CIVIL LAW PRE-WEEK LECTURE

(Based on Atty. Rabuya’s discussion)

OBLIGATIONS

SOURCES OF OBLIGATION
Solutio indebiti- if there is contract between the parties and there’s overpayment, the recovery
of the overpayment would not be pursuant to the concept of solutio indebiti (e.g. Contract of
lease)

CASE: Since there was a contract between the parties, the recovery of the overpayment should
not be pursuant to solutio indebiti but be pursuant to the agreement between the parties (written
contract: 10 years will apply)

SOLUTION INDEBITI v ACCION IN REM VERSO

As to its nature: Solutio indebiti is in the nature of a Quasi-contract while Accion in rem verso is
imposed by law.
Accion in Rem Verso will only be available if the plaintiff has no other remedy under the law, qc,
d, qd; whereas in Solutio Indebiti, if recovery is under S.I, it cannot be under the concept of
AIRV.
Solutio indebiti - requires mistake (mistake of fact or interpretation of a difficult or doubtful
interpretation of law); IRV- mistake is not an element

CASE: A passenger who rode a taxi but the taxi is owned by a taxi operator. Because of the
recklessness of the taxi driver, the passenger suffered an injury. What are the possible sources
of obligation:
A:
1. Breach of Contract (against taxi operator)(defense of diligence supervision selection of
employees does not lie),
2. Commission of a crime of reckless imprudence resulting in physical injuries (against taxi
driver)(employer may be held subsidiarily if employee is insolvent and no defense lie for
employer; automatic liable subsidiarily);
3. Quasi delict (against taxi driver (art. 2176); employer’s liability vicarious liability (Art. 2180))
(defense of supervision and selection lies)(2194, joint tortfeasor meaning driver and operator
solidarily liable

Even if the negligence is criminal in nature, the concept of quasi-delict is not limited to
negligence which are not criminal, Quasi-delict also covers negligence which are criminal in
nature whether the crime is committed negligently or intentionally.
GR: If there is a contract between the parties and negligence intervenes, it is not a case of
quasi-delict (art. 2176 requires that there must be no pre-existing contractual obligations
between the parties)
XPN: The act that breach the contract is also a tort. If the reason for the breach of the contract
is quasi-delict or negligence itself, the existence of the contract will not prevent the recovery of
civil liability based on quasi-delict.

KINDS OF OBLIGATION
CIVIL OBLIGATION v. NATURAL OBLIGATION
Civil Obligation- One which gives a right of action to compel its performance. It is legally
sanctioned
Natural Obligation- One which does not grant a right of action to enforce its performance It is
not legally sanctioned. The performance is voluntary on the part of the debtor. It produces legal
consequences that the law recognizes.
If the natural obligation is voluntarily performed by the debtor, the creditor is authorized to retain
the payment.
Even a Natural Obligation can be a subject of novation.
In accessory contracts (e.g. guaranty, surety, mortgage), they can also secure cases of natural
obligation

Art. 1956: 2 Kinds of interest

Monetary interest- interest that represent the cost of using the money
Compensatory Interest- serves as indemnity for damages

Art. 1956 is referring to only Monetary interest. If the requirement of Art. 1956 is complied with,
the obligation to pay monetary interest becomes a civil obligation and can be demanded in
court. If not complied, there is still an obligation to pay interest, but not civil obligation. It will
become a natural obligation.

Real obligation (to give)

a. Determinate- susceptible of extinguishment
NOTE: Loss must be without the debtor’s fault and that at the time of loss, the debtor must have
not incurred delay.
Aside from obligation to deliver determinate thing, prior to delivery, the debtor already:
1. has the obligation to preserve the thing to be delivered.
2. Obligation to deliver accessories even if not mentioned in the contract.
3. Obligation to deliver the fruits if the creditor is already entitled to the fruits.
REMEDIES: only the debtor can be compelled to make the delivery.

b. Indeterminate- not susceptible of extinguishment (genus never perishes)

REMEDY: compel the debtor himself to deliver the generic thing or the creditor may ask a third
person to make the delivery and simply charge the cost to the debtor (Art. 1165)
Personal Obligation (to do or not to do)
In case of nonperformance, the creditor cannot compel the debtor to perform what has
been agreed upon. The only remedy of the creditor is to
a. Ask another person to perform the obligation to do;
b. If the obligation cannot be performed by someone else (personal), the only
remedy is to recover damages.
EXTINGUISHMENT BY WAY OF LOSS
-If the prestation to do becomes physically/legally or impossible without the fault of the debtor-
(RENDITION OF AN IMPOSSIBLE SERVICE)(art. 1409) - The performance of the obligation to
do must be possible at the time of the perfection of the contract and has become impossible
only during the consummation stage and prior to fulfillment.
-Doctrine of supervening event- performance of obligation to do will become extremely difficult
as to have been beyond the contemplation of the parties because of an unforeseen event (art.
1267).

Fortuitous Event
Can be used as defense of a determinate obligation or the performance will become extremely
difficult by reason of the unforeseen event.
REQUIREMENTS:
a. The cause of the breach of obligation must be independent of the will of the debtor;

b. The event must be ether 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;

d. The debtor must be free from any participation in, or aggravation of, the injury of the
creditor. (Otherwise, the whole occurrence is humanized)

XPN to F.E: 1) when the law expressly specifies; 2) when otherwise declared by the parties; 3)
When the nature of the obligation requires assumption of risks

Q: Is the pandemic considered a fortuitous event?

A: DEFINITELY YES!
NOTE: Art. 1267 can only be invoked in obligations to do. (cannot be used to invoke in a
contract of lease. The obligation of the lessee to pay rentals is an obligation to give)

PURE, CONDITIONAL, TERM

a. PURE OBLIGATION
An obligation already existing from the time of its constitution. Nothing that will suspend the
demandability of the obligation

b. CONDITIONAL OBLIGATION
Covers Potestative, Casual, Mixed obligations (check concept)
In potestative Condition, it is exclusively dependent upon the will of either the debtor or creditor:
DEBTOR: If suspensive, VOID; If resolutory, VALID
CREDITOR: suspensive or resolutory both VALID

DOCTRINE OF CONSTRUCTIVE FULFILLMENT OF SUSPENSIVE CONDITION – When the

condition is mixed, suspensive, partly dependent upon the will of the debtor, and the latter
intentionally prevents the fulfillment of the condition dependent on him, the entire condition is
deemed constructively fulfilled.

DOCTRINE OF CONSTRUCTIVE FULFILLMENT OF MIXED CONDITIONAL OBLIGATION-

When the condition is mixed, suspensive, party dependent upon the will of the debtor and partly
dependent upon the will of a third person, and the debtor did all in his power to comply but the
condition is not fulfilled because of third person over whom the debtor has no control, the entire
condition is deemed constructively fulfilled.

Impossible condition
If the obligation is subjected to an impossible condition, the obligation itself becomes VOID
(applicable only to ordinary obligations). If the impossible condition is attached to a
testamentary, simple and remuneratory obligations, considered as NOT Imposed.
If ONEROUS, Art. 1183 will apply. The onerous obligation itself will become VOID.

c. OBLIGATIONS SUBJECTED TO A TERM

In SUSPENSIVE TERM, before the arrival of the period, the obligation already exists but is not
yet demandable. (will not affect the existence but only the demandability.)

In RESOLUTORY TERM, the obligation is valid up to a certain date. Upon the arrival of the
date, the obligation is terminated (without annulling the fact of its existence).

Instances when Court is Authorized to Fix Period: 1) When the obligation is intended to be with
a period but the period has not been fixed; 2) When the duration of the period is left to the
exclusive will of the debtor (e.g. when the debtor binds himself to pay when his means permit
him to do so); and 3) when the non-compliance by one of the parties in reciprocal obligations is
with respect to time.

The court may fix or grant a period if there exists a just cause therefore. In 1 and 2, the
fulfillment of the obligation itself cannot be demanded until after the court has fixed the period
for compliance therewith, and such period has arrived.

If the obligation is pure, the court has no authority to fix a period (e.g. payable on demand).
Ex. If to be paid within a reasonable time, the court has no authority to fix the period. It can only
inquire as to the lapse of the reasonable time.

d. DIVISIBLE AND INDIVISIBLE OBLIGATIONS (Art. 1225)

If the obligation is to deliver an indivisible thing, It will necessarily follow that the obligation itself
is indivisible.
If what is to be delivered is a divisible thing, it is possible for the obligation to become indivisible
if the law says so or the intention of the parties.

CASE: Purchase of a package in relation to photography. The price quoted is for a package (3
in one package). The seller only delivered 1 piece of equipment. The SC ruled that while the
nature of the thing delivered is divisible, it is the nature of the parties that the obligation is
indivisible since the sale is of the package of 3 equipment. The quoted price is for a package.

e. JOINT AND SOLIDARY OBLIGATIONS

Ex. A, B and C executed a P.N promising to pay X&Y to pay 1.2M. “We promise to pay X and Y
the sum of 1.2million” - Presumed Joint
The obligation of 1.2M shall be divided equally between A,B and C. will be liable only for 400k
each. The shares will be distinct and separate from each other. The share of X in the credit is
only 600k. X cannot collect the entire 600k from A alone. He can only collect from A 200k, B
200k and C 200k.

Ex. A, B, and C executed a P.N which indicates, “I promise to pay X and Y the sum of
1.2million”. A,B and C will become solidary debtors of X and Y. X can collect the entire 600k
from either or all of A, B and C.

In JOINT OBLIGATION, in case of plurality of subjects, the law presumes the obligation to be
merely joint.
The indivisibility of an obligation does not necessarily give rise to solidarity.

In SOLIDARY OBLIGATIONS, obligation becomes solidary when: 1) the obligation so states; 2)

The law so provides; 3) When the nature of the obligation so requires.

MODES OF EXTINGUISHMENT

a. Condonation
Concept: It is gratuitous on the part of the creditor but requires acceptance by the creditor to be
valid.
In the nature of donation:
Acceptance should be made during the lifetime of the debtor.
Can be made expressly (apply the formalities of donation otherwise it is VOID) OR
impliedly:
In the nature of a Legacy
In the nature of testamentary disposition (must comply with the formalities of a will)
Can only be made after the death of the creditor

b. Legal Compensation
RQMT:
 1. Parties must be mutual debtors and creditors of each other in their own right and as
principals .

Obligation to pay tax and obligation of the government to refund the taxpayer- not
subject to legal compensation. The parties are not mutually debtors and creditors of
each other.

2. Both debts consists 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 ben stated
3. Both must be due, liquidated and demandable
4. That neither of the debts be subject to any lien, retention, or suit instituted by third
persons of which notice has been communicated in due time to the debtor.

NOTE: If the notice from a third person was received by the debtor before the legal
compensation was supposed to take place, the legal compensation will not take place. If
notice was given after that time, it may no longer undo the compensation that had taken
place by force of law.

C. Novation
Extinctive- extinguishment of old obligation by way of creating an new one
Modificatory- the old obligation is not extinguished by the new contract but is only modified to
the extent that it is incompatible with the old obligation

Rqmts:
1. There must be a previous VALID obligation.
2.
3. The new contract must have the effect of extinguishing the old obligation
4. The new obligation must not be void ab initio

Objective novation- if the condition of obligation is changed, it must be the principal condition
to amount to novation
Personal Novation-

Substitution of the person of the debtor

There must be a clear agreement releasing the old debtor from the obligation and that a third
person will take his place. (EXPRESSLY or IMPLIEDLY)

Delegacion vs. Expromission

SUBROGATION
-Legal or Conventional
WHen legal subrogation takes place. 1) not so preferred creditor buys out the other preferred
creditor; 2) 3rd person interested in the fulfillment of debtors obligation, with or without the
consent of debtor (example: insurance company); 3) 3rd person not interested paid in behalf of
debtor with consent of debtor

Conventional Subgrogation- New contract involving the parties from the previous obligation
and a third person who will acquire the parties rights.
There will be a transfer of a creditors rights to the third person who will acquire all the rights of
the creditor and will have all the rights to exercise not only against the debtor but also to third
persons (e.g. guaranty, surety)

Assignment of Credit- is a contract involving only the assignor (previous creditor) and
assignee (third person), the consent of the debtor is not necessary.
Assignment of credit is not a mode of extinguishment of obligation. The credit transferred is the
very same obligation of the debtor to the assignor.

Conventional subrogation vs. Assignment of Credit

CS- mode of extinguishment
CS- what is transferred is a new obligation. AC- what is transferred is the very same obligation
of the debtor to assignor
CS0 3 persons consent of 3 persons is necessary ; in AC contract only between Assignor/ee
debtor is not a party to a contract, consent of debtor is not an assignee.

How to know: intention of the parties

If the intention of the parties that the transfer of credit will not be valid and binding without the
debtors consent, it is in the nature of conventional subrogation. If it will be valid and binding
even without the debtor’s consent, it is an assignment of credit.

If the intention of the creditor and person to be subrogated is a conventional subrogation, but
the consent of the debtor is not obtained, does it become an assignment of credit? SC said no!
There is no valid transfer of credit, such person has no right to collect or claim payment.

CONTRACTS IN GENERAL

From the point of view of perfection, Contract is either consensual or real

Consensual: Cause, consideration, consent

Real: 3 + delivery. (e.g. Commodatum, mutuum, deposit)(contract of pledge was

already revealed by PPSA)

In real contract, the delivery of the object is that which creates the contract. Without
delivery, no contract of commodatum, mutuum, deposit yet. Nonetheless, The
agreement to enter into the contract is still binding between the parties.
In the event that the perfected consensual contract of commodatum, mutuum, deposit
will be breached (bc no delivery was made), what is the remedy of the aggrieved
property?

IN perfected consensual contract, cannot be compelled by delivery bc it is the delivery

that will result in the perfection of the contract. And the perfection of a contract cannot
be compelled. Only can recover damages.

Perfection of contract: Negotiation stage; Consummation;

Prior to perfection of the contract, the offer can still be withdrawn at anytime, (XPN: if
there’s option contract)

Option contract v. RFR

Option and RFR purpose is to create an exclusive privilege to enter to contract with
another

If in the grant of the exclusive privilege, there is already a definite offer and were already
fixed and the only thing lacking is the acceptance of the other - option contract

In RFR , no definite offer yet, what is definite is only the object but the price and other is
to be fixed at a future time

OPTION - definite period

RFR- period for exercise of privilege is a definite or indefinite period

OPTION - is the option already a contract,? If it’s already a contract, it will bind both
offerror and offeree within the period agreed by them.

The option will become a contract if supported by a separate and distinct consideration
from the contemplated contract.

If there’s an option contract and the option contract is violated, remedy, is damages

Counter offer, will constitute a new offer would require an acceptance of new offer.

If RFR will violate the right to the grantee, may demand rescission (considered as
contract in fraud of creditors).

ESSENTIAL REQUISITE

Form does not affect the perfection of contract. It may only affect the contracts validity
and enforceability.
Generally contract can be entered into in any form.

XPN:

Only contract of sale which requires formality for its validity (sale of large cattle)

Oral sale of a parcel of land is unenforceable since it is governed by statute of frauds.

Defective contracts

Perfection - concept is limited to the existence of the contract

Validity- aside from perfection, Art. 1409 must be complied with.

Enforceability- valid but cannot be enforceability

Void- invalid from the very beginning

Obligatory- perfected valid and enforceable.

REscissible contract- both valid and enforceable until it is rescinded by a final judgment
ofthe court (defect cannot be used as a matter of defense)

Voidable- valid and enforceable and obligatory until it is annulled by a final judgment of
the court

Unenforceable contract- valid but cannot be enforceable in court (not obligatory). But
defect can be ratified. If ratified can now be enforced in court (will become obligatory).
So long as the defect is not ratified, defect is permanent. (UNENFORCEABILITY IS
ONLY A MATTER OF DEFENSE. THERE’S NO ACTION THAT IS REQUIRED TO BE
BROUGHT)

Void- invalid from teh very beginning and the defect is not susceptible of ratification. Not
obligatory and not possible to become obligatory. (can be used as a matter of defense.)
(can be raised directly or collaterally)

If the void contract is still purely executory, you cannot go to court because you are not
asking for any affirmative relief. Use it merely as an affirmative defense.
If it’s already executed, can be filed in court.

Void contract does not produce any legal effect.

XPN: 1) if parties are guilty of in pari delicto. 2) when plaintiff is guilty of laches

LOANS
 MORTGAGES

Loan (mutuum) v Real estate mortgage

CASE: Bonivie v. CA

What was being referred to as a perfected contract in this case is not the contract of
mutuum itself but the perfected consensual contract being referred to is the first clause
Art. 1394 .

Since the contract of REM is an accessory contract supporting only the contract of loan,
contract is

CASE: Reyes v. Valentine

Provisions of Art. 1409(3) must not be construed literally. Otherwise, it will be contrary
to the provisions of Art. 1347 of the Civil Code. Instead it must be construed in such a
way that it refers to objects which at the time of the perfection of the contract were
impossible to come into existence.

The execution of the REM is conditional that the proceeds of the loan will be released at
some future time.

CASE: PNB v Reyes (Leonen)

Involves a contract of loan executed by the wife without the consent of the husband.
Wife also executed a mortgage on the spouses community property.

Husband questioned the validity of the mortgage. (requires the consent of both H and
W)
Bank’s contention that the debt redounded to the benefit of the family.

R: That will only make the debt chargeable to CPG. But to the applicable of the
mortgage, the applicable law is Art. 142 of the FC. It must have the consent of both
husband and wife or court authorization, the mortgage is void regardless if the debt
redounded to the benefit of the family!
The fact that it redounded would only be important to determine if such debt will be
chargeable to the community property.

In a Contract of Loan, there is no requirement of formality in order for a contract of loan

to be valid or enforceable. It can be entered into orally. The contract of loan is not
covered by statute of frauds.

With respect to agreement to pay monetary interest, Art 1956 requires that for
agreement to become civil obligation 1) there must be an express agreement to pay
monetary interest and 2) that agreement must be reduced into writing.

If requirement is not complied, the agreement to pay monetary interest is not a case of
civil obligation. The creditor cannot compel the debtor by way of a court action to pay
interest. But nevertheless if there is an agreement to pay monetary interest (albeit
verbally), there’s still an obligation to pay interest but it is only in the nature of natural
obligation.

Art. 1956: 2 Kinds of interest

Monetary interest- interest that represent the cost of using the money
Compensatory Interest- serves as indemnity for damages

Art. 1956 is referring to only Monetary interest. If the requirement of Art. 1956 is complied with,
the obligation to pay monetary interest becomes a civil obligation and can be demanded in
court. If not complied, there is still an obligation to pay interest, but not civil obligation. It will
become a natural obligation.

If the debtor already incurs delay, he is obliged to pay compensatory interest at the legal
rate in the absence of any stipulated interest by the parties.

An additional requirement in relation to interest,

If the accessory contract is Antichresis, Art. 2134 requires that the amount of principal of
the loan and amount of interest of the loan must be specified in writing, otherwise, the
contract of antichresis is void. What must be specified in writing is not the contract of
anticresis, instead what is required is the amount of principal of the loan or amount of
interest of the loan (it can be made in the principal contract of the loan). If this is made,
requirement is deemed complied with. (R: complementary contracts construed together
doctrine)

In relation to Contract of Real Estate Mortgage, For the purpose of making the contract
of REM valid, no requirement of formality. An oral contract of REM is valid.

The contract of REM is not covered by statute of fraud.

What is covered by SOF: 1) sale of RP 2) lease of RP for a period longer than 1 yr 3)
express trust over an immovable property

The requirement of public document in Art. 1358 is not for the purpose of enforceability
nor for validity. Instead, the requirement is only for the convenience of the parties.
Hence, obligatory between the contracting parties.

Remedy is REM is entered orally: Art. 1357, for contracts which are required to be in a
public doc, the contracting parties can be compelled to observe the required form.

INTEREST

If there was an agreement for the payment of monetary interest in writing (he will pay
the principal amount with interest.) The promissory note failed to state the rate of
monetary interest to be applied.

A: If there’s agreement to pay monetary interest in writing but the rate of interest is not
specified in writing. The obligation to pay monetary interest is still a civil obligation and
as to the rate that will be applied, it is the legal rate that will be applicable.

Prior to July 1, 2013- 12%

July 1, 2013 onwards - rate is 6%

CASE: Lara crafts and decors vs. Midtown

SC further modified its ruling in eastern shipping and nacar. In both cases, the SC ruled
that if the judgment of the court provides for a payment of a sum of money. From the
finally of judment until its satisfaction, it will earn interest for legal rate 6% (intervening
period is loan or forbearance of money)

In new case, SC clarified that if there is a stipulated interest between the parties and
that stipulated rate of interest is not unconscionable, excessive, it is that stipulated rate
that will be applied until the full satisfaction of the judgment (even the intervening period.
It is not the legal rates but the agreed interest rate will be applicable provided that it is
not unconscionable or excessive)

The only evidence of indebtedness iss the PDC issued by the debtor. The contract of
loan was entered orally. No agreement to pay monetary interest in writing. If the
obligation is not paid and there was a demand from creditor and despite demand the
obligation was not paid, is the debtor liable to pay interest?
A: would respect to monetary interest, the debtor is not liable. Art. 1956 requires that
there must be an agreement of payment of monetary interest expressly stipulated in
writing for it to be demandable in court. Otherwise, only nat ob. But with respect to
compensatory interest the debtor is liable from the moment the debtor incurred delay.
Since no agreement with respect to monetary interest, it is the legal rate that will be
applicable.

INTEREST

PROPERTY