D

Rojano, Queennie Compiled

D. KINDS OF CIVIL OBLIGATIONS:1. AS TO PERFECTION & EXTINGUISHMENT:

a. PURE(CHAPTER 3) Different Kinds of OBLIGATIONS

SECTION 1 - Pure and Conditional OBLIGATIONSArticle 1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once. Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event.Article 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the court may fix the duration thereof.

The court shall also fix the duration of the period when it depends upon the will of the debtor.

In every case, the court shall determine such period as may under the circumstances have been probably contemplated by the parties. Once fixed by the court, the period cannot be changed by them. A pure obligation is one which is not subject to a condition or a term and it is immediately demandable that there is nothing to exempt the debtor from compliance therewith. (Floriano vs. Delgado) What is a demand note? It is subject to neither a suspensive condition nor a suspensive period. The demand is not a condition precedent , since the effectivity and binding effect of the note does not depend upon the making of the demand: the note is binding even before the demand is made. Neither does the demand constitute an implied suspensive period since there is nothing to prevent the creditor from making a demand. Case: Hongkong and Shanghai Banking Corp., Ltd. Staff Retirement Plan vs. Spouses Bienvenido and Editha Broqueza, November 17, 2012, J. Carpio.Facts: Spouses Broqueza, as employees of HSBC and members of Petitioner HSBC-SRP (purposely for the benefit of the employees), obtained loans specifically, car and appliance loan which are to be paid through automatic salary deduction. The promissory note appears to have this period for which the employees can pay for the loan: on or before until fully paid Meanwhile, when a labor dispute arose between HSBC and its employees, majority of the employees of the former were terminated including herein respondent (with supposed co-respondent Gerong who was eventually withdrawn through a manifestation because she settled her OBLIGATIONS to the company). Because of such dismissal, herein respondents were not able to pay the monthly amortizations of their loans. Thus, the HSBC-SRP considered the accounts for respondents as delinquent. Demand to pay the obligation were made upon respondents but failed to pay the same. In a civil suit for recovery and collection of sum of money against respondents, MeTC ruled that the nature of HSBC-SRPs demands for payment is civil and has no connection to the labor dispute and that by reason of the respondents termination from employment, it resulted in the loss of continued benefits under the retirement plan. Thus, the loans secured by their future retirement benefits to which they are no longer entitled are reduced to unsecured and pure civil OBLIGATIONS. As unsecured and pure OBLIGATIONS, the loans are immediately demandable. RTC affirmed the MeTC. But CA reversed the same saying that HSBC-SRPs complaints for recovery of sum of money against respondents are premature as the loan OBLIGATIONS have not yet matured. Thus, no cause of action accrued in favor of HSBC-SRP. Hence, this appeal.Issue: Whether or not the interpretation of the subject promissory note is correctly classified by MeTC and RTC as being a pure obligation.Held: YES. In ruling for HSBCL-SRP, we apply the first paragraph of Article 1179 of the Civil Code:Aright 1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once. x x x. (Emphasis supplied.)

We affirm the findings of the MeTC and the RTC that there is no date of payment indicated in the Promissory Notes. The RTC is correct in ruling that since the Promissory Notes do not contain a period, HSBCL-SRP has the right to demand immediate payment. Article 1179 of the Civil Code applies. The spouses Broquezas obligation to pay HSBCL-SRP is a pure obligation. The fact that HSBCL-SRP was content with the prior monthly check-off from Editha Broquezas salary is of no moment. Once Editha Broqueza defaulted in her monthly payment, HSBCL-SRP made a demand to enforce a pure obligation.

In their Answer, the spouses Broqueza admitted that prior to Editha Broquezas dismissal from HSBC in December 1993, she "religiously paid the loan amortizations, which HSBC collected through payroll check-ofollowing:" A definite amount is paid to HSBCL-SRP on a specific date. Editha Broqueza authorized HSBCL-SRP to make deductions from her payroll until her loans are fully paid. Editha Broqueza, however, defaulted in her monthly loan payment due to her dismissal. Despite the spouses Broquezas protestations, the payroll deduction is merely a convenient mode of payment and not the sole source of payment for the loans. HSBCL-SRP never agreed that the loans will be paid only through salary deductions. Neither did HSBCL-SRP agree that if Editha Broqueza ceases to be an employee of HSBC, her obligation to pay the loans will be suspended. HSBCL-SRP can immediately demand payment of the loans at anytime because the obligation to pay has no period. Moreover, the spouses Broqueza have already incurred in default in paying the monthly installments.CASE: re Article 1179, par. 1Case: In the matter of the Intestate Estate of Justo Palanca, deceased, George Pay vs. Segundina Chua Vda. De Palanca, June 28, 1974, J. Fernando.Facts: George Pay as creditor of the late Justo Palanca (who died in Manila on July 3, 1963) claimed payment from the latter premised from a promissory note dated January 30, 1952, which has the following details: For value received from time to time since 1947, we jointly and severally promise to pay to Mr. George Pay at his office the sum of P26, 900 with 12% interest rate per annum upon receipt by either of the undersigned of cash payment from the Estate of the late Don Carlos Palanca and Justo Palanca or upon demand. Then came this paragraph: "The Court has inquired whether any cash payment has been received by either of the signers of this promissory note from the Estate of the late Carlos Palanca. Petitioner informed that he does not insist on this provision but that petitioner is only claiming on his right under the promissory note." After which, came the ruling that the wording of the promissory note being "upon demand," the obligation was immediately due. Since it was dated January 30, 1952, it was clear that more "than ten (10) years has already transpired from that time until to date. The action, therefore, of the creditor has definitely prescribed." The result, as above noted, was the dismissal of the petition.Issue: Whether or not Pays claim against the estate of the deceased through the promissory note has already prescribed.Held: YES. The obligation being due and demandable, it would appear that the filing of the suit after fifteen years was much too late. For again, according to the Civil Code, which is based on Section 43 of Act No. 190, the prescriptive period for a written contract is that of ten years. From the manner in which the promissory note was executed, it would appear that petitioner was hopeful that the satisfaction of his credit could he realized either through the debtor sued receiving cash payment from the estate of the late Carlos Palanca presumptively as one of the heirs, or, as expressed therein, "upon demand." There is nothing in the record that would indicate whether or not the first alternative was fulfilled. What is undeniable is that on August 26, 1967, more than fifteen years after the execution of the promissory note on January 30, 1952, this petition was filed. The defense interposed was prescription. Its merit is rather obvious. Article 1179 of the Civil Code provides: "Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once." This used to be Article 1113 of the Spanish Civil Code of 1889.Q: Does the happening of a condition give rise to the OBLIGATION?

A: Not necessarily, only if suspensive condition; if resolutory condition, the happening extinguishes the OBLIGATION;

Q: In an OBLIGATION with a TERM will the answer above be the same?

A: Yes.b. CONDITIONALArticle 1181. 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. Article 1182. When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. If it depends upon chance or upon the will of a third person, the obligation shall take effect in conformity with the provisions of this Code. Balane: We are talking here of a suspensive condition.

First sentence of Article 1182.

The condition must be suspensive, potestative & depends on the sole will of the debtor. EXAMPLE: "I promise to sell you my car for P1.00 whenever I like."

Q: Why does it make the obligation void? A: Because such an obligation lacks one of the essential elements of an obligation, the vinculum juris, the binding force- the means by which it is enforceable in couright In this case, there is no binding force. There is no obligation. It is a joke.

Potestative Condition is one which depends solely on the will of either one party.

EXAMPLE: "I will give you my plantation in Davao provided you reside in Davao permanently."

Casual Condition is one where the condition is made to depend upon a third person or upon chance.

EXAMPLE: "I will give you my land in Floridablanca if Mt. Pinatubo erupts this year."

Mixed Condition is one which depends partly upon the will of one of the parties & partly on either chance or the will of a third person.

Q: What if the condition is suspensive, potestative & depends solely on the will of the creditor, is the conditional obligation valid? A: Yes. In fact, the obligation is not even a condition obligation. It is a pure obligation, binding at once. CASE: the term which parties attempted to fix were so uncertain it must be regarded as conditionCase: Smith Bell & Co., Ltd. vs. Vicente Sotelo Matti, March 9, 1922, J/ Romualdez.Facts: In August 1918, plaintiff corporation and defendant entered into contracts whereby the former obligated itself to sell and the latter to purchase from it the following which accordingly delivered with dates below:

Items/ProductsPricesDelivery date under the promissory noteActual date of delivery

2 steel tanksP21,000to be shipped from New York to Manila within 3 or 4 monthsApril 27, 1919

2 expellersP25,000/eachto be shipped from San Francisco in the month of September, 1918 or as soon as possibleOctober 26, 1918

2 electric motorsP2,000/eachApproximate delivery within 90 daysThis is not guaranteedFebruary 27, 1919

In all these contracts, there is a final clause as follows:

The sellers are not responsible for delays caused by fires, riots on land or on the sea, strikes or other causes known as "Force Majeure" entirely beyond the control of the sellers or their representatives.Smith Bell notified Mr. Sotelo of the arrival of these goods but the latter refused to receive and pay the pay prices stipulated. The plaintiff brought suit against the defendant, based on four separate causes of action, alleging, among other facts, that it immediately notified the defendant of the arrival of the goods, and asked instructions from him as to the delivery thereof, and that the defendant refused to receive any of them and to pay their price. The case having been tried, the court below absolved the defendants from the complaint insofar as the tanks and the electric motors were concerned, but rendered judgment against them, ordering them to "receive the aforesaid expellers and pay the plaintiff the sum of fifty thousand pesos (P50,00), the price of the said goods, with legal interest thereon from July 26, 1919, and costs." Both parties appeal from this judgment.

Issue: Whether or not under the contract being entered into by the parties, the plaintiff corporation is held in delay by reason of the period stipulated in the contract.Held: NO. Under these stipulations, it cannot be said that any definite date was fixed for the delivery of the goods. As to the tanks, the agreement was that the delivery was to be made "within 3 or 4 months," but that period was subject to the contingencies referred to in a subsequent clause. With regard to the expellers, the contract says "within the month of September, 1918," but to this is added "or as soon as possible." And with reference to the motors, the contract contains this expression, "Approximate delivery within ninety days," but right after this, it is noted that "this is not guaranteed." The oral evidence falls short of fixing such period. From the record it appears that these contracts were executed at the time of the world war when there existed rigid restrictions on the export from the United States of articles like the machinery in question, and maritime, as well as railroad, transportation was difficult, which fact was known to the parties; hence clauses were inserted in the contracts, regarding "Government regulations, railroad embargoes, lack of vessel space, the exigencies of the requirements of the United States Government," in connection with the tanks and "Priority Certificate, subject to the United State Government requirements," with respect to the motors. At the time of the execution of the contracts, the parties were not unmindful of the contingency of the United States Government not allowing the export of the goods, nor of the fact that the other foreseen circumstances therein stated might prevent it. Considering these contracts in the light of the civil law, we cannot but conclude that the term which the parties attempted to fix is so uncertain that one cannot tell just whether, as a matter of fact, those articles could be brought to Manila or not. If that is the case, as we think it is, the OBLIGATIONS must be regarded as conditional. OBLIGATIONS for the performance of which a day certain has been fixed shall be demandable only when the day arrives.

A day certain is understood to be one which must necessarily arrive, even though its date be unknown. If the uncertainty should consist in the arrival or non-arrival of the day, the obligation is conditional and shall be governed by the rules of the next preceding section. (referring to pure and conditional OBLIGATIONS). (Aright 1125, Civ. Code.) And as the export of the machinery in question was, as stated in the contract, contingent upon the sellers obtaining certificate of priority and permission of the United States Government, subject to the rules and regulations, as well as to railroad embargoes, then the delivery was subject to a condition the fulfillment of which depended not only upon the effort of the herein plaintiff, but upon the will of third persons who could in no way be compelled to fulfill the condition. In cases like this, which are not expressly provided for, but impliedly covered, by the Civil Code, the obligor will be deemed to have sufficiently performed his part of the obligation, if he has done all that was in his power, even if the condition has not been fulfilled in reality.Article 1183. Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid.

The condition not to do an impossible thing shall be considered as not having been agreed upon. Balane: This refers to a suspensive condition.There are 2 classes of impossible conditions: 1. Impossible in factEXAMPLE: "I promise to sell my car to Mr. M for P2 if he can swim across the Pacific Ocean for 2 hours."

2. Impossible in law or one which attaches an illegal condition

EXAMPLE: "I promise to sell my car to Mr. M for P2 on condition that he burns the College of Law."

Effect of Impossible Condition It annuls the obligation which depends upon them.

The entire juridical tie is tainted by the impossible condition. Correlate this with Articles 727 & 873.Article 727. Illegal or impossible conditions in simple & remuneratory donations shall be considered as not imposed.

Article 873. Impossible conditions & those contrary to law or good customs shall be considered as not imposed & shall in no manner prejudice the heir, even if the testator should otherwise provide. Tolentino: In contracts, an impossible condition annuls the contract.

In gratuitous dispositions, the impossible condition is simply disregarded. Balane: The first statement is inaccurate because donation is a contract & in a donation, the impossible condition does not annul the contract. It is simply disregarded. The proper way to say it is that: In an onerous transaction, an impossible condition annuls the condition obligation.

In a gratuitous disposition, as in a donation or testamentary disposition, an impossible condition attached to the disposition is simply considered as not imposed.Q: Why is there a difference?A: Because in a donation as well as in a testamentary disposition, the causa or consideration is the liberality of the donor or testator, as the case may be. Even if you take away the impossible condition, there is still a reason for the disposition to exist- liberality. They (donation & testamentary disposition) have both their underpinnings, liberality. But in an onerous transaction, since an onerous prestation which is reciprocal requires concomitant performances, that impossible condition becomes part of the causa. Therefore, if the condition is impossible, there is failure of causa. In no causa, there is also no contract.Paras:

Positive suspensive condition to do an impossible/ illegal thing The obligation is void (Article 1183, par. 1.) A negative condition (not to do an impossible thing) Just disregard the condition (Article 1183, par. 2.) A condition not to do an illegal thing (negative) This is not expressly provided for in the provision but is implied. The obligation is valid.

EXAMPLE: "I will sell you a piece of land provided you do not plant marijuana on it."Article 1184. The condition that some event happen at a determinate time shall extinguish the obligation as soon as the time expires or if it has become indubitable that the event will not take place. Balane: This article refers to suspensive conditions. If the condition is resolutory, the effect is the opposite.Article 1185. The condition that some event will not happen at a determinate time shall render the obligation effective from the moment the time indicated has elapsed, or if it has become evident that the event cannot occur.

If no time has been fixed, the condition shall be deemed fulfilled at such time as may have probably been contemplated, bearing in mind the nature of the obligation. Balane: This article refers to a suspensive condition.Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.Balane: This article refers to a suspensive condition. Doctrine of Constructive Compliance There are three requisites in order that this article may apply:1. Intent on the part of the obligor to prevent fulfillment of the condition. The intent does not have to be malicious.

2. Actual prevention of compliance (by the obligor)

3. Constructive compliance can have application only if the condition is potestative. It can also apply to mixed condition as to that part which the obligor should perform.Kinds of Conditional OBLIGATIONS:a. Suspensive Condition (Condition precedent) Article 1187. The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. Nevertheless, when the obligation imposes reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. If the obligation is unilateral, the debtor shall appropriate the fruits and interests received, unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different.

In OBLIGATIONS to do and not to do, the court shall determine, in each case, the retroactive effect of the condition that has been complied with. Balane:

This article refers to suspensive condition. This article sets forth the rule of retroactivity in an obligation to give. This rule is logical but impractical. Many modern Civil Codes have discarded it.

No Retroactivity as to the Fruits Notice that there is no retroactivity with respect to the fruits. The fruits are deemed to cancel out each other. If only one of the thing produces fruits, there is no obligation to deliver the fruits.Article 1188. The creditor may, before the fulfillment of the condition, bring the appropriate actions for the preservation of his right.

The debtor may recover what during the same time he has paid by mistake in case of a suspensive condition.Balane: This article refers to suspensive conditions.

Bring the appropriate actions According to JBL Reyes, the phrase "may xxx bring the appropriate actions" is inaccurate. To bring action is to file a suit. But the creditor is not restricted to filing a suit.

The proper verb is not "bring" but "take." For example, in a sale of land subject to suspensive condition, the creditor should have the suspensive condition annotated on the title of the land. This is not bringing an appropriate action but taking an appropriate action.

The principle in this article is: Vigilantibus et non dormientibus jura subveniunt which means that the laws aid those who are vigilant, not those who sleep upon their rights.Q: Why does Article 1188 give the creditor a recourse although technically the creditor still have no right?A: Because as a matter of fact, although technically the creditor still have no right, he is already expecting a right. You cannot let the creditor sit & fold his arms & wait for his right of expectancy to be rendered illusory.Article 1189. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing during the pendency of the condition:

(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;

(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered;

(3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;

(4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case;

(5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor;

(6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary. (1122) (b) Resolutory Condition (Condition subsequent)Balane: Article 1190 refers to resolutory conditions. This is just the opposite of Article 1189.Article 1190. When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall return to each other what they have received.

In case of the loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article shall be applied to the party who is bound to return.

As for the OBLIGATIONS to do and not to do, the provisions of the second paragraph of article 1187 shall be observed as regards the effect of the extinguishment of the obligation. Balane: A condition is a future & uncertain event upon which an obligation or provision is made to depend.

Tolentino: Futurity & uncertainty must concur as characteristics of the event.

A past thing can never be a condition. A condition is always future & uncertain.Past event unknown to the parties It is really the knowledge of the event which constitutes the future. It is the knowledge which is future & uncertain.

EXAMPLE: "I will treat you for lunch if you get the highest score in the Civil Law Final Exams (on the assumption that Prof. Balane has already finished checking the papers.)" Here, the event (getting the highest score) is already a past event, yet the knowledge is future & uncertain.

Condition compared to a term

ConditionTerm

As to element of futuritySame, may be past event unknown to partiesSame, always future

in the aspect of certaintyuncertaincertain

Conditions can either be:1. Suspensive condition (condition precedent) wherein the happening of the event gives birth to an obligation2. Resolutory condition (condition subsequent) wherein the happening of the event will extinguish the obligation. c. WITH A TERM OR PERIOD:Article 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of article 1197.Balane: A term is a future and certain event upon which the demandability (or extinguishment) of an obligation depends.

Tolentino: Period must be (1) future (2) certain and (3) possible.A term can either be:1. Suspensive term (ex die- from the day) or one the arrival of which will make the obligation demandable;2. Resolutory term (in die- into the day) or one the arrival of which will extinguish the obligation. The period after which the performance must terminate.Terms classified according to source;1. Legal, period fixed by law2. voluntary, stipulated by parties3. judicial, fixed/allowed by court

May also be, (a) express, specified

(b) tacit, e.g. stipulated to do some work which may only be done at a particular season.Or,

1. Original period

2. Grace period, extension fixed by partiesOr

a. definite, fixed known date or time,

b. indefinite, event will happen but not known when

Effect of Period: OBLIGATION with term are demandable only when day fixed for performance arrive; right of action arises only when date fixed arrives;

\Article 1193. OBLIGATIONS for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes.

OBLIGATIONS with a resolutory period take effect at once, but terminate upon arrival of the day certain.

A day certain is understood to be that which must necessarily come, although it may not be known when.

If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated by the rules of the preceding Section. MANRESA: A term or period is an interval of time, which, exerting an influence on an obligation as a consequence of a juridical act, either suspends its demandability or produces its extinguishment. Distinguished from Condition:CONDITIONTERM / PERIOD

As to fulfillment uncertain eventan event that must necessarily come, whether on a date known before hand or at a time which cannot be predetermined

As to influence on the obligation a condition gives rise to an obligation or extinguishes one already existinghas no effect upon the existence of OBLIGATIONS, but only their demandability or performance

EffectMay have retroactive effectNO retroactive effect, except when there is a special agreement

As to timemay refer to a past event unknown to the partiesalways refer to the future

As to will of debtora condition which depends exclusively on the will of the debtor annuls the obligationa period left to the debtor's will merely empowers the court to fix such period

Balane: In a (suspensive) term, the obligation has already arisen except that it is not yet demandable.Article 1194. In case of loss, deterioration or improvement of the thing before the arrival of the day certain, the rules in article 1189 shall be observed. Balane: There are three requisites in order for Article 1189 to apply--1. There is loss, deterioration or delay

2. There is an obligation to deliver a determinate thing (on the part of the debtor)

3. There is loss, deterioration or improvement before the happening of the condition.

4. The condition happens.Article 1195. Anything paid or delivered before the arrival of the period, the obligor being unaware of the period or believing that the obligation has become due and demandable, may be recovered, with the fruits and interests. Article 1195 applies only in OBLIGATION to give;

Balane:

Mistaken Premature Delivery This article assumes 2 things: (1) the delivery was by mistake;

(2) the mistake was discovered before the term arrives. Both the things & the fruits can be recovered.

If the term has already arrived, the question is moot & academic. But can he recover the fruits produced during the meantime? It depends on what school of thought you follow:Tolentino: According to one school of thought, the debtor is entitled to the fruits produced in the meantime. Caguioa: According to another school of thought, all the fruits received during the pendency of the term belong to the creditor.

When fruits & interests cannot be recovered notwithstanding premature delivery:1. When the obligation is reciprocal & there has been premature performance (by both parties);

2. When the obligation is a loan in which the debtor is bound to pay interest;

3. When the period is for the creditor's exclusive benefit;

4. When the debtor is aware of the period & pays anyway. (Knowledge, tacit waiver of benefit of term)2. Presumed for whose benefit: BOTHArticle 1196. Whenever in an obligation a period is designated, it is presumed to have been established for the benefit of both the creditor and the debtor, unless from the tenor of the same or other circumstances it should appear that the period has been established in favor of one or of the other. Balane:

General rule: If a period is attached in an obligation, the presumption is that it is for the benefit of both parties.

The consequence is that the creditor cannot compel the performance before the arrival of the term; the debtor cannot compel acceptance before the arrival of the term.

If the term is for the benefit of the creditor The creditor can demand performance anytime; but the debtor cannot insist on payment before the period.

If the term is for the benefit of the debtor The creditor cannot demand performance anytime; but the debtor can insist on performance anytime.

EXAMPLE:

"I promise to pay within 60 days." This is a term for the benefit of the debtor.

"I promise to pay Clara the sum of P100, 000 on or before Oct. 31, 1996." This is a term for the benefit of the debtor.-In contract of Loan, without interest, term is usually for benefit of debtor, thus he may pay in advance;

-If there is stipulation as to interest, period is generally for both parties, debtor cannot pay in advance vs. will of creditor; unless he also pays interest in full.

3. When NO period is fixedBalane: Cases where the Court may fix a period 1. Article 1197, par. 1Article 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the court may fix the duration thereof.

The court shall also fix the duration of the period when it depends upon the will of the debtor.

In every case, the court shall determine such period as may under the circumstances have been probably contemplated by the parties. Once fixed by the court, the period cannot be changed by them. Exceptions: Article 1682. The lease of a piece of rural land, when its duration has not been fixed, is understood to have been made for all the time necessary for the gathering of the fruits which the whole estate leased may yield in one year, or which it may yield once, although two or more years may have to elapse for the purpose.

Article 1687. If the period for the lease has not been fixed, it is understood to be from year to year, if the rent agreed upon is annual; from month to month, if it is monthly; from week to week, if the rent is weekly; & from day to day, if the rent is to be paid daily. xxx

Article 1606 in pacto de retro sale where the period is not specified by the partiesArticle 1606. The right referred to in article 1601 (the right of conventional redemption on the part of the vendor a retro), in the absence of an express agreement, shall last four years from the date of the contract.

XXX

contract of services for an indefinite term (because fixing of a period by the court may amount to involuntary servitude)

Article 1197. Xxx The court shall also fix the duration of the period when it depends upon the will of the debtor.

Article 1191. Xxx the court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

Article 1687. xxx However, even though a monthly rent is paid, & no period for the lease has been set, the court may fix a longer term for the lease after the lessee has occupied the premises for over one year. If the rent is weekly, the court may likewise determine a longer period after the lessee has been in possession for over six months. In case of daily rent, the court may also fix a longer period after the lessee has stayed in the place for over one month.

Article 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of article 1197.CASE: Where obligation does not fix a period; When fixing a period is mere formality Case: Chavez vs. Gonzales, 32 SCRA 547.Facts: In the early part of July 1963, Rosendo Chavez delivered to Fructuoso Gonzales, who is a typewriter repairer, a portable typewriter for routine cleaning and servicing. Gonzales was not able to finish job after some time despite repeated reminder. Gonzales merely gave assurances but failed to comply with the same. In October 1963, Gonzales asked from Chavez the sum of P6.00 for the purchase of spare parts which amount was duly given to the former. On October 26, 1963, Chavez asked for the return of the typewriter. Gonzales just delivered it in a wrapped package. And it was only upon reaching home that Chavez found out that the typewriter was in shambles, with the interior cover and some parts and screws missing. On October 29, 1963, Chavez demanded the return of the missing parts and the P6.00 which was heeded to. Thereafter, Chavez had the typewriter repaired for P89.85. Chavez sued for damages. Issue: Whether or not Gonzales is liable for damages for the subsequent repair of the typewriter of Chavez.Held: YES. The SC found that both Chavez and Gonzales had a perfected contract for cleaning and servicing of typewriter intending for Gonzales to finish the work at some future time although such time was not specified and that such time had passed without the work having been accomplished, for Gonzales returned the typewriter cannibalized and unrepaired, which in itself is a breach of obligation, without demanding that he should be given more time to finish the job or compensation for the work he had already done. The time for compliance having evidently expired and there being a breach of contract by non-compliance, Gonzales cannot invoke Article 1197 for he admitted non-performance by returning the typewriter that he was obliged to repair. The fixing of a period would thus be a mere formality and would serve no purpose than to delay. For such, Gonzales is liable under Article 1167 for the cost of the execution of the obligation in a proper manner. Case: Vicente Singson Encarnacion vs. Jacinta Baldomar, Oct. 4, 1946, J. Hilado.Facts: Vicente Singson Encarnacion, owner of the house numbered 589 Legarda Street, Manila, some six years ago leased said house to Jacinto Baldomar and her son, Lefrado Fernando, upon a month-to-month basis for the monthly rental of P35. After Manila was liberated in the last war, specifically on March 16, 1945, and on April 7, of the same year, plaintiff Singson Encarnacion notified defendants, the said mother and son, to vacate the house above-mentioned on or before April 15, 1945, because plaintiff needed it for his offices as a result of the destruction of the building where said plaintiff had said offices before. Despite this demand, defendants insisted on continuing their occupancy. When the original action was lodged with the Municipal Court of Manila on April 20, 1945, defendants were in arrears in the payment of the rental corresponding to said month, the agrees rental being payable within the first five days of each month. That rental was paid prior to the hearing of the case in the municipal court, as a consequence of which said court entered judgment for restitution and payment of rentals at the rate of P35 a month from May 1, 1945, until defendants completely vacate the premises. In the Court of First Instance, the defendants interposed defense that the contract which they had celebrated with plaintiff since the beginning authorized them to continue occupying the house indefinitely and while they should faithfully fulfill their OBLIGATIONS as respects the payment of the rentals. However, Vicente Singson Encarnacion, jr., contended that the lease had always and since the beginning been upon a month-to-month basis. The Court of First Instance gave more credence to the lessor.Issue: Whether the contract can be interpreted as a month-to-month basis thereby giving more credence to the effect that herein lessor can eject lessee at anytime possible.Held: YES. We think that the Court of First Instance was right in so declaring. Furthermore, carried to its logical conclusion, the defense thus set up by defendant Lefrado Fernando would leave to the sole and exclusive will of one of the contracting parties (defendants in this case) the validity and fulfillment of the contract of lease, within the meaning of article 1256 of the Civil Code, since the continuance and fulfillment of the contract would then depend solely and exclusively upon their free and uncontrolled choice between continuing paying the rentals or not, completely depriving the owner of all say in the matter. If this defense were to be allowed, so long as defendants elected to continue the lease by continuing the payment of the rentals, the owner would never be able to discontinue it; conversely, although the owner should desire the lease to continue, the lessees could effectively thwart his purpose if they should prefer to terminate the contract by the simple expedient of stopping payment of the rentals. This, of course, is prohibited by the aforesaid article of the Civil Code. (8 Manresa, 3d ed., pp. 626, 627; Cuyugan vs. Santos, 34 Phil., 100.)Case: Dario and Gaudencio Eleizegui vs. Manila Lawn Tennis Club, May 19, 1903, J. Arellano.Facts: This suit concerns the lease of a piece of land for a fixed consideration and to endure at the will of the lessee. By the contract of lease the lessee is expressly authorized to make improvements upon the land, by erecting buildings of both permanent and temporary character, by making fills, laying pipes, and making such other improvements as might be considered desirable for the comfort and amusement of the members. "The court is of the opinion that the contract of lease was terminated by the notice given by the plaintiff on August 28 of last year . . . ." And such is the theory maintained by the plaintiffs, which expressly rests upon article 1581 of the Civil Code, the law which was in force at the time the contract was entered into (January 25, 1890). The judge, in giving to this notice the effect of terminating the lease, undoubtedly considers that it is governed by the article relied upon by the plaintiffs, which is of the following tenor: "When the term has not been fixed for the lease, it is understood to be for years when an annual rental has been fixed, for months when the rent is monthly. . . ." The second clause of the contract provides as follows: "The rent of the said land is fixed at 25 pesos per month." (P. 11, Bill of Exceptions.)

In accordance with such a theory, the plaintiffs might have terminated the lease the month following the making of the contract at any time after the first month, which, strictly speaking, would be the only month with respect to which they were expressly bound, they not being bound for each successive month except by a tacit renewal (aright 1566) an effect which they might prevent by giving the required notice. The OBLIGATIONS which, with the force of law, the lessors assumed by the contract entered into, so far as pertaining to the issues, are the following: "First. . . . They lease the above-described land to Mr. Williamson, who takes it on lease, . . . for all the time the members of the said club may desire to use it . . . Third. . . . the owners of the land undertake to maintain the club as tenant as long as the latter shall see fit, without altering in the slightest degree the conditions of this contract, even though the estate be sold."

It is evident that they had no intention of stipulating that they reserved the right to give such notice. Clause 3 begins as follows: "Mr. Williamson, or whoever may succeed him as secretary of said club, may terminate this lease whenever desired without other formality than that of giving a month's notice. The owners of the land undertake to maintain the club as tenant as long as the latter shall see fit."

Although the relief asked for in the complaint, drawn in accordance with the new form of procedure established by the prevailing Code, is the restitution of the land to the plaintiffs (a formula common to various actions), nevertheless the action which is maintained can be no other than that of desahucio, in accordance with the substantive law governing the contract. The lessor says article 1569 of the Civil Code may judicially dispossess the lessee upon the expiration of the conventional term or of the legal term; the conventional term that is, the one agreed upon by the parties; the legal term, in defect of the conventional, fixed for leases by articles 1577 and 1581.Issue: Whether or not the duration of the term of lease can be fixed by the courightHeld: The Civil Code has made provision for such a case in all kinds of OBLIGATIONS. In speaking in general of OBLIGATIONS with a term it has supplied the deficiency of the former law with respect to the "duration of the term when it has been left to the will of the debtor," and provides that in this case the term shall be fixed by the court. (Aright 1128, sec. 2.) In every contract, as laid down by the authorities, there is always a creditor who is entitled to demand the performance, and a debtor upon whom rests the obligation to perform the undertaking. In bilateral contracts the contracting parties are mutually creditors and debtors. Thus, in this contract of lease, the lessee is the creditor with respect to the rights enumerated in article 1554, and is the debtor with respect to the OBLIGATIONS imposed by articles 1555 and 1561. The term within which performance of the latter obligation is due is what has been left to the will of the debtor. This term it is which must be fixed by the court.Case: Philippine Banking Corporation representing the estate of Justina Santos Y Canon Faustino, deceased vs. Lui She in her own behalf and as administratrix of the intestate estate of Wong Heng, deceased., 21 SCRA 53.Facts: Justina Santos y Canon Faustino and her sister Lorenzo were the owners in common of a piece of land in Manila. This parcel, with an area of 2,582.30 square meters, is located on Rizal Avenue and opens into Florentino Torres street at the back and Katubusan street on one side. In it are two residential houses with entrance on Florentino Torres street and the Hen Wah Restaurant with entrance on Rizal Avenue. The sisters lived in one of the houses, while Wong Heng, a Chinese, lived with his family in the restaurant. Wong had been a long-time lessee of a portion of the property, paying a monthly rental of P2,620.

On September 22, 1957 Justina Santos became the owner of the entire property as her sister died with no other heir. Then already well advanced in years, being at the time 90 years old, blind, crippled and an invalid, she was left with no other relative to live with. Her only companions in the house were her 17 dogs and 8 maids. Her otherwise dreary existence was brightened now and then by the visits of Wong's four children who had become the joy of her life. Wong himself was the trusted man to whom she delivered various amounts for safekeeping, including rentals from her property at the corner of Ongpin and Salazar streets and the rentals which Wong himself paid as lessee of a part of the Rizal Avenue property. Wong also took care of the payment; in her behalf, of taxes, lawyers' fees, funeral expenses, masses, salaries of maids and security guard, and her household expenses.

"In grateful acknowledgment of the personal services of the lessee to her," Justina Santos executed on November 15, 1957 a contract of lease (Plff Exh. 3) in favor of Wong, covering the portion then already leased to him and another portion fronting Florentino Torres street. The lease was for 50 years, although the lessee was given the right to withdraw at any time from the agreement; the monthly rental was P3,120. The contract covered an area of 1,124 square meters. Ten days later (November 25), the contract was amended (Plff Exh. 4) so as to make it cover the entire property, including the portion on which the house of Justina Santos stood, at an additional monthly rental of P360. For his part Wong undertook to pay, out of the rental due from him, an amount not exceeding P1,000 a month for the food of her dogs and the salaries of her maids.

On December 21 she executed another contract (Plff Exh. 7) giving Wong the option to buy the leased premises for P120,000, payable within ten years at a monthly installment of P1,000. The option, written in Tagalog, imposed on him the obligation to pay for the food of the dogs and the salaries of the maids in her household, the charge not to exceed P1,800 a month. The option was conditioned on his obtaining Philippine citizenship, a petition for which was then pending in the Court of First Instance of Rizal. It appears, however, that this application for naturalization was withdrawn when it was discovered that he was not a resident of Rizal. On October 28, 1958 she filed a petition to adopt him and his children on the erroneous belief that adoption would confer on them Philippine citizenship. The error was discovered and the proceedings were abandoned.

On November 18, 1958 she executed two other contracts, one (Plff Exh. 5) extending the term of the lease to 99 years, and another (Plff Exh. 6) fixing the term of the option of 50 years.

In two wills executed on August 24 and 29, 1959 (Def Exhs. 285 & 279), she bade her legatees to respect the contracts she had entered into with Wong, but in a codicil (Plff Exh. 17) of a later date (November 4, 1959) she appears to have a change of hearight Claiming that the various contracts were made by her because of machinations and inducements practiced by him, she now directed her executor to secure the annulment of the contracts.

On November 18 the present action was filed in the Court of First Instance of Manila. The complaint alleged that the contracts were obtained by Wong "through fraud, misrepresentation, inequitable conduct, undue influence and abuse of confidence and trust of and (by) taking advantage of the helplessness of the plaintiff and were made to circumvent the constitutional provision prohibiting aliens from acquiring lands in the Philippines and also of the Philippine Naturalization Laws."

From this judgment both parties appealed directly to this Couright After the case was submitted for decision, both parties died, Wong Heng on October 21, 1962 and Justina Santos on December 28, 1964. Wong was substituted by his wife, Lui She, the other defendant in this case, while Justina Santos was substituted by the Philippine Banking Corporation.

Justina Santos maintained now reiterated by the Philippine Banking Corporation that the lease contract (Plff Exh. 3) should have been annulled along with the four other contracts (Plff Exhs. 4-7) because it lacks mutuality; because it included a portion which, at the time, was in custodia legis; because the contract was obtained in violation of the fiduciary relations of the parties; because her consent was obtained through undue influence, fraud and misrepresentation; and because the lease contract, like the rest of the contracts, is absolutely simulated.

Paragraph 5 of the lease contract states that "The lessee may at any time withdraw from this agreement." It is claimed that this stipulation offends article 1308 of the Civil Code which provides that "the contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them." Issue: Whether or not the option given to Wong to buy the property despite him being an alien is valid.Held: NO. Taken singly, the contracts show nothing that is necessarily illegal, but considered collectively, they reveal an insidious pattern to subvert by indirection what the Constitution directly prohibits. To be sure, a lease to an alien for a reasonable period is valid. So is an option giving an alien the right to buy real property on condition that he is granted Philippine citizenship. As this Court said in Krivenko v. Register of Deeds:20[A]liens are not completely excluded by the Constitution from the use of lands for residential purposes. Since their residence in the Philippines is temporary, they may be granted temporary rights such as a lease contract which is not forbidden by the Constitution. Should they desire to remain here forever and share our fortunes and misfortunes, Filipino citizenship is not impossible to acquire. But if an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of which the Filipino owner cannot sell or otherwise dispose of his property,21 this to last for 50 years, then it becomes clear that the arrangement is a virtual transfer of ownership whereby the owner divests himself in stages not only of the right to enjoy the land ( jus possidendi, jus utendi, jus fruendi and jus abutendi) but also of the right to dispose of it ( jus disponendi) rights the sum total of which make up ownership. It is just as if today the possession is transferred, tomorrow, the use, the next day, the disposition, and so on, until ultimately all the rights of which ownership is made up are consolidated in an alien. And yet this is just exactly what the parties in this case did within the space of one year, with the result that Justina Santos' ownership of her property was reduced to a hollow concept. If this can be done, then the Constitutional ban against alien landholding in the Philippines, as announced in Krivenko v. Register of Deeds,22 is indeed in grave peril.Case: Lim vs. People

Facts: Lourdes Lim is a businesswoman who went to Maria Ayroso and proposed to the latter to sell Ayrosos tobacco. Ayroso agreed to the proposition to sell her tobacco consisting of 615 kilos at P1.30/kilo. The agreement reads: This is to certify that I have received from Maria Ayroso of Nueva Ecija, 615 kilos of leaf tobacco to be sold at P1.30/kilo. The proceed in the amount of P799.50 will be given to her as soon as it was sold. Of the P799.50, only P240 was paid by Lim. Lim failed to pay the balance. Ayroso filed an Estafa case against Lim. Issue: Whether Lims obligation to pay Ayroso is immediately demandable as soon as the tobacco was disposed of.Held: YES. The SC ruled that it was clear in the agreement that the proceeds of the sale of the tobacco should be turned over to the complainant as soon as the same was sold, or, that the obligation was immediately demandable as soon as the tobacco was disposed of. Hence, Article 1197 of the NCC, which provides that the court may fix the duration of the obligation if it does not fix a period, does not apply. The agreement cannot be understood to mean that the duration of the period depends upon the will of the debtor which the court can fix the duration thereof. Instead the agreement between them was one of agency with the OBLIGATION to return the unsold tobacco and the proceeds of the sale demandable.

Case: Gregorio Araneta, Inc. vs. Phil. Sugar Estates Dev., May 31, 1967, J.B.L. Reyes.Facts: J. M. Tuason & Co., Inc. is the owner of a big tract land situated in Quezon City, otherwise known as the Sta. Mesa Heights Subdivision, and covered by a Torrens title in its name. On July 28, 1950, through Gregorio Araneta, Inc., it (Tuason & Co.) sold a portion thereof with an area of 43,034.4 square meters, more or less, for the sum of P430,514.00, to Philippine Sugar Estates Development Co., Ltd. The parties stipulated, among in the contract of purchase and sale with mortgage, that the buyer will Build on the said parcel land the Sto. Domingo Church and Conventwhile the seller for its part will Construct streets on the NE and NW and SW sides of the land herein sold so that the latter will be a block surrounded by streets on all four sides; and the street on the NE side shall be named "Sto. Domingo Avenue;"The buyer, Philippine Sugar Estates Development Co., Ltd., finished the construction of Sto. Domingo Church and Convent, but the seller, Gregorio Araneta, Inc., which began constructing the streets, is unable to finish the construction of the street in the Northeast side named (Sto. Domingo Avenue) because a certain third-party, by the name of Manuel Abundo, who has been physically occupying a middle part thereof, refused to vacate the same; hence, on May 7, 1958, Philippine Sugar Estates Development Co., Lt. filed its complaint against J. M. Tuason & Co., Inc., and instance, seeking to compel the latter to comply with their obligation, as stipulated in the above-mentioned deed of sale, and/or to pay damages in the event they failed or refused to perform said obligation.

Both defendants J. M. Tuason and Co. and Gregorio Araneta, Inc. answered the complaint, the latter particularly setting up the principal defense that the action was premature since its obligation to construct the streets in question was without a definite period which needs to he fixed first by the court in a proper suit for that purpose before a complaint for specific performance will prosper.

Plaintiff moved to reconsider and modify the above decision, praying that the court fix a period within which defendants will comply with their obligation to construct the streets in question.

Defendant Gregorio Araneta, Inc. opposed said motion, maintaining that plaintiff's complaint did not expressly or impliedly allege and pray for the fixing of a period to comply with its obligation and that the evidence presented at the trial was insufficient to warrant the fixing of such a period.Issue: Whether the period fixed by the court is proper.Held: We agree with the petitioner that the decision of the Court of Appeals, affirming that of the Court of First Instance is legally untenable. The fixing of a period by the court under Article 1197 of the Civil Code of the Philippines is sought to be justified on the basis that petitioner (defendant below) placed the absence of a period in issue by pleading in its answer that the contract with respondent Philippine Sugar Estates Development Co., Ltd. gave petitioner Gregorio Araneta, Inc. "reasonable time within which to comply with its obligation to construct and complete the streets." Neither of the court below seems to have noticed that, on the hypothesis stated, what the answer put in issue was not whether the court should fix the time of performance, but whether or not the parties agreed that the petitioner should have reasonable time to perform its part of the bargain. If the contract so provided, then there was a period fixed, a "reasonable time;" and all that the court should have done was to determine if that reasonable time had already elapsed when suit was filed if it had passed, then the court should declare that petitioner had breached the contract, as averred in the complaint, and fix the resulting damages. On the other hand, if the reasonable time had not yet elapsed, the court perforce was bound to dismiss the action for being premature. But in no case can it be logically held that under the plea above quoted, the intervention of the court to fix the period for performance was warranted, for Article 1197 is precisely predicated on the absence of any period fixed by the parties.

Even on the assumption that the court should have found that no reasonable time or no period at all had been fixed (and the trial court's amended decision nowhere declared any such fact) still, the complaint not having sought that the Court should set a period, the court could not proceed to do so unless the complaint in as first amended; for the original decision is clear that the complaint proceeded on the theory that the period for performance had already elapsed, that the contract had been breached and defendant was already answerable in damages.

Granting, however, that it lay within the Court's power to fix the period of performance, still the amended decision is defective in that no basis is stated to support the conclusion that the period should be set at two years after finality of the judgment. The list paragraph of Article 1197 is clear that the period can not be set arbitrarily. The law expressly prescribes that

the Court shall determine such period as may under the circumstances been probably contemplated by the parties.

All that the trial court's amended decision (Rec. on Appeal, p. 124) says in this respect is that "the proven facts precisely warrant the fixing of such a period," a statement manifestly insufficient to explain how the two period given to petitioner herein was arrived at.It must be recalled that Article 1197 of the Civil Code involves a two-step process. The Court must first determine that "the obligation does not fix a period" (or that the period is made to depend upon the will of the debtor)," but from the nature and the circumstances it can be inferred that a period was intended" (Aright 1197, pars. 1 and 2). This preliminary point settled, the Court must then proceed to the second step, and decide what period was "probably contemplated by the parties" (Do., par. 3). So that, ultimately, the Court can not fix a period merely because in its opinion it is or should be reasonable, but must set the time that the parties are shown to have intended. As the record stands, the trial Court appears to have pulled the two-year period set in its decision out of thin air, since no circumstances are mentioned to support it. Plainly, this is not warranted by the Civil Code. Case: Pacifica Millare vs. Hon. Hernando, Antonio Co and Elsa Co., June 30, 1987, J. Feliciano.Facts: Pacifica Millare, lessor and spouses Co lessee in a 5-year contract of lease of Peoples Restaurant, a commercial establishment located at the corner of McKinley and Pratt Streets in Bangued, Abra. At the last week of the 5-year period, the lessor offered to extend the lease if spouses Co will agree to increase rental from P350 to P1200 a month. The spouses counter-offered the rental to P700 but this discussion was set aside. Later, a demand letter was issued by lessor to vacate premises without renewal of expired contract which the lessor disagreed and filed an ejectment case. The spouses Co filed a separate case for the court to order renewal of contract and fix rental at P700 a month. Spouses deposited monthly rental in court while the plaintiff filed Motion to Dismiss for lack of jurisdiction and no cause of action but the same was denied. Issue: Whether the Spouses Co have valid cause of action in claiming renewal of lease contract.Held: YES. There was implied renewal of lease contract but only on a month-to-month basis, but not for another 5 years. Hence, par. 1 of Article 1197 is clearly inapplicable, since the Contract of Lease did in fact fix an original period of 5 years, which had expired. It is also clear from par. 13 of the contract that the parties reserved to themselves the faculty of agreeing upon the period of the renewal contract. The 2nd par. of Article 1197 is equally inapplicable since the duration of the renewal period was not left to the will of the lessee alone, but rather to the will of both the lessor & the lessee. Most importantly, Article 1197 applies only where a contract of lease clearly exists. Here, the contract was not renewed at all, there was in fact no contract at all the period of which could have been fixed. SC agreed the TRO and injunction.Article 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of article 1197.4. When debtor loses the benefit of periodArticle 1198. The debtor shall lose every right to make use of the period:

(1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt;

(2) When he does not furnish to the creditor the guaranties or securities which he has promised;

(3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory;

(4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period;

(5) When the debtor attempts to abscond. (6) Article 2109 - If the creditor is deceived on the substance or quality of the thing pledged, he may either claim another thing in its stead, or demand immediate payment of the principal obligation. (The sixth ground was added by Prof. Balane.)

Effects of Loss of Term (Article 1198): OBLIGATION becomes immediately due & demandable even if period has not yet expired.

OBLIGATION is converted to a pure OBLIGATION

Insolvency of DEBTOR need not be judicially declared; state of financial difficulty is enough.Balane: In number one, factual insolvency is enough. A judicial declaration of insolvency is not required.

Summary of the Different Kinds of OBLIGATIONS As to Perfection and Extinguishment

DIFFERENT KINDS OF OBLIGATIONS:PURE AND CONDITIONAL OBLIGATIONS when the OBLIGATION contains no terms or conditions;CONDITIONAL OBLIGATIONS one which is subject to condition;CONDITION every future and uncertain event upon which an OBLIGATION or provision is made to depend;FUTURE & UNCERTAIN EVENT the acquisition or resolution of the rights is made to depend by those who execute the juridical act;CLASSIFICATION OF CONDITIONS:1. SUSPENSIVE the happening of the former gives rise to an OBLIGATION;

2. RESOLUTORY the happening of the latter extinguishes rights already existing.PAST BUT UNKNOWN a condition may refer to past event unknown to the parties;IMPOSSIBLE CONDITION:

1. PHYSICALLY IMPOSSIBLE when it is contrary to law of nature;

2. JUDICIALLY IMPOSSIBLE when contrary to law, morals, good customs and public safety

PURE OBLIGATIONS when it is not subject to a term, period and no condition;

- demandable at once

- it is immediate demandability, give time for debtor to comply

PERIOD- is an event that is future but certain (just a matter of time); e.g. passing this class (Civil law Review 2)

PAST EVENT cannot be future event, cannot be considered uncertain;SUSPENSIVE CONDITION:*rights are acquired, upon the happening of a condition.

Article 1181 OBLIGATION created upon the happening of a condition RESOLUTORY- extinguished, or loss of existing rights, upon the happening of a condition

*Thus a contract may be perfected but its demandability suspended.

Article 1186 deemed constructively fulfilled; applied only to suspensive not to resolutory condition

Article 1187 effects of conditional OBLIGATION to give;E.g. A sold a house & lot to B, 1MCondition: if B will pass the bar examTerm: effect retroacts after the passing is announced on April;

Jan.2004Sept. 2004Oct.04

Apr.05perfection

(without condition/condition

Pure)

[1544]

Retroactive effectArticle 1188 preserve his interest

PROTECT HIS EXPECTANCY1. Register with the Registry of Property

2. witness

3. possession in good faith

4. Injunction if the sell was not consummated or not for saleRESOLUTORY CONDITION

Article 1190 no exception, nothing will be left.SUSPENSIVE CONDITION upon the happening of the condition, the OBLIGATION exists (existence of OBLIGATION is affected)

CLASSIFICATION OF CONDITION:1. POTESTATIVE when the fulfillment of the condition depends upon the will of the party to the OBLIGATION;

2. CAUSAL depends upon chance 2nd or 3rd person3. MIXED depends partly upon the will of the party & partly upon chance or a 3rd person

Article 1182: Potestative sole will of the debtor Potestative suspensive is VOID.Example. A will give 5% commission to B, but it depends on the will of A, void;

All other potestative conditions, valid.

Article 1183 impossible condition

1. physical impossibility

2. legal impossibility

Article 873 impossible testamentary conditions

disregard

Ex. Article 727 donation

CONDITIONPERIOD / TERM

1. future & uncertain event1. future &certain

2. suspensive condition 2.suspensive period/demandability

3. resolutory condition3. resolutory period

SUSPENSIVE PERIOD prior to the period, there is already an OBLIGATION, but it is suspensive by the period;

Article 1164- the OBLIGATION to deliver arises upon the perfection of the contract if subject to suspensive period & not suspensive condition

RESOLUTORY PERIOD terminated but the effects that accrued in the past will remain;

RESOLUTORY CONDITION extinguishes as if nothing happens; retroactive effect of OBLIGATION;

EFFECTS OF FORTUITOUS EVENT IN PERIOD / TERM:-the contract shall be deemed suspended but the Fortuitous Event shall not stop the running of the term or period agreed upon;

Article 1195 advanced paymentArticle 1196 benefit of periodPresumption if the period is designated, the benefit is for both the creditor & debtor

Exception: the tenor of the same or other circumstances, it should appear that the period has been established in favor of one or the other;

Article 1197 3 reasons why the court will fix the period:1. if the OBLIGATION does not fix a period, but from its nature & circumstances it can be inferred that a period was intended by the parties;

2. in the duration of the time depends upon the will of the debtor

3. if the debtor binds himself to pay when his means permit him to do so

Article 1198 memorize!

Article 1198. The debtor shall lose every right to make use of the period WHEN:

(1) after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt;

(2) he does not furnish to the creditor the guaranties or securities which he has promised;

(3) by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory;

(4) the debtor violates any undertaking, in consideration of which the creditor agreed to the period;

(5) the debtor attempts to abscond. Q: How could there be guaranty when debtor is insolvent?A: 3rd person (surety)

Q: when is OBLIGATION due & demandable even if period has expired?A: if debtor has lost right to make use of such period (Article 1198)Illustrations:1. As to when the obligation will arise? It will depend on the nature of the obligation. How would you know what kind of obligation? It depends on the stipulation of the party, if the source of obligation is the law then the law may provide how the obligation may be complied with. Having said that another important consideration, we should go to the nature of the obligation as to prestation whether it is an obligation to give, to do, or not to do because whatever may be the cause of prestation there will be general rules as to how the obligation are to be complied with. 2. Specifically xxx a valid obligation, an obligation to give a generic thing what would be the source of this obligation? What contract? Would that be a valid obligation as to the sale of the car? CAN THERE BE A VALID OBLIGATION ARISING FROM A CONTRACT OF SALE INVOLVING A GENERIC THING? No specific thing has been agreed by a party. When would there be a valid sale of a car which is a generic car? When a thing, though generic is capable of being determined without a need of a new agreement. Therefore, a car per se as an object of a sale cannot be a valid sale. Therefore, may there be a valid obligation to deliver a generic thing as generic as a car or a condo unit, if there is such obligation it will arise from what source? Yes, it may arise from other sources like a legacy, in a will a car is given to an heir, maybe a donation involving a car, no particular, the law does not require a specific thing in order for an obligation to arise. 3. Assuming in the will of X a car was given, I hereby give a car to my favorite grandchild A, now upon the death of X, the executor delivered to A a brand new Toyota Yaris, A refused to accept the car and demanded for a brand new Mitsubishi lancer, who is correct? In an obligation to deliver a generic thing and the features of the thing has not been determined, the law provides that the debtor cannot deliver an inferior kind neither the creditor can demand for a superior thing. The problem in this rule is that how would we know if the thing being offered is just the appropriate thing, what is superior and inferior is very subjective? The purpose of the testator. What do you think would be the purpose of the testator that the grandchild is entitled to a better car? When for instance the purpose of the testator is to give the grandchild a race car. Having said that, therefore the child may be entitled to a car better than Yaris? Not necessarily. So what possible circumstances would affect the claim? If the estate cannot afford the car, the legitimes might be affected. So what is the solution? May be the executor may deliver a cheaper car like an altis not an evolution. Again sec. 1246 is very much relevant rule as regards obligation to deliver a generic thing.4. A obliged himself to deliver a brand new Mitsubishi lancer dlx 2008 black, due October 30, October 25, the B creditor demanded for the delivery of the car, A did not deliver until Nov. 1, the car he intended to deliver to B was destroyed probably of earthquake, can A be compelled to deliver the car? Yes the debtor can be compelled to deliver the thing. Is A already in default? The demand here is premature; demand should be made when the obligation is already due for a person to incur in delay. Having said that can A be compelled to perform the obligation? Yes because the reason here is the object involved is a generic thing and when a generic thing is lost because of fortuitous event, the obligation is not extinguished because generic things do not perish. In other words, in OBLIGATIONS to give a very important consideration is whether a thing to be delivered is generic or determinate.

5. Obligation to deliver a limited generic thing, like one of the horses of A, 5 of the horses of A died, what is the effect? It depends on the number of horses that A has, because if A still has other horses then there are other horses that may be delivered, the obligation is not extinguished. An obligation to deliver a limited generic thing will only be extinguished if all of the thing belonging to that group will perish due to fortuitous event.6. An obligation to deliver a determinate thing, the principal obligation of the debtor here is? The very thing which he promised to deliver in other words if A the debtor promised to deliver to B his Toyota Yaris, but instead, he offered to deliver brand new MB sporights car worth 4M, will the obligation be extinguished? It may be extinguished; while the creditor may not be compelled to he may accept the delivery of another thing. Now in this scenario, what is the mode of extinguishment? Novation, more specifically, dacion in payment which shall be governed by law on sales.

7. What are the accessory OBLIGATIONS of an obligation to deliver a generic thing? An obligation to preserve and to take good care of the thing with the diligence of a father of a good family. If the debtor xxx however, the creditor wanted to hold the debtor liable for the loss, but the creditor was not able to prove that the debtor failed to exercise due care, can the debtor be held liable? Yes, if there is another standard of care required, also known as utmost diligence. Therefore, if there is no stipulation as to degree of diligence, therefore the degree of diligence is diligence of a good father of a family? Not necessarily, the law may provide for the degree of diligence necessary, like what law, like the law on common carrier.8. A obliged himself to deliver and to transfer ownership to B a female pig, the agreement was entered January 1, the delivery was made May 1, however, when the pig was delivered to B, he demanded for the delivery of piglets, the piglets was born in February 15, does A have the right over the piglet? It will depend when the time the obligation to deliver arises because the law provides that the creditor has the right to the fruits of the thing from the time the obligation to deliver arises, however, he will only have real rights over the fruits when the same has been delivered. This reasonable because for example A owns the pig, if he was aware that in feb 15 the pig is pregnant, therefore he would want to deliver the pig only after 4 months when the pig has already gave birth. Therefore the obligation as to when to deliver will depend on? First as to the answer that the obligation will become due upon demand in what aspect will demand affect the time the obligation will become due? Do you agree that an obligation becomes demandable upon demand? As I mentioned earlier, you cannot demand if the obligation is not yet due, therefore demand has nothing to do with being due, because if it is not yet due you cannot demand validly, therefore the effect of demand is what? To suspend the running of the prescriptive period. Therefore an obligation becomes due when? It depends on the obligation. What kind of obligation? Whether the obligation is pure, conditional, or with a term. Thus, in which obligation or OBLIGATIONS would the obligation be due and demandable at once? Pure obligation and conditional obligation when the condition is resolutory because upon the happening of the resolutory condition it will extinguish the obligation.9. When would therefore an obligation be considered a pure obligation? A pure obligation is considered as such when it does not depend upon a future and uncertain event this is apparently correct, do you agree with this? This is wrong, why wrong? It should be future or uncertain event, why or where lies the difference in or and and? if and it can pertain to only condition and you are not pertaining to term, while if you use or future will pertain to a term, thus, if or is used, both the term and condition is excluded.10. A promissory note is what kind of obligation as to perfection and extinguishment? According to the SC in the case of Pay v. Palanca, it appears to be an alternative obligation, it may be considered as a pure or conditional obligation, because as worded there appears to be a condition but it also appears that it is demandable at once. What was the phrase in that promissory note which is the basis that the same is with condition? Upon receipt of the share from the estate of Don Palanca. On the other hand, the phrase UPON DEMAND is the basis why the PN seemed to be a pure obligation. The trial court ruled that the PN was a pure obligation, the judge here asked the plaintiff, under what cause of action have you filed this case, upon receipt or upon demand? The plaintiff said upon demand, the trial court here held that the action for compel performance has already prescribed. A PROMISSORY NOTE IS CONSIDERED A PURE OBLIGATION, therefore it is demandable at once, the prescriptive period begins to run from the time the cause of action accrued, in this case the period of prescription began to run at the time of execution.

11. BAR EXAM QUESTION: A grandfather promised the grandchild that he will give the GC a brand new car if he passed the bar examination, thereafter the GC passed the bar exam, the GC demanded the GF said that his obligation is void because it depends upon a potestative condition, is the GF correct? In this case, the condition is passing the bar exam, and therefore the answer is the obligation is valid because the condition is not purely potestative, the condition does not purely depend on the will of the debtor. The rule relative in this case is if the happening of the condition depends upon the sole will of the debtor the obligation is void. Having said this, aright 1182, in a conditional obligation when the condition depends solely upon the will of the debtor it is always void correct? Not necessarily. When may it be a valid obligation? When the condition is resolutory. What is the rationale behind this, why would the law consider an obligation void when it depends on a suspensive condition, the happening of which depends solely on the will of the debtor? Because then the debtor may make sure that the obligation will not happen. What if the debtor said, I will give you my car if I go to Baguio, this is void, but what if he went to Baguio 2 days after, can he be compelled to deliver his car? The obligation is void; a supervening event that makes the obligation valid will not make the void obligation valid. Passing the bar exam is a mixed obligation, CASUAL, in other words passing the bar is not dependent upon the will of the examinee, why? Because it will also depend upon the SC, or it depends upon the examiner. Lets assume that passing the bar is a potestative condition, therefore the GF was correct that his obligation is void? No, why not? Because in order that the obligation to be void, the happening of the event must depend solely on the will of the debtor, here, the GF will not take the exam, the GC, so the happning of the condition does not depend on his own will.12. If the debtor promised to pay if his son does not die of cancer within one year what is the status of the obligation? There are two important provisions in relation to effect conditions to OBLIGATIONS are aright 1182 or the provision about impossible obligation. When the condition is an impossible condition, it will annul the obligation, however the SC will not use the phrase shall annul because in fact the obligation is void, shall annul presupposes valid but it shall be annulled, which is wrong in the first place the obligation is impossible, the obligation will never arise. The more accurate statement is THE OBLIGATION IS VOID. In this problem what kind of condition is involved? If the son does not die of cancer within 1 year. This condition is? Suspensive. Passing the bar exam, give me an example when it would be a resolutory condition? I will give continuous support until you pass the bar exam. In the first problem, if his son does not die, what kind of condition? Aside from suspensive, it is possible, it is negative, and mixed condition not only dependent on the will of the debtor but other factors as well. Having said this, if the obligation is an impossible condition, therefore the obligation may not be a valid obligation? It may, if the condition is negative impossible condition, because under the law, the law provides that the negative impossible condition is deemed not written, therefore the effect is? The obligation becomes a pure obligation because no condition is attached to the obligation. In this discussion therefore, the happening of the condition does not depend solely on the will of the debtor, the condition is also possible, so when will the obligation become due? If the son does not die of cancer after 1 year. Even before the expiration of period may the son be compelled to pay? Yes when the son recovers from cancer or when the son dies of other causes not cancer. 13. A agreed with B, he promised to give his condo unit to B if B will not become a priest in 10 years. 2 weeks after the agreement, B entered the seminary; therefore it is already certain the obligation will not arise? The condition is suspensive; the condition may still be demandable. Because when B entered the seminary it does not necessarily confirm that he will become a priest because he might still get out of the seminary. The condition here is that B will not become a priest, this is a negative condition, in a negative condition, ordinarily, and when will it be certain that the condition will not arise? If within the 10th year he already becomes a priest. Therefore, in relation to the obligation, if 2 weeks after the obligation B entered the seminary? Not necessarily.14. The debtor prevented the happening of the condition; he may be compelled to perform the obligation? Not necessarily, it must be an intention of the debtor. Assuming he voluntarily prevented, does this mean that he is compelled? Not necessarily. When will the debtor voluntarily prevent the happening of the condition and the performance of obligation will not arise? When he prevented the happening of the condition as matter of a right. 15. BAR EXAM QUESTION: In 2001 A obliged himself to deliver a house and lot to B upon Bs passing the bar exam, B passed the bar exam in 2005, however when B passed the bar exam it so happen that A already sold the house and lot to C in 2003, who has the better right over the house and lot? B the effect of the happening of the condition in a conditional obligation will retroact to the time of the constitution of the agreement as if the condition has already happened before the property was sold to C, this does not have an exception? The exception is when C is a buyer in good faith, when would C be a buyer in good faith? when the agreement between A and B is not registered. Assuming that B has a better right, therefore B demanded for the delivery of the property and he also demanded for the rental, is it a valid claim? this may seem a unilateral obligation, although a good answer is if the obligation of A is unilateral obligation, who is entitled to the fruits if this problem pertains to a unilateral obligation, in the first place what transaction may have been entered into by A and B in the obligation to give? it may be xxx so who will be entitled? the donor, why the donor absolutely? No it is very clear from the agreement of the party that the fruits will pertain to the creditor from the time of constitution. If this is donation when will the creditor be entitled to the fruits? Upon the happening of the condition unless it is shown that the intention of the debtor is to give to the creditor even the fruits of the property. However, if the obligation is reciprocal? In the contract of sale, and therefore what is considered the fruits in relation to the obligation of B, as to A the fruit is the rental, in the first place if the obligation is sale what is obligation of B, payment and interest. The payment and interest are the fruits. 16. Before the happening of the condition, what is the implication, did the condition happen or not? Not yet. Before the happening of the condition what if an action was filed by the creditor against the debtor will that action prosper? Yes it may prosper it will depend on the action, whether it is xxx even if the right of the creditor is an inchoate right such right is already protected. Example of this action: Annotation so that third persons will be bound by their agreement.17. Obligation to deliver a condo unit, before of the happening of the condition, the debtor had the condo renovated, the condition happened, the creditor demanded for the delivery of the condo unit, the debtor claimed that he can only be compelled to deliver if he is reimbursed for the expenses of the renovation, until then he has the right to retain the condo unit, is the contention correct? The debtor has the right to remove those that may be removed without damaging the property. 18. A term pertain to an event, correct? Yes. When may a term pertain to an event? When the event is uncertain, like what? Death. But the definite term example? Dec. 25, 2009. Now, is it correct to say that just like a conditional obligation, in obligation with a term, depending whether the term is suspensive or resolutory the obligation will arise or the obligation will be extinguished? The error in the statement is when it provides that upon the arrival of the period the obligation arises because in an obligation with a term there is already an obligation, the arrival of the period will result in the demandability of the obligation, because since this is a term IT IS CERTAIN TO HAPPEN, THE PERIOD WILL ARRIVE BUT THE TIME OF HAPPENING IS JUST UNCERTAIN. 19. The kinds of periods discussed in the case of Eleizegui: Legal, voluntary. There will always be a period in contract of sale? No. when will there be a period in a contract of sale? Period as to payment of the price which is known as sale on credit, if it is installment sale on installment. This is correct because even on lease there is a period. Legal a period fixed by law, Example: Period provided by law like in contracts of lease if the parties failed to agree as to the period, depends on the manner of payment if annually 1 year and if monthly 30 days. Judicial period Aright 1180 if the obligor will pay if his means permits him to do so. 20. BAR EXAM QUESTION: A borrowed money from B in Jan 1 payable at the end of the year, the same was secured by a real estate mortgage, they agreed that B can occupy the house and lot during the period agreed upon, however, by June 30 of that year, A offered to pay the entire indebtedness and demanded B vacate the house, can the creditor be compelled to accept the payment? Can the creditor be compelled to vacate the house? It depends whether the period is solely for the benefit of the debtor or both the debtor or the creditor. If the same is for the benefit of the debtor what is the right? Xxx(2) OBLIGATIONS according to plurality of objects:A. SimpleB. MultipleC. Conjunctive where the debtor must perform more than one prestationQ: A promised to deliver to B his carabao, dog & goat. What kind of OBLIGATION is this?

A: conjunctive obligation.

D. Alternative OBLIGATIONS where the debtor must perform any of several prestations, when several objects due, the fulfillment of one is sufficient, generally the debtor chooses which one.

E. Facultative where only one thing is due but the debtor has reserved the right to substitute it with another (Article 1206)

-election here is never granted to creditor

Q: In conjunctive, right to choose is always with debtor?A: NO. No right to choose because all must be performed.

Q: In Alternative, right to choose can be given to 3rd person?A: YES. (Article 1000) as long as it is not contrary to law, morals, public order, public policy and etc.

Q: In an agreement where there is no stipulation as to who has right to choose? A: It depends. If Alternative, generally debtor chooses; if facultative, only with debtor

Q: What if debtor has right to choose and he delays?A: right is