BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY.

BATHAN (2019)

petitioners found out that the property was already

about to be sold, thus they instituted this case for
I. OBLIGATIONS Specific Performance [of the right of first refusal].

A. General Provisions The Trial Court dismissed the case. The trial court also
held that the Unjieng’s offer to sell was never accepted
1. Art. 1156 An obligation is a juridical necessity to by the Petitioners for the reason that they did not
give, to do or not to do. agree upon the terms and conditions of the proposed
2. Civil Obligation vs Natural Obligation sale, hence, there was no contract of sale at all.
Nonetheless, the lower court ruled that should the
Civil Obligation Natural Obligation defendants subsequently offer their property for sale at
Obligations which Not based on positive a price of P11-million or below, plaintiffs will have the
give to the creditor or law but equity and right of first refusal.
obligee a right under natural law. They do
the law to enforce not grant a right of The Court of Appeals affirmed the decision of the Trial
their performance in action to enforce Court.
courts of justice. their performance
although in case of In the meantime, in 1990, the property was sold to De
voluntary fulfilment by Buen Realty, Private Respondent in this case. The title
the debtor, the latter to the property was transferred into the name of De
may not recover what Buen and demanded that the Petitioners vacate the
has been delivered or premises.
rendered by reason
thereof. Because of this, Petitioners filed a motion for execution
of the CA judgement. At first, CA directed the Sheriff to
execute an order directing the Unjiengs to issue a
3. Requisites of an Obligation Deed of Sale in the Petitioner’s favour and nullified the
sale to De Buen Realty. But then, the CA reversed
(a) Active Subject (called the obligee or creditor) – the
itself when the Private Respondents Appealed
possessor of a right; he in whose favor the obligation is
constituted. Issues:
(b) Passive Subject (called the debtor or obligor) – he Whether or not the Contract of Sale is perfected by
who has the duty of giving, doing, or not doing. the grant of a Right of First Refusal.
(c) Object or Prestation (the subject matter of the Whether or not a Right of First Refusal may be
obligation) enforced in an action for Specific Performance.
(d) Efficient Cause (juridical tie or vinculum) – the Held:
reason why the obligation exists
No. A Right of First Refusal is not a Perfected Contract
of Sale under Art. 1458 or an option under Par. 2 Art
Asuncion et al vs CA and Buen 1479 or an offer under Art. 1319. In a Right of First
Refusal, only the object of the contract is determinate.
Realty Development Corp This means that no vinculum juris is created
Facts: between the seller-offeror and the buyer-offeree.

Petitioners Ang Yu Asuncion et. al. are lessees of
residential and commercial spaces owned by the
Unjiengs. They have been leasing the property and
possessing it since 1935 and have been paying
rentals.
In 1986, the Unjiengs informed Petitioners Ang Yu
Asuncion that the property was being sold and that
Petitioners were being given priority to acquire them
(Right of First Refusal). They agreed on a price of P5M
but they had not yet agreed on the terms and
conditions. Petitioners wrote to the Unjiengs twice,
asking them to specify the terms and conditions
for the sale but received no reply. Later, the
No. Since a contractual relationship does not exist
between the parties, a Right of First Refusal may not
be enforced through an action for specific
performance. Its conduct is governed by the law on
human relations under Art. 19-21 of the Civil Code and
not by contract law.
Therefore, the Supreme Court held that the CA could
not have decreed at the time the execution of any
deed of sale between the Unjiengs and Petitioners.
Other Rules, Comments and Discussion:

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 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)
This case is notable because it lays down the rules on
options contracts and right of first refusal as well as
promises to buy and sell. First, the Supreme Court
discussed the stages of the formation of a sales
contract, these are:
Negotiation – covers the period from the time the
prospective contracting parties indicate interest in the
contract to the time the contract is concluded
(perfected).
Perfection – takes place upon the concurrence of the
essential elements thereof. In a sales contract this is
governed by Art. 1458
Consummation – begins when the parties perform their
respective undertakings under the contract culminating
in the extinguishment thereof
Until the contract is perfected (No. 2), it cannot, as an
independent source of obligation, serve as a binding
juridical relation. A sales contract is perfected when a
person, called the seller, obligates himself, for a price
certain, to deliver and to transfer ownership of a thing
or right to another, called the buyer, over which the
latter agrees (Art 1458).
Under Art. 1458, there is no perfection of a sale under
a “Contract to Sell”. A Contract to Sell is characterized
as a conditional sale and the breach of the suspensive
condition will prevent the obligation to transfer title
from acquiring obligatory force.
An obligation is a juridical necessity to give, to do or
not to do (Art. 1156, Civil Code). The obligation is
constituted upon the concurrence of the essential
elements thereof, viz:
(a) The vinculum juris or juridical tie which is the
efficient cause established by the various sources of
obligations (law, contracts, quasi-contracts, delicts and
quasi-delicts);
(b) the object which is the prestation or conduct,
required to be observed (to give, to do or not to do);
and
(c) the subject-persons... who, viewed from the
demandability of the obligation, are the active (obligee)
and the passive (obligor) subjects.
Among the sources of an obligation is a contract (Art.
1157, Civil Code), which is a meeting of minds
between two persons whereby one binds himself, with
respect to the other, to give something or to render
some service (Art. 1305, Civil Code)
Until the contract is perfected, it cannot, as an
independent source of obligation, serve as a
binding juridical relation. In sales, particularly, to
which the topic for discussion about the case at bench
belongs, the contract is perfected when a person,
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called the seller, obligates himself, for a price certain,
to deliver and to transfer ownership of a thing or right
to another, called the buyer, over which the latter
agrees. Article 1458 of the Civil Code provides:
"Art. 1458. By the contract of sale one of the
contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and
the other to pay therefor a price certain in money or its
equivalent.
"A contract of sale may be absolute or conditional."
4. General Classifications
i. As to sanction
1) Civil obligation (or perfect obligation)
- The sanction is judicial process.
- Defined in Art. 1156
2) Natural obligation
The duty not to recover what has voluntarily been paid
although payment was no longer required.
- The sanction is law, but only because conscience
had originally motivated the payment.
3) Moral obligation (or imperfect obligation)
The duty of a Catholic to hear mass on Sundays and
holy days of obligation.
- The sanction here is conscience or morality, or the
law of the church.
ii. As to subject matter
1) Real obligation – the obligation to give
2) Personal obligation – the obligation to to or not
do
iii. As to affirmativeness and negativeness of the
obligation
1) Positive obligation – obligation to give or to do
2) Negative obligation – obligation not to do
iv. As to persons obliged
1) Unilateral – where only one of the parties is
bound
2) Bilateral – where both parties are bound
a. Reciprocal
b. Non-Reciprocal
5.
Obligation Cause of Action
(Wrong)
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)

The act or performance An act or omission of may return in the course of the completion of the
which the law will one party in violation of Project.
enforce. the legal right or rights of
another, causing injury Petitioner sought the reconveyance of the unused
to the latter portion of the property from the government.
An obligation on the part of a person cannot exist
Titan filed with the RTC a Petition for Declaratory
without a corresponding right in favor of another, and
relief, etc.
vice versa. A wrong or cause of action only arises at
the moment a right has been transgressed or violated. RTC denied for lack of merit.
Subject Matter Cause of Action Titan appealed to CA.
(Prestation) (Wrong)
The conduct required to An act or omission of Meanwhile, Titan filed an action for specific
be observed by the one party in violation of performance on the compromise judgment to the
debtor the legal right or rights of RTC.
another, causing injury
to the latter This prompted petitioner to file with the CA a Motion
for Direct Contempt and to Dismiss based on Forum
Shopping.
Ex. In a breach of contract,
It was dismissed by RTC, and his MR also denied.
Contract violated - subject matter,
Respondent filed a motion to withdraw the petition in
Breach thereof by the obligor - cause of action CA, which was granted. Thus, the case was dismissed
The subject matter is the item with respect to with finality.
which the controversy has arisen or concerning The RTC held that the violation on the rule of non-
which the wrong has been done, and is ordinarily forum shopping was cured when the CA dismiss with
the right, the thing or the contract under dispute. finality the motion for declaratory relief.
(Bachrach Corporation vs. Court of Appeals, 296
SCRA 487 [1998]; Dela Rosa vs. Mendiola, 401 SCRA Issue:
704 [2003].)
WON the specific performance case is barred by the
Elements of a Cause of Action are: petition for declaratory relief case on the ground of res
judicata?
(1) the legal right of plaintiff/creditor/obligee
Held:
(2) the correlative legal obligation of the
defendant/debtor/obligor (to respect or not to violate Yes.
said right)
There is res judicata where the following essential
(3) the act or omission of the defendant in violation of conditions occur:
said legal right.
(1) There must be a final judgment or order;

(2) The court rendering it must have jurisdiction over

De La Rama vs Mendiola
Facts:
Petitioner sold to the government on expropriation a
parcel of land, for use in the construction of the EDSA
Extension project.
Then, undertook to sell to respondent Titan Corp a
parcel of land adjacent to the one expropriated. Then
petitioner failed to comply with his obligations,
prompting respondent to file for rescission of contract.
Then, a compromise agreement between the parties
was effected with an Agreement to Sell and Buy,
stipulating that the respondent is waiving all his rights
with the parcel of land within which the government
the subject matter and the parties;
(3) It must be a judgment or order on the merits; and
(4) There must be, between the two cases, identity of
parties, subject matter and causes of action.
The subject matters and causes of action of the two
cases are likewise identical. A subject matter is the
item with respect to which the controversy has arisen,
or concerning which the wrong has been done, and it
is ordinarily the right, the thing, or the contract under
dispute. In the case at bar, both the first and second
actions involve the same real property. A cause of
action, broadly defined, is an act or omission of one
party in violation of the legal right of the other. Its
elements are the following:

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 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)
(1) the legal right of plaintiff;
(2) the correlative obligation of the defendant, and
(3) the act or omission of the defendant in violation of
said legal right.
Causes of action are identical when there is an identity
in the facts essential to the maintenance of the two
actions, or where the same evidence will sustain both
actions. If the same facts or evidence can sustain
either, the two actions are considered the same, so
that the judgment in one is a bar to the other. It is true
that the first case was a special civil action for
declaratory relief while the second case was a civil
action for specific performance. However, the
difference in form and nature of the two actions is
immaterial.
The issue involved in the declaratory relief case was
whether respondent has rights over the property which
was reconveyed to petitioner considering that he
waived all his rights by executing the Agreement to
Sell and Buy. In the specific performance case, the
issue involved was the same, that is, whether
respondent was entitled to the property reconveyed
when the petitioner failed to comply with the terms of
their agreement embodied in the same Agreement to
Sell and Buy. Respondent's alleged right in both
cases depends on one and the same instrument,
the Agreement to Sell and Buy.
Bachrach Corporation vs CA
Facts:
Bachrach Corporation entered into two lease contracts
with the Philippine government located at the Manila
Port Area.
During her tenure, President Corazon
Aquino issued Executive Order No. 321 transferring
the management and administration of the entire Port
Area to herein respondent Philippine Ports Authority
(PPA).
PPA issued a Memorandum increasing the rental rates
of Bachrach by 1,500%. Bachrach refused to pay the
substantial increased rates demanded by PPA.
PPA initiated unlawful detainer proceedings at the
Metropolitan Trial Court (MeTC) of Manila, against
Bachrach for non-payment of rent.
On 27 April 1993, MeTC rendered a decision ordering
the eviction of Bachrach from the leased premises.
Bachrach appealed to the Regional Trial Court (RTC)
of Manila which, on 21 September 1993, affirmed the
decision of the lower court in toto.
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Bachrach elevated the case to the Court of Appeals by
way of a petition for review. CA affirmed the decision
of RTC.
An MR was filed by Bachrach however, the resolution
was put on hold pending submission of a compromise
agreement.
Parties failed to submit the promise compromise
agreement so the CA denied Bachrach’s Motion for
reconsideration.
The decision of CA became final and executory.
Bachrach, while the MR was pending, filed a complaint
against PPA for refusing to honor a compromise
agreement said to have been perfected between
Bachrach and PPA during their conference that
superseded the ejectment case. In its complaint,
Bachrach prayed for specific performance.
Issue:
WON the CA erred in not dismissing the case despite
the fact that a similar petition earlier filed by PPA was
dismissed for being insufficient not only in form but
also in substance which dismissal constitutes res
judicata insofar as the issued raised therein are
concerned.
Held:
Yes. The CA erred. It would appear quite plain then
that the RTC did act aptly in taking cognizance of the
specific performance case. In Civil Case No. 138838 of
the MeTC, the unlawful detainer case, the subject
matter is the contract of lease between the parties
while the breach thereof, arising from petitioners non-
payment of rentals, constitutes the suits cause of
action. In Civil Case No. 73399 of the RTC, the
specific performance case, the subject matter is the
compromise agreement allegedly perfected between
the same parties while the cause of action emanates
from the averred refusal of PPA to comply therewith.
B. Sources of Obligations
Art. 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-Contracts;
(4) Act or omissions punished by law; and
(5) Quasi-Delicts.
Art. 1158. Obligations derived from law are not
presumed. Only those expressly determined in this
Code or in special laws are demandable, and shall
be regulated by the precepts of the law which
establishes them; and as to what has not been
foreseen, by the provisions of this Book.
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)
Pelayo vs Lauron
Facts:
Dr. Arturo Pelayo filed a complaint against Marcelo
Lauron and Juana Abella. He alleged that on October
13, 1906 at night, Pelayo was called to the house of
the defendants to assist their daughter-in-law who was
about to give birth to a child. Unfortunately, the
daughter-in-law died as a consequence of said
childbirth. Thus, the defendant refuses to pay. The
defendants argue that their daughter-in-law lived with
her husband independently and in a separate house
without any relation, that her stay there was accidental
and due to fortuitous event.
Issue:
WON the defendants should be held liable for the fees
demanded by the plaintiff upon rendering medical
assistance to the defendants’ daughter-in-law.
Ruling:
No. The Court held that the rendering of medical
assistance is one of the obligations to which spouses
are bound by mutual support, expressly determined by
law and readily demanded. Therefore, there was no
obligation on the part of the in-laws but rather on the
part of the husband who is not a party.
Thus, decision affirmed.
Among the reciprocal obligations existing between
a husband and wife is that of support, which
obligation is established by law.
Dela Cruz vs Northern Theatrical
Enterprise
Facts:
Domingo Delacruz, the plaintiff was hired as a security
guard for the Northern Theatrical Enterprises Inc, the
defendants. One Benjamin Martin wanted to crash the
gate or entrance of the movie house without a ticket.
Infuriated by the refusal of plaintiff De la Cruz to let him
in without first providing himself with a ticket, Martin
attacked him with a bolo. De la Cruz defendant himself
as best he could until he was cornered, at which
moment to save himself he shot the gate crasher,
resulting in the latter’s death. After trial, he was finally
acquitted of the charge on January 31, 1948. In both
criminal cases De la Cruz employed a lawyer to
defend him. He demanded from his former employer
reimbursement of his expenses but was refused, after
which he filed the present action against the movie
corporation and the three members of its board of
directors, to recover not only the amounts he had paid
his lawyers but also moral damages said to have been
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suffered, due to his worry, his neglect of his interests
and his family as well in the supervision of the
cultivation of his land, a total of P15,000.
Issue:
WON the employer and movie corporation is liable for
the obligation to render legal assistance and the
reimbursement of the expenses of Delacruz.
Held:
No. An employer has no obligation to furnish free
legal assistance to his employees because no law
requires this, and therefore, an employee may not
recover from his employer the amount he may
have paid a lawyer hired by him to recover
damages caused to said employee by a stranger or
strangers while in the performance of his duties.
(Obligations from law are not presumed. Art. 1158)
Contracts
Art. 1159. Obligations arising from contracts are
have the force of law between the contracting
parties and should be complied with in good faith.
Manzano vs Lazaro
FACTS:
1. Petitioner Eduardo B. Manzano and respondent
Antonio B. Lazaro entered into a Professional Services
Contract pertaining to the former's candidacy for the
Vice-Mayoralty post in Makati City.
2. Subsequently, petitioner won as Vice-Mayor of
Makati. Respondent, thereafter, learned in a
transmittal letter representing the last payroll of certain
individuals, which included him, that he would be paid
the amount of P15,000.00 only and the balance of
P20,000.00 shall be forwarded only upon his final
inventory of materials used during the campaign.
3. Petitioner acknowledged respondent's demand letter
and the delivery of the campaign equipment and
furniture in his letter but wrote that he needed to
receive the liquidation of the expenses incurred during
the campaign.
4. Respondent wrote that the preparation of the
audited financial report of the campaign was not part of
his responsibilities. As respondent's demand for
petitioner to pay him remained unheeded, he led with
the RTC an action for collection of sum of money
against petitioner.
5. RTC concluded that petitioner's contention was
merely used as an excuse to evade payment after
respondent had complied with the conditions requiring
the latter to submit such inventory.
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)
6. RTC said that to allege that petitioner's consent was
vitiated would not justify the refusal to pay the agreed
remuneration in the absence of a court ruling annulling
the subject contract; and that unless said contract was
annulled, the terms therein remained enforceable.
7. Petitioner filed his appeal with the CA. CA rendered
its assailed Decision, which dismissed the appeal and
affirmed the RTC decision. Petitioner's motion for
reconsideration was denied
ISSUE:
WON, petitioner is entitled to pay not only the full
payment of the compensation but also the bonus pay
for the performance of respondent’s professional
services
RULING:
YES.
1. It is basic that a contract is the law between the
parties. Obligations arising from contracts have the
force of law between the contracting parties and
should be complied with in good faith. (Art. 1159)
Unless the stipulations in a contract are contrary to
law, morals, good customs, public order or public
policy, the same are binding as between the parties.
2. In this case, the three-month period stated in the
contract had already elapsed and petitioner won as
Vice-Mayor of Makati in the 1998 elections, thus,
respondent is entitled not only to the full payment of
his compensation but also to a bonus pay.
3. Noteworthy to mention is the fact that petitioner had
even paid respondent his salary for the three-month
period with only a balance of P20,000.00, conditioned
upon respondent's delivery of the inventory of
campaign equipment. Such payment established that
indeed respondent had performed his responsibilities
under the contract. We, therefore, agree with the
RTC's conclusion that petitioner's claim of breach of
contract was merely used as an excuse to evade
payment of the amounts due respondent.
Compliance in good faith – means compliance or
performance in accordance with the stipulations or
terms of the contract or agreement.
Non-compliance by a party with his obligations with his
legitimate obligations after receiving the benefits of a
contract would constitute unjust enrichment on his
part.
-De Leon
Golangco Construction Corp vs
Philippine Commercial International
Bank
6|Page
FACTS:
1. William Golangco Construction Corporation
(WGCC) and the Philippine Commercial International
Bank (PCIB) entered into a contract for the
construction of the extension of PCIB Tower II.
2. The project included, among others, the application
of a granitite wash-out finish on the exterior walls of
the building.
3. Portions of the granitite wash-out finish of the
exterior of the building began peeling off and falling
from the walls in 1993. WGCC made minor repairs
after PCIB requested it to rectify the construction
defects.
4. In 1994, PCIB entered into another contract with
Brains and Brawn Construction and Development
Corporation to re-do the entire granitite wash-out nish
after WGCC manifested that it was "not in a position to
do the new finishing work," though it was willing to
share part of the cost.
5. PCIB led a request for arbitration with the
Construction Industry Arbitration Commission
(CIAC) for the reimbursement of its expenses for
the repairs made by another contractor. It
complained of WGCC's alleged non-compliance
with their contractual terms on materials and
workmanship.
6. The CIAC declared WGCC liable for the
construction defects in the project. WGCC led a
petition for review with the Court of Appeals (CA)
which dismissed it for lack of merit. Its motion for
reconsideration was similarly denied.
ISSUE:
WON, petitioner WGCC is liable for defects in the
granitite wash-out finish that occurred after the lapse of
the one-year defects liability period.
RULING:
NO.
1. Under Article 1723 of the Civil Code, the
CONTRACTOR hereby guarantees the work
stipulated in this Contract, and shall make good
any defect in materials and workmanship which
[becomes] evident within one (1) year after the final
acceptance of the work.
2. This kind of a stipulation is of particular importance
to the contractor, for as a general rule, after the lapse
of the period agreed upon therein, he may no longer
be held accountable for whatever defects, deficiencies
or imperfections that may be discovered in the work
executed by him.
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)
3. The autonomous nature of contracts is enunciated
in Article 1306 of the Civil Code.
Article 1306. The contracting parties may establish
such stipulations, clauses, terms and conditions as
they may deem convenient, provided they are not
contrary to law, morals, good customs, public order, or
public policy.
4. Obligations arising from contracts have the force of
law between the parties and should be complied with
in good faith. In characterizing the contract as having
the force of law between the parties, the law stresses
the obligatory nature of a binding and valid agreement.
5. By the nature of the obligation in such contract,
the provision limiting liability for defects and fixing
specific guaranty periods was not only fair and
equitable; it was also necessary. Without such
limitation, the contractor would be expected to
make a perpetual guarantee on all materials and
workmanship.
6. The contract did not specify a different period
for defects in the granitite wash-out finish; hence,
any defect therein should have been brought to
WGCC's attention within the one- year defects
liability period in the contract.
7. It was not an obligation that remained unperformed
or unfulfilled at the time the defects liability certificate
was issued. The alleged defects occurred more
than a year from the final acceptance by PCIB. The
purpose of the defects liability period was precisely to
give PCIB additional, albeit limited, opportunity to
oblige WGCC to make good any defect, hidden or
otherwise, discovered within one year.
Teresita Dio vs St. Ferdinand
Memorial Park
Facts:
On December 11, 1973, Teresita Dio agreed to buy,
on installment basis, a memorial lot from the St.
Ferdinand Memorial Park, Inc. (SFMPI) in Lucena City.
The purchase was evidenced by a Pre-Need Purchase
Agreement.
SFMPI issued a Deed of Sale and Certificate of
Perpetual Care. The ownership of Dio over the
property was made subject to the rules and regulations
of SFMPI, as well as the government, including all
amendments, additions and modifications that may
later be adopted. Dio decided to build a mausoleum on
the lot. She caused the preparation of a design-plan
for the construction of a mausoleum and the bidding
out of the project.
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Dio informed SFMPI, through its president and
controlling stockholder, that she was planning to build
a mausoleum on her lot and sought the approval
thereof. Dio even showed the plans and project
specifications accomplished by her private contractor.
The plans and specifications were approved, but was
insisted that the mausoleum be built by it or its agents
at a minimum cost of P100,000.00 as provided in Rule
69 of the Rules and Regulations the SFMPI.
On October 17, 1986, SFMPI wrote Dio informing her
that under Rule 69 of SFMPI Rules and Regulations,
she was prohibited from engaging an outside
contractor for the construction of buildings,
improvements and memorials.
Issue:
Whether or not Rule 69 is valid and binding upon
petitioner.
Held:
Yes.
Under the Deed of Sale and Certificate of Perpetual
Care, petitioner agreed to be bound not only by the
existing rules but also by future rules and
regulations that may be adopted by respondent
SFMPI. Thus, when petitioner executed the Pre-Need
Purchase Agreement and conformed to the Deed of
Sale, it was with full knowledge of the terms and
conditions thereof, including the rules and regulations
issued by respondent SFMPI. Hence, petitioner is
precluded from asserting that she had no
knowledge of said rules and regulations, and that
she never consented to comply with them. More
importantly, petitioner cannot feign ignorance of
said rules.
Petitioner is obliged to abide by the terms and
conditions of the Pre-Need Purchase Agreement
and the Deed of Sale, as well as said rules and
regulations which formed integral parts of said
deeds.
NHA V. Grace Baptist Church and
CA
FACTS:
1. Respondent Church applied to purchase lots from a
Resettlement Project in Cavite. Petitioner approved the
respondent’s application. Respondent entered into
possession of the lots and introduced
improvements thereon.
2. NHA's Board of Directors passed Resolution No.
2126, approving the sale of the subject lots to
respondent Church at the price of P700.00 per
square meter, or a total price of P430,500.00. The
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)
Church was duly informed of this Resolution
through a letter sent by the NHA.
3. The Church tendered to the NHA a manager’s
check in the amount of P55,350.00, purportedly in
full payment of the subject properties. The Church
insisted that this was the price quoted to them by the
NHA Field Office
4. Petitioner NHA returned the check, stating that the
amount was insufficient considering that the price of
the properties has changed. Thus, the Church
instituted a complaint for specific performance and
damages against the NHA with the Regional Trial
Court
5. RTC Ordered the defendant to reimburse to the
plaintiff the amount of P4,290.00 representing the
overpayment made and declared that there was no
perfected contract of sale
6. On appeal, the Court of Appeals, affirmed the trial
court’s finding that there was indeed no contract of
sale between the parties.
7. Petitioner NHA led a Motion for Reconsideration
which was denied in a Resolution dated November 8,
2002. Hence, the instant petition for review
ISSUE:
WON, there is the existence of a valid contract of sale
RULING:
NO
1. It is a fundamental rule that contracts, once
perfected, bind both contracting parties, and
obligations arising therefrom have the force of law
between the parties and should be complied with in
good faith. However, it must be understood that
contracts are not the only source of law that
govern the rights and obligations between the
parties.
2. The offer of the NHA to sell the subject property, as
embodied in Resolution No. 2126, was similarly not
accepted by the respondent. Thus, the alleged
contract involved in this case should be more
accurately denominated as inexistent. There being no
concurrence of the offer and acceptance, it did not
pass the stage of generation to the point of
perfection.
3. The mere inexistence of a contract, which would
ordinarily serve as the law between the parties, does
not automatically authorize disposing of a controversy
based on equitable principles alone. Notwithstanding
the absence of a perfected contract between the
parties, their relationship may be governed by other
8|Page
existing laws which provide for their reciprocal rights
and obligations.
4. Equity cannot give validity to a void contract,
and this rule should apply with equal force to
inexistent contracts.
Spouses Tiu Peck and Lee Lok Yan
vs CA and Spouses Conchita
Rubiato and Tan King
FACTS:
1. Joaquin Tiu Singco; father of petitioner Tiu Peck,
owned and operated the Argentina Trading, a business
engaged in the buying and selling of lumber, hardware
and general merchandise
2. Helping him run the business were private
respondents. After the death of Joaquin Tiu Singco in
1974, Tiu Peck took over and continued the business
left by his father.
3. Sometime in 1983, petitioners and private
respondents decided to end their business partnership.
Together with the five (5) middlemen, Tiu Peck and
Tan King discussed the manner of their separation and
the liquidation of the partnership properties. As a result
of the discussion, an "Agreement on the
Apportionment of Partnership Business" was
drawn up.
4. Eventually, private respondents filed an action
against petitioners for partition of the parcel of
land where the lumber and hardware business was
conducted and the parcel of land covered by where
the piggery business was located.
5. Regional Trial Court of the Third Judicial Region,
rendered judgment, declaring, among other things,
that the parcels of land are owned in common by
the plaintiffs (private respondents) and the
defendants (petitioners) in pro-indiviso equal
shares; and ordering plaintiffs and defendants to
partition the said parcels of land among
themselves.
6. Petitioners appealed the above decision to
respondent Court of Appeals respondent Court
promulgated the challenged decision modifying the
trial court's judgment
7. Undaunted, petitioners are now before us seeking a
review of respondent court's decision
THE FIRST ISSUE: concerns the alleged business
partnership between Tiu Peck on the one hand and the
spouses Tan King and Conchita M. Rubiato on the
other.
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)
1. To begin with, it cannot be said that there was a
business partnership between the appellants on
the one hand and the appellees on the other,
absent the required public instrument constituting
the partnership, immovable properties having been
contributed by the parties (Article 1771, Civil Code)
and recording thereof in the Securities and Exchange
Commission (Article 1772, Civil Code).
2. Nonetheless, the parties may be deemed as co-
owners of the real properties and the businesses
they are engaged in mentioned in the agreement
SECOND ISSUE: whether or not the agreement of 31
August 1983 is valid and binding between the
petitioners and private respondents.
1. There is no question that petitioners and the
private respondents voluntarily entered into the
agreement to apportion or divide their businesses,
whether as partners or co-owners. That agreement
is the law between them. Contracts shall be
obligatory in whatever form they may have been
entered into, provided all the essential requisites
for their validity are present.
2. The fact that after signing the agreement both
parties immediately took possession of their respective
shares is the most compelling evidence that there was
indeed a binding partition of the properties. Contracts,
once perfected, have the force of law between the
parties who are bound to comply therewith in good
faith, and neither one may, without the consent of the
other, renege therefrom.
3. Private respondents have no justification to
refuse delivery of TCT No. T-24999 to petitioners
after they agreed to the partition and consequently
took possession of the piggery business and
operated it for three (3) years before changing their
minds and seeking a new partition.
".Contracts solemnly and deliberately entered into may not
be overturned by inconclusive proof or by reason of mistake
of one of the parties to which the other in no way has
contributed."
4. To determine the nature of a contract, courts do not
have or are not bound to rely upon the name or title
given it by the contracting parties but the way the
contracting parties do or perform their respective
obligations, stipulated or agreed upon may be shown
and inquired into, and should such performance
conflict with the name or title given the contract by the
parties, the former must prevail over the latter."
5. The partition of the properties subject of the
Agreement On the Apportionment of Partnership
Businesses, dated 31 August 1983, is hereby
declared valid and binding between petitioners and
the private respondents;
9|Page
Quasi-Contracts
Art. 1160. Obligations derived from quasi-contracts
shall be subject to the provisions of Chapter 1,
Title XVII of this Book.
Definition:
A quasi-contract is that juridical relation resulting from
a lawful, voluntary, and unilateral act, and which has
for its purpose the payment of indemnity to the end
that no one shall be unjustly enriched or benefited at
the expense of another. (Art. 2142)
The 2 Principal Kinds:
(a) negotiorum gestio (unauthorized management)
(b) solutio indebiti (undue payment)
A. Negotiorum Gestio
- The voluntary management of the property or affairs
of another without the knowledge or consent of the
latter. (Art. 2144)
-Reimbursement must be made to the gestor for
necessary and useful expenses, as a rule.
B. Solutio Indebiti
- The juridical relation which is created when
something is received when there is no right to
demand it and it was unduly delivered through
mistake.
Requisites:
(a) There is no right to receive the thing delivered;
and
(b) The thing was delivered through mistake.
Is a Quasi-Contract an Implied Contract?
NO. Because in a quasi-contract (unlike in an impied
contract) there is NO meeting of the minds.
BPI vs Elizabeth Sarmiento
Facts:
Elizabeth Sarmiento was the assistant manager of BPI
Espana Branch. Sometime in 1987. The España
Branch was investigated for several alleged
anomalous transactions involving time deposits.
Among the suspects in the alleged scam was appellee
Sarmiento.
From October 10, 1987 to June 30, 1988, Sarmiento
did not regularly report for work. She however received
her full salary.
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)
Sarmiento received a demand from BPI to return said
amount but she refused to do so.
BPI asserted that since Sarmiento did not actually
work during the period adverted to, she was not
entitled to receive any salary.
According to Sarmiento, she was verbally directed to
stop working while the investigation was going on.
The RTC dismissed the complaint. The principle of
solutio indebiti upon which the petitioner based its
complaint. CA affirmed the decision.
ISSUE
WON there is Solutio Indebiti? NONE
HELD
The Supreme Court ruled in favor of Sarmiento.
The two requisites of Solutio Indebiti are NOT
present;
(1) There is no right to collect these excess sums; as
(2) The amounts have been paid through mistake by
defendants.
During the period in question, there still existed an
employer-employee relationship between the petitioner
and the respondent.
The Court likewise agrees with the CA that respondent
could not befaulted for not reporting for work because
she merely complied with the verbal instruction of AVP
Kimseng not to report for work when the latter was
conducting the investigation of the branch for
anomalies.
There can be no mistaken payment in this case. It
has been shown that the payment of respondent’s
salary was with the knowledge and approval of
respondent’s immediate superior officers.
Vicente Perez vs Eugenio Pomar,
Agent of the Compania-General de Tabacos
“Contracts resulting from an implied consent of
the parties are valid and enforceable.” (facio ut des
– I do the interpreting that you may give the
money)
“Where one has rendered services to another, and
these services are accepted by the latter, in the
absence of proof that the service was rendered
gratuitously, an obligation results to pay the
reasonable worth of the services rendered upon
the implied contract of hiring.”
“Although no fixed amount may have been
determined as the consideration for the contract of
10 | P a g e
hiring, the contract is nevertheless valid if the
amount of the implied compensation can be
determined by custom or frequent use in the place
where the services were rendered.”
FACTS:
1. Vicente Filed in the Court of First Instance of
Laguna a complaint against the defendant herein to
determine the amount due to the plaintiff, at the
customary rate of compensation for interpreting in
these island, for rendering services in the tabacalera
company.
2. In the complaint it was alleged that the defendant
rendered the services of the plaintiff to act as
interpreter between former and the military authorities;
not just for the latter but also between the defendant
and the colonel commanding the local garrison and
with various officer residing in the area, to the end that
such services might be punctually rendered, the agent,
Pomar, assured him that the Tabacalera Company
always generously repaid services rendered it, and
that he therefore did not trouble himself about his
inability to devote the necessary amount of time to his
business, the defendant going so far as to make him
flattering promises of employment with the company,
which he did not accept; that these statements were
made in the absence of witnesses and that therefore
his only proof as to the same was Mr. Pomar’s word as
a gentleman;
3. The defendant filed an answer to the complaint on
September 25, 1902 asking for the dismissal of the
complaint with the cost to the plaintiff, the defendant
denied the allegation and stated that it is wholly untrue,
the defendant also stated that the plaintiff acted as
interpreter of his own free will, without being requested
to do so by the defendant and without any offer of
payment or compensation; that therefore there existed
no legal relation whatever between the company and
the plaintiff, and the defendant.
ISSUE:
WON a Contract is formed between Perez and Pomar
RULING:
YES.
Article 1254 of the Civil Code provides that a contract
exists the moment that one or more persons consent
to be bound, with respect to another or others, to
deliver some thing or to render some service. Article
1255 provides that the contracting parties may
establish such covenants, terms, and conditions as
they deem convenient, provided they are not contrary
to law, morals or public policy. Whether the service
was solicited or offered, the fact remains that Perez
rendered to Pomar services as interpreter. As it does
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)
not appear that he did this gratuitously, the duty is
imposed upon the defendant, having accepted the
benefit of the service, to pay a just compensation
therefore, by virtue of the innominate contract of facio
ut des implicitly established.
It appears that Perez indeed rendered services as
interpreter of English. He obtained passes and
accompanied Pomar in his journeys in Laguna. But, it
doesn’t appear on record whether Perez was at the
disposal of Pomar for 6 months. No contract was
filed or any other innominate contract, but there
was tacit and mutual consent as to the rendition of
services.
Pomar accepted the service, and Perez rendered it
expecting that the benefit would be reciprocal. An
obligation arises from this scenario. There was an
innominate contract facio ut des. No salary was fixed
for the services, so the court must determine its value,
to be determined by the custom and frequent use of
the place in which such services were rendered. The
court ruled to Perez. Pomar should pay 200 Mexican
pesos, less 50 pesos as to the costs of the suit.
The supreme court of Spain in its decision of February
12, 1889, holds, among other things, “that not only is
there an express and tacit consent which produces
real contract but there is also a presumptive
consent which is the basis of quasi contracts, this
giving rise to the multiple juridical relations which
result in obligations for the delivery of a thing or
the rendition of a service.
David Reyes vs Jose Lim
Facts:
Petitioner Reyes filed a complaint for annulment of
contract and damages against respondents alleging
that petitioner as seller and respondent Lim as buyer
entered into a contract to sell a parcel of land.
Lim paid ten million pesos as down payment upon
the signing of the contract. However, before the
payment of the balance, Lim learned that Reyes
had already sold the property to another buyer.
Lim sought the cancellation of the contract to sell
and requested in open court that Reyes be ordered
to deposit the ten million down payment with the
trial court which was granted by the latter. Reyes
filed a Motion to Set Aside the Order but the same was
denied. Reyes filed a Petition for Certiorari with the
Court of Appeals (CA), but it was dismissed. Hence,
this petition for review.
In affirming the decision of the CA, the Supreme Court
ruled that the trial court, in the exercise of its equity
jurisdiction, may validly order the deposit of the ten
million down payment in court. The purpose of the
11 | P a g e
exercise of equity jurisdiction in this case is to
prevent unjust enrichment and to ensure
restitution. The application of equity always
involves the balancing of the equities in a
particular case, a matter addressed to the sound
discretion of the court. Here, the Court found the
equities weigh heavily in favor of Lim, who paid the
ten million down payment in good faith, only to
discover that Reyes had subsequently sold the
subject property to another buyer.
The Court further held that rescission creates the
obligation to return the things that are the subject of
the contract. Thus, since Reyes is demanding to
rescind the contract to sell, he cannot refuse to deposit
the ten million down payment in court. Such deposit
will ensure restitution of the ten million to its rightful
owner. Lim, on the other hand, has nothing to refund,
as he has not received anything under the contract to
sell. Moreover, in this case, it was just, equitable
and proper for the trial court to order the deposit of
the ten million down payment to prevent unjust
enrichment by Reyes at the expense of Lim
Issue:
WON the court can apply equity and require
deposit if the law already prescribes the specific
provisional remedies which do not include deposit.
Held: The instant case, the Supreme Court held that if
this was a case where there is hiatus in the law and in
the Rules of Court. If this case was left alone, the
hiatus will result in unjust enrichment to Reyes at
the expense of Lim. Here the court exercised
equity jurisdiction. The purpose of the exercise of
equity jurisdiction in this case is to prevent unjust
enrichment and to ensure restitution so that
substantial justice may be attained in cases where
the prescribed or customary forms of ordinary law
are inadequate.
The Supreme Court also state that rescission is
possible only when the person demanding rescission
can return whatever he may be obliged to restore. A
court of equity will not rescind a contract unless
there is restitution, that is, the parties are restored
to the status quo ante.
In this case, it was just, equitable and proper for
the trial court to order the deposit of the P10
million down payment. The decision of the Court of
Appeals was affirmed.
Rodzssen Supply Co. vs Far East
Bank & Trust Co.
“When the letter of Credit expires, the bank can
still collect from the plaintiff, not on the letter of
credit, but on the grounds of solutio indebiti”
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)
Facts:
Petitioner opened with respondent a domestic letter of
credit (LOC) in favor of Ekman and Company, Inc.
(Ekman) for the purchase of five hydraulic loaders. The
first three hydraulic loaders were received by the
petitioner before the expiry of LOC and respondent
paid Ekman. The remaining two hydraulic loaders were
received by the petitioner after the expiry of
LOC/contract but respondent still paid Ekman.
Petitioner refused to pay respondent. Respondent filed
a case. Petitioner answered by way of affirmative
defense that respondent had no cause of action being
allegedly in bad faith and breach of contract. The trial
court and Court of Appeals ruled in favor of respondent
to recover from the cost of two hydraulic loaders.
Issue:
WON the respondent is entitled of reimbursement from
petitioner for its payment out of mutual negligence.
Held:
YES. Petitioner should pay respondent bank the
amount the latter expended for the equipment
belatedly delivered by Ekman and voluntarily received
and kept by petitioner. Respondent bank’s right to
seek recovery from petitioner is anchored, not upon
the inefficacious Letter of Credit, but on Article 2142 of
the Civil Code which reads:
“Certain lawful, voluntary and unilateral acts give rise
to the juridical relation of quasi-contract to the end that
no one shall be unjustly enriched or benefited at the
expense of another.”
Ekman for the last 2 loaders on March 14, 1980, which
was five months after the expiration of the LC on
October 16, 1979. Respondent even informed
petitioner in December 1979 of the cancellation of the
LC and credited P22800 to the account of petitioner,
which represented the marginal deposit which
petitioner had been required to put up for the
unnegotiated portion of the LC. The subject LC had
become invalid upon the lapse of the period fixed
therein. Thus, respondent should not have paid
Ekman since it was not obliged to do so.
When both parties to a transaction are mutually
negligent in the performance of their obligations, the
fault of one cancels the negligence of the other, as in
this case, and their rights and obligations may be
determined equitably under the law proscribing unjust
enrichment.
Delict
Art. 1161. Civil obligations arising from criminal
offenses shall be governed by the penal laws,
12 | P a g e
subject to the provisions of Article 2177, and of the
pertinent provisions of Chapter 2, Preliminary Title,
on Human Relations, and of Title XVII of this Book,
regulating damages.
Art. 100 (RPC) Civil liability of a person guilty of
felony. – Every person criminally liable for a felony
is also civilly liable.
Scope of Civil Liability.
(a) Restitution;
(b) Reparation of the damage caused; and
(c) Indemnification for consequential damages.
People vs Catubig
FACTS:
1. Danilo Horio was charged with crime of rape before
rtc of Bulacan
2. Dannilyn, the private complainant, was raped by her
father and she was not able to resist him.
3. Dannilyns aunt, who got suspicious of what
appellant was doing to Dannilyn, informed the latters
mother, Jocelyn Catubig, about the said suspicion
4. Dannilyn was examined and it was found out that
Dannilyns healed laceration in the hymen was caused
by sexual intercourse
5. On 11 December 1998, the Regional Trial Court
rendered a decision holding the accused guilty of the
crime of rape; sentenced to suffer the penalty of death
and pay Dannilyn the amount of 50k as moral
damages
6. The concurrence of the minority of the victim and
her relationship to the offender are special qualifying
circumstances that are needed to be alleged in the
complaint or information for the penalty of death to be
decreed
ISSUE:
WON Article 335 of the Revised Penal Code as
amended by RA 7659 is applicable. (Death Penalty)
HELD:
1. Here, the information failed to state the minority of
the victim and her relationship with the offender, both
special qualifying circumstances under Republic Act
No. 7659, and for want of such allegations, the trial
court erred in imposing the death penalty on the
accused
2. Anent the award of damages, the trial court has
correctly awarded P50,000.00 moral damages, an
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)
award that rests on the jural foundation that the crime
of rape necessarily brings with it shame, mental
anguish, besmirched reputation, moral shock and
social humiliation to the offended party
3. In addition, the offended party deserves to receive
the amount of P50,000.00 civil indemnity, the
equivalent of compensatory damages, and exemplary
damages in the amount of P25,000.00
4. The Civil Code of the Philippines provides, in
respect to exemplary or corrective damage
a. ART. 2229. Exemplary or corrective damages are
imposed, by way of example or correction for the
public good, in addition to the moral, temperate,
liquidated or compensatory damages.
b. ART. 2230. In criminal offenses, exemplary
damages as a part of the civil liability may be imposed
when the crime was committed with one or more
aggravating circumstances. Such damages are
separate and distinct from fines and shall be paid to
the offended party.
c. ART. 2231. In quasi-delicts, exemplary damages
may be granted if the defendant acted with gross
negligence.
d. ART. 2232. In contracts and quasi-contracts, the
court may award exemplary damages if the defendant
acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.
e. ART. 2233. Exemplary damages cannot be
recovered as a matter of right; the court will decide
whether or not they should be adjudicated.
5. The alternative circumstance of relationship shall be
taken into consideration when the offended party is the
spouse, ascendant, descendant, legitimate, natural, or
adopted brother or sister, or relative by affinity in the
same degree of the offender.
6. As a rule, relationship is held to be aggravating in
crimes against chastity, such as rape
7. The term aggravating circumstances used by the
Civil Code, the law not having specified otherwise, is to
be understood in its broad or generic sense.
8. Thus, in the case at bar, although relationship has
not been alleged in the information, the offense having
been committed, however, prior to the effectivity of the
new rules, the civil liability already incurred by
appellant remains unaffected thereby.
9. WHEREFORE, the decision of the court a quo is
AFFIRMED with MODIFICATION in that appellant
Danilo Catubig y Horio is found guilty only of simple
rape and not in its qualified form, and he is hereby
sentenced to suffer the penalty of reclusion perpetua
13 | P a g e
and to pay complainant Dannilyn Catubig P50,000.00
civil indemnity, P50,000.00 moral damages and
P25,000.00 exemplary damages. Costs de oficio.
Thus, in the case at bar, although relationship has
not been alleged in the information, the offense
having been committed, however, prior to the
effectivity of the new rules, the civil liability already
incurred by appellant remains unaffected thereby.
In a criminal case, civil liability may be claimed
even if there is no specific allegation of damages
in the information or complaint that has been filed.
(Badiong vs Judge Apalisok)
Quasi-Delict
Art. 1162. Obligations derived from quasi-delicts
shall be governed by the provisions of Chapter 2,
Title XVII of this Book, and by special laws.
Definition of Quasi-Delict.
A quasi-delict is an act or omission by a person
(tortfeasor) which causes damage to another in his
person, property, or rights giving rise to an obligation
to pay for the damage done, there being fault or
negligence but there is no pre-existing contractual
relation between the parties. (Art. 2176)
Another name for quasi-delict is “tort” or “culpa
aquiliana.”
Requisites for Quasi-Delict:
(1) Act or omissions
(2) Fault or Negligence
(3) Damage Caused
(4) Direct relation or connection of cause and
effect between the act or omission and the
damage
Definition of Negligence (Culpa)
Negligence – the failure to observe, for the protection
of the interests of another person, that degree of care,
precaution, and vigilance which circumstances justly
demand, whereby such other person suffers injury.
Test for Determination of Negligence
Would a prudent man (in his position) foresee harm to
the person injured as a reasonable consequence of
the course about to be pursued? If so, the law imposes
a duty on the actor to refrain from that course, or to
take precaution against its mischievous results, and
the failure to do so constitutes negligence.
Reasonable foresight of harm, followed by the ignoring
of the admonition born of this provision, is the
constitute factof negligence.” (Picart v. Smith, 37 Phil.
809).
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)

Air France vs Rafael Carrascoso against personal misconduct, injurious language,

and CA
Facts:
The plaintiff, Rafael Carrascoso, paid for and was
issued a “First class” ticket by Air France from Manila
to Rome. During a stopover in Bangkok, the manager
of Air France asked the plaintiff to vacate his seat
because a white man has a “better right” than him. At
first, the plaintiff protested, but, as things got heated
up, he was asked by the other Filipinos on board to
give up his seat and transfer in the tourist class. After
the trip, Carrascoso sued Air France for the
embarrassment and inconvenience he suffered. The
trail court awarded damages to the plaintiff which was
affirmed by the Court of Appeals. Air France assailed
the decision. According to them, the issuance of a first
class ticket does not guarantee Carrascoso a seat in
the first Class.
Issue: Whether or not Air France is liable for the
damages to Carrascoso and on what basis
Decision:
Yes. Air France is liable based on culpa contractual
and culpa aquiliana.
Culpa Contractual:
There exists a contract of carriage between Air France
and Carrascoso. There was a contract to furnish
Carrasocoso a first class passage;
Second, That said contract was breached when Air
France failed to furnish first class transportation at
Bangkok; and
Third, that there was bad faith when Air France’s
employee compelled Carrascoso to leave his first class
accommodation berth “after he was already seated”
and to take a seat in the tourist class, by reason of
which he suffered inconvenience, embarrassments
and humiliations, thereby causing him mental anguish,
serious anxiety, wounded feelings and social
humiliation, resulting in moral damages. The Supreme
Court did not give credence to Air France’s claim that
the issuance of a first class ticket to a passenger is not
an assurance that he will be given a first class seat.
Such claim is simply incredible.
Culpa Aquiliana:
Here, the SC ruled, even though there is a contract of
carriage between Air France and Carrascoso, there is
also a tortuous act based on culpa aquiliana.
Passengers do not contract merely for transportation.
They have a right to be treated by the carrier’s
employees with kindness, respect, courtesy and due
consideration. They are entitled to be protected
14 | P a g e
indignities and abuses from such employees.
So it is, that any rule or discourteous conduct on the
part of employees towards a passenger gives the latter
an action for damages against the carrier. Air France’s
contract with Carrascoso is one attended with public
duty. The stress of Carrascoso’s action is placed upon
his wrongful expulsion. This is a violation of public duty
by the Air France — a case of quasi-delict. Damages
are proper.
Enumeration by law is Exclusive
Makati Stock Exchange vs Campos
(Enumeration by law is exclusive)
FACTS:
1. This is a petition for review on certiorari under rule
45 seeking the reversal of CA’s decision
2. Respondent Miguel Campos filed with the SICD of
SEC a petition against petitioners which sought:
a. Nullification of the resolution dated June 3 1993 of
the MKSE board of directors which allegedly deprived
him of his right to participate equally in the allocation of
Initial Public Offerings (IPO) of corporations registered
with MKSE
b. The delivery of the IPO shares he was allegedly
deprived of, for which he would pay IPO prices; and
c. The payment of P2 million as moral damages, P1
million as exemplary damages, and P500,000.00 as
attorney’s fees and litigation expenses.
3. SICD issued an order granting Campos’ prayer for
the issuance of TRO to enjoin petitioners from
implementing or enforcing the June 3 resolution of the
MKSE Board of Directors
4. SICD subsequently issued another order granting
respondent’s application for a writ of preliminary
injunction, to continuously enjoin, during the pendency
of the MKSE board resolution in question
5. Petitioners filed a motion to dismiss such petition
because it was already moot, SICD has no jurisdiction
over petition, and petition failed to state cause of
action
6. SICD denied such motion to dismiss by the
petitioner
7. Respondent filed a petition for certiorari with CA
while petitioner filed motion for recon but was denied
by CA
ISSUE:
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)
WON petition failed to state a cause of action
HELD:
1. Petition filed by Campos should be dismissed for
failure to state cause of action
2. A cause of action is the act or omission by which a
party violates a right of another.
3. A complaint states a cause of action where it
contains three essential elements of a cause of action,
namely:
(1) The legal right of the plaintiff,
(2) The correlative obligation of the defendant, and
(3) The act or omission of the defendant in violation of
said legal right.
4. If these elements are absent, the complaint
becomes vulnerable to dismissal on the ground of
failure to state a cause of action.
5. If a defendant moves to dismiss the complaint on
the ground of lack of cause of action, he is regarded as
having hypothetically admitted all the averments
thereof
6. There is no question that the Petition in SEC Case
No. 02-94-4678 asserts a right in favor of respondent,
particularly, respondents alleged right to subscribe to
the IPOs of corporations listed in the stock market at
their offering prices; and stipulates the correlative
obligation of petitioners to respect respondents right,
specifically, by continuing to allow respondent to
subscribe to the IPOs of corporations listed in the
stock market at their offering prices.
7. However, the terms right and obligation in
respondents Petition are not magic words that would
automatically lead to the conclusion that such
8. A right is a claim or title to an interest in anything
whatsoever that is enforceable by law. An obligation is
defined in the Civil Code as a juridical necessity to
give, to do or not to do. For every right enjoyed by any
person, there is a corresponding obligation on the part
of another person to respect such right.
9. Civil Code enumerates the sources of obligation
and an obligation imposed on a person, and the
corresponding right granted to another, must be
rooted in at least one of these five sources
10. The mere assertion of a right and claim of an
obligation in an initiatory pleading, whether a
Complaint or Petition, without identifying the basis or
source thereof, is merely a conclusion of fact and law
11. In the case at bar, the petition utterly failed to lay
down the source of the obligation’s source or basis
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12. There was nothing in the petition of the
respondent a thing that would verify that his
position as Chairman Emeritus of MKSE was
granted by law, contract, or any other legal source.
13. A meticulous review of the Petition reveals that
the allocation of IPO shares was merely alleged to
have been done in accord with a practice normally
observed by the members of the stock exchange
14. However, A practice or custom is, as a general
rule, not a source of a legally demandable or
enforceable right
15. WHEREFORE, the Petition is GRANTED. The
Decision of the Court of Appeals dated 11 February
1997 and its Resolution dated 18 May 1999 in CA-
G.R. SP No. 38455 are REVERSED and SET ASIDE
C. Nature and Effect of Obligations
Art. 1163. Every person obliged to give something
is also obliged to take care of it with the proper
diligence of a good father of a family, unless the
law or the stipulation of the parties requires
another standard of care.
Specific/Determinate Generic/Indeterminate
Thing Thing
Identified by its Identified only by its
individuality. specie.
The debtor cannot The debtor can give
substitute it with another anything of the same
although the latter is of class as long as it is of
the same kind and the same kind.
quality without the
consent of the creditor.
(Art. 1244)
Diligence Needed (Standard of Care)
(a) Diligence of a good father of a family – The
phrase has been equated with ordinary care or
that diligence which an average person
exercises over his own property. GENERAL
RULE
(b) Another standard of care – If the law or the
stipulation of the parties provides for another
standard of care (slight or extraordinary
diligence), said law or stipulation must prevail.
(Art. 1163) EXCEPTION
Piczon vs Piczon
FACTS:
1. There is an appeal from the decisions of the Court
of first instance of Samar in its civil case no. 5156
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)
2. When in this case was called for pre-trial, plaintiffs
and defendants through their lawyers, appeared and
entered into the following agreement:
a. 1. That defendants admit the due execution of
Annexes "A" and "B" of the complaint;
b. 2. That consequently defendant Sosing-Lobos and
Co., Inc. binds itself to the plaintiffs for P12,500.00, the
same to be paid on or before October 31, 1967
together with the interest that this court may determine
3. The parties are required to file their respective
memorandum if they so desire on or before Sep 15,
1967 to discuss the legal issues and the case shall be
submitted for decision
4. Agreement of Loan stipulates that Esteban Piczon,
president of corporation named Sosing-Lobos and Co.
Inc and also the guarantor of the same, presents a
contract of loan of 12,500php wherein the receipt was
acknowledged from Piczon and Co., Inc, another office
in Catbalogan. Same amount shall be returned with
12% interest per annum
ISSUE:
WON the trial court erred in ordering the payment of
12% interest on principal of 12,500php from August 6
instead of Sept 28 when the Agreement of Loan was
stipulated
HELD:
1. No. Instead of requiring appellees to pay interest at
12% only from August 6, RTC should have adhered
to the terms of the agreement which plain provides
that Piczon obligated Sosing Lobos and himself to
return or pay the same amount with 12% interest
from Sept 28
2. Under Article 2209 of the Civil Code "(i)f the
obligation consists in the payment of a sum of money,
and the debtor incurs in delay, the indemnity for
damages, there being no stipulation to the contrary,
shall be the payment of the interest agreed upon, and
in the absence of stipulation, the legal interest, which
is six per cent per annum."
3. In the case at bar, the "interest agreed upon" by
the parties in Annex A was to commence from the
execution of said document
4. Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of
their obligation.
5. In Firestone Tire & Rubber Co. (P.I.) vs. Delgado,
104 Phil. 920, the Court squarely ruled that if the
contract stipulates from what time interest will be
counted, said stipulated time controls, and,
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therefore interest is payable from such time, and
not from the date of the filing of the complaint
6. PREMISES CONSIDERED, the judgment of the trial
court is modified so as to make appellees liable for the
stipulated interest of 12% per annum from September
28, 1956, instead of August 6, 1964. In all other
respects, said judgment is affirmed. Costs against
appellees.
Obligations to Give
Art. 1164. The creditor has a right to the fruits of
the thing from the time the obligation to deliver it
arises. However, he shall acquire no real right over
it until the same has been delivered to him.
Art. 1165. When what is to be delivered is a
determinate thing, the creditor, in addition to the
right granted him by Article 1170, may compel the
debtor to make the delivery.
If the thing is indeterminate or generic, he may ask
that the obligation be complied with at the expense
of the debtor.
If the obligor delays, or has promised to deliver the
same thing to two or more persons who do not
have the same interest, he shall be responsible for
fortuitous event until he has effected the delivery.
Art. 1166. The obligation to give a determinate
thing includes that of delivering all its accessions
and accessories, even though they may not have
been mentioned.
Real Right Personal Right
A power over a specific A power demandable by
thing (like the right of one person of another –
ownershio or possession to give, to do, or not to
or mortgage) and is do.
binding on the whole
world
Kinds of Delivery
(a) Actual Delivery (tradition) – were physically,
the property changes hands. Example: If A
sells B a fountain pen, the giving by A to B of
the fountain pen is actual tradition.
(b) Constructive Delivery – that where the physical
transfer is implied. This may be done by:
1) traditio simbolica (symbolical tradition) —
(as when the keys of a bodega are given)
2) traditio longa manu (delivery by mere
consent or the pointing out of the object)
(Etymologically, “the extending of the
hand.”) Example: pointing out the car,
which is the object of the sale.
3) traditio brevi manu — (delivery by the
short hand; that kind of delivery whereby a
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)
possessor of a thing not as an owner,
becomes the possessor as owner)
(Example: when a tenant already in
possession buys the house he is renting).
4) traditio constitutum possessorium — the
opposite of brevi manu; thus, the delivery
whereby a possessor of a thing as an
owner, retains possession no longer as an
owner, but in some other capacity (like a
house owner, who sells a house, but
remains in possession as tenant of the
same house).
5) tradition by the execution of legal forms
and solemnities (like the execution of a
public instrument selling land).
When does the obligation to deliver arise?
It depends.
(a) If there is no term or condition, then from the
perfection of the contract.
(b) If there is a term or a condition, then from the
moment the term arrives or the condition
happens.
San Lorenzo Development Corp vs
CA, Babasanta, Spouses Lu
Facts:
On Aug. 20, 1986, Spouses Miguel Lu and Pacita
Zavalla purportedly sold two parcels of land to
respondent Pablo Babasanta at P15/sq.meter.
Downpayment worth P50,000 was made by Babasanta
as evidenced by a memorandum receipt issued by
Pacita Lu.
Babasanta paid a total of P200,000.
In May 1989, Babasanta, in a letter, demanded the
execution of a final deed of sale in his favor, and has
informed the spouses through the same letter that he
received info that the spouses has sold the same
parcels of land to another without his knowledge and
consent.
Pacita Lu responded through a letter that though she
agreed to sell, when the balance became due and
when she refused the price reduction he requested,
Babasanta backed out of the sale and claimed that she
returned the sum of P50,000 to Babasanta through
Eugenio Oya.
Babasanta then filed before the RTC a complaint for
specific performance and damages against Spouses
Lu claiming that the lands had been sold to him.
Spouses Lu in their answer claimed that Pacita had
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originally obtained loans from Babasanta and had
transformed the loan into a contract to sell without
Miguel Lu’s knowledge and consent. They further
claim that Babasanta failed to pay the balance despite
repeated demands, and when Babasanta’s request for
price reduction was denied, that he rescinded the
contract. San Lorenzo Development Corp filed a
Motion for Intervention alleging that it has legal interest
in the subject because the subject lands were sold to
it, with the Spouses Lu executing in its favor an Option
ti Buy, and subsequently, a Deed of Absolute Sale
after paying P632,320. The certificates if title were
then delivered to SLDC by the spouses. The RTC
upheld the sale of the property to SLDC and ordered
the Spouses Lu to pay Babasanta P200,000 with legal
interest plus P50,000.Babasanta and the Spouses Lu
appealed said decision. The CA reversed the lower
court’s decision, and declared that the sale between
Babasanta and the Spouses Lu was valid.
Issues:
Whether or not there was delivery in the contract of
sale between Babasanta and the Spouses Lu? NO.
Whether or not Babasanta acquired ownership over
the land? NO.
Held:
1. No.
2 modes of delivery:
(1) “Actual delivery which consists in placing the thing
sold in the control and possession of the vendee”, and
(2) “Legal or constructive delivery which maybe had
through any of the following ways: the execution of a
public instrument evidencing the sale;
symbolical tradition such as the delivery of the keys of
the place where the movable sold is being kept;
traditio longa manu or by mere consent or agreement if
the movable sold cannot yet be transferred to the
possession of the buyer at the time of the sale;
traditio brevi manu if the buyer already had
possession of the object even before the sale; and
traditio constitutum possessorium, where the seller
remains in possession of the property in a different
capacity.”
There was neither Actual nor constructive delivery.
Babasanta did not take possession at any time after
the perfection of the sale in his favor or exercised acts
of dominion over it despite his assertions that he was
the rightful owner of the lands, thus no actual delivery.
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)
The agreement was also not embodied in a public
instrument, nor in any other manner provided for in
order to have constructive delivery.
2. No. Ownership is only transferred to the vendee
upon its delivery to said vendee.
“even on the assumption that the perfected contract
between the parties was a sale, ownership could not
have passed to Babasanta in the absence of delivery,
since in a contract of sale ownership is transferred to
the vendee only upon the delivery of the thing sold.”
“Sale is not a mode but merely a title. A mode is the
legal means by which dominion or ownership is
created, transferred or destroyed, but title is only the
legal basis by which to affect dominion or ownership.
Contracts only constitute titles or rights to the transfer
or acquisition of ownership, while delivery or tradition
is the mode of accomplishing the same.
Therefore, sale by itself does not transfer or affect
ownership; the most that sale does is to create the
obligation to transfer ownership. It is tradition or
delivery, as a consequence of sale, that actually
transfers ownership.”
Caleon vs Agus Development Corp
Facts:
1. Case at bar is a petition for review on certiorari
seeking the reversal of the decision of CA
2. Respondent is the owner of a parcel of land
denominated as Lot 39 located in Sampaloc manila,
which it leased to petitioner Rita Caleon for a monthly
rental of 180 php
3. Petitioner constructed on lot leased a 3-door
apartment building
4. Without the consent of the respondent, petitioner
sub-leased 2 of the 4 doors of the apartment to
Guevarra and Estrada for a monthly rental of 350php
each.
5. When the respondent learned of such sub-lease,
respondent through a counsel demanded in writing
that the petitioner vacate the leased premises
6. Petitioner did not comply with the demand so
respondent filed a complaint for ejectment with MTC of
Manila citing as ground therefor the provisions of
Batas Pambansa Blg. 25, Section 5, which is the
unauthorized sub-leasing of part of the leased
premises to third persons without securing the
consent of the lessor within the required sixty (60)-
day period from the promulgation of the new law
7. Court rendered a decision ordering the petitioner
and all those who sub-lease the area to vacate the
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premises, remove whatever improvement was done, to
pay the respondent amount of 2k as attorney’s fees,
and to pay costs
8. Petitioner appealed to RTC but RTC affirmed the
decisions of MTC
9. RTC’s decision was appealed to CA for review
10. CA dismissed the petition for lack of merit; hence,
petition for certiorari
ISSUE:
WON the lease of an apartment includes a sublease of
the lot on which it is constructed, as would constitute a
ground for ejectment under Batas Pambansa BLg. 25
HELD:
1. Even if petitioner holds that BP 22 is not applicable
because what she leased was her own apartment, it is
untenable
2. In case of Duellome v Gotico: the lease of a building
would naturally include the lease of the lot and that the
rentals of the building include the rentals of the lot
3. Under the above ruling it is beyond dispute that
petitioner in leasing her apartment has also subleased
the lot on which it is constructed which lot belongs to
private respondent. Consequently, she has violated
the provisions of Section 5, Batas Pambansa Blg. 25
which is a ground for Ejectment.
4. BP 25 enumerated the grounds for judicial
ejectment, among which is the subleasing of
residential units without the written consent of the
owner/lessor
5. RESIDENTIAL UNIT: refers to an apartment, house
and/or land on which another's dwelling is located
used for residential purposes and shall include not only
buildings, parts or units thereof used solely as dwelling
places, except motels, motel rooms, hotels, hotel
rooms, boarding houses, dormitories, rooms and
bedspaces for rent, but also those used for home
industries, retail stores, or other business purposes if
the owner thereof and his family actually live therein
and use it principally for dwelling purposes
6. Petitioner also argues that BP 25 cannot be applied
because there is a perfected contract of lease without
any express prohibition on subleasing long before BP
25 was enacted. It would impair the obligation of
contracts acc to the petitioner
7. SC ruled that it is well settled that all presumptions
are indulged in favor of constitutionality; one who
attacks a statute, alleging unconstitutionality must
prove its invalidity beyond a reasonable doubt
 BELARMA NOTES IN OBLIGATIONS AND CONTRACTS – ATTY. BATHAN (2019)

8. In spite of the constitutional prohibition, the State

continues to possess authority to safeguard the vital
interests of its people

9. Every contract affecting public interest suffers a

congenital infirmity in that it contains an implied
reservation of the police power as a postulate of the
existing legal order

10. The social justice consecrated in our Constitution

was not intended to take away rights from a person
and give them to another who is not entitled thereto

11. WHEREFORE, the Petition is Denied for lack of

merit and the assailed decision of the Court of Appeals
is Affirmed.

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