 260; Bachrach Motor Co. vs. Lee Tay and Lee Chay, 90 Phil. 540; Ramcar vs.
Dizon, CA, 51 Off. Gaz. 3507.
182
See Lawyers Coop. Pub. Co. vs. Tabora, 13 SCRA 762; Rep. of the Phil. vs.
Grijaldo, 15 SCRA 681.
183
Art. 1170, Civil Code.
288
EXTINGUISHMENT OF OBLIGATIONS Art. 1262
Loss of the Thing Due
the rule is that such debtor can still be held liable for indemnity for
damages.184
Idem; Effect of fortuitous event. — The rule declared in
the first paragraph of Art. 1262 must always be read in relation
to the rule declared in Art. 1174 regarding the effect of the failure
of the debtor to comply with his obligation through a fortuitous
event. If the thing which constitutes the object of the obligation is
lost or destroyed through a fortuitous event, the debtor cannot be
held responsible.185 In other words, the obligation is extinguished.186
Thus, where some of the goods deposited in the defendant’s
warehouse were looted and the rest was taken by the Japanese
forces during the war, there would be no legal way of holding the
defendant responsible, because it is evident that the loss was due to
a fortuitous event.187 Similarly, where the launch or casco which the
defendant was supposed to deliver to the plaintiff was lost due to a
defect of the casco which could not have been foreseen, he cannot
be held liable.188 But where the defendant purchased a truck from
the plaintiff before the outbreak of the last war, payable in monthly
installments, and was commandeered by the USAFFE during the
war, the defendant’s obligation is not extinguished, because in the
first place, the truck became the property of the defendant when
it was delivered to him, and consequently, he must bear the loss;
in the second place, he could have filed a war damage claim with
the United States government and he would have been paid. His
negligent omission cannot, therefore, be imputed to the plaintiff who
was no longer the owner of the vehicle.189
Idem; id. — Exceptions. — There are, however, certain
exceptions to the rule that the debtor cannot be held liable if the
thing which constitutes the object of the obligation is lost or destroyed
through a fortuitous event. They are:
(1) When by law, the debtor is liable even for fortuitous
events;190
184
Arts. 1170, 1165, par. 3, Civil Code.
185
Art. 1174, Civil Code.
186
Art. 1262, Civil Code.
187
Cruz vs. Valero, 89 Phil. 260.
188
Ramcar vs. Dizon, CA, 51 Off. Gaz. 3507.
189
Bachrach Motor Co. vs. Lee Tay and Lee Chay, 90 Phil. 540.
190
Arts. 1174, 1262, par. 2, Civil Code.
289
Art. 1263 OBLIGATIONS
191
Ibid.
192
Art. 1262, par. 1, Civil Code.
193
Ibid. See Tan Chiong Sian vs. Inchauti & Co., 22 Phil. 152; Limpangco vs.
Yangco Steamship Co., 34 Phil. 597.
194
Arts. 1262, par. 1, 1165, par. 3, Civil Code.
195
Art. 1165, par. 3, Civil Code.
196
Art. 1268, Civil Code.
197
Art. 1263, Civil Code.
198
New provision.
199
Art 1263; see discussion under Arts. 1163, et seq., Civil Code.
290
EXTINGUISHMENT OF OBLIGATIONS Arts. 1264-1265
Loss of the Thing Due
200
Art. 1246, Civil Code.
201
Reyes vs. Caltex, 47 Off. Gaz 1193; Phil. Long Distance Co. vs. Jeturian, 97
Phil. 781.
202
Soriano vs. De Leon, 48 Off. Gaz. 2245.
203
Yu Tek Co. vs. Gonzalez, 29 Phil. 384; Lacson vs. Diaz, 47 Off. Gaz. 337.
204
Bunje Corp. vs. Elena Camenforte & Co., 48 Off. Gaz. 3377.
205
8 Manresa, 5th Ed., Bk. 1, p. 653.
206
New provision.
207
Art. 1183, Spanish Civil Code, in modified form.
291
Art. 1266 OBLIGATIONS
208
Art. 1184, Spanish Civil Code, in modified form.
292
EXTINGUISHMENT OF OBLIGATIONS Art. 1266
Loss of the Thing Due
209
8 Manresa, 5th Ed., Bk. 1, p. 661.
210
Ibid., pp. 661-663.
211
House vs. De la Costa, 63 Phil. 74.
293
Art. 1266 OBLIGATIONS
212
Tabora vs. Lazatin, G.R. No. L-5245, May 29, 1953. To the same effect: Thea-
tres Supply Corp. vs. Malolos, CA, 48 Off. Gaz. 1803.
213
Labayen vs. Talisay-Silay Milling Co., 52 Phil. 440.
214
Castro vs. Longa, 89 Phil. 581. To the same effect: Santos vs. Sec. of Agricul-
ture, 48 Off. Gaz. 3368.
294
EXTINGUISHMENT OF OBLIGATIONS Art. 1267
Loss of the Thing Due
215
8 Manresa, 5th Ed., Bk. 1, p. 664.
216
New provision.
295
Art. 1268 OBLIGATIONS
217
Report of the Code Commission, p. 133. It seems that the doctrine enunciated
by the Supreme Court in the cases of Labayen vs. Talisay-Silay Milling Co., 52 Phil.
440, and Castro vs. Longa, 89 Phil. 581 (supra), can be justified by an application of
the principle now enunciated in this article.
218
Art. 1185, Spanish Civil Code.
296
EXTINGUISHMENT OF OBLIGATIONS Art. 1269
Loss of the Thing Due
Furthermore, the rule is applicable not only to the persons who are
principally liable, but also to those who are subsidiarily liable. In all
of these cases, if the thing is lost, the debtor shall not be exempted
from the payment of the price of the thing, whatever may be the
cause for the loss. The only case where he is relieved of the severity
of the precept is when he had offered the thing to the obligee and the
latter had refused to accept it without justification.219
The offer referred to in this article should not be confused with
consignation inasmuch as the latter refers only to the payment of
the obligation, while the former refers to the extinguishment of the
obligation through loss by a fortuitous event. In consignation, the
offer is but a step to the payment; in this article, it is essential that
the creditor should refuse to accept the thing without justification
in order that the debtor may be released from liability in case of loss
through a fortuitous event.220
When the offer is made by the debtor and the creditor refuses to
accept it without justification, he may choose either of two courses:
(1) he may make a consignation of the thing and thereby completely
relieve himself of further liability, or (2) he may keep the thing in
his possession, in which case, the obligation shall still subsist but
with this difference — that if the thing is lost through a fortuitous
event, Arts. 1262 and 1265, and not Art. 1268, shall govern. It must,
of course, be noted that this Article (1268) can have no application
to those cases where an offer is not possible, since such offer by the
debtor is an essential requisite.221
219
8 Manresa, 5th Ed., Bk. 1, pp. 666-668.
220
Ibid.
221
Ibid.
222
Art. 1186, Spanish Civil Code.
297
Art. 1269 OBLIGATIONS
223
8 Manresa, 5th Ed., Bk. 1, pp. 670-672.
224
8 Manresa, 5th Ed., Bk. 1, p. 673.
225
4 Sanchez Roman 422.
226
8 Manresa, 5th Ed., Bk. 1, pp. 675-676.
298
EXTINGUISHMENT OF OBLIGATIONS Art. 1270
Condonation or Remission of the Debt
227
See Arts. 734, 745, 746, Civil Code.
228
See Arts. 935, 936, 937, Civil Code.
229
Art. 1270, par. 1, Civil Code.
230
Ibid.
231
Ibid.
232
3 Castan, 7th Ed., p. 265.
299
Art. 1270 OBLIGATIONS
233
Ibid., pp. 265-266.
234
Dalupan vs. Harden, 90 Phil. 417.
235
Arts. 734, 745, 746, Civil Code.
236
Arts. 748, 749, Civil Code.
237
Arts. 750, 751, 752, Civil Code.
238
Arts. 760-773, Civil Code.
239
Art. 1270, par. 2, Civil Code.
300
EXTINGUISHMENT OF OBLIGATIONS Art. 1270
Condonation or Remission of the Debt
240
8 Manresa, 6th Ed., Bk 1, pp. 679-680.
301
Art. 1270 OBLIGATIONS
241
Ibid.
242
Ibid.
302
EXTINGUISHMENT OF OBLIGATIONS Arts. 1271-1272
Condonation or Remission of the Debt
243
Ibid.
244
Ibid.
245
Ibid. As a matter of fact because of the provision of the last sentence of Art.
1270, we believe that the only possible cases implied would be those contemplated in
Arts. 1271, 1272 and 1274 of the Civil Code.
246
Art. 1188, Spanish Civil Code.
303
Arts. 1271-1272 OBLIGATIONS
247
Art. 1189, Spanish Civil Code.
248
8 Manresa, 5th Ed., Bk. 1, p. 684.
249
Veloso vs. Masa, 10 Phil. 279; Lopez vs. Tambunting, 33 Phil. 236.
304
EXTINGUISHMENT OF OBLIGATIONS Arts. 1273-1274
Condonation or Remission of the Debt
250
3 Castan, 7th Ed., p. 268. Under Sec. 5(h) and (k), Rule 131 of the New Rules
of Court, the rule is that if the private document evidencing the credit is in the pos-
session of the debtor, there arises a disputable presumption to the effect that the debt
has already been paid.
251
Art. 1190, Spanish Civil Code.
252
Art. 1191, Spanish Civil Code, in amended form.
253
Art. 1208, Civil Code.
305
Art. 1275 OBLIGATIONS
254
See Art. 2110, Civil Code.
255
Manresa, 5th Ed., Bk. 1, p. 697. Sanchez Roman, however, maintains that it
is conclusive (Vol. 4, p. 462).
256
Art. 1273, Civil Code.
257
Art. 1192, Spanish Civil Code, in modified form.
258
Art. 1192, Spanish Civil Code, in modified form.
259
4 Sanchez Roman 461.
306
EXTINGUISHMENT OF OBLIGATIONS Art. 1276
Confusion or Merger of Rights
260
Art. 1278, Civil Code.
261
Art. 1276, Civil Code.
262
Testate Estate of Mota vs. Serra, 40 Phil. 464.
263
For illustrative cases of partial confusion or merger — see Sochayseng vs.
Trujillo, 31 Phil. 153; Yek Ton Lin Fire & Marine Insurance Co. vs. Yusingco, 46
Phil. 473.
264
3 Castan, 7th Ed., p. 269.
265
Art. 1193, Spanish Civil Code.
307
Art. 1277 OBLIGATIONS
266
3 Castan, 7th Ed., p. 269.
267
Art. 2176, Civil Code.
268
Ibid.
269
8 Manresa, 5th Ed., Bk. 1, p. 707.
270
Art. 1194, Spanish Civil Code.
271
8 Manresa, 5th Ed., Bk. 1, pp. 709-710.
308
EXTINGUISHMENT OF OBLIGATIONS Art. 1278
Compensation
Section 5. — Compensation
272
Ibid., pp. 700-701.
273
Art. 1195, Spanish Civil Code.
274
3 Castan, 7th Ed., p. 270.
275
8 Manresa, 5th Ed., Bk. 1, p. 713.
309
Art. 1278 OBLIGATIONS
276
Ibid., pp. 713-714.
277
3 Castan, 7th Ed., p. 271.
278
2 Giorgi, Teoria de las Obligaciones, pp. 24-25.
279
Bocobo, Outlines of the Law on Obligations, p. 34.
310
EXTINGUISHMENT OF OBLIGATIONS Art. 1278
Compensation
280
“A counterclaim is any claim for money or other relief which a defending party
may have against an opposing party. A counterclaim need not diminish or defeat the
recovery sought by the opposing party, but many claim relief exceeding in amount
or different in kind from that sought by the opposing party’s claim.’’ (Sec. 6, Rule 6,
New Rules of Court) “A counter-claim not set up shall be barred if it arises out of or is
necessarily connected with the transaction or occurrence that is the subject matter of
the opposing party’s claim.’’ (Sec. 6, Rule 6, New Rules of Court) “A counter-claim not
set up shall be barred if it arises out of or is necessarily connected with the transac-
tion or occurrence that is the subject matter of the opposing party’s claim and does
not require for its adjudication the presence of third parties of whom the court can not
acquire jurisdiction.’’ (Sec. 4, Rule 9, New Rules of Court)
281
Art. 1179, No. 1, Civil Code; Sec. 6, Rule 6, New Rules of Court.
282
Art. 1179, No. 4, Civil Code; Yap Unki vs. Chua Japco, 14 Phil. 602.
283
Yap Unki vs. Chua Japco, 14 Phil. 602.
284
3 Castan, 7th Ed., pp. 272-273; Art. 1282, Civil Code.
311
Art. 1279 OBLIGATIONS
285
Art. 1283, Civil Code.
286
Art. 1281, Civil Code.
287
Ibid.
288
Art. 1196, Spanish Civil Code.
289
Arts. 1278, 1279, No. 1, Civil Code.
290
Art. 1279, No. 2, Civil Code.
312
EXTINGUISHMENT OF OBLIGATIONS Art. 1279
Compensation
291
Art. 1279, No. 3, Civil Code.
292
Art. 1279, No. 4, Civil Code.
293
Art. 1279, No. 5, Civil Code.
294
Arts. 1287, 1288, Civil Code; 3 Castan, 7th Ed., pp. 274-275.
295
8 Manresa, 5th Ed., Bk. 1, pp. 717-718.
296
Escano vs. Heirs of Escano, 28 Phil. 73.
313
Art. 1279 OBLIGATIONS
314
EXTINGUISHMENT OF OBLIGATIONS Art. 1279
Compensation
297
8 Manresa, 5th Ed., Bk. 1, p. 718.
298
Art. 1280, Civil Code.
299
De la Peña vs. Hidalgo, 20 Phil. 323.
300
Brimo vs. Goldemberg, 69 Phil. 502.
315
Art. 1279 OBLIGATIONS
against the government and such claim has already been recognized
by the enactment of a corresponding law appropriating funds for
that purpose. Under the circumstances, since both the claim of the
intestate against the government and the claim of the government
for taxes against the estate of said intestate have already become
overdue and demandable as well as fully liquidated, compensation
has already taken place by operation of law in accordance with the
provisions of Arts. 1279 and 1290 of the Civil Code, and both debts
are therefore extinguished to the extent that the amount of one is
covered by the amount of the other.301
301
Domingo vs. Carlitos, 8 SCRA 443.
316
EXTINGUISHMENT OF OBLIGATIONS Art. 1279
Compensation
302
8 Manresa, 5th Ed., Bk. 1, p. 723.
303
3 Castan, 7th Ed., p. 275; 8 Manresa, 5th Ed., Bk. 1, pp. 724-725.
304
8 Manresa, 5th Ed., Bk. 1, p. 725.
305
Ibid., pp. 725-726.
317
Art. 1280 OBLIGATIONS
it is necessary that such debts must be due and, at the same time,
liquidated.306
Idem; As to claims of third persons. — The fifth requisite is
that there must be no retention or controversy, commenced by third
persons and communicated in due time to the debtor, over either of
the debts. Retention consists in the application of the credit of one
of the parties to the satisfaction of the claims of a third person. It is
evident that in such a case there can be no compensation. However,
if there is an excess or balance remaining after the application
of the credit, compensation will still take place, but only to the
extent that the credit is not affected by the retention. Controversy
refers to a case in which a third person claims to be the creditor.
In other words, the party interested in the compensation and the
third person each claims that he is the real creditor. The effect of
such case is a provisional suspension of the compensation. If the
credit is adjudicated to the former, compensation takes place; if it is
adjudicated to the latter, compensation cannot take place.307
306
Luengco vs. Herrero, 17 Phil. 29; Compania General de Tobacos vs. French
and Unson, 39 Phil. 34.
307
8 Manresa, 5th Ed., Bk. 1, pp. 720-722.
308
Art. 1197, Spanish Civil Code.
318
EXTINGUISHMENT OF OBLIGATIONS Arts. 1281-1283
Compensation
309
8 Manresa, 5th Ed., Bk. 1, pp. 719-720.
310
New provision.
311
New provision.
312
New provision.
313
Yap Unki vs. Cha Japco, 14 Phil. 602.
314
Sec. 6, Rule 6, New Rules of Court.
319
Arts. 1284-1285 OBLIGATIONS
315
New provision.
316
8 Manresa, 5th Ed., Bk. 1, p. 725.
317
Art. 1198, Spanish Civil Code, in modified form.
320
EXTINGUISHMENT OF OBLIGATIONS Arts. 1284-1285
Compensation
318
Art. 1285, par. 1, Civil Code.
319
8 Manresa, 5th Ed., Bk. 1, p. 736.
321
Arts. 1284-1285 OBLIGATIONS
320
Art. 1285, par. 1, Civil Code.
321
Art. 1285, par. 2, Civil Code.
322
Art. 1285, par. 3, Civil Code.
322
EXTINGUISHMENT OF OBLIGATIONS Arts. 1286-1288
Compensation
323
8 Manresa, 5th Ed., Bk. 1, p. 738.
324
Art. 1199, Spanish Civil Code, in modified form.
325
Art. 1200, Spanish Civil Code.
326
New provision.
327
Art. 1287, Civil Code.
328
Ibid.
329
Ibid.
330
Art. 1288, Civil Code.
331
4 Tolentino, Civil Code 1956. Ed., p. 349.
323
Arts. 1289-1290 OBLIGATIONS
332
Gullas vs. Phil. Nat. Bank, 62 Phil. 519.
333
Arts. 1287, 301, Civil Code.
334
Art. 1201, Spanish Civil Code.
335
Art. 1202, Spanish Civil Code, in modified form.
336
Art. 1290, Civil Code; Acuna vs. Dievas, 12 Phil. 250.
337
8 Manresa, 5th Ed., Bk. 1, p. 747.
324
EXTINGUISHMENT OF OBLIGATIONS Art. 1291
Novation
Section 6. — Novation
338
Ibid.
339
Art. 1290, Civil Code. Legal compensation operates even against the will of the
interested parties even without their consent. Since this compensation takes place
ipso jure, its effects arise on the very day on which all its requisites concur. When
used as a defense, it retroacts to the date when its requisites are fulfilled. (BPI vs.
CA, et al., 255 SCRA 571.)
340
See 4 Tolentino, Civil Code, 1956 Ed., p. 351.
341
Art. 1203, Spanish Civil Code.
342
8 Manresa, 5th Ed., Bk. 1, p. 751.
325
Art. 1291 OBLIGATIONS
343
4 Sanchez Roman 242; quoted by Court of Appeals in Government vs. Bautis-
ta, CA, 37 Off. Gaz. 1880.
344
Tiu Siuco vs. Habana, 45 Phil. 707.
345
8 Manresa, 5th Ed., Bk. 1, p. 751.
346
Tiu Siuco vs. Habana, 45 Phil. 707.
326
EXTINGUISHMENT OF OBLIGATIONS Art. 1291
Novation
347
3 Castan, 7th Ed., p. 284.
348
Art. 1291, No. 1, Civil Code.
349
Art. 1291, Nos. 2 and 3, Civil Code.
350
3 Castan, 7th Ed., p. 284.
327
Art. 1291 OBLIGATIONS
351
Ibid., p. 285.
352
Art. 1292, Civil Code.
353
3 Castan, 7th Ed., p. 285.
354
Ibid., pp. 289-920.
355
8 Manresa, 5th Ed., Bk. 1, p. 772.
356
3 Castan, 7th Ed., p. 289.
357
Ibid., p. 290.
328
EXTINGUISHMENT OF OBLIGATIONS Art. 1291
Novation
358
Ibid., p. 291.
359
Ramos vs. Gibbon, 67 Phil. 371; Padilla vs. Levy Hermanos, Inc., 69 Phil. 681;
Asiatic Petroleum Co. vs. Sim Poo, CA, 49 Off. Gaz. 44.
360
Ramos vs. Gibbon, 67 Phil. 371.
361
Asiatic Petroleum Co. vs. Sim Poo, CA, 40 Off. Gaz. 44; Yellow Ball Freight
Lines, Inc. vs. Western Export Co., CA, G.R. No. 10422-R, Sept. 3, 1954.
362
Padilla vs. Levy Hermanos, Inc., 69 Phil. 681.
363
Tiu Siuco vs. Habana, 45 Phil. 707.
364
Ibid.
365
Zapanta vs. De Rotaeche, 21 Phil. 154.
366
Bank of the P.I. vs. Herridge, 47 Phil. 57.
329
Art. 1292 OBLIGATIONS
367
Art. 1204, Spanish Civil Code.
368
Tiu Siuco vs. Habana, 45 Phil. 707.
369
Art. 1292, Civil Code.
370
Dungo vs. Lopena, 116 Phil. 1305; Magdalena Estate, Inc. vs. Rodriguez, 18
SCRA 967.
371
Martinez vs. Cavives, 25 Phil. 581; Tiu Siuco vs. Habana, 45 Phil. 707; Young
vs. Villa, 49 Off. Gaz. 1818; Joe’s Radio & Electrical Supply vs. Alto Electronics Corp.,
104 Phil. 333.
330
EXTINGUISHMENT OF OBLIGATIONS Art. 1292
Novation
In People’s Bank and Trust Co. vs. Syvel’s, Inc. (164 SCRA
247), Syvel’s had a loan with People’s Bank and Trust Co. in the
amount of P900,000.00 secured by a chattel mortgage. Syvel’s
failed to pay the loan and People’s Bank and Trust Co. foreclosed
the chattel mortgage. Syvel’s opposed the foreclosure of the chattel
mortgage on the ground that the obligation secured by the chattel
mortgage sought to be foreclosed was novated by the subsequent
execution of a real estate mortgage as additional collateral to the
obligation secured by said chattel mortgage. The Supreme Court
held: “Novation takes place when the object or principal condition of
372
Martinez vs. Cavives, 25 Phil. 581.
331
Art. 1292 OBLIGATIONS
332
EXTINGUISHMENT OF OBLIGATIONS Art. 1292
Novation
373
Phil. Nat. Bank vs. Granada, CA, 51 Off. Gaz. 62.
374
Borja vs. Mariano, 66 Phil. 93.
333
Art. 1292 OBLIGATIONS
375
Tiu Siuco vs. Habana, 45 Phil. 707; Ramos vs. Gibbon, 67 Phil. 371; Padilla vs.
Levy Hermanos, Inc., 69 Phil. 681; Pablo vs. Sapungan, 71 Phil. 145; Asiatic Petrole-
um Co. vs. Sim Poo, CA, 40 Off. Gaz. 44; Yellow Ball, Inc. vs. Western Export Co., CA-
G.R. No. 10422-R, Sept. 3, 1954; Magdalena Estate, Inc. vs. Rodriguez, 18 SCRA 967.
376
Zapanta vs. De Rotaeche, 21 Phil. 154.
377
Bank of the P.I. vs. Herridge, 47 Phil. 57.
378
Ynchausti & Co. vs. Yulo, 34 Phil. 978; Pascual vs. Lacsamana, 100 Phil. 381;
La Tondeña, Inc. vs. Alto Surety & Ins. Co., 101 Phil. 879.
379
Magdalena Estate, Inc. vs. Rodriguez, 18 SCRA 967.
380
Dungo vs. Lopena, 116 Phil. 1305; Magdalena Estate, Inc. vs. Rodriguez, 18
SCRA 967.
334
EXTINGUISHMENT OF OBLIGATIONS Art. 1292
Novation
335
Art. 1292 OBLIGATIONS
381
Macondray & Co. vs. Ruiz, 66 Phil. 562. To the same effect: Paterson vs. Aza-
da, 8 Phil. 432; Fua vs. Yap, 74 Phil. 287.
382
Borja vs. Mariano, 66 Phil. 393.
383
Phil. Nat. Bank vs. Mallari, 104 Phil. 437.
336
EXTINGUISHMENT OF OBLIGATIONS Art. 1292
Novation
384
Pascual vs. Lacsamana, 100 Phil. 381.
385
Ynchausti & Co. vs. Yulo, 34 Phil. 978; La Tondeña, Inc. vs. Alto Surety & Ins.
Co., 101 Phil. 879.
386
3 Castan, 7th Ed., p. 291.
387
Ibid., pp. 291-292.
388
Kabankalan Sugar Co. vs. Pacheco, 55 Phil. 555.
337
Art. 1293 OBLIGATIONS
389
Art. 1205, Spanish Civil Code, in modified form.
338
EXTINGUISHMENT OF OBLIGATIONS Art. 1293
Novation
390
8 Manresa, 5th Ed., Bk. 1, p. 777; 3 Castan, 7th Ed., p. 292.
391
8 Manresa, 5th Ed., Bk. 1, p. 777.
339
Art. 1293 OBLIGATIONS
The case of Quinto vs. People, (April 14, 1999, 305 SCRA 709)
explain the concepts of expromisión and delegación as follows:
There are two forms of novation by substituting the person
of the debtor, depending on whose initiative it comes from, to
wit: expromisión and delegación. In the former, the initiative for
the change does not come from the debtor and may even be made
without his knowledge. Since a third person would substitute for the
original debtor and assume the obligation, his consent and that of
the creditor would be required. In the latter, the debtor offers, and
the creditor accepts, a third person who consents to the substitution
and assumes the obligation, thereby releasing the original debtor
from the obligation; here, the intervention and the consent of all
parties thereto would perforce be necessary. In either of these two
modes of substitution, the consent of the creditor, such as can be
seen, is an indispensable requirement.
392
8 Manresa, 5th Ed., Bk. 1, pp. 777-778, quoted in Testate Estate of Mota vs.
Serra, 47 Phil. 464.
340
EXTINGUISHMENT OF OBLIGATIONS Art. 1293
Novation
Rio Grande Oil Co. vs. CA, 39 Off. Gaz. 986; Santissimo Rosario de Molo vs.
394
341
Art. 1293 OBLIGATIONS
The law does not prescribe when such consent may be given;
neither does it require any specific form. Consequently, it may be
given simultaneously with the substitution or even afterwards.
And since consent may as well be expressed by deeds as by words,
it may be express or implied.395 Thus, where a stockholder in a
certain corporation sold his shares of stock to another subject to the
condition that his indebtedness to the corporation shall be assumed
by the latter and the corporation was duly notified regarding the sale
including all of the terms and conditions thereof, the act of the Board
of Directors of the corporation in electing the vendee as president of
the corporation as well as member of the Board of Directors as a
substitute of the vendor clearly constitutes an implied acceptance
of the substitution of debtors. There is, therefore, a novation by the
substitution of debtors, which is perfectly valid and lawful placing
the new debtor under obligation to pay the debt which he has
assumed.396 It must be observed, however, that the mere act of the
creditor in accepting payments by a third party for the benefit of a
debtor whose accounts the third party has assumed, without further
facts, does not constitute an implied acceptance of the substitution of
the debtor.397 Thus, where the mortgagor transferred the mortgaged
property to a third person subject to the condition that the latter
shall assume the payment of the obligation, the mere fact that the
creditor accepted payments from the transferee does not relieve the
mortgagor from his obligation to pay the unpaid balance of the debt,
since the substitution of debtors was made without the consent of the
creditor — a requirement which is indispensable in order to effect
a novation of the obligation.398 In such case, it is evident that Arts.
1236 and 1237 of the Civil Code, and not Art. 1293, shall govern.
Idem; Effect of payment by new debtor. — With regard to
the relation between the original debtor and the new debtor, since
donation cannot be presumed in such case, justice demands that the
original debtor shall reimburse to the new debtor whatever benefits
395
Asia Banking Corp. vs. Elser, 54 Phil. 994; Elmac, Inc. vs. Gustilo, CA, 37 Off.
Gaz. 189; Rio Grande Oil Co. vs. Coleman, CA, 39 Off. Gaz. 986.
396
Asia Banking Corp. vs. Elser, 54 Phil. 994.
397
Pacific Commercial Co. vs. Sotto, 34 Phil. 237; McCullough vs. Veloso, 46 Phil.
1; Gov’t. of the Philippine Islands vs. Bautista, CA, 37 Off. Gaz. 1880; Rio Grande Oil
Co. vs. Coleman, CA, 39 Off. Gaz. 986.
398
McCullough vs. Veloso, 46 Phil. 1.
342
EXTINGUISHMENT OF OBLIGATIONS Art. 1293
Novation
399
Manresa, 5th Ed., Bk. 1, pp. 778-779.
400
Art. 1236, Civil Code.
401
Arts. 1300, 1302, 1303, Civil Code.
402
Art. 1237, Civil Code.
403
Ibid.
343
Arts. 1294-1295 OBLIGATIONS
404
Art. 1236, Civil Code.
405
Arts. 1300, 1302, 1303, Civil Code.
406
Art. 1236, Civil Code.
407
Arts. 1300, 1302, 1303, Civil Code.
408
New provision.
409
Art. 1206, Spanish Civil Code, in modified form.
410
8 Manresa, 5th Ed., Bk. 1, p. 779.
344
EXTINGUISHMENT OF OBLIGATIONS Art. 1296
Novation
411
Ibid., pp. 779-780.
412
Ibid., p. 780.
345
Arts. 1297-1298 OBLIGATIONS
413
Art. 1207, Spanish Civil Code.
414
8 Manresa, 5th Ed., Bk. 1, p. 792.
415
Ibid., p. 793.
416
New provision.
417
Art. 1208, Spanish Civil Code, in modified form.
418
New Provision; Tiu Siuco vs. Habana, 45 Phil. 707.
419
3 Castan, 7th Ed., p. 289.
420
8 Manresa, 5th Ed., Bk. 1, pp. 796-797.
346
EXTINGUISHMENT OF OBLIGATIONS Arts. 1297-1298
Novation
421
Art. 1297, Civil Code.
422
Art. 1390, Civil Code.
423
8 Manresa, 5th Ed., Bk. 1, p. 798. These so-called exceptions found in Art.
1298 of the Code are not really exceptions because they refer to voidable contracts
(Art. 1390), while the general rule refers to void contracts (Art. 1409).
424
New provision.
425
3 Castan, 7th Ed., p. 289, quoted in Gov’t. of the Phil. vs. Bautista, CA, 37 Off.
Gaz. 1880.
347
Art. 1299 OBLIGATIONS
426
8 Manresa, 5th Ed., Bk. 1, pp. 797-798.
427
Ibid., p. 798.
428
Art. 1209, Spanish Civil Code, in modified form.
348
EXTINGUISHMENT OF OBLIGATIONS Arts. 1300-1301
Novation
429
Art. 1300, Civil Code.
430
New provision.
431
Art. 1300, Civil Code.
432
See Art. 1624, et seq., Civil Code.
433
8 Manresa, 5th Ed., Bk. 1, p. 890.
349
Art. 1302 OBLIGATIONS
434
Art. 1210, Spanish Civil Code, in modified form.
435
Art. 1300, Civil Code.
350
EXTINGUISHMENT OF OBLIGATIONS Art. 1302
Novation
436
8 Manresa, 5th Ed., Bk. 1, pp. 804-805.
437
Ibid., pp. 805-806.
438
Arts. 1236, 1302, No. 2, Civil Code.
439
Art. 1236, Civil Code.
440
Art. 1237, Civil Code.
351
Arts. 1303-1304 OBLIGATIONS
441
8 Manresa, 5th Ed., Bk. 1, pp. 806-807.
442
Wilson vs. Berkenkotter, 49 Off. Gaz. 1401; 8 Manresa, 5th Ed., Bk. 1, p. 807.
443
Art. 1212, Spanish Civil Code, in modified form.
444
Art. 1213, Spanish Civil Code.
445
8 Manresa, 5th Ed., Bk. 1, pp. 814-815. For illustrative case, see Somes vs.
Molina, 15 Phil. 133.
446
8 Manresa, 5th Ed., Bk. 1, p. 815.
352
EXTINGUISHMENT OF OBLIGATIONS Arts. 1303-1304
Novation
353
CONTRACTS
CHAPTER 1
GENERAL PROVISIONS
1
Art. 1254, Spanish Civil Code, in modified form.
2
3 Castan, 7th Ed., pp. 298-300.
3
4 Sanchez Roman 146.
354
GENERAL PROVISIONS Art. 1305
4
8 Manresa, 5th Ed., Bk. 2, pp. 268-270.
5
Ibid., p. 277.
6
Ibid., pp. 277-278.
355
Art. 1305 CONTRACTS
356
GENERAL PROVISIONS Art. 1305
7
3 Castan, 7th Ed., pp. 322-324.
8
Ibid., p. 324.
9
Arts. 1547, 1548, Civil Code.
10
3 Castan, 7th Ed., p. 324.
357
Art. 1305 CONTRACTS
11
Tolentino, 1956 Ed., Civil Code, pp. 376-378; but see No. 2 of Art. 1491, Civil
Code.
12
See Arts. 1159, 1308, 1315, 1356, Civil Code.
13
See Art. 1308, Civil Code.
358
GENERAL PROVISIONS Art. 1305
14
3 Castan, 7th Ed., p. 399.
15
Ibid., pp. 279-280.
359
Art. 1305 CONTRACTS
360
GENERAL PROVISIONS Art. 1306
16
4 Sanchez Roman 381-387; 3 Castan, 7th Ed., pp. 310-314.
17
Art. 1255, Spanish Civil Code, in modified form.
18
Art. IV, Sec. 11, Constitution of the Philippines.
19
Gabriel vs. Monte de Piedad, 71 Phil. 497. To the same effect: Ferrazzini vs.
Gsell, 34 Phil. 697; People vs. Pomar, 46 Phil. 440.
361
Art. 1306 CONTRACTS
20
Ferrazzini vs. Gsell, 34 Phil. 697; 8 Manresa, 5th Ed., Bk. 12, p. 288; 20 Scae-
vola 505.
21
8 Manresa, 5th Ed., Bk. 2, pp. 287-288.
22
Molina vs. De la Riva, 6 Phil. 12.
23
Puig vs. Sellner, 45 Phil. 286; Reyes vs. Nebrija, G.R. No. L-8720, March 21,
1956. To the same effect: Warner, Barnes & Co. vs. Jaucian, 13 Phil. 4; Aguilar vs.
Rubiato, 40 Phil. 570; Pamintuan vs. Tiglao, 53 Phil. 1; Hodges vs. Regalado, 69 Phil.
588. There are other pacts, besides pactum commissorium which are prohibited by
law, such as pactum leonina under Art. 1799 of the Civil Code and pactum de non
alienado under Art. 2130 of the same Code.
362
GENERAL PROVISIONS Art. 1306
Rosel argue that contracts have the force of law between the con-
tracting parties and must be complied with in good faith, there are,
however, certain exceptions to the rule, specifically Article 1306 of
the Civil Code, which provides: “Article 1306. The contracting par-
ties 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.’’ A scrutiny of
the stipulation of the parties reveals a subtle intention of the credi-
tor to acquire the property given as security for the loan. This is em-
braced in the concept of pactum commissorium where the elements
are as follows: (1) there should be a property mortgaged by way of
security for the payment of the principal obligation, and (2) there
should be a stipulation for automatic appropriation by the creditor
of the thing mortgaged in case of non-payment of the principal ob-
ligation within the stipulated period.’’ Said concept of pactum com-
missorium is proscribed by law.
Idem; id. — Second limitation. — The second limitation is the
most difficult to ascertain, because in subjecting obligations to moral
precepts we must be careful not to erase the distinction between the
moral and the juridical order. It is evident, however, that the morals
referred to are those principles which are incontrovertible and are
universally admitted and which have received social and practical
recognition.24 Thus, where the parties stipulated in their contract
that the defendant shall be obliged to render services to the plaintiff
as a domestic servant without any remuneration whatsoever
because of a certain loan obtained by the former from the latter, it is
evident that such agreement is void on the ground that it is contrary
to morals, unless it be admitted that slavery may be established in
this country through a covenant entered into between the interested
parties.25 Similarly, where the debtors executed a promissory note in
favor of the plaintiff for P465, promising to pay a penalty of P5.00 a
day in case of non-payment of the debt at maturity, it is clear that
such a promise is immoral and, therefore, cannot be enforced.26
Idem; id. — Third limitation. — The third limitation to the
right of the contracting parties to establish such stipulations, clauses,
terms, and conditions as they may deem convenient is good customs.
24
8 Manresa, 5th Ed., Bk. 2, p. 288.
25
De los Reyes vs. Alojado, 16 Phil. 499.
26
Ibarra vs. Aveyro, 37 Phil. 273.
363
Art. 1306 CONTRACTS
27
Report of the Code Commission, p. 134.
28
8 Manresa, 5th Ed., Bk. 2, p. 288.
29
Report of the Code Commission, p. 134.
30
Ferrazzini vs. Gsell, 34 Phil. 697; 8 Manresa, 5th Ed., Bk. 2, p. 288; 20 Scaevola
505.
31
Ferrazzini vs. Gsell, 34 Phil. 697.
364
GENERAL PROVISIONS Art. 1306
Thus, where the owner of stolen goods and the person respon-
sible for the theft entered into an agreement by which the former
agreed to stifle the criminal prosecution of the latter for a pecuni-
ary consideration, it is clear that such an agreement is manifestly
contrary to public policy and the due administration of justice; con-
sequently, it is void.33 The same can also be said with regard to an
agreement where a carrier is exempted from any liability for loss or
damage caused by its own negligence,34 or where an employee, after
the termination of his employment, shall neither engage or interest
himself in any business enterprise similar to or in competition with
that operated by the employer, nor enter into the employment of
any enterprise in the Philippines, except by obtaining the written
permission of such employer,35 or where an applicant for dollar al-
locations shall pay ten or fifteen or twenty per cent of the amount
to be approved by the Central Bank as fee for the services of the
“influence peddler” or “ten percenter” in securing the approval of the
foreign exchange application.36
It must be observed that in stipulations exempting a common
carrier from liability, three kinds of stipulations are ordinarily made
in a bill of lading. The first is one exempting the carrier from any and
32
Gabriel vs. Mateo, 71 Phil. 497.
33
Arroyo vs. Berwin, 36 Phil. 386; Velez vs. Ramas, 40 Phil. 787; Monterey vs.
Gomez, 104 Phil. 1059.
34
Heacock vs. Macondray & Co., 42 Phil. 205. See Arts. 1745, et seq., Civil Code.
35
Ferrazzini vs. Gsell, 34 Phil. 697.
36
Tee vs. Tacloban Electric and Ice Plant Co., 105 Phil. 168.
365
Art. 1306 CONTRACTS
all liability for loss or damage occasioned by its own negligence; the
second is one providing for an unqualified limitation of such liability
to an agreed valuation; and the third is one limiting the liability
of the carrier to an agreed valuation unless the shipper declares a
higher value and pays a higher rate of freight. According to Art. 1745
of the Civil Code, the first is contrary to public policy, and therefore,
void. As a rule, the second is also contrary to public policy, and
therefore, also void.37 However, according to Art. 1750 of the Civil
Code, if it can be shown to be reasonable under the circumstances,
and had been fairly and freely agreed upon, then it is perfectly valid
and binding. The third, on the other hand, is perfectly valid and
binding according to Art. 1749 of the Civil Code.
With regard to contracts which tend to restrain business trade,
the rule is now well established that a contract in restraint of trade
is valid provided that there is a limitation upon either time or place.
A contract, however, which restrains a man from entering into a
business or trade without either a limitation as to time or place is
invalid. The public welfare, of course, must always be considered.
Hence, in addition to the requirement that there must be a limitation
as to time or place, it is also required that the restraint must be
reasonably necessary for the protection of the contracting parties.38
37
Heacock vs. Macondray & Co., 42 Phil. 205; Ysmael & Co. vs. Barretto, 51 Phil.
90. See Arts. 1745 to 1754, Civil Code.
38
Del Castillo vs. Richmond, 45 Phil. 679. To the same effect: Ollendorf vs. Ab-
rahamson, 88 Phil. 585.
366
GENERAL PROVISIONS Art. 1306
367
Art. 1306 CONTRACTS
368
GENERAL PROVISIONS Art. 1306
369
Art. 1306 CONTRACTS
370
GENERAL PROVISIONS Art. 1307
39
New provision.
371
Art. 1307 CONTRACTS
8 Manresa, 5th Ed., Bk. 2, pp. 297-298; 3 Castan, 7th Ed., pp. 313-314.
40
For a more recent case stating the same doctrine — see Dizon vs. Gaborro, 83
41
SCRA 688.
372
GENERAL PROVISIONS Art. 1308
42
Art. 1256, Spanish Civil Code, in modified form.
373
Arts. 1309-1310 CONTRACTS
43
New provision.
44
New provision.
45
Arts. 1309, 1310, Civil Code. See also Arts. 1182, 1720, and 1798, Civil Code,
for similar provisions.
46
8 Manresa, 5th Ed., Bk. 2, p. 304.
374
GENERAL PROVISIONS Arts. 1309-1310
that whether or not such contract shall be valid (or shall be fulfilled)
shall depend exclusively upon the will of B, it is clear that such
a stipulation would be a direct violation of the prohibition stated
in the article; consequently, it is void. Thus, where it is expressly
stipulated in a contract of lease that the defendants can continue
occupying the house which is the object of the contract indefinitely
so long as they should faithfully fulfill their obligation to pay the
rentals, it is clear that the continuance and fulfillment of the contract
would then depend solely and exclusively upon their uncontrolled
choice between continuing paying the rentals or not, completely
depriving the owner of all say on the matter. Consequently, such
a stipulation cannot be set up by the defendants as a defense in
an action for ejectment instituted by the plaintiff. If this defense
is 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
Art. 1308 of the Civil Code.47
It must be noted, however, that there are certain agreements
which will in effect render the mutuality of contracts illusory because
one of the contracting parties is placed in a position of superiority
with regard to the determination of the validity or fulfillment of the
contract over that occupied by the other party, but which do not fall
within the purview of the prohibition stated in Art. 1308.
In the first place, we have those agreements where the obligor
promises to pay a certain amount which is not determined, but the
contract itself specifies the manner by which the amount may be
determined, such as by the exercise of the judgment and discretion of
the obligor. Undoubtedly, a promise of this character creates a legal
obligation binding upon the promisor, although in its actual results
it may not infrequently prove to be illusory.48 In the second place,
we have those agreements where the fulfillment of the contract is
left to the will of one of the contracting parties in the negative form
47
Encarnacion vs. Baldemar, 77 Phil. 470. See also General Enterprises, Inc. vs.
Lianga Bay Logging Co., 11 SCRA 733; Garcia vs. Rita Legarda, Inc., 21 SCRA 555.
48
Liebenow vs. Phil. Vegetable Oil Co., 39 Phil. 60.
375
Arts. 1309-1310 CONTRACTS
49
Taylor vs. Uy Tieng Piao, 43 Phil. 873; Melencio vs. Dy Liao Lay, 55 Phil. 99;
Phil. Banking Corp. vs. Lui She, 21 SCRA 52.
50
8 Manresa, 5th Ed., Bk. 2, p. 304. See Phil. Banking Corp. vs. Lui She, 21
SCRA 52.
376
GENERAL PROVISIONS Arts. 1309-1310
377
Art. 1311 CONTRACTS
51
Art. 1257, Spanish Civil Code, in modified form.
378
GENERAL PROVISIONS Art. 1311
52
3 Castan, 7th Ed., p. 399; see also Salonga vs. Warner, Barnes & Co., 88 Phil.
125.
53
Tuazon & San Pedro vs. Zamora, 2 Phil. 305; Blossom & Co. vs. Manila Gas
Corp., 48 Phil. 848.
54
De la Riva vs. Escobar, 51 Phil. 243.
55
9 Phil. 403.
379
Art. 1311 CONTRACTS
56
To the same effect: De Guzman vs. Salak, 91 Phil. 265; Galasinao vs. Austria,
97 Phil. 82.
57
Sec. 5, Rule 86, New Rules of Court.
58
Suiliong & Co. vs. Chio-Taysan, 12 Phil. 13; Limjoco vs. Intestate Estate of
Pedro Fragante, 80 Phil. 776. See also Pavia vs. De la Rosa, 8 Phil. 70; Ledesma vs.
McLaughlin, 66 Phil. 547; Tranez vs. Vail, CA, 37 Off. Gaz. 1253.
59
Limjoco vs. Intestate Estate of Pedro Fragante, 80 Phil. 776.
60
Mojica vs. Fernandez, 9 Phil. 403; De Guzman vs. Salak, 91 Phil. 265.
61
Art. 1311, par. 1, Civil Code.
380
GENERAL PROVISIONS Art. 1311
the rule is not applicable if the rights and obligations arising from
the contract are not transmissible:
(1) By their nature, as when the special or personal qualifi-
cation of the obligor constitutes one of the principal motives for the
establishment of the contract;62 or
(2) By stipulation of the parties, as when the contract ex-
pressly provides that the obligor shall perform an act by himself and
not through another; or
(3) By provision of law, as in the case of those arising from a
contract of partnership or of agency.63
Idem; Effect of contract on third persons. — Since a con-
tract can take effect only between the contracting parties, as well
as their assigns and heirs, it follows, as a general rule, that it can-
not produce any effect whatsoever as far as third persons are con-
cerned.64 Consequently, he who is not a party to a contract, or an
assignee thereunder, has no legal capacity to challenge its validity,
hence, even if it is admitted that a contract is voidable, nevertheless,
its voidable character cannot be asserted by one who is not a party
to the transaction or his representative.65 Thus, according to the Su-
preme Court:
62
Art. 1726, Civil Code. For illustrative case, see Javier Security Special Watch-
man Agency vs. Shell-Craft & Button Corp., 117 Phil. 218.
63
Arts. 1830, No. 5, 1919, No. 3, Civil Code.
64
Wolfson vs. Estate of Martinez vs. Ramos, 28 Phil. 589; Ayson vs. Court of Ap-
peals, 97 Phil. 965.
65
Wolfson vs. Estate of Martinez, 20 Phil. 340.
66
Ibañez vs. Hongkong and Shanghai Bank, 22 Phil. 572.
381
Art. 1311 CONTRACTS
67
Art. 1311, par. 2, Civil Code.
68
Art. 1312, Civil Code.
69
Art. 1313, Civil Code.
70
Art. 1314, Civil Code.
71
Kauffman vs. Phil. National Bank, 42 Phil. 182; Bank of the P.I. vs. Concep-
cion, 53 Phil. 806.
72
Uy Tam vs. Leonard, 30 Phil. 471.
382
GENERAL PROVISIONS Art. 1311
73
Ibid.
74
Art. 1311, par. 2, Civil Code.
75
Young vs. CA, G.R. No. 79518, Jan. 13, 1989.
383
Art. 1311 CONTRACTS
76
Uy Tam vs. Leonard, 30 Phil. 471. To the same effect: Kauffman vs. Phil. Nat.
Bank, 42 Phil. 182; Bank of the P.I. vs. Concepcion, 53 Phil. 806; Mendoza vs. Phil.
Air Lines, 90 Phil. 836.
384
GENERAL PROVISIONS Art. 1311
385
Art. 1311 CONTRACTS
386
GENERAL PROVISIONS Art. 1311
387
Art. 1312 CONTRACTS
77
New provision.
78
3 Sanchez Roman 6-8.
388
GENERAL PROVISIONS Arts. 1313-1314
79
Art. 1312, Civil Code.
80
Art. 2125, Civil Code.
81
Art. 1676, Civil Code.
82
New provision.
83
Art. 1313, Civil Code.
84
New provision.
389
Arts. 1313-1314 CONTRACTS
85
30 Am. Jur., Sec. 19, pp. 71-72.
86
Ibid., Secs. 21-23, pp. 73-75.
87
Ibid., Sec. 23, pp. 75-76.
88
Daywalt vs. Agustinos Recoletos, 39 Phil. 587.
390
GENERAL PROVISIONS Arts. 1313-1314
391
Art. 1316 CONTRACTS
89
Art. 1258, Spanish Civil Code.
90
New provision.
91
8 Manresa, 5th Ed., Bk. 2, p. 321.
92
Art. 1315, Civil Code.
93
Art. 1316, Civil Code. The four traditional real contracts, in the Roman jus
civile are commodatum, mutuum, depositum and pledge.
392
GENERAL PROVISIONS Art. 1317
company. That was on June 15, 1980. On June 20, 1980, the deed of
chattel mortgage was signed by both parties. On June 25, 1980, the
deed was recorded in the Chattel Mortgage Register. When was the
contract perfected? Reading Art. 1319 of the Civil Code in relation
to Art. 1315, it is clear that the contract was perfected only on June
25, 1980. It was only then that there was a complete manifestation
of the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract.
94
Art. 1317, Spanish Civil Code, in modified form.
95
See Arts. 1403, et seq., Civil Code.
393
Art. 1317 CONTRACTS
96
Report of the Code Commission, p. 139.
97
Art. 1317, Civil Code; see also Art. 1910, Civil Code.
394
GENERAL PROVISIONS Art. 1317
395
CONTRACTS
CHAPTER 2
General Provisions
1
Art. 1261, Spanish Civil Code.
2
3 Castan, 7th Ed., pp. 322-324; 8 Manresa, 5th Ed., Bk. 2, pp. 350-351.
396
ESSENTIAL REQUISITES OF CONTRACTS Art. 1319
Consent
Section 1. — Consent
3
8 Manresa, 5th Ed., Bk. 2, 351.
4
Art. 1262, Spanish Civil Code, in modified form.
5
3 Castan, 7th Ed., pp. 326-327; 8 Manresa, 5th Ed., Bk. 2, p. 365; 4 Sanchez
Roman 191.
397
Art. 1319 CONTRACTS
1330-1346).6 The first is expressly stated in the Code, the second and
the third are implied.
When Contracts are Perfected — In general, contracts
are perfected from the moment that there is a manifestation of the
concurrence between the offer and the acceptance with respect to
the object and the cause which shall constitute the contract. (Art.
1319, par. 1, New Civil Code.)
However, if the acceptance is made by letter or telegram, we
must distinguish. According to Art. 1319, par. 2, of the New Civil
Code, the contract is perfected from the moment that the offeror has
knowledge of such acceptance, while according to Art. 54 of the Code
of Commerce, the contract is perfected from the moment an answer
is made accepting the offer. Because of the repealing clause found in
Art. 2270 of the New Civil Code, it is submitted that Art. 54 of the
Code of Commerce can now be applied only to purely commercial
contracts, such as joint accounts, maritime contracts, etc. We can,
therefore, say that the rule found in the second paragraph of Art.
1319 of the New Civil Code is the general rule, while that found in
Art. 54 of the Code of Commerce is the exception.
Manifestation of Consent. — Before there is consent, it is
essential that it must be manifested by the meeting of the offer and
the acceptance upon the thing and the cause which are to constitute
the contract.7 Once there is such a manifestation of the concurrence of
the wills of the contracting parties, the period or stage of negotiation
is terminated. The contract, if consensual, is finally perfected.8
Thus, it was held, that even if the draft renewal contract had
not been signed by the lessor, the parties may be deemed to have
agreed to review their lease contract considering the exchanges of
letters between, and the implementing acts of the parties. (Ramon
Magsaysay Award Foundation vs. CA, G.R. No. 55998, Jan. 17,
1985.)
6
According to Castan, consent presupposes the following elements or conditions:
(1) plurality of subjects; (2) legal capacity; (3) intelligent and voluntary; (4) express
or implied manifestation; and (5) concurrence of the internal and the declared will. (3
Castan, 7th Ed., p. 327)
7
Art. 1318, par. 1, Civil Code.
8
8 Manresa, 5th Ed., Bk. 2, p. 368.
398
ESSENTIAL REQUISITES OF CONTRACTS Art. 1319
Consent
399
Art. 1319 CONTRACTS
9
3 Bouvier’s Law Dictionary, 2399.
10
Rosenstock vs. Burke, 46 Phil. 217.
11
Meads vs. Lasedeco, 52 Off. Gaz. 208.
12
Art. 1319, par. 1, Civil Code.
13
Ibid. See Beaumont vs. Prieto, 41 Phil. 670; Zayco vs. Serra, 44 Phil. 326; Ba-
tangan vs. Cojuangco, 78 Phil. 481. See also Logan vs. Philippine Acetylene Co., 33
Phil. 782; Datoc vs. Mendoza, CA, 47 Off. Gaz. 2427.
400
ESSENTIAL REQUISITES OF CONTRACTS Art. 1319
Consent
14
Beaumont vs. Prieto, 41 Phil. 670, 249 U.S. 554.
15
Zayco vs. Serra, 44 Phil. 326.
16
8 Manresa, 5th Ed., Bk. 2, pp. 372-373.
401
Art. 1319 CONTRACTS
17
3 Castan, 7th Ed., pp. 385-386; 2 De Diego 102-103.
18
Art. 54, Code of Commerce.
402
ESSENTIAL REQUISITES OF CONTRACTS Art. 1319
Consent
19
Report of the Code Commission, p. 135.
20
3 Castan, 7th Ed., p. 385; 8 Manresa, 5th Ed., Bk. 2, p. 373.
21
Art. 1322, Civil Code.
22
41 Phil. 269.
403
Art. 1319 CONTRACTS
23
117 Phil. 586.
404
ESSENTIAL REQUISITES OF CONTRACTS Art. 1319
Consent
24
3 Castan, 7th Ed., p. 387.
25
8 Manresa, 5th Ed., Bk. 2, p. 373.
26
43 Phil. 270.
405
Art. 1319 CONTRACTS
406
ESSENTIAL REQUISITES OF CONTRACTS Art. 1319
Consent
G.R. No. L-47088, July 10, 1981). Article 1318 of the Civil Code
provides that there can be no contract unless the following
requisites concur : (1) consent of the parties; (2) object certain
which is the subject matter of the contract; and (3) cause of the
obligation.
Gigi will not be liable to pay Chito any damages for
withdrawing the offer before the lapse of the period granted.
In this case, no consideration was given by Chito for the option
given. Thus, there is no perfected contract of option for lack of
cause of obligation. Gigi cannot be held to have breached the
contract. Thus, he cannot be held liable for damages (Suggested
Answers to the 2005 Bar Examination Questions, Philippine
Association of Law Schools).
27
8 Manresa, 5th Ed., Bk. 2, p. 373.
407
Art. 1320 CONTRACTS
such case there is still no meeting of the minds, since the revocation
has cancelled or nullified the acceptance which thereby ceased to
have any legal effect.28 We believe that this opinion is more logical.
After all, as far as the law is concerned, there is only one decisive
moment to consider and that is the moment when the offeror has
knowledge of the acceptance made by the offeree. At any time before
that moment, the offeror is not bound by his offer; neither should
the offeree be bound by his acceptance. Otherwise, it would then
be possible to say that there are two moments when a consensual
contract is perfected — first, when the offeree transmits his
acceptance to the offeror, and second, when the offeror has knowledge
of the acceptance. Legally, this is not possible.
28
4 Tolentino, Civil Code, 1956 Ed., p. 418.
29
New provision.
30
2 Phil. 682.
408
ESSENTIAL REQUISITES OF CONTRACTS Art. 1320
Consent
409
Arts. 1321-1323 CONTRACTS
Art. 1321. The person making the offer may fix the
time, place, and manner of acceptance, all of which must be
complied with.31
Art. 1322. An offer made through an agent is accepted
from the time acceptance is communicated to him.32
Art. 1323. An offer becomes ineffective upon the death,
civil interdiction, insanity, or insolvency of either party
before acceptance is conveyed.33
Effect of Death, Civil Interdiction, Insanity, or Insolven-
cy. — According to the above article, an offer becomes ineffective
upon the death, civil interdiction, insanity, or insolvency of either
party before acceptance is conveyed. The word “conveyed” refers to
that moment when the offeror has knowledge of the acceptance by
the offeree. Hence, the article merely means that an offer becomes
ineffective upon the death, civil interdiction, insanity, or insolvency
of either party before the offeror has knowledge of the acceptance by
the offeree.
31
New provision.
32
New provision.
33
New provision.
410
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1321-1323
Consent
411
Art. 1324 CONTRACTS
34
New provision.
35
41 Phil. 670.
412
ESSENTIAL REQUISITES OF CONTRACTS Art. 1324
Consent
36
Southwestern Sugar and Molasses Co. vs. Atlantic Gulf & Pacific Co., 51 Off.
Gaz. 3447; Navarro vs. Sugar Producers, Inc., 1 SCRA 1180.
413
Art. 1324 CONTRACTS
414
ESSENTIAL REQUISITES OF CONTRACTS Art. 1324
Consent
415
Arts. 1325-1326 CONTRACTS
37
New provision.
38
New provision.
416
ESSENTIAL REQUISITES OF CONTRACTS Art. 1327
Consent
39
Art. 1263, Spanish Civil Code, in modified form.
40
8 Manresa, 5th Ed., Bk. 2, p. 352.
417
Art. 1327 CONTRACTS
41
Art. 1390, No. 1, Civil Code.
42
Art. 1403, No. 3, Civil Code.
43
For legal effect of contracts entered into by unemancipated minors, see Gan
Tingco vs. Pabanguit, 35 Phil. 31; Ibañez vs. Rodriguez, 47 Phil. 554; Velayo vs. Al-
cantara, 47 Off. Gaz.
44
Mercado and Mercado vs. Espiritu, 37 Phil. 215; Sia Suan vs. Alcantara, 47
Off. Gaz. 4561.
45
Art. 1489, Civil Code.
46
Arts. 1425, 1426, 1427, Civil Code.
47
Arts. 120, 128, Civil Code.
48
Act No. 3424, as amended, Insurance Law.
49
37 Phil. 215.
418
ESSENTIAL REQUISITES OF CONTRACTS Art. 1327
Consent
the age of puberty and adolescence in such a way that they could
misrepresent and actually did misrepresent themselves as having
reached the age of majority, they cannot, upon reaching the age of
majority, annul the contract on the ground of minority inasmuch
as they are already in estoppel. This doctrine was reiterated in the
cases of Sia Suan vs. Alcantara50 and Hermosa vs. Zobel.51 In his
concurring and dissenting opinion in the Alcantara case, however,
Justice Padilla declared:
50
47 Off. Gaz. 4561.
51
104 Phil. 769.
52
This was true under the Spanish Civil Code. However, the New Civil Code
(Art. 1431) now provides that through estoppel, an admission or representation is
rendered conclusive upon the person making it and it cannot be denied or disproved
as against the person relying thereon.
53
The case of Young vs. Tecson was a case decided by the Court of Appeals hold-
ing that: “The theory advanced by the appellants that misrepresentation made by the
defendant as to his age estops him from denying that he was of age, or from assert-
419
Art. 1327 CONTRACTS
ing that he was under age, at the time he entered into the contract, for the breach of
which this action is brought is untenable, because under the principle of estoppel the
liability resulting from the misrepresentation has its juridical source in the capacity
of the person making the misrepresentation to bind himself. If the person making the
misrepresentation cannot bind himself by a contract, he cannot also be bound by any
misrepresentation he may have made in connection therewith.’’
54
Braganza vs. Villa Abrille, 106 Phil. 456.
420
ESSENTIAL REQUISITES OF CONTRACTS Art. 1327
Consent
of legal age, when in fact they were not, they will not later on
be permitted to excuse themselves from the fulfillment of the
obligation contracted by them, or to have it annulled.’ (Mercado,
et al. vs. Espiritu, 37 Phil. 15.) However, the Mercado case is dif-
ferent because the document signed therein by the minors spe-
cifically stated that they were of age, here, the promissory note
contained no such statement. In other words, in the Mercado
case, the minors were guilty of active misrepresentation; where-
as in this case, the minors are guilty of passive or constructive
misrepresentation. From the minor’s failure to disclose their mi-
nority, it does not follow, as a legal proposition, that they will
not be permitted there after to assert it. According to Corpus
Juris Secundum (43, p. 206), ‘mere silence when making a con-
tract as to his age does not constitute a fraud which can be made
the basis of an action for deceit. In order to hold the infant li-
able, the fraud must be actual and not constructive.’ Therefore,
the minors in the case at bar cannot be legally bound by their
signatures in the promissory note.
“They cannot, however, be absolved entirely from mon-
etary responsibility. Under the Civil Code, even if their written
contract is voidable because of non-age, they shall make resti-
tution to the extent that they may have profited by the money
they received. (Art. 1304, now Art. 1399, Civil Code.) There is
testimony that the funds were used for their support during the
Japanese occupation. Such being the case, it is but fair to hold
that they had profited to the extent of the value of such money,
which value has been established in the Ballantyne Schedule. In
October, 1944, P40 Japanese military notes were equivalent to
P1.00 of current Philippine money. Hence, they shall pay jointly
P1,666.67, plus 6% interest beginning March 7, 1949, when the
complaint was filed.”
421
Art. 1327 CONTRACTS
55
Dumaguin vs. Reynolds, 48 Off. Gaz. 3887.
56
Cui vs. Cui, 100 Phil. 913, citing Page on Contracts, Vol. 3, Sec. 2810.
422
ESSENTIAL REQUISITES OF CONTRACTS Art. 1327
Consent
“The fact that nine days after the execution of the contract,
Adriana Carillo was declared mentally incapacitated by the
trial court does not prove that she was so when she executed the
contract. After all this can perfectly be explained by saying that
her disease became aggravated subsequently.
“Our conclusion is that prior to the execution of the docu-
ment in question the usual state of Adriana Carillo was that of
being mentally capable, and consequently, the burden of proof
that she was mentally incapacitated at a specified time is upon
her who affirms said incapacity. If no sufficient proof to this ef-
fect is presented, her capacity must be presumed.’’
57
Standard Oil Co. vs. Arenas, 19 Phil. 363.
58
Standard Oil Co. vs. Arenas, 19 Phil. 363; Dumaguin vs. Reynolds, 48 Off. Gaz.
3887.
59
Standard Oil Co. vs. Arenas, 19 Phil. 363.
423
Art. 1327 CONTRACTS
60
Art. 34, Revised Penal Code.
61
Rules 92-93, New Rules of Court.
62
Art. 39, par. 2, Civil Code.
63
With regard to contracts involving paraphernal property, see Art. 140, and
with regard to those involving conjugal property, see Art. 172, Civil Code.
424
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1328-1329
Consent
are under guardianship.64 The same is also true with regard to those
suffering from civil interdiction.65 On the other hand, prodigals
and those who by reason of age, weak mind, and other similar
causes, cannot take care of themselves and manage their property,
before they are placed under judicial guardianship, are disputably
presumed to possess contractual capacity. Consequently, whether
or not they can give their consent to a contract becomes a matter of
proof. Hospitalized lepers, before they are placed under guardianship,
are, of course, not incapacitated. But once an incompetent is placed
upon guardianship, such incompetent can enter into a contract only
through his guardian; otherwise, the contract is voidable.
64
Art. 1327, Civil Code.
65
Art. 34, Revised Penal Code.
66
New provision.
67
Art. 1264, Spanish Civil Code.
425
Arts. 1328-1329 CONTRACTS
68
Act No. 2798 has extended the application of this rule to the non-Christians of
Mountain Province and Nueva Vizcaya.
69
Rep. Act No. 3872. See Porkan vs. Yatco, 70 Phil. 161; Porkan vs. Navarro, 73
Phil. 698; Madale vs. Raya, 49 Off. Gaz. 536; Miguel vs. Catalino, 26 SCRA 234; Heirs
of Lacamen vs. Heirs of Laruan, 65 SCRA 605.
70
Act No. 1956.
426
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1328-1329
Consent
427
Art. 1330 CONTRACTS
71
3 Castan, 7th Ed., p. 525.
72
Art. 1265, Spanish Civil Code.
73
Arts. 1345-1346, Civil Code. See also 3 Castan, 7th Ed., p. 330; 8 Manresa, 5th
Ed., Bk. 2, p. 393.
74
3 Castan, 7th Ed., p. 330.
75
8 Manresa, 5th Ed., Bk. 2, pp. 392-393.
428
ESSENTIAL REQUISITES OF CONTRACTS Art. 1331
Consent
76
Arts. 1330, 1345, Civil Code.
77
Art. 1266, Spanish Civil Code, in modified form.
78
8 Manresa, 5th Ed., Bk. 2, p. 395.
79
Luna vs. Linatoc, 74 Phil. 15, citing Art. 3, Civil Code, 3 Castan, 7th Ed., pp.
330-331.
429
Art. 1331 CONTRACTS
80
3 Castan, 7th Ed., pp. 331-335; 8 Manresa, 5th Ed., Bk. 2, pp. 397-405.
81
3 Castan, 7th Ed., pp. 331-332.
82
3 Castan, 7th Ed., pp. 332-333; 8 Manresa, 5th Ed., Bk. 2, pp. 397-398.
430
ESSENTIAL REQUISITES OF CONTRACTS Art. 1331
Consent
of 10 hectares shall be sold for P1,000 per hectare, and they thought
that the total price is only P5,000, there is a mistake of account; the
mistake in this case can only be corrected.83
83
8 Manresa, 5th Ed., Bk. 2, pp. 403-404. For cases illustrating mistakes account,
see Pastor vs. Nicasio, 6 Phil. 152; Aldecoa & Co. vs. Warner, Barnes & Co., 16 Phil.
23; Gutierrez Hermanos vs. Oria Hermanos,30 Phil. 491; Oquinena & Co. vs. Muer-
tegui, 32 Phil. 261.
431
Art. 1332 CONTRACTS
84
3 Castan, 7th Ed., pp. 334-335; 8 Manresa, 5th Ed., Bk. 2, p. 402.
85
New provision.
86
Report of the Code Commission, p. 136, cited in Ayola vs. Valderama Lumber
Co., CA, 49 Off. Gaz. 980.
432
ESSENTIAL REQUISITES OF CONTRACTS Art. 1332
Consent
read and write, signed with a cross a document which she thought
was merely a promise to pay certain expenses which defendant had
advanced to her in a certain law suit, but which turned out to be
an absolute deed of sale of two parcels of land and a carabao, said
document is voidable, for had she truly understood the contents
thereof, she would neither have accepted nor authenticated it by
her mark.87 Similarly, where the plaintiffs, both of whom are blind,
affixed their thumbmarks to a deed which they thought was a deed
of mortgage, but which turned out to be a deed of sale of certain
properties in favor of the defendant who is a son-in-law of one of
them, although the deed is a public document and the notary public
testified as to their due execution, since courts are given a wide
latitude in weighing the facts or circumstances in a given case and
since there exists a fiduciary relationship between the parties to the
contract, it was held that such contract is voidable.88 The same is also
true where the plaintiff had testified that he had signed a voucher
without knowing or understanding its contents. Since under Art.
1332, the burden of proving that the plaintiff had understood the
contents of the document was shifted to the defendant and he had
failed to do so, the presumption of mistake still stands unrebutted
and controlling.89
Article 1332 was intended for the protection of a party to a
contract who is at a disadvantage due to his illiteracy, ignorance,
mental weakness or other handicap. This article contemplates a
situation wherein a contract has been entered into, but the consent
of one of the parties is vitiated by mistake or fraud committed by
the other contracting party. This is apparent from the ordering of
the provisions under Book IV, Title II, Chapter 2, Section 1 of the
Civil Code, from which Article 1332 is taken. Article 1330 states
that “A contract where consent is given through mistake, violence,
intimidation, undue influence, or fraud is voidable.’’ (Hemedes vs.
Court of Appeals, 316 SCRA 348.)
In order that mistake may invalidate consent, it should refer
to the substance of the thing which is the object of the contract, or to
those conditions which have principally moved one or both parties to
enter into the contract. Fraud, on the other hand, is present when,
87
Dumasug vs. Modelo, 34 Phil. 252.
88
Trasporte vs. Beltran, CA, 51 Off. Gaz. 1434.
89
Ayola vs. Valderama Lumber Co., CA, 49 Off. Gaz. 980.
433
Arts. 1333-1334 CONTRACTS
90
New provision.
91
New provision.
92
The mistake referred to in this article seems to be the equivalent of what
Castan terms a mistake as to the nature of the contract (error in negocio) giving as
an example a contract in which one of the parties believes that he is selling the thing,
while the other thinks that he is merely leasing it. (3 Castan, 7th Ed., 335.)
434
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1335-1336
Consent
93
Report of the Code Commission, p. 136.
94
Art. 1267, Spanish Civil Code, in modified form.
95
Art. 1268, Spanish Civil Code.
96
8 Manresa, 5th Ed., Bk. 2, p. 408.
97
3 Castan, 7th Ed., p. 336.
435
Arts. 1335-1336 CONTRACTS
98
Ibid., pp. 337-338.
99
Ibid.
100
This rule, which is taken from Manresa (Vol. 8, Bk. 2, 5th Ed., p. 411), is enun-
ciated in the cases of Alarcon vs. Kasilag, CA, 40 Off. Gaz. 11th S, p. 203; De Asis vs.
Buenviaje, CA, 45 Off. Gaz. 317; Mirano vs. Mossessgeld Santiago, CA, 45 Off. Gaz.
343; Derequito vs. Dolutan, CA, 45 Off. Gaz. 1351; Valdeabella vs. Marquez, CA, 48
Off. Gaz. 719.
101
Rodriguez vs. De Leon, CA, 47 Off. Gaz. 6296.
436
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1335-1336
Consent
102
Valdeabella vs. Marquez, CA, 48 Off. Gaz. 719. To the same effect: Mirano vs.
Mossessgeld Santiago, CA, 45 Off. Gaz. 343; Phil. Trust Co. vs. Araneta, 46 Off. Gaz.
4254; Laraga vs. Bañez, 47 Off. Gaz. 696; Fernandez vs. Brownell, 51 Off. Gaz. 713.
103
Vales vs. Villa, 35 Phil. 769; Reyes vs. Zaballero, G.R. No. L-3561, May 23,
1951.
437
Arts. 1335-1336 CONTRACTS
438
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1335-1336
Consent
104
Vales vs. Villa, 35 Phil. 769. To a certain extent the doctrine of absolute judi-
cial objectivity as applied to contractual relations has been humanized by the provi-
sion of Art. 24 of the New Civil Code.
439
Arts. 1335-1336 CONTRACTS
440
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1335-1336
Consent
105
8 Manresa, 5th Ed., Bk. 2, p. 418; Rodriguez vs. De Leon, CA, 47 Off. Gaz.
6296.
441
Art. 1337 CONTRACTS
106
8 Manresa, 5th Ed., Bk. 2, p. 418.
107
Doronilla vs. Lopez, 3 Phil. 360; Martinez vs. Hongkong and Shanghai Bank,
5 Phil. 252; Jalbuena vs. Ledesma, 8 Phil. 601; Berg vs. Nat. City Bank of New York,
102 Phil. 309.
108
Berg vs. Nat. City Bank of New York, G.R. No. L-9312, Oct. 31, 1957.
442
ESSENTIAL REQUISITES OF CONTRACTS Art. 1337
Consent
109
New provision.
110
57 Am. Jur., Sec. 350, p. 258.
111
Martinez vs. Hongkong and Shanghai Bank, 15 Phil. 252.
443
Art. 1338 CONTRACTS
112
Coso vs. Fernandez Deza, 42 Phil. 595.
113
Art. 1337, Civil Code.
114
Art. 1269, Spanish Civil Code.
115
Art. 1338, Civil Code.
116
See distinctions under Art. 1171, Civil Code.
444
ESSENTIAL REQUISITES OF CONTRACTS Art. 1338
Consent
117
8 Manresa, 5th Ed., Bk. 2, pp. 240-241; Hill vs. Veloso, 31 Phil. 160; Wood-
house vs. Halili, 49 Off. Gaz. 3374.
445
Art. 1338 CONTRACTS
118
8 Manresa, 5th Ed., Bk. 2, p. 423; Eguaras vs. Great Eastern Life Ass. Co., 33
Phil. 263.
119
Ramos vs. Valencia, 47 Off. Gaz. 1978.
120
Eguaras vs. Great Eastern Life Ass. Co., 33 Phil. 263.
121
To the same effect: Musngi vs. West Coast Ins. Co., 61 Phil. 864.
446
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1339-1340
Consent
122
New provision.
123
Art. 1339, Civil Code.
124
Strong vs. Gutierrez Repide, 213 U.S. 419; 41 Phil. 947.
125
Tuazon vs. Marquez, 45 Phil. 481. To the same effect: Escudero vs. Flores, 51
Off. Gaz. 3444.
126
New provision.
127
Art. 1340, Civil Code.
447
Arts. 1339-1340 CONTRACTS
128
Azarraga vs. Gay, 52 Phil. 599. To the same effect: Songco vs. Sellner, 37 Phil.
254; Puato vs. Mendoza, 64 Phil. 457.
129
New provision.
130
Art. 1341, Civil Code.
448
ESSENTIAL REQUISITES OF CONTRACTS Art. 1342
Consent
131
New provision.
132
Art. 1342, Civil Code.
133
8 Manresa, 5th Ed., Bk. 2, p. 427; Hill vs. Veloso, 31 Phil. 160.
449
Arts. 1343-1344 CONTRACTS
promissory note and the mortgage covering the loan, she also
signed several documents. One of these documents signed by
her was promissory note of V for a loan of P3,000.00 also secured
by a mortgage on her house and lot. Several years later, she
received advice from the sheriff that her property shall be sold
at public auction to satisfy the two obligations. Immediately she
filed suit for annulment of her participation as co-maker in the
obligation contracted by V as well as of the mortgage in relation
to said obligation of V on the ground of fraud and mistake. Upon
filing of the complaint, she deposited P3,383.00 in court as
payment of her personal obligation including interests.
(a) Can be held liable for the obligation of V? Why?
(b) Was there a valid and effective consignation consid-
ering that there was no previous tender of payment made by C
to the Bank? Why?
Answer — (a) C cannot be held liable for the obligation
of V. It is crystal clear that C’s participation in V’s obligation
both as co-maker and as mortgagor is voidable not on the
ground of fraud because the Bank was not a participant in the
fraud committed by V, but on the ground of mistake. There was
substantial mistake on the part of both C and the Bank mutually
committed by them as a consequence of the fraud employed by
V. (See Rural Bank of Caloocan City vs. CA, 104 SCRA 151.)
(b) Despite the fact that there was no previous tender
of payment made directly to the Bank, nevertheless, the
consignation was valid and effective. The deposit was attached
to the record of the case and the Bank had not made any claim
thereto. Therefore, C was right in thinking that it was useless
and futile for her to make a previous offer and tender of payment
directly to the Bank. Under the foregoing circumstances, the
consignation was valid, if not under the strict provisions of the
law, under the more liberal consideration of equity. (Ibid.)
134
New provision.
450
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1343-1344
Consent
135
Art. 1270, Spanish Civil Code.
136
8 Manresa, 5th Ed., Bk. 2, p. 426.
451
Arts. 1343-1344 CONTRACTS
452
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1343-1344
Consent
dicative of the fact that the defendant was led to the belief that
plaintiff had the exclusive franchise, but that the same was to
be secured for or transferred to the partnership. The plaintiff
no longer had the exclusive franchise, or the option thereto, at
the time the contract was perfected. But while he had already
lost his option thereto (when the contract was entered into), the
principal obligation that he assumed or undertook was to secure
said franchise for the partnership, as the bottler and distributor
for the Mission Dry Corporation. We declare, therefore, that if
he was guilty of a false representation, this was not the causal
consideration, or the principal inducement, that led defendant
to enter into the partnership agreement. But, on the other hand,
this supposed ownership of an exclusive franchise was actual-
ly the consideration or price plaintiff gave in exchange for the
share of 30% granted him in the net profits of the partnership
business. Defendant agreed to give plaintiff 30% share in the
net profits because he was transferring his exclusive franchise
to the partnership.
“We conclude from the above that while the representation
that plaintiff had the exclusive franchise did not vitiate
defendant’s consent to the contract, it was used by plaintiff to
get from defendant a share of 30% of the net profits; in other
words, by pretending that he had the exclusive franchise and
promising to transfer it to defendant, he obtained the consent
of the latter to give him (plaintiff) a big slice in the net profits.
This is the dolo incidente defined in Article 1270 (now Art. 1344)
of the Civil Code, because it was used to get the other party’s
consent to a big share in the profits, an incidental matter in the
agreement.
“The last question for us to decide is that of damages, dam-
ages that plaintiff is entitled to receive because of defendant’s
refusal to form the partnership, and damages that defendant is
also entitled to collect because of the falsity of plaintiff’s repre-
sentation. Under Article 1106 (now Art. 2200) of the Civil Code,
the measure of damages is the actual loss suffered and the prof-
its reasonably expected to be received embraced in the terms
daño emergente and lucro cesante. Plaintiff is entitled under the
terms of the agreement to 30% of the net profits of the business.
Against this amount of damages, we must set off the damage
defendant suffered by plaintiff’s misrepresentation that he had
the exclusive franchise, by which misrepresentation he obtained
a very high percentage of share in the profits.’’
453
Arts. 1345-1346 CONTRACTS
137
New provision.
138
Art. 1270, Spanish Civil Code.
139
Rodriguez vs. Rodriguez, 28 SCRA 229; Carrantes vs. Court of Appeals, 76
SCRA 514.
454
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1345-1346
Consent
455
Arts. 1347-1348 CONTRACTS
of the Court that contracts of adhesion are not invalid per se. On
numerous occasions, the Supreme Court has upheld the binding
effects of such contracts.
Art. 1347. All things which are not outside the commerce
of men, including future things, may be the object of a
contract. All rights which are not intransmissible may also
be the object of contracts.
No contract may be entered into upon future inheritance
except authorized by law.
All services which are not contrary to law, morals, good
customs, public order or public policy may likewise be the
object of a contract.142
Art. 1348. Impossible things or services cannot be the
object of contracts.143
140
8 Manresa, 5th Ed., Bk. 2, pp. 430-431.
141
Adopted from the definition given by Castan (Vol. 3, 7th Ed., p. 243).
142
Art. 1271, Spanish Civil Code, in modified form.
143
Art. 1272, Spanish Civil Code.
456
ESSENTIAL REQUISITES OF CONTRACTS Art. 1349
Object of Contract
144
Art. 1273, Spanish Civil Code.
145
3 Castan, 7th Ed., pp. 342-343; 8 Manresa, 5th Ed., Bk. 2, pp. 431-432.
146
Art. 1347, par. 1, Civil Code.
147
Ibid.
148
Ibid.
149
Art. 1348, par. 3, Civil Code.
150
Ibid.
151
Art. 1349, Civil Code.
457
Art. 1349 CONTRACTS
two conditions must concur. In the first place, the thing, right or
service should be susceptible of appropriation; and in the second
place, it should be transmissible from one person to another.152 Those
things, rights or services which do not possess these conditions or
characteristics are outside the commerce of men, and therefore,
cannot be the object of contracts. These include: (1) those things
which are such by their very nature, such as common things like
the air or the sea, sacred things, res nullius, and property belonging
to the public domain; (2) those which are made such by special
prohibitions established by law, such as poisonous substances,
drugs, arms, explosives, and contrabands; and (3) those rights
which are intransmissible because either they are purely personal
in character, such as those arising from the relationship of husband
and wife, like jus consortium, or from the relationship of paternity
and filiation, like patria potestas, or they are honorary or political
in character, such as the right to hold a public office and the right of
suffrage.153
Thus, in this jurisdiction, it has been held that communal
things, such as public plazas, sidewalks, streets, rivers, fountains
and other things for public use cannot be sold or leased because they
are by their very nature outside the commerce of men.154
Idem; Existence of object. — The most evident and
fundamental requisite in order that a thing, right or service may
be the object af a contract is that it should be in existence at the
moment of the celebration of the contract, or at least, it can exist
subsequently or in the future. Hence, according to the first sentence
of Art. 1347, even future things may be the object of contracts.
Idem; id. — Things which have perished. — In principle,
these things cannot be the object of contracts because they are
inexistent. The rule declared in Art. 1493 of the Civil Code to the
effect that “if at the time the contract of sale is perfected, the thing
which is the object of the contract has been entirely lost, the contract
shall be without any effect’’ can, therefore, be generalized.155
152
6 Sanchez Roman 1281.
153
8 Manresa, 5th Ed., Bk. 2, pp. 441-443.
154
Mun. of Cavite vs. Rojas, 30 Phil. 602; Muyot vs. de la Fuente, CA, 48 Off.
Gaz. 4866.
155
8 Manresa, 5th Ed., Bk. 2, p. 432.
458
ESSENTIAL REQUISITES OF CONTRACTS Art. 1349
Object of Contract
156
See also Arts. 1461 and 1462, Civil Code.
157
8 Manresa, 5th Ed., Bk. 2, p. 433. See Art. 1461, Civil Code.
158
This rule is complemented by Arts. 905 and 2035, No. 6, Civil Code.
159
8 Manresa, 5th Ed., Bk. 2, p. 437.
160
Arroyo vs. Gerona, 58 Phil. 226. To the same effect: Tinsay vs. Yusay, 47 Phil.
639; Tordilla vs. Tordilla, 60 Phil. 162; Reyes vs. Reyes, CA, 45 Off. Gaz. 1836.
161
Rivero vs. Serrano, 48 Off. Gaz. 642.
459
Art. 1349 CONTRACTS
after the death of the decedent, anyone of the co-heirs may enter into
a contract with respect to the inheritance even before partition has
been effected. This is so because of the principle announced in Art.
777 of the Code that the rights to the succession are transmitted at
the moment of the death of the decedent.162
The following case, however, provides an interesting study
of the applicability or inapplicability of the rule enunciated in the
second paragraph of Art. 1347:
162
Osorio vs. Osorio, 41 Phil. 53; Ibarle vs. Po, 49 Off. Gaz. 1836.
460
ESSENTIAL REQUISITES OF CONTRACTS Art. 1349
Object of Contract
163
Art. 1409, Nos. 3 and 5, Civil Code.
461
Art. 1349 CONTRACTS
164
8 Manresa, 5th Ed., Bk. 2, pp. 433-434.
165
For a detailed discussion of Art. 1349, see Manresa, Vol. 8, Bk. 2, 5th Ed.,
pp. 444-448.
462
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1350-1351
Cause of Contracts
166
Liebenow vs. Phil. Vegetable Co., 39 Phil. 63.
167
8 Manresa, 5th Ed., Bk. 2, pp. 445-446.
168
Art. 1274, Spanish Civil Code.
169
New provision.
463
Arts. 1350-1351 CONTRACTS
170
8 Manresa, 5th Ed., Bk. 2, pp. 445-446.
171
3 Castan, 7th Ed., p. 347, citing 2 Planiol, 1949 Ed., Sec. 279. These definitions
have been cited with approval in General Enterprises, Inc. vs. Lianga Bay Logging
Co., 11 SCRA 733.
172
Art. 1350, Civil Code.
173
5 Tolentino, Civil Code, 1956 Ed., p. 486.
174
3 Castan, 7th Ed., p. 346.
464
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1350-1351
Cause of Contracts
the obligation of the vendee, while the cause of the obligation of the
vendee is the obligation of the vendor.175 The objects of the contract,
on the other hand, are the thing which is sold and the price which
is paid.176 This view, which is upheld by Manresa and Castan, may
be illustrated by an example. If A sells, an automobile to B for
P20,000, delivery and payment to be made at some specified date,
the cause of the contract, as far as A is concerned, is the promise of
B to pay him P20,000, while the cause, as far as B is concerned, is
the promise of A to deliver the automobile to him. The objects of the
contract, on the other hand, are the automobile and the purchase
price of P20,000. Dr. Tolentino, however, while concurring with the
opinion of Manresa and Castan that as to the vendor the cause is the
obligation of the vendee to pay the price, and as to the vendee it is the
obligation of the vendor to deliver the automobile, maintains that in
the example given, the object is the automobile itself because it is the
starting point of agreement, without which the negotiations would
never have begun. Consequently, the object of an onerous contract
is the same as to both parties, although the cause is different.177 Dr.
Padilla, on the other hand, contends that in bilateral contracts like
sale, the thing sold is the object, while the price paid is the cause.178
We believe that the view of Dr. Tolentino is the most logical.
Idem; Distinguished from motives. — Neither must the
cause be confused with the motives of the parties in entering into a
contract.179
The motives which impel one to a sale or purchase are not
always the consideration of the contract as the term is understood
in law. One may purchase an article not because it is cheap, for in
fact it may be dear, but because he may have some particular use
to which it may be put, because of a particular quality which the
article has, or the relation which it will bear, to other articles with
which it will be associated. These circumstances may constitute the
motive which induces the purchase, but the real consideration of
the purchase (as far as the vendor is concerned) is the money which
175
Dualde, “Concepto de la causa de los contratos,’’ cited by Castan, Vol. 3, 7th
Ed., p. 450.
176
8 Manresa, 5th Ed., Bk. 2, p. 450.
177
4 Tolentino, Civil Code, 1956 Ed., p. 485.
178
Padilla, Civil Code, 1956 Ed., p. 553.
179
Art. 1351, Civil Code.
465
Arts. 1350-1351 CONTRACTS
passed.180 As Castan says: “In the case of a contract of sale, the cause
as far as the vendor is concerned, is always the acquisition of the
purchase price, and as far as the vendee is concerned, it is always
the acquisition of the thing; the motives of the contracting parties,
on the other hand, are as different or complex and as capable of
infinite variety as the individual circumstances which may move
men to acquire things or to make money.’’181
Consequently, the cause of the contract and the motives of the
contracting parties may be distinguished from each other in the
following ways:
(1) While the cause is the direct or most proximate reason of
a contract, the motives are the indirect or remote reasons;
(2) While the cause is the objective or juridical reason of
a contract, the motives are the psychological or purely personal
reasons;
(3) While the cause is always the same, the motives differ for
each contracting party;182 and
(4) While the legality or illegality of the cause will affect the
existence or validity of the contract, the legality or illegality of the
motives will not affect the existence of the contract.
There are times, however, when the boundary line between
motive and cause disappears altogether. The motive may be regarded
as causa when the contract is conditioned upon the attainment of the
motive of either contracting party. In other words, motive becomes
causa when it predetermines the purpose of the contract.
The best examples are the decided cases. Thus —
(1) Where a married man of mature years donated a parcel
of land to a girl of sixteen subject to the condition that the latter
shall cohabit with him, and such condition is accepted, it is clear
that the donation is conditioned upon the attainment of the motive
of the donor; in other words, it predetermines the purpose of the
contract. Thus considered, the conveyance is clearly predicated upon
an illegal causa. Consequently, it is void. Therefore, under what is
180
De Jesus vs. Urrutia & Co., 33 Phil. 171.
181
3 Castan, 7th Ed., pp. 346-347.
182
Ibid.
466
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1350-1351
Cause of Contracts
now Art. 1412 of the New Civil Code, there can be no recovery of
what has already been delivered. (Liguez vs. CA, 102 Phil. 577.)
(2) Where a mother sold two fishponds to a daughter
and the latter, in turn, resold the same fishponds to her and her
stepfather, as a consequence of which said fishponds were converted
into conjugal properties, it is clear that the motive or purpose is
to circumvent the law against donations between spouses (Art.
133, CC). This motive or purpose is the illegal causa rendering
the contract void. Consequently, the rule of in pari delicto non
oritur actio, now enunciated in Art. 1412 of the New Civil Code, is
applicable. (Rodriguez vs. Rodriguez, 20 SCRA 908.)
(3) Where a Filipino leased a parcel of land to an alien for 99
years with an option to buy the property within 50 years, provided
that the latter shall become a Filipino citizen, it is clear that the
motive or purpose of the arrangement, which has resulted in the
virtual transfer of ownership to the lessee, is to circumvent the
Constitutional prohibition of transfer of lands to aliens. This motive
or purpose is the illegal causa rendering the contract void. However,
it will be the provision of Art. 1416 and not of Art. 1412, of the New
Civil Code that will apply. Because of public policy, the lessor will be
allowed to recover the property. (Phil. Banking Corp. vs. Lui She, 21
SCRA 52.)
467
Arts. 1350-1351 CONTRACTS
183
Enriguez de Cavada vs. Diaz, 37 Phil. 982; Phil. Banking Corp. vs. Lui She,
102 Phil. 577.
468
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1350-1351
Cause of Contracts
export logs to Korea and Europe at the best market price obtainable
on condition that it would pay the latter a commission of 13% of the
gross value of the logs, it was held that for the former the cause of
the agreement is the distribution of its logs in the areas agreed upon
which the latter undertook to accomplish, whereas for the latter
the cause is its commitment to sell or export the logs for onerous
consideration.184
184
General Enterprises, Inc. vs. Lianga Bay Co., 11 SCRA 733.
185
China Banking Corp. vs. Lichauco, 46 Phil. 460.
186
National Bank vs. Maza, 48 Phil. 207; Acuna vs. Veloso, 50 Phil. 241. But see
Standard Oil Co. vs. Arenas, 19 Phil. 363.
187
Fisher vs. Robb, 69 Phil. 101.
469
Arts. 1350-1351 CONTRACTS
188
Villaroel vs. Estrada, 71 Phil. 14. Strictly speaking, the moral obligation in
this case is a natural obligation (Arts. 1423, et seq., Civil Code), as distinguished from
a purely moral obligation, such as that referred to in the case of Fisher vs. Robb.
470
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1350-1351
Cause of Contracts
189
See Art. 726, Civil Code.
471
Arts. 1352-1355 CONTRACTS
190
Art. 1275, Spanish Civil Code, in modified form.
191
Art. 1276, Spanish Civil Code.
192
Art. 1277, Spanish Civil Code.
193
New provision.
194
3 Castan, 7th Ed., pp. 348-351.
472
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1352-1355
Cause of Contracts
195
Arts. 1352, 1409, Nos. 1, 2, 3, Civil Code.
196
Art. 1353, Civil Code.
197
Ocejo, Perez & Co. vs. Flores, 40 Phil. 921; Onejera vs. Iga Sy, 76 Phil. 580.
198
De Belen vs. Coll. of Customs, 46 Phil. 241; Gallon vs. Gayares, 53 Phil. 43;
Escutin vs. Escutin, 60 Phil. 922; Gonzales vs. Trinidad, 67 Phil. 682; Navarro vs.
Diego, CA, 40 Off. Gaz. 2106.
199
Puato vs. Mendoza, 64 Phil. 457.
200
76 SCRA 514.
473
Arts. 1352-1355 CONTRACTS
201
Azarraga vs. Rodriguez, 9 Phil. 637; Eliot vs. Montemayor, 9 Phil. 960; Stand-
ard Oil Co. vs. Arenas, 19 Phil. 211; Dumaguin vs. Reynolds, 48 Off. Gaz. 3887.
202
Bhen, Meyer & Co. vs. Davis, 37 Phil. 431. See Art. 1403, No. 2, Civil Code.
474
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1352-1355
Cause of Contracts
from the provision of Art. 1355, which states that lesion or inadequacy
of cause, except in cases specified by law, shall not invalidate a
contract, unless there has been fraud, mistake or undue influence.
This provision (which is new) reiterates the doctrine enunciated by
the Supreme Court in several notable cases.203 However, if it can be
established that the lesion or inadequacy of the cause was due to
fraud, mistake or undue influence, such fact will render the contract
voidable.204
Despite the fact that lesion or inadequacy of cause, in itself, can
not render the contract inexistent or void under Art. 1355 or voidable
under Art. 1330, the party who has suffered the lesion or damage is
not left without a remedy. There is always the possibility that the
contract may be rescissible in accordance with the provisions of Art.
1381 of the Code, in which case he can file an action for rescission.
Idem; Effect of unlawful cause. — According to Art. 1352 of
the Code, the cause is unlawful when it is contrary to law, morals,
good customs, public order or public policy. According to the same
article, if a contract has an unlawful cause, it shall not produce any
effect whatsoever; in other words it is void from the very beginning.205
Thus, it has been held that where the cause or consideration for
the sale of a certain property is no other than the accumulated
usurious interests which the vendor-debtor has not yet paid, the
sale is void because of the illegality of the cause or consideration.206 It
has also been held that a contract affecting the course of a criminal
prosecution is invalid, because such a contract would be manifestly
contrary to public policy and the due administration of justice.207 In
the words of the Supreme Court, “in the interest of the public it is
of the utmost importance that criminals should be prosecuted and
that all criminal proceedings should be instituted and maintained
in the form and manner prescribed by law. To permit an offender to
203
Asky vs. Cosalan, 46 Phil. 179; Gabriel vs. Mateo, 71 Phil. 497; Garcia vs.
Manas, 45 Off. Gaz. 1815.
204
See Arts. 1330, et seq., Civil Code; see also Alsua-Betts vs. Court of Appeals,
92 SCRA 332, 368.
205
See Art. 1409, No. 1, Civil Code.
206
Mulet vs. People of the Phil., 73 Phil. 63. But see Briones vs. Cammayo, 41
SCRA, 404; see also comments under Art. 1420.
207
Arroyo vs. Berwin, 36 Phil. 386; Velez vs. Ramas, 40 Phil. 787; Navarro vs.
Yuan, CA, 40 Off. Gaz. 1675; Reyes vs. Gonzales, 45 Off. Gaz. 381; Monteney vs.
Gomez, 104 Phil. 1059.
475
Arts. 1352-1355 CONTRACTS
“We are of the opinion that the trial court was correct in
the conclusion that an action cannot be maintained upon this
contract. In our opinion, the consideration for this agreement is
clearly illicit, which fact is apparent on the face of the contract,
and the case is accordingly governed by Art. 1275 (now Art.
1352) of the Civil Code.
“There has been no period since contract law reached
the state of consciousness, when the maxim ex turpi causa
non oritur actio was not recognized. A contract based upon
an unlawful object is and always has been void ab initio by
the common law, by the civil law, moral law, and all laws
whatsoever. It is immaterial whether the illegal character of
the contract is revealed in the matter of the consideration, in
the promise as expressed in the agreement or in the purpose
which the agreement, though legal in expression, is intended
to accomplish. If the illegality lurks in any element, or even
subsists exclusively in the purpose of the parties, it is fatal to
the validity of the contract.
“By the universal consensus of judicial opinion in all ages
it has been considered contrary to public policy to allow parties
to make agreements designed to prevent or stifle prosecutions
for crime. It is self-evident that the law cannot sanction
an engagement which is subversive of human society. The
machinery for the administration of justice cannot be used to
promote an unlawful purpose.’’
208
Arroyo vs. Berwin, 36 Phil. 386.
209
40 Phil. 787.
476
ESSENTIAL REQUISITES OF CONTRACTS Arts. 1352-1355
Cause of Contracts
210
Gonzales vs. Trinidad, 67 Phil. 862; Navarro vs. Diego, CA, 40 Off. Gaz. 2106.
477
Arts. 1352-1355 CONTRACTS
211
Liguez vs. Court of Appeals, 102 Phil. 577; Rodriguez vs. Rodriguez, 20 SCRA
908; Philippine Banking Corp. vs. Lui She, 21 SCRA 52.
212
Art. 1345, Civil Code.
213
Art. 1346, Civil Code.
478
CHAPTER 3
FORMS OF CONTRACTS
1
Art. 1278, Spanish Civil Code, in modified form.
2
Fernandez vs. De la Rosa, 1 Phil. 671; Thunga Chiu vs. Que Bentec, 2 Phil. 561.
3
Gutierrez Hnos. vs. Orense, 28 Phil. 571; Del Castillo vs. Robinson, CA, 44 Off.
Gaz. 4981.
4
Arroyo vs. Azur, 76 Phil. 493.
5
Duran vs. Cecilio, CA, 43 Off. Gaz. 2237; Hernandez vs. Andal, 44 Off. Gaz.
2672.
479
Art. 1356 CONTRACTS
6
Ibid.
7
Report of the Code Commission, pp. 137-138.
480
FORMS OF CONTRACTS Art. 1356
481
Art. 1357 CONTRACTS
8
Sec. 22, Act No. 1147; Art. 1581; Civil Code.
9
Arts. 1403, et seq., Civil Code.
482
FORMS OF CONTRACTS Art. 1358
each other to observe that form, once the contract has been
perfected. This right may be exercised simultaneously with
the action upon the contract.10
Art. 1358. The following must appear in a public docu-
ment:
(1) Acts and contracts which have for their object the
creation, transmission, modification or extinguishment of
real rights over immovable property; sales of real property
or of an interest therein are governed by Articles 1403, No. 2
and 1405;
(2) The cession, repudiation or renunciation of heredi-
tary rights or of those of the conjugal partnership of gains;
(3) The power to administer property, or any other
power which has for its object an act appearing or which
should appear in a public document, or should prejudice a
third person;
(4) The cession of actions or rights proceeding from an
act appearing in a public document.
All other contracts where the amount involved exceeds
five hundred pesos must appear in writing, even a private
one. But sales of goods, chattels or things in action are gov-
erned by Articles 1403, No. 2, and 1405.11
10
Art. 1279, Spanish Civil Code, in modified form.
11
Art. 1280, Spanish Civil Code, in modified form.
483
Art. 1358 CONTRACTS
12
Thunga Chiu vs. Que Bentec, 2 Phil. 261; Bian Hing vs. Tan Bomping, 48 Phil.
253; Escueta vs. Pando, 76 Phil. 256; Dauden-Hernaez vs. De los Angeles, 27 SCRA
1276.
13
Doliendo vs. Depino, 12 Phil. 758; Dievas vs. Acuña, 16 Phil. 447; Hawaiian-
Philippine Co. vs. Hernaez, 45 Phil. 760.
14
Thunga Chiu vs. Que Bentec, 2 Phil. 251; Soriano vs. Cortez, 8 Phil. 459; Conlu
vs. Araneta, 15 Phil. 387; Osorio vs. Cortez, 24 Phil. 653.
15
Solis vs. Barroso, 53 Phil. 913.
16
Peyer vs. Peyer, 77 Phil. 366.
17
Rodriguez vs. Pamintuan, 37 Phil. 876.
18
Art. 1357, Civil Code.
484
FORMS OF CONTRACTS Art. 1358
der them the execution of the required document must precede the
determination of the other obligations derived from the contract.19
19
Manalo vs. De Mesa, 25 Phil. 495.
485
Art. 1358 CONTRACTS
486
CHAPTER 4
REFORMATION OF INSTRUMENTS
1
New provision.
2
Art. 1359, par. 1, Civil Code.
487
Art. 1359 CONTRACTS
3
Ibid.
4
Garcia vs. Bisaya, 97 Phil. 609. To the same effect: Ongsiaco vs. Ongsiaco, 101
Phil. 1196.
5
Report of the Code Commission, p. 56.
488
REFORMATION OF INSTRUMENTS Arts. 1360-1365
6
Art. 1359, par. 2, Civil Code.
7
Garcia vs. Bisaya, 97 Phil. 609.
8
New provision.
9
New provision. For illustrative cases see Philippine Sugar Estate Development
Co. vs. Gov’t. of P.I., 247 U.S. 385; Bank of the P.I. vs. Fidelity and Surety Co., 51
Phil. 57; Jardenil vs. Solas, 73 Phil. 626; De la Cruz vs. Del Pilar, 95 Phil. 444.
10
New provision. See Ong Chua vs. Carr, 53 Phil. 975.
11
New provision.
12
New provision.
489
Arts. 1366-1369 CONTRACTS
13
New provision. See Aquino vs. Deala, 63 Phil. 582; Marquez vs. Valencia, 77
Phil. 782.
14
New provision.
15
New provision.
16
New provision.
490
REFORMATION OF INSTRUMENTS Arts. 1366-1369
491
Arts. 1366-1369 CONTRACTS
492
REFORMATION OF INSTRUMENTS Arts. 1366-1369
493
Arts. 1366-1369 CONTRACTS
494
CHAPTER 5
INTERPRETATION OF CONTRACTS
1
Art. 1281, Spanish Civil Code.
2
Art. 1282, Spanish Civil Code.
3
Kasilag vs. Rodriguez, 69 Phil. 317. To the same effect: Manila Engineering Co.
vs. Cranston, 45 Phil. 842; Roman vs. Asia Banking Corp., 46 Phil. 705; Valdez vs.
Sibal, 46 Phil. 930; National Bank vs. Paez, 54 Phil. 393; Abella vs. Gonzaga, 56 Phil.
132; Acosta vs. Llacuna, 59 Phil. 540; H.E. Heacock Co. vs. Buntal Manufacturing
Co., 66 Phil. 245; Jose vs. Veloso, 67 Phil. 191; Marquez vs. Valencia, 44 Off. Gaz. 895.
495
Arts. 1370-1371 CONTRACTS
4
Nielsen & Co. vs. Lepanto Consolidated Mining Co., 18 SCRA 1040.
496
INTERPRETATION OF CONTRACTS Arts. 1370-1371
of its stipulation shall control. The contract is the law between the
parties and when the words of the contract are clear and can easily
be understood, there is no room for contruction (Olivares and Robles
vs. Sarmiento, G.R. 158384, June 12, 2008).
Idem; How to judge intention. — In order to judge the in-
tention of the contracting parties, their contemporaneous and subse-
quent acts shall be principally considered. This is, of course, without
prejudice to the consideration of other factors as fixed or determined
by the other rules of interpretation mentioned in the Civil Code and
in the Rules of Courts. Hence, as a general rule, documents are in-
terpreted in the precise terms in which they are expressed, but the
courts, in the exercise of their sound discretion, are called upon to
admit direct and simultaneous circumstantial evidence necessary
for their interpretation with the purpose of making the true inten-
tion of the parties prevail.5 One pattern is to ascertain the contempo-
raneous and subsequent acts of the contracting parties in relation to
the transaction under consideration. Thus, where there is evidence
regarding the intention of the parties to extend the contract equiva-
lent to the period of suspension caused by the war and the parties
understood the suspension to mean extension, it was held that the
suspension of the agreement means the extension of the same for a
period equivalent to the suspension.6
5
Aves vs. Orillenedo, 70 Phil. 262, citing Arts. 1370 and 1371 of the Civil Code.
To the same effect: Atlantic Gulf Co. vs. Insular Government, 10 Phil. 166; Figueras
vs. Rocha, 13 Phil. 504; Tanido vs. Jumaoan, 17 Phil. 335; Soler vs. Chesley, 43 Phil.
529; Kidney vs. Carter, 43 Phil. 953; Rivero vs. Rabe, 54 Phil. 982; Gonzales vs. La
Previsora, 74 Phil. 165.
6
Nielsen & Co. vs. Lepanto Consolidated Mining Co., 18 SCRA 1040.
497
Arts. 1372-1377 CONTRACTS
7
Art. 1283, Spanish Civil Code.
8
Art. 1284, Spanish Civil Code.
9
Art. 1285, Spanish Civil Code.
10
Art. 1286, Spanish Civil Code.
11
Art. 1287, Spanish Civil Code.
12
Art. 1288, Spanish Civil Code.
498
INTERPRETATION OF CONTRACTS Arts. 1378-1379
13
Art. 1289, Spanish Civil Code.
14
New provision. The provisions of Rule 123 of the Rules of Court referred to are
Secs. 58-67, now Secs. 8-17, Rule 130, New Rules of Court.
499
CONTRACTS
CHAPTER 6
RESCISSIBLE CONTRACTS
1
Report of the Code Commission, pp. 138-140.
500
RESCISSIBLE CONTRACTS
501
Art. 1380 CONTRACTS
4. As to susceptibility of ratification:
(a) The first are not susceptible of ratification;
(b) The second are susceptible of ratification;
(c) The third are susceptible of ratification;
(d) The fourth are not susceptible of ratification.
5. As to who may assail contracts:
(a) The first maybe assailed not only by a contracting
party but even by a third person who is prejudiced or damaged
by the contract;
(b) The second may be assailed only by a contracting
party;
(c) The third may be assailed only by a contracting
party;
(d) The fourth may be assailed not only by a contracting
party but even by a third person whose interest is directly
affected.
6. As to how contracts may be assailed:
(a) The first may be assailed directly only, and not
collaterally;
(b) The second may be assailed directly or collaterally;
(c) The third may be assailed directly or collaterally;
(d) The fourth may be assailed directly or collaterally.
2
Art. 1290, Spanish Civil Code.
3
Report of the Code Commission, p. 139.
502
RESCISSIBLE CONTRACTS Art. 1380
4
Borja vs. Addison, 44 Phil. 895.
5
8 Manresa, 5th Ed., Bk. 2, p. 545.
503
Art. 1380 CONTRACTS
504
RESCISSIBLE CONTRACTS Art. 1381
(now Art. 1385) refers and which takes place only in the cases
mentioned in the preceding Articles, 1291 and 1292 (now Arts.
1381 and 1382). Rescission, in the light of these provisions, is
a relief which the law grants, on the premise that the contract
is valid, for the protection of one of the contracting parties and
third persons from all injury and damage that the contract may
cause, or to protect some incompatible and preferential right
created by the contract. Article 1295 (now Art. 1385) refers to
contracts that are rescissible in accordance with law in the cases
expressly fixed thereby, but it does not refer to contracts that
are rescinded by mutual consent and for the mutual convenience
of the contracting parties. The rescission in question was not
originated by any of the causes specified in Articles 1291 and
1292 (now Arts. 1381 and 1382), nor is it any relief for the
purposes sought by these articles. It is simply another contract
for the dissolution of a previous one, and its effects, in relation
to the contract so dissolved, should be determined by the
agreement made by the parties, or by the application of other
legal provisions, but not by Article 1295 (now Art. 1385), which
is not applicable.’’6
6
To the same effect: Luneta Motor Co. vs. Richey, CA, 39 Off. Gaz. 1101.
7
Art. 1291, Spanish Civil Code, in modified form.
505
Art. 1382 CONTRACTS
8
Art. 1292, Spanish Civil Code.
9
Art. 1281, No. 1, Civil Code.
10
See Rules 95-96, New Rules of Court.
11
Art. 326, Civil Code.
12
Sec. 1, Rule 95, New Rules of Court.
13
Arts. 1403, No. 1, and 1317, Civil Code.
14
Sec. 1, et seq., Rule 96, New Rules of Court. See 2 Moran, 1957 Ed., p. 506.
506
RESCISSIBLE CONTRACTS Art. 1382
15
Art. 1381, No. 2, Civil Code.
16
Art. 1386, Civil Code.
17
Art. 382, Civil Code.
18
Art. 1381, Nos. 1 and 2, Civil Code.
19
Ibid.
20
Art. 1386, Civil Code.
21
Art. 1383, Civil Code.
22
Art. 1385, par. 1, Civil Code.
23
Art. 1385, par. 2, Civil Code.
24
Art. 1385, par. 3, Civil Code.
507
Art. 1382 CONTRACTS
25
Art. 1381, No. 3, Civil Code.
26
3 Castan, 7th Ed., p. 422.
27
Art. 1385, par. 2, Civil Code.
28
Art. 1385, par. 3, Civil Code.
508
RESCISSIBLE CONTRACTS Art. 1382
29
Art. 1381, No. 4, Civil Code.
30
8 Manresa, 5th Ed., Bk. 2, p. 558.
509
Art. 1382 CONTRACTS
31
Ibid., p. 561.
32
Under Sec. 70 of the Insolvency Law (Act No. 1956), any payment, pledge,
mortgage, conveyance, sale, assignment or transfer of property made by an insolvent
within one month before the filing of the petition in insolvency by or against him, is
void, except when made for a valuable consideration and in good faith.
33
8 Manresa, 5th Ed., Bk. 2, p. 562.
34
Ibid., p. 536. This is, of course, without prejudice to the provisions of the Civil
Code regarding preference of credits. See Arts. 2241, et seq., Civil Code.
35
Art. 1381, No. 5, Civil Code.
510
RESCISSIBLE CONTRACTS Art. 1383
36
Art. 1294, Spanish Civil Code.
37
Art. 1383, Civil Code.
38
Art. 1177, Civil Code.
39
Goquiolay vs. Sycip, 9 SCRA 663.
40
Regalado vs. Luchsinger & Co., 5 Phil. 625; Guash vs. Espiritu, 11 Phil. 184;
Honrado vs. Mercayda, CA, 49 Off. Gaz. 1492.
41
3 Castan, 7th Ed., p. 433.
511
Art. 1384 CONTRACTS
42
Concepcion vs. Sta. Ana, 87 Phil. 787. The opinion of Manresa quoted here is
found in Vol. 8, Bk. 2, 5th Ed., pp. 555-556. See Art. 221, No. 4, Civil Code.
43
New provision.
512
RESCISSIBLE CONTRACTS Art. 1385
was not found in the old Code, is in accordance with the doctrine
enunciated by the Supreme Tribunal of Spain on December 10, 1904,
to the effect that a contract in fraud of creditors may be partially
rescinded to an extent which is sufficient to satisfy the damage
caused to the creditor.44
44
8 Manresa, 5th Ed., Bk. 2, p. 572.
45
Art. 1295. Spanish Civil Code.
46
8 Manresa, 5th Ed., Bk. 2, p. 578.
513
Art. 1385 CONTRACTS
47
Uy Soo Lim vs. Tan Unchuan, 38 Phil. 522.
48
Arts. 543, et seq., Civil Code.
49
8 Manresa, 5th Ed., Bk 2, pp. 577-578.
50
Gov’t. of the P.I. vs. Wagner, 54 Phil. 132.
51
Art. 559, Civil Code.
514
RESCISSIBLE CONTRACTS Art. 1385
52
8 Manresa, 5th Ed., Bk 2, pp. 379-380, quoted by the Supreme Court in Cord-
evero vs. Villaruz, 46 Phil. 473, and in Gatchalian vs. Manalo, 68 Phil. 608.
53
Cordevero vs. Villaruz, 46 Phil. 473.
515
Art. 1385 CONTRACTS
54
From this case, it is clear that when the law speaks of “third persons,” it refers
not only to subsequent transferees who are strangers to the contract which is sought
to be rescinded, but even to the immediate transferees who are not strangers to the
contract.
55
Art. 1385, par. 3, Civil Code.
516
RESCISSIBLE CONTRACTS Arts. 1386-1388
56
8 Manresa, 5th Ed., Bk. 2, p. 582.
57
Art. 1388, par. 1, Civil Code.
58
Art. 1296, Spanish Civil Code, in modified form.
59
Art. 1297, Spanish Civil Code, in modified form.
60
Art. 1298, Spanish Civil Code, in modified form.
517
Arts. 1386-1388 CONTRACTS
61
Art. 1387, par. 1, Civil Code.
62
Art. 1387, par. 2, Civil Code.
63
Regalado vs. Luchsinger & Co., 5 Phil. 25. To the same effect: see Cabaliw vs.
Sadorra, 64 SCRA 310.
64
Bachrach vs. Peterson, 7 Phil. 571. To the same effect: Panlileo vs. Victorio, 36
Phil. 706; Saavedra vs. Martinez, 68 Phil. 676; Contreras vs. China Banking Corp.,
76 Phil. 709.
65
Manila Mercantile Co. vs. Flores, 50 Phil. 759.
518
RESCISSIBLE CONTRACTS Arts. 1386-1388
519
Arts. 1386-1388 CONTRACTS
520
RESCISSIBLE CONTRACTS Arts. 1386-1388
521
Arts. 1386-1388 CONTRACTS
522
RESCISSIBLE CONTRACTS Arts. 1386-1388
and alleged that Civil Case 449 of the Court of First Instance
of Nueva Vizcaya was decided in his favor where in truth there
was no such decision because the proceedings in said case
were interrupted by the last world war. Such conduct of Sotero
Sadorra reveals, as stated by the lower court, an “utter lack of
sincerity and truthfulness” and belies his pretensions of good
faith.
On the part of the transferee, he did not present satis-
factory and convincing evidence sufficient to overthrow the
presumption and evidence of a fraudulent transaction. His is
the burden of rebutting the presumption of fraud established
by law, and having failed to do so, the fraudulent nature of the
conveyance in question prevails.
The decision of the Court of Appeals makes mention of Art.
1413 of the old Civil Code (now Art. 166 of the New Civil Code)
which authorizes the husband as administrator to alienate and
bind by onerous title the property of the conjugal partnership
without the consent of the wife, and by reason thereof concludes
that petitioner Isidora Cabaliw can not now seek annulment
of the sale made by her husband. On this point, counsel for
petitioners rightly claims that the lack of consent of the wife
to the conveyances made by her husband was never invoked
nor placed in issue before the trial court. What was claimed all
along by plaintiff, Isidora Cabaliw now petitioner, was that the
conveyances or deeds of sale were executed by her husband to
avoid payment of the monthly support adjudged in her favor and
to deprive her of the means to execute said judgment. In other
words, petitioner seeks relief not so much as an aggrieved wife
but more as a judgment creditor of Benigno Sadorra. Art. 1413
therefore is inapplicable; but even if it were, the result would
be the same because the very article reserves to the wife the
right to seek redress in court for alienations which prejudice her
or her heirs. The undisputed facts before Us clearly show that
the sales made by the husband were merely a scheme to place
beyond the reach of the wife the only properties belonging to the
conjugal partnership and deprive her of what rightly belongs to
her and her only daughter Soledad.
PREMISES CONSIDERED, We find merit to this Petition
for Review and We set aside the decision of the appellate court
for being contrary to the law applicable to the facts of the case.
The decision of the trial court stands affirmed with costs against
private respondents.
So Ordered.
523
Arts. 1386-1388 CONTRACTS
66
Peña vs. Mitchell, 9 Phil. 587 & Streiff vs. Coll. of Customs, 31 Phil. 643; Na-
tional Exchange Co. vs. Katigbak, 54 Phil. 599; Buencamino vs. Bantug, 58 Phil. 521;
Gatchalian vs. Manalo, 68 Phil. 708.
67
Buencamino vs. Bantug, 58 Phil. 521. To the same effect: Peña vs. Mitchell, 9
Phil. 587; Gatchalian vs. Manalo, 68 Phil. 706.
524
RESCISSIBLE CONTRACTS Arts. 1386-1388
525
Arts. 1386-1388 CONTRACTS
68
Ayles vs. Reyes, 18 Phil. 243.
69
Oria vs. McMicking, 21 Phil. 243.
70
Ibid.
526
RESCISSIBLE CONTRACTS Arts. 1386-1388
71
Asia Banking Corp. vs. Nable Jose, 51 Phil. 763.
72
Onglengco vs. Ozaeta, 70 Phil. 43.
73
Gaston vs. Hernaez, 58 Phil. 823.
74
Ayles vs. Reyes, 18 Phil. 243; Alpuerto vs. Perez, 38 Phil. 785.
75
Standard Oil Co. vs. Castro, 64 Phil. 716.
527
Arts. 1386-1388 CONTRACTS
76
Oria vs. McMicking, 21 Phil. 243.
77
See Honrado vs. Marcayda, supra, for definition of “purchaser in good faith and
for value” and also for authorities
528
RESCISSIBLE CONTRACTS Art. 1389
78
Art. 1388, Civil Code.
79
8 Manresa, 5th Ed., Bk. 2, p. 549.
80
Art. 1299, Spanish Civil Code.
529
Art. 1389 CONTRACTS
counted from the time the domicile of the absentee is known; under
Nos. 3 and 4 and also under Art. 1382, it must be counted from the
time of the discovery of the fraud. In certain cases of contracts of
sale which are specially declared by law to be rescissible, however,
the prescriptive period for the commencement of the action is six
months or even forty days, counted from the day of delivery.81
81
Arts. 1543, 1571, 1577, Civil Code.
530
CHAPTER 7
VOIDABLE CONTRACTS
1
See Art. 1390, Civil Code, and Art. 1300, Spanish Civil Code.
2
Castan calls the defect of voidable contracts (contratas anulables) “anulabi-
lidado nulidad relativa’’ in order to distinguish it from the defect of void contracts
(contratos inexistentes) which he calls “nulidad absoluta.’’ Derecho Civil, Vol. 3, 7th
Ed., pp. 409-415.
531
CONTRACTS
3
Art. 1390, Civil Code.
4
Arts. 1390, 1391, 1392-1396, Civil Code.
5
Art. 1397, Civil Code.
6
Arts. 1381, 1390, Civil Code.
7
Ibid.
8
8 Manresa, 5th Ed., Bk. 2, pp. 544-545.
9
Arts. 1381, 1390, Civil Code.
10
Ibid.
11
8 Manresa, 5th Ed., Bk. 2, p. 545.
532
VOIDABLE CONTRACTS Art. 1390
12
New provision superseding Art. 1300, Spanish Civil Code.
13
See comments on Arts. 1327-1329, with respect to legal incapacity, and on
Arts. 1330-1344, with respect to mistake, violence, intimidation, undue influence,
and fraud.
14
Arts. 1345, 1409, No. 2, Civil Code.
533
Art. 1390 CONTRACTS
534
VOIDABLE CONTRACTS Art. 1390
535
Art. 1390 CONTRACTS
536
VOIDABLE CONTRACTS Art. 1390
537
Art. 1390 CONTRACTS
538
VOIDABLE CONTRACTS Art. 1391
15
Art. 1301, Spanish Civil Code, in modified form.
16
Naval vs. Enriquez, 3 Phil. 699; Ullman vs. Hernaez, 30 Phil. 69; Villanueva
vs. Villanueva, 91 Phil. 43.
539
Art. 1391 CONTRACTS
540
VOIDABLE CONTRACTS Art. 1391
that the said lots, “by agreement of all the direct heirs and heirs
by representation of the deceased Mateo Carantes as expressed
and conveyed verbally by him during his lifetime, rightly and
exclusively belong to the particular heir, Maximino Carantes,
now and in the past in the exclusive, continuous, peaceful and
notorious possession of the same for more than ten years.”
On the same date Maximino Carantes sold to the
Government Lots Nos. 44-B and 44-C and divided the proceeds
of the sale among himself and the other heirs of Mateo.
On February 6, 1940, upon joint petition of the heirs of
Mateo Carantes, the Court of First Instance of Baguio City
issued an Order in another proceeding — Administrative Case
No. 368 — cancelling O.C.T. No. 3. Pursuant thereto the said title
was cancelled, and in its place Transfer Certificate of Title No.
2533 was issued in the joint names of the five children of Mateo
Carantes and the children of Apung Carantes (representing
their deceased father) as co-owners pro indiviso, or one-sixth
share for each child.
On March 16, 1940, Maximino Carantes registered the
deed of “Assignment of Right to Inheritance.’’ Accordingly,
T.C.T. No. 2533 in the names of the heirs was cancelled, and
in lieu thereof Transfer Certificate of Title No. 2540 was issued
on the same date in the name of Maximino Carantes. Also on
the same date, Maximino, acting as exclusive owner of the land
covered by T.C.T. No. 2540, executed a formal deed of sale in
favor of the Government over Lots Nos. 44-B and 44-C.
On February 21, 1947, as a result of the approval of
the Subdivision Survey Plan psd-16786, and pursuant to the
deed of sale executed in 1940 by Maximino Carantes in favor
of the Government, T.C.T. No. 2540 in Maximino’s name was
cancelled, and in lieu thereof Transfer Certificate of Title No.
T-98, covering Lots Nos. 44-A, 44-B and 44-C, was issued in the
name of the Government, while Transfer Certificate of Title No.
T-99, covering the remaining Lots Nos. 44-D (100,345 square
meters) and 44-E (10,070 square meters) was issued in the name
of Maximino Carantes, who has up to the present remained the
registered owner of said lots.
On September 4, 1958, the present complaint was filed by
three children of the late Mateo Carantes, namely, Bilad, Lauro
and Crispino, and by some of the surviving heirs of Apung and of
Sianang (also children of Mateo Carantes). Maximino Carantes
was named principal defendant, and some of the heirs of Apung
541
Art. 1391 CONTRACTS
542
VOIDABLE CONTRACTS Art. 1391
543
Art. 1391 CONTRACTS
17
3 Castan, 7th Ed., pp. 415-416, citing Manresa, De Buen and Ramos.
544
VOIDABLE CONTRACTS Art. 1391
vs. Villa Abrille,18 however, the Supreme Court declared that “there
is reason to doubt the pertinency of the period fixed by Art. 1301
— now Art. 1391 of the Civil Code where minority is set up only as
a defense to an action, without the minors asking for any positive
relief from the contract.” Although this statement in the decision is
not controlling because it is based on an assumption, nevertheless,
we believe that this view is more just and logical.
It is interesting to note that the above aspect of the law was
taken up in the Bar Examinations of 1979. Thus —
18
105 Phil. 456.
545
Arts. 1392-1395 CONTRACTS
19
Art. 1309, Spanish Civil Code, in modified form.
20
Art. 1311, Spanish Civil Code, in modified form.
21
New provision.
22
Art. 1312, Spanish Civil Code.
546
VOIDABLE CONTRACTS Art. 1396
23
Art. 1313, Spanish Civil Code.
24
Art. 1392, Civil Code. For a third mode of extinguishing the action, see Art.
1401, Civil Code.
25
8 Manresa, 5th Ed., Bk. 2, p. 665.
26
3 Castan, 7th Ed., p. 419; 8 Manresa, 5th Ed., 2, pp. 668-671.
27
8 Manresa, 5th Ed., Bk. 2, pp. 668-670.
547
Art. 1396 CONTRACTS
28
Arts. 1394-1395, Civil Code. See 3 Castan, 7th Ed., p. 419.
29
8 Manresa, 5th Ed., Bk. 2, pp. 670-671.
30
Ibid., p. 672.
31
3 Castan, 7th Ed., p. 419.
32
Art. 1349, Civil Code.
548
VOIDABLE CONTRACTS Art. 1397
33
8 Manresa, 5th Ed., Bk. 2, p. 671.
34
Art. 1393, Civil Code.
35
Uy Soo Lim vs. Tan Unchuan, 38 Phil. 552.
36
Tacalinar vs. Corro, 34 Phil. 8898.
37
Arts. 1392, 1396, Civil Code; 3 Castan, 7th Ed., p. 420.
38
Art. 1302, Spanish Civil Code, in modified form.
549
Art. 1397 CONTRACTS
The first requisite is that the plaintiff must have an interest in the
contract. The second is that the victim and not the party responsible
for the vice or defect must be the person who must assert the same.39
Discussing the first requisite, the Supreme Court, in a leading
case, declared:
39
8 Manresa, 6th Ed., Bk. 2, p. 639; Wolfson vs. Estate of Martinez, 20 Phil. 340.
40
Ibañez vs. Hongkong & Shanghai Bank, 22 Phil. 572. To the same effect: Com-
pania General vs. Topino, 4 Phil. 33; Martell Ong vs. Jariol, 17 Phil. 244; Dy Sun vs.
Brilliantes, 93 Phil. 175.
41
Teves vs. People’s Homesite & Housing Corp., 23 SCRA 1141; De Santos vs.
City of Manila, 45 SCRA 409; Singsong vs. Isabela Sawmill, 88 SCRA 623.
42
Singsong vs. Isabela Sawmill, 88 SCRA 623. But would this not be confusing
the concept of annulment of voidable contracts with the concept of rescission of rescis-
sible contracts?
550
VOIDABLE CONTRACTS Art. 1397
43
Bastida vs. Dy Buncio & Co., 93 Phil. 195.
44
8 Manresa, 5th Ed., Bk. 2, p. 641.
551
Arts. 1398-1399 CONTRACTS
dead, and it is his heirs who are now assailing the validity of
the sale. However, under the principle of relativity of contracts
recognized in Art. 1311 of the Civil Code, the contract takes
effect not only between the contracting parties, but also between
their assigns and heirs.
(Note: Another way of answering the above problem would
be to state the two requisites which must concur in order that
a voidable contract may be annulled. These requisites are: (a)
that the plaintiff must have an interest in the contract; and (b)
that the victim or the incapacitated party must be the person
who must assert the same. The second requisite is lacking in the
instant case.)
45
Art. 1303, Spanish Civil Code, in modified form.
46
Art. 1304, Spanish Civil Code.
47
3 Castan, 7th Ed., pp. 416-417.
552
VOIDABLE CONTRACTS Arts. 1398-1399
48
Art. 1398 Civil Code; 3 Castan, 7th Ed., pp. 416-417.
49
Cadwallader & Co. vs. Smith, Bell & Co., 7 Phil. 461. To the same effect: Du-
masug vs. Modelo, 34 Phil. 252; Oliveros vs. Porciongcola, 69 Phil. 305; Talag vs.
Tankengco, 92 Phil. 1066.
50
8 Manresa, 5th Ed., Bk. 2, p. 646.
51
See Art. 1426, Civil Code.
52
8 Manresa, 5th Ed., Bk. 2, p. 647.
553
Arts. 1400-1401 CONTRACTS
53
Ibid., pp. 648-649.
54
Braganza vs. Villa Abrille, 105 Phil. 456.
55
Uy Soo Lim vs. Tan Unchuan, 38 Phil. 552. See also Young vs. Tecson, CA, 39
Off. Gaz. 953.
56
Art. 1307, Spanish Civil Code, in modified form.
554
VOIDABLE CONTRACTS Art. 1402
lost through the fraud or fault of the person who has a right
to institute the proceedings.
If the right of action is based upon the incapacity of any
one of the contracting parties, the loss of the thing shall not
be an obstacle to the success of the action, unless said loss
took place through the fraud or fault of the plaintiff.57
Art. 1402. As long as one of the contracting parties does
not restore what in virtue of the decree of annulment he is
bound to return, the other cannot be compelled to comply
with what is incumbent upon him.58
Effect of Failure to Make Restitution. — Sometimes, for
some reason or other, the action for annulment is commenced after
the lapse of several years from the time of the consummation of the
contract. Suppose then that prior to the commencement of the action,
the thing which constitutes the object of the contract is lost, what is
the effect upon the right of the party who, ordinarily, is entitled to
institute the action for annulment? This question is resolved in part
by the provisions of Arts. 1400 to 1402 of the Code.
Idem; Where loss is due to fault of defendant. — According
to Art. 1400, when the person obliged by the decree of annulment to
return the thing cannot do so because it has been lost through his
fault, he shall return the fruits received and the value of the thing
at the time of the loss, with interest from the same date. It is evident
that this rule is applicable only when the loss of the thing is due to
the fault of the party against whom the action for annulment may
be instituted.59 This is so because if the loss is due to the fault of the
party who has a right to institute the action, the provision of Art.
1401 shall apply. The loss of the thing which constitutes the object of
the contract through the fault of the party against whom the action
for annulment may be instituted shall not, therefore, extinguish the
action for annulment. The only difference from an ordinary action
for annulment is that, instead of being compelled to restore the
thing, the defendant can only be compelled to pay the value thereof
at the time of the loss.
57
Art. 1314, Spanish Civil Code, in modified form.
58
Art. 1308, Spanish Civil Code.
59
8 Manresa, 6th Ed., Bk. 2, p. 658.
555
Art. 1402 CONTRACTS
60
Art. 1314, Spanish Civil Code.
556
VOIDABLE CONTRACTS Art. 1402
the defendant can be held liable only for the value of the thing at
the time of the loss, but without interest thereon. The defendant,
and not the plaintiff, must suffer the loss because he was still the
owner of the thing at the time of the loss; he should, therefore, pay
the value of the thing, but not the interest thereon because the loss
was not due to his fault.61
If it is the plaintiff who cannot return the thing because it
has been lost through a fortuitous event, the contract may still be
annulled, but with this difference — he must pay to the defendant
the value of the thing at the time of the loss, but without interest
thereon. According to Dr. Tolentino, if the plaintiff offers to pay the
value of the thing at the time of its loss as a substitute for the thing
itself, the annulment of the contract would still be possible, because,
otherwise, we would arrive at the absurd conclusion that an action
for annulment would in effect be extinguished by the loss of the
thing through a fortuitous event.62
61
4 Tolentino, Civil Code, 1956 Ed., pp. 558-559.
62
Ibid., pp. 557-558.
557
CONTRACTS
CHAPTER 8
UNENFORCEABLE CONTRACTS
1
Art. 1403, Civil Code.
2
Report of the Code Commission, p. 139.
3
While the classification in the other defective contracts is based on the defect
from which the contracts suffer, here it is based on the consequence. As a result,
the classification found in Art. 1403 has been criticized on the ground that it places
contracts which are tainted with a vice or defect which affects not only their enforce-
ability but also their validity in the same category as contracts which are tainted with
a mere formal defect which affect only their enforcement.
558
UNENFORCEABLE CONTRACTS
4
Art. 1403, Civil Code.
5
Arts. 1403, 1405, 1407, 1371, Civil Code.
6
Art. 1408, Civil Code.
559
Art. 1403 CONTRACTS
560
UNENFORCEABLE CONTRACTS Art. 1403
7
New provision.
8
Tipton vs. Velasco, 6 Phil. 67; Gutierrez Hnos. vs. Orense, 28 Phil. 517; Tacali-
nar vs. Corro, 34 Phil. 898; Ibañez vs. Rodriguez, 47 Phil. 554; Zamboanga Trans. Co.
vs. Bachrach Motor Co., 62 Phil. 244; Gana vs. Archbishop of Manila, 43 Off. Gaz.
3224.
9
Arts. 1317, 1881, Civil Code.
10
Arts. 1403, No. 1, 1317, Civil Code.
11
Art. 1898, Civil Code. “If the agent contracts in the name of the principal, ex-
ceeding the scope of his authority, and the principal does not ratify the contract, it
shall be void if the party with whom the agent contracted is aware of the limits of the
powers granted by the principal. In this case, however, the agent is liable if he un-
dertook to secure the principal’s ratification.” It must be noted that this article says
that the contract is void, whereas Art. 1403, No. 1, says that it is unenforceable. Now,
which is which? The mistake is in Art. 1898. The correct term is “unenforceable.”
12
Art. 1317, Civil Code.
561
Art. 1403 CONTRACTS
74 Phil. 15.
13
Phil. National Bank vs. Phil. Vegetable Oil Co., 49 Phil. 857; Shoemaker vs. La
14
562
UNENFORCEABLE CONTRACTS Art. 1403
15
Jimenez vs. Rabot, 38 Phil. 378.
16
Basa vs. Raquel, 45 Phil. 655.
17
Gallemit vs. Tabilaran, 20 Phil. 241.
18
Domalagan vs. Bolifer, 33 Phil. 471.
19
Phil. National Bank vs. Phil. Vegetable Oil Co., 49 Phil. 857.
563
Art. 1403 CONTRACTS
20
Shoemaker vs. La Tondeña, 68 Phil. 24.
21
15 Phil. 350.
564
UNENFORCEABLE CONTRACTS Art. 1403
22
For illustrative cases, see Atienza vs. Castillo, 72 Phil. 589; Cabague vs. Aux-
ilio, 48 Off. Gaz. 4823.
23
Arts. 122, 127, Civil Code.
24
For illustrative case, see Robles vs. Lizarraga Hnos, 50 Phil. 387.
25
For illustrative cases, see Gorospe vs. Ilayat, 29 Phil. 21; Fernandez vs. Bayan,
62 Phil. 909; Pascual vs. Realty Investment, Inc., 91 Phil. 257; Valino vs. Medina,
CA, 49 Off. Gaz. 592.
565
Art. 1403 CONTRACTS
566
UNENFORCEABLE CONTRACTS Art. 1403
567
Art. 1403 CONTRACTS
568
UNENFORCEABLE CONTRACTS Art. 1403
26
Arroyo vs. Azur, 76 Phil. 493. To the same effect: Almirol vs. Monserrat, 48
Phil. 67; Asturias Sugar Central, Inc. vs. Montinola, 69 Phil. 725; Diana vs. Macalibo,
74 Phil. 70; Facturan vs. Sabanal, 46 Off. Gaz. 310; Carbonnel vs. Poncio, 103 Phil.
655.
569
Art. 1403 CONTRACTS
570
UNENFORCEABLE CONTRACTS Art. 1403
571
Arts. 1404-1407 CONTRACTS
27
Art. 1403, No. 3, Civil Code.
28
Art. 1390, No. 1, Civil Code.
29
Art. 1407, Civil Code.
30
New provision.
31
New provision.
32
New provision.
572
UNENFORCEABLE CONTRACTS Art. 1408
33
New provision.
34
New provision.
573
CONTRACTS
CHAPTER 9
1
8 Manresa, 5th Ed., Bk. 2, p. 608.
2
Liguez vs. Court of Appeals, 102 Phil. 577; Motion for Reconsideration, Feb.
13, 1958.
574
VOID OR INEXISTENT CONTRACTS
not inexistent but merely void or illegal, specific articles of the Civil
Code command that neither party thereto may be heard to invoke
its unlawful character as a ground for relief.3 Consequently, the two
may be distinguished from each other as follows:
(1) In a void contract, all of the requisites of a contract are
present, but the cause, object or purpose is contrary to law, morals,
good customs, public order or public policy, or the contract itself is
prohibited or declared by law to be void; in an inexistent contract,
one or some or all of those requisites which are essential for validity
are absolutely lacking.
(2) The principle of pari delicto is applicable in the first, but
not in the second. Consequently, the first may produce legal effects,
but the second cannot produce any effect whatsoever.
Idem; Distinguished from Rescissible Contracts. — A
void or inexistent contract may be distinguished from a rescissible
contract in the following ways:
(1) A void or inexistent contract produces as a rule no effect
even if it is not set aside by a direct action, while a rescissible
contract is valid, unless it is rescinded.4
(2) The defect of the former consists in absolute lack in fact
or in law of one or some of the essential elements of a contract, while
the defect of the latter consists in lesion or damage to one of the
contracting parties or to third persons.5
(3) In the former, the nullity or inexistence of the contract
is based on the law, whi1e in the latter the rescissible character is
based on equity. Hence, absolute nullity is not only a remedy but a
sanction, while rescission is a mere remedy. Public interest, therefore,
predominates in the first, while private interest predominates in the
second.6
(4) The action for the declaration of the nullity or inexistence
of a contract is imprescriptible, while the action for the rescission of
a contract is prescriptible.7
3
Ibid.
4
Art. 1380, 1409, Civil Code.
5
Ibid.
6
8 Manresa, 5th Ed., Bk. 2, pp. 544-545.
7
Arts. 1389, 1410, Civil Code.
575
CONTRACTS
8
Arts. 1381, 1382, 1409, Civil Code.
9
Arts. 1390, 1409, Civil Code.
10
Ibid.
11
Ibid.
12
Arts. 1391, 1410, Civil Code.
13
Arts. 1397, 1421, Civil Code.
14
Arts. 1403, 1409, Civil Code.
15
Ibid.
576
VOID OR INEXISTENT CONTRACTS Art. 1409
16
Arts. 1404, 1405, 1407, 1409, Civil Code.
17
Arts. 1408, 1421, Civil Code.
18
New provision.
19
For comments, cases and related provisions on No. 1, see those under Arts.
1306, 1346, 1347, 1352; on No. 2, see those under Arts. 1345, 1346, on No. 3, see those
under Arts. 1347, 1352; on No. 4, see those under Art. 1347; on No. 5, see those under
Art. 1348; on No. 6, see those under Art. 1378.
577
Art. 1409 CONTRACTS
20
Art. 1422, Civil Code.
21
3 Castan, 7th Ed., p. 409.
578
VOID OR INEXISTENT CONTRACTS Art. 1409
22
Ibid., p. 410.
23
Art. 1409, Civil Code.
24
Ibid.
25
Art. 1410, Civil Code.
26
Art. 1421, Civil Code; 3 Castan, 7th Ed., p. 410.
27
3 Castan, 7th Ed., p. 409.
579
Art. 1409 CONTRACTS
(and not merely executory), will produce the effect of barring any
action by a guilty to recover what he has already given under the
contract.
The above principle is very well illustrated in the case of
Liguez vs. Court of Appeals.28 Here, the deceased, Salvador Lopez,
a married man of mature years, donated a parcel of land belonging
to the conjugal partnership to Conchita Liguez, a minor of sixteen,
subject to the condition that the latter shall become his mistress.
The donation was duly accepted. After the perfection of the donation,
Conchita became the mistress of Lopez. When Lopez died, his widow
and heirs took possession of the land. Subsequently, Conchita
commenced an action for the recovery of the property. The widow
and heirs of the deceased now maintain that since the cause of the
contract is illegal or immoral, consequently, it is inexistent, and
therefore, can produce no effect whatsoever; hence, they are entitled
to the property donated. Plaintiff, on the other hand, contends that
what is illegal is the motive of the donor and not the cause, since the
contract in this case is one of pure beneficence. Hence, the principal
questions to be resolved are: (1) What is the character of the contract
— valid, void or inexistent? (2) Assuming that the contract is either
void or inexistent, what are its effects, if any? The decision of the
Supreme Court may be summarized as follows:
(1) According to the plaintiff, the contract is valid because the
condition that she will become the mistress of the donor is merely the
motive of a party to the contract and not the causa. In other words,
according to her, the contract here is a contract of pure beneficence;
hence, the causa is the liberality of the benefactor,29 and certainly,
under the law, liberality per se can never be illegal. This contention
is untenable. The contract is onerous in character. Here the facts
clearly demonstrate that in making the donation, the donor was
not moved exclusively by the desire to benefit the donee, but also to
gratify his sexual impulse. While it is true that we must not confuse
the causa of a contract with the motives of the contracting parties,30
there is an exception. The motive may be regarded as causa when
it pre-determines the purpose of the contract. In other words, we
must except from the rule those contracts that are conditioned upon
28
102 Phil. 577.
29
Art. 1350, Civil Code.
30
Art. 1351, Civil Code.
580
VOID OR INEXISTENT CONTRACTS Art. 1409
581
Art. 1409 CONTRACTS
why a guilty party may not ask the courts for a restoration to the
status quo ante.” The same reasons can also be applied to the case
of the successors or heirs of the guilty party. They cannot attack the
validity of the donation in their quality as successors or heirs of the
donor, since it is undeniable that they cannot be placed in a better
position than their predecessor.
It must be observed, however, that the property donated is
conjugal. Does that mean that the donation made by Lopez to the
plaintiff shall not be given any effect with respect to the share of
the widow? The answer is simple. Since the donation was made
under the old law, the Civil Code of 1889 shall apply. The second
paragraph of Art. 1419 of the old Code considers the donation as
merely fraudulent, subject to collation upon liquidation of the
conjugal partnership and deduction of its value from the donor’s
share in the conjugal profits.31
Therefore, the plaintiff is entitled to so much of the donated
property as may be found upon proper liquidation not to prejudice
the share of the widow or the legitimes of the compulsory heirs.
But suppose that the above donation had been made after the
effectivity of the New Civil Code, would the same rules stated in the
decision still apply?
It is submitted that as far as the donor is concerned, the
same rules with respect to the illegality of the donation and its
consequences would still apply. The contract would still be void
because of the illegality of the causa or consideration for the reasons
stated in Liguez. It would also be void under Art. 174 of the New
Civil Code (a provision not found in the Spanish Civil Code) which
declares that “with the exception of moderate donations for charity,
neither husband nor wife can donate any property of the conjugal
partnership without the consent of the other.’’ Consequently, as
far as the donor is concerned, Art. 1412 of the Civil Code would be
applicable.
However, as far as the wife of the donor is concerned the
applicable rules would be different. Art. 173 of the New Civil Code
states: “The wife may, during the marriage and within ten years
31
The law which is now applicable is found in Arts. 173 and 174 of the New Civil
Code.
582
VOID OR INEXISTENT CONTRACTS Art. 1409
from the transaction questioned, ask the courts for the annulment
of any contract of the husband entered into without her consent,
when such consent is required, or any act or contract of the husband
which tends to defraud her or impair her interest in the conjugal
partnership property. Should the wife fail to exercise this right,
she or her heirs, after the dissolution of the marriage, may demand
the value of the property fraudulently alienated by the husband.”
Does this provision, which was not found in the Spanish Civil Code,
spell the remedy of the wife in Liguez? I do not think so; it only
indicates it. It must be observed that the article presupposes either
a voidable (or unenforceable) contract executed by the husband, and
not a void contract. Therefore, the remedy of the wife is to bring
an action for the declaration of absolute nullity of the contract of
donation, a remedy which will have all of the effects of an action for
reconveyance. The action would be imprescriptible because it would
be based on a void contract. If she dies without bringing the action,
her heirs in their capacity as heirs, would be able to institute the
action. The principle of pari delicto in such a case cannot be applied
because the wife or her heirs were not parties to the illegal contract.
The case of Francisco J. Chavez vs. PCGG (May 19, 1999,
307 SCRA 394) states, among others that where the Agreements
undeniably contain terms and conditions that are clearly contrary
to the Constitution and the laws and are not subject to compromise,
such terms and conditions cannot be granted by the PCGG to
anyone. Being so, no argument of the contractors will make such
illegal and unconstitutional stipulations pass the test of validity.
The void agreement will not be rendered operative by the parties’
alleged performance (partial or full) of their respective prestations.
A contract that violates the Constitution and the law is null and void
ab initio and vests no rights and creates no obligations. It produces
no legal effect at all.
A void contract cannot be ratified. — In the case of
Guiang vs. Court of Appeals (June 26, 1998, 291 SCRA 372), the
Supreme Court ruled that the trial court correctly held: “By the
specific provision of the law (Art. 1390, Civil Code) therefore, the
Deed of Transfer of Rights cannot be ratified, even by an ‘amicable
settlement.’ The participation by some barangay authorities in
the ‘amicable settlement’ cannot otherwise validate an invalid act.
Moreover, it cannot be denied that the ‘amicable settlement’ entered
into by plaintiff Gilda Corpuz and defendant spouses Guiang is a
583
Art. 1410 CONTRACTS
32
New provision.
33
Eugenio vs. Perdido, 97 Phil. 41. But how about the doctrine of stale demands
(laches) — has not this doctrine eroded entirely the provision of Art. 1410?
584
VOID OR INEXISTENT CONTRACTS Art. 1410
585
Art. 1410 CONTRACTS
586
VOID OR INEXISTENT CONTRACTS Art. 1410
587
Art. 1410 CONTRACTS
588
VOID OR INEXISTENT CONTRACTS Art. 1410
589
Art. 1410 CONTRACTS
590
VOID OR INEXISTENT CONTRACTS Arts. 1411-1412
34
Art. 1410 in relation to Art. 1409(3) of the Civil Code.
591
Arts. 1411-1412 CONTRACTS
35
Art. 1306, Spanish Civil Code.
36
Perez vs. Herranz, 7 Phil. 693.
37
Iribar vs. Millat, 5 Phil. 362. For cases illustrating Art. 1411, see Go Chioco vs.
Martinez, 45 Phil. 256; Harden vs. Benguet Consolidated Mining Co., 58 Phil. 141.
38
Bough vs. Cantiveros, 40 Phil. 209.
592
VOID OR INEXISTENT CONTRACTS Arts. 1411-1412
593
Arts. 1411-1412 CONTRACTS
594
VOID OR INEXISTENT CONTRACTS Arts. 1411-1412
595
Arts. 1411-1412 CONTRACTS
39
Article 1301 of the Civil Code of 1889, in force when the assailed contracts were
executed (1934).
596
VOID OR INEXISTENT CONTRACTS Arts. 1411-1412
597
Arts. 1411-1412 CONTRACTS
598
VOID OR INEXISTENT CONTRACTS Arts. 1411-1412
599
Arts. 1411-1412 CONTRACTS
40
See also Liguez vs. Court of Appeals, 102 Phil. 581-582; Perez vs. Herranz, 7
Phil. 695.
600
VOID OR INEXISTENT CONTRACTS Arts. 1411-1412
41
Vasquez vs. Porta, 98 Phil. 490.
42
Liguez vs. Court of Appeals, supra.
43
Gonzales vs. Trinidad, 67 Phil. 682.
601
Arts. 1411-1412 CONTRACTS
44
Liguez vs. Court of Appeals, supra.
45
Arts. 1411, 1412, Civil Code.
46
Ibid.
47
Art. 1413, Civil Code.
48
Art. 1414, Civil Code.
49
Art. 1415, Civil Code.
50
Art. 1416, Civil Code.
602
VOID OR INEXISTENT CONTRACTS Art. 1413
51
Art. 1417, Civil Code.
52
Art. 1418, Civil Code.
53
Art. 1419, Civil Code.
54
New provision.
603
Art. 1413 CONTRACTS
55
23 SCRA 119.
56
58 Off. Gaz. 3146. See also People vs. Masangkay, 58 Off. Gaz. 3565.
604
VOID OR INEXISTENT CONTRACTS Art. 1413
one is to pay the debt; the accessory is to pay interest thereon. These
two stipulations are divisible. According to Art. 1420 of the New
Civil Code, “in case of a divisible contract, if the illegal terms can
be separated from the legal ones, the latter may be enforced.” In a
simple contract of loan with usurious interest, the prestation of the
debtor to pay the principal debt is not illegal; what is illegal is to
pay the stipulated interest. Hence, being separable, the latter only
should be deemed void.
Plaintiff is therefore entitled to the recovery of the principal of
the loan plus legal interest of 6% per annum from the filing of the
complaint pursuant to Art. 2209 of the New Civil Code. Attorney’s
fees, however, cannot be recovered since there is no showing that
the case falls under any of the exceptions provided for in Art. 2208
of the New Civil Code. Besides, defendants had reasons to resist
the claim since there was yet no definite ruling on the point of law
involved herein in the light of the New Civil Code.57
The above doctrine was reiterated in Briones vs. Cammayo.
In order that we shall have a complete picture of the case, we are
reproducing the entire decision penned by Justice Dizon, including
the dissenting opinion penned by Justice Castro and the concurring
opinion penned by Justice Barredo.
DIZON, J.:
On February 22, 1962, Aurelio G. Briones filed an action
in the Municipal Court of Manila against Primitivo, Nicasio,
Pedro, Hilario and Artemio, all surnamed Cammayo, to recover
from them, jointly and severally, the amount of P1,500.00,
plus damages, attorney’s fees and costs of suit. The defendants
answered the complaint with specific denials and the following
special defenses and compulsory counterclaim:
“x x x;
By way of —
57
Angel Jose Warehousing Co. vs. Chelda Enterprises, supra.
605
Art. 1413 CONTRACTS
SPECIAL DEFENSES
Defendants Allege:
4. Defendants executed the real estate mortgage, Annex
‘A’ of the complaint, as security for the loan of P1,200.00 given to
defendant Primitivo O. Cammayo upon the usurious agreement
that defendant pays to the plaintiff and that the plaintiff reserve
and secure, as in fact plaintiff reserved and secured himself, out
of the alleged loan of P1,500.00 as interest the sum of P300.00
for one year;
5. That although the mortgage contract, Annex ‘A’ was
executed for securing the payment of P1,500 for a period of
one year, without interest, the truth and the real fact is that
plaintiff delivered to the defendant Primitivo P. Cammayo only
the sum of P1,200.00 and withheld the sum of P300.00 which
was intended as advance interest for one year;
6. That on account of said loan of P1,200.00, defendant
Primitivo P. Cammayo paid to the plaintiff during the period
from October, 1955 to July, 1956 the total sum of P330.00 which
plaintiff, illegally and unlawfully refuse to acknowledge as part
payment of the account but as in interest of said loan for an
extension of another term of one year;
7. That said contract of loan entered into between
plaintiff and defendant Primitivo P. Cammayo is a usurious
contract and is contrary to law, morals, good customs, public
order or public policy and is, therefore, inexistent and void from
the beginning (Art. 1407, Civil Code);
And as —
COMPULSORY COUNTERCLAIM
606
VOID OR INEXISTENT CONTRACTS Art. 1413
docketed in this court as Civil Case No. 75845 (Branch VII) and
the same was dismissed by the Court of First Instance (Branch of
Manila) on July 13, 1961 in Civil Case No. 43121 (Branch XVII)
and for repeatedly bringing this case to the court, harassing
and persecuting defendants in the manner, defendants have
suffered mental anguish and anxiety for which they should be
compensated for moral damages.’’
On September 7, 1962, Briones filed an unverified reply
in which he merely denied the allegations of the counterclaim.
Thereupon, the defendants moved for the rendition of a
summary judgment on the ground that, upon the record, there
was no genuine issue of fact between the parties. The Municipal
Court granted the motion and rendered judgment sentencing
the defendants to pay the plaintiff the sum of P1,500.00, with
interests thereon at the legal rate from February 22, 1962, plus
the sum P150.00 as attorney’s fees. From this judgment, the
defendants appealed to the Court of First Instance of Manila
where, according to the appealed decision, “defendant has
asked for summary judgment and plaintiff has agreed to the
same.” (Record on Appeal, p. 21.) Having found the motion for
summary judgment to be in order, the court then proceeded to
render judgment as follows:
“Judgment is, therefore, rendered, ordering defen-
dant to pay plaintiff the sum of P1,180.00 with interest
thereon at the legal rate from October 16, 1962 until
fully paid. This judgment represents defendant’s debts of
P1,500.00 less usurious interest of P120.00 and the addi-
tional sum of P200.00 as attorney’s fees or a total deduc-
tion of P320.00. Plaintiff shall pay the costs.”
In the present appeal defendants claim that the trial
court erred in sentencing them to pay the principal of the loan
notwithstanding its finding that the same was tainted with
usury, and erred likewise in not dismissing the case.
It is now disputed that the contract of loan in question was
tainted with usury. The only questions to be resolved, therefore,
are firstly, whether the creditor is entitled to collect from the
debtor the amount representing the principal obligation;
secondly, in the affirmative, if he is entitled to collect interests
thereon, and if so, at what rate.
The Usury Law penalizes any person or corporation who,
for any loan or renewal thereof or forbearance, shall collect or
receive a higher rate or greater sum or value than is allowed
by law, and provides further that, in such case, the debtor may
607
Art. 1413 CONTRACTS
608
VOID OR INEXISTENT CONTRACTS Art. 1413
609
Art. 1413 CONTRACTS
610
VOID OR INEXISTENT CONTRACTS Art. 1413
611
Art. 1413 CONTRACTS
612
VOID OR INEXISTENT CONTRACTS Art. 1413
613
Art. 1413 CONTRACTS
58
See Articles 1933, 1950 and 1957, New Civil Code.
614
VOID OR INEXISTENT CONTRACTS Art. 1413
59
De Jesus vs. Urrutia & Company, 32 Phil. 171.
60
Lopez and Javelona vs. El Hogar Pilipino, 47 Phil. 249.
615
Art. 1413 CONTRACTS
61
73 Phil. 60.
62
L-17895, promulgated Sept. 30, 1963, 9 SCRA 131.
616
VOID OR INEXISTENT CONTRACTS Art. 1413
617
Art. 1413 CONTRACTS
618
VOID OR INEXISTENT CONTRACTS Art. 1413
619
Art. 1413 CONTRACTS
recover only all the interests, including, of course, the legal part
thereof, with legal interest from the date of judicial demand,
without maintaining that he can also recover the principal he
has already paid to the lender.
As first discussed under Art. 1175, there is now no longer
any ceiling in interest rates on loans pursuant to Central Bank
Circular No. 224 issued last Dec. 1, 1982.
Problem — On Jan. 15, 1958, D borrowed P10,000 from
C. as evidence of the indebtedness, D executed a promissory
note promising to pay the entire obligation on Jan. 15, 1959,
at 24% interest per annum. As security for the payment of the
obligation, he also executed a real estate mortgage on a house
and lot registered in his name in favor of C. This mortgage
was duly registered. When the note matured, D paid the entire
obligation plus interest amounting to P2,400. Considering that
the contract is usurious, if D institutes an action against C for
the recovery of the usurious interest which he has paid, how
much can he recover? Reason.
Answer — D can recover the entire interest of P2,400
which he has paid plus 6% interest thereon from the date of
payment. This is in accordance with Sec. 6 of the Usury Law
and Art. 1413 of the New Civil Code. It must be observed that
under Sec. 6 of the Usury Law, the debtor may recover the whole
interest paid. Under the New Civil Code , in Art. 1413, “interest
paid in excess of the interest allowed by the usury laws may be
recovered by the debtor, with interest thereon from the date of
payment.” When the Code speaks of “interest paid in excess of
the interest allowed by usury laws,” it means the whole usurious
interest. The two provisions, therefore, are almost identical. The
only change effected by Art. 1413, NCC, is not to provide for the
recovery of the interest paid in excess of that allowed by law,
which the Usury Law already provided for, but to add that the
same can be recovered “with interest thereon from the date of
payment.” (Angel Jose Warehousing Co. vs. Chelda Enterprises,
23 SCRA 119.)
(Note: Prior to January 1, 1983 and under the Treasury
Laws, no person shall receive a rate of interest, including
commissions, premiums, fines and penalties, higher than 12%
per annum or the maximum rate prescribed by the Monetary
Board for a loan secured by a mortgage upon real estate the
title to which is duly registered. Therefore, the 18% interest
rate plus the additional interest and penalty charges of 18% and
8%, respectively, are highly usurious. [Development Bank of the
620
VOID OR INEXISTENT CONTRACTS Arts. 1414-1416
Philippines vs. Perez, G.R. No. 148541, Nov. 11, 2004.] Under
Central Bank (CB) Circular No. 905, which became effective on
Jan. 1, 1983, whereby the Monetary Board is authorized to fix
interest rates, the ceiling rates under the Usury law [Act No.
2655, as amended by P.D. No. 116] have been abolished.
It should be noted that Circular No. 905 did not repeal
nor in any way amend the Usury Law but simply suspended
the latter’s effectivity. The legislation of usury is wholly the
creature of legislation. A CB Circular cannot repeal a law. Only
a law can repeal another law. Thus, retroactive application of a
CB Circular cannot, and should not, be presumed. (Development
Bank of the Philippines vs. Perez, G.R. No. 148541, Nov. 11,
2004.)
In declaring void the stipulations authorizing excessive
interest and charges, the SC declared that although the Usury
Law was suspended by CB Circular No. 905 and consequently
the parties are given wide latitude to agree on any interest
rate, nothing in the said Circular grants lenders carte blanche
authority to raise interest rates to levels which will either
enslave their borrowers or lead to a hemorrhaging of their
assets. (Heirs of Zoilo Espiritu and Primitiva Espiritu vs. Sps.
Maximo Landrito and Paz Landrito, etc., G.R. No. 169617, April
3, 2007)
63
New provision.
64
New provision.
621
Arts. 1414-1416 CONTRACTS
65
New provision.
622
VOID OR INEXISTENT CONTRACTS Arts. 1414-1416
66
To the same effect: Santander vs. Villanueva, 103 Phil. 1; Feliceo vs. Iriola 103
Phil. 125; Ras vs. Sua, 25 SCRA 153.
623
Arts. 1414-1416 CONTRACTS
624
VOID OR INEXISTENT CONTRACTS Arts. 1414-1416
67
Rodriguez vs. Rodriguez, 20 SCRA 908.
68
29 Phil. 480-481 (1947).
625
Arts. 1414-1416 CONTRACTS
69
Cf. Concurring opinion of Justice Bengzon in Rellosa vs. Gaw Chee Hun, 93
Phil. 827, 836 (1953).
70
Const., Art. XIII, Sec. 5.
71
93 Phil. 827 (1953).
626
VOID OR INEXISTENT CONTRACTS Arts. 1414-1416
72
79 Phil. 461 (1947).
627
Arts. 1414-1416 CONTRACTS
73
93 Phil. 827.
74
93 Phil. 843.
75
93 Phil. 855.
76
93 Phil. 861. See also Arambulo vs. Cua So, 95 Phil. 749 (1954); Dinglasan vs.
Lee Bun Ting, 99 Phil. 427 (1955).
77
Bough vs. Cantiveros, 40 Phil. 210 (1919) and Perez vs. Herranz, 7 Phil. 693
(1902).
628
VOID OR INEXISTENT CONTRACTS Arts. 1414-1416
629
Arts. 1414-1416 CONTRACTS
78
79 Phil. 461, 480 (1947).
630
VOID OR INEXISTENT CONTRACTS Arts. 1417-1419
79
New provision.
80
New provision.
631
Art. 1420 CONTRACTS
81
New provision.
82
New provision.
632
VOID OR INEXISTENT CONTRACTS Art. 1420
633
Arts. 1421-1422 CONTRACTS
83
New provision.
84
New provision.
634
TITLE III. — NATURAL
OBLIGATIONS 1
1
All provisions in this Title are new.
2
4 Tolentino, Civil Code, 1956 Ed., p. 588, citing Colin & Capitant.
3
See comments under Art. 1156, Civil Code.
4
Art. 1423, Civil Code.
635
Art. 1423 CONTRACTS
5
See 4 Tolentino, Civil Code, 1956 Ed., p. 589.
6
See Villaroel vs. Estrada, 71 Phil. 140, and Fisher vs. Robb, 69 Phil. 101. See
also Art. 1350, Civil Code. Strictly speaking, the obligation referred to the first case
is a natural obligation, while that referred to the second case is a moral obligation.
636
NATURAL OBLIGATIONS Arts. 1424-1425
7
Report of the Code Commission, pp. 58-59.
637
Arts. 1426-1430 CONTRACTS
638
TITLE IV. — ESTOPPEL 1
1
All provisions in this Title are new.
2
Report of the Code Commission, p. 59.
639
Arts. 1431-1433 CONTRACTS
3
Tijam vs. Sibonghanoy, 23 SCRA 29.
4
31 C.J.S. 237.
5
Ibid.
6
Ibid.
640
ESTOPPEL Arts. 1431-1433
7
Ibid.
8
19 Am. Jur. 601.
9
Ibid.
10
Phil. National Bank vs. Barretto, 52 Phil. 818; Namarco vs. Macadaeg, 52 Off.
Gaz. 182.
11
Tijam vs. Sibonghanoy, supra.
641
Arts. 1431-1433 CONTRACTS
12
Ibid.
13
Miguel vs. Catalino, 26 SCRA 234, and cases cited therein.
14
24 SCRA 908.
15
Supra.
642
ESTOPPEL Arts. 1431-1433
suit now barred by laches? According to the Supreme Court, the suit
is now barred by laches. Even granting plaintiff’s proposition that no
prescription lies against their father’s recorded title, their passivity
and inaction for more than thirty-four years justifies the defendant
in setting up the equitable defense of laches. All of the four elements
of laches are present. As a result, the action of plaintiffs must be
considered barred.16
16
To the same effect — Lucas vs. Compania, 100 Phil. 277; Lotho vs. Ice and Cold
Storage of the Phil., 113 Phil. 713; Heirs of Lacamen vs. Heirs of Laruan, 65 SCRA
605.
643
Arts. 1431-1433 CONTRACTS
I
“. . . IN DECLARING THE SALE BETWEEN LACAMEN
AND LARUAN TO BE NULL AND VOID.
II
“. . . IN APPLYING STRICTLY THE PROVISIONS
OF SECTIONS 118 AND 122 OF ACT NO. 2874 AND
SECTIONS 145 AND 146 OF THE MINDANAO AND
SULU.
644
ESTOPPEL Arts. 1431-1433
III
“. . . IN AFFIRMING THE DECISION OF THE COURT
OF FIRST INSTANCE OF BAGUIO CITY.’’
645
Arts. 1431-1433 CONTRACTS
646
ESTOPPEL Arts. 1431-1433
17
De Lucas vs. Gamponia, 100 Phil. 277; Wright, Jr. vs. Lepanto Consolidated
Mining Co., L-18904, July 11, 1964, 11 SCRA 508.
18
Miguel vs. Catalino, L-23072, November 29, 1968, 26 SCRA 234.
647
Arts. 1431-1433 CONTRACTS
father, they too kept si1ent, never claiming that the lot is their
own until in 1957 or after almost 30 years they took “advantage
of the [non-approval of the sale] as their lever to deprive
[petitioners-appellants] of this land’’ with a motive that was “out
and out greed.’’ Even granting, therefore, that no prescription
lies against their father’s recorded title, their quiescence and
inaction for almost 30 years now commands the imposition of
laches against their adverse claim. (Miguel, footnote 27)
“It results that as against Laruan and his heirs,
respondents-appellants herein, the late Batiog Lacamen and his
heirs, petitioners-appellants herein, have superior right and,
hence, have validly acquired ownership of the litigated land.
Vigilantibus non dormientibus sequitas subvenit.
“IN VIEW OF THE FOREGOING, the judgment of the
Court of Appeals affirming that of the trial court is hereby
reversed and set aside.
“The petitioners-appellants are hereby declared the lawful
owners of the land in question. Accordingly, Transfer Certificate
of Title No. T-775 in the name of respondents-appellants is
hereby cancelled and in lieu thereof the Register of Deeds of
Benguet is ordered to issue a new transfer certificate of title in
the name of petitioners-appellants.’’
19
Fabian vs. Fabian, 22 SCRA 231.
648
ESTOPPEL Art. 1434
20
Miguel vs. Catalino, supra; Nielsen vs. Lepanto Consolidated Mining Co., 18
SCRA 1040.
649
Art. 1434 CONTRACTS
650
ESTOPPEL Art. 1434
651
Art. 1434 CONTRACTS
652
ESTOPPEL Art. 1434
653
Art. 1434 CONTRACTS
21
Couto vs. Cortes, 8 Phil. 459, 460 (1907); Guerrero vs. Miguel, 10 Phil. 52, 53
(1908).
22
Llacer vs. Muñoz de Bustillo, et al., 12 Phil. 328, 334; Inquimboy vs. Paez Vda.
de Cruz, 108 Phil. 1054, 1057; Castrillo, et al. vs. Court of Appeals, et al., March 31,
1964, 10 SCRA 549, 553; Estoque vs. Pajimula, L-24419, July 15, 1968, 24 SCRA 59,
62.
654
ESTOPPEL Art. 1434
23
103 Phil. 683, 686-687.
655
Arts. 1435-1439 CONTRACTS
656
TITLE V. — TRUST 1
CHAPTER 1
GENERAL PROVISIONS
1
All provisions in this Title are new.
2
54 Am. Jur., Sec. 4, p. 21.
3
Art. 1440, Civil Code.
4
54 Am. Jur., Sec. 32, p. 44.
657
Art. 1441 CONTRACTS
5
Art. 1441, Civil Code.
658
TRUST Art. 1442
6
See Cuaycong vs. Cuaycong, 21 SCRA 1192; Fabian vs. Fabian, 22 SCRA 231.
See also Arts. 1443, 1457, Civil Code.
659
CONTRACTS
CHAPTER 2
EXPRESS TRUSTS
660
CHAPTER 3
IMPLIED TRUSTS
661
Arts. 1451-1453 CONTRACTS
662
IMPLIED TRUSTS Arts. 1454-1456
See Fabian vs. Fabian, 22 SCRA 231, and cases cited therein.
1
Jacinto vs. Jacinto, 115 Phil. 363. To the same effect: Juan vs. Zuñiga, 114 Phil.
2
1163; Villaluz vs. Neme, 117 Phil. 25, and cases cited therein.
663
Arts. 1454-1456 CONTRACTS
3
11 SCRA 153.
664
IMPLIED TRUSTS Arts. 1454-1456
This finds codal support in No. (2) of Art. 1144 of the Civil Code,
which declares that an action based upon an obligation created by
law must be brought within ten years from the time the right of
action accrues. It also finds support in the cases of Bueno vs. Reyes
(27 SCRA 1179), Varsity Hills, Inc. vs. Navarro (43 SCRA 503), Escay
vs. Court of Appeals (61 SCRA 369), Jaramil vs. Court of Appeals (78
SCRA 420), Vda. de Nacalaban vs. Court of Appeals (80 SCRA 428),
Duque vs. Domingo (80 SCRA 654), and cases.
4. If the legitimate owner of the subject property which was
fraudulently registered in the name of another had always been in
possession thereof so that, as a consequence, the constructive notice
rule cannot be applied, in reality the action for reconveyance is an
action to quiet title; therefore, the action is imprescriptible. This
finds support in the case of Caragay Layno vs. Court of Appeals (133
SCRA 718).
Idem; Laches may bar action. — In Fabian vs. Fabian,4 the
Supreme Court reiterated the rule laid down in Diaz vs. Goricho5
that laches may bar an action to enforce a constructive trust. In
the latter case, the Court, speaking through Justice J.B.L. Reyes,
declared:
4
22 SCRA 231.
5
103 Phil. 264-265.
665
Arts. 1454-1456 CONTRACTS
6
Fabian vs. Fabian, supra.
7
See Lagura vs. Levantino, 71 Phil. 566; Salinas vs. Tunson, 55 Phil. 729; Ramos
vs. Ramos, 61 SCRA 284.
666
IMPLIED TRUSTS Arts. 1454-1456
667
Arts. 1454-1456 CONTRACTS
668
IMPLIED TRUSTS Arts. 1454-1456
Reyes to file was not adverse to them; and neither he nor the
appellees may invoke the constructive notice rule on the basis of
their own breach of the authority thus given. On top of all these,
it was the appellants and not the appellees who were in posses-
sion of the property as owners, continuously up to 1962, when
for the first time the latter appeared upon the scene and tried
to get such possession, thereby revealing to them the fact of the
fraudulent registration.
It would be more in keeping with justice, therefore, to
afford the plaintiffs as well as the defendants the opportunity
to lay their respective claims and defenses before the court in a
full-blown litigation. Wherefore, the order appealed from is set
aside and the case is remanded for further proceedings.
669
Arts. 1454-1456 CONTRACTS
670
IMPLIED TRUSTS Arts. 1454-1456
671
Arts. 1454-1456 CONTRACTS
672
IMPLIED TRUSTS Arts. 1454-1456
673
Arts. 1454-1456 CONTRACTS
674
IMPLIED TRUSTS Arts. 1454-1456
675
Arts. 1454-1456 CONTRACTS
676
IMPLIED TRUSTS Art. 1457
— oOo —
677
COMMENTS and JURISPRUDENCE
on
OBLIGATIONS and CONTRACTS
By
DESIDERIO P. JURADO†
Associate Justice, Court of Appeals
Pre-Bar Reviewer, Civil Law, San Beda College, UP Law Center,
Ateneo de Manila University, Far Eastern University,
University of Santo Tomas, University of Manila,
Manila Review Center; Professor, Civil Law Review,
San Beda College, Far Eastern University,
University of Santo Tomas,
Lyceum; Lecturer, UP Law Center
DESIDERIO P. JURADO†
ISBN 978-971-23-5330-7
No. ____________
ISBN 978-971-23-5330-7
9 789712 353307
Printed by
rexprintingcompany,inc.
typography & creative lithography
84 P. Florentino St., Quezon City
Tel. Nos. 712-41-01
ii • 712-41-08
To my beloved wife
NENA
this work is affectionately dedicated.
iii
iv
PREFACE TO THE 2010 EDITION
v
JUSTICE ROLAND B. JURADO
Associate Justice, Sandiganbayan, Chairman, 5th Division;
Former RTC Judge Branch 76, Malolos, Bulacan;
Former MTC Judge, Branch 2, Malolos, Bulacan;
Former Fourth Assistant City Prosecutor,
Caloocan City; Former Professor of Law – FEU, UE, MLQU and
SSC; BSC; Ll.B. (FEU)
vi
PREFACE TO THE 2002 EDITION
We cannot help but read once again the Foreword that
Dr. Jovito R. Salonga has written way back in 1959. Yes, it was
written almost forty three years ago, but as we read it, we only
realize too well how true and accurate every word he has written,
more particularly when he said that:
“x x x life is complex and real, that the law which essays
to support and maintain a regime of ordered liberty, upholding
basic values and reconciling demands and interests that over-
lap and conflict, should cope with its increasing complexities,
that it cannot be inert but that it must thrive and flourish,
since history has shown that law assumes stability only when
it has not lost its capacity for growth.
x x x The subject of Obligations and Contracts pervades
the entire social structure. It has been recognized that no
society can long endure without a workable, realistic system
of liabilities. The field of contracts alone illustrates the vital
function of law in a free society, where respect for the worth
and dignity of the human personality demands that individual
volition be afforded a wide area of latitude consistent with the
demands of the social order. x x x’’
And as we write this Preface, the law on Obligations and
Contracts continue to expand and pervade even our advancing
technology, including electronic commerce. Yes, indeed, this is a
living law. It is neither simple nor easy but is rather real and as
involved as life.
We are glad that as observed by Dr. Salonga this “book sup-
plies an acute need for a manual that is well-grounded, comprehen-
sive and balanced in treatment.’’
Thus, once again, we wish to extend our increasing gratitude
to Dr. Salonga, to the Professors of Obligations and Contracts who
have been prescribing this book as their official text, to our brother,
RICHARD B. JURADO of the Philippine Senate who assisted us in
the preparation of this book and to Rex Book Store. To all of you,
thank you so much!!!
vii
JUDGE ROLAND B. JURADO
Judge, Regional Trial Court, Branch 76, Malolos, Bulacan;
Former Judge, Municipal Trial Court, Branch 2, Malolos, Bulacan;
Former Fourth Assistant City Prosecutor, Caloocan City;
Former Legal Consultant, Metro Manila Commission
Former Professor, San Sebastian College of Law;
U.E. College of Law and
M.L.Q.U. College of Law; — B.S.C., Ll.B. (F.E.U.)
and
viii
PREFACE TO THE 1993 EDITION
ix
Former Professor, F.E.U. School of Business;
A.B, Ll.B., U.P.)
and
x
PREFACE
D. P. JURADO
Manila
July 20, 1987
xi
xii
FOREWORD
xiii
that it cannot be inert but that it must thrive and flourish, since his-
tory has shown that law assumes stability only when it has not lost
its capacity for growth.
The book of Professor Desiderio P. Jurado is now involved in
this debate, and it is well that it has made its appearance. The sub-
ject of Obligations and Contracts pervades the entire social struc-
ture. It has been recognized that no society can long endure without
a workable, realistic system of liabilities. The field of contracts alone
illustrates the vital function of law in a free society, where respect
for the worth and dignity of the human demands that individual
volition be afforded a wide area of latitude consistent with the de-
mands of the social order. There is therefore more than enough room
for works such as this, and in particular, Professor Jurado’s book
supplies an acute need for a manual that is well-grounded, compre-
hensive, and balanced in treatment. It does not belong to the “easy’’
school.
Professor Jurado has brought to this book the wealth of expe-
rience he has gained as a respected scholar and teacher of law; his
years of courtroom practice are also visible all throughout. Undoubt-
edly many of his former students, now practicising lawyers in vari-
ous places of the country, will find in these pages rich opportunities
for looking back to those hours of earnest discussion in the class-
room, where honest disagreement is honored and debate on tenuous
points of law skilfully handled by the master.
We who study and teach law may not agree with all the con-
clusions set forth in this book; Professor Jurado does not expect un-
questioning assent from us on all points. But before we register our
dissent it may be well for us to consider the validity and weight of
his premises, for, indeed, this book deserves more than just a re-
reading. It is the product of a hard discipline — the discipline of fine,
unselfish scholarship.
JOVITO R. SALONGA
Dean, Institute of Law, Far Eastern University
xiv
CONTENTS
BOOK IV
OBLIGATIONS AND CONTRACTS
Title I. — OBLIGATIONS
Chapter 1
GENERAL PROVISIONS
Page
xv
Idem; Persons liable ................................................. 20
Idem; Requisites of liability ..................................... 21
Idem; Quasi-delicts and crimes ................................ 21
Idem; Scope of quasi-delicts ..................................... 21
Idem; Character of remedy....................................... 23
Chapter 2
NATURE AND EFFECT OF OBLIGATIONS
xvi
Idem; Test or negligence........................................... 68
Idem; Effects of negligence ....................................... 70
Idem; id. Regulatory power of the courts ................ 71
Idem; id.; id. Effect of good faith .............................. 71
Idem; id.; id. Effect of bad faith................................ 72
Idem; id.; id. Effect of contributory negligence ....... 72
Idem; id.; id. Other circumstances ........................... 74
Voluntary Breach Through Contravention of Tenor
of Obligation .............................................................. 74
Art. 1174 ................................................................................... 74
Concept of Fortuitous Event ............................................. 74
Classification ..................................................................... 75
Effect Upon Obligation...................................................... 76
Idem; Essential conditions ....................................... 88
Idem; Exceptions....................................................... 96
Art. 1175 ................................................................................... 101
Usurious Transactions ...................................................... 101
Art. 1176 ................................................................................... 102
Extinguishment of Interests and Prior Installments ...... 102
Art. 1177 ................................................................................... 103
Remedies of Creditor to Protect Credit ............................ 103
Idem; Exhaustion of debtor’s property .................... 103
Idem; Accion subrogatoria ........................................ 104
Idem; Accion pauliana .............................................. 105
Art. 1178 ................................................................................... 105
Transmissibility of Rights................................................. 105
Chapter 3
DIFFERENT KINDS OF OBLIGATIONS
xvii
Idem; Effect of casual conditions ............................. 118
Idem; Effect of mixed conditions .............................. 118
Art. 1183 ................................................................................... 122
Possible and Impossible Conditions ................................. 122
Idem; Effects ............................................................. 123
Art. 1184 ................................................................................... 124
Art. 1185 ................................................................................... 124
Positive and Negative Conditions .................................... 124
Idem; Effects ............................................................. 124
Art. 1186 ................................................................................... 125
Constructive Fulfillment of Suspensive Conditions ........ 125
Art. 1187 ................................................................................... 126
Art. 1188 ................................................................................... 126
Effect of Suspensive Conditions Before Fulfillment ........ 126
Effect of Suspensive Conditions After Fulfillment .......... 128
Idem; Retroactivity of effect ..................................... 128
Idem; id. In obligations to give ................................. 129
Idem; id. In obligations to do or not to do ................ 130
Art. 1189 ................................................................................... 130
Effect of Loss, Deterioration or Improvement ................. 131
Idem; Losses .............................................................. 131
Idem; Deteriorations................................................. 132
Idem; Improvements................................................. 132
Art. 1190 ................................................................................... 133
Effect of Resolutory Conditions Before Fulfillment......... 134
Effect of Resolutory Conditions After Fulfillment ........... 134
Idem; Retroactivity of effect ..................................... 134
Idem; Effect of loss, deterioration
or improvement ................................................ 135
Art. 1191 ................................................................................... 136
Concept of Reciprocal Obligations .................................... 136
Tacit Resolutory Condition ............................................... 137
Idem; Necessity of judicial action ............................ 137
Idem; Nature of Breach ............................................ 139
Idem; Alternative remedies of injured party........... 140
Idem; id. Damages to be awarded ............................ 141
Idem; Judicial discretion to decree rescission ......... 142
Idem; Effect of rescission .......................................... 142
Idem; id. Effect upon third persons ......................... 143
Art. 1192 ................................................................................... 146
Effect of Breach by Both Parties ...................................... 146
xviii
Section 2. — Obligations With a Period
Art. 1193 ................................................................................... 146
Concept of Term or Period ................................................ 146
Idem; Distinguished from condition ........................ 147
Classification of Term or Period ....................................... 147
Effects of Term or Period .................................................. 149
Idem; Effect of fortuitous event ............................... 150
Art. 1194 ................................................................................... 151
Art. 1195 ................................................................................... 151
Effect of Advanced Payment or Delivery ......................... 152
Art. 1196 ................................................................................... 152
Benefit of Term or Period .................................................. 152
Idem; Exception ........................................................ 154
Art. 1197 ................................................................................... 154
Judicial Term or Period .................................................... 155
Idem; When court may fix term ............................... 155
Idem; Nature of action .............................................. 160
Idem; Effect of judicial period .................................. 160
Art. 1198 ................................................................................... 163
Extinguishment of Debtor’s Right to Period .................... 164
xix
Idem; Distinguished from alternative obligations .. 174
Idem; When substitution takes effect ...................... 175
Idem; Effect of loss of substitute .............................. 175
xx
Art. 1219 ................................................................................... 208
Art. 1220 ................................................................................... 208
Art. 1221 ................................................................................... 209
Effect of Loss or Impossibility of Performance ................ 209
Art. 1222 ................................................................................... 210
Defenses Available to a Solidary Debtor .......................... 210
xxi
Chapter 4
EXTINGUISHMENT OF OBLIGATIONS
General Provisions
xxii
What Must Be Paid ........................................................... 245
Idem; Effect of dation in payment ........................... 246
Idem; Effect if object is generic ................................ 246
Art. 1247 ................................................................................... 247
Expenses of Payment ........................................................ 247
Art. 1248 ................................................................................... 247
Character of Payment ....................................................... 247
Art. 1249 ................................................................................... 248
Rule in Monetary Obligations........................................... 248
Idem; Effect of Rep. Act Nos. 529 and 4100 ............ 249
Idem; Meaning of legal tender ................................. 251
Idem; Payments with Japanese military notes ....... 251
Idem; Payments with emergency notes ................... 253
Idem; Payments with negotiable paper ................... 253
Idem; id. Exceptions ................................................. 260
Art. 1250 ................................................................................... 261
Effect of Extraordinary Inflation or Deflation ................. 261
Idem; War-time obligations ...................................... 263
Idem; id. The Ballantyne Schedule .......................... 264
Idem; id.; id. Application .......................................... 265
Art. 1251 ................................................................................... 267
Place of Payment ............................................................... 267
xxiii
Subsection 2. — Payment of Cession
xxiv
Art. 1265 ................................................................................... 291
Rule If Thing is in Debtor’s Possession ............................ 291
Art. 1266 ................................................................................... 292
Effect of Impossibility of Performance
in Obligations to do ................................................... 292
Idem; Effect ............................................................... 293
Idem; Effect in obligations not to do ........................ 295
Art. 1267 ................................................................................... 295
Effect of Relative Impossibility......................................... 295
Art. 1268 ................................................................................... 296
Rule If Obligation Arises from Criminal Offense ............ 296
Art. 1269 ................................................................................... 297
Effect of Extinguishment of Obligation............................ 297
xxv
Effect Upon Collective Obligations................................... 308
Effect of Revocation of Confusion ..................................... 309
Section 5. — Compensation
xxvi
Section 6. — Novation
xxvii
Title II. — CONTRACTS
Chapter 1
GENERAL PROVISIONS
xxviii
Contracts In Fraud of Creditors ....................................... 389
Art. 1314 ................................................................................... 389
Interferences With Contractual Relations ....................... 389
Idem; Requisites ....................................................... 390
Art. 1315 ................................................................................... 391
Art. 1316 ................................................................................... 392
Perfection of Contracts ...................................................... 392
Art. 1317 ................................................................................... 393
Contracts in Name of Another .......................................... 393
Chapter 2
ESSENTIAL REQUISITES OF CONTRACTS
General Provisions
Section 1. — Consent
xxix
Idem; Incapacitated persons .................................... 417
Idem; id. Unemancipated minors............................. 418
Idem; id. Effect of misrepresentation ...................... 418
Idem; id. Insane or demented persons ..................... 421
Idem; id. Deaf-mutes ................................................ 423
Idem; id. Other incapacitated persons..................... 423
Art. 1328 ................................................................................... 425
Art. 1329 ................................................................................... 425
Disqualifications to Contract ............................................ 425
Idem; Distinguished from incapacity to contract .... 425
Art. 1330 ................................................................................... 428
Vices of Consent ................................................................ 428
Art. 1331 ................................................................................... 429
Mistake ........................................................................... 429
Idem; Mistakes which vitiate consent ..................... 429
Idem; id. Mistake of fact ........................................... 430
Art. 1332 ................................................................................... 432
Rule Where a Party is Illiterate ....................................... 432
Art. 1333 ................................................................................... 434
Art. 1334 ................................................................................... 434
Mistake of Law .................................................................. 434
Art. 1335 ................................................................................... 435
Art. 1336 ................................................................................... 436
Violence and Intimidation ................................................ 436
Idem; Requisites of violence ..................................... 436
Idem; Requisites of intimidation.............................. 436
Idem; id. Character of intimidation ......................... 436
Idem; id. Distinguished from reluctant consent ..... 437
Idem; id. Determination of degree
of intimidation .................................................. 441
Idem; id. Effect of just or legal threat...................... 442
Art. 1337 ................................................................................... 442
Undue Influence ................................................................ 443
Idem; Undue influence which vitiates consent ....... 443
Art. 1338 ................................................................................... 444
Fraud ........................................................................... 444
Idem; Kinds of fraud ................................................. 444
Idem; Requisites ....................................................... 445
Idem; id. Nature of fraud.......................................... 445
Art. 1339 ................................................................................... 447
Effect of Failure to Disclose Facts .................................... 447
Art. 1340 ................................................................................... 447
Effect of Exaggerations in Trade ...................................... 447
xxx
Art. 1341 ................................................................................... 448
Effect of Expression of Opinion ........................................ 448
Art. 1342 ................................................................................... 449
Effect of Misrepresentation By Third Persons ................ 449
Art. 1343 ................................................................................... 450
Art. 1344 ................................................................................... 450
Magnitude of Fraud........................................................... 451
Relation Between Fraud and Consent ............................. 451
Art. 1345 ................................................................................... 454
Art. 1346 ................................................................................... 454
Simulation of Contracts .................................................... 454
Idem; Effects ............................................................. 454
Contracts of Adhesion ....................................................... 455
xxxi
Art. 1352 ................................................................................... 472
Art. 1353 ................................................................................... 472
Art. 1354 ................................................................................... 472
Art. 1355 ................................................................................... 472
Essential Requisites of Cause........................................... 472
Idem; Effect of lack of cause ..................................... 472
Idem; Effect of unlawful cause ................................. 475
Idem; Effect of false cause ........................................ 478
Chapter 3
FORMS OF CONTRACTS
Chapter 4
REFORMATION OF INSTRUMENTS
xxxii
Chapter 5
INTERPRETATION OF CONTRACTS
Chapter 6
RESCISSIBLE CONTRACTS
xxxiii
Effect of Rescission Upon Third Persons ......................... 513
Art. 1386 ................................................................................... 517
Art. 1387 ................................................................................... 517
Art. 1388 ................................................................................... 517
Proof of Fraud .................................................................... 517
Idem; Presumptions of fraud.................................... 518
Idem; Badges of fraud............................................... 526
Idem; id. Acquisition by third person
in good faith ...................................................... 528
Idem; id. Acquisition by third person in
bad faith............................................................ 529
Art. 1389 ................................................................................... 529
Prescriptive Period ............................................................ 529
Chapter 7
VOIDABLE CONTRACTS
xxxiv
Effect of Failure to Make Restitution............................... 555
Idem; Where loss is due to fault of defendant ......... 555
Idem; Where loss is due to fault of plaintiff ............ 556
Idem; Where loss is due to fortuitous event ............ 556
Chapter 8
UNENFORCEABLE CONTRACTS
Chapter 9
VOID OR INEXISTENT CONTRACTS
xxxv
Art. 1410 ................................................................................... 584
Imprescriptibility of Action or Defense ............................ 584
Art. 1411 ................................................................................... 591
Art. 1412 ................................................................................... 591
Principle of In Pari Delicto ............................................... 592
Idem; Effect if only one party is at fault.................. 601
Idem; Exceptions....................................................... 602
Art. 1413 ................................................................................... 603
Recovery By Debtor of Usurious Interest ........................ 603
Art. 1414 ................................................................................... 621
Art. 1415 ................................................................................... 621
Art. 1416 ................................................................................... 621
Article Applied ................................................................... 622
Art. 1417 ................................................................................... 631
Art. 1418 ................................................................................... 631
Art. 1419 ................................................................................... 631
Art. 1420 ................................................................................... 632
Article Applied ................................................................... 632
Art. 1421 ................................................................................... 634
Art. 1422 ................................................................................... 634
xxxvi
Idem; Estoppel in pais .............................................. 640
Idem; id. Estoppel by silence .................................... 640
Idem; id. Estoppel by acceptance of benefits ........... 640
Idem; Estoppel by deed or by record ........................ 640
Idem; id. Estoppel by judgment ............................... 640
Idem; Estoppel by laches .......................................... 641
Idem; id. Basis .......................................................... 641
Idem; id. Elements .................................................... 642
Idem; id. Application ................................................ 642
Idem; id. Laches distinguished from
prescription....................................................... 648
Art. 1434 ................................................................................... 649
Article Applied ................................................................... 649
Art. 1435 ................................................................................... 656
Art. 1436 ................................................................................... 656
Art. 1437 ................................................................................... 656
Art. 1438 ................................................................................... 656
Art. 1439 ................................................................................... 656
Title V. — TRUSTS
Chapter 1
GENERAL PROVISIONS
Chapter 2
EXPRESS TRUSTS
Chapter 3
IMPLIED TRUSTS
xxxvii
Art. 1448 ................................................................................... 661
Art. 1449 ................................................................................... 661
Art. 1450 ................................................................................... 661
Article Applied ................................................................... 661
Art. 1451 ................................................................................... 662
Art. 1452 ................................................................................... 662
Art. 1453 ................................................................................... 662
Art. 1454 ................................................................................... 663
Art. 1455 ................................................................................... 663
Art. 1456 ................................................................................... 663
Article Applied ................................................................... 663
Idem; Prescriptibility of actions to enforce trust .... 663
Idem; id. Period of prescription ................................ 664
Idem; Laches may bar action ................................... 665
Idem; Acquisition of property by trustee
through prescription ........................................ 666
Idem; Illustrative cases ............................................ 667
Art. 1457 ................................................................................... 677
xxxviii