XI.

Samantha sold all her business interest in a sole proprietorship to Sergio for the amount of PhP1 million.
Under the sale agreement, Samantha was supposed to pay for all prior unpaid utility bills incurred by the
sole proprietorship. A month after the Contract to Sell was executed, Samantha still had not paid the
PhP50,000 electricity bills incurred prior to the sale. Since Sergio could not operate the business without
electricity and the utility company refused to restore electricity services unless the unpaid bills were
settled in full, Sergio had to pay the unpaid electricity bills. When the date for payment arrived, Sergio
only tendered PhP950,000 representing the full purchase price, less the amount he paid for the unpaid
utility bills. Samantha refused to accept the tender on the ground that she was the one supposed to pay
the  bills and Sergio did not have authorization to pay on her behalf.

(a) What is the effect of payment made by Sergio without the knowledge and consent of
Samantha? (b) Is Samantha guilty of mora accipiendi? 
a. Under Art. 1236(2) of the Civil Code, whoever pays for another may demand from the debtor what he 
has paid, except that if he has paid without the knowledge or against the will of the debtor, he can only 
recover insofar as the payment has been beneficial to the debtor. 

In the problem, Sergio paid the utility bills without the consent of Samantha. He cannot demand from
the  latter what he has paid because the payment here cannot be said to have been beneficial to
Samantha  because it can be inferred from the facts that she has the resources to do so. 

b. Yes, Samantha is guilty of mora accipiendi. 

Under the Civil Code, mora accipiendi is delay on the part of the creditor without justifiable reason to 
accept performance of an obligation. In the problem, Samantha has the obligation, as a creditor in the
sale  of business of sole proprietorship to accept the payment of Sergio representing P950,000. The fact
that  Sergio paid her prior unpaid utility bills against her will will is not a justifiable reason to refuse  
acceptance of compensation to their binding contract of sale. 

The following are the requisites of Mora Accipiendi,(1) Offer of performance by the debtor who has the 
required capacity; (2) Offer is to comply with the prestation as it should be performed; and (3) creditor 
refuses the performance without just cause. 
 XV. 

Simon owned a townhouse that he rented out to Shannon, a flight attendant with Soleil Philippine
Airlines  (SPA). They had no written contract but merely agreed on a three (3)-year lease. Shannon had
been using  the townhouse as her base in Manila and had been paying rentals for more than a year when
she accepted  a better job offer from Sing Airlines. This meant that Singapore was going to be her new
base and so she  decided, without informing Simon, to sublease the townhouse to Sylvia, an office clerk
in SPA. 

(a) Can Simon compel Shannon to reduce the lease agreement into writing?  

(b) Does the sublease without Simon's knowledge and consent constitute a ground for terminating
the lease? 

a. Yes. 

Under the Civil Code, an agreement for the leasing of real property for more than one year is covered  
under the Statute of Frauds which requires that the same should be reduced into writing in order to be 
enforceable.

In this problem, the lease agreement between Simon and Shannon over a townhouse is for a period of 3  
years. This gives Simon the right to compel the lease agreement into writing because the same is within  
the purview of Statute of Frauds. 

b. Yes. 

Under Sec. 8 of RA 9653 or the Rent Control Act of 2009, subleasing a residential units in whole or in 
part without the written consent of the lessor is prohibited. Accordingly, this gives the lessor a ground
for  terminating the lease as well as a ground for ejectment. 

XVIII. 

Shasha purchased an airline ticket from Sea Airlines (SAL) covering Manila-Bangkok- Hanoi-Manila.
The ticket was exclusively endorsable to Siam Airlines (SMA). The contract of air transportation was
between Shasha and SAL, with the latter endorsing to SMA the Hanoi-Manila segment of the journey.
All  her flights were confirmed by SAL before she left Manila. Shasha took the flight from Manila to
Bangkok  on board SAL using the ticket. When she arrived in Bangkok, she went to the SAL ticket
counter and  confirmed her return trip from Hanoi to Manila on board SMA Flight No. SA 888. On the
date of her  return trip, she checked in for SMA Flight No. SA 888, boarded the plane, and before she
could even  settle in on her assigned seat, she was off-loaded and treated rudely by the crew. She lost her
luggage and  missed an important business meeting. She thereafter filed a complaint solely against SAL
and argued  that it was solidarily liable with SMA for the damages she suffered since the latter was only
an agent of  the former. 

a) Should either, or both, SAL and SMA be held liable for damages that Shasha suffered? 

SAL should be held liable for damages suffered by Shasha. Sea Airlines (SAL) as the ticket-issuing
airline is the principal in a contract of carriage, while Siam Airlines (SMA) as the endorsee-airline, is the
agent. Under Article 1910 of the Civil Code, the principal must comply with all the obligations which
the  agent may have contracted within the scope of his authority. 

The contract of air transportation was between Shasha and SAL with the latter endorsing to SMA the
Hanoi-Manila segment of the journey. Such contract of carriage has always been treated in our
jurisdiction as a single operation.  

As the principal in the contract of carriage, SAL should be held liable, even when the breach of contract
had occurred, not on its own flight, but on that of SMA. The obligation of the ticket-issuing airline
remained and did not cease, regardless of the fact that another airline had undertaken to carry the
passengers to one of their destinations(China Airlines vs. Chiok; G.R. 152122, July 30, 2003). 

b) Assuming that one is an agent of the other, is the agency coupled with interest? 

Yes.Where an agency is for the mutual benefit of the principal and of the agent, the agency is deemed  
coupled with an interest. The agent’s interest must be in the subject matter of the power conferred and
not  merely an interest in the exercise of the power because it entitles him to compensation.  

SMA, as the agent of SAL and as an endorsee-airline, has a personalinterest in the business. It had
assumed a personal obligation for the operation of the airline by undertaking to transport passengers
from  Hanoi to Manila. Its interest extends to the very subject matter of the transportation of passengers
as an  airline company for it undertakes to transport passengers from one destination to another(Sevilla v.
Court  of Appeals; G.R. No. 139540. June 29, 2005) (Lim vs. Saban; G.R. No. 163720, December 16,
2004).

XX. 

Simeon was returning to Manila after spending a weekend with his parents in Sariaya, Quezon. He
boarded a bus operated by the Sabbit Bus Line (SBL) on August 30, 2013. In the middle of the journey,
the bus collided with a truck coming from the opposite direction, which was overtaking the vehicle in
front of the truck. Though the driver of the SBL bus tried to avoid the truck, a mishap occurred as the
truck hit the left side of the bus. As a result of the accident, Simeon suffered a fractured leg and was
unable to report for work for one week. He sued SBL for actual and moral damages. SBL raised the
defense that it was the driver of the truck who was at fault, and that it exercised the diligence of a good
father of a family in the selection and supervision of its driver. 

(a) Is SBL liable for actual damages? Moral damages? 

(b) Will SBL be liable to pay interest if it is required to pay damages, and delays in the payment of
the judgment award? What is the rate of interest, and from when should the interest start
running? 

a.) Yes, SBL is liable to pay actual damages. Article 1759 of the NCC provides that common carriers
are liable for the death or injuries to passengers through the negligence or willfuk acts of the former’s
employees, although such employees may have acted beyond the scope of their authority or in violation

of the orders of the common carriers. The liability if the 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. 

As to the actual damages, Article 2199 of the NCC provides that except as provided by law or by
stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as
he has duly proved. In this case, the actual damages are luco cesante, or the Loss of a benefit that the
plaintiff failed to receive. 
As to moral damages, the same may be recovered in breach of contract of carriage only if the defendant
acted fraudulently or in bad faith. In this case, since the accident was caused by the truck and not the
driver of the bus, SBL is not liable to pay moral damages. 

b.) Yes, SBL will be liable to pay interest if a judgment to pay damages is given and it delays in the
payment of such damages. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of the legal interest, shall be 6% per annum from such finality until its satisfaction. 

Extinguishment; Compensation (2009) No.XV. Sarah had a deposit in a savings account with
Filipino Universal Bank in the amount of five million pesos (P5,000,000.00). To buy a new car,
she obtained a loan from the same bank in the amount of P1,200,000.00, payable in twelve
monthly installments. Sarah issued in favor of the bank post-dated checks, each in the amount
of P100,000.00, to cover the twelve monthly installment payments. On the third, fourth and
fifth months, the corresponding checks bounced. The bank then declared the whole obligation
due, and proceeded to deduct the amount of one million pesos (P1,000,000.00) from Sarah’s
deposit after notice to her that this is a form of compensation allowed by law. Is the bank
correct? Explain. (4%)

SUGGESTED ANSWER: No, the bank is not correct. While the Bank is correct about the
applicability of compensation, it was not correct as to the amount compensated. A bank deposit
is a contract of loan, where the depositor is the creditor and the bank the debtor. Since Sarah is
also the debtor of the bank with respect to the loan, both are mutually principal debtors and
creditors of each other. Both obligation are due, demandable and liquidated but only up to the
extent of P300,000.00 (covering the unpaid third, fourth and fifth monthly installments). The
entire one million was not yet due because the loan has no acceleration clause in case of
default. And since there is no retention or controversy commenced by third person and
communicated in due time to the debtor, then all the requisites of legal compensation are
present but only up to the amount of P300,000.00. The bank, therefore, may deduct
P300,000.00 from Sarah’s bank deposit by way of compensation. Extinguishment;
Compensation (2008)
Extinguishment; Compensation (2008) No. XV. Eduardo was granted a loan by XYZ Bank for the
purpose of improving a building which XYZ leased from him. Eduardo, executed the promissory note
("PN") in favor of the bank, with his friend Recardo as co-signatory. In the PN, they both acknowledged
that they are "individually and collectively" liable and waived the need for prior demand. To secure the
PN, Recardo executed a real estate mortgage on his own property. When Eduardo defaulted on the PN,
XYZ stopped payment of rentals on the building on the ground that legal compensation had set in. Since
there was still a balance due on the PN after applying the rentals, XYZ foreclosed the real estate mortgage
over Recardo's property. Recardo opposed the foreclosure on the ground that he is only a co-signatory;
that no demand was made upon him for payment, and assuming he is liable, his liability should not go
beyond half the balance of the loan. Further, Recardo said that when the bank invoked compensation
between the reantals and the amount of the loan, it amounted to a new contract or novation, and had the
effect of extinguishing the security since he did not give his consent (as owner of the property under the
real estate mortgage) thereto. (

A). Can XYZ Bank validly assert legal compensation? (2%)

SUGGESTED ANSWER: Yes, XYZ Bank can validly assert legal compensation. In the present case, all
of the elements of legal compensation are present: (1) XYZ Bank is the creditor of Eduardo while
Eduardo is the lessor of XYZ Bank; (2) both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) the
two debts be due; (4) they be liquidated and demandable, and (5) over neither of them there be any
retention or controversy, commenced by third persons and communicated in due time to the debtor (Art.
1279, Civil Code). Extinguishment; Novation

Extinguishment; Novation (2008) No. XV. Eduardo was granted a loan by XYZ Bank for the purpose of
improving a building which XYZ leased from him. Eduardo, executed the promissory note ("PN") in
favor of the bank, with his friend Recardo as co-signatory. In the PN, they both acknowledged that they
are "individually and collectively" liable and waived the need for prior demand. To secure the PN,
Recardo executed a real estate mortgage on his own property. When Eduardo defaulted on the PN, XYZ
stopped payment of rentals on the building on the ground that legal compensation had set in. Since there
was still a balance due on the PN after applying the rentals, XYZ foreclosed the real estate mortgage over
Recardo's property. Recardo opposed the foreclosure on the ground that he is only a co-signatory; that no
demand was made upon him for payment, and assuming he is liable, his liability should not go beyond
half the balance of the loan. Further, Recardo said that when the bank invoked compensation between the
reantals and the amount of the loan, it amounted to a new contract or novation, and had the effect of
extinguishing the security since he did not give his consent (as owner of the property under the real estate
mortgage) thereto.

(C). Does Recardo have basis under the Civil Code for claiming that the original contract was novated?
(2%)

SUGGESTED ANSWER: No. Recardo has no basis for claiming novation of the original contract when
the bank invoked compensation because there was simply partial compensation (Art. 1290, Civil Code)
and this would not bar the bank from recovering the remaining balance of the obligation.

ALTERNATIVE ANSWER: No. In order that an obligation may be extinguished by another, it is that it
be so declared in unequivocal terms, or that the old and new obligations be on every point compatible
with each other. Novation is never presumed (Art. 1292, Civil Code).

Extinguishment; Payment of Check (2013) No.VI. Lito obtained a loan of P1,000,000 from Ferdie,
payable within one year. To secure payment, Lito executed a chattel mortgage on a Toyota Avanza and a
real estate mortgage on a 200-square meter piece of property. (B) Lito's failure to pay led to the
extrajudicial foreclosure of the mortgaged real property. Within a year from foreclosure, Lito tendered a
manager's check to Ferdie to redeem the property. Ferdie refused to accept payment on the ground that he
wanted payment in cash: the check does not qualify as legal tender and does not include the interest
payment.

Is Ferdie's refusal justified? (4%)

SUGGESTED ANSWER: A check, whether a manager’s check or an ordinary check is not legal tender,
and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt
by the oblige or creditors (Philippine Airlines v. CA and Amelia Tan, G.R. No. L-49188, 1990). Mere
delivery of checks does not discharge the obligation under a judgment. A check shall produce the effect
of payment only when they have been cashed or where through the fault of the creditor they have been
impaired (Art 1249, Civil Code). However, it is not necessary that the right of redemption be exercised by
delivery of legal tender. A check may be used for the exercise of right of redemption, the same being a
right and not an obligation. The tender of a check is sufficient to compel redemption but is not in itself a
payment that relieves the redemptioner from his liability to pay the redemption price (Biana v. Gimenez,
G.R. No. 132768, Sept 9, 2005, citing Fortunado v. CA). Redemption within the period allowed by law is
not a matter of intent but a question of payment or valid tender of full redemption prices within the said
period. Whether redemption is being made under Art. 3135 or under the General Banking Law, the
mortgagor or his assignee is required to tender payment to make said redemption valid (Heirs of
Quisumbing v. PNB and SLDC, G.R. No. 178242, Jan 20, 2009)\

Moreover, Ferdie’s refusal was justified on the ground that the amount tendered does not include interest.
In order to effect the redemption of the foreclosed property, the payment to the purchaser must include
the following sums: (a) the bid price; (b) the interest on the bid price, computed at one per centum (1%)
per month; and (c) the assessments and taxes, if any, paid by the purchaser with the same rate of interest
(Sec 28, 1997 Rules of Civil Procedure). Unless there is an express stipulation to that effect, the creditor
cannot be compelled to receive partial payment of the prestation (Art. 1248, Civil Code)

Extinguishment; Payment of Check; Legal Tender (2008) No. XVII. Felipe borrowed $100 from Gustavo
in 1998, when the Phil P - US$ exchange rate was P56 - US$1. On March 1, 2008, Felipe tendered to
Gustavo a cashier's check in the amount of P4,135 in payment of his US$ 100 debt, based on the Phil P -
US$ exchange rat at that time. Gustavo accepted the check, but forgot to deposit it until Sept. 12, 2008.
His bank refused to accepted the check because it had become stale. Gustavo now wants Felipe to pay
him in cash the amount of P5,600. Claiming that the previous payment was not in legal tender, and that
there has been extraordinary deflation since 1998, and therefore, Felipe should pay him the value of the
debt at the time it was incurred. Felipe refused to pay him again, claiming that Gustavo is estopped from
raising the issue of legal tender, having accepted the check in March, and that it was Gustavo's negligence
in not depositing the check immediately that caused the check to become stale.

(A). Can Gustavo now raised the issue that the cashier's check is not legal tender? (2%)

SUGGESTED ANSWER: No. Gustavo previously accepted a check as payment. It was his fault why the
check became stale. He is now estopped from raising the issue that a cashier's check is not legal tender

(B). Can Felipe validly refuse to pay Gustavo again? (2%)

SUGGESTED ANSWER: Yes, Felipe can refuse to pay Gustavo, who allowed the check to become stale.
Although a check is not legal tender (Belisario v. Natividad. 60 Phil 156), there are instances when a
check produces the effects of payment, for example: (a) when the creditor is in estoppel or he had
previously promised he would accept a check (Paras, Civil Civil Law Q&As (2007-2013) (b) when the
check has lost its value because of the fault of the creditor (Art. 1249, 2nd par.),as when he was
unreasonably delayed in presenting the check for payment (PNB v. Seeto, G.R. No, L-4388, 13 August
1952).
(C). Can Felipe compel Gustavo to receive US$100 instead? (1%)

SUGGESTED ANSWER: Felipe cannot compel Gustavo to receive US$100 because under RA 529,
payment of loans should be at Philippine currency at the rate of exchange prevailing at the time of the
stipulated date of payment. Felipe could only compel Gustavo to receive US$ 100 if they stipulated that
obligation be paid in foreign currency (R.A. 4100).

Liability; Solidary Liability (2008) No. XV. Eduardo was granted a loan by XYZ Bank for the purpose of
improving a building which XYZ leased from him. Eduardo, executed the promissory note ("PN") in
favor of the bank, with his friend Recardo as co-signatory. In the PN, they both acknowledged that they
are "individually and collectively" liable and waived the need for prior demand. To secure the PN,
Recardo executed a real estate mortgage on his own property. When Eduardo defaulted on the PN, XYZ
stopped payment of rentals on the building on the ground that legal compensation had set in. Since there
was still a balance due on the PN after applying the rentals, XYZ foreclosed the real estate mortgage over
Recardo's property. Recardo opposed the foreclosure on the ground that he is only a co-signatory; that no
demand was made upon him for payment, and assuming he is liable, his liability should not go beyond
half the balance of the loan. Further, Recardo said that when the bank invoked compensation between the
reantals and the amount of the loan, it amounted to a new contract or novation, and had the effect of
extinguishing the security since he did not give his consent (as owner of the property under the real estate
mortgage) thereto.

(B). Can Recardo's property be foreclosed to pay the full balance of the loan? (2%)

SUGGESTED ANSWER: Yes, Recardo's property can be foreclosed to pay the full balance of the loan
because when he signed as cosignatory in the promissory note, he acknowledged he is solidarily liable
with Eduardo. In solidary obligations, a creditor has the right to demand full payment of the obligation
from any of Civil Law Q&As (2007-2013) (Art. 1207, Civil Code)

Obligations; Without Agreement (2007) No.V. What are obligations without an agreement"? Give five
examples of situations giving rise to this type of obligations? (10%)
SUGGESTED ANSWER: "Obligations without an agreement" are obligations that do not arise from
contract such as those arising from: 1. delicts; 2. quasi-delicts; 3. solutio indebiti; 4. negotiorum gestio;
and 5. all other obligations arising from law.

ALTERNATIVE ANSWER: "Obligations without an agreement" refer to the juridical relation of quasi-
contract which arise from certain lawful, voluntary and unilateral acts to the end that no one shall be
unjustly enriched or benefited at the expense of another. (Art. 2142, NCC)

First Example of an obligation without an agreement is a case of negotiorum gestio, whereby one who
voluntarily takes charge of the agency or management of the business or property of another without any
power from the latter, is obliged to continue the same until the termination of the affair and its incidents,
or to require the person concerned to substitute him, if the owner is in a position to do so (Art. 2144,
NCC).

Second example, a case of solutio indebiti may also give rise to an obligation without an agreement. This
refers to the obligation to return which arises when something is received when there is no right to
demand it, and it was unduly delivered through mistake (Art. 2154, NCC).

Third example, is when without the knowledge of the person obliged to give support, it is given by a
stranger, the latter shall have a right to claim the same from the former, unless it appears that he gave it
out of piety and without intention of being repaid (Art. 2164, NCC).

Fourth example, is when through accident or other causes a person is injured or becomes seriously ill,
and he is treated or helped while he is not in a condition to give consent to a contract, he shall be liable to
pay for the services of the physician or other person aiding him, unless the service has been rendered out
of pure generosity (Art. 2167, NCC).

Fifth instance of an obligation without an agreement is when the person obliged to support an orphan or
an insane or other indigent person unjustly refuses to give support to the latter, any third person may
furnish support to the needy individual, with right of reimbursement from the person obliged to give
support. The provisions of this article apply when the father or mother of a child under eighteen years of
age unjustly refuses to support him (Art. 2166, NCC).