Oblicon Provision Notebook + Cases

OBLIGATIONS AND CONTRACTS first exam
Kristine Confesor
TITLE V
Chapter 1
PRESCRIPTIONS
PRESCRIPTION
Concept and Kinds of Prescription
Prescription- acquisition of a right by a lapse of time.
Limitation- actions under the common law; time within which an action must be brought after the right of action has accrued.
Mode of acquiring or losing ownership and other real rights through the lapse of time in the manner and under the conditions
laid down by law:
1.
In the concept of an owner
2.
Public
3.
Peaceful
4.
Uninterrupted
5.
Adverse
2 Kinds of Prescription as to acquisition /loss of rights
1)
Acquisitive Prescription- acquisition of a right by the lapse of time, also known as adverse possession and usucapcion
Ordinary
Extraordinary
2)
Extinctive Prescription- Loss of right of action by the lapse of time, also known as limitation of actions
2 Kinds of Prescription as to Object/SM
1. Property (real/personal)
2. Rights
Art. 1106 By prescription, one acquires ownership and other real rights through the lapse of time in the manner and under conditions
laid down by law.
In the same way, rights and actions are lost by prescription.
Basis of Prescription
Abandonment, Negligence, Carelessness of owners provided with the most perfect titles may be deprived and dispossessed of their
properties by usurpers, who, by the lapse of the time specified by law, acquire the same by prescription.
Sta. Maria: statute of repose whose object is to suppress fraudulent and stale claims from springing up at great distances of
time and surprising the parties of their representatives when the facts have become obscure from the lapse of time or the
defective memory or death or removal of witnesses.
ACQUISITIVE
PRESCRIPTION
acquisition of a right by the lapse of time; adverse possession
and usucapcion
Based on the assertion by a usurper of an adverse right for
such a long time, uncontested by the true owner of the right, as
to give rise to the presumption that the latter has given up such
right in favor of the former.
Voluntary return of the property, even if not viewed as a
performance of a natural obligation, can be regarded as a tacit
renunciation of prescription under 1112.
AS A DEFENSE:
plea of ownership is already sufficient to justify proof thereof
even if there is no allegation of prescription of action.
(ex. Defense that the occupant of property is the absolute
owner due to prescription)
EXTINCTIVE
PRESCRIPTION
Loss of a rights and action due to lapse of time; limitation of
action
Based on the probability, born of experience, that the alleged
right which accrued in the distant past never existed or has
already been extinguished; or if it exists, the inconvenience
caused by the lapse of time should be borne by the party
negligent in the assertion of his right.
To protect the diligent and vigilant, not the person who sleeps on
his rights
AS A DEFENSE: must be expressly relied upon in the pleadings,
proved, and established with a certain degree of certainty
Retroactivity of Prescription
Acquisition of ownership or other real rights through prescription is retroactive; once the period is completed, the new owner is
considered as having acquired the thing or right from the moment the period began to run.
Doctrine of Stale Demands (LACHES)
Unreasonable delay in the bringing of a cause of action before the courts of justice
Failure or neglect for an unreasonable and unexplained length of time to do which by exercising due diligence, could or should
have been done earlier
Negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled thereto
either has abandoned it or declined to assert it
Based upon grounds of public policy which requires, for the peace of society, and the discouragement of stale claims
Requisites
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 complainants rights, the complainant having been afforded an opportunity to institute a suit
3)
Lack of knowledge or notice on the part of the defendant that the complaint would assert the right on which he bases his
suit;
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4)
Injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred
PRESCRIPTION
Statute of Limitations
Concerned with the FACT of delay
Matter of time
Statutory
Law
Fixed Time
LACHES
Doctrine of Stale Demands
Concerned with the EFFECT of delay
Question of inequity of permitting a claim to be enforced,
founded on some change in the condition of the property or the
relation of the parties
Not
Equity
Not
Applies independently of prescription so that laches has been
successfully interposed even if a shorter time had elapsed and
prescriptive period has not yet expired
Can bar filing or prosecution of a suit; determined by the
ccourts
1107. Persons who are capable of acquiring property or rights by the other legal modes may acquire the same by means of
prescription.
Minors and other incapacitated persons may acquire property or rights by prescription, either personally or through their parents,
guardians, or legal representatives.
Art. 1108. Prescription, both acquisitive and extinctive,

runs against:
(1) Minors and other incapacitated persons who have
parents, guardians or other legal representatives;
(2) Absentees who have
administrators, either appointed by them before their
disappearance, or appointed by thecourts;
(3) Persons living abroad, who have
managers or administrators;
(4) Juridical persons,
except the State and its subdivisions.
Persons who are disqualified from administering their
property have a right to claim damages from their legal representatives whose negligence has been the cause of prescription.
Art. 1110 Prescription, acquisitive and extinctive, runs in favor of, or against a married woman.
Capacity for PrescriptionGR: Capacity to acquire property or rights by other legal modes is required for prescription.
Sta. Maria:
Prescription is a mode of acquiring property or rights. The acquisition of a minor who personally acquires property or rights
without the assistance of his parents/guardian is annullable or voidable.
However, when such minor comes of age, he may ratify the acquisition.
A person of majority age of 18 is already emancipated and is responsible for all acts of civil life, save for exceptions
established by existing laws on special cases.
If discernment is wanting, Minors and Incapacitated Persons may acquire prescription through their:
o
Parents
o
Guardians
o
Legal representative
NOTES:
***Capacity for possession is required because possession is an element common to all kinds of acquisitive prescription.
***Even if the donation is VOID, it may constitute the legal basis for adverse possession
***Act. No 190 under Code of Civil Procedure provides for the right to bring actions within 3 or 2 years after the
minor/incapacitated persons disability has been removed.
Has the effect of giving the incapacitated person the designated period after the removal of the disability within which to
bring suit, if said prescription has already expired.
Extends to all parties who have a joint and inseparable interest with the party under disability.
***No prescription can run against the State and its subdivisions, except with reference to patrimonial property
Art. 1109 Prescription does not run between

husband and wife, even though there be a separation of property agreed upon in the marriage settlements or by judicial decree.
Neither does prescription run between
parents and children, during the minority or insanity of the latter, and between guardian and ward during the continuance of the
guardianship.
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Kristine Confesor
Prescription by adverse possession does not run
Between H and W
Parents and Children during minority/insanity
Guardian and Ward during continuance or rel.
Except
1.
Legal separation (w/I 5 years from occurrence of the cause)
2.
Annulment (5 years from the starting point provided by law)
3.
Husbands action Impugning the legitimacy of childs wife (1,2,3 depending upon the residence of the husband and the place
of birth of the child)
4.
Alienations made by the husband without the wifes consent
Art. 1111 Prescription obtained by a co-proprietor or a co-owner shall benefit the others.
NB: applies only when property is owned in common because they have the same interest
No Need for Ratification- applies only when the co-owner in adverse possession clearly possesses in representation of the co-ownership.
But mere existence of relationship of co-owners will not in itself suffice to give the benefit of prescription by one in favor of all the
others. In the latter, ratification is now needed under Art. 532, CC.
Furthermore, possession must be in the concept of owner in order to ripen into ownership by prescription
Art. 1112 Persons with capacity to alienate property may renounce
prescription already obtained, but not the right to prescribe in the
future.
Prescription is deemed to have been tacitly renounced when the
renunciation results from act which imply the abandonment of the right
acquired.
NB:
***Renunciation is Unilateral and does not require the acceptance of the person to be benefited by it.
Tacit Renunciation- where a party acknowledges the correctness of a debt and promises to pay it after the same has prescribed and w/
full knowledge of the prescription, he waives the benefit of prescription.
Full knowledge and promise to pay beyond Prescribed period
Extension of time to pay
***Advance renunciation is void. Only persons with the capacity to alienate property can renounce prescription already obtained
***Example: D formerly owed C but the debt has already prescribed.
If Sonia, knowing that the debt has prescribed, nevertheless still acknowledges the existence of the debt and promises to pay
for it, there is an implied renunciation of the prescription.
She still has a civil obligation.
If Sonia, knowing that the debt has prescribed, nevertheless

voluntarily pays the debt, she cannot recover what she had paid.
This would be a natural obligation.
If Sonia, not knowing that the debt has prescribed pays it, there is no renunciation of the prescription;
Can still recover on the basis of solutio indebiti
Art. 1113 All things which are within the commerce of men are
susceptible of prescription, unless otherwise provided. Property of the
State or any of its subdivisions not patrimonial in character shall not be
the object of prescription.
1)
2)
Subject to the Commerce of Man

Patrimonial Property of the State
I. Object
of prescription; Rules
Possession is an essential element in prescription
only things susceptible of being appropriated may be the object of possession (530, CC)
Hence, only things susceptible to appropriation may be acquired through prescription
Therefore the ff cannot be acquired by prescription
o
Common things
o
Intransmissible rights
o
Outside the commerce of men
o
Movables acquired through crime
o
Lands registered under the Torrens system (Javier v. Concepcion)
o
Properties of spouses, parents, and children, wards and guardians, under the restrictions imposed by law (1109)
o
Property of public dominion
429 provides The following are property of public dominion

1)
Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State,
banks, shores, roadsteads, and other of similar character
2)
Those which belong to the State without being for public use, and are intended for some public service or for the
development of the national wealth
502 adds
1)
Rivers and natural beds
2)
Continuous or intermittent waters of springs and brooks running in their natural beds and beds themselves
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Kristine Confesor
3)
4)
Waters rising continuously or intermittently on lands of public dominion

Lakes and lagoons formed by Nature on public lands and their beds
Exception:
RA 1942 (June 22, 1957) amending PLA or CA141

Sec. 48 of CA 141 provides that citizens therein described occupying lands of public domain or claiming to own any such land
or an interest therein, but whose titles have not been perfected or complete, may apply to the CFI where the land is located
for confirmation of their claims and the issuance of title under LRA.
o
Those who by themselves or through their predecessors in interest have been in open, continuous, exclusive, and
notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of
acquisition of ownership, for at least 30 years immediately preceding the filing of the application for confirmation of
the title except when prevented by war or force majeure. ***deals with judicial confirmation of imperfect or
incomplete title until Dec. 31, 1957
Art. 1114 Creditors and all other persons interested in making the
prescription effective may avail themselves thereof notwithstanding the
express or tacit renunciation by the debtor or proprietor.
Creditors may plead prescription despite tacit renunciation of right by debtor/proprietor
Illustration:
A is indebted to B in the amount of 50k.
C guarantees the said indebtedness and waives his benefit of excussion. This means that should A fail to pay B, B need not exhaust all
remedies against A for collection before he could demand payment from C, the guarantor.
In the event that the time within which to pay has already prescribed, but A nevertheless waives the prescription such that B can still
collect from him, and should A fail again to pay, thereby prompting B to demand payment from C, the guarantor, the latter can resist
payment by invoking that the collection of debt of A has already prescribed. C will not be prejudiced by the act of A in waiving the
prescription. OKAY GETS!
Art. 1115 The provisions of the present Title are understood to be
without prejudice to what in this Court or in special laws is established
with respect to specific cases of prescription
Prescriptive Periods in specific cases. In case of conflict between period provided in this Title and period provided in another portion of
Civil Code, the more specific provision will prevail.
Art. 1116 Prescription already running before the effectivity of this Code
shall be governed by laws previously in force; but if since the time this
Code took effect the entire period herein required for prescription should
lapse, the present Code shall be applicable, even though by the former
laws a longer period might be required.
TRANSITIONAL RULES FOR PRESCRIPTION
1950 Civil Code took effect Aug. 30, 1950 (transitory provision)
1.
If the period of prescription BEGAN and ENDED under the OLD laws, said OLD laws govern
2.
If the period of prescription BEGAN under the NEW civil code, the NEW CC governs.
3.
If the period began under the OLD law, and continues under NCC, the old law applies.
Exception: Therefore, NCC applies provided
a.
NEW CC requires shorter period
b.
This shorter period has already lapsed since Aug. 1950
1)
2)
(if NCC provides for a shorter period, it must apply NCC)

o
Thus, if under an old law previous to the effectivity of the 1950 CC, X has 30 years to file a particular suit and by the
time CC took effect is only 12 years, he cannot file the case on the 12 th or even on the 11 th year if the 1950 CC only
provides for 10 years as prescriptive period for exactly the same kind of case.
o
This is because by the 11 yr or 12 th year, the prescriptive period of 10 years counted from the effectivity of the 1050
cc has already lapsed.
If the prescriptive period under the old law is still running upon the NCCs effectivity and the remaining balance of such period
since the effectivity of NCC is shorter than that provided under the old law, the old prescriptive period will apply. (whichever is
shorter)
o
If under the old law, the balance of the period is 12 years remaining upon 1950 NCCs effectivity and the new law
provides for a longer period, the old law of 12 years governs.
TITLE V
Chapter 2
PRESCRIPTION OF OWNERSHIP AND
OTHER REAL RIGHTS
Art. 1117 Acquisitive prescription of dominion and other real rights

maybe ordinary or extraordinary.
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Kristine Confesor
Ordinary Acquisitive Prescription requires possession of things in
good faith and with just title for the time fixed by law.
REQUISITES FOR ACQUISITIVE

PRESCRIPTION
Capacity to acquire by prescription
Thing capable of acquisition by
prescription
Possession of thing under certain
conditions
Lapse of time provided by law
ORDINARY PRESCRIPTION
EXTRAORDINARY PRESCRIPTION
1107
>persons who are capable of acquiring property/rights through other legal modes
>any person incapacitated w/ legal representatives
1113
All things within the commerce of men
Property of the State or any of its subdivisions not patrimonial in character, not object of
prescription
Good faith with just title
Bad faith
Concept of an owner
Concept of owner
Open, Exclusive, Continuous Possession
Uninterrupted ownership, open
exclusive, continuous possession
Movable/Personal (4 years)
Movable property
Immovable (10years)
(8 years)
Immovable property (30 years)
Conversion of Possession- When the possession begins in good faith, but later on is converted to bad faith, extraordinary or ordinary?
Three possible solutions:
1.
Supervening bad faith erases the former possession in good faith, and extraordinary prescription will run
from the date of the possession in bad faith

2.
Prescription will be extraordinary, but the period will be counted
from the time the possession began

3.
The prescription will be extraordinary but the possession in good faith shall be computed
in proportion that the period of extraordinary bears to that or ordinary prescription.

NB: the last solution appears to be the most acceptable because it reflects the difference between the 2 kinds of prescription
and gives proper value to possession in good faith.
Art. 1118 Possession has to be in the concept of an owner, public,

peaceful, and uninterrupted.
Art. 1119 Acts of possessory character executed in virtue of license or

by mere tolerance of the owner shall not be available for the purposes of
possession.
FOR POSSESSION TO BE VALID
1) Concept of Owner must be possessed in this manner for a period of time so claim of acquisitive prescription would prosper; not
due to license or mere tolerance
***License- positive act of owner in favor of possessor
***Tolerance- passive acquiescence of the owner to acts being performed by another which appear to be contrary to the rights of
the former
Acts pertaining to the concept of an owner (payment of taxes) and continuous possession
Not concept of an owner

o
Mere possession with juridical title (unless such title is repudiated), such as being a trustee, usufructuary, lessee,
agent, pledge
o
That which subsists by mere tolerance or is in virtue of a license, because both of these imply consent on the part
of the owner, and thus constitute a recognition by the possessor that somebody else owns the property
o
Mere transient, in which case the owner is not divested of the title, but cannot exercise ownership in the meantime
2) Public- acts of enjoyment are executed in such manner as to be manifest or visible to all, especially to the person against whom the
possession is being adversely asserted
3) Peaceful- acquired and maintained without any violence, physical or moral.
4) Uninterrupted- continuous when the possessor has never ceased to manifest with external acts his intention to exercise a right
over the thing, which presupposes that he has never in fact ceased to exercise such right.
Art. 1120 Possession is interrupted for the purposes of prescription,

naturally or civilly.
How Interrupted
1. Naturally
o
Cessation of possession for MORE THAN 1 year
o
If 1 year or less, counted in favor of prescription
2. Civilly
o
Judicial summons
Except:
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Kristine Confesor
3.
When are judicial summons deemed not to have been issued?

a.
VOID for lack of legal solemnities. Hence, if the judicial summons as well as the copy of the complaint have been
served by a person not authorized by the court, it shall be deemed as not issued, thereby allowing the possession to
run uninterrupted.
b.
DESISTANCE by the Plaintiff from the complaint
c.
ABSOLVED: Possessor/defendant
Express Tacit Recognition of Owners right
Effects of Interruption
All benefits acquired so far from the possession ceases
When prescription runs again, it shall be a new one
In suspension, past period is included in the computation (insanity of the child or ward placed under guardianship)
Art. 1121 Possession is naturally interrupted when through any cause it

should cease for more than one year.
The old possession is not revived if a new possession should be
exercised by the same adverse claimant.
Art. 1122 The natural interruption is for only one year or less, the time elapsed shall be counted in favor of the prescription.
Art.1123 Civil interruption is produced by judicial summons to the possessor.

Art. 1124 Judicial summons shall be deemed not to have been issued and shall not give rise to interruption:
If it should be void for lack of legal solemnities; If the plaintiff
should desist from the complaint or should allow the
proceedings to lapse;
If the possessor should be absolved from the complaint
In all these cases, the period of interruption shall be counted for the prescription
When possession is civilly interrupted?
It is not the filing of the complaint in court which interrupts

the possession. It is interrupted upon receipt of the possessor of the judicial summons after the filing of the complaint. When the
possessor receives the judicial summons and the copy of the complaint, it is only during that time that jurisdiction is acquired by the
court of the person of the possessor and it is at that time that possession is interrupted.
Effect of Recovery of Possession;, in case
natural interruption - Under 1121 & 1122, the old possession loses all its juridical effects, and even if the possession is reacquired,
the old possession cannot be tacked to the new possession for purposes of prescription. MUST BEGIN ALL OVER AGAIN
Civil interruption if possession is recovered, it can be connected to the time that has elapsed as if it were in fact continuous; the
period to be counted for the prescription.
Art. 1125 Any express or tacit recognition which the possessor may
make of the owners right also interrupts possession.
Recognition by Possessor of owners rights recognition of owners right must be made by the possessor or declared by a third
person that the property does not belong to the possessor and it is authorized and ratified by the possessor.
Art. 1126 Against a title recorded in the Registry of Property, ordinary

prescription of ownership or real rights shall not take place to the
prejudice of a third person, except in virtue of another title also
recorded; and the time shall begin to run from the recording of the latter.
As to lands registered under the Land Registration Act, the provisions of
that special law shall govern.
Recorded Titles as to Third Persons;
NB: the owner of the thing at the beginning of the prescriptive period is not considered as a third person.
But those who acquire their right subsequently, relying on the registration of ownership in the Registry, must be considered as
third persons, and they cannot be prejudiced by the period of possession prior to the date of their acquisition.
Requisites for 3rd Persons
1.
That the acquisition is by onerous title;
2.
Acquisition is from one who, according to the Registry, can transmit the title;
3.
That the acquisition is registered;
4.
Such third person has no knowledge of prescription
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Kristine Confesor
NB:
one who acquires with knowledge that prescription is running or has run with respect to the tenement, cannot be afforded the
protection incident to registration.
-
While the registered owner who executed the title which is the basis for prescription, is not considered a third person, he is
however regarded as a third person with respect to a title executed by another who is not the registered owner.
When the title of a first transferee is not registered, a subsequent transferee of a real right over the things is considered as a third
person if his title is recorded.
The time for prescription to the prejudice of those who are not considered as third persons with recorded titles, shall be counted
from the commencement of the possession under title of ownership, although the title by virtue of which it is held may not have
been registered.
Registered Lands
Adverse possession may not be allowed to defeat the owners right to possession of land registered under Torrens system
(otherwise, loss of land by prescription would be indirectly approved, in violation of LRA)
Neither can prescription be allowed against the registered owners hereditary successors because the latter merely step into the
shoes of a decedent and are merely the continuation of the personality of their predecessor in interest.
Art. 1127 The good faith of the possessor consists in the reasonable
belief that
the person from whom he received the thing was the
owner thereof, and
could transmit his ownership.
Art. 1128 The conditions of good faith required for possession in Articles
526, 527, 528, and 529 of this Code are likewise necessary for the
determination of good faith in the prescription of ownership and other
real rights.
Defect is cured when:
Well-founded Belief that the grantor is the owner with the right to convey
Presumed, unless the contrary is shown
Good faith must not only exist at the beginning of the possession, but throughout the entire period required for prescription.
If VOID, good faith/bad faith will be then immaterial
If VOIDABLE, knowledge of the grantee of such defect does not deprive him of good faith for purposes of prescription (because he
can consider that the defect may not be set up and the title would thereby be invalidated)
Art. 1129 For the purposes of prescription, there is just title when the
adverse claimant came into possession of the property through one of the
modes recognized by law for the acquisition of ownership or other real
rights, but the grantor was not the owner or could not transmit any right.
Art. 1130 The title for prescription must be true and valid
Art. 1131 For purposes of prescription, just title must be proved; it is

never presumed.
Title for Prescription
1) Just an act which has for its purpose the transmission of ownership, and which would have been actually transferred ownership if
the grantor had been the owner (vice defect cured by prescription)
Ex. Sale with delivery, exchange, donation, succession, and dation in payment.
Does not constitute a Title
Ex. Lease of things, loan, deposit, and all contracts which do not transmit property rights; and
Partition, compromise and court decision, which are all declaratory property rights but do not transmit them.
2) True title must exist actually, and not merely in the mind of possessor.
False title- one which does not exist but is believed by the possessor to exist, may or may not be sufficient.
o
May be based on error in fact/law
o
Mistake of fact
If act of a 3rd person, the title is sufficient for prescription
If act of possessor himself, not sufficient

o
Mistake of law
If validity of the act, title is not adequate (ex. Belief that insane person can validly alienate)
If Mistake in application of law, adequate title (ex. If he did not know about insanity of owner, title is
sufficient)
Revocable title- one which the transferor has made a reservation by virtue of which the right of the possessor may
disappear, cannot serve as a basis for prescription; Once the reservation becomes ineffective, the period that has run
can be counter for the prescription (ex. A sale w/ right to repurchase)
3) Valid validity of the title means that it should be sufficient to transmit the right if the grantor had been the owner.
VOID title: insufficient
VOIDABLE title: sufficient until annulled, can be the basis of ordinary prescription
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Kristine Confesor
-
Suspensive Condition: period of prescription begin to run from the fulfillment of the condition
Resolutory Condition: begins at once, w/o prejudice to the effect of the resolution by the condition which may later happen
4) Proved requirement of just title must be proved for purposes of prescription (exception to the GR in 541, CC which provides for a
presumption of a just title for every possessor in the concept of owner).
Art. 1132 The ownership of movables prescribes
uninterrupted possession for 4years, in good faith.
through
The ownership of personal property also prescribes through

uninterrupted possession of 8years, without need of any other condition.
With regard to the right of the owner to recover personal property lost
or of which he has been illegally deprived, as well as with respect to
movables acquired in public sale, fair, or market, or from a merchants
store the provisions of articles 559 and 1505 of this Code shall be
observed.
Art. 1133 Movables possessed through a crime can never be acquired

through prescription by the offender.
Art. 1134 Ownership and other real rights over immovable property are
acquired by ordinary prescription through possession of 10years.
Art. 1135 In case the adverse claimant possesses by mistake an area

greater, or less, than that expressed in his title, prescription shall be
based on the possession
Constructive Possession- possession upon which prescription is based, is not limited to the area actually occupied, but covers the
area over which the possession is asserted.
Therefore, the area referred to by the present article as possessed by mistake, must be deemed to include not only that actually and
physically occupied but also everything under constructive possession.
Possession in the eyes of the law does not mean that a man has to have his feet on every sqm of the land (Ramos v. Dir.)
Possession prevails over title. If there is NO title, article cannot apply
Possession must be by MISTAKE
Art. 1136 Possession in wartime, when the civil courts are not open,
shall not be counted in favor of the adverse claimant.
Possession of adverse claimant during wartime cannot be counted in favor of prescription
Art. 1137 Ownership and other real rights over immovable also
prescribe through uninterrupted adverse possession thereof for 30
years, without need of title or of good faith.
When title is VOID. Even when the title of the possessor is void, such as an oral donation of real property, he may acquire ownership
by prescription under this article.
Art. 1138 In the computation of time necessary for prescription, the
following rules shall be observed.
1)
The present possessor may complete the period necessary for
prescription by tacking his possession to that of his grantor or
predecessor in interest;
2)
It is presumed that the present possessor who was also the
possessor at a previous time, has continued to be in
possession during the intervening time, unless there is proof to
the contrary; presumption of continuity
3)
The first day shall be excluded and the last day included.
Tacking
previous
Possession- in order that there can be tacking of possession , present possessor must have obtained his possession from the
possessor with privity between them.
A deed does not in itself create a privity
Nor bare taking possession of the land
Tacking is only possible only when there is a succession of rights between the predecessor and the successor. A mere usurper
cannot invoke the possession of any previous possessor.
Different Character of Possession

Predecessor: Goodfaith
Successor: Bad Faith
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Kristine Confesor
Extraordinary Prescription
Tacking possession permitted; possession in good faith should be computed in the proportion that the period of
extraordinary prescription bears to that of ordinary prescription.
Predecessor: Bad Faith

Successor: Good Faith
Ordinary Prescription
Possession of the Predecessor cannot be counted
Period of Bad Faith cannot be counted for ordinary prescription.
Ratio: Principle in 534: One who succeeds by hereditary title shall not suffer the consequences of the wrongful possession of
the decedent, if it is not shown that he was aware of the flaws affecting it;
***but the effects of possession in good faith shall not benefit him except from the date of death of the decedent. The same
applies to transfers of possession by acts inter vivos.
ACQUISITIVE PRESCRIPTION
ORDINARY : 4 years
EXTRAORDINARY: 8 years
ORDINARY: 10 years
Movables
Immovable
EXTRAORDINARY: 30 years
8 years; No condition
Personal
(ie. Shares of stock)
Personal
(illegally deprived)
Movables
(acquired in public sale, fair, market,
merchants store)
559 movable property acquired in good faith is equivalent to a title

1505
Goods sold by 3rd person not authorized by the owner, buyer acquires no better title
than the seller had
Chapter 3
PRESCRIPTION OF ACTIONS
Abandonment of Right of Action (Extinction)
PERIOD
In Years
Prescription of
ACTION
30
Immovable property
10
Written contract
Obligation created by law
Judgment
Mortgage action
Movables
Oral contract
Quasi-contract
Actions not fixed by law
4
1
Injury to the rights of the plaintiff

Quasi-delict
Forcible entry
Detainer
Defamation
Statutes of Limitations- acts limiting the time within which actions shall be brought.
Does not confer any right of action, but are enacted to restrict the period within which the right, otherwise unlimited, might be
asserted.
Not matters of substantive right, but are available only as defenses.
Founded in the general experience of mankind that claims which are valid are not usually allowed to remain neglected, and
that the lapse of years without any attempt to enforce a demand creates a presumption against its original validity or that it
has ceased to exist.
PURPOSE: to protect the diligent and vigilant, not those who sleep on their rights
Art. 1139 Actions prescribe by the mere lapse of time fixed by law.
-
Lapse of time has the effect of extinguishing the action

There is no extinctive prescription unless the period provided by law expires
Mere delay in the enforcement of claim does not result in any reduction or loss of right, unless the full period required by law
for prescription has expired
Prescription as a defense must be pleaded by the debtor.

Bar of statute of limitations must be pleaded in the answer and proven with the same degree of certainty by which any
essential allegation in the pleadings is established.
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Kristine Confesor
Art. 1140 Actions to recover movables shall prescribe 8years from the
time the possession thereof is lost, unless the possessor has acquired
the ownership by prescription for a less period, according to Art. 1132,
and without prejudice to the provisions of Articles 559, 1505, and 1133.
Article 559. The possession of movable property acquired in good faith is equivalent to title. Nevertheless, one who has lost
any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same
Article 1505. Subject to the provisions of this Title, where goods are sold by a person who is not the owner thereof, and who
does not sell them under authority or with the consent of the owner, the buyer acquires no better title to the goods than the
seller had, unless the owner of the goods is by his conduct precluded from denying the sellers authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors acts, recording laws, or any other provisions of law enabling the apparent owner of good
to dispose of them as if he were the true owner thereof;
(2) The validity of any contract of sale under statutory power of sale or under the order of a court of competent
jurisdiction;
(3) Purchases made in a merchants store, or in fairs, or markets, in accordance with the Code of Commerce and special
laws.
Art. 1141 Real actions over immovable prescribe after

30 years
This provision is without prejudice to what is established
for the acquisition of ownership and other real rights by prescription.
Action affecting Realty- while an action for reformation of instrument, such as a contract of sale with pacto de retro alleged to be
merely an equitable mortgage, is an action based upon a written contract which must be brought within 10 years from the time the right
of action accrues (1144,CC), where, however, the accrual of such right could not be established, it is more logical to apply 1141, CC
because in reality the action seeks to reassert ones title of ownership over the real property, not to recover the same.
Art. 1142 A mortgage action prescribes after
10 years
A mortgage is an accessory contract. It is constituted to secure a debt so that if the debtor fails to pay the principal obligation, the
creditor can foreclose on the mortgage by selling the same in a public sale or bidding and the proceeds thereof are used to pay off
the principal debt and interest if any. If there is any deficiency, the creditor can still go against the principal debtor to collect such
deficiency.
Reckoning point: upon judicial/extrajudicial foreclosure of property

Not imprescriptible. The fact that mortgage is registered does not make the action to foreclose it imprescriptible.
Effects on Interest- it is not possible to separate legally the interest or any part thereof from the principal itself; hence, if the action to
recover the mortgage debt itself has prescribed, the action to recover the interest must also be prescribed.
Art. 1143 The following rights, among others specified elsewhere in
this Code, are not extinguished by prescription:
1)
The demand a right of way, regulated in Art. 649
2)
To bring an action to abate a public or private nuisance
Between Co-owners and Co-heirs
Under 494, CC, no prescription shall run in favor of a co-owner or co-heirs so long as he expressly/impliedly recognize the coownership. The possession of each of the co-owners or co-heirs is in the nature of a subsisting trust and considered to be in
the name of the others.
The rule on imprescriptibility, however, applies only so long as it is admitted/presumed that the co-ownership exists. It cannot be
invoke when one of the co-owners or co-heirs has possessed the property as exclusive owner for a period sufficient to acquire the
property by prescription.
Other actions imprescriptible
Action by the govt or its entity

Action for mandamus
Action to enforce an express trust, as long as the trustee does not repudiate it
Action to declare a contract null and void
Action to quiet a title initiated by the person having possession of property
Action to partition a property among his co-heirs
Right to demand support (present and future) except in arrears
Right of applicant-purchaser for registered land to ask for the writ of possession
Art. 1144 The following actions must be brought within 10 years from
the time the right of action accrues:
1)
Upon a written contract;
2)
Upon an obligation created by law;
3)
Upon a judgment
Reckoning point of Accrual of Right of Actions

1) A right in favor of plaintiff by whatever means and under whatever law it arises or created
2) Obligation on the part of such defendant to respect such right
3) Act or omission on the part of such defendant violative of the right of plaintiff
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Kristine Confesor
It is only when the last element occurs or takes place that it can be said in law that a cause of action has arisen.
Art. 1145 The following actions must be commenced within 6 years

1)
Upon an Oral contract;
2)
Upon a Quasi-contract
Art. 1146 The following actions must be instituted within 4 years

1)
Upon an injury to the rights of the plaintiff;
2)
Upon a quasi-delict
Injury Rights- 1yr period fixed by RoC within which to file a petition for quo warranto should be filed, counted from the date of ouster,
does not apply to a case where the plaintiff is separated from his employment of unjustifiable causes. Such unjustified separation from
employment is an injury to the rights of the plaintiff and the action may be brought within 4 years under this Article.
Art. 1147 The following actions must be filed within 1year
1)
For forcible entry and detainer;
2)
For defamation
Art. 1148 The limitations of action mentioned in 1140-1142, and 1114 to
1147 are without prejudice to those specified in other parts of this code,
in the Code of Commerce, and in special laws.
Art. 1149 All other actions whose periods are not fixed in this Code or in
other laws must be brought within
5 years from the time the right of action accrues
Right to collect Taxes- limitations here are not presumed in the absence of clear legislation to the contrary, and where the
government has not by express statutory provision provided a limitation upon its right to assess unpaid taxes, such right is
imprescriptible.
Art. 1150 The time for prescription of all kinds of actions, when there is
no special provision which ordains otherwise, shall be counted from the
day they may be brought
Legal possibility of bringing the action which determines the starting point for the computation of the period.
Essential Elements of a good cause of Action
1. Existence of Legal right of Plaintiff
2. Corresponding legal duty of defendant
3. Violation or breach of that right/duty w/ consequential injury or damage to the plaintiff, for which he may maintain an
action for appropriate relief.
NB:
1)
When windows were opened in the bldg. of a neighbor in violation of law, the period of prescription for the action to close the
same must be counted from the day they were opened.
2)
Payment upon receipt of an inheritance by the debtor, prescription begins to run from the date of such receipt (because when
the obligation is subject to a suspensive condition, prescription runs only from the happening of the condition)
3)
Obligations without date of maturity, or a note is payable on demand, prescription begins to run from the date of the not e or
obligation and not from demand
4)
Action based on fraud or deceit, the period of prescription will begin to run on the date of discovery of the fraud or deceit.
5)
In Quasi-delict, the prescriptive period starts from the day the quasi-delict occurred or was committed.
6)
In an action for Partition or Recoveyance based on implied or constructive trusts, the time for prescription begins to run from
the date of issuance of original certificate of title because registration of an instrument in the office of the RiD constitutes
constructive notice to the whole world.
Obligations and Interest- runs only from the last
Art. 1151 the time for prescription of actions which have for their object
payment of interest rule, is applicable only to cases where
the
the principal debt is already due. It will cause to
enforcement of obligations to pay principal with interest or annuity runs
commence only after the maturity of the debt.
from the last payment of the annuity or of the interest.
Art. 1152 The period for prescription of actions to demand the

fulfillment of obligations declared by a judgment commences from
the time the judgment became final
Final judgment- upon the expiration of the period for appeal; thereafter, prescription begins to run (RTC); but in CA or SC, the true
judgment is that entered b the clerk of Court pursuant to the dispositive portion of its decision, and the period of such prescription
therefore is computed from the date such judgment is entered.
Art. 1153 The period for prescription of actions to demand accounting

runs from the day the persons who should render the same cease in their
functions.
The period for the action arising from the result of the accounting runs
from the date when said result was recognized by agreement of the
interested parties
Page | 11
Kristine Confesor
From the date of the retirement of members from whom accounting is demanded.
Current accounts: There is a distinction as to the time when the period of prescription begins to run in mutual current accounts and in
simple current open accounts. In mutual, statute of limitations does not begin on the date of the last item; while in simple, the statute
begins to run from the date of each particular item.
Art. 1154 The period during which the oblige was prevented by a
fortuitous event from enforcing his right is not reckoned against him
Art. 1155 The prescription of actions is interrupted when they are filed
before the court, when there is a written extrajudicial demand by the
creditors, and when there is any written acknowledgement of the debt by
the debtor.
INTERRUPTION OF PRESCRIPTION OF ACTION
1) Filed before the court (legal commencement)
2) Written extrajudicial demand by creditors
3) Written acknowledgment of the debt by the debtor
NB: No suspension although an action is started within the prescriptive period, if the plaintiff desists in its prosecution or judgment is
unconditionally stayed for one year or another, the running of the period of limitations is not suspended.
***interruption lasts during the pendency of the action and ends upon the dismissal of the case where it now runs anew
CAUSES NOT INTERRUPTING
1)
2)
3)
4)
5)
Death of the debtor does not interrupt the running of the statute of limitations, because the creditor has at his disposal
appropriate means for the prosecution of an action to enforce the collection of his claim
Transfer of the right to another person
Institution of a criminal action cannot have the effect of interrupting the institution of a civil action based on quasi-delict
An order to stay execution of a judgment does not suspend the running of prescription against it
Confinement in jail
BENTIR V. LEANDA (Reformation of Instrument)
FACTS: On May 15, 1992, RC (Lessee) filed against petitioners Bentir (lessor) and spouses Pormada a complaint for reformation of
instrument, specific performance, annulment of conditional sale and damages with prayer for writ of injunction. RC alleged that he
entered into a contract of lease of a parcel of land with Bentir for a period of twenty (20) years starting May 5, 1968 and was extended
for another four (4) years or until May 31, 1992. Bentir sold the leased premises which RC questioned alleging that it had a right of first
refusal and now seeking the reformation of the expired contract of lease. It further noted that its lawyer inadvertently omitted to
incorporate in the contract of lease executed in 1968, which gave RC has the right to equal the highest offer. Bentir and spouses
Pormada raised as defense the lease contract as not a ground for reformation as well as laches for not bringing the case for reformation
of the lease contract within the prescriptive period of ten (10) years from its execution.
Respondent Judge Mateo M. Leanda reversed the lower courts order dismissing the action of RC. To the mind of this Court, the
dismissal order adverted to above, was obviously premature and precipitate, thus resulting denial upon the right of plaintiff that
procedural due process. The other remaining four (4) causes of action of the complaint must have been deliberated upon before that
court acted hastily in dismissing this case.
ISSUE: W/N complaint for reformation of instrument has prescribed. Yes.
RULING: (10 years from 1968 is 1978, action made on 1992, 24 yrs)
The remedy for reformation of instrument is grounded on the principle of equity where, in order to express the true intention of the
contracting parties, an instrument already executed is allowed by law to be reformed. The right of reformation is necessarily an invasion
or limitation of the parol evidence rule since, when writing is reformed, the result is that an oral agreement is by court decree made
legally effective. Consequently, the courts, as the agencies authorized by law to exercise the power to reform an instrument, must
necessarily exercise that power sparingly and with great caution and zealous care subject to limitations as may be provided by law.
A suit for reformation of an instrument may be barred by lapse of time. The prescriptive period for actions based upon a written contract
and for reformation of an instrument is ten (10) years under Article 1144 of the Civil Code.
PURPOSE: intended to suppress stale and fraudulent claims arising from transactions like the one at bar which facts had become so
obscure from the lapse of time or defective memory. In the case at bar, RC had ten (10) years from 1968, the time when the contract of
lease was executed, to file an action for reformation. Sadly, it did so only on May 15, 1992 or twenty-four (24) years after the cause of
action accrued, hence, its cause of action has become stale, hence, time-barred.
Art. 1670 would not apply as this provision speaks of an implied new lease (tacita reconduccion) where at the end of the contract,
the lessee continues to enjoy the thing leased "with the acquiescence of the lessor", so that the duration of the lease is "not for the
period of the original contract, but for the time established in Article 1682 and 1687." In other words, if the extended period of lease
was expressly agreed upon by the parties, then the term should be exactly what the parties stipulated, not more, not
less.
Even if the supposed 4-year extended lease be considered as an implied new lease under Art. 1670, "the other terms of the original
contract" contemplated in said provision are only those terms which are germane to the lessee's right of continued enjoyment of the
property leased. 15
RECKONING POINT:
The prescriptive period of ten (10) years provided for in Art. 1144 16 applies by operation of law, not by the will of the parties. Therefore,
the right of action for reformation accrued from the date of execution of the contract of lease in 1968.
Page | 12
Kristine Confesor
What if action for reformation is not time-barred?
Action will still not prosper.
Under Section 1, Rule 64 of the New RoC, 17

an action for the reformation of an instrument is instituted as a special civil action for declaratory relief, an action to secure
an authoritative statement of the rights and obligations of the parties for their guidance in the enforcement thereof, or
compliance therewith, and not to settle issues arising from an alleged breach thereof, it may be entertained only before
the breach or violation of the law or contract to which it refers. 18
Here, RC brought the present action for reformation after an alleged breach or violation of the contract was already committed by
petitioner Bentir. Consequently, the remedy of reformation no longer lies. Petition is GRANTED. CA decision REVERSED and SET ASIDE.
AINZA vs. SPOUSES PADUA

Ainza (Concepcion) filed a complaint for partition of real property, annulment of titles against Spouses Eugenia Padua who caused a
subdivision of the lot into three under their names w/o her consent. She bought a portion of the undivided lot on 1987 from her
daughter and husband for 100k. No Deed of Absolute Sale was executed to evidence the transaction, but cash payment was
received by the Paduas, and ownership was transferred to Concepcion through physical delivery to her attorney-in-fact and
daughter, (Natividad) whom she allowed to occupy the premises, and make improvements on the unfinished building. However, the
Paduas caused the subdivision of the property without her consent into three portions and registered it in their names under in
violation of the restrictions annotated at the back of the title. Antonio averred that he bought the property in 1980 and introduced
improvements thereon. An ejectment suit against Natividad was filed by Antonio for resisting to vacate the premises. Concepcion,
represented by Natividad, also filed on May 4, 1999 a civil case for partition of real property and annulment of titles with damages. his
wife, Eugenia, admitted that Concepcion offered to buy one third (1/3) of the property who gave her small amounts over
several years which totaled P100,000.00 by 1987 and for which she signed a receipt.
RTC upheld the sale between Eugenia and Concepcion.
the sale was consummated when both contracting parties complied with their respective obligations. Eugenia transferred
possession by delivering the property to Concepcion who in turn paid the purchase price.
Statute of Frauds was not violated by the transfer of the property because a fully executed contract does not fall within its
coverage.
CA reversed the decision of the TC and declared the sale null and void.
Article 124 of the FC, since the subject property is conjugal, the written consent of Antonio must be obtained for the sale to be
valid. It also ordered the spouses Padua to return the amount of P100,000.00 to petitioners plus interest. 6
ISSUE: Is there a valid contract of sale between Eugenia and Concepcion? Yes.
Has Antonios action to annul the sale prescribed? Yes.
RULING:
(Oral Contract done without the consent of the husband, annullable. Six years from 1987 is 1993.) Antonios right to file an action to
annul the sale has been extinguished by prescription.
A contract of sale is perfected by mere consent, upon a meeting of the minds on the offer and the acceptance thereof based on
subject matter, price and terms of payment.7
In this case, there was a perfected contract of sale between Eugenia and Concepcion. The records show that Eugenia offered to sell a
portion of the property to Concepcion, who accepted the offer and agreed to pay 100k as consideration. The contract of sale was
consummated when both parties fully complied with their respective obligations. Eugenia delivered the property to
Concepcion, who in turn, paid Eugenia the price of One Hundred Thousand Pesos (P100,000.00), as evidenced by the receipt which
reads:
The verbal contract of sale between Eugenia and Concepcion did not violate the provisions of the Statute of Frauds that a
contract for the sale of real property shall be unenforceable unless the contract or some note or memorandum of the sale is in writing
and subscribed by the party charged or his agent.9
As in this case When a verbal contract has been completed, executed or partially consummated as evidenced by the
receipt signed by Eugenia. Hence, its enforceability will not be barred by the Statute of Frauds, which applies only to an executory
agreement.10 Thus, where one party has performed his obligation, oral evidence will be admitted to prove the agreement. 11
The contract of sale between Eugenia and Concepcion being an oral contract, the action to annul the same must be
commenced within six years from the time the right of action accrued.
Eugenia sold the property in April 1987 hence Antonio should have asked the courts to annul the sale on or before April 1993. No
action was commenced by Antonio to annul the sale, hence his right to seek its annulment was extinguished by prescription.
Even assuming that the ten (10)-year prescriptive period under Art. 173 should apply, Antonio is still barred from instituting an action to
annul the sale because since April 1987, more than ten (10) years had already lapsed without any such action being filed.
In sum, the sale of the conjugal property by Eugenia without the consent of her husband is voidable. It is binding unless annulled.
Antonio failed to exercise his right to ask for the annulment within the prescribed period, hence, he is now barred from questioning the
validity of the sale between his wife and Concepcion.
WHEREFORE, the petition is GRANTED.
ABALOS vs.HEIRS OF VICENTE TORIO,

FACTS: HT filed a Complaint for Recovery of Possession and Damages against Abalos (Jaime) and spouses Salazar on 1996. HT alleged
that it was only through HTs tolerance, that Jaime and the Spouses Salazar were allowed to stay and build their respective houses on
the subject parcel of land. In 1985, HT asked them to vacate the subject lot, but they refused to heed the demand forcing respondents
to file the complaint. Jaime Abalos and the Spouses Salazar raised acquisitive prescription as a defense contending that their
predecessors-in-interest had been in actual, continuous and peaceful possession of the subject lot as owners since time
immemorial; defendants are faithfully and religiously paying real property taxes on the disputed lot as evidenced by Real Property
Page | 13
Kristine Confesor
Tax Receipts; they have continuously introduced improvements on the said land, such as houses, trees and other kinds of
ornamental plants which are in existence up to the time of the filing of their Answer.
ISSUE: whether petitioners possess the subject property as owners, or whether they occupy the same by mere tolerance of
respondents. MERE TOLERANCE.
RULING: Abalos and Spouses Salazars possession did not ripen into ownership, because they failed to meet the required statutory
period of extraordinary prescription.
Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary . Ordinary acquisitive prescription
requires possession in good faith and with just title for ten (10) years. Without good faith and just title, acquisitive prescription can only
be extraordinary in character which requires uninterrupted adverse possession for thirty (30) years.
Possession "in good faith" consists in the reasonable belief that the person from whom the thing is received has been the owner
thereof, and could transmit his ownership. There is "just title" when the adverse claimant came into possession of the property through
one of the modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not
transmit any right.
In the instant case, it is clear that during their possession of the property in question, Abalos and spouses Salazar acknowledged
ownership thereof by the immediate predecessor-in-interest Vicente Torio. Petitioners' possession could not be deemed as possession in
good faith as to enable them to acquire the subject land by ordinary prescription.
Tax Declaration acknowledged the ownership of Vicente Torio. TD in the name of Jaime for the year 1984 wherein it
contains a statement admitting that Jaime's house was built on the land of
It was by mere tolerance of Heirs of Torio and Vicente and Acts of possessory character executed due to license or by mere
tolerance of the owner are inadequate for purposes of acquisitive prescription.
Possession, to constitute the foundation of a prescriptive right, must be en concepto de dueo, or, to use the common law
equivalent of the term, that possession should be adverse, if not, such possessory acts, no matter how long, do not start the
running of the period of prescription.
Even if adverse possession, still below 30 years.
as evidenced by their declaration of the same for tax purposes under the names of their predecessors-in-interest, their possession
still falls short of the required period of thirty (30) years in cases of extraordinary acquisitive prescription which was only made
starting 1974. Reckoned from such date, the thirty-year period was completed in 2004.
However, herein respondents' complaint was filed in 1996, effectively interrupting petitioners' possession upon service of
summons on them. Thus, petitioners possession also did not ripen into ownership, because they failed to meet the required
statutory period of extraordinary prescription.
This Court has held that the evidence relative to the possession upon which the alleged prescription is based, must be clear,
complete and conclusive in order to establish the prescription. In the present case, the Court finds no error on the part of the CA in
holding that petitioners
o
failed to present competent evidence to prove their alleged good faith in neither possessing the subject lot nor their
adverse claim thereon.
o
Instead, the records would show that petitioners' possession was by mere tolerance of respondents and their
predecessors-in-interest.
due execution and authenticity of the deed of sale upon which respondents anchor their ownership were not proven,
Settled is the rule that points of law, theories, issues, and arguments not adequately brought to the attention of the trial court
need not be, and ordinarily will not be, considered by a reviewing court. 26 They cannot be raised for the first time on appeal. To
allow this would be offensive to the basic rules of fair play, justice and due process. 27
Even granting that the issue of due execution and authenticity was properly raised, the Court finds no cogent reason to depart from the
findings of the CA, to wit:
xxxx
Based on the foregoing, respondents [Jaime Abalos and the Spouses Felix and Consuelo Salazar] have not inherited the
disputed land because the same was shown to have already been validly sold to Marcos Torio, who, thereupon,
assigned the same to his son Vicente, the father of petitioners [herein respondents]. A valid sale was amply established
and the said validity subsists because the deed evidencing the same was duly notarized.
There is no doubt that the deed of sale was duly acknowledged before a notary public. As a notarized document, it has in its
favor the presumption of regularity and it carries the evidentiary weight conferred upon it with respect to its due execution. It
is admissible in evidence without further proof of its authenticity and is entitled to full faith and credit upon its face. 28
MERCADO vs. ESPINOCILLA,

FACTS: Doroteo Espinocilla owned a parcel of land in Sorsogon. After he died, his 5 children, Salvacion, Aspren, Isabel, Macario,
and Dionisia divided the lot equally among themselves. Later, Dionisia died without issue ahead of her 4 siblings, and Macario took
possession of Dionisias share. In an affidavit of transfer of real property 4 dated November 1, 1948, Macario claimed that Dionisia
had donated her share to him in May 1945.
Macario and his daughters Betty and Saida sold 5to his son Roger Espinocilla on 1977. Rogers wife Belen and son Ferdinand are
respondents in this case.
Roger Espinocilla sold6 114 sq. m. to Caridad Atienza on March 8, 1985
Belen Espinocilla occupies 109 sq. m.,
Caridad Atienza occupies 120 sq. m.,
Caroline Yu occupies 209 sq. m., and
Celerino Mercado, petitioner, Salvacion's son, occupies 132 sq. m.7

C. Mercado, son of Salvacion sued the Espinocillas and now claims that he is entitled to a total of 171 Sq. m recover two portions:
He is entitled to own and possess 171 sq. m. of Lot No. 552, having inherited from his mother Salvacion 142.5 sq. m and
bought from his aunt Aspren 28.5 sq. m.
According to him, his mothers inheritance is 142.5 sq. m., that is, 114 sq. m. from Doroteo plus 28.5 sq. m. from Dionisia.
Page | 14
Kristine Confesor
Since the area he occupies is only 132 sq. m.,10 he claims that respondents encroach on his share by 39 sq. m. 11
Espinocillas agree that Doroteos five children each inherited 114 sq. m. of Lot No. 552. However, Macarios share increased when he
received Dionisias share. Macarios increased share was then sold to his son Roger, respondents husband and father.
rightfully possess the land they occupy by virtue of acquisitive prescription and that there is no basis for petitioners claim of
encroachment.
RTC decision ruled in favor of petitioner C. Mercado and held that he is entitled to 171 sq. m. and ordered respondents must
return 39 sq. m. to petitioner who occupies only 132 sq. m as there was no public document to prove Dionisias donation, and
Macarios 1948 affidavit is void and is an invalid repudiation of the shares of his sisters Salvacion, Aspren, and Isabel in Dionisias
share. Hence, Macario cannot acquire said shares by prescription. Furthermore, the oral partition by Doroteos heirs did not
include Dionisias share and that partition should have been the main action. Thus, the RTC ordered partition and deferred the
transfer of possession of the 39 sq. m. pending partition. 14 The dispositive portion of the RTC decision reads:
The CA Decision reversed RTC and dismissed C. Mercados complaint as extraordinary acquisitive prescription has already set in in
favor of respondent Espinocillas. Doroteos four remaining children made an oral partition of Lot No. 552 after Dionisias death in 1945
and occupied specific portions. The oral partition terminated the co-ownership of Lot No. 552 in 1945. Said partition also included
Dionisias share because the lot was divided into four parts only. And since petitioners complaint was filed only on July 13, 2000, the CA
concluded that prescription has set in.
ISSUE: whether C. Mercados action to recover the subject portion is barred by prescription. Yes.
RULING:
CAs decision Affirmed; action of petitioner barred by prescription. 55 years since 1945
Prescription, as a mode of acquiring ownership and other real rights over immovable property, is concerned with lapse of time in
the manner and under conditions laid down by law, namely, that the possession should be in the concept of an owner, public,
peaceful, uninterrupted, and adverse.
Acquisitive prescription of real rights may be ordinary or extraordinary. Ordinary acquisitive prescription requires possession in
good faith and with just title for 10 years.
In extraordinary prescription, ownership and other real rights over immovable property are acquired through uninterrupted
adverse possession for 30 years without need of title or of good faith.20
Here, C. Mercado himself admits the adverse nature of respondents possession with his assertion that Macarios fraudulent acquisition
of Dionisias share created a constructive trust.
In a constructive trust, there is neither a promise nor any fiduciary relation to speak of and the so-called trustee ( Macario)
neither accepts any trust nor intends holding the property for the beneficiary (Salvacion, Aspren, Isabel). The relation of trustee
and cestui que trust does not in fact exist, and the holding of a constructive trust is for the trustee himself, and therefore, at all
times adverse.21 Prescription may supervene even if the trustee does not repudiate the relationship.22
Then, too, respondents uninterrupted adverse possession for 55 years of the lot was established. Macario occupied Dionisias
share in 1945 although his claim that Dionisia donated it to him in 1945 was only made in a 1948 affidavit. We also agree with
the CA that Macarios possession of Dionisias share was public and adverse since his other co-owners, his three
other sisters, also occupied portions of Lot No. 552.
Acts of Ownership
1)
1977 sale made by in favor of Roger confirms the adverse nature of Macarios possession because said sale was an act of
ownership over Macarios original share and Dionisias share.
2)
In 1985, when Roger sold 114 sq. m. to Caridad Atienza.
3)
It was only in the year 2000, upon receipt of the summons to answer petitioners complaint, that respondents peaceful
possession of the remaining portion (109 sq. m.) was interrupted.
By then, however, extraordinary acquisitive prescription has already set in in favor of respondents.
That the RTC found Macarios 1948 affidavit void is of no moment.
Extraordinary prescription is unconcerned with Macarios title or good faith.
Accordingly, the RTC erred in ruling that Macario cannot acquire by prescription the shares of Salvacion, Aspren, and
Isabel, in Dionisias 114-sq. m. share from Lot No. 552.
Moreover, the CA correctly dismissed petitioners complaint as an action for reconveyance based on an implied or constructive
trust prescribes in 10 years from the time the right of action accrues . This is the other kind of prescription under the Civil Code,
called extinctive prescription, where rights and actions are lost by the lapse of time. Petitioners action for recovery of possession having
been filed 55 years after Macario occupied Dionisias share, it is also barred by extinctive prescription. The CA while condemning
Macarios fraudulent act of depriving his three sisters of their shares in Dionisias share, equally emphasized the fact that Macarios
sisters wasted their opportunity to question his acts.
WHEREFORE, we DENY the petition , CA Affirmed.
VIRTUCIO vs. ALEGARBES

FACTS: (Alegarbes) filed Homestead Application for a 24-hectare tract of unsurveyed land situated in Basilain in 1949 and approved on
January 23, 1952. The Land was subdivided into three (3) lots in 1955 as a consequence of a public land subdivision. Lot 139 was
allocated to (Custodio) while Lot 140 was allocated to (Virtucio).
Alegarbes opposed the homestead applications filed by Custodio and Virtucio, claiming that his approved application covered the whole
area, including Lot Nos. 139 and 140. Director of Lands denied Alegarbes' protest and amended the latter's application to exclude Lots
139 and 140 (October 30, 1961). Only Lot 138 was given due course. The applications of Custodio and Virtucio for Lots 139 and 140,
respectively, were likewise given due course.6
Secretary of Agriculture and Natural Resources likewise dismissed his appeal and affirmed by Office of the President (OP) in a decision,
dated October 25, 1974. MR was likewise denied. OPs decision was sought to be enforced through a May 11, 1989 order of execution
and order by Alegarbes to vacate the premises as issued by the Lands Management Bureau of the Department of Environment and
Natural Resources .
Virtucio then filed a complaint9 for "Recovery of Possession and Ownership with Preliminary Injunction" before the RTC.
Page | 15
Kristine Confesor
Alegarbes
decision of the Bureau of Lands was void ab initio considering that the Acting Director of Lands acted without jurisdiction and
in violation of the provisions of the Public Land Act.
said decision conferred no rights and imposed no duties and left the parties in the same position as they were before its
issuance
patent issued in favor of Virtucio was procured through fraud and deceit,
his homestead application on January 23, 1952 by the Bureau of Lands had already attained finality and could not be
reversed, modified or set aside.
His possession of Lot Nos. 138, 139 and 140 had been open, continuous, peaceful and uninterrupted in the concept of an
owner for more than 30 years and had acquired such lots by acquisitive prescription.
his now deceased brother, Alejandro Alegarbes, and the latter's family helped him develop Lot 140 in 1955.
Alejandro and his family, as well as Alegarbes' wife and children, had been permanently occupying the said lot and,
introducing permanent improvements thereon since 1960.
The RTC Ruling : Virtucio
The CA Ruling: Reversed.
Alegarbes became ipso jure owner of Lot 140 and, therefore, entitled to retain possession of it.
Even if the decision to approve Virtucio's homestead application over Lot 140 had become final, Alegarbes could still acquire
the said lot by acquisitive prescription. The decisions on the issues of the approval of Virtucio's homestead application and its
validity were impertinent as Alegarbes had earlier put in issue the matter of ownership of Lot 140 which he claimed by virtue
of adverse possession.
RTC committed reversible error in disregarding the evidence before it and relying entirely upon the decisions of the administrative
bodies, none of which touched upon the issue of Alegarbes' open, continuous and exclusive possession of over thirty (30) years of
an alienable land.
The Director of Lands, the Secretary of Agriculture and Natural Resources and the OP did not determine whether Alegarbes'
possession of the subject property had ipso jure segregated Lot 140 from the mass of public land and, thus, was beyond their
jurisdiction.
ISSUES: W/N Alegarbes acquired ownership over the subject property by acquisitive prescription.
HELD: Yes.
On Acquisitive Prescription
Virtucio
period of acquisitive prescription was interrupted on October 30, 1961 (or in 1954 when Alegarbes filed the protest) when the
Director of Lands rendered a decision giving due course to his homestead application and that of Ulpiano Custodio.
since 1954, several extrajudicial demands were also made upon Alegarbes demanding that he vacate said lot. Those demands
constitute the "extrajudicial demand" contemplated in Article 1155, thus, tolling the period of acquisitive
prescription.19
Article 1106 of the NCC, in relation to its Article 712, provides that prescription is a mode of acquiring ownership through
the lapse of time in the manner and under the conditions laid down by law. Under the same law, it states that acquisitive
prescription may either be ordinary or extraordinary.20 Ordinary acquisitive prescription requires possession of things in
good faith and with just title for a period of ten years,21 while extraordinary acquisitive prescription requires
uninterrupted adverse possession of thirty years, without need of title or of good faith.22
There are 2 kinds of Prescription in CC.
Acquisitive:, that is, the acquisition of a right by the lapse of time as expounded in par. 1, Article 1106 or adverse
possession and usucapcion.
Extinctive prescription whereby rights and actions are lost by the lapse of time as defined in Article 1106 and par.
2, Article 1139. Another name for extinctive prescription is litigation of action. 23 These two kinds of prescription
should not be interchanged.
Article 1155 of the NCC (Prescription of Actions; Interruption)

Filed before the court
Written extrajudicial demand by the creditors
Written acknowledgment of the debt by the debtor
Articles 1120-1125 (Acquisitive Prescription; Interruption)

Naturally (cessation of possession for more than 1 year)
Civilly (judicial summons, except when void, plaintiffs desistance, defendant is absolved)
Express or tacit recognition of the owners right
Virtucios reliance on Article 1155 for purposes of tolling the period of acquisitive prescription is misplaced. The only kinds of
interruption that effectively toll the period of acquisitive prescription are natural and civil interruption. 24
Civil interruption takes place with the service of judicial summons to the possessor. 25 When no action is filed, then there is no occasion to
issue a judicial summons against the respondents. The period of acquisitive prescription continues to run.
In this case, Virtucio claims that the protest filed by Alegarbes against his homestead application interrupted the thirty (30)-year period
of acquisitive prescription. The law, as well as jurisprudence, however, dictates that only judicial summons can effectively toll the
said period.
In the case of Heirs of Marcelina Azardon-Crisologo v. Raon, 26 the Court ruled that a mere Notice of Adverse Claim did not
constitute an effective interruption of possession.
In the case of Heirs of Bienvenido and Araceli Tanyag v. Gabriel, 27 which also cited the Raon Case, the Court stated that the acts of
declaring again the property for tax purposes and obtaining a Torrens certificate of title in one's name cannot defeat
another's right of ownership acquired through acquisitive prescription.28
-
A protest filed before an administrative agency and even the decision resulting from it cannot effectively toll the
running of the period of acquisitive prescription.
Page | 16
Kristine Confesor
-
In such an instance, no civil interruption can take place. Only in cases filed before the courts may judicial summons be
issued and, thus, interrupt possession.
It was only in 1997 when Virtucio filed a case before the RTC.
The CA was, therefore, correct in ruling that Alegarbesbecame ipso jure owner of Lot 140 entitling him to retain
possession of it because he was in open, continuous and exclusive possession for over thirty (30) years of alienable
public land.
Virtucio emphasizes that the CA erred in disregarding the decisions of the administrative agencies which amended
Alegarbes' homestead application excluding Lot 140 and gave due course to his own application for the said lot, which
decisions were affirmed by the RTC.
Well-settled is the rule that factual findings of the lower courts are entitled to great weight and respect on appeal and, in
fact, are accorded finality when supported by substantial evidence on the record. 29 It appears, however, that the
conclusion made by the RTC was not substantially supported. Even the RTC itself noted in its decision:
The approval of a Homestead Application merely authorizes the applicant to take possession of the land so that he could
comply with the requirements prescribed by law before a final patent could be issued in his favor what divests the
government of title to the land is the issuance of a patent and its subsequent registration with the
Register of Deeds.30
A perusal of the records would reveal that there was no issuance of any patent in favor of either parties. This
simply means that the land subject of the controversy remains to be in the name of the State.
Hence, neither Virtucio nor Alegarbes can claim ownership. There was, therefore, no substantial and legal basis for the RTC to declare
that Virtucio was entitled to possession and ownership of Lot 140. It can be argued that the lower court had the decisions of the
administrative agencies, which ultimately attained finality, as legal bases in ruling that Virtucio had the right of possession and
ownership. In fact, the Department of Environment and Natural Resources (DENR) even issued the Order of Execution 31 on May 11, 1989
ordering Alegarbes to vacate Lot 140 and place Virtucio in peaceful possession of it.
The CA, however, was correct in finding that:
But appellant had earlier put in issue the matter of ownership of Lot 140 which he claims by virtue of adverse possession. On this
issue, the cited decisions are impertinent. Even if the decision to approve appellee Virtucio's homestead application over Lot 140 had
become final, appellant (Alegarbes) could still acquire the said lot by acquisitive prescription.32
In the case of Heirs of Gamos v. Heirs of Frando, 33 the Court ruled that the mere application for a patent, coupled with the fact of
exclusive, open, continuous and notorious possession for the required period, is sufficient to vest in the applicant the
grant applied for.34 It likewise cited the cases of Susi v. Razon35 and Pineda v. CA,36 where the Court ruled that the possession of a
parcel of agricultural land of the public domain for the prescribed period of 30 years ipso jure converts the lot into
private property.37
In this case, Alegarbes had applied for homestead patent as early as 1949. He had been in exclusive, open, continuous and
notorious possession of Lot 140 for at least 30 years. By the time the DENR issued its order of execution in 1989, Alegarbes had
Lot 140 in his possession for more than 30 years. Even more so when Virtucio filed the complaint before the RTC in 1997, Alegarbes
was already in possession of the subject property for forty-eight (48) years.
The CA correctly observed that the RTC erred in disregarding the evidence before it and relying entirely upon the decisions of the
Director of Lands, the Secretary of Agriculture and Natural Resources and the OP, which never touched the issue of whether Alegarbes
open, continuous and exclusive possession of over thirty (30) years of alienable land had ipso jure segregated Lot 140 from the mass of
public land and beyond the jurisdiction of these agencies.38
When the CA ruled that the RTC was correct in relying on the abovementioned decisions, it merely recognized the primary jurisdiction of
these administrative agencies. It was of the view that the RTC was not correct in the other aspects of the case. Thus, it declared
Alegarbes as owner ipso jure of Lot 140 and entitled to retain possession of it. There is no reason for the Court to disturb these findings
of the CA as they were supported by substantial evidence, hence, are conclusive and binding upon this Court. 39
On the CA Decision involving a similar case
Virtucio insists that the CA gravely erred in disregarding its decision in Custodio v. Alegarbes, CA-G.R. CV 26286, for Recovery of
Possession and Ownership, which involved the same factual circumstances and ruled against Alegarbes.
It must be noted that the subject property in the said case was Lot 139 allocated to Custodio and that Virtucio was not a party to that
case.
-
The latter cannot enjoy whatever benefits said favorable judgment may have had just because it involved similar factual
circumstances. The Court also found from the records that the period of acquisitive prescription in that case was
effectively interrupted by Custodio's filing of a complaint, which is wanting in this case.
the CA does not establish judicial precedent. 40 "The principle of stare decisis enjoins adherence by lower courts to doctrinal
rules established by this Court in its final decisions.
only final decisions of this Court are considered precedents. 42
In view of the foregoing, the Court need not dwell on the complaint of Virtucio with regard to the deletion of the award of attorney's fees
in his favor. It is ludicrous for the CA to order Alegarbes to pay attorney's fees, as a measure of damages, and costs, after finding him to
have acquired ownership over the property by acquisitive prescription.
WHEREFORE, the petition is DENIED
BANEZ, JR. v. CONCEPCION

FACTS:
Leodegario B. Ramos (Ramos), discovered that a parcel of land located in Meycauayan, Bulacan that he had adjudicated solely to himself upon his mothers
death on November 16, 1982 had been earlier transferred by his mother to one Ricardo Asuncion, who had, in turn, sold it to the late Rodrigo Gomez.
Ramos alleged that Gomez had induced him to sell the 1,233 square meters to Gomez on the understanding that Gomez would settle Ramos obligation to
three other persons, commenced in the RTC in Valenzuela an action against Gomez, a.k.a Domingo Ng Lim, seeking the rescission of their contract of sale and
the payment of damages.
Ramos and Gomez entered into a compromise agreement which the RTC approved.
Atty. Banez, Jr, being then the counsel of Ramos in that civil case, assisted the latter in entering into the compromise agreement "to finally terminate this
case."
Page | 17
Kristine Confesor
The terms and conditions of the compromise agreement to finally terminate the casewere as follows:
That out of the total area of Three Thousand and Fifty Four (3,054) sq. m., more or less, defendant shall cause survey of said property, at its own
expense, to segregate the area of, (1,233) sq. m. more or less, to take along lines two (2) to three (3), then to four (4) and up to five (5) of said
plan
That upon completion of the technical survey and plan, Gomez shall cause the registration of the Deed of Absolute Sale executed by plaintiff
Ramos over the 1,233 sq. m. in his favor and that defendant Gomez shall deliver the survey and plan pertaining to the 1,821 sq, m. to Ramos
with both parties defraying the cost of registration and titling over their respective shares;
That to carry out the foregoing, plaintiff Ramos shall entrust the Owners Duplicate of title to the defendant Gomez upon approval of this
COMPROMISE AGREEMENT by the Court;
. That upon the approval of this Compromise Agreement plaintiff shall execute a Deed of Absolute Sale in favor of defendant over the 1,233 sq. m.
surveyed and segregated from the 1,821 sq. m. which should remain with the plaintiff and to be titled in his name;
That plaintiff Ramos obligates himself to return his loan obligation to the defendant Gomez, in the principal sum of P 80,000.00 plus P 20,000.00
for the use thereof, and an additional sum of P 10,000.00 in the concept of attorneys fees, which sums shall be guaranteed by a post-dated check,
in the amount of P 110,000.00 in plaintiffs name with his prior endorsement, drawn and issued by plaintiffs counsel, for a period of Sixty (60) days
from October 9, 1990;
That in the event the check issued pursuant to paragraph 5 hereof, is dishonored for any reason whatsoever, upon presentment for payment, then
this Compromise Agreement, shall be considered null and void and of no effect whatsoever;
That upon faithful compliance with the terms and conditions of this COMPROMISE AGREEMENT and the Decision based thereon, the parties hereto
shall have respectively waived, conceded and abandoned all claims and rights of action of whatever kind or nature, against each
other over the subject property.
One of the stipulations of the compromise agreement was for Ramos to execute a deed of absolute sale in favor of Gomez respecting the parcel of land
with an area of 1,233 square meters, and covered by Transfer Certificate of Title in the name of Ramos. 9 Another stipulation was for the petitioner to issue postdated checks totaling P 110,000.00 to guarantee the payment by Ramos of his monetary obligations towards Gomez as stated in the compromise agreement
broken down as follows: (a) P 80,000.00 as Ramos loan obligation to Gomez; (b) P 20,000.00 for the use of the loan; and (c) P 10,000.00 as attorneys fees.
Of these amounts, only P 80,000.00 was ultimately paid to Gomez, because the petitioners check dated April 23, 1991 for the balance of P 30,000.00 was
dishonored for insufficiency of funds.
Gomez meanwhile died on November 7, 1990. The Estate of Gomez sued Ramos and the petitioner for specific performance in the RTC in Caloocan City to
recover the balance of P 30,000.00.
On February 28, 1994, however, this case was amicably settled through a compromise agreement, whereby the petitioner directly bound himself to pay to
the Estate of Gomez P 10,000.00 on or before March 15, 1994; P 10,000.00 on or before April 15, 1994; and P 10,000.00 on or before May 15,
1994.
Estate of Gomez performed the obligations of Gomez under the first paragraph of the compromise agreement of October 9, 1990 by causing the survey of
the bigger tract of land containing an area of 3,054 square meters, more or less, in order to segregate the area of 1,233 square meters that should be
transferred by Ramos to Gomez in accordance with Ramos undertaking under the second paragraph of the compromise agreement of October 9, 1990.
But Ramos failed to cause the registration of the deed of absolute sale pursuant to the second paragraph of the compromise agreement of October 9,
1990 despite the Estate of Gomez having already complied with Gomezs undertaking to deliver the approved survey plan and to shoulder the expenses for
that purpose.
Nor did Ramos deliver to the Estate of Gomez the owners duplicate copy of TCT No. T-10179 P(M) of the Registry of Deeds of Meycauayan, Bulacan,
as stipulated under the third paragraph of the compromise agreement of October 9, 1990. Instead, Ramos and the petitioner caused to be registered
the 1,233 square meter portion in Ramoss name under TCT No. T-13005-P(M) of the Registry of Deeds of Meycauayan, Bulacan.
Estate of Gomez brought a complaint for specific performance On July 6, 1995, against Ramos and the petitioner in the RTC in order to recover the 1,233
square meter lot.
However, it was dismissed on April 1, 1996 upon the motion of Ramos
improper venue because the objective was to recover the ownership and possession of realty situated in Meycauayan, Bulacan,
proper recourse was to enforce the judgment by compromise Agreement rendered on October 9, 1990 through a motion for execution.
The Estate of Gomez appealed to (CA), affirmed Valenzuela RTC
commenced Civil Case No. 722-M-2002 in the Valenzuela RTC, ostensibly to revive the judgment by compromise rendered on October 9,
1990 in Civil Case No. 3287-V-90,
That Ramos be ordered to execute the deed of absolute sale covering the 1,233 square meter lot pursuant to the fourth stipulation of the
compromise agreement of October 9, 1990.
Petitioner lawyer was impleaded as a party-defendant because of his having guaranteed the performance by Ramos of his
obligation and for having actively participated in the transaction.
Atty. Banez, JR. Moved for the dismissal of Civil Case On January 8, 2003
action was already barred by res judicata and by prescription;
he was not a real party-in-interest; and
the amount he had guaranteed with his personal check had already been paid by Ramos with his own money. 11
RTC Granted the M for dismissal
right of action had already prescribed due to more than 12 years having elapsed from the approval of the compromise agreement on
October 9, 1990,
Article 1143 (3) of the Civil Code (which provides a 10-year period within which a right of action based upon a judgment must be brought from).
RTC reversed itself and reinstated Civil Case No. 722-M-2002,
filing of the complaint for specific performance on July 6, 1995 in the Valenzuela RTC had interrupted the prescriptive period pursuant to
Article 1155 of the Civil Code.
Issues: W/N Judge Concepcion abused his discretion, amounting to lack of, or in excess of jurisdiction, when, after ordered the dismissal of Civil Case, as
prescription has set in, under Art. 1143 of the Civil Code, he set aside and reconsidered his said Order, on motion of plaintiff, by thereafter denied petitioners
Motion for Reconsideration, and Second Motion for Reconsideration, insisting, despite his being presumed to know the law, that the said action is not barred by
prescription, under Art. 1145 of the Civil Code;
2) W/N, the present pending action, Civil Case No. 722-M-2002, before Branch 12 of the Regional Trial Court of Malolos, Bulacan, is barred, and should be
ordered be dismissed, on the ground of prescription, under the law and the rules, and applicable jurisprudence.
3) W/N, the same action may be dismissed on other valid grounds. 17
Page | 18
Kristine Confesor
Banez submits
Civil Case was one for the revival of the judgment upon a compromise agreement rendered in previous case which already attained finality on
October 9, 1990;
considering that an action for revival must be filed within 10 years from the date of finality, pursuant to Article 1144 of the Civil Code, 18in
relation to Section 6, Rule 39 of the Rules of Court, 19 Civil Case No. 722-M-2002 was already barred by prescription, having been filed
beyond the 10-year prescriptive period;
RTC gravely abused its discretion in reinstating the complaint despite prescription having already set in; that the dismissal of Civil Case No. 722-M2002 was proper also because the judgment had already been fully satisfied; that the claim relative to the 1,233 square meter lot under the
compromise agreement had been waived, abandoned, or otherwise extinguished on account of the failure of the Estate of Gomezs counsel to
move for the issuance of a writ of execution; and
that the Estate of Gomez could not rely upon the pendency and effects of the appeal from the action for specific performance after its dismissal
had been affirmed by the CA on grounds of improper venue, the plaintiffs lack of personality, and improper remedy (due to the proper remedy
being by execution of the judgment).
The Estate of Gomez
the filing on July 6, 1995 of the action for specific performance in the RTC in Valenzuela stopped the running of the 10-year prescriptive
period under Art. 1144;
and commenced to run again after the CA dismissed that action on July 24, 2001;
that the total elapsed period was only five years and 11 months; and that the action for the revival of judgment filed on September 20, 2002
was within the period of 10 years to enforce a final and executory judgment by action.
HELD:
Banez, dismissed.
Article 1144 of the Civil Code requires, indeed, that an action to revive a judgment must be brought before it is barred by prescription, which was ten
years from the accrual of the right of action.
such a defense could not be determined in the hearing of the petitioners motion to dismiss considering that the complaint did not show on its face
that the period to bring the action to revive had already lapsed.
An allegation of prescription, as the Court put it in Pineda v. Heirs of Eliseo Guevara,26 "can effectively be used in a motion to dismiss only
when the complaint on its face shows that indeed the action has already prescribed, [o]therwise, the issue of prescription is one
involving evidentiary matters requiring a full blown trial on the merits and cannot be determined in a mere motion to dismiss."
-
At any rate, the mere lapse of the period per se did not render the judgment stale within the context of the law on prescription, for
events that effectively suspended the running of the period of limitation might have intervened.
In other words, the Estate of Gomez was not precluded from showing such events, if any. The Court recognized this possibility of suspension in
Lancita v. Magbanua:27
In computing the time limited for suing out of an execution, although there is authority to the contrary, the GR is that there should not be included the
time when execution is stayed, either by agreement of the parties for a definite time, by injunction, by the taking of an appeal or writ of
error so as to operate as a supersedeas, by the death of a party or otherwise. Any interruption or delay occasioned by the debtor will extend the time
within which the writ may be issued without scire facias.
Verily, the need to prove the existence or non-existence of significant matters, like supervening events, in order to show either that Civil Case No. 722-M-2002
was barred by prescription or not was present and undeniable. Moreover, the petitioner himself raised factual issues in his motion to dismiss, like his averment
of full payment or discharge of the obligation of Ramos and the waiver or abandonment of rights under the compromise agreement. The proof thereon cannot
be received in certiorari proceedings before the Court, but should be established in the RTC.
SC: DISMISSES the petition for certiorari; and DIRECTS the petitioner to pay the cost of suit.
REPUBLIC vs DOMINGO ESPINOSA,
On March 3, 1999, respondent Domingo Espinosa (Espinosa) filed with the (MTC) Cebu an application 3 for land registration covering a parcel of land with an
area of 5,525 square meters In support of his application, Espinosa alleged that:
(a) the property, is alienable and disposable;
(b) he purchased the property from his mother (Isabel), on July 4, 1970 and the latters other heirs had waived their rights thereto; and
(c) he and his predecessor-in-interest had been in possession of the property in the concept of an owner for more than thirty (30) years.
Espinosa submitted the blueprint of Advanced Survey to prove the identity of the land.
As proof that the property is alienable and disposable, he marked as evidence the annotation on the advance survey plan made by Chief of the
Map Projection Section, stating that "CONFORMED PER L.C. MAP NOTATION L.C. certified on June 25, 1963, verified to be within Alienable &
Disposable Area".5
two (2) tax declarations for the years 1965 and 1974 in Isabels name to prove she had been in possession since 1965
a Certification6 dated December 1, 1998 issued by the Office of the Treasurer of Consolacion, Cebu and three (3) tax declarations for
the years 1978, 1980 and 1985
RP opposed Espinosas application, claiming that:

(a) Section 48(b) of CA 141 or "Public Land Act" (PLA) had not been complied with as Espinosas predecessor-in-interest possessed the property
only after June 12, 1945; and
(b) the tax declarations do not prove that his possession and that of his predecessor-in-interest are in the character and for the length of time
required by law.
MTC rendered a Judgment 9 granting Espinosas petition for registration On 2000 since Espinosa was able to prove that the property is alienable and
disposable and that he complied with the requirements of Section 14(1) of Presidential Decree (P.D.) No. 1529. Specifically:
is within the area considered by the Department of Environment and Natural Resources (DENR) as alienable and disposable land of the public
domain.
predecessor-in-interest have been in open, actual, public, continuous, adverse and under claim of title thereto within the time
prescribed by law (Sec. 14, sub-par. 1, P.D. 1529) and/or in accordance with the LRA
RP appealed to the CA and pointed Espinosas failure to prove that his possession and that of his predecessor-in-interest were for the period required by law.
Tax Declaration, Isabels possession commenced only in 1965 and not on June 12, 1945 or earlier as required by Section 48(b) of the PLA.
Espinosa came into possession of the property only in 1970 following the sale that transpired between him and his mother and the earliest
tax declaration in his name was for the year 1978.
Espinosa and his predecessor-in-interest were supposedly in possession for more than thirty (30) years is inconsequential absent proof that such
possession began on June 12, 1945 or earlier.12
Espinosas failure to present the original tracing cloth of the survey plan or a sepia copy thereof is fatal to his application as it is
mandatory in establishing the identity of the land subject of the application. 15
annotation on the advance survey plan is not the evidence admissible to prove that the subject land is alienable and disposable.16
CA dismissed RPs appeal and affirmed the MTC Decision
Page | 19
Kristine Confesor
Possession for at least thirty (30) years, despite the fact that it commenced after June 12, 1945, sufficed to convert the property to private
Established jurisprudence has consistently pronounced that "open, continuous and exclusive possession for at least 30 years of alienable
public land ipso jure converts the same into private property (Director of Lands vs. Intermediate Appellate Court, 214 SCRA 604). This
means that occupation and cultivation for more than 30 years by applicant and his predecessor-in-interest vests title on such applicant so as to
segregate the land from the mass of public land (National Power Corporation vs. Court of Appeals, 218 SCRA 41); and
b) It is true that the requirement of possession since June 12, 1945 is the latest amendment of Section 48(b) of the Public Land Act (C.A. No. 141),
but a strict implementation of the law would in certain cases result in inequity and unfairness to Espinosa. As wisely stated by the
Supreme Court in the case of Republic vs. Court of Appeals, 235 SCRA 567:
"Following the logic of the petitioner, any transferee is thus foreclosed to apply for registration of title over a parcel of land notwithstanding the fact
that the transferor, or his predecessor-in-interest has been in open, notorious and exclusive possession thereof for thirty (30) years or more." 17
registration can be based on other documentary evidence,.

While the best evidence to identify a piece of land for registration purposes may be the original tracing cloth plan from the Land Registration
Commission, the court may sufficiently order the issuance of a decree of registration on the basis of the blue print copies and other evidence
(Republic of the Philippines vs. Intermediate Appellate Court, G.R. No. L-70594, October 10, 1986). The said case provides further:
"The fact that the lower court finds the evidence of the applicant sufficient to justify the registration and confirmation of her titles and did not find it
necessary to avail of the original tracing cloth plan from the Land Registration Commission for purposes of comparison, should not militate against
the rights of the applicant. Such is especially true in this case where no clear, strong, convincing and more preponderant proof has been shown by
the oppositor to overcome the correctness of said plans which were found both by the lower court and the Court of Appeals as conclusive proofs of
the description and identities of the parcels of land contained therein."
There is no dispute that, in case of Del Rosario vs. Republic, supra the SC pronounced that the submission in evidence of the original tracing cloth
plan, duly approved by the Bureau of Lands, in cases for application of original registration of land is a mandatory requirement, and that failure
to comply with such requirement is fatal to ones application for registration. However, such pronouncement need not be taken as an iron
clad rule nor to be applied strictly in all cases without due regard to the rationale behind the submission of the tracing cloth plan.
xxxx
As long as the identity of and location of the lot can be established by other competent evidence like a duly approved blueprint copy of the
advance survey plan of Lot 8499 and technical description of Lot 8499, containing and identifying the boundaries, actual area and location of the
lot, the presentation of the original tracing cloth plan may be excused. 18
Moreover, the CA ruled that Espinosa had duly proven that the property is alienable and disposable:
Petitioners Case
(a) Espinosa failed to property is alienable and disposable;
(b) jurisprudence dictates that a survey plan identifies the property in preparation for a judicial proceeding but does not convert the property into
alienable, much less, private;
(c) under Section 17 of P.D. No. 1529, the submission of the original tracing cloth plan is mandatory to determine the exact metes and bounds of the
property; and
(d) a blueprint copy of the survey plan may be admitted as evidence of the identity and location of the property only if it bears the approval of the Director
of Lands.
Issues
whether Espinosa has acquired an imperfect title over the subject property that is worthy of confirmation and registration is hinged on the determination of the
following issues:
a. whether the blueprint of the advanced survey plan substantially complies with Section 17 of P.D. No. 1529; No and
b. whether the notation on the blueprint copy of the plan made by the geodetic engineer who conducted the survey sufficed to prove that the land applied for
is alienable and disposable.No
HELD:
Based on Espinosas allegations and his supporting documents, it is patent that his claim of an imperfect title over the property in question is based on Section
14(2) and not Section 14(1) of P.D. No. 1529 in relation to Section 48(b) of the PLA. Espinosa did not allege that his possession and that of his predecessorin-interest commenced on June 12, 1945 or earlier as prescribed under the two (2) latter provisions. On the contrary, Espinosa repeatedly alleged that he
acquired title thru his possession and that of his predecessor-in-interest, Isabel, of the subject property for thirty (30) years, or through
prescription. Therefore, the rule that should have been applied is Section 14(2) of P.D. No. 1529, which states:
Sec. 14. Who may apply. The following persons may file in the proper CFI an application for registration of landtitles
(2) Those who have acquired ownership of private lands by prescription under the provision of existing laws.
Obviously, the confusion that attended the lower courts disposition of this case stemmed from their failure to apprise themselves of the changes that Section
48(b) of the PLA underwent over the years. Section 48(b) of the PLA originally states:
Sec. 48. The following described citizens of the Philippines, occupying lands of the public domain or claiming to own any such lands or an interest
therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance of the province where the land is located
for confirmation of their claims and the issuance of a certificate of title therefor, under the Land Registration Act, to wit:
xxxx
(b) Those who by themselves or through their predecessors-in-interest have been in the open, continuous, exclusive and notorious
possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition or ownership, except
as against the Government, since July 26, 1894 except when prevented by war or force majeure. These shall be conclusively presumed to have
performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter.
Thus, the required possession and occupation for judicial confirmation of imperfect title was since July 26, 1894 or earlier.
On June 22, 1957, Republic Act (R.A.) No. 1942 amended Section 48(b) of the PLA by providing a thirty (30)-year prescriptive period for judicial
confirmation of imperfect title. Thus:
(b) Those who by themselves or through their predecessors-in-interest have been in the open, continuous, exclusive and notorious possession and
occupation of agricultural lands of the public domain, under a bona fide claim of acquisition or ownership, for at least thirty years immediately
preceding the filing of the application for confirmation of title except when prevented by war or force majeure . These shall be conclusively
presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of
this chapter.
On January 25, 1977, P.D. No. 1073 was issued, changing the requirement for possession and occupation for a period of thirty (30) years to
possession and occupation since June 12, 1945 or earlier.
Section 4 of P.D. No. 1073 states:
Sec. 4. The provisions of Section 48(b) and Section 48(c), Chapter VIII of the Public Land Act are hereby amended in the sense that these
provisions shall apply only to alienable and disposable lands of the public domain which have been in open, continuous, exclusive and notorious
possession and occupation by the applicant himself or thru his predecessor-in-interest, under a bona fide claim of acquisition of ownership, since
June 12, 1945.
On June 11, 1978, P.D. No. 1529 was enacted. Notably, the requirement for possession and occupation since June 12, 1945 or earlier was adopted under
Section 14(1) thereof.
P.D. No. 1073, in effect, repealed R.A. No. 1942 such that applications under Section 48(b) of the PLA filed after the promulgation of P.D. No.
1073 should allege and prove possession and occupation that dated back to June 12, 1945 or earlier. However, vested rights may have been acquired under
Section 48(b) prior to its amendment by P.D. No. 1073. That is, should petitions for registration filed by those who had already been in possession of alienable
and disposable lands of the public domain for thirty (30) years at the time P.D. No. 1073 was promulgated be denied because their possession commenced
after June 12, 1945? In Abejaron v. Nabasa,21 this Court resolved this legal predicament as follows:
Page | 20
Kristine Confesor
However, as petitioner Abejarons 30-year period of possession and occupation required by the Public Land Act, as amended by R.A. 1942 ran from
1945 to 1975, prior to the effectivity of P.D. No. 1073 in 1977, the requirement of said P.D. that occupation and possession should have started on
June 12, 1945 or earlier, does not apply to him. As the Susi doctrine holds that the grant of title by virtue of Sec. 48(b) takes place by
operation of law, then upon Abejarons satisfaction of the requirements of this law, he would have already gained title over the disputed land in
1975. This follows the doctrine laid down in Director of Lands v. Intermediate Appellate Court, et al., that the law cannot impair vested rights such
as a land grant.
More clearly stated, "Filipino citizens who by themselves or their predecessors-in-interest have been, prior to the effectivity of P.D.
1073 on January 25, 1977, in open, continuous, exclusive and notorious possession and occupation of agricultural lands of the
public domain, under a bona fide claim of acquisition of ownership, for at least 30 years, or at least since January 24, 1947" may
apply for judicial confirmation of their imperfect or incomplete title under Sec. 48(b) of the Public Land Act. 22 (Citations omitted)
Consequently, for one to invoke Section 48(b) and claim an imperfect title over an alienable and disposable land of the public domain on the basis of a thirty
(30)-year possession and occupation, it must be demonstrated that such possession and occupation commenced on January 24, 1947 and the thirty (30)year period was completed prior to the effectivity of P.D. No. 1073 on 1/25/1977.
There is nothing in Section 48(b) that would suggest that it provides for two (2) modes of acquisition. It is not the case that there is an option between
possession and occupation for thirty (30) years and possession and occupation since June 12, 1945 or earlier. It is neither contemplated under Section 48(b)
that if possession and occupation of an alienable and disposable public land started after June 12, 1945, it is still possible to acquire an imperfect title if such
possession and occupation spanned for thirty (30) years at the time of the filing of the application.
In this case, the lower courts concluded that Espinosa complied with the requirements of Section 48(b) of the PLA in relation to Section 14(1) of P.D. No. 1529
based on supposed evidence that he and his predecessor-in-interest had been in possession of the property for at least thirty (30) years prior to the time he
filed his application. However, there is nothing on record showing that as of January 25, 1977 or prior to the effectivity of P.D. No. 1073 , he or Isabel
had already acquired title by means of possession and occupation of the property for thirty (30) years. On the contrary, the earliest tax declaration in Isabels
name was for the year 1965 indicating that as of January 25, 1977, only twelve (12) years had lapsed from the time she first came supposedly into
possession.
The CAs reliance on Director of Lands v. Intermediate Appellate Court 23 is misplaced considering that the application therein was filed on October 20, 1975 or
before the effectivity of P.D. No. 1073. The same can be said with respect to N ational Power Corporation v. Court of Appeals. 24 The petition for registration
therein was filed on August 21, 1968 and at that time, the prevailing rule was that provided under Section 48(b) as amended by R.A. No. 1942.
In Republic v. Court of Appeals,25 the applicants therein entered into possession of the property on June 17, 1978 and filed their application on February 5,
1987. Nonetheless, there is evidence that the individuals from whom the applicant purchased the property, or their predecessors-in-interest, had been in
possession since 1937. Thus, during the effectivity of Section 48(b) as amended by R.A. No. 1942, or while the prevailing rule was possession and occupation
for thirty (30) years, or prior to the issuance of P.D. No. 1073, the thirty (30)-year prescriptive period was already completed.
Thus, assuming that it is Section 48(b) of the PLA in relation to Section 14(1) of P.D. No. 1529 that should apply in this case, as the lower courts held, it was
incumbent upon Espinosa to prove, among other things, that Isabels possession of the property dated back at least to June 12, 1945. That in view of the
established fact that Isabels alleged possession and occupation started much later, the lower courts should have dismissed Espinosas application outright.
In sum, the CA, as well as the MTC, erred in not applying the present text of Section 48(b) of the PLA. That there were instances wherein
applications were granted on the basis of possession and occupation for thirty (30) years was for the sole reason discussed above. Regrettably, such reason
does not obtain in this case.
Being clear that it is Section 14(2) of P.D. No. 1529 that should apply, it follows that the subject property being supposedly alienable and disposable will not
suffice. As Section 14(2) categorically provides, only private properties may be acquired thru prescription and under Articles 420 and 421 of
the Civil Code, only those properties, which are not for public use, public service or intended for the development of national wealth, are considered private.
In Heirs of Mario Malabanan v. Republic, 26 this Court held that there must be an official declaration to that effect before the property may be
rendered susceptible to prescription:
Nonetheless, Article 422 of the Civil Code states that "property of public dominion, when no longer intended for public use or for public service,
shall form part of the patrimonial property of the State." It is this provision that controls how public dominion property may be converted into
patrimonial property susceptible to acquisition by prescription. After all, Article 420(2) makes clear that those property "which belong to the State,
without being for public use, and are intended for some public service or for the development of the national wealth" are public dominion
property. For as long as the property belongs to the State, although already classified as alienable or disposable, it remains property of the public dominion if
when it is "intended for some public service or for the development of the national wealth." (Emphasis supplied)
Without such express declaration, the property, even if classified as alienable or disposable, remains property of the public dominion, pursuant to Article
420(2), and thus incapable of acquisition by prescription. It is only when such alienable and disposable lands are expressly declared by the State to
be no longer intended for public service or for the development of the national wealth that the period of acquisitive prescription can begin to
run. Such declaration shall be in the form of a law duly enacted by Congress or a Presidential Proclamation in cases where the President is duly authorized by
law.27
Thus, granting that Isabel and, later, Espinosa possessed and occupied the property for an aggregate period of thirty (30) years, this does not operate to divest
the State of its ownership. The property, albeit allegedly alienable and disposable, is not patrimonial. As the property is not held by the State in
its private capacity, acquisition of title thereto necessitates observance of the provisions of Section 48(b) of the PLA in relation to Section
14(1) of P.D. No. 1529 or possession and occupation since June 12, 1945.
For prescription to run against the State, there must be proof that there was an official declaration that the subject property is no longer earmarked for public
service or the development of national wealth. Moreover, such official declaration should have been issued at least ten (10) or thirty (30) years, as the case
may be, prior to the filing of the application for registration. The period of possession and occupation prior to the conversion of the property to private or
patrimonial shall not be considered in determining completion of the prescriptive period. Indeed, while a piece of land is still reserved for public service or the
development of national wealth, even if the same is alienable and disposable, possession and occupation no matter how lengthy will not ripen to ownership or
give rise to any title that would defeat that of the States if such did not commence on June 12, 1945 or earlier.
At any rate, as RP correctly pointed out, the notation on the survey plan does not constitute incontrovertible evidence that would overcome the presumption
that the property belongs to the inalienable public domain.
REGALIAN DOCTRINE; All lands of the public domain belong to the State , which is the source of any asserted right to any ownership of land. All lands
not appearing to be clearly within private ownership are presumed to belong to the State. Accordingly, public lands not shown to have been reclassified
or released as alienable agricultural land, or alienated to a private person by the State, remain part of the inalienable public domain. The
burden of proof in overcoming the presumption of State ownership of the lands of the public domain is on the person applying for registration (or claiming
ownership), who must prove that the land subject of the application is alienable or disposable. To overcome this presumption, incontrovertible evidence must
be established that the land subject of the application (or claim) is alienable or disposable. 28
Espinosa To discharge the onus, relies on the blue print copy of the conversion and subdivision plan approved by the DENR Center which bears the notation of
the surveyor-geodetic engineer that "this survey is inside the alienable and disposable area, Project No. 27-B. L.C. Map No. 2623, certified on January 3, 1968
by the Bureau of Forestry."
Menguito v. Republic teaches, however, that reliance on such a notation to prove that the lot is alienable is insufficient and does not constitute
incontrovertible evidence to overcome the presumption that it remains part of the inalienable public domain.
"To prove that the land in question formed part of the alienable and disposable lands of the public domain, petitioners relied on the printed words which read:
"This survey plan is inside Alienable and Disposable Land Area, Project No. 27-B as per L.C. Map No. 2623, certified by the Bureau of Forestry on January 3,
1968,"
Page | 21
Kristine Confesor
This proof is not sufficient. Section 2, Article XII of the 1987 Constitution, provides: "All lands of the public domain, waters, minerals, coal, petroleum,
and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the
State. . . ."
For the original registration of title, the applicant (petitioners in this case) must overcome the presumption that the land sought to be registered forms part of
the public domain. Unless public land is shown to have been reclassified or alienated to a private person by the State, it remains part of the inalienable public
domain. Indeed, "occupation thereof in the concept of owner, no matter how long, cannot ripen into ownership and be registered as a title." To
overcome such presumption, incontrovertible evidence must be shown by the applicant. Absent such evidence, the land sought to be registered remains
inalienable.
In the present case, petitioners cite a surveyor geodetic engineers notation in Exhibit "E" indicating that the survey was inside alienable and disposable land.
Such notation does not constitute a positive government act validly changing the classification of the land in question . Verily, a mere
surveyor has no authority to reclassify lands of the public domain
numerous grounds for its denial. The blueprint copy of the advanced survey plan may be admitted as evidence of the identity and location of the subject
property if:
(a) it was duly executed by a licensed geodetic engineer; (b) it proceeded officially from the Land Management Services ( LMS) of the DENR; and
(c) it is accompanied by a technical description of the property which is certified as correct by the geodetic surveyor who conducted the
survey and the LMS of the DENR.
As ruled in Republic v. Guinto-Aldana,32 the identity of the land, its boundaries and location can be established by other competent evidence
apart from the original tracing cloth such as a duly executed blueprint of the survey plan and technical description : Yet if the reason for
requiring an applicant to adduce in evidence the original tracing cloth plan is merely to provide a convenient and necessary means to afford certainty as to the
exact identity of the property applied for registration and to ensure that the same does not overlap with the boundaries of the adjoining lots, there stands to be
no reason why a registration application must be denied for failure to present the original tracing cloth plan, especially where it is accompanied by pieces of
evidencesuch as a duly executed blueprint of the survey plan and a duly executed technical description of the propertywhich may likewise substantially
and with as much certainty prove the limits and extent of the property sought to be registered. 33
However, while such blueprint copy of the survey plan may be offered as evidence of the identity, location and the boundaries of the property applied for, the
notation therein may not be admitted as evidence of alienability and disposability.
In Republic v. Heirs of Juan Fabio, 34 this Court enumerated the documents that are deemed relevant and sufficient to prove that the property is already outside
the inalienable public domain as follows:
In Republic v. T.A.N. Properties, Inc., we ruled that it is not enough for the Provincial Environment and Natural Resources Office (PENRO) or CENRO
to certify that a land is alienable and disposable. The applicant for land registration must prove that the DENR Secretary had approved the
land classification and released the land of the public domain as alienable and disposable, and that the land subject of the application for
registration falls within the approved area per verification through survey by the PENRO or CENRO. In addition, the applicant must present a copy of the
original classification of the land into alienable and disposable, as declared by the DENR Secretary, or as proclaimed by the President. Such copy of the
DENR Secretarys declaration or the Presidents proclamation must be certified as a true copy by the legal custodian of such official record. These facts must
be established to prove that the land is alienable and disposable.35
Therefore, Espinosa cannot avail the benefits of either Section 14(1) of P.O. No. 1529 in relation to Section 48(b) of the PLA or Section 14(2) of P.O. No. 1529.
Applying Section 14(1) of P.O. No. 1529 and Section 48(b) of the PLA, albeit improper, Espinosa failed to prove that:
(a) Isabel's possession of the property dated back to June 12, 1945 or earlier; and
(b) the property is alienable and disposable.
On the other hand, applying Section 14(2) of P.O. No. 1529, Espinosa failed to prove that the property is patrimonial. As to whether Espinosa was able to
prove that his possession and occupation and that of Isabel were of the character prescribed by law, the resolution of this issue has been rendered
unnecessary by the foregoing considerations.
REMMAN ENTERPRISES, INC v. RP
Remman Enterprises, Inc (Inocencio), filed with the RTC on June 4, 1998 an application for registration of the subject properties situated in Taguig, Metro
Manila, with an area of 27,477 square meters, 23,179 sq m and 45,636 sq m, more particularly described as follows:
1)
(27,477)
sqm, more or less;
2)
(23,179) square meters, more or less; and
3)
(45,636) square meters, more or less, all brought under the operation of the Property Registration Decree (PD 1529) or Commonwealth Act 141,
OSG, interposed its opposition to the application. During the initial hearing of the case on May 4, 1999, the REI presented and marked documentary
evidence6 to prove its compliance with jurisdictional requirements.7
REI
-
purchased on August 28, 1989 from sellers Samonte, Aldana and Navarro.
declared on August 9, 1989 for taxation purposes.
occupied the properties and planted thereon crops like rice, corn and vegetables. 8
Witness (Serquia) supported the application for registration by claiming that he had been the caretaker of the subject properties since 1957,
long before the lots were purchased by the petitioner.
Serquinia alleged that no person other than the applicant and its predecessors-in-interest had claimed ownership or rights over the subject
properties.9
RTC granted: REI is the absolute owner in fee simple of three (3) parcels of land.
RP
-
identity of the subject properties was not sufficiently established.

character and length of possession required by law in land registration cases were not satisfied by the petitioner.
CA reversed:
survey plans and technical descriptions submitted by the petitioner failed to establish the true identity of the subject properties. T
application should have been accompanied by the original tracing cloth plan duly approved by the Director of Lands. 13
no certification from the proper government office stating that the properties were already declared alienable and disposable. 14
a failure to establish that the petitioner and its predecessors-in-interest possessed the subject parcels of land under a bona fide claim of ownership
since June 12, 1945 or earlier.15
SC: Petition must be dismissed.
On the matter of proof of the subject propertys identity,
presentation of the original tracing cloth plan may be dispensed with, subject however to certain conditions. Contrary to the petitioners claim, the
original clothing plans that cover the subject properties do not form part of the case records. The Court has nonetheless held in Republic v.
Espinosa:16
Page | 22
Kristine Confesor
-
Republic v. Guinto-Aldana, the identity of the land, its boundaries and location can be established by other competent evidence apart from the
original tracing cloth such as a duly executed blueprint of the survey plan and technical description:
"Yet if the reason for requiring an applicant to adduce in evidence the original tracing cloth plan is merely to provide a convenient and necessary
means to afford certainty as to the exact identity of the property applied for registration and to ensure that the same does not overlap with the
boundaries of the adjoining lots, there stands to be no reason why a registration application must be denied for failure to present the original
tracing cloth plan, especially where it is accompanied by piecesof evidencesuch as a duly executed blueprint of the survey plan and a duly
executed technical description of the propertywhich may likewise substantially and with as much certainty prove the limits and extent of
the property sought to be registered."17
Notwithstanding the foregoing, the CAs dismissal of the petitioners application for original registration was proper considering the latters failure
to sufficiently establish that the subject properties were already declared alienable and disposable by the government. Its reliance on a
Report,18 issued by the CENRO, DENR National Capital Region, West Sector, was misplaced. The Court ruled in Republic v. Medida: 19
In Republic v. T.A.N. Properties, Inc.,this Court explained that a Provincial Environment and Natural Resources Office (PENRO) or CENRO
certification, by itself, fails toprove the alienable and disposable character of a parcel of land. We ruled:
[I]t is not enough for the PENRO or CENRO to certify that a land is alienable and disposable.
The applicant for land registration must prove that

1)
DENR Secretary had approved the land classification and released the land of the public domain as alienable and disposable,
2)
land falls within the approved area per verification through survey by the PENRO or CENRO
3)
present a copy of the original classification approved by the DENR Secretary and certified as a true copy by the legal custodian of the official
records.
The burden of proof in overcoming the presumption of State ownership of the lands of the public domain is on the person applying for registration, who must
provethat the properties subject of the application are alienable and disposable. 21 Even the notations on the survey plans submitted by the petitioner
cannot be admitted asevidence of the subject properties alienability and disposability. Such notations do not constitute incontrovertible evidence
to overcome the presumption that the subject properties remain part of the inalienable public domain. 22
Given the foregoing, the dismissal of the petitioner's application for registration was proper. Under pertinent laws and jurisprudence, the petitioner had to
sufficiently establish that:
1)
2)
3)
properties form part of the disposable and alienable lands of the public domain;
open, continuous, exclusive, and notorious possession anq occupation of the same; and
possession is under a bona fide claim of ownership since June 12, 1945 or earlier.23
Without sufficient proof that the subject properties had been declared alienable and disposable, the Court DENIES.
SO ORDERED.
MANGASER, vs.
DIONISIO UGAY,
"a case of forcible entry and damages.

Anacleto Mangaser on October 30, 2007, represented by his attorney-in-fact, Eustaquio Dugenia (petitioner), filed a complaint for Forcible Entry with
Damages against respondent Dionisio Ugay before MTC La Union.
In his complaint, Mangasaer alleged that he was the registered owner and possessor of a parcel of land situated in LU
that on October 31, 2006, he discovered that respondent stealthy intruded and occupied a portion of his property by constructing a residential
house thereon without his knowledge and consent
a certification to file action was issued by the Lupon was issued after failing to reach at a compromise; and
that demand letters were sent to respondent but he still refused to vacate the premises, thus, he was constrained to seek judicial remedy. 3
Ugay denied the material allegations
that he had been a resident in La Union, since birth and when he reached the age of reason, he started occupying a parcel of land in that place
then known as Sta. Lucia, Aringay, La Union;
years later, this parcel of land was designated as part of Santiago Sur, Caba, La Union due to a survey made by the government;
that he introduced more improvements on the property by cultivating the land, and in March 2006, he put up a "bahay kubo";
that in October 2006, he installed a fence made of "bolo" to secure the property; that in installing the fence, he was guided by the concrete
monuments which he knew to be indicators of the boundaries of Mangasaers property;
that while he could not locate some of the monuments, he based the boundaries on his recollection since he was around when these were
installed;
that he knew the boundaries of petitioner's property because he knew the extent of the "iron mining" activities done by a company on the said
property;
that petitioner was never in actual possession of the property occupied by him, and it was only on October 31, 2006 when he discovered the al
legccl intrusion;
that it was not correct to say that he refused to vacate and surrender the premises despite receipt of the demand letters because in his letter-reply,
he assured petitioner that he would voluntarily vacate the premises if he would only be shown to have intruded into petitioner's titled lot after the
boundaries were pointed out to him; and that instead of shmving the boundaries to him, petitioner filed an action for forcible entry before the MTC. 4
MTC Ruling in favor of UGAY
Mangasaer failed to adduce any evidence to prove that the lot occupied by Ugay was within his lot.
Mangasaer could have presented a relocation survey, which would have pinpointed the exact location of the house and fence put up by
respondent, and resolved the issue once and for all.6
He also failed to prove his prior physical possession of the subject property.
Lot registered under his name and the Tax Declaration were not proof of actual possession of the property.
RTC Reversed
Page | 23
Kristine Confesor
in ejectment cases, possession of the land did not only mean actual or physical possession but also included the subject of the thing to the action
of one's will or by the proper acts and legal formalities established for acquiring such right.
Mangasaer had clearly shown his possession of the property as evidenced by his OCT issued in March 1987 and tax declaration, dating back as
early as 1995.11
the boundaries of the property were clearly indicated in the title, thus, there was no need to conduct a survey. As the owner, petitioner knew the
exact metes and bounds of his property so that when respondent intruded stealthily, he filed the subject suit. 12
CA reversed RTC Citing Quizon v. Juan,14
Mangasaer must allege and prove that he was in prior physical possession of the property in dispute.
The word "possession," as used in forcible entry and unlawful detainer cases, meant nothing more than physical possession, not legal
possession in the sense contemplated in civil law.
Mangasaer was not in physical possession despite the presentation of the OCT and his tax declarations.
when the law would speak of possession in forcible entry cases, it is prior physical possession or possession de facto, as
distinguished from possession de Jure.
What petitioner proved was legal possession, not his prior physical possession
RTC misquoted Nunez v. SLTEAS Pheonix Solutions 16 by giving the wrong notion of what kind of possession was contemplated in forcible entry
cases. In other words, physical possession was the crux in forcible entry, not possession that stemmed upon ownership. 17 The dispositive portion of
the assailed decision reads:
Hence, this petition, anchored on the following
ISSUES
1.
w/n ca failed to consider the evidence of ownership of petitioner which may establish prior possession over the property by herein petitioner
2.
w/n the resolution dated december 5, 2012 of CA, former special fourth division, denying the motion for reconsideration is valid.
Mangasaer argues that in ejectment cases, possession of the land does not only mean actual or physical possession or occupation but also by the fact that a
land is subject to the action of one's will or by proper acts and legal formalities established for acquiring such right; that the CA should have considered OCT
No. RP-174(13789) his tax declaration as proofs of prior physical possession over the property; and that the issuance of the same are considered to by law as
proper acts and legal formalities established for acquiring such right. Petitioner cited Tolentino, as one of the authors and experts in Civil law, stating that the
"proper acts and formalities" refer to juridical acts, or the acquisition of possession by sufficient title, inter vivas or mortis causa, onerous or lucrative. These
are the acts which the law gives the force of acts of possession.
Petitioner also avers that the December 5, 2012 CA Resolution was not valid as it did not state the legal basis required by the Constitution.
On May 28, 2013, Ugay filed his Comment23 before this Court. He stated that the issues raised and the arguments presented by petitioner have been
thoroughly resolved and ruled upon by the CA. The appellate court did not err in reversing the RTC decision because petitioner was never in prior physical
possession of the property in dispute. Respondent asserts that he has been in prior, actual, continuous, public, notorious, exclusive and peaceful possession in
the concept of an owner of the property in dispute.24
On March 28, 2014, petitioner filed his Reply, 25 reiterating the case of Nunez v. SLTEAS Phoenix Solutions, Inc., 26where a party was able to demonstrate that it
had exercised acts of ownership over the property by having it titled in its name and by paying real property taxes on it. Petitioner also laments the wrongful
insistence of respondent that his possession over the property was one in the concept of an owner. To petitioner's mind, respondent failed to adequately
adduce evidence to show proof of his right to possess the property when his possession came under attack with the filing of the subject case. 27
HELD: Petition is with merit
For a forcible entry suit to prosper, the plaintiffs must allege and prove:
(a) that they have prior physical possession of the property;
(b) that they were deprived of possession either by force, intimidation, threat, strategy or stealth; and,
(c) action was filed within one (1) year from the time the owners or legal possessors learned of their deprivation of the physical
possession of the property.28
Page | 24
Kristine Confesor
There is only one issue in ejectment proceedings: who is entitled to physical or material possession of the premises , that is, to possession
de facto, not possession de Jure? Issues as to the right of possession or ownership are not involved in the action; evidence thereon is not
admissible, except only for the purpose of determining the issue of possession.29
As a rule, the word "possession" in forcible entry suits indeed refers to nothing more than prior physical possession or possession de facto, not
possession de Jure or legal possession in the sense contemplated in civil law. Title is not the issue, and the absence of it "is not a ground
for the courts to withhold relief from the parties in an ejectment case."30
The Court, however, has consistently ruled in a number of cases 31 that while prior physical possession is an indispensable requirement in forcible entry cases,
the dearth of merit in respondent's position is evident from the principle that possession can be acquired not only by material occupation, but also by
the fact that a thing is subject to the action of one's will or by the proper acts and legal formalities established for acquiring such right . The
case of Quizon v. Juan,32 which surprisingly was relied on by the CA, also stressed this doctrine.
Possession can be acquired by juridical acts. These are acts to which the law gives the force of acts of possession.
Examples of these are donations, succession, execution and registration of public instruments, inscription of possessory information titles and the
like.33
The reason for this exceptional rule is that possession in the eyes of the law does not mean that a man has to have his feet on every square meter
of ground before it can be said that he is in possession.34 It is sufficient that petitioner was able to subject the property to the action of his
will.35 Here, respondent failed to show that he falls under any of these circumstances. He could not even say that the subject property was leased to him
except that he promised that he would vacate it if petitioner would be able to show the boundaries of the titled lot.
In the case of Nunez v. SLTEAS Phoenix Solutions, inc., 36 the subject parcel was acquired by the respondent by virtue of the June 4, 1999 Deed of Assignment
executed in its favor by Spouses Ong Tiko and Emerenciana Sylianteng. The petitioner in the said case argued that, aside from the admission in the complaint
that the subject parcel was left idle and unguarded, the respondent's claim of prior possession was clearly negated by the fact that he had been in occupancy
thereof since 1999. The Court disagreed with the petitioner and said: Although it did not immediately put the same to active use, respondent appears to have
additionally caused the property to be registered in its name as of February 27, 2002 and to have paid the real property taxes due thereon alongside the
sundry expenses incidental thereto. Viewed in the light of the foregoing juridical acts, it consequently did not matter that, by the time respondent conducted its
ocular inspection in October 2003, petitioner hml already been occupying the land since 1999.
Hence, in that case, the Court ruled that such juridical acts were sufficient to establish the respondent's prior possession of the subject property.
The case of Habagat Grill v. DMC-Urban Property Developer, Inc., 37 also involves an action for forcible entry. On June 11, 1981, David M. Consunji, Inc. acquired
a residential lot situated in Matina, Davao City. it transferred the said lot to respondent DMC. Alleging that the petitioner forcibly entered the property in
December 1993, the respondent filed on March 28, 1994 a complaint for forcible entry. One of the issues raised therein was whether respondent DMC had prior
possession of the subject property, to which the Court answered in the affirmative. It ruled that:
Prior possession of the lot by respondent's predecessor was sufficiently proven by evidence of the execution and registration of public
instruments and by the fact that the lot was subject to its will from then until December 1, 1993, when petitioner unlawfully entered the premises and
deprived the former of possession thereof.
In the case at bench, the Court finds that Mangasaer acquired possession of the subject property by juridical act, specifically, through the issuance of a free
patent under Commonwealth Act No. 141 and its subsequent registration with the Register of Deeds on March 18, 1987. 38
Before the Court continues any further, it must be determined first whether the issue of ownership is material and relevant in resolving the issue of possession.
The Rules of Court in fact expressly allow this: Section 16, Rule 70 of the Rules of Court provides that the issue of ownership shall be resolved in deciding
the issue of possession if the question of possession is intertwined with the issue of ownership. But this provision is only an exception and is allowed only in
this limited instance - to determine the issue of possession and only if the question of possession cannot be resolved without deciding the issue of ownership. 39
issue of ownership should be provisionally determined in this case Because there are conflicting claims of ownership, then it is proper to provisionally
determine the issue of ownership to settle the issue of possession de facto.
1)
the juridical act from which the right of ownership of petitioner arise would be the registration of the free patent and the issuance of OCT No. RP174(13789). Apparently, the Torrens title suggests ownership over the land.
2)
respondent also asserts ownership over the land based on his prior, actual, continuous, public, notorious, exclusive and peaceful possession in the
concept of an owner of the property in dispute. 40
petitioner's OCT No. RP-174(13789) and his tax declarations should absolutely be disregarded. The issuance of an original certificate of title to the
petitioner evidences ownership and from it, a right to the possession of the property flows. Well-entrenched is the rule that a person who has a
Torrens title over the property is entitled to the possession thereof. 41
Moreover, his claim of possession is coupled with tax declarations. While tax declarations are not conclusive proof of possession of a parcel of land, they are
good indicia of possession in the concept of an owner, for no one in his right mind would be paying taxes for a property that is not in his
actual or constructive possession.42
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Kristine Confesor
Together with the Torrens title, the tax declarations dated 1995 onwards presented by petitioner strengthens his claim of possession over
the land before his dispossession on October 31, 2006 by respondent.
The CA was in error in citing the case of De Grano v. Lacaba 43 to support its ruling. In that case, the respondent tried to prove prior possession, by
presenting only his tax declarations, tax receipt and a certification from the municipal assessor attesting that he had paid real property tax from previous
years. The Court did not give credence to his claim because tax declarations and realty tax payments are not conclusive proof of possession. The
situation in the present case differs because aside from presenting his tax declarations, the petitioner submitted OCT No. RP-174(13 789) which is the best
evidence of ownership from where his right to possession arises.
Against the Torrens title and tax declarations of petitioner, the bare allegations of respondent that he had prior, actual, continuous, public, notorious,
exclusive and peaceful possession in the concept of an owner, has no leg to stand on. Thus, by provisionally resolving the issue of ownership, the Court
is satisfied that petitioner had prior possession of the subject property. When petitioner discovered the stealthy intrusion of respondent over
his registered prope1iy, he immediately filed a complaint with the Lupong Tagapamayapa and subsequently filed an action for forcible entry
with the MTC. Instead of taking the law into his own hands and forcefully expelling respondent from his property, petitioner composed himself and followed
the established legal procedure to regain possession of his land.
If the Court were to follow the ruling of the CA and disregard juridical acts to obtain prior possession, then it would create an absurd situation. It
would be putting premium in favor of land intruders against Torrens title holders , who spent months, or even years, in order to register their land,
and who religiously paid real property taxes thereon. They cannot immediately repossess their properties simply because they have to prove their literal and
physical possession of their property prior to the controversy. The Torrens title holders would have to resort to ordinary civil procedure by filing either an accion
publiciana or accion reinvidicatoria and undergo arduous and protracted litigation while the intruders continuously enjoy and rip the benefits of another man's
land. It will defeat the very purpose of the summary procedure of an action for forcible entry.
The underlying philosophy behind ejectment suits is to prevent breach of the peace and criminal disorder and to compel the party out of possession to respect
and resort to the law alone to obtain what he claims is his. Ejectment proceedings are summary in nature so the authorities can speedily settle actions to
recover possession because of the overriding need to quell social disturbances. 44
As to the other requirements of an action for forcible entry, the Court agrees with the RTC that petitioner had sufficiently complied with them. Petitioner proved
that he was deprived of possession of the property by stealth. The complaint was also filed on October 30, 2007, within the one year reglementary
period counted from the discovery of the stealthy entry by respondent to the property on October 31, 2006.
OBLIGATIONS AND CONTRACTS

Title I- Obligations
Chapter 1- GENERAL PROVISIONS

See Arts. 1156-1162
Art. 1156. An obligation is a juridical necessity to give, to do or not to do.
OBLIGATION- juridical relation between 2 persons, known as C and D, whereby creditor can demand from debtor the observance of a
determinate conduct and in case of breach, may obtain satisfaction from debtors assets.
Juridical necessity connotes that in case of noncompliance, there will be a legal sanction
Covers only civil obligations, not natural
Characteristics:
1. Represents exclusively private interest
2. Creates ties that are by nature transitory
3. Involves the power to make the juridical tie effective in case of non-fulfillment through an economic equivalent obtained from the
debtors patrimony.
Types:
1.
Civil- derives their binding force from positive law, and can be enforced by court action or other coercive power of public authority
2.
Natural- derive their binding force from equity and natural justice, and its fulfillment cannot be compelled by court action but
depends exclusively on the conscience of the debtor.
3.
Moral- arise from moral law developed by the church and not enforceable in court.
Elements:
1. Active Subject(Obligee/Creditor): one whose favor the obligation is constituted; Has the power to demand the protestation
2. Passive Subject(Obligor/Debtor): Bound to perform the protestation; one who has the duty to give, to do, or not to do
3. Object(pretestation); the conduct which has to be observed by the debtor/obligor
to give: delivery of a movable or immovable thing which is either determinate (specific) or indeterminate (generic). This is in
order to create a real right, or for the use of the creditor, or for its simple possession, or in order to return to its owner.
to do: involves all kinds of work or services whether physical or mental, but in most cases the essence of the act man not be
such, but merely the necessity of concluding a juridical operation, such as, when a person promises to give a bond.
not to do: is a negative obligation which consists of abstaining from some act, it includes not to give.
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Kristine Confesor
4.
5.
Efficient Cause: Juridical tie between 2 subjects by reason of which the debtor is bound in favor of the creditor to perform the
protestation; The vinculum by which the debtor is bound to in favor of the creditor to perform the prestation. It is determined by
knowing the sources of the obligation
Form: Not essential; no form required to be binding
Requisites
1.
Licit
2.
physically and juridically possible
3.
determinate or atleast determinable
4.
It must have pecuniary value
a.
Vinculum Juria: juridical tie;binds the parties to the obligation
b.
Causa (causa debend/causa obligationes): why obligation exists
Art. 1157. Obligations arise from:

(1) Law;
(2) Contracts;
(3) Quasi-Contracts;
(4) Delict;
(5) Quasi-delicts.
SOURCES OF OBLIGATION Art. 1157
Law- obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are demandable,
and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of
this Book. [1158]
Contracts- obligations arising from contracts have the force of law between the contracting parties and should be complied with in
good faith. [1159]
Principle of autonomy of will. The parties can stipulate anything (they have the freedom), provided that the terms of the
contract are not contrary to law, public policy or public order
Quasi-Contracts obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, title XVII of this book
Juridical relation which arises from certain lawful, voluntary and unilateral acts, to the end that no one may be unjustly
enriched or benefited at the expense of another.
o
Lawful- distinguished from delict
o
Voluntary- from quasi-delict
o
Unilateral- from contracts
Kinds of Quasi-Contract
NEGOTIORUM GESTIO- (officious manager) juridical relation which takes place when somebody takes charge of the
agency or management of the business or property of another without any power form the latter. The owner shall
reimburse the gestor for the necessary and useful expenses incurred by the latter, and for the damages suffered by him
in the performance of his functions.
SOLUTIO INDEBITI a juridical relation which takes place when somebody received something from another without
any right to demand for it, and the thing was unduly delivered through mistake (compared to Art. 22 or unjust
enrichment wherein there was no mistake). Obligation to return the thing arises on the part of the recipient.
Delict- Civil obligations arising from criminal offenses shall be governed by the penal laws, subject to the provisions of article 2177, and
of the pertinent provisions of Chapter 2, Preliminary title, on Human Relations, and of Title XVIII of this book, regulating damages.
Basis is Article 100 of RPC, that every person criminally liable is also civilly liable
o
Restitution
o
Reparation
o
Indemnification of Consequential Damages
Governing Rules
1.
Article 100-113 of RPC & other penal laws subject to Art. 2177 of CC (quasi-delict)
2.
Chapter 2, Preliminary title, on Human Relations (Civil Code)
3.
Title 18 of Book IV of the Civil Code on Damages
Effect of Acquittal in a Criminal Case

1.
Due to reasonable doubt no civil liability
2.
Exempting circumstances- there is civil liability
3.
Preponderance of evidence- there is civil liability
Crimes without civil liability

1.
Contempt
2.
Insults to persons in Authority
3.
Gambling
4.
Violations of traffic Regulations
Quasi-Delict - Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2, Title XVII of this Book, and by
special laws.
NB: The enumeration of the sources of obligation is exclusive; no obligation exists if its source is not one of those enumerated above.
1. Unilateral promise is admitted by modern doctrine, which recognizes that unilateral engagements may give rise to obligations without
the need of acceptance.
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Kristine Confesor
2. Contrary to Pineda, Tolentino supports that it cannot be said with certainty that the enumeration in this article is exclusive because
there is nothing which expressly precludes other sources of obligation, such as the unilateral promise to the public of an award for a
certain act or accomplishment.
3. The clear implication of Sagrada Orden vs. Nacoco is that, these five (5) are the only sources of obligations.
Articles 1158 - 1162 specify the general principles regarding the sources of obligation enumerated in Art. 1157.
NATURE AND EFFECTS OF OBLIGATIONS

Art. 1163
Every person obliged TO GIVE something
is also obliged to take care of it
with proper diligence of a good father of a family,
unless
the law or stipulation of the parties
requires another standard of care
Art. 1164
The creditor has a right to the fruits of the thing
from the time the obligation TO DELIVER it arises.
However,
he shall acquire no real right over it
until the same has been delivered to him.
Art. 1165
When what is to be delivered is a DETERMINATE THING,
The creditor, in addition to the right granted by him by Art. 1170,
may compel the debtor to make the delivery.
If the thing is INDETERMINATE OR GENERIC,
he may ask that the obligation be complied with
at the expense of the debtor
If the obligor DELAYS, or
has promised to deliver the same thing to two or more persons who do not have the same interest,
he shall be responsible for fortuitous event
until he has effected the delivery
Art. 1166
The obligation to deliver a DETERMINATE THING
Includes that of delivering all its accessions and accessories,
Even though they may not have been mentioned
Art. 1167
If a person obliged TO DO something
Fails to do it
The same shall be executed at his cost
This same rule shall be observed
if he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been
poorly done
be undone
Art. 1168
When the obligation consists in NOT DOING, and
The obligor does what has been forbidden him,
It shall also be undone at his expense
Art. 1169
Those obliged TO DELIVER or TO DO somethings incur in DELAY
from the time the oblige judicially or extra-judicially demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
1.
When the obligation or the law expressly so declares; or
2.
When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to
be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or
3.
When the demand would be useless, as when the obligor has rendered it beyond his power to perform
In RECIPROCAL OBLIGATIONS,
neither party incurs in delay
if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him.
From the moment one of the parties fulfills his obligation,
delay by the other begins.
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Kristine Confesor
NATURE OF OBLIGATIONS
1. Personal Obligations: obligations to do or not to do; where the subject matter is an act to be done or not to be done
a.
Positive obligation- obligation to do
b.
Negative obligation- obligation not to do
2.
Real Obligations: obligations to give; where the subject matter is a thing which the obligor must deliver to the oblige
a.
Determinate/specific- object is particularly designated or physically segregated from all other things of the same class
b.
Generic- object is designated by its class or genus
c.
Limited Generic- generic objects confined into a particular class
EFFECTS OF OBLIGATIONS
A.
DUTIES OF DEBTOR IN AN OBLIGATION TO GIVE A DETERMINATE THING (see Art. 1163, 1164, 1166)
1.
To preserve or take care of the thing due with diligence of a good father of a family
Diligence of a Good Father of a Family: ordinary care or that diligence which an average or reasonably prudent person would
exercise over his own property.
Standard of Care required
1)
Which the law requires
2)
Stipulation of the parties
3)
In the absence of the two, diligence of a good father of a family
2.
To deliver the fruit of the thing: Right to the fruits of the thing from the time the obligation to deliver it arises
When obligation to deliver arises
GR: From the time of the perfection of the contract (meeting of the minds between the parties)
Exception:
a) When the parties made a stipulation as regards the right of the creditor to the fruits of the thing
b) When the obligation is subject to a suspensive condition or period; arises upon the fulfillment of the condition or arrival
of the period
Personal Right (Jus ad Rem)- a right enforceable only against a definite person or group of persons; Right pertaining to a person
to demand to another, as a definite passive subject, the fulfillment of a prestation to give, to do, or not to do.
Real Right (Jus in re)- a right enforceable against the whole world; right pertaining to a person over a specific thing, without
definite passive subject against whom the right may be personally enforced.
Kinds of Delivery
1. Actual (tradition)- where physically, the property is handed over
2. Constructive- where the physical transfer is implied
a.
Traditio Simbolica
key to a car
delivery of ideal share

b. Tradition Longa Manu- delivery by mere consent or the pointing out of the object
c.
Traditio brevi manu delivery by short hand; that kind of delivery whereby a possessor of a thing not as an
owner, becomes the possessor as owner)
d. Tradition Constitutum Possessorium- The opposite of brevi manu; thus the delivery whereby a possessor
of a thing as na owner, retains possession no longer as an owner, who sells a house, but remains in possession
as tenant of the same house.
e.
Tradition by the execution of legal forms or solemnities- execution of a public instrument selling land
3.
To deliver its accessions and accessories
Accessions: everything which is produced by a thing, or which is incorporated or attached thereto, either naturally or
artificially
o
Continuao
Natural- alluvion,
o
Industrial- building, planting, sowing
Accessories: things joined to, or included with the principal things for its better use, embellishment or completion
4.
5.
To deliver the thing itself

To pay damages in case of breach of the obligation by reason of delay, fraud, negligence, or contravention of the tenor of the
obligation.
B.
DUTIES OF DEBTOR IN AN OBLIGATION TO GIVE A

GENERIC THING
To deliver the thing which is neither of superior or inferior quality
To pay damages in case of breach of the obligation by reason of delay, fraud, negligence or contravention of the tenor of the
obligation
1.
2.
C.
REMEDIES OF THE CREDITOR IN CASE OF NON-PERFORMANCE

(See Arts 1165-1168)
Real Obligations
1. Specific Performance by the debtor of prestation itself (determinate thing)
2. Substitute performance by another at the expense of the debtor
(indeterminate thing/generic)
3. Equivalent Performance , damages and bears the loss in fortuitous events
(in case of delay, or promise to deliver the same thing to 2/+ persons not having the same interest)
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Kristine Confesor
Personal Obligations [1167]
1. Executed at his cost
a)
Fails to do it
b)
Does it in contravention of the tenor of the obligation
c)
Poorly done
d)
Does what has been forbidden (undone at his expense)
D.
BREACH OF OBLIGATIONS
(See Arts 1170-1174)
1.
Voluntary- debtor in the performance of the obligation is guilty of:
a.
Fraud (dolo)
b.
Negligence (culpa)
c.
Delay (mora)
d.
Contravention of the tenor of the obligation
NB: debtor is liable for damages
DAMAGES:
1)
Moral (mental and physical anguish: must be proved)
2)
Exemplary (corrective/set an example)
Punish the intent- this cannot be presumed on the part of the employer merely because of the wanton, or malicious intent on
the part of the agent
3)
Nominal (vindication of the right violated, courts discretion)
4)
Temperate (when the exact amount of damages cannot be determined)
5)
Actual (actual losses as well as unrealized profit)
6)
Liquidated (predetermined beforehand-by agreement)
2.
Involuntary- debtor is unable to comply with his obligation due to fortuitous events
NB: debtor is not liable for damages unless indeterminate thing
FRAUD
Deliberate or intentional evasion of the normal fulfillment of an obligation
Fraud in the Performance
Causal Fraud
(Art. 1170)
Malice/bad faith
(Art. 1338)
deceit
Present during the performance of a prePresent during the perfection of the
existing obligation
contract
Purpose is to evade the normal fulfillment
of the obligation
Purpose is to secure the consent of

another to enter into a contract
Results in the breach of the obligation
Results in the vitiation of the consent;

voidable contract
Gives rise to the right of an innocent party
to annul the contract
Gives rise to a right in favor of the creditor

to recover damages
Incidental Fraud
(Art. 1344)
Present during the perfection of a
contract
Purpose is to secure the consent of the
other party but the fraud was not the
principal inducement in the making of
the contract
Does not result in vitiation of consent
Gives rise to a right of an innocent party
to claim for damages
NB: Future fraud cannot be waived. However, the law does not prohibit renunciation of the action for damages on the ground of fraud
already committed.
REMEDIES OF DEFRAUDED PARTY
1. Insist on specific performance
2. Resolve the contract
3. Claim damages in either case
FRAUD
There is deliberate intention to cause damage
Liability cannot be mitigated
Waiver of future fraud is VOID
NEGLIGENCE
No deliberate intent
Liability may be mitigated
Waiver of future negligence may be WAIVED in certain cases, like
simple negligence
***waiver of gross negligence is against public policy
NEGLIGENCE: consists in the omission of that diligence which is required by the nature of the conditions of the obligation and
corresponds with the circumstances of the persons, time, and place.
CULPA ACQUILANIA
TORT (2176)
Negligence is substantive and independent
There may or may not be a pre-existing contractual obligation
Source of the obligation is the negligence itself
Negligence must be proved
Diligence in the selection and supervision of the employees is a
defense
CULPA CONTRACTUAL
Negligence is merely an incident of performance of an obligation
There is a pre-existing contractual relation
Source of the obligation is the breach of the contractual
obligation
Proof of existence of the contract and its breach is prima facie
sufficient to warrant recovery
Diligence in the selection and supervision of the employees is
not available as a defense
Master-servant rule (negligence of the servant is negligence
Page | 30
Kristine Confesor
Negligence of employer is presumptive and may be rebutted
of the master)- but may be mitigated; direct and immediate

liability of the owner, not subsidiary
A passenger in a taxi was hurt because of the drivers
negligence (breach of contract of carriage)
EFFECTS OF THE CONTRIBUTORY NEGLIGENCE OF THE CREDITOR

GR: Reduces or mitigates the damages which he can recover
Exception: if the negligent act or omission of the creditor is the proximate cause of the event which led to the damage or injury
complained of, he cannot recover.
DELAY
1. Ordinary delay: failure to perform on time
2. Legal delay/default: failure to perform an obligation on time which failure constitutes a breach of the obligation
Requisites:
1.
Obligation must be due, demandable, and liquidated
2.
Debtor fails to perform his positive obligation on the date agreed upon
3.
A judicial or extra-judicial demand (not merely a reminder or notice) was made by the creditor upon the debtor to perform or
comply with his obligation otherwise, he will be in default
4.
Failure of the debtor to comply with such demand
Demand not necessary to constitute the debtor in default
1.
Where there is express stipulation to that effect
2.
Where the law so provides
3.
When the period is the controlling motive or the principal inducement for the creation of the obligation
4.
Where demand would be useless
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Kristine Confesor
PRINCIPL;E OF
DELAY,
SEE
1169
REQUISITES
EFFECTS
MORA SOLVENDI
Default on part of the debtor
Ex re- real obligations
Ex persona- personal obligations
1.
2.
3.
Demandable and liquidated;

Debtor delays performance;
Creditor requires performance
judicially/extra-judicially
1.
Debtor is guilty of breach of

obligation
Liability:
2.
if the obligation to pay
money- pay interest. If no
extra-judicial demand,
interest runs from the filing of
the complaint. In other
obligations, pay damages.
3.
Obligations to deliver a
determinate thing, liable for
fortuitous events. If debtor
can prove that loss would
have resulted even if he had
not been in default, the court
may equitably mitigate the
damages (Art. 2215 [4])
4.
Resolution (Art. 1170, in
proper cases)
MORA ACCIPIENDI
Default on part of the creditor
when he unjustifiably refuses to
accept the performance of the
obligation
1.
Offer of performance by
debtor
2.
Offer must be to comply with
the prestation as it should be
performed
3.
Creditor
refuses
the
performance
without
just
cause
1.
2.
3.
4.
5.
6.
Responsibility of debtor is
limited to fraud and gross
negligence
Debtor is exempted from, risk
of loss of thing; creditor bears
risk of loss
Expenses
by
debtor
for
preservation of thing after
delay is chargeable to creditor
If obligation bears interest,
debtor does not have to pay
from time of delay
Creditor liable for damages
Debtor may relieve himself of
obligation by consigning the
thing
COMPENSATIO MORAE
Both parties are in default (in
reciprocal obligations); there is no
actionable default on the part of
both parties
RULE ON
RECIPROCAL OBLIGATIONS
GR: fulfillment of the parties must
be simultaneous
Neither party incurs in delay if the
other does not comply or is not
ready to comply in a proper
manner with what is incumbent
upon him. From the moment one of
the parties fulfills his obligation,
Performance must be simultaneous
unless different dates for the
performance of the obligation was
fixed by the parties
CESSATION OF EFFECTS OF
MORA
1. Renunciation
2. Prescription
NB: no delay in
negative obligations
natural
and
Art. 1170
Those who in the performance of their obligations are guilty of
fraud
negligence, or
delay, and
those who in any manner contravene the tenor thereof,
are liable for damages
Art. 1171
Responsibility arising from FRAUD
is demandable in all obligations.
Any waiver of an action for future fraud is VOID.
Art. 1172
Responsibility arising from NEGLIGENCE
in the performance of every kind of obligation
is also demandable,
but such liability may be regulated by the courts,
according to the circumstances.
Art. 1173
The FAULT or NEGLIGENCE of the obligor consists in the
omission of that diligence which is
required by the nature of the obligation and
corresponds with the circumstances of
the persons, of
the time and of
the place.
When negligence shows bad faith, the provisions of
Art. 1171 and
2201, paragraph 2, shall apply.

If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a
good father of a family shall be required.

Art. 1174
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Kristine Confesor
Except in cases
expressly specified by the law, or when
it is otherwise declared by stipulation, or when
the nature of the obligation requires the assumption of risk,

No person shall be responsible for those events which,
Could not be foreseen, or which
Though foreseen, were inevitable

Art. 1175
Usurious transactions
shall be governed by special laws

Art. 1176
The receipt of the principal by the creditor,
Without reservation with respect to the interest,
Shall give rise to the presumption that
said interest has been paid

The receipt of a later installment of a debt
Without reservation as to the prior installments,
Shall likewise raise the presumption that
such installments have been paid.

Art. 1177
The creditors, after having
pursued the property in possession of the debtor to satisfy their claims,
May exercise all rights and
Bring all the actions of the latter for the same purpose,
Save those which are inherent in his person;
They may also impugn the acts which the debtor may have done to defraud them.
Art. 1178
Subject to the laws,
all rights acquired in virtue of an obligation are transmissible,
if there has been no stipulation to the contrary.
FORTUITOUS EVENT- an event which could not be foreseen, or which though foreseen, was inevitable.
REQUIREMENTS:
1.
The cause of the breach of the obligation must be independent of the will of the debtor
2.
The event must be either unforeseeable or unavoidable
3.
The event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner
4.
The debtor must be free from any participation in, or aggravation of injury to the creditor
RULE ON FORTUITOUS EVENT
GENERAL RULE: No liability for fortuitous event
Exceptions:
1.
When expressly declared by law
Bad faith, subject matter is generic, delay

2.
When expressly declared by the stipulation of the parties
3.
When the nature of the obligation requires the assumption of risk
4.
When the obligor is in default or has promised to deliver the same thing to 2 or more persons who do not have the same interest
(Art. 165[3])
Ruling:
One who negligently creates a dangerous condition cannot escape liability for the natural and probable consequences thereof, although
the act of a third person, or an act of God for which he is not responsible, intervenes to precipitate the loss.
EFFECT OF FORTUITOUS EVENT
DETERMINATE OBLIGATION
Obligation is extinguished
GENERIC OBLIGATION
Obligation is not extinguished based on the rule that genus
never persishes (genus nunquam peruit)
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Kristine Confesor
Article 1169
PRINCIPLE OF DELAY
LEANO V. CA
(Contract to Sell)
PARDO, J.:
On 1985, Fernando (vendor) and Leao, (vendee) executed a contract to sell involving a piece of land.In the contract, Carmelita
Leao bound herself to pay Fernando the sum of (P107,750.00) as the total purchase price of the lot. The manner of paying the total
purchase price was as follows:
(P10,775.00) DOWN PAYMENT,

(P96,975.00) shall be paid within a period of 10 years at a monthly amortization of P1,747.30 to begin from December 7,
1985 with interest at eighteen per cent (18%) per annum based on balances.
The contract also provided for a grace period of one month within which to make payments, together with the one
corresponding to the month of grace.
If the period expires without the installments for both months having been satisfied, an interest of 18% per annum will be
charged on the unpaid installments.5
Should a period of ninety (90) days elapse from the expiration of the grace period without the overdue and unpaid
installments having been paid with the corresponding interests up to that date, respondent Fernando, as vendor, was
authorized to declare the contract cancelled and to dispose of the parcel of land , as if the contract had not been
entered into.
The payments made, together with all the improvements made on the premises, shall be considered as rents paid for the
use and occupation of the premises and as liquidated damages.6
The last payment that she made was on 1989. 1991 Leao was ordered to vacate the premises and to pay P250.00 per
month by way of compensation for the use and occupation of the property from May 27, 1991 until she vacated the premises pursuant
to an order by the TC in the ejectment suit. 1993, TC issued a writ of execution which was duly served on petitioner Leao. She then
filed before RTC a complaint for specific performance with preliminary injunction.11
judgment is violative of her right to due process
contrary to the avowed intentions of Republic Act No. 6552 regarding protection to buyers of lots on installments.
deposited P18,000.00 with the clerk of court RTC to cover the balance of the total cost of Lot in dispute., granted.
On 1995, Fernando filed MR and the supplement19 thereto. The trial court increased the amount of P103,090.70 to P183,687.00 and
ordered petitioner Leao ordered to pay attorney's fees.20
TC: an absolute sale, making petitioner Leao the owner of the lot upon actual and constructive delivery thereof.
the seller, was divested of ownership and cannot recover the same
unless the contract is rescinded pursuant to Article 1592 of the Civil Code which requires a judicial or notarial demand.
Since there had been no rescission, petitioner Leao, as the owner in possession of the property, cannot be evicted.
-
On the issue of delay, the trial court held: "While the said contract provides that the whole purchase price is payable within
a ten-year period, yet the same contract clearly specifies that the purchase price shall be payable in monthly installments for
which the corresponding penalty shall be imposed in case of default. The plaintiff certainly cannot ignore the binding
effect of such stipulation by merely asserting that the ten-year period for payment of the whole purchase price
has not yet lapsed. In other words, the plaintiff has clearly defaulted in the payment of the amortizations due under the
contract as recited in the statement of and she should be liable for the payment of interest and penalties in accordance with
the stipulations in the contract pertaining thereto."21
disregarded Leaos claim that she made a downpayment of P10,000.00, at the time of the execution of the contract.
relied on the statement of account 22 and the summary23 prepared by respondent Fernando to determine petitioner
Leao's liability for the payment of interests and penalties.
consignation did not produce any legal effect as the same was not done in accordance with Articles 1176, 1177 and
1178 of the Civil Code.
ISSUES
(1) absolute sale or a conditional sale;
(2) Was there a proper cancellation of the contract to sell; none
(3) Was there a delay in the payment of the monthly amortizations? yes
HELD:
CONDITIONAL SALE not an absolute sale. The intention of the parties was to reserve the ownership of the land in the seller until the
buyer has paid the total purchase price.
the contract to sell makes the sale, cession and conveyance "subject to conditions" set forth in the contract to sell.
transferred was the possession of the property, not ownership. even limited by the following:
o
(1) that the vendee may continue therewith "as long as the VENDEE complies with all the terms and conditions
mentioned, and (
o
2) that the buyer may not sell, cede, assign, transfer or mortgage or in any way encumber any right, interest or
equity that she may have or acquire in and to the said parcel of land nor to lease or to sublease it or give
possession to another person without the written consent of the seller.30
the land is covered by a torrens title, the act of registration of the deed of sale was the operative act that could transfer
ownership over the lot.
There is not even a deed that could be registered since the contract provides that the seller will execute such a deed "upon
complete payment by the VENDEE of the total purchase price of the property" with the stipulated interest. 32
IN A CONTRACT TO SELL REAL PROPERTY ON INSTALLMENTS, THE FULL PAYMENT OF THE PURCHASE PRICE IS A POSITIVE
SUSPENSIVE CONDITION
the failure of which is not considered a breach, casual or serious, but simply an event that prevented the obligation of the vendor to
convey title from acquiring any obligatory force.33 The transfer of ownership and title would occur after full payment of the price.34
In the case at bar, petitioner Leao's non-payment of the installments after April 1, 1989, prevented the obligation of respondent
Fernando to convey the property from arising. In fact, it brought into effect the provision of the contract on cancellation.
Page | 34
Kristine Confesor
Article 1592 CC is inapplicable to the case at bar. 35
However, any attempt to cancel the contract to sell would have to comply with the provisions Realty Installment Buyer
Protection Act. which recognizes the right of the seller to cancel the contract upon non-payment of an installment by
the buyer in conditional sales of all kinds of real estate (industrial, commercial, residential), which is simply an event that
prevents the obligation of the vendor to convey title from acquiring binding force.36
The law also provides for the rights of the buyer in case of cancellation. Thus, Sec. 3 (b) of the law provides that:"If the
contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property equivalent
to fifty percent of the total payments made and, after five years of installments, an additional five percent every year but not
to exceed ninety percent of the total payment made
Provided, Thatthe actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice
of cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender
value to the buyer." [Emphasis supplied]
THE DECISION IN THE EJECTMENT CASE 37 OPERATED AS THE NOTICE OF CANCELLATION

Leao was not given then cash
surrender value of the payments that she made, there was still no actual cancellation of the contract Leao may still reinstate the
38
contract by updating the account during the grace period and before actual cancellation. Leano would then have to pay respondent
Fernando in accordance with the statement of account39 which amount was P183,687.00.40
PETITIONER LEANO WAS ON DELAY. contract provided that the total purchase price was payable within a ten-year period, the same
contract specified that the purchase price shall be paid in monthly installments for which the corresponding penalty shall be imposed in
case of default. Leao cannot ignore the provision on the payment of monthly installments by claiming that the ten-year period within
which to pay has not elapsed. Yes.
Article 1169 of the Civil Code provides that in reciprocal obligations, neither party incurs in delay if the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation,
In the case at bar, respondent Fernando performed his part of the obligation by allowing petitioner Leao to continue in possession and
use of the property. Clearly, when petitioner Leao did not pay the monthly amortizations in accordance with the terms of the contract,
she was in delay and liable for damages. 41 However, we agree with the trial court that the default committed by petitioner Leao in
respect of the obligation could be compensated by the interest and surcharges imposed upon her under the contract in question. 42
It is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall control. 43 Thus, as there is no ambiguity in the language of the contract,
there is no room for construction, only compliance. Petition denied.
HEIRS OF BACUS V. CA
(option to buy)
QUISUMBING, J.:
on June 1, 1984 Luis Bacus leased to private respondent Duray a parcel of agricultural land in Cebu to expire after 6 years, ending
May 31, 1990. The contract contained an option to buy clause.
the lessee had the exclusive and irrevocable right to buy 2,000 square meters of the property within five years from
a year after the effectivity of the contract, at P200 per square meter.
Luis Bacus died Close to the expiration of the contract on October 10, 1989.
1990, Duray spouses informed one of the heirs of Luis Bacus, that they were willing and ready to purchase the property
under the option to buy clause. They requested Roque Bacus to prepare the necessary documents, such as a SPA authorizing
him to enter into a contract of sale,2 on behalf of his sisters who were then abroad.
adverse claim was annotated by the Register of Deeds of Cebu, at the back of TCT
Duray filed a complaint for specific performance asking that he be allowed to purchase the lot specifically referred to in the
lease contract
Duray presented a bank certification addressed to Luis Bacus, stating that arrangements were being made to allow Duray to
borrow funds of approximately P700,000 to enable him to meet his obligations under the contract with Luis Bacus. 5
filed a complaint for specific performance with damages against petitioners before the RTC, praying that the latter
(a) execute a deed of sale over the subject property in favor of private respondents;
(b) receive the payment of the purchase price; and
(c) pay the damages.
Heirs alleged
did not deposit the money as required by the Lupon and instead presented a bank certification which cannot be deemed legal
tender.
Durays manifested in court that they caused the issuance of a cashier's check in the amount of P650,000 6 payable to
petitioners at anytime upon demand.
RTC ruled in favor of Durays.
CA denied Heirs appeal. the private respondents exercised their option to buy the leased property before the expiration of the contract
of lease. It held:
. . . After a careful review of the entire records of this case, we are convinced that the
plaintiffs-appellees (Durays) validly and effectively exercised their option to buy the subject property. As opined by the lower
court, "the readiness and preparedness of Duray on his part, is manifested by his cautionary letters, the prepared bank
certification long before the date of May 31, 1990, the final day of the option, and his filing of this suit before said date. If the
plaintiff-appellee Francisco Duray had no intention to purchase the property, he would not have bothered to write those letters
to the defendant-appellants (which were all received by them) and neither would he be interested in having his adverse claim
annotated at the back of the T.C.T. of the subject property, two (2) months before the expiration of the lease. Moreover, he
Page | 35
Kristine Confesor
even went to the extent of seeking the help of the Lupon Tagapamayapa to compel the defendants-appellants to recognize his
right to purchase the property and for them to perform their corresponding obligation.8
ISSUES:
a) When private respondents opted to buy the property covered by the lease contract with option to buy, were they already required to
deliver the money or consign it in court before petitioner executes a deed of transfer? No
b) Did private respondents incur in delay when they did not deliver the purchase price or consign it in court on or before the expiration
of the contract?
HELD:
OBLIGATIONS UNDER AN OPTION TO BUY ARE RECIPROCAL OBLIGATIONS.12 The performance of one obligation is conditioned on
the simultaneous fulfillment of the other obligation. 13 In other words, in an option to buy, the payment of the purchase price by the
creditor depends upon the execution and delivery of a deed of sale by the debtor.
In this case, when Durays opted to buy the property, their obligation was to advise Heirs of their decision and their readiness to pay the
price. They were not yet obliged to make actual payment. Only upon Heir's actual execution and delivery of the deed of sale were they
required to pay. As earlier stated, the creditor was contingent upon the debtor.
In Nietes vs. Court of Appeals, 46 SCRA 654 (1972), we held that NOTICE OF THE CREDITOR'S DECISION TO EXERCISE HIS OPTION
TO BUY NEED NOT BE COUPLED WITH ACTUAL PAYMENT OF THE PRICE, so long as this is delivered to the owner of the property
upon performance of his part of the agreement. Consequently, since the obligation was not yet due, consignation in court of the
purchase price was not yet required.
CONSIGNATION is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or
refuses to accept payment and it generally requires a prior tender of payment. In instances, where no debt is due and owing,
consignation is not proper.14
DURAYS DID NOT INCUR IN DELAY WHEN THEY DID NOT YET DELIVER PAYMENT NOR MAKE A CONSIGNATION BEFORE THE
EXPIRATION OF THE CONTRACT. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. Only from the moment one of the parties fulfills his obligation, does delay
by the other begin.15
In this case, Durays, as early as March 15, 1990, communicated to petitioners their intention to buy the property and they were at that
time undertaking to meet their obligation before the expiration of the contract on May 31, 1990. However, petitioners refused to execute
the deed of sale and it was their demand to Durays to first deliver the money before they would execute the same which prompted
Durays to institute a case for specific performance in the Lupong Tagapamayapa and then in the RTC. On October 30, 1990, after the
case had been submitted for decision but before the trial court rendered its decision, Durays issued a cashier's check in Heirs favor
purportedly to bolster their claim that they were ready to pay the purchase price. The trial court considered in Durays favor and we
believe that it rightly did so, because at the time the check was issued, Heirs had not yet executed a deed of sale nor expressed
readiness to do so. Accordingly, as there was no compliance yet with what was incumbent upon the Heirs under the option to
buy, private respondents had not incurred in delay when the cashier's check was issued even after the contract expired.
MEGAWORLD vs. TANSECO

(Contract to Buy and Sell)
CARPIO MORALES, J.:
1995 Megaworld and Tanseco entered into a Contract to Buy and Sell a condominium unit at a pre-selling project, "The Salcedo Park
with a purchase price of P16m to be paid as follows:
30% less the reservation fee of P100k orP4m, by postdated check payable on July 14, 1995;
9m through 30 equal monthly installments of P300k from August 14, 1995 to January 14, 1998; and
the balance of P2m on October 31, 1998, the stipulated delivery date of the unit;
provided that if the construction is completed earlier, Tanseco would pay the balance within seven days from receipt of a
notice of turnover.
Section 4 of the Contract to Buy and Sell provided for the construction schedule as follows: 4. CONSTRUCTION SCHEDULE The
construction of the Project and the unit/s herein purchased shall be completed and delivered not later than October 31, 1998 with
additional grace period of six (6) months within which to complete the Project and the unit/s, barring delays due to fire,
earthquakes, the elements, acts of God, war, civil disturbances, strikes or other labor disturbances, government and economic controls
making it, among others, impossible or difficult to obtain the necessary materials, acts of third person, or any other cause or conditions
beyond the control of the SELLER. In this event, the completion and delivery of the unit are deemed extended accordingly without
liability on the part of the SELLER. The foregoing notwithstanding, the SELLER reserves the right to withdraw from this transaction and
refund to the BUYER without interest the amounts received from him under this contract if for any reason not attributable to SELLER,
such as but not limited to fire, storms, floods, earthquakes, rebellion, insurrection, wars, coup de etat, civil disturbances or for other
reasons beyond its control, the Project may not be completed or it can only be completed at a financial loss to the SELLER. In any event,
all construction on or of the Project shall remain the property of the SELLER. (Underscoring supplied)
Tanseco paid all installments due up to January, 1998, leaving unpaid the balance of P2m pending delivery of the
unit.2 Megaworld, however, failed to deliver the unit within the stipulated period on October 31, 1998 or April 30, 1999, the last day
of the six-month grace period. A few days shy of three years later, Megaworld, by notice dated April 23, 2002 (notice of turnover),
informed Tanseco that the unit was ready for inspection preparatory to delivery. 3 Tanseco replied through counsel demanding the return
of the total installment payment she had made, with interest at 12% per annum from April 30, 1999, the expiration of the six-month
grace period. Tanseco pointed out that none of the excepted causes of delay existed. 4
Tanseco filed on June 5, 2002 for rescission of contract, refund of payment, and damages against Megaworld with
(HLURB).Megaworld attributed the delay to the 1997 Asian financial crisis which was beyond its control; and argued that default had
not set in, Tanseco not having made any judicial or extrajudicial demand for delivery before receipt of the notice of
turnover.6
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Kristine Confesor
HLURB Arbiter dismissed Tansecos complaint for lack of cause of action. Board of Commissioners sustained the HLURB Arbiters
Decision laches for failure to demand rescission when the right thereto accrued. OP dismissed not shown that findings of the HLURB
were tainted with grave abuse of discretion.
CA assailed decision of the HLURB Field Office, and Resolution of the Office of the President. (1) RESCINDING, as prayed for by TANSECO,
the aggrieved party, the contract to buy and sell; (2) DIRECTING MEGAWORLD TO PAYTANSECO the amount she had paid totaling 14m
with (12%) interest per annum from October 31, 1998; damages and attys fees
-
Article 1169 of the Civil Code, no judicial or extrajudicial demand is needed to put the obligor in default if the
contract, as in the herein parties contract, states the date when the obligation should be performed; that time was of
the essence because Tanseco relied on Megaworlds promise of timely delivery when she agreed to part with her money; that
the delay should be reckoned from October 31, 1998, there being no force majeure to warrant the application of the April
30, 1999 alternative date; and that specific performance could not be ordered in lieu of rescission as the right to choose the
remedy belongs to the aggrieved party.
ISSUE: Whether or not Megaworld has incurred delay in its failure to deliver on stipulated date in the contract.
HELD: Yes.
Article 1169 of the Civil Code provides:. Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.However, the demand by the creditor shall not be
necessary in order that delay may exist:
(1) When the obligation or the law expressly so declares; or
(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the
thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the
contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with
what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins.
In this case, THE CONTRACT TO BUY AND SELL OF THE PARTIES CONTAINS RECIPROCAL OBLIGATIONS, i.e., to complete and deliver the
condominium unit on October 31, 1998 or six months thereafter on the part of Megaworld, and to pay the balance of the purchase price
at or about the time of delivery on the part of Tanseco.
COMPLIANCE BY MEGAWORLD WITH ITS OBLIGATION IS DETERMINATIVE OF COMPLIANCE BY TANSECO with her obligation to
pay the balance of the purchase price. Megaworld having failed to comply with its obligation under the contract, it is liable therefor. That
Megaworlds sending of a notice of turnover came before Tansecos demand for refund does not abate her cause. For demand would
have been useless, Megaworld admittedly having failed in its obligation to deliver the unit on the agreed date.
Article 1174 of the Civil Code provides: Except in cases expressly specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events
which could not be foreseen, or which, though foreseen, were inevitable.
In this case, The Court cannot generalize the 1997 Asian financial crisis to be unforeseeable and beyond the control of a business
corporation. A real estate enterprise engaged in the pre-selling of condominium units is concededly a master in projections on
commodities and currency movements, as well as business risks. The fluctuating movement of the Philippine peso in the foreign
exchange market is an everyday occurrence, hence, not an instance of caso fortuito. 19 Megaworlds excuse for its delay does not thus
lie.
As for Megaworlds argument that Tansecos claim is considered barred by laches on account of her belated demand, it does not lie too.
Laches is a creation of equity and its application is controlled by equitable considerations.20 It bears noting that Tanseco religiously
paid all the installments due up to January, 1998, whereas Megaworld reneged on its obligation to deliver within the stipulated period. A
circumspect weighing of equitable considerations thus tilts the scale of justice in favor of Tanseco.
Pursuant to Section 23 of Presidential Decree No. 95721 which reads:
Sec. 23. Non-Forfeiture of Payments. - No installment payment made by a buyer in a subdivision or condominium project for
the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to
the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision
or condominium project according to the approved plans and within the time limit for complying with the same.
Such buyer may, at his option, be reimbursed the total amount paid including amortizationinterests but
excluding
delinquency interests, with interest thereon at the legal rate.
Tanseco is, as thus prayed for, entitled to be reimbursed the total amount she paid Megaworld. While the appellate court correctly
awarded P14,281,731.70 then, the interest rate should, however, be 6% per annum accruing from the date of demand on May 6, 2002,
and then 12% per annum from the time this judgment becomes final and executory.
ARTICLE 119125 OF THE CIVIL CODE DOES NOT APPLY TO A CONTRACT TO BUY AND SELL, the suspensive condition of full
payment of the purchase price not having occurred to trigger the obligation to convey title, cancellation, not rescission, of the contract
is thus the correct remedy in the premises. The July 7, 1995 Contract to Buy and Sell between the parties is cancelled.
GMC vs. RAMOS

(Growers Contract)
VELASCO, JR., J.:
Annulment and/or Declaration of Nullity of Extrajudicial Foreclosure Sale with Damages.
(GMC) entered into a Growers Contract with Spouses Ramos on August 24, 1989. Under the contract,
GMC was to supply broiler chickens for the spouses to raise on their land in Lipa City, Batangas. 1
To guarantee full compliance, spouses mortgaged the real property upon which their conjugal home was built which extended
to Spouses Ramos a maximum credit line of PhP 215,000 payable within an indefinite period with an interest of twelve percent
(12%) per annum.2
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Kristine Confesor
Spouses also put up a surety bond at the rate of PhP 20,000 per 1,000 chicks delivered by GMC.
Spouses Ramos eventually were unable to settle their account with GMC. They alleged that they suffered business losses because of the
negligence of GMC and its violation of the Growers Contract. 3 On March 31, 1997, GMC notified Spouses Ramos that GMC would
institute foreclosure proceedings on their mortgaged property. 4 On May 7, 1997, GMC filed a Petition for Extrajudicial Foreclosure
of Mortgage.
subsequently sold by public auction to GMC after the required posting and publication. 5 Foreclosed at PhP 9m an amount representing
the losses on chicks and feeds exclusive of interest at 12% per annum and attorneys fees. 6 To complicate matters, on October 27,
1997, GMC informed the spouses that its Agribusiness Division had closed its business and poultry operations. 7
Spouses Ramos filed a Complaint for Annulment and/or Declaration of Nullity of the Extrajudicial Foreclosure Sale with Damages.
extrajudicial foreclosure sale on June 10, 1997 was null and void,
no compliance with the requirements of posting and publication of notices under Act No. 3135, as amended, or An Act to
Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages.
no sheriffs affidavit to prove compliance with the requirements on posting and publication of notices
the Deed of Real Estate Mortgage had no fixed term
when the property was foreclosed, GMC did not notify him at all of the foreclosure. 9
RTC granted.
Deed of Real Estate Mortgage was valid even if its term was not fixed.
duration of the term was made to depend exclusively upon the will of the debtors-spouses,
"the obligation is not due and payable until an action is commenced by the mortgagee GMC against the mortgagor Spouses
for the purpose of having the court fix the date on and after which the instrument is payable and the date of maturity is fixed
in pursuance thereto."12
action of GMC in moving for the foreclosure of the spouses properties was premature, because the latters obligation under
their contract was not yet due.
CA sustained w/ different ruling
publication requirement was complied with, but GMCs action was premature, as they were not in default when the action was
filed on May 7, 1997.14
GMC made no demand to spouses Ramos for the full payment of their obligation.
While it was alleged in the Answer as well as in the Affidavit constituting the direct testimony of Joseph Dominise, the principal
witness of defendant-appellant GMC, that demands were sent to spouses Ramos, the documentary evidence proves
otherwise.
GMC did not "demand" but only request spouses Ramos to go to the office of GMC to "discuss" the settlement of their
account.15
Can the CA consider matters not alleged? Yes.
an appellate court has a broad discretionary power in waiving the lack of assignment of errors if consideration of which is necessary in
arriving at a just decision and complete resolution of the case or to serve the interests of a justice or to avoid dispensing piecemeal
justice;
Was there sufficient demand? None
There are three requisites necessary for a finding of default.
obligation is demandable and liquidated;
debtor delays performance; and
creditor judicially or extrajudicially requires the debtors performance.

According to the CA, GMC did not make a demand on Spouses Ramos but merely requested them to go to GMCs office to discuss the
settlement of their account. In spite of the lack of demand made on the spouses, however, GMC proceeded with the foreclosure
proceedings. Neither was there any provision in the Deed of Real Estate Mortgage allowing GMC to extrajudicially foreclose the
mortgage without need of demand.
Article 1169 of the Civil Code on delay requires the following: Those obliged to deliver or to do something incur in delay from the
time the obligee judicially or extrajudicially demands from them the fulfilment of their obligation. However, the demand bythe creditor
shall not be necessary in order that delay may exist: (1) When the obligation or the law expressly so declares; x x x
in the instant case As the contract carries no such provision on demand not being necessary for delay to exist, We agree with
the appellate court that GMC should have first made a demand on the spouses before proceeding to foreclose the real estate mortgage.
DBP v. Licuanan finds application to the instant case: The issue of whether demand was made before the foreclosure was effected is
essential. If demand was made and duly received by the respondents and the latter still did not pay, then they were already in default
and foreclosure was proper.
However, if demand was not made, then the loans had not yet become due and demandable. This meant that respondents
had not defaulted in their payments and the foreclosure by petitioner was premature. Foreclosure is valid only when the debtor is in
default in the payment of his obligation.22
Whether or not demand was made is a question of fact. 23 This petition filed under Rule 45 of the Rules of Court shall raise only questions
of law. For a question to be one of law, it must not involve an examination of the probative value of the evidence presented by the
litigants or any of them. The resolution of the issue must rest solely on what the law provides on the given set of circumstances. Once it
is clear that the issue invites a review of the evidence presented, the question posed is one of fact. 24 It need not be reiterated that this
Court is not a trier of facts. 25 We will defer to the factual findings of the trial court, because petitioner GMC has not shown any
circumstances making this case an exception to the rule. DENIED.
R.S. TOMAS, INC., vs.

RIZAL CEMENT COMPANY, INC. (Breach of Contract; Job Orders)
PERALTA, J.:
Rizal Cements action for sum of money or damages arising from breach of contract for supply by RS Tomas
Page | 38
Kristine Confesor
FACTS:
The contract involved in this case refers to the rewinding and conversion of one unit of transformer to be installed and energized to
supply respondents power requirements.[38] This project was embodied in three (3) job orders, all of which were awarded to petitioner
who represented itself to be capable, competent, and duly licensed to handle the projects.[39] Petitioner, however, failed to complete
the projects within the agreed period allegedly because of misrepresentation and fraud committed by respondent as to the true nature
of the subject transformer. The trial court found that respondent indeed failed to inform petitioner of the true condition of the
transformer which amounted to fraud thereby justifying the latters failure to complete the projects. The CA, however, had a different
conclusion and decided in favor of respondent.
On December 28, 1990, Rizal Cement and R.S. Tomas entered into a Contract [5] for the supply of labor, materials, and technical
supervision of the following projects:
1) Wiring and installation of primary and secondary lines system.

2) Supply and installation of primary protection and disconnecting switch.
3) Rewinding and conversion of Transformers
R.S. TOMAS agreed to perform the above-mentioned job orders. Specifically, it undertook to supply the labor, equipment, supervision,
and materials as specified in the detailed scope of work. Rizal Cement agreed to pay the total sum of almost 3million in consideration
of the performance of the job orders.
Rizal Cement
made an initial payment of P1,458,618.18 on January 8, 1991.[11]
R.S. TOMAS
undertook to complete the projects within (120) days from the effectivity of the contract. Otherwise, failure would
amount to liquidated damages in the amount of 30k/day of delay in the completion of the projects which shall be limited to
10% of the project cost.
obtained from (Times Insurance) a performance bond amounting to secure the full and faithful performance of all its
obligations and responsibilities under the contract
-
requested for an extension of seventy-five (75) days within which to complete the projects because of the need to import
some of the materials needed.
for a price adjustment of P255,000.00 to cover the higher cost of materials.[13]
requested for another 75 days extension for the completion of the transformer portion of the projects for failure of its supplier
to deliver the materials.
Requested for respondents assistance by facilitating the acquisition of materials and supplies needed to complete by directly
paying the suppliers.
Sought to be allowed to back out from 3rd JO covering the rewinding and conversion of the damaged transformer.
RC through counsel manifested

that RS TOMAS financial status showed that it could no longer complete the projects as agreed upon.
informed RS that it was already in default having failed to complete the projects within 120 days from the effectivity of the
contract.
terminating the contract
refund of the amount already paid, otherwise, the necessary action would be instituted.
sent another demand letter] to Times Insurance for the payment of P1,472,000.00 pursuant to the performance bond it issued
entered into two contracts with Geostar Philippines, Inc. (Geostar) for the completion of the projects commenced but
not completed by petitioner for a total consideration ofP3,435,000.00.
Complaint for Sum of Money filed by RC against RS Tomas and Times Surety & Insurance Co., Inc. praying for the payment of
the following: P493,695.00 representing the amount which they owed respondent from the down payment and advances
made by the latter vis--vis the work accomplishment; P2,550,945.87 representing the amount incurred in excess of the
cost of the projects as agreed upon;
RS Tomas
denied liability and claimed instead that it failed to complete the projects due to respondents fault
it relied in good faith on respondents representation that the transformer subject of the contract could still be rewound but the
coils were already badly damaged and the primary bushing broken which entailed price adjustment.
requested respondent for additional time within which to complete the project and additional amount to finance the same.
proximate cause of the delay is the misrepresentation of the respondent on the extent of the defect of the
transformer.
RTC DISMISSED
Since respondent was found to have committed deceit in its dealings with petitioner, the court awarded damages in favor of
the latter.
CA REVERSED
failed to prove that RC made fraudulent misrepresentation to induce the former to enter into the contract.
petitioner was given the opportunity to inspect the transformer before offering its bid. [28]
petitioners failure to avail of such opportunity is inexcusable, considering that it is a company engaged in the electrical
business and the contract involved a sizable amount of money.[29]
testimony was insufficient to prove that the transformer could no longer be rewound or converted [
the reimbursement of what respondent paid to Geostar for the unfinished projects of petitioner as well as the
payment of liquidated damages as stipulated in the contract.
ISSUES:
1)
2)
3)
W/N RC was guilty of fraud or misrepresentation as to the actual condition of the transformer subject of the contract;
W/N RST is guilty of inexcusable delay in the completion of the projects;
W/N RST is liable for the cost of the contract between respondent and Geostar
HELD:
1) NO FRAUD OR MISREPRESENTATION. CA conclusions upheld.
Records show that in a letter, petitioner justified its inability to complete the projects within the stipulated period on the
alleged unavailability of the materials to be used to perform the projects as stated in the job orders.
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Kristine Confesor
-
Nowhere in said letters did petitioner claim that it could not finish the projects, particularly the conversion of the transformer
unit because the defects were worse than the representation of respondent. In other words, there was no allegation of fraud,
bad faith, concealment or misrepresentation on the part of respondent as to the true condition of the subject transformer.
petitioner was aware that there was a need for complete replacement of windings to copper and of secondary bushings
FAILED TO PROVE THAT RESPONDENT WAS GUILTY OF BAD FAITH, FRAUD, DECEIT OR MISREPRESENTATION. Bad faith does
not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing
of a wrong, a breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud. Fraud
has been defined to include an inducement through insidious machination. Insidious machination refers to a deceitful
scheme or plot with an evil or devious purpose. Deceit exists where the party, with intent to deceive, conceals or omits to
state material facts and, by reason of such omission or concealment, the other party was induced to give consent that would
not otherwise have been given.
In this case, the evidence presented is insufficient to prove that respondent acted in bad faith or fraudulently in dealing with
petitioner. Petitioner in fact admitted that its representatives were given the opportunity to inspect the subject
transformer before it offered its bid.
(1) that the projects were not completed by petitioner; (2) that petitioner was given the opportunity to inspect the subject transformer;
(3) that petitioner failed to thoroughly study the entirety of the projects before it offered its bid; (4) that petitioner failed to complete the
projects because of the unavailability of the required materials and that petitioner needed financial assistance; (5) that the evidence
presented by petitioner were inadequate to prove that the subject transformer could no longer be repaired; and (6) that there was no
evidence to show that respondent was in bad faith, acted fraudulently, or guilty of deceit and misrepresentation in dealing with
petitioner.
Breach of contract is defined as the failure without legal reason to comply with the terms of a contract. It is also defined as the failure,
without legal excuse, to perform any promise which forms the whole or part of the contract. [64] In the present case, petitioner did not
complete the projects. This gives respondent the right to terminate the contract by serving petitioner a written notice
2) PETITIONER IS LIABLE FOR LIQUIDATED DAMAGES
In this case, petitioner bound itself to complete the projects within 120 days from December 29, 1990.
despite the lapse of eleven months from the time of the effectivity of the contract entered into between respondent and
petitioner, the latter had not completed the projects. Undoubtedly, petitioner may be held to answer for liquidated damages in
its maximum amount which is 10% of the contract price
it is liable for damages that are the natural and probable consequences of its breach of obligation.
Since advanced payments had been made by respondent, petitioner is bound to return the excess vis--vis its work
accomplishments.
In order to finish the projects, respondent had to contract the services of another contractor. We, therefore,
find no reason to depart from the CA conclusion requiring the return of the excess payments as well as the
payment of the cost of contracting Geostar, in addition to liquidated damages.[70]
CRUZ vs. ATTY. GRUSPE

(Joint Affidavit of Undertaking)
BRION, J.:
Atty. Delfin Grupes claim for payment of sum of money against petitioners Rodolfo G. Cruz and Esperanza Ibias. 4
A mini bus owned and operated by Cruz and driven by one Arturo Davin collided with the Toyota Corolla car of Gruspe; The next day,
Cruz along with Leonardo Q. Ibias went to Gruspes office, apologized for the incident, and executed a Joint Affidavit of Undertaking
promising jointly and severally to replace the Gruspes damaged car in 20 days, or until November 15, 1999, of the same
model and of at least the same quality;
or, alternatively, to pay the cost of the car 350k with interest at 12% per month for any delayed payment after November 15,
1999, until fully paid.5
Gruspe filed a complaint for collection of sum of money November 19, 1999 against Cruz and Leonardo when it failed to comply
with their undertaking
Cruz and Leonardo denied Gruspes allegation
Atty. Gruspe prepared the JAU and forced them to affix their signatures thereon, without explaining and informing them of its
contents;
Cruz affixed his signature so that his mini bus could be released as it was his only means of income; Leonardo, a barangay
official, accompanied Cruz to Gruspes office for the release of the mini bus, but was also deceived into signing the Joint
Affidavit of Undertaking.
RTC favor of Gruspe
CA affirmed but reduced the interest rate to 12% per annum pursuant to the JAU
It declared that despite its title, JAU is a contract, as it has all the essential elements of consent, object certain, and
consideration required under Article 1318 of the CivilCode.
failure to present evidence to support their contention of vitiated consent.
By signing the JAU, they voluntarily assumed the obligation for the damage they caused to Gruspes car; Leonardo, who was
not a party to the incident, could have refused to sign the affidavit, but he did not.
Cruz and Esperanza assail the CA ruling
JAU is not a contract that can be the basis of an obligation to pay a sum of money in favor of Gruspe. T
an affidavits purpose is simply to attest to facts that are within his knowledge, while a contract requires that there be a
meeting of the minds between the two contracting parties.
invalid because Cruz and Leonardos consent thereto was vitiated;
the contract was prepared by Gruspe who is a lawyer, and its contents were never explained to them. Moreover, Cruz and
Leonardo were simply forced to affix their signatures, otherwise, the mini van would not be released.
prior to the filing of the complaint for sum of money, Gruspe did not make any demand upon them. Hence, pursuant to
Article 1169 of the Civil Code, they could not be considered in default. Without this demand, Cruz and Esperanza contend that
Gruspe could not yet take any action.
ISSUE:
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Kristine Confesor
1) Whether JAU partakes of a nature of a contract
2) Whether the contract is tainted with a vice of consent
3) Demand
HELD:
CONTRACTS ARE OBLIGATORY NO MATTER WHAT THEIR FORMS MAY BE, whenever the essential requisites for their validity are
present. In determining whether a document is an affidavit or a contract, the Court looks beyond the title of the document, since
the denomination or title given by the parties in their document is not conclusive of the nature of its contents. 8 In the construction or
interpretation of an instrument, the intention of the parties is primordial and is to be pursued. If the terms of the document are
clear and leave no doubt on the intention of the contracting parties, the literal meaning of its stipulations shall control. If the words
appear to be contrary to the parties evident intention, the latter shall prevail over the former. 9
-
JAU contains stipulations characteristic of a contract where Cruz and Leonardo promised to replace the damaged car of
Gruspe, 20 days from of the same model and of at least the same quality.
In the event that they cannot replace the car within the same period, they would pay the cost of Gruspes car in the total
amount of P350,000.00, with interest at 12% per month for any delayed payment after November 15, 1999, until fully paid.
These, as read by the CA, are very simple terms that both Cruz and Leonardo could easily understand.
VALIDITY AND ENFORCEABLE; NOT A VITIATED CONSENT. An allegation of vitiated consent must be proven by preponderance of
evidence;
They, in fact, admitted they signed the same to secure possession of their vehicle. If they truly believed that the vehicle had
been illegally impounded, they could have refused to sign the JAU and filed a complaint, but they did not. That the release of
their mini bus was conditioned on their signing the JAU does not, by itself, indicate that their consent was forced they may
have given it grudgingly, but it is not indicative of a vitiated consent that is a ground for the annulment of a contract.
. the CA did not commit any legal error that merits the reversal of the assailed decision.
The 15% interest (later modified by the CA to be 12%) was computed from November 15, 1999 the date stipulated in the
Joint Affidavit of Undertaking for the payment of the value of Gruspes car.
In the absence of a finding by the lower courts that Gruspe made a demand prior to the filing of the complaint, the
interest cannot be computed from November 15, 1999 because until a demand has been made, Cruz and Leonardo could
not be said to be in default.12 "In order that the debtor may be in default, it is necessary that the following requisites be present:
(1) that the obligation be demandable and already liquidated;
(2) that the debtor delays performance; and
(3) that the creditor requires the performance judicially and extrajudicially."
Default generally begins from the moment the creditor demands the performance of the obligation.
In this case, demand could be considered to have been made upon the filing of the complaint on November 19, 1999, and it is
only from this date that the interest should be computed.
DOCTRINE OF FORTUITOUS EVENT
GACAL V. PAL
(Hi-Jacking Incident under Martial Law)
PARAS, J.:
Franklin G. Gacal and his wife, Bonifacio S. Anislag and his wife and the late Elma de Guzman, were then passengers boarding PALs
BAC 1-11 at DVO-MNL. not knowing that on the same flight (MNLF) members were their co-passengers, three (3) armed with grenades,
two (2) with .45 caliber pistols, and one with a .22 caliber pistol. Ten (10) minutes after take off at about 2:30 in the afternoon,
the hijackers brandishing their respective firearms announced the hijacking of the aircraft and directed its pilot to fly to
Libya. With the pilot explaining to them especially to its leader, Commander Zapata, of the inherent fuel limitations of the plane and
that they are not rated for international flights, the hijackers directed the pilot to fly to Sabah. With the same explanation, they relented
and directed the aircraft to land at Zamboanga Airport, Zamboanga City for refueling. The aircraft landed at 3:00 o'clock in the
afternoon of May 21, 1976 at Zamboanga Airport.
When the plane began to taxi at the runway, it was met by two armored cars of the military with machine guns pointed at the plane,
and it stopped there. The demanded that a DC-aircraft take them to Libya with the President of PAL as hostage and that they be given
$375,000 and six (6) armalites, otherwise they will blow up the plane if their demands will not be met by the government and PAL.
Meanwhile, the passengers were not served any food nor water and it was only on May 23, a Sunday, at about 1:00 o'clock in the
afternoon that they were served 1/4 slice of a sandwich and 1/10 cup of PAL water. After that, relatives of the hijackers were allowed to
board the plane but immediately after they alighted therefrom, an armored car bumped the stairs. That commenced the battle between
the military and the hijackers which led ultimately to the liberation of the surviving crew and the passengers, with the final score of ten
(10) passengers and three (3) hijackers dead on the spot and three (3) hijackers captured.
City Fiscal Franklin G. Gacal was unhurt. Mrs. Corazon M. Gacal suffered injuries in the course of her jumping out of the plane
when it was peppered with bullets by the army and after two (2) hand grenades exploded inside the plane. She was
hospitalized at General Santos Doctors Hospital, General Santos City, for two (2) days, spending P245.60 for hospital and medical
expenses, Assistant City Fiscal Bonifacio S. Anislag also escaped unhurt but Mrs. Anislag suffered a fracture at the radial bone of
her left elbow for which she was hospitalized and operated on at the San Pedro Hospital, Davao City, and therefore, at Davao
Regional Hospital, Davao City, spending P4,500.00. Elma de Guzman died because of that battle. Hence, the action of damages
instituted by the plaintiffs demanding the following damages, to
TC on dismissed the complaints
damages sustained in the premises were attributed to force majeure.
Petitioners alleged
main cause of the unfortunate incident is the gross, wanton and inexcusable negligence of respondent Airline personnel
in their failure to frisk the passengers adequately in order to discover hidden weapons in the bodies of the six (6) hijackers.
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Kristine Confesor
-
despite the prevalence of skyjacking, PAL did not use a metal detector which is the most effective means of discovering
potential skyjackers among the passengers
in the performance of its obligation to safely transport passengers as far as human care and foresight can provide, it has
exercised the utmost diligence of a very cautious person with due regard to all circumstances, but the security checks and
measures and surveillance precautions in all flights, including the inspection of baggages and cargo and frisking of passengers
at the Davao Airport were performed and rendered solely by military personnel who under appropriate authority had assumed
exclusive jurisdiction over the same in all airports in the Philippines.
negotiations with the hijackers were a purely government matter and a military operation, handled by and subject to the
absolute and exclusive jurisdiction of the military authorities.
the accident that befell RP-C1161 was caused by fortuitous event, force majeure and other causes beyond the control
of the respondent Airline.
PAL
ISSUE: whether or not hijacking or air piracy during martial law and under the circumstances obtaining herein, is a caso fortuito or force
majeure which would exempt an aircraft from payment of damages to its passengers whose lives were put in jeopardy and whose
personal belongings were lost during the incident.
HELD:
Under the Civil Code, common carriers are required to exercise extraordinary diligence in their vigilance over the goods
and for the safety of passengers transported by them, according to all the circumstances of each case (Article 1733). They
are presumed at fault or to have acted negligently whenever a passenger dies or is injured (Philippine Airlines, Inc. v. NLRC) or for the
loss, destruction or deterioration of goods in cases other than those enumerated in Article 1734 of the Civil Code (Eastern Shipping
Lines, Inc. v. IAC).
THE SOURCE OF A COMMON CARRIER'S LEGAL LIABILITY IS THE CONTRACT OF CARRIAGE, and by entering into said contract,
it binds itself to carry the passengers safely as far as human care and foresight can provide . There is breach of this
obligation if it fails to exert extraordinary diligence according to all the circumstances of the case in exercise of the utmost diligence of a
very cautious person
IT IS THE DUTY OF A COMMON CARRIER TO OVERCOME THE PRESUMPTION OF NEGLIGENCE and it must be shown that the
carrier had observed the required extraordinary diligence of a very cautious person as far as human care and foresight can provide or
that the accident was caused by a fortuitous event. Thus, as ruled by this Court, no person shall be responsible for those "events
which could not be foreseen or which though foreseen were inevitable. (Article 1174, Civil Code). The term is synonymous with
caso fortuito which is of the same sense as "force majeure"
In order to constitute a caso fortuito or force majeure that would exempt a person from liability under Article 1174 of the Civil Code, it is
necessary that the following elements must concur:
(a) the cause of the breach of the obligation must be independent of the human will (the will of the debtor or the obligor);
(b) the event must be either unforeseeable or unavoidable;
(c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and
(d) the debtor must be free from any participation in, or aggravation of the injury to the creditor
Caso fortuito or force majeure, by definition, are extraordinary events not foreseeable or avoidable, events that could not be
foreseen, or which, though foreseen, are inevitable. It is, therefore, not enough that the event should not have been foreseen or
anticipated, as is commonly believed, but it must be one impossible to foresee or to avoid. The mere difficulty to foresee the happening
is not impossibility to foresee the same.
Applying the above guidelines to the case at bar, the failure to transport petitioners safely from Davao to Manila was due to the
skyjacking incident staged by six (6) passengers of the same plane, all members of the (MNLF), without any connection with PAL hence,
independent of the will of either the PAL or of its passengers.
Under normal circumstances, PAL might have foreseen the skyjacking incident which could have been avoided had there been a more
thorough frisking of passengers and inspection of baggages as authorized by R.A. No. 6235. But the incident in question occurred
during Martial Law where there was a military take-over of airport security including the frisking of passengers and the
inspection of their luggage preparatory to boarding domestic and international flights. In fact military take-over was
specifically announced by Commanding General of the Philippine Air Force in a letter to then Director of the Civil Aeronautics
Administration later confirmed shortly before the hijacking incident of May 21, 1976 by Letter of Instruction No. 399 issued on April 28,
1976
Otherwise stated, these events rendered it impossible for PAL to perform its obligations in a nominal manner and obviously it
cannot be faulted with negligence in the performance of duty taken over by the Armed Forces of the Philippines to the exclusion of the
former.
Finally, there is no dispute that the fourth element has also been satisfied.
SOUTHEASTERN COLLEGE INC., vs.

CA & DIMAANO
PURISIMA, J.:
Dimaanos are owners of a house at 326 College Road, Pasay City, while SEC owns a four-storey school building along the same
College Road. On October 11, 1989, at about 6:30 in the morning, a powerful typhoon "Saling" hit Metro Manila. Buffeted by very strong
winds, the roof of SEC building was partly ripped off and blown away, landing on and destroying portions of the roofing of
Dimaanos house.
After the typhoon had passed, an ocular inspection of the destroyed building was conducted by engineers and the report were as
follows.
5. One of the factors that may have led to this calamitous event is the formation of the building in the area and the
general direction of the wind. Situated in the peripheral lot is an almost U-shaped formation of 4-storey building. Thus,
with the strong winds having a westerly direction, the general formation of the building becomes a big funnel-like structure,
Page | 42
Kristine Confesor
the one situated along College Road, receiving the heaviest impact of the strong winds. Hence, there are portions of the
roofing, those located on both ends of the building, which remained intact after the storm.
6. Another factor and perhaps the most likely reason for the dislodging of the roofing structural trusses is the improper
anchorage of the said trusses to the roof beams. The 1/2' diameter steel bars embedded on the concrete roof beams
which serve as truss anchorage are not bolted nor nailed to the trusses. Still, there are other steel bars which were not
even bent to the trusses, thus, those trusses are not anchored at all to the roof beams.
It then recommended that "to avoid any further loss and damage to lives, limbs and property of persons living in the vicinity," the fourth
floor of subject school building be declared as a "structural hazard."
Dimaanos filed a complaint for damages based on culpa aquiliana
house became uninhabitable, forcing them to stay temporarily in others' houses.
P117,116.00, as actual damages
P1,000,000.00, as moral damages,
P300,000.00, as exemplary damages and
P100,000.00, for and as attorney's fees; plus costs.
SEC
school building had withstood several devastating typhoons and other calamities in the past, without its roofing or any
portion thereof giving way;
that it has not been remiss in its responsibility to see to it that said school building, which houses school children, faculty
members, and employees, is "in tip-top condition";
typhoon "Saling" was "an act of God and therefore beyond human control" such that petitioner cannot be
answerable for the damages wrought thereby, absent any negligence on its part
RTC,
-
, the damage to private respondents' houses "could have been avoided if the construction of the roof of [petitioner's] building
was not faulty."
CA affirmed with modification the trial court's disposition by reducing the award of moral damages from P1,000,000.00 to
P200,000.00. Hence, petitioner's resort to this Court, raising for resolution the issues of:
ISSUE: whether the damage on the roof of the building of Dimaanos resulting from the impact of the falling portions of the school
building's roof ripped off by the strong winds of typhoon "Saling", was, within legal contemplation, due to fortuitous event?
HELD: YES
1174 of Civil Code, which provides:
Art 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of
the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or
which, though foreseen, were inevitable.
The antecedent of fortuitous event or caso fortuito is found in the Partidas which defines it as "an event which takes place by
accident and could not have been foreseen." "an unexpected event or act of God which could neither be foreseen nor resisted."
TOLENTINO: "[f]ortuitous events may be produced by two general causes:
(1) by nature, such as earthquakes, storms, floods, epidemics, fires
(2) by the act of man, such as an armed invasion, attack by bandits, governmental prohibitions, robbery, etc."
In order that a fortuitous event may exempt a person from liability, it is necessary that he be free from any previous negligence or
misconduct by reason of which the loss may have been occasioned. An act of God cannot be invoked for the protection of a person who
has been guilty of gross negligence in not trying to forestall its possible adverse consequences. When a person's negligence concurs
with an act of God in producing damage or injury to another, such person is not exempt from liability by showing that the immediate or
proximate cause of the damages or injury was a fortuitous event. When the effect is found to be partly the result of the
participation of man whether it be from active intervention, or neglect, or failure to act the whole occurrence is
hereby humanized, and removed from the rules applicable to acts of God.
In the case under consideration, the lower court accorded full credence to the finding of the investigating team that subject school
building's roofing had "no sufficient anchorage to hold it in position especially when battered by strong winds." Based on such finding,
the trial court imputed negligence to petitioner and adjudged it liable for damages to private respondents.
THE LOWER COURTS MISAPPRECIATED THE EVIDENCE PROFFERED.There is no question that a typhoon or storm is a fortuitous event, a
natural occurrence which may be foreseen but is unavoidable despite any amount of foresight, diligence or care. In order to be
exempt from liability arising from any adverse consequence engendered thereby, there should have been no human
participation amounting to a negligent act. In other words; the person seeking exoneration from liability must not be guilty of
negligence. Negligence, as commonly understood, is conduct which naturally or reasonably creates undue risk or harm to others. It
may be the failure to observe that degree of care, precaution, and vigilance which the circumstances justify demand, 17 or
the omission to do something which a prudent and reasonable man, guided by considerations which ordinarily regulate the conduct of
human affairs, would
do. 18 From these premises, we proceed to determine whether petitioner was negligent, such that if it were not, the damage caused to
private respondents' house could have been avoided?
A PERSON CLAIMING DAMAGES FOR THE NEGLIGENCE OF ANOTHER HAS THE BURDEN OF PROVING THE EXISTENCE OF
FAULT OR NEGLIGENCE CAUSATIVE OF HIS INJURY OR LOSS.
must be affirmatively established by competent evidence, 19 not merely by presumptions and conclusions without basis in
fact.
merely relied on the aforementioned report submitted by a team which made an ocular inspection of petitioner's school
building after the typhoon.
an ocularinspection is one by means of actual sight or viewing.
What is visual to the eye through, is not always reflective of the real cause behind.
In the present case, other than the said ocular inspection, no investigation was conducted to determine the real cause of the
partial unroofing of petitioner's school building.
Private respondents did not even show that the plans, specifications and design of said school building were
deficient and defective.
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Kristine Confesor
SEC
Neither did they prove any substantial deviation from the approved plans and specifications. Nor did they conclusively
establish that the construction of such building was basically flawed.
Having obtained both building permit and certificate of occupancy, these are, at the very least, prima facieevidence of the
regular and proper construction of subject school building.
when part of its roof needed repairs of the damage inflicted by typhoon "Saling", the same city official gave the go-signal
for such repairs without any deviation from the original design and subsequently, authorized the use of the
entire fourth floor of the same building.
These only prove that subject building suffers from no structural defect , contrary to the report that its "U-shaped"
form was "structurally defective."
SEC VP testified that an annual maintenance inspection and repair of subject school building were regularly undertaken
even willing to present its maintenance supervisor to attest to the extent of such regular inspection but private respondents
agreed to dispense with his testimony and simply stipulated that it would be corroborative of the vice president's narration.
Moreover, the city building official, said no complaint regarding any defect on the same structure has ever been lodged
before his office prior to the institution of the case at bench. It is a matter of judicial notice that typhoons are common
occurrences in this country. If subject school building's roofing was not firmly anchored to its trusses, obviously, it could
not have withstood long years and several typhoons even stronger than "Saling."
typhoon "Saling" was the proximate cause of the damage suffered by private respondents' house.
More so because no bad faith or willful act to cause damage was alleged and proven to warrant moral damages.
PHILCOMSAT vs.
GLOBE TELECOM, INC.
TINGA, J.:
.
For several years prior to 1991, Globe Telecom, Inc. (Globe), had been engaged in the coordination of the provision of various
communication facilities for the military bases of (US) in Clark Air Base, Angeles, Pampanga and Subic Naval Base in Cubi Point,
Zambales. The said communication facilities were installed and configured for the exclusive use of the US Defense Communications
Agency (USDCA), and for security reasons, were operated only by its personnel or those of American companies contracted by it to
operate said facilities. The USDCA contracted with said American companies, and the latter, in turn, contracted with Globe for the use of
the communication facilities. Globe, on the other hand, contracted with local service providers such as the (Philcomsat) for the provision
of the communication facilities.
On 07 May 1991, Philcomsat and Globe entered into an Agreement
Philcomsat obligated itself to establish, operate and provide an (earth station) within Cubi Point for the exclusive use of the
USDCA.
The term of the contract was for 60 months, or five (5) years. In turn, Globe promised to pay Philcomsat monthly rentals for
each leased circuit involved.
At the time of the execution of the Agreement, both parties knew that the MBA (RP-US Military Bases Agreement), which was the basis
for the occupancy of the Clark Air Base and Subic Naval Base in Cubi Point, was to expire in 1991. Subsequently, Philcomsat installed
and established the earth station at Cubi Point and the USDCA made use of the same.On 16 September 1991, the Senate passed
did not concur in the ratification of the Treaty that was supposed to extend the term of the use by the US of Subic Naval Base,
among others. The last two paragraphs of the Resolution state:
In a letter dated 06 August 1992, Globe notified Philcomsat of its intention to discontinue the use of the earth station
effective 08 November 1992 in view of the withdrawal of US military personnel from Subic Naval Base after the termination of the RPUS Military Bases Agreement. Globe invoked as basis for the letter of termination Section 8 (Default) of the Agreement, which provides:
Neither party shall be held liable or deemed to be in default for any failure to perform its obligation under this Agreement if
such failure results directly or indirectly from force majeure or fortuitous event . Either party is thus precluded from
performing its obligation until such force majeure or fortuitous event shall terminate. For the purpose of this paragraph , force
majeure shall mean circumstances beyond the control of the party involved including, but not limited to, any law, order,
regulation, direction or request of the Government of the Philippines, strikes or other labor difficulties, insurrection riots,
national emergencies, war, acts of public enemies, fire, floods, typhoons or other catastrophies or acts of God.
Philcomsat sent a reply letter dated 10 August 1992 to Globe,
we expect [Globe] to know its commitment to pay the stipulated rentals for the remaining terms of the Agreement even after
[Globe] shall have discontinue[d] the use of the earth station after November 08, 1992."7 Philcomsat referred to Section 7 of
the Agreement, stating as follows:
7. DISCONTINUANCE OF SERVICE
Should [Globe] decide to discontinue with the use of the earth station after it has been put into operation , a written notice
shall be served to PHILCOMSAT at least sixty (60) days prior to the expected date of termination.
Notwithstanding the non-use of the earth station, [Globe] shall continue to pay PHILCOMSAT for the rental of
the actual number of T1 circuits in use, but in no case shall be less than the first two (2) T1 circuits, for the
remaining life of the agreement. However, should PHILCOMSAT make use or sell the earth station subject to this
agreement, the obligation of [Globe] to pay the rental for the remaining life of the agreement shall be at such monthly rate as
may be agreed upon by the parties.8
After the US military forces left Subic Naval Base, Philcomsat sent Globe a letter dated 24 November 1993 demanding payment of its
outstanding obligations under the Agreement amounting to US$4,910,136.00 plus interest and attorneys fees. However, Globe refused
to heed Philcomsats demand.
Philcomsat filed with RTC of Makati a Complaint against Globe
to pay liquidated damages under the Agreement
Globe filed an Answer to the Complaint,
constrained to end the Agreement due to the termination of the RP-US Military Bases Agreement and the non-ratification by
the Senate of the Treaty of Friendship and Cooperation, which events constituted force majeure under the Agreement. Globe
Page | 44
Kristine Confesor
explained that the occurrence of said events exempted it from paying rentals for the remaining period of the Agreement.
Decided in favor of complainant.
CA dismissing Philcomsats appeal for lack of merit and affirming the trial courts finding that certain events constituting force majeure
under Section 8 the Agreement occurred and justified the non-payment by Globe of rentals for the remainder of the term of the
Agreement.
non-ratification by the Senate are acts, directions, or requests of the Government of the Philippines which constitute force
majeure
there were circumstances beyond the control of the parties, such as the issuance of a formal order by Cdr. Walter Corliss of
the US Navy, the issuance of the letter notification from ATT and the complete withdrawal of all US military forces and
personnel from Cubi Point, which prevented further use of the earth station under the Agreement.
although Globe sought to terminate Philcomsats services by 08 November 1992, it is still liable to pay rentals for the
December 1992, amounting to US$92,238.00 plus interest, considering that the US military forces and personnel
completely withdrew from Cubi Point only on 31 December 1992.
Philcomsat
cannot be considered a fortuitous event because the happening thereof was foreseeable. Although the Agreement was freely
entered into by both parties, Section 8 should be deemed ineffective because it is contrary to Article 1174 of the Civil Code
the view that the validity of the parties definition of force majeure in Section 8 of the Agreement as "circumstances beyond
the control of the party involved including, but not limited to, any law, order, regulation, direction or request of
the Government of the Philippines, strikes or other labor difficulties, insurrection riots, national emergencies,
war, acts of public enemies, fire, floods, typhoons or other catastrophies or acts of God," should be deemed
subject to Article 1174 which defines fortuitous events as events which could not be foreseen, or which, though
foreseen, were inevitable.
-
CA erred in holding that Globe is not liable to pay for the rental of the earth station for the entire term of the Agreement
because it runs counter to what was plainly stipulated by the parties in Section 7 thereof.
said ruling is inconsistent with the appellate courts pronouncement that Globe is liable to pay rentals for December 1992
even though it terminated Philcomsats services effective 08 November 1992, because the US military and personnel
completely withdrew from Cubi Point only in December 1992.
it was Globe which proposed the five-year term of the Agreement, and that the other provisions of the Agreement,
such as Section 4.114 thereof, evince the intent of Globe to be bound to pay rentals for the entire five-year term.
Globe asserts
that Section 8 of the Agreement is not contrary to Article 1174 of the Civil Code because said provision does not prohibit
parties to a contract from providing for other instances when they would be exempt from fulfilling their contractual
obligations.
termination of the RP-US Military Bases Agreement constitutes force majeure and exempts it from complying with its
obligations under the Agreement.
ISSUES: (1) whether the termination of the RP-US Military Bases Agreement, the non-ratification of the Treaty of Friendship, Cooperation
and Security, and the consequent withdrawal of US military forces and personnel from Cubi Point constitute force majeure which would
exempt Globe from complying with its obligation to pay rentals under its Agreement with Philcomsat; (2) whether Globe is liable to pay
rentals under the Agreement for the month of December 1992;
HELD: YES.
GLOBE IS EXEMPTED. NON-RATIFICATION IS A FORTUITOUS EVENT THAT COULD BE FORESEEN BUT NONETHELESS INEVITABLE.Section 8
of the Agreement must be given effect
Philcomsat contends that under Article 1174 of the Civil Code, an event must be unforeseen in order to exempt a party to a contract
from complying with its obligations therein. It insists that since the expiration of the RP-US Military Bases Agreement, the non-ratification
of the Treaty of Friendship, Cooperation and Security and the withdrawal of US military forces and personnel from Cubi Point were not
unforeseeable, but were possibilities known to it and Globe at the time they entered into the Agreement, such events cannot exempt
Globe from performing its obligation of paying rentals for the entire five-year term thereof. However, Article 1174, which exempts
an obligor from liability on account of fortuitous events or force majeure, refers not only to events that are
unforeseeable, but also to those which are foreseeable, but inevitable:
Art. 1174. Except in cases specified by the law, or when it is otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be responsible for those events which, could not be foreseen, or
which, though foreseen were inevitable.
A fortuitous event under Article 1174 may either be an "act of God," or natural occurrences such as floods or typhoons,24 or an "act of
man," such as riots, strikes or wars.
-
Stipulations are not contrary or expanding to the concept of a fortuitous event under Article 1174.
Article 1306 of the Civil Code, parties to a contract may establish such stipulations, clauses, terms and conditions as they
may deem fit, as long as the same do not run counter to the law, morals, good customs, public order or public policy.
Article 1159 of the Civil Code also provides that "[o]bligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith."
Not being contrary to law, morals, good customs, public order, or public policy, Section 8 of the Agreement which Philcomsat
and Globe freely agreed upon has the force of law between them.
Elements to exempt globe:

(1) the event must be independent of the human will;
(2) the occurrence must render it impossible for the debtor to fulfill the obligation in a normal manner; and
(3) the obligor must be free of participation in, or aggravation of, the injury to the creditor.
Requisites are present in the instant case. Philcomsat and Globe had no control over the non-renewal of the term of
the RP-US Military Bases Agreement when the same expired in 1991, because the prerogative to ratify the treaty
extending the life thereof belonged to the Senate. Neither did the parties have control over the subsequent withdrawal of the
US military forces and personnel from Cubi Point in December 1992:
acts, direction or request of the Government and circumstances beyond the control of the defendant.
formal order from Cdr. Walter Corliss of the USN, the letter notification from ATT and the complete withdrawal of all the
military forces and personnel from Cubi Point in the year-end 1992 are also acts and circumstances beyond the control of the
defendant.
Page | 45
Kristine Confesor
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"force majeure or fortuitous event(s) as defined under paragraph 8 of the Agreement

impossible the continuation of the Agreement until the end of its five-year term without fault on the part of either party.
FORTUITOUS EVENTS RENDERED GLOBE EXEMPT FROM PAYMENT OF RENTALS FOR THE REMAINDER OF THE
TERM OF THE AGREEMENT.
unjust to require Globe to continue paying rentals even though Philcomsat cannot be compelled to perform its corresponding
obligation under the Agreement.
grossly unfair and iniquitous to hold GLOBE liable for lease charges for a service that was not and could not have been
rendered due to an act of the government which was clearly beyond GLOBEs control.
GLOBE IS LIABLE FOR PAYMENT OF RENTALS FOR THE MONTH OF DECEMBER 1992
Although Globe alleged that it terminated the Agreement with Philcomsat effective 08 November 1992 pursuant to the
formal order issued by Cdr. Corliss of the US Navy, the date when they actually ceased using the earth station subject
of the Agreement was not established during the trial
TC found that US military forces and personnel completely withdrew from Cubi Point only on 31 December 1992.
Philcomsat could not have removed or rendered ineffective said communication facility until after 31 December 1992 because
Cubi Point was accessible only to US naval personnel up to that time.
EXEMPLARY DAMAGES MAY BE AWARDED IN CASES INVOLVING CONTRACTS OR QUASI-CONTRACTS if the erring party acted in
a wanton, fraudulent, reckless, oppressive or malevolent manner
GAISANO CAGAYAN, INC. vs.

INSURANCE COMPANY OF NORTH
(BLUE JEANS)
AUSTRIA-MARTINEZ, J.:
Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi Strauss (Phils.) Inc. (LSPI) is the local distributor of
products bearing trademarks owned by Levi Strauss & Co.. IMC and LSPI separately obtained from ICNA fire insurance policies with
book debt endorsements. The insurance policies
provide for coverage on "book debts in connection with ready-made clothing materials which have been sold or delivered to
various customers and dealers of the Insured anywhere in the Philippines." The policies defined book debts as the "unpaid
account still appearing in the Book of Account of the Insured 45 days after the time of the loss covered under this Policy."
the ICNA shall not be liable for any unpaid account in respect of the merchandise sold and delivered by the Insured which are
outstanding at the date of loss for a period in excess of six (6) months from the date of the covering invoice or actual delivery
of the merchandise whichever shall first occur.
Insured shall submit to the ICNA within twelve (12) days after the close of every calendar month all amount shown in their
books of accounts as unpaid and thus become receivable item from their customers and dealers.
Gaisano is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the Gaisano Superstore Complex in CDO was
consumed by fire. Included in the items lost or destroyed in the fire were stocks of ready-made clothing materials sold and delivered
by IMC and LSPI.
ICNA filed a complaint for damages against Gaisano on February 4, 1992,.
IMC and LSPI filed with ICNA their claims under their respective fire insurance policies with book debt endorsements;
As of February 25, 1991, the unpaid accounts of Gaisano on the sale and delivery of ready-made clothing materials with IMC
was P2,119,205.00 while with LSPI it was P535,613.00;
They paid the claims of IMC and LSPI and, by virtue thereof, ICNA was subrogated to their rights against Gaisano;
made several demands for payment but went unheeded
Gaisano
Fortuitous event or force majeure
respondent's right of subrogation has no basis inasmuch as there was no breach of contract committed by it since the loss
was due to fire which it could not prevent or foresee;
that IMC and LSPI never communicated to it that they insured their properties;
it never consented to paying the claim of the insured.
RTC dismissed ICNAs complaint.
Fire was purely accidental and cause was not attributable to the negligence of the Gaisano;
it has not been established that Gaisano is the debtor of IMC and LSPI;
that since the sales invoices state that "it is further agreed that merely for purpose of securing the payment of
purchase price, the above-described merchandise remains the property of the vendor until the purchase price is
fully paid", IMC and LSPI retained ownership of the delivered goods and must bear the loss.
CA reversed.
sales invoices are proofs of sale, being detailed statements of the nature, quantity and cost of the thing sold;
that loss must be borne by Gaisano since the proviso contained in the sales invoices is an exception under Article 1504
(1) of the Civil Code, to the general rule that if the thing is lost by a fortuitous event, the risk is borne by the owner of the
thing at the time the loss under the principle of res perit domino;
that Gaisanos obligation to IMC and LSPI is not the delivery of the lost goods but the payment of its unpaid account and
as such the obligation to pay is not extinguished, even if the fire is considered a fortuitous event;
that by subrogation, the ICNA has the right to go against Gaisano;
being a fire insurance with book debt endorsements, what was insured was the vendor's interest as a creditor.
ISSUES:
1)
2)
3)
W/N CA erred in holding that the insurance in the instant case was one over credit.
W/N CA erred in holding that all risk over the subject goods in the instant case had transferred to petitioner upon
delivery thereof.
W/N CA erred in holding that there was automatic subrogation under art. 2207 of the civil code in favor of respondent.
Page | 46
Kristine Confesor
1)
petitioner contends
insurance in the present case cannot be deemed to be over credit since an insurance "on credit" belies not only the
nature of fire insurance but the express terms of the policies;
it was not credit that was insured since respondent paid on the occasion of the loss of the insured goods to fire and not
because of the non-payment by petitioner of any obligation;
even if the insurance is deemed as one over credit, there was no loss as the accounts were not yet due since no prior
demands were made by IMC and LSPI against petitioner for payment of the debt and such demands came from respondent
only after it had already paid IMC and LSPI under the fire insurance policies.15
2)
petitioner avers
despite delivery of the goods, petitioner-buyer IMC and LSPI assumed the risk of loss when they secured fire insurance policies
over the goods.
3)
petitioner submits
no subrogation in favor of respondent as no valid insurance could be maintained thereon by IMC and LSPI since all risk had
transferred to petitioner upon delivery of the goods;
that petitioner was not privy to the insurance contract or the payment between respondent and its insured nor was its
consent or approval ever secured;
that this lack of privity forecloses any real interest on the part of respondent in the obligation to pay, limiting its interest
to keeping the insured goods safe from fire.
Respondent counters
while ownership over the ready- made clothing materials was transferred upon delivery to petitioner, IMC and LSPI have
insurable interest over said goods as creditors who stand to suffer direct pecuniary loss from its destruction by fire;
petitioner is liable for loss of the ready-made clothing materials since it failed to overcome the presumption of liability
under Article 1265 of the Civil Code;
fire was caused through petitioner's negligence in failing to provide stringent measures of caution , care and
maintenance on its property because electric wires do not usually short circuit unless there are defects in their installation or
when there is lack of proper maintenance and supervision of the property;
PROPER INTERPRETATION OF THE QUESTIONED INSURANCE POLICY.

Gaisano claims that the CA erred in construing a fire insurance policy on book debts as one covering the unpaid accounts of IMC and
LSPI since such insurance applies to loss of the ready-made clothing materials sold and delivered to petitioner.
WORDS OF A CONTRACT ARE PLAIN AND READILY UNDERSTOOD, THERE IS NO ROOM FOR CONSTRUCTION. In this
case, the questioned insurance policies provide coverage for "book debts in connection with ready-made clothing
materials which have been sold or delivered to various customers and dealers (Gaisano) of the Insured
anywhere in the Philippines." and defined book debts as the "unpaid account still appearing in the Book of Account of the
Insured (Blue Jeans Distributors) 45 days after the time of the loss covered under this Policy."
Nowhere is it provided in the questioned insurance policies that the subject of the insurance is the goods sold and delivered to
the customers and dealers of the insured.
Thus, what were insured were the accounts of IMC and LSPI with Gaisano which remained unpaid 45 days after the loss
through fire, and not the loss or destruction of the goods delivered.
Gaisano argues that IMC bears the risk of loss because it expressly reserved ownership of the goods by stipulating in the sales invoices
that "[i]t is further agreed that merely for purpose of securing the payment of the purchase price the above described merchandise
remains the property of the vendor until the purchase price thereof is fully paid."
The present case clearly falls under paragraph (1), Article 1504 of the Civil Code: ART. 1504. Unless otherwise agreed, the
goods remain at the seller's risk until the ownership therein is transferred to the buyer, but when the ownership therein is
transferred to the buyer the goods are at the buyer's risk whether actual delivery has been made or not , except
that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the
contract and the ownership in the goods has been retained by the seller merely to secure performance
by the buyer of his obligations under the contract, the goods are at the buyer's risk from the time of such
delivery; x
when the seller retains ownership only to insure that the buyer will pay its debt, the risk of loss is borne by the
buyer (gaisano). gaisano bears the loss of the goods delivered. IMC and LSPI did not lose complete interest over the
goods. They have an insurable interest until full payment of the value of the delivered goods. Unlike the civil law concept of
res perit domino, where ownership is the basis for consideration of who bears the risk of loss, IN PROPERTY INSURANCE,
ONE'S INTEREST IS NOT DETERMINED BY CONCEPT OF TITLE, BUT WHETHER INSURED HAS SUBSTANTIAL
ECONOMIC INTEREST IN THE PROPERTY.
Section 13 of our Insurance Code defines insurable interest as "every interest in property, whether real or
personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might
directly damnify the insured."
Parenthetically, under Section 14 of the same Code, an insurable interest in property may consist in:
(a) an existing interest;
(b) an inchoate interest founded on existing interest; or
(c) an expectancy, coupled with an existing interest in that out of which the expectancy arises.
Therefore, anyone has an insurable interest in property who derives a benefit from its existence or would suffer
loss from its destruction. Indeed, a vendor or seller retains an insurable interest in the property sold so long as he has any
interest therein, in other words, so long as he would suffer by its destruction, as where he has a vendor's lien.
In this case, the insurable interest of IMC and LSPI pertain to the unpaid accounts appearing in their Books of Account 45 days after
the time of the loss covered by the policies.
Is petitioner liable for the unpaid accounts? YES
Petitioner's argument that it is not liable because the fire is a fortuitous event under Article 1174 of the Civil Code is misplaced.
Page | 47
Kristine Confesor
petitioner bears the loss under Article 1504 (1) of the Civil Code.
insurance in this case is not for loss of goods by fire but for petitioner's accounts with IMC and LSPI that remained unpaid 45
days after the fire.
petitioner's obligation is for the payment of money.
where the obligation consists in the payment of money, the failure of the debtor to make the payment even by reason of a
fortuitous event shall not relieve him of his liability. The rationale for this is that the rule that an obligor should be held exempt
from liability when the loss occurs thru a fortuitous event only holds true when the obligation consists in the delivery of a
determinate thing and there is no stipulation holding him liable even in case of fortuitous event. It does not apply when the
obligation is pecuniary in nature.
Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing, the loss or destruction of anything of the
same kind does not extinguish the obligation." If the obligation is generic in the sense that the object thereof is designated
merely by its class or genus without any particular designation or physical segregation from all others of the same class, the
loss or destruction of anything of the same kind even without the debtor's fault and before he has incurred in delay
will not have the effect of extinguishing the obligation. This rule is based on the principle that the genus of a thing can never
perish. Genus nunquan perit.
An obligation to pay money is generic; therefore, it is not excused by fortuitous loss of any specific property of the debtor.
Thus, whether fire is a fortuitous event or petitioner was negligent are matters immaterial to this case. What is
relevant here is whether it has been established that petitioner has outstanding accounts with IMC and LSPI.
With respect to IMC, the respondent has adequately established its claim. Records show that Gaisano has an outstanding account with
IMC in the amount of P2,119,205.00. The check voucher as evidencing payment to IMC and the subrogation receipt executed by IMC in
favor of respondent upon receipt of the insurance proceeds. All these documents have been properly identified, presented and marked
as exhibits in court. The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent as
insurer and IMC as the insured, but also the amount paid to settle the insurance claim . The right of subrogation accrues
simply upon payment by the insurance company of the insurance claim. Respondent's action against petitioner is squarely sanctioned
by Article 2207 of the Civil Code which provides:
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the
injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to
the rights of the insured against the wrongdoer or the person who has violated the contract. x x x
Gaisano failed to refute respondent's evidence. As to LSPI, respondent failed to present sufficient evidence to prove its cause
of action. No evidentiary weight can be given to Exhibit "F Levi Strauss",42 a letter dated April 23, 1991 from petitioner's
General Manager, Stephen S. Gaisano, Jr., since it is not an admission of petitioner's unpaid account with LSPI. It only
confirms the loss of Levi's products in the amount of P535,613.00 in the fire that razed petitioner's building on
February 25, 1991.
Moreover, there is no proof of full settlement of the insurance claim of LSPI; no subrogation receipt was offered in evidence.
Thus, there is no evidence that respondent has been subrogated to any right which LSPI may have against petitioner. Failure
to substantiate the claim of subrogation is fatal to petitioner's case for recovery of the amount of P535,613.00.
ROBERTO SICAM vs. LULU JORGE (pawn)

AUSTRIA-MARTINEZ, J.:
On different dates from September to October 1987, Lulu V. Jorge (respondent Lulu) pawned several pieces of jewelry with Sicam to
secure a loan of P59,500.00. On October 19, 1987, two armed men entered the pawnshop and took away whatever cash and jewelry
were found inside the pawnshop vault. The incident was entered in the police blotter of the Southern Police District, Paraaque Police
Station.
Petitioner Sicam sent respondent Lulu a letter dated October 19, 1987 informing her of the loss of her jewelry due to the robbery
incident in the pawnshop. On November 2, 1987, respondent Lulu then wrote a letter to petitioner Sicam expressing disbelief stating
that when the robbery happened, all jewelry pawned were deposited with Far East Bank near the pawnshop since it had been the
practice that before they could withdraw, advance notice must be given to the pawnshop so it could withdraw the jewelry from the bank.
Respondent Lulu then requested petitioner Sicam to prepare the pawned jewelry for withdrawal on November 6, 1987 but
petitioner Sicam failed to return the jewelry.
On September 28, 1988, respondent Lulu filed a complaint against petitioner Sicam with the RTC seeking indemnification for the loss of
pawned jewelry and payment of actual, moral and exemplary damages. Petitioner Sicam filed his Answer
he is not the real party-in-interest as the pawnshop was incorporated
that petitioner corporation had exercised due care and diligence in the safekeeping of the articles pledged with it and could
not be made liable for an event that is fortuitous.Respondents subsequently filed an Amended Complaint to include petitioner
corporation.
-
filed a Motion to Dismiss as far as he is concerned considering that he is not the real party-in-interest. Respondents opposed
the same
The RTC dismissed respondents complaint as well as petitioners counterclaim.

petitioner Sicam could not be made personally liable for a claim arising out of a corporate transaction;
in the Amended Complaint of respondents, they asserted that "plaintiff pawned assorted jewelries in defendants' pawnshop";
and that as a consequence of the separate juridical personality of a corporation, the corporate debt or credit is not the debt or
credit of a stockholder.
had not been rebutted by respondents that the loss of the pledged pieces of jewelry in the possession of the corporation was
occasioned by armed robbery; that robbery is a fortuitous event which exempts the victim from liability for the loss and that
the parties transaction was that of a pledgor and pledgee and under Art. 1174 of the Civil Code, the pawnshop as a pledgee
is not responsible for those events which could not be foreseen.
CA reversed the RTC, the dispositive portion of which reads as follows:
ordering the appellees to pay appellants the actual value of the lost jewelry amounting to P272,000.00, and attorney' fees of
P27,200.00.8
Page | 48
Kristine Confesor
-
DOCTRINE OF PIERCING THE VEIL OF CORPORATE ENTITY reasoning that respondents were misled into thinking that
they were dealing with the pawnshop owned by petitioner Sicam as all the pawnshop tickets issued to them bear the words
"Agencia de R.C. Sicam";
there was no indication on the pawnshop tickets that it was the petitioner corporation that owned the pawnshop which
explained why respondents had to amend their complaint impleading petitioner corporation.
corresponding diligence required of a pawnshop is that it should take steps to secure and protect the pledged items and
should take steps to insure itself against the loss of articles which are entrusted to its custody as it derives earnings from the
pawnshop trade which petitioners failed to do;
Austria is not applicable to this case since the robbery incident happened in 1961 when the criminality had not as yet reached
the levels attained in the present day; that they are at least guilty of contributory negligence and should be held liable for the
loss of jewelries; and that robberies and hold-ups are foreseeable risks in that those engaged in the pawnshop
business are expected to foresee.
THE COURT OF APPEALS ERRED AND WHEN IT DID, IT OPENED ITSELF TO REVERSAL, WHEN IT ADOPTED UNCRITICALLY (IN FACT IT
REPRODUCED AS ITS OWN WITHOUT IN THE MEANTIME ACKNOWLEDGING IT) WHAT THE RESPONDENTS ARGUED IN THEIR BRIEF, WHICH
ARGUMENT WAS PALPABLY UNSUSTAINABLE.
THE COURT OF APPEALS ERRED, AND WHEN IT DID, IT OPENED ITSELF TO REVERSAL BY THIS HONORABLE COURT, WHEN IT AGAIN
ADOPTED UNCRITICALLY (BUT WITHOUT ACKNOWLEDGING IT) THE SUBMISSIONS OF THE RESPONDENTS IN THEIR BRIEF WITHOUT
ADDING ANYTHING MORE THERETO DESPITE THE FACT THAT THE SAID ARGUMENT OF THE RESPONDENTS COULD NOT HAVE BEEN
SUSTAINED IN VIEW OF UNREBUTTED EVIDENCE ON RECORD.9
Anent the first assigned error, petitioners point out that the CAs finding that petitioner Sicam is personally liable for the loss of the
pawned jewelries is "a virtual and uncritical reproduction of the arguments set out on pp. 5-6 of the Appellants brief."10
Petitioners argue that the reproduced arguments of respondents in their Appellants Brief suffer from infirmities, as follows:
(1) Respondents conclusively asserted in paragraph 2 of their Amended Complaint that Agencia de R.C. Sicam, Inc. is the present owner
of Agencia de R.C. Sicam Pawnshop, and therefore, the CA cannot rule against said conclusive assertion of respondents;
(2) The issue resolved against petitioner Sicam was not among those raised and litigated in the trial court; and
(3) By reason of the above infirmities, it was error for the CA to have pierced the corporate veil since a corporation has a personality
distinct and separate from its individual stockholders or members.
Anent the second error, petitioners point out that the CA finding on their negligence is likewise an unedited reproduction of respondents
brief which had the following defects:
(1) There were unrebutted evidence on record that petitioners had observed the diligence required of them, i.e, they wanted to open a
vault with a nearby bank for purposes of safekeeping the pawned articles but was discouraged by the Central Bank (CB) since CB rules
provide that they can only store the pawned articles in a vault inside the pawnshop premises and no other place;
(2) Petitioners were adjudged negligent as they did not take insurance against the loss of the pledged jelweries, but it is judicial notice
that due to high incidence of crimes, insurance companies refused to cover pawnshops and banks because of high probability of losses
due to robberies;
(3) In Hernandez v. Chairman, Commission on Audit (179 SCRA 39, 45-46), the victim of robbery was exonerated from liability for the
sum of money belonging to others and lost by him to robbers.
Respondents filed their Comment and petitioners filed their Reply thereto. The parties subsequently submitted their respective
Memoranda.
We find no merit in the petition.
CA correctly pierced the veil of the corporate fiction and adjudged petitioner Sicam liable together with petitioner corporation.
The rule is that the veil of corporate fiction may be pierced when made as a shield to perpetrate fraud and/or confuse
legitimate issues. The theory of corporate entity was not meant to promote unfair objectives or otherwise to shield them.
Notably, the evidence on record shows that at the time respondent Lulu pawned her jewelry, the pawnshop was owned by
Sicam himself. As correctly observed by the CA, in all the pawnshop receipts issued to respondent Lulu in September 1987, all
bear the words "Agencia de R. C. Sicam," notwithstanding that the pawnshop was allegedly incorporated in April 1987. The
receipts issued after such alleged incorporation were still in the name of "Agencia de R. C. Sicam," thus inevitably misleading,
or at the very least, creating the wrong impression to respondents and the public as well, that the pawnshop
was owned solely by petitioner Sicam and not by a corporation.
Even petitioners counsel, Atty. Marcial T. Balgos, in his letter dated October 15, 1987 addressed to the Central Bank,
expressly referred to petitioner Sicam as the proprietor of the pawnshop notwithstanding the alleged incorporation in April
1987.
We likewise find no merit in petitioners' contention that the CA erred in piercing the veil of corporate fiction of petitioner corporation, as
it was not an issue raised and litigated before the RTC.
Petitioner Sicam had alleged in his Answer filed with the trial court that he was not the real party-in-interest because since
April 20, 1987, the pawnshop business initiated by him was incorporated and known as Agencia de R.C. Sicam. In the pre-trial
brief filed by petitioner Sicam, he submitted that as far as he was concerned, the basic issue was whether he is the real party
in interest against whom the complaint should be directed. In fact, he subsequently moved for the dismissal of the complaint
as to him but was not favorably acted upon by the trial court. Moreover, the issue was squarely passed upon, although
erroneously, by the trial court in its Decision
Clearly, in view of the alleged incorporation of the pawnshop, the issue of whether petitioner Sicam is personally liable is inextricably
connected with the determination of the question whether the doctrine of piercing the corporate veil should or should not apply to the
case.
ISSUE: whether petitioners are liable for the loss of the pawned articles in their possession. Yes.
Article 1174 of the Civil Code provides: Except in cases expressly specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those
events which could not be foreseen or which, though foreseen, were inevitable.
Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It is therefore, not enough that the event should
not have been foreseen or anticipated, as is commonly believed but it must be one impossible to foresee or to avoid. T he mere
difficulty to foresee the happening is not impossibility to foresee the same.
To constitute a fortuitous event, the following elements must concur:
a)
the cause of the unforeseen and unexpected occurrence or of the failure of the debtor to comply with obligations
must be independent of human will;
b)
it must be impossible to foresee the event that constitutes the caso fortuito or, if it can be foreseen, it must be
impossible to avoid;
c)
the occurrence must be such as to render it impossible for the debtor to fulfill obligations in a normal
manner; and,
d)
the obligor must be free from any participation in the aggravation of the injury or loss.
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Kristine Confesor
THE BURDEN OF PROVING THAT THE LOSS WAS DUE TO A FORTUITOUS EVENT RESTS ON HIM WHO INVOKES it. And, in order
for a fortuitous event to exempt one from liability, it is necessary that one has committed no negligence or misconduct that may have
occasioned the loss. It has been held that an act of God cannot be invoked to protect a person who has failed to take steps to forestall
the possible adverse consequences of such a loss. One's negligence may have concurred with an act of God in producing damage and
injury to another; nonetheless, showing that the immediate or proximate cause of the damage or injury was a fortuitous
event would not exempt one from liability. When the effect is found to be partly the result of a person's participation -whether by active intervention, neglect or failure to act -- the whole occurrence is humanized and removed from the rules applicable to
acts of God.
In this case, Petitioner Sicam had testified that there was a security guard in their pawnshop at the time of the robbery. He likewise
testified that when he started the pawnshop business in 1983, he thought of opening a vault with the nearby bank for the purpose of
safekeeping the valuables but was discouraged by the Central Bank since pawned articles should only be stored in a vault
inside the pawnshop. The very measures which petitioners had allegedly adopted show that to them the possibility of robbery was
not only foreseeable, but actually foreseen and anticipated. Petitioner Sicams testimony, in effect, contradicts petitioners defense of
fortuitous event.
-
Sicam failed to show that they were free from any negligence by which the loss of the pawned jewelry may have been
occasioned.
Robbery per se, just like carnapping, is not a fortuitous event. It does not foreclose the possibility of negligence on the part of
herein petitioners.
It is not a defense for a repair shop of motor vehicles to escape liability simply because the damage or loss of a thing lawfully
placed in its possession was due to carnapping.
Carnapping per se cannot be considered as a fortuitous event. The fact that a thing was unlawfully and forcefully
taken from another's rightful possession, as in cases of carnapping, does not automatically give rise to a
fortuitous event. To be considered as such, carnapping entails more than the mere forceful taking of another's property. It
must be proved and established that the event was an act of God or was done solely by third parties and that
neither the claimant nor the person alleged to be negligent has any participation.
On the contrary, by the very evidence of petitioners, the CA did not err in finding that petitioners are guilty of concurrent or contributory
negligence as provided
in Article 1170 of the Civil Code, to wit:
Art. 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.
Article 2123 of the Civil Code provides that with regard to pawnshops and other
establishments which are engaged in making loans secured by pledges, the special laws and regulations concerning them
shall be observed, and subsidiarily, the provisions on pledge, mortgage and antichresis.
Article 2099 of the Civil Code, the provision on pledge, particularly provides that
the creditor shall take care of the thing pledged with the diligence of a good father of a family. This means that petitioners
must take care of the pawns the way a prudent person would as to his own property.
Article 1173 of the Civil Code further provides:The fault or negligence of the
obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the
circumstances of the persons, of time and of the place. When negligence shows bad faith, the provisions of Articles 1171 and
2201, paragraph 2 shall apply. If the law or contract does not state the diligence which is to be observed in the performance,
that which is expected of a good father of a family shall be required.
-
NEGLIGENCE is the omission to do something which a reasonable man, guided by those considerations which ordinarily
regulate the conduct of human affairs, would do; or the doing of something which a prudent and reasonable man would not
do. It is want of care required by the circumstances.
failed to exercise reasonable care and caution that an ordinarily prudent person would have used in the same situation.
Petitioners were guilty of negligence in the operation of their pawnshop business. Petitioner Sicam testified, thus:
NO SECURITY MEASURES ADOPTED. There was no clear showing that there was any security guard at all; Sicam's admission
that the vault was open at the time of robbery is clearly a proof of petitioners' failure to observe the care, precaution and
vigilance that the circumstances justly demanded.
We, however, do not agree with the CA when it found petitioners negligent for not taking steps to insure themselves against
loss of the pawned jewelries since there is no statutory basis. Nevertheless, the preponderance of evidence shows that
petitioners failed to exercise the diligence required of them under the Civil Code. The diligence with which the law requires the
individual at all times to govern his conduct varies with the nature of the situation in which he is placed and the importance of
the act which he is to perform.
the debtor must, in addition to the casus itself, be free of any concurrent or contributory fault or negligence (Austria)
Unlike in Hernandez where the robbery happened in a public utility, the robbery in this case took place in the pawnshop which
is under the control of petitioners. Petitioners had the means to screen the persons who were allowed entrance to the
premises and to protect itself from unlawful intrusion. Petitioners had failed to exercise precautionary measures in ensuring
that the robbers were prevented from entering the pawnshop and for keeping the vault open for the day, which paved the way
for the robbers to easily cart away the pawned articles.
In Cruz, Dr. Filonila O. Cruz, Camanava District Director of (TESDA),. We held that riding the LRT cannot per se be denounced
as a negligent act more so because Cruzs mode of transit was influenced by time and money considerations; that she
boarded the LRT to be able to arrive in Caloocan in time for her 3 pm meeting; that any prudent and rational person under
similar circumstance can reasonably be expected to do the same; that possession of a cellphone should not hinder one from
boarding the LRT coach as Cruz did considering that whether she rode a jeep or bus, the risk of theft would have also been
present; that because of her relatively low position and pay, she was not expected to have her own vehicle or to ride a
taxicab; she did not have a government assigned vehicle; that placing the cellphone in a bag away from covetous eyes and
Page | 50
Kristine Confesor
-
holding on to that bag as she did is ordinarily sufficient care of a cellphone while traveling on board the LRT; that the records
did not show any specific act of negligence on her part and negligence can never be presumed.
Unlike in the Cruz case, the robbery in this case happened in petitioners' pawnshop and they were negligent in not exercising
the precautions justly demanded of a pawnshop.
METRO CONCAST STEEL vs.

ALLIED BANK CORPORATION,
PERLAS-BERNABE, J.:
On various dates and for different amounts, Metro Concast, a corporation duly organized and existing under and by virtue of Philippine
laws and engaged in the business of manufacturing steel, through its officers, herein individual petitioners, obtained several loans from
Allied Bank. These loan transactions were covered by a promissory note and separate letters of credit/trust receipts, the details of which
are as follows:
The interest rate under Promissory Note No. 96-21301 was pegged at 15.25% per annum (p.a.), with penalty charge of 3% per month in
case of default; while the twelve (12) trust receipts uniformly provided for an interest rate of 14% p.a. and 1% penalty charge. By way
of security, the individual petitioners executed several Continuing Guaranty/Comprehensive Surety Agreements in favor of
Allied Bank. Petitioners failed to settle their obligations under the aforementioned promissory note and trust receipts, hence, Allied
Bank, through counsel, sent them demand letters, all dated December 10, 1998, seeking payment of the total amount of P51m but to
no avail. Thus, Allied Bank was prompted to file a complaint for collection of sum of money (subject complaint) against
petitioners before the RTC.
Petitioners
admitted their indebtedness to Allied Bank but denied liability for the interests and penalties charged, claiming to have paid
the total sum of P65,073,055.73 by way of interest charges for the period covering 1992 to 1997.
the economic reverses suffered by the Philippine economy in 1998 as well as the devaluation of the peso against the US
dollar contributed greatly to the downfall of the steel industry, directly affecting the business of Metro Concast and eventually
leading to its cessation.
Hence, in order to settle their debts with Allied Bank, petitioners offered the sale of Metro Concasts remaining assets,
consisting of machineries and equipment, to Allied Bank, which the latter, however, refused. Instead, Allied Bank advised
them to sell the equipment and apply the proceeds of the sale to their outstanding obligations.
petitioners offered the equipment for sale, but since there were no takers, the equipment was reduced into ferro scrap or
scrap metal over the years.
In 2002, Peakstar, expressed interest in buying the scrap metal. During the negotiations with Peakstar, petitioners claimed
that (Atty. Saw), a member of Allied Banks legal department, acted as the latters agent.
Eventually, with the alleged conformity of Allied Bank, through Atty. Saw, a MOA was drawn between Metro Concast,
represented by petitioner Jose Dychiao, and Peakstar, through Camiling, under which Peakstar obligated itself to purchase the
scrap metal for a total consideration of P34,000,000.00, payable as follows:
(a) P4m by way of earnest money 2m to be paid in cash and the other 2m to be paid in two (2) post-dated checks and
(b) the balance of P30m to be paid in ten (10) monthly installments of P3,000,000.00, secured by bank guarantees from Bankwise,
Inc. (Bankwise) in the form of separate post-dated checks.
Unfortunately, Peakstar reneged on all its obligations under the MoA. In this regard, petitioners asseverated that:
(a) their failure to pay their outstanding loan obligations to Allied Bank must be considered as force majeure ; and
(b) since Allied Bank was the party that accepted the terms and conditions of payment proposed by Peakstar, petitioners must
therefore be deemed to have settled their obligations to Allied Bank.
-
it was Atty. Saw himself who drafted the MoA and subsequently received the P2m cash and the two (2) Bankwise post-dated
checks worth P1m each from Camiling. However, Atty. Saw turned over only the two (2) checks and P1.5 in cash to the wife of
Jose Dychiao.
RTC dismissed the subject complaint,

"causes of action sued upon had been paid or otherwise extinguished."
since Allied Bank was duly represented by its agent, Atty. Saw, in all the negotiations and transactions with Peakstar
considering that Atty. Saw
(a) drafted the MoA,
(b) accepted the bank guarantee issued by Bankwise, and
(c) was apprised of developments regarding the sale and disposition of the scrap metal
then it stands to reason that the MoA between Metro Concast and Peakstar was binding upon said bank.
The CA reversed and set aside the ruling of the RTC,
"no legal basis in fact and in law to declare that when Bankwise reneged its guarantee under the [MoA], herein [petitioners]
should be deemed to be discharged from their obligations lawfully incurred in favor of [Allied Bank]."
MOA did not indicate that Allied Bank intervened or was a party thereto.
the post-dated checks pursuant to the MoA were issued in favor of Jose Dychiao.
no sufficient evidence on record showing that Atty. Saw was duly and legally authorized to act for and on behalf of Allied
Bank, opining that the RTC was "indulging in hypothesis and speculation"
While Atty. Saw received the earnest money from Peakstar, the receipt was signed by him on behalf of Jose Dychiao.
aforesaid checks and receipts were signed by [Atty.] Saw either as representative of [petitioners] or as partner of the latters
legal counsel, and not in anyway as representative of [Allied Bank]."
ISSUE: W/N the loan obligations incurred by the petitioners under the subject promissory note and various trust receipts have already
been extinguished when Peakstar reneged its obligation under its MOA with Allied Bank it being a force majeure?
HELD: NO.
Article 1231 of the Civil Code states that obligations are extinguished either by payment or performance, the loss of the
thing due, the condonation or remission of the debt, the confusion or merger of the rights of creditor and debtor,
compensation or novation.
Page | 51
Kristine Confesor
-
The MoA does not have any relevance to the performance of petitioners obligations to Allied Bank. The MoA is a sale of
assets contract, while petitioners obligations to Allied Bank arose from various loan transactions. Absent any
showing that the terms and conditions of the latter transactions have been, in any way, modified or novated by the terms and
conditions in the MoA, said contracts should be treated separately and distinctly from each other, such that the
existence, performance or breach of one would not depend on the existence, performance or breach of the other.
as the CA pointed out, the fact of Allied Banks representation has not been proven in this case and hence, cannot be
deemed as a sustainable defense to exculpate petitioners from their loan obligations to Allied Bank.
Now, anent petitioners reliance on force majeure,

Peakstars breach of its obligations to Metro Concast arising from the MoA cannot be classified as a fortuitous event under
jurisprudential formulation. As discussed in Sicam v. Jorge:
-
Fortuitous events: extraordinary events not foreseeable or avoidable. It is therefore, not enough that the event should not
have been foreseen or anticipated, as is commonly believed but it must be one impossible to foresee or to avoid. The
mere difficulty to foresee the happening is not impossibility to foresee the same. To constitute a fortuitous event, the
following elements must concur:
(a) the cause of the unforeseen and unexpected occurrence or of the failure of the debtor to comply with obligations
must be independent of human will;
(b) it must be impossible to foresee the event that constitutes the caso fortuito or, if it can be foreseen, it must be
impossible to avoid;
(c) the occurrence must be such as to render it impossible for the debtor to fulfill obligations in a normal manner;
and (d) the obligor must be free from any participation in the aggravation of the injury or loss.
Peakstars breach is not "impossible"to foresee or even an event which is independent of human will."
Neither has it been shown that said occurrence rendered it impossible for petitioners to pay their loan obligations to Allied
Bank and thus, negates the formers force majeure theory altogether.
In any case, as earlier stated, the performance or breach of the MoA bears no relation to the performance or breach of the
subject loan transactions, they being separate and distinct sources of obligations.
No proof that the obligations in Allied bank by petitioners had already been paid or, in any way, extinguished.
Considering, however, that Allied Banks extra-judicial demand on petitioners appears to have been made only on December
10, 1998, the computation of the applicable interests and penalty charges should be reckoned only from such date.
Art. 1176: The receipt of the principal by the creditor without the reservation with respect to the interest, shall give rise to the
presumption that said interest has been paid.
The receipt of a later installment of a debt without reservation as to prior installments, shall likewise raise the presumption that such
installments have been paid.
Principle in 1176:
Before the presumption that a prior installment had been paid may arise, the receipt must specify the installment of which
payment is made
Art. 1177: The creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all rights
and bring all the actions of the latter for the same purpose, save those which are
inherent In his person; they may also impugn acts which the debtor may have done to defraud them.
Art. 1178 Subject to the law, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the
contrary.
Art. 1191 The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is
incumbent upon him. The injured party may choose between fulfillment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be
without prejudice to the rights of third persons who have acquired the thing , in accordance with Art. 1385 and 1388 and the Mortgage
Law.
Art. 1192 In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered
by the courts. IF it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and
each shall bear his own damages.
REMEDIES AVAILABLE TO CREDITORS FOR THE SATISFACTION OF THEIR CLAIMS
1. Exact fulfillment of the obligation by specific or substitute performance with a right to damages in either case;
2. In case of reciprocal obligations, petition the court to resolve the contract;
3. Pursue the leviable (not exempt from attachment under the law) property of the debtor;
4. Accio Ddirecta (1729 and 1652): Right of the lessor to go directly to the sublessee for the unpaid rents of the lessee, Right
of the laborers or persons who furnish materials for a piece of work undertaken by a contractor to go directly to the owner for
any unpaid claims due to the contractor
5. Accion Subrogatoria- to be subrogated to all the right and actions of the debtor save those which are inherent in his
persons
REQUISITES
1.
The debtor to whom the right of action properly pertains must be indebted to the creditor;
2.
The creditor must be prejudiced by the inaction or failure of the debtor to proceed against third person;
3.
The creditor must have pursued first or exhausted all the properties of the debtor which are not exempt from execution;
4.
The debtors assets are insufficient to satisfy his claims; and
5.
The right of account is not purely personal
Personal rights of debtor (cannot be exercised by creditor)
Right to existence (support)
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Kristine Confesor
6.
Accion Pauliana- asking the court to rescind or to impugn all the acts which the debtor may have done to defraud the
creditors (Art. 1380-1389)
REQUISITES
1.
There is credit in favor of the plaintiff
2.
Debtor has performed an act subsequent to the contract, giving advantage to other persons
3.
Creditor is prejudiced by the debtors act which are in favor of 3 rd parties and rescission will benefit the creditor
4.
The creditor has no other legal remedy
5.
The debtors acts are fraudulent
LOSS
DETERIORATION
1175
Usury
Rights or relations of public character

Rights of an honorary character
Rights consisting of powers which have not been used, including:
o
Power to administer, such as when the debtor fails to have some property leased the creditor cannot give
it in lease for him
o
Power to carry out an agency or deposit, which are purely personal acts
o
Power to accept for a contract
Non-patrimonial rights (action to establish the debtors status as a legitimate/illegitimate child, the action for legal
separation / annulment of marriage, and other rights arising from family relations
Patrimonial rights inherent in the person of the debtor, such as the right to revoke a donation by reason of
ingratitude and the right to demand the exclusion of an unworthy heir
Without the fault of the debtor

Impairment borne by the creditor
With the fault of the debtor

Debtor obliged to pay damages
Creditor may choose between rescission
or its fulfillment with damages in either
case
contracting for or receiving something in excess of the amount allowed by law for the loan or use of money, goods, chattels,
or credits; exaction of excessive interest.
Kinds of Interest
1) Interest given for compensation or use of the money (moratory interest)
2) Interest given by way of damages (compensatory interest)
Simple Laon (Mutuum)
One of the parties delivers to another money or other consumable things upon the condition that the same amount of the
same kind and quality shall be paid.
CHAPTER 3
DIFFERENT KINDS OF OBLIGATIONS
See Art. 1179-1230
Section 1. Pure and Contractual Obligations
Art. 1179 (PURE)
Every obligation whose performance does not depend
upon a future or uncertain event, or
upon a past event unknown to the parties,
is demandable at once
Every obligation which contains a resolutory condition
shall also be demandable,
without prejudice to the effects of the happening of the event.
Art. 1180
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.
Art. 1181 SUSPENSIVE AND RESOLUTORY
In conditional obligations,
the acquisition of rights, as well as
the extinguishment or loss of those already acquired,
shall depend upon the happening of the event
which constitutes the condition.
Art. 1182 POTESTATIVE, CASUAL, AND MIXED
When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon
chance or upon the will of a third person, the obligation shall take effect in conformity with the provisions of this Code.
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Kristine Confesor
Art. 1183 IMPOSSIBLE, DIVISIBLE, AND INDIVISIBLE
Impossible conditions,
those contrary to good customs or public policy and
those prohibited by law
shall annul the obligation which depends upon them.
If the obligation is divisible,
that part thereof which is not affected by the impossible or unlawful condition
shall be valid.
The condition not to do an impossible thing shall be considered as not having been agreed upon.
Art. 1184 POSITIVE
The condition that some event happen at a determinate time
Shall extinguish the obligation as soon as the time expires or if it has become indubitable that the event will not take place.
Art. 1185 NEGATIVE
The condition that some event will not happen at a determinate time
Shall render the obligation effective
from the moment the time indicated has elapsed, or
if it has become evident that the event cannot occur.
If no time has been fixed, the condition shall be deemed fulfilled at such time as may have probably been contemplated,
Bearing in mind the nature of the obligation
Art. 1186
The condition shall be deemed fulfilled
when the obligor voluntarily prevents its fulfillment.
Art. 1187
The effects of a conditional obligation to give,
once the condition has been fulfilled,
shall retroact to the day of the constitution of the obligation.
Nevertheless, when the obligation imposes reciprocal prestation upon
the parties,
The fruits and interests during the pendency of the condition
Shall be deemed to have been mutually compensated.
If the obligation is unilateral, the debtor shall appropriate the fruits and interests received, unless from the nature and circumstances of
the obligation it should be inferred that the intention of the person constituting the same was different.
In obligations to do and not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been
complied with.
Art. 1188
The creditor may, before the fulfillment of the condition, bring the appropriate actions for the preservation of his right.
The debtor may recover what during the same time he paid by mistake in case of a suspensive condition.
Art. 1189
When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the following rules shall
be observed in case of the improvement, loss or deterioration of the thing during the pendency of the condition:
1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;
2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is lost
when it perishes, or goes out of commerce, or disappears
3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;
4) If it deteriorates through the fault of the debtor, the creditor my choose between the rescission of the obligation and its
fulfillment, with indemnity for damages in either case;
5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor;
6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary.
CHAPTER 3
DIFFERENT KINDS OF OBLIGATIONS
See Art. 1179-1230
Classification of Obligations [PARAS]
a) According to the PRIMARY classification of Civil Code:
1.
Pure as distinguished from conditional
2.
Pure as distinguished from that with a period or term
3.
Alternative or facultative obligations (as distinguished from conjunctive)
4.
Joint as distinguished from solidary
5.
Divisible as distinguished from indivisible
6.
With a penal clause (as distinguished from those without)
b) SECONDARY classification by the Civil Code:
1.
Unilateral as distinguished from bilateral
2.
Real and Personal
3.
Determinate and Generic
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Kristine Confesor
4.
5.
6.
c) According
1.
Positive and Negative

Legal, Conventional, Penal
Civil and Natural
to Sanchez Roman, IV
According to juridical quality and efficaciousness
i. Natural- according to natural law
ii. Civil- according to civil law
iii. Mixed- according to both natural and civil laws
2.
By the parties or subjects
i. Unilateral, bilateral
ii. Individual, collective
iii. Joint, solidary
3.
By the object of the obligation
i. Specific, generic
ii. Positive, negative
iii. Real, personal
iv. Possible, impossible
v. Divisible, indivisible
vi. Principal, accessory
vii. Simple, compound
[if compound-may be
1.
Conjunctive- demandable at the same time
2.
Distributive- either alternative or facultative]
4.
Classification by the Code according to Defects:

i. No defect- valid
ii. Defective
1.
Rescissible
2.
Voidable
3.
Unenforceable
4.
Void
PRIMARY CLASSIFICATION OF OBLIGATIONS

UNDER THE CIVIL CODE
1. Demandability
a)
Pure
b)
Conditional
c)
With a period
2. Plurality of Object
a) Simple
b) Alternative
c) facultative
3. Plurality of Subject
a) Simple
b) Joint
c) Solidary
4. Performance
a) Divisible
b) Indivisible
5. Sanctions for Breach
a) With a penal clause
b) Without a penal clause
Classification of Conditions
As to effect:
Suspensive- happening of the condition gives rise to the obligation
Resolutory- the happening of the condition extinguishes the obligation
Effects:
No retroactive effect
Restore to each other what was received plus interest/fruits
As to Cause or Origin
Potestative- depends upon the will of the debtor
(Ill sell you my car if I like)

Casual- depends on chance or hazard or the will of a third person
(If I win the lotto)

Mixed- depends partly on the will of one of the parties and partly on chance or the will of a third person
(If I pass the bar)
As to Divisibility
Divisible capable of partial performance
Indivisible- not capable of partial performance because of the nature of the thing or the intention of the parties.
As to Mode
Positive- an act is to be performed
Negative something will be omitted
As to Form
Express- the condition is stated
Implied- the condition merely inferred
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Kristine Confesor
As to Possibility
Possible- capable of fulfillment in nature and in law
Impossible- not capable of fulfillment due to nature or due to the operation of the law or morals or public policy, or due to a
contradiction on its terms
GR: Impossible and illegal conditions shall annul the obligation which depends upon them
Exception:
Pre-existing obligation
If obligation is divisible
In simple or remuneratory donations
Testamentary dispositions
Conditions not to do an impossible thing

As to number
Conjunctive- if all the conditions must be performed
Alternative- if only a few of the conditions has to be performed
PURE AND CONDITIONAL OBLIGATIONS
(See Articles 1179-1190)
PURE- one whose effectivity or extinguishment does not depend upon the fulfillment or nonfulfillment of a condition or upon the
expiration of a period and is demandable at once; Nothing to exempt the debtor from compliance therewith (no
condition/date=immediately demandable)
CONDITION future and uncertain event or a past event unknown to the parties
Must be imposed by the will of the party and not a necessary requisite of a legal act
CONDITIONAL one whose effectivity is subordinated to the fulfillment of a future AND uncertain event or upon a past event unknown
to the parties
CHARACTERISTICS OF CONDITIONS
1)
Future and uncertain
An event which is NOT uncertain but must necessarily happen cannot be a condition, but a TERM.
2)
Past but unknown
Future knowledge of a past event
3)
Must NOT be impossible
PRINCIPAL KINDS
1.
Suspensive- (condition precedent/antecedent)- happening of condition gives rise to obligation; demandability is suspended until
the happening of a future and uncertain event which constitutes the condition
Birth of the contract takes place only if and when the condition happens or is fulfilled
It must appear that the performance of an act or the happening of an event was intended by the parties as a suspensive
condition
There can be no rescission (1191) of an obligation that is still non-existent, the suspensive condition not having been fulfilled
Effects:
a)
Effectivity retroacts to the day of the constitution of the obligation
b)
No retroactivity with reference to fruits or interest and prescription
c)
Creditor may preserve rights
d)
Debtor- recovery of payment by mistake or even w/o mistake
2.
Resolutory (condition subsequent) happening of condition extinguishes obligation (or right) already existing
Effects: where a contract is subject to a resolutory condition, non-compliance with or non-fulfillment of the condition resolves the
contract by force of law and without need of judicial intervention
WHEN OBLIGATION IS DEMANDABLE AT ONCE

1. When it is pure
2. Or when it has a resolutory condition
(Ill give you my car, but you should not marry Maria this year.) (This is demandable NOW).
3. When it is subject to a resolutory period (Art. 1193, 2)
[1180] comments
1)
Debtor to pay when his means permit: considers the obligation as one with a TERM or PERIOD
o Art. 1197 shall apply and the court is obliged to fix the duration of the period within which payment is to be made
[1181] comments
1)
Suspensive conditions
happening of which will give rise to the acquisition of a right (condition precedent)
not demandable at once
characterized by its efficacy or obligatory force is subordinated to the happening of a future AND uncertain event;
If the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed.
Where suspensive condition depends upon the will of the creditor, it is VALID
Positive suspensive condition:
o
Contract to sell- property on installment
o
Promise to give a book to a person if it rains the next day (uncertain event)
2)
Resolutory conditions
Conditions subsequent
Page | 56
Kristine Confesor
3)
Demandable at once
Rights already acquired are lost once the condition is fulfilled
Where resolutory condition depends upon the will of the debtor, it is VALID
Conditional Perfection of a Contract

If the Nature of the contract depends upon the fulfillment of a condition, non-fulfillment thereof means the non-perfection of the
contract since the suspensive condition should have been first fulfilled.
ACQUISITION AND
EXTINGUISHMENT OF RIGHTS
DBP v. CA
J. Padilla
FACTS:
Private respondents were original land owners of a parcel of agricultural land which they mortgaged to DBP on May 1977. When PR
defaulted in their obligation, DBP foreclosed the mortgage and emerged as sole bidder in the ensuing auction sale.
On 1984, both parties entered into A deed of Conditional Sale where DBP agreed to reconvey the foreclosed property to PRs for 73k and
the balance is payable on an installment basis for six years. The PRs religiously paid and were able to pay the full repurchase price on
1990.
However, DPB informed them that it was already legally impossible for them to reconvey the property in view of Sec. 6 of RA 6657
(CARL) approved on June 10, 1988 and Sec. 1 of EO 407 issue on June 10, 1990.
RTC ruled in favor of PR and maintained that Sec. of CARL taken in its entirety, is a provision dealing primarily with retention limits in
agricultural land allowed the landowner and his family and that the 4 th para , which nullifies any sale by the original landowner does not
cover sale by DPB as they only acquired the property through the foreclosure
CA maintained that if the obligation depends upon a suspensive condition, the demandability as well as the acquisition or
effectivity of the rights arising from the obligation is suspended pending the happening or fulfillment of the fact or event
which constitutes the condition. Once the event which constitutes the condition is fulfilled resulting in the effectivity of
the obligation, its effects retroact to the moment when the essential elements which gave birth to the obligation have
taken place.
In this case, full payment by the appellee on 1990 retroacts to the time the contract of Conditional sale was executed on
1984. As such, it cannot be covered by CARL.
It also accepted payments until full payment
EO 407 cannot affect appellants obligation since the property has already been obtained prior to the effectivity of the EO.
ISSUE: W/N it is legally impossible for the DBP to reconvey the agricultural land to its original owners due to supervening event of
enacting the laws they invoke?
HELD: No.
In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall
depend upon the happening of the event which constitutes the condition.
The deed of conditional sale executed by the parties on 1984 was faithfully complied with by PRs as they paid the full
repurchase price on 1990. They allowed PRs to fulfill the condition and they only invoked Sec. 6 of RA 6657 after full payment
and demand of PRs for the execution of Deed of Sale.
Sec. 6 of RA 6657 was enacted on June 10, 1988
(deals with any sale, lease, management contract or transfer or possession of private lands executed by
original landowner)
DBP only acquired the land through foreclosure proceedings; original owner is PR
CARL deals with retention limits
Enacted 2 months after PRs had legally fulfilled the condition in the contract of conditional sale by the payment of all
installments on their due dates. (the laws are prospective in application)
CPU v. CA
J. Padilla
Don Ramon Lopez, Sr. was a member of the Board of Trustees of the CPU who donated a parcel of land in favor of CPU (petitioner) with a
condition that the land shall be utilized by CPU exclusively for the establishment and use of a medical college with all its buildings as
part of the curriculum. (1939)
Conditions
1.
Utilized by CPU exclusively for establishment and use of medical college with all its buildings as part of the curriculum
2.
CPU must not sell/transfer/convey to any 3rd persons or encumber the land
Page | 57
Kristine Confesor
3.
It shall be called RAMON LOPEZ CAMPUS
The Heirs of Lopez, Sr. filed an action for annulment of donation and reconveyance against CPU for its failure to comply with the
conditions of the donation. It also argued that it had in fact negotiated the donated property to be exchanged with NHA.
CPU raised prescription as defense and denied having violated the conditions.
RTC ruled that CPU failed to comply with the conditions which was affirmed by CA Reversed and maintained
annotations of the title are resolutory conditions and the breach of which should terminate the rights of the donee thus
making the donation revocable.
No fixed period within which the condition must be fulfilled; hence until a period is fixed, pet could not be considered as
having failed to comply
Remanded
ISSUE: W/N the annotations are resolutory conditions and breach of which would terminate the rights of the donee and render the
donation revocable.
HELD: Yes.
The donation made was onerous and one executed for a valuable consideration which is considered the equivalent of the donation itself
since it imposes a burden (to build a medical school)
Art. 1181 of the Civil Code on Conditional Obligations: the acquisition of rights as well as the extinguishment or loss of those already
acquired shall depend upon the happening of the event which constitutes the condition.
When a person donates land to another on the condition that the latter would build upon the land a school, the condition
imposed was not a condition precedent or a suspensive condition but a resolutory one.
It is not correct to say that the schoolhouse had to be constructed before the donation became effective, that is, before the
done could become the owner of the land, otherwise, it would be invading the property rights of the donor.
The condition had to be valid before the fulfillment of the condition. If there was no fulfillment or compliance with the condition, such as
what obtains in the instant case, the donation may now be revoked and all rights which the donee may have acquired under it shall be
deemed lost and extinguished.
PRESCRIPTION DOES NOT APPLY. The condition imposed by the donor depended upon the exclusive will of the donee as to when it
shall be fulfilled. When CPU accepted the donation, it bound itself to comply with the conditions thereof. Since the time within which the
condition should be fulfilled depended upon the donees will, it has been held that is absolute acceptance and the acknowledgment of
its obligation provided in the deed of donation were sufficient to prevent the statute of limitations from barring the action of the heirs of
the donor upon the original contract.
Moreover, the time from which the cause of action accrued for the revocation of the donation and recovery of the property
donated cannot be specifically determined in the instant case.
Period must then be counted from the day on which the corresponding action could have been instituted. (legal possibility of
bringing the action as starting point)
In this case, the reckoning point is the expiration of a reasonable opportunity for CPU to fulfill (court must determine this)
Art. 1197 APPLIES WHERE PERIOD IS NOT FIXED. The courts may fix the duration because the fulfillment of the obligation itself
cannot be demanded until after the court has fixed the period for compliance therewith and such has arrived.
BUT NOT IN THIS CASE. More than reasonable period of 50 years has already been allowed for CPU to avail of the
opportunity to comply with the condition even if it be burdensome, but it failed to do so.
Art. 1191 When one of the obligors cannot comply with what is incumbent upon him, the oblige may seek rescission and the court shall
decree the same unless there is just cause authorizing the fixing of a period. In the absence of any just cause for the court to determine
the period of the compliance, there is no more obstacle for the court to decree the rescission claimed.
[1182] comments
POTESTATIVE CONDITIONS
- a condition both potestative and resolutory may be valid even if the condition is made to depend upon the will of the obligor
1)
Potestative, Casual, and Mixed Conditions

a.
Potestative- depends on the exclusive will of one of the parties
b.
Casual- depends on chance or upon the will of a third person
2)
Potestative (Facultative) Condition

a.
On part of debtor
i. If suspensive- both the condition and obligation are VOID, for the obligation is illusory (Ill give you 1000
next month if I live)
(Ill pay you only after I have harvested fish)
ii.
b.
If resolutory- VALID
(A promises to put in possession his house in Phil to B while A is abroad, but requires that the house be
returned to As possession in the event A returns, the condition is VALID as it is in resolutory character)
On part of the creditor- VALID

(Ill give you my fountain pen if you desire to have it)
but if the potestative condition is imposed not upon the birth of the contract but on the fulfillment, only the condition is
avoided, leaving the obligation unaffected
o
court must fix a period
Page | 58
Kristine Confesor
[1183 ] comments
IMPOSSIBLE AND ILLEGAL CONDITIONS
GR: They shall annul the obligation which depends upon them
Except:
a)
Pre-existing obligation
b)
Divisible obligation
c)
Simple or remuneratory donations
d)
Testamentary dispositions
e)
Conditions not to do an impossible thing
Only applies to positive suspensive conditions

Only applies to contracts
Classification
a) Impossible
a.
Physically- to make a dead man alive
b.
Logically- to make a circle and at the same time square
b) Illegal
a.
Prohibited by good customs, public policy, prohibited, directly, or indirectly, by law, like killing X, a friend
Effects:
a) If the condition is to do an impossible or illegal thing, BOTH the condition and the obligation are VOID (because the debtor
knows that no fulfillment can be done and therefore is not serious about being liable)
a.
Ill sell you my land if you can make a dead man live again
b) If the condition is NEGATIVE, that is, not to do the impossible, just disregard the condition BUT the obligation remains.
a.
Ill sell you my land if you cannot make a circle that is at the same time square (useless; doesnt make sense)
c) If the condition is NEGATIVE, i.e. not to do an illegal thing, both the condition and the obligation are VALID
a.
Ill sell you my land if you do not kill X. (Valid, if you kill X, you cannot but the land)
NB: Example given only applies to ObliCon, not to Testamentary dispositions or Donations because in such cases,
impossible or illegal condition is just disregarded, and the disposition or donation remains valid. Reason: the liberality of the
giver is the consideration of the gift
Rulings:
The duty of a successful bidder to make a construction within one and one-half years from the award is extinguished, if
because of the confiscation of his materials by the Japanese army, the work has become physically impossible.
FACTS: Seller owned a piece of land mortgaged to X. Land was sold to buyer on the condition that the mortgage would first be
cancelled. Seller, however, could not have contact with X.Issue: Is he still bound to sell?
HELD: No, since the condition has become impossible.
If some conditions in a contract are impossible to comply with, the insurer cannot validly assert a breach of said conditions.
[1184] comments
POSITIVE CONDITIONS
Extinguished if time expires or
indubitable of condition to happen

Example: Ill give you my land if you marry Maria X this year. If by the end of the year, Maria X is already dead, or you have not yet
married her, the obligation is extinguished.
If the period is not fixed in the contract, the court, considering the parties intentions, should determine what period was really
intended.
[1185]
NEGATIVE CONDITIONS
Effective from the moment the time elapsed, or
Evident that it cannot happen
If no time or period is fixed, it is deemed fulfilled at such time as may have probably been contemplated has elapsed
Bearing in mind the nature of the obligation
Example: Ill give you P1m if by 10/1/2005 you have not yet
married Maria X. If by said date, you are not yet married, or if prior thereto, Maria X had died, the obligation is effective in the first
case, from Oct. 1, 2005; and in the second case, from Marias death.
[1186]
CONSTRUCTIVE OR PRESUMED FULFILLMENT
Reason: one must not profit by his own fault
Requisites:
a)
Intent of the obligor to prevent the fulfillment of the obligation
either maliciously or not, the intent to prevent must be present
b)
actual prevention of compliance
intention without prevention or prevention without intention is not sufficient. But intention and prevention in the exercise of a
lawful right will not render this article applicable.
Example:
A promised to sell to B a car if C could pass the bar. On the day of the examination, A caused C to be poisoned and be hospitalized. A is
still bound to sell the car. (If, however, it turns out that C was really disqualifed to take the bar, as when he had not finished high school,
or had taken his first year law in the prohibited special class, A is not bound.)
Page | 59
Kristine Confesor
FACTS: A employed B for 2 years unless within 6 months, machinery already ordered would not, for any reason, arrive. A cancelled the
order, so the machines did not arrive. At the end of six months B was discharged. B now claims salary for the period of two years on the
ground that the debtor (A) had voluntarily prevented compliance with the condition. HELD: B has no right. First, because the condition
here is resolutory and not suspensive; second, it was expressly agreed that the failure to arrive could be for any reason, including As
own acts. Ordinary words should be given their ordinary significations, unless the parties intended otherwise
Although in general, Art. 1186 applies only to a suspensive condition, it may sometimes apply to a resolutory condition
as in this case: A sold land now to B on condition that B marries C within one year, otherwise B should return the land. If A kills C, B does
not have to return the land. This is because A is at fault
CONSTRUCTIVE FULFILLMENT
TAYAG v. CA & Leyva

J. Melo
FACTS:
Deed of conveyance was executed on May 28, 1975 by Juan Galicia Sr and sister Celerina in favor of Leyva involving an undivided
portion of a piece of land. In consideration was an amount of 50k to be paid under the ff terms
1.
3k dp
2.
10k to be paid 10 days after execution
3.
10k to substitute indebtedness in PVB
4.
27k within 1 year
An action
1.
2.
3.
4.
for specific performance was filed by Leyva which ruled in their favor while Heirs opposed alleging breach of conditions:
3k paid
10 k staggered but only 9k was paid
10 k for PVB, only 6k was paid
27 k not paid
RTC upheld the theory of Constructive notice under 1186 and estoppel through acceptance of piecemeal payments in line with Article
1235 of the Civil Code. Josefina tayag admitted that the check issued as payment of the second installment was paid on staggered basis
when it was dishonored; 3rd condition: Leyva paid BUT the sister co-vendor paid almost 4k which circumstance was construed
to be a ploy under Art. 1186 of the Civil Code that prematurely prevented plaintiff from paying the installment fully
and for the purpose of withdrawing the title of the lot.; The acceptance by petitioners of the various payments even beyond
the periods agreed upon, was perceived as tantamount to faithful performance of obligation under Art. 1235 CC. ; Leyva also consigned
an amount to offset the remaining balance Petitioners are of the impression that the contract must be rescinded and
ISSUE:
Did CA err in applying 1186 on constructive fulfillment where the proviso speaks of an obligor, while the petitioners are obligees? NO
HELD:
Instead of filing the case precisely to rescind the instrument because of non-compliance, they allowed PR to effect numerous payments
after the grace periods in the contract. They even permitted PRs to take the initiative in filing a case for specific performance against
them which is akin to a waiver or abandonment of their right to rescind normally under Art. 1191 of the Civil Code.
When the oblige accepts the performance, knowing its completeness or irregularity, and without expressing any protest or objection, the
obligation is deemed fully complied with.
The right to rescind is not absolute and will not be granted where there has been substantial compliance by partial payments. By and
large, petitioners actuation is susceptible of but one construction- that they are now estopped from reneging from their commitment on
account of acceptance of benefits arising from overdue accounts of PR.
Yes. CA correctly applied 1186 anent the third item of the contract.
In a reciprocal obligation like a contract of purchase, both parties are mutually obligors and also obligees, and any of the
contracting parties may, upon non-fulfillment by the other privy of his part of the prestation, rescind the contract or
seek fulfillment (Art. 1191).
Petitioners are also bound as obligors to respect the stipulation in permitting PR to assume the loan with the PVB which
petitioners impeded when they paid the balance of said loan. As vendors, they are supposed to execute the final deed of sale
upon full payment of the balance as determined thereafter.
[1187] comments
EFFECTS OF FULFILLMENT OF SUSPENSIVE CONDITIONS
GR: The obligation becomes effective from the time the obligation was constituted
Except:
1)
fruits or interests during pendency of the condition
unilateral obligations, debtor gets the fruits and interests unless there is contrary intent
in reciprocal obligations, the fruits and interests during the pendency of the condition shall be deemed to compensate each
other
personal obligations, courts shall determine the retroactive effect of the condition that has been complied
2)
period of prescription
Scope of Fruits
Fruits refer to natural, industrial, and civil fruits (rent)
[1188]
Page | 60
Kristine Confesor
1. ACTION TO PRESERVE CREDITORS RIGHTS
Reason: if not allowed to take the appropriate actions, there is a danger the creditor will receive nothing, as when the object is
deliberately destroyed, or hidden, or alienated
a.
To prevent loss/deterioration, enjoin and restrain acts of alienation or destruction by the debtor himself or by 3 rd persons
b.
Prevent concealment of the debtors properties which constitute the guaranty in case of nonperformance of the obligation
c.
Demand security in case the debtor becomes insolvent
d.
To compel the acknowledgment of the debtors signature on a private document or the execution of the proper public documents
for registration so as to affect 3rd persons
e.
Register the deeds of sale or mortgages evidencing the contract
f.
Set aside fraudulent alienations made by the debtor
g.
Interrupt the period of prescription by actions against adverse possessors of the things which are the objects of the obligation
Example:
ISSUES:
(a) Pending fulfillment of the conditions (such as the employees
service), do the employees have any right with respect to the pension plan?
(b) Would financial losses during the war authorize abolition
of the plan?
HELD:
(a) Pending fulfillment of the conditions, the employees have
a right in expectancy, which the law protects. Hence, under
Art. 1188, appropriate actions may be taken by them.
(b) Financial losses will not excuse abolition of the pension plan because the obligation to pay money is an obligation to give a GENERIC
thing.
RIGHT OF DEBTOR TO RECOVER WHAT WAS PAID BY MISTAKE
Reason: Solutio Indebiti, After all, the condition may not materialize
The debtor is also entitled to fruits or legal interest if the creditor be in BAD FAITH, that is, if the creditor knew that payment
was being made prior t the fulfillment of the condition
If not paid by mistake, can there be recovery?
1) If the condition is fulfilled, none (because of retroactivity)
2) If not fulfilled, there is recovery (for this would be unjust enrichment) unless a pure donation was intended
[1189] comments
RULES ON LOSS, DETERIOARATION, AND IMPROVEMENTS DURING PENDENCY OF A SUSPENSIVE CONDITION (Art. 1189)
Improvement
If by nature or by time inures to the

benefit of the creditor
If at the expense of the debtor debtors

right is only that or a usufructuary
Requisites for application of 1189

1) The obligation must be a real obligation (to give)
2) The object is a specific or determinate thing
3) The obligation is subject to a suspensive condition
4) The condition is fulfilled
5) There is loss, deterioration, or improvement of the thing during the pendency of the happening of the condition
LOSS
Perishes
Goes out of commerce
Disappears, in such a way that its existence is unknown
Disappears, in such a way that it cannot be recovered

Effects of partial loss
That would amount to loss important enough to be considered a complete loss (determined by the courts)
That would merely be considered a deterioration of the thing, in which case the rules on deterioration should apply
Deterioration
Any reduction or impairment in the substance or value of a thing which does not amount to a loss
If not imputable to the debtor, he is not liable for any damages
But if due to fault of debtor, then creditor may either demand the thing or ask for rescission, w/ damages in either case
Improvement of a thing
Anything added to or incorporated in, or attached to the thing that is due, is an improvement.
If caused by nature of the thing or by time, such as alluvion or deposits of soil on the edge of the land bordering a river, or the
natural growth of trees or plants on a piece of land, the improvement shall inure to the benefit of the creditor (principle of
retroactivity)
If done at the expense of the debtor, rights of usufructuary (579, 580)- improvements may be removed without damage
1190. RESOLUTORY CONDITION HAPPENING; MUTUAL RESTITUTION

When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said
conditions, shall return to each other what they have received
In case of loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in the
preceding article which shall be applied to the party who is bound to return
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Kristine Confesor
As for obligations to do and not to do, the provisions of the second paragraph of Art. 1187 shall be observed as regards to the effect of
the extinguishment of the obligation
[1190] Comments
Rights of 3rd Persons
the happening of a resolutory condition does not ipso jure revest ownership in him; he merely becomes entitled to the delivery
which would give him the ownership anew. (personal right)
Loss, Deterioration, Improvement
before the RC happens, the party who has a right, is practically in the same position as one who has an obligation subject to a
suspensive condition; there is the possibility that he may have to return or deliver the thing to the other party, and that possibility
becomes a positive duty when the resolutory condition is fulfilled; in case of loss of the thing, deteriorations suffered by it, or
improvements made thereon, the provisions of Article 1189 shall apply
Fruits and Interests
no express provision unlike in reciprocal obligation where pending the happening of a suspensive condition, fruits and interests
compensate each other and in unilateral obligations, the debtor shall keep the fruits received
expenses incurred by the person obliged to make restitution should be deducted from the gross value of the fruits to be returned
Protection of Rights
party who would be entitled to restitution from the other in the event of resolutory condition is fulfilled, stands in the same position
as a creditor in an obligation with a suspensive condition, in that he has expectancy of recovery of the thing.
Pending the fulfillment of resolutory condition, therefore, he should be entitled to take the same steps and bring the same actions
allowed to the creditor under the 1st para. of art. 1188 for the protection of his rights.
1191. RECIPROCAL OBLIGATIONS
The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent
upon him.
The injured party may choose between
the fulfillment and
the rescission of the obligation,
with the payment of damages in either case.
He may also seek rescission, even after he has chosen fulfillment,
if the latter should become impossible.
The court shall decree the rescission claimed,
Unless there be just cause authorizing the fixing of the period.
This is understood to be without prejudice to the rights of 3rd person who have acquired the thing,
In accordance w/ articles 1385 and 1388 and the Mortgage Law.
[1191] Comments:
RECIPROCAL OBLIGATIONS
Arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is
dependent upon the obligation of the other.
To be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other
Tacit Resolutory Condition
Condition imposed exclusively by law, even if there is no corresponding agreement between the parties
When one party has performed his part of the contract, the other party incurs in delay
Declaration of Rescission by the Injured Party
Does not require rescission by the courts
Extrajudicial declaration by the creditor, electing rescission produces legal effect
Mere failure of one party to perform his undertaking does not ipso jure produce the resolution of the contract; the party entitled to
resolve should apply to the court for a decree of rescission or resolution
In the absence of previous judicial decree declaring resolved the contract of sale of property by reason of the failure of the vendee
to pay the stipulated price, the vendor cannot just recover possession of the property or sell the same to another person
NB:
If the obligation has not yet been performedrescission by the party who is ready and willing to perform would suffice
But where the injured party has already performed such as when property has already been delivered by him, he cannot by his own
declaration rescind the contract and reacquire title to the property, if the other party opposes the rescission; court action must be
taken
1192.
In case both parties have committed a breach of the obligation,
The liability of the first shall be equitably tempered by the courts.
If it cannot be determined which of the parties first violated the contract,
The same shall be deemed extinguished, and
Each shall bear his own damages.
RESCISSION/RESOLUTION
(1191)
CANNU v. GALANG
Page | 62
(resolution in 1191 is a principal action)
Kristine Confesor
J. Melo
FACTS:
Spouses Galang obtained a loan from Fortune Savings and Loan Association (FSLA) for 173k to purchase a House and Lot. To secure
payment, a real estate mortgage was constituted on the said property in favor of the bank. Subsequently, National Home Mortgage
Finance Corp (NHMFC) purchased the mortgage loan of the spouses from FSLA for 173k.
Galang (wife) authorized her atty-in-fact to sell the H&L in favor of Leticia Cannu who agreed to buy the property for 120k and assume
the balance of the mortgage obligations w/ the NHMFC and with CERF realty
Date
July 19, 1990
Amount paid
40k
March 13, 1190
15k
April 6, 1991
November 28, 1991
Balance
45k
15k
5k
Total
75k
A deed of sale w/ Assumption of Mortgage obligation was made and entered into by the parties which stated among others that a
consideration of 250k was received by the vendors. Cannus then immediately took possession of the property and paid 55k to NHMFC
and paid the equity or second mortgage to CERF.
Despite requests from Timbang and Galang to pay the balance of 45k, or in the alternative vacate the property, Cannus
refused. On the other hand, the Cannus informed the NHMFC of their assumption of mortgage which was not formally approved by the
mortgagee.
Since Cannus failed to comply with their obligations, Galang paid 200k as full payment of her remaining mortgage loan
with NMHFC. However, the release of the TCT in favor of the Galangs was held in abeyance due to the opposition made by the Cannus
(they subsequently filed a specific performance against NMFHC)
NMFHC claimed that Cannus have no cause of action against it because they have not submitted the formal requirements. While
Galangs said that their failure to fully pay the consideration and update the monthly amortizations with the NHMFC, they
paid full the existing obligations as an initial step in the rescission and annulment of the Deed of Sale with Assumption
of Mortgage.
RTC: no cause of action; admitted failure to pay 45k in consideration of the deed of sale w/ assumption of mortgage obligation (breach of
contract); no legal personality since failed to comply with formal requirements
CA: breach is substantial; rescission is warranted and justified
Out of the 250k purchase price which was supposed to be paid on the day of the execution of the contract in July, 1990, they only paid
in the span of 8 years from 1990 to present the amount of 75k.
Tender made by Cannus after the filing of the case in the amount of 278k cannot be considered as an effective mode of payment. It
must not be by tender alone but by tender and consignation.
1990-1993 only six payments; not even sufficient for arrears and interests and penalties
ISSUES:
1st error: Was the breach substantial so as to warrant rescission? Yes.
2nd error: Was there non-compliance with the monthly amortization? Yes.
3rd error: Did the facts and circumstances militate against rescission? No
4th error: Is the action for rescission subsidiary? No
HELD:
#1: Yes
Art. 1191 the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is
incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even after he has chosen fulfillment if the latter should become impossible. The
court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
Rescission will not be permitted for a slight or casual breach of the contract. Rescission may be had only for such
breaches that are substantial and fundamental as to defeat the object of the parties in making the agreement. The
question of whether a breach of contract is substantial depends upon the attending circumstances and not merely on the percentage of
the amount not paid.
In this case, petitioners failure to pay the remaining balance of 45k is substantial. Even if assuming arguendo that it is the remaining
balance left out of 250k or 18%, it is still substantial take together with the fact that the last payment was made only 18mos. before
Galang paid the outstanding balance of the mortgage loan. The tender was only made 7months after the filing of the case; it is not legal
payment unless it is completed by consignation.
#2: Yes
Petitioners were not religious in paying the amortization with the NHMFC, as admitted by them in a span of 3 years from 1990-93.
There was no formal assumption of mortgage obligation with NHMFC because of the lack of approval on account of petitioners nonsubmission of requirements in order to be considered as assingnees/successors-in-interest over the property covered by the mortgage
obligation.
#3. The Atty-in-fact made constant follow-ups after the last payment made on 1991 but petitioners did not pay. Galang in her answer
stated that she ordered Cannus for the complete compliance of their obligation by paying the full amount of the consideration or in the
alternative vacate the property in question.
Page | 63
Kristine Confesor
The fact that they later accepted installments does not constitute waiver on their part to exercise their right to rescind
the Deed of Sale with Assumption of Mortgage. It was merely accepted as accommodation to petitioners since they kept on
promising they would pay. But still, 18 months have lapsed and it never fully paid.
Galangs exercised their right of rescission when they paid the outstanding balance of the mortgage loan with NHMFC. It was only after
petitioners stopped paying that Galangs moved to exercise such right.
Right to rescind or resolve can be demanded only if the plaintiff is ready, willing and able to comply with his own obligation, and the
other is not (paras)
#4. RESOLUTION UNDER 1191 IS A PRINCIPAL ACTION UNLIKE IN 1381. The rescission on account of breach of stipulations is not
predicated on injury to economic interests of the plaintiff but on the breach of faith by the defendant. It is not a subsidiary action, and
Article 1191 may be scanned without disclosing anywhere that the action for rescission thereunder is subordinated to anything other
than the culpable breach of his obligations by the defendant. This rescission is principal action retaliatory in character, it being unjust
that a party be held bound to fulfill his promises when the other violates his. Hence, reparation of damages for the breach is purely
secondary.
On the contrary, rescission by reason of lesion or economic prejudice, the cause of action is subordinated to the existence of that
prejudice, because it is the raison deter as well as the measure of the right to rescind. Hence, when the defendant makes good the
damages caused, the action cannot be maintained or continued. But the operation of this provision is limited to rescission enumerated
under 1381.
#5. UNILATERAL RESCISSION OF CONTRACT. The power to rescind obligations is implied in reciprocal ones in case one of the
obligors should not comply with what is incumbent upon him. However, it is likewise settled in the absence of any stipulation to the
contrary, this power must be invoked judicially; it cannot be exercised solely on a partys own judgment that the other has committed a
breach of the obligation. Where there is nothing in the contract empowering the petitioner to rescind it without resort to the courts, the
petitioners action is unilaterally terminating the contract is unjustified [Tan v. CA]
In the case at bar, Galangs should have asked for judicial intervention to obtain judicial declaration of rescission. Be that as it may, the
court still considered it to avoid the issues to undergo a new litigation since it was already found that the petitioners have substantially
breached the contract.
PAGTALUNAN v. DELA CRUZ

(Maceda Law, Unlawful detainer)
J. Azcuna
FACTS:
Patricio Pagtalunan entered into a Contract to Sell with respondent whereby the former agreed to sell and the latter to buy a house
and lot which formed half of a parcel of land owned by Patricio for a purchase price of 17, 800 to be paid with a DP of 1,500 and through
monthly installments of 150.
Among the stipulations in the contract is that respondent could immediately occupy the house and lot and in case of default of payment
of any of the installments and upon lapse of 90 days after its due date, the contract would be automatically rescinded without need of
judicial declaration and all the payments made will be considered as rentals.
Petitioners claimed
Respondents only paid 12, 950 and stopped paying on 1979
Kasunduan (respo borrowed 3k payable in 1 year but failed at it so it would be added to the monthly amortizations)
Her status as buyer automatically converted to lessee upon non-payment; continued possession was by mere tolerance
Respondent alleged
Patricio changed his mind and offered to refund all her payments provided she would surrender the house, but she refused
Harassments and demolitions plus nonpayment ensued
Admission of nonpayment but resumption of payment made on 1980
Patricio never sued for ejectment despite delayed payment
Accepted delayed payments
Agreement where Patricio consented to the suspension of installments but Patricio resumed demolishing even before the
lapse of period agreed upon
Brgy. Capt. Said she should continue w/ suspension until her materials be returned by Patricio which he did not do until he
died
Denied about kasunduan
MTC (unlawful detainer case)
Although the Contract to Sell provides for a rescission of the agreement upon failure of the vendee to pay any installment,
what the contract actually allows is properly termed a resolution under 1191
Respondents failure to pay not a few installments caused the resolution or termination of the Contract to Sell
Last payment was made on January 9, 1980 and thereafter respondents right ceased to be a legal right and became
possession by mere tolerance
RTC reversed
Agreement could not be automatically rescinded since there was delivery to the buyer
Judicial determination of rescission must be secured as a condition precedent to convert the possession de facto of
respondent from lawful to unlawful
CA found that
Lower courts did not consider the MAceda Laws application which protects the buyers of real estate on installment payments
against onerous and oppressive conditions
Under said law, a buyer who has paid atleast two years of installments has a grace period of one month for every year of
installment paid
Petitioner contends that
his demand letter be considered as a notice of cancellation for it would be a mere superfluity on part of the seller to have a
rescission by a notarial act.
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Kristine Confesor
-
Assuming Patricio accepted payments after delayed installments, such act cannot prevent the cancellation of the Contract to
Sell.
ISSUE: W/N the contract to sell was validly cancelled.

HELD: NO.
non-compliance of the Maceda Law.
RA 6552 or the REALTY INSTALLEMNT BUYER PROTECTION ACT governs the sale of real estate on installment. Petitioner must prove
that the Contract of sell had been cancelled in accordance with this law which provides among others that:
If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments of the property
equivalent to 50% of the total payments made and after 5 years of installments, an additional 5% every year.
The actual cancellation of the contract shall take place after 30 days from receipt by the buyer of the notice of cancellation or
the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender of the value to the
buyer.
This law recognizes the rights of seller to cancel the contract upon nonpayment of an installment by the buyer which is simply
an event that prevents the obligation of the vendor to convey title from acquiring binding force. Cancellation of the contract to
sell may be done outside the court particularly when the buyer agrees to such.
However, the cancellation of the contract by the seller must be by a

o
notarial act of rescission and must also
o
refund to the buyer of the full payment of the cash surrender value of the payment of the property.
o
Actual cancellation of the contract takes place after 30 days from receipt by the buyer of the notice of
cancellation or the demand for rescission.
Non-compliance
Patricio died without cancelling the contract; petitioner likewise failed to cancel in accordance w/ the law
Demand letter cannot operate as a substitute to the requirement of a rescission by a notarial act
Filing of the case does not exempt him from complying with the requirement unlike in Layug where the case is one for
annulment of contract which is akin to the concept of rescission by notarial act
Refund is likewise required; cash surrender value cannot be substituted by the rentals of the property after respondent failed
to pay the installments due as the law does not provide a different mode of refund.
22 years of continued possession also noted
Allowed to balance the purchase price
Filing of complaint as reckoning point for determining the period for interests
DIEGO v. DIEGO (Oral contract to sell)

J. Del Castillo
FACTS:
Nicolas entered into an oral contract to sell with his brother Rodolfo where he sold his share in a family building in consideration of an
amount of 500k. DP was 250k, the remaining half remained unpaid. It being a contract to sell, Nicolas still retains ownership. The rents
of the building however, were remitted to by their brother, who was designated as administrator of the family building to Rodolfo. He
demanded his two brothers to make an accounting and remit his share in the rents and fruits of the building but it remained unheeded.
Hence, a suit was filed. Rodolfo however countered that Nicolas could no longer claim of the rents to the building since it was already
sold to him and that he would pay the balance only after Nicolas would execute the deed of absolute sale.
RTC dismissed
As early as 1993, Nicolas was no longer entitled to the fruits of his share in the building upon acceptance of the partial
consideration of his share in the building, it being a contract of sale that was perfected.
It was in 1997 when plaintiff was being required by Eduardo to sign the Deed of Absolute sale, hence no default on Rodolfos
part.
Equity and fairness dictate that defendant has to execute the necessary document regarding the sale of his share to
defendant
250k balance will only be due and demandable when Nicolas executes a absolute deed of sale
CA
Sustained
No valid rescission
o
Theres already a partial payment
o
Nicolas had already performed his part regarding the contract
o
Rodolfo opposes the rescission
No period was stipulated within which Rodolfo shall deliver the balance of the purchase price and he should have acted to
have it fixed by the courts; hence, no default
He can only demand payment, nothing more
ISSUE: W/N what transpired is a Contract to Sell or Contract of Sale
HELD:
Contract to Sell Indicators
The stipulation to execute a deed of sale upon full payment of the purchase price is a unique and distinguishing characteristic
of a contract to sell. It also shows that the vendor reserved title to the property until full payment.
The absence of a formal deed of reconveyance
Acknowledgment receipt signed by Nicolas as well as the contemporaneous acts of the parties show that they agreed on a
contract to sell, NOT of sale.
Parties could have executed a document of sale upon receipt of the partial payment but they did not
No intention to immediately transfer title over his share but only upon payment of the total purchase price
Hence, Nicolas cannot be compelled to deliver the property until after the full-payment of the buyer
Nicolas did not surrender the title/possession to Rodolfo
Nature; repeated demands to return the fruits
Repeated demands to execute the deed of sale, recognition of nics ownership
Page | 65
Kristine Confesor
The contract is terminated or cancelled. The remedy of rescission is not available to parties in a contract to sell. If the
vendor should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not
rescinding it since he retains ownership. Full payment of the purchase price partakes of a suspensive condition, the nonfulfillment
of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective buyer. It does not, by itself,
transfer the ownership to the buyer.
It was error for the CA to rule that Nicolas should have filed a case to fix a period for Rodolfos payment of the balance of the purchase
price. It was not Nicolas obligation to compel Rodolfo to pay, it is the latters duty.
Rodolfo and Eduardo hired the services of an accounting firm for the purpose of estimating the amount to which Nicolas still
owes Rodolfo as a consequence of the unconsummated verbal agreement
The report said that after the revocation of Nicolas, the DP was considered as loan by Nicolas to Rodolfo which should earn
18% interest. Nicolas opposed, it was not previously agreed upon
Eduardo is solidarily liable with Rodolfo as regards the share of Nicolas in the rents. Bad faith, abuse of authority, complicity
Eduardo must be held solidarily liable with Rodolfo
GOTESCO PROP v. EUGENIO & FAJARDO

J, Perlas-Bernabe
FACTS:
Sps Fajardo entered into a Contract to Sell with GPI for the purchase of a subdivision lot owned and developed by the latter. Under the
contract, Sps Fajardo undertook to pay the purchase price of 126k within 10 yr including the interest at the rate of 9% /annum. GPI
agreed to execute the final deed of sale in favor of Sps Fajardo upon full payment of the stipulated consideration. However, despite its
full payment of the price and subsequent demands, GPI failed to full its obligation and to deliver the title and physical possession of the
subject lot. Thus, Sps Fajardo filed before the HLURB a complaint for specific performance or rescission of contract against GPI.
Sps Fajardo
Violation sec. 20 of PD 957 due to its failure to construct and provide water facilities, improvements, etc.
Failed to provide boundary marks for each lot and the mother title had no technical description and was even levied in BSP
w/o their knowledge
They pray to deliver or in the alternative, cancel or rescind and refund the total payments made plus legal interest
Gotesco
HLURB
-
Sps are already aware that the title had no technical description
Failure to deliver the title to subject lot was beyond their control because while GPIs petition for inscription of technical
description was favorably granted, the same was reversed by CA which caused the delat in the subdivision of the property
into individual lots w/ individual titles
Hence, 1191 does not apply since they were actually willing to comply w/ their obligation but were only prevented from doing
so due to circumstances beyond their control
GPIs obligation to execute the corresponding deed and to deliver the TCT and possession of the subject lot arose and thus
became due and demandable at the time the Sps had fully paid the purchase price for the subject lot
Consequently, GPIs failure to meet the said obligation constituted SUBSTANTIAL BREACH of the contract which perforce
warranted ITS RESCISSION. Hence, they have the option to recover the money
ISSUE: Does the Sps have the right to rescind the contract
HELD: Yes
It is settled that in a contract to sell, the seller's obligation to deliver the corresponding certificates of title is simultaneous and reciprocal
to the buyer's full payment of the purchase price. In this relation, Section 25 of PD 957, which regulates the subject transaction, imposes
on the subdivision owner or developer the obligation to cause the transfer of the corresponding certificate of title to the buyer upon full
payment
GPI only filed a petition for inscription after almost 8 years after the acquisition of said property from its original owner.
Moreover, despite petitioners allegation29 that the claim of BSP had been settled, there appears to be no cancellation of the
annotations30 in GPIs favor. Clearly, the long delay in the performance of GPI's obligation from date of demand on September
16, 2002 was unreasonable and unjustified. It cannot therefore be denied that GPI substantially breached its contract to sell
with Sps. Fajardo which thereby accords the latter the right to rescind the same pursuant to Article 1191 of the Code, viz:
ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with
what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with
articles 1385 and 1388 and the Mortgage Law.
RESCISSION DOES NOT MERELY TERMINATE THE CONTRACT AND RELEASE THE PARTIES FROM FURTHER OBLIGATIONS TO
EACH OTHER, BUT ABROGATES THE CONTRACT FROM ITS INCEPTION AND RESTORES THE PARTIES TO THEIR ORIGINAL
POSITIONS AS IF NO CONTRACT HAS BEEN MADE. Consequently, mutual restitution, which entails the return of the benefits that
each party may have received as a result of the contract, is thus required. To be sure, it has been settled that the effects of rescission as
provided for in Article 1385 of the Code are equally applicable to cases under Article 1191, to wit:
xxxx
Mutual restitution is required in cases involving rescission under Article 1191. This means bringing the parties back to their
original status prior to the inception of the contract. Article 1385 of the Civil Code provides, thus:
Page | 66
Kristine Confesor
ART. 1385. Rescission creates the obligation to return the things which were the object of the contract, together with their
fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return
whatever he may be obligated to restore.
Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third
persons who did not act in bad faith.
In this case, indemnity for damages may be demanded from the person causing the loss.
This Court has consistently ruled that this provision applies to rescission under Article 1191:
Since Article 1385 of the Civil Code expressly and clearly states that "rescission creates the obligation to return the things which
were the object of the contract, together with their fruits, and the price with its interest," the Court finds no justification to
sustain petitioners position that said Article 1385 does not apply to rescission under Article 1191.
In this light, it cannot be denied that only GPI benefited from the contract, having received full payment of the contract price plus
interests as early as January 17, 2000, while Sps. Fajardo remained prejudiced by the persisting non-delivery of the subject lot despite
full payment. As a necessary consequence, considering the propriety of the rescission as earlier discussed, Sps. Fajardo must be able to
recover the price of the property pegged at its prevailing market value consistent with the Courts pronouncement in Solid Homes
Indeed, there would be unjust enrichment if respondents Solid Homes, Inc. & Purita Soliven are made to pay only the purchase price
plus interest. It is definite that the value of the subject property already escalated after almost two decades from the time
the petitioner paid for it. Equity and justice dictate that the injured party should be paid the market value of the lot, otherwise,
respondents Solid Homes, Inc. & Purita Soliven would enrich themselves at the expense of herein lot owners when they sell the same lot
at the present market value. Surely, such a situation should not be countenanced for to do so would be contrary to reason and therefore,
unconscionable. Over time, courts have recognized with almost pedantic adherence that what is inconvenient or contrary to reason is
not allowed in law.
On this score, it is apt to mention that it is the intent of PD 957 to protect the buyer against unscrupulous developers,
operators and/or sellers who reneged on their obligations .Thus, in order to achieve this purpose, equity and justice dictate that
the injured party should be afforded full recompense and as such, be allowed to recover the prevailing market value of the undelivered
lot which had been fully paid for.
MAGLASANG v. NORTHWESTERN UNIVERSITY

(IBS)
J, Sereno
FACTS:
Northwestern, an educational institution offering maritime-related courses engaged the services of a QC-based firm, GL Enterprises
(Maglasang) to install a new IBS in Laoag. The installation of an IBS used as the students training lab was required by CHED to schools
offering maritime transportation programs. Fort this purpose, the parties executed two contracts.
Total cost- 3.8m
Trade in value of OLD IBS- 1m
Discount- 100k
Payment-1m
Common to both contracts are the ff provisions
1.
The IBS and its components must be compliant with the International Maritime Organization and CHED standard and w/
manuals for simulators/major equipment;
2.
Contracts may be terminated if one party commits a substantial breach of its undertaking and
3.
Dispute under the agreement shall first be settled mutually between the parties, and if settlement is not obtained, resort shall
be sought in the courts of law
Northwestern
paid 1m as DP to GL Enterprises who in turn assumed possession of Northwesterns old IBS as trade-in payment for its service.
Thus the balance of the contract price remained at 1.97 m.
-
2 months after the execution of the contract, Northwestern halted the installment operations of GLE upon finding that the
materials are substandard (components were old, did not have instruction manuals, and warranty certificates; contained
indications of being reconditioned; did not meet IMO and CHED stds.
demanded compliance w/ agreement and suggested that GLE meet w/ its representatives to settle the situation. Instead of
heeding this suggestion,
prayed for the rescission of contracts
Instead of heeding the demand, filed a complaint for breach of contract and prayed for the payment of the remaining balance.
Both are at fault; each party must bear his own loss
Northwestern unduly halted the operations
GLE delivered substandard equipment
Mutual restitution and restore to original situation
GLE is at fault
Since the parties essentially sought to have an IBS compliant with the CHED and IMO stds, it was GLEs delivery of defective
equipment that materially and substantially breached the contracts.
Northwestern only exercised ordinary prudence to prevent inevitable rejection of the IBS
Declared rescission under 1191 and ordered mutual restitution
GLE
RTC
CA
Page | 67
Kristine Confesor
ISSUE: W/N GLE committed substantial breach of contract
HELD: Yes
The power to rescind the obligations of the injured party is implied in reciprocal obligations, such as in this case. See 1191
The two contracts require no less than substantial breach before they can be rescinded. Since the contracts do not provide for a
definition of substantial breach that would terminate the rights and obligations of the parties, we apply the definition in our
jurisprudence.
In Cannu v. Galang
Substantial breaches are fundamental ones that defeat the object of the parties in entering into an agreement since the law is
not concerned with trifles.
W/N it is substantial depends upon the circumstances

In this case,
Parties explicitly agreed that the materials to be delivered must be compliant with the CHED and IMO stds and must be
complete w/ manuals
According to CHED Memo, any simulator used for simulator-based training school shall be capable of simulating the operating
capabilities of the shipboard equipment concerned; must achieve physical realism appropriate for training objectives, etc.
It was thus incumbent upon GLE to supply the components that would create an IBS that would effectively facilitate the
learning of the students
However, it miserably failed

o
Old and substandard equipments
o
No instruction manuals and warranty certs
o
Indications of being reconditioned
o
Does not accurately point to the true north
o
Steering wheel is not one used in ships but came from an automobile
In contrast, the breach committed by Northwestern was considered as casual or slight. By way of negative definition, a breach is
considered casual if it does not fundamentally defeat the object of the parties in entering into agreement. Furthermore, for there to be a
breach to begin with, there must be failure, without legal excuse, to perform any promise which forms the whole or part of the
contract. The stoppage of the installation in this case was justified in order to prevent the highly possible rejection of the IBS. It was an
exercise of ordinary prudence to avert a possible wastage of time, effort, and resources.
OPTIMUM DEV BANK v. JOVELLANOS

J, Perlas-Bernabe
FACTS:
Sps Jovellanos entered into a Contract to Sell with Palmera Homes for the purchase of residential HL for a total consideration of 1m.
Pursuant to the contract, sps took possession of the subject property upon DP of 91, 500 undertaking to pay the remaining balance of
the contract price in monthly installments for a period of 10 years.
Palmera homes assigned all its rights, titles, and interest in the Contract to Sell in favor of ODB through a deed of assignment. The latter
issued a Notice of Delinquency and cancellation for sps Jovellanoss failure to pay their monthly installments despite several written and
verbal notices. Demand letters made by ODB remained unheeded which prompted ODB to file for unlawful detainer before the MeTC.
MeTC
-
Ordered the sps to vacate the premises

Contract to sell; cancelled for nonpayment of the stipulated monthly installment
Rights of possession is terminated or expired hence, their continued possession thereof constituted unlawful detainer
Sps contended
ODB made them believe that a compromise agreement is being prepared
RTC
CA
Affirmed MeTC
Action involves the rights of the respective parties under the contract but merely the recovery of possession by ODB of the
subject property after the spouses default
Reversed
Controversy does not only involve issue on possession but also validity of cancellation of Contract to Sell and the
determination of rights of the parties thereunder as well as the governing law RA6552.
MeTC had no jurisdiction over the complaint for unlawful detainer, for the case involves a matter not capable of pecuniary
estimation
o
Determination of rights of the parties under the contract
o
Hence within the jurisdiction of the RTC
ISSUE: W/N there was a valid cancellation of the contract to sell

HELD: Yes.
Cause of action for unlawful detainer (physical or material possession at issue)
Possession of property by defendant was by contract w/ or by tolerance of the plaintiff
Possession became illegal upon notice by plaintiff to defendant of the termination of the latters right of possession
Defendant remained in possession of the property and deprived plaintiff of the enjoyment thereof
W/in 1 yr from last demand on defendant to vacate the premises, plaintiff instituted an ejectment
MeTC are conditionally vested with authority to resolve question of ownership raised as an incident in an ejectment case
where the determination is essential to complete adjudication of the issue of possession.
Page | 68
Kristine Confesor
-
Concomitant to this authority is the ejectment courts authority to look into the claim of ownership for purposes of resolving
the issue of possession is its authority to interpret the contract or agreement upon which the claim is premised.
The full payment of the purchase price in a contract to sell is a suspensive condition, the non-fulfillment of which prevents the
prospective sellers obligation to convey title from becoming effective. Further, it is significant to note that given that the Contract to
Sell in this case is one which has for its object real property to be sold on an installment basis, the said contract is especially governed
by and thus, must be examined under the provisions of RA 6552, or the "Realty Installment Buyer Protection Act", which provides for
the rights of the buyer in case of his default in the payment of succeeding installments.
Pertinently, since Sps. Jovellanos failed to pay their stipulated monthly installments as found by the MeTC, the Court examines
Optimums compliance with Section 4 of RA 6552, as above-quoted and highlighted, which is the provision applicable to buyers who
have paid less than two (2) years-worth of installments. Essentially, the said provision provides for three (3) requisites before the seller
may actually cancel the subject contract:
first, the seller shall give the buyer a 60-day grace period to be reckoned from the date the installment became due;
second, the seller must give the buyer a notice of cancellation/demand for rescission by notarial act if the buyer fails to pay
the installments due at the expiration of the said grace period; and
third, the seller may actually cancel the contract only after thirty (30) days from the buyers receipt of the said notice of
cancellation/demand for rescission by notarial act.
In the present case, the 60-day grace period automatically operated in favor of the buyers, Sps. Jovellanos, and took effect
from the time that the maturity dates of the installment payments lapsed. With the said grace period having expired bereft of
any installment payment on the part of Sps. Jovellanos,
Optimum then issued a notarized Notice of Delinquency and Cancellation of Contract on April 10, 2006. Finally, in
proceeding with the actual cancellation of the contract to sell, Optimum gave Sps. Jovellanos an additional thirty (30) days
within which to settle their arrears and reinstate the contract, or sell or assign their rights to another.
It was only after the expiration of the thirty day (30) period did Optimum treat the contract to sell as effectively cancelled
making as it did a final demand upon Sps. Jovellanos to vacate the subject property only on May 25, 2006. Thus, based on the
foregoing, the Court finds that there was a valid and effective cancellation of the Contract to Sell in accordance with Section 4
of RA 6552 and since Sps. Jovellanos had already lost their right to retain possession of the subject property as a consequence
of such cancellation, their refusal to vacate and turn over possession to Optimum makes out a valid case for unlawful detainer
as properly adjudged by the MeTC.
FIL ESTATE PROP v. RON

J. Perez
QUILLO
FACTS:
Fil-Estate Properties, Inc. is the owner and developer of the Central Park Tower while co-petitioner Fil-Estate Network, Inc. is its
authorized marketing agent. Ronquillo purchased from petitioners an 82sqm condominium unit at Central Park Place Tower in
Mandaluyong City for a pre-selling contract price of 5m. They executed and signed a Reservation Application Agreement wherein they
deposited 200k as reservation fee. As agreed upon, respondents paid the full DP of 1.5m and had been paying the 63k monthly
amortizations until September 1998.
Upon learning that construction works had stopped, Ronquillo likewise stopped paying their monthly amortization. Claiming to have paid
a total of P2m to petitioners, Ronquillo through two (2) successive letters, demanded a full refund of their payment with interest.
When their demands went unheeded, respondents were constrained to file a Complaint for Refund before (HLURB) which then issued an
Order of Default against petitioners.
Petitioners attributed their
delay in construction to the 1997 Asian financial crisis. Petitioners denied committing fraud or
misrepresentation which could entitle respondents to an award of moral damages.
HLURB rendered judgment
ordering petitioners to jointly and severally pay respondents total sum plus damages.
failure to develop the condominium project as a substantial breach of their obligation
entitles respondents to seek for rescission with payment of damages.
mere economic hardship is not an excuse for contractual and legal delay.
CA denied the petition for review for lack of merit.
"a buyer for a condominium/subdivision unit/lot unit which has not been developed in accordance with the approved
condominium/subdivision plan within the time limit for complying with said developmental requirement may opt for
reimbursement under Section 20 in relation to Section 23 of Presidential Decree (P.D.) 957 x x x." 9
failure to develop the condominium project is tantamount to a substantial breach which warrants a refund of the total amount
paid, including interest.
petitioners failed to prove that the Asian financial crisis constitutes a fortuitous event which could excuse them from the
performance of their contractual and statutory obligations.
ISSUES: 1) W/N the Asian financial crisis constitute a fortuitous event which would justify delay by petitioners in the performance of their
contractual obligation; 2) assuming that petitioners are liable, whether or not 12% interest was correctly imposed on the judgment
award, and 3) whether the award of moral damages, attorneys fees and administrative fine was proper.
It is apparent that these issues were repeatedly raised by petitioners in all the legal fora. The rulings were consistent that first, the
Asian financial crisis is not a fortuitous event that would excuse petitioners from performing their contractual obligation; second,
as a result of the breach committed by petitioners, respondents are entitled to rescind the contract and to be refunded
Page | 69
Kristine Confesor
the amount of amortizations paid including interest and damages; and third, petitioners are likewise obligated to pay attorneys fees and
the administrative fine.
HELD:
non-performance of petitioners obligation entitles respondents to rescission under Article 1191 of the New Civil Code
which states:
Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation,
with payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should
become impossible.
More in point is Section 23 of Presidential Decree No. 957, the rule governing the sale of condominiums, which provides:
Section 23. Non-Forfeiture of Payments. No installment payment made by a buyer in a subdivision or condominium
project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the
buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner
or developer to develop the subdivision or condominium project according to the approved plans and within the
time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including
amortization interests but excluding delinquency interests, with interest thereon at the legal rate.
Conformably with these provisions of law, respondents are entitled to rescind the contract and demand reimbursement for the payments
they had made to petitioners. The principle of stare decisis, which means adherence to judicial precedents, applies.
we cannot generalize that the Asian financial crisis in 1997 was unforeseeable and beyond the control of a business
corporation. a real estate enterprise engaged in the pre-selling of condominium units is concededly a master in
projections on commodities and currency movements and business risks. The fluctuating movement of the Philippine
peso in the foreign exchange market is an everyday occurrence, and fluctuations in currency exchange rates happen
everyday, thus, not an instance of caso fortuito. 16
Finally, we sustain the award of moral damages. In order that moral damages may be awarded in breach of contract cases, the
defendant must have acted in bad faith, must be found guilty of gross negligence amounting to bad faith, or must have acted in wanton
disregard of contractual obligations.19 The Arbiter found petitioners to have acted in bad faith when they breached their
contract, when they failed to address respondents grievances and when they adamantly refused to refund respondents'
payment.
CHAPTER 3
Sec. 2
OBLIGATIONS WITH A PERIOD
(See Arts. 1193, 1196)
1193.
Obligations for whose fulfillment a day certain has been fixed,
Shall be demandable only when that day comes
Obligations with a resolutory period take effect at once,
But terminate upon the arrival of the day certain
A day certain is understood to be that which must necessarily come,
Although it may not be known when
If the uncertainty consists in whether the day will come or not,
The obligation is conditional, and
it shall be regulated by the rules of the preceding section
1194.
In case of loss, deterioration, or improvement of the thing before the arrival of the day certain,
The rules in Art. 1189 shall be observed
Rules in 1189 providing for rules during pendency of the condition suspending the efficacy of an obligation to give.
The same applies in obligations subject to a suspensive and to a resolutory condition
[1193] comments
With a Period
An obligation which depends on a future and certain event
Example: payable when able

Remedy:
1. Agreement among the parties
2. Court shall fix period of payment when parties unable to agree
Requisites for a valid period or term
1. It must refer to future
2. It must be certain but can be extended (becomes pure if eliminated subsequently by mutual agreement)
3. It must be physical and legally possible, otherwise VOID.
KINDS:
1. Resolutory (In diem) demandable at once but terminates upon arrival of day certain
Ex. I will support you until the first day of next year
2.
Suspensive (Ex die) obligation becomes demandable on the day stipulated

Ex. I will support you, beginning the first day of next year
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Kristine Confesor
1.
2.
Definite- the exact date or time is known and given (1st Monday of May)
Indefinite- something that will surely happen, but the date of
happening is unknown (death/birth)
1.
2.
3.
Legal- a period granted under the provisions of law

Conventional/Voluntary- period agreed upon or stipulated by the parties
Judicial- the period or term fixed by the courts for the performance
of an obligation or for its termination
Day Certain
Understood to be that which must necessarily come, although it may not be known when
Arrival commences the prescription period
TERM
interval of time which is
future or certain
Time which must necessarily
come although it may not be
known when
CONDITION
Fact or event which is
future or uncertain or
a past event unknown
to the parties
Future and uncertain fact or event
which may or may not happen
Exerts an influence upon the

time of demandability or
extinguishment of an
obligation
Does not have any retroactive
effect unless there is an
agreement to the contrary
Exerts an influence upon the very

existence of an obligation itself
when it is left exclusively to

the will of the debtor, the
existence of the obligation is
affected
When it is left exclusively to the

will of the debtor, the obligation is
VOID
Has retroactive effect
[1194] comments
RULES IN CASE OF LOSS, DETERIORATION, OR IMPROVEMENT before arrival of day certain (1189)
1195.
Anything paid or delivered before the arrival of the period,
the obligor being unaware of the period, or
believing that the obligation has become due and demandable,
may be recovered with the fruits and interests.
To recover:
1) must have been unaware of the period; or
2) must have believed that the obligation has become
due and demandable.
1196.
Whenever in an obligation a period is designated,
It is presumed to have been established for the benefit of BOTH the creditor and the debtor,
Unless from the tenor of the same or other circumstances it should appear
That the period has been established in favor of one or of the other
General Rule
1. Term is for the benefit of both debtor and creditor (the debtor cannot pay prematurely and the creditor cannot demand
prematurely)
Exceptions: (if there is intent)
1.
Benefit of DEBTOR
He is required to pay at the end, but he may pay even before
Ex. D will pay C within 6 years
2.
Benefit of the CREDITOR
Creditor can demand at any time even before the term expires, and he cannot be compelled to accept payment from the
debtor prior to the stipulated period
Ex. D promised to pay on Dec. 1, 2005 with the creditor given the right to demand performance even before said date
3.
INDICATORS
For BOTH
a.
WITH INTEREST, creditor is interested in the term because of the interests that would be earned; the debtor is interested
because he is given enough time to pay.
Ex. With interest, to be paid Within the 6th year
When the creditor is interested in keeping his money safely invested (depository), or when the creditor wants to protect himself
from the dangers of currency depreciation
For DEBTOR
a. NO INTEREST
b. When payment is to be made within a certain period from the date of contract
For CREDITOR
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Kristine Confesor
a. No payment to be made until after a certain given period
b. Acceptance of partial payment even before the expiration of the period means a waiver on the part of the creditor of his right
to refuse payment before the end of said period
1197.
If the obligation does not fix a period
but from its nature and the circumstances it can be inferred that a period was intended,
the courts may fix the duration thereof.
The courts shall also fix the duration of the period
when it depends upon the will of the debtor.
In every case, the courts shall determine such period
as may under the circumstances have been probably contemplated by the parties.
Once fixed by the courts, the period cannot be changed by them.
When Court may fix a Period
1.
When duration depends upon the will of the debtor
(When my means permit me to do so)
(Ill pay you little by little)
(As soon as possible)
(As soon as I have money)
(In partial payments)
When the debtors (is in a position to discharge his obligation)
2.
When although the obligation does not fix a period, it can be inferred that a period is intended
Ex.
a.
A contract to construct a house where the period was not stated
b.
A donation where the land was given provided certain construction was to be made on it
c.
An obligation with an indefinite period, such as when the time for the payment of a subscription of shares of stocks has not
been fixed
Must be immediately fulfilled, giving the debtor only such time as might be reasonably be necessary for its actual fulfillment
When Court may NOT fix a Period
1.
When no term was specified by the parties because no term was even intended (pure obligation)
2.
Payable on demand
3.
Substantial breach
4.
Specific periods are provided for by law, as in employment contract where if no period was agreed upon, the time of employment
depends upon the time for payment of salary
1198
The debtor shall lose every right to make use of the period:
1.
When after the obligation has been contracted, he becomes insolvent,
unless he gives a guaranty or security for the debt
2.
When he does not furnish to the creditor the guaranties or securities which he has promised
3.
When by his own acts he has impaired said guaranties and securities after their establishment, and when through a fortuitous
event they disappear, unless he immediately gives new ones equally satisfactory
4. When the debtor violates any undertaking, in consideration of which the creditor agreed to the period
5. When the debtor attempts to abscond
When Debtor loses the benefit of the period
Means, the term is extinguished and the obligation is demandable at once
Sec. 3
ALTERNATIVE OBLIGATIONS
(See Arts. 1199-1206)
1199.
A person alternatively bound by different prestations
shall completely perform one of them.
The creditor cannot be compelled to receive part of one and part of the other undertaking.
Obligations with Several Objects
1. Conjunctive debtor has to perform several prestations; extinguished only by performance of all of them
2. Alternative 3. Facultative
FACULTATIVE Only one prestation has been agreed upon but another may be given in substitution
EFFECT OF LOSS OR DETERIORATION THRU NEGLIGENCE, DELAY OR FRAUD OF THE OBLIGOR
of the thing intended as substitute- no liability
of the substitute after substitution is made- with liability
ALTERNATIVE- bound by different prestations but only one is due
right of choice belongs to debtor
EFFECT OF LOSS OF OBJECTS OF ALTERNATIVE OBLIGATIONS
1. if the right of choice belongs to the debtor
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Kristine Confesor
2.
if through a fortuitous event all were lost, debtor cannot be held liable for damages
if 1 or more but not all of the things are lost or one or some but not all of the prestations cannot be performed due to the
fortuitous event or fault of the debtor, creditor cannot hold the debtor liable for damages because the debtor can still comply
with his obligation
if all things, except one, were lost, the debtor must comply by performing that which remain
if all were lost by fault of the debtor the latter is liable for the value of the last thing or service which became impossible
If the right of choice belongs to the creditor

If 1 of the things is lost through a fortuitous event, the debtor
shall perform the obligation by delivering that which the creditor should choose from among the remainder or that which
remains if only 1 subsists
If the loss of 1 of the things occurs through the fault of the debtor, the creditor may claim any of those subsisting or the price of
that which, through the fault of the former, has disappeared with a right of damages
If all the things are lost through the fault of the debtor, the choice by the creditor shall fall upon the price of any 1 of them, also
with indemnity for damages
REQUISITES FOR MAKING THE CHOICE

1. Made properly so that the creditor or his agent will actually know
2. Made will full knowledge that a selection is indeed being made
3. Made voluntarily and freely
4. Made in due time- before or upon maturity
5. Made to all proper persons
6. Made without conditions unless agreed by the creditor
7. Maybe waived, expressly or impliedly
ALTERNATIVE
Various things are due but the giving principally of one is
sufficient
If one of prestations is illegal, other may be valid but obligation
remains
If it is impossible to give all except one, the last one must still be
given
Right to choose may be given either to debtor or creditor
FACULTATIVE
Only one thing is due but a substitute may be given to render
payment/fulfillment easy
If principal obligations is void and there is no necessity of giving
the substitute; nullity of P carries with it nullity of S
If it is impossible to give the principal, the substitute does not
have to be given; if it is impossible to give the substitute, the
principal must be given
The right of choice is given only to the debtor
Sec. 3
JOINT AND SOLIDARY OBLIGATIONS
(See Arts 1207-1222)
Art. 1207.
The concurrence of two or more creditors or
of two or more debtors in one and the same obligation
does not imply that
each one of the former has a right to demand, or that
each one of the latter is bound to render, entire compliance with the prestation.
There is a solidary liability only when
the obligation expressly so states, or
when the law or the nature of the obligation requires solidarity. (1137a)
Art. 1208.
If from the law, or the nature or the wording of the obligations to which the preceding article refers the contrary does not appear,
the credit or debt shall be presumed to be divided into as
many shares as there are creditors or debtors, the credits or
debts being considered distinct from one another,
subject to the Rules of Court governing the multiplicity of suits. (1138a)
JOINT- presumption when two or more creditors or two or more debtors concur in one and the same obligation (to each his own)
Exception:
1.
when expressly stated that there is solidarity
2.
when the law requires solidarity
3.
when the nature of the obligation requires solidarity
4.
when a charge or condition is imposed upon heirs or legatees and the testament expressly makes the charge or condition in
solidum
5.
when a solidary responsibility is imputed by a final judgment upon several defendants
EFFECTS OF JOINT LIABILITY
1.
demand on one produces delay only with respect to the debt
2.
interruption in payment by one does not benefit or prejudice the other
3.
vices of one debtor to creditor has no effect on the others
4.
insolvency of one debtor does not affect the other debtors
5.
defenses of one debtor are not necessarily available to others
JOINT DIVISIBLE OBLIGATIONS
1.
Each creditor can demand for the payment of his proportionate share of the credit, while each debtor can be held liable only for the
payment of his proportionate share of the debt
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Kristine Confesor
2.
A joint creditor cannot act in representation of the other creditors while a joint debtor cannot be compelled to answer for the acts
or liability of the other debtors
KEYWORDS (JOINT)
1. Mancomunada
2. Mancomunada simple
3. Proportionate
4. Pro-rata
5. We promise to pay (2 or more signatures)
6. Arises out of contract
Art. 1209. JOINT INDIVISIBLE OBLIGATIONS

If the division is impossible,
the right of the creditors may be prejudiced only by their collective acts, and
the debt can be enforced only by proceeding against all the debtors.
If one of the latter should be insolvent, the others shall not be liable for his share. (1139)
Art. 1210.
The indivisibility of an obligation
does not necessarily give rise to solidarity.
Nor does solidarity of itself imply indivisibility. (n)
JOINT INDIVISIBLE OBLIGATIONS (1209)
1. if there are 2 or more debtors, the fulfillment of or compliance with the obligation requires the concurrence of all the debtors,
although each for his own share. The obligation can be enforced only by proceedings against all of the debtors
2. if there are 2 or more creditors, the concurrence or collective act of all the creditors although each for his own share, is also
necessary for the enforcement of the obligation
CHARACTERISTICS
a.
The obligation is joint but since the object is indivisible, the creditor must proceed against ALL the joint debtors (Art. 1209), for
compliance is possible only if all the joint debtors would act TOGETHER.
b.
Demand must, therefore, be made on ALL the joint debtors.
c.
A demand by one joint creditor is NOT a demand by others
d.
If any one of the debtors does not comply with his monetary obligation for damages. (Art. 1224, Civil Code; 8 Manresa 237-238).
e.
If any of the joint debtors be insolvent, the others shall not be liable for his share. (Art. 1209, Civil Code). (NOTE: The obligation to
pay monetary damages is of course no longer indivisible, and therefore, the creditor may go against each debtor individually,
subject to the provisions of the Rules of Court.)
f.
If there be joint creditors, delivery must be made to all, and not merely to one, unless that one be specifically authorized by the
others.
g.
Each joint creditor is allowed to renounce his proportionate credit.
EFFECT OF BREACH
If one of the joint debtors fails to comply with his undertaking, the obligation can no longer be fulfilled or performed.. Consequently, it is
converted into one of indemnity for damages. Innocent joint debtor shall NOT contribute to the indemnity beyond their corresponding
share of the obligation.
(See 1224) The debtors who may have been ready to fulfill their promises shall not contribute to the indemnity beyond the
corresponding portion of the price of the thing or of the value of the service in which the obligation consists.
Example:
(1) A, B, and C are jointly liable to give D a car valued at P240,000.00.
On the date of delivery, A and B are willing to deliver but C is not.
In this case, D has no cause of action against C for the delivery of the car because, as a joint-debtor, C is liable only for a
proportionate part of the obligation which is P80,000.00.
Since the object (car) is indivisible, the debt can only be enforced by proceeding against all the debtors for compliance is not
possible unless they act together.
Pursuant to Article 1224 (infra.), the liability is converted into one for damages. So, A, B, and C will be liable for P80,000.00 each or
a total of P240,000.00 which is the value of the car without increase of responsibility for A and B. C, the unwilling debtor, shall be
liable for damages to D for having violated the obligation.
If A and B suffered damages by reason of the non-fulfillment by C, they may recover them from C.
Should anyone of the debtors be insolvent, the others shall not be liable for their share. (Art. 1209.) D must wait until the insolvent
debtor can pay.
(2) If there are two creditors, say D and E, and one debtor, A, the obligation can be performed only by delivering the car to them jointly.
A (there may be more than one debtor) can insist that both D and E together accept the car; and if either of them refuses to join the
other, A
may legally refuse to deliver the car. He may deposit the car in court by way of consignation. (see Art. 1256.)
If A becomes liable to pay damages for non-performance, D and E can recover only their respective shares in the indemnity. Neither D
nor E may do anything which may be prejudicial to the other (Art. 1212.) like renouncing or assigning the entire obligation without the
consent of the other. This is so because the obligation is joint, i.e., the credit of D is separate from that of E, and, therefore, neither D nor
E can act in representation of the other. Their rights may be prejudiced only by their collective acts. (Art. 1209.)
INDIVISIBILITY
Refers
to
the
prestation which
constitutes the object of the obligation
SOLIDARITY
Refers
to
the
legal
tie
and
consequently to the subject or parties
of the obligation
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Kristine Confesor
Plurality of subjects is not required
In case of breach, obligation is
converted to 1 of indemnity for
damages
because
of
breach,
indivisibility of the obligation is
terminated
Plurality of subjects is indispensable

When there is liability on the part of
the debtors because of the breach, the
solidarity among the debtor remains
SOLIDARY- must be expressed in the stipulation or provided by law or by nature of the obligation (one for all, all for one)
1.
Active- on the part of the creditor or oblige

EFFECTS:
a) Death of 1 solidary creditor transmits share to heirs (but collectively)
b) Each creditor represents the other in the act of recovery of payment
c)
Credit is divided equally between creditors as among themselves
2.
Passive- on the part of debtors or obligors

EFFECTS:
a) Each debtor may be requested to pay the whole obligation with right to recover from co-debtors
b) Interruption of prescription to one creditor affects all
c)
Interest from delay on 1 debtor is borne by all
3.
4.
5.
Mixed- on the part of both obligors and obliges, or the part of the debtors and the creditors
Conventional- agreed upon by the parties
Legal- imposed by law
Instances where the law imposes solidary obligation
a)
Obligations arising from tort
b)
Obligations arising from quasi-contracts
c)
Legal provisions regarding obligation of devisees and legatees
d)
Liability of principals, accomplices, and accessories of a felony
e)
Bailees in commodatum
EFFECTS:
a) Payment made before debt is due, no interest can be charged,
otherwise interest can be charged
b) Insolvency of one
Others are liable for share pro-rata
c) If different terms and conditions
collect only wat is due, later on collect from any
d) if payment is made after prescription or became illegal
No reimbursement
e) Remission made after payment is made- co-debtor
still entitled to reimbursement
f) Effect of insolvency or death of co-debtor
still liable for the whole amount
g) Fault of any debtor- every one is responsible
price, damage, and interest.
h) Complete/personal defense
total or partial (up to the amount of share only) if not personal to him
KEYWORDS (SOLIDARY)
1. Joint and several
2. In solidum
3. Mancomunada solidaria
4. Juntos o separadamente
5. Individually and collectively
6. Each will pay the whole value
7. I promise to pay (2 or more signatures)
8. Arises out of a crime (quasi-delict)
9. Liability of Violators of 19, 20, 21, 22 on Human Relations (Civil Code)
Penal in nature or contrary to morals; nature of the obligation
PASSIVE SOLIDARITY
SOLIDARY GUARANTY
In passive solidarity although some sort of mutual agency may be seen as
in active solidarity, guaranty is a characteristic which predominates over
that of mere agency.By virtue of this, the solidary debtor like the surety,
answers for a debt which is not properly his own.
Like the surety also, after paying, he may demand reimbursement from
the debtor personally bound in the obligation paid
Solidary debtor is liable not only for
Guaranty does NOT incur liability
the debt of another but also for one
unless the principal debtor is held
properly his own
liable
debtor who made the payment

may claim reimbursement from his
It does not mean that the surety

cannot be held liable to the same
extent of the liabilities of a surety
is determined by the contract of
suretyship
Surety who paid the obligation is
entitled to be indemnified by the
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Kristine Confesor
co-debtors for the share which
corresponds to each
Extension granted by the creditor
to one of the solidary debtors
without the consent of the other
solidary debtors would not release
the latter from their obligations.
They are still liable for the whole
obligation less the share of the
debtor granted the extension. Upon
the arrival of the extended period,
the creditor can demand the
remaining balance from any of the
solidary creditors
principal debtor w/ the right to be

subrogated by virtue of such
payment to all the rights which the
creditor had against the debtor
An extension granted to the
principal
debtor
without
the
consent of the surety should have
the effect of extinguishing the
suretyship.
Art. 1211.
Solidarity may exist although the creditors and the debtors may not be
bound in the same manner and
by the same periods and
conditions. (1140)
Solidarity Despite Different Terms or Conditions

Example of a case when solidarity may exist even when the creditors and the debtors are not bound in the same manner:
A and B solidarily bound themselves to pay a total of P1,000,000 to C, D, and E subject to the following conditions and terms:
Cs share will be due at the end of the year;
D will get his share only if he passes the bar; and
E will get his share only after he (E) has painted the house of X.
Here, the obligation is still solidary.
The obligation is still solidary but Cs share will only be due and demandable at the end of the year, and E and Ds shares will be
due and demandable only upon the fulfillment of the condition.
Supposing the obligation is to be subject to different terms and conditions, the following is the solution: the creditor may recover
that part which is pure and unconditional, and should leave in suspense or pending, the right to demand the payment of the
remainder until the expiration of the term or the fulfillment of the condition. Solidarity is still preserved by recognizing in the
creditor the power, upon the fulfi llment of the condition or the expiration of the term, of claiming from any or all of the debtors,
that part of the obligation effected by these conditions.
CASE:
Inchausti & Co. v. Yulo
34 Phil. 978
FACTS: A, B, C, D, and E borrowed money from F. The contract stipulated solidary one, and the debtors were bound under different
terms and conditions. F brought an action to recover from A, whose obligation was already due. A claims that he cannot be made to pay
because the obligations incurred by his solidary co-debtors were not yet due.
Issue: When the debtors of a solidary obligation are bound by different terms and conditions,
may the creditor sue one of them?
HELD: Yes, the creditor may sue the one whose share has already become due and demandable but the creditor cannot recover yet from
the debtor sued, the shares of the other debtors, until the conditions or terms of the others have already been fulfilled. In other words, F
may recover now from A only As share; and when the conditions and terms have been fulfilled for the shares of B, C, D, and E, the
creditor F can recover their shares from A. This, after all, is still a solidary obligation.
PROBLEM
FACTS: In 2004, A, B, and C bound themselves in solidum to give X P300,000 subject to the following stipulations: A to pay in 2005; B, if
he passes the bar; C, in 2007.
ISSUE:(a) In 2005, how much can X demand from A?
ANS.: Only P100,000. Since this is solidary, X has a right to P300,000 (the whole) MINUS Bs share of P100,000 and Cs share of
P100,000, or a total of only P100,000. In 2007, X can collect from A the P100,000 corresponding to C. The moment B passes the bar, X
can also collect from A, Bs share of P100,000.
rule is that the whole solidary obligation can be recovered from ANY of the solidary debtors MINUS the share of those with
unmatured conditions or terms. (See 8 Manresa 203).
JOINT OBLIGATION ON ONE SIDE,

SOLIDARY ON THE OTHER.
An obligation may be joint on the side of the creditors and solidary on the side of the debtors, or vice versa. In such cases, the rules
applicable to each subject of the obligation should be applied, the character of the creditors or the debtors determining their respective
rights and liabilities. Thus, if the obligation is joint on the side of the creditors, and solidary on the side of the debtors, each creditor can
demand only his share in the obligation; but each debtor may be compelled to pay the entire obligation to the creditors.
EXAMPLES:
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Kristine Confesor
(1) A and B, joint debtors, are liable to C and D, solidary creditors, for P1,000.00. Here, we have two (2) separate debts of A and B
(P500.00 each), and one (1) credit (P1,000.00) of C and D. C or D can demand from
A and B P500.00 each only, their respective share in the debt; and A and B may be required to pay P500.00 each, either to C or to D. In
other words, A and B are not liable for more than P500.00 each and C or D is entitled to receive not more than P1,000.00.
(2) Assume that A and B are the solidary debtors, and C and D, the joint creditors. Now we have one (1) debt (P1,000.00) of A and B,
and two (2) separate credits (P500.00 each) of C and D. C and D can demand P500.00 each, their respective share in the credit, from A
or B; and A or B
may be compelled to pay P1,000.00 (the entire obligation), P500.00 to C
and P500.00 to D.
In other words, A or B may be made liable for P1,000.00 and C and B
are entitled to receive not more than P500.00 each.
Art. 1212.
Each one of the solidary creditors may do whatever may be useful to the others, but not anything which may be prejudicial to
the latter. (1141a)
SOLIDARY CREDITORS MAY DO USEFUL, NOT PREJUDICIAL ACTS
(a) Example of Beneficial Act To interrupt the running of prescription, the act of one solidary creditor in making a judicial demand
upon any of the solidary debtors is sufficient. The law provides that: The prescription of actions is interrupted when they are filed
before the Courts. (Art. 1155, 1st clause, Civil Code).
(b) Prejudicial Acts should not be performed, otherwise, there will be liability for damages. However, in the case of remission or
condonation (which is really prejudicial), the solidary creditor is allowed to so remit, and the obligation is extinguished, without prejudice
to his liability to the other creditors. (See Art. 1215, Civil Code).
based on the theory of mutual agency among the solidary creditors. A joint creditor cannot act in representation of the others
EXAMPLE:
A owes B and C, solidary creditors, the sum of P2,000.00. B may make a demand for the payment of the obligation for this will benefit C.
Under the law, the prescription of action is interrupted when they are filed before the court. (Art. 1155.) So also, if B collects from A, C
will be benefited. In case of remission or condonation effected by B, the obligation will be extinguished but since C cannot be prejudiced
by the remission, B has to reimburse C for the latters share. (Art. 1215.)
Art. 1213.
A solidary creditor cannot assign his rights without the consent of the others. (n)
REASON FOR THE LAW:
Essentially, a solidary obligation implies mutual agency and mutual confidence. Should the assignee or substitute do acts which would
prejudice the others (as when he absconds after receiving payment), there is no doubt that the other creditors right are endangered,
hence, the necessity of their consent.
EFFECT OF UNAUTHORIZED ASSIGNMENT.
Suppose a solidary creditor did assign his rights, will payment to
the assignee extinguish the obligation? Article 1213 seems to imply that
such assignment is invalid. This article has been criticized as follows:
This rule is unjustifiable and places an unnecessary restriction on the rights of the solidary co-creditor upon his share. The reason
behind it seems to be that each creditor represents the others and, therefore, must have the confidence of the latter. But in the first
place, confidence between co-creditors cannot properly be said to exist except in the case of a solidary credit by contract.
In the second place, the representation (by each creditor) of the solidary creditors is created by law and not by consent or agreement of
the parties. If danger is seen in the possible misfeasance of the assignee, the remedy is not the paralyzation of the proprietary rights of
the solidary creditor, but to impose upon him a subsidiary responsibility for the acts of the assignee, similar to that of the agent for the
acts of the sub-agent under Art. 1892.4
This is Manresas view in his comment to Art. 1141 of the Code of 1889. So that Art. 1213 could have been made to read : A solidary
creditor who assigns his rights without the consent of his co-creditors shall answer subsidiarily for any prejudice caused
to the latter by the assignee in connection with the credit. (Justice J.B.L. Reyes, Observation on the New Civil Code, XVI L.J. 48,
Jan. 31, 1951.)
Art. 1214.
The debtor may pay any one of the solidary creditors;
but if any demand, judicial or extrajudicial, has been made by one of them,
payment should be made to him. (1142a)
TO WHOM DEBTOR MUST PAY
(a) to any of the solidary creditors
(b) exception payment must be made to solidary creditor who made a demand (judicial or extrajudicial)
The demand has the effect of terminating the mutual agency among the solidary creditors.
PROBLEMS
1.
A and B are solidary debtors of C, D, and E, solidary creditors.
May A pay C the whole obligation?
ANS.: Yes, provided, no judicial or extrajudicial demand had been made by either D or E.
2.
A and B are solidary debtors of C, D, and E, solidary creditors. E makes judicial demand. There is no extrajudicial demand upon A.
To whom should A pay?
ANS: Only E, who had made the judicial demand. Payment to any other creditor will not extinguish the obligation except insofar as
the payees share is concerned
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3.
A and B are solidary debtors of C, D, and E, solidary creditors. C makes a judicial demand on A. Can D and E sue A?
ANS: In the meantime, no, because C is supposed to be representing already D and E. If judgment is rendered against A, and A
does not have enough money, then D, E, or C (individually or collectively) may still sue B for the remainder. But it is essential that
the first action be first terminated.
4.
A and B are solidary debtors of C, D, and E. C makes an extrajudicial demand upon A, who does not pay. Can D and E sue (judicial
demand) A?
ANS.: Although strictly speaking, the answer may be in the NEGATIVE since under the law payment must be made to C, who had
made the extrajudicial demand, still the law should not be construed to effect an absurdity in that D and E would be compelled to
just stand by idly, since C does not institute any judicial action. Since Cs act (or inaction) is prejudicial to D and E, both should be
allowed to make the judicial demand (See Art. 1212, Civil Code)
Art. 1215. Novation, compensation, confusion or remission of the debt, made by any of the solidary creditors or with any of the solidary
debtors, shall extinguish the obligation, without prejudice to the provisions of Article 1219.
The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to the others for the share in
the obligation corresponding to them. (1143)
(1) EFFECT OF NOVATION
Novation is the modification of an obligation by changing its object or principal conditions, or by substituting the person of the debtor,
or by subrogating the person of the debtor, or by subrogating a third person in the rights of creditor. (Art. 1291,Civil Code).
(a) Example:
A and B are solidarily liable to X and Y, solidary creditors, for the payment of P800,000. A and X agreed that instead of paying P800,000,
A will just paint Xs house (including costs of the points to be used).
ANS :Here the solidary obligation of paying P800,000 is extinguished but a new one, that of painting Xs house, has arisen. If B did not
consent to the novation, B will not be bound to X and Y in any way, and moreover, will not be obliged to give A anything except insofar
as he (B) has been benefited. Upon the other hand, only X will be allowed to prejudice his co-creditor Y, so X must reimburse Y for
P400,000 (which is really Ys share of the credit). (Art. 1215, 2nd par.).
(b)
A and B are solidary debtors of X. If A is granted an extension of time within which to pay, is B released from the obligation?
ANS.: No. The only effect is this: if X sues B, B will pay the whole debt minus the share of A. When the extended period terminates, X can
demand the remaining balance (As share) from either A or B. And if B pays again, B will now have the right to collect reimbursement
from A, for As share. (See Inchausti and Co. v. Yulo, 34 Phil. 978).
[NOTE: The rule is different in suretyship, where although the surety is also, in a way, a solidary debtor, an extension of time to the
principal debtor without the
suretys consent will release the surety from the contract.
(See Phil. Nat. Bank v. Veraguth, 50 Phil. 253).]
(2) EFFECT OF COMPENSATION
Compensation is that which takes place when two persons, in their own right, are creditors and debtors of each other. (Art. 1278, Civil
Code) (as when A owes B P1,000,000 and B owes A P1,000,000). Compensation may be total or partial, depending upon the amount
involved. Total compensation of course
automatically extinguishes the obligation, whether known or unknown to the parties. (See Art. 1290, Civil Code).
(a) Example of Total Compensation in Connection with Solidary Obligation:
A and B are solidary debtors of X and Y, solidary creditors to the amount of P400,000. But X owes A P400,000 on account of a different
obligation. Here we have a case of automatic extinguishment of the obligation by virtue of total
compensation. But B should not benefit completely since it was As credit that was used to compensate. So B owes A P200,000 (his
share of the debt). Upon the other hand,Y should not be prejudiced, so Y can recover P200,000 (his
credit) from X. (Art. 1215, par. 2).
(b) Example of Partial Compensation in Connection with Solidary
Obligations:
A and B are solidary debtors of C to the amount of P2,000,000, but C is indebted to A for P500,000. This is a case of partial
compensation, and therefore the solidary obligation amounting to P1,500,000 still subsists.
(3) EFFECT OF CONFUSION (OR MERGER)
Confusion or merger is that which takes place when the characters of creditor and debtor are merged in the same person (Art. 1275,
Civil Code), as when my check in the course of negotiation, is eventually endorsed to me.
Example:
A and B made a negotiable promissory note in favor of C and D, whereby A and B bound themselves solidarily to C and D, solidary
creditors. C and D endorsed the note in favor of E; E in favor of F; F in favor of A. Notice that A, who is a debtor, now becomes a creditor.
There is merger or confusion of rights here; the solidary obligation is extinguished; but B is indebted to A for his (Bs) share of the debt.
(4) EFFECT OF REMISSION (OR WAIVER)

Remission or waiver is that act of liberality whereby a creditor condones the obligation of the debtor; that where the creditor tells the
debtor to forget about the whole thing. (See Art. 1270, Civil Code). (Remission may be total or partial).
(a) Example of Total Remission:
A and B are solidary debtors of X and Y, solidary creditors to the amount of P4 million. X tells A that he was waiving the whole obligation.
Here, the total remission completely extinguishes the whole obligation, without prejudice to Y collecting from X his (Ys) share of the
creditof P2 million, otherwise Xs remission would prejudice Y. Upon the other hand, B does not have to reimburse A for anything, for
after all the remission was a gratuitous act, and A did not have to give anything to the creditors. (See 8 Manresa, pp. 225-226).
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Kristine Confesor
(b) Example of Partial Remission:
A, B, and C are solidary debtors of X in the amount of P3 million. X then made a demand from A but collected only P2 million because he
(X) was remitting As share (of P1 million). How much can A recover from B and C?
ANS: Only P1 million from each because the solidary debt of P3 million had been reduced by partial remission to only P2 million.
[NOTE: It follows, in the example given, that A can be reimbursed the whole P2 million (plus interest in the proper case), and therefore it
is as if A did not have to pay from his own pocket. This is but just because after all, As share had been remitted. This example is also a
correct illustration of the rule that a partial remission benefits ALL in that the solidary debt is diminished, so that if A had not been able
to pay, or had the creditor chosen to collect from either B or C, he can demand not P3 million but only P2 million. (See Inchausti & Co. v.
Yulo, 34 Phil. 978).] (NOTE: Although from said viewpoint all had been benefited, it should be noted that the individual shares of B and C
have NOT really been diminished.)
Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made
against one of them shall not be an obstacle to those which may subsequently be directed against the others, so long as the debt has
not been fully collected. (1144a)
EFFECT OF NOT PROCEEDING AGAINST ALL
If the creditor sues only one, or two, or several of the debtors (but not all) there is no waiver against those not yet sued. They may be
proceeded against later.
APPLICABILITY OF ART. 1216
Note that Art. 1216 applies only to solidary obligations, not to joint ones, for in the latter, failure to collect from one joint debtor his
share does not authorize the creditor to proceed against the others, regarding the insolvent debtors share.
PASSIVE SOLIDARITY
Art. 1216 applies to what is called passive solidarity (solidarity among the debtors). It can also apply to mixed solidarity.
PASSIVE SOLIDARITY
(debtor)
Both the solidarity debtor and the surety
Both can demand reimbursement
Solidarity debtor is indebted for his
own share only
Solidary debtor can be reimbursed
what he has paid MINUS his own share
If a solidary debtor receives an
extension of the period for payment,
the others are still liable for the whole
obligation now, minus the share of the
debtor who has received the extension
(but same share can be demandable
also from them upon the arrival of the
extended term)
SURETYSHIP
guarantee for another person
The surety is indebted only for the
share of the principal debtor
Surety can be reimbursed of the
ENTIRE payment he made
If a principal debtor receives an
extension,
without
the
suretys
consent, the surety is released
(6) Examples
(a) A and B are solidary debtors of C to the amount of P1,000,000. Either A or B may be made to pay the whole P1,000,000 but the
payer can collect half (P500,000) from the other (since each is a principal debtor).
(b) A borrowed from C P1,000,000. B acted as surety (solidary guarantor) for A. C can demand P1,000,000 from either A or B. But if B is
made to pay, B can demand the whole P1,000,000 from A since B is not really a principal debtor.
PROBLEMS
a.
A and B are solidary debtors of X and Y to the amount of P4 million. X sued A but recovered only P3.5 million. May Y still sue B for
P500,000?
ANS.: Yes, because the debt has not yet been entirely satisfied.
b.
A and B are solidary debtors of X and Y. X sues A but A wins the case (for example, on the ground that the subject matter is illegal).
Can Y still sue B?
ANS.: No more because here the principle of res judicata clearly applies. Since X was representing Y, there would be identity of
parties.
Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the
creditor may choose which offer to accept.
He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment
already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded.
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. (1145a)
EFFECTS OF PAYMENT
Payment is one of the ways by which an obligation is extinguished
and consists in the delivery of the thing or the rendition of the service which is the object of the obligation.
(1) Between the solidary debtors and creditor(s). Payment made
by one of the solidary debtors extinguishes the obligation. (When
speaking of payment that extinguishes an obligation, the law refers to
payment in full.) However, the creditor for his protection is given the
right to choose which offer to accept if two or more solidary debtors
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Kristine Confesor
offer to pay. (par. 1.)
(2) Among the solidary debtors. Payment by one of the solidary debtors does not create a real case of subrogation. (see Arts.
1302,
1303.) It merely entitles him to claim reimbursement from his co-debtors
only the share which corresponds to each. (see Art. 1277.), i.e., only
for their proportionate shares with (legal) interest only from the time
of payment.
(a) The other debtors do not become by virtue of such payment solidary debtors of the debtor-payer. Their liability is not based on the
original obligation which has been extinguished, but upon the payment made by the co-debtor which creates a joint obligation of
reimbursement on the part of the others. (Art. 1208.) However, in case of insolvency of any of the solidary debtors, the others assume
the share of the insolvent one pro rata. (pars. 2 and 3.)
(b) Payment by a solidary debtor does not automatically result in a corresponding obligation of the other debtors to reimburse the
paying debtor. If a solidary debtor pays the obligation in part, he can recover reimbursement from the co-debtors only in so far as his
payment exceeded his share in the obligation.
(c) If the amount is equal to his proportionate share in the obligation he, in effect, pays only what is due from him; if the amount is less
than his share, he cannot demand reimbursement because his payment is less than his actual debt. (see Republlic Glass Corporation vs.
Qua, 435 SCRA 480 [2004].)
(3) Among the solidary creditors. The receiving creditor is jointly
liable to the others for their corresponding shares. (Art. 1208.)
a.
A, B, and C are the solidary debtors of D. A and B offer to pay. Is the creditor allowed to choose which offer to accept?
ANS.: Yes. If two or more solidary debtors offer to pay, the creditor may choose which to accept. (Art. 1217, 2nd sentence, Civil
Code). Even if C has not offered to pay, it is believed that D would be allowed to make a demand upon C. The creditor may
proceed against any one of the solidary debtors.
b.
A, B, C, and D are solidary debtors of E to the amount of P1.2 million. A pays E the whole P1.2 million. Is A entitled to
reimbursement from B, C, and D?
ANS.: Yes, reimbursement plus interest from the date of payment.
Are B, C, and D considered the solidary debtors of A?

ANS: No. With reference to the reimbursement B, C, and D are not solidary debtors of A but merely joint debtors of A. It is true that B, C,
and D, together with A, used to be solidary debtors of E, but As payment to E of the whole amount has extinguished that solidary
obligation, and what remains now is merely the joint obligation of reimbursement. As a matter of fact, the law provides that: He who
made the payment may claim from
his co-debtors only the share which corresponds to each, with the interest for payment already made . (1st sentence, second
paragraph, Art. 1217, Civil Code)
Since originally there were four debtors, each has a proportional share of P300,000 in the obligation. Hence, A can recover P300,000
with interest from each of the other three.
It should be noted, however, that the liability is not the ordinary joint one, for in the instant case, the insolvency of one must in the
meantime be shouldered by the rest. (Last paragraph,Art. 1217, Civil Code).
CASE
INCHAUSTI & CO. V. YULO

34 PHIL. 978
FACTS: A, B, C, D, E, and F were solidary debtors of G to the amount of P253,445.42. Later in an agreement with B, C, D, E, and F, the
debt was reduced by G to P225,000. G sued A. Because of the partial remission, A was made to pay only P225,000. Issue: How much can
A recover from the other solidary debtors?
HELD: A can recover the proportional shares of the other, not with respect to P253,445.42 but with respect to P225,000, the amount as
reduced. Since there are 6 solidary debtors, he can recover 1/6 of P225,000 from each plus interest from the time of payment.
BASIS OF THE RIGHT TO BE REIMBURSED
The fact of payment (and not the original contract) is the basis of the right to be reimbursed, for not until then had he the right to be
reimbursed. Hence, the obligation of the others to reimburse him arises only from the time payment is made.
SUBSTITUTION OF PARTIES
A, B, and C are solidary debtors of X who sued all of them. If during the pendency of the case, A pays X, in the same action A can be
changed from defendant to plaintiff in substitution of X. This is to enable A to collect reimbursement of contribution from B and C.
PROBLEM #1
A and B were sued on a promissory note which read as follows: Manila, May 1, 2004. For value received, we, the undersigned, promise
solidarily to pay C or his order, on or before May 1, 2005, the sum of P1,000,000, plus an interest of 6% (Sgd.) A and B. Should B turn
out to be insolvent, may C recover allhis claim from A who is solvent? Why?
ANS.: Yes, because A had bound himself solidarily, without prejudice, of course, to his recovering later on from B, the share of B in the
debt, plus interest from the date of payment. (Art. 1217, Civil Code).
PROBLEM #2
A, B, and C are joint and several debtors of D. D allows C an extension of two years within which to pay his portion of the indebtedness.
Upon being sued by D, may A and B interpose the defense of the extension of the time granted to C? Should A and B eventually pay the
entire obligation, may they compel C to reimburse them with his share without waiting for the two-year extension granted to D?
Reasons.
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Kristine Confesor
ANS.: Yes, A and B can set up the extension but only as partial defense, limited to Cs share. Hence, they should now pay ALL minus Cs
share. (See Inchausti v. Yulo, 34 Phil. 978). If they paid ALL (without deductions) they must wait for the 2-year period before they can
compel reimbursement from C.
This is because A and B merely stepped into the shoes of the creditor D, and therefore C can plead against them the defense of
extension of payment.
Art. 1218. Payment by a solidary debtor shall not entitle him to reimbursement from his co-debtors if such payment is made after the
obligation has prescribed or become illegal. (n)
EFFECT OF PAYMENT OF PRESCRIBED DEBT
A and B are solidary debtors of C to the amount of P1,000,000. The debt prescribed. But A voluntarily paid C, nevertheless, because A
felt morally obliged to so pay.
(a) May A recover from C what he has paid?
(b) May A get any reimbursement from B?
ANS.:
(a) A cannot recover from C what he has paid because it was voluntarily given after A knew of the prescription of the debt. The law says,
when a right to sue upon a civil obligation has lapsed by extinctive prescription, the obligor cannot recover what he has delivered or
the value of the
service he has rendered. (Art. 1424, Civil Code).
(NOTE: If payment had been made by A to C, without A knowing that the debt had prescribed, A can recover from C on the basis of
solutio indebiti.)
(b) A cannot get any reimbursement from B because A paid the debt after it had prescribed. The law says, Payment by a solidary
debtor shall not entitle him to reimbursement from his co-debtors if such payment is made after the obligation has prescribed or
become illegal. (Art. 1218, Civil Code).
EFFECT OF PAYMENT OF AN ILLEGAL OBLIGATION
A and B are solidarily bound to give C some drugs worth P1,000,000. Later, the law prohibits the transaction of said drugs, and declares
the drugs to be outside the commerce of man. Knowing this, A nevertheless delivers the drugs to C. May A now get reimbursement from
B?
ANS.: No, A cannot get any reimbursement from B because A made the payment after the obligation had become illegal.
Art. 1219. The remission made by the creditor of the share which affects one of the solidary debtors does not release the latter from
his responsibility towards the co-debtors, in case the debt had been totally paid by anyone of them before the remission was
effected. (1146a)
If payment is made first, the remission (see Art. 1270.) or waiver is of no effect. There is no more obligation to remit.
The purpose of the article is to forestall fraud whereby the debt having been paid, the creditor, who does not stand to suffer any
loss or damage, remits the share of a particular debtor.
Inferentially, had remission preceded payment, the debtor whose share has been remitted cannot be made to reimburse anything, for
after all, the payor-debtor will have paid only the balance of the debt (after deducting the share of the debtors who has received the
benefit of the remission).
EFFECT OF REMISSION MADE AFTER TOTAL PAYMENT HAD ALREADY
EXTINGUISHED THE OBLIGATION
This Article is designed to prevent fraud and to give justice to the paying debtor. (See 8 Manresa 226).
Example: A and B solidarily owe X P1,000,000. A paid X the whole amount. Later, X remitted Bs share. Can A still recover
reimbursement of
P500,000 from B?
ANS.: Yes. Because there is nothing more to remit since the obligation has been extinguished by payment already made by X.
PROBLEMS
a.
A, B, and C solidarily owe X P3 million. X remitted Cs share. A, therefore, paid later only P2 million. Can A recover reimbursement?
ANS.: Yes, but only from B and not from C, whose share had previously been remitted. Here, remission was previous to the
payment.
b.
In problem (a), how much can A recover from B and C?

ANS.: From B, P1 million with interest. From C, nothing, because Cs share had been remitted.
c.
In problem (b), suppose B is insolvent, can C be made liable in the meantime for part of the insolvency? In other words, can A get
anything from C, whose share the creditor had remitted?
ANS.: Yes, because under Art. 1217, when one of the solidary debtors cannot, because of his insolvency, reimburse his share to
the debtor paying the obligation, such share must be borne by all his co-debtors in proportion to the debt of each. In other words,
even if Cs share has been remitted (and even if he therefore does not have to reimburse for his own share) he will still have to
bear part of the burden of Bs insolvency, because the creditors act of liberality towards him cannot excuse him from
fulfilling his legal duty under the provision hereinabove mentioned. Thus, Bs share of P1 million will be borne in the
meantime by A and C, and C will have to give P500,000 to A. Later, C can recover from B, should the latters finances improve.
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Kristine Confesor
Art. 1220. The remission of the whole obligation, obtained by one of the solidary debtors, does not entitle him to reimbursement from
his co-debtors. (n)
Remission, it must be borne in mind, is essentially gratuitous. Note that this Article applies only when the whole obligation is remitted .
PROBLEM
A and B are solidary debtors of C to the amount of P1,000,000. C remitted the whole obligation when A offered to pay.
ANS: A here cannot get any reimbursement from B since after all, A did not pay anything to C. To allow the contrary would be to induce
fraud and to countenance partiality.
Art. 1221. If the thing has been lost or if the prestation has become impossible without the fault of the solidary debtors, the obligation
shall be extinguished.
If there was fault on the part of any one of them, all shall be responsible to the creditor, for the price and the payment of damages and
interest, without prejudice to their action against the guilty or negligent debtor.
If through a fortuitous event, the thing is lost or the performance has become impossible after one of the solidary debtors has incurred
in delay through the judicial or extrajudicial demand upon him by the creditor, the provisions of the preceding paragraph shall apply.
(1147a)
EFFECT OF LOSS OR IMPOSSIBLITY OF THE PRESTATION
1.
If without fault- no liability
2.
If with fault there is liability (also for damage and interest)
3.
Loss due to fortuitous event after default- there is liability (because of delay)
PROBLEMS
a.
A and B are solidarily obliged to give C this particular car. The car was lost by a fortuitous event, and without any fault on the part
of the debtors. What happens to the obligation?
ANS.: The obligation is extinguished. It is essential here, however, that the debtors be not guilty of default.
b.
If in problem (a), the car was lost through the fault of A, and C makes a demand later upon B, should B be liable for the price of the
car as well as damages or interest?
ANS.: Yes, B will still be liable even if he was not at fault at all. Remember that a solidary obligation implies mutual agency and
mutual confidence. The law expressly makes B liable in such a case both for the price of the car as well as damages or interests,
but B can later on recover from A the whole of what he paid, for had A not been at fault, the obligation would have been already
extinguished.
c.
A, B, and C are solidary debtors of D in an obligation to give a particular car. D makes an extrajudicial demand upon A. After the
demand, the car was lost by a fortuitous event. Is the obligation extinguished? If not, what is Ds right?
ANS.: The obligation is not extinguished because the loss through a fortuitous event occurred after default on the part of the
debtors had arisen. Ds right is to exact the price of the car from any of them. The debtors, however, who did not have a hand in
the default (B and C) have the right to recover from their co-debtor, A, who after all, was
responsible due to his default.
Tolentino Comment
Limited to the loss of the thing
Effects provided in the present article are limited to the case of non-performance because of loss of the thing or impossibility of the
prestation that is due. If the loss or impossibility is due to fortuitous event, without fault or delay on the part of any debtor, then
the obligation is extinguished; no debtor can be held liable for damages.
LOSS/IMPOSSIBILITY
DUE TO FAULT OR DELAY OF 1
The obligation is converted into an
obligation to pay indemnity (price,
damages, interest).
The entire indemnity may be
recovered by the creditor from the
other debtors who were free from
default or delay
But the innocent debtors can
recover from the guilty debtor the
FULL AMOUNT OF THE INDEMNITY
they have paid to the creditor
The guilty debtor must shoulder
ALL THE CONSEQUENCES of the
loss because of his fault or delay
NON-PERFORMANCE W/O LOSS

but there is fraud, fault,
negligence, breach, etc
The creditor may also recover
indemnity for damages from any of
the solidary debtors
As among themselves, however,
the guilty debtor cannot be made
to shoulder, as part of the
indemnity, the shares of the codebtors in the original obligation
Even the debtors who were free
from delay must bear a PART OF
THE PRICE OF THING; burden of
innocent debtors not increased.
The guilty debtor must shoulder
the DAMAGES exclusively
Art. 1222. 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 the
others, he may avail himself thereof only as regards that part of the debt for which the latter are responsible. (1148a)
DEFENSES IN ACTIONS FILED
This Article applies in ACTIONS filed by the creditor.
KINDS OF DEFENSES
A.
Those derived from the NATURE of the obligation (this is a complete defense).
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Kristine Confesor
Examples:
1)
lack of consideration or cause
2)
absolute simulation (as when the contract is totally fictitious)
3)
illegal consideration
4)
extinguishment of the obligation (as when the whole debt has been paid, remitted, or has prescribed)
5)
non-fulfillment of the suspensive condition (if made upon the whole object or upon all the debtors)
6)
Statute of Frauds
7)
when ALL the debtors were incapacitated to give consent (such as unemancipated minors, insane, idiots, persons under a
hypnotic spell)
8)
when there are VICES OF CONSENT (vitiated consent) on the part of ALL the debtors (such as when all were forced or
intimidated or unduly influenced or were led into error)
B.
Those PERSONAL to the debtor sued. (This is a complete defense generally, but if the defense is non-fulfillment yet of a condition
or the non-arrival yet of the term, this is only a PARTIAL defense, that is, he will still be liable except for his own share in the
meantime).
Examples:
1)
Vitiated consent (as when he was forced, etc.) COMPLETE defense.
2)
Incapacity to give consent (as when he is a minor)- COMPLETE defense.
3)
Non-fulfillment of condition imposed regarding his share (PARTIAL defense, unless provided otherwise).
4)
Non-arrival of term (regarding his share PARTIAL defense unless provided otherwise)
C.
Those PERSONAL TO THE OTHERS same as (b) (Partial defense regarding share of others involved).
Examples
1)
A, B, and C are solidarily indebted to X for the selling of shabu or the sale of property of public dominion. If A, B, or C is sued,
none can be held liable. This is a complete defense.
2)
A, B, and C are solidarily indebted to X for P3 million but As consent had been obtained by intimidation. If X sues A, how much
will A be liable for?
ANS.: Nothing, for as to him, this is a complete defense. After all, he would not have been involved at all, had there been no
intimidation.
If X sues B, how much will B be liable for?
ANS.: For the whole P3 million MINUS As share (P1 million) if B puts up As vitiated consent as a defense. Having only a
PARTIAL defense, B can still be held liable for P2 million.
PROBLEM
On Jun. 15, 2005, X, Y, and Z executed a promissory note promising to pay B the sum of P3,000,000 jointly and severally with interest of
10% per annum within 6 months. In an action by B against X for nonpayment of the note, X interposed the defenses
(1) that Y was a minor when the note was executed, and
(2) that B had given an extension of one year to Z.
What are the effects of these defenses?
ANS.: B can recover P1,000,000 because Ys minority is a partial defense for X (for Ys share of P1,000,000). The extension to Z is also a
partial defense for X (for Zs share of P1,000,000). (Art. 1222; see Inchausti v. Yulo, 34 Phil. 978).
CASES
Braganza v. Villa Abrille
L-12471, Apr. 13, 1957
FACTS: On Oct. 20, 1944, Rosario de Braganza and her two minor sons (18 and 16 years of age) borrowed from Villa Abrille P70,000 in
Japanese money, promising to pay solidarily P10,000 in legal currency of the Philippines 2 years after the war. The money was used for
the support of the children. For failure to pay, Villa Abrille sued in March 1949. The mother and the two sons pleaded in defense the
minority of the two children at the time the contract was entered into.
HELD:
1) The mother is liable for 1/3 of the P10,000. Reason: The minority of her children did not completely release her from liability, since
minority is a personal defense of the minors. She can avail herself of said defense only as regards that part of the debt for which the
minors are liable. 2) The contract entered into by the minors is voidable, but since it cannot be denied that they had profited by the
money they received (for their support), it is fair to hold them liable to the extent of said benefit (computed in accordance with the
Ballantyne scale).
EFFECT OF DEBTORS DEATH
X is Ys surety. Creditor sued Y, who died pending the proceedings. Although the credit must now be brought in the special settlement
proceedings of Ys estate, an ordinary action filed against X as surety would prosper, the transfer not being a defense of X. (See Chinese
Chamber of Commerce v. Pua Te Ching, 16 Phil. 406).
1207-CASES
PACIFIC BANKING CORPORATION, vs.IAC
MEDIALDEA, J.:p
FACTS: On October 24, 1975, defendant Celia Syjuco Regala (hereinafter referred to as Celia Regala for brevity), applied for and
obtained from the plaintiff the issuance and use of Pacificard credit card under the Terms and Conditions Governing the Issuance and
Use of Pacificard a copy of which was issued to and received by the said defendant on the date of the application and expressly agreed
that the use of the Pacificard is governed by said Terms and Conditions. On the same date, the Robert Regala, Jr, the husband, executed
a "Guarantor's Undertaking in favor of the appellee Bank, whereby the latter agreed "jointly and severally of his wife, to pay the
Pacific Banking Corporation upon demand, any and all indebtedness, obligations, charges or liabilities due and incurred by
Page | 83
Kristine Confesor
said Celia Aurora Syjuco Regala with the use of the Pacificard, or renewals thereof, issued in her favor by the Pacific Banking
Corporation". It was also agreed that "any changes of or novation in the terms and conditions in connection with the issuance or use of
the Pacificard, or any extension of time to pay such obligations, charges or liabilities shall not in any manner release me/us from
responsibility hereunder, it being understood that I fully agree to such charges, novation or extension, and that this understanding is a
continuing one and shall subsist and bind me until the liabilities of the said Celia Syjuco Regala have been fully satisfied or paid..
In view of defendant Celia Regala's failure to settle her account for the purchases, a written demand was sent to the latter and also to
the defendant Roberto Regala, Jr under his "Guarantor's Undertaking."A complaint was subsequently filed in Court for defendant's ( sic)
repeated failure to settle their obligation. Defendant Celia Regala was declared in default for her failure to file her answer within the
reglementary period. Defendant-appellant Roberto Regala, Jr., on the other hand, filed his Answer with Counterclaim admitting his
execution of the "Guarantor's Understanding", "but with the understanding that his liability would be limited to P2,000.00 per month."
ISSUE: W/N husband is a surety and is solidarily liable. Yes.
HELD:
The pertinent portion of the "Guarantor's Undertaking" which private respondent Roberto Regala, Jr. signed in favor of Pacific Banking
Corporation provides:
I/We, the undersigned, hereby agree, jointly and severally with Celia Syjuco Regala to pay the Pacific Banking Corporation upon
demand any and all indebtedness, obligations, charges or liabilities due and incurred by said Celia Syjuco Regala with the use of
the Pacificard or renewals thereof issued in his favor by the Pacific Banking Corporation. Any changes of or Novation in the terms
and conditions in connection with the issuance or use of said Pacificard, or any extension of time to pay such obligations, charges
or liabilities shall not in any manner release me/us from the responsibility hereunder, it being understood that the undertaking is a
continuing one and shall subsist and bind me/us until all the liabilities of the said Celia Syjuco Regala have been fully satisfied or
paid. (p. 12,Rollo)
SURETY V. GUARANTY. The undertaking signed by Roberto Regala, Jr. although denominated "Guarantor's Undertaking," was in
substance a contract of surety. As distinguished from a contract of guaranty where the guarantor binds himself to the creditor to fulfill
the obligation of the principal debtor only in case the latter should fail to do so, in a contract of suretyship, the surety binds
himself solidarily with the principal debtor (Art. 2047, Civil Code of the Philippines).
We need not look elsewhere to determine the nature and extent of private respondent Roberto Regala, Jr.'s undertaking. As a surety he
bound himself jointly and severally with the debtor Celia Regala "to pay the Pacific Banking Corporation upon demand, any and all
indebtedness, obligations, charges or liabilities due and incurred by said Celia Syjuco Regala with the use of Pacificard or renewals
thereof issued in (her) favor by Pacific Banking Corporation." This undertaking was also provided as a condition in the issuance of the
Pacificard to Celia Regala, thus:
5. A Pacificard is issued to a Pacificard-holder against the joint and several signature of a third party and as such, the Pacificard holder
and the guarantor assume joint and several liabilities for any and all amount arising out of the use of the Pacificard. (p. 14, Rollo)
The respondent appellate court held that "all the other rights of the guarantor are not thereby lost by the guarantor becoming liable
solidarily and therefore a surety." It further ruled that although the surety's liability is like that of a joint and several debtor, it does not
make him the debtor but still the guarantor (or the surety), relying on the case of Government of the Philippines v. Tizon. G.R. No. L22108, August 30, 1967, 20 SCRA 1182. Consequently, Article 2054 of the Civil Code providing for a limited liability on the part of the
guarantor or debtor still applies.
It is true that under Article 2054 of the Civil Code, "(A) guarantor may bind himself for less, but not for more than the principal debtor,
both as regards the amount and the onerous nature of the conditions. 2 We do not agree however, that Roberto Jr.'s liability should be
limited to that extent. Private respondent Roberto Regala, Jr., as surety of his wife, expressly bound himself up to the extent of the
debtor's (Celia) indebtedness likewise expressly waiving any "discharge in case of any change or novation of the terms and conditions
in connection with the issuance of the Pacificard credit card." Roberto, in fact, made his commitment as a surety a continuing one,
binding upon himself until all the liabilities of Celia Regala have been fully paid. All these were clear under the "Guarantor's
Undertaking" Roberto signed. As in guaranty, a surety may secure additional and future debts of the principal debtor the amount of
which is not yet known (see Article 2053, supra)..
A guarantor or surety does not incur liability unless the principal debtor is held liable. It is in this sense that a surety,
although solidarily liable with the principal debtor, is different from the debtor. It does not mean, however, that the surety cannot be
held liable to the same extent as the principal debtor. The nature and extent of the liabilities of a guarantor or a surety is determined by
the clauses in the contract of suretyship.
(INIMACO), v. NLRC
BUENA, J.:
FACTS: This is a petition for certiorari assailing the Resolution dated September 4, 1991 issued by the National Labor Relations
Commission in RAB-VII-0711-84 on the alleged ground that it committed a grave abuse of discretion amounting to lack of jurisdiction in
upholding the Alias Writ of Execution issued by the Labor Arbiter which deviated from the dispositive portion of the Decision dated
March 10, 1987, thereby holding that the liability of the six respondents in the case below is solidary despite the absence of the word
"solidary" in the dispositive portion of the Decision, when their liability should merely be joint. S-jcj
In September 1984, 6 PRs filed a complaint with DOLE against (INIMACO)et al, for payment of separation pay and unpaid wages. The
labor arbiter ordered respondents (INIMACO) et al, to pay complainants to be deposited with this Commission within ten (10) days from
receipt of this Decision for appropriate disposition. No appeal was filed within the reglementary period thus, the above Decision became
final and executory. On June 16, 1987, the Labor Arbiter issued a writ of execution but it was returned unsatisfied. On August 26, 1987,
the Labor Arbiter issued an Alias Writ of Execution which ordered to proceed to the premises of INIMACO et al to collect the aggregate
award in favor of complainants. Petitioner filed a "Motion to Quash Alias Writ of Execution and Set Aside Decision," [3] alleging among
others that the alias writ of execution altered and changed the tenor of the decision by changing the liability of therein respondents from
joint to solidary, by the insertion of the words "AND/OR" between "Antonio Gonzales/Industrial Management Development
Page | 84
Kristine Confesor
Corporation and Filipinas Carbon and Mining Corporation, et al." However, in an order dated September 14, 1987, the Labor Arbiter
denied the motion. The respondent NLRC dismissed the appeal. Dissatisfied with the foregoing, petitioner filed the instant case, alleging
that the respondent NLRC committed grave abuse of discretion in affirming the Order of the Labor Arbiter dated August 15, 1989, which
declared the liability of petitioner to be solidary.
ISSUE: W/N liability is joint/solidary?
HELD: JOINT. A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation, and each creditor is
entitled to demand the whole obligation. [9] In a joint obligation each obligor answers only for a part of the whole liability and to each
obligee belongs only a part of the correlative rights. [10] Well-entrenched is the rule that solidary obligation cannot lightly be inferred.
[11]
There is a solidary liability only when the obligation expressly so states, when the law so provides or when the nature of the
obligation so requires.[12]
In the dispositive portion of the Labor Arbiter, the word "solidary" does not appear. The said fallo expressly states the following
respondents therein as liable, namely: Filipinas Carbon and Mining Corporation, Gerardo Sicat, Antonio Gonzales, Industrial Management
Development Corporation (petitioner INIMACO), Chiu Chin Gin, and Lo Kuan Chin. Nor can it be inferred therefrom that the liability of the
six (6) respondents in the case below is solidary, thus their liability should merely be joint.
Moreover, it is already a well-settled doctrine in this jurisdiction that, when it is not provided in a judgment that the defendants are liable
to pay jointly and severally a certain sum of money, none of them may be compelled to satisfy in full said judgment. In Oriental
Commercial Co. vs. Abeto and Mabanag[13] this Court held:
"It is of no consequence that, under the contract of suretyship executed by the parties, the obligation contracted by the sureties was
joint and several in character. The final judgment, which superseded the action for the enforcement of said contract, declared the
obligation to be merely joint, and the same cannot be executed otherwise."[14]
Granting that the Labor Arbiter has committed a mistake in failing to indicate in the dispositive portion that the liability of respondents
therein is solidary, the correction -- which is substantial -- can no longer be allowed in this case because the judgment has already
become final and executory.
Sec. 5
DIVISIBLE AND INDIVISIBLE
OBLIGATIONS
(See Arts 1223-1225)
Art.
1223.
The
divisibility
or
indivisibility of the things that are the
object of obligations in which there is
only one debtor and only one creditor
does not alter or modify the provisions
of Chapter 2 of this title.
KINDS OF DIVISION
1)
QUANTITATIVE DIVISION
(depends on quantity: Example
if 10 chairs are equally divided
between two brothers.)
In
the
next
following
example, if the inheritance
consists only of a ricefield
its partition by metes and
bounds into two equal parts
is a quantitative division.
Another example, is when A
and B divide 300 cavans of
palay harvested from the
ricefield or the P100,000.00
cash.
2)
3)
QUALITATIVE DIVISION
(depends on quality, irrespective
of quantity. Example: If one child
inherits land, and another
inherits cash.)
A and B are heirs of C. They
agreed
to
divide
the
inheritance as follows: to A
a house and lot and
home appliances and to
a ricefield, a car and
P100,000.00 cash.
INTELLECTUAL OR MORAL
DIVISION (one that exists
merely in the mind, and not in
physical reality. Example: My
brother and I own in common a
car. My one-half share is only in
the mind.)
KINDS OF INDIVISIBILITY.
They are:
(1) LEGAL INDIVISIBILITY. where
a specific provision of law declares as
indivisible, obligations which, by their
nature, are divisible (Art. 1225, par.
3.);
(2)
CONVENTIONAL
INDIVISIBILITY. where the will of
the parties makes as indivisible,
obligations which, by their nature, are
divisible (Ibid.); and
(3) NATURAL INDIVISIBILITY.
where the nature of the object or
prestation does not admit of division,
e.g., to give a particular car, to sing a
song, etc. (Ibid., par. 1.)
INDIVISIBILITY V. SOLIDARITY
(See page, 67)
1224.
A joint indivisible obligation
gives rise to indemnity for
damages
from the time anyone of the debtors
does not comply with his undertaking.
The debtors who may have been
ready to fulfill their promises shall not
contribute to the indemnity beyond
the corresponding portion of the price
of the thing or of the value of the
service in which the obligation
consists.
JOINT INDIVISIBLE OBLIGATION
Here the object is indivisible and yet
the parties are merely bound jointly.
Example: Mila and Ligaya are jointly
bound to give a specific car to Jose.
EFFECT OF NON-COMPLIANCE
The obligation is converted into a
monetary one for indemnity.
Example: Mila and Ligaya promised
jointly to give a specific car worth
P2,400,000 to Jose. In the meantime,
the car is with Honda Motors Co. Milas

share is, therefore, P1,200,000. If Mila,
because of gambling, does not have
the money, but Ligaya has P1,200,000
it is clear that they cannot get the car
from Honda Motors Co. So they also
cannot comply with their obligation of
delivering the car to Jose. Here, the
obligation to give the car is converted
to a monetary obligation to give
P2,400,000 to Jose. Ligaya is not
responsible for Milas insolvency, so
she is duty bound to give only
P1,200,000. Mila will be indebted to
Jose for her share of P1,200,000.
(c) Suppose in the preceding problem,
the obligation was SOLIDARY and
INDIVISIBLE, what would be the
effect?
ANS.: Jose can demand the whole car
or its price of P2,400,000 from Ligaya
alone, but Ligaya can later recover
reimbursement from Mila.
EFFECTS OF NONCOMPLIANCE BY
A DEBTOR
JOINT INDIVISIBLE
the obligation is transformed into
one for damages. NOT specific
performance/rescission
because
there is no cause of action against
the other debtors who are willing to
fulfill their promises. ALL debtors
liable for damages but the innocent
debtors shall not contribute beyond
their respective shares of the
obligation. The obligation becomes
a divisible one.
1225.
For the purposes of the
preceding articles, obligations
to give definite things and
those
which
are
not
susceptible
of
partial
performance
shall
be
Page | 85
SOLIDARY
breach by a co
debtors liable
obligation
RE
without prejud
against the g
debtor. (Art. 122
Kristine Confesor
deemed
INDIVISIBLE.
to
be
When the obligation has for its object

the
execution of a certain
number of days of work,
the accomplishment of work
by metrical units, or
analogous things which by
their nature are susceptible
of partial performance, shall
be DIVISIBLE.
However, even though the object or
service may be physically divisible, an
obligation is indivisible if so provided
by law or intended by the parties. In
obligations not to do, divisibility or
indivisibility shall be determined by
the character of the prestation in each
particular case
(1) Obligations That Are Deemed

Indivisible
a.
b.
c.
d.
Obligations to give definite

things.
(Example: to give this car)
Those which are not
susceptible of partial
performance.
(Example: to conduct the
orchestra in a single rendition
of Buencaminos Mayon
Concerto)
Even if the thing is physically
divisible, it may be indivisible
if so provided by law.
Even if the thing is physically
divisible, it may be indivisible
if such was the intention of
the parties concerned.
(2) Obligations That Are Deemed

Divisible
a.
Execution of certain number of
days work
Example: When a laborer is
hired to work for 10days.
b.
Expressed by metrical units
Example: When a laborer is
hired to construct a street 3
meters wide and 50 meters
long.
c.
Nature of obligationsusceptible of partial
fulfillment
Example: When a debtor is
required to pay in ten annual
installments
d.
When the object of the
obligation is the
accomplishment of work
susceptible of partial
performance.
[NOTE: The character of the
prestation or obligation will
determine the divisibility or
indivisibility
(3) Effect of Illegality on a
Divisible Contract
In case of a divisible contract, if the
illegal terms can be separated from
the legal ones, the latter may be
enforced. (Art. 1420, Civil Code)
CASES
Blossom & Co. v. Manila Gas Corp.
55 Phil. 226
FACTS: P and D entered into a

contract whereby D will supply P with
gas tar at the price of P65 per ton. The
contract was to run for 10 years, to
start from the year 1919. D began
delivering but later on he refused to
continue. In 1923, P brought an action
for damages against D and asked for
damages. P was awarded damages up
to 1923. The judgment became final,
and P did not then ask for more. Later,
P brought an action to recover
damages from 1923 to 1929. Issue: Is
he allowed to do so?
HELD: No, P is not allowed to recover
any more damages. He should have
questioned the judgment before it
became final, but he did not. He had
brought the first action to recover
damages for the contract, the whole
contract, and because the judgment in
that case had already become final it
cannot be changed although what he
had obtained was only partial
recovery. As a general rule, a contract
to do several things at several times is
divisible, and a judgment for a single
breach of a continuing contract is not
a bar to a suit for the subsequent
breach. When the defendant (D)
terminated a continuing contract by
absolute refusal in bad faith to
perform (absolute, because he refused
not only a single delivery but all
subsequent deliveries Authors
comments), a claim for damages for a
breach is an indivisible demand, and
where as in this case, a former final
judgment was rendered, it is a bar to
any damages which the plaintiff may
thereafter sustain.
L. Buck & Son Lumber Co. v.
Atlantic Lumber Co.
109 Federal 411
FACTS: A contract was made for the
sale of a large quantity of logs to be
delivered in monthly installments
during a period of 8 years, payments
to be made also in installment, at
times
having
relations
to
the
deliveries. It contained stipulations as
to such payments, and guaranties as
to the average size of the logs to be
delivered in each installment. The
seller terminated the contract for
alleged breaches by the buyer and
brought suit for damages, among
them payments due for installments
of the logs already delivered. The
seller got some damages. Later, he
wanted to recover for the other
installments.
ISSUES:
(a) Is this a divisible or indivisible
obligation?
(b) After recovery has been had of
prior installments in a court action,
may another court action prosper for
the recovery of the remaining
installments?
HELD:
(a) This is an indivisible contract, and
not a number of separate and
independent agreements for the sale
of the quantity to be delivered and
paid for each month, although there
might be breaches of the minor
stipulations and warranties with
reference thereto which would warrant

suits with a termination of the
contract.
b) The later court action for the
recovery of the remaining installments
cannot prosper. The judgment in such
action was conclusive as to all claims
or demands of either party against the
other, growing out of the indivisible
contract.
Sec. 6
OBLIGATIONS WITH A PENAL
CLAUSE
(See Arts 1226-1230)
1226.
In obligations with a penal
clause,
the
penalty
shall
substitute
the indemnity for damages and the
payment of interests in case of
noncompliance,
if
there
is
no
stipulation
to
the
contrary.
Nevertheless, damages shall be paid if
the obligor refuses to pay the penalty
or is guilty of fraud in the fulfillment of
the obligation.
The penalty may be enforced only
when it is demandable in accordance
with the provisions of this code.
1227.
The debtor cannot exempt
himself from the performance of
the obligation by paying
the penalty, save in the case where
this right has been expressly reserved
for him. Neither can the creditor
demand
the
fulfillment
of
the
obligation and the satisfaction of the
penalty at the same time, unless this
right has been clearly granted him.
However, if after the creditor has
decided to require the fulfillment of
the
obligation,
the
performance
thereof should become impossible
without his fault, the penalty may be
enforced.
1228.
Proof of actual damages
suffered by the creditor is not
necessary in order that the
penalty may be demanded.
1229.
The judge shall equitably
reduce the penalty when the
principal obligation has been
partly or irregularly complied with by
the debtor. Even if there has been no
performance, the penalty may also be
reduced by the courts if it is iniquitous
or unconscionable.
1230.
The nullity of the penal
clause does not carry with it that
of the principal obligation.
The nullity of the principal obligation
carries with it that of the penal clause.
WITH A PENAL CLAUSE- one to

which an accessory undertaking is
attached for the purpose of insuring
its performance by virtue of which the
obligor is bound to pay a stipulated
indemnity to perform a stipulated
prestation in case of breach
Page | 86
Kristine Confesor
Meaning of principal and
accessory obligations.
(1) Principal obligation is one which
can stand by itself and does not
depend for its validity and existence
upon another obligation.
(2) Accessory obligation is one which
is attached to a principal obligation
and, therefore, cannot stand alone.
a.
b.
It is a coercive means to obtain

from the debtor compliance from
the debtor. (Georg).
A penal clause is an accessory
undertaking to assume greater
liability in case of breach. It is
attached to obligations in order
to insure their performance. (8
Manresa245).
PRINCIPAL PURPOSE OF THE

PENAL CLAUSE
a.
to insure the performance of an
obligation
b.
to substitute for damages and
the payment of interest in case
of non-compliance.
c.
to punish the debtor for the nonfulfillment or violation of his
obligation.
PENAL CLAUSE DISTINGUISHED

FROM A CONDITION
Between a condition and a penalty,
there are notable differences: the
PENALTY constitutes an obligation
although accessory; CONDITION does
not. Therefore, the PENALTY may
become demandable in default of the
unperformed principal obligation, and
sometimes jointly with it, while
CONDITION is never demandable.
CHARACTERISTICS
OF
PENAL
CLAUSES
1. Subsidiary- as a general rule,
only penalty can be demanded,
principal cannot be demanded
because it takes place of
indemnity for damages and the
payment of interest, except:
Penalty
is
joint
or
cumulative
2.
Exclusivetakes
place
of
damage, damage can only be
demanded in the ff cases
(exception to GR, INSTANCES
WHEN ADDITIONAL DAMAGES
MAY BE RECOVERED):
a) Stipulation- granting right
b) Refusal to pay penalty
c)
With dolo (not of creditor)
The reason for the

third exception is clear:
there
can
be
no
renunciation
of
an
action
to
enforce
liability for future fraud
because, as we have
seen, this is against
public
policy
and
against the express
provisions of the law.
MAY
ANY
PENALTY
BE
DEMANDABLE?
ANS.: No. The penalty may be
enforced only when it is demandable
in accordance with the provisions of

the Civil Code, one of which states
that the penalty may be reduced if it
is iniquitous or unconscionable. (Art.
1229, Civil Code).
However, if she so desires, she

may instead give me P700,000.
(NOTE: Here, Gloria is
clearly
and
expressly
allowed
to
make
the
substitution. If the ring is
lost by a fortuitous event,
she is excused from giving
me
the
substitute
of
P700,000, for indeed the
principal
obligation
has
been extinguished.)
CAUSES
FOR
REDUCTION
OF
PENALTY
1.
Partial or irregular performance
2.
Penalty
provided
is
iniquitous/unconscionable
CASES
Navarro v. Mallari
45 Phil. 242
FACTS: In a building contract, there
was stipulation for a penalty clause.
The builder, however, was sued for
additional damages on account of
breach of the contract. But the breach
was not occasioned by fraud. Issue: Is
the owner entitled to get more
damages from the builder?
HELD: No, he cannot get damages
other than what has been stipulated
upon as the penalty or waiver of other
damages, except if otherwise provided
by law. A party to a building contract
who is given the benefi t of a
stipulation fixing a round sum as
liquidated damages for breach of
contract on the part of the builder
cannot
be
awarded
additional
damages at large for the same
breach. Insistence upon receiving
satisfaction of the penal clause
operates as a renunciation of the right
to other damages
Lambert v. Fox
26 Phil. 588
FACTS: In the promissory notes
executed by the defendants, and
incorporated in the mortgage deeds,
they voluntarily undertook to pay the
sum of P1,300 as court costs,
expenses of collection, and attorneys
fees, whether incurred or not.
Issue: Is this penal clause valid?
HELD: Yes, this stipulation is valid and
permissible penal clause, not contrary
to any law, morals, or public order,
and is therefore, strictly binding upon
the defendants.
OBLIGATIONS WITH
A PENAL
CLAUSE
DISTINGUISHED FROM
EXAMPLES
FROM
THE
FACULTATIVE
AND
THE
ALTERNATIVE OBLIGATIONS
1.
Obligations with a penal

clause
Example: Gloria is obliged to give
me a particular diamond ring. If
she fails to do so, she must give
P700,000.
(NOTE: Ordinarily, Gloria
cannot excuse herself from
the duty of giving me the
ring
by
simply
paying
P700,000.
For
her
to
substitute the penalty, she
must be expressly given the
right to do so)
1.
Facultative Obligation
me a particular diamond ring.
2.
Alternative Obligation
me either a particular diamond
ring or P700,000.
(NOTE: Here, the choice
given to Gloria is absolute
.If, however, the ring is lost
by a fortuitous event, she is
still obliged to give me the
P700,000.)\
1227
Generally,
Debtor
Cannot
Substitute
Penalty
for
the
Principal Obligation
The general rule is that the debtor is
not allowed to just pay the penalty
instead of fulfi lling the obligation. He
can only do so if the right has been
EXPRESSLY reserved. The reason is
that if he can just pay, fulfi llment of
the obligation will be considered an
alternative one. The word EXPRESSLY
means that any implied reservation is
not allowed.
Example
A promises to fi nish a certain piece of
work within six months. The contract
stipulates that in case he does not
build the house at all, he is supposed
to forfeit the sum of P1,000,000. In
this case, as a general rule the
contractor cannot just give the sum of
P1,000,000 as a substitute for his nonperformance of the obligation. It must
be remembered that as a general rule,
therefore, the penal clause is not
supposed to substitute the
performance
of
the
principal
obligation. He may, however, be
expressly granted by the creditor the
right to refrain from the execution of
the contract by a forfeiture of the
penalty.
Cui v. Sun Chan

41 Phil. 523
FACTS: A lessee rented property from
a lessor. The contract of lease
contained a stipulation to the effect
that the lessee should not make any
construction on the property without
the permission of the lessor, and that
should the lessee do so without the
permission
of
the
lessor
said
improvements would inure to the
benefi t of the estate (lessor) and the
lessee, in such a case, would not have
any
right
to
ask
for
any
reimbursement for the cost of the
construction. The lessee made some
improvements without the consent of
the lessor. Now, the lessor wants
to evict the lessee for the violation of
the conditions of the lease. The
lessee, on the other hand, said that he
should not be ousted because he was
Page | 87
Kristine Confesor
ready to forfeit the improvements in
favor of the lessors estate.
Issue: Is the fact that the lessee is
ready to forfeit the improvement on
the estate suffi cient to prevent his
being ousted from the premises?
: Even if the lessee is ready to forfeit
the improvements on the estate, he
may still be ousted from the premises
for his having violated the condition
imposed upon him, namely, not to
make any such improvements without
the permission of the lessor. It is true
that the lessee was ready to fulfi ll

what may perhaps be termed a
penalty, but this does not excuse him
from complying with the principal
obligation
of
not
making
any
improvements without the consent of
the lessor. It must be borne in mind
that a debtor (the lessee) cannot
escape the fulfi llment
of the obligation by just paying the
penalty, unless such right has
expressly been granted him. Hence,
everything considered, the lessee may
lawfully be ousted from the premises.
(3) Generally, Creditor Cannot

Demand Both Fulfi llment and
Penalty at the same time
As a general rule, the creditor does
not have this right to demand fulfi
llment of the obligation and the
penalty at the same time. The
exception arises when such a right has
been CLEARLY granted to him
Page | 88

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OBLIGATIONS AND CONTRACTS first exam

OBLIGATIONS AND CONTRACTS first exam

Art. 1108. Prescription, both acquisitive and extinctive,

Art. 1109 Prescription does not run between

OBLIGATIONS AND CONTRACTS first exam

If Sonia, knowing that the debt has prescribed, nevertheless

Subject to the Commerce of Man

429 provides The following are property of public dominion

OBLIGATIONS AND CONTRACTS first exam

Waters rising continuously or intermittently on lands of public dominion

RA 1942 (June 22, 1957) amending PLA or CA141

Creditors may plead prescription despite tacit renunciation of right by debtor/proprietor

(if NCC provides for a shorter period, it must apply NCC)

Art. 1117 Acquisitive prescription of dominion and other real rights

OBLIGATIONS AND CONTRACTS first exam

REQUISITES FOR ACQUISITIVE

from the date of the possession in bad faith

from the time the possession began

in proportion that the period of extraordinary bears to that or ordinary prescription.

Art. 1118 Possession has to be in the concept of an owner, public,

Art. 1119 Acts of possessory character executed in virtue of license or

Not concept of an owner

Art. 1120 Possession is interrupted for the purposes of prescription,

OBLIGATIONS AND CONTRACTS first exam

When are judicial summons deemed not to have been issued?

All benefits acquired so far from the possession ceases

When prescription runs again, it shall be a new one

Art. 1121 Possession is naturally interrupted when through any cause it

Art.1123 Civil interruption is produced by judicial summons to the possessor.

It is not the filing of the complaint in court which interrupts

Art. 1126 Against a title recorded in the Registry of Property, ordinary

OBLIGATIONS AND CONTRACTS first exam

Presumed, unless the contrary is shown

If VOID, good faith/bad faith will be then immaterial

Art. 1131 For purposes of prescription, just title must be proved; it is

If act of possessor himself, not sufficient

OBLIGATIONS AND CONTRACTS first exam

The ownership of personal property also prescribes through

Art. 1133 Movables possessed through a crime can never be acquired

Art. 1135 In case the adverse claimant possesses by mistake an area

Possession of adverse claimant during wartime cannot be counted in favor of prescription

Different Character of Possession

OBLIGATIONS AND CONTRACTS first exam

Predecessor: Bad Faith

559 movable property acquired in good faith is equivalent to a title

Actions not fixed by law

Injury to the rights of the plaintiff

Lapse of time has the effect of extinguishing the action

Prescription as a defense must be pleaded by the debtor.

OBLIGATIONS AND CONTRACTS first exam

Art. 1141 Real actions over immovable prescribe after

Reckoning point: upon judicial/extrajudicial foreclosure of property

Action by the govt or its entity

Reckoning point of Accrual of Right of Actions

OBLIGATIONS AND CONTRACTS first exam

Art. 1145 The following actions must be commenced within 6 years

Art. 1146 The following actions must be instituted within 4 years

Art. 1152 The period for prescription of actions to demand the

Art. 1153 The period for prescription of actions to demand accounting

OBLIGATIONS AND CONTRACTS first exam

BENTIR V. LEANDA (Reformation of Instrument)

OBLIGATIONS AND CONTRACTS first exam

Under Section 1, Rule 64 of the New RoC, 17

AINZA vs. SPOUSES PADUA