Article 1156

Ang obligasyon ay ang juridical necessity na magbigay, gumawa o hindi gumawa.

Article 1157
Ang mga obligasyon ay sumisibol mula sa:

1. Law (Batas)
2. Contracts (Contrata)
3. Quasi- Contracts
4. Acts or Omissions Punished by Law; and
5. Quasi-delicts

Article 1158
Ang pananagutan mula sa batas ay hindi ipinagpapalagay. Ang mga tiyak na
ipinahayag lamang sa koda o sa espesyal na batas ang maaaring habulin at at
isaayos ng mas malalim na batas na nagawa na at sa ano pa wala pang nakatala sa
mga probisyon ng Aklat na ito.

Article 1159
Ang mga obligasyon na nagmumula sa mga kontrata o kasunduan ay may bisa sa
pagitan ng dalawang nagkasundo at dapat ay tuparin ng pasubali.

Article 1160
Ang mga obligasyon na hinango mula sa quasi-contracts ay dapat na ayon sa mga
probisyon ng Chapter 1, Title XVII ng aklat na ito. (n)

Article 1161
Ang mga obligasyong sibil na nagmumula sa mga criminal na opensa ay dapat
pamunuan ng mga batas na pang penal, na naayos sa mga probisyon ng Artikulo
2177 at ng mga pertenenteng probisyon ng Chapter 2, Prelimary Title sa Human
Relations at ng Title XVIII ng aklat na ito na nagsasaayos ng mg danyos.

Article 1162
Ang mga obligasyon na nagmula sa quasi-delicts ay nasasakupan ng probisyon ng
Chapter 2, Title XVII ng Aklat na ito, at ng mga espesyal na batas.

Article 1163
Bawat tao may pananagutan magbigay ay tamang pagkalinga tulad isang ama ng
tahanan, malban ang batas o kasunduan na nangangailangan ng naaayon na
kalinga

Case Digest by Ainna Fathi

Case: The Roman Catholic Bishop of Jaro v. Gregorio de la Peña (26 PHIL.
144), Nov. 21, 1913

FACTS PETITIONER-APPELLEE: The Roman Catholic Bishop of Jaro

RESPONDENT-APPELLANT: Gregorio de la Peña (administrator of the
 estate of Father Agustin de la Peña

PONENTE: Moreland, J.

The Roman Catholic Bishop of Jaro brought action against the

appellant, Gregorio de la Peña, who was the administrator of the
property of the deceased Fr. Agustin de la Peña (deceased- 1900), to
recover the sum of P6,641 (Mexican currency) in the Court of First
Instance in Iloilo.

The amount of money in question, was collected by the deceased

priest, as an authorized representative to collect fees for the
construction of a leper hospital. The appellee was a trustee of such
charitable bequest. The same amount was deposited, along with Fr.
de la Peña’s personal funds, in the Hong Kong and Shanghai Bank of
Iloilo.

During the war of the revolution, Fr. de la Peña was arrested by the
military authorities as a political prisoner. His bank funds were
confiscated as the military authorities thought that the funds were
for revolutionary purposes.

The CFI of Iloilo awarded the plaintiff P6,641 with interest at the legal
rate from the beginning of action, thus this appeal.

Whether Father de la Peña is liable for the loss of the bequest money
ISSUE/S by placing it in his personal bank account?

LAWS Article 1094 (The Civil Code of the Philippines): A person obliged to
give something is also bound to preserve it with the diligence
pertaining to a good father of a family.
Article 1163 (The New Civil Code of the Philippines): 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. (1094a)

Article 1105 (The Civil Code of the Philippines): No one shall be liable
for events which could not be foreseen, or which having been
 foreseen were inevitable,

with the exception of the cases expressly mentioned in the law or

those in which the obligation so declares

Article 1174 (The New Civil Code of the Philippines): Except in cases
expressly specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires the
assumption of risk, no person shall be responsible for those events
which could not be foreseen, or which, though foreseen, were
inevitable. (1105a)

HOLDINGS No. Fr. de la Peña and his trustee (or estate administrator), Gregorio
de la Peña is not liable for the loss of the bequest money.
Fr. de la Peña’s liability is determined by portions in the Civil Code
that relate to obligations (Book 4, Title 1.) and the New Civil Code
(Book 4, Title 1.)

Although Article 1094 of the Civil Code, now, Article 1163 (The New
Civil Code) discusses that “a person obliged to give something is also
bound to preserve it with the diligence pertaining to a good father of
a family”, it also states that “no one shall be liable for events which
could not be foreseen, or which having been

foreseen were inevitable, with the exception of the cases expressly

mentioned in the law or those in which the obligation so declares
(Article 1105, the Civil Code and Article 1174, The New Civil Code).

The precise question is not about negligence as we cannot measure

nor say if Fr. de la Peña was indeed negligent by depositing the
donated funds in his bank. We cannot also do the same if he just left
the funds in his home or if he deposited the amount in a separate
account as a trustee. No law prohibited him from depositing the
amount as he did and no law changed his responsibility because of
that act. While one who is under obligation to give a thing is obliged,
when he foresees events which may be dangerous to his trust, to
exhaust all means and measures to elude or, if unavoidable, to
mitigate the effects of those events, the Supreme Court held that in
choosing between two means equally legal, with two possible same
 repercussions, making him negligent in selecting either, Fr. de la
Peña was not responsible for the loss of the amount in question.

The judgment was reversed.

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Article 1164
Ang nagpapautang ay may karapatan sa mga bunga ng mga bagay na mula sa
panahon na naipagkaloob na. Gayun pa man, hindi nya makakamit ang tunay na
karapatan hanggang ang nasabing karapatan ay naipagkaloob sa kanya.

Article 1165
Kung ang kinakailangan gawin o ibigay ay isang determinang bagay, ang
nagpautang, ayon sa karapatan na ipinataw sa kanya ng Article 1170, ay pwedeng
pilitin ang umutang na gawin o ibigay ang bagay na ito.

Kung hindi determina ang bagay, pwede nya ipakiusap na ang obligasyon ay
magawa mula sa pananagutan ng umutang.

Kung ang umutang ay nahuli sa pagtupad o nangako na gawin o ibigay ang bagay
na ito sa dalawa o higit na mga tao na walang kinalaman sa obligasyon, siya ay
responsable sa kahit ano mang di inaasang pangyayari hangga’t hindi nya
nagagawa o naibibigay ang bagay na iyon.

DISCUSSION BY BONG REYES

Concept of Determinate and Indeterminate thing

1. Determinate or specific thing- example are gold jewelries like necklace, ring,
earrings and other accessories made up of gold

2. Indeterminate or generic thing- example is an ounce of gold

Effect of Fortuitous Events on Determinate or Indeterminate Things

General Rule- A debtor is relieved from obligation “to give” if the thing was lost
through fortuitous event.
Exception- if the obligor delays and if he was bound to give the thing whatever
happened.

Article 1166
Ang obligasyon para magbigay ng determinang bagay ay bahagi ang pag gawa o
pag bigay ng bagay na ito at ang kanyang mga accessions and accessories kahit na
hindi nabanggit ang mga ito.

Article 1167
Kung ang tao ay obligado na gumawa ng isang bagay at hindi nya nagawa ito, and
pag gawa o pagkumpleto nito ay maipapataw sa kanya.

Itong patakaran na ito ay kailangan tuparin kung taliwas ang pag gawa ng bagay na
ito sa napagkasunduan. Ganun din kung ang pag gawa ng bagay na ito ay hindi
ayon sa napagkasunduang pamantayan, ito ay maaring ipa bawi o ipa giba.

Article 1168
Kung ang obligasyon ay masasalay ang hindi pag gawa ng isang bagay at ito ay
ginawa ng obligor, ang bagay na ito ay kailangan maisabalik sa dati sa kapinsalaan
o sa gastos ng obligor.

Article 1169
Ang mga obligadong mag hatid o magsagawa ng isang bagay ay mababalam mula
sa oras na ang obligee ay judicially o extra judicially na hiningi na maisagawa o
maihatid ang bagay na ito.

Ngunit, ang paghingi o pag demand ng obligee o ng nagpautang ay hindi

kinakailangan upang masabi na mayroon nang balam sa mga sitwasyon na ito:

1. Kapag nakasaad ito sa obligasyon o sa batas.

2. Kapag ayon sa kallikasan ng obligasyon na ang pag tatakda ng oras ay ang
nag cocontrol na motibo ng pagtatala ng kontrata.
3. Kapag ang demand o paghingi ay walang bisa. Katulad ng pagkakataon na
naisakatuparan na ng obligor ang bagay na ito ng higit pa sa kakayahan
nyang maikumpleto o maisakatuparan ito.
Sa reciprocal obligations, wala sa sino mang piging ay mababalam kung ang isa ay
hindi isasakatuparan o hindi handa na isagawa ang bagay na ito sa tamang paraan.
Kapag nagawa na ng isang piging ang kanyang obligasyon, ang balam ng isa ay
magsisimula.

Case: Julio de la Rosa v. The Bank of the Philippine Islands (51 PHIL. 926),
Nov. 28, 1924

FACTS PETITIONER-APPELLEE: Julio de la Rosa

RESPONDENT-APPELLANT: The Bank of the Philippine Islands
 PONENTE: Romualdez, J.

On June 11, 1923, a complaint was filed by Julio de la Rosa on the

ground that the defendant bank started a contest of designs and
plans for the construction of a building, and announced that prizes
would be awarded no later than November 30, 1921.

De la Rosa, the plaintiff, claimed that he joined the said contest and
performed work and incurred expenses for that purpose. Also, the
said bank did not name the contest judges and failed to ward the
prizes in accordance to the contest conditions stipulated. Because of
this, the plaintiff prays that judgment be rendered in his favor for the
sum of Php 30,000 as damages, with interests and costs.

The trial court ruled in favor of de la Rosa, ordering BPI to pay the
plaintiff an indemnity of Php 4,000 and the costs.

Both parties appealed from this judgment, the plaintiff argued that
the trial court erred:

1. In holding that the sum of P4,000 was a just and reasonable

indemnity to the plaintiff.

2. In not ordering the defendant bank to pay the P30,000 prayed for
in the complaint.

The defendant bank, in turn, assigned the following errors as

committed by the trial court:

1. In holding that the date set for the award of prizes is essential in
the contract.

2. In ordering that the sum of P4,000 be paid to the plaintiff.

Whether the defendant bank was in default in not awarding the

ISSUE/S prizes on November 30, 1921
LAWS Article 1100 (The Civil Code of the Philippines): Persons obliged to
deliver or to do something are in default from the moment the
creditor demands of them judicially or extrajudicially the fulfillment
of their obligation.
Nevertheless, the demand of the creditor shall not be necessary in
order that the default may arise —

1. When the obligator or the law expressly so provides;

2. When by reason of the nature and circumstances of the obligation

it shall appear that the designation of the time at which the thing
was to be delivered or the service rendered was the principal
inducement to the creation of the obligation.

In reciprocal obligations neither of the obligators shall be in default if

the other does not fulfill or does not submit to the fulfillment of that
which is incumbent upon him. From the time on the obliges performs
his obligation the default begins for the other party.

Article 1169 (The New Civil Code of the Philippines): Those obliged to
deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially

demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order

that delay may exist:

(1) When the obligation or the law expressly so declare; or

(2) When from the nature and the circumstances of the obligation it
appears that the designation of the time when the thing is to be
delivered or the service is to be rendered was a controlling motive
for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has

rendered it beyond his power to perform.
 In reciprocal obligations, neither party incurs in delay if the other
does not comply or is not ready to comply in a proper manner with
what is incumbent upon him. From the moment one of the parties
fulfills his obligation, delay by the other begins. (1100a)

No. The defendant bank cannot be held to have been in default

through the mere lapse of time. For this judicial or extrajudicial
demand was necessary for the performance of the obligation, and it
was not alleged here, nor does it appear that before bringing this
action the plaintiff had ever demanded it from the defendant bank in
any manner whatsoever. The defendant bank, therefore, was not in
default.
The plaintiff invoked paragraph 2 of Article 1100 of the Civil Code
and contended that November 30, 1921 was the principal
inducement because of the current cost of concrete buildings at the
time was fixed. The fixation of said price cannot be considered as the
controlling factor of setting the date of the awarding of
prizes/contract but just for the uniformity of the designs to be
presented and to secure greater justice in the appreciation of
relative merits of each work submitted.

Since the date was not a controlling motive for the establishment of
the contract, the plaintiff cannot invoke the exception on Article
1100 of the Civil Code. Thus, a judicial or extrajudicial demand was
necessary for the performance of the obligation, and in this case was
not done by de la Rosa.

The plaintiff had no cause of action; the judgment was reversed.

HOLDINGS

Discussion
TERMS:
 The Kind of Delay Applicable to Article 1169 is Legal Delay or Default
(Mora) and not ordinary delay.
 Extra-judicial- Done outside of court (sending of demand letter by creditor or
by his lawyer
 Judicial – done by filing of a formal complaint in court
Article 1169 discusses that as a GENERAL RULE, a judicial and extra-judicial demand
by the creditor signals the delay to deliver something by the debtor.

The exceptions to the rule are also listed in Art. 1169: Demand may not be
necessary in the following circumstances:
 1. When the obligation or the law expressly stipulates (example: a
newborn should have its Fact of Birth registered immediately, otherwise,
penalty will be imposed for its late registration
2. From the nature and circumstances of the obligation –When the choosing
of the time of delivery of the obligation is the controlling factor for
the creation of the contract or the obligation. (example: when there is
an obligation to build a convention hall as the site of an international event
that will be help on a specific date. Time is of the essence)
3. When the demand would be useless (example: When on performs the
prestation impossible of performance (like an impossible crime) as the very
thing to be delivered has already been destroyed)
4. When the debtor admits he is in default (No need to further demand to
put the debtor in default)
However: Asking for an extension is not indicative of acknowledging default.
In reciprocal obligations, neither party incurs default when the other does not
comply in a proper manner required of him (when one fulfills his obligation, delay by
the other begins)

***Without DEMAND, the effects of default shall not arise***

Example: One cannot be ordered to vacate a leased property for non-payment of

dues when the lessor’s collector fails to collect the same (when there is no
agreement on place of payment, collection must be made in the domicile of the
lessee)

EFFECT of LACK OF DEMAND

When there is NO DATE fixed for delivery, time is NOT considered essential. In this
case, delivery must be done within a reasonable timeframe to be fixed by the court
based on the circumstances of the case.

When the TIME is fixed for the fulfillment of the obligation, no further demand or
notice by the obligee or creditor is needed.

In case of DOUBT on whether a debtor is in default of his obligation, the doubt shall
be resolved in the debtor’s favor because dispensing the required demand is just an
exception to the general rule.

Classes of MORA
1. Mora Solvendi – default on the part of the debtor/obligor
Requisites:
 Obligation pertains to the debtor/obligor
 Obligation is determinate (susceptible of particular designation) or liquidated;
due and demandable
 Obligation has not been performed on its maturity date
***It is not enough to fix a period in the contract, demand is still needed to put the
debtor in default.
Does not apply on:
 Natural obligations – being based on equity and natural law, do not grant a
right of action to enforce their performance
 Negative obligations – a person cannot be tardy in not doing something that
is prohibited
Effects:
Ex Re: Default in Real Obligations
Ex Persona: Default in Personal Obligations
 Debtor may be liable for interests and damages
 Debtor may bear the risk of loss of things, even if the loss is due to a
fortuitous event (1165) subject to equitable mitigation if the loss would
transpire even if there was no default on the part of the debtor 
2. Mora Accipiendi – default on the part of the creditor or obligee; when the
obligee unjustifiably refuses to accept payment or performance at the time
the obligation is due. If the refusal is justified such as when the payment
given is not that of what has been stipulated upon, there is no Mora
Accipiendi.
Effects:
 Obligation arising from a crime (delicto), culprit is liable for the loss of the
thing even if its loss of the subject of the crime was due to a fortuitous event,
unless the creditor is guilty of Mora Accipiendi. Obligee is barred from
recovering for damages from the culprit if there was mora accipiendi.
 The refusal of lessors to accept current rentals without just cause makes
them shoulder the subsequent accidental loss of the leased premises. The
default incurred by the lessors was NOT cured by the failure of the lessee to
consign the rejected payments
3. Compensation Morae – default on the part of both debtor/obligor and the
creditor/obligee which arises in reciprocal obligations. The effect is the
default of one party neutralizes the default of the other. Parties are both
guilty of mutual default. Their respective liabilities shall be offset equitably.
When one party does not fulfill, he releases the other from his obligations and
does not become delinquent in the fulfillment of his prestation.

Article 1170
Sa mga nagsasagawa ng kanilang obligasyon na may kasalanan ng fraud,
nagligence, o delay o balam at sa mga nagsasagawa ng kanilang obligasyon na
hindi ayon sa napagkasunduan ay mananagot sa mga danyos.

Article 1171
Ang mga responsibilidad na sumisibol mula sa fraud ay kailangan masagawa sa
lahat ng obligasyon. Kahit anong waiver ng pag gawa nito sa kakaharapin na fraud
ay walang bisa.

CASE DIGEST BY BONG REYES

Pamintuan v. CA  (G. R. No. L-26339),

December 14, 1979

FACTS:
This is about the recovery compensatory, damages of breach of a contract of sale in
addition to the liquidated damages.

Pamintuan and Yu Ping Kun were business partners. Pamintuan was a license barter
who export corn flakes to Japan in exchange of plastic sheetings. Yu Ping Kun
complains in violation of their contract because although plastic sheetings were
delivered on the proper time and place. The quality of materials and overpricing the
same violates their agreement.

ISSUE:

Whether or not Pamintuan is guilty of fraud?

HELD:

Yes. Pamintuan is guilty of fraud because he change the manner of paying that
resulted to overpricing, he controlled disposal of goods in the warehouse and
manipulated receipts. There is no justification for the Civil Code to make an
apparent distinction between penalty and liquidated damages because the settled
rule is that there is no difference between penalty and liquidated damages insofar
as legal results are concerned and that either maybe recovered without the
necessary of proving actual damages and both maybe reduced when proper. The
CA ordered him to deliver to Yu Ping Kun plastic sheetings if he could not do so, to
pay P100 559.28 as damages with 6% interest. With the modification of the
judgment the CA is affirmed with all respects. No cost in this instance.

Article 1172
Ang mga responsibilidad na sumisibol mula sa negligence ng pagsasakatuparan ng
lahat ng klase ng obligasyon ay kailangan maisagawa o maisakatuparan, ngunit ang
tulad na liabilidad na ito ay maaring mai-regula ng korte na ayon sa mga
pangyayari.

Article 1173
Ang fault of negligence ng obligor ay magbabangkas ng hindi pagsasagawa ng
sipag na kailangan isagawa sa kalikasan ng obligasyon at umaayon sa mga
kalagayan ng mga tao, ng oras at ng lugar. Kung ang negligence ay nagpapakita ng
hindi mabuting tangka , ang mga probisyon ng Article 1171 at 2201, ika
pangalawang talataan, ang masusunod.

Kung hindi nasasaad sa batas o kontrata ang klase ng sipag na kailangan

maisagawa sa pagsasakatuparan ng obligasyon, iyong sipag na inaasahan sa
mabuting padre de pamilya ang kailangang isagawa.

Article 1174
Maliban sa mga kaso o pangyayari na isinaad sa batas, o naisulat sa stipulasyon, o
ang kalikasan ng obligasyon ay nangangailangan assumption of risk, walang tao
ang magiging responsable sa sa ganitong mga pagkakataon na hindi inaasahan, o
kung inaasahan man ay hindi maiiwasan.

Case: The Roman Catholic Bishop of Jaro v. Gregorio de la Peña (26 PHIL.
144), Nov. 21, 1913

PETITIONER-APPELLEE: The Roman Catholic Bishop of Jaro

RESPONDENT-APPELLANT: Gregorio de la Peña (administrator of the
estate of Father Agustin de la Peña

PONENTE: Moreland, J.

The Roman Catholic Bishop of Jaro brought action against the

appellant, Gregorio de la Peña, who was the administrator of the
property of the deceased Fr. Agustin de la Peña (deceased- 1900), to
recover the sum of P6,641 (Mexican currency) in the Court of First
Instance in Iloilo.

The amount of money in question, was collected by the deceased

priest, as an authorized representative to collect fees for the
construction of a leper hospital. The appellee was a trustee of such
charitable bequest. The same amount was deposited, along with Fr.
de la Peña’s personal funds, in the Hong Kong and Shanghai Bank of
Iloilo.

During the war of the revolution, Fr. de la Peña was arrested by the
military authorities as a political prisoner. His bank funds were
confiscated as the military authorities thought that the funds were
for revolutionary purposes.

The CFI of Iloilo awarded the plaintiff P6,641 with interest at the legal
rate from the beginning of action, thus this appeal.
FACTS

Whether Father de la Peña is liable for the loss of the bequest money
ISSUE/S by placing it in his personal bank account?

LAWS Article 1094 (The Civil Code of the Philippines): A person obliged to
give something is also bound to preserve it with the diligence
pertaining to a good father of a family.
 Article 1163 (The New Civil Code of the Philippines): 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. (1094a)

Article 1105 (The Civil Code of the Philippines): No one shall be liable
for events which could not be foreseen, or which having been
foreseen were inevitable,

with the exception of the cases expressly mentioned in the law or

those in which the obligation so declares

Article 1174 (The New Civil Code of the Philippines): Except in cases
expressly specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires the
assumption of risk, no person shall be responsible for those events
which could not be foreseen, or which, though foreseen, were
inevitable. (1105a)

HOLDINGS No. Fr. de la Peña and his trustee (or estate administrator), Gregorio
de la Peña is not liable for the loss of the bequest money.
Fr. de la Peña’s liability is determined by portions in the Civil Code
that relate to obligations (Book 4, Title 1.) and the New Civil Code
(Book 4, Title 1.)

Although Article 1094 of the Civil Code, now, Article 1163 (The New
Civil Code) discusses that “a person obliged to give something is also
bound to preserve it with the diligence pertaining to a good father of
a family”, it also states that “no one shall be liable for events which
could not be foreseen, or which having been

foreseen were inevitable, with the exception of the cases expressly

mentioned in the law or those in which the obligation so declares
(Article 1105, the Civil Code and Article 1174, The New Civil Code).

The precise question is not about negligence as we cannot measure

nor say if Fr. de la Peña was indeed negligent by depositing the
donated funds in his bank. We cannot also do the same if he just left
the funds in his home or if he deposited the amount in a separate
 account as a trustee. No law prohibited him from depositing the
amount as he did and no law changed his responsibility because of
that act. While one who is under obligation to give a thing is obliged,
when he foresees events which may be dangerous to his trust, to
exhaust all means and measures to elude or, if unavoidable, to
mitigate the effects of those events, the Supreme Court held that in
choosing between two means equally legal, with two possible same
repercussions, making him negligent in selecting either, Fr. de la
Peña was not responsible for the loss of the amount in question.

The judgment was reversed.

Article 1175
Ang mga usurious na transaksyon ay masasaklawan o pamumunuan ng mga
espesyal na batas.
Case Digest

Case: Bulos Jr. v Yasuma (527 SCRA 727);

October 17, 1952

FACTS PETITIONER:
HONORIO C. BULOS, JR
RESPONDENT: KOJI YASUMA
PONENTE: Chico-Nasario

In 1988, Bulos, Atty. Tabalingcos and Dr. Lim incurred a P2.5M loan
from Yasuma, a Japanese national. The terms of the loan provide
that it is payable in 3 months at 4% interest rate; that in case of
nonpayment, it shall continue at that rate until paid (48% per
annum). And in case of litigation, plus 10% of principal balance for
atty’s fees (no less than P10,000). Dr. Lim signed the promissory
note in behalf of the others as agreed upon. Each of them mortgaged
their respective properties in favor of Yasuma.

The three failed to pay upon maturity in 1989. Loan then was already
at P2.7M. Yasuma foreclosed the mortgaged properties. The sale
amounted to P1.6M leaving a balance of P1.06M. Interest also
accrued and other penalties ballooning  the balance to P2.4M.
Yasuma won a subsequent collection suit filed at the RTC of Makati
City in 1996 in which he was a defendant on along with Bede
 Tabalingcos. Bulos appealed. The Court of Appeals, in 2004, denied
the motion for reconsideration and affirmed the lower court’s
decision. It ruled that Yasuma is entitled to the 20% principal balance
for atty’s fees as per contract. The CA however reduced the interest
rate to 21% per annum, thus this SC case with the petitioner’s prayer
that the CA and RTC decision be declared null and void under Rule
45 of the Revised Rules of Civil Procedure with a petition for review
on Certiorari

In the main, Bulos claims that his obligation was extinguished when
his property was foreclosed via dacion en pago and when he offered
his shares of stock in the Rural Bank of Paranaque to Yasuma.

Whether or not Bulos is correct in claiming that his obligation to pay

ISSUE/S Yasuma has been fully extinguished.

Article 1175.
Usurious transactions shall be governed by special laws. (n)
LAWS

No. The dacion en pago merely paid off a portion of the loan. Second,
Yasuma is a foreign national and is banned by law to be shareholder
in a rural bank (RA 7353).
The additional penalty of paying an additional 20% for Atty’s fees is
valid for it was agreed upon in the promissory note. The parties are
bound by it.

The 48% per annum interest rate is excessive as well as the reduced
amount of 21% per annum. Though the ceiling of interest rate has
been removed by CB Circular 905, in no way shall interest rates be
excessive as to enslave borrowers. Interest rates of 3% per month or
higher is already excessive. Hence, the interest is reduced to the
legal rate which is at 12% per annum.

Instant petition was partially granted. Interest rate modified and

applied to the balance of Php 2,240,000 computed from the date of
judicial demand.
HOLDINGS
Discussion

TERMS:
Usury: The act of lending money at an interest rate that is considered
unreasonably high or that is higher than the rate permitted by law; Crime of
charging higher interest on loan that the law permits
Carte blanche:  Unconditional authority; full discretionary power
Unconscionable: Unreasonable; Not Right; Excessive
Iniquitous: Grossly unfair; Morally wrong
Dacion de Pago: is a Spanish term that means the giving back of the property
mortgaged to the lender in exchange for the discharge of a mortgage debt.
Article 1175: Usurious transactions shall be governed by special laws (A new
provision)

 Article has been declared legally ineffective by Resolution no. 224 (Dec. 3,

1982) of the Monetary Board of the Central Bank and later by the Central
Bank Circular No. 905 which took effect on 1, 1983 and removed the
ceiling on interest rates for secured and unsecured loans regardless of
maturity.
 The virtual repeal of the law is within the range of judicial notice that the
courts are bound to take into account: fundamental tenet is that the law
is deemed part of the contract.
 Law is legally inexistent – Interest can now be charged as lender and
borrower may agree upon
***UNCONSCIONABLE INTERESTS are REDUCIBLE under Article 21, New Civil Code
for being CONTRARY TO MORALS:

Article 21: Any person who willfully causes loss or injury to another in manner that
is contrary to morals, good customs or public policy shall compensate the latter for
the damage.

***CB Circular No. 905 DOES NOT grant Money Lenders Carte Blanche Authority to
Raise Interest at any level – nothing in the Circular grants lenders carte blanche
authority to interest rates to levels which will either enslave their borrowers or lead
to a hemorrhaging of their assets.

 Allowing high interest rates to thrive is tantamount to obstructing the

economic recovery of the country: debtors are unable to pay loan sharks and
lose their properties used as collaterals.
 Banks which foreclosed properties find those properties as dead assets as
they do not generate funds;
 small entrepreneurs are discouraged from getting loans to establish
businesses as they are afraid of the staggering interest rates.
 Stunts the economic growth of the country
***UNILATERAL INCREASE of Interest by Lender, NOT allowed – increases of interest
rates unilaterally imposed by a bank without petitioner’s consent/assent are
violative of mutuality of contracts ordained in Article 1308.
***CASE where AMOUNTS of Interest are found UNCONSCIONABLE and INIQUITOUS
–

Article 1176
Ang pagtanggap ng nautangan ng halaga na inutang ng walang patumanggi ay
magbibigay sibol sa pag aakala na ang interest nito ay nabayaran na.

Ang pagtanggap ng installment na babayaran dapat sa kakaharapin para sa utang,

ng walang patumanggi para sa mga nakaraan na installments ay magbibigay sibol
sa sa pag aakala na ang mga installment na ito ay nabayaran na.

CASE DIGEST BY BONG REYES

Case: PNB v. Pedro Relativo  (G. R. No. L-5298),

October 29, 1952
 

PETITIONER: Philippine National Bank

RESPONDENT:  Pedro Relativo

PONENTE: Paras C.J.

This is a suit by the bank for collection. Pedro C. Relativo owed the
Philippine National Bank the sum of P600 for which he executed a
promissory note. The tender payment of the loan out of check was
dishonored by Naga Agency and, however, honored and cashed by the
Legaspi Branch.
 
FACTS

  Whether or not the tender of payment in check resulted in the discharge

ISSUE/S of the obligation?

Article 1176 provides that after a valid tender of payment the debtor
  shall be release from the responsibility by the consignation of the thing
LAWS or sum due.

HOLDING No, because the tender of payment was conditional. Under the civil code,
S a tender of payment, to be valid must be unconditional. The bank in this
case had some reasons to reject the condition because of the financial
risk it takes in making the payment in connection with its genuineness,
identity of payee and other infirmities they expected to foresee. The
 effect of valid tender of payment is merely to exempt the debtor from
payment of interest and other damages. Tender of payment even if
valid, does not by itself produce legal payment, unless it is completed by
consignation. The judgment of the CFI of Camarines Sur was affirmed,
requiring the defendant-appellant to pay the debt with interest.

Article 1177
Ang mga nagpautang na kumuha na ng mga propriedad ng mga may utang para
makumpleto ang kanilang mga bayarin  ay maaring isakatuparan ang kanilang mga
karapatan at dalahin ang mga aksyon ng may utang para sa pagkumpleto ng mga
bayarin na ito, maliban sa mga pagaari ng may utang na likas sa kanyang
pagkatao. Maari din na idagdag o isalangsang ng nagpautang ang mga aksyon ng
umutang  para dayain sila.

Article 1178
Saklaw ng mga batas, ang mga karapatan na nakuha o sumibol mula sa obligasyon
ay pwedeng mailipat kung walang naisaad na stipulasyon na salungat nito.