Contracts; annulment of contracts; capacity to sue

1996 No 9;
Sometime in 1955, Tomas donated a parcel of land to his stepdaughter Irene,
subject to the condition that she may not sell, transfer or cede the same for twenty
years. Shortly thereafter, he died. In 1965, because she needed money for medical
expenses, Nene sold the land to Conrado. The following year, Irene died, leaving as
her sole heir a son by the name of Armando. When Armando learned that the land
which he expected to inherit had been sold by Irene to Conrado. he filed an
action
against the latter for annulment of the sale, on the ground that it violated
the
restriction imposed by Tomas. Conrado filed a motion to dismiss, on the ground that
Armando did not have the legal capacity to sue.
If you were the Judge, how will you rule on this motion to dismiss? Explain.
Answer:
As judge, 1 will grant the motion to dismiss. Armando has no personality to
bring the action for annulment of the sale to Conrado. Only an aggrieved party to
the
contract may bring the action for annulment thereof (Art. 1397. NCC). While
Armando is heir and successor-in-interest of his mother (Art. 1311, NCC), he
[standing in place of his mother) has no personality to annul the contract.
Both are
not aggrieved parties on account of their own violation of the condition of,
or
restriction on, their ownership Imposed by the donation. Only the donor or his heirs
would have the personality to bring an action to revoke a donation for violation of a
condition thereof or a restriction thereon. (Garrido u. CA, 236 SCRA 450).
Consequently, while the donor or his heirs were not parties to the sale, they
have

the right to annul the contract of sale because their rights are prejudiced by one
of
the contracting parties thereof [DBP v. CA, 96 SCRA 342; Teves vs. PHHC. 23
SCRA 1141. Since Armando is neither the donor nor heir of the donor, he
has no
personality to bring the action for annulment.
Alternative Answer:
As judge, I will grant the motion to dismiss. Compliance with a condition
imposed by a donor gives rise to an action to revoke the donation under
Art. 764,
NCC. However, the right of action belongs to the donor. Is transmissible to his heirs,
and may be exercised against the donee's heirs. Since Armando is an heir
of the
donee, not of the donor, he has no legal capacity to sue for revocation of
the
donation. Although he is not seeking such revocation but an annulment of
the sale
which his mother, the donee, had executed in violation of the condition imposed by
the donor, an action for annulment of a contract may be brought only by those who
are principally
exception to

or

subsidiarily

obliged

thereby

(Art.

1397,

NCC).

As

an

the rule, it has been held that a person not so obliged may nevertheless
ask for
annulment if he is prejudiced in his rights regarding one of the contracting
parties
(DBP us. CA. 96 SCRA 342 and other cases) and can show the detriment
which
would result to him from the contract in which he had no intervention,
(Teves vs.
PHHC, 23 SCRA 1141).
Such detriment or prejudice cannot be shown by Armando. As a forced heir,

Armando's interest In the property was, at best, a mere expectancy. The sale of the
land by his mother did not impair any vested right. The fact remains that
the
premature sale made by his mother (premature because only half of the
period of
the ban had elapsed) was not voidable at all, none of the vices of consent under Art.
139 of the NCC being present. Hence, the motion to dismiss should be granted.
07; Contracts; annulment of contracts; prescriptive period
1979 No. IX
Page 251 of 391
On the basis of a document entitled "Deed of Absolute Sale", a certain lot and
building then, leased by its owner, PC, to JG with a monthly rental of P1,000.00, was
sold to, and thus registered in the latter's name. Six years after the issuance of the
title to JG, MC the sole heir of PC who had just died brought an action for recovery
of the property alleging in his complaint, among others, that PC then very
old and
with weak eyesight was tricked by JG into signing the Deed of Absolute Sale
upon
the fraudulent misrepresentation that said document was only a renewal of the
lease
contract over the property; that the price stated in the document is only
P10,000
although the property was then worth about P50,000 JG moved to dismiss the action
on the ground of prescription. Should the motion be granted? Why?
Answer
The motion should be granted. In reality, the action instituted by MC against
JG for recovery of the property is an action for annulment of the contract based on
fraud and/or
complaint.

mistake.

This

can

be

inferred

from

the

allegations

in

the

Being an action
prescription is

for

annulment

of

voidable

contract,

the

period,

of

four years to be counted from the time of the discovery of the fraud or
mistake.
When did PC and his heir MC discover the fraud or mistake? The discovery
took
place when
instrument

JG

registered

the

property

in

his

name.

Registration

of

an

constitutes constructive notice to the whole world, and therefore, discovery of

the
fraud or mistake is deemed to have taken place at the time of registration.
(Carantes
vs. CA, 76 SCRA 514) In the case at bar, since the action fop annulment
was
instituted six years after registration of the property in JC's name, it follows that it is
now barred by the statute of limitation.
Answer No. II
The motion should be granted. In reality, the action instituted by MC against
JG for recovery of the property is an action for reconveyance of property based on
implied or constructive trust. The allegation in the complaint are clear. JG
acquired
the property through fraud. He is, therefore, by force of law, considered a trustee of
an implied trust for the benefit of the person from whom the property
comes (Art.
1456, Civil Code). It is now a well-settled rule in this jurisdiction that an
action for
reconveyance based on implied trust is prescriptible and that the action
prescribes
after ten years to be counted from the time of the discovery of the fraud. When did
PC and his heir MC discover the fraud? The discovery took place when JG
registered the property in his name. Registration of an instrument constitutes

constructive notice to the whole world, and therefore, discovery of the fraud
is
deemed to have taken place at the time of registration. (Carantes vs. CA, 76 SCRA
514, and cases cited thereunder). In the case at bar, since the action for
reconveyance was instituted six years after registration of the property in JG's
name,
it follows that it is not yet barred by the statute of limitations.
07; Contracts; consensual vs real contracts
1998 No XVIII.
2.

Distinguish consensual from real contracts and name at least four (4)

kinds of real contracts under the present law. [3%|

Answer;
2.

Consensual contracts are those which are perfected by mere consent

(Art. 1315. Civil Code).

the

Real contracts are those which are perfected by

delivery of the object of the obligation. (Art. 1316, Civil Code)

Examples of real contracts are deposit, pledge, commodatum and simple
loan (mutuum).
07; Contracts; consent; invitation to bid
Page 252 of 391
1980 No. IV
(a)

"K" & Co. published in the newspaper an "Invitation To Bid" inviting

proposals to supply labor and materials for a construction project described

in the
invitation. "L", "M", and "N" submitted bids. When the bids were opened, it
appeared
that "L" submitted the lowest bid. However, "K" & Co. awarded the contract "N", the
highest bidder,
responsible

on

the

ground

that

he

was

the

most

experienced

and

bidder. "L" brought an action against "K" & Co, to compel the award to him
and to
recover damages.
Is "L's" position meritorious?
Answer
(a) "L's" position is not meritorious. According to the Civil Code,
advertisements for bidders are simply invitations to make proposals, and the
advertiser is not bound to accept the highest or lowest bidder, unless the
contrary
appears (Art. 1326). It is clear that the general rule applies in the instant case. In its
advertisements, "K" & Co., for instance, did not state that it will award the contract
to
the lowest bidder. Therefore, in awarding the contract to "N", the defendant
company acted in accordance with its rights.
07; Contracts; consideration; validity
2000 No XV
a) Lolita was employed in a finance company. Because she could not account
for the funds entrusted to her. she was charged with estafa and ordered arrested. In
order to secure her release from jail, her parents executed a promissory note to pay
the finance company the amount allegedly misappropriated by their daughter.
The
finance company then executed an affidavit of desistance which led to the
withdrawal of the information against Lolita and her release from jail. The
parents
failed to comply with their promissory note and the finance company sued them for
specific performance. Will the action prosper or not? (3%)
SUGGESTED ANSWER:
The action will prosper. The promissory note executed by Lolita's parents is

valid and binding, the consideration being the extinguishment of Lolita's civil
liability
and not the stifling of the criminal prosecution.
ALTERNATIVE: ANSWER:
The action will not prosper because the consideration for the promissory note
was the non-prosecution of the criminal case for estafa. This cannot be done
anymore because the information has already been filed in court and to do
it is
illegal. That the consideration for the promissory note is the stifling of the
criminal
prosecution is evident from the execution by the finance company of the affidavit of
desistance
promissory

immediately

after

the

execution

by

Lolita's

parents

of

the

note. The consideration being illegal, the promissory note is invalid and may not be
enforced by court action.
07; Contracts; form of contracts
1977 No IV-c
H sold a parcel of land, with right to repurchase in a private instrument to C,
who sold it to D, who transferred it to E. E took possession, and because all
the
transfers were in private instruments, E after 30 years filed suit to compel the heirs
of H to execute a formal deed of conveyance. Has prescription set in? Can
E
prevail?
Answer
Page 253 of 391
The suit filed by E against the heirs of H cannot prosper. In the first place,
there is no privity of interest between E and H or the latter's heirs. E
should have

directed the suit against D, his immediate predecessor. In the second place,
said
action filed by E against the heirs of H, which is presumably based on Art. 1357 of
the Civil Code (to compel each other to execute the required form), has
already
prescribed. An action based on a right provided by law prescribes in 10 years.
07; Contracts; forms of contracts
1982 No. 17
"A" and "B" entered into a verbal contract whereby "A" agreed to sell to "B"
his only parcel
aforementioned

of

land

for

P20,000,

and

"B"

agreed

to

buy

at

the

price. "B" went to the bank, withdrew the necessary amount, and returned to "A" for
the consummation of the contract. "A" however, had changed his mind and refused
to go through with the sale. Is the agreement valid? Will an action by "B" against "A"
for specific performance prosper? Reason.
Answer
It must be observed that there are two questions in the case at bar. They are:
(1) Is the agreement valid? The answer is yes. It is a time-honored rule that
even a verbal agreement to sell land is valid so long as there is already an
agreement with respect to the object and the purchase price.
(2) Will an action by "B" against "A" for specific performance prosper? The
answer is no, unless it is ratified. The reason is obvious. The agreement,
being an
agreement of sale of real property, is covered by the Statute of Frauds
cannot,
therefore, be enforced by a court action because it is not evidenced by any note or
memorandum or writing properly subscribed by the party charged.
(Note: The above answer is based on No. 2 of Art. 1203 of the Civil Code and

It

on decided cases.)
07; Contracts; inducing another to violate a contract
1980 No. V
(a) "O", a very popular movie star was under contract with "P" Movie
Productions to star exclusively in the latter's films for two years. "O" was prohibited
by the contract to star in any film produced by another producer. "X" Film
Co.
induced "O" to break her contract with "P" Movie Productions by giving her twice her
salary. "P" Movie Productions sued "X" Film Co. for damages "X" Film Co contended
that it had a right to compete for the services of "0" and that her contract
with "P"
Movie Productions was in restraint of trade and a restriction on her freedom
of
contract.
Whose contention would you sustain?
Answer
(a)

The contention of "P" Movie Productions should be sustained.

According to the Civil Code, any third person who induces another to violate
his
contract shall be liable for damages to the other contracting party
1314).

(Art.

However, the following requisites must concur: (a) the existence of a valid contract;
(b)
knowledge on the part of the third person of the existence of the
contract; and
(c) interference of the third person without legal justification or excuse. All of these
requisites are present in the case at bar. (See Daywalt vs. Agustinos Recoletos, 39
Phil. 587).
07; Contracts; innominate contracts
1977 No. X-c

Page 254 of 391

What are the different kinds of innominate contracts and how are they
regulated?
Answer
There are four kinds of innominate contracts. They are:
(1) Do ut des I give that you give;
(2) Do ut facias I give that you do;
(3) Facio ut des - I do that you give; and
(4) Facio ut facias I do that you do. These contracts shall be regulated by
the stipulation of the parties, by the general provisions or principles of
obligations
and contracts,
contracts, and

by

the

rules

governing

the

most

analogous

nominate

by the custom of the place (Art. 1307, Civil Code).

1977 No. XI-a
A and B are spurious children of T, born in 1945 and 1947, respectively. T
died in 1955. Can A and B inherit from him? Would your answer be the
same if T
died the year after B's birth?
Answer
If T died in 1955, A and B can inherit from him. Under the New Civil Code,
spurious children can inherit. This is, of course, based on the assumption that T had
recognized A and B as his spurious children either voluntarily or by means of a final
judgment of a competent court. If T had not recognized them, they cannot
inherit
from him.
If T died the year after B's birth, A and B cannot inherit from him. The reason
is that in such case the right of A and B to inherit from T shall still be governed by

the Spanish Civil Code (Art. 2263, Civil Code). Under the facts presented, it is clear
that T died prior to the effectivity (Aug. 30, 1950) of the New Civil Code. Therefore,
what is applicable is the Spanish Civil Code. Under said Code, spurious
children
cannot inherit
07; Contracts; obligatory nature of contracts
1991 No 9:
Roland, a basketball star, was under contract for one year to play-for-play
exclusively for Lady Love, Inc. However, even before the basketball season
could
open, he was offered a more attractive pay plus fringes benefits by Sweet
Taste,
Inc. Roland accepted the offer and transferred to Sweet Taste. Lady Love
sues
Roland and Sweet Taste for breach of contract. Defendants claim that the restriction
to play for Lady Love alone Is void, hence, unenforceable, as It constitutes an undue
Interference with the right of Roland to enter into contracts and the impairment of
his
freedom to play and enjoy basketball
Can Roland be bound by the contract he entered Into with Lady Love or can
he disregard the same? Is he liable at all? How about Sweet Taste? Is it
liable to
Lady Love?
Answer;
Roland Is bound by the contract he entered into with Lady Love and he
cannot disregard
contracts.

the

same,

under

the

principles

of

obligatoriness

Obligations arising from contracts have the force of law between the parties.
Yes, Roland is liable under the contract as far as Lady Love is concerned.

of

He is liable for damages under Article 1170 of the Civil Code since he
contravened the tenor of his obligation. Not being a contracting party, Sweet Taste
is
Page 255 of 391
not bound by the contract but It can be held liable under Art. 1314. The basis of its
liability Is not prescribed by contract but is founded on quail-delict, assuming
that
Sweet Taste knew of the contract. Article 1314 of the Civil Code provides
that any
third person who induces another to violate his contract shall be liable for damages
to the other contracting party.
Alternative Answer:
It is assumed that Lady Love knew of the contract.
Neither Roland nor Sweet Taste would be liable, because the restriction in
the contract is violative of Article 1306 as being contrary to law. morals,
good
customs, public order or public policy.
07; Contracts; perfection of contracts; obligations with a period
1988 No. 11:
(b)

Merle offered to sell her automobile to Violy for P60,000.00. After

inspecting the automobile, Violy offered to buy it for P50,000.00. This offer
was
accepted by Merle. The next day, Merle offered to deliver the automobile, but Violy
being short of funds, secured postponement of the delivery, promising to pay
the
price "upon arrival of the steamer,
arrived

Helena".

The steamer however

never

because it was wrecked by a typhoon and sank somewhere off the Coast of Samar.
(1) Is there a perfected contract in this case? Why?

(2) Is the promise to pay made by Violy conditional or with a term? Why?
(3)

Can Merle compel Violy to pay the purchase price and to accept the

automobile? Why?
Answer:
(b) (1) Yes, there is a perfected contract because there is already a
concurrence between the offer and the acceptance with respect to the object
and
the cause which shall constitute the contract. Such concurrence is manifested by
the
acceptance made by Merle of the offer made by Violy.
(2) I submit that the promise to pay made by Violy is not conditional, but with
a term. The promise is to pay the P50,000 upon arrival in this port of the
steamer,
Helena, not if the steamer Helena shall arrive in this port. Hence,
promise is

the

with regard to the date of arrival and not with regard to the fact of arrival.
(3) Yes, Merle can compel Violy to pay the purchase price and to accept the
automobile. She will, however, have to wait for the date when the steamer, Helena,
would have arrived were it not for the shipwreck. After all, there is already
a
perfected contract.
Suggested Alternative Answers To: No. 11 (b):
(b) (2) The promise to pay is subject to a term. When there is a pre-existing
obligation and the "condition" affects only the time of payment such "condition" can
be considered as a period. In other words, the parties must be deemed to
have
contemplated a period,
(3) Yes Merle can compel Violy to pay the purchase price and to accept the
automobile but only after the parties would have fixed the period. Failing in that, the

courts may be asked to fix the period. Article 1180 provides that:
"When the debtor binds himself to pay when his means permit him to do so,
the obligation shall be deemed to be one with a period, subject to the provisions of
article 1197."
07; Contracts; privity of contract
Page 256 of 391
1996 No. 12:
Baldomero leased his house with a telephone to Jose. The lease contract
provided that Jose shall pay for all electricity, water and telephone services
in the
leased premises during the period of the lease. Six months later. Jose surreptitiously
vacated the premises. He left behind unpaid telephone bills for overseas telephone
calls amounting to over P20,000.00. Baldomero refused to pay the said bills on the
ground that
telephone

Jose

had

already

substituted

him

as

the

customer

of

the

company. The latter maintained that Baldomero remained as his customer as far as
their service
between

contract

was

concerned,

notwithstanding

the

lease

contract

Baldomero and Jose.

Who is correct, Baldomero or the telephone company? Explain.
Answer:
The telephone company is correct because as far as it is concerned, the only
person it contracted with was Baldomero. The telephone company has no
contract
with Jose. Baldomero cannot substitute Jose in his stead without the consent of the
telephone company (Art. 1293, NCC). Baldomero is. therefore, liable under
the
contract.

07; Contracts; reformation of instruments

1984 No. 15
On June 13, 1982, A sold to B in a public instrument a parcel of land for
P50,000, Simultaneously, B granted A an option to buy the same property
for
P60,000 within one year. On June 13, 1983, B allowed A an extension of the option
to buy for another year, this time at the price of P72,000. All the while, A
has
remained in possession of the land.
In May, 1984, A filed an action for the reformation of the deed of sale into a
real estate mortgage, alleging that the land covered thereby was given only
as a
security for the repayment of a loan.
Under the circumstances, will the action prevail? Why?
Answer:
A.

Furnished by the Office of Justice Palma,

The option was granted on the same date that the sale was executed. The
repurchase price
equivalent to
interest at the
possession of

increased at a rate of 20% a year, which could be

rate

of

20%

year.

Moreover,

the

seller

remained

in

the premises. All of these are indications that the real transaction between
the
parties is a loan, not a sale. In case of doubt, under Article 1603, a
contract
purporting to be a sale with right of repurchase shall be construed as an
equitable
mortgage. The instrument should therefore be reformed.
B.

Comments and Suggested Answer

We agree with the answer of the Bar Examiner.

07; Contracts; rescission of contracts; capacity to sue
1996 No. 13:
In December 1985, Salvador and the Star Semiconductor Company (SSC)
executed a Deed of Conditional Sale wherein the former agreed to sell his
2,000
square meter lot in Cainta, Rizal, to the latter for the price of P1,000,000.00,
payable
P100,000.00 down, and the balance 60 days after the squatters in the property
have
been removed. If the squatters are not removed within six months, the P100,000.00
down payment shall be returned by the vendor to the vendee,
Page 257 of 391
Salvador filed ejectment suits against the squatters, but in spite of the
decisions in his favor, the squatters still would not leave. In August, 1986, Salvador
offered to return the PIOO,OOO.OO down payment to the vendee, on the
ground
that he is unable to remove the squatters on the property. SSC refused to accept the
money and demanded that Salvador execute a deed of absolute sale of the property
in its favor, at which time It will pay the balance of the price. Incidentally, the value
of
the land had doubled by that time.
Salvador consigned the P 100,000.00 in court, and filed an action for
rescission of the deed of conditional sale, plus damages.
Will the action prosper? Explain.
Answer;
No, the action will not prosper. The action for rescission may be brought only
by the aggrieved party to the contract. Since it was Salvador who failed to
comply

with his conditional obligation, he is not the aggrieved party who may file the action
for rescission but the Star Semiconductor Company, The company, however, is not
opting to rescind the contract but has chosen to waive Salvador's compliance
with
the condition which it can do under Art. 1545, NCC.
Alternative Answer:
The action for rescission will not prosper. The buyer has not committed any
breach,
let
alone
rescission/resolution

substantial

or

serious

one,

to

warrant

the

sought by the vendor. On the contrary, it is the vendor who appears to have failed
to
comply with the condition imposed by the contract the fulfillment of which
would
have rendered the obligation to pay the balance of the purchase price demandable.
Further, far from being unable to comply with what is incumbent upon it, ie., pay the
balance of the price - the buyer has offered to pay it even without the vendor
having
complied with the suspensive condition attached to the payment of the price,
thus
waiving such condition as well as the 60-day term in its favor The stipulation that
the
PI00,000.00 down payment shall be returned by the vendor to the vendee if
the
squatters are not removed within six months, is also a covenant for the benefit of
the
vendee, which the latter has validly waived by Implication when it offered to pay the
balance of the purchase price upon the execution of a deed of absolute sale by the
vendor. (Art. 1545, NCCJ
07; Contracts; Statute of Frauds
1988 No. 15:

(a) Suppose that in an oral contract, which by its terms is not to be performed
within one year from the execution thereof, one of the contracting parties
has
already complied within the year with the obligations imposed upon him by
said
contract, can the other party avoid fulfillment of those incumbent upon him
by
invoking the Statute of Frauds?
Answer:
(a) No, he cannot. This is so, because the Statute of Frauds aims to prevent
and not to protect fraud. It is well-settled that when the law declares that
an
agreement which by its terms is not to be performed within a year from the making
thereof is unenforceable by action, unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party- charged, or by his agent, it
refers
only to an agreement which by its terms is not to be performed on either side within
a year from the execution thereof. Hence, one which has already been fully
performed on one side within a year is taken out of the operation of the statute.
(Phil.
Nat. Bank vs. Phil. Vegetable Oil Co., 49 Phil. 857; Shoemaker vs. La Tondena, 68
Phil. 24.)
Page 258 of 391
07; Contracts; Statute of Frauds
1979 No. XI
W and Colk a logging company, received a letter from M, the new owner of a
certain property, notifying it that the latter will close the road running thru
his

property and thru which W & Co.'s trucks pass in hauling logs to its saw
mill. W &
Co. therefore begged M not to do so and upon the latter's refusal, W & Co. filed an
action for injunction alleging among others that it had acquired a right of way
through
M's land before by virtue of a verbal agreement with the previous owner.
Will the
action prosper? Why?
Answer
Yes, the action will prosper. The right of way, although arising from a verbal
agreement with the former owner of the land, still subsists. Obviously, the Statute of
Frauds cannot be applied because the agreement is not an agreement for the sale
of real property or an interest therein. Therefore, the agreement is both valid
and
enforceable. (Western Mindanao Lumber Co. vs. Medalle, 79 SCR A 702).
Alternative Answer
Yes, the action will prosper. The right of way, although arising from a verbal
agreement with the former owner of the land still subsists. It is a well-settled rule in
this jurisdiction
executory

that

the

Statute

of

Frauds

is

applicable

only

to

purely

contracts and not to contracts which have already been executed either
totally or
partially. Here, the verbal agreement with respect to the right of way had
already
been totally executed. Besides, there was already acceptance of benefits.
Therefore, the agreement is now valid and enforceable at the same time.
07; Contracts; Statute of Frauds; ratification by acceptance
1981 No. 9
"O" verbally leased his house and lot to "L" for two years at a monthly rental

of P250 a month. After the first year, "0" demanded a rental of P500.00 claiming
that
due to the energy crisis, with the sudden increase of the price of oil, which
no one
expected, there was also a general increase in prices. "O" proved an inflation rate of
100%. When "L" refused to vacate the house, "0" brought an action for
ejectment.
"O" denied that he had agreed to a lease for two years.
a) Can the lessee testify on a verbal contract of lease? Reasons.
b)

Assuming that "O" admits the two-year contract, is he justified in

increasing the rental? Why?

Answer
(a) Yes, the lessee "L" may testify on the verbal contract of lease. Wellsettled is the rule
contracts {such

that

the

Statute

of

Frauds

by

virtue

of

which

oral

as the contract in the instant case) are unenforceable by court action is

applicable
only to those contracts which have not been consummated either totally or partially.
The reason for this rule is obvious. In effect, there is already a ratification
of the
contract by acceptance of benefits. Here, "L" has been paying to "O" in
monthly
rental of P250.00 for one year. The case is, therefore, withdrawn from the coverage
of the Statute of Frauds.
{Note: The above answer is based on Arts. 1403, No. 2 and 1405 of the Civil
Code and on decided cases.)
(b) Yes, "O" is justified in increasing the monthly rental. Since it is admitted
that the contract of lease is for a definite term or period of two years and
since he

Page 259 of 391

has established an inflation rate of 100%, it is crystal clear that the case is
withdrawn from the coverage of the new rental law.
(Note: The above answer is based on Batas Pambansa Blg. 25.)
07; Contracts; stipulation pour atrui
2002 No X.
Printado is engaged in the printing business. Suplico supplies printing paper
to Printado
himself to

pursuant

to

an

order

agreement

under

which

Suplico

binds

deliver the same volume of paper every month for a period of 18 months,
with
Printado in turn agreeing to pay within 60 days after each delivery. Suplico has been
faithfully delivering under the order agreement for 10 months but thereafter
stopped
doing so, because Printado has not made any payment at all. Printado has
also a
standing contract with publisher Publico for the printing of 10, 000 volumes of
school
textbooks. Suplico was aware of said printing contract. After printing 1, 000
volumes,
Printado also fails to perform under its printing contract with Publico. Suplico
sues
Printado for the value of the unpaid deliveries under their order agreement.
At the
same time Publico sues Printado for damages for breach of contract with respect to
their own printing agreement. In the suit filed by Suplico, Printado counters that: (a)
Suplico cannot
agreement

demand

payment

for

deliveries

made

under

their

order

until Suplico has completed performance under said contract; (b) Suplico should pay
damages for breach of contract; and (c) with Publico should be liable for Printados

breach of his contract with Publico because the order agreement between
Suplico
and Printado was for the benefit of Publico. Are the contentions of Printado tenable?
Explain your answers as to each contention. (5%)
SUGGESTED ANSWER:
No, the contentions of Printado are untenable.
Printado having failed to pay for the printing paper covered by the delivery
invoices on time, Suplico has the right to cease making further delivery. And
the
latter did not violate the order agreement (Integrated Packaging Corporation v.
Court
of Appeals, (333 SCRA 170, G.R. No. 115117, June 8, [2000]).
Suplico cannot be held liable for damages, for breach of contract, as it was
not he who violated the order agreement, but Printado.
Suplico cannot be held liable for Printados breach of contract with Publico.
He is not a party to the agreement entered into by and between Printado
and
Publico. Theirs is not a stipulation pour atrui. [Aforesaid] Such contracts do could not
affect third persons like Suplico because of the basic civil law principle of relativity
of
contracts which provides that contracts can only bind the parties who entered into
it,
and it cannot favor or prejudice a third person, even if he is aware of such contract
and has acted with knowledge thereof. (Integrated Packaging Corporation v.
CA,
supra.)
07; Contracts; stipulation pour atrui
1977 No. VII-b
What is a stipulation pour atrui and what are its essential requisites? Give an

example.
Answer
A stipulation pour atrui is a stipulation in a contract, clearly and deliberately
conferred by the contracting parties as a favor upon a third person, who
must
communicate his acceptance to the obligor before it is revoked. Before such
a
stipulation may be enforced, it is necessary that the following requisites must
concur: (1) that it must be for the benefit or interest of the third person; (2) that
such
Page 260 of 391
benefit or Interest must not be merely incidental; (3) that the contracting
parties
should have clearly and deliberately conferred such benefit or interest upon the
third
person; and (4) that the third person should have communicated his acceptance of
the benefit or interest to the obligor before its revocation. (Art. 1311, par. 2,
Civil
Code.)
Example: In a contract with X Co., the Philippine National Bank, for a
valuable consideration, agreed to cause a sum of money to be paid to A in
New
York City. If A communicates his acceptance of the benefit to X Co. before it could
be revoked by the latter, we have what is commonly known as a stipulation
pour
atrui.
07; Contracts; void contracts; in pari delicto principle
1977 No, VII-c
Discuss the principle of in pari delicto and enumerate five (5) instances in the

Civil Code which are exceptions to the principle.

Answer
When the defect of a void contract consists in the illegality of the cause or
object of the contract, and both of the parties are at fault or in pari delicto,
the law
refuses them every remedy and leaves them where they are. This rule which
is
embodied in Arts. 1411 of the Civil Code is what is commonly known as the principle
of in pari delicto,
The exceptions to the principle of pari delicto are the following:
(1) Payment of usurious interest. In such case, the law allows the debtor to
recover the interest paid in excess of that allowed by the usury laws, with
interest
thereon from the date of payment. (Art 1413, Civil Code).
(2)

Payment of money or delivery of property for an illegal purpose, where

the party who paid or delivered repudiates the contract bore the purpose has been
accomplished, or before any damage has been caused to a third person. In
such
case, the courts may allow such party to recover what he has paid or delivered if
the
public interest will thus be sub served. (Art. 1414, Civil Code).s
(3) Payment of money or delivery of property by an incapacitated person. In
such case, the courts may allow such person to recover what he has paid
or
delivered, if the interest of justice so demands. (Art, 1415, Civil Code).
(4) Agreement or contract which is not illegal per se but is merely prohibited
by law, and the prohibition is designed for the protection of the plaintiff. In such
case,
such plaintiff, if public policy is thereby enhanced, may recover what he has paid or

delivered. (Art. 1416. Civil Code).

(5) Payment of any amount in excess of the maximum price of any article or
commodity fixed by law. In such case, the buyer may recover the excess. (Art. 1417,
Civil Code).
(6)

Contract whereby a laborer undertakes to work longer than the

maximum number of hours fixed by law. In such case, the laborer may demand for
overtime pay. (Art. 1418, Civil Code).
(7)

Contract whereby a laborer accepts a wage lower than the minimum

wage fixed by
deficiency, (Art.

law.

In

such

case,

the

laborer

may

demand

for

the

1419, Civil Code).

(NOTE: The above exceptions may be tagged or labeled only either by their
codal numbers or by any means of identification.)
07; Contracts; void contracts; usurious interests
Page 261 of 391
1977 No. X-a
The Court found that the loan by C to D of P20,000.00 was usurious,
because it provided for the payment P5,000 as interest in 1 year.
(1) If the principal and the interest were paid, what can D recover from C?
(2) If no payment whatsoever was made, can D resist an action to collect by
C on the ground that the transaction is illegal and void?
Answer:
(1)
with

D can recover from S the entire interest paid by him to the latter

interest thereon from the date of payment. This is expressly directed by the
Civil
Code (Art. 1418.) True, the Usury Law (Sec. 6) merely states that he can
recover

only the whole interest paid, but the Civil Code (Art. 1413) adds that the same can
be recovered with interest thereon from the date of payment. (Angel Jose
Warehousing Co. vs. Ckelda Enterprises, 23 SCRA 119.)
(2)

No, D cannot. According to the Civil Code (Art. 1420), in case of a

divisible contract, if the illegal terms can be separated from the legal ones, the
latter
may be enforced. In a simple contract of a loan with usurious interest, the
prestation
of the debtor to pay the principal debt is not illegal; what is illegal is to
pay the
stipulated interest. Hence, being separable, the latter only should be deemed
void.
(Angel Jose vs. Chelda, supra; Briones vs, Cammayo, 41 SCRA 404.)
07; Contracts; void vs voidable contracts
2004 No. II
A. Distinguish briefly but clearly between: 4. Inexistent contracts and
annullable contracts.
07; Contracts; void/unenforceable contracts
1976 No. X-c
C, husband of D, sold paraphernal property in her name without her (D's)
consent. Was such sale valid, void, voidable, rescissible or unenforceable? Explain.
Answer
Under the general principle on contracts, the contract is unenforceable if
entered into in the name of another without authority. (Article 1317)
Assuming that C, the husband of D was the letter's agent, under the law on
agency which was taken from the old Statute of Frauds (Art. 1874), if a sale
of a
piece of land or any interest therein is through an agent, the authority of
the latter

shall be in writing; otherwise, the sale shall be void.

To reconcile those two provisions, Article 1317 should apply if the property
sold was movable
immovable.

and

Article

1874

shall

apply

if

the

property

sold

is

Hence it the property is movable, the contract is unenforceable, and if the property
is
immovable, the contract is void.
07; Contracts; voidable contracts
1990 No 7:
X was the owner of a 10,000 square meter property. X married Y and out of
their union. A, B and C were born. After the death of Y, X married Z and they begot
as children, D, E and F. After the death of X. the children of the first and
second
marriages executed an extrajudicial partition of the aforestated property on
May 1,
1970. D, E and F were given a one thousand square meter portion of the property.
They were minors at the time of the execution of the document. D was 17 years old,
E was 14and F was 12; and they were made to believe by A, B and C that
unless
Page 262 of 391
they sign the document they will not get any share. Z was not present
then. In
January 1974, D,E and F filed an action in court to nullify the suit alleging
they
discovered the fraud only in 1973.
(a) Can the minority of D, E and F be a basis to nullify the partition? Explain
your answer.
(b) How about fraud? Explain your answer.
Answer;

(a) Yes, minority can be a basis to nullify the partition because D, E and F
were not properly represented by their parents or guardians at the time they
contracted the extra-judicial partition. (Articles 1327. 1391, Civil Code).
(b) In the case of fraud, when through Insidious words or machinations of one
party the other is induced to enter into the contract without which he would not
have
agreed to, the action still prosper because under Art, 1391 of the Civil Code, in case
of fraud, the action for annulment may be brought within four years from
the
discovery of the fraud.
07; Contracts; voidable contracts
1976 No. VIII-a
A, 20, contracted in 1970 with B, 22, an operator of a driving range for
golfers, to supply the latter with golf balls. May B annul the contract on the
ground
that A was incapable of giving consent to a contract? Explain.
Answer
No, under the law on contracts, only the incapacitated person can bring the
action to annul, based on the ground of estoppel. Hence, only A may bring
the
action to annul. (Article 1397)
1976 No. VIII-b
If A claims that he (A) was drunk when the contract was signed, may an
action to annul the contract be filed by him in 1975? Explain.
Answer
No. Contracts agreed upon in a state of drunkenness are voidable but the
action to annul on that ground must be brought within four (4) years. (Article
1328,

1391,) Here it was brought beyond the 4-year period.

1976 No. VIII-c
If one week after the execution of the contract, B was told by A that A would
have the contract annulled as A was drunk at the time of the signing thereof and A
continued delivering golf balls for 3 years, will such action by A prosper? Explain.
Answer
No. The act of A in performing his obligation under the contract after he
became of age, constituted ratification and cleanses the contract of all its
defects
from the time of execution of the agreement. (Article 1396) He may also be
barred
from bringing the action on the ground of estoppel.
07; Contracts; voidable contracts
1978 No. VI-a
A purchased from XYZ subdivision company a lot of three hundred (300)
square meters in Cebu on December 3, 1973. Transfer Certificate of Title No. 2537
was issued in his name with the annotation at the back thereof that the lot is
subject
to the condition that it cannot be resold within the period of ten (10) years and if he
is
Page 263 of 391
forced to resell, he may resell it only to XYZ subdivision company. A year
later, A
executed a real estate mortgage in favor of B upon a P5,000 loan, which
was
registered with the Register of Deeds. A and B were aware of the condition in favor
of XYZ subdivision company. Upon A's failure to redeem the property in 1927, B was
the highest bidder at the foreclosure sale conducted by the sheriff and was issued a

certificate of sale which was registered with the Register of Deeds. A later
brought
an action to annul the sale on the ground that it violated the condition.
Decide the
case with reasons.
Answer:
The action brought by A against B to annul the sheriff's sale will not prosper.
Both parties are equally guilty of breaching the condition in favor of XYZ
subdivision,
a condition known to both of them. Under both the principle of estoppel and of pari
delicto, neither one of sale. Besides, and this is decisive, the proper party
who
should institute the action is XYZ subdivision and not A. Under the law on defective
contracts, in actions for annulment of rescission, it is the party who is
damaged or
prejudiced who should institute the action and not the party who, with
another or
others, was responsible for the breach or damage.
(NOTE: The above answer is based on Art. 1431, with respect to pari delicto,
and Art 1397, Civil Code, with respect to proper party in actions for annulment.)
07; Contracts; voidable contracts
1979 No. X
Mrs. S borrowed P20,000 from PG, She and her 19-year old son, Mario,
signed the promissory note for the loan, which note did not say anything- about the
capacity of the signers. Mrs. S made partial payments little by little. After seven (7)
years she died leaving a balance of P10,000.00 on the note. PG demanded
payment from Mario who refused to pay. When sued for the amount, Mario
raised
the defense: that when he signed the note he was still a minor. Should the defense

be sustained? Why?
Answer
The defense should be sustained. Mario cannot be bound by his signature in
the promissory note. It must be observed that the promissory note does not
say
anything about the capacity of the signers. In other words, there is no active fraud
or
misrepresentation; there is merely silence or constructive fraud or
misrepresentation. It would have been different if the note says that Mario is of age.
The principle of estoppel would then apply. Mario would not be allowed to invoke the
defense of minority. The promissory note would then have all of the effects
of a
perfectly valid note. Hence, as far as Mario's share in the obligation is
concerned,
the promissory note is voidable because of minority or non-age. He cannot,
however, be absolved entirely from monetary responsibility. Under the Civil
Code,
even if his written contract is voidable because of minority he shall make restitution
to the extent that he may have been benefited by the money received by
him (Art.
1399, Civil Code). (Braganza vs. Villa Abrille, L-12471, April 13, 1959).
07; Estoppel
1987 No. 7:
Fred sold to Juan a parcel of land, belonging to his minor son, Lino, then
under his guardianship,
immediately

without

judicial

approval.

After

the

sale,

Juan

took possession of the land, built a house and religiously paid the taxes
thereon.
Nine years thereafter, Lino, no longer a minor, rented the ground floor of the house

built by Juan. Lino paid the rent for the first month, then stopped paying. Two years
thereafter, when pressed for payment of the accrued rent. Lino refused,
claiming
Page 264 of 391
ownership over the property, alleging that the sale of the property to Juan while he
was A minor without the approval of the guardianship court rendered the
sale null
and void.
Is the claim of Lino valid and meritorious.? Explain. Answer
No, Lino's claim is not valid and not meritorious because Lino is in estoppel.
A lessee cannot assail the right and title of the lessor and cannot claim ownership
as
against the lessor. The fact that the sale was made while Lino was a minor is of no
moment because
already of

he

recognized

and

ratified

the

contract

after

he

was

majority age.
Answer;
No, Lino's claim is not valid and not meritorious because Juan had already
become the owner of the land by ordinary acquisitive prescription through
adverse
possession of the land for over ten (10) years.
Answer
No, Lino's claim is not valid and not meritorious. Lino can no longer recover
the land because of laches.
07; Estoppel
1989 No. 15:
(1) What do you understand by ESTOPPEL? What are the different kinds of
estoppel? Explain.

Answer:
The Civil Code enumerates only two (2) kinds of estoppel: estoppel in pais or,
by conduct and estoppel by deed. Estoppel in pais or by conduct arises
when one
by his act, representation, oral admission or by his silence induces another
to
believe certain facts to exist and the other realize an act on such belief.
Estoppel by deed is that by virtue of which a party to a deed and his privies
are precluded from asserting as against the other party any right or title in
derogation of the deed or any fact asserted therein.
Alternative Extended Answer:
The Civil Code gives two (2) kinds of estoppel, namely: estoppel in pais and
estoppel by deed; and jurisprudence gives a third, namely: estoppel by laches.
Estoppel in pais or by conduct arises when one by his act, representation,
oral admission or by his silence induces another to believe certain facts to exist and
the other realize an act on such belief.
Estoppel by deed is that by virtue of which a party to a deed and his privies
are precluded from asserting as against the other party by which any right or title in
derogation of the deed or any fact asserted therein.
Laches is negligence or omission to assert a right within a reasonable time
giving rise to the presumption that the party entitled to assert it either has
abandoned it or declined to assert it.
07; Estoppel; laches
1988 No. 2:
(c)

Since 1935, Janice possessed alone a parcel of land which

she

co-

owned with Lenny. In 1970, with the knowledge of Lenny, Janice obtained a

Torrens title over the land in her own name alone. On August 1, 1988,
Lenny
Page 265 of 391
brought an action against Janice for reconveyance of her share, Janice set up
the
defense of laches. Will the defense prosper? Reasons.
Answer:
(c) It is submitted that the defense of laches will prosper. As held by the
Supreme Court in several notable decisions, in order that the doctrine of
laches or
"stale demands" can be applied, the following elements must concur: (1) Conduct
on
the part of the defendant, or of one under whom he claims, giving rise to
the
situation of which complaint is made and for which the complaint seeks a
remedy;
(2) delay in asserting the complainant's rights, the complainant having had
knowledge or notice, of the defendant's conduct and having been afforded
an
opportunity to institute a suit (3) lack of knowledge or notice on the part of
the
defendant that the complainant would assert the right on which he bases
the suitand (4) injury or prejudice to the defendant in the event relief is accorded
to the
complainant, or the suit is not held to be barred (Miguel vs. Catalino, 26 SCRA 234).
All of these elements are present in the instant case. As a matter of fact, the
doctrine
was applied to a case wherein co-heir and another were able, through fraud,
to

register a tract of land in their names. According to the Supreme Court, the action
for
reconveyance brought by the other co-heirs more than twenty years later is
now
barred not only by extinctive prescription but also by laches- (Fabian vs. Fabian, 22
SCRA 231).
07; Natural obligations
1977 No. IX-c
What are natural obligations? Give an example. Answer
Natural obligations are those based on equity and natural law, which are not
enforceable by means of a court action, but which, after voluntary fulfillment by the
obligor, authorize the retention by the obligee of what has been delivered or
rendered by reason thereof. In other words, they refer to those ''obligations without
a
sanction susceptible of voluntary performance, but not through compulsion by legal
means". (4 Tolentino, Civil Code, 1956 Ed., p. 588, citing Colin & Capitant)
(NOTE: There are seven examples given in the Civil Code (Arts, 1424 to
1430). Any one of them may be given.)
07; Obligations; alternative obligations
1988 No. 9:
(a) Define alternative and facultative obligations.
Answer:
(a) Alternative obligations

refer

to those

juridical relations which

comprehend several objects or prestations which are due, but the payment
or
performance
facultative

of

obligations refer
prestation has

one
to

of

them

those

would

juridical

be

sufficient.

relations

where

On
only

the

other

one

hand,

object

or

been agreed upon by the parties to the obligation, but the obligor may
deliver or
render another in substitution.
07; Obligations; alternative/facultative obligations
1977 No. VIII-c
Distinguish between alternative and facultative obligations: and between
suspensive and resolutory conditions in obligations.
Answer
Facultative obligations may be distinguished from alternative obligations in
the following ways:
Page 266 of 391
(1) As to object due: In facultative obligations only one object is due, whereas
in alternative obligations several objects are due.
(2)

As to compliance: Facultative obligations may be complied with by the

delivery of another object or the performance of another prestation in substitution

of
that which is due, whereas alternative obligations may be complied with by
the
delivery of one of the objects or by the performance of the prestations
which are
alternative due.
(3) As to right of choice: In the first, the right of choice pertains only to the
debtor, whereas in the second, the right of choice may pertain even to the creditor
or
to a third person.
(4) As to effect of fortuitous loss: In the first, the loss or impossibility of the
object or prestation which is due without any fault of the debtor is sufficient
to

extinguish the obligation, whereas in the second, the loss or impossibility of all of
the
objects or prestations which are due without any fault of the debtor is necessary to
extinguish the obligation.
<6) As to effect of culpable loss: In the first, the culpable loss of the object
which the debtor may deliver in substitution before the substitution is effected does
not give rise to any liability on the part of such debtor; in the second, the
culpable
loss of any of the objects which are alternately due before the choice is made may
give rise to a liability on the part of the debtor.
(NOTES: A brief statement of the first three distinctions should constitute a
sufficient answer.)
If the suspensive condition is fulfilled, the obligation fulfilled, the obligation is
extinguished. If the first arises or becomes effective; if the resolutory condition is
not
fulfilled, no juridical relation is created; if the second is not fulfilled, the
juridical
relation is consolidated.
acquired, but

In

other-words,

in

the

first,

rights

are

not

yet

there is a hope or expectancy that they will soon be acquired; in the second, rights
are already acquired, but subject to the threat of extinction.
(NOTE: A statement of the substance of the above distinctions should
constitute a sufficient answer.)
07; Obligations; civil vs natural oblig
2004 No. II
A. Distinguish briefly but clearly between: 3. Civil obligation and natural
obligation.
07; Obligations; civil vs natural obligation

1989 No. 15:

(2) How is a civil obligation distinguished from a natural obligation? Give an
example of a natural obligation.
Answer:
Civil obligations give a right of action to compel their performance. Natural
obligations, not being based on positive law but on equity and natural law,
do not
grant a right of action to enforce their performance, but after voluntary fulfillment
by
the obligor, they authorize the retention of what has been delivered on rendered by
reason thereof.
Example of a natural obligation (one example out of any of the following):
1.

When a right to sue upon a civil obligation has lapsed by extinctive

prescription, the obligor who voluntarily performs the contract cannot recover
what
he has delivered or the value of the service he has rendered.
Page 267 of 391
2.

When without the knowledge or against the will of the debtor a third

person pays a debt which the obligor is not legally

the
action thereon
the third

bound to

pay because

has prescribed, but the debtor later voluntarily reimburses

person, the obligor cannot recover what he has paid.

3.

When a minor between eighteen and twenty-one years of age who has

entered into a contract without the consent of the parent or guardian, after
the
annulment
received,

of

the

contract

voluntarily

returns

the

whole

thing

or

price

notwithstanding the fact that he has not been benefited thereby, there is no right to

demand the thing or price thus returned.

4.

When a minor between eighteen and twenty-one years of age, who has

entered into a contract without the consent of the parent or guardian,

voluntarily
pays a sum of money or delivers a fungible thing in fulfillment of the obligation,
there
shall be no right to recover the same from the obligee who has spent or consumed
it
in good faith.
5. When, after an action to enforce a civil obligation has failed, the defendant
voluntarily performs the obligation, he cannot demand the return of what he
has
delivered or the payment of the value of the service he has rendered,
6.

When a testate or intestate heir voluntarily pays a debt of the decedent

exceeding the value of the property which he received by will or by the law
of
intestacy from the estate of the deceased, the payment is valid and cannot
be
rescinded by the payer.
7. When a will is declared void because it has not been executed in
accordance with the formalities required by law, but one of the intestate heirs, after
the settlement of the debts of the deceased, pays a legacy in compliance
with a
clause in the defective will, the payment is effective and irrevocable.
07; Obligations; conditional obligations
1997 No, 14;
In two separate documents signed by him, Juan Valentino "obligated" himself
each to Maria and to Perla, thus 'To Maria, my true love, I obligate myself to give you my one and only horse

when I feel like It."

- and 'To Perla, my true sweetheart, I obligate myself to pay you the P500.OO I
owe you when I feel like it."
Months passed but Juan never bothered to make good his promises. Maria
and Perla came to consult you on whether or not they could recover on the basis of
the foregoing settings.
What would your legal advice be? Answer:
I would advise Maria not to bother running after Juan for the latter to make
good his promise. [This is because a promise is not an actionable wrong that allows
a party to recover especially when she has not suffered damages resulting
from
such promise, A promise does not create an obligation on the part of Juan because
it is not something which arises from a contract, law, quasi-contracts or quasidelicts
(Art, 1157)]. Under Art. 1182, Juan's promise to Maria is void because a conditional
obligation depends upon the sole will of the obligor.
As regards Perla, the document is an express acknowledgment of a debt,
and the promise
equivalent to a

to

pay

what

he

owes

her

when

he

feels

like

it

Is

promise to pay when his means permits him to do so, and is deemed to be one with
Page 268 of 391
an indefinite period under Art. 1180. Hence the amount Is recoverable after
Perla
asks the court to set the period as provided by Art. 1197, par. 2.
07; Obligations; conditional obligations
1999 No XI
In 1997, Manuel bound himself to sell Eva a house and lot which is being

rented by another person, if Eva passes the 1998 bar examinations. Luckily for Eva,
she passed said examinations.
(a)

Suppose Manuel had sold the same house and lot to another before

Eva passed the 1998 bar examinations, is such sale valid? Why? (2%)
(b)

Assuming that it is Eva who is entitled to buy said house and lot, is she

entitled to the rentals collected by Manuel before she passed the 1998 bar
examinations? Why? (3%)
ANSWER:
(a) Yes, the sale to the other person is valid as a sale with a resolutory
condition because what operates as a suspensive condition for Eva operates
a
resolutory condition for the buyer.
FIRS T ALTERNATIVE ANS WER:
Yes, the sale to the other person is valid. However, the buyer acquired the
property subject to a resolutory condition of Eva passing the 1998 Bar
Examinations.
Hence, upon Eva's passing the Bar, the rights of the other buyer terminated and Eva
acquired ownership of the property.
SECOND ALTERNATIVE ANSWER:
The sale to another person before Eva could buy it from Manuel is valid, as
the contract between Manuel and Eva is a mere promise to sell and Eva
has not
acquired a real right over the land assuming that there is a price stipulated
in the
contract for the contract to be considered a sale and there was delivery or tradition
of the thing sold.
(b) No, she is not entitled to the rentals collected by Manuel because at the
time they accrued and were collected, Eva was not yet the owner of the property.

FIRST ALTERNATIVE ANSWER:

Assuming that Eva is the one entitled to buy the house and lot, she is not
entitled to the rentals collected by Manuel before she passed the bar examinations.
Whether it is a contract of sale or a contract to sell, reciprocal prestations
are
deemed imposed A for the seller to deliver the object sold and for the buyer to pay
the price. Before the happening of the condition, the fruits of the thing and
the
interests on the money are deemed to have been mutually compensated
under
Article 1187.
SECOND ALTERNATIVE ANSWER:
Under Art. 1164, there is no obligation on the part of Manuel to deliver the
fruits (rentals) of the thing until the obligation to deliver the thing arises. As
the
suspensive condition has not been fulfilled, the obligation to sell does not arise.
07; Obligations; conditional obligations
2000 No XV
b) Pedro promised to give his grandson a car if the latter will pass the bar
examinations.
refused to

When

his

grandson

passed

the

said

examinations,

Pedro

give the car on the ground that the condition was a purely potestative one.
Is he
correct or not? (2%)
Page 269 of 391
SUGGESTED ANSWER:
No, he is not correct. First of all, the condition is not purely potestative,
because it does not depend on the sole will of one of the parties. Secondly, even if it

were, it would be valid because it depends on the sole will of the creditor (the
donee)
and not of the debtor (the donor).
07; Obligations; conditional obligations
2003 No XIII.
Are the following obligations valid, why, and if they are valid, when is the
obligation demandable in each case?
(a) If the debtor promises to pay as soon as he has the means to pay;
(b) If the debtor promises to pay when he likes;
(c) If the debtor promises to pay when he becomes a lawyer;
(d) If the debtor promises to pay if his son, who is sick with cancer, does
not die within one year. 5%
SUGGESTED ANSWER:
(a) 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
(Article
1180, NCC). When the creditor knows that the debtor already has the means to pay,
he must file an action in court to fix the period, and when the definite period as set
by the court arrives,
1197,

the obligation

to pay becomes demandable 9Article

NCC).
(b) 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. (Article 1182, NCC).
(c) The obligation is valid. It is subject to a suspensive condition, i.e. the
future and uncertain event of his becoming
this

a lawyer. The performance of

obligation does not

factors

depend solely

on the will of the debtor but also on other

outside the debtors control.

(d) 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 (Article 1185, NCC).
07; Obligations; conditional obligations
1988 No. 8:
(b)

Distinguish between the effects of suspensive and resolutory conditions

upon an obligation.
Answer:
(b) It is evident that a resolutory condition affects the obligation to which it is
attached in a manner which is diametrically opposed to that of a suspensive
condition. If the suspensive condition is fulfilled, the obligation arises or
becomes
effective if the resolutory condition is fulfilled, the obligation is extinguished.
If the
first is not fulfilled, the juridical relation is created; if the second is not
fulfilled, the
juridical relation is consolidated. In other words, in the first, rights are not
yet
acquired, but there is a hope or expectancy that they will soon be acquired;
in the
second, rights are already acquired, but subject to the threat of extinction (8
Manresa, 5th Ed., Bk. 1, p. 311.)
07; Obligations; conditional obligations
Page 270 of 391
1975 No. XIII
A owed B a certain sum of money. C wrote B a letter stating that he would be

the one to take care of A's debt as soon as A had made a shipment of logs to Japan.
A never made such shipment, C did not pay B. Is C liable to B? Explain.
Answer
No, C is not liable to B. C did not assume the obligation of A. C merely stated
that he will "take care" of A's debt. Moreover, even if C assumed liability,
the
suspensive conditionnamely, the shipment by A of logs to Japan, was never
fulfilled. C's obligation never arose. Under Article 1181 of the Civil Code, in
conditional
obligations,
extinguishment or

the

acquisition

of

rights,

as

well

as

the

loss of those already acquired, shall depend upon the happening of the event which
constitutes the condition. (Villanueva v. Girged, 110 Phil. 478)
07; Obligations; exemption from liability due to fortuitous events; exceptions
1983 No. 11
Cite three instances where a person is made civilly liable for failure to comply
with his obligations although he was prevented from doing so by a fortuitous event.
Answer
(a)

When the loss is due to the debtor's fault.

(b)

When the debtor has incurred in delay,

(c)

When he has promised to deliver the same thing to 2 or more different

persons who do not have the same interest,

(d)

When it is expressly stipulated.

(e)

When the law expressly provides so,

(f)
(g)
of

When the nature of the obligation requires the assumption of risk, and
When the thing to be delivered is indeterminate, the loss of a thing

the same kind, even if due to

the

fortuitous event, does

not

extinguish

obligation.
07; Obligations; extinguishment of a cause of action
2004 No. I
B. TX filed a suit for ejectment against BD for non-payment of condominium
rentals amounting to P150,000. During the pendency of the case, BD offered and TX
accepted the full amount due as rentals from BD, who then filed a motion to dismiss
the ejectment suit on the ground that the action is already extinguished.
Is BDs contention correct? Why or why not? Reason. (5%)
07; Obligations; extinguishment; assignment of rights
2001 No XI
The sugar cane planters of Batangas entered into a long-term milling contract
with the Central Azucarera de Don Pedro Inc. Ten years later, the Central assigned
its rights to the said milling contract to a Taiwanese group which would take over
the
operations of the sugar mill. The planters filed an action to annul the said
assignment on the ground that the Taiwanese group was not registered with
the
Board of Investments. Will the action prosper or not? Explain briefly. (5%)
(Note: The question presupposes knowledge and requires the application of
the provisions of the Omnibus Investment Code, which properly belongs to
Commercial law)
Page 271 of 391
SUGGESTED ANSWER
The action will prosper not on the ground invoked but on the ground that the
farmers have not given their consent to the assignment. The milling contract
imposes reciprocal obligations on the parties. The sugar central has the obligation
to

mill the sugar cane of the farmers while the latter have the obligation to deliver
their
sugar cane to the sugar central. As to the obligation to mill the sugar cane, the
sugar
central is a debtor of the farmers. In assigning its rights under the contract, the
sugar
central will also transfer to the Taiwanese its obligation to mill the sugar cane of the
farmers. This will amount to a novation of the contract by substituting the debtor
with
a third party. Under Article 1293 of the Civil Code, such substitution cannot
take
effect without the consent of the creditor. The formers, who are creditors as
far as
the obligation to mill their sugar cane is concerned, may annul such assignment for
not having given their consent thereto.
ALTERNATIVE ANSWER
The assignment is valid because there is absolute freedom to transfer the
credit and the creditor need not get the consent of the debtor. He only
needs to
notify him.
07; Obligations; extinguishment; compensation
2002 No IX.
Stockton is a stockholder of Core Corp. He desires to sell his shares in Core
Corp. In view of a court suit that Core Corp. has filed against him for damages in the
amount of P 10 million, plus attorneys fees of P 1 million, as a result of statements
published by Stockton which are allegedly defamatory because it was calculated to
injure and damage the corporations reputation and goodwill.
The articles of incorporation of Core Corp. provide for a right of first perusal in

favor of the corporation. Accordingly, Stockton gave written notice to the

corporation
of his offer to sell his shares of P 10 million. The response of Core corp.
was an
acceptance of the offer in the exercise of its rights of first refusal, offering
for the
purpose payment in form of compensation or set-off against the amount of
damages
it is claiming against him, exclusive of the claim for attorneys fees. Stockton
rejected
the offer of the corporation, arguing that compensation between the value of
the
shares and the amount of damages demanded by the corporation cannot
legally
take effect. Is Stockton correct? Give reason for your answer. (5%)
SUGGESTED ANSWERS:
Stockton is correct. There is no right of compensation between his price of P
10 million and Core Corp.s unliquidated claim for damages. In order that
compensation
demandable.

may

be

proper,

the

two

debts

must

be

liquidated

and

The case for the P 10 million damages being still pending in court, the
corporation
has as yet no claim which is due and demandable against Stockton.
ANOTHER MAIN ANSWER:
The right of first refusal was not perfected as a right for the reason that there
was a conditional acceptance equivalent to a counter-offer consisting in the amount
of damages as being credited on the purchase price. Therefore, compensation
did
not result since there was no valid right of first refusal (Art. 1475 & 1319, NCC)
ANOTHER MAIN ANSWER:

Even [if] assuming that there was a perfect right of first refusal, compensation
did not take place because the claim is unliquidated.
07; Obligations; extinguishment; compensation
Page 272 of 391
1981 No. 8
"B" borrowed from "C" Pl,000.00 payable in one year. When "C" was in the
province, "C's" 17-year old son, borrowed P500 from "B" for his school
tuition.
However, the son spent it instead nightclubbing. When the debt to "C" fell due, "B"
tendered only P500, claiming compensation on the P500 borrowed by "C's" son,
a) Is there legal compensation? Why?
b) Suppose the minor son actually used the money for school tuition, would
the answer be different? Reasons.
Answer
(a) There is no legal compensation. Under the Civil Code, in order that there
will be a valid and effective compensation, it is essential that there must be
two
parties, who in their own right, are principal creditors and principal debtors
of each
other. In the instant case, "C" cannot be considered as a party to the act of his 17year old son in borrowing P500.00 from "B ". Consequently, he did not
become a
principal debtor of "B"; neither did "B" become a principal creditor of "C". Therefore,
there can be no partial compensation of the P1 ,000,00 borrowed by "B" from "C".
(Note: The above answer is based on Arts. 1278 and 1279, No. (1), of the
Civil Code and on decided cases.)
(b) There would be no difference in any answer. There will still be no legal

compensation. The fact that "C's" son actually used the P500.00 for his
school
tuition did not make "C" a party to the contract between his son and "B". Therefore,
"C" is not the principal debtor of "B" and "B" is not the
principal creditor of "C" with respect to said amount.

(Note: The above answer is based on Arts. 1278 and 1279, No. UK Civil
Code.)
07; Obligations; extinguishment; compensation vs payment
1998 No XIV.
1. Define compensation as a mode of extinguishing an obligation, and
distinguish it from payment. |2%]
2. X, who has a savings deposit with Y Bank in the sum of P1 ,000,000.00,
incurs a loan obligation with the said Bank in the sum of P800.000.00 which
has
become due. When X tries to withdraw his deposit, Y Bank allows only P200.000.00
to be withdrawn, less service charges, claiming that compensation has extinguished
its obligation under the savings account to the concurrent amount of X's
debt. X
contends that compensation is improper when one of the debts, as here, arises from
a contract of deposit. Assuming that the promissory note signed by X to
evidence
the loan does not provide for compensation between said loan and his
savings
deposit, who is correct? [3%]
Answer:
1.

Compensation is a mode of extinguishing to the concurrent amount, the

obligations of those persons who In their own right are reciprocally debtors
and

creditors of each other (Tolentino, 1991 ed., p. 365, citing 2 Castan 560 and Francia
vs. IAC. 162 SCRA 753). It involves the simultaneous balancing of two obligations in
order to extinguish them to the extent in which the amount of one is covered by
that
of the other. (De Leon, 1992 ed., p. 221, citing 8 Manresa 401).
Payment means not only delivery of money but also performance of an
obligation (Article 1232, Civil Code). In payment, capacity to dispose of the
thing
Page 273 of 391
paid and capacity to receive payment are required for debtor and creditor,
respectively: in compensation, such capacity is not necessary, because the
compensation
payment, the

operates

by

law

and

not

by

the

act

of

the

parties.

In

performance must be complete; while in compensation there may be partial

extinguishment of an obligation (Tolentino, supra)
Answer:
2.

Y bank is correct. An. 1287, Civil Code, does not apply. All the requisites

of Art. 1279, Civil Code are present. In the case of Gullas vs. PNB [62 Phil. 519), the
Supreme Court
compensation

held:

(set off) and deposit.

"The

Civil

Code

contains

provisions

regarding

These portions of Philippine law provide that compensation

shall take place when two persons are reciprocally creditor and debtor of each other.
In this connection, it has been held that the relation existing between a
depositor
and a bank is that of creditor and debtor, x x x As a general rule, a bank has a right
of set off of the deposits in its hands for the payment of any indebtedness to it on
the
part of a depositor." Hence, compensation took place between the mutual
obligations of X and Y bank.

07; Obligations; extinguishment; compensation: payment: confusion: set-off

1977 No X-b
Differentiate compensation from payment, from confusion and from set-off.
Answer
Compensation may be distinguished from payment in the following ways:
(1)

The requisites prescribed by law for compensation are different from

those prescribed by law for payment.

(2)

Compensation takes effect by operation of law, whereas payment takes

effect by act of the parties.

(3) Capacity to give and to acquire is not necessary in compensation, but it
is essential in payment.
(4)

Compensation is, as a rule, partial, whereas payment is, as a rule,

complete and indivisible.

Compensation may be distinguished from confusion in the following ways;
(1)

As to number of persons, in compensation there must be two persons,

who, in their own right, are creditors and debtors of each other, whereas in
confusion there is only one person in whom is merged the qualities of
creditor and
debtor.
(2) As to number of obligations, in compensation there must be at least two,
whereas in confusion there is only one.
Compensation

may be distinguished from set-off or counterclaim in the

following ways:
(1) Compensation requires that the two debts must consists in money, or if
the things due are fungibles, they must be of the same kind and quality,
but in
counterclaim this is not necessary.

(2)

Compensation, as a general rule, requires that the debts must be

liquidated, but counterclaim does not.

(3) Compensation need not be pleaded, whereas a counterclaim must be
pleaded to be effectual.
07; Obligations; extinguishment; condonation
Page 274 of 391
2000 No VII
a) Arturo borrowed P500,000.00 from his father. After he had paid
P300,000.00, his father died. When the administrator of his father's estate
requested
payment of the balance of P200,000.00. Arturo replied that the same had
been
condoned by his father as evidenced by a notation at the back of his check payment
for the P300,000.00 reading: "In full payment of the loan". Will this be a
valid
defense in an action for collection? (3%)
SUGGESTED ANSWER;
It depends. If the notation "in full payment of the loan" was written by Arturo's
father, there was an implied condonation of the balance that discharges the
obligation. In such case, the notation is an act of the father from which condonation
may be inferred. The condonation being implied, it need not comply with the
formalities of a donation to be effective. The defense of full payment will, therefore,
be valid.
When, however, the notation was written by Arturo himself. It merely proves
his intention in making that payment but in no way does it bind his father
(Yam v.
CA, G.R No. 104726. 11 February 1999). In such case, the notation was not the act

of his father
condonation

from

which

condonation

may

be

Inferred.

There

being

no

at all. the defense of full payment will not be valid.

ALTERNATIVE ANSWER:
If the notation was written by Arturo's father, it amounted to an express
condonation of the balance which must comply with the formalities of a donation to
be valid under the 2nd paragraph of Article 1270 of the New Civil Code.
Since the
amount of the balance is more than 5,000 pesos, the acceptance by Arturo
of the
condonation must also be in writing under Article 748. There being no acceptance in
writing by Arturo, the condonation is void and the obligation to pay the
balance
subsists. The defense of full payment is, therefore, not valid. In case the
notation
was not written by Arturo's father, the answer is the same as the answers above.
07; Obligations; extinguishment; dation
1986 No. 9.
On due date, Mayutang, finding himself unable to pay Makaragdag his
P5OO,OOO.OO obligation, proposed in a letter to Makaragdag that he would deed
over to Makaragdag his Mercedes Benz car, "to be applied to the amount
which I
owe you." The following week, Mayutang sent the car to Makaragdag with the
proper
deed of conveyance. It was accepted.
Was the arrangement a valid way of settling the obligation? Explain.
After the delivery of the car would Makaragdag have any further claim against
Mayutang if the value of the car is found to be Less than the P500,000.00
obligation? Explain.

Answer
The general rule according to commentators (Castan and Manresa) is that
dation extinguishes
agreement

in

full

the

obligation-the

exception

is

contrary

because then it becomes assignment of rights - hence valid only up to the value.
Answer - The arrangement was a valid way of settling the obligation. The law
provides that payment for an obligation may be made by delivery of other property.
Answer - The creditor can claim the deficiency because the-debt shall only be
extinguished up to extent of the value of the property given to him, since
the
agreement was that the car was "to be applied "to the amount owed.
Page 275 of 391
Answer - Yes, the arrangement was a valid way of settling the obligation.
Under the Civil Code, there are several special forms of payment which will have all
of the effects of a valid payment. One of them is dation in payment (dacion en
pago).
It is defined as the transmission of the ownership of a thing by the debtor
to the
creditor as the accepted equivalent of the performance of an obligation, According
to
the Civil Code, the law on sales shall govern the transaction. Thus, in the
instant
problem, the Mercedes Benz car is considered the object of the contract of
sale,
while the debt of P500,000 is considered the purchase price.
If the value of the car is found to be less than the P500,000.00 obligation,
would Makaragdag
Normally,

have

any

further

monetary

claim

against

Mayutang?

dacion en pago has the effect of extinguishing the obligation to the extent
of the

value of the thing delivered either as agreed upon or as may be proved, unless the
silence of the parties signifies that they consider the delivery of the thing as
the
equivalent of the performance of the obligation. It must be observed, however, that
Makaragdag accepted
objection. The

the

delivery

of

the

car

without

any

protest

or

entire obligation, therefore, is deemed fully complied with.

(Note: The above answer is based upon Arts. 1245 and 1235 of the Civil
Code and upon Lopez vs. CA, 114 SCRA 671.)
Answer - The arrangement is a valid way of settling the obligation which is
known as "dacion en pago." As to whether the delivery of the car was in
"full
satisfaction" of the debt or to be merely "applied" to the whole indebtedness
is
another question. The interpretation of their agreement would depend on the
difference between the value of the car and P500,000.00. If the difference is
very
great, the intention of the parties would be that the car is not in "full satisfaction" of
the debt.
07; Obligations; extinguishment; dation in payment vs assignment
1989 No. 8:
(2) What is dation in payment and how is it distinguished from assignment of
property?
Answer:
Dation in payment is a special form of payment whereby property is alienated
to the creditor in satisfaction of a debt in money.
Assignment of property, or payment by cession, is a special form of payment
whereby the debtor cedes or assigns his property to his creditors so that
the

proceeds thereof will be applied in payment of his debts.

Alternative Answer;
In dation in payment whereby property is given by the debtor to the creditor in
payment of a debt in money, there is only one creditor. In assignment of
property,
there are several creditors.
In the former, the debtor may be solvent. In the latter, there may be partial
insolvency.
In the former, particular property is ceded. In the latter, all the property of the
debtor is ceded.
In the former, the particular obligation is extinguished in whole or in part as
agreed upon. In the latter, it releases the debtor from the net proceeds only, unless
otherwise agreed or intended.
07; Obligations; extinguishment; extraordinary inflation or deflation
2001 No X
Page 276 of 391
On July 1, 1998, Brian leased an office space in a building for a period of five
years at a rental rate of P1,000.00 a month. The contract of lease contained
the
proviso that "in case of inflation or devaluation of the Philippine peso, the
monthly
rental will automatically be Increased or decreased depending on the devaluation or
inflation of the peso to the dollar." Starting March 1, 2001, the lessor increased the
rental to P2,000 a month, on the ground of inflation proven by the fact that
the
exchange rate of the Philippine peso to the dollar had Increased from P25.00=$1.00
to P50.00=$1.00. Brian refused to pay the increased rate and an action for unlawful
detainer was filed against him. Will the action prosper? Why? (5%)

SUGGESTED ANSWER
The unlawful detainer action will not prosper. Extraordinary inflation or
deflation is defined as the sharp decrease in the purchasing power of the
peso. It
does not necessarily refer to the exchange rate of the peso to the dollar. Whether or
not there exists an extraordinary inflation or deflation is for the courts to
decide.
There being no showing that the purchasing power of the peso had been
reduced
tremendously, there could be no inflation that would justify the increase in
the
amount of rental to be paid. Hence, Brian could refuse to pay the increased rate.
ALTERNATIVE ANSWER.
The action will not prosper. The existence of inflation or deflation requires an
official declaration by the Bangko Sentral ng Pilipinas.
ALTERNATIVE ANSWER:
The unlawful detainer action will prosper. It is a given fact in the problem, that
there was Inflation, which caused the exchange rate to double. Since the
contract
itself authorizes
devaluation of

the

increase

in

rental

in

the

event

of

an

inflation

or

the Philippine peso, the doubling of the monthly rent is reasonable and is therefore
a
valid act under the very terms of the contract. Brian's refusal to pay is thus a
ground
for ejectment.
07; Obligations; extinguishment; loss
1994 No, 17;
Dino sued Ben for damages because the latter had failed to deliver the

antique Marcedes Benz car Dino had purchased from Ben, which wasby
agreementdue for delivery on December 31,1993. Ben, in his answer to
Dino's
complaint, said Dino's claim has no basis for the suit, because as the car was being
driven to be delivered to Dino on January 1, 1994, a reckless truck driver
had
rammed into the Mercedes Benz. The trial court dismissed Dino's complaint, saying
Ben's obligation had. indeed, been extinguished by force majeure.
Is the trial court correct? Alternative Answers:
a) No. Article 1262, New Civil Code provides, "An obligation which consists
in the delivery of a determinate thing shall be extinguished if it should be
lost or
destroyed without the fault of the debtor, and before he has incurred in delay.
b)

The judgment of the trial court is incorrect. Loss of the thing due by

fortuitous events or force majeure is a valid defense for a debtor only when
the
debtor has not incurred delay.
event

Extinguishment of liability for fortuitous

requires that the debtor has not yet incurred any delay. In the present case,
the
debtor was in delay when the car was destroyed on January 1,1993 since it was due
for delivery on December 31, 1993. (Art. 1262 Civil Code)
c)

It depends whether or not Ben the seller, was already in default at the

time of the accident because a demand for him to deliver on due date was
not
complied with by him. That fact not having been given in the problem, the trial
court
Page 277 of 391
erred in dismissing Dino's complaint.

Reason: There is default making him

responsible for fortuitous events Including the assumption of risk or loss.

If on the other hand Ben was not in default as no demand has been sent to
him prior to the accident, then we must distinguish whether the price has been paid
or not. If it has been paid, the suit for damages should prosper but only to enable
the
buyer to recover the price paid. It should be noted that Ben. the seller, must bear
the
loss on the principle of res perit domino. He cannot be held answerable for damages
as the loss of the car was not imputable to his fault or fraud. In any case,
he can
recover the value of the car from the party whose negligence caused the accident. If
no price has been paid at all, the trial court acted correctly in dismissing
the
complaint.
07; Obligations; extinguishment; loss; impossible service
1993 No. 11
In 1971, Able Construction, Inc. entered into a contract with Tropical Home
Developers, Inc. whereby the former would build for the latter the houses
within Its
subdivision. The cost of each house, labor and materials included, was
P100,000.00. Four hundred units were to be constructed within five years. In 1973,
Able found that it could no longer continue with the job due to the increase
in the
price of oil and its derivatives and the concomitant worldwide spiraling of prices of
all
commodities, including basic raw materials required for the construction of
the
houses. The cost of development had risen to unanticipated levels and to
such a

degree that the conditions and factors which formed the original basis of the
contract
had been totally changed. Able brought suit against Tropical Homes praying that the
Court relieve it of its obligation.
Is Able Construction entitled to the relief sought?
Answer;
Yes, the Able Construction. Inc. is entitled to the relief sought under Article
1267, Civil Code. The law provides: "When the service has become so difficult as to
be manifestly beyond the contemplation of the parties, the obligor may also
be
released therefrom, in whole or in part."
07; Obligations; extinguishment; novation
1977 No. XIV-b
R borrowed P5,000 from H and he authorized his bank to pay the loan. The
bank agreed. Eventually, the bank paid only P2,550.00 H sued both R and the bank.
Discuss the bank's liability.
Answer
The bank cannot be held liable for the remaining P2,500. Even assuming that
H gave his consent to R's proposal that the bank shall pay his indebtedness
of
P5,000, in reality, there was no substitution of debtor by delegation resulting
in a
novation of the obligation. There was merely
accepted

an

authorization,

which

was

by the bank, that the latter shall pay R's debt. As it turned out, the bank
paid only
P2,500.00 to
(Hodges vs.

H.

Key, 111 Phil. 219).

Beyond

that

amount,

the

bank

cannot

be

held

liable.

07; Obligations; extinguishment; novation

1988 No. 11:
(a)

Suppose that under an obligation imposed by a final judgment, the

liability of the judgment debtor is to pay the amount of P6,000.00 but both
the
judgment debtor and the judgment
contract

creditor subsequently

entered

into

Page 278 of 391

reducing the liability of the former to only P4,000.00, is there an implied
novation
which will have the effect of extinguishing the judgment
creating a

obligation and

modified obligatory relation? Reasons.

Answer:
There is no implied novation in this case. We see no valid objection to the
judgment debtor and the judgment creditor in entering into an agreement regarding
the monetary obligation of the former under the judgment referred to. The payment
by the judgment debtor of the lesser amount of P4,000, accepted by the
creditor
without any protest or objection and acknowledged by the latter as in full
satisfaction
of the money judgment, completely extinguished the judgment debt and released
the
debtor from his pecuniary liability.
Novation results in two stipulationsone to extinguish an existing obligation,
the other to substitute a new one in its place. Fundamental it is that novation
effects
a substitution or modification of an obligation by another or an extinguishment of
one
obligation by the creation of another. In the case at hand, we fail to see what new or

modified obligation arose out of the payment by judgment debtor of the

reduced
amount of P4,000 to the creditor. Additionally, to sustain novation necessitates that
the same be so declared in unequivocal terms clearly and unmistakably
shown by
the express agreement of the parties or by acts of equivalent importor that there
is
complete and substantial incompatibility between the two obligations. (Sandico
vs.
Piguing, 42 SCRA322.)
Suggested Alternative Answers To: No. 11(a):
(a) (1) There remains an obligation on the basis of the facts given. There is
no showing in the facts that the P4,000 has been paid so it created a
modified
obligatory obligation no longer based on the judgment but based on the
novatory
agreement.
(2) There is no implied novation. Instead there has been a partial remission
in the amount of P2,000 leaving P4,000 still enforceable under the judgment.
(3) It can amount to a compromise. A final judgment which has not yet been
fully satisfied may be the subject of a compromise. The compromise partakes
the
nature of a novation. Article 204; provides that:
"If one of the parties fails or refuses to abide by the compromise, the other
party may either enforce the compromise or regard it as rescinded and insist
upon
his original demand."
(Gatchalian vs, Arlegui 75 SCRA 234; Dormitorio vs. Fernandez 72 SCRA
388).

07; Obligations; extinguishment; novation

1982 No. 19
ABC Trading Co., a domestic corporation engaged in the sale of automobile
spare parts, opened with "X" Bank letter of credit up to the extent of P450,000.00
for
a period of one year. To secure payment thereof, it executed a chattel
mortgage
over its stocks-in-trade valued at 7500,000.00. On May 15, and June 15r 1981, Mr.
"Y", president and general manager of ABC Trading drew against this letter of credit
by means of promissory notes in the total amount of P430,000.00, payable within
30
days from the respective dates of the promissory notes with interest of 10%.
Upon
maturity of said notes, ABC Trading failed to pay, but was able to negotiate
for an
extension of six (6) months within which to pay said amount, in return for
the
additional security posted by Mr. "Y" consisting- of a real estate mortgage
over his
land in Manila. At the end of 6 months, ABC Trading Co. failed to pay the
amount
due despite repeated demands by "X" Bank. "X" Bank filed an action for foreclosure
Page 279 of 391
of the chattel mortgage executed by ABC Trading. ABC Trading opposed said action
contending that the chattel mortgage has been novated by the real estate
mortgage
executed by Mr. "Y" in favor of "X" Bank. Is the contention of ABC Trading
Co.
tenable? Reasons.
Answer

The contention of ABC Trading Co. that the chattel mortgage has been
novated by the real estate mortgage executed by Mr. "Y" in favor of "X"
Bank is
untenable. Well-settled is the rule that in order that there will be a novation,
there
must be complete incompatibility between the two obligations. And the test
of
incompatibility is simple. All that we have to ask is: Can the two obligations
stand
together. If they
incompatibility,

can

then

there

is

no

incompatibility.

If

there

is

no

then there is no novation. However, if they cannot stand together, then

there is
incompatibility. If there is incompatibility, then there is a novation. Applying
the test
to the instant case, it is clear that the two obligations can stand together. Therefore,
there is no novation*
(Note: The above answers is based on Arts. 1291(1) and 1292 of the Civil
Code and on decided cases, such as Bank of PI. vs. Herridge, 47 Phil. 57;
Ynchausti & Co. vs. Yulo, 34 Phil. 978; Pascual vs. Lacsamana,, 400 Phil. 381; La
Tondena, vs. Alto Surety & Ins. Co., 101 Phil. 879.)
07; Obligations; extinguishment; novation
1978 No. V-a
A bought from B a parcel of land and paid the purchase price except for an
unpaid balance of P6,000. A, therefore, executed a promissory note for the balance
of P6,000 with interest at ten per cent (10%) to be paid within sixty (60) days. On
the
same date, C surety company executed a bond in favor of B for the amount
of
P6,000 representing the unpaid balance of the purchase price of the parcel of land,

without any stipulation regarding payment of interest. On the due date, A

failed to
pay, and C surety company paid P6,000 to B. B then sued A for the
accumulated
interest on the principal of P6,000. A claimed novation of the obligation
when B
accepted unqualifiedly the surety bond which merely guaranteed payment of
P6,000. Is A correct? Explain your answer.
Answer
A is not correct. There is no novation so long as there is no agreement that
the principal debtor (a) shall be released from responsibility, Here, there is no such
agreement. True, C surety company executed a bond in favor of B for the amount of
P6,000, but that did not have the effect of releasing A from the obligation. The
surety
bond is not a new and separate contract but is merely an accessory of the original
contract entered into by and between A and C surety company on one hand and B
on the other hand. It provided merely for a more definite and solid arrangement for
payment. Therefore, A and B are still bound under their old contract. The former is
still liable for accumulated interests on the principal of P6,000.
(NOTE: The above answer is based on Arts. 1291, No. 1, and 1292, Civil
Code, and on Dungo vs. Lopena, L-18377, Dec. 29, 1962, and Magdalena
Estate
vs. Rodriguez, 18 SCRA 967.)
Alternative Answer
A is not correct. The defense of implied novation requires clear and
convincing proof of complete incompatibility between the two obligations. The test
is
whether the two obligations can stand together. If they cannot, incompatibility
arises,

and the second obligation novates the first. If they can stand together, no
incompatibility results and novation does not take place. Applying this test to
the
Page 280 of 391
instant-case, it is clear that the original contract between A and B and the
surety
bond executed by C surety company can stand together. The bond is merely
an
accessory of the original contract. Therefore, there is no novation.
(NOTE: The above answer-is based on decided cases applying Arts. 1291,
No. 1, and 1292 of the Civil Code.)
07; Obligations; extinguishment; novation
1994 No. 11:
In 1978, Bobby borrowed Pl,000,000.00 from Chito payable in two years. The
loan, which was
mortgage on

evidenced

by

promissory

note,

was

secured

by

real property. No action was filed by Chito to collect the loan or to foreclose
the
mortgage. But in 1991, Bobby, without receiving any amount from Chito,
executed
another promissory note which was worded exactly as the 1978 promissory
note,
except for the date thereof, which was the date of its execution.
1) Can Chito demand payment on the 1991 promissory note in 1994?
2) Can Chito foreclose the real estate mortgage if Bobby fails to make good
his obligation under the 1991 promissory note?
Answer:
1) Yes, Chito can demand payment on the 1991 promissory note in 1994.
Although the 1978 promissory note for P1 million payable two years later or in 1980

became a natural obligation after the lapse of ten (10) years, such natural
obligation
can be a valid consideration of a novated promissory note dated in 1991
and
payable two years later, or in 1993.
All the elements of an implied real novation are present:
a)

an old valid obligation;

b) a new valid obligation;

c)

capacity of the parties;

d) animus novandi or intention to novate; and

e) The old and the new obligation should be incompatible with each other on
all material points (Article
together,

1292).

The two promissory notes cannot stand

hence, the period of prescription of ten (10) years has not yet lapsed.
2) No. The mortgage being an accessory contract prescribed with the loan.
The novation of the loan, however, did not expressly include the mortgage,
hence,
the mortgage is extinguished under Article 1296 of the NCC. The contract has been
extinguished by the novation or extinction of the principal obligation insofar as third
parties are concerned.
07; Obligations; extinguishment; novation
1979 No. XII
T borrowed P10,000.00 from a bank executing a promissory note therefore
wherein it is expressly stated that the note is due 120 days thereafter. On the date
of
maturity T pays only the very small amount of P200.00 plus interest in advance for
the renewal of the note for another 60 days. For almost two years the bank was
very
lenient with T and allowed him to renew his note in the same manner more than 10

times until finally the bank management had to make demand for payment
of the
balance of P8,000.00 after the expiration of the date of last renewal. Upon T's
failure
to pay, the bank filed an action for collection of said balance. T raised the
defense
that the action is premature because the bank by its conduct had impliedly
agreed
Page 281 of 391
that the payment of the note is to be made as the financial means of T
warrants.
Should the defense be sustained? Why?
Answer
The defense should not be sustained. The acts of leniency of the bank in
accepting partial payments for a period of two years by virtue of BO many renewals
or extensions should not be interpreted as a novation of the original obligation. The
bank was merely compassionate. It is a well-settled rule in this jurisdiction
that the
extension of the
payment does

period

for

payment

or

postponement

of

the

date

of

not result in a novation. There is no clear case of incompatibility between

such
extension or postponement and the original obligation; neither is there a
change in
the obligatory relation of the parties which will alter the essence of the
original
obligation.
07; Obligations; extinguishment; payment
1986 No. 8.
Mr. Magaling obtained a judgment against Mr. Mayaman in the amount of

P500,000.00.
personal

writ

of

execution

was

issued

pursuant

to

which

various

properties of Mayaman were levied upon by the sheriff. An auction sale was
scheduled.
Before the appointed day of the auction. Mayaman delivered to the sheriff a
cashier's check of Far East Bank in the amount of .P200,000.00 and enough cash to
cover the remainder of the total amount due. Magaling refused to accept the check
and asked the sheriff to proceed with the auction sale.
Did Magaling have the right to refuse the payment of part of the obligation
with a cashier's check? Explain.
Answer:
Magaling did not have the right to refuse the payment of part of the obligation
with a cashier's check.
The Central Dank Act provides that a check which has been cleared and
credited to the account of the creditor shall be equivalent to a delivery to the
creditor
in cash in an amount equal to the amount credited to his account.
Analyzing the above provision, it is clear that the cashier's check of Far East
Bank, a reputable bank, and credited to the account of Mayaman has legal
tender
power. Therefore, there was no basis for Magaling in refusing payment of the
obligation.
(Note: The above answer is based on Art. 1249 of the Civil Code. The
exception in New Pacific Timber and Supply -Co. vs. Seneris, 101 SCRA 686, refers
to "Certified Check" because the reason given in that case was based on Sec. 63 of
the Central Bank Act. However, a contrary answer that "Cashier's Check" is
payment
confused

in

cash

may

be

considered

correct

because

the

above

case

cashier's check
benefit of

with

certified

check

hence

examinee

should

be

given

doubt.)
Answer - It is well settled that a cashier's check is as good as cash. The law,
however, provides that a creditor may refuse payment if it is other than legal
tender.
Although the creditor has the right to refuse the payment in the form of the
check, he cannot do so without any justifiable reason. Under the Chapter on Human
Relations in the Civil Code, a person, in the exercise of his rights, must act
with
justice x x x. Therefore, although technically the creditor can refuse the
check, he
could be made liable if he refused the cashier's check for no good reason or in bad
faith.
Page 282 of 391
Answer - Although a cashier's check may be as good as cash, still it is not
legal tender, and the sheriff may refuse to accept the check, as it does not produce
the effect of payment until cashed.
07; Obligations; extinguishment; payment
1981 No. 11
"S", an American resident of Manila, about to leave on a vacation, sold his
car to "B" for U.S. $2,000.00, the payment to be made ten days after delivery to
"X",
a third party depositary agreed upon, who shall deliver the car to "B" upon receipt
by
"X" of the purchase price. It was stipulated that ownership is retained by "S"
until
delivery of the car to "X". Five days after delivery of the car to "X", it was destroyed
in a fire which gutted the house of "X", without the fault of either "X" or "B".

a) Is buyer "B" still legally obligated to pay the purchase price? Explain.
b) May seller "S" demand payment in U.S. dollar? Why?
Answer
(a) Yes, B is still legally obligated to pay the purchase price...
(b) The seller "S" cannot demand payment in U.S. dollars. According to the
law, an agreement that payment shall be made in currency other than
Philippine
currency is void because it is contrary to public policy. That does not mean,
however, that "S" cannot demand payment from "B." He can demand payment, but
not in American dollars. Otherwise, there would be unjust enrichment at the
expense
of another. Payment, therefore, should be made in Philippine currency,
(Note: The above answer is based on R.A. No. 529 and on Ponce vs. CA,
May 31, 1979.)
07; Obligations; extinguishment; payment
1983 No. 13
A owes B P20,000 which became due and payable last October 1, 1983. On
that date, A offered B P10,000 the only money he then had, but B refused to accept
the payment. A thereafter met C, B's 22-year old son, to whom he gave the P10,000
with the request that he turn the money over to B. The money was stolen
while in
C's possession.
Was B justified in refusing to accept the payment of A? May he still recover
the full amount of his debt of P20,000? Why?
Answer
Yes, the creditor cannot be compelled to receive partial payments of the
obligation due him, there being no stipulation to the contrary.

B may still demand full payment of the sum due him. The payment to his son,
who does not appear to have been authorized to receive it, is invalid, the creditor
not
having received any benefit therefrom.
07; Obligations; extinguishment; payment
1995 No. 12;
In 1983 PHILCREDJT extended loans to Rivett-Strom Machineries, Inc.
(RIVETTT-STROM), consisting of US$10 Million for the cost of machineries
imported and directly paid by PHTLCREDIT, and 5 Million in cash payable in
installments over a period of ten (10) years on the basis of the value
thereof
computed at the rate of exchange of the U.S. dollar vis--vis the Philippine peso at
the time of payment.
Page 283 of 391
RIVETT-STROM made payments on both loans which if based on the rate of
exchange In 1983 would have fully settled the loans.
PHILCREDIT contends that the payments on both loans should be based on
the rate of exchange
exchange has

existing

at

the

time

of

payment,

which

rate

of

been consistently increasing, and for which reason there would still be a
considerable balance on each loan.
Is the contention of PHILCREDIT correct? Discuss fully. Answer:
As regards the loan consisting of dollars, the contention of PHILCREDIT is
correct. It has to be paid in Philippine currency computed on the basis of
the
exchange rate at the time of payment of each installment, as held in Kalalo v. Luz,
34 SCRA 337. As regards the P5 Million loan in Philippine pesos, PHILCREDIT
Is

wrong. The payment thereof cannot be measured by the peso-dollar exchange rate.
That will be violative of the Uniform Currency Act (RA, 529] which prohibits
the
payment of an obligation which, although to be paid In Philippine currency,
Is
measured by a foreign currency. (Palanca v. CA, 238 SCRA 593).
07; Obligations; extinguishment; payment, consignation, set-off
1988 No. 10:
(a) Under the Civil Code, what are the different special forms of payments?
(b)

What are the special requisites of consignation in order that it shall

produce the effect of payment?

(c) A treasury warrant payable to Rosenne and indorsed by Boni was
cashed at
dishonored

the

Philippine

National

Bank.

The

warrant

was

subsequently

by the Philippine Treasury. The Bank then applied the deposit of Boni to the
payment of the amount paid for the warrant. Is the action of the Bank in accordance
with law? Reasons.
Answer:
(a) Under the Civil Code, there are actually four special forms of payment.
They are (1) application of payment (Arts. 1252-1254); (2) dation in payment (Art.
1245); (3) payment by cession (Art. 1255): and (4) tender of payment and
consignation
payment,

(Arts.

1256-1261).

Strictly

speaking,

however,

application

of

by its very nature, is not a special form of payment,

(b) In order that consignation shall produce the effect of payment, it is not
only essential that it must conform with all of the requisites of payment, but it is
also
essential that certain special requirements prescribed by law must be complied
with.

The debtor must show;

(1) That there is a debt due;
(2)

That the consignation has been made either because the creditor to

whom tender of payment was made refused to accept the payment without
just
cause, or because any of the cause stated by law for effective consignation
without
previous tender of payment exists (Art. 1256, CC);
(3)

The previous notice of the consignation had been given to the persons

interested in the fulfillment of the obligation (Art, 1256, CC);

(4) That the thing or amount due had been placed at the disposal of judicial
authority (Art. 1258, par. 1, CC); and
(5) That after the consignation had been made, the persons interested in the
fulfillment of the obligation had been notified thereof (Art. 1258, par. 2, CC).
Page 284 of 391
(c) Yes, the action of the Bank is in accordance with law. The facts stated in
the above problem are exactly the same as those in the case of Cullas vs. National
Bank, 62 Phil. 519, where the Supreme Court held that a bank has a right of set-off
of the deposit in its hands for the payment of any indebtedness to it on
the part of
the depositor. When a person deposits his money at a bank, whether such deposit is
fixed, savings or current, a relationship of creditor and debtor is established
between
the depositor and bank. It is, therefore, evident that all of the requisites for
compensation are present in this case.
Committee's Recommendation Re: No. 10(a):
(a) The committee recommends that if application for payment is not
mentioned by the examinee, full credit must likewise be given,

07; Obligations; extinguishment; payment; application

1982 No. 16
The debtor owes his creditor several debts, all of them due, to wit: (1) an
unsecured debt;
property; (3) a

(2)

debt

secured

with

mortgage

of

the

debtor's

debt bearing interest; (4) a debt in which the debtor is solidarily liable with another.
Partial payment was made by the debtor. Assuming that the debtor had not
specified the debts to which the payment should be applied and, on the other hand,
the creditor had not specified in the receipt he issued the application of
payment,
state the order in which the payment should be applied and your reasons therefore.
Answer
In this case, according to the Civil Code, the debt, which is most onerous to
the debtor, among those due, shall be deemed satisfied.
Analyzing the four debts stated in the problem, the most onerous is No. 4, the
second most onerous is No. 2, the third most onerous is No. 3, and the last onerous
is No. 1, Consequently, the payment should be applied in that order.
(Note: The above answer is based on Art. l254 of the Civil Code and on
decided cases and commentaries of recognized commentators.)
07; Obligations; extinguishment; payment; consignation, when applicable
1984 No. 12
A sold to B a parcel of land with the right to repurchase the same within three
years. A tendered the repurchase of price to B within the prescribed period,
but B
refused to accept it. A then brought an action in court for specific performance.
B contends that since A did not deposit the money in court within the
stipulated period for repurchase and the period has now lapsed, A can no
longer

repurchase the property. Is this contention correct? Explain.

Answer:
A.

Furnished by Office of Justice Palma

No. Consignation is not necessary to compel B to make the resale if he

refused to
consignation

accept

the

repurchase

price

tendered.

The

provisions

of

refer only to obligations. They are not applicable to the right of repurchase which is
not an obligation but a right exercisable purely at the option of A.
B.

Comments and Suggested Answer

We agree with the answer of the Bar Examiner. However, if the bar candidate
will attack the problem by holding that there was no default or mora of A because of
the previous
justifiable

tender

of

payment

which

was

refused

by

without

any

Page 285 of 391

cause, and consequently.
recommended

can

still

repurchase

the

property,

it

is

that said answer should be properly credited.

07; Obligations; fortuitous events
1988 No. 8:
(a)

Mario received from Edgar a pendant with diamonds valued at

P5,OOO.OO to be sold on commission basis or to be returned on demand. In

the
evening of August 31, 1987, while he was walking home, two men snatched
his
clutch bag containing the pendant and ran away. Subsequently, the snatchers were
apprehended and charged. During the pendency of the criminal case, Edgar brought
an action against Mario for the recovery of the pendant or its value and damages.
Mario interposed the defense of fortuitous event but Edgar contends

(1)

That the defense of fortuitous event is untenable because there was

negligence on the part of the defendant; and

(2)

That if the defense is untenable, there must be a prior conviction of

robbery before it can be availed of, Decide the case.

Answer:
(a) The factual setting of the above problem is identical to that of Austria vs.
Court of Appeals (39 SCRA 527). In that case the Supreme Court held that
defendant is not liable.
To constitute a caso fortuito that would exempt a person from responsibility, it
is necessary (1) that the event must be independent of the will of the debtor; (2)
that
it must be either unforeseeable or unavoidable; (3) that the occurrence must render
it impossible for the debtor to fulfill the obligation in a normal manner; and
(b) that
the debtor must be free of, participation in, or aggravation of, the injury to
the
creditor.
All of the above requisites or conditions are present in this case. It is
undeniable that in order to completely exonerate the debtor by reason of a
fortuitous
event, such debtor must, in addition into the causes itself, be free of any concurrent
or contributory fault or negligence. We believe, however, that her act in
traveling
alone in the
considered

evening,

carrying

jewelry

of

considerable

value,

cannot

be

as either concurrent or contributory negligence. While it may be so considered now,

we are not persuaded that the same rule should obtain ten years previously
when

the robbery in question took place, for at that time criminality had not by far
reached
the levels attained in the present day.
There is likewise no merit in the contention that to allow the fact of robbery to
be recognized in this case before conviction is secured in the criminal action, would
prejudice the latter case, or would result in inconsistency should the accused obtain
an acquittal or should the criminal case be dismissed. It must be realized that a
court
finding that a robbery has happened would not necessarily mean that those
accused
in the criminal action would be found guilty of the crime; nor would a ruling that
those
actually accused did not commit the robbery be inconsistent with a finding
that a
robbery did take place. The evidence to establish these facts would not necessarily
be the same.
Suggested Alternative Answers to No. 8(a):
(a) (1) We would like to call attention to the fact that the question says
"contends." So perhaps we should make a distinction if negligence is proven and if
negligence is not proven. If the negligence of the defendant is not proven as Edgar
contends, then the defense of fortuitous event is tenable. However, if negligence is
proven to be present then the defense of fortuitous event is not tenable here and
the
defendant will be liable.
Page 286 of 391
(2) There is no need of prior conviction in either case.
07; Obligations; joint/ solidary liability; joint
2001 No VII
Four foreign medical students rented the apartment of Thelma for a period of

one year. After one semester, three of them returned to their home country and the
fourth transferred to a boarding house. Thelma discovered that they left
unpaid
telephone bills
provided that

in

the

total

amount

of

P80,000.00.

The

lease

contract

the lessees shall pay for the telephone services in the leased premises.
Thelma
demanded that the fourth student pay the entire amount of the unpaid
telephone
bills, but the latter is willing to pay only one fourth of it. Who is correct? Why? (5%)
SUGGESTED ANSWER:
The fourth student is correct. His liability is only joint, hence, pro rata. There is
solidary liability only when the obligation expressly so states or when the
law or
nature of the obligation requires solidarity (Art. 1207, CC). The contract of
lease in
the problem does not, in any way, stipulate solidarity.
07; Obligations; joint/ solidary liability; solidary
1998 No XV.
Joey, Jovy and Jojo are solidary debtors under a loan obligation of
P300,000.00 which has fallen due. The creditor has, however, condoned Jojo's
entire share in the debt. Since Jovy has become insolvent, the creditor
makes a
demand on Joey to pay the debt.
1.

How much, if any, may Joey be compelled to pay? [2%]

2.

To what extent, if at all. can Jojo be compelled by Joey to contribute to

such payment? [3%]

Answer:
1.

Joey can be compelled to pay only the remaining balance of

P2OO.OOO, in view of the remission of Jojo's share by the creditor. (Art. 1219, Civil
Code)
Answer;
2.

Jojo can be compelled by Joey to contribute P5O.OOO. Art. 1217. par.

3, Civil Code provides. "When one of the solidary debtors cannot, because of
his
insolvency, reimburse his share to the debtor paying the obligation, such share shall
be borne by all his co-debtors, in proportion to the debt of each."
Since the insolvent debtor's share which Joey paid was P100,000, and there
are only two remaining debtors - namely Joey and Jojo - these two shall
share
equally the burden of reimbursement. Jojo may thus be compelled by Joey to
contribute P50.0OO.OO.
07; Obligations; joint/ solidary liability; solidary
2003 No XIV.
A,B,C,D, and E made themselves solidarity indebted to X for the amount of
P50,000.00. When X demanded payment from A, the latter refused to pay on
the
following grounds.
(a) B is only 16 years old.
(b) C has already been condoned by X
(c) D is insolvent.
Page 287 of 391
(d) E was given by X an extension of 6 months without the consent of the
other four co-debtors.
State the effect of each of the above defenses put up by A on his obligation to
pay X, if such defenses are found to be true.

SUGGESTED ANSWER:
(a) A may avail the minority of B as a defense, but only for Bs share of P
10, 000.00.
personally

solidary

debtor

may

avail

himself

of

any

defense

which

belongs to a solidary co-debtor, but only as to the share of that co-debtor.

(b) A may avail of the condonation by X of Cs 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. (Article 1222, NCC).
(c) 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 Ds share and of all the other co-debtors. Hence, A cannot avail
of the
defense of Ds insolvency.
(d) 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.
07; Obligations; joint/ solidary liability; solidary obligations
1988 No. 9:
(b) Define joint and solidary obligations.
(c)

A, B, and C borrowed P12,000 from X. This debt is evidenced by a

promissory note wherein the three bound themselves to pay the debt jointly
and
severally. However, according to the note, A can be compelled to pay only on June

15, 1962, B can be compelled to pay only on June 15, 1964, while C can
be
compelled to pay only on June 15T 1966. On June 15, 1962, X made a
demand
upon A to pay the entire indebtedness but the latter aid only P4,OOO.OO,
Subsequently, because of A's refusal to pay the balance, X brought an action
against him for collection of the amount. Will such an action prosper? Reasons.
Answer:
(b) When there is a concurrence of two or more creditors or of two or more
debtors in one and the same obligation, such
either joint
(obligation
joint

mancomunada)

or

solidary

obligation
(obligacion

may

be

solidaria).

obligation may be defined as an obligation where there is a concurrence of several

creditors or several debtors, or of several creditors and debtors, by virtue
which
each of the creditors has a right to demand, while each of debtors is bound to
render
compliance with his proportionate part of the prestation which constitutes the
object
of the obligation. In other words, each of the creditors is entitled to demand
the
payment of only a proportionate part of the credit, while each of the debtors is
liable
for the payment of only a proportionate part of the debt. A solidary obligation, on
the
other hand, may be defined as an obligation where there is a concurrence of several
creditors, or several debtors, or of several creditors and debtors, by virtue
which
each of the creditors has a right to demand, while each of the debtors is
bound to

render entire compliance with the prestation which constitutes the object of
the
obligation. In other words, each of the creditors is entitled to demand the payment
of
the entire credit/ while each of the debtors is liable for the payment of the
entire
debt. (See Art. 1207, CC; 3 Castan, 7th Ed,, pp. 65-66.)
Page 288 of 391
(c)

For the present, the action will not prosper. It is of course true that the

obligation here is solidary and that its solidary character is not destroyed by the fact
that the debtors
expressly

are

provided for
obligations of

Art.

in

bound
1211

by different
of the Civil

periods

for

payment

is

Code. However, in solidary

this type, the right of the creditor is limited to the recovery of the amount owed by
the
debtor whose obligation has already matured, leaving in suspense his right
to
recover the shares corresponding to the other debtors whose obligations have
not
yet matured. This restriction upon the creditor's right does not destroy the
solidary
character of the obligation, because ultimately, he can still compel one and the
same
debtor, if that is his wish, to pay the entire obligation Therefore, in the instant case,
X
shall have to wait for June 15, 1964, when B's obligation shall have matured, and for
June 15, 1966, when C's obligation shall have also matured. On June 15, 1966, he
can collect P4,000 from either A or B. On June 15, 1966, he can again
collect
another P4,000 from either A or B or C. (See Ynchausti vs. Yulo, 34 Phil. 978.)

Suggested Alternative Answer To: No. 9 (c):

(c) It now being 1988, the action can no longer prosper because it has
already prescribed. Actions upon written contracts prescribe in 10 years.
07; Obligations; joint/ solidary liability; solidary obligations
1992 No. 3:
In June 1988, X obtained a loan from A and executed with Y as solidary comaker a promissory note in favor of A for the sum of P200,OOO.OO. The loan was
payable at P20,000.00 with interest monthly within the first week of each
month
beginning July 1988 until maturity in April 1989. To secure the payment of the loan.
X put up as security a chattel mortgage on his car, a Toyota Corolla sedan. Because
of failure of X and Y to pay the principal amount of the loan, the car was
extrajudicially
P120,000.00

foreclosed.

acquired

the

car

at

A's

highest

bid

of

during the auction sale.

After several fruitless letters of demand against X and Y, A sued Y alone for
the discovery of P80.000.00 constituting the deficiency.
Y resisted the suit raising the following defenses:
a) That Y should not be liable at all because X was not sued together with Y.
b) That the obligation has been paid completely by A's acquisition of the car
through "dacion en pago" or payment by cession.
c) That Y should not be held liable for the deficiency of P80,000.00 because
he was not
contract was

a co-mortgagor in

the

chattel

mortgage

of the

car.

executed by X alone as owner and mortgagor.

d) That assuming that Y is liable, he should only pay the proportionate sum
of P40,000.00.

which

Decide each defense with reasons.

Answer:
(a) This first defense of Y is untenable. Y is still liable as solidary debtor. The
creditor may proceed against any one of the solidary debtors. The demand against
one does not preclude further demand against the others so long as the debt is not
fully paid.
(b)

The second defense of Y is untenable. Y is still liable. The chattel

mortgage is only given as a security and not as payment for the debt in
case of
failure to pay. Y as a solidary co-maker is not relieved of further liability on
the
promissory note as a result of the foreclosure of the chattel mortgage.
Page 289 of 391
{c} The third defense of Y is untenable. Y is a surety of X and the extrajudicial
demand
demand

against

the

principal

debtor

is

not

inconsistent

with

judicial

against the surety. A suretyship may co-exist with a mortgage.

(d) The fourth defense of Y is untenable. Y is liable for the entire prestation
since Y incurred a solidary obligation with X.
(Arts. 1207, 1216. 1252 and 2047 Civil Code; Bicol Savings and Loan
Associates vs. Guinhawa 188 SCRA 642)
07; Obligations; joint/ solidary liability; solidary obligations
1980 No. IX
(a)

"FF" and "GG" executed a promissory note binding themselves, jointly

and severally, to pay "X" Bank P10,000.00 within 90 days from January 10,
1979,
"FF" signed the note as principal and "GG" as guarantor. Upon failure to pay
the

note on due
interposed the

date

"X"

bank

sued

"FF"

and

"GG"

for

payment.

"GG"

defense that he was just a guarantor and the Bank must first exhaust all
the
remedies against the principal "FF"
Is "GG's" defense tenable?
Answer
(a) "GG's" defense is untenable. Had he not bind himself solidarity with "FF"
to pay the obligation, undoubtedly, as guarantor, he could have availed of
the
defense of benefit of excussion. In other words, he cannot be compelled to pay the
creditor unless the latter has exhausted all the property of the debtor and
he
resorted to all the legal remedies against the said debtor. But then in the promissory
note, he bound himself jointly and severally with "FF" to pay the obligation
to the
creditor. According to the law, such a defense now invoked by "GG" is no
longer
available.
(NOTE: The above answer is based on Arts. 2058, 2059, Civil Code,)
07; Obligations; joint/ solidary liability; solidary obligations
1984 No. 11
A, B and C solidarity promised to pay D the amount of P3,000.00.
Unfortunately, C became insolvent.
What recourse does B have against A and B? What are the rights of A and B
as against each other?
Answer:
A.

Furnished by the Office of Justice Palma

D may sue either A or B, or both, and recover the whole amount of P3,000

(Art. 1207) from either or both of them. Either party paying the entire
amount may
recover the amount of P1,5000 from the other party. (Art. 1217).
B.

Comments and Suggested Answer

We agree with the answer of the Bar Examiner. However, if the bar candidate
will answer the problem by invoking the provisions of Arts, 1216 and 1217
of the
Civil Code instead of Arts. 1207 and 1217, it is recommended that the
answer
should be considered a correct Answer.
07; Obligations; joint/ solidary obligations; joint
1983 No. 12
A and B sold 1,000 sacks of rice to X and Y and, on X's request, delivered
them to him. X resold the rice, without turning over any part of it or its price to Y.
Page 290 of 391
May Y compel A and B to deliver what he bought? If so, to what extent?
Answer
Yes, Y may compel A to deliver 250 sacks of rice and B the same quantity,
the obligation being joint, not solidary.
07; Obligations; loss of the thing due
1986 No. 1:
Mr. Mekanico leased some automobile repair equipment to Mr. Masipag, who
was opening his auto repair shop. The lease agreement was executed on February
15, 1985. It stipulated that the period was one month only, at the expiration of
which
Masipag was to return the equipment of Mekanico. The equipment was delivered on
February 15, 1985. On March 15, 1985 Mekanico, in a telephone call, asked
Masipag to return the leased property that same day. Because his truck broke down,

Masipag was unable to comply. Early the next morning, the equipment was burned
in an accidental
Masipag's auto

fire

that

started

in

nearby

restaurant

and

gutted

repair shop. Mekaniko seeks to hold Masipag liable for the value of the lost property
plus damages on the ground that he did not return it as agreed upon. Is Mekanico's
claim tenable? Explain.
Answer:
Mekaniko's claim in untenable.
The fire of accidental origin which destroyed the equipment which is the
object of the obligation in the instant case is clearly fortuitous in character.
Therefore, the
obligator,

doctrine

of fortuitous events

is applicable. The

debtor

or

Masipag, is not liable. In other words, the obligation is extinguished.

The fact that the loss took place on March 16, 1985. which is one day after
Mekaniko had made a demand upon Masipag to return the leased property,
does
not mean that the loss took place after the obligor had already incurred in
delay. It
must be noted that the lease agreement was executed on February 15,
1985,
Obviously, on March 16, 1985. Masipag had not yet incurred in delay.
(Note: The above answer is based upon Arts. 13 and 1174 of the Civil Code.
We recommend that an answer based on Arts. 13 and 1262 of the Civil Code or on
Arts. 13, 1665 and 1667, arriving at the same conclusion should also be considered
correct)
Answer - The loss occurred by fortuitous event before Masipag incurred in
delay. Therefore, the general rule applies; No one shall be held liable for loss due to
fortuitous event.

The one-month period of lease would expire only on March 18th while the fire
occurred on the 29th day. The C.C. provides that one-month consists of 30 days and
February
1985 had only 28 days, not being a leap year.
07; Obligations; loss of the thing due; force majeure
2000 No XIV
Kristina brought her diamond ring to a jewelry shop for cleaning. The jewelry
shop undertook to return the ring by February 1, 1999." When the said date arrived,
the jewelry shop informed Kristina that the Job was not yet finished. They asked her
to return five days later. On February 6, 1999, Kristina went to the shop to claim the
ring, but she was informed that the same was stolen by a thief who entered the
shop
the night before. Kristina filed an action for damages against the jewelry shop which
put up the defense of force majeure. Will the action prosper or not? (5%)
Page 291 of 391
SUGGESTED ANSWER:
The action will prosper. Since the defendant was already in default not having
delivered the ring when delivery was demanded by plaintiff at due date, the
defendant is liable for the loss of the thing and even when the loss was due to force
majeure,
07; Obligations; nature and effect of obligations
1986 No. 11:.
By means of a public instrument, Mr. Nagbibili sold his mango plantation to
Abenturero
delivery

effective

immediately.

The

document

stipulated,

however,

that

would be effected six months from the execution of the deed of sale. When the said
period arrived, Abenturero demanded delivery in writing but Nagbibili dilly-dallied. It

was not until a month afterwards that Nagbibili finally gave the land to Abenturero.
In
the three weeks before
produce of
the mango
knew

plantation

to

delivery, Nagbibili
Mr.Commerciante

sold and delivered the

for

P200.000.00.

entire

Commerciante

nothing of the contract between Nagbibili and Abenturero. Abenturero now seeks to
recover from Commerciante either the full value of the mangoes or a similar amount
and quality of the mangoes sold.
Does Abenturero have this right against Commerciante? Explain.
Answer:
Abenturero does not have any right, whether personal or real, to proceed
against Commerciante.
In obligations to give, the creditor has a right to the thing which is the object
of the obligation and to the fruits thereof when the obligation to deliver
arises. The
obligation to
contract. In

deliver

arises

from

the

moment

of

the

perfection

of

the

sales, once the contract is perfected, the vendor is bound to deliver the
thing sold
and the fruits, unless there is a stipulation to the contrary. In the instant
problem,
there is a stipulation that delivery will be effected six months from the
execution of
the deed of sale. Instead of delivering the mango plantation and the fruits
of
Abenturero in accordance with the agreement, Nagbibili breached the contract
by
delaying the delivery of the plantation beyond the period agreed upon and by
selling
the fruits to Commerciante. However, since there was still no delivery of the

plantation and the fruits, it is obvious that the only right which Abenturero
had
acquired was a personal right enforceable against Nagbibili, not a real right
enforceable against the whole world. Ergo, he can now proceed against Nagbibili for
indemnification for damages. He cannot proceed against Commerciante who
was
not even aware of the existence of the contract between Nagbibili and Abenturero.
(Note - The above answer is based upon Arts. 1164 and 1537 of the Civil
Code and upon decided cases.)
Answer - Although the buyer is entitled to the fruits of the land from the time
of perfection of the contract, still he did not acquire a real right over the
fruits until
they are delivered to him. Therefore, Abenturero has no right of action
against
Commerciante.
Answer - The seller is supposed to deliver to the buyer the thing sold as well
as the fruits and accessions that accrue from the moment of perfection. Abenturero
is entitled to the fruits of the mango plantation from the time of the execution of the
public instrument
immediately.
Delivery may
instrument is

be

which
either

provided
actual

that
or

the

sale

was

to

be

effective

constructive. The execution of public

one of the modes of constructive delivery.

07; Obligations; obligation to deliver a determinate thing; effect of loss
Page 292 of 391
1984 No. 14
For value received, Pedro promised to deliver to Juan on or before August
15, 1984 a Mercedes Benz with Plate No. 123 which he (Pedro) had just
brought

home from Germany,

Unfortunately,

as

well

as

1984

18"

Sony

television

set.

before the scheduled delivery date, the Mercedes Benz and the television set which
Pedro had intended to deliver to Juan were destroyed by an accidental fire.
Has the obligation of Pedro been extinguished? Explain.
Answer:
A. Furnished by Office of Justice Palma
The obligation to deliver the Mercedes-Benz is an obligation to deliver a
determinate thing, because the particular
designated.

car

to

be

delivered

had

been

The obligation to deliver that particular car was therefore extinguished by

the
occurrence of the fire, a fortuitous event.
On the other hand, the obligation to deliver the television set is an obligation
to deliver a generic thing. The particular television set to be delivered has not been
determined. Only the kind of television set to be delivered was agreed upon. Pedro
is therefore still obligated to deliver a television set of the kind and quality
agreed
upon, since generic obligations are never extinguished by fortuitous events.
E.

Comments and Suggested Answer

We agree with the answer of the Bar Examiner.

07; Obligations; obligation to deliver a generic thing
1985 No. 15
A)

On September 1, 1982, A sold to B 50 heads of cattle for P150,000.00

and 60 heads of carabao for the same price, the cattle to be loaded in Davao City
on
December 1, 1982, on the SS "Argus" and delivered upon her arrival in Manila
5 days later while the carabao were be loaded in the same city and shipped
on

December 15 and delivered likewise to B upon her arrival in Manila 5 days

later.
Because of the breakdown of his cargo truck, A was able to ship the cattle and the
carabaos only on December 15. On her way to Manila, the SS "Argus" ran
into a
storm and all the animals were thrown into the sea to prevent her from
sinking. B,
who paid one
demanded its

half

of

the

price

upon

the

execution

of

the

contract,

return while A sought from B the full payment of the price.

Decide the controversy, giving the reasons for your decision.
Answers:
A) 1. The obligation of A to deliver the cattle or carabao is a generic
obligation, therefore, it is not extinguished by loss, so the seller is liable.
However,
the question of damages will depend on who is at fault. Since, however,
there is
nothing stated here as to whether the price is for a lump sum or for each cattle, the
problem here is on the partial payment. And the partial payment of one-half
is a
demand. If the one-half payment is equivalent to the value of 1/2, it is a demand for
one-half and, therefore, when A delayed the delivery of the cattle, he is "in
mora"
and will be liable for damages.
2. The question with respect to the sale is whether ownership passed to the
buyer at the time of the loss. The place of delivery and the sale is Manila. The things
sold were destroyed on the way to Manila. The ownership did not pass to the buyer
and therefore the buyer is not yet answerable for the payment of the price.
B can

demand therefore its return. Aside from that there was a delay on the part
of the
vendor and being in delay, he bears the loss through fortuitous -event.
Page 293 of 391
3.

The heads of cattle and carabaos are to be considered specific, so this

refers to the sale of specific things, and when they were lost, the obligation
was
extinguished because of fortuitous event.
4. Res perit creditori applies. The risk, therefore, would lie with the buyer
from the perfection of the contract until the delivery of the thing sold.
Accordingly,
the buyer must pay to the seller the remaining unpaid price of the goods.
6. The seller is liable to the buyer for the loss of the cattle because the
delivery to the carrier was late.
The buyer is liable for the loss of the carabaos since delivery to the carrier is
equivalent to delivery to the buyer. The buyer bears the loss and is liable under the
principle of "res pent domino" when the subject matter is lost through
fortuitous
event.
07; Obligations; obligation to give; obligation to do
1983 No. 10
A bound himself to deliver to B a 21-inch 1983 model TV set, and the 13
cubic feet White Westinghouse refrigerator, with Motor No. WERT-385, which B saw
in A's store, and to repair B's piano. A did none of these things.
May the court compel A to deliver the TV set and the refrigerator and repair
the piano? Why? If not, what relief may the court grant B? Why?
Answer
(Examiner's Answer)

Yes, in so far as his obligation to deliver the Westinghouse refrigerator is

concerned, the thing to be given being determinate, but no in so far as the
2 other
obligations are concerned, one being an obligation to give an indeterminate
thing,
and the other being an obligation to do. In these 2 cases, the court shall
order the
obligations to be performed at A's expense.
(Committee's Answer)
As far as the refrigerator is concerned, the Court may compel A to deliver the
refrigerator to B. The obligation to give is a determinate obligation to give. Under
the
law, in this type of obligation, the principal right of the creditor against the debtor is
to compel the debtor to make the delivery.
(Note; The above answer is based on Art. 1165, par. 1, Civil Code)
As far as the TV set is concerned, the Court may compel A to deliver
although not specifically. The obligation of A is a generic obligation to give.
Under
the law, in this type of obligation, once all of the circumstances of the obligation
have
been taken into consideration, the Court may compel A to deliver to B a TV
set
which must be neither of superior nor inferior quality.
(Note: The above answer is based on Art, 1246, Civil Code.)
As far as the repair of the piano is concerned, the court cannot compel A to
repair said piano. The obligation here is a purely personal obligation, an obligation
to
do. Under the law, in this type of obligation to compel A to repair the piano
of B
would constitute an infringement of A's liberty,

(Note: The above answer is based by implication on Art. 1165, Civil Code.)
Anent the TV set, if the debtor refuses or is unable to comply with his
obligation to deliver a 21 inch TV get which must be neither of superior nor inferior
quality, B may ask the court to order the performance of the obligation at
the
expense of A. Additionally, he can ask for damages.
Page 294 of 391
Anent the repair of the piano, B may also ask the court to order the
performance of the obligation at the expense of A.
(The above answers are based on Arts. 1165, par. 2 and 1170, Civil Code.)
07; Obligations; obligations with a penal clause
1986 No. 10:
The Betis Furniture Co. undertook to deliver to Mr. Bagongkasal specified
pieces of living room, dining room and bedroom furniture, all made of narra,
for a
price stated in the contract. The agreement had a penal clause that any violation of
the contract would entitle the aggrieved party to damages in the amount of
P100,000.00. The furniture delivered by Betis was made, not of narra, but of inferior
wood.
In a suit to recover damages, Bagongkasal was able to prove that the actual
damages he sustained amounted to P200,000.00, He demanded that amount
plus
the P100,000.00 penalty or a total of P300,000.00. Betis, however, countered that if
it were liable for damages at all, the maximum award should not exceed
P100,000.00 as stated in the penal clause of the contract.
Whose claim would you sustain? Why? Answer:
I would sustain the claim of Betis. A penal clause is supposed to answer for

damages without the introduction of proof as to actual damages. It is to be

noted
that the penal clause has been freely agreed upon between the parties
precisely
with the intention of doing away with having to present proof of damages.
Answer I shall sustain the claim of the defendant Betis Furniture Co. The
Civil Code is explicit. According to said Code, in obligations with a penal clause, the
penalty shall substitute the indemnity for damages and the payment of
interests in
case of non-compliance. There are only three exceptions to this rule. They are: first,
when there is a stipulation to the contrary: second, when the creditor is compelled
to
sue the debtor because of the latter's refusal to pay the agreed penalty;
and third,
when the debtor is guilty of fraud. It is clear that the instant case does not fall
within
the purview of any of the three exceptions Therefore, the award in favor of
the
plaintiff should be for P100,000.00 only.
Answer -- I shall not sustain the claim of Beds Furniture Co. The Civil Code is
explicit. According to said Code, in obligations with a penal clause, the penalty shall
substitute the indemnity for damages and the payment of interests in case
of noncompliance. There are three exceptions to this rule. They are: first, when there is a
stipulation to the contrary; second, when the creditor is compelled to sue the debtor
because of the latter's refusal to pay the agreed penalty: and third, when the debtor
is guilty of fraud. It is clear that the instant case falls within the purview of the third
exception. The furniture delivered by Betis was made, not of narra. but of
inferior

wood. That
obligation.

indicates

that

the

debtor

commuted

fraud

in

performing

its

Therefore, the award in favor of the plaintiff should be for P200,000 actual damages
plus the P100,000 penalty.
Answer - Under the doctrine of G.A. Machineries, Inc. vs. Yaptinchay. 126
SCRA 78 (ponente J. Gutierrez) there is breach of contract not breach of warranty.
The breach is fraudulent. Under the doctrine of Mariano Pamintuan vs. CA.
SCRA
556, since debtor is guilty of fraud - "The proven damages supersede the stipulated
damages (penalty)" citing Art. 1226 Civil Code of the Philippines).
Answer ~ Here there is a breach of warranty and Betis Furniture Co. must
know the difference between "narra" and other kinds of wood. Therefore, in
delivering the
fraudulently,

furniture

and under the

reimbursed the

C.C,

the

made

of

buyer

inferior
in

this

quality,
case

it

would

undoubtedly
be

entitled

acted
to

be

Page 295 of 391

difference in value of the furniture and the price 'he paid (P200,000) and
damages
(penalty -P100,000),
07; Obligations; obligations with a penal clause
1985 No, 12
A, agreed to build a house for B on the condition that it shall be completed
within 6 months from January 1, 1980, that work shall begin when B pays A
P30,000.00, and that A shall pay a penalty of P200.00 for each day of delay in the
fulfillment of the
August 31,

contract. A

finished the

construction

of the

house on

1980, and turned it over the same day to B who demanded payment of the penalty

of P200.00 for every day of delay in its completion. A refused to pay,

alleging the
delay was caused by B who gave him the first payment only on March 1. B's answer
was that he had the money ready since January 1 but it was not until March 1, after
calling A, that he went to his house to get it
a) Rule on the respective contentions of both parties.
b) Was there delay in the completion of the house? State your reasons.
Answers:
(a) and (b)
1. B was bound to pay A the amount of P30.000 only upon demand for such
payment by A. Hence, there was no default on the part of B who was ready
to
comply with the obligation. Since the agreement was that the house was to
be
completed within 6 months from Jan. 1, 1980 and the building was not
completed
within the specified time, the builder is liable for the penalty according to the terms
of
the agreement.
2. Even though there is a penalty, that is dependent on the fact whether time
is of the essence of the contract or not. The mere fixing of the date is not
considered
necessarily to mean that time is of the essence. The date is only for
maturity.
Generally, time is not of the essence.
3.

Although B had the money, he never informed the other party. So the

other party did not get to know that he had the money. Therefore, B was
not in
default. A is not entitled to collect penalty.

4.

I would rule in favor of B, since the payment of P30,000.00 does not

appear to be a condition for the completion of the house within six months
from
January 1, 1980. But, assuming otherwise, there was no default in. the payment of
the P30.000.00 since there was
(Art.
1169). In addition,
payment shall

unless

no

demand made for the payment thereof

otherwise

expressed

in

the

agreement,

be made at the domicile of the obligor (Art. 1251).

There was a delay in the completion of the house; accordingly, the payment
of P200 for each day of delay could be sought since this penalty is not
unconscionable considering the total value of the contract.
07; Obligations; obligations with a period
1980 No. IV
(b)

"M" and "N" were very good friends. "N" borrowed P10,000 from "M".

Because of their close relationship, the promissory note executed by "N"

provided
that he would pay the loan "whenever his means permit." subsequently, "M" and
"N"
quarreled. "M" now asks you to collect the loan because he is in dire need of money.
What legal action, if any, would you take in behalf of "M"?
Answer
Page 296 of 391
(b) "M" must bring an action against "N" for the purpose of asking the court to
fix the duration of the term or period for payment (Arts. 1180, 1197, Civil
Code).
Once the court has fixed the duration of the term or period, it becomes a part of the
covenant of the two contracting parties. If the debtor defaults in the payment of the

obligation after the expiration of the period fixed by the court, the creditor
can then
bring an action against him for collection. Any action for collection brought
before
that would be premature. This is well-settled. (Gonzales vs. Jose, 66 Phil.
369) ;
Conception vs. People of the Phil, 74 Phil. 62; Pages vs. Basilan, 104 Phil. 882).
Alternative Answer: Normally, before an action for collection may be
maintained by the creditor against the debtor, the former must first bring an
action
against the latter asking the court to fix the duration of the term or period
for
payment (Art. 1197, Civil Code). However, an action combining such action with
that
of an action for collection may be allowed if it can be shown that a separate action
for collection would be a. mere formality because no additional proofs other than
the
admitted facts will be presented and would serve no purpose other than to
delay.
Here, there is no legal obstacle to such course of action. (Borromeo vs.
Court of
Appeals, 47 SCRA 65).
07; Obligations; obligations with a period
1984 No. 13
A obtained from B a loan payable within a year. As security for its repayment,
A mortgaged his uninsured house.
Three months after the loan was given, A's house was gutted by an
accidental fire. Thereupon, B demanded immediate payment from A, who refused to
pay contending that the loan was for a one-year period.
Is A's contention valid? Explain. Answer:

A.

Furnished by Office of Justice Palma

No. Under Art. 1198, the debtor shall low every right to make use of a period
when the securities disappear through a fortuitous event. A has to give satisfactory
substitute collateral.
B.

Comments and Suggested Answer

We agree with the answer of the Bar Examiner.

07; Obligations; obligations with a period
1982 No 15
"A" Corporation, engaged in the sale of subdivision residential lots, sold to "B"
a lot of 1,000 square meters. The contract provides that the corporation should put
up an artesian well with tank, within a reasonable time from the date
thereof and
sufficient for the needs of the buyers. Five years thereafter, and no well and
tank
have been put up by the corporation, "B" sued the corporation for specific
performance. The corporation set up a defense that no period having been fixed,
the
court should fix the period. Decide with reason.
Answer
First Answer: The action for specific performance should be dismissed on the
ground that it is premature. It is clear that the instant case falls within the purview
of
obligations with a term or period which must be judicially fixed. Thus, "B", instead of
bringing an action for specific performance, should bring an action asking the court
to determine
artesian well

the

period

within

which

"A"

Corporation

shall

put

up

the

with tank. Once the court has fixed the period, once the court, let us say,
has
declared that the period is six months, then that will become a part of the covenant

Page 297 of 391

between the contracting parties. It can no longer be changed by them. If
the
Corporation does not put up the artesian well with tank within the period fixed by
the
court, "B" can then bring an action for specific performance.
Second Answer: Normally, before an action for specific performance may be
maintained by "B" against "A" Corporation, the former must first bring an
action
against the latter asking the court to fix the duration of the term or period
to install
the artesian well with tank. However, an action combining such action with that of
an
action for specific performance may be allowed if it can be shown that a
separate
action for
additional

specific

performance

would

proofs other than the admitted facts will

purpose

be
be

mere

formality

because

no

presented and would serve no

other than to delay. Here, there is no obstacle to such course of action.

(Note: The above answers are based on Art. 1197 of the Civil Code and on
decided cases. The Committee respectfully recommends that either answers should
be considered correct.)
07; Obligations; obligations with a period; suspensive period dependent upon
will of debtor
1991 No 13:
In a deed of sale of a realty, it was stipulated that the buyer would construct a
commercial building on the lot while the seller would construct a private
passageway
bordering the lot. The building was eventually finished but the seller failed to

complete the passageway as some of the squatters, who were already known to be
there at the time they entered into the contract, refused to vacate the
premises, In
fact, prior to its execution, the seller filed ejectment cases against the squatters.
The buyer now sues the seller for specific performance with damages. The
defense is that the obligation to construct the passageway should be with a
period
which, incidentally, had not been fixed by them, hence, the need for fixing a judicial
period.
Will the action for specific performance of the buyer against the seller
prosper?
Answer:
No. the action for specific performance filed by the buyer is premature under
Art. 1197 of the Civil Code. If a period has not been fixed although contemplated by
the parties, the parties themselves should fix that period, failing in which, the Court
maybe asked to fix it taking into consideration the probable contemplation of
the
parties. Before the period is fixed, an action for specific performance is premature.
Alternative Answer;
It has been held in Borromeo vs. CA (47 SCRA 69), that the Supreme Court
allowed the simultaneous filing of action to fix the probable contemplated
period of
the parties where
multiplicity of

none

is

fixed

in

the

agreement

if

this

would

avoid

suits. In addition, technicalities must be subordinated to substantial justice.

Alternative Answer;
The action for specific performance will not prosper. The filing of the
ejectment suit by the seller was precisely in compliance with his obligations
and

should not, therefore, be faulted if no decision has yet been reached by the Court on
the matter.