OBLIGATIONS & CONTRACTS | Atty.

Daryl Bretch Largo | Digests by Frances Megan Ouano

SOURCES OF OBLIGATIONS

A. Law (Art. 1158)

BAUTISTA AND TAN TING V. F.O. BORROMEO, INC

30 SCRA 119

 Bautista, driving a truck owned by Tan Ting, was involved in a vehicular accident with a
delivery truck owned by Borromeo
 In the accident, Borromeo’s helper, Delgado, sustained injuries that led to his death.
Borromeo had to pay Delgado’s widow for the death benefit and funeral expenses under the
Workmen’s Compensation Act
FACTS  Upon determination that the cause of the accident was due to Bautista’s negligence,
Borromeo filed a suit with the MTC to recover the expenses he paid to Delgado’s widow
 When Bautista and Tan Ting, along with their counsel, failed to appear on the schedule
hearing, evidence was presented ex parte and judgement was given in favour of Borromeo
 Upon learning of the decision, Bautista and Tan Ting appealed with the CFI who affirmed the
MTC’s ruling. They appealed to the SC

 There was no contractual relationship between the parties, whether express or implied, to
PETITIONER
warrant payment

RESPONDENT 

W/N Bautista and Tan Ting are obligated to reimburse the expenses incurred by Borromeo upon
ISSUE
the death of Delgado

Yes, Bautista and Tan Ting are obligated to reimburse the expenses incurred by Borromeo upon
the death of Delgado.

The cause of action arises by virtue of subrogation, as sanctioned by the Workmen’s

Compensation Law.

When Borromeo paid Delgado’s widow his death benefit and funeral expenses, such an obligation
was required by law, pursuant to Sec. 2 of the Workmen’s Compensation Law.

The same law in its Sec. 6 also provides that in case an employee suffers an injury and
compensation is due, they have the option to claim such an amount from their employer or to sue
another for damages. If the employer paid such compensation, he has the right to recover what
he has paid.

"[i]n case an employee suffers an injury for which compensation is due under this Act by any
RULING other person besides his employer, it shall be optional with such injured employee either to
claim compensation from his employer, under this Act, or sue such other person for damages,
in accordance with law; and in case compensation is claimed and allowed in accordance with
this Act, the employer who paid such compensation or was found liable to pay the same, shall
succeed the injured employee to the right of recovering from such person what he paid: ..."

It is evident from the foregoing that "if compensation is claimed and awarded, and the employer
pays it, the employer becomes subrogated to and acquires, by operation of law, the worker's
rights against the tortfeasor."

No need then there is to establish any contractual relationship between Quintin Delgado and
herein petitioners. Indeed, there is none. The cause of action of respondent corporation is one
which does not spring from a creditor-debtor relationship. It arises by virtue of its subrogation to
the right of Quintin Delgado to sue the guilty party. Such subrogation is sanctioned by the
Workmen's Compensation Law aforesaid. It is as a subrogee to the rights of its deceased
employee, Quintin Delgado, that Borromeo filed a suit against petitioners.

 Subrogation is the assumption by a third party of another party's legal right to collect a debt
NOTES or damages. It is a legal doctrine whereby one person is entitled to enforce the subsisting or
revived rights of another for one's own benefit.
PELAYO V. LAURON
12 PHIL 453

 Dr. Pelayo sued Lauron and Abella for refusing to pay him for the medical services he
FACTS
rendered to their daughter-in-law who was about to give birth

PETITIONER  Dr. Pelayo demanded payment for the medical service he rendered

 Their daughter-in-law had live with her husband independently without any relation to them.
RESPONDENT Even if she was in the house with them on the day she was about to give birth, it was merely
incidental

ISSUE W/N the parents-in-law are obligated to shoulder the cost of medical care

P a g e 1 | 13
OBLIGATIONS & CONTRACTS | Atty. Daryl Bretch Largo | Digests by Frances Megan Ouano

No, parents-in-law are not obligated to shoulder the cost of medical care.

According to Art. 1089 of the Civil Code, obligations can be created by:
a) Law
b) Contracts
c) Quasi-contracts
d) Illicit acts and omissions (delict)
e) Those acts in which any kind of fault or negligence occurs (quasi-delict)

Obligations arising from law are not presumed. Those expressly determined in the code or in
special laws, etc., are the only demandable ones. Obligations arising from contracts have legal
force between the contracting parties and must be fulfilled in accordance with their stipulations.
(Arts. 1090 and 1091.)

The rendering of medical assistance in case of illness is comprised among the mutual obligations
to which spouses are bound by way of mutual support. (Arts. 142 and 143.)

If every obligation consists in giving, doing, or not doing something (Art. 1088), and spouses are
mutually bound to support each other, there can be no question but that, when either of them by
RULING reason of illness should be in need of medical assistance, the other is under the unavoidable
obligation to furnish the necessary services of a physician in order that health may be restored,
and he or she may be freed from the sickness by which life is jeopardized; the party bound to
furnish such support is therefore liable for all expenses, including the fees of the medical expert
for his professional services. This liability originates from the above-cited mutual obligation which
the law has expressly established between the married couple.

Therefore, Dr. Pelayo should not have brought the action towards the parents-in-law but towards
the husband. The fact that it was her parents-in-law who called for his services is not a bar in the
fulfilment of spousal obligation, especially considering the urgency of the situation. The parents-
in-law are not under any obligation by virtue of any legal provision, to pay the fees claimed, nor
in consequence of any contract entered into between them and the plaintiff from which such
obligation might have arisen.

Within the meaning of the law, the father and mother law are strangers with respect to the
obligation that devolves upon the husband to provide support, among which is the furnishing of
medical assistance to his wife at the time of her confinement; and, on the other hand, it does not
appear that a contract existed between the defendants and the plaintiff physician, for which
reason it is obvious that the former cannot be compelled to pay fees which they are under no
liability to pay because it does not appear that they consented to bind themselves.

 RECIPROCAL OBLIGATION OF HUSBAND AND WIFE; SUPPORT. — Among the

reciprocal obligations existing between a husband and wife is that of support, which obligation
is established by law.
NOTES  SUPPORT OF STRANGERS. — The law does not compel any person to support a stranger
unless such person bound himself to do so by an express contract
 SUPPORT OF WIFE. — Where a husband whom the law compels to support his wife in living,
the father and mother-in-law of the latter are under no liability to provide for her.
MARTINEZ V. MARTINEZ
1 PHIL 647

 The titles of both the steamer Balayan and coasting vessel Ogoñoare registered in the name
of Pedro, the son
FACTS
 However, both vessels were purchased with money that belonged to his father, Francisco
 Father and son did not bind themselves to a contract of any kind

 His son, Pedro, was merely acting as his agent in the purchase
PETITIONER  Under Law 49, Title 5, Partida 5, property bought with another’s money should not belong to
the owner of the money except in certain enumerated cases

RESPONDENT 

ISSUE W/N the ownership of the vessels belongs to Pedro

Yes, the ownership of the vessels belongs to Pedro

Article 1090 of the Civil Code provides that "obligations derived from the law are not to be
presumed. Only those expressly provided for in this Code or in special laws are enforceable." In
this case, Law 49, Title 5, Partida 5 does not apply because it is not one of the enumerated cases.
RULING
Moreover, it may be true that the laws in some of the United States would in this case raise a
resulting trust in favor of the plaintiff. But such laws are not in force here; and whatever other right
the father may have against the son, either for the recovery of the money paid or for damages, it
is clear that such payment gave him no title either legal or equitable to these vessels.

P a g e 2 | 13
OBLIGATIONS & CONTRACTS | Atty. Daryl Bretch Largo | Digests by Frances Megan Ouano

While there are many ways to acquire property under Art. 609 of the Civil Code, Franciso did not
acquire it thru any of such ways. It was not acquired thru donation, succession, or by means of a
contract. However, the fact remains that despite the money coming from his father, both vessels
were registered in his name. Hence, in the eyes of the law, he is the legal owner of both vessels
and may exercise his rights over the property as he sees fit.

 Those facts were that the father bought and paid for it, and that the titles to it were taken and
NOTES registered in the son’s name. A statement that by reason of these facts the father is the
owner is a statement of law and not a finding of fact.

B. Contracts (Arts. 1159; 1305)

PEREZ V. POMAR
G.R. NO. L-1299 | NOV. 16,1903

 Perez filed with the CFI, asking for compensation for services rendered as an interpreter for
the Tabacalera Company
 Perez alleges that Pomar had verbally requested his services and had accompanied the latter
FACTS
for over 5 months to various conferences, even abandoning his own business
 Their agreement was made in the absence of witnesses and Perez’s only proof was Pomar’s
word as a gentleman

 Perez alleges that Pomar had verbally requested his services and had accompanied the latter
PETITIONER
for over 5 months to various conferences, even abandoning his own business

 He had never solicited the services of Perez and that the latter merely accompanied him on
RESPONDENT these trips through motives of friendship
 Perez acted as interpreter on his own free will without any request or offer of compensation

ISSUE W/N there was an existing contracting obligation between Perez and Pomar

Yes, was an existing contracting obligation between Perez and Pomar

While there was no written contract between the parties, there was tacit and mutual consent to
the rendition of such services. This gives rise to the obligation upon the person benefited by the
services to make compensation therefor, since the bilateral obligation to render services as
interpreter, on the one hand, and on the other to pay for the services rendered, is thereby incurred.
(Arts. 1088, 1089, and 1262 of the Civil Code).

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."

There also shows a concurrence of the three elements necessary under Art. 1261 of the Civil
Code to constitute a contract of lease of service:
a) The consent of the contracting parties
b) A definite object which is the subject-matter of the contract
c) A consideration for the obligation established

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
RULING 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 not appear that he did this gratuitously, the duty is imposed
upon Pomar, having accepted the benefit of the service, to pay just compensation therefor, by
virtue of the innominate contract of facio ut des implicitly established.

The obligations arising from this contract are reciprocal, and, apart from the general provisions
with respect to contracts and obligations, the special provisions concerning contracts for lease of
services are applicable by analogy.

In this special contract, as determined by Art. 1544 of the Civil Code, one of the parties undertakes
to render the other a service for a price certain. The tacit agreement and consent of both parties
with respect to the service rendered by the plaintiff, and the reciprocal benefits accruing to each,
are the best evidence of the fact that there was an implied contract sufficient to create a legal
bond, from which arose enforceable rights and obligations of a bilateral character

In contracts the will of the contracting parties is law, this being a legal doctrine based upon the
provisions of Arts. 1254, 1258, 1262, 1278, 1281, 1282, and 1289 of the Civil Code. If it is a fact
sufficiently proven that the defendant, Pomar, on various occasions consented to accept an

P a g e 3 | 13
OBLIGATIONS & CONTRACTS | Atty. Daryl Bretch Largo | Digests by Frances Megan Ouano

interpreter's services, rendered in his behalf and not gratuitously, it is but just that he should pay
a reasonable remuneration therefor, because it is a well-known principle of law that no one should
be permitted to enrich himself to the damage of another.

 Facio ut des is a Latin term which means “I do so that you give.” This is a species of contract
NOTES in the civil law which arises when a person agrees to perform anything for a price, either
exclusively mentioned or left to the determination of the law to set a value to it.
MARITIME COMPANY OF THE PHILIPPINES V. REPARATIONS COMMISSION
40 SCRA 170

 Maritime Company of the Philippines (MCP) shipped reparation goods in three of its vessels
consigned to the Reparations Commission (RC)
FACTS
 MCP sued the RC for refusing to pay them for the shipment, after receiving it in good condition
 The lower court dismissed the MPC’s complaint. Hence, the appeal to the SC

PETITIONER 

 Sec. 11 of the Reparations Act provides that ocean freight and other expenses incident to
RESPONDENT importation shall be paid by the end-user (in this case, the MPC) and not by such agency (in
this case, the RC)

W/N the provisions of Sec. 11 of the Reparations Act should be considered as entering into and
ISSUE
forming part of the contract between the parties

Yes, the provisions of Sec. 11 of the Reparations Act should be considered when entering into
and forming part of the contract between the parties.

While a large degree of autonomy is accorded to contracting parties, 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. The law thus sets limits.

It is a fundamental requirement that the contract entered into must be in accordance with, and
not repugnant to, an applicable statute. Its terms are embodied therein. The contracting parties
need not repeat them. They do not even have to be referred to. Every contract thus contains not
only what has been explicitly stipulated, but the statutory provisions that have any bearing on the
matter.

According to Justice Malcolm, speaking for the Court in the former: "It is an elementary rule of
contracts that the laws, in force at the time the contract was made, enter into and govern it."
RULING
"The principle is thus well-settled that an existing law enters into and forms part of a valid
contract without the need for the parties expressly making reference to it. Only thus could its
validity insofar as some of its provisions are concerned be assured."

"The rule is that the law forms part of, and is, read into, every contract, unless clearly excluded
therefrom in those cases where such exclusion is allowed”

Under the provision of Sec. 11 of RA 1789, "The insurance, ocean freight and other expenses
incident to importation shall be paid by the end-user in accordance with usual business practice."
The Last sentence is equally plain: "Nothing herein shall be construed as exempting the end-user
from paying in full all the necessary costs, charges and expenses incident to the application for
and the procurement, production, delivery and acquisition, of, the goods concerned." The above
provisions, then, form part of and must be read into the shipping contracts between MCP and RC,
unless they could be "clearly excluded therefrom", assuming "such exclusion is allowed."

NOTES 

NHA V. CA
G.R. NO. 128064 | MAR. 1, 2004

 On June 13, 1986, Grace Baptist Church inquired with the National Housing Authority (NHA)
regarding their intent to purchase Lot 4 and 17 along GMA, Cavite
 NHA replied to the letter, asking the Church to visit their field office to process the application.
Despite yet there being no contract of sale, the Church took possession of the lots and
improved it
 On Feb. 22, 1991, NHA passed Resolution No. 2126, which sold the lot to the Church at
P430,500 (P700/sqm)
FACTS
 On April 8, 1991, the Church sent a manager’s check to the NHA in the amount of P55,350.
They claim this to be price quoted by the NHA field office—it was written on an unsigned
piece of paper
 NHA refused to accept the amount despite several demands by the Church
 The Church filed a complaint for specific performance and damages with the RTC. RTC ruled
that there was no contract of sale and ordered the Church to pay rent to the NHA from the
time of occupation to the time of vacancy

P a g e 4 | 13
OBLIGATIONS & CONTRACTS | Atty. Daryl Bretch Largo | Digests by Frances Megan Ouano

 The Church appealed to the CA, who affirmed the RTC decision. However, they ordered the
NHA to sell the questioned lots to the Church at P700/sqm. This was because Resolution No.
2126 has not been revoked and is therefore still in effect. NHA is estopped from fixing a
different price while the Church, who has since been occupying the lot, should be allowed to
purchase the property in the interest of equity

 NHA cannot be compelled to sell the lots in question because to do so would be a violation
of its freedom to contract
PETITIONER
 Equity should only be applied in the absence of any law governing the relationship between
the parties. In this case, the law on sales and the law on contracts should govern

 Resolution No. 2126 has not been revoked and is therefore still in effect. NHA is estopped
from fixing a different price
RESPONDENT
 The Church, who has since been occupying the lot, should be allowed to purchase the
property in the interest of equity

W/N the NHA is compelled to the subject lots to the Grace Baptist Church in the absence of any
ISSUE
perfected contract of sale between the parties

No, NHA is not compelled to sell the subject lots to the Grace Baptist Church in the absence of
any perfected contract of sale between the parties.

The fundamental rule is that perfected contracts will bind the contracting parties, any obligations
arising from it will have the force of law between such parties, and such obligations must therefore
be complied in good faith. However, since contracts are not the only source of law governing
rights and obligations, no contractual stipulation may contradict law, morals, good customs, public
order or public policy.

A contract is perfected when there is said to be a meeting of the minds. When there is absolutely
no acceptance of an offer or if the offer is expressly rejected, there is no meeting of the minds.
The inexistence of a contract implies the lack of a binding law between the parties but it does not
automatically authorize disposing of a controversy based on equitable principles alone. In the
absence of a perfected contract, other existing laws which provide for reciprocal rights and
obligations may govern the relationship between parties.

RULING In this case, which involves an unperfected contract, the Civil Law principles governing contracts
should apply. As seen in Resolution No. 2126, the NHA’s offer to sell the lots was rejected.

“There being no concurrence of the offer and acceptance, it did not pass the stage of
generation to the point of perfection. As such, it is without force and effect from the very
beginning or from its incipiency, as if it had never been entered into, and hence, cannot be
validated either by lapse of time or ratification. Equity cannot give validity to a void contract,
and this rule should apply with equal force to inexistent contracts.”

It can be seen that both parties acted in bad faith: (a) the Church possessed and improved on
the lot despite the lack of a valid contract to sell and (b) the NHA knowingly granted the Church
use of the property and did not prevent it from making improvements. Since they both acted in
bad faith, it shall be treated as though they were both in good faith under Art. 448 of the Civil
Code.

Hence, the case is remanded to the trial court to determine the proper application of the provision
in Art. 448.

 In the application of equity in the context of contract law, while the Court is aware of its equity
jurisdiction, it is first and foremost, a court of law. While equity might tilt on the side of one
NOTES party, the same cannot be enforced so as to overrule positive provisions of law in favor of the
other. Thus, before we can pass upon the propriety of an application of equitable principles
in the case at bar, we must first determine whether or not positive provisions of law govern.

C. Quasi-contracts (Arts. 1160; 2142; 2144; 2154)

CRUZ V. JM TUASON & CO. INC.

76 SRA 543

 Cruz filed a complaint against Tuason for unjust enrichment and failure to uphold the
compromise agreement between the latter and Deudor (previous owner of the lot now owned
by JM Tuason)
 Cruz had worked with Deudor as an intermediary to settle a dispute. For performance of his
service, a compromise agreement was made between Deudor and Tuason to convey a
FACTS
portion of the land to Cruz within 10 years from the date of the contract
 Moreover, Cruz had made improvements on the land which is now benefitting JM Tuason,
hence, he is entitled to reimbursement
 The trial dismissed the complaint on the ground of unenforceability due to the Statute of
Frauds

P a g e 5 | 13
OBLIGATIONS & CONTRACTS | Atty. Daryl Bretch Largo | Digests by Frances Megan Ouano

 Under Art. 2142, “Certain lawful voluntary and unilateral acts give rise to the juridical relation
of quasi-contract to the end that no one shill be unjustly enriched or benefited at the expense
of another.”
 Moreover, Art. 19 states that, “Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give every-one his due and observe honesty and
PETITIONER good faith”
 Art. 2142 deals with quasi-contracts or situations where there is no contract between the
parties to the action. Despite the absence of an agreement between Cruz and Tuason,
Tuason is presently enjoying and utilizing the benefits brought about through Cruz’s labor and
expenses. Tuason should pay and reimburse him therefor under the principle that 'no one
may enrich himself at the expense of another.'

RESPONDENT 

ISSUE W/N Art. 2142 can be used as a ground to enforce the obligations of Tuason to Cruz

No, Art. 2142 cannot be used as a ground to enforce the obligations of Tuason to Cruz.

From the very language of this provision, it is obvious that a presumed qauasi-contract cannot
emerge as against one party when the subject matter thereof is already covered by an existing
contract with another party. Predicated on the principle that no one should be allowed to unjustly
enrich himself at the expense of another, Art. 2124 creates the legal fiction of a quasi-contract
precisely because of the absence of any actual agreement between the parties concerned.

Corollarily, if the one who claims having enriched somebody has done so pursuant to a contract
with a third party, his cause of action should be against the latter, who in turn may, if there is any
ground therefor, seek relief against the party benefited. It is essential that the act by which the
defendant is benefited must have been voluntary and unilateral on the part of the plaintiff.
RULING
As one distinguished civilian puts it, "The act is voluntary because the actor in quasi-contracts is
not bound by any pre-existing obligation to act. It is unilateral, because it arises from the sole will
of the actor who is not previously bound by any reciprocal or bilateral agreement. The reason why
the law creates a juridical relations and imposes certain obligation is to prevent a situation where
a person is able to benefit or take advantage of such lawful, voluntary and unilateral acts at the
expense of said actor." (Ambrosio Padilla, Civil Law, Vol. VI, p. 748, 1969 ed.)

In the case at bar, Cruz has a clearer and more direct recourse against the Deudors with whom
he had entered into an agreement regarding the improvements and expenditures made by him
on the land of JM Tuason. Hence, it cannot be said, in the sense contemplated in Art. 2142, that
Tuason had been enriched at the expense of Cruz.

NOTES 

NATIONAL COMMERCIAL BANK OF SAUDI ARABIA V. CA

G.R. NO. 124267 | JAN. 31, 2003

 National Commercial Bank of Saudi Arabia (NCBSA) filed a case against Philippine Banking
Corporation (PBC) to collect a duplication in the payment of proceeds of a letter of credit
issued by the former
 The RTC ruled in favour of NCBSA
 Upon the filing of PBC’s motion for reconsideration, it failed to include a notice of hearing.
FACTS Moreover, it was only able to file a motion for hearing 9 days after the notice to appeal had
expired
 RTC denied PBC’s motion, leading them to appeal to the CA. The CA ruled in their favour,
claiming that procedural rules should not be set too harshly especially when PBC has filed
a motion for reconsideration to set a notice of hearing
 NCBSA appealed to the SC

 NCBSA thus calls for the strict application of our rules of procedure to avoid further delays in
PETITIONER
the disposition of the case, which has remained pending for more than 17 years

 PBC invokes a just and fair determination of the case

 PBC invokes the doctrine of laches since, technicality aside, NCBSA's complaint is "based
RESPONDENT
on the quasi-contract of solutio indebiti," hence, it prescribes in six years and, therefore, when
NCBSA filed its complaint nine years after the cause of action arose, it had prescribed

ISSUE W/N NCBSA is bound by solutio indebiti

Yes, NCBSA’s is not bound by solutio indebiti

Solutio indebiti applies where:

RULING a) a payment is made when there exists no binding relation between the payor, who has
no duty to pay, and the person who received the payment, and
b) the payment is made through mistake, and not through liberality or some other cause

P a g e 6 | 13
OBLIGATIONS & CONTRACTS | Atty. Daryl Bretch Largo | Digests by Frances Megan Ouano

In the case at bar, PBC and NCBSA were bound by their contract, the letter of credit, under which
NCBSA obliged itself to pay PBC, subject to compliance by the latter with certain conditions
provided therein. As such, the cause of action was based on a contract, and the prescriptive
period is ten years.

PBC's defense of laches is bereft of merit, the cause of action not having yet prescribed at the
time NCBSA's complaint was filed. Courts should never apply the doctrine of laches earlier than
the expiration of time limited for the commencement of actions at law.

 Laches refers to a lack of diligence and activity in making a legal claim, or moving forward
with legal enforcement of a right, particularly in regard to equity; unreasonable delay in
NOTES
seeking a remedy for a legal right or claim will prevent it from being enforced or allowed if the
delay has prejudiced the opposing party.
SEBASTIAN SIGA-AN V. ALICIA VILLANUEVA
G.R. NO. 173227 | JAN. 20, 2009

 Villanueva filed a complaint against Siga-an with the RTC

 Villanueva is a businesswoman who supplies office material and equipment to the Philippine
Navy Office (PNO) while Siga-an is a military office and comptroller
 Siga-an had approached Villanueva in 1992 and offered to loan her the amount of P540,000,
since she needed capital to continue her business with the PNO, she accepted. However, the
agreement was not in writing and there was no stipulation to paying the interest of the loan
 She eventually paid Siga-an P700,000 on August 31, 1993, where the excess of P160,000
would be interest for the loan
FACTS  Siga-an was not satisfied with the payment of the interest and pestered her to pay more,
threatening to block her transactions with the PNO
 Scared, she eventually ended up paying a total of P1,200,000 for the loan along with its
interest. Siga-an did not give her receipts, despite Villanueva’s demands
 Villanueva, upon advice of counsel, sent a demand letter asking for reimbursement of
P660,000 but was ignored
 The RTC ruled in Villanueva’s favour. Since she made an overpayment by mistake, Siga-an
should return the amount pursuant to the principle of solutio indebiti
 The CA denied Siga-an’s appeal, hence the appeal to the SC

 Siga-an gave her the initial loan in 1992, which Villanueva eventually paid in full
 She contracted a second loan which he granted
 However, she asked for a restructuring of the loan payment due to inability to pay. On her
second request, he denied her
 He made her sign a promissory note for the loan of P1,240,00, with interest, which she would
PETITIONER
pay on March 1995. She issued 6 postdated checks but only one was honoured. Hence, he
filed cases for BP 22 with the MTC
 There was no overpayment and she was estopped from complaining because she was given
several opportunities to pay it
 To rule in favor of Villanueva is tantamount to concluding that the loan was given interest-free

RESPONDENT 

ISSUE W/N the RTC and the CA erred in applying the principle of solutio indebiti

No, the RTC and the CA did not err in applying the principle of solutio indebiti.

Under Art. 1960 of the Civil Code, if the borrower of loan pays interest when there has been no
stipulation therefor, the provisions of the Civil Code concerning solutio indebiti shall be applied.

Art. 2154 of the Civil Code explains the principle of solutio indebiti. Said provision provides that if
something is received when there is no right to demand it, and it was unduly delivered through
mistake, the obligation to return it arises. In such a case, a creditor-debtor relationship is created
under a quasi-contract whereby the payor becomes the creditor who then has the right to demand
the return of payment made by mistake, and the person who has no right to receive such payment
becomes obligated to return the same. The quasi-contract of solutio indebiti harks back to the
ancient principle that no one shall enrich himself unjustly at the expense of another.
RULING
The principle of solutio indebiti applies where:
(1) a payment is made when there exists no binding relation between the payor, who has no duty
to pay, and the person who received the payment; and
(2) the payment is made through mistake, and not through liberality or some other cause.

The principle of solutio indebiti applies in this case of erroneous payment of undue interest. It was
duly established that Villanueva paid interest to Siga-an, even when she was under no duty to
make such payment because there was no express stipulation in writing to that effect. There was
no binding relation between her and Siga-an as regards the payment of interest. The payment
was clearly a mistake. Since Siga-an received something when there was no right to demand it,
he has an obligation to return it.

P a g e 7 | 13
OBLIGATIONS & CONTRACTS | Atty. Daryl Bretch Largo | Digests by Frances Megan Ouano

Art. 2232 of the Civil Code states that in a quasi-contract, such as solutio indebiti, exemplary
damages may be imposed if the defendant acted in an oppressive manner. Petitioner acted
oppressively when he pestered respondent to pay interest and threatened to block her
transactions with the PNO if she would not pay interest. This forced respondent to pay interest
despite lack of agreement thereto. Thus, the award of exemplary damages is appropriate. The
amount of ₱50,000.00 imposed as exemplary damages by the RTC and the Court is fitting so as
to deter petitioner and other lenders from committing similar and other serious wrongdoings.

NOTES 

D. Delict (Arts. 1161; 2177; Arts. 100 & 104 RPC)

DMPI EMPLOYEES CREDIT COOPERATIVE INC. V. VELEZ

371 SCRA 72

 A case for estafa was filed against Mandawe for failing to account to Villegas the amount of
P608,532.46. Villegas had entrusted the money to Mandawe since she was an employee of
FACTS DMPI and has tasked her deposit it to the teller
 The RTC dismissed the civil case since there was a pending criminal case arising from the
same facts. However, upon motion for reconsideration, the RTC reversed its decision

PETITIONER 

RESPONDENT 

W/N the civil case could proceed independently of the criminal case for estafa without having
ISSUE
reserved the filing of the civil action

Yes, the civil case may proceed independently of the criminal case even if there was no
reservation as to its filing.

As a general rule, an offense causes two (2) classes of injuries. The first is the social injury
produced by the criminal act which is sought to be repaired thru the imposition of the
corresponding penalty, and the second is the personal injury caused to the victim of the crime
which injury is sought to be compensated through indemnity which is civil in nature.

Thus, every person criminally liable for a felony is also civilly liable" (Art. 100, RPC). This is the
law governing the recovery of civil liability arising from the commission of an offense. Civil liability
includes restitution, reparation for damage caused, and indemnification of consequential
damages (Art. 104, RPC).

The offended party may prove the civil liability of an accused arising from the commission of the
offense in the criminal case since the civil action is either deemed instituted with the criminal
action or is separately instituted.

Rule 111, Section 1 of the Revised Rules of Criminal Procedure, which became effective on
December 1, 2000, provides that:

“(a) When a criminal action is instituted, the civil action for the recovery of civil liability arising from
the offense charged shall be deemed instituted with the criminal action unless the offended party
RULING waives the civil action, reserves the right to institute it separately or institutes the civil action prior
to the criminal action.”

Rule 111, Section 2 further provides that:

“After the criminal action has been commenced, the separate civil action arising therefrom cannot
be instituted until final judgment has been entered in the criminal action.”

However, with respect to civil actions for recovery of civil liability under Articles 32, 33, 34 and
2176 of the Civil Code arising from the same act or omission, this rule has been changed. Under
the present rule, only the civil liability arising from the offense charged is deemed instituted with
the criminal action unless the offended party waives the civil action, reserves his right to institute
it separately, or institutes the civil action prior to the criminal action.

There is no more need for a reservation of the right to file the independent civil actions under
Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines. The reservation and waiver
referred to refers only to the civil action for the recovery of the civil liability arising from the offense
charged. This does not include recovery of civil liability under Articles 32, 33, 34 and 2176 of the
Civil Code of the Philippines arising from the same act or omission which may be prosecuted
separately even without a reservation.

Rule 111, Section 3 reads:

P a g e 8 | 13
OBLIGATIONS & CONTRACTS | Atty. Daryl Bretch Largo | Digests by Frances Megan Ouano

“Sec. 3. When civil action may proceed independently. In the cases provided in Articles 32, 33,
34 and 2176 of the Civil Code of the Philippines, the independent civil action may be brought by
the offended party. It shall proceed independently of the criminal action and shall require only a
preponderance of evidence. In no case, however, may the offended party recover damages twice
for the same act or omission charged in the criminal action.”

The changes in the Revised Rules on Criminal Procedure pertaining to independent civil actions
which became effective on December 1, 2000 are applicable to this case. Procedural laws may
be given retroactive effect to actions pending and undetermined at the time of their passage.
There are no vested rights in the rules of procedure.

Thus, the present case, an independent civil action for damages on account of the fraud
committed against respondent Villegas under Art. 33 of the Civil Code, may proceed
independently even if there was no reservation as to its filing.

NOTES 

HUN HYUNG PARK V. EUNG WON CHOI

G.R. NO. 165496 | FEB. 12, 2007

 Choi was charged with violation of BP 22 when his checks to Park were dishonoured for being
drawn against insufficient funds
 Choi filed his demurrer claiming the lack of knowledge of such insufficiency. The demurrer
was granted by the MeTC
 Park appealed the civil aspect with the RTC, claiming that the dismissal of the criminal case
FACTS should not include dismissal of its civil aspect. The RTC ruled in favour of Park and ordered
Choi to pay the amount with interest
 However, upon Choi’s motion for reconsideration, the RTC remanded the case to the MeTC
so that Park can adduce evidence on the civil aspect
 Park elevate the case to the CA who dismissed his petition
 Hence, the appeal to the SC

PETITIONER 

RESPONDENT 

ISSUE W/N Park’s petition is meritorious

No, Park’s petition is unmeritorious

Unless the offended party waives the civil action or reserves the right to institute it separately or
institutes the civil action prior to the criminal action, there are two actions involved in a criminal
case. The first is the criminal action for the punishment of the offender. The parties are the People
of the Philippines as the plaintiff and the accused. In a criminal action, the private complainant is
merely a witness for the State on the criminal aspect of the action. The second is the civil action
arising from the delict. The private complainant is the plaintiff and the accused is the defendant.
There is a merger of the trial of the two cases to avoid multiplicity of suits.

It bears recalling that the MeTC acquitted respondent. As a rule, a judgment of acquittal is
immediately final and executory and the prosecution cannot appeal the acquittal because of the
constitutional prohibition against double jeopardy.

Either the offended party or the accused may, however, appeal the civil aspect of the judgment
despite the acquittal of the accused. The public prosecutor has generally no interest in appealing
the civil aspect of a decision acquitting the accused. The acquittal ends his work. The case is
terminated as far as he is concerned. The real parties in interest in the civil aspect of a decision
RULING are the offended party and the accused.

When a demurrer to evidence is filed without leave of court, the whole case is submitted for
judgment on the basis of the evidence for the prosecution as the accused is deemed to have
waived the right to present evidence. At that juncture, the court is called upon to decide the case
including its civil aspect, unless the enforcement of the civil liability by a separate civil action has
been waived or reserved.

If the filing of a separate civil action has not been reserved or priorly instituted or the enforcement
of civil liability is not waived, the trial court should, in case of conviction, state the civil liability or
damages caused by the wrongful act or omission to be recovered from the accused by the
offended party, if there is any.

For, in case of acquittal, the accused may still be adjudged civilly liable. The extinction of the
penal action does not carry with it the extinction of the civil action where (a) the acquittal is based
on reasonable doubt as only preponderance of evidence is required; (b) the court declares that
the liability of the accused is only civil; and (c) the civil liability of the accused does not arise from
or is not based upon the crime of which the accused was acquitted.

P a g e 9 | 13
OBLIGATIONS & CONTRACTS | Atty. Daryl Bretch Largo | Digests by Frances Megan Ouano

The civil action based on delict may, however, be deemed extinguished if there is a finding on
the final judgment in the criminal action that the act or omission from which the civil liability may
arise did not exist.

In case of a demurrer to evidence filed with leave of court, the accused may adduce countervailing
evidence if the court denies the demurrer. Such denial bears no distinction as to the two aspects
of the case because there is a disparity of evidentiary value between the quanta of evidence in
such aspects of the case. In other words, a court may not deny the demurrer as to the criminal
aspect and at the same time grant the demurrer as to the civil aspect, for if the evidence so far
presented is sufficient to prove the crime beyond reasonable doubt, then the same evidence is
likewise sufficient to establish civil liability by mere preponderance of evidence.

On the other hand, if the evidence so far presented is insufficient as proof beyond reasonable
doubt, it does not follow that the same evidence is insufficient to establish a preponderance of
evidence. For if the court grants the demurrer, proceedings on the civil aspect of the case
generally proceeds. The only recognized instance when an acquittal on demurrer carries with it
the dismissal of the civil aspect is when there is a finding that the act or omission from which the
civil liability may arise did not exist. Absent such determination, trial as to the civil aspect of the
case must perforce continue.

Thus this Court, in Salazar v. People, held:

“If demurrer is granted and the accused is acquitted by the court, the accused has the right to
adduce evidence on the civil aspect of the case unless the court also declares that the act or
omission from which the civil liability may arise did not exist.”

In the instant case, the MeTC granted the demurrer and dismissed the case without any finding
that the act or omission from which the civil liability may arise did not exist. The SC therefore
upholds respondent’s right to present evidence as reserved by his filing of leave of court to file
the demurrer.

 Procedural rules are tools designed to facilitate the adjudication of cases. Courts and litigants
alike are thus enjoined to abide strictly by the rules. And while the Court, in some instances,
allows a relaxation in the application of the rules, this we stress, was never intended to forge
a bastion for erring litigants to violate the rules with impunity. The liberality in the interpretation
NOTES and application of the rules applies only in proper cases and under justifiable causes and
circumstances.
 While it is true that litigation is not a game of technicalities, it is equally true that every case
must be prosecuted in accordance with the prescribed procedure to insure an orderly and
speedy administration of justice.
JEFFREY RESO DAYAP V. SENDIONG
G.R. NO. 177960 | JAN. 29, 2009

 Dayap was charged with reckless imprudence resulting to homicide, less serious physical
injuries, and damage to property when his 10-wheeler cargo truck hit an automobile. He killed
one passenger, injured the other two, and extensively damaged the car. He was charged
under Art. 365 of the RPC
 The case was filed with the MTC where Dayap pleaded not guilty. He filed his demurrer,
grounded on the prosecution’s failure to prove his guilt beyond reasonable doubt. MTC
granted his demurrer and acquitted him of the crime based on insufficiency of evidence
 Sendiong filed a petition for certiorari, claiming that the MTC failed to consider their evidence,
FACTS
that Sec. 11, Rule 119 of the Rules of Court was not observed, and that there was a failure
to rule on the civil liability.
 The case was raffled to the RTC who affirmed the acquittal and refuted Sendiong’s allegations
against the MTC. However, the RTC agreed on the failure to rule on the civil liability and
remanded the case back to the MTC to determine the same
 Sendiong appealed to the CA who remanded the case to the RTC since such a criminal case
falls within their jurisdiction and not with the MTC
 Dayap appealed to the SC

PETITIONER  Pleads not guilty

RESPONDENT 

ISSUE W/N the CA erred in remanding the case on the matter of civil liability for the reception of evidence

Yes, the CA erred in remanding the case on the matter of civil liability for the reception of
evidence. In fact, no remand by either the CA or the RTC should have been done.

As a general rule, the acquittal of the accused does not automatically preclude a judgement on
RULING
civil liability. The extinction of the penal action does not extinguish civil liability and such liability
may still be determined when:
a) Acquittal is based on reasonable doubt; only preponderance of evidence is required to
determine civil liability

P a g e 10 | 13
OBLIGATIONS & CONTRACTS | Atty. Daryl Bretch Largo | Digests by Frances Megan Ouano

b) Court declares the accused’s liability to be only civil

c) Civil liability of the accused is not based on the crime of which the accused is acquitted

However, a civil action based on delict may be extinguished if:

a) There is final judgement on the criminal action that the act or omission giving rise to civil
liability did not exist
b) The accused did not commit the act or omissions imputed to him/her

Looking at the MTC’s decision, it shows that the acquittal was based on the findings that the act
or omission from which the civil liability may arise did not exist and that petitioner did not commit
the acts or omission imputed to him; hence, petitioner’s civil liability has been extinguished by his
acquittal.

It should be noted that the MTC categorically stated the failure to find evidence that there was a
crime and that Dayap was responsible for it. Hence, he is not guilty of any crime. Consequently,
there is no more need to remand the case to the trial court for proceedings on the civil aspect of
the case, since petitioner’s acquittal has extinguished his civil liability.

 Demurrer is a pleading in a lawsuit that objects to or challenges a pleading filed by an

opposing party. The word demur means "to object"; a demurrer is the document that makes
the objection. Lawyers informally define a demurrer as a defendant saying "So what?" to the
pleading.
 When a demurrer is granted and the accused is acquitted by the court, he had the right to
present evidence against payment of the civil aspect of the case—unless the court declares
NOTES that the act or omission does not exist. This is because when the accused files a demurrer to
evidence, he has not yet adduced evidence both on the criminal and civil aspects of the case.
The only evidence on record is the evidence for the prosecution. What the trial court should
do is issue an order or partial judgment granting the demurrer to evidence and acquitting the
accused, and set the case for continuation of trial for the accused to adduce evidence on the
civil aspect of the case and for the private complainant to adduce evidence by way of rebuttal.
Thereafter, the court shall render judgment on the civil aspect of the case

E. Quasi-delict (Arts. 1162; 2176)

LASAM V. SMITH
45 PHIL 657

 Husband and Wife Lasam filed an action to recover damages for physical injuries sustained
in an automobile accident
 Smith is the owner of a public garage who was in the business of carrying passengers from
one point to another
 Smith undertook to convey the Lasams. By supplying them with a car and a licensed
chauffeur.
 Initially, the chauffeur operated the vehicle. However, the rest of the way was driven by an
FACTS
assistant who held no driver’s license but had some experience driving
 Aside from slight engine trouble in the beginning, there was no other problem with the car or
the assistant’s driving. However, it suddenly developed certain defect and went down a steep
embankment
 The trial court ruled in favour of the Lasam’s and ruled that the cause of action rested on
Smith’s breach of the contract of carriage, pursuant to Arts. 1101-1107 of the Civil Code.
Smith is therefore liable for damages

 The accident was due to the defects in the automobile and to the incompetence and
PETITIONER negligence of the chauffeur
 The damages awarded are insufficient

RESPONDENT  Smith denies liability for any damages whatsoever

ISSUE W/N Smith is obligated to pay for damages for breach of the contract of carriage

Yes, Smith is obligated to pay for damages for breach of the contract of carriage

It is sufficient to reiterate that the source of the defendant's legal liability is the contract of carriage;
that by entering into that contract he bound himself to carry the plaintiffs safely and securely to
their destination; and that having failed to do so he is liable in damages unless he shows that the
failure to fulfill his obligation was due to causes mentioned in article 1105 of the Civil Code:
RULING
“No one shall be liable for events which could not be foreseen or which, even if foreseen, were
inevitable, with the exception of the cases in which the law expressly provides otherwise and
those in which the obligation itself imposes such liability.”

What is meant by "events which cannot be foreseen and which, having been foreseen, are
inevitable?" The Spanish authorities regard the language employed as an effort to define the
term caso fortuito and hold that the two expressions are synonymous.

P a g e 11 | 13
OBLIGATIONS & CONTRACTS | Atty. Daryl Bretch Largo | Digests by Frances Megan Ouano

The antecedent to article 1105 is found in Law 11, Title 33, Partida 7, which defines caso
fortuito as an event that takes place by accident and could not have been foreseen. Examples of
this are destruction of houses, unexpected fire, shipwreck, violence of robbers.

In discussing and analyzing the term caso fortuito the Enciclopedia Juridica Española says that
in a legal sense and, consequently, also in relation to contracts, a caso fortuito presents the
following essential characteristics:
a. 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
b. 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
c. The occurrence must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner
d. And the obligor (debtor) must be free from any participation in the aggravation of the
injury resulting to the creditor.

As will be seen, these authorities agree that some extraordinary circumstance independent of the
will of the obligor, or of his employees, is an essential element of a caso fortuito. Turning to the
present case, it is at once apparent that this element is lacking. It is not suggested that the
accident in question was due to an act of God or to adverse road conditions which could not have
been foreseen. As far as the records shows, the accident was caused either by defects in the
automobile or else through the negligence of its driver. That is not a caso fortuito.

However, while there can be no doubt that the expenses incurred by the plaintiffs as a result of
the accident greatly exceeded the amount of the damages awarded, bear in mind that in
determining the extent of the liability for losses or damages resulting from negligence in the
fulfillment of a contractual obligation, the courts have "a discretionary power to moderate the
liability according to the circumstances". Hence, the evidence is not enough to justify the SC’s
interfering with the discretion of the lower courts in this respect.

NOTES 

ELCANO V. HILL
77 SCRA 98

 Husband and Wife Elcano sued Hill, a minor, for the killing of their son, Agapito
FACTS  Elcano appealed the CFI decision for dismissing the case on the ground that Hill’s act was
not criminal because of "lack of intent to kill, coupled with mistake."

PETITIONER  The lower court erred in dismissing the case

RESPONDENT 

ISSUE W/N the civil action for damages against Hill is barred by his acquittal in the criminal case

No, the civil action for damages against Hill is not barred by his acquittal in the criminal case

Firstly, the Revised Penal Code in articles 365 punishes not only reckless but also simple
negligence. If we were to hold that articles 1902 to 1910 of the Civil Code refer only to fault or
negligence not punished by law, accordingly to the literal import of article 1093 of the Civil Code,
the legal institution of culpa aquiliana would have very little scope and application in actual life.
Death or injury to persons and damage to property- through any degree of negligence - even the
slightest - would have to be indemnified only through the principle of civil liability arising from a
crime.

Secondary, to find the accused guilty in a criminal case, proof of guilt beyond reasonable doubt
is required, while in a civil case, preponderance of evidence is sufficient to make the defendant
pay in damages. There are numerous cases of criminal negligence which cannot be shown
beyond reasonable doubt, but can be proved by a preponderance of evidence. In such cases,
RULING
the defendant can and should be made responsible in a civil action under articles 1902 to 1910
of the Civil Code. Otherwise, there would be many instances of unvindicated civil wrongs.

“ART. 2177. Responsibility for fault or negligence under the preceding article is entirely
separate and distinct from the civil liability arising from negligence under the Penal Code. But
the plaintiff cannot recover damages twice for the same act or omission of the defendant.”

The extinction of civil liability referred to in Par. (e) of Section 3, Rule 111, 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.

P a g e 12 | 13
OBLIGATIONS & CONTRACTS | Atty. Daryl Bretch Largo | Digests by Frances Megan Ouano

Hence, the acquittal of Reginal 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.

NOTES 

VIRATA V. OCHOA
81 SCRA 472

 Virata died as a result of being hit by a jeepney driven by Borilla, but was owned by Ochoa
FACTS  An action for homicide was filed and the heirs of Virata reserved their right to institute a
separate civil action

PETITIONER 

RESPONDENT 

W/N the heirs of Virata can prosecute an action for damages based on quasi-delict against Borilla
ISSUE
and Ochoa

Yes, the heirs of Virata can prosecute an action for damages based on quasi-delict against Borilla
and Ochoa.

It is settled that in negligence cases, the aggrieved parties may choose between an action under
the Revised Penal Code or of quasi-delict under Art. 2176 of the Civil Code of the Philippines.
What is prohibited by Art. 2177 of the Civil Code of the Philippines is to recover twice for the same
negligent act.
RULING
The heirs of Virata are not seeking to recover twice since they had filed a separate civil action for
damages based on quasi-delict. The acquittal of Borilla in the criminal case is not a bar to the
prosecution of the civil case for damages based on quasi-delict.

In this case, the source of obligation to be enforced is quasi-delict, not an act or omission
punishable by law. Under Art. 1157 of the Civil Code of the Philippines, quasi-delict and an act or
omission punishable by law are two different sources of obligation. For the heirs of Virata to
prevail, they only have to establish their cause of action by preponderance of evidence.

NOTES 

NEPLUM INC. V. ORBESO

G.R. NO. 141986 | JUL. 11, 2002

FACTS 

PETITIONER 

RESPONDENT 

ISSUE W/N

RULING

NOTES 

P a g e 13 | 13