Sources and types of obligations under Philippine law

OBLIGATIONS
I. SOURCES OF OBLIGATIONS (Article 1157)
 Is the enumeration in Article 1157 exclusive? See Sagrada Orden vs. NACOCO, 91
Phil 503; The Metrobank vs. Rosales and Yo Yuk To, G.R. No. 183204, 13 January
2014
In those two cases, there was no categorical statement that the enumeration in
Article 1157 is exclusive. But it can be inferred from these two cases that an
obligation can only arise from any of the sources listed in Article 1157.
1. Law - Article 1158
2. Contract- Article 1159 – Principle of Autonomy of Will
3. Quasi-contract - Obligations derived from quasi-contracts shall be subject to the
provisions of Chapter 1, Title XVII, of this Book (Article 1160)
 Is the enumeration of quasi-contract in the Civil Code exclusive?
No, because the Civil Code expressly provides that the enumeration in the said Code
does not exclude other quasi-contracts which may come within the purview of the
said concept (Art. 2143, NCC)
 In order for the quasi-contract of negotiorum gestio to exist, what are the four
requisites? (Article 2144)
i. The gestor voluntarily assumes the management or agency of a business
or property belonging to another;
ii. The property or business must be neglected or abandoned;
iii. The gestor has not been authorized by the owner, either expressly or
impliedly (tacitly);
iv. The assumption of management or agency is done in good faith.
 Is negotiorum gestio immediately terminated upon the reappearance of the

owner?
No. Under the Civil Code, the obligation of the gestor shall continue until the
termination of the affairs or incidents of such management or agency. The
said rule shall apply even if the owner reappears unless the gestor can prove that
the owner is in a position to substitute for him (Art. 2144, NCC).
 If the gestor enters into a contract with third persons in pursuance of his duties
as such, may the owner and the third person have a cause of action against each
other in relation to such contract? What is the rule?
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OBLIGATIONS/vdvillar
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SCENARIO
In fear of reprisals, X left his fishpond and went to Europe. Y seeing the fishes
ready for harvest, harvested the same, and sold them to Z. Y then borrowed
from W to prepare the fishpond for the next batch.
Can X, the owner, be held liable under the contract of loan entered into by Y
with W?
The general rule is that the gestor is personally liable for the contracts that he or
she entered into with the 3rd person. The owner and the 3rd person do not have a
cause of action against each other in relation to the contract entered into by the
gestor with the 3rd person. (Art. 2152, NCC)
 Are there any exceptions?

(1) If the owner has expressly or tacitly ratified the management, or
(2) When the contract refers to things pertaining to the owner of the business.
4. Delict
 What are the two kinds of acquittal?
(1) acquittal on the ground that the accused is not the author of the act or
omission complained of (or that the accused was not the one who committed
the crime); and
(2) acquittal on the ground that the guilt of the accused has not been proven
beyond reasonable doubt.
 Why is it important to identify the basis of the acquittal?
To determine whether or not the civil liability of the accused is

extinguished.
The well-settled doctrine is that a person while not criminally liable, may still be
civilly liable. The judgment of acquittal extinguishes the civil liability of the
accused ONLY when there is a declaration that the facts from which the civil
liability might arise did not exist. However, IF the acquittal is based on
reasonable doubt, the civil liability arising from crime is not necessarily
extinguished. (Art. 29, NCC).
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SCENARIO
Going to his work, P rode a taxi driven by D and owned by E. While driving
the taxi at high speed, D was texting on his cellphone. The taxi collided with a
bus, which resulted into injuries to both P and D. In the criminal case filed by P
against D, the latter was acquitted by reason of reasonable doubt. May D still
be held civilly liable to P on the basis of a commission of a crime? Explain.
Yes. Notwithstanding the acquittal of D by reason of reasonable doubt, a civil

action to prove the civil liability of the accused can still be filed where only
preponderance of evidence is needed (Art. 29, NCC). D’s acquittal in the
criminal case therefore does not preclude P from filing a suit to enforce D’s civil
liability for the same act or omission under Article 29 of the New Civil Code.
Assuming that D was held civilly liable ex delicto notwithstanding his

acquittal, but he turned out insolvent. May E be held liable to P on the basis of
civil liability ex delicto? Explain.
No, if the source of obligation is delict or crime, the employer’s subsidiary

liability will only attach if the employee has been convicted of the crime charged
and the latter is insolvent. Here, E’s subsidiary liability does not attach because D
was acquitted of the crime charged. (Article 103 in relation to Article 100, RPC)
NOTE: In Carpio vs. Hon. Doroja, et al., G.R. No. 84516 December 5, 1989,
the Supreme Court explained the employer’s subsidiary liability in this wise:
In order that an employer may be held subsidiarily liable for the

employee's civil liability in the criminal action, it should be
shown (1) that the employer, etc. is engaged in any kind of
industry, (2) that the employee committed the offense in the
discharge of his duties and (3) that he is insolvent. The
subsidiary liability of the employer, however, arises only after
conviction of the employee in the criminal action.
If the basis of the recovery of civil liability is delict, may D and E be held
solidarily liable?
No. Under the law, where the civil liability originates from delict committed by
the employee, the latter shall be primarily liable, while the employer’s liability is
merely subsidiary. (Article 103, RPC) The employer and employee, E and D in
the instant case, cannot therefore be held solidarily liable since the basis of the
civil liability is delict.
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See Calang and Philtranco vs. People, G.R. No. 190696, 3 August 2010, where
the Supreme Court held:
We, however, hold that the RTC and the CA both erred in
holding Philtranco jointly and severally liable with Calang. We
emphasize that Calang was charged criminally before the RTC.
Undisputedly, Philtranco was not a direct party in this case.
Since the cause of action against Calang was based on
delict, both the RTC and the CA erred in holding
Philtranco jointly and severally liable with Calang, based
on quasi-delict under Articles 21761 and 21802 of the Civil
Code. Articles 2176 and 2180 of the Civil Code pertain to the
vicarious liability of an employer for quasi-delicts that an
employee has committed. Such provision of law does not apply
to civil liability arising from delict.
If at all, Philtranco’s liability may only be subsidiary. Article 102

of the Revised Penal Code states the subsidiary civil liabilities of
innkeepers, tavernkeepers and proprietors of establishments…
The foregoing subsidiary liability applies to employers,
according to Article 103 of the Revised Penal Code.
What if P sued D and E on the basis of breach of contract, will the action
prosper?
As to E, the action will prosper because the contract of carriage is between the
passenger and the taxi operator (the employer).
As to D, the action will not prosper because he is a mere employee. He is not a

party to the contract of carriage. There is no privity of contract between the
employee and the passenger.
NOTE: In Sanico and Castro vs. Colipano, G.R. No. 209969, 27 September
2017, Caguioa, J., the Supreme Court held:
Here, it is beyond dispute that Colipano was injured while she was a
passenger in the jeepney owned and operated by Sanico that was being
driven by Castro. Both the CA and RTC found Sanico and Castro jointly
and severally liable. This, however, is erroneous because only Sanico
was the party to the contract of carriage with Colipano.
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Since the cause of action is based on a breach of a contract of
carriage, the liability of Sanico is direct as the contract is between him
and Colipano. Castro, being merely the driver of Sanico's jeepney,
cannot be made liable as he is not a party to the contract of carriage.
May D & E be held solidarily liable to pay civil liability to Pedro?
No. If the civil liability is based on breach of contract, only the taxi operator
(employer) is liable to the passenger. The driver cannot be held solidarily liable
with the employer for the breach because he is not a party to the contract of
carriage.
NOTE: The Supreme Court however in Gutierrez vs. Gutierrez held the driver
of the truck liable for breach of contract together with the employer; and that he
is solidarily liable with the employer and the other tortfeasor.
5. Quasi-delict
Can P sue D instead on the basis of quasi-delict even if the negligence of the latter
is criminal in character? Explain.
Yes. It bears noting that the scope of quasi-delict is much broader and also covers
negligent acts which are criminal in character. The same negligent act causing
damages may produce civil liability arising from a crime, or create an action for
quasi-delict. (Barredo v. Garcia, G.R. No. L-48006, July 8, 1942)
Can P sue on the basis of quasi-delict even if there was a pre-existing contractual
relation? Explain.
Yes. A pre-existing contractual relation between the parties is not a bar to the
recovery of civil liability based on quasi-delict if it can be shown that the act that
breaks the contract is also a tort (Air France v. Carrascoso, G.R. No. L-21438,
September 28, 1966). Here, the reason for the breach of the contract of carriage is the
negligence of the taxi driver, which constitutes quasi-delict.
See JOSE CANGCO vs. MANILA RAILROAD CO., G.R. No. L-12191, October 14,
1918; Fisher, J., where the Supreme Court held:
The field of non- contractual obligation is much broader than that of

contractual obligations, comprising, as it does, the whole extent of
juridical human relations. These two fields, figuratively speaking,
concentric; that is to say, the mere fact that a person is bound to
another by contract does not relieve him from extra-contractual
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liability to such person. When such a contractual relation exists
the obligor may break the contract under such conditions that
the same act which constitutes the source of an extra-
contractual obligation had no contract existed between the
parties.
If P can recover civil liability on the basis of quasi-delict, may he be allowed to sue
both D and E. If yes, what will be the basis of their respective liabilities?
D’s liability shall be based on his negligent acts (Article 2176, NCC), while E’s
liability shall be based on the employer’s presumed negligence in the selection and
supervision of his employee (Art. 2180, NCC).
If P will recover civil liability on the basis of quasi-delict, may D be held solidarily
liable? Why?
Yes, D may be held solidarily liable with E because they are considered joint
tortfeasors as their respective negligent acts are the proximate cause of the injury
suffered by P. Under the law, the liability of joint tortfeasors is solidary. (Art. 2194,
NCC)
What are the defenses available to E to escape liability?
To be relieved of liability, E must show that it exercised the diligence of a good

father of a family, both in the selection of the employee and in the supervision of the
performance of his duties. (Article 2180, NCC)
NOTE: The Supreme Court in Mercury Drug vs. Spouse Huang, G.R. No. 172122,
June 22, 2007, explained the defense available to the employer to escape liability,
thus:
… Mercury Drug should show that it exercised the diligence of a

good father of a family, both in the selection of the employee and in
the supervision of the performance of his duties. Thus, in the
selection of its prospective employees, the employer is required to
examine them as to their qualifications, experience, and service
records. With respect to the supervision of its employees, the
employer should formulate standard operating procedures, monitor
their implementation, and impose disciplinary measures for their
breach. To establish compliance with these requirements, employers
must submit concrete proof, including documentary evidence.
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REMINDER: This defense is NOT available to the employer IF the cause
of action is breach of contract.
SUMMARY
i. Civil liability arising from crime = the employer and the employee cannot be
held solidarily liable; the employee is primarily liable while the employer’s
liability is mere subsidiary. The subsidiary liability of the employer, however,
arises only after conviction of the employee in the criminal action.
ii. Civil liability arising from breach of contract = the employer and the
employee cannot be held solidarily liable; the employer is the only one liable
here because there is no privity of contract between the employee and the
passenger.
iii. Civil liability arising from quasi-delict = the employer and the employee can
be held solidarily liable as they are considered tortfeasors
SCENARIO
J had a heated argument with B, in connection with G. The heated argument

escalated until J shot B, resulting into the latter’s death. In this situation, may the
family of B recover civil liability from J on the basis of quasi-delict? Explain.
Yes. Quasi-delict covers not only acts "not punishable by law" but also acts criminal
in character, whether intentional and voluntary or negligent (Elcano v. Hill, G.R. No.
L-24803 May 26, 1977). Hence, a crime committed by means of dolo may produce
two distinct sources of obligations: delict and quasi-delict.
II. COMPLIANCE WITH OBLIGATIONS
Article 19 of the Civil Code embodies the cardinal rule in the performance of
obligations. The said provision sets certain standards which must be observed not only
in the exercise of one’s rights but also in the performance of one’s duties. These
standards are the following: to act with justice; to give everyone his due; and to observe
honesty and good faith.
In terms of compliance, one must identify what kind of obligation is involved as it will
determine (1) the accessory obligations of the debtor, (2) the remedies available to both
the creditor and the debtor, in case of breach or non-performance, and (3) applicable
defenses to escape liability, in case of non-performance, among others.
Article 1156 of the Civil Code mentions 3 kinds of prestation: (1) to give, (2) to do, and
(3) not to do, which includes the obligation not to give.
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The first one, or the obligation to give, is referred to as Real Obligation, while the
obligations to do and not to do, are often referred to as Personal Obligation.
First. THE OBLIGATION TO GIVE
An obligation to give may involve the delivery of either a determinate thing or an

indeterminate thing.
 What is a determinate thing?
See Article 1460.
Article 1460. A thing is determinate when it is particularly designated or physically segregated

from all others of the same class.
The requisite that a thing be determinate is satisfied if at the time the contract is entered into,
the thing is capable of being made determinate without the necessity of a new or further
agreement between the parties. (n)
 Why is it important to identify whether the obligation to give involves a delivery

of a determinate (specific) or an indeterminate (generic) thing?
(1) If the obligation involves a delivery of a determinate thing, there are

accessory obligations attached to it which are not present if the
obligation involves a delivery of an indeterminate thing.
 What are these accessory obligations?
i. The obligation to preserve the thing to be delivered with due

care under Article 1163.
o Article 1163. Every person obliged to give something is also obliged to take
care of it with the proper diligence of a good father of a family, unless the law
or the stipulation of the parties requires another standard of care. (1094a)
ii. The obligation to deliver the fruits IF the creditor is already

entitled to it under Article 1164. The right of the creditor under
Article 1164 is available only if the obligation involves a delivery
of a determinate thing.
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o Article 1164. The creditor has a right to the fruits of the thing from the
time the obligation to deliver it arises. However, he shall acquire no real right
over it until the same has been delivered to him. (1095)
SCENARIO NO. 1
X sold 5 horses to Y. On the agreed date of delivery, which was a month

after they entered into such contract, X delivered the 5 horses he had in
his stable. But Y learned that one of those horses gave birth to an
offspring two weeks ago. Hence, Y also demanded for the delivery of
such offspring arguing that he was already entitled to its delivery. Is Y
correct?
No, because the obligation involved in the instant case is an obligation to

deliver a generic thing. The obligation to deliver a generic thing is not
confined to the objects which the debtor may own or possess. Applying
the foregoing to the instant case, X is not obliged to deliver his own
horse. He can deliver any 10 horses, so long as they are not of inferior
quality. Moreover, the creditor is only entitled to the fruits of the thing
due if the obligation involved is an obligation to deliver a determinate
thing, which is not the case here (Article 1164). Consequently, Y is not
entitled to the offspring of X’s horse.
SCENARIO NO. 2
X sold the only 5 horses in his stable to Y. On the agreed date of

delivery, which was a month after they entered into such contract, X
delivered the 5 horses he had in his stable. But Y learned that one of
those horses gave birth to an offspring two weeks ago. Hence, Y also
demanded for the delivery of such offspring arguing that he was already
entitled to its delivery. Is Y correct?
See Article 1164. Did Y already acquire the right to the fruits of the
thing?
 When does the creditor acquire the right to the fruits of the thing?
The creditor acquires a right to demand for the delivery of the fruits
of the determinate thing due from the time the obligation to
deliver the thing arises.
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 When does the obligation to deliver arise?
1. In obligations arising from law, quasi-delict, quasi-contract, and

crimes, the specific provisions of law applicable to the obligation
shall determine when the delivery should be made.
2. In obligations subject to suspensive conditions, the obligation to

deliver arises from the moment the condition happens, cf. Article
1187
3. When there is a suspensive term or condition for the

performance of the obligation, the obligation to deliver arises
upon the expiration of the term or period.
4. In obligations arising from contract, the obligation to deliver

arises from the perfection of the contract.
o From the time the obligation to deliver arises, the creditor

acquires personal right over the thing due and its fruits. The
creditor acquires real right over the thing from the time it is
delivered to the creditor.
 When there has been no delivery yet, the proper action

for a vendee to take against the vendor of a thing is not
one for revindicacion (which is an action based on
ownership), but one for specific performance of the sale
or for the delivery of the thing.
NOTE: Article 1477 of the New Civil Code provides

that ownership of the thing sold shall be transferred to
the vendee upon the actual or constructive delivery
thereof; and Article 1496 points out that ownership of the
thing sold is acquired by the vendee from the moment it
is delivered to him in any of the ways specified in articles
1497 to 1501.
iii. Obligation to deliver all its accessions and accessories under

Article 1166
o Article 1166. The obligation to give a determinate thing includes that of

delivering all its accessions and accessories, even though they may not have
been mentioned. (1097a)
(2) The remedies available to the parties are different depending on the
kind of obligation.
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(i) If the obligation involves a delivery of determinate thing
o Right to compel the debtor to deliver the determinate thing

in an action for specific performance, with damages (See Article
1165, 1st par, Article 1170)
o Right to rescind, in proper cases, with right to recover
damages
o Right to recover damages, if specific performance is no longer
possible, i.e., the thing has already been sold to another who is a
buyer in good faith (Article 1170)
(ii) If the obligation involves a delivery of indeterminate thing
o Right to compel the debtor to make the delivery of ANY

thing belonging to the class stipulated, in an action for
specific performance, with damages (See Article 1165, 2nd par.,
cf. Article 1246,)
Article 1246. When the obligation consists in the delivery of an
indeterminate or generic thing, whose quality and circumstances have
not been stated, the creditor cannot demand a thing of superior
quality. Neither can the debtor deliver a thing of inferior quality. The
purpose of the obligation and other circumstances shall be taken into
consideration. (1167a)
o Right to ask another to make the delivery at the expense of
the debtor, with damages (See Article 1165, 2nd par, Article
1170)
o Right to rescind, in proper cases, with right to recover
damages
(3) There are also defenses available to the debtor if the obligation
involves a delivery of a determinate thing, while it is not present if the
obligation is for a delivery of an indeterminate thing.
CHOOSE THE BEST ANSWER
Aurora obliged herself to deliver to Natalia 100 cavans of corn on October

31, 2010. On November 1, 2010, Natalia orally demanded for the delivery
of the 100 cavans of corn but Aurora failed to comply. The next day, a flood
damaged the 500 cavans of corn stored in the warehouse of Aurora, from
which she intended to get the 100 cavans of corn for delivery to Natalia.
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a. Aurora’s obligation to deliver 100 cavans of corn to Natalia was
extinguished, the cause of the loss being fortuitous event.
b. Aurora’s obligation to deliver 100 cavans of corn to Natalia was not
extinguished due to the nature of the goods to be delivered.
c. Aurora’s obligation to deliver 100 cavans of corn to Natalia was not
extinguished because Aurora is already in default.
d. Aurora’s obligation to deliver 100 cavans of corn to Natalia was
extinguished because an oral demand is not a valid demand.
ANSWER: B. Why? See next problem.
SCENARIO
X committed to deliver 100 sacks of rice to Y, a rice trader. It was supposed

to be delivered last month but X failed to do so. When Y made a demand
for the delivery of the agreed number of sacks of rice, X replied that his non-
performance is excusable because his farm was destroyed by a typhoon. Is X
correct? Explain.
No, since the obligation of X is a generic obligation as it involves the delivery

of a generic thing, the same cannot be extinguished by reason of loss. The
rule is that the genus of a thing never perishes.
Will your answer be different if what X committed to deliver are 100 sacks
of rice that will be produced by his farm?
Yes, the answer will be different. Since the rice to be delivered is limited to
the produce of X’s farm, the obligation is one for the delivery of specific
thing. The loss of the palay in X’s farm by reason of fortuitous event
extinguishes Lucio’s obligation, applying the general rule that no person shall
be responsible for a fortuitous event. (Article 1174)
Second. THE OBLIGATION TO DO
Article 1167, cf. Article 1165, 1st paragraph of the Civil Code
o Article 1167. If a person obliged to do something fails to do it, the same shall be executed at his
cost.
This same rule shall be observed if he does it in contravention of the tenor of the obligation.
Furthermore, it may be decreed that what has been poorly done be undone. (1098)
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o Article 1165. When what is to be delivered is a determinate thing, the creditor, in addition to the
right granted him by article 1170, may compel the debtor to make the delivery.
TRUE or FALSE: If a person who is obliged to do something fails to do it, an action

for specific performance will prosper.
FALSE. Unlike in an obligation to deliver, an action for specific performance is not
available to the creditor in an obligation to do. The debtor cannot be compelled to do
or perform the obligation as this will amount to involuntary servitude.
 What is/are the remedy/ies available to the creditor in case of non-performance

of an obligation TO DO?
(1) The creditor may perform the obligation himself, or ask another person
to perform the obligation, and have the cost charged against the debtor,
with damages. (Article 1167, 1st par.)
(2) But if the personal qualification of the debtor was taken into account in
the creation of the obligation, the only available remedy to the creditor is
to recover damages. (Article 1170)
(3) If the obligation was poorly done, or was done in contravention of the
tenor of the obligation, the creditor may ask that it be undone, if still
possible, at the expense of the debtor, with damages. (Article 1167, 2nd
par.) Otherwise, the creditor can only recover damages.
SCENARIO
As part of its program, the DOT hired the services of Apo Whang-Od, the
famous last Kalinga tattoo artist in the Philippines, to do the tattoos of a group
of incoming tourists from England. But a week prior to the arrival of said
tourists, Apo Whang-Od backed out of the agreement and returned the down
payment. Can the DOT compel Apo to honor her agreement? What is/are the
remedy/ies available to the DOT?
No, since the obligation of Apo Whang-Od is to do something, she cannot be

compelled to execute or perform the act she promised to do as this will amount to
involuntary servitude which is prohibited by the Constitution. The only remedy
available to the DOT is the to recover the damages it has suffered from the
debtor.
Third. THE OBLIGATION NOT TO DO

 What is the remedy available to the creditor in case of breach?
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i. The creditor may ask the undoing of what has been done at the expense of
the debtor, with damages. See Article 1168
o Article 1168. When the obligation consists in not doing, and the obligor does what
has been forbidden him, it shall also be undone at his expense. (1099a)
ii. If, however, it has become physically or legally impossible to undo what has
been done, the remedy is to simply recover damages.
III. KIND OF OBLIGATIONS
1. As to its perfection or extinguishment, obligations may be classified into

three:
i. Pure or Simple - an obligation is simple if it contains NO condition or term;

it is immediately demandable
The Supreme Court in HSBC vs. Sps. Broqueza, G.R. No. 178610, 17
November 2010, ruled:
We affirm the findings of the MeTC and the RTC that there is no date of
payment indicated in the Promissory Notes. The RTC is correct in ruling that
since the Promissory Notes do not contain a period, HSBCL-SRP has
the right to demand immediate payment. Article 1179 of the Civil Code
applies. The spouses Broqueza’s obligation to pay HSBCL-SRP is a pure
obligation. The fact that HSBCL-SRP was content with the prior monthly
check-off from Editha Broqueza’s salary is of no moment. Once Editha
Broqueza defaulted in her monthly payment, HSBCL-SRP made a demand to
enforce a pure obligation.
 What are the obligations that are due and demandable at once?
(1) Pure obligation
(2) Obligation subject to a resolutory condition
(3) Obligation with a resolutory term
(4) Obligation subject to a negative impossible condition
ii. Conditional obligation
 What is the difference between a condition and a term? Is your

becoming a lawyer or passing the Bar a condition or a term?
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Note the wording in Article 1179. The conjunction used is incorrect. For
an event to be considered a condition, it must have both the element of
futurity and uncertainty.
 Under Article 1179, a past event unknown to the parties is also

considered a condition. How do you reconcile the element of uncertainty
with that of the past event?
Senator Tolentino explains it in this wise: The condition here is not the
past event per se, but the future knowledge or proof of a past event.
 What are the different kinds of conditional obligations?
(1) Obligation subject to a suspensive condition

(2) Obligation subject to a resolutory condition
Article 1181. In conditional obligations, the acquisition of rights, as well as the

extinguishment or loss of those already acquired, shall depend upon the happening of
the event which constitutes the condition. (1114)
i. The acquisition of rights shall depend upon the happening of the

event which constitutes the SUSPENSIVE condition
ii. The extinguishment or loss of those already acquired shall depend

upon the happening of the event which constitutes the
RESOLUTORY condition
 In an obligation subject to a suspensive condition, and the condition is

not fulfilled, may the creditor demand that the debtor perform the
obligation?
Generally, no. However, there is an exception. See Article 1186 which

speaks of constructive fulfillment of a condition. The condition shall be deemed
fulfilled when the obligor voluntarily prevents its fulfillment.
SCENARIO
Aurora committed to shoulder Layla's tuition fees in law school should
she also decide to enroll in ML law school. For the past two semesters,
Layla had been accomplishing Aurora's application for admission in
ML law school, but the latter kept on postponing her decision.
Contending that Aurora has intentionally prevented the fulfillment of
the condition, Layla argued that the condition is deemed constructively
fulfilled. Is Layla correct?
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No. Here, the obligation of Aurora will only arise if she decides to enroll
in ML law school. This is an obligation subject to a suspensive condition
the fulfillment of which depends exclusively upon the will of the debtor
(Aurora) which under the law is void. (Article 1182). Likewise, the rule
on constructive fulfillment of condition under Article 1186 finds no
application here because said provision of law covers suspensive
conditions that are not exclusively dependent upon the will of the
debtor.
 What is the doctrine of constructive fulfillment of condition under

Article 1186? To what kind of condition and obligation is the doctrine
applicable?
Under this doctrine, the condition is deemed constructively fulfilled

when the debtor intentionally and actually prevented the fulfillment of
the condition (Art. 1186, NCC). It is applicable to a mixed conditional
obligation where a part of the condition is dependent upon the debtor's
will and such condition is suspensive.
Development Bank of the Philippines vs. Sta. Ines Melale Forest

Products Corporation, Rodolfo Cuenca, Manuel Tinio, Cuenca
Investment Corporation and Universal Holdings Corporation (G.R.
No. 193068, February 1, 2017; Leonen, J.)
The Court affirms the Court of Appeals' finding that the failure to
execute the share purchase agreement was brought about by NDC's
delay in reviewing the financial accounts submitted by Galleon's
stockholders. The Memorandum of Agreement was executed on August
10, 1981, giving the parties no more than sixty days or up to October 9,
1981, to prepare and sign the share purchase agreement. However, it was
only on April 26, 1982, or more than eight months after the
Memorandum of Agreement was signed, did NDC's General Director
submit his recommendation on Galleon's outstanding account. Even
then, there was no clear intention to execute a share purchase
agreement as compliance with the Memorandum of Agreement.
Article 1186 of the Civil Code is categorical that a "condition shall
be deemed fulfilled when the obligor voluntarily prevents its
fulfilment." Considering NDC's delay, the execution of the share
purchase agreement should be considered fulfilled with NDC as
the new owner of 100% of Galleon's shares of stocks. The due
execution of the share purchase agreement is further bolstered by Article
1198(4) of the Civil Code, which states that the debtor loses the right to
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make use of the period when a condition is violated, making the
obligation immediately demandable.
SCENARIO
Akai donated a parcel of land to the Municipality of Mobile Legends

but imposed a condition that the latter should construct a public-school
building on the donated lot within a period of five years from the
donation; otherwise, the land shall automatically revert back to Akai.
What kind of condition was imposed?
The condition imposed was a resolutory condition. It is not correct to

say that the schoolhouse had to be constructed before the donation
became effective, that is, before the donee could become the owner of
the land, otherwise, it would be invading the property rights of the
donor. The donation had to be valid before the fulfillment of the
condition. If there was no fulfillment or compliance with the condition,
the donation may now be revoked and all rights which the donee may
have acquired under it shall be deemed lost and extinguished. (Central
Philippines University, G.R. No. 112127 July 17, 1995)
 Differentiate Article 1184 with Article 1185
i. Article 1184: Positive condition
X says to Y, “I will give you 1 Million if you marry before reaching the age
of 35.”
The obligation will be extinguished IF: (1) Y reaches the age of

35 without getting married; and (2) Y dies before reaching the
age of 35.
ii. Article 1185: Negative condition
X says to Y, “I will give you 1 Million if you do not marry M until you
reach the age of 35.”
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The obligation will become effective IF: (1) Y reaches the age of
35 without getting married to M; and (2) M dies.
See Tolentino’s example in page 160 of his Obligations and

Contracts Book. Go figure what’s wrong with the given
example. 😉
 What are the rights and obligations of the creditor and debtor
pending the happening of the condition?
i. Suspensive Condition
1. The obligation does not arise yet, so it cannot be

demanded. The debtor may still recover what has
been paid by mistake. (Article 1188, 2nd par., cf., with
Article 1195)
 Can there be recovery of fruits and interests by the

debtor?
Yes. While Article 1188 is silent, the provisions on

solutio indebiti can be applied.
2. The creditor’s right is mere expectancy. However,

the law grants the creditor to protect his or her
interest. (Article 1188, 1st par.)
SCENARIO
In February 2019, X committed to deliver to Y his

only female horse on the condition that the latter
should pass the bar examinations to be given in
November of that year. In August 2019, the horse
gave birth to a foal. When the results of the bar
exams were released in April 2020, Y was among
the passers. What if X sold the horse to Z last in
June 2019. Can Y recover the horse from Z upon
passing the bar examinations?
No. It must be noted that while Y’s interest is mere

inchoate pending the happening of the condition, the
law grants her remedies to protect said interest
(Article 1188). In the given situation, Y took no steps
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to protect or preserve her interest. Likewise, Z who
may be considered a buyer in good faith has better
right over the horse.
3. Who has the rights to the fruits and interests during

the pendency of the condition?
It depends on whether the obligation is

reciprocal or unilateral -
(a) Reciprocal obligation

GR: mutually compensated (Article 1187, par. 1)
ER: Unless otherwise provided
(b) Unilateral obligation

GR: Debtor (Article 1187, par. 1)
ER: From the nature and circumstances of the
obligation it should be inferred that the
intention of the person constituting the same
was different.
ii. Resolutory Condition: Here, it is the debtor who has

inchoate right. By analogy then, the debtor can avail the
rights granted to the creditor in Article 1188, 1 par.
 What are the Rules to be observed with regard to the loss,

deterioration, and improvement of the thing during the
pendency of the condition (which was later on fulfilled)?
i. Suspensive Condition
The Rules are set forth in Article 1189 – this set of

rules is only applicable to obligation to deliver a
determinate thing, and once the suspensive
condition is fulfilled.
Article 1189. When the conditions have been imposed with the
intention of suspending the efficacy of an obligation to give, the
following rules shall be observed in case of the improvement, loss or
deterioration of the thing during the pendency of the condition:
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(1) If the thing is LOST without the fault of the debtor, the
obligation shall be extinguished; cf. Article 1262
(2) If the thing is LOST through the fault of the debtor, he

shall be obliged to pay damages; it is understood that the thing is
lost when it perishes, or goes out of commerce, or disappears in such
a way that its existence is unknown or it cannot be recovered;
(3) When the thing DETERIORATES without the fault of

the debtor, the impairment is to be borne by the creditor;
(4) If it DETERIORATES through the fault of the

debtor, the creditor may choose between the rescission of the
obligation and its fulfillment, with indemnity for damages in either
case;
(5) If the thing is IMPROVED by its nature, or by time, the

improvement shall inure to the benefit of the creditor;
(6) If it is IMPROVED at the expense of the debtor, he

shall have no other right than that granted to the usufructuary. Cf.
Articles 579 and 580
SCENARIO
A promised to deliver his car to B when the latter passes the bar
exams. Before the happening of the condition, the A thought
that the condition will no longer be fulfilled since B
continuously failed the bar exams. As such, A had the car
repainted and seat covers were changed. In the following bar
exam, B passed and demanded that A deliver the car. B refused
demanding reimbursement for the repainting and the new seat
covers. Can he validly do so? Suppose in the above question, the
property was land which was increased by alluvion, who is
entitled to the improvement?
1st Question: Apply Article 1189 (6), cf. Articles 579 and 580.
NOTE: Under Article 579, the usufructuary is NOT entitled to a

refund for the improvements that he/she has introduced, but has
the following option: (1) Remove the improvements if no
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substantial damage to the property in usufruct is caused; or (2)
Set off the improvements against damages for which he may be
liable (Article 580).
2nd Question: Apply Article 1189 (5).
ii. Resolutory Condition
Article 1190, 2nd par., in relation to Article 1189 – the

debtor in Article 1189 shall be the one who has the
obligation to return.
 What are the rights and obligations of the creditor and debtor
once the condition has been fulfilled?
i. Suspensive Condition: See Article 1187
Obligation to give: It retroacts to the day on which the

obligation is constituted. (1st par)
Obligation to do or not to do: The courts shall
determine, in each case, the retroactive effect of the
condition that has been complied with. (2nd par)
SCENARIO
In February 2019, X committed to deliver to Y his only female

horse on the condition that the latter should pass the bar
examinations to be given in November of that year. In August
2019, the horse gave birth to a foal. In April 2020, the results of
the BAR came out, and Y was among those who successfully
passed. Is Y also entitled to the delivery of the foal?
The creditor acquires a right to demand for the delivery of the

fruits of the determinate thing due from the time the obligation
to deliver the thing arises. In obligations subject to suspensive
conditions, the obligation to deliver arises from the moment the
condition happens. Thus, when Y passed the BAR Exams, Y
acquires right to the foal.
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Note also that under Article 1187, the effects of the happening of
the suspensive condition shall retroact to the day of the
constitution of the obligation. Hence, the obligation of X to
deliver the horse arose when the obligation was constituted last
February 2019. Therefore, Y became entitled to the fruits of the
specific thing to be delivered existing as of February 2019 or
thereafter.
ii. Resolutory Condition:
(a) Obligation to give: See Article 1190, 1st par
- The happening of the resolutory condition shall

extinguish the obligation, as though it had not
existed at all. Consequently, the same shall also
result to the extinguishment of rights already
acquired.
- The parties shall make mutual restitution of
what they have received from each other,
including not only the thing, but also the
interests and fruits; the restitution is absolute.
- Right of a 3rd person: What will happen if the
resolutory condition happened after the creditor
sold the subject property to a 3rd person? May
the debtor recover the subject property from the
3rd person? What is the remedy of the debtor?
In an obligation subject to a resolutory

condition, the rights of the creditor are
immediately vested. Once the thing has been
delivered, the ownership is transferred to the
creditor.
The debtor cannot sue the 3rd person directly for

the recovery of the thing, by an accion
reivindicatoria, because the former is no longer the
owner. The happening of the resolutory
condition does not automatically revest the
ownership to the debtor – he is merely entitled
to the delivery of the thing which would give
him a new ownership. This is a personal right
which he can enforce against the creditor who
becomes a debtor obliged to make restitution.
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(b) Obligation to do or not to do: See Article 1190, 3rd
par, in relation to Article 1187, 2nd par.
The courts shall determine, in each case, the
retroactive effect of the condition that has been
complied with.
(3) Obligation subject to a potestative condition
 What is a potestative condition?

The fulfillment of the condition is subject to the sole will of any
of the contracting parties.
TRUE or FALSE. An obligation with a potestative condition is

void.
False. See Article 1182. Only if the fulfillment of the
condition depends upon the sole will of the debtor. Article 1182 is
applicable only if the condition is potestative on the part of
the debtor. Thus, if the fulfillment of the condition depends
upon the sole will of the creditor, the obligation is still valid.
TRUE or FALSE. When the fulfilment of the condition

depends upon the sole will of the debtor, the obligation shall be
void.
False. Article 1182 is applicable only if the condition is
suspensive, and fulfillment of the condition depends upon
the sole will of the debtor.
Rationale: If the existence of the obligation is dependent
upon the sole will of the debtor, then the latter will make
sure that it will not happen. It will thus render the obligation
illusory. On the other hand, in an obligation subject to a
resolutory condition, the obligation is already existing.
 Cf. Article 1182 with testamentary dispositions subject to

potestative condition (Articles 876, 879) – testamentary
dispositions subject to potestative condition are VALID
Article 876. Any purely potestative condition imposed upon an heir must
be fulfilled by him as soon as he learns of the testator's death.
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This rule shall not apply when the condition, already complied with, cannot
be fulfilled again. (795a)
Article 879. If the potestative condition imposed upon the heir is negative,
or consists in not doing or not giving something, he shall comply by giving a
security that he will not do or give that which has been prohibited by the
testator, and that in case of contravention he will return whatever he may
have received, together with its fruits and interests. (800a)
SCENARIO
What if Aurora committed to shoulder Layla's tuition fees in
ML law school as long as she finds the study of law appealing.
Aurora made the commitment when they were first year law
students. Is the obligation valid?
Yes, the obligation is valid. While the condition is potestative on

the part of the debtor, it is at the same time resolutory. Article
1182 is applicable only if the condition is suspensive, and the
fulfillment of the condition depends upon the sole will of the
debtor.
SCENARIO
What if Aurora committed to shoulder Layla's tuition fees in
the same law school where they are studying should she win in
the lotto. Assuming Aurora won in the lotto draw. Is she now
obliged to shoulder Layla's tuition fees?
Yes. In the given situation, the obligation is subject to a casual

condition, that is, the fulfillment of which depends upon chance.
Thus, upon the happening of the condition, that is, Aurora
winning the lottery, her obligation to pay Layla’s tuition fees
becomes effective and demandable.
(4) Obligation subject to an impossible or illegal condition
 What is the effect of an impossible or illegal condition on

obligation? If an impossible obligation is imposed on an
obligation, what will happen with the obligation?
Article 1183. Impossible conditions, those contrary to good customs or public

policy and those prohibited by law shall annul the obligation which depends
upon them. If the obligation is divisible, that part thereof which is not affected
by the impossible or unlawful condition shall be valid.
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The condition not to do an impossible thing shall be considered as not having
been agreed upon. (1116a)
Under Article 1183, it “shall annul” the obligation.
 Is this accurate?
No, because it presupposes a valid obligation which is later on

declared invalid. But, an obligation with impossible condition
never comes into existence. It is void ab initio.
 Can there be a valid obligation with an impossible condition?
Yes. See Article 1183, 2nd par. If the obligation is subject to a

negative impossible condition.
 Cf. Article 1183, with Article 727 (Donations subject to

impossible/illegal condition) and Article 873 (Testamentary
dispositions subject to impossible condition). Do they have the
same consequence?
No. Go figure. 😊
SCENARIO
Diegong, an old man, executed a deed of donation of all his

property in favor of a young married couple on condition that
the couple would take care of him until his dying days and the
young man would allow him, from time to time, to sleep with
the young woman. Upon the death of Diegong, his daughter,
Seereh, questioned the validity of the donation arguing that the
same is void pursuant to Article 1183 of the Civil Code. The
young couple contended that the donation is valid pursuant to
Article 727 of the Civil Code because the condition is considered
not imposed. Who is correct?
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The daughter’s contention is correct. The conveyance was an
onerous donation as the properties were given to the young
couple in exchange for their obligation to take care of the donor
for the rest of his life and to allow the donor, from time to time,
to sleep with the young woman. Since the donation is onerous,
we apply the law on contracts (Article 733). Applying Article
1183 and 1409(1) of the Civil Code, the donation is void because
it is subject to an impossible condition and the cause is immoral.
Note that Article 727 of the Civil Code refers to simple and
remuneratory donation.
NOTE:
From the viewpoint of motive, purpose or cause, donations may

be 1) simple, 2) remuneratory or 3) onerous. A simple donation
is one the cause of which is pure liberality (no strings attached).
A remuneratory donation is one where the donee gives
something to reward past or future services or because of future
charges or burdens, when the value of said services, burdens or
charges is less than the value of the donation. An onerous
donation is one which is subject to burdens, charges or future
services equal (or more) in value than that of the thing donated.
 When must the impossibility of the condition exist?
The impossibility of the condition must exist at the time of the

creation of the obligation. Cf. Article 1266 (the obligation is
extinguished due to impossibility of performance) and Article
1184 (it has become certain that the condition will not be
fulfilled).
iii. Obligation with a term (use “arrival or expiration” when referring to a

term/period; use “happening” when referring to condition) –
Requisites of a Period: Future, certain, and possible

Kinds of term
(1) Definite – specific date; six months from now; on or before xxx
(2) Indefinite – period may arrive upon the fulfillment of a certain event that
will arrive in the future, e.g. death
(3) Legal – impose by law, e.g., payment of taxes
(4) Voluntary – agreed upon by the parties
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(5) Judicial – those fixed by court
 As to their effects upon the obligation:
o What is the difference between a suspensive condition and a

suspensive term?
A suspensive condition affects the very existence of the obligation,

while a suspensive term merely affects the demandability of the
obligation. In the former, the obligation does not exist until the
condition is fulfilled; while in the latter, the obligation is already
existing but not yet demandable until the arrival of the period agreed
upon.
o What is the difference between a resolutory condition and a

resolutory term?
The happening of the resolutory condition extinguishes the

obligation as though it had not existed. On the other hand, the arrival
of the resolutory term will result to the termination of the obligation
without however annulling its fact of existence. In the former, the
effects of the obligation are wiped out by way of restitution; while in
the latter, the effects of the obligation remain; there is no retroactivity.
 When may the court fix the period? When are the courts allowed to fix
the period?
There are three instances when the courts may fix a period, as provided
under Article 1197:
(1) The parties intended a period, but no period was fixed (1st par.)
In Gregorio Araneta, Inc. v. Philippine Sugar Estate Development
Co., Ltd., G.R. No. L-22558, May 31, 1967, penned by JBL
Reyes, the Supreme Court ruled:
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It must be recalled that Article 1197 of the Civil Code involves a
two-step process. The Court must first determine that "the
obligation does not fix a period" (or that the period is made to
depend upon the will of the debtor)," but from the nature and the
circumstances it can be inferred that a period was intended" (Art.
1197, pars. 1 and 2). This preliminary point settled, the Court must
then proceed to the second step, and decide what period was
"probably contemplated by the parties" (Do., par. 3). So that,
ultimately, the Court cannot fix a period merely because in its
opinion it is or should be reasonable, but must set the time that the
parties are shown to have intended.
(2) The period solely depends upon the will of the debtor (2nd par.,
cf. Article 1180, Article 1182)
NOTE: In both cases, it would be premature for the creditor to file an

action for specific performance. The creditor’s remedy is to file an action
asking the court to fix a period.
(3) In case of breach of reciprocal obligations, the court may fix

the period if there exists a just cause (Article 1191, 3rd par.)
 Is Article 1187 applicable in Lim vs. People of the Philippines, G.R.

No. L-34338 November 21, 1984?
NO. It is clear in the agreement, Exhibit "A", that the proceeds of the
sale of the tobacco should be turned over to the complainant as soon as
the same was sold, or, that the obligation was immediately demandable
as soon as the tobacco was disposed of. Hence, Article 1197 of the New
Civil Code, which provides that the courts may fix the duration of the
obligation if it does not fix a period, does not apply.
SCENARIO
Estes borrowed a sum of money from Rafaela in the amount of P1

Million. In their written contract, the loan is "payable on demand."
Rafaela then made a demand upon Estes to pay the loan. Instead of
paying the loan, Estes filed an action in court for the fixing of the
period for the payment of the loan. Will the action prosper?
No. A loan that is “payable on demand” is an obligation without a term

or a pure obligation. Thus, it would be improper on the part of the court
to fix a period when none was intended by the parties.
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SCENARIO
In the last will and testament of the testator, a devise consisting of a
parcel of land was bequeathed in favor of A but the testator imposed
upon him the obligation to erect a statute of the testator within
reasonable time. After seven years, the legal heirs of the testator made a
demand upon A to reconvey the land to them because of the latter's
failure to erect the statute. A went to court and asked the court to fix
the period for the performance of his obligation. How would you rule if
you were the judge?
The intervention of the court to fix the period for performance was not
warranted, for Article 1197 is precisely predicated on the absence of any
period fixed by the parties.
In the instant case, there was a period fixed, a "reasonable time;" and all
that the court should have done was to determine if that reasonable time
had already elapsed when suit was filed if it had passed, then the court
should declare that petitioner had breached the contract, as averred in
the complaint, and fix the resulting damages. On the other hand, if the
reasonable time had not yet elapsed, the court perforce was bound to
dismiss the action for being premature. (See Gregorio Araneta, Inc. v.
Philippine Sugar Estate Development Co., Ltd., G.R. No. L-22558,
May 31, 1967)
SCENARIO
Zeny and Nolan were best friends for a long time already. Zeny
borrowed P10, 000.00 from Nolan, evidenced by a promissory note
whereby Zeny promised to pay the loan “once his means permit.” Two
months later, they had a quarrel that broke their long-standing
friendship. Nolan seeks your advice on how to collect from Zeny despite
the tenor of the promissory note. What will your advice be? Explain
your answer. (2012, 2017 Bar)
The remedy of Nolan is to go to court and ask that a period be fixed for
the payment of debt. Article 1180 of the New Civil Code provides that
when a debtor binds himself to pay when his means permit him to do so,
the obligation shall be deemed to be one with a period (suspensive).
Article 1197 provides that the courts may fix a period if such was
intended from the nature of the obligation and may also fix the duration
of the period when such depends on the will of the debtor. It is only
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after the period has been fixed by the court and said period has lapsed
that the creditor will acquire a cause of action for collection.
 For whose benefit is the period constituted?
GR: The period is established for the benefit of both the creditor and
the debtor (Article 1196) – this is a disputable presumption
ER: From the tenor of the same or other circumstances it should appear
that the period has been established in favor of one or of the other.
 Before the arrival of the term:
(1) Can the debtor be compelled to perform the obligation?

(2) Can the creditor be compelled to accept?
GR: No
EXCEPTIONS:
(1) If the period is fixed for the benefit of the debtor, the debtor
can perform the obligation any time. But the debtor CANNOT
be compelled to perform the obligation before the arrival of the
term, BUT the creditor CAN be compelled to accept it, in the
event the debtor chooses to perform the obligation.
(2) If the period is fixed for the benefit of the creditor, the creditor
may demand the performance of the obligation any time. Hence,
the debtor CAN be compelled to perform the obligation before
the arrival of the term. However, if the debtor chooses to perform
the obligation prior to the arrival of the term, the creditor
CANNOT be compelled to accept the same.
SCENARIO
On February 14, 2020, Zilong borrowed a sum of money from
Hayabusa in the amount of P1 Million. In their written contract, the
loan is payable "within a period of three years to be counted from
February 14, 2020”. Last week, Zilong made a tender of payment of
the amount borrowed but Hayabusa refused to accept contending
that he could not be compelled to accept the payment prior to
February 14, 2023.
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Is Hayabusa correct?
No, the period is for the benefit of the debtor alone. The expression
that the loan is payable "within a period of three years to be counted
from February 14, 2020," means that the debt could be settled at any
time within the stipulated period. Consequently, the creditor
cannot refuse to accept the payment.
CHOOSE THE BEST ANSWER:

On January 1, 1999, A signed a promissory note binding himself to
pay X P100, 000.00 on or before June 30, 1999.
a. Before June 30, 1999, A can be compelled to pay.

b. Before June 30, 1999, X can validly refuse an offer to pay.
c. Before June 30, 1999 while A cannot be compelled to pay, X can
be compelled to accept payment.
d. Before June 30, 1999, while A can be compelled to pay, X cannot
be compelled to accept payment.
ANSWER: C. The period is for the benefit of A, the debtor, because

of the use of the words “on or before”.
 What are the instances where the debtor loses the benefit of the period,
making the obligation demandable at once?
Article 1198. The debtor shall lose every right to make use of the period:
(1) When after the obligation has been contracted, he becomes insolvent, unless he
gives a guaranty or security for the debt;
NOTE: The debtor need not be judicially declared as insolvent.
(2) When he does not furnish to the creditor the guaranties or securities which he has
promised;
(3) When by his own acts he has impaired said guaranties or securities after their
establishment, and when through a fortuitous event they disappear, unless he
immediately gives new ones equally satisfactory;
(4) When the debtor violates any undertaking, in consideration of which the creditor
agreed to the period;
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(5) When the debtor attempts to abscond. (1129a)
SCENARIO
Moskov borrowed from Angela, the sum of Php1,500, 000.00, payable

on April 1, 2021. To secure the indebtedness, Moskov mortgaged his 2-
storey building. On November 10, 2020, the mortgaged building was
totally destroyed due to a strong typhoon. On December 10, 2020,
Angela demanded payment from Moskov. Can Angela compel Moskov
to pay?
Yes. See Article 1198 (3).
 What if the debtor, being unaware of the period or believing that the
obligation has become due, paid the debt before the arrival of the term.
May the debtor recover what he has paid? Is he entitled to recover
interest?
YES to both questions. Article 1195 allows the debtor to recover the
thing or money itself, plus the interests, which accrues from the date of
payment until the date of recovery, where the debtor paid under a
mistake as to the period. See Article 1195, cf. Article 1188, 2nd par. on
conditional obligations
 Are the following obligations valid, why, and if they are valid, when
is the obligation demandable in each case? (2003 BAR)
a. If the debtor promises to pay as soon as he has the means to pay
The obligation is valid. It is an obligation subject to an indefinite

period because the debtor binds himself to pay when his means
permit him to do so (Art. 1180). When the creditor knows that the
debtor already has the means to pay, he must file an action in court to
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fix the period, and when the definite period as set by the court arrives,
the obligation to pay becomes demandable (Art. 1197).
b. If the debtor promises to pay when he likes
The obligation to pay when he likes is a suspensive condition the

fulfillment of which is subject to the sole will of the debtor and
therefore the conditional obligation is void (Art. 1182).
c. If the debtor promises to pay when he becomes a lawyer
The obligation is valid. It is subject to a suspensive condition, i.e., the

future and uncertain event of his becoming a lawyer. The
performance of this obligation does not depend solely on the will of
the debtor but also on other factors outside the debtor’s control.
d. If the debtor promises to pay if his son, who is sick with cancer, does
not die within one year
The obligation is valid. The death of the son of cancer within one
year is made a negative suspensive condition to his making the
payment. The obligation is demandable if the son does not die within
one year (Art. 1185).
2. As to plurality of prestation, obligations may be classified into three:
i. Conjunctive – prestations are demandable jointly or both at the same time;

all prestations must be fulfilled to extinguish the obligation
ii. Alternative – there are various prestations that are due and the obligation is
fulfilled by performance of one of them (Article 1199)
iii. Facultative – only one prestation is due, but the debtor has reserved the
right to substitute it with another (Article 1206)
 Who has the right of choice? See comparative table below.
CONJUNCTIV ALTERNATIVE FACULTATIVE

E
Right of NOT GR: The right of choice is The right of choice
Choice APPLICABLE, with the DEBTOR. is ALWAYS with
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all prestations the DEBTOR, and
must be ER: If the right of choice is never with the
performed to EXPRESSLY creditor. (Article
extinguish the GRANTED to the 1206, 1st par.)
obligation CREDITOR or 3rd
PERSON. (Article 1200)
 What are the limitations upon the debtor’s right of choice?
1. The right of choice is indivisible. (Article 1199, 2nd par.)

2. The debtor shall have no right to choose those prestations which are
impossible, unlawful or which could not have been the object of the
obligation. (Article 1200, 2nd par.)
 When does the choice become effective?
- If the right of choice is with the debtor: Apply Article 1201. The choice shall
produce no effect except from the time it has been communicated.
- If the right of choice is with the creditor: Apply Article 1205. When the choice has
been expressly given to the creditor, the obligation shall cease to be
alternative from the day when the selection has been communicated to
the debtor.
- Once the choice has been communicated to the other party, the obligation
ceases to become alternative, and is converted to simple obligation.
 How does one communicate his or her choice? Does the law prescribe a form?
- The notice may be in any form – so long as the choice has been
communicated to the other party.
 Is the consent of the other party necessary for the choice to be effective?
- The consent of the other party is not needed for the choice to be effective.
The law requires mere notice to the other party.
See Arco Pulp and Paper Co., Inc. and Santos vs. Lim, G.R. No. 206806, 25 June
2014, penned by Justice Leonen, where the Supreme Court elucidates the
nature of an alternative obligation:
"In an alternative obligation, there is more than one object, and the fulfillment of one
is sufficient, determined by the choice of the debtor who generally has the right of
election." The right of election is extinguished when the party who may exercise that
option categorically and unequivocally makes his or her choice known.
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The choice of the debtor must also be communicated to the creditor who must
receive notice of it since: The object of this notice is to give the creditor . . .
opportunity to express his consent, or to impugn the election made by the debtor,
and only after said notice shall the election take legal effect when consented by the
creditor, or if impugned by the latter, when declared proper by a competent court.
 Does that mean the consent of the creditor is necessary for the choice to be
effective?
No. Note that the right of election is not absolute. The exercise of this right
is subject to certain limitations. The object of the notice requirement is to
give the creditor the opportunity to impugn the choice made by the
debtor if the same does not conform to the agreement.
[In the instant case,] [as] found by the trial court and the appellate court, the original
contract between the parties was for respondent to deliver scrap papers worth
₱7,220,968.31 to petitioner Arco Pulp and Paper. The payment for this delivery
became petitioner Arco Pulp and Paper’s obligation. By agreement, petitioner Arco
Pulp and Paper, as the debtor, had the option to either (1) pay the price or (2) deliver
the finished products of equivalent value to respondent.
The appellate court, therefore, correctly identified the obligation between the parties as
an alternative obligation, whereby petitioner Arco Pulp and Paper, after receiving the
raw materials from respondent, would either pay him the price of the raw materials or,
in the alternative, deliver to him the finished products of equivalent value.
When petitioner Arco Pulp and Paper tendered a check to respondent in partial
payment for the scrap papers, they exercised their option to pay the price.
Respondent’s receipt of the check and his subsequent act of depositing it constituted
his notice of petitioner Arco Pulp and Paper’s option to pay.
This choice was also shown by the terms of the memorandum of agreement, which
was executed on the same day. The memorandum declared in clear terms that the
delivery of petitioner Arco Pulp and Paper’s finished products would be to a third
person, thereby extinguishing the option to deliver the finished products of equivalent
value to respondent.
An obligation ceases to be alternative and becomes simple obligation:
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a. When the debtor has already made a choice
b. When the creditor has already made a choice
c. When the choice of the debtor is consented to by the creditor
d. When the choice of the creditor is consented to by the debtor
e. None of the above
ANSWER: E. From the time it has been communicated to the other party.
(Articles 1201, 1205)
 What if the party who has the right of choice refuses to elect, who will make the
selection?
Note that the party who has been granted the right of choice has the obligation
to make the selection. Thus, if said party refuses or failed to exercise his right of
choice, then the other party may avail the remedy provided under Article 1167.
 What is the consequence if the prestations in an alternative obligation become

impossible to perform? (Articles 1202, 1203, 1204, and 1205)
Cause DEBTOR has the CREDITOR has the

right of choice right of choice
One or Fortuitous i. Perform the i. The obligation

some of the event remaining prestation becomes a simple
prestations (Article 1202), or obligation, if there
were lost choose from the remains only one
but not all remaining prestation, or the
(at least prestations creditor may choose
one ii. Without liability for from the remaining
prestation damages (because prestations. (Article
remains) the creditor has not 1205 (1))
incurred any ii. Without liability for
damage) damages (Article
1174)
Fault of i. Demand the value of

debtor the thing lost, plus
damages; or
ii. Choose from the
remaining prestations
(Article 1205 (2))
NOTE: Under Article

1205 (2), the phrase
“with a right to
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damages”, what does
it qualify?
Fault of i. The debtor may i. Perform the remaining
creditor rescind the prestation, or choose
obligation, plus from the remaining
damages (Article prestations
1203) ii. Without liability for
ii. Perform the damages (because the
remaining creditor has not
prestations, no incurred any damage)
right to recover
damages
ALL Fortuitous The obligation is extinguished. (Article 1174)

prestations event
are lost
(nothing Fault of The creditor is entitled The choice by the creditor
remains to debtor to recover the value of shall fall upon the price of
be the last thing lost, or that any one of them, also with
performed) of the service which last indemnity for damages.
become impossible, plus (Article 1205 (3))
damages (Article 1204)
Fault of The obligation is extinguished.

creditor
Scenario No. 1
D obliged himself to give C, Object No.1 valued at P15, 000.00; or Object No.
2 valued at P10, 000.00; or Object No. 3 valued at P5, 000.00. All the objects
were lost due to D’s fault in the order stated. Which statement is correct?
a. D’s obligation is extinguished.

b. D’s obligation is to pay the value of object No. 1, plus damages.
c. C’s right is to demand the value of any of the objects, plus damages.
d. D’s obligation is to pay the value of object No. 3, plus damages.
ANSWER: D. Article 1204. The right of choice is generally with the

debtor, unless the same is expressly granted to the creditor,
Scenario No. 2
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2 valued at P10, 000.00; or Object No. 3 valued at P5, 000.00. All the objects
were lost due to D’s fault in the order stated. The right of choice was expressly
granted to C.
a. D’s obligation is extinguished.

b. D’s obligation is to pay the value of object No. 1, plus damages.
c. C’s right is to demand the value of any of the objects, plus damages.
d. D’s obligation is to pay the value of object No. 3, plus damages.
ANSWER: C. The applicable provision is Article 1205 (3) because the

right of choice is given to the creditor.
Scenario No. 3
2 valued at P10, 000.00; or Object No. 3 valued at P15, 000.00. All objects
were lost in the order stated. Object Nos. 1 and 2 were lost due to fortuitous
event, while Object No. 3 was lost due to debtor’s fault. Discuss the liability of
D.
ANSWER: The creditor shall have a right to indemnity for damage. The
indemnity shall be fixed taking as a basis the value of the last thing
which disappeared, or that of the service which last became impossible.
In the instant case, D’s obligation is to pay the value of Object No. 3.
(Article 1204)
Scenario No. 4
2 valued at P10, 000.00; or Object No. 3 valued at P15, 000.00. All objects
were lost in the order stated. Object Nos. 1 and 2 were lost due to D’s fault,
while Object No. 3 was lost due to fortuitous event. Discuss the liability of D.
ANSWER: Article 1203, cf. Article 1174. When Objects No. 1 and No. 2
were lost, the obligation is converted to a simple obligation. When
Object No. 3 was lost, the applicable provision is Article 1174.
SCENARIO
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The obligation of A may be performed either by: (1) the delivery of P500,000
to B; (2) the delivery of A's Fortuner car; or (3) the delivery of Amorsolo's
painting hanging on A's condo unit. On the agreed date of delivery. A
delivered his Fortuner car. B did not accept the car and demanded for the
delivery of the Amorsolo painting. A refused to deliver the Amorsolo
painting. Who is in default?
B is in default, a case of mora accipiendi. The instant case involves an

alternative obligation wherein the debtor is generally given the right of choice,
unless the right of choice has been expressly granted to the creditor. By
delivering the Fortuner car, A impliedly communicated to B that he is choosing
to perform the 2nd option, i.e., to deliver the Fortuner car, and B, the creditor,
has no right to refuse, and demand the performance of another prestation. By
unjustly refusing the Fortuner car, B incurred in default.
What if B was notified that A chose to deliver the Fortuner car but prior to
delivery, the car was destroyed by lightning. What is the effect of such event
upon the obligation of A?
The obligation is extinguished. From the time the choice is communicated to

the creditor, the obligation ceases to be alternative and becomes a simple
obligation. The loss of A’s Fortuner car by reason of fortuitous event
extinguishes A’s obligation, applying the general rule that no person shall be
responsible for a fortuitous event.
What if A, because of his fault, lost both the Fortuner car and the Amorsolo
painting. May A be held liable to pay damages to B?
No. A is not liable for damages. Foremost, since there’s only one remaining
prestation, the obligation ceases to become alternative, and is converted to a
simple obligation. (Article 1202) Secondly, A cannot be liable for damages
because B has not incurred any damage at all since the right of choice is with
A, the debtor.
What if both the Fortuner car and the Amorsolo painting were lost by reason
of B's fault, may A recover damages from B?
Yes, if the former chooses to rescind the obligation. Under the law, if the
debtor cannot make a choice according to the terms and conditions of the
obligation due to creditor’s fault, the debtor is given the following options: (1)
rescind the obligation, plus damages (Article 1203); or (2) perform the
remaining prestation but without right to recover damages. From the
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foregoing, A may recover damages from B, only if the former chooses to
rescind the obligation.
What if the right of choice was granted to B, may B hold A liable to pay
damages?
Yes, if B chooses to demand the value of Fortuner car or the value of the
Amorsolo painting. Under the law, if the loss of some of the prestations is due
to debtor’s fault, and the right of choice is given to the creditor, the latter is
given the following options: (1) demand the value of any of the things lost,
plus damages; or (2) choose from the remaining prestations. (Article 1205 (2))
From the foregoing, B may recover damages from A, only if the former
chooses to demand the value of any of the things lost, Fortuner car or the
Amorsolo painting.
 In a facultative obligation, when should the debtor make the choice? When can
the debtor make the substitution? Before the obligation becomes due and
demandable, is the debtor allowed to make exercise his or right of election?
The law is silent.
 When does the election of the substitute become effective?
The law is silent. Applying by analogy Article 1201, from the time the debtor
communicates to the creditor that he elects to perform the substitute prestation,
the substitute prestation becomes the only prestation due.
 What is the effect of the loss of the principal prestation?
Prior to Substitution** After the Substitution
Without fault of The obligation is extinguished, and The obligation is not

the debtor or the debtor is not liable for damages. extinguished, and no
Fortuitous event (Articles 1174, 1262) liability for damages
With fault of the The debtor becomes liable for
debtor damages. The substitute prestation
NOTE: The option to perform the becomes the only
substitute is exclusive to the debtor. prestation that is due.
The debtor cannot be compelled to
perform it.
** When the debtor communicates to the creditor that he/she elects to perform the substitute
prestation.
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 What is the effect of the loss of the substitute, in a facultative obligation?
Prior to Substitution After the Substitution
Without fault of The obligation is not The obligation is

the debtor or extinguished, and the debtor is extinguished. (The debtor
Fortuitous event not liable. must not be in default)
(Because during this time, the
With fault of the substitute is not yet the The obligation is not
debtor prestation due) extinguished, and the debtor
is liable for damages.
Which statement is incorrect?
a. Before substitution: if the principal thing is lost due to fortuitous event, there is no more
obligation.
b. Before substitution: if the substitute thing is lost due to debtor’s fault, there is no
more obligation.
c. After substitution, if the principal thing is lost, the debtor is no longer liable even if it was lost
due to his fault.
d. None of the above.
3. As to plurality of Parties, obligations may be classified into:
i. Joint – each of the debtors is liable only for a proportionate part of the debt,
and the creditor is entitled to demand only a proportionate part of the credit
ii. Solidary – each debtor is liable for the entire debt, and each creditor is
entitled to demand the whole obligation
iii. Disjunctive – there are two or more creditors and two, or more debtors, and
they are named disjunctively as debtors and creditors in the alternative.
(NOTE: This type of obligation is not found in the Civil Code.)
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GENERAL RULE: An obligation is presumed to be JOINT. (Article 1207)
JOINT OBLIGATION - The share of each of the joint creditors and debtors
in the credit or debt is considered distinct from each other (Article 1208):
i. The payment of the debt of one of the joint debtors shall not affect the
share of the other joint debtors.
ii. The delay of one joint debtor shall not affect the other.
iii. The interruption of prescription by judicial demand made by one creditor
upon a debtor shall not benefit the other creditors, nor interrupt the
prescription with respect to other debtors
iv. The insolvency of one of the debtors does not increase the liability of the
other debtors.
EXCEPTIONS to the GR: There is a SOLIDARY liability only when:

i. Solidary liability by express stipulation
“Jointly and severally”
“Individually and collectively”
“Individually and jointly”
ii. Solidary liability provided by law

 “I promise to pay”, signed by two or more persons – the obligation is
solidary (Section 17 (g), NIL)
 When two or more heirs take possession of the estate, they shall be
solidarily liable for any loss or destruction (Article 927)
 Liability of the partners with the partnership (Article 1824, in relation
to Article 1822, NCC
 Liability of the principal with the agent (Article 1911)
 Liability of all agents in a common transaction (Article 1915)
 Liability of two or more payees in solution indebiti (Article 2157)
 Liability of two or more persons who are liable in quasi-delict (Article
2194)
iii. Solidary liability by nature of obligation, i.e., Liability of two tortfeasors,

cf. Article 2194
See Ruks Konsult and Construction vs. Adworld Sign and Advertising
Corp and Transworld Media Ads, G.R. No. 204866, 21 January 2015,
where the Supreme Court explained the liability of joint tortfeasors:
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As joint tortfeasors, therefore, they are solidarily liable to Adworld.
Verily, "[j]oint tortfeasors are those who command, instigate,
promote, encourage, advise, countenance, cooperate in, aid or abet
the commission of a tort, or approve of it after it is done, if done for
their benefit. They are also referred to as those who act together in
committing wrong or whose acts, if independent of each other, unite
in causing a single injury. Under Article 2194 of the Civil Code, joint
tortfeasors are solidarily liable for the resulting damage. In other
words, joint tortfeasors are each liable as principals, to the same
extent and in the same manner as if they had performed the wrongful
act themselves."
Citing People v. Velasco, G.R. No. 195668, June 25, 2014, the Supreme
Court further explained:
Where several causes producing an injury are concurrent and each is

an efficient cause without which the injury would not have happened,
the injury may be attributed to all or any of the causes and recovery
may be had against any or all of the responsible persons although
under the circumstances of the case, it may appear that one of them
was more culpable, and that the duty owed by them to the injured
person was not same. No actor's negligence ceases to be a
proximate cause merely because it does not exceed the
negligence of other actors. Each wrongdoer is responsible for
the entire result and is liable as though his acts were the sole
cause of the injury.
There is no contribution between joint [tortfeasors] whose

liability is solidary since both of them are liable for the total
damage. Where the concurrent or successive negligent acts or
omissions of two or more persons, although acting independently, are
in combination the direct and proximate cause of a single injury to a
third person, it is impossible to determine in what proportion each
contributed to the injury and either of them is responsible for the
whole injury.
Arco Pulp and Paper Co., Inc. and Santos vs. Lim, G.R. No. 206806, 25
June 2014, the Supreme Court ruled:
As a general rule, directors, officers, or employees of a corporation

cannot be held personally liable for obligations incurred by the
corporation. However, this veil of corporate fiction may be pierced if
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complainant is able to prove, as in this case, that (1) the officer is
guilty of negligence or bad faith, and (2) such negligence or bad faith
was clearly and convincingly proven.
Here, petitioner Santos entered into a contract with respondent in her

capacity as the President and Chief Executive Officer of Arco Pulp
and Paper. She also issued the check in partial payment of petitioner
corporation’s obligations to respondent on behalf of petitioner Arco
Pulp and Paper. This is clear on the face of the check bearing the
account name, "Arco Pulp & Paper, Co., Inc."54 Any obligation
arising from these acts would not, ordinarily, be petitioner Santos’
personal undertaking for which she would be solidarily liable with
petitioner Arco Pulp and Paper.
We find, however, that the corporate veil must be pierced.
xxx
We agree with the Court of Appeals. Petitioner Santos cannot be
allowed to hide behind the corporate veil. When petitioner Arco Pulp
and Paper’s obligation to respondent became due and demandable,
she not only issued an unfunded check but also contracted with a
third party in an effort to shift petitioner Arco Pulp and Paper’s
liability. She unjustifiably refused to honor petitioner corporation’s
obligations to respondent. These acts clearly amount to bad faith. In
this instance, the corporate veil may be pierced, and petitioner Santos
may be held solidarily liable with petitioner Arco Pulp and Paper.
OBLIGATION ARISING FROM DIFFERENT SOURCES: There

is NO SOLIDARITY
See Malayan Insurance Co., Inc. vs. CA, GR. No. L-36413
ISSUE: Whether the trial court, as upheld by the Court of Appeals,

was correct in holding petitioner and respondents Sio Choy and San
Leon Rice Mill, Inc. "solidarily liable" to respondent Vallejos
The trial court found, as affirmed by the appellate court, that

petitioner and respondents Sio Choy and San Leon Rice Mill, Inc. are
jointly and severally liable to respondent Vallejos.
RULING: We do not agree with the aforesaid ruling. We hold

instead that it is only respondents Sio Choy and San Leon Rice
Mill, Inc, (to the exclusion of the petitioner) that are solidarily
liable to respondent Vallejos for the damages awarded to
Vallejos.
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It must be observed that respondent Sio Choy is made liable to
said plaintiff as owner of the ill-fated Willys jeep, pursuant to Article
2184 of the Civil Code.
On the other hand, it is noted that the basis of liability of

respondent San Leon Rice Mill, Inc. to plaintiff Vallejos, the
former being the employer of the driver of the Willys jeep at the time
of the motor vehicle mishap, is Article 2180 of the Civil Code.
It thus appears that respondents Sio Choy and San Leon Rice
Mill, Inc. are the principal tortfeasors who are primarily liable to
respondent Vallejos. The law states that the responsibility of two or
more persons who are liable for a quasi-delict is solidarily.
On the other hand, the basis of petitioner's liability is its

insurance contract with respondent Sio Choy. If petitioner is
adjudged to pay respondent Vallejos in the amount of not more than
P20,000.00, this is on account of its being the insurer of respondent
Sio Choy under the third-party liability clause included in the private
car comprehensive policy existing between petitioner and respondent
Sio Choy at the time of the complained vehicular accident.
While it is true that where the insurance contract provides for

indemnity against liability to third persons, such third persons can
directly sue the insurer, however, the direct liability of the insurer
under indemnity contracts against third party liability does not mean
that the insurer can be held solidarily liable with the insured and/or
the other parties found at fault. The liability of the insurer is based on
contract; that of the insured is based on tort.
In the case at bar, petitioner as insurer of Sio Choy, is liable to

respondent Vallejos, but it cannot, as incorrectly held by the trial
court, be made "solidarily" liable with the two principal tortfeasors
namely respondents Sio Choy and San Leon Rice Mill, Inc. For if
petitioner-insurer were solidarily liable with said two (2) respondents
by reason of the indemnity contract against third party liability-under
which an insurer can be directly sued by a third party — this will
result in a violation of the principles underlying solidary obligation
and insurance contracts.
In solidary obligation, the creditor may enforce the entire obligation

against one of the solidary debtors. On the other hand, insurance is
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defined as "a contract whereby one undertakes for a consideration to
indemnify another against loss, damage, or liability arising from an
unknown or contingent event."
In the case at bar, the trial court held petitioner together with
respondents Sio Choy and San Leon Rice Mills Inc. solidarily liable to
respondent Vallejos for a total amount of P29,103.00, with the
qualification that petitioner's liability is only up to P20,000.00. In the
context of a solidary obligation, petitioner may be compelled by
respondent Vallejos to pay the entire obligation of P29,013.00,
notwithstanding the qualification made by the trial court. But, how
can petitioner be obliged to pay the entire obligation when the
amount stated in its insurance policy with respondent Sio Choy for
indemnity against third party liability is only P20,000.00? Moreover,
the qualification made in the decision of the trial court to the effect
that petitioner is sentenced to pay up to P20,000.00 only when the
obligation to pay P29,103.00 is made solidary, is an evident breach of
the concept of a solidary obligation. Thus, We hold that the trial
court, as upheld by the Court of Appeals, erred in holding petitioner,
solidarily liable with respondents Sio Choy and San Leon Rice Mill,
Inc. to respondent Vallejos.
See Calang and Philtranco vs. People, G.R. No. 190696, 3 August 2010,
where the Supreme Court held:
We, however, hold that the RTC and the CA both erred in holding
Philtranco jointly and severally liable with Calang. We emphasize that
Calang was charged criminally before the RTC. Undisputedly,
Philtranco was not a direct party in this case. Since the cause of
action against Calang was based on delict, both the RTC and
the CA erred in holding Philtranco jointly and severally liable
with Calang, based on quasi-delict under Articles 21761 and 21802
of the Civil Code. Articles 2176 and 2180 of the Civil Code pertain to
the vicarious liability of an employer for quasi-delicts that an
employee has committed. Such provision of law does not apply to
civil liability arising from delict.
If at all, Philtranco’s liability may only be subsidiary. Article 102 of the

Revised Penal Code states the subsidiary civil liabilities of innkeepers,
tavernkeepers and proprietors of establishments… The foregoing
subsidiary liability applies to employers, according to Article 103 of
the Revised Penal Code.
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TMBI vs. Feb Mitsui and Manalastas, G.R. No. 194121, 11 July 2016
We disagree with the lower courts’ ruling that TMBI and BMT are
solidarily liable to Mitsui for the loss as joint tortfeasors, citing Article
2194.
Notably, TMBI’s liability to Mitsui does not stem from a quasi-
delict (culpa aquiliana) but from its breach of contract (culpa
contractual). The tie that binds TMBI with Mitsui is contractual,
albeit one that passed on to Mitsui as a result of TMBI’s contract of
carriage with Sony to which Mitsui had been subrogated as an insurer
who had paid Sony’s insurance claim. The legal reality that results
from this contractual tie precludes the application of quasi-delict
based Article 2194.
We likewise disagree with the finding that BMT is directly liable to
Sony/Mitsui for the loss of the cargo. While it is undisputed that the
cargo was lost under the actual custody of BMT (whose employee is
the primary suspect in the hijacking or robbery of the shipment), no
direct contractual relationship existed between Sony/Mitsui and
BMT. If at all, Sony/Mitsui’s cause of action against BMT could
only arise from quasi-delict, as a third-party suffering damage
from the action of another due to the latter’s fault or negligence,
pursuant to Article 2176 of the Civil Code.
In the present case, Mitsui’s action is solely premised on TMBI’s
breach of contract. Mitsui did not even sue BMT, much less prove
any negligence on its part. If BMT has entered the picture at all, it is
because TMBI sued it for reimbursement for the liability that TMBI
might incur from its contract of carriage with Sony/Mitsui.
Accordingly, there is no basis to directly hold BMT liable to Mitsui
for quasi-delict.
We do not hereby say that TMBI must absorb the loss. By
subcontracting the cargo delivery to BMT, TMBI entered into its own
contract of carriage with a fellow common carrier.
The cargo was lost after its transfer to BMT' s custody based on its
contract of carriage with TMBI. Following Article 1735, BMT is
presumed to be at fault. Since BMT failed to prove that it observed
extraordinary diligence in the performance of its obligation to TMBI,
it is liable to TMBI for breach of their contract of carriage.
In these lights, TMBI is liable to Sony (subrogated by Mitsui) for
breaching the contract of carriage. In tum, TMBI is entitled to
reimbursement from BMT due to the latter's own breach of its
contract of carriage with TMBI. The proverbial buck stops with
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BMT who may either: (a) absorb the loss, or (b) proceed after its
missing driver, the suspected culprit, pursuant to Article 2181.
KINDS OF SOLIDARITY
i. Active solidarity – One that exists among the creditors; essential feature is the
existence of mutual agency among the creditors, that is, each creditor is
authorized to claim and enforce the rights of all
 Each one of the solidary creditors may do whatever is beneficial to
the other creditors. (Article 1212)
o Each creditor may make demand upon the debtors (Article 1214)
o Each creditor may proceed against one or all debtors (Article
1216)
See PNB vs. Independent Planters, 122 SCRA 113 where the
Supreme Court ruled that:
It is now settled that the quoted Article 1216 grants the creditor the
substantive right to seek satisfaction of his credit from one, some or
all of his solidary debtors, as he deems fit or convenient for the
protection of his interests; and if, after instituting a collection suit
based on contract against some or all of them and, during its
pendency, one of the defendants dies, the court retains jurisdiction
to continue the proceedings and decide the case in respect of the
surviving defendants.
 The creditor who collects the credit shall be liable to the others for
their share.
 GR: Each one of the solidary creditors may not do acts that are
prejudicial to other creditors (Article 1212)
ER: Article 1215 (Novation, Compensation, Merger, Remission)
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 What are the effects of these prejudicial acts mentioned in Article
1215 made by a solidary creditor with any of the solidary debtor?
 As between the creditors and debtors - Any of these acts
shall extinguish the obligations, except in case of novation,
where there will be a new obligation. (Article 1215, 1st par.)
 As among the creditors - The creditor who makes the
prejudicial acts shall be liable to the co-creditors. (Article 1215,
2nd par.)
 As among the debtors -

i. GR: The co-debtor as to whom the obligation was
extinguished is ENTITLED to be reimbursed.
 Extent of Reimbursement: How much can the
debtor recover from his/her co-debtors?
The debtor as to whom the obligation was
extinguished cannot recover from his other co-
debtors more than their respective shares in what he
may have given up or lost as the consideration for
the extinguishment of the obligation.
ii.ER: In case of remission, since this is purely gratuitous and
the debtor gives or loses nothing, he is NOT ENTITLED
to reimbursement. (Article 1220)
 What is the effect of the Remission of debt made in favor of a

solidary debtor?
i. Remission of the full obligation - Extinguishes the
obligation
ii. Partial remission -
Full share: The debtor ceases to have any relation with
the creditors; hence, the balance cannot be collected
from said debtor; unless there is a stipulation to the
contrary.
Partial share: The debtor’s character as solidary debtor
continues; hence the balance can be collected from said
debtor.
SCENARIO
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In a solidary obligation with V, W, X, Y, and Z as debtors and A
and B as creditors to the amount of P900,000.00, where A remitted
the share of Z, may B validly demand from the latter the balance?
No. As a result of the remission of Z’s full share, the latter ceases to
have any relation with the creditors.
What if A remitted the amount of 100K in favor of Z, may B

validly demand from Z the balance?
Yes. Since the remission covers Z’s partial share, the latter’s
character as solidary debtor continues
iii. If a co-debtor has already paid the obligation in full

prior to remission, the remission does not release said
debtor from his obligation to reimburse the debtor-
payor. (Article 1219)
 What if the co-debtor paid the debt when it was not
yet due? After the co-debtor paid the debt which is
not yet due, the creditor remitted the share of one of
the debtors. Is Article 1219 applicable? 😊
ii. Passive solidarity – one that exists among the debtors; essential feature is the
existence of mutual guaranty among the debtors, that is, each debtor can be
made to answer for the others, with the right of the debtor-payor to recover
from the others their respective shares.
 The solidary debtor is not released from his liability by the mere fact that
the creditor in attempting to collect the debt brought an action against a co-
debtor. (Article 1216)
 The solidary debtors may be sued simultaneously in one suit, or successively

in different actions. (Article 1216)
See PNB vs. Independent Planters, 122 SCRA 113
 What is the effect of Payment made by a solidary debtor?
i.Payment of one of the solidary debtors to any solidary creditor shall

extinguish the obligation (Article 1217, 1st par.)
1. If two or more offer to pay, the creditor may choose which
offer to accept. (Article 1217, 1st par.)
2. To whom should the payment be made? Cf. Article 1214
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GR: The debtor may pay to any one of the solidary
creditors.
ER: (i) IF demand has been made by one of the solidary
creditors, payment shall be made to him/her; (ii) IF two or
more creditors demand payment separately, payment shall be
made to the creditor who first notified him/her.
SCENARIO
In a solidary obligation with V, W, X, Y, and Z as debtors,
and A and B as creditors to the amount of P900,000.00, A
made a demand on V for the payment of said debt.
May V pay to B? No. When a creditor makes a demand
upon one of the debtors, the latter cannot pay to any
creditor, but to the one who made the demand.
What is the effect if the payment was made to B? The

payment shall be considered as a payment to a 3rd person, in
so far as the shares of the other creditors are concerned. The
debtor may be required to pay again, if the creditor-payee
did not turn over to the others their shares.
In the given scenario, if V paid 900K to B, and the latter did

not turn over A’s share, then A can require V to pay his
share, that is 450K.
May W, X, or Y pay to B? Yes. So long as the debt has not

been paid and demand was not made upon them, the other
solidary debtors may pay to any solidary creditors.
ii. May the debtor-payor claim reimbursement from the co-

debtors? Yes.
iii. How much may the debtor-payor claim from his co-debtors?
The debtor-payor may claim reimbursement from the co-debtors
the amount corresponding to their shares, with interest. (Article
1217, 2nd par.) However, if the payment is made before the debt
is due, no interest for the intervening period may be demanded.
Note that the relationship among the co-debtors is joint. So, the
debtor-payor may only recover from a co-debtor that person’s
corresponding share, with interest.
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See Malayan Insurance Co., Inc. vs. CA, GR. No. L-36413
ISSUE: Whether petitioner is entitled to be reimbursed by

respondent San Leon Rice Mill, Inc. for whatever amount
petitioner has been adjudged to pay respondent Vallejos on its
insurance policy
RULING: Petitioner, upon paying respondent Vallejos the

amount of not exceeding P20,000.00, shall become the subrogee
of the insured, the respondent Sio Choy; as such, it is subrogated
to whatever rights the latter has against respondent San Leon
Rice Mill, Inc. Article 1217 of the Civil Code gives to a
solidary debtor who has paid the entire obligation the right
to be reimbursed by his co-debtors for the share which
corresponds to each.
Thus, if Sio Choy as solidary debtor is made to pay for the entire
obligation (P29,103.00) and petitioner, as insurer of Sio Choy, is
compelled to pay P20,000.00 of said entire obligation, petitioner
would be entitled, as subrogee of Sio Choy as against San Leon
Rice Mills, Inc., to be reimbursed by the latter in the amount of
P14,551.50 (which is 1/2 of P29,103.00)
 When is the debtor-payor NOT ENTITLED TO

REIMBURSEMENT?
If payment was made after the obligation has prescribed, or
has become illegal (Article 1218)
iv. Effect of insolvency of one of the solidary debtors.

 What is the effect of insolvency of one of the solidary debtors?
The share of the insolvent debtor shall be borne by all his
co-debtors, in proportion to the debt of each. (Article 1217,
3rd par.)
iii. Mixed solidarity – exists on the part of both creditors and debtors
 May the obligation be joint on the side of the creditors and solidary on the side
of the debtors or vice-versa?
Yes. In such cases, the rules applicable to each subject of the obligation should be
applied, the character of the creditors or the debtors shall determine their
respective rights and liabilities.”
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A and B are joint debtors of C, D, E, and F, who are solidary creditors, to the
amount of P1,000,000. How much can C collect from A?
C is a solidary creditor, so presumably he can collect the whole debt. But since A
is only a joint debtor, C is entitled to collect only P500,000 from A, which
corresponds to the latter’s share.
A and B are solidary debtors of C, D, E, and F, who are joint creditors, to the
amount of P1,000,000. How much can C recover from A?
Since C is only a joint creditor, he can only recover his entire share which is
P250,000 from A, a solidary debtor.
 What are the defenses available to a solidary debtor?
 Defense arising from the nature of the obligation (TOTAL DEFENSE) –

such as payment, prescription, remission, statute of frauds, presence of vices
of consent, etc.
 Defenses which are personal to him (TOTAL DEFENSE) - such as

minority, insanity and others purely personal to him; or which pertains to his
own share alone (PARTIAL DEFENSE)
 Defenses personal to the other solidary debtors but only as regards that part
of the debt for which the other debtors are liable (PARTIAL DEFENSE)
 What kind of defense is minority?
Joint obligation – it is a defense as to the minor, but can’t be invoked by

the other co-debtors
Solidary obligation -
TOTAL Defense – if the minor is the one invoking
PARTIAL Defense – if the other solidary debtors are invoking
SCENARIO
A, B, C, D and E made themselves solidarily 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:
(1) B is only 16 years old.

(2) C has already been condoned by X.
(3) D is insolvent.
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(4) 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. (2003 Bar)
(1) A may avail the minority of B as a defense, but only for B’s share of P
10,000.00. A solidary debtor may avail himself of any defense which
personally belongs to a solidary co-debtor, but only as to the share of that
co-debtor.
(2) A may avail of the condonation by X of C’s share of P 10, 000.00. A
solidary debtor may, in actions filed by the creditor, avail himself of all
defenses which are derived from the nature of the obligation and of those
which are personal to him or pertain to his own share. With respect to those
which personally belong to others, he may avail himself thereof only as
regards that part of the debt for which the latter are responsible (Art. 1222).
(3) A may not interpose the defense of insolvency of D as a defense. Applying
the principle of mutual guaranty among solidary debtors, A guaranteed the
payment of D’s share and of all the other co-debtors. Hence, A cannot avail
of the defense of D’s insolvency.
(4) The extension of six (6) months given by X to E may be availed of by A as
a partial defense but only for the share of E. There is no novation of the
obligation but only an act of liberality granted to E alone.
*** INSERT ACTIVITY ***
 What is the effect on the liability of the debtors if the thing has been lost or
when the performance of the prestation has become impossible?
APPLICABILITY OF Article 1221: There is non-performance due to loss of

thing or impossibility of performance, in a solidary obligation
Effect on the Liability

Fortuitous event, The obligation is extinguished. Article 1221, 1st par,
without fault of any of cf. Article 1174)
the debtors
Fortuitous event, after Liable for the price, and payment of damages and
one of the debtors interest (Article 1221, 3rd par., cf. Article 1174,
incurred in delay Article 1165, 3rd par.), without prejudice to their
action against the guilty or negligent debtor.
Fault of any of the Liable for the price, and payment of damages and
debtors interest (Article 1221, 2nd par.), without prejudice to
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their action against the guilty or negligent debtor.
NOTE:
 Every debtor is liable for losses and damages, even those who are fault-
free.
 The creditor may demand the ENTIRE indemnity, price of the thing plus
damages, from ANY debtor, even if the latter is fault-free.
 The innocent debtor may recover from the guilty or negligent debtor
 How much can be recovered from the defaulting debtor?
 Non-performance due to loss of thing or impossibility of

performance: Apply Article 1221. The innocent debtor-payor
may recover from the guilty or negligent debtor the full amount
of the indemnity that he or she has paid to the creditor.
 Non-performance without loss: Apply Article 1170. The guilty
or negligent debtor may be liable to damages, but he/she
cannot be made to shoulder the shares of the co-debtors as part
of the indemnity.
DISJUNCTIVE OBLIGATION
SCENARIO
A obliged himself to pay X or Y. Y demanded payment from A.
Thereafter, X made a demand upon A. If A paid X, may Y still hold A
liable?
Cf. Article 1214 –
Article 1214. The debtor may pay any one of the solidary creditors; but if any demand,
judicial or extrajudicial, has been made by one of them, payment should be made to him.
(1142a)
If we apply the rule on alternative obligation – the debtor has the right
to choose the creditor to whom he would pay
If we apply the rule on solidary obligation – either one of the creditors

may demand the debt in full
(1) It depends on the intention of the parties, that is, who has the right of
choice
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- If Y has the right of choice, then the payment to X is a payment to
the wrong party
- If A has the right of choice, then it does not matter who made the
demand first. Then the payment of A to X extinguishes the
obligation.
(2) If the intent of the parties is not clear

- TOLENTINO: APPLY THE RULE ON SOLIDARY
OBLIGATION
Thus, applying Article 1214, the payment to X is a payment to the wrong party
- URIBE: APPLY THE RULE ON ALTERNATIVE

OBLIGATION
- Thus, since the right of choice is with the debtor, the payment to X extinguishes
the obligation
4. As to performance of the prestation, obligations may be classified into four:
(i) Indivisible
(ii) Divisible
(iii) Joint indivisible
(iv) Solidary indivisible
 The obligation to pay 1Million, is it divisible?
Not necessarily. It depends on the intention or agreement of the parties.
 Without any express agreement on how the obligation shall be performed, is

the obligation divisible or indivisible?
See Article 1248 - Article 1248. Unless there is an express stipulation to that effect, the
creditor cannot be compelled partially to receive the prestations in which the obligation consists.
Neither may the debtor be required to make partial payments.
 Are there any obligations which are considered as divisible by nature?
See Article 1225, 2nd par. - When the obligation has for its object the execution of a
certain number of days of work, the accomplishment of work by metrical units, or analogous
things which by their nature are susceptible of partial performance, it shall be divisible.
 Are there any obligations which are considered by law as indivisible?
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See Article 1225, 1st par. - For the purposes of the preceding articles, obligations to give
definite things and those which are not susceptible of partial performance shall be deemed to be
indivisible.
TEST OF DIVISIBILITY OF AN OBLIGATION

Nazareno v. Court of Appeals
(G.R. No. 138842, October 18, 2000; Mendoza, J.)
An obligation is indivisible when it cannot be validly performed in parts, whatever

may be the nature of the thing which is the object thereof. The indivisibility refers to
the prestation and not to the object thereof. In the present case, the Deed of Sale of
January 29, 1970 supposedly conveyed the six lots to Natividad. The obligation is
clearly indivisible because the performance of the contract cannot be done in parts,
otherwise the value of what is transferred is diminished. Petitioners are therefore
mistaken in basing the indivisibility of a contract on the number of obligors.
In any case, if petitioners’ only point is that the estate of Maximino, Sr. alone cannot
contest the validity of the Deed of Sale because the estate of Aurea has not yet been
settled, the argument would nonetheless be without merit. The validity of the
contract can be questioned by anyone affected by it.33 A void contract is inexistent
from the beginning. Hence, even if the estate of Maximino, Sr. alone contests the
validity of the sale, the outcome of the suit will bind the estate of Aurea as if no sale
took place at all.
Sps. Lam vs. KODAK Philippines

(G.R. No. 167615, 11 January 2016; Leonen, J.)
ISSUE: Whether the contract between petitioners Spouses Alexander and Julie Lam
and respondent Kodak Philippines, Ltd. pertained to obligations that are severable,
divisible, and susceptible of partial performance under Article 1225 of the New Civil
Code
RULING: The Letter Agreement contained an indivisible obligation.
Both parties rely on the Letter Agreement as basis of their respective obligations.
Written by respondent’s Jeffrey T. Go and Antonio V. Mines and addressed to
petitioner Alexander Lam, the Letter Agreement contemplated a "package deal"
involving three (3) units of the Kodak Minilab System 22XL…
Based on the foregoing, the intention of the parties is for there to be a single
transaction covering all three (3) units of the Minilab Equipment.
Respondent’s obligation was to deliver all products purchased under a "package,"
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and, in turn, petitioners’ obligation was to pay for the total purchase price, payable in
installments.
The intention of the parties to bind themselves to an indivisible obligation can be

further discerned through their direct acts in relation to the package deal. There was
only one agreement covering all three (3) units of the Minilab Equipment and
their accessories. The Letter Agreement specified only one purpose for the buyer,
which was to obtain these units for three different outlets. If the intention of the
parties were to have a divisible contract, then separate agreements could have been
made for each Minilab Equipment unit instead of covering all three in one package
deal. Furthermore, the 19% multiple order discount as contained in the Letter
Agreement was applied to all three acquired units. The "no downpayment" term
contained in the Letter Agreement was also applicable to all the Minilab
Equipment units. Lastly, the fourth clause of the Letter Agreement clearly referred to
the object of the contract as "Minilab Equipment Package."
In ruling that the contract between the parties intended to cover divisible obligations,
the Court of Appeals highlighted: (a) the separate purchase price of each item; (b)
petitioners’ acceptance of separate deliveries of the units; and (c) the separate
payment arrangements for each unit. However, through the specified terms and
conditions, the tenor of the Letter Agreement indicated an intention for a single
transaction. This intent must prevail even though the articles involved are
physically separable and capable of being paid for and delivered individually.
JOINT INDIVISIBLE – See Article 1224, cf. Article 1209
 If you were the creditors, how would you enforce a joint indivisible obligation
against the debtors? How would you demand performance of a joint
indivisible obligation?
Enforcement of Joint indivisible obligation –
Article 1209. If the division is impossible, the right of the creditors may be prejudiced only
by their collective acts, and the debt can be enforced only by proceeding against all the debtors.
If one of the latter should be insolvent, the others shall not be liable for his share. (1139)
PLURALITY OF DEBTORS - there must be collective fulfillment, that is,

the fulfillment of the obligation requires the concurrence of all the debtors,
although each for his part; all must therefore be sued.
PLURALITY OF CREDITORS - collective action is required for acts
which may be prejudicial; the obligation can be performed only by delivering
the object to all the creditors jointly.
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 What is the consequence in case of non-performance of a joint indivisible
obligation?
Consequence of Non-performance
Article 1224. A joint indivisible obligation gives rise to indemnity for damages from the
time anyone of the debtors does not comply with his undertaking. The debtors who may have
been ready to fulfill their promises shall not contribute to the indemnity beyond the
corresponding portion of the price of the thing or of the value of the service in which the
obligation consists. (1150)
In case of non-performance by the debtors, the obligation to pay damages

arises. The obligation is converted into a liability of losses and damages. The
prestation becomes divisible:
PLURALITY OF CREDITORS – each creditor can ONLY recover

his/her proportionate share
PLURALITY OF DEBTORS –each debtor can be made liable ONLY
with his/her respective share
- If one of the debtors is insolvent or fails to pay his or her share, the
others will not be liable for the insolvent’s share
- The debtors who are ready to perform their part do not become liable
for more than the portions respectively corresponding to them in the
price of the subject matter of the obligation
- The entire liability for damages shall be borne by the defaulting debtor
SOLIDARY INDIVISIBLE –
 How is joint indivisible obligation different from a solidary indivisible
obligation?
 Every debtor is liable for losses and damages, although the debtors who are
ready to perform can later recover from the guilty one.
 The creditor may demand the ENTIRE indemnity, price of the thing plus
damages, from ANY debtor, even if the latter is ready and willing to perform.
- But the debtor who paid the entire indemnity may recover from the
others their respective shares in the price, and from the guilty debtor
the entire amount of damages.
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- But if the non-performance is due to loss of thing or impossibility
of performance, the paying debtor may recover from the guilty
debtor the entire indemnity.
SCENARIO
A and B obliged themselves to deliver a horse to X. Is the obligation of A and

B solidary?
It is not solidary but a joint indivisible obligation. It must be pointed out that
the indivisibility of an obligation does not necessarily give rise to solidarity.
Moreover, the obligation is presumed to be joint in case of plurality of subjects,
and this presumption also applies in case of indivisible obligation. Here, the
obligation to deliver a horse is a joint indivisible obligation.
X made a demand upon A to perform the latter's part in the obligation and A
was not able to do so. Is A already in default?
No. In the instant case, the obligation to deliver a horse is a joint indivisible
obligation. As such, the obligation can be enforced only by proceeding against
all the debtors – although they are each liable only for their respective part. In
addition, A cannot be made to perform the entire obligation because A is a
mere joint debtor, and at the same time, A cannot be made to perform only his
part because the obligation is indivisible or incapable of partial performance.
If A and B failed to deliver the horse to X due to the fault of A. X sued A and
B for the value of the horse, which is P50,000, plus damages. How much can
X recover from each? See Article 1224
B – 25K
A – 25K + damages
5. As to the presence of accessory undertaking: Obligation with a penal clause
GR: The penalty shall substitute the indemnity for damages and the payment of
interests in case of non-compliance (Article 1226)
NOTE:
1.The creditor need not present proof of actual damages suffered by him in
order that the penalty may be demanded. (Article 1228)
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2.The creditor cannot recover more than the penalty stipulated, even if he
proves that the damage suffered by him exceed in amount such penalty.
ER: Indemnity for damages plus the penalty may be recovered in the following
instances: (Article 1226)
(1) When there is a stipulation to that effect

(2) The debtor refuses to pay the penalty after failing to comply with the
obligation
(3) The debtor is guilty of fraud in the performance of the obligation
- Fraud is not presumed; the same must be established by clear and
convincing evidence
- In case the creditor demands indemnity for damages in addition to the
stipulated penalty, proof of actual damages is necessary.
- In such case, the creditor may be entitled only to the stipulated penalty
plus the difference between the proven damages and the stipulated
penalty.
 May the debtor say “I don’t feel like performing the obligation. I’ll just pay
the stipulated penalty.”
What are the rules laid down in Article 1227?
1st part of Article 1227: Right of the Debtor to choose to pay the penalty
as substitute for performance
GR: The debtor cannot avoid the performance of the obligation by offering
to pay the stipulated penalty.
ER: Such right has been expressly granted to the debtor.
 May the creditor demand both the fulfillment of the obligation and
payment of the stipulated penalty at the same time?
2nd part of Article 1227: Right of the Creditor to demand both the
fulfillment of the obligation and payment of the penalty
GR: The creditor cannot demand the fulfillment of the obligation and the
satisfaction of the penalty at the same time.
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ER: (1) Such right has been clearly granted him.
(2) Where the creditor demanded the fulfillment of the obligation and
the performance thereof should become impossible without his fault,
the penalty may be enforced.
PEZA vs. PILHINO Sales Corporation

(G.R. No. 185765, September 26, 2016; Leonen, J.)
FACTS
PEZA published an invitation to bid in the Business Daily for its acquisition
of two (2) brand new fire truck units. Pilhino participated in the bidding and
eventually secured the contract for the acquisition of the fire trucks.
The contract stipulated that Pilhino was to deliver to the PEZA two (2)
FF3HP brand fire trucks within 45 days of receipt of a purchase order. A
further stipulation stated that "[i]n case of fail[u]re to deliver the . . . good on
the date specified . . . the Supplier agree[s] to pay penalty at the rate of 1/10
of 1% of the total contract price for each day commencing on the first day
after the date stipulated above."
PEZA furnished Pilhino with a purchase order, however, the latter failed to
deliver the trucks as it had committed. Despite formal demand, Pilhino still
failed to comply. As a result, PEZA filed a Complaint for rescission of
contract and damages.
ISSUE: The propriety of an award based on contractually stipulated

liquidated damages notwithstanding the rescission of the same contract
stipulating it
RULING: YES
Respondent's intimation that with the rescission of a contract necessarily and

inexorably follows the obliteration of liability for what the same contract
stipulates as liquidated damages is entirely misplaced.
Respondent correctly notes that rescission under Article 1911 of the Civil
Code results in mutual restitution. Jurisprudence has long settled that the
restoration of the contracting parties to their original state is the very essence
of rescission.
Contrary to respondent's assertion, mutual restitution under Article

1191 is, however, no license for the negation of contractually stipulated
liquidated damages. Article 1191 itself clearly states that the options of
rescission and specific performance come with "with the payment of
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damages in either case." It is the very same breach or delay in
performance that triggers rescission is what makes damages due.
When the contracting parties, by their own free acts of will, agreed on what
these damages ought to be, they established the law between themselves.
Their contemplation of the consequences proper in the event of a breach has
been articulated. When courts are, thereafter, confronted with the need to
award damages in tandem with rescission, courts must not lose sight of how
the parties have explicitly stated, in their own language, these consequences.
To uphold both Article 1191 of the Civil Code and the parties' will,
contractually stipulated liquidated damages must, as a rule, be maintained.
 May the court reduce the stipulated penalty? When can the court reduce the
stipulated penalty?
GR: The courts have no power to ease the burden of obligations voluntarily
assumed by parties
ER: (Article 1229)
(1) When the principal obligation has been partly or irregularly complied
with by the debtor; and
(2) Even if there has been no performance, the penalty may also be reduced
by the courts if it is iniquitous or unconscionable.
PEZA vs. PILHINO Sales Corporation

(G.R. No. 185765, September 26, 2016; Leonen, J.)
ISSUE: The propriety of the Court of Appeals' reduction of the liquidated

damages due to petitioner
RULING: NO
Liquidated damages are a penalty, meant to impress upon defaulting obligors

the graver consequences of their own culpability. Liquidated damages must
necessarily make non-compliance more cumbersome than compliance.
Otherwise, contracts might as well make no threat of a penalty at all.
Respondent cannot now balk at the natural result of its own breach. The
Court of Appeals erred in frustrating the express terms of the contract that
respondent actively endeavored to be awarded to it. The exigencies that
impelled petitioner to obtain fire trucks made it imperative for respondent to
act with dispatch. Instead, it dragged its feet, left petitioner with inadequate
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means for addressing the very emergencies that engendered the need for fire
trucks, and forced it into litigation to enforce its rights.
Sps. Poon vs. Prime Savings Bank,

(G.R. No. 183794, 13 June 2016; Sereno, CJ.)
It is settled that a provision is a penal clause if it calls for the forfeiture of any
remaining deposit still in the possession of the lessor, without prejudice to
any other obligation still owing, in the event of the termination or
cancellation of the agreement by reason of the lessee's violation of any of the
terms and conditions thereof. This kind of agreement may be validly entered
into by the parties. The clause is an accessory obligation meant to ensure the
performance of the principal obligation by imposing on the debtor a special
prestation in case of nonperformance or inadequate performance of the
principal obligation.
It is evident from the above-quoted testimony of Jaime Poon that the

stipulation on the forfeiture of advance rentals under paragraph 24 is a
penal clause in the sense that it provides for liquidated damages.
As the CA correctly found, the penalty was to compel respondent to

complete the 10-year term of the lease. Petitioners, too, were similarly obliged
to ensure the peaceful use of their building by respondent for the entire
duration of the lease under pain of losing the remaining advance rentals paid
by the latter.
The forfeiture clauses of the Contract, therefore, served the two functions of
a penal clause, i.e., (1) to provide for liquidated damages and (2) to strengthen
the coercive force of the obligation by the threat of greater responsibility in
case of breach. As the CA correctly found, the prestation secured by those
clauses was the parties' mutual obligation to observe the fixed term of the
lease. For this reason, We sustain the lower courts' finding that the forfeiture
clause in paragraph 24 is a penal clause, even if it is not expressly labelled as
such.
A reduction of the penalty agreed upon by the parties is warranted

under Article 1229 of the Civil Code.
If this were an ordinary contest of rights of private contracting parties,

respondent lessee would be obligated to abide by its commitment to
petitioners. The general rule is that courts have no power to ease the burden
of obligations voluntarily assumed by parties, just because things did not turn
out as expected at the inception of the contract.
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It must be noted, however, that this case was initiated by the PDIC in
furtherance of its statutory role as the fiduciary of Prime Savings Bank. As
the state-appointed receiver and liquidator, the PDIC is mandated to recover
and conserve the assets of the foreclosed bank on behalf of the latter's
depositors and creditors. In other words, at stake in this case are not just
the rights of petitioners and the correlative liabilities of respondent
lessee. Over and above those rights and liabilities is the interest of
innocent debtors and creditors of a delinquent bank establishment.
These overriding considerations justify the 50% reduction of the penalty
agreed upon by petitioners and respondent lessee in keeping with Article
1229 of the Civil Code.
Under the circumstances, it is neither fair nor reasonable to deprive

depositors and creditors of what could be their last chance to recoup
whatever bank assets or receivables the PDIC can still legally recover.
Besides, nothing has prevented petitioners from putting their building to
other profitable uses, since respondent surrendered the premises immediately
after the closure of its business. Strict adherence to the doctrine of
freedom of contracts, at the expense of the rights of innocent creditors
and investors, will only work injustice rather than promote justice in
this case. Such adherence may even be misconstrued as condoning profligate
bank operations. We cannot allow this to happen. We are a Court of both law
and equity; We cannot sanction grossly unfair results without doing violence
to Our solemn obligation to administer justice fairly and equally to all who
might be affected by our decisions.
IV. BREACH OF OBLIGATIONS
 Was there a breach of contract in Honrado vs. GMA Network Films, Inc., G.R.
No. 204702, 14 January 2015? YES.
In terms devoid of any ambiguity, Paragraph 4 of the Agreement requires the

intervention of MTRCB, the state censor, before GMA Films can reject a film
and require its replacement. Specifically, Paragraph 4 requires that MTRCB, after
reviewing a film listed in the Agreement, disapprove or X-rate it for telecasting.
GMA Films does not allege, and we find no proof on record indicating, that
MTRCB reviewed Winasak na Pangarap and X-rated it. Indeed, GMA Films’
own witness, Jose Marie Abacan (Abacan), then Vice-President for Program
Management of GMA Network, testified during trial that it was GMA Network
which rejected Winasak na Pangarap because the latter considered the film
"bomba." In doing so, GMA Network went beyond its assigned role under the
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Agreement of screening films to test their broadcast quality and assumed the
function of MTRCB to evaluate the films for the propriety of their content.
This runs counter to the clear terms of Paragraphs 3 and 4 of the
Agreement.
 Who may commit a breach of obligation? Who may be held liable for
damages in case of breach?
Note that Article 1170 uses the phrase “Those who in the performance of their
obligations,” hence, not only the debtor who may be held liable for
damages. The creditor may likewise be held liable.
1. MANNER OF BREACH – How may an obligation be breached?
Article 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are
liable for damages. (1101)
i. FRAUD, Arts. 1171, 1338, 1344
There is a distinction between the fraud under Article 1171, and the fraud
under Article 1338. The distinction is determined by the moment in
which the fraud occurs -
(a) Fraud under Article 1171 occurs in connection with or an incident

to the fulfillment of the obligation
(b) Fraud under Article 1338, the fraud is prior or simultaneous to the
consent or creation of the obligation
- Dolo causante – can be a ground for annulment of contract
- Dolo incidente – gives rise to an action for damages under Article

1344
Fraud under Article 1171
 Fraud – the voluntary and willful act or omission, which prevents

the normal realization of the prestation execution; in fraud, there
is an intent to evade the normal fulfillment of the obligation and
to cause damage.
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 Fraud as a ground for damages under Article 1170 implies some
kind of malice or dishonesty, and it cannot cover cases of mistake
and errors of judgment made in good faith; it is synonymous to
bad faith
 Gross negligence is equivalent to fraud (See Article 1173)
 Waiver of fraud
o Renunciation made in advance of the fraud or gross

negligence (future fraud or gross negligence) – VOID
o Renunciation of fraud already committed – VALID
ii. NEGLIGENCE, Arts. 1171-1173
 How is negligence different from fraud?
Fraud involves willfulness or deliberate intent to cause damage or

injury to another, while negligence is mere want of care or
diligence.
 What is the difference between negligence under Article 2176,

and negligence referred to in Article 1173?
Negligence under Article 2176 refers to negligence as a source of

obligation (Culpa aquiliana); Negligence under Article 1173 is
negligence in the performance of an obligation (Culpa
contractual).
In cases involving negligence, one must know the

distinction between culpa aquiliana and culpa contractual -
(1) WHAT NEEDS TO BE ALLEGED and WHO HAS

THE BURDEN OF PROOF: When the sources of the
obligation upon which plaintiff's cause of action depends is a
negligent act or omission, the burden of proof rests upon
plaintiff to prove the negligence; if he does not, his action
will fail. But when the facts averred show a contractual
undertaking by defendant for the benefit of plaintiff, and it is
alleged that defendant has failed or refused to perform the
contract, it is not necessary for plaintiff to specify in his
pleadings whether the breach of the contract is due to willful
fault or to negligence on the part of the defendant, or of his
servants or agents. Proof of the contract and of its
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nonperformance is sufficient prima facie to warrant a
recovery.
(2) BASIS OF LIABILITY OF THE MASTERS AND

EMPLOYERS and DEFENSE AVAILABLE: The
liability of masters and employers for the negligent acts or
omissions of their servants or agents under Article 2176, in
relation to Article 2180, is based upon a mere
presumption of the master's negligence in their
selection or control, and proof of exercise of the utmost
diligence and care in this regard is a defense available
to the employer to escape liability. On the other hand, in
a breach of a contract, the liability of masters and employers
for the negligent acts or omissions of their servants or agents
is not based upon a mere presumption of the master's
negligence in their selection or control, and proof of
exercise of the utmost diligence and care in this regard
does not relieve the master of his liability for the breach
of his contract.
(3) MITIGATION OF DAMAGES: In case of culpa

contractual, the court is given general discretion to mitigate
liability according to the attendant circumstances (See Article
1172). No such general discretion is given to courts in
dealing with liability arising under Article 2176
NOTE: Whether negligence occurs as an incident in the course of

the performance of a contractual undertaking or is itself the source
of an extra-contractual undertaking obligation, its essential
characteristics are identical. There is always an act or omission
productive of damage due to carelessness or inattention on the
part of the defendant. The negligence of the defendant must be
the proximate cause of the damage to the plaintiff. Consequently,
when the court holds that a defendant is liable in damages for
having failed to exercise due care, either directly, or in failing to
exercise proper care in the selection and direction of his servants,
the practical result is identical in either case.
JOSE CANGCO vs. MANILA RAILROAD CO.

G.R. No. L-12191, October 14, 1918; Fisher, J.
Was there contributory negligence?
RULING: As pertinent to the question of contributory negligence on

the part of the plaintiff in this case the following circumstances are to be
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noted: The company's platform was constructed upon a level higher than
that of the roadbed and the surrounding ground. The distance from the
steps of the car to the spot where the alighting passenger would place his
feet on the platform was thus reduced, thereby decreasing the risk
incident to stepping off. The nature of the platform, constructed as it was
of cement material, also assured to the passenger a stable and even
surface on which to alight. Furthermore, the plaintiff was possessed of
the vigor and agility of young manhood, and it was by no means so risky
for him to get off while the train was yet moving as the same act would
have been in an aged or feeble person. In determining the question of
contributory negligence in performing such act — that is to say, whether
the passenger acted prudently or recklessly — the age, sex, and physical
condition of the passenger are circumstances necessarily affecting the
safety of the passenger, and should be considered. Women, it has been
observed, as a general rule are less capable than men of alighting with
safety under such conditions, as the nature of their wearing apparel
obstructs the free movement of the limbs. Again, it may be noted that
the place was perfectly familiar to the plaintiff as it was his daily custom
to get on and of the train at this station. There could, therefore, be no
uncertainty in his mind with regard either to the length of the step which
he was required to take or the character of the platform where he was
alighting. Our conclusion is that the conduct of the plaintiff in
undertaking to alight while the train was yet slightly under way was not
characterized by imprudence and that therefore he was not guilty of
contributory negligence.
Telefast vs. Castro, 158 SCRA 445

(G.R. No. 73867 February 29, 1988; Padilla, J.)
In the case at bar, petitioner and private respondent Sofia C. Crouch

entered into a contract whereby, for a fee, petitioner undertook to send
said private respondent's message overseas by telegram. This, petitioner
did not do, despite performance by said private respondent of her
obligation by paying the required charges. Petitioner was therefore guilty
of contravening its obligation to said private respondent and is thus liable
for damages.
This liability is not limited to actual or quantified damages. To sustain

petitioner's contrary position in this regard would result in an inequitous
situation where petitioner will only be held liable for the actual cost of a
telegram fixed thirty (30) years ago.
We find Art. 2217 of the Civil Code applicable to the case at bar. It
states: "Moral damages include physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock,
social humiliation, and similar injury. Though incapable of pecuniary
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computation, moral damages may be recovered if they are the proximate
results of the defendant's wrongful act or omission." (Emphasis
supplied).
Here, petitioner's act or omission, which amounted to gross

negligence, was precisely the cause of the suffering private
respondents had to undergo.
 What is the standard degree of diligence in the performance of

obligation? (Article 1163)
i. Stipulation of the parties

ii. Law
iii. When neither the law or contract state the diligence, which is
to be observed, the default standard of diligence in the
performance of obligations is "diligence of a good father
of a family". The diligence of a good father of a family requires
only that diligence which an ordinary prudent man would
exercise with regard to his own property.
 By the nature of their business and for reasons of public policy,

other industries are bound to observe higher standards of
diligence, i.e., extraordinary diligence
(1) Common carrier – Article 1733
Sanico and Castro vs. Colipano

G.R. No. 209969, 27 September 2017; Caguioa, J.
Having established that the contract of carriage was only between

Sanico and Colipano and that therefore Colipano had no cause of
action against Castro, the Court next determines whether Sanico
breached his obligations to Colipano under the contract.
Sanico is liable as operator and owner of a common carrier.
Specific to a contract of carriage, the Civil Code requires common

carriers to observe extraordinary diligence in safely transporting their
passengers. This extraordinary diligence, following Article 1755 of the
Civil Code, means that common carriers have the obligation to carry
passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with due regard
for all the circumstances.
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In case of death of or injury to their passengers, Article 1756 of the
Civil Code provides that common carriers are presumed to have been
at fault or negligent, and this presumption can be overcome only by
proof of the extraordinary diligence exercised to ensure the safety of
the passengers.
Being an operator and owner of a common carrier, Sanico was

required to observe extraordinary diligence in safely transporting
Colipano. When Colipano's leg was injured while she was a passenger
in Sanico's jeepney, the presumption of fault or negligence on
Sanico's part arose and he had the burden to prove that he exercised
the extraordinary diligence required of him. He failed to do this.
Sanico failed to rebut the presumption of fault or negligence under

the Civil Code. More than this, the evidence indubitably established
Sanico's negligence when Castro made Colipano sit on an empty beer
case at the edge of the rear entrance/exit of the jeepney with her
sleeping child on her lap, which put her and her child in greater peril
than the other passengers.
The CA also correctly held that the of defense of engine failure,

instead of exonerating Sanico, only aggravated his already precarious
position. The engine failure "hinted lack of regular check and
maintenance to ensure that the engine is at its best, considering that
the jeepney regularly passes through a mountainous area." This failure
to ensure that the jeepney can safely transport passengers through its
route which required navigation through a mountainous area is proof
of fault on Sanico's part. In the face of such evidence, there is no
question as to Sanico's fault or negligence.
Sanico's attempt to evade liability by arguing that he exercised

extraordinary diligence when he hired; Castro, who was allegedly an
experienced and time-tested driver, whom he had even accompanied
on a test-drive and in whom he was personally convinced of the
driving skills, are not enough to exonerate him from liability - because
the liability of common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection.
and supervision of their employees. This is the express mandate of
Article 1759 of the Civil Code.
The only defenses available to common carriers are (1) proof that
they observed extraordinary diligence as prescribed in Article 1756,31
and (2) following Article 1174 of the Civil Code, proof that the injury
or death was brought about by an event which "could not be
foreseen, or which, though foreseen, were inevitable," or a fortuitous
event.
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The Court finds that neither of these defenses obtain. Thus, Sanico is
liable for damages to Colipano because of the injury that Colipano
suffered as a passenger of Sanico's jeepney.
TMBI vs. Feb Mitsui and Manalastas, G.R. No. 194121, 11 July
2016; Brion, J.
Common carriers are persons, corporations, firms or associations

engaged in the business of transporting passengers or goods or both,
by land, water, or air, for compensation, offering their services to the
public. By the nature of their business and for reasons of public
policy, they are bound to observe extraordinary diligence in the
vigilance over the goods and in the safety of their passengers.
In A.F. Sanchez Brokerage Inc. v. Court of Appeals, we held that a

customs broker – whose principal business is the preparation of
the correct customs declaration and the proper shipping
documents – is still considered a common carrier if it also
undertakes to deliver the goods for its customers. The law does
not distinguish between one whose principal business activity is the
carrying of goods and one who undertakes this task only as an
ancillary activity.
Despite TMBI’s present denials, we find that the delivery of the

goods is an integral, albeit ancillary, part of its brokerage services.
TMBI admitted that it was contracted to facilitate, process, and clear
the shipments from the customs authorities, withdraw them from the
pier, then transport and deliver them to Sony’s warehouse in Laguna.
That TMBI does not own trucks and has to subcontract the delivery
of its clients’ goods, is immaterial. As long as an entity holds itself to
the public for the transport of goods as a business, it is considered a
common carrier regardless of whether it owns the vehicle used or has
to actually hire one.
Lastly, TMBI’s customs brokerage services – including the

transport/delivery of the cargo – are available to anyone willing to pay
its fees. Given these circumstances, we find it undeniable that TMBI
is a common carrier.
Consequently, TMBI should be held responsible for the loss,

destruction, or deterioration of the goods it transports unless it results
from:
(1) Flood, storm, earthquake, lightning, or other natural disaster or

calamity;
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(2) Act of the public enemy in war, whether international or civil;
(3) Act of omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the

containers;
(5) Order or act of competent public authority.
For all other cases - such as theft or robbery – a common carrier is

presumed to have been at fault or to have acted negligently, unless it
can prove that it observed extraordinary diligence.
Simply put, the theft or the robbery of the goods is not considered a
fortuitous event or a force majeure. Nevertheless, a common carrier
may absolve itself of liability for a resulting loss: (1) if it proves that it
exercised extraordinary diligence in transporting and safekeeping the
goods; or (2) if it stipulated with the shipper/owner of the goods to
limit its liability for the loss, destruction, or deterioration of the goods
to a degree less than extraordinary diligence.
However, a stipulation diminishing or dispensing with the common

carrier’s liability for acts committed by thieves or robbers who do not
act with grave or irresistible threat, violence, or force is void under
Article 1745 of the Civil Code for being contrary to public policy.
Jurisprudence, too, has expanded Article 1734’s five exemptions. De
Guzman v. Court of Appeals interpreted Article 1745 to mean that a
robbery attended by "grave or irresistible threat, violence or force" is
a fortuitous event that absolves the common carrier from liability.
In the present case, the shipper, Sony, engaged the services of TMBI,
a common carrier, to facilitate the release of its shipment and deliver
the goods to its warehouse. In turn, TMBI subcontracted a portion of
its obligation – the delivery of the cargo – to another common carrier,
BMT.
Despite the subcontract, TMBI remained responsible for the cargo.

Under Article 1736, a common carrier’s extraordinary responsibility
over the shipper’s goods lasts from the time these goods are
unconditionally placed in the possession of, and received by, the
carrier for transportation, until they are delivered, actually or
constructively, by the carrier to the consignee.
That the cargo disappeared during transit while under the custody of
BMT – TMBI’s subcontractor – did not diminish nor terminate
TMBI’s responsibility over the cargo. Article 1735 of the Civil Code
presumes that it was at fault.
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Instead of showing that it had acted with extraordinary diligence,
TMBI simply argued that it was not a common carrier bound to
observe extraordinary diligence. Its failure to successfully establish
this premise carries with it the presumption of fault or negligence,
thus rendering it liable to Sony/Mitsui for breach of contract.
Specifically, TMBI’s current theory – that the hijacking was attended

by force or intimidation – is untenable.
First, TMBI alleged in its Third Party Complaint against BMT that
Lapesura was responsible for hijacking the shipment. Further, Victor
Torres filed a criminal complaint against Lapesura with the
NBI.These actions constitute direct and binding admissions that
Lapesura stole the cargo. Justice and fair play dictate that TMBI
should not be allowed to change its legal theory on appeal.
Second, neither TMBI nor BMT succeeded in substantiating this

theory through evidence. Thus, the theory remained an unsupported
allegation no better than speculations and conjectures. The CA
therefore correctly disregarded the defense of force majeure.
(2) Public utility –
Meralco vs. Ramoy, G.R. No. 158911, 4 March 2008
MERALCO admits that respondents are its customers under a

Service Contract whereby it is obliged to supply respondents with
electricity. Nevertheless, upon request of the NPC, MERALCO
disconnected its power supply to respondents on the ground that they
were illegally occupying the NPC's right of way. Under the Service
Contract, "[a] customer of electric service must show his right or
proper interest over the property in order that he will be provided
with and assured a continuous electric service."7 MERALCO argues
that since there is a Decision of the Metropolitan Trial Court (MTC)
of Quezon City ruling that herein respondents were among the illegal
occupants of the NPC's right of way, MERALCO was justified in
cutting off service to respondents.
Clearly, respondents' cause of action against MERALCO is anchored

on culpa contractual or breach of contract for the latter's
discontinuance of its service to respondents under Article 1170.
Article 1173 also provides that the fault or negligence of the obligor
consists in the omission of that diligence which is required by the
nature of the obligation and corresponds with the circumstances of
the persons, of the time and of the place. The Court emphasized in
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Ridjo Tape & Chemical Corporation v. Court of Appeals that "as a
public utility, MERALCO has the obligation to discharge its
functions with utmost care and diligence."
The Court agrees with the CA that under the factual milieu of the
present case, MERALCO failed to exercise the utmost degree of care
and diligence required of it. To repeat, it was not enough for
MERALCO to merely rely on the Decision of the MTC without
ascertaining whether it had become final and executory. Verily, only
upon finality of said Decision can it be said with conclusiveness that
respondents have no right or proper interest over the subject
property, thus, are not entitled to the services of MERALCO.
Although MERALCO insists that the MTC Decision is final and

executory, it never showed any documentary evidence to support this
allegation. Moreover, if it were true that the decision was final and
executory, the most prudent thing for MERALCO to have done was
to coordinate with the proper court officials in determining which
structures are covered by said court order. Likewise, there is no
evidence on record to show that this was done by MERALCO.
The utmost care and diligence required of MERALCO necessitates

such great degree of prudence on its part, and failure to exercise the
diligence required means that MERALCO was at fault and negligent
in the performance of its obligation.
This being so, MERALCO is liable for damages under Article 1170 of
the Civil Code.
(3) Banks -
PHILIPPINE NATIONAL BANK VS CARMELITA SANTOS

(G.R. No. 208293 DECEMBER 10, 2014, Leonen, J.)
FACTS
Respondents discovered that their deceased father maintained a

premium savings account with Philippine National Bank (PNB), Sta.
Elena-Marikina City Branch. Later, respondents would discover that
their father also had a time deposit with PNB.
Respondents went to PNB to withdraw their father’s deposit.
Lina B. Aguilar, the Branch Manager of PNB, required them to

submit certain requirements. When Respondents had already obtained
the necessary documents, they tried to withdraw the deposit.
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However, Aguilar informed them that the deposit had already been
released to a certain Bernardito Manimbo (Manimbo).
Respondents filed a complaint for sum of money and damages against

PNB, Aguilar, and a John Doe. Respondents questioned the release of
the deposit amount to Manimbo who had no authority from them to
withdraw their father’s deposit and who failed to present to PNB all
the requirements for such withdrawal. Respondents prayed that they
be paid: (a) the premium deposit amount; (b) the certificate of time
deposit amount; and (c) moral and exemplary damages, attorney’s
fees, and costs of suit.
1st ISSUE: Whether PNB was negligent in releasing the deposit to

Manimbo
RULING: YES, the trial court and the Court of Appeals

correctly found that petitioners PNB and Aguilar were negligent
in handling the deposit of Angel C. Santos.
Other industries, because of their nature, are bound by law to observe

higher standards of diligence. Common carriers, for example, must
observe "extraordinary diligence in the vigilance over the goods and
for the safety of [their] passengers" because it is considered a business
affected with public interest. "Extraordinary diligence" with respect to
passenger safety is further qualified as "carrying the passengers safely
as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the
circumstances."
Similar to common carriers, banking is a business that is impressed

with public interest. It affects economies and plays a significant role in
businesses and commerce. The public reposes its faith and confidence
upon banks, such that "even the humble wage-earner has not
hesitated to entrust his life’s savings to the bank of his choice,
knowing that they will be safe in its custody and will even earn some
interest for him." This is why we have recognized the fiduciary nature
of the banks’ functions, and attached a special standard of
diligence for the exercise of their functions.
This court in one case described the nature of banks’ functions and
the attitude expected of banks in handling their depositors’ accounts,
thus: in every case, the depositor expects the bank to treat his account
with the utmost fidelity, whether such account consists only of a
few hundred pesos or of millions.
The court explained the meaning of fiduciary relationship and the

standard of diligence assumed by banks:
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This fiduciary relationship means that the bank’s
obligation to observe "high standards of integrity
and performance" is deemed written into every
deposit agreement between a bank and its
depositor. The fiduciary nature of banking requires
banks to assume a degree of diligence higher than that
of a good father of a family. Article 1172 of the Civil
Code states that the degree of diligence required of an
obligor is that prescribed by law or contract, and absent
such stipulation then the diligence of a good father of a
family.
Petitioners PNB and Aguilar’s negligence is not based on their failure

to accept respondents’ documents as evidence of their right to claim
Angel C. Santos’ deposit. Rather, it is based on their failure to exercise
the diligence required of banks when they accepted the fraudulent
representations of Manimbo. Petitioners PNB and Aguilar
disregarded their own requirements for the release of the deposit to
persons claiming to be heirs of a deceased depositor.
PNB and Aguilar’s treatment of Angel C. Santos’ account is

inconsistent with the high standard of diligence required of banks.
They accepted Manimbo’s representations despite knowledge of the
existence of circumstances that should have raised doubts on such
representations. As a result, Angel C. Santos’ deposit was given to a
person stranger to him.
Here, PNB and Aguilar released the deposit to Manimbo without

having been presented the BIR-issued certificate of payment of, or
exception from, estate tax. This is a legal requirement before the
deposit of a decedent is released. PNB and Aguilar’s negligence is also
clear when they accepted as bases for the release of the deposit to
Manimbo: (a) a mere photocopy of Santos’ death certificate; (b) the
falsified affidavit of self-adjudication and special power of attorney
purportedly executed by Reyme Santos; and (c) the certificate of time
deposit.
2nd ISSUE: Whether Lina B. Aguilar is jointly and severally liable

with Philippine National Bank for the release of the deposit to
Bernardito Manimbo
Petitioner Aguilar argued that the Court of Appeals had already found
no malice or bad faith on her part. Moreover, as a mere officer of the
bank, she cannot be made personally liable for acts that she was
authorized to do. These acts were mere directives to her by her
superiors. Hence, she should not be held solidarily liable with PNB.
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RULING: PNB is a bank from which a degree of diligence higher
than that of a good father of a family is expected. PNB and its
manager, petitioner Aguilar, failed to meet even the standard of
diligence of a good father of a family. Their actions and inactions
constitute gross negligence. It is for this reason that we sustain
the ruling that PNB and Aguilar are solidarily liable with each
other.
iii. Delay, Arts. 1169, 1165, 1786, 1788, 1896, 1942
Delay is used as synonymous to default or mora, which means delay in

the fulfillment of obligations; it is non-fulfillment with respect to time.
 When does an obligation become due and demandable? Does it

become due upon demand?
An obligation becomes due upon the happening of the condition or

arrival of the period.
 When is there a delay (in the performance of an obligation)?
GR: Default begins from the moment the creditor judicially or extra-
judicially, demands the performance of the obligation which is already
due and demandable.
ER: See Article 1169, 2nd par.
NOTE:
(1) There can be no delay if the obligation is not yet due and
demandable.
(2) There is no mora in a natural obligation.
(3) There can be no delay in negative obligation.
(4) There can only be delay in positive obligation.
 What are the different kinds of Mora?
(1) Mora solvendi – There is delay on the fulfillment of the

prestation by reason or cause imputable to the debtor.
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NOTE: By implication, if the cause is not imputable to the
debtor, there is no delay.
 What is the consequence/effect?

See Article 1165, 3rd par. and Article 1170
(2) Mora accipiendi – There is delay in the performance due to

the omission by the creditor of the necessary cooperation.
Example: The creditor unjustly refuses the payment.
 What are the consequences? See page 108, Tolentino
(3) Compensation morae – Both the creditor and debtor are in

delay
iv. Any other manner of contravention
Sanico and Castro vs. Colipano

G.R. No. 209969, 27 September 2017; Caguioa, J.
Further, common carriers may also be liable for damages when they
contravene the tenor of their obligations.
In Magat v. Medialdea, 206 Phil. 341 (1983), the Court ruled: "The
phrase 'in any manner contravene the tenor' of the obligation includes
any illicit act or omission which impairs the strict and faithful fulfillment
of the obligation and every kind of defective performance."
There is no question here that making Colipano sit on the empty

beer case was a clear showing of how Sanico contravened the tenor
of his obligation to safely transport Colipano from the place of
departure to the place of destination as far as human care and
foresight can provide, using the utmost diligence of very cautious
persons, and with due regard for all the circumstances.
2. Excuses for Non-performance
i. Fortuitous event - Arts. 1174, 552, 1165, 2147, 2159
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 Define fortuitous events.
Fortuitous events by definition are extraordinary events not

foreseeable or avoidable. It is therefore, not enough that the event
should not have been foreseen or anticipated, as is commonly
believed but it must be one impossible to foresee or to avoid. The
mere difficulty to foresee the happening is not impossibility to
foresee the same.
Fortuitous events may either be acts of God or acts of man (force

majeure).
An act of God has been defined as an accident, due directly and

exclusively to natural causes without human intervention, which by
no amount of foresight, pains or care, reasonably to have been
expected, could have been prevented.
 What are the elements that must concur to constitute a fortuitous

event?
To constitute a fortuitous event, the following elements must

concur:
(a) the cause of the unforeseen and unexpected occurrence or of the

failure of the debtor to comply with obligations must be
independent of human will;
(b) it must be impossible to foresee the event that 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 obligations in a normal manner; and,
(d) the obligor must be free from any participation in the

aggravation of the injury or loss.
 RULE ON FORTUITOUS EVENT
GR: No person shall be responsible for events which could not be

foreseen or which though foreseen, were inevitable (Article 1174,
New Civil Code).
Exceptions: See Article 1174
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ER No. 1: Express Stipulation, cf. Article 1162, 2nd par.
The parties may expressly stipulate that the debtor shall be liable to
the creditor, even if the performance is rendered impossible by
fortuitous event or force majeure.
ER No. 2: Express Provision of Law, cf. Article 1162, 2nd par.
ii. See Article 1165, 3rd par.: “If the obligor delays, or has
promised to deliver the same thing to two or more persons who do
not have the same interest, he shall be responsible for any fortuitous
event until he has effected the delivery.”
iii. See Article 552, 2nd par.: “A possessor in bad faith shall
be liable for deterioration or loss in every case, even if caused by a
fortuitous event.”
iv. See Article 2147 – Enumerates the instances where
the officious manager shall be liable for any fortuitous
event, cf. Article 2148
v.See Article 1942 - The bailee is liable for the loss of the
thing, even if it should be through a fortuitous event.
vi. See Article 1979 - The depositary is liable for the loss
of the thing through a fortuitous event.
vii. See Article 2159, 2nd par.: “Whoever in bad faith accepts
an undue payment…
He shall furthermore be answerable for any loss or impairment of
the thing from any cause, and for damages to the person who
delivered the thing, until it is recovered.”
ER No. 3: The nature of the obligation requires assumption of

risk
ER No. 4: Contributory Negligence
If upon the happening of a fortuitous event or an act of God,

there concurs a corresponding fraud, negligence, delay or
violation or contravention in any manner of the tenor of the
obligation as provided for in Article 1170 of the Civil Code,
which results in loss or damage, the obligor cannot escape
liability.
When the effect, the cause of which is to be considered, is found to

be in part the result of the participation of man, whether it be from
active intervention or neglect, or failure to act, the whole occurrence
is thereby humanized, as it were, and removed from the rules
applicable to the acts of God.
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It has been held that when the negligence of a person concurs
with an act of God in producing a loss, such person is not
exempt from liability by showing that the immediate cause of
the damage was the act of God. To be exempt from liability for
loss because of an act of God, he must be free from any
previous negligence or misconduct by which that loss or
damage may have been occasioned.
Nakpil & Sons vs. CA, 144 SCRA 596, 160 SCRA 334
 Whether or not an act of God-an unusually strong earthquake-which

caused the failure of the building, exempts from liability, parties who are
otherwise liable because of their negligence.
There is no dispute that the earthquake of August 2, 1968 is a fortuitous event

or an act of God.
To exempt the obligor from liability under Article 1174 of the Civil Code, for a
breach of an obligation due to an "act of God," the following must concur: (a)
the cause of the breach of the obligation must be independent of the will of the
debtor; (b) the event must be either unforeseeable or unavoidable; (c) the event
must be such as to render it impossible for the debtor to fulfill his obligation in a
normal manner; and (d) the debtor must be free from any participation in, or
aggravation of the injury to the creditor.
Thus, if upon the happening of a fortuitous event or an act of God, there

concurs a corresponding fraud, negligence, delay or violation or
contravention in any manner of the tenor of the obligation as provided for
in Article 1170 of the Civil Code, which results in loss or damage, the
obligor cannot escape liability.
The principle embodied in the act of God doctrine strictly requires that
the act must be one occasioned exclusively by the violence of nature and
all human agencies are to be excluded from creating or entering into the
cause of the mischief. When the effect, the cause of which is to be considered,
is found to be in part the result of the participation of man, whether it be from
active intervention or neglect, or failure to act, the whole occurrence is thereby
humanized, as it were, and removed from the rules applicable to the acts of
God. (1 Corpus Juris, pp. 1174-1175).
Thus it has been held that when the negligence of a person concurs with an
act of God in producing a loss, such person is not exempt from liability by
showing that the immediate cause of the damage was the act of God. To
be exempt from liability for loss because of an act of God, he must be free
from any previous negligence or misconduct by which that loss or
damage may have been occasioned.
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The negligence of the defendant and the third-party defendants petitioners was
established beyond dispute both in the lower court and in the Intermediate
Appellate Court. Defendant United Construction Co., Inc. was found to
have made substantial deviations from the plans and specifications. and
to have failed to observe the requisite workmanship in the construction as
well as to exercise the requisite degree of supervision; while the third-party
defendants were found to have inadequacies or defects in the plans and
specifications prepared by them. As correctly assessed by both courts, the
defects in the construction and in the plans and specifications were the
proximate causes that rendered the PBA building unable to withstand the
earthquake of August 2, 1968. For this reason the defendant and third-party
defendants cannot claim exemption from liability.
Sicam vs.Jorge, G.R. No. 159617, 8 August 2007
 Whether robbery is a fortuitous event which would exempt petitioners from

being liable for the loss of the pawned articles in their possession.
RULING:
The burden of proving that the loss was due to a fortuitous event rests on him
who invokes it. And, in order for a fortuitous event to exempt one from liability,
it is necessary that one has committed no negligence or misconduct that may
have occasioned the loss.
It has been held that an act of God cannot be invoked to protect a person who
has failed to take steps to forestall the possible adverse consequences of such a
loss. One's negligence may have concurred with an act of God in producing
damage and injury to another; nonetheless, showing that the immediate or
proximate cause of the damage or injury was a fortuitous event would not
exempt one from liability. When the effect is found to be partly the result of a
person's participation -- whether by active intervention, neglect or failure to act -
- the whole occurrence is humanized and removed from the rules applicable to
acts of God.
Petitioner Sicam had testified that there was a security guard in their pawnshop
at the time of the robbery. He likewise testified that when he started the
pawnshop business in 1983, he thought of opening a vault with the nearby bank
for the purpose of safekeeping the valuables but was discouraged by the Central
Bank since pawned articles should only be stored in a vault inside the pawnshop.
The very measures which petitioners had allegedly adopted show that to them
the possibility of robbery was not only foreseeable, but actually foreseen and
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anticipated. Petitioner Sicam’s testimony, in effect, contradicts petitioners’
defense of fortuitous event.
Moreover, petitioners failed to show that they were free from any negligence by
which the loss of the pawned jewelry may have been occasioned.
Robbery per se, just like carnapping, is not a fortuitous event. It does not
foreclose the possibility of negligence on the part of herein petitioners. In Co v.
Court of Appeals, the Court held:
It is not a defense for a repair shop of motor vehicles to escape liability

simply because the damage or loss of a thing lawfully placed in its
possession was due to carnapping. Carnapping per se cannot be considered
as a fortuitous event. The fact that a thing was unlawfully and forcefully
taken from another's rightful possession, as in cases of carnapping,
does not automatically give rise to a fortuitous event. To be
considered as such, carnapping entails more than the mere forceful
taking of another's property. It must be proved and established that
the event was an act of God or was done solely by third parties and
that neither the claimant nor the person alleged to be negligent has
any participation. In accordance with the Rules of Evidence, the
burden of proving that the loss was due to a fortuitous event rests on
him who invokes it — which in this case is the private
respondent. However, other than the police report of the alleged
carnapping incident, no other evidence was presented by private respondent
to the effect that the incident was not due to its fault. A police report of an
alleged crime, to which only private respondent is privy, does not suffice to
establish the carnapping. Neither does it prove that there was no fault on
the part of private respondent notwithstanding the parties' agreement at the
pre-trial that the car was carnapped. Carnapping does not foreclose the
possibility of fault or negligence on the part of private respondent.
Just like in Co, petitioners merely presented the police report of the Parañaque
Police Station on the robbery committed based on the report of petitioners'
employees which is not sufficient to establish robbery. Such report also does not
prove that petitioners were not at fault.
On the contrary, by the very evidence of petitioners, the CA did not err in
finding that petitioners are guilty of concurrent or contributory negligence as
provided in Article 1170 of the Civil Code.
Article 2123 of the Civil Code provides that with regard to pawnshops and other
establishments which are engaged in making loans secured by pledges, the
special laws and regulations concerning them shall be observed, and subsidiarily,
the provisions on pledge, mortgage and antichresis.
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The provision on pledge, particularly Article 2099 of the Civil Code, provides
that the creditor shall take care of the thing pledged with the diligence of a good
father of a family. This means that petitioners must take care of the pawns the
way a prudent person would as to his own property.
We expounded in Cruz v. Gangan that negligence is the omission to do

something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do; or the doing of
something which a prudent and reasonable man would not do.31 It is want of
care required by the circumstances.
A review of the records clearly shows that petitioners failed to exercise

reasonable care and caution that an ordinarily prudent person would have used
in the same situation. Petitioners were guilty of negligence in the operation of
their pawnshop business. Petitioner Sicam’s testimony reveals that there were no
security measures adopted by petitioners in the operation of the pawnshop.
Evidently, no sufficient precaution and vigilance were adopted by petitioners to
protect the pawnshop from unlawful intrusion. There was no clear showing that
there was any security guard at all. Or if there was one, that he had sufficient
training in securing a pawnshop. Further, there is no showing that the alleged
security guard exercised all that was necessary to prevent any untoward incident
or to ensure that no suspicious individuals were allowed to enter the premises.
In fact, it is even doubtful that there was a security guard, since it is quite
impossible that he would not have noticed that the robbers were armed with
caliber .45 pistols each, which were allegedly poked at the employees.
Significantly, the alleged security guard was not presented at all to corroborate
petitioner Sicam's claim; not one of petitioners' employees who were present
during the robbery incident testified in court.
Furthermore, petitioner Sicam's admission that the vault was open at the time of
robbery is clearly a proof of petitioners' failure to observe the care, precaution
and vigilance that the circumstances justly demanded. Petitioner Sicam testified
that once the pawnshop was open, the combination was already off. Considering
petitioner Sicam's testimony that the robbery took place on a Saturday afternoon
and the area in BF Homes Parañaque at that time was quiet, there was more
reason for petitioners to have exercised reasonable foresight and diligence in
protecting the pawned jewelries. Instead of taking the precaution to protect
them, they let open the vault, providing no difficulty for the robbers to cart away
the pawned articles.
We, however, do not agree with the CA when it found petitioners negligent for
not taking steps to insure themselves against loss of the pawned jewelries. There
is no statutory duty imposed on petitioners to insure the pawned jewelry in
which case it was error for the CA to consider it as a factor in concluding that
petitioners were negligent.
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Nevertheless, the preponderance of evidence shows that petitioners failed to
exercise the diligence required of them under the Civil Code.
Fil-Estate vs. Sps. Ronquillo, G.R. No.185798, 13 January 2014
ISSUE; Whether or not the Asian financial crisis constitutes a fortuitous event
which would justify delay by petitioners in the performance of their contractual
obligation
RULING: NO
Notably, the issues had already been settled by the Court in the case of Fil-
Estate Properties, Inc. v. Spouses Go, promulgated on 17 August 2007, where
the Court stated that the Asian financial crisis is not an instance of caso
fortuito. Bearing the same factual milieu as the instant case, G.R. No. 165164
involves the same company, Fil-Estate, albeit about a different condominium
property. The company likewise reneged on its obligation to respondents therein
by failing to develop the condominium project despite substantial payment of
the contract price. Fil-Estate advanced the same argument that the 1997 Asian
financial crisis is a fortuitous event which justifies the delay of the construction
project.
First off, the Court classified the issue as a question of fact which may not be
raised in a petition for review considering that there was no variance in the
factual findings of the HLURB, the Office of the President and the Court of
Appeals.
Second, the Court cited the previous rulings of Asian Construction and Development
Corporation v. Philippine Commercial International Bank and Mondragon Leisure and
Resorts Corporation v. Court of Appeals holding that the 1997 Asian financial crisis
did not constitute a valid justification to renege on obligations. The Court
expounded:
Also, we cannot generalize that the Asian financial crisis in 1997 was
unforeseeable and beyond the control of a business corporation. It is
unfortunate that petitioner apparently met with considerable difficulty
e.g. increase cost of materials and labor, even before the scheduled
commencement of its real estate project as early as 1995. However, a
real estate enterprise engaged in the pre-selling of condominium units
is concededly a master in projections on commodities and currency
movements and business risks. The fluctuating movement of the
Philippine peso in the foreign exchange market is an everyday
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occurrence, and fluctuations in currency exchange rates happen
everyday, thus, not an instance of caso fortuito.
ii. Act of creditor
Mindanao Terminal vs. Phoenix Assurance, G.R. No. 162467, 8 May 2009
 What is the degree of diligence required of a stevedoring company?
Article 1173 of the Civil Code is very clear that if the law or contract does not
state the degree of diligence which is to be observed in the performance of an
obligation then that which is expected of a good father of a family or ordinary
diligence shall be required. Mindanao Terminal, a stevedoring company which
was charged with the loading and stowing the cargoes of Del Monte Produce
aboard M/V Mistrau, had acted merely as a labor provider in the case at bar.
There is no specific provision of law that imposes a higher degree of diligence
than ordinary diligence for a stevedoring company or one who is charged only
with the loading and stowing of cargoes. It was neither alleged nor proven by
Phoenix and McGee that Mindanao Terminal was bound by contractual
stipulation to observe a higher degree of diligence than that required of a good
father of a family. We therefore conclude that following Article 1173,
Mindanao Terminal was required to observe ordinary diligence only in
loading and stowing the cargoes of Del Monte Produce aboard M/V
Mistrau.
 What is the degree of diligence required of an arrastre operator?
The case of Summa Insurance Corporation v. CA, which involved the issue of
whether an arrastre operator is legally liable for the loss of a shipment in its
custody and the extent of its liability, is inapplicable to the factual circumstances
of the case at bar. Therein, a vessel owned by the National Galleon Shipping
Corporation (NGSC) arrived at Pier 3, South Harbor, Manila, carrying a
shipment consigned to the order of Caterpillar Far East Ltd. with Semirara Coal
Corporation (Semirara) as "notify party." The shipment, including a bundle of
PC 8 U blades, was discharged from the vessel to the custody of the private
respondent, the exclusive arrastre operator at the South Harbor. Accordingly,
three good-order cargo receipts were issued by NGSC, duly signed by the ship's
checker and a representative of private respondent. When Semirara inspected
the shipment at house, it discovered that the bundle of PC8U blades was
missing. From those facts, the Court observed:
x x x The relationship therefore between the consignee and the

arrastre operator must be examined. This relationship is much akin
to that existing between the consignee or owner of shipped goods
and the common carrier, or that between a depositor and a
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warehouseman. In the performance of its obligations, an arrastre
operator should observe the same degree of diligence as that
required of a common carrier and a warehouseman as enunciated
under Article 1733 of the Civil Code and Section 3(b) of the
Warehouse Receipts Law, respectively. Being the custodian of the
goods discharged from a vessel, an arrastre operator's duty is to
take good care of the goods and to turn them over to the party
entitled to their possession. (Emphasis supplied)
There is a distinction between an arrastre and a stevedore. Arrastre, a Spanish

word which refers to hauling of cargo, comprehends the handling of cargo on
the wharf or between the establishment of the consignee or shipper and the
ship's tackle. The responsibility of the arrastre operator lasts until the delivery of
the cargo to the consignee. The service is usually performed by longshoremen.
On the other hand, stevedoring refers to the handling of the cargo in the holds
of the vessel or between the ship's tackle and the holds of the vessel. The
responsibility of the stevedore ends upon the loading and stowing of the cargo
in the vessel.
 What is the rationale for the difference?
In the present case, Mindanao Terminal, as a stevedore, was only charged with
the loading and stowing of the cargoes from the pier to the ship’s cargo hold; it
was never the custodian of the shipment of Del Monte Produce. A stevedore is
not a common carrier for it does not transport goods or passengers; it is not
akin to a warehouseman for it does not store goods for profit. The loading and
stowing of cargoes would not have a far reaching public ramification as that of a
common carrier and a warehouseman; the public is adequately protected by our
laws on contract and on quasi-delict. The public policy considerations in legally
imposing upon a common carrier or a warehouseman a higher degree of
diligence is not present in a stevedoring outfit which mainly provides labor in
loading and stowing of cargoes for its clients.
 Was there negligence?
RULING: NO.
Phoenix and McGee failed to prove by preponderance of evidence that

Mindanao Terminal had acted negligently. Where the evidence on an issue
of fact is in equipoise or there is any doubt on which side the evidence
preponderates the party having the burden of proof fails upon that issue. That is
to say, if the evidence touching a disputed fact is equally balanced, or if it does
not produce a just, rational belief of its existence, or if it leaves the mind in a
state of perplexity, the party holding the affirmative as to such fact must fail.
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It was not disputed by Phoenix and McGee that the materials, such as ropes,
pallets, and cardboards, used in lashing and rigging the cargoes were all provided
by M/V Mistrau and these materials meets industry standard.
It was further established that Mindanao Terminal loaded and stowed the
cargoes of Del Monte Produce aboard the M/V Mistrau in accordance
with the stowage plan, a guide for the area assignments of the goods in
the vessel’s hold, prepared by Del Monte Produce and the officers of M/V
Mistrau. The loading and stowing was done under the direction and supervision
of the ship officers. The vessel’s officer would order the closing of the hatches
only if the loading was done correctly after a final inspection. The said ship
officers would not have accepted the cargoes on board the vessel if they were
not properly arranged and tightly secured to withstand the voyage in open seas.
They would order the stevedore to rectify any error in its loading and stowing. A
foreman’s report, as proof of work done on board the vessel, was prepared by
the checkers of Mindanao Terminal and concurred in by the Chief Officer
of M/V Mistrau after they were satisfied that the cargoes were properly loaded.
Jimenez vs. City of Manila, 150 SCRA 510
 Can the City of Manila be held liable for the injuries sustained by
Petitioner?
This issue has been laid to rest in the case of City of Manila v. Teotico (22 SCRA
269-272 [1968]) where the Supreme Court squarely ruled that Republic Act No.
409 establishes a general rule regulating the liability of the City of Manila for
"damages or injury to persons or property arising from the failure of city
officers" to enforce the provisions of said Act, "or any other law or ordinance or
from negligence" of the City "Mayor, Municipal Board, or other officers while
enforcing or attempting to enforce said provisions."
Upon the other hand, Article 2189 of the Civil Code of the Philippines
constitutes a particular prescription making "provinces, cities and municipalities
... liable for damages for the death of, or injury suffered by any person by
reason" — specifically — "of the defective condition of roads, streets, bridges,
public buildings, and other public works under their control or supervision."
In other words, Art. 1, sec. 4, R.A. No. 409 refers to liability arising from
negligence, in general, regardless of the object, thereof, while Article 2189 of the
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Civil Code governs liability due to "defective streets, public buildings and other
public works" in particular and is therefore decisive on this specific case.
In the same suit, the Supreme Court clarified further that under Article 2189 of
the Civil Code, it is not necessary for the liability therein established to attach,
that the defective public works belong to the province, city or municipality from
which responsibility is exacted. What said article requires is that the province,
city or municipality has either "control or supervision" over the public building
in question.
In the case at bar, there is no question that the Sta. Ana Public Market, despite
the Management and Operating Contract between respondent City and Asiatic
Integrated Corporation remained under the control of the former.
 Was there negligence?
RULING: Yes.
As a defense against liability on the basis of a quasi-delict, one must have

exercised the diligence of a good father of a family. (Art. 1173 of the Civil
Code).
There is no argument that it is the duty of the City of Manila to exercise

reasonable care to keep the public market reasonably safe for people frequenting
the place for their marketing needs.
While it may be conceded that the fulfillment of such duties is extremely difficult
during storms and floods, it must however, be admitted that ordinary
precautions could have been taken during good weather to minimize the dangers
to life and limb under those difficult circumstances.
For instance, the drainage hole could have been placed under the stalls instead
of on the passage ways. Even more important is the fact, that the City should
have seen to it that the openings were covered. Sadly, the evidence indicates that
long before petitioner fell into the opening, it was already uncovered, and five
(5) months after the incident happened, the opening was still uncovered. (Rollo,
pp. 57; 59). Moreover, while there are findings that during floods the vendors
remove the iron grills to hasten the flow of water (Decision, AC-G.R. CV No. 0
1387; Rollo, p. 17), there is no showing that such practice has ever been
prohibited, much less penalized by the City of Manila. Neither was it shown that
any sign had been placed thereabouts to warn passersby of the impending
danger.
To recapitulate, it appears evident that the City of Manila is likewise liable for
damages under Article 2189 of the Civil Code, respondent City having retained
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control and supervision over the Sta. Ana Public Market and as tort-feasor under
Article 2176 of the Civil Code on quasi-delicts
Petitioner had the right to assume that there were no openings in the middle of
the passageways and if any, that they were adequately covered. Had the opening
been covered, petitioner could not have fallen into it. Thus the negligence of the
City of Manila is the proximate cause of the injury suffered, the City is therefore
liable for the injury suffered by the petitioner.
Respondent City of Manila and Asiatic Integrated Corporation being joint tort-
feasors are solidarily liable under Article 2194 of the Civil Code
Gilat Satellite Networks, Ltd. vs. UCPB, G.R. No. 189563, 7 April 2014
 What is the nature of Suretyship?
First, we have held in Stronghold Insurance Co. Inc. v. Tokyu Construction Co.
Ltd.,38 that "[the] acceptance [of a surety agreement], however, does not change
in any material way the creditor’s relationship with the principal debtor nor does
it make the surety an active party to the principal creditor-debtor relationship. In
other words, the acceptance does not give the surety the right to intervene in the
principal contract. The surety’s role arises only upon the debtor’s default, at
which time, it can be directly held liable by the creditor for payment as a solidary
obligor." Hence, the surety remains a stranger to the Purchase Agreement. We
agree with petitioner that respondent cannot invoke in its favor the arbitration
clause in the Purchase Agreement, because it is not a party to that contract.39 An
arbitration agreement being contractual in nature,40 it is binding only on the
parties thereto, as well as their assigns and heirs.41
Second, Section 24 of Republic Act No. 928542 is clear in stating that a referral to
arbitration may only take place "if at least one party so requests not later than
the pre-trial conference, or upon the request of both parties thereafter."
Respondent has not presented even an iota of evidence to show that either
petitioner or One Virtual submitted its contesting claim for arbitration.
Third, sureties do not insure the solvency of the debtor, but rather the debt
itself.43 They are contracted precisely to mitigate risks of non-performance on
the part of the obligor. This responsibility necessarily places a surety on the same
level as that of the principal debtor.44 The effect is that the creditor is given the
right to directly proceed against either principal debtor or surety. This is the
reason why excussion cannot be invoked.45 To require the creditor to proceed to
arbitration would render the very essence of suretyship nugatory and diminish its
value in commerce. At any rate, as we have held in Palmares v. Court of
Appeals,46 "if the surety is dissatisfied with the degree of activity displayed by the
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creditor in the pursuit of his principal, he may pay the debt himself and become
subrogated to all the rights and remedies of the creditor."
 Was there an inexcusable delay in the performance of the obligation?
Article 2209 of the Civil Code is clear: "[i]f an obligation consists in the payment
of a sum of money, and the debtor incurs a delay, the indemnity for damages,
there being no stipulation to the contrary, shall be the payment of the interest
agreed upon, and in the absence of stipulation, the legal interest."
Delay arises from the time the obligee judicially or extrajudicially demands from
the obligor the performance of the obligation, and the latter fails to
comply.50 Delay, as used in Article 1169, is synonymous with default or mora,
which means delay in the fulfilment of obligations.51 It is the nonfulfillment of
an obligation with respect to time.52 In order for the debtor (in this case, the
surety) to be in default, it is necessary that the following requisites be present: (1)
that the obligation be demandable and already liquidated; (2) that the debtor
delays performance; and (3) that the creditor requires the performance judicially
or extrajudicially.53
Having held that a surety upon demand fails to pay, it can be held liable for
interest, even if in thus paying, its liability becomes more than the principal
obligation.54 The increased liability is not because of the contract, but because of
the default and the necessity of judicial collection.55
However, for delay to merit interest, it must be inexcusable in nature. In Guanio

v. Makati-Shangri-la Hotel,56 citing RCPI v. Verchez,57 we held thus:
In culpa contractual x x x the mere proof of the existence of the contract and
the failure of its compliance justify, prima facie, a corresponding right of relief.
The law, recognizing the obligatory force of contracts, will not permit a party to
be set free from liability for any kind of misperformance of the contractual
undertaking or a contravention of the tenor thereof. A breach upon the contract
confers upon the injured party a valid cause for recovering that which may have
been lost or suffered. The remedy serves to preserve the interests of the
promissee that may include his "expectation interest," which is his interest in
having the benefit of his bargain by being put in as good a position as he would
have been in had the contract been performed, or his "reliance interest," which
is his interest in being reimbursed for loss caused by reliance on the contract by
being put in as good a position as he would have been in had the contract not
been made; or his "restitution interest," which is his interest in having restored
to him any benefit that he has conferred on the other party. Indeed, agreements
can accomplish little, either for their makers or for society, unless they are made
the basis for action. The effect of every infraction is to create a new duty, that is,
to make RECOMPENSE to the one who has been injured by the failure of
another to observe his contractual obligation unless he can show extenuating
circumstances, like proof of his exercise of due diligence x x x or of the
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attendance of fortuitous event, to excuse him from his ensuing liability.
(Emphasis ours)
We agree with petitioner that records are bereft of proof to show that
respondent’s delay was indeed justified by the circumstances – that is, One
Virtual’s advice regarding petitioner’s alleged breach of obligations. The lower
court’s Decision itself belied this contention when it said that "plaintiff is not
disputing that it did not complete commissioning work on one of the two
systems because One Virtual at that time is already in default and has not paid
GILAT." Assuming arguendo that the commissioning work was not completed,
respondent has no one to blame but its principal, One Virtual; if only it had paid
its obligation on time, petitioner would not have been forced to stop operations.
Moreover, the deposition of Mr. Erez Antebi, vice president of Gilat, repeatedly
stated that petitioner had delivered all equipment, including the licensed
software; and that the equipment had been installed and in fact, gone into
operation. Notwithstanding these compliances, respondent still failed to pay.
 When interest must accrue?
As to the issue of when interest must accrue, our Civil Code is explicit in stating
that it accrues from the time judicial or extrajudicial demand is made on the
surety. This ruling is in accordance with the provisions of Article 1169 of the
Civil Code and of the settled rule that where there has been an extra-judicial
demand before an action for performance was filed, interest on the amount due
begins to run, not from the date of the filing of the complaint, but from the date
of that extra-judicial demand.60 Considering that respondent failed to pay its
obligation on 30 May 2000 in accordance with the Purchase Agreement, and that
the extrajudicial demand of petitioner was sent on 5 June 2000,61 we agree with
the latter that interest must start to run from the time petitioner sent its first
demand letter (5 June 2000), because the obligation was already due and
demandable at that time.
 What is the interest rate?
With regard to the interest rate to be imposed, we take cue from Nacar v.
Gallery Frames, which modified the guidelines established in Eastern Shipping
Lines v. CA, in relation to Bangko Sentral-Monetary Board Circular No. 799
(Series of 2013), to wit:
1. When the obligation is breached, and it consists in the payment of a

sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing. Furthermore,
the interest due shall itself earn legal interest from the time it is judicially
demanded.1âwphi1In the absence of stipulation, the rate of interest shall
be 6% per annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of Article 1169
of the Civil Code.
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xxxx
3. When the judgment of the court awarding a sum of money becomes

final and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 6% per annum from such
finality until its satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit.
Applying the above-discussed concepts and in the absence of an agreement as to

interests, we are hereby compelled to award petitioner legal interest at the rate of
6% per annum from 5 June 2000, its first date of extra judicial demand, until the
satisfaction of the debt in accordance with the revised guidelines enunciated in
Nacar.
Rivera vs. Sps. Chua, G.R. No. 184458, 14 January 2015
 Was there delay in the performance of the obligation?
The Promissory Note is unequivocal about the date when the obligation falls
due and becomes demandable—31 December 1995. As of 1 January 1996,
Rivera had already incurred in delay when he failed to pay the amount of
₱120,000.00 due to the Spouses Chua on 31 December 1995 under the
Promissory Note.
The date of default under the Promissory Note is 1 January 1996, the day
following 31 December 1995, the due date of the obligation. On that date,
Rivera became liable for the stipulated interest which the Promissory Note says
is equivalent to 5% a month. In sum, until 31 December 1995, demand was not
necessary before Rivera could be held liable for the principal amount of
₱120,000.00. Thereafter, on 1 January 1996, upon default, Rivera became liable
to pay the Spouses Chua damages, in the form of stipulated interest.
The liability for damages of those who default, including those who are guilty of
delay, in the performance of their obligations is laid down on Article 117024 of
the Civil Code.
Corollary thereto, Article 2209 solidifies the consequence of payment of interest

as an indemnity for damages when the obligor incurs in delay:
Art. 2209. If the obligation consists inthe payment of a sum of money, and the
debtor incurs in delay, the indemnity for damages, there being no stipulation to
the contrary, shall be the payment of the interest agreed upon, and in the
absence of stipulation, the legal interest, which is six percent per annum.
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Article 2209 is specifically applicable in this instance where: (1) the obligation is
for a sum of money; (2) the debtor, Rivera, incurred in delay when he failed to
pay on or before 31 December 1995; and (3) the Promissory Note provides for
an indemnity for damages upon default of Rivera which is the payment of a
5%monthly interest from the date of default.
Solar Harvest Inc. vs. Davao Corrugated Carton, Corp., G.R. No. 176868, 26
July 2010
 Was there a substantial breach of contract to merit a rescission?
Petitioner's claim for reimbursement is actually one for rescission (or resolution)
of contract under Article 1191 of the Civil Code. The right to rescind a contract
arises once the other party defaults in the performance of his obligation. In
determining when default occurs, Art. 1191 should be taken in conjunction with
Art. 1169.
In reciprocal obligations, as in a contract of sale, the general rule is that

the fulfillment of the parties' respective obligations should be
simultaneous. Hence, no demand is generally necessary because, once a
party fulfills his obligation and the other party does not fulfill his, the
latter automatically incurs in delay. But when different dates for
performance of the obligations are fixed, the default for each obligation
must be determined by the rules given in the first paragraph of the
present article, that is, the other party would incur in delay only from the
moment the other party demands fulfillment of the former's obligation.
Thus, even in reciprocal obligations, if the period for the fulfillment of the
obligation is fixed, demand upon the obligee is still necessary before the
obligor can be considered in default and before a cause of action for
rescission will accrue.
Evident from the records and even from the allegations in the complaint was the
lack of demand by petitioner upon respondent to fulfill its obligation to
manufacture and deliver the boxes. The Complaint only alleged that petitioner
made a "follow-up" upon respondent, which, however, would not qualify as a
demand for the fulfillment of the obligation. Petitioner's witness also testified
that they made a follow-up of the boxes, but not a demand. Note is taken of the
fact that, with respect to their claim for reimbursement, the Complaint alleged
and the witness testified that a demand letter was sent to respondent. Without a
previous demand for the fulfillment of the obligation, petitioner would not have
a cause of action for rescission against respondent as the latter would not yet be
considered in breach of its contractual obligation.
Even assuming that a demand had been previously made before filing the
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present case, petitioner's claim for reimbursement would still fail, as the
circumstances would show that respondent was not guilty of breach of contract.
As correctly observed by the CA, aside from the pictures of the finished boxes
and the production report thereof, there is ample showing that the boxes had
already been manufactured by respondent. There is the testimony of Estanislao
who accompanied Que to the factory, attesting that, during their first visit to the
company, they saw the pile of petitioner's boxes and Que took samples thereof.
Que, petitioner's witness, himself confirmed this incident. He testified that Tan
pointed the boxes to him and that he got a sample and saw that it was blank.
Que's absolute assertion that the boxes were not manufactured is, therefore,
implausible and suspicious.
In fact, we note that respondent's counsel manifested in court, during trial, that
his client was willing to shoulder expenses for a representative of the court to
visit the plant and see the boxes. Had it been true that the boxes were not yet
completed, respondent would not have been so bold as to challenge the court to
conduct an ocular inspection of their warehouse. Even in its Comment to this
petition, respondent prays that petitioner be ordered to remove the boxes from
its factory site,which could only mean that the boxes are, up to the present, still
in respondent's premises.
We also believe that the agreement between the parties was for petitioner to pick
up the boxes from respondent's warehouse, contrary to petitioner's allegation.
Thus, it was due to petitioner's fault that the boxes were not delivered to
TADECO.
Petitioner had the burden to prove that the agreement was, in fact, for
respondent to deliver the boxes within 30 days from payment, as alleged in the
Complaint. Its sole witness, Que, was not even competent to testify on the terms
of the agreement and, therefore, we cannot give much credence to his
testimony. It appeared from the testimony of Que that he did not personally
place the order with Tan
Agcaoili vs. GSIS, 165 SCRA 1
There was then a perfected contract of sale between the parties; there had been a
meeting of the minds upon the purchase by Agcaoili of a determinate house and
lot in the GSIS Housing Project at Nangka Marikina, Rizal at a definite price
payable in amortizations at P31.56 per month, and from that moment the parties
acquired the right to reciprocally demand performance. 13 It was, to be sure, the
duty of the GSIS, as seller, to deliver the thing sold in a condition suitable for its
enjoyment by the buyer for the purpose contemplated ,14 in other words, to
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deliver the house subject of the contract in a reasonably livable state. This it
failed to do.
It sold a house to Agcaoili, and required him to immediately occupy it under

pain of cancellation of the sale. Under the circumstances there can hardly be any
doubt that the house contemplated was one that could be occupied for purposes
of residence in reasonable comfort and convenience. There would be no sense
to require the awardee to immediately occupy and live in a shell of a house, a
structure consisting only of four walls with openings, and a roof, and to theorize,
as the GSIS does, that this was what was intended by the parties, since the
contract did not clearly impose upon it the obligation to deliver a habitable house,
is to advocate an absurdity, the creation of an unfair situation. By any objective
interpretation of its terms, the contract can only be understood as imposing on
the GSIS an obligation to deliver to Agcaoili a reasonably habitable dwelling in
return for his undertaking to pay the stipulated price. Since GSIS did not fulfill
that obligation, and was not willing to put the house in habitable state, it cannot
invoke Agcaoili's suspension of payment of amortizations as cause to cancel the
contract between them. It is axiomatic that "(i)n 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."15
Nor may the GSIS succeed in justifying its cancellation of the award to Agcaoili
by the claim that the latter had not complied with the condition of occupying the
house within three (3) days. The record shows that Agcaoili did try to fulfill the
condition; he did try to occupy the house but found it to be so uninhabitable
that he had to leave it the following day. He did however leave a friend in the
structure, who being homeless and hence willing to accept shelter even of the
most rudimentary sort, agreed to stay therein and look after it. Thus the
argument that Agcaoili breached the agreement by failing to occupy the house,
and by allowing another person to stay in it without the consent of the GSIS,
must be rejected as devoid of merit.
Finally, the GSIS should not be heard to say that the agreement between it and
Agcaoili is silent, or imprecise as to its exact prestation Blame for the
imprecision cannot be imputed to Agcaoili; it was after all the GSIS which
caused the contract to come into being by its written acceptance of Agcaoili's
offer to purchase, that offer being contained in a printed form supplied by the
GSIS. Said appellant having caused the ambiguity of which it would now make
capital, the question of interpretation arising therefrom, should be resolved
against it
V. EXTINGUISHMENT OF OBLIGATION
I. Payment
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1. In order for payment to produce all its effect, the following requisites must
concur:
a. PAYOR – the party who pays
i. Article 1239 - Payor must be (1) capacitated and (2) have the free disposal of the
thing due. Thus, minor (incapacitated) and those suffering the penalty of civil
interdiction cannot make a valid payment.
ii. Payment by a 3rd person
GR. The Creditor cannot be compelled to accept payment from a 3rd

person.
 When is the creditor bound to accept payment from a 3rd person?
(1) When there is stipulation

(2) When the 3rd party payor has an interest in the fulfillment of the obligation –
Article 1236
 Who are these persons who have intertest in the fulfillment of the
obligation?
Those that are subsidiarily liable such as guarantors and mortgagors
 What are the rights of the 3rd party payor?
(1) Right to be reimbursed (Article 1236, 2nd par)
 To what extent?
a. Full amount – if debtor consented

b. In so far as the payment has been beneficial to the debtor – if the
debtor has no knowledge or against the debtor’s will
(2) Right to be subrogated (Article 1237) – if
a. Article 1302 (2) – no interest, but the debtor consented

b. Article 1302 (3) – with interest, even if the debtor has no knowledge
or against the debtor’s will
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NOTE: There is no legal subrogation if a person who has no interest
paid the obligation without the debtor’s knowledge or against the
debtor’s will.
A's obligation to B in the amount of P100,000 is secured by the guaranty of C and a

security agreement over the property of D. When A failed to pay B upon maturity, F,
without the knowledge and consent of A, offered to pay A's obligation to B. Can F
compel B to accept payment coming from him?
No, the creditor is not bound to accept payment by a third person who has no interest in
the fulfillment of the obligation, unless there is a stipulation to the contrary (Art. 1236,
par. 1). Since there is no stipulation allowing F to make the payment, he cannot compel
B to accept payment coming from him.
Assuming B accepted the payment offered by F in the amount of P100,000. Is F entitled

to reimbursement from A? If so, to what extent?
Yes, a third person who pays the obligation of the debtor without the knowledge and
consent of the latter is still entitled to reimbursement from the latter but only up to the
extent that such payment has been beneficial to the latter (Art. 1236, par. 2). In this case,
the entire payment of F is beneficial to the debtor A, which entitles F to a full
reimbursement.
Will F be entitled to go after C or to foreclose the security if A turns out to be insolvent?
No, because there is no legal subrogation when third person, not interested in the
obligation, pays without the express or tacit approval of the debtor (Art. 1302 [2]).
Hence, F cannot exercise the rights of the creditor against third persons, such as
guarantors or possessors of mortgages (Art. 1303).
What if after F's payment was accepted by B, the latter also accepted payment from A
in the amount of P100,000, who paid without knowledge of F's earlier payment. Is F
entitled to reimbursement from A? Can A be compelled to reimburse F?
F is still entitled to reimbursement because the payment made by F had already

extinguished the obligation of A. The law recognizes the extinguishment of the debtor's
obligation because the remedy of the third person is not to recover the payment from
the creditor but to seek reimbursement from the debtor (Art. 1236, par. 2).
What is the remedy and who is required to exercise it?
The previous payment made by F had already extinguished the obligation of A. Thus,
when A paid B without knowledge that his obligation was already extinguished, the same
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is a case of a payment by mistake which entitles A to recover the payment from B. From
the foregoing, it is A who must recover the undue payment from B under the principle
of solutio indebiti in order to prevent unjust enrichment.
What if it was C who offered to pay A’s debt to B. Can C compel B to accept payment
coming from him?
Yes. See Article 1236
If C paid A's debt to B, without the knowledge and consent of A and after the payment
A turns out to be insolvent, will C be entitled to foreclose the security over the personal
property of D?
Yes. See Article 1302, cf. 1303
b. PAYEE – who receives the payment
GR: Payment must be made to those mentioned in Article 1240.
 Who are those mentioned in Article 1240?
 What is the effect if payment was made to a person who is not one of those
mentioned in Article 1240?
The payment is invalid and it will not extinguish the obligation. The debtor may be
compelled to pay again.
 What is the remedy of the payor against the person to whom he wrongfully
paid?
To recover from the payee under solution indebiti.
ER - Where a payment made to a wrong person is exceptionally considered valid
(i) When the payment redounded to the benefit of the creditor (Art. 1241);
(ii) When the payment is made to a possessor of the credit in good faith (Art. 1242);
and
(iii) When payment is made after the assignment of the credit, but the debtor has no
knowledge of such assignment (Art. 1626).
Creditor C assigned his right under the promissory note to A, without the
knowledge and consent of debtor D. After the assignment, D paid C his entire
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indebtedness, which payment was accepted by latter. After D's payment to C, A
also demanded payment from D. Can A compel D to pay again? In this
situation, what is the remedy of A?
No, because D's obligation was already extinguished. The law provides that when
the debtor, having no knowledge of the assignment of the credit, pays his
obligation to the creditor, he will be released from the obligation (Article 1626).
Thus, A cannot compel D to pay again. The remedy of A is to recover from C
under the principle of in rem verso in order to prevent unjust enrichment.
Debtor D executed a promissory note payable to his creditor C or to the order of

the latter. Unknown to D and C, T stole the promissory note from C, forged the
signature of the latter in the endorsement and demanded payment from D.
Without any inquiry, D paid T. Is D's obligation to C already extinguished?
No, because he paid the obligation to the wrong person. The payment to T did
not extinguish the obligation because the latter is neither the creditor, nor
authorized by the creditor to collect, nor a successor in interest of the creditor,
nor a possessor of the credit. Moreover, there was no payment in good faith in
the instant case, hence, Article 1242 is inapplicable. In the given situation, D paid
T without any inquiry as to how the latter came into possession of the
promissory note.
c. THING/PRESTATION INVOLVED
See Article 1233 – Article 1233 states two requisites of payment - Identity and Integrity
i. Integrity
Explain the element of payment known as integrity of payment.
The payment, in order to extinguish the obligation, must be complete and

regular. The prestation must be fulfilled completely.
Cf. Article 1248 – The creditor cannot be compelled to receive partial

performance; neither the debtor may be required to make partial payments.
What are the exceptions?
- If the obligation has been substantially performed in good faith (Art.

1234)
- If the creditor intentionally waives the right to the balance or remainder
of the obligation (Art. 1235)
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"A" is indebted to "B" in the amount of P100,000. Upon maturity, A tendered
the sum of P90,000 to B, which the latter accepted without objection. Two
weeks after, B demanded for the payment of the balance. A refused to pay on
the ground that his obligation was totally extinguished when B accepted the
incomplete payment without objection. Is A correct?
No, A is not correct. While a creditor may not be compelled to accept

incomplete performance, nothing prevents the creditor from accepting the same
(Art. 1248). The acceptance of incomplete performance does not necessarily
extinguish the obligation unless the creditor intentionally waives the remainder
of the obligation. Such intention may not be inferred from mere silence in
accepting an incomplete performance.
ii. Identity
What is the element of payment known as identity?
In order for the payment to be valid, the very thing due must be delivered or
rendered.
Cf. Article 1244, 1246, and 1249
d. TIME, PLACE, MANNER
Time – stipulated period

Place – Article 1248
Manner – Article 1233, 1234, 1235, 1243, 1247
2. SPECIAL FORM OF PAYMENT
a. Dation in payment – Article 1245
 What is the extent of extinguishment? Does it totally extinguish the

obligation?
b. Application of Payment
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D owes C three debts in the following amounts: (1) P200,000, unsecured debt
and without interest: (2) P400,000, unsecured but with interest; and (3)
P900,000 secured by a real mortgage and with interest. When all debts became
due, D paid C the sum of P1 Million. At the time of payment, D did not tell
where to apply the payments. C, however, issued a receipt with the following
application of payments: (1) P200,000 to loan number 1: (2) P300,000 to loan
number 2; and (3) P500,000 to loan number 3. D refused to accept the receipt
and instructed C to apply the payment to loan number 3 and loan number 2. C
refused and insisted on the application of payment that he made. Who is correct
between the two?
See Article 1252
1st par. – the law grants the debtor preferential right to decide how to apply the
payment or how should the payment be applied. But the right must be exercised
at the time of payment
3rd par. – if debtor does not exercise the right granted to him in the 1st par., the
creditor may exercise such right by indicating in the receipt the application of
payment, subject to the approval/acceptance of the debtor.
NOTE: Be mindful of the limitations provided in Articles 1248, 1252 (2nd

par.) and Article 1253 in the exercise of such right.
In the above problem, how must the payment be applied?
Since the debtor did not make the application of payment and he also did not
accept the creditor's proposal on how the payment is to be applied, the
application of payment shall now be in pursuant to the provision of law. See
Article 1254
c. Payment by Cession
There are two kinds:
(1) Voluntary – Article 1255 of the New Civil Code

(2) Judicial – Insolvency Law
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 What are the differences between dacion en pago and cession?
Dacion en pago Cession

it does not require plurality of there must be plurality of creditors
creditors
the debtor must not be the debtor must be in a state of insolvency or at
insolvent, otherwise the dacion the very least in financial difficulties
is considered in fraud of other
creditors
specific property or properties all properties of the debtor are involved
of the debtor is/are involved
ownership is transferred to the there is no transfer of ownership to the
creditor upon delivery creditors upon delivery
the obligation of the debtor is the obligation of the debtor is not extinguished
extinguished upon delivery upon delivery but only upon satisfaction of the
various credits out of the proceeds of the sale
of the properties.
NOTE:
GR: Properties that are exempt from execution are not covered by cession.
ER: If the debtor waives such exemption
 How are the proceeds distributed?
(1) By stipulation
(2) Preference of credit
d. Tender of Payment and Consignation
 What is tender of payment?
The manifestation made by the debtor to the creditor of his or her desire to
comply with his or her obligation with the offer of immediate performance.
 What is consignation?
The deposit of the object of the obligation in a competent court, in accordance

with the rules, after the tender of payment has been refused or because of
circumstances which render direct payment to the creditor impossible or
inadvisable.
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 What are the requisites of consignation?
(1) There must be a debt due

(2) The consignation was made because of some legal cause provided under
Article 1256
(3) That previous notice of the consignation has been given to the persons
interested in the performance of the obligation (1st Notice) – See Article
1257
(4) The amount or thing due must be placed at the disposal of the proper
court
(5) That after the consignation had been made, the persons interested were
notified thereof (2nd Notice) – See Article 1258
 What is the effect if the 2-Notice Rule has not been complied with?
See Soco vs. Militante, 123 SCRA 160, Valdellon vs. Tengco, 141 SCRA 321
 Does tender of payment extinguish the obligation?
No. Tender of payment is just the preparatory act that precedes consignation. It
is the consignation which constitutes a form of payment.
When his obligation to C became due and demandable, D made a tender of

payment to C but the latter refused to accept the payment because he still
wanted to earn interest. When six months passed without any payment coming
from D, C filed an action for collection of the debt, in addition to recovery of
monetary and compensatory interest? Is D liable to pay both monetary and
compensatory interests?
As to compensatory interest, D is not liable to pay the same because he was

not in mora solvendi. On the contrary, it was the creditor who was in mora accipiendi,
for unjustly refusing the payment. As to monetary interest, however, the debtor
is still liable; otherwise, the debtor will be unjustly enriching himself at the
expense of the creditor. It must be noted that after D made a tender of payment,
and the same was refused by C, the former did not consign the payment in court
but chose to retain it.
NOTE: When a tender of payment is not accompanied by the means of

payment, and the debtor did not take immediate step to make a consignation, the
accrual of interest on the obligation is NOT suspended.
 Who shall bear the expenses of consignation?
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See Article 1259 – If properly made, the expenses shall be chargeable
against the creditor
 When is consignation deemed properly made?
(1) When after the thing has been deposited in court, the creditor accepts the
consignation without any objection or reservation of his right to contest it
because of failure to comply with any of the requisites for consignation
(2) When the creditor objects to the consignation but court after proper
hearing declares the consignation has been validly made
 When does consignation take effect?
The consignation has a retroactive effect, and the payment is deemed to have
been made at the time of the deposit of the thing in court, or when it was
placed at the disposal of the judicial authority.
 What are the effects of consignation?
(1) The debtor is released in the same manner as if he had performed the
obligation at the time of the consignation, because it produces the same
effect as a valid payment
(2) The accrual of interest is suspended from the moment of consignation
(3) The deterioration or loss of the thing or amount consigned occurring
with the fault of the debtor must be borne by the creditor, because the
risks of the thing are transferred to the creditor from the moment of
deposit
(4) Any increment or increase in value of the thing after the consignation
inures to the creditor
 In consignation, after depositing the payment in court, may the debtor still
withdraw the deposit as a matter of right? If yes, in what situation?
The debtor can still withdraw the deposit as a matter of right (1) before
the creditor accepts the deposit as full satisfaction of the indebtedness, or
(2) before the court declares the consignation to be valid. (Article 1260)
Basis: The debtor is still the owner
 May the co-debtors, guarantors and sureties, who would have benefited by
the consignation, oppose the withdrawal of the thing or amount deposited?
No. Go figure why 😉
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 If the creditor allows the withdrawal of the deposit by the debtor after the
court declared the consignation to be valid, what will be its effect?
(1) The obligation of the debtor is revived; and

(2) The creditor will lose his or her preference over the thing
(3) The co-debtors*, guarantors and sureties are released from their
obligation. (Art. 1261).
* The withdrawal of the consignation releases the solidary co-debtor only

from his/her solidary liability for the share of the others, but not from
the liability from his/her own share.
NOTE:
(1) GR: Tender of payment is required before consignation.
ER: See Article 1256, 2nd par. – enumerates the circumstance wherein tender
of payment is no longer required prior consignation. A consignation case
may be filed right away.
(2) Consignation in not proper if there is no debt due.
(3) Once the thing or money has been deposited in court, it is in custodia
legis, and therefore exempt from attachment and execution.
II. Loss of the thing due or impossibility of performance
Definition – The thing is lost when it perishes, goes out of commerce or disappears in
such a way that its existence is unknown or cannot be recovered.
A borrowed the car of B. He was scheduled to return it last week but failed to do so.
When he was about to return the car and while he was on the road, the heavy crane
machine being used in the construction of the Skyway fell on the car driven by A.
Luckily, A survived but the car was destroyed. Is A liable to B for the value of the car?
No, because the specific thing due is lost without the fault of the debtor, and the latter is
not yet in default. In the given problem, the debtor is not yet in delay because there is no
demand from the creditor. See Article 1262
NOTE:
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(1) Loss may be total or partial - Not imputable to the fault or negligence of the
debtor
 What is the effect of the total loss of the thing due?
In the absence of any stipulation or provision of law, the loss of a determinate thing
without fault of the debtor, and before the debtor is in default extinguishes the
obligation to give (Article 1262); however, the loss of an indeterminate thing does
not extinguish the obligation (Article 1263).
 What is the effect of the partial loss of the thing due?
GR: Partial loss does not extinguish the obligation; the thing should be delivered to
the creditor in its impaired condition, without liability for damages.
ER: But if the portion that is lost is of such extent and nature that the obligation
would not have been constituted without it, the obligation will be extinguished. (See
Article 1264)
(2) The happening of a fortuitous event in itself does not necessarily extinguish an
obligation to deliver a determinate thing. Take note of the instances where the
debtor may still be held liable even if the non-performance of the obligation is due to
fortuitous event. (See Article 1262, cf. Article 1174)
(3) Presumption of fault/negligence under Article 1265?
Applicability of Article 1265: The thing is in the possession of the debtor.

Due to acts of man – There is a presumption that the loss of the thing is due to the
debtor’s fault or negligence. To escape liability, the debtor must show that he or she
is free from negligence
Due to natural calamity - The creditor bears the burden of proof that the loss is
due to the debtor’s fault, or there’s contributory negligence on the part of the debtor.
(4) Impossibility of performance under Article 1266 – Obligation to do
 Distinguish Article 1348 vis-à-vis Article 1266
Under Article 1348, impossibility exists at the time the obligation is constituted,
which renders the contract a nullity. Under Article 1266, impossibility exists at the
time of the performance of the obligation which may result to the extinguishment of
the obligation, depending on whether the same is imputable to the debtor or not.
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(5) Difficulty of prestation (Obligation to do) under Article 1267 – The Doctrine of
the Unforeseen Event
 Explain the doctrine of unforeseen events.
Under the doctrine of unforeseen event, an obligation to do is extinguished if an

unforeseen event will render the performance of the obligation extremely difficult as
to be manifestly beyond the contemplation of the parties.
Requisites for applicability:
i. Event or change in the circumstance that could not have been foreseen
at the time of the execution of the contract – the difficulty must be
beyond the contemplation of the parties
ii. Such event or change in the circumstance makes the performance
extremely difficult but not impossible
iii. Such event or change in circumstance is not due to the act of any of
the parties
iv. The contract concerns a future prestation
NOTE: Difficulty of service authorizes the release of the debtor but does not
authorize the courts to modify or revise the contract.
A is one of the lessees in SM MOA, operating a restaurant. Due to the Wuhan virus
pandemic, A's restaurant was forced to close and A defaulted in the payment of the
monthly rentals. When the management of SM MOA demanded from A payment of the
unpaid rentals, A argued that his obligation to pay rentals was extinguished pursuant
to either Article 1266 or 1267 of the Civil Code. Is A correct?
No, because Articles 1266 and 1267 are applicable only to obligation to do. The
obligation of A to pay rentals is an obligation to give. Hence, it cannot be extinguished
pursuant to Articles 1266 and 1267.
III. Condonation or Remission – Article 1270
Remission or Condonation – an act of liberality by virtue of which, without receiving

any equivalent, the creditor renounces the enforcement of the obligation, which is
extinguished in its entirety or in that part or aspect of the same to which the remission
refers; it is essentially a donation of the credit to the debtor
Kinds of Condonation
1. As to form –
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i. Express – must comply with the forms of ordinary donations; acceptance is
necessary (Articles 745, 746)
a. Movable – Article 748

b. Immovables – Article 749
ii. Implied – Articles 1271, cf. Article 1272; Article 1274, cf. Article 2110.
NOTE: Article 1271 is limited to private document.
2. As to extent –
i. Total
ii. Partial
3. As to manner of remission –
i. Inter vivos
ii. Mortis causa – must be in a will
Requisites of Remission
1. The debt must be existing and demandable at the time the remission is made
2. The renunciation must be done gratuitously, or without any equivalent consideration
3. There must be acceptance on the part of the debtor
D was indebted to C in the amount of P300,000. In a telephone call, C informed A that

he would not collect the sum because he was condoning it but he wanted the
condonation to take effect upon his death. After the telephone conversation, A
immediately drafted a notice of condonation, had it signed by C and he also wrote his
acceptance in the same instrument. In affixing his signature, C wrote that the
condonation shall take effect only upon my death." Three months after, C died. May
the heirs of C collect the loan from D?
Yes, because the condonation is invalid since it was not in the form of a last will and
testament. Since the condonation was intended to be effective upon the death of the
creditor, the same partakes of a legacy of condonation of the debt which must be
embodied in a last will and testament. Since the condonation is not valid, the heirs of the
creditor who inherited the credit may demand for its performance.
To evidence his indebtedness to C in the amount of P100,000, D wrote a promissory

note addressed to C in his own handwriting. After signing the promissory note, he gave
it to C. After a month, C voluntarily returned the promissory note to D without saying
any word. D, in turn, accepted the return of the promissory note. Five months after the
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return of the promissory note. C demanded payment from D. D refused to pay on the
ground that the obligation was already condoned. C contended, however, that such
alleged condonation was invalid for failure to comply with the formalities required by
law. Is C correct?
No, C is not correct because the condonation was made impliedly and did not, therefore,
require compliance with any formality. See Article 1271
D borrowed Php10,000.00 from his father. After he had paid half of his debt, his father
died. When the administrator of his father’s estate requested for the payment of the
balance, D replied that the same has been condoned by his father as evidenced by a
handwritten notation at the back of the check payment for the half of the debt reading:
“In full payment of the loan.” Will this be a valid defense in an action for collection of
sum of money? Assuming the amount of the loan involved in Php1Million. Will your
answer be the same?
See Article 748. Determine the amount involved to know the formalities that must be
complied with.
IV. Confusion or Merger of Rights – Article 1275
V. Compensation
 What is compensation?
See Article 1278
 Kinds of compensation
(1) As to effect – See Article 1281
i. Total (The 2 obligations are of the same amount); or

ii. Partial
(2) As to origin –
i. Conventional - by agreement, which may include debts that are not

yet due (See Article 1282)
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Minimum Requirements:
a. Each of the parties can dispose of the credits he or she seeks to

compensate
b. The parties agree to the mutual extinguishment of their credits.
 When does it take effect? Upon the agreement of the parties.
ii. Facultative – when only one can invoke or claim it, who has the
right to reject it
Example: A owes B a car. On the other hand, B owes A a Ferrari

car. Who can set up compensation?
 When does it take effect? When the creditor communicates his or

her decision to set it up.
iii. Judicial – decreed by Court
 When does it take effect? Upon final judgment.
iv. Legal - by operation of law
 What are the requisites for legal compensation to take place? See
Article 1279, cf. Article 1290
1. Parties are mutually creditors and debtors of each other in their

own right and as principals;
2. Both debts consist of payment of money or if the things due be

consumable (fungible), they be of the same kind and quality, if
the latter is stated;
NOTE:
i. Fungible things refer to things of the same kind which in

payment can be substituted for each other.
ii. For there to be compensation, all that is necessary is that
the specie if the thing is determined.
iii. When the obligations refer to determinate or specific
things, there can be no compensation.
iv. No compensation in reciprocal obligations – otherwise
no one can be compelled to perform the obligation.
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3. Both debts be due;
 Does this mean both obligations must be due at the same

time?
No. It is NOT required that both debts must be due AT THE

SAME TIME. The requirement is that at the time of the
compensation, both debts are already due.
4. Both debts be liquidated and demandable; and
NOTE:
Before a judicial decree of rescission or annulment, a rescissible

or voidable obligation/debt is valid and demandable, hence it can
be a subject of compensation. (Cf. Article 1284)
5. There must be no retention or controversy over either of the

debts, commenced by a third person and communicated in due
time to the debtor.
 When does it take effect? When all the requisites mention in Article
1279 are present, legal compensation takes place (Article 1290)
 Cite at least 3 kinds of debts which may not be the subject

matter of legal compensation?
1. Debt arising from obligation of depositary in contract of

deposit (Art. 1287, 1st par.)
2. Debt arising from the obligation of the bailee in commodatum
(Art. 1287, 1st par.)
3. Claim for support by gratuitous title (Art. 1287, 2nd par.)
4. Debts consisting civil liability arising from a crime (Art. 1288)
 SITUATIONS
1. ALL ELEMENTS ARE PRESENT
D is a depositor of BPI who obtained a loan from the same bank

in the amount of P3 Million. When the loan became due and
demandable, D failed to pay. May BPI set off D's loan
obligation with his deposit account with BPI which currently
has a balance of P5 Million?
Yes, because the parties are creditors and debtors of each other in
their own right and as principals. Under the law, deposits in banks are
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in the nature of simple loan where the relationship between the
parties is that of creditor and debtor, the bank being the debtor and
the depositor being the creditor (Article 1980). Since the parties are
mutually creditors and debtors of each other in their own right and as
principals, the requisites of legal compensation are present.
Instead of opening a savings account, D delivered a sum of
money to the bank for safe keeping in a safety deposit bank.
Can the bank invoke compensation for the debt due? Can D
invoke compensation for the debt due?
1st Question: See Article 1287.

2nd Question: Only the depositary is prohibited by Article 1287. The
depositor may set up compensation. This is an example of a
facultative compensation.
2. AT LEAST ONE OF THE ELEMENTS IS MISSING
Corp. A, a taxpayer owes the government taxes. The government, in

turn, is also indebted to Corporation A. May the two obligations be
the subject matter of legal compensation?
No, because they are not creditors and debtors of each other. Taxes
are not in the nature of ordinary debts that can be the subject matter
of legal compensation. The taxpayer owes the government taxes in
the latter's sovereign capacity and not in its corporate capacity.
X is indebted to Y in a promissory note he executed in favor of the
latter Thereafter, X sold the property of A to Y, in his capacity as the
guardian of his ward. May legal compensation take place with what
X owes to Y and what Y owes to X from the sale?
No, because the parties are not mutually creditors and debtors of each
other in their own right. With respect to what Y owes X, the latter is
the creditor of Y in a representative capacity, in representation of his
ward, and not in his own right. Hence, the requisites of legal
compensation are not present.
G is the guarantor when X borrowed P1,000,000 from Y. Y is also
indebted to G in the amount of P1,000,000. May legal compensation
take place between the two debts?
No, because the parties are not mutually creditors and debtors of each
other as principals. G is a mere guarantor and not the principal debtor
in the debt where Y is the creditor. Hence, the requisites of legal
compensation are not present.
A is indebted to B in the amount of P100,000, evidenced by a

promissory, and payable on March 1, 2021. By virtue of an
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assignment of credit, A became the assignee of another
promissory note in the amount of P100,000 where B was the
debtor, which matured on March 5, 2021. In an action filed by C
against A for quasi delict, A was ordered by the court to pay
damages to in the amount of P100,000. To satisfy the judgment,
a notice of garnishment of A's credit was issued by the court
and received by B last March 4, 2021. Did legal compensation
take place between the debts which A and B owed to each
other?
The answer is NO. See Article 1279 Go figure why😊
 Who can set up legal compensation?
(1) Although legal compensation takes place by operation of law once

all the requisites mentioned in Article 1279 concur, it must be
alleged and proved by the debtor who claims it benefits. Once
proved, its effect shall retroact to the moment when the provided
by law are present.
(2) Under Article 1280, the guarantor may set up compensation as

regards what the creditor may owe the principal debtor.
 May the debtor still invoke compensation even after the

assignment of credit? See Article 1285
NOTE:
1. When the debtor consented to the assignment of credit, without

reservation. The debtor’s consent constitutes as a waiver of the
compensation. (Article 1285, 1st par) – Debtor can no longer
invoke compensation
2. Instances where the debtor can still invoke compensation
i. When the debtor expressly reserves his right to the

compensation. (Article 1285, 1st par)
ii. When the debtor had no knowledge of the assignment or
did not consent to the assignment
ILLUSTRATION:
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D borrowed the amount of Php100K from C, payable on January
1, 2021. In turn, C was indebted to D the following amounts:
30K, due on December 15, 2020; 20K, due on February 15, 2021;
and 10K, due on May 1, 2021. On February 16, 2021, C assigned
his credit to X.
1. How much can C demand from D on December 31, 2020?

None.
2. If a demand was made on May 2, 2021, how much can X

collect from D?
i. With knowledge and consent, without reservation –

100K, because D can no longer invoke compensation
ii. With reservation – debt that is already due before the

assignment can be set up for compensation, hence:
100K – 50K = 50K
iii. With knowledge but did not give consent – debt that
became due before the assignment (February 15, 2021)
can be compensated, hence:
100K – 50K = 50K
iv. Without knowledge – can set up the compensation of all

credits prior to the assignment as well as the later ones
until the debtor had knowledge of the assignment; here, D
found out about the assignment when demand has been
made on May 2, 2021. On May 2, 2021 all three credits
have become due, hence, can be set up for compensation.
Remaining balance is 40K
VI. Novation
 Distinguish between modificatory and extinctive novation.
Modificatory novation is not a mode of extinguishment; while extinctive is. In

modificatory, the obligation is not extinguished but simply modified. In extinctive, the
old obligation is extinguished by creating a new obligation which replaces it.
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 What are the 4 requisites of extinctive novation?
1. There must be a previous valid obligation.

2. There must be a new contract or agreement.
3. The new contract extinguishes the old obligation.
4. The new obligation must not be void.
 Classification of Novation
1. As to its effect –
i. Partial
ii. Total
2. As to its form – Article 1292
i. Express
ii. Implied – Test of incompatibility
3. As to its nature –
i. Subjective - it involves the substitution of the person of the debtor

or the subrogation to the rights of the creditor.
ii. Objective - it involves a change of the object, cause, or principal
condition of the obligation.
iii. Mixed
 SUBJECTIVE NOVATION
1. PASSIVE SUBJECTIVE NOVATION or SUBSTITUTION OF

DEBTOR – Article 1293
 Distinguish between expromision and delegacion

In expromision, the substitution of the debtor is not upon the initiative of the
debtor but of a third person who offered himself as the substitute. It may
be done, with or without the consent of the debtor.
In delegacion, the substitution of the debtor is upon the initiative of the
original debtor, with the concurrence of the substitute and the creditor. The
consent of the three, i.e., original debtor, substitute, and the creditor,
is essential.
NOTE: In both cases, the consent of the creditor is NECESSARY.
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 Effect on Debtors
1. The novation has the effect of releasing the original debtor from the
obligation, and of making the new debtor liable therefor.
2. If the change is by expromission, and the new debtor pays the
obligation, the matter should be governed by the rules on payment by a
3rd person.
3. If the change is by delegacion, and there is no agreement between the
old and new debtors, the rule applicable to payment by a 3rd person with
the consent of the debtor should apply.
 Will the insolvency of the new debtor or the non-fulfillment of the

new debtor of the obligation revive the old debtor’s liability?
If the change is by way of expromission – no liability can be enforced

against the old debtor; the old debtor is exempt from any future liability
when he did not propose to the new debtor (Article 1294)
If the change is by way of delegacion –
GR: The insolvency of the new debtor will not revive the action
against the old debtor.
ER:
 In delegacion, what are two instances where the action against

the original debtor is considered revived when the new
obligation is not paid due to the new debtor’s insolvency?
If at the time of the substitution, the insolvency of the substitute

(new debtor) was already existing and:
1. The same is known to the debtor: or
2. Even if not known to the debtor, it was of public knowledge.
(Art. 1295)
In D's mortgage obligation to ABC Bank, D sold the mortgaged property

to B. D and B executed a deed of sale with assumption of mortgage. A copy
of the deed of sale was received by ABC Bank and it accepted payments of
the succeeding monthly amortizations from B. When B stopped paying the
monthly amortizations, ABC Bank demanded payment from D. The latter
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refused to pay on the ground that there was already substitution of his
person by B. Is D correct?
The answer is no, because there was no substitution since the creditor did not give
his consent. Go figure 😊
 What is the effect of the nullity of the new obligation to the old one?
GR: The old obligation subsists.

ER: Parties intend otherwise (Article 1297)
2. ACTIVE SUBJECTIVE NOVATION or SUBROGATION TO THE

RIGHTS OF THE CREDITOR – Article 1300
 What is subrogation – The transfer of all the rights of the creditor to the
3rd person, who substitutes him or her in all his or her rights (Article 1303)
 Kinds of Subrogation
1. Conventional – by agreement of the parties; the consent of all the

three parties is essential (Article 1301)
Original creditor – it is necessary because his or her right is extinguished
New creditor – it is necessary because he or she becomes a party to a

new relation
Debtor – he or she becomes liable to the new obligation
 Distinguish between assignment of credit and conventional

subrogation
In assignment of the credit, the obligation is not extinguished. In

conventional obligation, the old obligation is extinguished by the
creation of a new obligation which replaces the old one.
In assignment of credit, the consent of the debtor is not necessary.

In conventional subrogation, the consent of the debtor is necessary.
2. Legal – by operation of law
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 What are the instances where legal subrogation can take place?
1. When a creditor pays another creditor who is preferred, even

without the debtor’s knowledge.
2. When a third person, not interested in the fulfillment of the
obligation, pays the obligation with the express or tacit approval of
the debtor.
3. When a third person interested in the fulfillment of the obligation
pay the obligation, with or without the knowledge of the debtor.
(Art. 1302)
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Sources and types of obligations under Philippine law

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Sources and types of obligations under Philippine law

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OBLIGATIONS

I. SOURCES OF OBLIGATIONS (Article 1157)

 Is the enumeration of quasi-contract in the Civil Code exclusive?

 Is negotiorum gestio immediately terminated upon the reappearance of the

CIVIL LAW REVIEW 2

 Are there any exceptions?

 What are the two kinds of acquittal?

 Why is it important to identify the basis of the acquittal?

To determine whether or not the civil liability of the accused is

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Yes. Notwithstanding the acquittal of D by reason of reasonable doubt, a civil

Assuming that D was held civilly liable ex delicto notwithstanding his

No, if the source of obligation is delict or crime, the employer’s subsidiary

In order that an employer may be held subsidiarily liable for the

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If at all, Philtranco’s liability may only be subsidiary. Article 102

As to D, the action will not prosper because he is a mere employee. He is not a

CIVIL LAW REVIEW 2

May D & E be held solidarily liable to pay civil liability to Pedro?

The field of non- contractual obligation is much broader than that of

CIVIL LAW REVIEW 2

What are the defenses available to E to escape liability?

To be relieved of liability, E must show that it exercised the diligence of a good

… Mercury Drug should show that it exercised the diligence of a

CIVIL LAW REVIEW 2

J had a heated argument with B, in connection with G. The heated argument

II. COMPLIANCE WITH OBLIGATIONS

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First. THE OBLIGATION TO GIVE

An obligation to give may involve the delivery of either a determinate thing or an

 What is a determinate thing?

See Article 1460.

Article 1460. A thing is determinate when it is particularly designated or physically segregated

 Why is it important to identify whether the obligation to give involves a delivery

(1) If the obligation involves a delivery of a determinate thing, there are

 What are these accessory obligations?

i. The obligation to preserve the thing to be delivered with due

ii. The obligation to deliver the fruits IF the creditor is already

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X sold 5 horses to Y. On the agreed date of delivery, which was a month

No, because the obligation involved in the instant case is an obligation to

X sold the only 5 horses in his stable to Y. On the agreed date of

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1. In obligations arising from law, quasi-delict, quasi-contract, and

2. In obligations subject to suspensive conditions, the obligation to

3. When there is a suspensive term or condition for the

4. In obligations arising from contract, the obligation to deliver

o From the time the obligation to deliver arises, the creditor

 When there has been no delivery yet, the proper action

NOTE: Article 1477 of the New Civil Code provides

iii. Obligation to deliver all its accessions and accessories under

o Article 1166. The obligation to give a determinate thing includes that of

o Right to compel the debtor to deliver the determinate thing

(ii) If the obligation involves a delivery of indeterminate thing

o Right to compel the debtor to make the delivery of ANY

CHOOSE THE BEST ANSWER

Aurora obliged herself to deliver to Natalia 100 cavans of corn on October

ANSWER: B. Why? See next problem.

X committed to deliver 100 sacks of rice to Y, a rice trader. It was supposed

No, since the obligation of X is a generic obligation as it involves the delivery

Second. THE OBLIGATION TO DO

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TRUE or FALSE: If a person who is obliged to do something fails to do it, an action