Bar Questions 1 3 Merged

Civil Law Q&As (2007-2013) hectorchristopher@yahoo.com dbaratbateladot@gmail.
com
will of the debtor or without his statement is false. Explain your answer in
participation or aggravation (Paras, Civil not more than two (2) sentences.
Code Annotated, vol. IV, 2000 ed., p
159). As mentioned in the facts, labor (A). A clause in an arbitration contract
unrest of the employees was caused by granting one of the parties the power to
AB Corp.'s failure to pay its employees choose more arbitrators than the other
on time. renders the arbitration contract void. (1%)
(B). Can XY Corp. unilaterrally and SUGGESTED ANSWER:
immediately cancel the contract? (2%) True. The Civil Code provides that “Any
clause giving one of the parties power to
SUGGESTED ANSWER: choose more arbitrators than the other
is void and of no effect” (Art 2045, NCC).
No, XY Corp. cannot unilaterally and
Obligations
immediately cancel the contract. In the
absence of any stipulation for automatic
Extinguishment; Compensation (2009)
rescission, rescission must be judicial
(Art. 1191, Civil Code). No.XV. Sarah had a deposit in a savings
account with Filipino Universal Bank in the
(C). Must AB Corp. return the 50%
amount of five million pesos
downpayment? (2%)
(P5,000,000.00). To buy a new car, she
obtained a loan from the same bank in the
SUGGESTED ANSWER:
amount of P1,200,000.00, payable in twelve
AB Corp. need not return the 50% down monthly installments. Sarah issued in favor
payment because 45% of the work was of the bank post-dated checks, each in the
already completed, otherwise, XY Corp. amount of P100,000.00, to cover the twelve
would be unjustly enriching itself at the monthly installment payments. On the
expense of AB Corp. third, fourth and fifth months, the

corresponding checks bounced.
The bank then declared the whole

Stipulation; Arbitration Clause (2009) obligation due, and proceeded to deduct the
amount of one million pesos
No. XI. TRUE or FALSE. Answer TRUE if (P1,000,000.00) from Sarah’s deposit after
the statement is true, or FALSE if the notice to her that this is a form of
“Never Let The Odds Keep You From Pursuing What You Know In Your Heart You Were Meant To Do.”-Leroy Satchel Paige
Page 91 of 180
Civil Law Q&As (2007-2013) hectorchristopher@yahoo.com dbaratbateladot@gmail.com
compensation allowed by law. Is the bank Extinguishment; Compensation (2008)

correct? Explain. (4%)
No. XV. Eduardo was granted a loan by
SUGGESTED ANSWER: XYZ Bank for the purpose of improving a
No, the bank is not correct. While the building which XYZ leased from him.
Bank is correct about the applicability of Eduardo, executed the promissory note
compensation, it was not correct as to ("PN") in favor of the bank, with his friend
the amount compensated. Recardo as co-signatory. In the PN, they
both acknowledged that they are
A bank deposit is a contract of loan, "individually and collectively" liable and
where the depositor is the creditor and waived the need for prior demand. To
the bank the debtor. Since Sarah is also secure the PN, Recardo executed a real
the debtor of the bank with respect to estate mortgage on his own property. When
the loan, both are mutually principal Eduardo defaulted on the PN, XYZ stopped
debtors and creditors of each other. Both payment of rentals on the building on the
obligation are due, demandable and ground that legal compensation had set in.
liquidated but only up to the extent of Since there was still a balance due on the
P300,000.00 (covering the unpaid third, PN after applying the rentals, XYZ
fourth and fifth monthly installments). foreclosed the real estate mortgage over
The entire one million was not yet due Recardo's property. Recardo opposed the
because the loan has no acceleration foreclosure on the ground that he is only a
clause in case of default. And since there co-signatory; that no demand was made
is no retention or controversy upon him for payment, and assuming he is
commenced by third person and liable, his liability should not go beyond
communicated in due time to the half the balance of the loan. Further,
debtor, then all the requisites of legal Recardo said that when the bank invoked
compensation are present but only up to compensation between the reantals and the
the amount of P300,000.00. The bank, amount of the loan, it amounted to a new
therefore, may deduct P300,000.00 from contract or novation, and had the effect of
Sarah’s bank deposit by way of extinguishing the security since he did not
compensation. give his consent (as owner of the property
under the real estate mortgage) thereto.
(A). Can XYZ Bank validly assert legal

compensation? (2%)
Page 92 of 180
SUGGESTED ANSWER: ground that legal compensation had set in.

Since there was still a balance due on the
Yes, XYZ Bank can validly assert legal PN after applying the rentals, XYZ
compensation. In the present case, all of foreclosed the real estate mortgage over
the elements of legal compensation are Recardo's property. Recardo opposed the
present: (1) XYZ Bank is the creditor of foreclosure on the ground that he is only a
Eduardo while Eduardo is the lessor of co-signatory; that no demand was made
XYZ Bank; (2) both debts consist in a upon him for payment, and assuming he is
sum of money, or if the things due are liable, his liability should not go beyond
consumable, they be of the same kind, half the balance of the loan. Further,
and also of the same quality if the latter Recardo said that when the bank invoked
has been stated; (3) the two debts be compensation between the reantals and the
due; (4) they be liquidated and amount of the loan, it amounted to a new
demandable, and (5) over neither of them contract or novation, and had the effect of
there be any retention or controversy, extinguishing the security since he did not
commenced by third persons and give his consent (as owner of the property
communicated in due time to the debtor under the real estate mortgage) thereto.
(Art. 1279, Civil Code).
(C). Does Recardo have basis under the
Civil Code for claiming that the original
contract was novated? (2%)
Extinguishment; Novation (2008)
SUGGESTED ANSWER:
XYZ Bank for the purpose of improving a No. Recardo has no basis for claiming
building which XYZ leased from him. novation of the original contract when
Eduardo, executed the promissory note the bank invoked compensation because
("PN") in favor of the bank, with his friend there was simply partial compensation
Recardo as co-signatory. In the PN, they (Art. 1290, Civil Code) and this would
both acknowledged that they are not bar the bank from recovering the
"individually and collectively" liable and remaining balance of the obligation.
waived the need for prior demand. To
secure the PN, Recardo executed a real ALTERNATIVE ANSWER:
estate mortgage on his own property. When
Eduardo defaulted on the PN, XYZ stopped No. In order that an obligation may be
payment of rentals on the building on the extinguished by another, it is imperative
Page 93 of 180
that it be so declared in unequivocal or creditors (Philippine Airlines v. CA

terms, or that the old and new and Amelia Tan, G.R. No. L-49188,
obligations be on every point compatible 1990). Mere delivery of checks does not
with each other. Novation is never discharge the obligation under a
presumed (Art. 1292, Civil Code). judgment. A check shall produce the
effect of payment only when they have
been cashed or where through the fault
of the creditor they have been impaired
Extinguishment; Payment of Check
(Art 1249, Civil Code).
(2013)
However, it is not necessary that the

No.VI. Lito obtained a loan of P1,000,000
right of redemption be exercised by
from Ferdie, payable within one year. To
delivery of legal tender. A check may be
secure payment, Lito executed a chattel
used for the exercise of right of
mortgage on a Toyota Avanza and a real
redemption, the same being a right and
estate mortgage on a 200-square meter
not an obligation. The tender of a check
piece of property.
is sufficient to compel redemption but is
not in itself a payment that relieves the
(B) Lito's failure to pay led to the extra-
redemptioner from his liability to pay
judicial foreclosure of the mortgaged real
the redemption price (Biana v. Gimenez,
property. Within a year from foreclosure,
G.R. No. 132768, Sept 9, 2005, citing
Lito tendered a manager's check to Ferdie
Fortunado v. CA).
to redeem the property. Ferdie refused to
accept payment on the ground that he
Redemption within the period allowed by
wanted payment in cash: the check does
law is not a matter of intent but a
not qualify as legal tender and does not
question of payment or valid tender of
include the interest payment. Is Ferdie's
full redemption prices within the said
refusal justified? (4%)
period. Whether redemption is being
made under Art. 3135 or under the
SUGGESTED ANSWER:
General Banking Law, the mortgagor or
A check, whether a manager’s check or his assignee is required to tender
an ordinary check is not legal tender, payment to make said redemption valid
and an offer of a check in payment of a (Heirs of Quisumbing v. PNB and SLDC,
debt is not a valid tender of payment G.R. No. 178242, Jan 20, 2009).
and may be refused receipt by the oblige
Page 94 of 180
Moreover, Ferdie’s refusal was justified there has been extraordinary deflation since
on the ground that the amount tendered 1998, and therefore, Felipe should pay him
does not include interest. In order to the value of the debt at the time it was
effect the redemption of the foreclosed incurred. Felipe refused to pay him again,
property, the payment to the purchaser claiming that Gustavo is estopped from
must include the following sums: (a) the raising the issue of legal tender, having
bid price; (b) the interest on the bid accepted the check in March, and that it
price, computed at one per centum (1%) was Gustavo's negligence in not depositing
per month; and (c) the assessments and the check immediately that caused the
taxes, if any, paid by the purchaser with check to become stale.
the same rate of interest (Sec 28, 1997
Rules of Civil Procedure). Unless there is (A). Can Gustavo now raised the issue that
an express stipulation to that effect, the the cashier's check is not legal tender? (2%)
creditor cannot be compelled to receive

SUGGESTED ANSWER:
partial payment of the prestation (Art.
1248, Civil Code).
No. Gustavo previously accepted a check
as payment. It was his fault why the
check became stale. He is now estopped
Extinguishment; Payment of Check; from raising the issue that a cashier's
Legal Tender (2008) check is not legal tender.
No. XVII. Felipe borrowed $100 from (B). Can Felipe validly refuse to pay
Gustavo in 1998, when the Phil P - US$ Gustavo again? (2%)
exchange rate was P56 - US$1. On March

SUGGESTED ANSWER:
1, 2008, Felipe tendered to Gustavo a
cashier's check in the amount of P4,135 in
Yes, Felipe can refuse to pay Gustavo,
payment of his US$ 100 debt, based on the
who allowed the check to become stale.
Phil P - US$ exchange rat at that time.
Although a check is not legal tender
Gustavo accepted the check, but forgot to
(Belisario v. Natividad. 60 Phil 156),
deposit it until Sept. 12, 2008. His bank
there are instances when a check
refused to accepted the check because it
produces the effects of payment, for
had become stale. Gustavo now wants
example: (a) when the creditor is in
Felipe to pay him in cash the amount of
estoppel or he had previously promised
P5,600. Claiming that the previous
he would accept a check (Paras, Civil
payment was not in legal tender, and that
Page 95 of 180
Code Annotated, Vol IV, 2000 ed., p. secure the PN, Recardo executed a real
394); (b) when the check has lost its estate mortgage on his own property. When
value because of the fault of the creditor Eduardo defaulted on the PN, XYZ stopped
(Art. 1249, 2nd par.),as when he was payment of rentals on the building on the
unreasonably delayed in presenting the ground that legal compensation had set in.
check for payment (PNB v. Seeto, G.R. Since there was still a balance due on the
No, L-4388, 13 August 1952). PN after applying the rentals, XYZ
foreclosed the real estate mortgage over
(C). Can Felipe compel Gustavo to receive Recardo's property. Recardo opposed the
US$100 instead? (1%) foreclosure on the ground that he is only a
co-signatory; that no demand was made
SUGGESTED ANSWER:
upon him for payment, and assuming he is
liable, his liability should not go beyond
Felipe cannot compel Gustavo to receive
half the balance of the loan. Further,
US$100 because under RA 529, payment
Recardo said that when the bank invoked
of loans should be at Philippine currency
compensation between the reantals and the
at the rate of exchange prevailing at the
amount of the loan, it amounted to a new
time of the stipulated date of payment.
contract or novation, and had the effect of
Felipe could only compel Gustavo to
extinguishing the security since he did not
receive US$ 100 if they stipulated that
give his consent (as owner of the property
obligation be paid in foreign currency
under the real estate mortgage) thereto.
(R.A. 4100).
(B). Can Recardo's property be foreclosed to

pay the full balance of the loan? (2%)
Liability; Solidary Liability (2008)

SUGGESTED ANSWER:

Yes, Recardo's property can be
XYZ Bank for the purpose of improving a
foreclosed to pay the full balance of the
building which XYZ leased from him.
loan because when he signed as co-
Eduardo, executed the promissory note
signatory in the promissory note, he
("PN") in favor of the bank, with his friend
acknowledged he is solidarily liable with
Recardo as co-signatory. In the PN, they
Eduardo. In solidary obligations, a
both acknowledged that they are
creditor has the right to demand full
"individually and collectively" liable and
payment of the obligation from any of
waived the need for prior demand. To
Page 96 of 180
the solidary debtors (Art. 1207, Civil latter, is obliged to continue the same
Code). until the termination of the affair and its
incidents, or to require the person
concerned to substitute him, if the
owner is in a position to do so (Art.
Obligations; Without Agreement (2007)
2144, NCC).
No.V. What are obligations without an

Second example, a case of solutio
agreement"? Give five examples of
indebiti may also give rise to an
situations giving rise to this type of
obligation without an agreement. This
obligations? (10%)
refers to the obligation to return which
arises when something is received when
SUGGESTED ANSWER:
there is no right to demand it, and it was
"Obligations without an agreement" are unduly delivered through mistake (Art.
obligations that do not arise from 2154, NCC).
contract such as those arising from: 1.

Third example, is when without the
delicts; 2. quasi-delicts; 3. solutio
knowledge of the person obliged to give
indebiti; 4. negotiorum gestio; and 5. all
support, it is given by a stranger, the
other obligations arising from law.
latter shall have a right to claim the
ALTERNATIVE ANSWER: same from the former, unless it appears

that he gave it out of piety and without
"Obligations without an agreement" refer intention of being repaid (Art. 2164,
to the juridical relation of quasi-contract NCC).
which arise from certain lawful,
voluntary and unilateral acts to the end Fourth example, is when through
that no one shall be unjustly enriched or accident or other causes a person is
benefited at the expense of another. (Art. injured or becomes seriously ill, and he
2142, NCC) is treated or helped while he is not in a

condition to give consent to a contract,
First Example of an obligation without he shall be liable to pay for the services
an agreement is a case of negotiorum of the physician or other person aiding
gestio, whereby one who voluntarily him, unless the service has been
takes charge of the agency or rendered out of pure generosity (Art.
management of the business or property 2167, NCC).
of another without any power from the
Page 97 of 180
Fifth instance of an obligation without ought not, in equity and good

an agreement is when the person obliged conscience, to hold (Heirs of Lorenzo
to support an orphan or an insane or Yap v. CA, 371 Phil 523, 1991). The
other indigent person unjustly refuses to following are examples of constructive
give support to the latter, any third trust: 1. Art. 1456 NCC which provides:
person may furnish support to the needy "If property is acquired through mistake
individual, with right of reimbursement or fraud, the person obtaining it is, by
from the person obliged to give support. force of law considered a trustee of an
The provisions of this article apply when implied trust for the benefit of the
the father or mother of a child under person for whom the property comes." 2.
eighteen years of age unjustly refuses to Art 1451 NCC which provides: "When
support him (Art. 2166, NCC). land passes by succession through any
person and he causes the legal title to be
Trust put in the name of another, a trust is
established by implication of law for the
Trust De Son Tort (2007) benefit of the true owner." 3. Art 1454
NCC which provides: "If an absolute
No.III. Explain the following concepts and conveyance of property is made in order
doctrines and give an example of each: to secure the performance of an
obligation of the grantor toward the
(A). concept of trust de son
grantee, a trust by virtue of law is
tort (constructive trust) (5%)
established. If the fulfillment of the
obligation is offered by the grantor when
SUGGESTED ANSWER:
it becomes due, he may demand the
A constructive trust is a trust NOT reconveyance of the property to him." 4.
created by any word or phrase, either Art 1455 NCC which provides: "When any
expressly or impliedly, evincing a direct trustee, guardian or any person holding a
intention to create a trust, but is one fiduciary relationship uses trust funds
that arises in order to satisfy the for the purchase of property and causes
demands of justice. It does not come conveyance to be made to him or to
about by agreement or intention but third person, a trust is established by
mainly operation of law and construed as operation of law in favor of the person to
a trust against one who, by fraud, duress whom the funds belong."
or abuse of confidence, obtains or holds

the legal right to property which he
Page 98 of 180
brought an action against Janice for reconveyance of her share, Janice set up the
defense of laches. Will the defense prosper? Reasons.
Answer:
(c) It is submitted that the defense of laches will prosper. As held by the
Supreme Court in several notable decisions, in order that the doctrine of laches or
"stale demands" can be applied, the following elements must concur: (1) Conduct on
the part of the defendant, or of one under whom he claims, giving rise to the
situation of which complaint is made and for which the complaint seeks a remedy;
(2) delay in asserting the complainant's rights, the complainant having had
knowledge or notice, of the defendant's conduct and having been afforded an
opportunity to institute a suit (3) lack of knowledge or notice on the part of the
defendant that the complainant would assert the right on which he bases the suit-
and (4) injury or prejudice to the defendant in the event relief is accorded to the
complainant, or the suit is not held to be barred (Miguel vs. Catalino, 26 SCRA 234).
All of these elements are present in the instant case. As a matter of fact, the doctrine
was applied to a case wherein co-heir and another were able, through fraud, to
register a tract of land in their names. According to the Supreme Court, the action for
reconveyance brought by the other co-heirs more than twenty years later is now
barred not only by extinctive prescription but also by laches- (Fabian vs. Fabian, 22
SCRA 231).
07; Natural obligations
1977 No. IX-c
What are natural obligations? Give an example. Answer
Natural obligations are those based on equity and natural law, which are not
enforceable by means of a court action, but which, after voluntary fulfillment by the
obligor, authorize the retention by the obligee of what has been delivered or
rendered by reason thereof. In other words, they refer to those ''obligations without a
sanction susceptible of voluntary performance, but not through compulsion by legal
means". (4 Tolentino, Civil Code, 1956 Ed., p. 588, citing Colin & Capitant)
(NOTE: There are seven examples given in the Civil Code (Arts, 1424 to
1430). Any one of them may be given.)
07; Obligations; alternative obligations
1988 No. 9:
(a) Define alternative and facultative obligations.
Answer:
(a) Alternative obligations refer to those juridical relations which
comprehend several objects or prestations which are due, but the payment or
performance of one of them would be sufficient. On the other hand, facultative
obligations refer to those juridical relations where only one object or prestation has
been agreed upon by the parties to the obligation, but the obligor may deliver or
render another in substitution.
07; Obligations; alternative/facultative obligations
1977 No. VIII-c
Distinguish between alternative and facultative obligations: and between
suspensive and resolutory conditions in obligations.
Answer
Facultative obligations may be distinguished from alternative obligations in
the following ways:
Page 265 of 391

(1) As to object due: In facultative obligations only one object is due, whereas
in alternative obligations several objects are due.
(2) As to compliance: Facultative obligations may be complied with by the
delivery of another object or the performance of another prestation in substitution of
that which is due, whereas alternative obligations may be complied with by the
delivery of one of the objects or by the performance of the prestations which are
alternative due.
(3) As to right of choice: In the first, the right of choice pertains only to the
debtor, whereas in the second, the right of choice may pertain even to the creditor or
to a third person.
(4) As to effect of fortuitous loss: In the first, the loss or impossibility of the
object or prestation which is due without any fault of the debtor is sufficient to
extinguish the obligation, whereas in the second, the loss or impossibility of all of the
objects or prestations which are due without any fault of the debtor is necessary to
extinguish the obligation.
<6) As to effect of culpable loss: In the first, the culpable loss of the object
which the debtor may deliver in substitution before the substitution is effected does
not give rise to any liability on the part of such debtor; in the second, the culpable
loss of any of the objects which are alternately due before the choice is made may
give rise to a liability on the part of the debtor.
(NOTES: A brief statement of the first three distinctions should constitute a
sufficient answer.)
If the suspensive condition is fulfilled, the obligation fulfilled, the obligation is
extinguished. If the first arises or becomes effective; if the resolutory condition is not
fulfilled, no juridical relation is created; if the second is not fulfilled, the juridical
relation is consolidated. In other-words, in the first, rights are not yet acquired, but
there is a hope or expectancy that they will soon be acquired; in the second, rights
are already acquired, but subject to the threat of extinction.
(NOTE: A statement of the substance of the above distinctions should
constitute a sufficient answer.)
07; Obligations; civil vs natural oblig
2004 No. II
A. Distinguish briefly but clearly between: 3. Civil obligation and natural
obligation.
07; Obligations; civil vs natural obligation
1989 No. 15:
(2) How is a civil obligation distinguished from a natural obligation? Give an
example of a natural obligation.
Answer:
Civil obligations give a right of action to compel their performance. Natural
obligations, not being based on positive law but on equity and natural law, do not
grant a right of action to enforce their performance, but after voluntary fulfillment by
the obligor, they authorize the retention of what has been delivered on rendered by
reason thereof.
Example of a natural obligation (one example out of any of the following):
1. When a right to sue upon a civil obligation has lapsed by extinctive
prescription, the obligor who voluntarily performs the contract cannot recover what
he has delivered or the value of the service he has rendered.
Page 266 of 391

2. When without the knowledge or against the will of the debtor a third
person pays a debt which the obligor is not legally bound to pay because the
action thereon has prescribed, but the debtor later voluntarily reimburses the third
person, the obligor cannot recover what he has paid.
3. When a minor between eighteen and twenty-one years of age who has
entered into a contract without the consent of the parent or guardian, after the
annulment of the contract voluntarily returns the whole thing or price received,
notwithstanding the fact that he has not been benefited thereby, there is no right to
demand the thing or price thus returned.
4. When a minor between eighteen and twenty-one years of age, who has
entered into a contract without the consent of the parent or guardian, voluntarily
pays a sum of money or delivers a fungible thing in fulfillment of the obligation, there
shall be no right to recover the same from the obligee who has spent or consumed it
in good faith.
5. When, after an action to enforce a civil obligation has failed, the defendant
voluntarily performs the obligation, he cannot demand the return of what he has
delivered or the payment of the value of the service he has rendered,
6. When a testate or intestate heir voluntarily pays a debt of the decedent
exceeding the value of the property which he received by will or by the law of
intestacy from the estate of the deceased, the payment is valid and cannot be
rescinded by the payer.
7. When a will is declared void because it has not been executed in
accordance with the formalities required by law, but one of the intestate heirs, after
the settlement of the debts of the deceased, pays a legacy in compliance with a
clause in the defective will, the payment is effective and irrevocable.
07; Obligations; conditional obligations
1997 No, 14;
In two separate documents signed by him, Juan Valentino "obligated" himself
each to Maria and to Perla, thus -
'To Maria, my true love, I obligate myself to give you my one and only horse
when I feel like It."
- and -
'To Perla, my true sweetheart, I obligate myself to pay you the P500.OO I
owe you when I feel like it."
Months passed but Juan never bothered to make good his promises. Maria
and Perla came to consult you on whether or not they could recover on the basis of
the foregoing settings.
What would your legal advice be? Answer:
I would advise Maria not to bother running after Juan for the latter to make
good his promise. [This is because a promise is not an actionable wrong that allows
a party to recover especially when she has not suffered damages resulting from
such promise, A promise does not create an obligation on the part of Juan because
it is not something which arises from a contract, law, quasi-contracts or quasi-delicts
(Art, 1157)]. Under Art. 1182, Juan's promise to Maria is void because a conditional
obligation depends upon the sole will of the obligor.
As regards Perla, the document is an express acknowledgment of a debt,
and the promise to pay what he owes her when he feels like it Is equivalent to a
promise to pay when his means permits him to do so, and is deemed to be one with
Page 267 of 391

an indefinite period under Art. 1180. Hence the amount Is recoverable after Perla
asks the court to set the period as provided by Art. 1197, par. 2.
1999 No XI
In 1997, Manuel bound himself to sell Eva a house and lot which is being
rented by another person, if Eva passes the 1998 bar examinations. Luckily for Eva,
she passed said examinations.
(a) Suppose Manuel had sold the same house and lot to another before
Eva passed the 1998 bar examinations, is such sale valid? Why? (2%)
(b) Assuming that it is Eva who is entitled to buy said house and lot, is she
entitled to the rentals collected by Manuel before she passed the 1998 bar
examinations? Why? (3%)
ANSWER:
(a) Yes, the sale to the other person is valid as a sale with a resolutory
condition because what operates as a suspensive condition for Eva operates a
resolutory condition for the buyer.
FIRS T ALTERNATIVE ANS WER:
Yes, the sale to the other person is valid. However, the buyer acquired the
property subject to a resolutory condition of Eva passing the 1998 Bar Examinations.
Hence, upon Eva's passing the Bar, the rights of the other buyer terminated and Eva
acquired ownership of the property.
SECOND ALTERNATIVE ANSWER:
The sale to another person before Eva could buy it from Manuel is valid, as
the contract between Manuel and Eva is a mere promise to sell and Eva has not
acquired a real right over the land assuming that there is a price stipulated in the
contract for the contract to be considered a sale and there was delivery or tradition
of the thing sold.
(b) No, she is not entitled to the rentals collected by Manuel because at the
time they accrued and were collected, Eva was not yet the owner of the property.
FIRST ALTERNATIVE ANSWER:
Assuming that Eva is the one entitled to buy the house and lot, she is not
entitled to the rentals collected by Manuel before she passed the bar examinations.
Whether it is a contract of sale or a contract to sell, reciprocal prestations are
deemed imposed A for the seller to deliver the object sold and for the buyer to pay
the price. Before the happening of the condition, the fruits of the thing and the
interests on the money are deemed to have been mutually compensated under
Article 1187.
SECOND ALTERNATIVE ANSWER:
Under Art. 1164, there is no obligation on the part of Manuel to deliver the
fruits (rentals) of the thing until the obligation to deliver the thing arises. As the
suspensive condition has not been fulfilled, the obligation to sell does not arise.
2000 No XV
b) Pedro promised to give his grandson a car if the latter will pass the bar
examinations. When his grandson passed the said examinations, Pedro refused to
give the car on the ground that the condition was a purely potestative one. Is he
correct or not? (2%)
Page 268 of 391

SUGGESTED ANSWER:
No, he is not correct. First of all, the condition is not purely potestative,
because it does not depend on the sole will of one of the parties. Secondly, even if it
were, it would be valid because it depends on the sole will of the creditor (the donee)
and not of the debtor (the donor).
2003 No XIII.
Are the following obligations valid, why, and if they are valid, when is the
obligation demandable in each case?
(a) If the debtor promises to pay as soon as he has the means to pay;
(b) If the debtor promises to pay when he likes;
(c) If the debtor promises to pay when he becomes a lawyer;
(d) If the debtor promises to pay if his son, who is sick with cancer, does
not die within one year. 5%
SUGGESTED ANSWER:
(a) The obligation is valid. It is an obligation subject to an indefinite period
because the debtor binds himself to pay when his means permit him to do so (Article
1180, NCC). When the creditor knows that the debtor already has the means to pay,
he must file an action in court to fix the period, and when the definite period as set
by the court arrives, the obligation to pay becomes demandable 9Article 1197,
NCC).
(b) The obligation “to pay when he likes” is a suspensive condition the
fulfillment of which is subject to the sole will of the debtor and, therefore the
conditional obligation is void. (Article 1182, NCC).
(c) The obligation is valid. It is subject to a suspensive condition, i.e. the
future and uncertain event of his becoming a lawyer. The performance of this
obligation does not depend solely on the will of the debtor but also on other factors
outside the debtor’s control.
(d) The obligation is valid. The death of the son of cancer within one year
is made a negative suspensive condition to his making the payment. The obligation
is demandable if the son does not die within one year (Article 1185, NCC).
1988 No. 8:
(b) Distinguish between the effects of suspensive and resolutory conditions
upon an obligation.
Answer:
(b) It is evident that a resolutory condition affects the obligation to which it is
attached in a manner which is diametrically opposed to that of a suspensive
condition. If the suspensive condition is fulfilled, the obligation arises or becomes
effective if the resolutory condition is fulfilled, the obligation is extinguished. If the
first is not fulfilled, the juridical relation is created; if the second is not fulfilled, the
juridical relation is consolidated. In other words, in the first, rights are not yet
acquired, but there is a hope or expectancy that they will soon be acquired; in the
second, rights are already acquired, but subject to the threat of extinction (8
Manresa, 5th Ed., Bk. 1, p. 311.)
Page 269 of 391

1975 No. XIII
A owed B a certain sum of money. C wrote B a letter stating that he would be
the one to take care of A's debt as soon as A had made a shipment of logs to Japan.
A never made such shipment, C did not pay B. Is C liable to B? Explain.
Answer
No, C is not liable to B. C did not assume the obligation of A. C merely stated
that he will "take care" of A's debt. Moreover, even if C assumed liability, the
suspensive condition—namely, the shipment by A of logs to Japan, was never
fulfilled. C's obligation never arose. Under Article 1181 of the Civil Code, in
conditional obligations, 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. (Villanueva v. Girged, 110 Phil. 478)
07; Obligations; exemption from liability due to fortuitous events; exceptions
1983 No. 11
Cite three instances where a person is made civilly liable for failure to comply
with his obligations although he was prevented from doing so by a fortuitous event.
Answer
(a) When the loss is due to the debtor's fault.
(b) When the debtor has incurred in delay,
(c) When he has promised to deliver the same thing to 2 or more different
persons who do not have the same interest,
(d) When it is expressly stipulated.
(e) When the law expressly provides so,
(f) When the nature of the obligation requires the assumption of risk, and
(g) When the thing to be delivered is indeterminate, the loss of a thing of
the same kind, even if due to a fortuitous event, does not extinguish the
obligation.
07; Obligations; extinguishment of a cause of action
2004 No. I
B. TX filed a suit for ejectment against BD for non-payment of condominium
rentals amounting to P150,000. During the pendency of the case, BD offered and TX
accepted the full amount due as rentals from BD, who then filed a motion to dismiss
the ejectment suit on the ground that the action is already extinguished.
Is BD’s contention correct? Why or why not? Reason. (5%)
07; Obligations; extinguishment; assignment of rights
2001 No XI
The sugar cane planters of Batangas entered into a long-term milling contract
with the Central Azucarera de Don Pedro Inc. Ten years later, the Central assigned
its rights to the said milling contract to a Taiwanese group which would take over the
operations of the sugar mill. The planters filed an action to annul the said
assignment on the ground that the Taiwanese group was not registered with the
Board of Investments. Will the action prosper or not? Explain briefly. (5%)
(Note: The question presupposes knowledge and requires the application of
the provisions of the Omnibus Investment Code, which properly belongs to
Commercial law)
Page 270 of 391

SUGGESTED ANSWER
The action will prosper not on the ground invoked but on the ground that the
farmers have not given their consent to the assignment. The milling contract
imposes reciprocal obligations on the parties. The sugar central has the obligation to
mill the sugar cane of the farmers while the latter have the obligation to deliver their
sugar cane to the sugar central. As to the obligation to mill the sugar cane, the sugar
central is a debtor of the farmers. In assigning its rights under the contract, the sugar
central will also transfer to the Taiwanese its obligation to mill the sugar cane of the
farmers. This will amount to a novation of the contract by substituting the debtor with
a third party. Under Article 1293 of the Civil Code, such substitution cannot take
effect without the consent of the creditor. The formers, who are creditors as far as
the obligation to mill their sugar cane is concerned, may annul such assignment for
not having given their consent thereto.
ALTERNATIVE ANSWER
The assignment is valid because there is absolute freedom to transfer the
credit and the creditor need not get the consent of the debtor. He only needs to
notify him.
07; Obligations; extinguishment; compensation
2002 No IX.
Stockton is a stockholder of Core Corp. He desires to sell his shares in Core
Corp. In view of a court suit that Core Corp. has filed against him for damages in the
amount of P 10 million, plus attorney’s fees of P 1 million, as a result of statements
published by Stockton which are allegedly defamatory because it was calculated to
injure and damage the corporation’s reputation and goodwill.
The articles of incorporation of Core Corp. provide for a right of first perusal in
favor of the corporation. Accordingly, Stockton gave written notice to the corporation
of his offer to sell his shares of P 10 million. The response of Core corp. was an
acceptance of the offer in the exercise of its rights of first refusal, offering for the
purpose payment in form of compensation or set-off against the amount of damages
it is claiming against him, exclusive of the claim for attorney’s fees. Stockton rejected
the offer of the corporation, arguing that compensation between the value of the
shares and the amount of damages demanded by the corporation cannot legally
take effect. Is Stockton correct? Give reason for your answer. (5%)
SUGGESTED ANSWERS:
Stockton is correct. There is no right of compensation between his price of P
10 million and Core Corp.’s unliquidated claim for damages. In order that
compensation may be proper, the two debts must be liquidated and demandable.
The case for the P 10 million damages being still pending in court, the corporation
has as yet no claim which is due and demandable against Stockton.
ANOTHER MAIN ANSWER:
The right of first refusal was not perfected as a right for the reason that there
was a conditional acceptance equivalent to a counter-offer consisting in the amount
of damages as being credited on the purchase price. Therefore, compensation did
not result since there was no valid right of first refusal (Art. 1475 & 1319, NCC)
Even [if] assuming that there was a perfect right of first refusal, compensation
did not take place because the claim is unliquidated.
07; Obligations; extinguishment; compensation
Page 271 of 391

1981 No. 8
"B" borrowed from "C" Pl,000.00 payable in one year. When "C" was in the
province, "C's" 17-year old son, borrowed P500 from "B" for his school tuition.
However, the son spent it instead nightclubbing. When the debt to "C" fell due, "B"
tendered only P500, claiming compensation on the P500 borrowed by "C's" son,
a) Is there legal compensation? Why?
b) Suppose the minor son actually used the money for school tuition, would
the answer be different? Reasons.
Answer
(a) There is no legal compensation. Under the Civil Code, in order that there
will be a valid and effective compensation, it is essential that there must be two
parties, who in their own right, are principal creditors and principal debtors of each
other. In the instant case, "C" cannot be considered as a party to the act of his 17-
year old son in borrowing P500.00 from "B ". Consequently, he did not become a
principal debtor of "B"; neither did "B" become a principal creditor of "C". Therefore,
there can be no partial compensation of the P1 ,000,00 borrowed by "B" from "C".
(Note: The above answer is based on Arts. 1278 and 1279, No. (1), of the
Civil Code and on decided cases.)
(b) There would be no difference in any answer. There will still be no legal
compensation. The fact that "C's" son actually used the P500.00 for his school
tuition did not make "C" a party to the contract between his son and "B". Therefore,
"C" is not the principal debtor of "B" and "B" is not the
principal creditor of "C" with respect to said amount.
(Note: The above answer is based on Arts. 1278 and 1279, No. UK Civil
Code.)
07; Obligations; extinguishment; compensation vs payment
1998 No XIV.
1. Define compensation as a mode of extinguishing an obligation, and
distinguish it from payment. |2%]
2. X, who has a savings deposit with Y Bank in the sum of P1 ,000,000.00,
incurs a loan obligation with the said Bank in the sum of P800.000.00 which has
become due. When X tries to withdraw his deposit, Y Bank allows only P200.000.00
to be withdrawn, less service charges, claiming that compensation has extinguished
its obligation under the savings account to the concurrent amount of X's debt. X
contends that compensation is improper when one of the debts, as here, arises from
a contract of deposit. Assuming that the promissory note signed by X to evidence
the loan does not provide for compensation between said loan and his savings
deposit, who is correct? [3%]
Answer:
1. Compensation is a mode of extinguishing to the concurrent amount, the
obligations of those persons who In their own right are reciprocally debtors and
creditors of each other (Tolentino, 1991 ed., p. 365, citing 2 Castan 560 and Francia
vs. IAC. 162 SCRA 753). It involves the simultaneous balancing of two obligations in
order to extinguish them to the extent in which the amount of one is covered by that
of the other. (De Leon, 1992 ed., p. 221, citing 8 Manresa 401).
Payment means not only delivery of money but also performance of an
obligation (Article 1232, Civil Code). In payment, capacity to dispose of the thing
Page 272 of 391

paid and capacity to receive payment are required for debtor and creditor,
respectively: in compensation, such capacity is not necessary, because the
compensation operates by law and not by the act of the parties. In payment, the
performance must be complete; while in compensation there may be partial
extinguishment of an obligation (Tolentino, supra)
Answer:
2. Y bank is correct. An. 1287, Civil Code, does not apply. All the requisites
of Art. 1279, Civil Code are present. In the case of Gullas vs. PNB [62 Phil. 519), the
Supreme Court held: "The Civil Code contains provisions regarding compensation
(set off) and deposit. These portions of Philippine law provide that compensation
shall take place when two persons are reciprocally creditor and debtor of each other.
In this connection, it has been held that the relation existing between a depositor
and a bank is that of creditor and debtor, x x x As a general rule, a bank has a right
of set off of the deposits in its hands for the payment of any indebtedness to it on the
part of a depositor." Hence, compensation took place between the mutual
obligations of X and Y bank.
07; Obligations; extinguishment; compensation: payment: confusion: set-off
1977 No X-b
Differentiate compensation from payment, from confusion and from set-off.
Answer
Compensation may be distinguished from payment in the following ways:
(1) The requisites prescribed by law for compensation are different from
those prescribed by law for payment.
(2) Compensation takes effect by operation of law, whereas payment takes
effect by act of the parties.
(3) Capacity to give and to acquire is not necessary in compensation, but it
is essential in payment.
(4) Compensation is, as a rule, partial, whereas payment is, as a rule,
complete and indivisible.
Compensation may be distinguished from confusion in the following ways;
(1) As to number of persons, in compensation there must be two persons,
who, in their own right, are creditors and debtors of each other, whereas in
confusion there is only one person in whom is merged the qualities of creditor and
debtor.
(2) As to number of obligations, in compensation there must be at least two,
whereas in confusion there is only one.
Compensation may be distinguished from set-off or counterclaim in the
following ways:
(1) Compensation requires that the two debts must consists in money, or if
the things due are fungibles, they must be of the same kind and quality, but in
counterclaim this is not necessary.
(2) Compensation, as a general rule, requires that the debts must be
liquidated, but counterclaim does not.
(3) Compensation need not be pleaded, whereas a counterclaim must be
pleaded to be effectual.
07; Obligations; extinguishment; condonation
Page 273 of 391

2000 No VII
a) Arturo borrowed P500,000.00 from his father. After he had paid
P300,000.00, his father died. When the administrator of his father's estate requested
payment of the balance of P200,000.00. Arturo replied that the same had been
condoned by his father as evidenced by a notation at the back of his check payment
for the P300,000.00 reading: "In full payment of the loan". Will this be a valid
defense in an action for collection? (3%)
SUGGESTED ANSWER;
It depends. If the notation "in full payment of the loan" was written by Arturo's
father, there was an implied condonation of the balance that discharges the
obligation. In such case, the notation is an act of the father from which condonation
may be inferred. The condonation being implied, it need not comply with the
formalities of a donation to be effective. The defense of full payment will, therefore,
be valid.
When, however, the notation was written by Arturo himself. It merely proves
his intention in making that payment but in no way does it bind his father (Yam v.
CA, G.R No. 104726. 11 February 1999). In such case, the notation was not the act
of his father from which condonation may be Inferred. There being no condonation
at all. the defense of full payment will not be valid.
ALTERNATIVE ANSWER:
If the notation was written by Arturo's father, it amounted to an express
condonation of the balance which must comply with the formalities of a donation to
be valid under the 2nd paragraph of Article 1270 of the New Civil Code. Since the
amount of the balance is more than 5,000 pesos, the acceptance by Arturo of the
condonation must also be in writing under Article 748. There being no acceptance in
writing by Arturo, the condonation is void and the obligation to pay the balance
subsists. The defense of full payment is, therefore, not valid. In case the notation
was not written by Arturo's father, the answer is the same as the answers above.
07; Obligations; extinguishment; dation
1986 No. 9.
On due date, Mayutang, finding himself unable to pay Makaragdag his
P5OO,OOO.OO obligation, proposed in a letter to Makaragdag that he would deed
over to Makaragdag his Mercedes Benz car, "to be applied to the amount which I
owe you." The following week, Mayutang sent the car to Makaragdag with the proper
deed of conveyance. It was accepted.
Was the arrangement a valid way of settling the obligation? Explain.
After the delivery of the car would Makaragdag have any further claim against
Mayutang if the value of the car is found to be Less than the P500,000.00
obligation? Explain.
Answer
The general rule according to commentators (Castan and Manresa) is that
dation extinguishes in full the obligation-the exception is a contrary agreement
because then it becomes assignment of rights - hence valid only up to the value.
Answer - The arrangement was a valid way of settling the obligation. The law
provides that payment for an obligation may be made by delivery of other property.
Answer - The creditor can claim the deficiency because the-debt shall only be
extinguished up to extent of the value of the property given to him, since the
agreement was that the car was "to be applied "to the amount owed.
Page 274 of 391

Answer - Yes, the arrangement was a valid way of settling the obligation.
Under the Civil Code, there are several special forms of payment which will have all
of the effects of a valid payment. One of them is dation in payment (dacion en pago).
It is defined as the transmission of the ownership of a thing by the debtor to the
creditor as the accepted equivalent of the performance of an obligation, According to
the Civil Code, the law on sales shall govern the transaction. Thus, in the instant
problem, the Mercedes Benz car is considered the object of the contract of sale,
while the debt of P500,000 is considered the purchase price.
If the value of the car is found to be less than the P500,000.00 obligation,
would Makaragdag have any further monetary claim against Mayutang? Normally,
dacion en pago has the effect of extinguishing the obligation to the extent of the
value of the thing delivered either as agreed upon or as may be proved, unless the
silence of the parties signifies that they consider the delivery of the thing as the
equivalent of the performance of the obligation. It must be observed, however, that
Makaragdag accepted the delivery of the car without any protest or objection. The
entire obligation, therefore, is deemed fully complied with.
(Note: The above answer is based upon Arts. 1245 and 1235 of the Civil
Code and upon Lopez vs. CA, 114 SCRA 671.)
Answer - The arrangement is a valid way of settling the obligation which is
known as "dacion en pago." As to whether the delivery of the car was in "full
satisfaction" of the debt or to be merely "applied" to the whole indebtedness is
another question. The interpretation of their agreement would depend on the
difference between the value of the car and P500,000.00. If the difference is very
great, the intention of the parties would be that the car is not in "full satisfaction" of
the debt.
07; Obligations; extinguishment; dation in payment vs assignment
1989 No. 8:
(2) What is dation in payment and how is it distinguished from assignment of
property?
Answer:
Dation in payment is a special form of payment whereby property is alienated
to the creditor in satisfaction of a debt in money.
Assignment of property, or payment by cession, is a special form of payment
whereby the debtor cedes or assigns his property to his creditors so that the
proceeds thereof will be applied in payment of his debts.
Alternative Answer;
In dation in payment whereby property is given by the debtor to the creditor in
payment of a debt in money, there is only one creditor. In assignment of property,
there are several creditors.
In the former, the debtor may be solvent. In the latter, there may be partial
insolvency.
In the former, particular property is ceded. In the latter, all the property of the
debtor is ceded.
In the former, the particular obligation is extinguished in whole or in part as
agreed upon. In the latter, it releases the debtor from the net proceeds only, unless
otherwise agreed or intended.
07; Obligations; extinguishment; extraordinary inflation or deflation
2001 No X
Page 275 of 391

On July 1, 1998, Brian leased an office space in a building for a period of five
years at a rental rate of P1,000.00 a month. The contract of lease contained the
proviso that "in case of inflation or devaluation of the Philippine peso, the monthly
rental will automatically be Increased or decreased depending on the devaluation or
inflation of the peso to the dollar." Starting March 1, 2001, the lessor increased the
rental to P2,000 a month, on the ground of inflation proven by the fact that the
exchange rate of the Philippine peso to the dollar had Increased from P25.00=$1.00
to P50.00=$1.00. Brian refused to pay the increased rate and an action for unlawful
detainer was filed against him. Will the action prosper? Why? (5%)
SUGGESTED ANSWER
The unlawful detainer action will not prosper. Extraordinary inflation or
deflation is defined as the sharp decrease in the purchasing power of the peso. It
does not necessarily refer to the exchange rate of the peso to the dollar. Whether or
not there exists an extraordinary inflation or deflation is for the courts to decide.
There being no showing that the purchasing power of the peso had been reduced
tremendously, there could be no inflation that would justify the increase in the
amount of rental to be paid. Hence, Brian could refuse to pay the increased rate.
ALTERNATIVE ANSWER.
The action will not prosper. The existence of inflation or deflation requires an
official declaration by the Bangko Sentral ng Pilipinas.
ALTERNATIVE ANSWER:
The unlawful detainer action will prosper. It is a given fact in the problem, that
there was Inflation, which caused the exchange rate to double. Since the contract
itself authorizes the increase in rental in the event of an inflation or devaluation of
the Philippine peso, the doubling of the monthly rent is reasonable and is therefore a
valid act under the very terms of the contract. Brian's refusal to pay is thus a ground
for ejectment.
07; Obligations; extinguishment; loss
1994 No, 17;
Dino sued Ben for damages because the latter had failed to deliver the
antique Marcedes Benz car Dino had purchased from Ben, which was—by
agreement—due for delivery on December 31,1993. Ben, in his answer to Dino's
complaint, said Dino's claim has no basis for the suit, because as the car was being
driven to be delivered to Dino on January 1, 1994, a reckless truck driver had
rammed into the Mercedes Benz. The trial court dismissed Dino's complaint, saying
Ben's obligation had. indeed, been extinguished by force majeure.
Is the trial court correct? Alternative Answers:
a) No. Article 1262, New Civil Code provides, "An obligation which consists
in the delivery of a determinate thing shall be extinguished if it should be lost or
destroyed without the fault of the debtor, and before he has incurred in delay.
b) The judgment of the trial court is incorrect. Loss of the thing due by
fortuitous events or force majeure is a valid defense for a debtor only when the
debtor has not incurred delay. Extinguishment of liability for fortuitous event
requires that the debtor has not yet incurred any delay. In the present case, the
debtor was in delay when the car was destroyed on January 1,1993 since it was due
for delivery on December 31, 1993. (Art. 1262 Civil Code)
c) It depends whether or not Ben the seller, was already in default at the
time of the accident because a demand for him to deliver on due date was not
complied with by him. That fact not having been given in the problem, the trial court
Page 276 of 391

erred in dismissing Dino's complaint. Reason: There is default making him
responsible for fortuitous events Including the assumption of risk or loss.
If on the other hand Ben was not in default as no demand has been sent to
him prior to the accident, then we must distinguish whether the price has been paid
or not. If it has been paid, the suit for damages should prosper but only to enable the
buyer to recover the price paid. It should be noted that Ben. the seller, must bear the
loss on the principle of res perit domino. He cannot be held answerable for damages
as the loss of the car was not imputable to his fault or fraud. In any case, he can
recover the value of the car from the party whose negligence caused the accident. If
no price has been paid at all, the trial court acted correctly in dismissing the
complaint.
07; Obligations; extinguishment; loss; impossible service
1993 No. 11
In 1971, Able Construction, Inc. entered into a contract with Tropical Home
Developers, Inc. whereby the former would build for the latter the houses within Its
subdivision. The cost of each house, labor and materials included, was
P100,000.00. Four hundred units were to be constructed within five years. In 1973,
Able found that it could no longer continue with the job due to the increase in the
price of oil and its derivatives and the concomitant worldwide spiraling of prices of all
commodities, including basic raw materials required for the construction of the
houses. The cost of development had risen to unanticipated levels and to such a
degree that the conditions and factors which formed the original basis of the contract
had been totally changed. Able brought suit against Tropical Homes praying that the
Court relieve it of its obligation.
Is Able Construction entitled to the relief sought?
Answer;
Yes, the Able Construction. Inc. is entitled to the relief sought under Article
1267, Civil Code. The law provides: "When the service has become so difficult as to
be manifestly beyond the contemplation of the parties, the obligor may also be
released therefrom, in whole or in part."
07; Obligations; extinguishment; novation
1977 No. XIV-b
R borrowed P5,000 from H and he authorized his bank to pay the loan. The
bank agreed. Eventually, the bank paid only P2,550.00 H sued both R and the bank.
Discuss the bank's liability.
Answer
The bank cannot be held liable for the remaining P2,500. Even assuming that
H gave his consent to R's proposal that the bank shall pay his indebtedness of
P5,000, in reality, there was no substitution of debtor by delegation resulting in a
novation of the obligation. There was merely an authorization, which was accepted
by the bank, that the latter shall pay R's debt. As it turned out, the bank paid only
P2,500.00 to H. Beyond that amount, the bank cannot be held liable. (Hodges vs.
Key, 111 Phil. 219).
1988 No. 11:
(a) Suppose that under an obligation imposed by a final judgment, the
liability of the judgment debtor is to pay the amount of P6,000.00 but both the
judgment debtor and the judgment creditor subsequently entered into a contract
Page 277 of 391

reducing the liability of the former to only P4,000.00, is there an implied novation
which will have the effect of extinguishing the judgment obligation and creating a
modified obligatory relation? Reasons.
Answer:
There is no implied novation in this case. We see no valid objection to the
judgment debtor and the judgment creditor in entering into an agreement regarding
the monetary obligation of the former under the judgment referred to. The payment
by the judgment debtor of the lesser amount of P4,000, accepted by the creditor
without any protest or objection and acknowledged by the latter as in full satisfaction
of the money judgment, completely extinguished the judgment debt and released the
debtor from his pecuniary liability.
Novation results in two stipulations—one to extinguish an existing obligation,
the other to substitute a new one in its place. Fundamental it is that novation effects
a substitution or modification of an obligation by another or an extinguishment of one
obligation by the creation of another. In the case at hand, we fail to see what new or
modified obligation arose out of the payment by judgment debtor of the reduced
amount of P4,000 to the creditor. Additionally, to sustain novation necessitates that
the same be so declared in unequivocal terms clearly and unmistakably shown by
the express agreement of the parties or by acts of equivalent import—or that there is
complete and substantial incompatibility between the two obligations. (Sandico vs.
Piguing, 42 SCRA322.)
Suggested Alternative Answers To: No. 11(a):
(a) (1) There remains an obligation on the basis of the facts given. There is
no showing in the facts that the P4,000 has been paid so it created a modified
obligatory obligation no longer based on the judgment but based on the novatory
agreement.
(2) There is no implied novation. Instead there has been a partial remission
in the amount of P2,000 leaving P4,000 still enforceable under the judgment.
(3) It can amount to a compromise. A final judgment which has not yet been
fully satisfied may be the subject of a compromise. The compromise partakes the
nature of a novation. Article 204; provides that:
"If one of the parties fails or refuses to abide by the compromise, the other
party may either enforce the compromise or regard it as rescinded and insist upon
his original demand."
(Gatchalian vs, Arlegui 75 SCRA 234; Dormitorio vs. Fernandez 72 SCRA
388).
1982 No. 19
ABC Trading Co., a domestic corporation engaged in the sale of automobile
spare parts, opened with "X" Bank letter of credit up to the extent of P450,000.00 for
a period of one year. To secure payment thereof, it executed a chattel mortgage
over its stocks-in-trade valued at 7500,000.00. On May 15, and June 15r 1981, Mr.
"Y", president and general manager of ABC Trading drew against this letter of credit
by means of promissory notes in the total amount of P430,000.00, payable within 30
days from the respective dates of the promissory notes with interest of 10%. Upon
maturity of said notes, ABC Trading failed to pay, but was able to negotiate for an
extension of six (6) months within which to pay said amount, in return for the
additional security posted by Mr. "Y" consisting- of a real estate mortgage over his
land in Manila. At the end of 6 months, ABC Trading Co. failed to pay the amount
due despite repeated demands by "X" Bank. "X" Bank filed an action for foreclosure
Page 278 of 391

of the chattel mortgage executed by ABC Trading. ABC Trading opposed said action
contending that the chattel mortgage has been novated by the real estate mortgage
executed by Mr. "Y" in favor of "X" Bank. Is the contention of ABC Trading Co.
tenable? Reasons.
Answer
The contention of ABC Trading Co. that the chattel mortgage has been
novated by the real estate mortgage executed by Mr. "Y" in favor of "X" Bank is
untenable. Well-settled is the rule that in order that there will be a novation, there
must be complete incompatibility between the two obligations. And the test of
incompatibility is simple. All that we have to ask is: Can the two obligations stand
together. If they can then there is no incompatibility. If there is no incompatibility,
then there is no novation. However, if they cannot stand together, then there is
incompatibility. If there is incompatibility, then there is a novation. Applying the test
to the instant case, it is clear that the two obligations can stand together. Therefore,
there is no novation*
(Note: The above answers is based on Arts. 1291(1) and 1292 of the Civil
Code and on decided cases, such as Bank of PI. vs. Herridge, 47 Phil. 57;
Ynchausti & Co. vs. Yulo, 34 Phil. 978; Pascual vs. Lacsamana,, 400 Phil. 381; La
Tondena, vs. Alto Surety & Ins. Co., 101 Phil. 879.)
1978 No. V-a
A bought from B a parcel of land and paid the purchase price except for an
unpaid balance of P6,000. A, therefore, executed a promissory note for the balance
of P6,000 with interest at ten per cent (10%) to be paid within sixty (60) days. On the
same date, C surety company executed a bond in favor of B for the amount of
P6,000 representing the unpaid balance of the purchase price of the parcel of land,
without any stipulation regarding payment of interest. On the due date, A failed to
pay, and C surety company paid P6,000 to B. B then sued A for the accumulated
interest on the principal of P6,000. A claimed novation of the obligation when B
accepted unqualifiedly the surety bond which merely guaranteed payment of
P6,000. Is A correct? Explain your answer.
Answer
A is not correct. There is no novation so long as there is no agreement that
the principal debtor (a) shall be released from responsibility, Here, there is no such
agreement. True, C surety company executed a bond in favor of B for the amount of
P6,000, but that did not have the effect of releasing A from the obligation. The surety
bond is not a new and separate contract but is merely an accessory of the original
contract entered into by and between A and C surety company on one hand and B
on the other hand. It provided merely for a more definite and solid arrangement for
payment. Therefore, A and B are still bound under their old contract. The former is
still liable for accumulated interests on the principal of P6,000.
(NOTE: The above answer is based on Arts. 1291, No. 1, and 1292, Civil
Code, and on Dungo vs. Lopena, L-18377, Dec. 29, 1962, and Magdalena Estate
vs. Rodriguez, 18 SCRA 967.)
Alternative Answer
A is not correct. The defense of implied novation requires clear and
convincing proof of complete incompatibility between the two obligations. The test is
whether the two obligations can stand together. If they cannot, incompatibility arises,
and the second obligation novates the first. If they can stand together, no
incompatibility results and novation does not take place. Applying this test to the
Page 279 of 391

instant-case, it is clear that the original contract between A and B and the surety
bond executed by C surety company can stand together. The bond is merely an
accessory of the original contract. Therefore, there is no novation.
(NOTE: The above answer-is based on decided cases applying Arts. 1291,
No. 1, and 1292 of the Civil Code.)
1994 No. 11:
In 1978, Bobby borrowed Pl,000,000.00 from Chito payable in two years. The
loan, which was evidenced by a promissory note, was secured by a mortgage on
real property. No action was filed by Chito to collect the loan or to foreclose the
mortgage. But in 1991, Bobby, without receiving any amount from Chito, executed
another promissory note which was worded exactly as the 1978 promissory note,
except for the date thereof, which was the date of its execution.
1) Can Chito demand payment on the 1991 promissory note in 1994?
2) Can Chito foreclose the real estate mortgage if Bobby fails to make good
his obligation under the 1991 promissory note?
Answer:
1) Yes, Chito can demand payment on the 1991 promissory note in 1994.
Although the 1978 promissory note for P1 million payable two years later or in 1980
became a natural obligation after the lapse of ten (10) years, such natural obligation
can be a valid consideration of a novated promissory note dated in 1991 and
payable two years later, or in 1993.
All the elements of an implied real novation are present:
a) an old valid obligation;
b) a new valid obligation;
c) capacity of the parties;
d) animus novandi or intention to novate; and
e) The old and the new obligation should be incompatible with each other on
all material points (Article 1292). The two promissory notes cannot stand together,
hence, the period of prescription of ten (10) years has not yet lapsed.
2) No. The mortgage being an accessory contract prescribed with the loan.
The novation of the loan, however, did not expressly include the mortgage, hence,
the mortgage is extinguished under Article 1296 of the NCC. The contract has been
extinguished by the novation or extinction of the principal obligation insofar as third
parties are concerned.
1979 No. XII
T borrowed P10,000.00 from a bank executing a promissory note therefore
wherein it is expressly stated that the note is due 120 days thereafter. On the date of
maturity T pays only the very small amount of P200.00 plus interest in advance for
the renewal of the note for another 60 days. For almost two years the bank was very
lenient with T and allowed him to renew his note in the same manner more than 10
times until finally the bank management had to make demand for payment of the
balance of P8,000.00 after the expiration of the date of last renewal. Upon T's failure
to pay, the bank filed an action for collection of said balance. T raised the defense
that the action is premature because the bank by its conduct had impliedly agreed
Page 280 of 391

that the payment of the note is to be made as the financial means of T warrants.
Should the defense be sustained? Why?
Answer
The defense should not be sustained. The acts of leniency of the bank in
accepting partial payments for a period of two years by virtue of BO many renewals
or extensions should not be interpreted as a novation of the original obligation. The
bank was merely compassionate. It is a well-settled rule in this jurisdiction that the
extension of the period for payment or postponement of the date of payment does
not result in a novation. There is no clear case of incompatibility between such
extension or postponement and the original obligation; neither is there a change in
the obligatory relation of the parties which will alter the essence of the original
obligation.
07; Obligations; extinguishment; payment
1986 No. 8.
Mr. Magaling obtained a judgment against Mr. Mayaman in the amount of
P500,000.00. A writ of execution was issued pursuant to which various personal
properties of Mayaman were levied upon by the sheriff. An auction sale was
scheduled.
Before the appointed day of the auction. Mayaman delivered to the sheriff a
cashier's check of Far East Bank in the amount of .P200,000.00 and enough cash to
cover the remainder of the total amount due. Magaling refused to accept the check
and asked the sheriff to proceed with the auction sale.
Did Magaling have the right to refuse the payment of part of the obligation
with a cashier's check? Explain.
Answer:
Magaling did not have the right to refuse the payment of part of the obligation
with a cashier's check.
The Central Dank Act provides that a check which has been cleared and
credited to the account of the creditor shall be equivalent to a delivery to the creditor
in cash in an amount equal to the amount credited to his account.
Analyzing the above provision, it is clear that the cashier's check of Far East
Bank, a reputable bank, and credited to the account of Mayaman has legal tender
power. Therefore, there was no basis for Magaling in refusing payment of the
obligation.
(Note: — The above answer is based on Art. 1249 of the Civil Code. The
exception in New Pacific Timber and Supply -Co. vs. Seneris, 101 SCRA 686, refers
to "Certified Check" because the reason given in that case was based on Sec. 63 of
the Central Bank Act. However, a contrary answer that "Cashier's Check" is
payment in cash may be considered correct because the above case confused
cashier's check with certified check - hence examinee should be given benefit of
doubt.)
Answer - It is well settled that a cashier's check is as good as cash. The law,
however, provides that a creditor may refuse payment if it is other than legal tender.
Although the creditor has the right to refuse the payment in the form of the
check, he cannot do so without any justifiable reason. Under the Chapter on Human
Relations in the Civil Code, a person, in the exercise of his rights, must act with
justice x x x. Therefore, although technically the creditor can refuse the check, he
could be made liable if he refused the cashier's check for no good reason or in bad
faith.
Page 281 of 391

Answer - Although a cashier's check may be as good as cash, still it is not
legal tender, and the sheriff may refuse to accept the check, as it does not produce
the effect of payment until cashed.
1981 No. 11
"S", an American resident of Manila, about to leave on a vacation, sold his
car to "B" for U.S. $2,000.00, the payment to be made ten days after delivery to "X",
a third party depositary agreed upon, who shall deliver the car to "B" upon receipt by
"X" of the purchase price. It was stipulated that ownership is retained by "S" until
delivery of the car to "X". Five days after delivery of the car to "X", it was destroyed
in a fire which gutted the house of "X", without the fault of either "X" or "B".
a) Is buyer "B" still legally obligated to pay the purchase price? Explain.
b) May seller "S" demand payment in U.S. dollar? Why?
Answer
(a) Yes, B is still legally obligated to pay the purchase price...
(b) The seller "S" cannot demand payment in U.S. dollars. According to the
law, an agreement that payment shall be made in currency other than Philippine
currency is void because it is contrary to public policy. That does not mean,
however, that "S" cannot demand payment from "B." He can demand payment, but
not in American dollars. Otherwise, there would be unjust enrichment at the expense
of another. Payment, therefore, should be made in Philippine currency,
(Note: The above answer is based on R.A. No. 529 and on Ponce vs. CA,
May 31, 1979.)
1983 No. 13
A owes B P20,000 which became due and payable last October 1, 1983. On
that date, A offered B P10,000 the only money he then had, but B refused to accept
the payment. A thereafter met C, B's 22-year old son, to whom he gave the P10,000
with the request that he turn the money over to B. The money was stolen while in
C's possession.
Was B justified in refusing to accept the payment of A? May he still recover
the full amount of his debt of P20,000? Why?
Answer
Yes, the creditor cannot be compelled to receive partial payments of the
obligation due him, there being no stipulation to the contrary.
B may still demand full payment of the sum due him. The payment to his son,
who does not appear to have been authorized to receive it, is invalid, the creditor not
having received any benefit therefrom.
1995 No. 12;
In 1983 PHILCREDJT extended loans to Rivett-Strom Machineries, Inc.
(RIVETTT-STROM), consisting of US$10 Million for the cost of machineries
imported and directly paid by PHTLCREDIT, and 5 Million in cash payable in
installments over a period of ten (10) years on the basis of the value thereof
computed at the rate of exchange of the U.S. dollar vis-à-vis the Philippine peso at
the time of payment.
Page 282 of 391

RIVETT-STROM made payments on both loans which if based on the rate of
exchange In 1983 would have fully settled the loans.
PHILCREDIT contends that the payments on both loans should be based on
the rate of exchange existing at the time of payment, which rate of exchange has
been consistently increasing, and for which reason there would still be a
considerable balance on each loan.
Is the contention of PHILCREDIT correct? Discuss fully. Answer:
As regards the loan consisting of dollars, the contention of PHILCREDIT is
correct. It has to be paid in Philippine currency computed on the basis of the
exchange rate at the time of payment of each installment, as held in Kalalo v. Luz,
34 SCRA 337. As regards the P5 Million loan in Philippine pesos, PHILCREDIT Is
wrong. The payment thereof cannot be measured by the peso-dollar exchange rate.
That will be violative of the Uniform Currency Act (RA, 529] which prohibits the
payment of an obligation which, although to be paid In Philippine currency, Is
measured by a foreign currency. (Palanca v. CA, 238 SCRA 593).
07; Obligations; extinguishment; payment, consignation, set-off
1988 No. 10:
(a) Under the Civil Code, what are the different special forms of payments?
(b) What are the special requisites of consignation in order that it shall
produce the effect of payment?
(c) A treasury warrant payable to Rosenne and indorsed by Boni was
cashed at the Philippine National Bank. The warrant was subsequently dishonored
by the Philippine Treasury. The Bank then applied the deposit of Boni to the
payment of the amount paid for the warrant. Is the action of the Bank in accordance
with law? Reasons.
Answer:
(a) Under the Civil Code, there are actually four special forms of payment.
They are (1) application of payment (Arts. 1252-1254); (2) dation in payment (Art.
1245); (3) payment by cession (Art. 1255): and (4) tender of payment and
consignation (Arts. 1256-1261). Strictly speaking, however, application of payment,
by its very nature, is not a special form of payment,
(b) In order that consignation shall produce the effect of payment, it is not
only essential that it must conform with all of the requisites of payment, but it is also
essential that certain special requirements prescribed by law must be complied with.
The debtor must show;
(1) That there is a debt due;
(2) That the consignation has been made either because the creditor to
whom tender of payment was made refused to accept the payment without just
cause, or because any of the cause stated by law for effective consignation without
previous tender of payment exists (Art. 1256, CC);
(3) The previous notice of the consignation had been given to the persons
interested in the fulfillment of the obligation (Art, 1256, CC);
(4) That the thing or amount due had been placed at the disposal of judicial
authority (Art. 1258, par. 1, CC); and
(5) That after the consignation had been made, the persons interested in the
fulfillment of the obligation had been notified thereof (Art. 1258, par. 2, CC).
Page 283 of 391

(c) Yes, the action of the Bank is in accordance with law. The facts stated in
the above problem are exactly the same as those in the case of Cullas vs. National
Bank, 62 Phil. 519, where the Supreme Court held that a bank has a right of set-off
of the deposit in its hands for the payment of any indebtedness to it on the part of
the depositor. When a person deposits his money at a bank, whether such deposit is
fixed, savings or current, a relationship of creditor and debtor is established between
the depositor and bank. It is, therefore, evident that all of the requisites for
compensation are present in this case.
Committee's Recommendation Re: No. 10(a):
(a) The committee recommends that if application for payment is not
mentioned by the examinee, full credit must likewise be given,
07; Obligations; extinguishment; payment; application
1982 No. 16
The debtor owes his creditor several debts, all of them due, to wit: (1) an
unsecured debt; (2) a debt secured with a mortgage of the debtor's property; (3) a
debt bearing interest; (4) a debt in which the debtor is solidarily liable with another.
Partial payment was made by the debtor. Assuming that the debtor had not
specified the debts to which the payment should be applied and, on the other hand,
the creditor had not specified in the receipt he issued the application of payment,
state the order in which the payment should be applied and your reasons therefore.
Answer
In this case, according to the Civil Code, the debt, which is most onerous to
the debtor, among those due, shall be deemed satisfied.
Analyzing the four debts stated in the problem, the most onerous is No. 4, the
second most onerous is No. 2, the third most onerous is No. 3, and the last onerous
is No. 1, Consequently, the payment should be applied in that order.
(Note: The above answer is based on Art. l254 of the Civil Code and on
decided cases and commentaries of recognized commentators.)
07; Obligations; extinguishment; payment; consignation, when applicable
1984 No. 12
A sold to B a parcel of land with the right to repurchase the same within three
years. A tendered the repurchase of price to B within the prescribed period, but B
refused to accept it. A then brought an action in court for specific performance.
B contends that since A did not deposit the money in court within the
stipulated period for repurchase and the period has now lapsed, A can no longer
repurchase the property. Is this contention correct? Explain.
Answer:
A. Furnished by Office of Justice Palma
No. Consignation is not necessary to compel B to make the resale if he
refused to accept the repurchase price tendered. The provisions of consignation
refer only to obligations. They are not applicable to the right of repurchase which is
not an obligation but a right exercisable purely at the option of A.
B. Comments and Suggested Answer
We agree with the answer of the Bar Examiner. However, if the bar candidate
will attack the problem by holding that there was no default or mora of A because of
the previous tender of payment which was refused by B without any justifiable
Page 284 of 391

cause, and consequently. A can still repurchase the property, it is recommended
that said answer should be properly credited.
07; Obligations; fortuitous events
1988 No. 8:
(a) Mario received from Edgar a pendant with diamonds valued at
P5,OOO.OO to be sold on commission basis or to be returned on demand. In the
evening of August 31, 1987, while he was walking home, two men snatched his
clutch bag containing the pendant and ran away. Subsequently, the snatchers were
apprehended and charged. During the pendency of the criminal case, Edgar brought
an action against Mario for the recovery of the pendant or its value and damages.
Mario interposed the defense of fortuitous event but Edgar contends—
(1) That the defense of fortuitous event is untenable because there was
negligence on the part of the defendant; and
(2) That if the defense is untenable, there must be a prior conviction of
robbery before it can be availed of, Decide the case.
Answer:
(a) The factual setting of the above problem is identical to that of Austria vs.
Court of Appeals (39 SCRA 527). In that case the Supreme Court held that
defendant is not liable.
To constitute a caso fortuito that would exempt a person from responsibility, it
is necessary (1) that the event must be independent of the will of the debtor; (2) that
it must be either unforeseeable or unavoidable; (3) that the occurrence must render
it impossible for the debtor to fulfill the obligation in a normal manner; and (b) that
the debtor must be free of, participation in, or aggravation of, the injury to the
creditor.
All of the above requisites or conditions are present in this case. It is
undeniable that in order to completely exonerate the debtor by reason of a fortuitous
event, such debtor must, in addition into the causes itself, be free of any concurrent
or contributory fault or negligence. We believe, however, that her act in traveling
alone in the evening, carrying jewelry of considerable value, cannot be considered
as either concurrent or contributory negligence. While it may be so considered now,
we are not persuaded that the same rule should obtain ten years previously when
the robbery in question took place, for at that time criminality had not by far reached
the levels attained in the present day.
There is likewise no merit in the contention that to allow the fact of robbery to
be recognized in this case before conviction is secured in the criminal action, would
prejudice the latter case, or would result in inconsistency should the accused obtain
an acquittal or should the criminal case be dismissed. It must be realized that a court
finding that a robbery has happened would not necessarily mean that those accused
in the criminal action would be found guilty of the crime; nor would a ruling that those
actually accused did not commit the robbery be inconsistent with a finding that a
robbery did take place. The evidence to establish these facts would not necessarily
be the same.
Suggested Alternative Answers to No. 8(a):
(a) (1) We would like to call attention to the fact that the question says
"contends." So perhaps we should make a distinction if negligence is proven and if
negligence is not proven. If the negligence of the defendant is not proven as Edgar
contends, then the defense of fortuitous event is tenable. However, if negligence is
proven to be present then the defense of fortuitous event is not tenable here and the
defendant will be liable.
Page 285 of 391

(2) There is no need of prior conviction in either case.
07; Obligations; joint/ solidary liability; joint
2001 No VII
Four foreign medical students rented the apartment of Thelma for a period of
one year. After one semester, three of them returned to their home country and the
fourth transferred to a boarding house. Thelma discovered that they left unpaid
telephone bills in the total amount of P80,000.00. The lease contract provided that
the lessees shall pay for the telephone services in the leased premises. Thelma
demanded that the fourth student pay the entire amount of the unpaid telephone
bills, but the latter is willing to pay only one fourth of it. Who is correct? Why? (5%)
SUGGESTED ANSWER:
The fourth student is correct. His liability is only joint, hence, pro rata. There is
solidary liability only when the obligation expressly so states or when the law or
nature of the obligation requires solidarity (Art. 1207, CC). The contract of lease in
the problem does not, in any way, stipulate solidarity.
07; Obligations; joint/ solidary liability; solidary
1998 No XV.
Joey, Jovy and Jojo are solidary debtors under a loan obligation of
P300,000.00 which has fallen due. The creditor has, however, condoned Jojo's
entire share in the debt. Since Jovy has become insolvent, the creditor makes a
demand on Joey to pay the debt.
1. How much, if any, may Joey be compelled to pay? [2%]
2. To what extent, if at all. can Jojo be compelled by Joey to contribute to
such payment? [3%]
Answer:
1. Joey can be compelled to pay only the remaining balance of
P2OO.OOO, in view of the remission of Jojo's share by the creditor. (Art. 1219, Civil
Code)
Answer;
2. Jojo can be compelled by Joey to contribute P5O.OOO. Art. 1217. par.
3, Civil Code provides. "When one of the solidary debtors cannot, because of his
insolvency, reimburse his share to the debtor paying the obligation, such share shall
be borne by all his co-debtors, in proportion to the debt of each."
Since the insolvent debtor's share which Joey paid was P100,000, and there
are only two remaining debtors - namely Joey and Jojo - these two shall share
equally the burden of reimbursement. Jojo may thus be compelled by Joey to
contribute P50.0OO.OO.
07; Obligations; joint/ solidary liability; solidary
2003 No XIV.
A,B,C,D, and E made themselves solidarity indebted to X for the amount of
P50,000.00. When X demanded payment from A, the latter refused to pay on the
following grounds.
(a) B is only 16 years old.
(b) C has already been condoned by X
(c) D is insolvent.
Page 286 of 391

(d) E was given by X an extension of 6 months without the consent of the
other four co-debtors.
State the effect of each of the above defenses put up by A on his obligation to
pay X, if such defenses are found to be true.
SUGGESTED ANSWER:
(a) A may avail the minority of B as a defense, but only for B’s share of P
10, 000.00. A solidary debtor may avail himself of any defense which personally
belongs to a solidary co-debtor, but only as to the share of that co-debtor.
(b) A may avail of the condonation by X of C’s share of P 10, 000.00. A
solidary debtor may, in actions filed by the creditor, avail himself of all defenses
which are derived from the nature of the obligation and of those which are personal
to him or pertain to his own share. With respect to those which personally belong to
others, he may avail himself thereof only as regards that part of the debt for which
the latter are responsible. (Article 1222, NCC).
(c) A may not interpose the defense of insolvency of D as a defense.
Applying the principle of mutual guaranty among solidary debtors, A guaranteed the
payment of D’s share and of all the other co-debtors. Hence, A cannot avail of the
defense of D’s insolvency.
(d) The extension of six (6) months given by X to E may be availed of by A
as a partial defense but only for the share of E. there is no novation of the obligation
but only an act of liberality granted to E alone.
07; Obligations; joint/ solidary liability; solidary obligations
1988 No. 9:
(b) Define joint and solidary obligations.
(c) A, B, and C borrowed P12,000 from X. This debt is evidenced by a
promissory note wherein the three bound themselves to pay the debt jointly and
severally. However, according to the note, A can be compelled to pay only on June
15, 1962, B can be compelled to pay only on June 15, 1964, while C can be
compelled to pay only on June 15T 1966. On June 15, 1962, X made a demand
upon A to pay the entire indebtedness but the latter aid only P4,OOO.OO,
Subsequently, because of A's refusal to pay the balance, X brought an action
against him for collection of the amount. Will such an action prosper? Reasons.
Answer:
(b) When there is a concurrence of two or more creditors or of two or more
debtors in one and the same obligation, such obligation may be either joint
(obligation mancomunada) or solidary (obligacion solidaria). A joint
obligation may be defined as an obligation where there is a concurrence of several
creditors or several debtors, or of several creditors and debtors, by virtue which
each of the creditors has a right to demand, while each of debtors is bound to render
compliance with his proportionate part of the prestation which constitutes the object
of the obligation. In other words, each of the creditors is entitled to demand the
payment of only a proportionate part of the credit, while each of the debtors is liable
for the payment of only a proportionate part of the debt. A solidary obligation, on the
other hand, may be defined as an obligation where there is a concurrence of several
creditors, or several debtors, or of several creditors and debtors, by virtue which
each of the creditors has a right to demand, while each of the debtors is bound to
render entire compliance with the prestation which constitutes the object of the
obligation. In other words, each of the creditors is entitled to demand the payment of
the entire credit/ while each of the debtors is liable for the payment of the entire
debt. (See Art. 1207, CC; 3 Castan, 7th Ed,, pp. 65-66.)
Page 287 of 391

(c) For the present, the action will not prosper. It is of course true that the
obligation here is solidary and that its solidary character is not destroyed by the fact
that the debtors are bound by different periods for payment is expressly
provided for in Art. 1211 of the Civil Code. However, in solidary obligations of
this type, the right of the creditor is limited to the recovery of the amount owed by the
debtor whose obligation has already matured, leaving in suspense his right to
recover the shares corresponding to the other debtors whose obligations have not
yet matured. This restriction upon the creditor's right does not destroy the solidary
character of the obligation, because ultimately, he can still compel one and the same
debtor, if that is his wish, to pay the entire obligation Therefore, in the instant case, X
shall have to wait for June 15, 1964, when B's obligation shall have matured, and for
June 15, 1966, when C's obligation shall have also matured. On June 15, 1966, he
can collect P4,000 from either A or B. On June 15, 1966, he can again collect
another P4,000 from either A or B or C. (See Ynchausti vs. Yulo, 34 Phil. 978.)
Suggested Alternative Answer To: No. 9 (c):
(c) It now being 1988, the action can no longer prosper because it has
already prescribed. Actions upon written contracts prescribe in 10 years.
1992 No. 3:
In June 1988, X obtained a loan from A and executed with Y as solidary co-
maker a promissory note in favor of A for the sum of P200,OOO.OO. The loan was
payable at P20,000.00 with interest monthly within the first week of each month
beginning July 1988 until maturity in April 1989. To secure the payment of the loan.
X put up as security a chattel mortgage on his car, a Toyota Corolla sedan. Because
of failure of X and Y to pay the principal amount of the loan, the car was
extrajudicially foreclosed. A acquired the car at A's highest bid of P120,000.00
during the auction sale.
After several fruitless letters of demand against X and Y, A sued Y alone for
the discovery of P80.000.00 constituting the deficiency.
Y resisted the suit raising the following defenses:
a) That Y should not be liable at all because X was not sued together with Y.
b) That the obligation has been paid completely by A's acquisition of the car
through "dacion en pago" or payment by cession.
c) That Y should not be held liable for the deficiency of P80,000.00 because
he was not a co-mortgagor in the chattel mortgage of the car. which contract was
executed by X alone as owner and mortgagor.
d) That assuming that Y is liable, he should only pay the proportionate sum
of P40,000.00.
Decide each defense with reasons.
Answer:
(a) This first defense of Y is untenable. Y is still liable as solidary debtor. The
creditor may proceed against any one of the solidary debtors. The demand against
one does not preclude further demand against the others so long as the debt is not
fully paid.
(b) The second defense of Y is untenable. Y is still liable. The chattel
mortgage is only given as a security and not as payment for the debt in case of
failure to pay. Y as a solidary co-maker is not relieved of further liability on the
promissory note as a result of the foreclosure of the chattel mortgage.
Page 288 of 391

{c} The third defense of Y is untenable. Y is a surety of X and the extrajudicial
demand against the principal debtor is not inconsistent with a judicial demand
against the surety. A suretyship may co-exist with a mortgage.
(d) The fourth defense of Y is untenable. Y is liable for the entire prestation
since Y incurred a solidary obligation with X.
(Arts. 1207, 1216. 1252 and 2047 Civil Code; Bicol Savings and Loan
Associates vs. Guinhawa 188 SCRA 642)
1980 No. IX
(a) "FF" and "GG" executed a promissory note binding themselves, jointly
and severally, to pay "X" Bank P10,000.00 within 90 days from January 10, 1979,
"FF" signed the note as principal and "GG" as guarantor. Upon failure to pay the
note on due date "X" bank sued "FF" and "GG" for payment. "GG" interposed the
defense that he was just a guarantor and the Bank must first exhaust all the
remedies against the principal "FF"
Is "GG's" defense tenable?
Answer
(a) "GG's" defense is untenable. Had he not bind himself solidarity with "FF"
to pay the obligation, undoubtedly, as guarantor, he could have availed of the
defense of benefit of excussion. In other words, he cannot be compelled to pay the
creditor unless the latter has exhausted all the property of the debtor and he
resorted to all the legal remedies against the said debtor. But then in the promissory
note, he bound himself jointly and severally with "FF" to pay the obligation to the
creditor. According to the law, such a defense now invoked by "GG" is no longer
available.
(NOTE: The above answer is based on Arts. 2058, 2059, Civil Code,)
1984 No. 11
A, B and C solidarity promised to pay D the amount of P3,000.00.
Unfortunately, C became insolvent.
What recourse does B have against A and B? What are the rights of A and B
as against each other?
Answer:
A. Furnished by the Office of Justice Palma
D may sue either A or B, or both, and recover the whole amount of P3,000
(Art. 1207) from either or both of them. Either party paying the entire amount may
recover the amount of P1,5000 from the other party. (Art. 1217).
We agree with the answer of the Bar Examiner. However, if the bar candidate
will answer the problem by invoking the provisions of Arts, 1216 and 1217 of the
Civil Code instead of Arts. 1207 and 1217, it is recommended that the answer
should be considered a correct Answer.
07; Obligations; joint/ solidary obligations; joint
1983 No. 12
A and B sold 1,000 sacks of rice to X and Y and, on X's request, delivered
them to him. X resold the rice, without turning over any part of it or its price to Y.
Page 289 of 391

May Y compel A and B to deliver what he bought? If so, to what extent?
Answer
Yes, Y may compel A to deliver 250 sacks of rice and B the same quantity,
the obligation being joint, not solidary.
07; Obligations; loss of the thing due
1986 No. 1:
Mr. Mekanico leased some automobile repair equipment to Mr. Masipag, who
was opening his auto repair shop. The lease agreement was executed on February
15, 1985. It stipulated that the period was one month only, at the expiration of which
Masipag was to return the equipment of Mekanico. The equipment was delivered on
February 15, 1985. On March 15, 1985 Mekanico, in a telephone call, asked
Masipag to return the leased property that same day. Because his truck broke down,
Masipag was unable to comply. Early the next morning, the equipment was burned
in an accidental fire that started in a nearby restaurant and gutted Masipag's auto
repair shop. Mekaniko seeks to hold Masipag liable for the value of the lost property
plus damages on the ground that he did not return it as agreed upon. Is Mekanico's
claim tenable? Explain.
Answer:
Mekaniko's claim in untenable.
The fire of accidental origin which destroyed the equipment which is the
object of the obligation in the instant case is clearly fortuitous in character.
Therefore, the doctrine of fortuitous events is applicable. The debtor or obligator,
Masipag, is not liable. In other words, the obligation is extinguished.
The fact that the loss took place on March 16, 1985. which is one day after
Mekaniko had made a demand upon Masipag to return the leased property, does
not mean that the loss took place after the obligor had already incurred in delay. It
must be noted that the lease agreement was executed on February 15, 1985,
Obviously, on March 16, 1985. Masipag had not yet incurred in delay.
(Note: The above answer is based upon Arts. 13 and 1174 of the Civil Code.
We recommend that an answer based on Arts. 13 and 1262 of the Civil Code or on
Arts. 13, 1665 and 1667, arriving at the same conclusion should also be considered
correct)
Answer - The loss occurred by fortuitous event before Masipag incurred in
delay. Therefore, the general rule applies; No one shall be held liable for loss due to
fortuitous event.
The one-month period of lease would expire only on March 18th while the fire
occurred on the 29th day. The C.C. provides that one-month consists of 30 days and
February
1985 had only 28 days, not being a leap year.
07; Obligations; loss of the thing due; force majeure
2000 No XIV
Kristina brought her diamond ring to a jewelry shop for cleaning. The jewelry
shop undertook to return the ring by February 1, 1999." When the said date arrived,
the jewelry shop informed Kristina that the Job was not yet finished. They asked her
to return five days later. On February 6, 1999, Kristina went to the shop to claim the
ring, but she was informed that the same was stolen by a thief who entered the shop
the night before. Kristina filed an action for damages against the jewelry shop which
put up the defense of force majeure. Will the action prosper or not? (5%)
Page 290 of 391

SUGGESTED ANSWER:
The action will prosper. Since the defendant was already in default not having
delivered the ring when delivery was demanded by plaintiff at due date, the
defendant is liable for the loss of the thing and even when the loss was due to force
majeure,
07; Obligations; nature and effect of obligations
1986 No. 11:.
By means of a public instrument, Mr. Nagbibili sold his mango plantation to
Abenturero effective immediately. The document stipulated, however, that delivery
would be effected six months from the execution of the deed of sale. When the said
period arrived, Abenturero demanded delivery in writing but Nagbibili dilly-dallied. It
was not until a month afterwards that Nagbibili finally gave the land to Abenturero. In
the three weeks before delivery, Nagbibili sold and delivered the entire produce of
the mango plantation to Mr.Commerciante for P200.000.00. Commerciante knew
nothing of the contract between Nagbibili and Abenturero. Abenturero now seeks to
recover from Commerciante either the full value of the mangoes or a similar amount
and quality of the mangoes sold.
Does Abenturero have this right against Commerciante? Explain.
Answer:
Abenturero does not have any right, whether personal or real, to proceed
against Commerciante.
In obligations to give, the creditor has a right to the thing which is the object
of the obligation and to the fruits thereof when the obligation to deliver arises. The
obligation to deliver arises from the moment of the perfection of the contract. In
sales, once the contract is perfected, the vendor is bound to deliver the thing sold
and the fruits, unless there is a stipulation to the contrary. In the instant problem,
there is a stipulation that delivery will be effected six months from the execution of
the deed of sale. Instead of delivering the mango plantation and the fruits of
Abenturero in accordance with the agreement, Nagbibili breached the contract by
delaying the delivery of the plantation beyond the period agreed upon and by selling
the fruits to Commerciante. However, since there was still no delivery of the
plantation and the fruits, it is obvious that the only right which Abenturero had
acquired was a personal right enforceable against Nagbibili, not a real right
enforceable against the whole world. Ergo, he can now proceed against Nagbibili for
indemnification for damages. He cannot proceed against Commerciante who was
not even aware of the existence of the contract between Nagbibili and Abenturero.
(Note - The above answer is based upon Arts. 1164 and 1537 of the Civil
Code and upon decided cases.)
Answer - Although the buyer is entitled to the fruits of the land from the time
of perfection of the contract, still he did not acquire a real right over the fruits until
they are delivered to him. Therefore, Abenturero has no right of action against
Commerciante.
Answer - The seller is supposed to deliver to the buyer the thing sold as well
as the fruits and accessions that accrue from the moment of perfection. Abenturero
is entitled to the fruits of the mango plantation from the time of the execution of the
public instrument which provided that the sale was to be effective immediately.
Delivery may be either actual or constructive. The execution of public instrument is
one of the modes of constructive delivery.
07; Obligations; obligation to deliver a determinate thing; effect of loss
Page 291 of 391

1984 No. 14
For value received, Pedro promised to deliver to Juan on or before August
15, 1984 a Mercedes Benz with Plate No. 123 which he (Pedro) had just brought
home from Germany, as well as a 1984 18" Sony television set. Unfortunately,
before the scheduled delivery date, the Mercedes Benz and the television set which
Pedro had intended to deliver to Juan were destroyed by an accidental fire.
Has the obligation of Pedro been extinguished? Explain.
Answer:
The obligation to deliver the Mercedes-Benz is an obligation to deliver a
determinate thing, because the particular car to be delivered had been designated.
The obligation to deliver that particular car was therefore extinguished by the
occurrence of the fire, a fortuitous event.
On the other hand, the obligation to deliver the television set is an obligation
to deliver a generic thing. The particular television set to be delivered has not been
determined. Only the kind of television set to be delivered was agreed upon. Pedro
is therefore still obligated to deliver a television set of the kind and quality agreed
upon, since generic obligations are never extinguished by fortuitous events.
E. Comments and Suggested Answer
We agree with the answer of the Bar Examiner.
07; Obligations; obligation to deliver a generic thing
1985 No. 15
A) On September 1, 1982, A sold to B 50 heads of cattle for P150,000.00
and 60 heads of carabao for the same price, the cattle to be loaded in Davao City on
December 1, 1982, on the SS "Argus" and delivered upon her arrival in Manila
5 days later while the carabao were be loaded in the same city and shipped on
December 15 and delivered likewise to B upon her arrival in Manila 5 days later.
Because of the breakdown of his cargo truck, A was able to ship the cattle and the
carabaos only on December 15. On her way to Manila, the SS "Argus" ran into a
storm and all the animals were thrown into the sea to prevent her from sinking. B,
who paid one half of the price upon the execution of the contract, demanded its
return while A sought from B the full payment of the price.
Decide the controversy, giving the reasons for your decision.
Answers:
A) 1. The obligation of A to deliver the cattle or carabao is a generic
obligation, therefore, it is not extinguished by loss, so the seller is liable. However,
the question of damages will depend on who is at fault. Since, however, there is
nothing stated here as to whether the price is for a lump sum or for each cattle, the
problem here is on the partial payment. And the partial payment of one-half is a
demand. If the one-half payment is equivalent to the value of 1/2, it is a demand for
one-half and, therefore, when A delayed the delivery of the cattle, he is "in mora"
and will be liable for damages.
2. The question with respect to the sale is whether ownership passed to the
buyer at the time of the loss. The place of delivery and the sale is Manila. The things
sold were destroyed on the way to Manila. The ownership did not pass to the buyer
and therefore the buyer is not yet answerable for the payment of the price. B can
demand therefore its return. Aside from that there was a delay on the part of the
vendor and being in delay, he bears the loss through fortuitous -event.
Page 292 of 391

3. The heads of cattle and carabaos are to be considered specific, so this
refers to the sale of specific things, and when they were lost, the obligation was
extinguished because of fortuitous event.
4. Res perit creditori applies. The risk, therefore, would lie with the buyer
from the perfection of the contract until the delivery of the thing sold. Accordingly,
the buyer must pay to the seller the remaining unpaid price of the goods.
6. The seller is liable to the buyer for the loss of the cattle because the
delivery to the carrier was late.
The buyer is liable for the loss of the carabaos since delivery to the carrier is
equivalent to delivery to the buyer. The buyer bears the loss and is liable under the
principle of "res pent domino" when the subject matter is lost through fortuitous
event.
07; Obligations; obligation to give; obligation to do
1983 No. 10
A bound himself to deliver to B a 21-inch 1983 model TV set, and the 13
cubic feet White Westinghouse refrigerator, with Motor No. WERT-385, which B saw
in A's store, and to repair B's piano. A did none of these things.
May the court compel A to deliver the TV set and the refrigerator and repair
the piano? Why? If not, what relief may the court grant B? Why?
Answer
(Examiner's Answer)
Yes, in so far as his obligation to deliver the Westinghouse refrigerator is
concerned, the thing to be given being determinate, but no in so far as the 2 other
obligations are concerned, one being an obligation to give an indeterminate thing,
and the other being an obligation to do. In these 2 cases, the court shall order the
obligations to be performed at A's expense.
(Committee's Answer)
As far as the refrigerator is concerned, the Court may compel A to deliver the
refrigerator to B. The obligation to give is a determinate obligation to give. Under the
law, in this type of obligation, the principal right of the creditor against the debtor is
to compel the debtor to make the delivery.
(Note; The above answer is based on Art. 1165, par. 1, Civil Code)
As far as the TV set is concerned, the Court may compel A to deliver
although not specifically. The obligation of A is a generic obligation to give. Under
the law, in this type of obligation, once all of the circumstances of the obligation have
been taken into consideration, the Court may compel A to deliver to B a TV set
which must be neither of superior nor inferior quality.
(Note: The above answer is based on Art, 1246, Civil Code.)
As far as the repair of the piano is concerned, the court cannot compel A to
repair said piano. The obligation here is a purely personal obligation, an obligation to
do. Under the law, in this type of obligation to compel A to repair the piano of B
would constitute an infringement of A's liberty,
(Note: The above answer is based by implication on Art. 1165, Civil Code.)
Anent the TV set, if the debtor refuses or is unable to comply with his
obligation to deliver a 21 inch TV get which must be neither of superior nor inferior
quality, B may ask the court to order the performance of the obligation at the
expense of A. Additionally, he can ask for damages.
Page 293 of 391

Anent the repair of the piano, B may also ask the court to order the
performance of the obligation at the expense of A.
(The above answers are based on Arts. 1165, par. 2 and 1170, Civil Code.)
07; Obligations; obligations with a penal clause
1986 No. 10:
The Betis Furniture Co. undertook to deliver to Mr. Bagongkasal specified
pieces of living room, dining room and bedroom furniture, all made of narra, for a
price stated in the contract. The agreement had a penal clause that any violation of
the contract would entitle the aggrieved party to damages in the amount of
P100,000.00. The furniture delivered by Betis was made, not of narra, but of inferior
wood.
In a suit to recover damages, Bagongkasal was able to prove that the actual
damages he sustained amounted to P200,000.00, He demanded that amount plus
the P100,000.00 penalty or a total of P300,000.00. Betis, however, countered that if
it were liable for damages at all, the maximum award should not exceed
P100,000.00 as stated in the penal clause of the contract.
Whose claim would you sustain? Why? Answer:
I would sustain the claim of Betis. A penal clause is supposed to answer for
damages without the introduction of proof as to actual damages. It is to be noted
that the penal clause has been freely agreed upon between the parties precisely
with the intention of doing away with having to present proof of damages.
Answer — I shall sustain the claim of the defendant Betis Furniture Co. The
Civil Code is explicit. According to said Code, in obligations with a penal clause, the
penalty shall substitute the indemnity for damages and the payment of interests in
case of non-compliance. There are only three exceptions to this rule. They are: first,
when there is a stipulation to the contrary: second, when the creditor is compelled to
sue the debtor because of the latter's refusal to pay the agreed penalty; and third,
when the debtor is guilty of fraud. It is clear that the instant case does not fall within
the purview of any of the three exceptions Therefore, the award in favor of the
plaintiff should be for P100,000.00 only.
Answer -- I shall not sustain the claim of Beds Furniture Co. The Civil Code is
explicit. According to said Code, in obligations with a penal clause, the penalty shall
substitute the indemnity for damages and the payment of interests in case of non-
compliance. There are three exceptions to this rule. They are: first, when there is a
stipulation to the contrary; second, when the creditor is compelled to sue the debtor
because of the latter's refusal to pay the agreed penalty: and third, when the debtor
is guilty of fraud. It is clear that the instant case falls within the purview of the third
exception. The furniture delivered by Betis was made, not of narra. but of inferior
wood. That indicates that the debtor commuted fraud in performing its obligation.
Therefore, the award in favor of the plaintiff should be for P200,000 actual damages
plus the P100,000 penalty.
Answer - Under the doctrine of G.A. Machineries, Inc. vs. Yaptinchay. 126
SCRA 78 (ponente J. Gutierrez) there is breach of contract not breach of warranty.
The breach is fraudulent. Under the doctrine of Mariano Pamintuan vs. CA. SCRA
556, since debtor is guilty of fraud - "The proven damages supersede the stipulated
damages (penalty)" citing Art. 1226 Civil Code of the Philippines).
Answer ~ Here there is a breach of warranty and Betis Furniture Co. must
know the difference between "narra" and other kinds of wood. Therefore, in
delivering the furniture made of inferior quality, it undoubtedly acted fraudulently,
and under the C.C, the buyer in this case would be entitled to be reimbursed the
Page 294 of 391

difference in value of the furniture and the price 'he paid (P200,000) and damages
(penalty -P100,000),
07; Obligations; obligations with a penal clause
1985 No, 12
A, agreed to build a house for B on the condition that it shall be completed
within 6 months from January 1, 1980, that work shall begin when B pays A
P30,000.00, and that A shall pay a penalty of P200.00 for each day of delay in the
fulfillment of the contract. A finished the construction of the house on August 31,
1980, and turned it over the same day to B who demanded payment of the penalty
of P200.00 for every day of delay in its completion. A refused to pay, alleging the
delay was caused by B who gave him the first payment only on March 1. B's answer
was that he had the money ready since January 1 but it was not until March 1, after
calling A, that he went to his house to get it
a) Rule on the respective contentions of both parties.
b) Was there delay in the completion of the house? State your reasons.
Answers:
(a) and (b)
1. B was bound to pay A the amount of P30.000 only upon demand for such
payment by A. Hence, there was no default on the part of B who was ready to
comply with the obligation. Since the agreement was that the house was to be
completed within 6 months from Jan. 1, 1980 and the building was not completed
within the specified time, the builder is liable for the penalty according to the terms of
the agreement.
2. Even though there is a penalty, that is dependent on the fact whether time
is of the essence of the contract or not. The mere fixing of the date is not considered
necessarily to mean that time is of the essence. The date is only for maturity.
Generally, time is not of the essence.
3. Although B had the money, he never informed the other party. So the
other party did not get to know that he had the money. Therefore, B was not in
default. A is not entitled to collect penalty.
4. I would rule in favor of B, since the payment of P30,000.00 does not
appear to be a condition for the completion of the house within six months from
January 1, 1980. But, assuming otherwise, there was no default in. the payment of
the P30.000.00 since there was no demand made for the payment thereof (Art.
1169). In addition, unless otherwise expressed in the agreement, payment shall
be made at the domicile of the obligor (Art. 1251).
There was a delay in the completion of the house; accordingly, the payment
of P200 for each day of delay could be sought since this penalty is not
unconscionable considering the total value of the contract.
07; Obligations; obligations with a period
1980 No. IV
(b) "M" and "N" were very good friends. "N" borrowed P10,000 from "M".
Because of their close relationship, the promissory note executed by "N" provided
that he would pay the loan "whenever his means permit." subsequently, "M" and "N"
quarreled. "M" now asks you to collect the loan because he is in dire need of money.
What legal action, if any, would you take in behalf of "M"?
Answer
Page 295 of 391

(b) "M" must bring an action against "N" for the purpose of asking the court to
fix the duration of the term or period for payment (Arts. 1180, 1197, Civil Code).
Once the court has fixed the duration of the term or period, it becomes a part of the
covenant of the two contracting parties. If the debtor defaults in the payment of the
obligation after the expiration of the period fixed by the court, the creditor can then
bring an action against him for collection. Any action for collection brought before
that would be premature. This is well-settled. (Gonzales vs. Jose, 66 Phil. 369) ;
Conception vs. People of the Phil, 74 Phil. 62; Pages vs. Basilan, 104 Phil. 882).
Alternative Answer: — Normally, before an action for collection may be
maintained by the creditor against the debtor, the former must first bring an action
against the latter asking the court to fix the duration of the term or period for
payment (Art. 1197, Civil Code). However, an action combining such action with that
of an action for collection may be allowed if it can be shown that a separate action
for collection would be a. mere formality because no additional proofs other than the
admitted facts will be presented and would serve no purpose other than to delay.
Here, there is no legal obstacle to such course of action. (Borromeo vs. Court of
Appeals, 47 SCRA 65).
1984 No. 13
A obtained from B a loan payable within a year. As security for its repayment,
A mortgaged his uninsured house.
Three months after the loan was given, A's house was gutted by an
accidental fire. Thereupon, B demanded immediate payment from A, who refused to
pay contending that the loan was for a one-year period.
Is A's contention valid? Explain. Answer:
No. Under Art. 1198, the debtor shall low every right to make use of a period
when the securities disappear through a fortuitous event. A has to give satisfactory
substitute collateral.
We agree with the answer of the Bar Examiner.
1982 No 15
"A" Corporation, engaged in the sale of subdivision residential lots, sold to "B"
a lot of 1,000 square meters. The contract provides that the corporation should put
up an artesian well with tank, within a reasonable time from the date thereof and
sufficient for the needs of the buyers. Five years thereafter, and no well and tank
have been put up by the corporation, "B" sued the corporation for specific
performance. The corporation set up a defense that no period having been fixed, the
court should fix the period. Decide with reason.
Answer
First Answer: The action for specific performance should be dismissed on the
ground that it is premature. It is clear that the instant case falls within the purview of
obligations with a term or period which must be judicially fixed. Thus, "B", instead of
bringing an action for specific performance, should bring an action asking the court
to determine the period within which "A" Corporation shall put up the artesian well
with tank. Once the court has fixed the period, once the court, let us say, has
declared that the period is six months, then that will become a part of the covenant
Page 296 of 391

between the contracting parties. It can no longer be changed by them. If the
Corporation does not put up the artesian well with tank within the period fixed by the
court, "B" can then bring an action for specific performance.
Second Answer: Normally, before an action for specific performance may be
maintained by "B" against "A" Corporation, the former must first bring an action
against the latter asking the court to fix the duration of the term or period to install
the artesian well with tank. However, an action combining such action with that of an
action for specific performance may be allowed if it can be shown that a separate
action for specific performance would be a mere formality because no additional
proofs other than the admitted facts will be presented and would serve no purpose
other than to delay. Here, there is no obstacle to such course of action.
(Note: The above answers are based on Art. 1197 of the Civil Code and on
decided cases. The Committee respectfully recommends that either answers should
be considered correct.)
07; Obligations; obligations with a period; suspensive period dependent upon
will of debtor
1991 No 13:
In a deed of sale of a realty, it was stipulated that the buyer would construct a
commercial building on the lot while the seller would construct a private passageway
bordering the lot. The building was eventually finished but the seller failed to
complete the passageway as some of the squatters, who were already known to be
there at the time they entered into the contract, refused to vacate the premises, In
fact, prior to its execution, the seller filed ejectment cases against the squatters.
The buyer now sues the seller for specific performance with damages. The
defense is that the obligation to construct the passageway should be with a period
which, incidentally, had not been fixed by them, hence, the need for fixing a judicial
period.
Will the action for specific performance of the buyer against the seller
prosper?
Answer:
No. the action for specific performance filed by the buyer is premature under
Art. 1197 of the Civil Code. If a period has not been fixed although contemplated by
the parties, the parties themselves should fix that period, failing in which, the Court
maybe asked to fix it taking into consideration the probable contemplation of the
parties. Before the period is fixed, an action for specific performance is premature.
Alternative Answer;
It has been held in Borromeo vs. CA (47 SCRA 69), that the Supreme Court
allowed the simultaneous filing of action to fix the probable contemplated period of
the parties where none is fixed in the agreement if this would avoid multiplicity of
suits. In addition, technicalities must be subordinated to substantial justice.
Alternative Answer;
The action for specific performance will not prosper. The filing of the
ejectment suit by the seller was precisely in compliance with his obligations and
should not, therefore, be faulted if no decision has yet been reached by the Court on
the matter.
07; Trust; implied resulting trust
1995 No. 17:
Page 297 of 391

CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
Salvador consigned the P 100,000.00 in court, and filed an property of ZY, his wife may also sue to recover it under
action for rescission of the deed of conditional sale, plus Article 2016 of the Civil Code if she and the family needed
damages. Will the action prosper? Explain. the money for support.
SUGGESTED ANSWER: ALTERNATIVE ANSWER (2):
No, the action will not prosper. The action for rescission may A. (2). Mrs. ZY cannot file a suit to recover what her husband
be brought only by the aggrieved party to the contract. Since it lost. Art 2014 of the Civil Code provides that any loser in a
was Salvador who failed to comply with his conditional game of chance may recover his loss from the winner, with
obligation, he is not the aggrieved party who may file the legal interest from the time he paid the amount lost. This
action for rescission but the Star Semiconductor Company. means that only he can file the suit. Mrs. ZY cannot recover
The company, however, is not opting to rescind the contract as a spouse who has interest in the absolute community
but has chosen to waive Salvador's compliance with the property or conjugal partnership of gains, because under Art.
condition which it can do under Art. 1545, NCC. 117(7} of the Family Code, losses are borne exclusively by the
loser-spouse. Therefore, these cannot be charged against
ALTERNATIVE ANSWER: absolute community property or conjugal partnership of
The action for rescission will not prosper. The buyer has not gains. This being so, Mrs. ZY has no interest in law to
committed any breach, let alone a substantial or serious one, prosecute and recover as she has no legal standing in court to
to warrant the rescission/resolution sought by the vendor. On do so.
the contrary, it is the vendor who appears to have failed to
comply with the condition imposed by the contract the Conditional Obligations (2000)
fulfillment of which would have rendered the obligation to Pedro promised to give his grandson a car if the latter will
pay the balance of the purchase price demandable. Further, pass the bar examinations. When his grandson passed the
far from being unable to comply with what is incumbent said examinations, Pedro refused to give the car on the
upon it, ie., pay the balance of the price the buyer has offered ground that the condition was a purely potestative one. Is he
to pay it even without the vendor having complied with the correct or not? (2%)
suspensive condition attached to the payment of the price, SUGGESTED ANSWER:
thus waiving such condition as well as the 60-day term in its No, he is not correct. First of all, the condition is not purely
favor The stipulation that the P100,000.00 down payment potestative, because it does not depend on the sole will of
shall be returned by the vendor to the vendee if the squatters one of the parties. Secondly, even if it were, it would be valid
are not removed within six months, is also a covenant for the because it depends on the sole will of the creditor (the
benefit of the vendee, which the latter has validly waived by donee) and not of the debtor (the donor).
implication when it offered to pay the balance of the purchase
price upon the execution of a deed of absolute sale by the Conditional Obligations (2003)
vendor. (Art. 1545, NCC) Are the following obligations valid, why, and if they are valid,
when is the obligation demandable in each case? a) If the
debtor promises to pay as soon as he has the
means to pay; b) If the debtor promises to pay when he likes;
OBLIGATIONS c) If the debtor promises to pay when he becomes a
Aleatory Contracts; Gambling (2004) lawyer; d) If the debtor promises to pay if his son, who is
A. Mr. ZY lost P100,000 in a card game called Russian sick with cancer, does not die within one year. 5%
poker, but he had no more cash to pay in full the winner at
the time the session ended. He promised to pay PX, the SUGGESTED ANSWER:
winner, two weeks thereafter. But he failed to do so despite (a) The obligation is valid. It is an obligation subject to an
the lapse of two months, so PX filed in court a suit to collect indefinite period because the debtor binds himself to pay
the amount of P50,000 that he won but remained unpaid. when his means permit him to do so (Article 1180, NCC).
Will the collection suit against ZY prosper? Could Mrs. ZY When the creditor knows that the debtor already has the
file in turn a suit against PX to recover the P100,000 that her means to pay, he must file an action in court to fix the
husband lost? Reason. (5%) period, and when the definite period as set by the court
SUGGESTED ANSWER: arrives, the obligation to pay becomes demandable 9Article
A. 1. The suit by PX to collect the balance of what he won 1197, NCC).
from ZY will not prosper. Under Article 2014 of the Civil
Code, no action can be maintained by the winner for the SUGGESTED ANSWER:
collection of what he has won in a game of chance. Although (b) The obligation ―to pay when he likes‖ is a suspensive
poker may depend in part on ability, it is fundamentally a condition the fulfillment of which is subject to the sole will of
game of chance. the debtor and, therefore the conditional obligation is void.
(Article 1182, NCC).
2) If the money paid by ZY to PX was conjugal or
community property, the wife of ZY could sue to recover it SUGGESTED ANSWER:
because Article 117(7) of the Family Code provides that (c) The obligation is valid. It is subject to a suspensive
losses in gambling or betting are borne exclusively by the condition, i.e. the future and uncertain event of his becoming
loser-spouse. Hence, conjugal or community funds may not a lawyer. The performance of this obligation does
be used to pay for such losses. If the money were exclusive
not depend solely on the will of the debtor but also on condition of Eva passing the 1998 Bar Examinations.
other factors outside the debtor’s control. Hence, upon Eva's passing the Bar, the rights of the other buyer
terminated and Eva acquired ownership of the property.
SUGGESTED ANSWER:
(d) The obligation is valid. The death of the son of cancer SECOND ALTERNATIVE ANSWER:
within one year is made a negative suspensive condition to his The sale to another person before Eva could buy it from
making the payment. The obligation is demandable if the son Manuel is valid, as the contract between Manuel and Eva is a
does not die within one year (Article 1185, NCC). mere promise to sell and Eva has not acquired a real right
over the land assuming that there is a price stipulated in the
contract for the contract to be considered a sale and there
Conditional Obligations; Promise (1997) was delivery or tradition of the thing sold.
In two separate documents signed by him, Juan Valentino
"obligated" himself each to Maria and to Perla, thus - 'To SUGGESTED ANSWER:
Maria, my true love, I obligate myself to give you my one and (b) No, she is not entitled to the rentals collected by Manuel
only horse when I feel like It." - and -'To Perla, my true because at the time they accrued and were collected, Eva was
sweetheart, I obligate myself to pay you the P500.00 I owe not yet the owner of the property.
you when I feel like it." Months passed but Juan never FIRST ALTERNATIVE ANSWER:
bothered to make good his promises. Maria and Perla came Assuming that Eva is the one entitled to buy the house and
to consult you on whether or not they could recover on the lot, she is not entitled to the rentals collected by Manuel
basis of the foregoing settings. What would your legal advice before she passed the bar examinations. Whether it is a
be? contract of sale or a contract to sell, reciprocal prestations are
deemed imposed A for the seller to deliver the object sold
SUGGESTED ANSWER: and for the buyer to pay the price. Before the happening of
I would advise Maria not to bother running after Juan for the the condition, the fruits of the thing and the interests on the
latter to make good his promise. [This is because a promise is money are deemed to have been mutually compensated under
not an actionable wrong that allows a party to recover Article 1187.
especially when she has not suffered damages resulting from SECOND ALTERNATIVE ANSWER:
such promise. A promise does not create an obligation on the Under Art. 1164, there is no obligation on the part of Manuel
part of Juan because it is not something which arises from a to deliver the fruits (rentals) of the thing until the obligation
contract, law, quasi-contracts or quasidelicts (Art, 1157)]. to deliver the thing arises. As the suspensive condition has
Under Art. 1182, Juan's promise to Maria is void because a not been fulfilled, the obligation to sell does not arise.
conditional obligation depends upon the sole will of the
obligor.
Extinguishment; Assignment of Rights (2001)
As regards Perla, the document is an express acknowledgment The sugar cane planters of Batangas entered into a long-term
of a debt, and the promise to pay what he owes her when he milling contract with the Central Azucarera de Don Pedro
feels like it is equivalent to a promise to pay when his means Inc. Ten years later, the Central assigned its rights to the said
permits him to do so, and is deemed to be one with an milling contract to a Taiwanese group which would take over
indefinite period under Art. 1180. Hence the amount is the operations of the sugar mill. The planters filed an action
recoverable after Perla asks the court to set the period as to annul the said assignment on the ground that the
provided by Art. 1197, par. 2. Taiwanese group was not registered with the Board of
Investments. Will the action prosper or not? Explain briefly.
Conditional Obligations; Resolutory Condition (1999) (5%)
(Note: The question presupposes knowledge and requires the
In 1997, Manuel bound himself to sell Eva a house and lot
application of the provisions of the Omnibus Investment Code, which
which is being rented by another person, if Eva passes the
properly belongs to Commercial law)
1998 bar examinations. Luckily for Eva, she passed said SUGGESTED ANSWER:
examinations. The action will prosper not on the ground invoked but on the
(a) Suppose Manuel had sold the same house and lot to ground that the farmers have not given their consent to the
another before Eva passed the 1998 bar examinations, is assignment. The milling contract imposes reciprocal
such sale valid? Why? (2%) obligations on the parties. The sugar central has the obligation
(b) Assuming that it is Eva who is entitled to buy said house to mill the sugar cane of the farmers while the latter have the
and lot, is she entitled to the rentals collected by Manuel obligation to deliver their sugar cane to the sugar central. As
before she passed the 1998 bar examinations? Why? (3%) to the obligation to mill the sugar cane, the sugar central is a
debtor of the farmers. In assigning its rights under the
SUGGESTED ANSWER: contract, the sugar central will also transfer to the Taiwanese
(a) Yes, the sale to the other person is valid as a sale with a its obligation to mill the sugar cane of the farmers. This will
resolutory condition because what operates as a suspensive
amount to a novation of the contract by substituting the
condition for Eva operates a resolutory condition for the
debtor with a third party. Under Article 1293 of the Civil
buyer.
Code, such substitution cannot take effect without the
FIRST ALTERNATIVE ANS WER:
Yes, the sale to the other person is valid. However, the buyer consent of the creditor. The formers, who are creditors as far
acquired the property subject to a resolutory as the obligation to mill their sugar cane is
concerned, may annul such assignment for not having given Even [if] assuming that there was a perfect right of first
their consent thereto. refusal, compensation did not take place because the claim is
ALTERNATIVE ANSWER: unliquidated.
The assignment is valid because there is absolute freedom to
transfer the credit and the creditor need not get the consent Extinguishment; Compensation vs. Payment (1998)
of the debtor. He only needs to notify him. Define compensation as a mode of extinguishing an
obligation, and distinguish it from payment. [2%]
Extinguishment; Cause of Action (2004) SUGGESTED ANSWER:
TX filed a suit for ejectment against BD for non-payment of COMPENSATION is a mode of extinguishing to the
condominium rentals amounting to P150,000. During the concurrent amount, the obligations of those persons who in
pendency of the case, BD offered and TX accepted the full their own right are reciprocally debtors and creditors of each
amount due as rentals from BD, who then filed a motion to other (Tolentino, 1991 ed., p. 365, citing 2 Castan 560 and
dismiss the ejectment suit on the ground that the action is Francia vs. IAC. 162 SCRA 753). It involves the simultaneous
already extinguished. Is BD’s contention correct? Why or balancing of two obligations in order to extinguish them to
why not? Reason. (5%) the extent in which the amount of one is covered by that of
SUGGESTED ANSWER: the other. (De Leon, 1992 ed., p. 221, citing 8 Manresa 401).
BD's contention is not correct. TX can still maintain the suit
for ejectment. The acceptance by the lessor of the payment
by the lessee of the rentals in arrears even during the PAYMENT means not only delivery of money but also
pendency of the ejectment case does not constitute a waiver performance of an obligation (Article 1232, Civil Code). In
or abandonment of the ejectment case. (Spouses Clutario v. payment, capacity to dispose of the thing paid and capacity to
CA, 216 SCRA 341 [1992]). receive payment are required for debtor and creditor,
respectively: in compensation, such capacity is not necessary,
Extinguishment; Compensation (2002) because the compensation operates by law and not by the act
Stockton is a stockholder of Core Corp. He desires to sell his of the parties. In payment, the performance must be complete;
shares in Core Corp. In view of a court suit that Core Corp. while in compensation there may be partial extinguishment of
has filed against him for damages in the amount of P 10 an obligation (Tolentino, supra)
million, plus attorney’s fees of P 1 million, as a result of
statements published by Stockton which are allegedly Extinguishment; Compensation/Set-Off; Banks (1998)
defamatory because it was calculated to injure and damage the X, who has a savings deposit with Y Bank in the sum of
corporation’s reputation and goodwill. The articles of P1,000,000.00 incurs a loan obligation with the said Bank in
incorporation of Core Corp. provide for a right of first refusal the sum of P800.000.00 which has become due. When X tries
in favor of the corporation. Accordingly, Stockton gave to withdraw his deposit, Y Bank allows only P200.000.00 to
written notice to the corporation of his offer to sell his shares be withdrawn, less service charges, claiming that
of P 10 million. The response of Core corp. was an acceptance compensation has extinguished its obligation under the
of the offer in the exercise of its rights of first refusal, offering savings account to the concurrent amount of X's debt. X
for the purpose payment in form of compensation or set-off contends that compensation is improper when one of the
against the amount of damages it is claiming against him, debts, as here, arises from a contract of deposit. Assuming
exclusive of the claim for attorney’s fees. Stockton rejected the that the promissory note signed by X to evidence the loan
offer of the corporation, arguing that compensation between does not provide for compensation between said loan and his
the value of the shares and the amount of damages demanded savings deposit, who is correct? [3%]
by the corporation cannot legally take effect. Is Stockton SUGGESTED ANSWER:
correct? Give reason for your answer. (5%) Y bank is correct. An. 1287, Civil Code, does not apply. All
the requisites of Art. 1279, Civil Code are present. In the case
SUGGESTED ANSWERS: of Gullas vs. PNB [62 Phil. 519), the Supreme Court held:
Stockton is correct. There is no right of compensation "The Civil Code contains provisions regarding compensation
between his price of P10 million and Core Corp.’s (set off) and deposit. These portions of Philippine law
unliquidated claim for damages. In order that compensation provide that compensation shall take place when two persons
may be proper, the two debts must be liquidated and are reciprocally creditor and debtor of each other. In this
demandable. The case for the P 10million damages being still connection, it has been held that the relation existing between
pending in court, the corporation has as yet no claim which is a depositor and a bank is that of creditor and debtor, x x x As
due and demandable against Stockton. a general rule, a bank has a right of set off of the deposits in
ANOTHER MAIN ANSWER: its hands for the payment of any indebtedness to it on the part
The right of first refusal was not perfected as a right for the of a depositor." Hence, compensation took place between the
reason that there was a conditional acceptance equivalent to a mutual obligations of X and Y bank.
counter-offer consisting in the amount of damages as being
credited on the purchase price. Therefore, compensation did
not result since there was no valid right of first refusal (Art. Extinguishment; Condonation (2000)
1475 & 1319, NCC) Arturo borrowed P500,000.00 from his father. After he had
paid P300,000.00, his father died. When the administrator of
his father's estate requested payment of the balance of
P200,000.00. Arturo replied that the same had been
condoned by his father as evidenced by a notation at the The action will not prosper. The existence of inflation or
back of his check payment for the P300,000.00 reading: "In deflation requires an official declaration by the Bangko
full payment of the loan". Will this be a valid defense in an Sentral ng Pilipinas.
action for collection? (3%) ALTERNATIVE ANSWER:
SUGGESTED ANSWER: The unlawful detainer action will prosper. It is a given fact in
It depends. If the notation "in full payment of the loan" was the problem, that there was inflation, which caused the
written by Arturo's father, there was an implied condonation exchange rate to double. Since the contract itself authorizes
of the balance that discharges the obligation. In such case, the the increase in rental in the event of an inflation or
notation is an act of the father from which condonation may devaluation of the Philippine peso, the doubling of the
be inferred. The condonation being implied, it need not monthly rent is reasonable and is therefore a valid act under
comply with the formalities of a donation to be effective. The the very terms of the contract. Brian's refusal to pay is thus a
defense of full payment will, therefore, be valid. ground for ejectment.
Extinguishment; Loss (1994)

When, however, the notation was written by Arturo himself. Dino sued Ben for damages because the latter had failed to
It merely proves his intention in making that payment but in deliver the antique Marcedes Benz car Dino had purchased
no way does it bind his father (Yam v. CA, G.R No. 104726. 11 from Ben, which was—by agreement—due for delivery on
February 1999). In such case, the notation was not the act of December 31, 1993. Ben, in his answer to Dino's complaint,
his father from which condonation may be inferred. There said Dino's claim has no basis for the suit, because as the car
being no condonation at all the defense of full payment will was being driven to be delivered to Dino on January 1, 1994,
not be valid. a reckless truck driver had rammed into the Mercedes Benz.
ALTERNATIVE ANSWER: The trial court dismissed Dino's complaint, saying Ben's
If the notation was written by Arturo's father, it amounted to obligation had indeed, been extinguished by force majeure. Is
an express condonation of the balance which must comply the trial court correct?
with the formalities of a donation to be valid under the 2nd
paragraph of Article 1270 of the New Civil Code. Since the SUGGESTED ANSWER:
amount of the balance is more than 5,000 pesos, the a) No. Article 1262, New Civil Code provides, "An obligation
acceptance by Arturo of the condonation must also be in which consists in the delivery of a determinate thing shall be
writing under Article 748. There being no acceptance in extinguished if it should be lost or destroyed without the fault
writing by Arturo, the condonation is void and the obligation of the debtor, and before he has incurred in delay. b) The
to pay the balance subsists. The defense of full payment is, judgment of the trial court is incorrect. Loss of the thing due
therefore, not valid. In case the notation was not written by by fortuitous events or force majeure is a valid defense for a
Arturo's father, the answer is the same as the answers above. debtor only when the debtor has not incurred delay.
Extinguishment of liability for fortuitous event requires that
the debtor has not yet incurred any delay. In the present case,
Extinguishment; Extraordinary Inflation or Deflation (2001) the debtor was in delay when the car was destroyed on
On July 1, 1998, Brian leased an office space in a building for a January 1, 1993 since it was due for delivery on December 31,
period of five years at a rental rate of P1,000.00 a month. The 1993. (Art. 1262 Civil Code)
contract of lease contained the proviso that "in case of
inflation or devaluation of the Philippine peso, the monthly
rental will automatically be increased or decreased depending c) It depends whether or not Ben the seller, was already in
on the devaluation or inflation of the peso to the dollar." default at the time of the accident because a demand for him
Starting March 1, 2001, the lessor increased the rental to to deliver on due date was not complied with by him. That
P2,000 a month, on the ground of inflation proven by the fact fact not having been given in the problem, the trial court
that the exchange rate of the Philippine peso to the dollar had erred in dismissing Dino's complaint. Reason: There is
increased from P25.00=$1.00 to P50.00=$1.00. Brian refused default making him responsible for fortuitous events
to pay the increased rate and an action for unlawful detainer including the assumption of risk or loss.
was filed against him. Will the action prosper? Why? (5%)
If on the other hand Ben was not in default as no demand
SUGGESTED ANSWER: has been sent to him prior to the accident, then we must
The unlawful detainer action will not prosper. Extraordinary distinguish whether the price has been paid or not. If it has
inflation or deflation is defined as the sharp decrease in the been paid, the suit for damages should prosper but only to
purchasing power of the peso. It does not necessarily refer to enable the buyer to recover the price paid. It should be noted
the exchange rate of the peso to the dollar. Whether or not that Ben, the seller, must bear the loss on the principle of res
there exists an extraordinary inflation or deflation is for the perit domino. He cannot be held answerable for damages as the
courts to decide. There being no showing that the purchasing loss of the car was not imputable to his fault or fraud. In any
power of the peso had been reduced tremendously, there case, he can recover the value of the car from the party whose
could be no inflation that would justify the increase in the negligence caused the accident. If no price has been paid at
amount of rental to be paid. Hence, Brian could refuse to pay all, the trial court acted correctly in dismissing the complaint.
the increased rate.
ALTERNATIVE ANSWER:
Extinguishment; Loss; Impossible Service (1993)
Page 86 of 119
In 1971, Able Construction, Inc. entered into a contract has been extinguished by the novation or extinction of the
with Tropical Home Developers, Inc. whereby the former principal obligation insofar as third parties are concerned.
would build for the latter the houses within its subdivision.
The cost of each house, labor and materials included, was Extinguishment; Payment (1995)
P100,000.00. Four hundred units were to be constructed In 1983 PHILCREDIT extended loans to Rivett-Strom
within five years. In 1973, Able found that it could no longer Machineries, Inc. (RIVETTT-STROM), consisting of US$10
continue with the job due to the increase in the price of oil Million for the cost of machineries imported and directly paid
and its derivatives and the concomitant worldwide spiraling by PHTLCREDIT, and 5 Million in cash payable in
of prices of all commodities, including basic raw materials installments over a period of ten (10) years on the basis of the
required for the construction of the houses. The cost of value thereof computed at the rate of exchange of the U.S.
development had risen to unanticipated levels and to such a dollar vis-à-vis the Philippine peso at the time of payment.
degree that the conditions and factors which formed the
original basis of the contract had been totally changed. Able
brought suit against Tropical Homes praying that the Court RIVETT-STROM made payments on both loans which if
relieve it of its obligation. Is Able Construction entitled to the based on the rate of exchange in 1983 would have fully
relief sought? settled the loans.
SUGGESTED ANSWER:
Yes, the Able Construction. Inc. is entitled to the relief PHILCREDIT contends that the payments on both loans
sought under Article 1267, Civil Code. The law provides: should be based on the rate of exchange existing at the time
"When the service has become so difficult as to be manifestly of payment, which rate of exchange has been consistently
beyond the contemplation of the parties, the obligor may also increasing, and for which reason there would still be a
be released therefrom, in whole or in part." considerable balance on each loan. Is the contention of
PHILCREDIT correct? Discuss fully.
Extinguishment; Novation (1994) SUGGESTED ANSWER:
In 1978, Bobby borrowed Pl,000,000.00 from Chito payable As regards the loan consisting of dollars, the contention of
in two years. The loan, which was evidenced by a promissory PHILCREDIT is correct. It has to be paid in Philippine
note, was secured by a mortgage on real property. No action currency computed on the basis of the exchange rate at the
was filed by Chito to collect the loan or to foreclose the TIME OF PAYMENT of each installment, as held in Kalalo
mortgage. But in 1991, Bobby, without receiving any amount v. Luz, 34 SCRA 337. As regards the P5 Million loan in
from Chito, executed another promissory note which was Philippine pesos, PHILCREDIT is wrong. The payment
worded exactly as the 1978 promissory note, except for the thereof cannot be measured by the peso-dollar exchange rate.
date thereof, which was the date of its execution. 1) Can Chito That will be violative of the Uniform Currency Act (RA, 529]
demand payment on the 1991 promissory note in 1994? 2) which prohibits the payment of an obligation which, although
Can Chito foreclose the real estate mortgage if Bobby fails to to be paid in Philippine currency, is measured by a foreign
make good his obligation under the 1991 promissory note? currency. (Palanca v. CA, 238 SCRA 593).
Liability; Lease; Joint Liability (2001)

SUGGESTED ANSWER: Four foreign medical students rented the apartment of
1) Yes, Chito can demand payment on the 1991 promissory Thelma for a period of one year. After one semester, three of
note in 1994. Although the 1978 promissory note for P1 them returned to their home country and the fourth
million payable two years later or in 1980 became a natural transferred to a boarding house. Thelma discovered that they
obligation after the lapse of ten (10) years, such natural left unpaid telephone bills in the total amount of P80,000.00.
obligation can be a valid consideration of a novated The lease contract provided that the lessees shall pay for the
promissory note dated in 1991 and payable two years later, or telephone services in the leased premises. Thelma demanded
in 1993. All the elements of an implied real novation are that the fourth student pay the entire amount of the unpaid
present: a) an old valid obligation; b) a new valid obligation; telephone bills, but the latter is willing to pay only one fourth
c) capacity of the parties; d) animus novandi or intention to of it. Who is correct? Why? (5%)
novate; and e) The old and the new obligation should be SUGGESTED ANSWER:
incompatible with each other on all material points (Article The fourth student is correct. His liability is only joint, hence,
1292). The two promissory notes cannot stand together, pro rata. There is solidary liability only when the obligation
hence, the period of prescription of ten (10) years has not yet expressly so states or when the law or nature of the obligation
lapsed. requires solidarity (Art. 1207, CC). The contract of lease in
the problem does not, in any way, stipulate solidarity.
SUGGESTED ANSWER: Liability; Solidary Liability (1998)

2) No. The mortgage being an accessory contract prescribed with Joey, Jovy and Jojo are solidary debtors under a loan
the loan. The novation of the loan, however, did not expressly
include the mortgage, hence, the mortgage is extinguished under
obligation of P300,000.00 which has fallen due. The creditor
Article 1296 of the NCC. The contract has, however, condoned Jojo's entire share in the debt. Since
Jovy has become insolvent, the creditor makes a demand on
Joey to pay the debt.
1) How much, if any, may Joey be compelled to pay? promissory note as a result of the foreclosure of the chattel
[2%] 2) To what extent, if at all, can Jojo be compelled by mortgage.
Joey to contribute to such payment? [3%]
SUGGESTED ANSWER: (c) The third defense of Y is untenable. Y is a surety of X

1. Joey can be compelled to pay only the remaining balance and the extrajudicial demand against the principal debtor is
of P200.000, in view of the remission of Jojo's share by the not inconsistent with a judicial demand against the surety. A
creditor. (Art. 1219, Civil Code) suretyship may co-exist with a mortgage.
(d) The fourth defense of Y is untenable. Y is liable for the
2. Jojo can be compelled by Joey to contribute P50.000 Art. entire prestation since Y incurred a solidary obligation with
1217. par. 3, Civil Code provides. "When one of the solidary X.
debtors cannot, because of his insolvency, reimburse his (Arts. 1207, 1216. 1252 and 2047 Civil Code; Bicol Savings and Loan
share to the debtor paying the obligation, such share shall be Associates vs. Guinhawa 188 SCRA 642)
borne by all his co-debtors, in proportion to the debt of
each." Liability; Solidary Obligation; Mutual Guaranty (2003)
A,B,C,D, and E made themselves solidarity indebted to X
Since the insolvent debtor's share which Joey paid was for the amount of P50,000.00. When X demanded payment
P100,000, and there are only two remaining debtors - namely from A, the latter refused to pay on the following grounds. a)
Joey and Jojo - these two shall share equally the burden of B is only 16 years old. b) C has already been condoned by X
reimbursement. Jojo may thus be compelled by Joey to c) D is insolvent. d) E was given by X an extension of 6
contribute P50.000.00. months without
Liability; Solidary Obligation (1992) the consent of the other four co-debtors. State the effect of
In June 1988, X obtained a loan from A and executed with Y each of the above defenses put up by A on his obligation to
as solidary co-maker a promissory note in favor of A for the pay X, if such defenses are found to be true.
sum of P200,000.00. The loan was payable at P20,000.00 with
interest monthly within the first week of each month SUGGESTED ANSWERS:
(a) A may avail the minority of B as a defense, but only for
beginning July 1988 until maturity in April 1989. To secure the
B’s share of P 10,000.00. A solidary debtor may avail himself
payment of the loan. X put up as security a chattel mortgage
of any defense which personally belongs to a solidary
on his car, a Toyota Corolla sedan. Because of failure of X
co-debtor, but only as to the share of that codebtor.
and Y to pay the principal amount of the loan, the car was
extrajudicially foreclosed. A acquired the car at A's highest bid
of P120,000.00 during the auction sale.
(b) A may avail of the condonation by X of C’s share of P 10,
000.00. A solidary debtor may, in actions filed by the creditor,
After several fruitless letters of demand against X and Y, A avail himself of all defenses which are derived from the
sued Y alone for the recovery of P80.000.00 constituting the nature of the obligation and of those which are personal to
deficiency. Y resisted the suit raising the following defenses: him or pertain to his own share. With respect to those which
personally belong to others, he may avail himself thereof only
a) That Y should not be liable at all because X was not
sued together with Y. as regards that part of the debt for which the latter are
b) That the obligation has been paid completely by A's responsible. (Article 1222, NCC).
acquisition of the car through "dacion en pago" or payment
by cession. (c) A may not interpose the defense of insolvency of D as a
c) That Y should not be held liable for the deficiency defense. Applying the principle of mutual guaranty among
of P80,000.00 because he was not a co-mortgagor in the solidary debtors, A guaranteed the payment of D’s share and
chattel mortgage of the car which contract was executed by X of all the other co-debtors. Hence, A cannot avail of the
alone as owner and mortgagor. defense of D’s insolvency.
d) That assuming that Y is liable, he should only pay the
proportionate sum of P40,000.00. Decide each defense with (d) The extension of six (6) months given by X to E may be
reasons. availed of by A as a partial defense but only for the share of
SUGGESTED ANSWER: E, there is no novation of the obligation but only an act of
(a) This first defense of Y is untenable. Y is still liable as liberality granted to E alone.
solidary debtor. The creditor may proceed against any one of
the solidary debtors. The demand against one does not Loss of the thing due; Force Majeure (2000)
preclude further demand against the others so long as the Kristina brought her diamond ring to a jewelry shop for
debt is not fully paid. cleaning. The jewelry shop undertook to return the ring by
February 1, 1999." When the said date arrived, the jewelry
(b) The second defense of Y is untenable. Y is still liable. The shop informed Kristina that the Job was not yet finished.
chattel mortgage is only given as a security and not as They asked her to return five days later. On February 6, 1999,
payment for the debt in case of failure to pay. Y as a solidary Kristina went to the shop to claim the ring, but she was
co-maker is not relieved of further liability on the informed that the same was stolen by a thief who entered the
shop the night before. Kristina filed an action
for damages against the jewelry shop which put up the Bernie 50% of the total payments made. (Rillo v. Court of
defense of force majeure. Will the action prosper or not? Appeals, G.R. No. 125347, June 19,1997)
(5%)
SUGGESTED ANSWER:
The action will prosper. Since the defendant was already in Period; Suspensive Period (1991)
default not having delivered the ring when delivery was In a deed of sale of a realty, it was stipulated that the buyer
demanded by plaintiff at due date, the defendant is liable for would construct a commercial building on the lot while the
the loss of the thing and even when the loss was due to force seller would construct a private passageway bordering the lot.
majeure. The building was eventually finished but the seller failed to
complete the passageway as some of the squatters, who were
Non-Payment of Amortizations; Subdivision Buyer; When already known to be there at the time they entered into the
justified (2005) contract, refused to vacate the premises. In fact, prior to its
Bernie bought on installment a residential subdivision lot from execution, the seller filed ejectment cases against the
DEVLAND. After having faithfully paid the installments for squatters. The buyer now sues the seller for specific
48 months, Bernie discovered that DEVLAND had failed to performance with damages. The defense is that the obligation
develop the subdivision in accordance with the approved to construct the passageway should be with a period which,
plans and specifications within the time frame in the plan. He incidentally, had not been fixed by them, hence, the need for
thus wrote a letter to DEVLAND informing it that he was fixing a judicial period. Will the action for specific
stopping payment. Consequently, DEVLAND cancelled the performance of the buyer against the seller prosper?
sale and wrote Bernie, informing him that his payments are
forfeited in its favor. SUGGESTED ANSWER:
No. the action for specific performance filed by the buyer is
a) Was the action of DEVLAND proper? Explain. (2%) premature under Art. 1197 of the Civil Code. If a period has
not been fixed although contemplated by the parties, the
SUGGESTED ANSWER: parties themselves should fix that period, failing in which, the
No, the action of DEVLAND is not proper. Under Section 23 of Court maybe asked to fix it taking into consideration the
Presidential Decree No. 957, otherwise known as the Subdivision probable contemplation of the parties. Before the period is
and Condominium Buyer's Protection Decree, non-payment of fixed, an action for specific performance is premature.
amortizations by the buyer is justified if non-payment is due to ALTERNATIVE ANSWER:
the failure of the subdivision owner to develop the subdivision It has been held in Borromeo vs. CA (47 SCRA 69), that the
project according to the approved plans and within the limit for Supreme Court allowed the simultaneous filing of action to
complying. fix the probable contemplated period of the parties where
(Eugenio v. Drilon, G.R. No. 109404, January 22, 1996) none is fixed in the agreement if this would avoid multiplicity
of suits. In addition, technicalities must be subordinated to
b) Discuss the rights of Bernie under the circums- substantial justice.
tances. (2%) ALTERNATIVE ANSWER:
SUGGESTED ANSWER: The action for specific performance will not prosper. The
Under P.D. No. 957, a cancellation option is available to filing of the ejectment suit by the seller was precisely in
Bernie. If Bernie opts to cancel the contract, DEVLAND compliance with his obligations and should not, therefore, be
must reimburse Bernie the total amount paid and the faulted if no decision has yet been reached by the Court on
amortizations interest, excluding delinquency interest, plus the matter.
interest at legal rate. (Eugenio v. Drilon, G.R. No. 109404,
TRUST
January 22, 1996)
c) Supposing DEVLAND had fully developed the

subdivision but Bernie failed to pay further installments Express Trust; Prescription (1997)
after 4 years due to business reverses. Discuss the rights On 01 January 1980, Redentor and Remedies entered into an
and obligations of the parties. (2%) agreement by virtue of which the former was to register a
SUGGESTED ANSWER: parcel of land in the name of Remedies under the explicit
In this case, pursuant to Section 24 of P.D. No. 957, R.A. covenant to reconvey the land to Remigio, son of Redentor,
No. 6552 otherwise known as the Realty Installment Buyer upon the son's graduation from college. In 1981, the land
Protection Act, shall govern. Under Section 3 thereof, Bernie was registered in the name of Remedies.
is entitled: 1) to pay without additional interest the unpaid
installments due within a grace period of four (4) months or Redentor died a year later or in 1982. In March 1983, Remigio
one month for every year of installment paid; 2) if the graduated from college. In February 1992, Remigio
contract is cancelled, Bernie is entitled to the refund of the accidentally found a copy of the document so constituting
cash surrender value equal to 50% of the total payments Remedies as the trustee of the land. In May 1994, Remigio
made. filed a case against Remedies for the reconveyance of the land
to him. Remedies, in her answer, averred that the action
DEVLAND on the other hand has the right to cancel the already prescribed. How should the matter be decided?
contract after 30 days from receipt by Bernie of notice of
cancellation. DEVLAND is however obliged to refund to SUGGESTED ANSWER:

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Civil Law Q&As (2007-2013) hectorchristopher@yahoo.com dbaratbateladot@gmail.

on time. renders the arbitration contract void. (1%)

(B). Can XY Corp. unilaterrally and SUGGESTED ANSWER:

already completed, otherwise, XY Corp. amount of P100,000.00, to cover the twelve

would be unjustly enriching itself at the monthly installment payments. On the

expense of AB Corp. third, fourth and fifth months, the

The bank then declared the whole

compensation allowed by law. Is the bank Extinguishment; Compensation (2008)

(A). Can XYZ Bank validly assert legal

SUGGESTED ANSWER: ground that legal compensation had set in.

payment of rentals on the building on the extinguished by another, it is imperative

that it be so declared in unequivocal or creditors (Philippine Airlines v. CA

However, it is not necessary that the

A check, whether a manager’s check or his assignee is required to tender

and an offer of a check in payment of a (Heirs of Quisumbing v. PNB and SLDC,

and may be refused receipt by the oblige

creditor cannot be compelled to receive

Extinguishment; Payment of Check; from raising the issue that a cashier's

Legal Tender (2008) check is not legal tender.

Gustavo in 1998, when the Phil P - US$ Gustavo again? (2%)

exchange rate was P56 - US$1. On March

(B). Can Recardo's property be foreclosed to

Liability; Solidary Liability (2008)

No. XV. Eduardo was granted a loan by

No.V. What are obligations without an

"Obligations without an agreement" are unduly delivered through mistake (Art.

obligations that do not arise from 2154, NCC).

contract such as those arising from: 1.

ALTERNATIVE ANSWER: same from the former, unless it appears

that no one shall be unjustly enriched or accident or other causes a person is

2142, NCC) is treated or helped while he is not in a

Fifth instance of an obligation without ought not, in equity and good

A constructive trust is a trust NOT reconveyance of the property to him." 4.

expressly or impliedly, evincing a direct trustee, guardian or any person holding a

demands of justice. It does not come conveyance to be made to him or to

about by agreement or intention but third person, a trust is established by

or abuse of confidence, obtains or holds

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