Obligation Bar Questions of the former’s scrap metals.

However, Peakstar
reneged in all its obligations.
Nature and Effects
Metro interposed the defense of force majeure for
1. In two separate documents signed by him, Juan
their failure to pay their loan obligations to Allied
Valentino "obligated" himself each to Maria and to
Bank.
Perla, thus -'To Maria, my true love, I obligate myself
to give you my one and only horse when I feel like
Is Metro Concast Correct?
It." - and - 'To Perla, my true sweetheart, I obligate
myself to pay you the P500.00 I owe you when I feel
5. Printado is engaged in the printing business. Suplico
like it."
supplies printing paper to Printado pursuant to an
order agreement under which Suplico binds himself
Months passed but Juan never bothered to make good
to deliver the same volume of paper every month for
his promises. Maria and Perla came to consult you on
a period of 18 months, with Printado in turn agreeing
whether or not they could recover on the basis of the
to pay within 60 days after each delivery. Suplico has
foregoing settings. What would your legal advice be?
been faithfully delivering under the order agreement
(1997 BAR)
for 10 months but thereafter stopped doing so,
because Printado has not made any payment at all.
2. Roland, a basketball star, was under contract for one
Printado has also a standing contractwith publisher
year to play-for-play exclusively for Lady Love, Inc.
Publico for the printing of 10, 000 volumes of school
However, even before the basketball season could
textbooks. Suplico was aware of said printing
open, he was offered a more attractive pay plus
contract. After printing 1, 000 volumes, Printado also
fringes benefits by Sweet Taste, Inc. Roland accepted
fails to perform under its printing contract with
the offer and transferred to Sweet Taste. Lady Love
Publico. Suplico sues Printado for the value of the
sues Roland and Sweet Taste for breach of contract.
unpaid deliveries under their order agreement. At the
Defendants claim that the restriction to play for Lady
same time Publico sues Printado for damages for
Love alone is void, hence, unenforceable, as it
breach of contract with respect to their own printing
constitutes an undue interference with the right of
agreement. In the suit filed by Suplico, Printado
Roland to enter into contracts and the impairment of
counters that: (a) Suplico cannot demand payment for
his freedom to play and enjoy basketball. Can Roland
deliveries made under their order agreement until
be bound by the contract he entered into with Lady
Suplico has completed performance under said
Love or can he disregard the same? Is he liable at all?
contract; (b) Suplico should pay damages for breach
How about Sweet Taste? Is it liable to Lady Love?
of contract; and (c) with Publico should be liable for
(1991 BAR)
Printado’s breach of his contract with Publico
3. FSI entered into an agreement with FBI whereby the
because the order agreement between Suplico and
former, as subcontractor, undertook constructions of
Printado was for the benefit of Publico. Are the
walls, capping beam in a certain plaza.
contentions of Printado tenable? Explain your
answers as to each contention. (2002 BAR)
FSI then filed a complaint for Sum of Money stating
6. Under a deed of conditional sale, Castillo agreed to
that the FBI refused to pay despite demand.
sell his property to Olivarez Realty; with Olivarez
Realty delivering the down payment and the rest to
RTC and CA ruled in favor of FSI and was
be paid in 30 equal monthly installments every 8th of
demanded FBI to pay the claimed amount plus 12%
the month beginning in the month.
interest from the time of judgment.
However, Olivarez Realty failed to comply with the
FBI avers that the CA erred in imposing the 12%
conditions therein, to wit: a) pay the full purchase
interest as its agreement with FSI was not a “loan or
price; b) failed to file any action against PTA; c)
forbearance of money”. Is the FBI correct?
failed to clear the land of the tenants nor paying them
disturbance compensation. For breaching the
4. Metro Concast Steel Corporation obtained several
contract, Castillo prayed for rescission of contract
loans from Allied Bank. Metro failed to pay such
under Art. 1191 of Civil Code, plus damages.
loans upon maturity. In order to pay its debts, Metro
If you are the judge, will you grant the rescission?
entered into an agreement with Peakstar for the sale

7. Respondent Estrella Querimit opened a
dollar savings account in FEBTC for which she was
issued 4 Certificates of Deposit. In 1989, respondent
accompanied her husband to the US for medical
treatment. In 1993, her husband died and Estrella
Querimit returned to the Philippines.
She went to petitioner FEBTC to withdraw her
deposit but she was told that her husband had
withdrawn the money in deposit. Respondent
demanded payment including interests earned.
Respondent filed a complaint upon refusal of
petitioner to pay.  constructed the Greenhills Shopping Arcade and
Is the petitioner bank liable?
8. Q: A van owned by Orlando and driven by Diego,
while negotiating a downhill slope of a city road,
suddenly gained speed, obviously beyond the
authorized limit in the area, and bumped a car in front
of it, causing severe damage to the care and serious
injuries to its passengers. Orlando was not in the car
at the time of the incident. The car owner and the
injured passengers sued Orlando and Diego for
damages caused by Diego’s negligence. In their
defense, Diego claims that the downhill slope caused
the van to gain speed and that, as he stepped on the
brakes to check the acceleration, the brakes locked,
causing the van to go even faster and eventually to hit
the car in front of it. Orlando and Diego contend that
the sudden malfunction of the van’s brake system is a
fortuitous even and that, therefore, they are exempt
from any liability. Is this contention tenable? Explain.
(2002 BAR)
9. On September 3, 2012, Remarkable Laundry and
Dry Cleaning (respondent) filed a Complaint
denominated as “Breach of Contract and Damages”
against spouses Romeo and Ida Pajares (petitioners)
before the RTC.
Respondent alleged that it entered into a Remarkable
Dealer Outlet Contract with petitioners whereby the
latter, acting as a dealer outlet, shall accept and
receive items or materials for laundry which are then
picked up and processed by the former in its main
plant or laundry outlet; that petitioners violated
Article IV (Standard Required Quota & Penalties) of
said contract, which required them to produce at least
200 kilos of laundry items each week, when, on April
30, 2012, they ceased dealer outlet operations on
account of lack of personnel; that respondent made
written demands upon petitioners for the payment of
penalties imposed and provided for in the contract,
but the latter failed to pay; and, that petitioners’
violation constitutes breach of contract.
Will the complaint of respondent although
denominated as one for breach of contract give rise to
either specific performance or rescission?
10. Ortigas & Company, Limited Partnership entered
into a lease agreement with La Paz Investment &
Realty Corporation wherein the former leased to the
latter its parcel of land located in San Juan. La Paz
divided it into several stalls and subleased them
to other people. One of the sub-lessees was Edsel
Liga (Liga), who obtained the leasehold right to Unit
No. 26, Level A of the GSA. As the lease expired, the
stallholders made several attempts to have their
leasehold rights extended. Allegro Resources
became the new lessee. As the new lessee, Allegro
offered to sublease Unit No. 26, Level A to Liga.
They entered into a lease agreement dubbed Rental
Information in which Liga agreed to pay rental of
P40K monthly. She also agreed to pay the back
rentals due Ortigas. Liga also gave P40K as one
month advance rental and another P40K as one
month security deposit as provided in the
agreement. Liga failed to pay the subsequent due
rent. Despite repeated demands from Allegro, Liga
had failed to pay her rentals for the subleased
property, as well as the back rentals from January to
August 2001 due Ortigas.
Should Liga be required to pay back rentals covering
the period of January 1 to August 31?
11. AB Corp. entered into a contract with XY Corp.
whereby the former agreed to construct the research
and laboratory facilities of the latter. Under the terms
of the contract, AB Corp. agreed to complete the
facility in 18 months, at the total contract price of
P10 million. XY Corp. paid 50% of the total contract
price, the balance to be paid upon completion of the
work. The work stated immediately, but AB Corp.
later experienced work slippage because of labor
unrest in his company. AB Corp.'s employees
claimed that they are not being paid on time; hence,
the work slowdown. As of the 17th month, work was
only 45% completed. AB Corp. asked for extension
of time, claiming that its labor problems is a case of
fortuitous event, but this was denied by XY Corp.
When it became certain that the construction could
 not be finished on time, XY Corp. sent written notice
cancelling the contract, and requiring AB Corp. to
immediately vacate the premises. Can the labor
unrest be considered a fortuitous event? (2008 BAR)
12. Kristina brought her diamond ring to a jewelry shop
form cleaning. The jewelry shop undertook to return
the ring by February 1, 1999." When the said date
arrived, the jewelry shop informed Kristina that the
Job was not yet finished. They asked her to return
five days later. On February 6, 1999, Kristina went to
the shop to claim the ring, but she was informed that
the same was stolen by a thief who entered the shop
the night before. Kristina filed an action for damages
against the jewelry shop which put up the
defense of force majeure. Will the action prosper or
not?
13. Dra De Llana was involved in a vehicular accident
caused by a truck driver employed by Rebecca
Biong.
Dra. dela Llana sued Rebecca for damages She
alleged that she lost the mobility of her arm as a
result of the vehicular accident, medical expenses an
average monthly income of P30,000.00 since June
2000. During trial showed pictures of the collision
and a medical certificate issued by Dr. Milla as
evidence of her whiplash injury.
In defense, Rebecca maintained that Dra. dela Llana
had no cause of action against her as no reasonable
relation existed between the vehicular accident and
Dra. dela Llana's injury. Dra. dela Llana's illness
became manifest one month and one week from the
date of the vehicular accident.
Whether or not Rebecca Biong is liable for damages
for the whiplash injury of Dra. Dela Llana?
14. Petitioner Metrobank is a domestic banking
corporation duly organized and existing under the
laws of the Philippines issued a “hold-out” clause
against respondent Rosales is the owner of a travel
agency while Yo Yuk To is her mother.
The basis of such hold-out clause is for the alleged
unauthorized withdrawal of respondent.
Is the issuance of the hold-out clause valid?
15. Polo Pantaleon sued American Express International
for an alleged delay is approving his purchase while
he was in a vacation in Amsterdam. Such delay
caused not only inconvenience but also humiliation
for their family.
He filed with the RTC a breach of contractual
obligations. Rule on the case
16. On 1990, Marquez contracted a obtained a loan of
20, 000 pesos from Elisan Credit Corporation subject
to 26% annual interest. And, in case of non-payment,
a 10% monthly penalty based on the amount unpaid
and another 25% of such amount for attorney’s fees.
A chattel mortgage was also executed over a motor
vehicle
On 1992, the loan reached maturity but only 10, 000
pesos was paid. Marquez asked Elisan if she could
pay in daily installments to which the latter agreed.
On 1995, Despite Marquez having paid 20, 000,
Elisan foreclosed the chattel mortgage as the former
did not settle her balance despite demand as her
payment during the daily installment was applied to
the interest accrued as a consequence of her delay in
payment as stipulated invoking Article 1253.
Marquez insist that it should be credited against the
principal, invoking Article 1176 of the Civil Code.
Rule on the case.
17. Respondent Mekeni offered petitioner Antonio
Locsin II the position of Regional Sales Manager. In
addition to a compensation and benefit package,
Mekeni offered petitioner a car plan, under which
one-half of the cost of the vehicle is to be paid by the
company and the other half to be deducted from
petitioner's salary.
Subsequently, Locsin resigned. Petitioner thus
returned the vehicle to Mekeni. Petitioner made
personal and written follow-ups regarding his unpaid
salaries, commissions, benefits, and offer to purchase
his service vehicle. Mekeni replied that the company
car plan benefit applied only to employees who have
been with the company for five years and that the
deductions on his salary are to be treated as rentals
for the car. Petitioner filed against Mekeni and/or its
President, Prudencio S. Garcia, a Complaint for the
recovery of monetary claims consisting of unpaid
salaries, commissions, sick/vacation leave
Is the petition meritorious?
Kinds of Obligation
18. Are the following obligations valid, why, and if they
are valid, when is the obligation demandable in each
case?
a) If the debtor promises to pay as soon as he has the
means to pay;
b) If the debtor promises to pay when he likes;
c) If the debtor promises to pay when he becomes a
lawyer;
d) If the debtor promises to pay if his son, who is sick
with cancer, does not die within one year. 5%
19. Joey, Jovy and Jojo are solidary debtors under a loan
obligation of P300,000.00 which has fallen due. The
creditor has, however, condoned Jojo's entire share in
the debt. Since Jovy has become insolvent, the
creditor makes a demand on Joey to pay the debt.
1) How much, if any, may Joey be compelled to pay?
[2%]
2) To what extent, if at all, can Jojo be compelled by
Joey to contribute to such payment? [3%]
20. Dux leased his house to Iris for a period of 2 years, at
the rate of P25,000.00 monthly, payable annually in
advance. The contract stipulated that it may be
renewed for another 2-year period upon mutual
agreement of the parties. The contract also granted
Iris the right of first refusal to purchase the property
at any time during the lease, if Dux decides to sell the
property at the same price that the property is offered
for sale to a third party. Twenty-three months after
execution of the lease contract, Dux sold the house to
his mother for P2 million. Iris claimed that the sale
was a breach of her right of first refusal. Dux said
there was no breach because the property was sold to
his mother who is not a third party. Iris filed an
action to rescind the sale and to compel Dux to sell
the property to her at the same price. Alternatively,
she asked the court to extend the lease for another 2
years on the same terms.
a) Can Iris seek rescission of the sale of the property
to Dux’s mother? (3%)
b) Will the alternative prayer for extension of the
lease prosper? (2%)
21. In 1997, Manuel bound himself to sell Eva a house
and lot which is being rented by another person, if
Eva passes the 1998 bar examinations. Luckily for
Eva, she passed said examinations.
(a) Suppose Manuel had sold the same house and lot
to another before Eva passed the 1998 bar
examinations, is such sale valid? Why?
(2%)
(b) Assuming that it is Eva who is entitled to buy said
house and lot, is she entitled to the rentals collected
by Manuel before she passed the 1998 bar
examinations?Why?
(3%)
22. Dino sued Ben for damages because the latter had
failed to deliver the antique Marcedes Benz car Dino
had purchased from Ben, which was—by agreement
—due for delivery on December 31, 1993. Ben, in his
answer to Dino's complaint,
said Dino's claim has no basis for the suit, because as
the car was being driven to be delivered to Dino on
January 1, 1994, a reckless truck driver had rammed
into the Mercedes Benz. The trial court dismissed
Dino's complaint, saying Ben's obligation had indeed,
been extinguished by force majeure.
Is the trial court correct?
23. A,B,C,D, and E made themselves solidarity indebted
to X for the amount of P50,000.00. When X
demanded payment from A, the latter refused to pay
on the following grounds.
a) B is only 16 years old.
b) C has already been condoned by X
c) D is insolvent.
d) E was given by X an extension of 6 months
without the consent of the other four co-debtors.
State the effect of each of the above defenses put up
by A on his obligation to pay X, if such defenses are
found to be true
24. Four foreign medical students rented the apartment of
Thelma for a period of one year. After one semester,
three of them returned to their home country and the
fourth transferred to a boarding house. Thelma
discovered that they left unpaid telephone bills in the
total amount of P80, 000.00. The lease contract
provided that the lessees shall pay for the telephone
services in the leased premises. Thelma demanded
that the fourth student pay the entire amount of the
unpaid telephone bills, but the latter is willing to pay
only one fourth of it. Who is correct? Why? (2001
BAR)
25. For 200, 000, D promised to teach C mathematics for
the year 2005 or to buy him a computer notebook. In
2005, C goes to Germany. D moves to rescind the
 contract. If you were the judge, will you grant the
rescission?
26. A and B were both responsible in causing injury to C
through their negligence. C brought an action against
both. What is the nature of their (A and B) liability?
27. X, a registered operator of a common carrier, sold the
vehicle to B without prior approval of the
Commission. B then operated the vehicle. An
accident took place one day, injuring the passenger of
B. Are X and B jointly or solidarily liable?
28. A borrowed from B on the strength of two sureties, C
and D, who assumed joint and several liability with
A. The trial judge, upon non-payment of the debt,
rendered a judgment against all the defendants for the
total amount sought by B. But the judgment did not
state whether the liability of the defendants was joint
or solidary. B asked for the execution of C’s
properties for the whole obligation? Is B correct?
29. Butch got a loan from Hagibis Corporation (Hagibis)
but he defaulted in the payment. A case for collection
of a sum of money was filed against him. As a
defense, Butch claims that there was already an
arrangement with Hagibis on the payment of the loan.
To implement the same, Butch already surrendered
five (5) service utility vehicles (SUVs) to the
company for it to sell and the proceeds to be credited
to the loan as payment. Was the obligation of Butch
extinguished by reason of dacion en pago upon the
surrender of the SUVs? Decide and explain. (2016
BAR)
30. Jerico, the project owner, entered into a Construction
Contract with Ivan for the latter to construct his
house. Jojo executed a Surety undertaking to
guarantee the performance of the work by Ivan.
Jerico and Ivan later entered into a Memorandum of
Agreement (MOA) revising the work schedule of
Ivan and the subcontractors. The MOA stated that all
the stipulations of the original contract not in conflict
with said agreement shall remain valid and legally
effective. Jojo filed a suit to declare him relieved of
his undertaking as a result of the MOA because of the
change in the work schedule. Jerico claims there is no
novation of the Construction Contract. Decide the
case and explain. (2016 BAR)
31. A, B, and C are jointly liable to give a particular car
worth 1 million in favor of D, E, F, and G. A is
insolvent and the debtor, therefore, cannot purchase
the car to give to the creditors. D and E have
renounced their rights. The debtors are not in default.
How much can the creditors get from each of the
debtors?
32. In 2004, A, B, and C bound themselves in solidum to
give X 300,000 subject the following stipulations: A
to pay in 2005; B, if he passes the Bar; C in 2007.
a. In 2005, how much can X demand from A?
33. A and B are solidarily liable to X and Y, solidary
creditors, for the payment of 800,000. A and X
agreed that instead of paying 800,000, A will just
paint X’s house. Is the obligation extinguished? If
yes, what are its effects?
34. A and B are solidary debtors to X and Y, solidary
creditors to the amount of 400,000. But x owes A
400,000 on account of a different obligation. Is the
obligation extinguished? If yes, what are its effects?
35. A and B are solidary debtors to X and Y, solidary
creditors to the amount of 4 million. X tells A that he
is waiving the whole obligation. Is the obligation
extinguished? If yes, what are its effects?
36. A and B made a negotiable promissory note in favor
of C and D, whereby A and B bound themselves
solidarily to C and d, solidary creditors. C and D
endorsed the note in favor of E; E in favor of F; F in
favor of A. Is the obligation extinguished? If yes,
what are its effects?
37. A and B are solidary debtors of X and Y to the
amount of 4 million. X sued A but recovered only 3.5
million. May Y still sue B for 500,000?
38. A, B, C, and D are solidary debtors of E to the
amount of 1 millio. A paid E the whole obligation of
1 million. It is clear that a is entitled to
reimbursement for now A has become the creditor for
reimbursement. Are B, C, and D considered the
solidary debtors of A?
39. A, B, and C executed jointly and severally a
promissory note for 300,000 in favor of D payable
after six months. Upon maturity, A and B refused to
pay. Is D entitled to recover from C the amount of
300,000? In case of payment by C, what right, if any,
he has against A and B?
40. A, B, and C are solidary debtors of D in an obligation
to give a particular car. D makes an extrajudicial
demand upon A. After the demand, the car was lost
by a fortuitous event. Is the obligation extinguished?
If not, what is D’s right?
41. A, B, and C are solidarily indebted to X for 3 million
but A’s consent had been obtained by intimidation.
a. If X sues A, how much will A be liable for?
b. If X sues B, how much will B be held liable
for?
42. In 2005, X, Y, and Z executed a promissory note
promising B the sum of 3 million jointly and
severally of 10% annum within six months. In an
action by B against X for nonpayment of the note, X
 interposed the defenses that 1) that Y was a minor
when the note was executed, and 2) that B had given
an extension of one year to Z. What are the effects of
these defenses?
43. In a deed of sale of realty, it was stipulated that the
buyer would construct a commercial building on the
lot while the seller would construct a private
passageway bordering the lot. The building was
eventually finished but the seller failed to complete
the passageway as some of the squatters, who were
already known to be there at the time they entered
into the contract, refused to vacate the premises. In
fact, prior to its execution, the seller filed ejectment
cases against the squatters.
The buyer now sues the seller for specific
performance with damages. The defense is that the
obligation to construct the passageway should be
with a period which, incidentally, had not been fixed
by them, hence, the need for fixing a judicial period.
Will the action for specific performance of the buyer
against the seller prosper? (1991 BAR)
44. In June 1988, X obtained a loan from A and executed
with Y as solidary co-maker a promissory note in
favor of A for the sum of P200, 000.00. The loan was
payable at P20, 000.00 with interest monthly within
the first week of each month beginning July 1988
until maturity in April 1989. To secure the payment
of the loan, X put up as security a chattel mortgage
on his car, a Toyota Corolla sedan. Because of failure
of X and Y to pay the principal amount of the loan,
the car was extrajudicially foreclosed. A acquired the
car at A’s highest bid of P120, 000.00 during the
auction sale.
After several fruitless letters of demand against X
and Y, A sued Y for the discovery of P80, 000.00
constituting the deficiency.
Y resisted the suit raising the following defenses:
a) That Y should not be liable at all because X was
not sued together with Y.
b) That the obligation has been paid completely by
A’s acquisition of teh car through “dacion en pago”
or payment by cession.
c) That Y should not be held liable for the deficiency
of P80, 000.00 because he was not a co-mortgagor in
teh chattel mortgage of the car, which contract was
executed by X alone as owner and mortgagor.
d) That assuming he is liable, he should only pay the
proportionate sum of P40, 000.00.
Decide the defense with reasons. (1992 BAR)
Modes of Extinguishment
45. Sarah had a deposit in a savings account with Filipino
Universal Bank in the amount of five million pesos
(P5,000,000.00). To buy a new car, she obtained a
loan from the same bank in the amount of
P1,200,000.00, payable in twelve monthly
installments. Sarah issued in favor of the bank post-
dated checks, each in the amount of P100,000.00, to
cover the twelve monthly installment payments. On
the third, fourth and fifth months, the corresponding
checks bounced. The bank then declared the whole
obligation due, and proceeded to deduct the amount
of one million pesos (P1,000,000.00) from Sarah’s
deposit after notice to her that this is a form of
compensation allowed by law. Is the bank correct?
Explain. (4%)
46. Eduardo was granted a loan by XYZ Bank for the
purpose of improving a building which XYZ leased
from him. Eduardo executed the promissory note
(“PN”) in favor of the bank, with his friend Recardo
as cosignatory. In the PN, they both acknowledged
that they are “individually and collectively” liable
and waived the need for prior demand. To secure the
PN, Recardo executed a real estate mortgage on his
own property. When Eduardo defaulted on the PN,
XYZ stopped payment of rentals on the building on
the ground that legal compensation had set in. Since
there was still a balance due on the PN after applying
the rentals, XYZ foreclosed the real estate mortgage
over Recardo’s property. Recardo opposed the
foreclosure on the ground that he is only a co-
signatory; that no demand was made upon him for
payment, and assuming he is liable, his liability
should not go beyond half the balance of the loan.
Further, Recardo said that when the bank invoked
compensation between the rentals and the amount of
the loan, it amounted to a new contract or novation,
and had the effect of extinguishing the security since
he did not give his consent (as owner of the property
under the real estate mortgage) thereto.
a) Can XYZ Bank validly asserts legal
compensation? (2%)
b) Can Recardo’s property be foreclosed to pay the
full balance of the loan? (2%)
c) Does Recardo have basis under the Civil Code for
claiming that the original contract was novated? (2%)
47. Felipe borrowed $100 from Gustavo in 1998, when
the Phil P - US$ exchange rate was P56 – US$1. On
March 1, 2008, Felipe tendered to Gustavo a
cashier’s check in the amount of P4,135 in payment
of his US$ 100 debt, based on the Phil P – US$
exchange rate at that time. Gustavo accepted the
check, but forgot to deposit it until Sept. 12, 2008.
His bank refused to accept the check because it had
become stale. Gustavo now wants Felipe to pay him
in cash the amount of P5,600. Claiming that the
previous payment was not in legal tender and that
there has been extraordinary deflation since 1998,
and therefore, Felipe should pay him the value of the
debt at the time it was incurred. Felipe refused to pay
him again, claiming that Gustavo is estopped from
raising the issue of legal tender, having accepted the
check in March, and that it was Gustavo’s negligence
in not depositing the check immediately that caused
the check to become stale.
a) Can Gustavo now raise the issue that the cashier’s
check is not legal tender? (2%)
b) Can Felipe validly refuse to pay Gustavo again?
(2%)
c) Can Felipe compel Gustavo to receive US$100
instead? (1%)
48. The sugar cane planters of Batangas entered into a
longterm milling contract with the Central Azucarera
de Don Pedro Inc. Ten years later, the Central
assigned its rights to the said milling contract to a
Taiwanese group which would take over the
operations of the sugar mill. The planters filed an
action to annul the said assignment on the ground that
the Taiwanese group was not registered with the
Board of Investments. Will the action prosper or not?
Explain briefly. (5%)
(Note: The question presupposes knowledge and
requires the application of the provisions of the
Omnibus Investment Code, which properly belongs
to Commercial law)
49. Stockton is a stockholder of Core Corp. He desires to
sell his shares in Core Corp. In view of a court suit
that Core Corp. has filed against him for damages in
the amount of P10 million, plus attorney's fees of P 1
million, as a result of statements published by
Stockton which are allegedly defamatory because it
was calculated to injure and damage the corporation's
reputation and goodwill.
The articles of incorporation of Core Corp. provide
for a right of first refusal in favor of the corporation.
Accordingly, Stockton gave written notice to the
corporation of his offer to sell his shares of P 10
million. The response of Core corp. was an
acceptance of the offer in the exercise of its rights of
first refusal, offering for the purpose payment in form
of compensation or set-off against the amount of
damages it is claiming against him, exclusive of the
claim for attorney's fees. Stockton rejected the offer
of the corporation, arguing that compensation
between the value of the shares and the amount of
damages demanded by the corporation cannot legally
take effect. Is Stockton correct? Give reason for your
answer.
50. Define compensation as a mode of extinguishing an
obligation, and distinguish it from payment.
51. X, who has a savings deposit with Y Bank in the sum
of P1,000,000.00 incurs a loan obligation with the
said Bank in the sum of P800.000.00 which has
become due. When X tries to withdraw his deposit, Y
Bank allows only P200.000.00 to be withdrawn, less
service charges, claiming that compensation has
extinguished its obligation under the savings account
to the concurrent amount of X's debt. X contends that
compensation is improper when one of the debts, as
here, arises from a contract of deposit. Assuming that
the promissory note signed by X to evidence the loan
does not provide for compensation between said loan
and his savings deposit, who is correct? [3%]
52. Arturo borrowed P500,000.00 from his father. After
he had paid P300,000.00, his father died. When the
administrator of his father's estate requested payment
of the balance of P200,000.00. Arturo replied that the
same had beenArturo borrowed P500,000.00 from his
father. After he had paid P300,000.00, his father died.
When the administrator of his father's estate
requested payment of the balance of P200,000.00.
Arturo replied that the same had been condoned by
his father as evidenced by a notation at the back of
his check payment for the P300,000.00 reading: "In
full payment of the loan". Will this be a valid defense
in an action for collection? (3%)
53. On July 1, 1998, Brian leased an office space in a
building for a period of five years at a rental rate of
P1,000.00 a month. The contract of lease contained
the proviso that "in case of inflation or devaluation of
the Philippine peso, the monthly rental will
automatically be increased or decreased depending
on the devaluation or inflation of the peso to the
dollar." Starting March 1, 2001, the lessor increased
the rental to P2,000 a month, on the ground of
inflation proven by the fact that the exchange rate of
the Philippine peso to the dollar had increased from
 P25.00=$1.00 to P50.00=$1.00. Brian refused to pay
the increased rate and an action for unlawful detainer
was filed against him. Will the action prosper? Why?
(5%)
54. In 1971, Able Construction, Inc. entered into a
contract with Tropical Home Developers, Inc.
whereby the former would build for the latter the
houses within its subdivision. The cost of each house,
labor and materials included, was P100,000.00. Four
hundred units were to be constructed
within five years. In 1973, Able found that it could
no longer continue with the job due to the increase in
the price of oil and its derivatives and the
concomitant worldwide spiraling of prices of all
commodities, including basic raw materials required
for the construction of the houses. The cost of
development had risen to unanticipated levels and to
such a degree that the conditions and factors which
formed the original basis of the contract had been
totally changed. Able brought suit against Tropical
Homes praying that the Court relieve it of its
obligation.
Is Able Construction entitled to the relief sought?
55. In 1971, Able Construction, Inc. entered into a
contract with Tropical Home Developers, Inc.
whereby the former would build for the latter the
houses within its subdivision. The cost of each house,
labor and materials included, was P100,000.00. Four
hundred units were to be constructed within five
years. In 1973, Able found that it could no
longer continue with the job due to the increase in the
price of oil and its derivatives and the concomitant
worldwide spiraling of prices of all commodities,
including basic raw materials required for the
construction of the houses. The cost of development
had risen to unanticipated levels and to such a degree
that the conditions and factors which formed the
original basis of the contract had been totally
changed.
Able brought suit against Tropical Homes praying
that the Court relieve it of its obligation.
Is Able Construction entitled to the relief sought?
56. In June 1988, X obtained a loan from A and executed
with Y as solidary co-maker a promissory note in
favor of A for the sum of P200,000.00. The loan was
payable at P20,000.00 with interest monthly within
the first week of each month beginning July 1988
until maturity in April 1989. To secure the payment
of the loan. X put up as security a chattel mortgage
on his car, a Toyota Corolla sedan. Because of failure
of X and Y to pay the principal amount of the loan,
the car was extrajudicially foreclosed. A acquired the
car at A's highest bid of P120,000.00 during the
auction sale.
After several fruitless letters of demand against X
and Y, A sued Y alone for the recovery of
P80.000.00 constituting the deficiency. Y resisted the
suit raising the following defenses:
a) That Y should not be liable at all because X was
not sued together with Y.
b) That the obligation has been paid completely by
A's acquisition of the car through "dacion en pago" or
payment by cession.
c) That Y should not be held liable for the deficiency
of P80,000.00 because he was not a co-mortgagor in
the chattel mortgage of the car which contract was
executed by X alone as owner and mortgagor.
d) That assuming that Y is liable, he should only pay
the proportionate sum of P40,000.00.
Decide each defense with reasons.
57. In a deed of sale of a realty, it was stipulated that the
buyer would construct a commercial building on the
lot while the seller would construct a private
passageway bordering the lot. The building was
eventually finished but the seller failed to complete
the passageway as some of the squatters, who were
already known to be there at the time they entered
into the contract, refused to vacate the premises. In
fact, prior to its execution, the seller filed ejectment
cases against the squatters. The buyer now sues the
seller for specific performance with damages. The
defense is that the obligation to construct the
passageway should be with a period which,
incidentally, had not been fixed by them, hence, the
need for fixing a judicial period. Will the action for
specific performance of the buyer against the seller
prosper?
58. In 1978, Bobby borrowed P1 ,000, 000.00 form Chito
payable in two years. The loan, which was evidenced
by a promissory note, was secured by a mortgage on
real property. No action was filed by Chito to collect
the loan or to foreclose the mortgage. But in 1991,
Bobby, without receiving any amount from Chito,
 executed another promissory note, except for the date
thereof, which was the date of its execution.

1) Can Chito demand payment on the 1991

promissory note in 1994?
2) Can Chito foreclose the real estate mortgage if
Bobby fails to make good his obligation under the
1991 promissory note?
59. Baldomero leased his house with a telephone to Jose.
The lease contract provided that Jose shall pay for all
electricity, water and telephone services in the leased
premises during the period of the lease. Six months
later, Jose surreptitiously vacated the premises. He
left behind unpaid telephone bills for overseas
telephone calls amounting to over P20, 000.00.
Baldomero refused to pay the said bills ont he ground
that Jose had already substituted him as the customer
of the telephone company. The latter maintained that
Baldomero remained as his customer as far as their
service contract was concerned, notwithstanding the
lease contract between Baldomero and Jose. Who is
correct, Baldomero or the telephone company?
Explain. (1996 BAR)
60. The sugar cane planters of Batangas entered into a
long-term milling contract with the Central
Azucarera de Don Pedro Inc. Ten years later, the
Central assigned its rights to the said milling contract
to a Taiwanese group which would take over the
operations of the sugar mill. The planters filed an
action to annul the said assignment on the ground that
the Taiwanese group was not registered with the
Board of Investments. Will the action prosper or not?
Explain briefly. (2001 BAR)