Book 4 - Obligation and Contracts_v3.docx

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School of Law

Compilation ofQuestions and Suggested Answers

Book 4

(Obligations & Contracts)

Submitted by:

CIVIL LAW (Weekday & Weekend CLASS

(A!"! #$%'#$%

Submitted to:

A))"! *+,,-. )+Q/ILL-Ci0il Law 1e0iew 2rofessor

3e4ember %56 #$%



)able of Content

OBLIGATIONS & CONTRACTS...................................................................................1

-bligations & Contra4ts!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!%

The Weelex Group vs. U-Land Airlines, Co................................................1Clemente vs. Court of Appeals....................................................................3

Comglaso Corporation vs. !antos Car Che" Center Corporation..........# Asano-Cupino vs. $aifi %ehouse Corporation.......................................&

'()C Constrution vs. Lanu*o...................................................................+

)el Carmen vs. !pouses !aordo..............................................................1 $hilippine ational 'an" vs. )ee..............................................................11

The /etropolitan 'an" 0 Trust Co. vs. %osales.......................................1

2il-state $roperties vs. !pouses Conrado...............................................13

%ivelisa %ealt4 5n. vs. 2irst !ta. Clara 'uilders Corporation.................16Golden 7alle4 xploration, 5n. vs. $in"ian /ining Compan4.................1#

/anlar %ie /ill vs. )e4to.......................................................................1& !pouses 'inua vs. 8ng..............................................................................19 %eus:uillo vs. !pouses %eus:uillo-Gualve*..........................................

5nternational ;otel Corporation vs. (oa:uin............................................1

)eganos vs. $eople...................................................................................3 /ondragon $ersonal !ales, 5n. vs. !ola, (r.............................................6

Land 'an" of the $hilippines vs. ;eirs of !pouses (or<a %igor-!oriano..=

Constantino vs. ;eirs of $edro Constantino, (r........................................& Consolidated 5ndustrial Gases, 5n. vs. Alaang /edial Center............+

2ormaran vs. 8ng.....................................................................................31

!andoval !hip4ard, 5n. vs. $hilippine /erhant /arine Aadem4.........33

;ur Tin >ang vs. $eople............................................................................36 ( $lus Asia )evelopment Corporation vs. Utilit4 Assurane Corporation

...................................................................................................................3=

2ontana %esort and Countr4 Clu, 5n. vs. !pouses Tan..........................39 /ontema4or vs. /illora............................................................................3+

/arin vs. Adil............................................................................................61

OBLIGATIONS...............................................................................................................43

A4tion for 1e4on0eyan4e!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!78 'rito vs. )ianala.......................................................................................63

Consignation!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!7

!pouses Caa4orin vs. Armed 2ores and $olie /utual 'enefit Assoiation................................................................................................6#

3elay in t9e -bligation to 2ay Sum of oney; Interest as 3amages!!!!!!!!!!!!!!!!!!!7!pouses ameal vs. !pouses Luna............................................................6=

3emand to In4ur 3elay!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!7< %ivera vs. !pouses Chua...........................................................................69

3iligen4e 1e=uired!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!$



2raniso vs. Chemial 'ul" Carriers, 5n...............................................#

3o4trine of In 2ari 3eli4to; +>4eption!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!#Gon*alo vs. Tarnate, (r..............................................................................#

3o4trine of In 2ari 3eli4to; /n?ust +nri49ment!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!7 Loria vs. /u?o*, (r....................................................................................#6

+>tinguis9ment of -bligations!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! /etro Conast !teel Corporation vs. Allied 'an" Corporation...... .........#=

+>tinguis9ment of -bligations; Compensation!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!<!oriano vs. $eople.....................................................................................#9

+>tinguis9ment of -bligations; 2ayment!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!% 'ognot vs. %%5 Lending Corporation........................................................=1

@raud!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!8Tan"eh vs. )evelopment 'an" of the $hilippines......................................=3

Interest; 2restation!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 'ernavide* vs. !alvador............................................................................=#

*udgment on Compromise!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!5

Gadrina vs. !alamana.............................................................................=& Legal Compensation!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Union 'an" of the $hilippines vs. )evelopment 'an" of the $hilippines.=+

Liability of a Solidary 3ebtor!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!5% ovate"ni"a Land Corporation vs. $hilippine ational 'an"..................&1

,o0ation!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!58!.C. /ega@orld Constrution and )evelopment Corporation vs. $arada...................................................................................................................&3

2ure and Conditional -bligations!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!5!@ire %ealt4 )evelopment Corporation vs. >u.........................................&#

Quasi'Contra4t (Solutio Indebiti!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!5 /etropolitan 'an" 0 Trust Compan4 vs. Asolute /anagement

Corporation...............................................................................................&= 1e4on0eyan4e!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!5<

U4 vs. Court of Appeals.............................................................................&9

1esolutory 2eriod!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!5!alonte vs. Commission on Audit..............................................................&+

Solidary -bligation!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!<#!pouses 'erot vs. !iapno...........................................................................9

)ender of 2ayment!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!<8 etlin" Computer 5n. vs. )elmo..............................................................93

Valid 2ayment!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!< ational $o@er Corporation vs. 5rahim.................................................9#

CONTRACTS..................................................................................................................86

Contra4ts as Law between t9e 2arties!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!< /alvar vs. raft 2ood $hils., 5n..............................................................9=

+>isten4e of a 2erfe4ted Contra4t!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!<< 2irst 8ptima %ealt4 Corporation vs. !euritron !eurit4 !ervies, 5n.. .99

@raud!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!<



C %ealt4 and )evelopment, 5n. vs. /andap.......................................9+

Interpretation of a Contra4t!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!% <erito vs. 8riental Assurane Corporation............................................+1

utuality of Contra4ts!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!# $hilippine ational 'an" vs. !pouses /analo.........................................+

,o0ation!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!7 Ae 2oods, 5n. vs. /iro $aifi Tehnologies Co..................................+6

2erfe4tion!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! ;eirs of 2austo C. 5gnaio vs. ;ome 'an"ers !avings and Trust Co.......+=

2ri0ity of Contra4ts!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!<!tronghold 5nsurane Co., 5n. vs. !pouses !troem..................................+9

;onrado vs. G/A et@or" 2ilms...........................................................1

1e4issible Contra4ts!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!%$% $lanters )evelopment 'an" vs. !pouses Lope*......................................11

/nenfor4eable Contra4ts!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!%$# 5glesia 2ilipina 5ndependiente vs. ;eirs of 'ernardino Tae*a................1

Void Contra4t!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!%$8 'orromeo vs. /ina..................................................................................13

Voidable Contra4ts!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!%$7The %oman Catholi Churh vs. $ante...................................................16



OBLIGATIONS & CONTRACTS

Obligations & Contracts

I!

Ciil La! To"ic : -bligations and Contra4ts

So#rc$ : )9e Weele> Broup 0s! /'Land Airlines6 Co!G.%. o. 1=&#1+, (anuar4 16, 1#

Contrib#tor : Sayson6 Berlyn ae

'>>>>'

%ROBL':

WC 4ompany entered into a emorandum of Agreement wit9 /'L 4orporation entitled@irst emorandum of Agreement! )9e agreement stipulated t9at wit9in 7$ days from itse>e4ution date6 WC and /'L would e>e4ute a s9are pur49ase agreement 4o0ering /'Lsa4=uisition of t9e s9ares of sto4k of bot9 A2IC (A2IC s9ares and 2+C (2+C s9ares! Int9is s9are pur49ase agreement6 /'L would pur49ase from WC its A2IC s9ares and 2+C

s9ares! @urt9er6 Se4tion # of t9e @irst emorandum of Agreement 4learly pro0ides t9att9e e>e4utionof a s9are pur49ase agreement 4ontaining mutually agreeable terms and4onditions must first be a44omplis9ed by t9e parties before respondent /'L pur49asesany of t9e s9ares owned by W!

)9e 7$'day period lapsed! ,o s9are pur49ase agreement 9appened! Dut despite su49lapse6 /'L paid WC /SE56767!$$ w9i49 was a4knowledged by WC and a re4eiptwas issued! )9ereafter6 w9en no s9are pur49ase agreement still materialiFes6 /'Ldemanded from WC t9e money it paid! WC refusedto return t9e money! W9at are t9eremedies of /'LG +>plain

S(GGST) ANS*R :

/'L 4an demand res4ission and get t9e money it paid to WC under Art! %%% of t9e ,ewCi0il Code!



Arti4le %%% pro0ides t9at t9e power to res4ind obligations is implied in re4ipro4al ones6in 4ase one of t9e obligors s9ould not 4omply wit9 w9at is in4umbent upon 9im! )9ein?ured party may 49oose between t9e fulfillment and t9e res4ission of t9e obligation6wit9 t9e payment of damages in eit9er 4ase! .e may also seek res4ission6 e0en after 9e9as 49osen fulfillment6 if t9e latter s9ould be4ome impossible! )9e 4ourt s9all de4ree t9e

res4ission 4laimed6 unless t9ere be ?ust 4ause aut9oriFing t9e fi>ing of a period! )9is isunderstood to be wit9out pre?udi4e to t9e rig9ts of t9ird persons w9o 9a0e a4=uired t9et9ing6 ina44ordan4e wit9 arti4les %8< and %8<< and t9e ortgage Law!

Arti4le %%% is appli4able in re4ipro4al obligations! In t9e instant 4ase6 WC 9as t9eobligation to enter into s9are pur49ase agreement wit9 /'L before t9e latter pur49asesany s9ares owned by t9e former! )9e non'o44urren4e or non'e>e4ution of t9e s9are pur49ase agreement t9at would gi0e rise to t9e obligation to bot9 parties free ea49 ot9er from t9eir respe4ti0e undertakings! Sin4e t9e s9are pur49ase agreement did notmaterialiFe6 /' Ls obligation to buy t9e s9are in A2IC 4eased! )9e ineffi4a4y of t9e-A in4ludes returning to ea49 ot9er all t9at t9e parties re4ei0ed in pursuit of entering

into t9e s9are pur49ase agreement!

utual restitution is re=uired in 4ases in0ol0ing res4ission under Arti4le %%% in relationto Art! %8<! Arti4le %8< pro0ides t9at res4ission 4reates t9e obligation to return t9et9ings w9i49 were t9e ob?e4t of t9e 4ontra4t6 toget9er wit9 t9eir fruits6 and t9e pri4e wit9its interest; 4onse=uently6 it 4an be 4arried out only w9en 9e w9o demands res4ission 4anreturn w9ate0er 9e may be obligated to restore!

3ue to t9e non' performan4e or brea49 by WC to t9e agreement6 it must return to /'L t9emoney it paid!



II!


So#rc$ : Clemente 0s! Court of AppealsG.%. o. 1&#693, 8toer 16, 1#

Contrib#tor : )e?ano6 isaellee

'>>>>'

%ROBL':

Sally asked 9er grandmot9er Sara9 to 9elp in4rease 9er 49an4es of getting a /S Visa!Sara9 e>e4uted a deed of absolute sale o0er Lots 8# and 876 and t9eir impro0ements6 infa0or of Sally6 bearing on its fa4e t9e pri4e of 2#$6$$$!$$! Sally also e>e4uted a spe4ial power of attorney in fa0or of Sally granting t9e latter power to administer6 take 49argeand manage t9e said properties!

Sally registered t9e sale o0er Lots 8# and 87 wit9 t9e 1egistry of 3eeds w9i49subse=uently resulted to t9e issuan4e of )C) ,o %#87 and )C) ,o%#88 issued in 9er name! Sara9 died intestate! )9ereafter6 Sally filed an e?e4tment suit against Si>to andS9erry6 Sara9s 49ildren6 w9o were staying in Lot 8# and Lot 87!

Si>to and S9erry filed a 4omplaint for re4on0eyan4e of t9e property !

If you were t9e ?udge6 will you grant t9e petitionG

S(GGST) ANS*R :

"es! )9ere was no 0alid 4ontra4t of sale between Sally and Sara9 be4ause Sara9s 4onsentwas absent! Consent is manifested by t9e meeting of t9e offer and t9e a44eptan4e of t9et9ing and t9e 4ause6 w9i49 are to 4onstitute t9e 4ontra4t! A 4ontra4t of sale is perfe4ted att9e moment t9ere is a meeting of t9e minds upon t9e t9ing t9at is t9e ob?e4t of t9e

4ontra4t6 and upon t9e pri4e!

)9e 4ontra4t was a mere simulation!

Simulation takes pla4e w9en t9e parties do not really want t9e 4ontra4t t9ey 9a0ee>e4uted to produ4e t9e legal effe4ts e>pressed by its wordings! Arti4le %87 of t9e Ci0ilCode pro0ides t9at t9e simulation of a 4ontra4t may eit9er be absolute or relati0e! )9e



former takes pla4e w9en t9e parties do not intend to be bound at all; t9e latter6 w9en t9e parties 4on4eal t9eir true agreement!

In absolute simulation t9ere appears to be a 0alid 4ontra4t but t9ere is a4tually none be4ause t9e element of 4onsent is la4king! )9is is so be4ause t9e parties do not a4tually

intend to be bound by t9e terms of t9e 4ontra4t!

)9e e>e4ution of an S2A for t9e administration of t9e 2roperties6 on t9e same day t9e3eeds of Absolute Sale were e>e4uted6 is antit9eti4al to t9e relin=uis9ment of owners9ip!



III!


So#rc$ : Comglas4o Corporation 0s! Santos Car C9e4k Center CorporationG.%. o. +9+, /arh #, 1#

Contrib#tor : a4atangay6 aria )9eresa

'>>>>'

%ROBL':

In t9e year #$$$6 W 1etailers and Q Corp entered into a 4ontra4t of lease for fi0e years of a s9owroom in Iloilo City! .owe0er6 Q Corp ad0ised W 1etailers t9at it is pre'terminating t9e lease effe4ti0e 3e4ember %6 #$$%6 to w9i49 Santos did not a44ede6 4itingt9at t9eir 4ontra4t was for fi0e years! Q Corp 0a4ated t9e premises on *anuary %6 #$$#and stopped paying any rentals! 3espite se0eral demands6 Q Corp ignored t9e demandletters 9en4e W 1etailers filed a 4ase for brea49 of 4ontra4t! In its answer6 Q Corpa0erred t9at business setba4ks 4aused by t9e %5 finan4ial 4risis 4aused it to pre'terminate t9e 4ontra4t6 w9i49 allows pre'termination wit9 4ause in t9e first t9ree years of t9e 4ontra4t and wit9out 4ause after t9e t9ird year! In0oking Arti4le %#5 of t9e Ci0ilCode6 Q Corp a0erred t9at it is aut9oriFed to pre'terminate t9e 4ontra4t before t9e lapseof t9e t9ree years!

Is Q Corps argument meritoriousG

S(GGST) ANS*R :

Q Corps argument6 in relying on Arti4le %#5 of t9e ,CC6 is not meritorious!

1elying on Arti4le %#5 of t9e Ci0il Code to ?ustify its de4ision to pre'terminate its lease wit9 respondent6 petitioner in0okes t9e %5 Asian 4urren4y 4risisas 4ausing it mu49 diffi4ulty in meeting its obligations! In 29ilippine ,ational

Constru4tion Corporation 0! CA6 t9e Court 9eld t9at t9e payment of lease rentals does notin0ol0e a prestation Hto do6 en0isaged in Arti4les %# and %#56 w9i49 9as beenrendered legally or p9ysi4ally impossible wit9out t9e fault of t9e obligor lessor!Arti4le %#5 speaks of a prestation in0ol0ing ser0i4e w9i49 9as been rendered so diffi4ult by unforeseen subse=uent e0ents as to be manifestly beyond t9e 4ontemplation of t9e parties! )o be sure6 t9e Asian 4urren4y 4risis befell t9e region from *uly %5 andfor some time t9ereafter6 but petitioner 4annot be permitted to blame its diffi4ulties on



t9e said regional e4onomi4 p9enomenon be4ause it entered into t9e sub?e4t lease onlyon August %6 #$$$6 more t9an t9ree years after it began6 and by t9en petitioner 9ad known w9at business risks it assumed w9en it opened a new s9op in IloiloCity!



IV!


So#rc$ : As4ano'Cupino 0s! 2a4ifi4 1e9ouse CorporationG.%. o. #113, August=, 1#

Contrib#tor : /dto9an6 Lil?oy

'>>>>'

%ROBL':

. and @ toget9er wit9 t9eir sister , entered into a 3eed of Conditional Sale wit9 2Corporation for t9e pur49ase of t9eir par4el of land! 2 Corporation 9ad t9e followingobligations: (% to pay t9e down payment and (# to pay t9e balan4e of t9e pur49ase pri4eupon 4ompletion of .6 @ and , of t9e pertinent do4uments t9at are ne4essary for t9etransfer of t9e )ransfer Certifi4ate of )itle! -n t9e ot9er 9and6 .6 @ and , undertook t9efollowing: (% to furnis9 2 Corporation wit9 all pertinent do4uments t9at are ne4essary for t9e transfer of t9e )ransfer Certifi4ate of )itle (# to guarantee remo0al of tenants ands9oulder t9e full amount of t9e tenantsJ disturban4e 4ompensation; and (8 to furnis9 2Corporation t9e 4ertifi4ate of non'tenan4y and land operation transfer do4ument! 2Corporation paid t9e down payment as agreed upon! .6 @ and , 4ontinued to ask for ad0an4e payment to be used to fulfill t9e 4onditions in t9e 3eed of Conditional Sale

w9i49 2 Corporation ga0e! .owe0er6 .6 @ and , failed on t9eir obligations! 2Corporation made se0eral demands to fulfill t9em! Later6 .6@ and , wanted to res4indt9e 4ontra4t alleging t9at 2 Corporation defaulted on t9eir payment! oreo0er6 it failed to pay t9e disturban4e 4ompensation of t9e tenants as agreed in t9e Addendum e>e4uted between t9em! 2 Corporation refused to a4knowledge t9e Addendum asserting t9at it wasnot signed by t9eir aut9oriFed representati0e! It t9en filed a 4omplaint for spe4ifi4 performan4e against .6@ and ,!

a W9o is an Hin?ured partyG b W9o between .6@ and , and 2 Corporation is entitled to t9e relief prayed forG

S(GGST) ANS*R :

a )9e Hin?ured party is t9e party w9o 9as fait9fully fulfilled 9is obligation or isready and willing to perform 9is obligation



b 2 Corporation is entitled to ask for spe4ifi4 performan4e!Arti4le %%% of t9e Ci0il Code states: Art! %%%! )9e power to res4ind obligations is implied in re4ipro4al ones6in 4ase one of t9e obligors s9ould not 4omply wit9 w9at is in4umbentupon 9im!

)9e in?ured party may 49oose between fulfillment and t9e res4ission of t9e obligation6 wit9 payment of damages in eit9er 4ase! .e may also seek res4ission6 e0en after 9e 9as 49osen fulfillment6 if t9e latter s9ould be4ome impossible!

)9e 4ourt s9all de4ree t9e res4ission 4laimed6 unless t9ere be ?ust4ause aut9oriFing t9e fi>ing of a period!

)9is is understood to be wit9out pre?udi4e to t9e rig9ts of t9ird personsw9o 9a0e a4=uired t9e t9ing6 in a44ordan4e wit9 Arti4les %8< and

%8<< and t9e ortgage Law!

As pre0iously dis4ussed6 t9e 3eed of Conditional Sale 4learly spells out t9e obligationsof ea49 party! Dased on t9e allegations of t9e parties and t9e findings of t9e lower 4ourts62 Corporation 9as already partially fulfilled its obligation w9ile .6 @ and , 9a0e not!

)9e obligation of .6 @ and , under t9e 3eed of Conditional Sale is to Kguaranteeremo0al of tenantsK and not merely to pay disturban4e 4ompensation! It is an undertakingspe4ifi4ally gi0en to t9em under t9e 3eed of Conditional Sale6 4onsidering t9at 2Corporation is not yet t9e owner of t9e property and will 9a0e no personality to e0i4t t9e propertyJs present o44upants! .6 @ and , failed to fulfill t9is obligation6 as well as t9eobligation to deli0er t9e ne4essary do4uments to 4omplete t9e sale!

@rom t9e foregoing6 it is 4lear t9at 2 Corporation is t9e in?ured party6 entitled to ele4t between res4inding of t9e 4ontra4t and e>a4ting fulfillment of t9e obligation! It 9as optedfor t9e remedy of spe4ifi4 performan4e!

oreo0er6 res4ission must not be allowed in fa0or of .6@ and , sin4e t9ey t9emsel0esfailed to perform t9eir obligations under t9e 3eed of Conditional Sale!



V!


So#rc$ : D*3C Constru4tion 0s! LanuFoG.%. o. 1=11#1, (anuar4 1#, 16

Contrib#tor : Corbo6 19obie

'>>>>'

%ROBL':

,orberto was a deli0ery staff of etro Store6 9e is in 49arged wit9 t9e supply loading andunloading of any deli0ery of goods in t9e supermarket! -n t9e nig9t of 3e4ember %#6%7 w9en a re'blo4king work at around 52 at t9e same area w9ere 9e was about to park 9is motor4y4le6 it sideswiped t9e road barri4ade pla4ed by etro in t9e rig9t lane portion of t9e road6 4ausing 9im to lose 4ontrol of 9is motor4y4le and to 4ras9 on t9enewly 4emented road6 resulting in 9is instant deat9 and t9at t9e 4ompanys failure to pla4e illuminated warning signs on t9e site of t9e pro?e4t6 espe4ially during nig9t timewas t9e pro>imate 4ause of t9e deat9 of ,orberto!

Was t9ere a preponderan4e of e0iden4e to 9eld etro Strore liable for negligen4eG

S(GGST) ANS*R :

,-! As a rule6 t9e party alleging t9e negligen4e of t9e ot9er as t9e 4ause of in?ury 9as t9e burden to establis9 t9e allegation wit9 4ompetent e0iden4e! If t9e a4tion based onnegligen4e is 4i0il in nature6 t9e proof re=uired is preponderan4e of e0iden4e!

In t9is 4ase6 proof of e0iden4e did not all toget9er 4onstitute preponderan4e of e0iden4eon t9e guilt of etro Stores! In order t9at a party may be 9eld liable for damages

for any in?ury broug9t about by t9e negligen4e of anot9er6 t9e 4laimant must pro0e t9att9e negligen4e was t9e immediate and pro>imate 4ause of t9e in?ury w9i49 was not

establis9ed in t9is 4ase! )9e burden of proof is on t9e plaintiff if t9e defendant denies t9efa4tual allegations of t9e 4omplaint in t9e manner re=uired by t9e 1ules of Court6 but itmay rest on t9e defendant if 9e admits e>pressly or impliedly t9e essential allegations butraises affirmati0e defense or defenses6 w9i49 if pro0ed6 will e>4ulpate 9im from liability!



VI!


So#rc$ : 3el Carmen 0s! Spouses SabordoG.%. o. 191&3, August 11, 16

Contrib#tor : ,alia6 +llen

'>>>>'

%ROBL':

)9e 4ourt ordered A to pay or reimburse D 29p %$$6$$$ for t9e re4o0ery of Lot %#8! Adis4o0ered t9at D mortgaged Lot %#8 wit9 Dank as se4urity for a loan w9i496subse=uently6 be4ame delin=uent! Claiming t9at 9e is ready wit9 t9e payment of 2%$$6$$$!$$6 but alleging t9at 9e 4annot determine as to w9om su49 payment s9all bemade and t9e sub?e4t lot is in danger of being fore4losed6 A filed a 4omplaint wit9 t9e1)C seeking to 4ompel D and Dank to interplead and litigate between t9emsel0es t9eir respe4ti0e interests on t9e abo0ementioned sum of money! /pon filing of 9is 4omplaint6A deposited t9e amount of 2%$$6$$$!$$ wit9 t9e 1)C! Is t9ere a 0alid 4onsignationG

S(GGST) ANS*R :

)9ere is no 0alid 4onsignation!

It is settled t9at 4omplian4e wit9 t9e re=uisites of a 0alid 4onsignation is mandatory!@ailure to 4omply stri4tly wit9 any of t9e re=uisites will render t9e 4onsignation 0oid!-ne of t9ese re=uisites is a 0alid prior tender of payment! /nder Arti4le %#6 t9e onlyinstan4es w9ere prior tender of payment is e>4used are: (% w9en t9e 4reditor is absent or unknown6 or does not appear at t9e pla4e of payment; (# w9en t9e 4reditor isin4apa4itated to re4ei0e t9e payment at t9e time it is due; (8 w9en6 wit9out ?ust 4ause6t9e 4reditor refuses to gi0e a re4eipt; (7 w9en two or more persons 4laim t9e same rig9tto 4olle4t; and ( w9en t9e title of t9e obligation 9as been lost!

,one of t9ese instan4es are present in t9e instant 4ase! )9e fa4t t9at t9e sub?e4t lot is indanger of being fore4losed does not e>4use A from tendering payment to D6 as dire4ted by t9e 4ourt!



VII!


So#rc$ : 29ilippine ,ational Dank 0s! 3eeG.%. o. 1919, 2eruar4 1+, 16

Contrib#tor : Bula6 aria oni4a

'>>>>'

%ROBL':

W9at is t9e 2rin4iple of 1elati0ity of Contra4tsG

S(GGST) ANS*R :

)9e basi4 prin4iple of relati0ity of 4ontra4ts is t9at 4ontra4ts 4an only bind t9e partiesw9o entered into it6 and 4annot fa0or or pre?udi4e a t9ird person6 e0en if 9e is aware of su49 4ontra4t and 9as a4ted wit9 knowledge t9ereof! KW9ere t9ere is no pri0ity of 4ontra4t6 t9ere is likewise no obligation or liability to speak about!K



VIII!


So#rc$ : )9e etropolitan Dank & )rust Co! 0s! 1osalesG.%. o. 1936, (anuar4 13, 16

Contrib#tor : Villamor6 Cletus

'>>>>'

%ROBL':

1 and (mot9er of 1 open a ?oint dollar a44ount wit9 ADC Dank! Later6 1 and 4ouldno longer wit9draw t9eir deposit due to t9e 9old'out order issued by t9e bank be4ause 1 is suspe4ted of taking part on a fraudulent transa4tion t9at 4auses t9e bank to reimburseits 4lient6 w9o also 9appens to be a 4lient of 1 in 9er tra0el ser0i4es! 1 filed a brea49 of 4ontra4t against t9e bank! Is t9e a4tion of 1 properG 3e4ide wit9 reason!

S(GGST) ANS*R :

"es6 t9e a4tion of 1 is proper!

)9e K.old -utK 4lause applies only if t9ere is a 0alid and e>isting obligation arising fromany of t9e sour4es of obligation enumerated in Arti4le %%5 of t9e Ci0il Code6 to wit: law64ontra4ts6 =uasi'4ontra4ts6 deli4t6 and =uasi'deli4t! In t9is 4ase6 petitioner failed to s9owt9at respondents 9a0e an obligation to it under any law6 4ontra4t6 =uasi'4ontra4t6 deli4t6 or =uasi'deli4t! And alt9oug9 a 4riminal 4ase was filed by petitioner against respondent1osales6 t9is is not enoug9 reason for petitioner to issue a K.old -utK order as t9e 4ase isstill pending and no final ?udgment of 4on0i4tion 9as been rendered against respondent1osales! In fa4t6 it is signifi4ant to note t9at at t9e time petitioner issued t9e K.old -utKorder; t9e 4riminal 4omplaint 9ad not yet been filed! )9us6 4onsidering t9at respondent1osales is not liable under any of t9e fi0e sour4es of obligation6 t9ere was no legal basisfor petitioner to issue t9e K.old -utK order! A44ordingly6 we agree wit9 t9e findings of

t9e 1)C and t9e CA t9at t9e K.old -utK 4lause does not apply in t9e instant 4ase!



I!


So#rc$ : @il'+state 2roperties 0s! Spouses ConradoG.%. o. 19#&+9, (anuar4 13, 16

Contrib#tor : Siega6 ar )eresa

'>>>>'

%ROBL':

@il' Am 2roperties In4 is t9e owner and de0eloper of t9e 2ark )ower! Spouses 1o=ue pur49ased from @il'Am an <# s='mtr 4ondominium unit for a pre'selling 4ontra4t pri4e of illion! Spouses e>e4uted and signed a 1eser0ation Appli4ation Agreement w9ereint9ey deposited 2#$$6$$$!$$ as reser0ation fee! As agreed upon6 respondents paid t9e fulldownpayment and 9ad been paying t9e mont9ly amortiFations! /pon learning t9at4onstru4tion works 9ad stopped6 spouses likewise stopped paying t9eir mont9lyamortiFation6 4laiming to 9a0e paid a total of #illion pesos to @il' Am! Spousesdemanded a full refund of t9eir payment wit9 interest! @il'Am 4ontended t9at t9ey s9ouldnot be made to reimburse sin4e t9eir delay in t9e 4onstru4tion works is due to t9e %5Asian finan4ial 4risis! Is t9e 4ontention of @il'Am tenableG

S(GGST) ANS*R :

,-!

@il'Ams failure to de0elop t9e 4ondominium pro?e4t is tantamount to a substantial brea49 w9i49 warrants a refund of t9e total amount paid6 in4luding interest! Art %%% of t9e ,ew Ci0il Code pro0ides t9at t9e power to res4ind obligations is implied in re4ipro4alones6 in 4ase one of t9e obligors s9ould not 4omply wit9 w9at is in4umbent upon 9im!)9e in?ured party may 49oose between t9e fulfillment and t9e res4ission of t9e obligation6wit9 payment of damages in eit9er 4ase! .e may also seek res4ission e0en after 9e 9as

49osen fulfillment6 if t9e later s9ould be4ome impossible!



!


So#rc$ : 1i0elisa 1ealty In4! 0s! @irst Sta! Clara Duilders CorporationG.%. o. 19+=19, (anuar4 1#, 16

Contrib#tor : 2arawan6 +ula

'>>>>'

%ROBL':

Corp entered into a 4ontra4t wit9 " In4 for t9e 4onstru4tion and de0elopment of aresidential subdi0ision! A44ording to its terms6 " In4 was to assume t9e 9oriFontalde0elopment works in t9e remaining M unde0eloped portion of t9e pro?e4t owned by Corp! 3uring t9e 4ourse of t9e pro?e4t6 " In4 9ired a sub4ontra4tor to perform t9e9oriFontal de0elopment works! Sin4e " In4 ran out of funds after only two (# mont9s of 4onstru4tion6 Corp was for4ed to s9oulder part of t9e payment due to t9e sub4ontra4tor!" In4 manifested its intention to ba4k out from t9e 4ontra4t w9en Corp refused toad0an4e any more funds! Corp agreed to reimburse " In4! .owe0er6 a 4onsiderableamount remained unpaid despite se0eral demands! .en4e6 " In4 filed a 4omplaint for res4ission of t9e 4ontra4t against Corp6 4laiming t9e payment of damages for brea49 of 4ontra4t and delay in t9e performan4e of an obligation! @or its part6 Corp asserted t9at

it was not obligated to pay " In4 any amount at all sin4e t9e latter 9ad e0en failed to4omply wit9 its obligation! Is Corp 4orre4tG

S(GGST) ANS*R :

,o! " In4 is entitled to be 4ompensated for t9e de0elopment works it 9ad a44omplis9edon t9e pro?e4t based on t9e prin4iple of =uantum meruit! Case law instru4ts t9at under t9is prin4iple6 a 4ontra4tor is allowed to re4o0er t9e reasonable 0alue of t9e t9ing or ser0i4esrendered despite t9e la4k of a written 4ontra4t6 in order to a0oid un?ust enri49ment!



I!


So#rc$ : Bolden Valley +>ploration6 In4! 0s! 2inkian ining CompanyG.%. o. 1+9, (une 11, 16

Contrib#tor : *ordan6 1ebe44a

'>>>>'

%ROBL':

2C entered into an -perating Agreement5 (-A wit9 BV+I6 granting t9e latter Kfull6e>4lusi0e and irre0o4able possession6 use6 and 4ontrol o0er t9e mining 4laims6 and for t9ee>ploration6 de0elopment and mining of t9e mining 4laims and t9e pro4essing andmarketing of t9e produ4ts for a period of # years! )9e -A 4ontained an e>pressedstipulation allowing e>tra'?udi4ial res4ission if t9eres a 0iolation of t9e -A! )9us2Ce>tra'?udi4ially res4inded t9e -A against BV+I for t9e latters failure to ad0an4e t9ea4tual 4ost for t9e perfe4tion of t9e mining 4laims and 4ost of lease appli4ations! BV+I4ontested 2Cs e>tra'?udi4ial res4ission of t9e -A a0erring t9erein t9at its obligation to pay royalties to 2C arises only w9en t9e mining 4laims are pla4ed in 4ommer4ial produ4tion w9i49 4ondition 9as not yet taken pla4e! Was 2Cs e>tra'?udi4ial res4issionof t9e -A 0alidG

S(GGST) ANS*R :

"+S! In re4ipro4al obligations6 eit9er party may res4ind t9e 4ontra4t upon t9e ot9erssubstantial brea49 of t9e obligationNs 9e 9ad assumed t9ereunder! )9e rig9t of res4issionunder Arti4le %%% is predi4ated on a brea49 of fait9 t9at 0iolates t9e re4ipro4ity between parties to t9e 4ontra4t!#7 )9is retaliatory remedy is gi0en to t9e 4ontra4ting party w9osuffers t9e in?urious brea49 on t9e premise t9at it is Kun?ust t9at a party be 9eld bound tofulfill 9is promises w9en t9e ot9er 0iolates 9is!K

Art! %%%! )9e power to res4ind obligations is implied in re4ipro4al ones6in 4ase one of t9e obligors s9ould not 4omply wit9 w9at is in4umbentupon 9im!)9e in?ured party may 49oose between t9e fulfillment and t9e res4issionof t9e obligation6 wit9 t9e payment of damages in eit9er 4ase! .e mayalso seek res4ission6 e0en after 9e 9as 49osen fulfillment6 if t9e latter s9ould be4ome impossible!



>>>>

)9is is understood to be wit9out pre?udi4e to t9e rig9ts of t9ird personsw9o 9a0e a4=uired t9e t9ing6 in a44ordan4e wit9 Arti4les %8< and %8<<

and t9e ortgage Law!

@urt9ermore6 Dy e>pressly stipulating in t9e -A t9at BV+Is non'payment of royaltieswould gi0e 2C suffi4ient 4ause to 4an4el or res4ind t9e -A6 t9e parties 4learly 9ad4onsidered su49 0iolation to be a substantial brea49 of t9eir agreement!



II!


So#rc$ : anlar 1i4e ill 0s! 3eytoG.%. o. 1+119+, (anuar4 1, 16

Contrib#tor : A0enido6 Anna ae

'>>>>'

%ROBL':

Lea9 is t9e daug9ter of )iffany and was a former employee of )iffany 1i4e ill! Lea94ontra4ted a business wit9 ar0ins 1i4e ill w9erein s9e made se0eral pur49ases of ri4e! Lea9 issued post dated 49e4ks from 9er personal a44ount in fa0our of ar0in!/pon presentment of t9e first two 49e4ks6 t9e same boun4ed due to insuffi4ien4y of funds! ar0in made demand for payment against )iffany and Lea9 but went un9eeded!ar0in t9en filed a 4omplaint for sum of money against )iffany and Lea9! )9e purposeof t9e Complaint is to 9old )iffany liable from t9e loan in4urred by Lea9! )9e )rial Courtfa0oured t9e 4ontention of ar0in and 9eld )iffany solidarily liable to Lea9! Was t9e)rial Court 4orre4tG

S(GGST) ANS*R :

,o6 t9e )rial Court was not 4orre4t!

)9e law pro0ides t9at it is a basi4 prin4iple in law t9at 4ontra4ts 4an bind only t9e partiesw9o 9ad entered into it; it 4annot fa0or or pre?udi4e a t9ird person!K /nder Arti4le %8%%of t9e Ci0il Code6 4ontra4ts take effe4t only between t9e parties6 t9eir assigns and 9eirs!)9us6 ar0in may sue Lea96 but not )iffany! Lea9 was t9e only party to t9e ri4e supply4ontra4t wit9 ar0in!



III!


So#rc$ : Spouses Dinua 0s! -ngG.%. o. &1&=, (une 19, 16

Contrib#tor : Quiron6 aria Cristina

'>>>>'

%ROBL':

Lanie was 4on0i4ted of +stafa upon 4omplaint of 2erla and senten4ed to imprisonment of up to 8$ years of re4lusion perpetua! S9e was also ordered to pay 2#6#<6$$$!$$ wit9%$Minterest and damages!

)o a0oid 4riminal liability6 s9e settled 9er liability of indebtedness t9roug9 and e>e4utionof separate real estate mortgages o0er Bils properties wort9 256$$$6$$$!$$!

.owe0er6 Lanie failed to pay t9e obligation6 t9us Bra4e e>tra?udi4ially fore4losed t9e properties 4o0ered by t9e real estate mortgage! Lanie and Bil t9en filed a 4ase for 3e4laration of ,ullity -f ortgage Contra4ts6 4iting t9at t9e mortgage do4uments wereHe>e4uted under duress6 as t9ey were suffering from t9e effe4ts of Lanies 4on0i4tion and

t9e fear t9at s9e will go to ?ail t9us 4ould not 9a0e freely entered into t9e 4ontra4t!

Lanie and Bil furt9er 4laim t9at Bra4e rammed t9e two mortgage 4ontra4ts on Bilst9roat6 ?ust so to make 9im sign t9e said do4uments!

Were Lanie and Bils defense t9at t9ey e>e4uted t9e mortgage 4ontra4t under duresstenableG

S(GGST) ANS*R :

,o! Lanie and Bils defense is not tenable! Bils 4laim t9at 9e e>e4uted t9e mortgage4ontra4t due to fear t9at Lanie will go to ?ail is not t9e intimidation referred to by law! Inasserting t9at t9e abo0e'mentioned 4ir4umstan4es 4onstituted fear6 duress and t9reat6 t9eymissed altoget9er t9e essential ingredients t9at would =ualify t9e a4t 4omplained of asintimidation6 t9at t9e t9reat must be an un?ust a4t!



Branting t9at t9e mortgage 4ontra4ts were indeed e>e4uted under duress6 t9e last paragrap9 of Arti4le %88 of t9e Ci0il Code pro0ides t9at6 HA t9reat to enfor4e ones4laim t9roug9 4ompetent aut9ority6 if t9e 4laim is ?ust and legal6 does not 0itiate 4onsent!Lanie profited from it as s9e did not go to ?ail!

In 4ases in0ol0ing mortgages6 a preponderan4e of t9e e0iden4e is essential to establis9 its0alidity6 and in order to s9ow fraud6 duress6 or undue influen4e of a mortgage6 a 4lear and4on0in4ing proof is ne4essary!



IV!


So#rc$ : 1ebus=uillo 0s! Spouses 1ebus=uillo'Bual0eFG.%. o. 6+, (une 6, 6

Contrib#tor : anuales6 +isone Dri>

'>>>>'

%ROBL':

W9at are t9e kinds of simulation of a 4ontra4tG Bi0e at least two distin4tions!

S(GGST) ANS*R :

Simulation of a 4ontra4t may be absolute or relati0e! )9e former takes pla4e w9en t9e parties do not intend to be bound at all; t9e latter6 w9en t9e parties 4on4eal t9eir trueagreement! An absolutely simulated or fi4titious 4ontra4t is 0oid! A relati0e simulation6 w9en it doesnot pre?udi4e a t9ird person and is not intended for any purpose 4ontrary to law6 morals6

good 4ustoms6 publi4 order or publi4 poli4y binds t9e parties to t9eir real agreement!

In absolute simulation6 t9ere is a 4olorable 4ontra4t but it 9as no substan4e as t9e parties9a0e no intention to be bound by it! )9e main 49ara4teristi4 of an absolute simulation ist9at t9e apparent 4ontra4t is not really desired or intended to produ4e legal effe4t or inany way alter t9e ?uridi4al situation of t9e parties! As a result6 an absolutely simulated or fi4titious 4ontra4t is 0oid6 and t9e parties may re4o0er from ea49 ot9er w9at t9ey may9a0e gi0en under t9e 4ontra4t! .owe0er6 if t9e parties state a false 4ause in t9e 4ontra4t to4on4eal t9eir real agreement6 t9e 4ontra4t is relati0ely simulated and t9e parties are still bound by t9eir real agreement! .en4e6 w9ere t9e essential re=uisites of a 4ontra4t are present and t9e simulation refers only to t9e 4ontent or terms of t9e 4ontra4t6 t9e

agreement is absolutely binding and enfor4eable between t9e parties and t9eir su44essorsin interest!



V!


So#rc$ : International .otel Corporation 0s! *oa=uinG.%. o. 1#93=1, April 1, 13

Contrib#tor : Cata=uis6 *asmine 1awen

'>>>>'

%ROBL':

1odrigo *a0ier works for a multinational 4ompany primarily in0ol0ed in 4onstru4ting9otels6 t9e )ipton .otel Industries ().I! -n *uly 76 %6 t9e Doard of 3ire4tors soug9tte49ni4al assistan4e for 9im to obtain a loan for t9e 4onstru4tion of a new lu>ury 9otel to be 4onstru4ted in Lapu'Lapu City6 to be guaranteed by t9e 3e0elopment Danks of t9e29ilippines! )9e board asked 9im to submit a proposal for t9em to grant 9is loan! )9e3D2 appro0ed t9e appli4ation sub?e4t to 4ertain 4onditions! )9e board6 likewise6 granted9is proposal and agreed to issue to 9im s9ares of sto4k as payment of 9is ser0i4es!

)9ey 4ommen4ed negotiations wit9 foreign finan4er6 Strong9old Corporation! 3uring t9enegotiations6 1odrigo and one of t9e dire4tors of t9e board6 )omas San49eF6 met wit9anot9er foreign finan4ier6 t9e Westworks Industries! W9en Strong9old failed to deli0er

t9e loan6 ).I would submit Westworks for 3D2s 4onsideration! .en4e6 3D2 4an4elledits pre0ious guaranty! -n September #$6 %56 3D2 denied t9e appli4ation for guarantyfor failure to 4omply wit9 t9e 4onditions! 3ue to 1odrigos failure to se4ure t9e loan6 ).I4an4elled t9e s9ares of sto4k pre0iously issued to 9im! 1odrigo filed a 4ase against ).Ialleging t9at t9e 4an4ellation of t9e s9ares 9ad been illegal6 ).I answered t9at t9e s9aresissued to 1odrigo as 4ompensation for t9eir Hpast and future ser0i4es 9ad been issued in0iolation of Se4tion % of t9e Corporation Code! )9e trial 4ourt ruled in fa0or of 1odrigo*a0ier stating t9at in t9e 4onte>t of Arti4le %#87 of t9e Ci0il Code6 1odrigo 9adsubstantially performed 9is obligations and 9ad be4ome entitled to be paid for 9isser0i4es as 4ompensation! Is t9e 4ompensation properG

S(GGST) ANS*R :

,o! It is well to note t9at Arti4le %#87 applies only w9en an obligor admits brea49ing t9e4ontra4t after 9onestly and fait9fully performing all t9e material elements t9ereof e>4eptfor some te49ni4al aspe4ts t9at 4ause no serious 9arm to t9e obligee! ).I 4orre4tly



submits t9at t9e pro0ision refers to an omission or de0iation t9at is slig9t6 or te49ni4aland unimportant6 and does not affe4t t9e real purpose of t9e 4ontra4t!

Dy reason of t9e in4onse=uential nature of t9e brea49 or omission6 t9e law deems t9e performan4e as substantial6 making it t9e obligees duty to pay! )9e 4ompulsion of

payment is predi4ated on t9e substantial benefit deri0ed by t9e obligee from t9e partial performan4e! Alt9oug9 4ompelled to pay6 t9e obligee is nonet9eless entitled to anallowan4e for t9e sum re=uired to remedy omissions or defe4ts and to 4omplete t9e work agreed upon! Con0ersely6 t9e prin4iple of substantial performan4e is inappropriate w9ent9e in4omplete performan4e 4onstitutes a material brea49 of t9e 4ontra4t! A 4ontra4tual brea49 is material if it will ad0ersely affe4t t9e nature of t9e obligation t9at t9e obligor promised to deli0er6 t9e benefits t9at t9e obligee e>pe4ts to re4ei0e after full 4omplian4e6and t9e e>tent t9at t9e nonperforman4e defeated t9e purposes of t9e 4ontra4t!A44ordingly6 for t9e prin4iple embodied in Arti4le %#87 to apply6 t9e failure of 1odrigo to4omply wit9 t9eir 4ommitment s9ould not defeat t9e ultimate purpose of t9e 4ontra4t!



VI!


So#rc$ : 3eganos 0s! 2eopleG.%. o. 1=9=, 8toer 16, 13

Contrib#tor : amao6 Arief

'>>>>'

%ROBL':

.arry -sborn re4ei0ed from 2eter 2arker gold and pie4es of ?ewelry wort9 27$6$$$!$$6under e>press obligation to sell t9e same on 4ommission and remit t9e pro4eeds t9ereof or return t9e unsold gold and pie4es of ?ewelry!

-sborn was able to pay only up to a 4ertain point! .owe0er6 re4eipt nos! %7 to 57 datedfrom April #56 #$%8 up to *uly #$6 #$%8 were no longer paid and t9e .arry -sborn failedto return t9e ?ewelry 4o0ered by su49 re4eipts!

.arry -sborn was 49arged wit9 estafa under t9e 1e0ised 2enal Code! .e appealed and4ontended t9at 9is partial payments to t9e 4omplainant and 9is purported agreement to pay t9e remaining obligations no0ated 9is 4ontra4t wit9 9im from agen4y to loan6 t9ereby

4on0erting 9is liability from 4riminal to 4i0il! Is 9is 4ontention 9olds waterG

S(GGST) ANS*R :

,o6 9is 4ontention donJt 9old water! -sborns 4laim was de0oid of basis be4ause in Ci0ilLaw t9e a44eptan4e of partial payments6 wit9out furt9er 49ange in t9e original relation between t9e 4omplainant and t9e a44used6 4an not produ4e no0ation! @or t9e latter toe>ist6 t9ere must be proof of intent to e>tinguis9 t9e original relations9ip6 and su49 intent4an not be inferred from t9e mere a44eptan4e of payments on a44ount of w9at is totallydue!

,o0ation is ne0er presumed6 and t9e animus no0andi6 w9et9er totally or partially6 mustappear by e>press agreement of t9e parties6 or by t9eir a4ts t9at are too 4lear andune=ui0o4al to be mistaken!



VII!


So#rc$ : ondragon 2ersonal Sales6 In4! 0s! Sola6 *r!G.%. o. 1&699, (anuar4 1, 13

Contrib#tor : *urolan6 arymar

'>>>>'

%ROBL':

*C Corp!6 a 4orporation engaged in t9e business of selling 0arious beauty produ4tst9roug9 a network of sales representati0es6 entered into a Contra4t of Ser0i4es wit9 ,atalia .ipolito for a period of two years! /nder t9e said 4ontra4t6 ,atalia6 as ser0i4e4ontra4tor6 would pro0ide ser0i4e fa4ilities to *C Corp!Js produ4ts in 2ogapog City andas su496 s9e was entitled to 4ommission or ser0i4e fee! 2rior to t9e e>e4ution of t9e4ontra4t6 9owe0er6 ,atalias sister6 Veroni4a .ipolito'3aF6 9ad an e>isting obligation wit9*C Corp! arising from 9er 3istributors9ip Agreement wit9 t9e latter! -n ,o0ember #6#$$6 ,atalia wrote a letter addressed to Antonio C! /y6 *C Corp!Js Vi4e'2resident for @inan4e6 w9erein s9e a4knowledged and 4onfirmed 9er sisters indebtedness to *C int9e amount of 2$$6$$$!$$ and6 toget9er wit9 9er sister6 bound 9erself to pay oninstallment basis t9e said debt! Conse=uently6 *C wit99eld t9e payment of ,ataliaJs

ser0i4e fees from @ebruary to April #$$ and applied t9e same as partial payments to t9edebt w9i49 s9e obligated to pay! -n April #6 #$$6 ,atalia 4losed and suspendedoperation of 9er offi4e w9ere *CJs produ4ts were stored! ,atalia t9en filed a Complaintfor a44ounting and res4ission against *C alleging t9at t9e latter wit99eld portions of 9er ser0i4e fees and a0erred t9at s9e was made to belie0e t9at t9e sales 4ommission 4ontainedin *CJs memorandum dated *uly 6 #$$7 would be appli4able to 9er; t9at it wasimproper for *C to 4onfuse ,ataliaJs transa4tion wit9 t9at of 9er sister as it wasdi0ergent in nature and terms! Is ,atalia 4orre4tG

S(GGST) ANS*R :

,o6 ,atalia is not 4orre4t!

)9e law pro0ides t9at 4ompensation is a mode of e>tinguis9ing to t9e 4on4urrent amountt9e obligations of persons w9o in t9eir own rig9t and as prin4ipals are re4ipro4allydebtors and 4reditors of ea49 ot9er!



In t9e problem gi0en6 by 0irtue of t9e letter e>e4uted by ,atalia in fa0or of *C6 s9esolidarily bound 9erself to pay su49 debt! *C Corp!Js a4t of wit99olding ,ataliaJsser0i4e feesN4ommissions and applying t9em to t9e latterJs outstanding obligation wit9 t9eformer is merely an a4knowledgment of t9e legal 4ompensation t9at o44urred byoperation of law between t9e parties!



VIII!


So#rc$ : Land Dank of t9e 29ilippines 0s! .eirs of Spouses *or?a 1igor'SorianoG.%. o. 1&931, (anuar4 3, 13

Contrib#tor : "gana6 Angeline

'>>>>'

%ROBL':

Se0eral properties owned by late spouses r! and rs! Datongbakal be4ame sub?e4t to-peration Land )ransfer (-L) were 0alued by t9e Land Dank and t9e 3epartment of Agrarian 1eform (3A1 at 2%$6$$$!$$N9e4tare! )9e 49ildren 4ontended t9at su490aluation was too low and so an a4tion for 4ompensation was 4ommen4ed! .owe0er during t9e penden4y of t9e a4tion Land Dank submitted to t9e Court a so'4alled *ointanifestation and otion(1e: /n4onditional A44eptan4e of 1e0aluation w9i49 4onsistt9ere 4ompromise agreement and praying to resol0e t9e 4ase on t9e basis of t9ea44eptan4e of payment by t9e 49ildren! If you were t9e ?udge6 will you grant t9e motionG

S(GGST) ANS*R :

"es!

/nder Arti4le #$#< of t9e Ci0il Code6 a 4ompromise is a 4ontra4t w9ereby t9e parties6 bymaking re4ipro4al 4on4essions6 a0oid a litigation or put an end to one already4ommen4ed! A44ordingly6 a 4ompromise is eit9er ?udi4ial6 if t9e ob?e4ti0e is to put an endto a pending litigation6 or e>tra?udi4ial6 if t9e ob?e4ti0e is to a0oid a litigation! As a4ontra4t6 a 4ompromise is perfe4ted by mutual 4onsent! .owe0er6 a ?udi4ial 4ompromise6w9ile immediately binding between t9e parties upon its e>e4ution6 is not e>e4utory untilit is appro0ed by t9e 4ourt and redu4ed to a ?udgment!% )9e 0alidity of a 4ompromise isdependent upon its 4omplian4e wit9 t9e re=uisites and prin4iples of 4ontra4ts di4tated by

law! Also6 t9e terms and 4onditions of a 4ompromise must not be 4ontrary to law6 morals6good 4ustoms6 publi4 poli4y and publi4 order!



I!


So#rc$ : Constantino 0s! .eirs of 2edro Constantino6 *r!G.%. o. 191#9, 8toer , 13

Contrib#tor : 2erias6 C9ristine *oymarie

'>>>>'

%ROBL':

3on @a4undo Sr! died lea0ing a 8$6$$$ s=uare meters of land to 9is 49ildren; Aida6 Lornaand )ito! )9e 9eirs filed for partition! Aida a4ted as t9e administrator sin4e Lorna is li0ingabroad! Sin4e Aida was interested in Lornas s9are so s9e paid all t9e ta>es and e>e4uteda 4ontra4t of sale in fa0or of 9er as payment for all t9e e>penses in w9i49 Lorna wasunable to pay! Lorna be4ame ill w9ile li0ing abroad and needed money for 9er medi4ale>penses; s9e e>e4uted a 4ontra4t of sale6 selling t9e same par4el of land to )ito! Lornadied wit9out an 9eir! -ne year after )itos deat9; Vi46 9is only son 4laim t9e s9are of Lorna from Aida as it was already sold to 9is fat9er s9owing a deed of absolute sale andt9e re4eipt as e0iden4e of payment! Aida refused to gi0e Lornas s9are6 as s9e 9erself is a9older of a deed of sale in w9i49 s9e 4laimed to be e>e4uted by Lorna before s9e got ill!Vi4 filed a 4ase against Aida asking t9e 4ourt to nullify t9e 4ontra4t of sale between Lorna

and Aida 4laiming it was fi4titious and fraudulently a4=uired! Aidas defense is t9at t9eyare in pari deli4to as )ito; 9is fat9er knew t9at s9e paid for all t9e e>penses in4ludingta>es 9en4e t9e law lea0es t9em as t9ey are and denies re4o0ery by eit9er one of t9em! Is9er 4ontention 4orre4tG

S(GGST) ANS*R :

,o6 In pari deli4to6 latin for Kin e=ual fault 4onnotes t9at two or more people are at faultor are guilty of a 4rime! ,eit9er 4ourts of law nor e=uity will interpose to grant relief tot9e parties6 w9en an illegal agreement 9as been made6 and bot9 parties stand in pari

deli4to! /nder t9e pari deli4to do4trine6 t9e parties to a 4ontro0ersy are e=ually 4ulpableor guilty6 t9ey s9all 9a0e no a4tion against ea49 ot9er6 and it s9all lea0e t9e parties w9ereit finds t9em!

Arti4le %7%# of t9e Ci0il Code t9at breat9es life to t9e do4trine speaks of t9e rig9ts andobligations of t9e parties to t9e 4ontra4t wit9 an illegal 4ause or ob?e4t6 w9i49 does not4onstitute a 4riminal offense! It applies to 4ontra4ts6 w9i49 are 0oid for illegality of



sub?e4t matter and not to 4ontra4ts rendered 0oid for being simulated6 or t9ose in w9i49t9e parties do not really intend to be bound t9ereby! Spe4ifi4ally6 in pari deli4to situationsin0ol0e t9e parties in one 4ontra4t w9o are bot9 at fault6 su49 t9at neit9er 4an re4o0er nor 9a0e any a4tion against ea49 ot9er!

In t9is 4ase6 t9ere are two deeds of sale6 one was fraudulently a4=uired and t9e ot9er one0alidly e>e4uted! )9e separate deeds 4ame into being out of an identi4al intention t9at isto transfer owners9ip of t9e land 9owe0er; t9e first deed was a4=uired t9roug9 simulationor fi4titious sale! Corollarily6 gi0en t9e 49ara4ter and nature of t9e first deed as being 0oidand in e>istent6 it 9as6 as a 4onse=uen4e6 of no for4e and effe4t from t9e beginning6 as if it9ad ne0er been entered into and w9i49 4annot be 0alidated eit9er by time or ratifi4ation!

.en4e6 t9e prin4iple of in pari deli4to 4annot be applied!



!


So#rc$ : Consolidated Industrial Bases6 In4! 0s! Alabang edi4al Center G.%. o. 191+93, ovemer 13, 13

Contrib#tor : "ray6 19ea

'>>>>'

%ROBL':

Consolidated Industrial Bases6 In4! (CIBI is a domesti4 4orporation engaged in t9e business of selling industrial gases and installing 4entraliFed medi4al and 0a4uum pipeline system! 1espondent Alabang edi4al Center (AC6 on t9e ot9er 9and6 is adomesti4 4orporation operating a 9ospital business!

-n August %76 %6 CIBI6 as 4ontra4tor and AC6 as owner6 entered into a 4ontra4tw9ereby t9e former bound itself to pro0ide labor and materials for t9e installation of amedi4al gas pipeline system for t9e first6 se4ond and t9ird floors of t9e 9ospital! After6 t9e parties entered into anot9er agreement t9is time for t9e 4ontinuation of t9e 4entraliFedmedi4al o>ygen and 0a4uum pipeline system in t9e 9ospitals fourt9 & fift9 floors!

CIBI t9en sent AC C9arge Sales In0oi4e as 4ompletion billing for t9e unpaid balan4eof 2%6#56877!7# for t9e installation pro?e4t! W9en t9e sales in0oi4e was left un9eeded6CIBI sent a demand letter to AC! AC6 9owe0er6 still failed to pay t9us promptingCIBI to file a 4olle4tion suit before t9e 1)C on September %6 %<! 1)C rendered its3e4ision w9erein it ad?udged AC to 9a0e brea49ed t9e 4ontra4t for failure to performits obligation of paying t9e remaining balan4e of t9e 4ontra4t pri4e! CIBI6 on t9e ot9er 9and6 was found to 9a0e fait9fully 4omplied wit9 its 4ontra4tual obligations!

a! W9at are re4ipro4al obligationsG b! Are t9e sub?e4t installation 4ontra4ts bear t9e features of re4ipro4al obligations!

S(GGST) ANS*R :

a! K1e4ipro4al obligations are t9ose w9i49 arise from t9e same 4ause6 and in w9i49ea49 party is a debtor and a 4reditor of t9e ot9er6 su49 t9at t9e obligation of one isdependent upon t9e obligation of t9e ot9er! )9ey are to be performed simultaneously6 sot9at t9e performan4e of one is 4onditioned upon t9e simultaneous fulfillment of t9e



ot9er!K In re4ipro4al obligations6 neit9er party in4urs in delay if t9e ot9er does not 4omplyor is not ready to 4omply in a proper manner wit9 w9at is in4umbent upon 9im! @rom t9emoment one of t9e parties fulfils 9is obligation6 delay by t9e ot9er begins!

Arti4le %% of t9e Ci0il Code pro0ides: )9ose obliged to deli0er or to do

somet9ing in4ur in delay from t9e time t9e obligee ?udi4ially or e>tra?udi4ially demands from t9em t9e fulfillment of t9eir obligation!

.owe0er6 t9e demand by t9e 4reditor s9all not be ne4essary in order t9atdelay may e>ist:

(% W9en t9e obligation or t9e law e>pressly so de4lares; or (# W9en from t9e nature and t9e 4ir4umstan4es of t9e obligation itappears t9at t9e designation of t9e time w9en t9e t9ing is to be deli0eredor t9e ser0i4e is to be rendered was a 4ontrolling moti0e for t9eestablis9ment of t9e 4ontra4t; or

(8 W9en demand would be useless6 as w9en t9e obligor 9as rendered it beyond 9is power to perform!

In re4ipro4al obligations6 neit9er party in4urs in delay if t9e ot9er doesnot 4omply or is not ready to 4omply in a proper manner wit9 w9at isin4umbent upon 9im! @rom t9e moment one of t9e parties fulfills 9isobligation6 delay by t9e ot9er begins! (+mp9asis ours

b! "es6 t9e sub?e4t installation 4ontra4ts bear t9e features of re4ipro4al obligations!/nder t9e sub?e4t 4ontra4ts6 CIBI as 4ontra4tor bound itself to install a 4entraliFedmedi4al o>ygen and 0a4uum pipeline system for t9e first to fift9 floors of AC6 w9i49 inturn6 undertook to pay t9e 4ontra4t pri4e t9erefor in t9e manner pres4ribed in t9e 4ontra4t!Deing re4ipro4al in nature6 t9e respe4ti0e obligations of AC and CIBI are dependentupon t9e performan4e of t9e ot9er of its end of t9e deal su49 t9at any 4laim of delay or non'performan4e 4an only prosper if t9e 4omplaining party 9as fait9fully 4omplied wit9its own obligation!



I!


So#rc$ : @ormaran 0s! -ngG.%. o. 19==6, (ul4 9, 13

Contrib#tor : Da4also6 Vernie 1ose

'>>>>'

%ROBL':

Lorna owns a par4el of land w9i49 was donated to 9er inter0i0os by 9er un4le and aunt(t9e parents of Blenda on *une #6 %5! )9at on August %#6 %5 upon t9e proddingsand representation of Blenda6 t9at s9e badly needed a 4ollateral for a loan w9i49 s9e wasapplying from a bank to e=uip 9er dental 4lini46 Lorna made it appear t9at s9e sold one'9alf of t9e afore' des4ribed par4el of land to Blenda by e>e4uting a 3eed of AbsoluteSale; t9at t9e sale was totally wit9out any 4onsideration and fi4titious! As owner t9ereof6Lorna de4lared t9e land for ta>ation purposes and religiously paid its realty ta>es! S9emortgaged t9e land on ay %<6 %5< to Aklan 3e0elopment Dank to se4ure payment of aloan in t9e amount of 2#86$$$! Blenda did not pus9 t9roug9 wit9 t9e loan be4ause t9e banks interest t9erefore was 9ig9 and t9at t9ey 4rampled t9e 3eed of Absolute Sale andt9rew it away! Blenda paid for t9e first time t9e realty ta>es of t9e land in =uestion on

*anuary 6 % and up to t9e present time! -n ay 8$6 %6 Blenda filed a 4omplaintfor unlawful detainer against Lorna before t9e 5t9 uni4ipal Cir4uit )rial Court of Iba?ay',abas6 Iba?ay6 Aklan! )9e 4ase was de4ided on September #6 %56 in fa0or of Blenda; ordering Lorna to 0a4ate t9e land in =uestion! @rom t9e time of t9e alleged sale6Lorna 9as been in a4tual possession of t9e sub?e4t land and 9er 9ouse stood on a part of t9e sub?e4t land! )9e do4ument of sale affe4ting t9e land in =uestion was notimmediately registered after its e>e4ution in %5 but only on ay #6 %% and t9erewere no impro0ements t9ereon! Is t9e 3eed of Absolute Sale null and 0oid for being anabsolutely simulated 4ontra4tG

S(GGST) ANS*R :

"es! Art! %87 of t9e Ci0il Code pro0ides t9at Simulation of a 4ontra4t may be absoluteor relati0e! )9e former takes pla4e w9en t9e parties do not intend to be bound at all; t9elatter6 w9en t9e parties 4on4eal t9eir true agreement!



Art! %87 pro0ides t9at an absolutely simulated or fi4titious 4ontra4t is 0oid! A relati0esimulation6 w9en it does not pre?udi4e a t9ird person and is not intended for any purpose4ontrary to law6 morals6 good 4ustoms6 publi4 order or publi4 binds t9e parties to t9eir real agreement!

In t9e present 4ase6 t9e sub?e4t 3eed of Sale is indeed simulated6 as it is: (% totallyde0oid of 4onsideration; (# it was e>e4uted on August %#6 %56 less t9an two mont9sfrom t9e time t9e sub?e4t land was donated to Lorna on *une #6 %5 by no less t9an t9e parents of Blenda; (8 on ay %<6 %5<6 Lorna mortgaged t9e land to t9e Aklan3e0elopment Dank for a 2#86$$$!$$ loan; (7 from t9e time of t9e alleged sale6 Lorna 9as been in a4tual possession of t9e sub?e4t land; ( t9e alleged sale was registered on ay#6 %% or about twenty four (#7 years after e>e4ution; ( Blenda ne0er introdu4ed anyimpro0ement on t9e sub?e4t land; and (5 Lornas 9ouse stood on a part of t9e sub?e4tland! )9ese are fa4ts and 4ir4umstan4es w9i49 may be 4onsidered badges of bad fait9 t9attip t9e balan4e in fa0or of Lorna!

H)9e amplitude of foregoing undisputed fa4ts and 4ir4umstan4es 4learly s9ows t9at t9esale of t9e land in =uestion was purely simulated! It is 0oid from t9e 0ery beginning(Arti4le %876 ,ew Ci0il Code! If t9e sale was legitimate6 Blenda s9ould 9a0eimmediately taken possession of t9e land6 de4lared in 9er name for ta>ation purposes6registered t9e sale6 paid realty ta>es6 introdu4ed impro0ements t9erein and s9ould not9a0e allowed Lorna to mortgage t9e land! )9ese omissions properly militated againstBlendas submission t9at t9e sale was legitimate and t9e 4onsideration was paid!



II!


So#rc$ : Sando0al S9ipyard6 In4! 0s! 29ilippine er49ant arine A4ademyG.%. o. 199=33, April 1, 13

Contrib#tor : 1i0era6 Clieford

'>>>>'

%ROBL':

)9e 2A entered into S9ip Duilding Contra4t wit9 Sando0al S9ipyards6 In4! wit9 t9elatter obliging itself to 4onstru4t two units of lifeboats to be used by t9e students of 2A for training! )9e parties agreed on t9e spe4ifi4ations of t9e boats6 t9e date of deli0ery and t9e amount of payment as stated in t9e 4ontra4t! 2A paid t9e agreed pri4e! .owe0er6 upon inspe4tion by t9e 2A6 it found t9at t9e 4onstru4tion being done by t9e petitioner was not in 4onformity wit9 t9e appro0ed plan! Sando0al asked for e>tension of t9e time of deli0ery of t9e lifeboats w9i49 was granted by 2A!.owe0er6 Sando0al was not able to 4omply wit9 t9e agreed spe4ifi4ations for t9e boatsand t9e agreed time of deli0ery despite repeated demands from 2A! 2A filed a4ase for res4ission of t9e 4ontra4t and damages! 1ule of t9e 4ase!

S(GGST) ANS*R :

Sando0al is liable! Art! %%%! )9e power to res4ind obligations is implied in re4ipro4alones6 in 4ase one of t9e obligors s9ould not 4omply wit9 w9at is in4umbent upon 9im!)9e in?ured party may 49oose between t9e fulfillment and t9e res4ission of t9e obligation6wit9 t9e payment of damages in eit9er 4ase! .e may also seek res4ission6 e0en after 9e9as 49osen fulfillment6 if t9e latter s9ould be4ome impossible!

)9e fa4tual 4ir4umstan4es6 9owe0er6 rendered mutual restitution impossible! As it ne0er re4ei0ed t9e ob?e4t of t9e 4ontra4t6 it 4annot return t9e ob?e4t! /nfortunately6 t9e same

t9ing 4annot be said of Sando0al! 2A already paid Sando0al t9e 4onstru4tion of t9elifeboats! @or t9is reason6 Sando0al s9ould return t9e same amount to 2A6 wit9 payment of damages!



III!


So#rc$ : .ur )in "ang 0s! 2eopleG.%. o. 1+#11&, August 16, 13

Contrib#tor : AraOas6 ,iOa Bra4e

'>>>>'

%ROBL':

etrobank e>tended se0eral 4ommer4ial letters of 4redit (LCs to Superma>! )9ese4ommer4ial LCs were used by Superma> to pay for t9e deli0ery of se0eral 4onstru4tionmaterials w9i49 will be used in t9eir 4onstru4tion business! etrobank re=uired petitioner6 as representati0e and Vi4e'2resident for Internal Affairs of Superma>6 to signtwenty'four (#7 trust re4eipts as se4urity for t9e 4onstru4tion materials and to 9old t9osematerials or t9e pro4eeds of t9e sales in trust for etrobank to t9e e>tent of t9e amountstated in t9e trust re4eipts! W9en t9e #7 trust re4eipts fell due and despite t9e re4eipt of ademand letter dated August %6 #$$$6 Superma> failed to pay or deli0er t9e goods or pro4eeds to etrobank! Instead6 Superma>6 t9roug9 petitioner6 re=uested t9e restru4turingof t9e loan! W9en t9e intended restru4turing of t9e loan did not materialiFe6 etrobank sent anot9er demand letter w9i49 fell on deaf ears6 prompting t9e filing of a 4riminal

4omplaint for +stafa against petitioner!

@or 9is defense6 w9ile admitting signing t9e trust re4eipts6 petitioner argued t9at said trustre4eipts were demanded by etrobank as additional se4urity for t9e loans e>tended toSuperma> for t9e pur49ase of 4onstru4tion e=uipment and materials! 2etitioner arguedt9at etrobank knew all along t9at t9e 4onstru4tion materials sub?e4t of t9e trust re4eiptswere ,-) intended for resale but for personal use of Superma> relating to its4onstru4tion business! 2etitioner 4ontends t9at t9e transa4tions between t9e parties do not4onstitute trust re4eipt agreements but rat9er of simple loans and 9en4e 9e is not guilty!

Was transa4tion between petitioner and etrobank was a trust re4eipt transa4tion -1 one

of simple loan! +>plain your answer!

S(GGST) ANS*R :

)9e dealing between petitioner and etrobank was ,-) a trust re4eipt transa4tion butone of simple loan!



In determining t9e nature of a 4ontra4t6 4ourts are not bound by t9e title or name gi0en byt9e parties! )9e de4isi0e fa4tor in e0aluating su49 agreement is t9e intention of t9e parties6 as s9own not ne4essarily by t9e terminology used in t9e 4ontra4t but by t9eir 4ondu4t6 words6 a4tions and deeds prior to6 during and immediately after e>e4uting t9eagreement! As su496 t9erefore6 do4umentary and parol e0iden4e may be submitted and

admitted to pro0e su49 intention!

2etitioners admission t9at 9e signed t9e trust re4eipts on be9alf of Superma>6 w9i49failed to pay t9e loan or turn o0er t9e pro4eeds of t9e sale or t9e goods to etrobank upon demand does not 4on4lusi0ely pro0e t9at t9e transa4tion was6 indeed6 a trustre4eipts transa4tion! In a4tuality6 t9e parties really intended a 4ontra4t of loan! In pre0ious4ases6 t9e Court 9as ruled t9at t9e fa4t t9at t9e entruster bank knew e0en before t9ee>e4ution of t9e trust re4eipt agreements t9at t9e 4onstru4tion materials 4o0ered werene0er intended by t9e entrustee for resale or for t9e manufa4ture of items to be sold butfor use in t9e fabri4ation of steel 4ommuni4ation towers is suffi4ient to pro0e t9at t9etransa4tion was a simple loan and not a trust re4eipts transa4tion!

W9en bot9 parties enter into an agreement knowing fully well t9at t9e return of t9e goodssub?e4t of t9e trust re4eipt is not possible e0en wit9out any fault on t9e part of t9e trustee6it is not a trust re4eipt transa4tion as t9e only obligation a4tually agreed upon by t9e parties would be t9e return of t9e pro4eeds of t9e sale transa4tion! )9is transa4tion be4omes a mere loan6 w9ere t9e borrower is obligated to pay t9e bank t9e amount spentfor t9e pur49ase of t9e goods!



IV!


So#rc$ : * 2lus Asia 3e0elopment Corporation 0s! /tility Assuran4eCorporation

G.%. o. 1++=#, (une =, 13

Contrib#tor : Solon6 1oger Den?amin

'>>>>'

%ROBL':

+ Corporation entered into a 4ontra4t wit9 to 4onstru4t a 4ondominium! )9e 4ontra4tstipulated among ot9ers t9at 9ad one year to 4omplete t9e pro?e4t along wit9 pro0isions for delay! )9e 4ontra4t was signed and submitted t9e re=uired 2erforman4eDond issued by B Surety Corporation! + Corporation paid t9e mont9ly installments to religiously but an e0aluation in t9e t9 mont9 of t9e pro?e4t re0ealed t9at only #M was4ompleted! + Corporation ad0ised of t9e delay6 9owe0er6 little progress was madedespite assuran4es of ! @or t9is reason + Corporation terminated t9e 4ontra4t and filed a4ase against and B Surety Corporation!

4ontended t9at t9e one year period 9ad yet to e>pire and t9at t9e 4ase was premature!

-n t9e ot9er 9and B Corporation argued t9at it 9ad paid up to t9e stipulated amount andt9us its liability was e>tinguis9ed!

)9e lower 4ourt ruled t9at t9ere was delay on t9e part of and t9at B Corporation 9ad to pay t9e entire amount! -n appeal6 t9e Court of Appeals re0ersed t9e ruling t9at 9adin4urred delay w9i49 entitled + Corporation to t9e stipulated li=uidated damages andunre4ouped down payment!

W9at are t9e 4onditions before an obligee 4an 9old an obligor in defaultG Was t9eredefault in t9is 4aseG

S(GGST) ANS*R :

"es6 t9ere is default in t9is 4ase! /nder Arti4le %% of t9e ,ew Ci0il Code t9ere isdefault w9en: H)9ose obliged to deli0er or to do somet9ing in4ur in delay from t9e timet9e obligee ?udi4ially or e>tra?udi4ially demands from t9em t9e fulfillment of t9eir obligation! )9e re=uisites for a debtor to be in default are:



(% )9at t9e obligation be demandable and already li=uidated;(# )9at t9e debtor delays performan4e; and(8 )9at t9e 4reditor re=uires t9e performan4e ?udi4ially or e>tra?udi4ially!

In t9e 4ase at bar6 t9e 4ontra4t pro0ided for a delay 4lause and + Corporation 9ad alreadysent letter re=uests to ad0ising 9im of t9e delay! 3espite t9is still 4ontinued to delay9is obligation! is t9erefore in default of 9is obligation to + Corporation!



V!


So#rc$ : @ontana 1esort and Country Club6 In4! 0s! Spouses )anG.%. o. 1#6=&, (anuar4 3, 1

Contrib#tor : Buma6 Israel

'>>>>'

%ROBL':

3a0e +dward boug9t from ,oelle Corporation two 4lass H3s9ares of sto4k of BeliCorporation wort9 29p 7$$6$$$ be4ause t9ey were enti4ed by t9e promises of t9e latter t9at it will 4onstru4t a park wit9 first'4lass leisure fa4ilities6 and t9at 4lassH3s9are9olders would be admitted to one members9ip in t9e leisure 4omple>! )wo yearslater6 +dward filed a 4omplaint wit9 t9e S+C for refund of t9e 29p 7$$6$$$6 alleging t9att9ey 9a0e been de4ei0ed! )9ey alleged t9at t9e park remained unfinis9ed and t9eregulations of t9e 4omple> were obs4ure be4ause of t9e problems in a44ommodations!Are ,oelle Corporation and Beli Corporation guilty of fraud t9at would ?ustify t9eannulment of t9eir 4ontra4tG +>plain!

S(GGST) ANS*R :

,o6 t9e 4orporations are not guilty of fraud!

)9ere are fraud w9en one party indu4ed by t9e ot9er to enter into a 4ontra4t6 t9roug9 andsolely be4ause of t9e latters insidious words or ma49inations! )9e general rule is t9at 9ew9o alleges fraud or mistake in a transa4tion must substantiate 9is allegations as t9e presumption is t9at a person takes ordinary 4are for 9is 4on4erns and t9at pri0ate dealings9a0e been entered into fairly and regularly! -ne w9o alleges defe4t or la4k of 0alid4onsent to a 4ontra4t by reason of fraud or undue influen4e must establis9 by full6 4lear and 4on0in4ing e0iden4e su49 spe4ifi4 a4ts t9at 0itiated a partys 4onsent!

In t9is 4ase6 it is normal t9at bot9 4orporations present t9eir proposals in order to attra4tmembers! +dward failed to pro0e 9ow t9e 4orporations employed fraud to indu4e 9im to buy! )9us6 t9ey are not guilty of fraud!



VI!


So#rc$ : ontemayor 0s! illoraG.%. o. 1=9#1, (ul4 &, 11

Contrib#tor : 3a4udao6 1on *uko

'>>>>'

%ROBL':

@or Atty! Vi4entes failure to settle 9is loan obligation in t9e amount of 28$$6$$$!6 3r!*esus filed before t9e 1)C of QueFon City a Complaint for Sum of oney against t9elawyer! )9e former filed 9is Answer interposing a 4ounter4laim for attorneys fees of notless t9an 2$$6$$$!$$! Atty! Vi4ente 4laimed t9at 9e 9andled se0eral 4ases for 3r! *esus but 9e was summarily dismissed from 9andling t9em w9en t9e instant 4omplaint for sumof money was filed! In its 3e4ision6 t9e 1)C ordered a set'off between 3r! *esus 4laim and Atty! Vi4entes4ounter4laim in t9is wise:

W.+1+@-1+6 */3B+,) is 9ereby rendered ordering defendant

Vi4ente to pay plaintiff *esus t9e sum of 28$$6$$$!$$ wit9 interest at t9erate of %#M per annum 4ounted from t9e filing of t9e instant 4omplaintuntil fully paid and w9ate0er amount re4o0erable from defendant s9all beset off by an e=ui0alent amount awarded by t9e 4ourt on t9e 4ounter4laimrepresenting attorneys fees of defendant on t9e basis of =uantum meruitfor legal ser0i4es pre0iously rendered to plaintiff! S- -13+1+3!

3r! *esus filed 9is otion for 1e4onsideration 4ontending t9at offsetting 4annot be made be4ause t9e ?udgment of t9e 1)C failed to spe4ify t9e amount of attorneys fees! .emaintains t9at for offsetting to apply6 t9e two debts must be li=uidated or as4ertainable!)9e trial 4ourt merely awarded to Vi4ente attorneys fees based on =uantum meruitwit9out spe4ifying t9e e>a4t amount t9ereof! 1ule on t9e motion!

S(GGST) ANS*R :



A debt is li=uidated w9en its e>isten4e and amount are determined! It is not ne4essary t9atit be admitted by t9e debtor! ,or is it ne4essary t9at t9e 4redit appear in a final ?udgmentin order t9at it 4an be 4onsidered as li=uidated; it is enoug9 t9at its e>a4t amount isknown! In t9e instant 4ase6 bot9 obligations are li=uidated! Vi4ente 9as t9e obligation to pay 9is debt due to *esus in t9e amount of 28$$6$$$!$$ wit9 interest at t9e rate of %#M

per annum 4ounted from t9e filing of t9e instant 4omplaint until fully paid! *esus6 on t9eot9er 9and6 9as t9e obligation to pay attorneys fees for t9e legal ser0i4es pre0iouslyrendered by Vi4ente6 w9i49 t9e 1)C 9ad already determined to be e=ui0alent to w9ate0er amount re4o0erable from Vi4ente to *esus! )9erefore6 w9ate0er amount due to *esus as payment of Vi4entes debt is e=ui0alent to t9e amount awarded to t9e latter as 9isattorneys fees! Legal 4ompensation or set'off t9en takes pla4e between *esus and Vi4enteand bot9 parties are on e0en terms su49 t9at t9ere is a4tually not9ing left to e>e4ute andsatisfy in fa0or of eit9er party!



VII!


So#rc$ : arin 0s! AdilG.%. o. L-6&+9=, (ul4 1=, 1+96

Contrib#tor : Imperial6 C9ristine

'>>>>'

%ROBL':

)9e Armadas were e>pe4ting to in9erit some lots from t9eir un4le! arin 9ad 9ereditaryrig9ts in t9e estates of 9er parents! A deed of e>49ange was e>e4uted w9erein it wasstipulated t9at bot9 parties a4knowledge t9at t9e e>49ange operates to t9eir indi0idualand mutual benefit and ad0antage6 for t9e reason t9at t9e property being 4eded6transferred6 4on0eyed and un4laimed by one party to t9e ot9er is situated in t9e pla4ew9ere eit9er is a resident resulting in better administration of t9e properties! Dut t9ee>pe4ted land was ad?udi4ated to Soledad6 sister of arin! So6 t9e Armadas and ot9er 9eirs sued Soledad for 4laiming to be t9e sole 9eir of t9eir un4le6 but ended in a4ompromise w9ere t9e Armadas were awarded two lots! arin wai0ed6 renoun4ed and=uit4laimed 9er s9are in 9er parents estate in fa0our of 9er anot9er sister Aurora! S9e4annot anymore fulfil 9er obligations in 9er signed deed of e>49ange wit9 t9e Armadas!

)9e Armadas filed a res4isorry a4tion against arin!

a 3is4uss t9e nature of t9e 4ontra4t entered into between t9e Armadas and arinG b W9en will an a4tion to de4lare 4ontra4ts 0oid and ine>istent pres4ribeG

S(GGST) ANS*R :

a )9e 4ontra4t entered into between Armadas and arin is a 0oid and ine>istent4ontra4t!It is e0ident from t9e deed of e>49ange t9at t9e intention of t9e parties relati0e tot9e lots 4annot be definitely as4ertained! )9is 4ir4umstan4e renders t9e e>49ange 0oid!

Arti4le %7$ of t9e ,CC states t9at 4ontra4ts are ine>istent and 0oid from t9e beginningw9en:

%! )9ose w9ose 4ause6 ob?e4t or purpose is 4ontrary to law6 morals6 good4ustoms6 publi4 order or publi4 poli4y;

#! )9ose w9i49 are absolutely simulated or fi4titious;8! )9ose w9ose 4ause or ob?e4t did not e>ist at t9e time of t9e transa4tion;



7! )9ose w9ose ob?e4t is outside t9e 4ommer4e of men;! )9ose w9i49 4ontemplate an impossible ser0i4e;! )9ose w9ere t9e intention of t9e parties relati0e to t9e prin4ipal ob?e4t of t9e

4ontra4t 4annot be as4ertained;(as in this case)

5! )9ose e>pressly pro9ibited or de4lared 0oid by law!

)9ese 4ontra4ts 4annot be ratified! ,eit9er 4an t9e rig9t to set up t9e defense of illegality be wai0ed!

b Art %7%$ of t9e ,CC pro0ides t9at t9e a4tion or defense for t9e de4laration of t9eine>isten4e of a 4ontra4t does not pres4ribe!



OBLIGATIONS

Action +or R$con$,anc$

I!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; A4tion for 1e4on0eyan4e

So#rc$ : Drito 0s! 3ianalaG.%. o. 1&1&1&, )eemer 1#, 1

Contrib#tor : DernaldeF6 *osep9us

'>>>>'

%ROBL':

Spouses +0an and Linda died intestate lea0ing a par4el of land! 3rew and ar?e6 t9eir 49ildren entered into a 4ompromise agreement di0iding t9e land! )9ereafter6 -nSeptember #<6 %$ )C) ,o! )'%#% was issued in t9eir names! -n August %<6 %2aul and "edda filed t9eir 4omplaint for re4on0eyan4e 4laiming t9at t9at prior to 9ismarriage to Linda6 +0an was married to a 4ertain @ran4es; t9at +0an and @ran4es bore #

49ildren6 2aul and "edda; t9ey are t9e 9eirs of +0an and @ran4es; t9at t9eir legal interestso0er t9e sub?e4t lot pre0ails o0er 3rew and ar?e and t9at t9ey a=uired t9e said property byfraud!

3rew and ar?e 4ontend t9at 2aul and "edda are barred by pres4ription for 9a0ing filedt9eir 4omplaint for re4on0eyan4e only after more t9an eig9t years from t9e dis4o0ery of t9e fraud allegedly 4ommitted by 3rew and ar?e6 arguing t9at under t9e law an a4tionfor re4on0eyan4e of real property resulting from fraud pres4ribes in four years6 w9i49 periodisre4konedfromt9edis4o0eryoft9efraud!Are3rewandar?e4orre4tG

S(GGST) ANS*R :

,o6 3rew and ar?e are not 4orre4t! Arti4le %7 of t9e Ci0il Code pro0ides t9at a persona4=uiring property t9roug9 fraud be4omes6 by operation of law6 a trustee of an impliedtrust for t9e benefit of t9e real owner of t9e property! An a4tion for re4on0eyan4e basedon an implied trust pres4ribes in ten years6 t9e re4koning point of w9i49 is t9e date of registrationoft9edeedort9edateofissuan4eoft9e4ertifi4ateoftitleo0ert9eproperty!



In t9e instant 4ase6 )C) ,o! )'%#% was obtained by 3rew and ar?e on September #<6%$6 w9ile 2aul and "edda filed t9eir 4omplaint for re4on0eyan4e on August %<6 %!

.en4e6 it is 4lear t9at t9e ten'year pres4ripti0e period 9as not yet e>pired!



Consignation

II!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; Consignation

So#rc$ : Spouses Ca4ayorin 0s! Armed @or4es and 2oli4e utual Denefit

Asso4iationG.%. o. 1&1+9, April 1#, 13

Contrib#tor : Dautista 6 el'Lisanina

'>>>>'

%ROBL':

A 4ase was filled in 1)C for a 4omplaint for 4onsignation be4ause t9e petitioners 4ouldnot de4ide w9ere to pay as t9e bank 4losed and 23ICs failure to lo4ate t9e loan re4ordsand title! A motion to dismiss was filed 4laiming no prior 0alid tender of payment wasmade! If you were t9e ?udge6 de4ide on t9e 4ase!

S(GGST) ANS*R :

If I were t9e ?udge6 I would deny t9e motion to dismiss!

Arti4le %# aut9oriFes 4onsignation alone6 wit9out need of prior tender of payment6w9ere t9e ground for 4onsignation is t9at t9e 4reditor is unknown6 or does not appear att9e pla4e of payment; or is in4apa4itated to re4ei0e t9e payment at t9e time it is due; or w9en6 wit9out ?ust 4ause6 9e refuses to gi0e a re4eipt; or w9en two or more persons 4laimt9e same rig9t to 4olle4t; or w9en t9e title of t9e obligation 9as been lost!



)$la, in t-$ Obligation to %a, S# o+ 'on$,/ Int$r$st as )aag$s

III!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; 3elay in t9e -bligation to 2aySum of oney; Interest as 3amages

So#rc$ : Spouses ,ameal 0s! Spouses LunaG.%. o. 1&36=, (ul4 6, 13

Contrib#tor : 1egudo6 arion )9ursday

'>>>>'

%ROBL':

In %#6 C6 as buyer6 entered into a Contra4t to Sell wit9 D3C in0ol0ing a 9ouse and lot!Darely a year after6 C6 t9is time as t9e seller6 entered into anot9er Contra4t to Sell wit9 L4on4erning t9e same property under t9e following terms and 4onditions:

%! )9e stipulated pri4e of 2%6#$6$$$!$$ s9all be paid by t9e V+,3++ to t9e V+,3-1 in t9e following manner:

(a 2#$$6$$$!$$ upon signing > > > t9e Contra4t )o Sell6(b 28$$6$$$!$$ payable on or before April 8$6 %86(4 288$6$$$!$$ payable on or before *uly 8%6 %86(d 27%56$$$!$$ payable to t9e ,ew Capitol +state6 for % years at 26<5!%# amont96

#! > > > In t9e e0ent t9e V+,3++ fails to pay t9e se4ond installment on time6 t9eV+,3++ will pay starting ay %6 %8 a #M interest on t9e 28$$6$$$!$$ mont9ly!Likewise6 in t9e e0ent t9e V+,3++ fails to pay t9e amount of 28$6$$$!$$ on t9estipulated time6 t9is C-,)1AC) )- S+LL s9all likewise be deemed 4an4elled andres4inded and > > > M of t9e total 4ontra4t pri4e of 2%6#$6$$$!$$ s9all be deemedforfeited in fa0or of t9e V+,3-1! /npaid mont9ly amortiFation s9all likewise bededu4ted from t9e initial down payment in fa0or of t9e V+,3-1!

In 4ase of delay in t9e payment of t9e subse=uent installments and t9e mont9lyamortiFation6 w9at s9ould be t9e proper interest rate6 if anyG



S(GGST) ANS*R :

/nder Arti4le ##$ of t9e Ci0il Code6 Kif t9e obligation 4onsists in t9e payment of a sumof money6 and t9e debtor in4urs in delay6 t9e indemnity for damages6 t9ere being no

stipulation to t9e 4ontrary6 s9all be t9e payment of t9e interest agreed upon6 and in t9eabsen4e of stipulation6 t9e legal interest!K )9ere being no stipulation on interest in 4ase of delay in t9e payment of amortiFation6 t9e interest s9ould be at t9e legal rate!

.en4e6 L must pay t9e sum of 28$$6$$$!$$ plus interest t9ereon at t9e stipulated rate of #M per mont9 from ay %6 %8 until fully paid; t9e sum of 288$6$$$!$$ plus interestt9ereon at t9e legal rate from August %6 %8 until fully paid; and to reimburse C in t9e payment of amortiFation to D3C6 plus interest t9ereon at t9e legal rate from filing of t9e4omplaint until fully reimbursed!



)$an0 to Inc#r )$la,

IV!

Ciil La! To"ic : -bligations and Contra4ts; 3emand to in4ur delay

So#rc$ : 1i0era 0s! Spouses C9uaG.%. o. 1966#9, (anuar4 16, 1#

Contrib#tor : Sumampong'+spe?o6 arietes

'>>>>'

%ROBL':

3uterte obtained a loan from 2o96 a known money lender in t9eir town6 as e0iden4ed by a2romissory ,ote w9i49 states t9at:

• )9e amount of 2#$$6$$$!$$ must be paid on ,o0ember 8$6 #$%8!

• In 4ase of non'payment on t9e agreed date6 a 49arge of 8M interest per mont9 will

be 4olle4ted in addition to t9e prin4ipal amount until full payment of t9e loan be

made!• In t9e e0ent t9at legal a4tion will be soug9t6 an attorneys fee s9all be 4olle4ted

e=ui0alent to %M of t9e total amount due!

-n *uly #$%6 3uterte tendered payment by issuing a 49e4k in t9e amount of 2$6$$$!$$ but w9en presented to t9e bank for en4as9ment it was dis9onored' a44ount 4losed! After a mont9 Santiago instituted an a4tion against 3uterte for t9e 4olle4tion of t9e prin4ipalamount and interest due from 3e4ember #$%8 until full payment be made! .owe0er63uterte denied su49 indebtedness and e0en alleged forgery on t9e 2, e>e4uted! .e4ontended t9at Santiago would not release su49 big amount wit9out asking for 4ollateral4ontrary to 9er imposed poli4y! @urt9er6 9e argues t9at e0en assuming t9e 0alidity of t9e

2, still 4annot be made liable to t9e stipulated interest be4ause no demand was made tode4lare 9im in default!

Is 3uterte 4orre4t in 9is 4ontention t9at demand is ne4essary to 9old 9im liable of t9einterest stipulatedG Are t9ere any e>4eptionsG



S(GGST) ANS*R :

Benerally6 t9e obligor in4urs delay from t9e time t9e obligee ?udi4ially or e>tra?udi4iallydemands payment of t9e obligation as e>pli4itly pro0ided under arti4le %% of t9e Ci0ilCode! .owe0er6 same arti4le also pro0ides 4ertain e>4eptions w9ere demand is no longer

ne4essary in order t9at delay may e>ist:

(% W9en t9e obligation or t9e law e>pressly so de4lare; or (# W9en from t9e nature and t9e 4ir4umstan4es of t9e obligation it appears t9att9e designation of t9e time w9en t9e t9ing is to be deli0ered or t9e ser0i4e is to berendered was a 4ontrolling moti0e for t9e establis9ment of t9e 4ontra4t; or (8 W9en demand would be useless6 as w9en t9e obligor 9as rendered it beyond9is power to perform!

In t9e 4ase at bar6 demand is no longer ne4essary being t9at it falls wit9in t9e e>4eptions pro0ided under art! %% of t9e 4i0il 4ode to 9old 3uterte liable of t9e stipulated interest!S4rutiniFing from t9e 2,6 it was 4learly agreed t9at 3uterte will be4ome liable of 8Mmont9ly interest from t9e moment t9e amount due is not paid! )9erefore6 3uterte is not4orre4t wit9 9is 4ontention t9at demand is still ne4essary to in4ur delay in order to 9old9im liable of t9e interest!



)ilig$nc$ R$#ir$0

V!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; 3iligen4e 1e=uired

So#rc$ : @ran4is4o 0s! C9emi4al Dulk Carriers6 In4!G.%. o. 1+3#&&, !eptemer &, 11

Contrib#tor : )o9ay6 Ada Donita

'>>>>'

%ROBL':

@ran4is6 w9o is blind6 was t9e owner and manager of a Calte> Station for % years! -neday6 ario arukoy offered to sell to @ran4is a 4ertain =uantity of CDCIJs diesel fuel!After 49e4king arioJs I!3Js6 @ran4is agreed to pur49ase CDCIJs diesel fuel a44ording to9is terms and 4onditions! 3eli0eries were made! )9ereafter6 CDCI sent a demand letter to@ran4is regarding t9e diesel fuel deli0ered to 9im! W9en @ran4is re?e4ted t9e demand6CDCI filed a 4omplaint for sum of money and damages and argued t9at @ran4is s9ould9a0e 4alled CDCI and 4onfirm if it was indeed selling its diesel fuel sin4e it is not one of t9e oil 4ompanies known in t9e market to be selling petroleum produ4ts! )9is fa4t alones9ould 9a0e put @ran4is4o on guard! @ran4is 4ountered t9at 9e s9ould not be 9eld liable be4ause sin4e 9e is blind6 t9e standard of 4ondu4t t9at was re=uired of 9im was t9at of areasonable person under like disability!

Is @ran4is liableG W9y or W9y notG

S(GGST) ANS*R :

"es! @ran4is is liable!

/nder t9e ?urispruden4e6 to determine t9e diligen4e w9i49 must be re=uired of all persons6 we use as basis t9e abstra4t a0erage standard 4orresponding to a normal orderly person! -ne w9o is p9ysi4ally disabled is re=uired to use t9e same degree of 4are t9at areasonably 4areful person w9o 9as t9e same p9ysi4al disability would use!



In t9e gi0en 4ase6 alt9oug9 @ran4is is blind6 t9e fa4t t9at 9e 9as been in t9e business for % years s9ould 9a0e alarmed 9im of t9e transa4tion 9e is into! C9e4king t9eidentifi4ation 4ard of ario alone would not suffi4e to be 4onsidered as enoug9 diligen4eto in=uire into t9e legality of su49 9uge transa4tion! @or failure to e>er4ise su49 diligen4ere=uired of 9im6 @ran4is is liable!



)octrin$ o+ In %ari )$licto/ 2c$"tion

VI!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; 3o4trine of In 2ari 3eli4to;+>4eption

So#rc$ : BonFalo 0s! )arnate6 *r!G.%. o. 1==, (anuar4 1#, 16

Contrib#tor : aylon6 1on Step9ane

'>>>>'

%ROBL':

BonFalo6 t9e sole 4ontra4tor of t9e pro?e4t in =uestion6 sub4ontra4ted t9e implementationof t9e pro?e4t to )arnate in 0iolation of t9e statutory pro9ibition t9at e0ery 4ontra4tor is pro9ibited from sub4ontra4ting wit9 or assigning to anot9er person any 4ontra4t or pro?e4t t9at 9e 9as wit9 t9e 32W. unless t9e 32W. Se4retary 9as appro0ed t9esub4ontra4ting or assignment!

)arnate6 9a0ing been fully aware of t9e illegality and ineffe4tuality of t9e deed of assignment from t9e time of its e>e4ution6 pro0ided t9e e=uipment6 labor and materialsfor t9e pro?e4t in 4omplian4e wit9 9is obligations under t9e sub4ontra4t and t9e deed of assignment!

.owe0er6 it was BonFalo as t9e 4ontra4tor w9o re4ei0ed t9e payment wit9 t9e 32W. aswell as t9e %$M retention fee t9at s9ould 9a0e been paid to )arnate pursuant to t9e deedof assignment! BonFalo refused despite demands to deli0er to )arnate t9e stipulated %$Mretention fee t9at would 9a0e 4ompensated t9e latter for t9e use of 9is e=uipment in t9e pro?e4t!

Can )arnate re4o0erN4laim under a 0oid deed of assignment 4onsidering t9at bot9 partieswere in pari deli4toG

S(GGST) ANS*R :



"es6 t9e pre0ention of un?ust enri49ment 4alled for t9e e>4eption to apply in )arnatesfa0or! )9e do4trine of in pari deli4to w9i49 stipulates t9at t9e guilty parties to an illegal4ontra4t are not entitled to any relief6 4annot pre0ent a re4o0ery if doing so 0iolates t9e publi4 poli4y against un?ust enri49ment!

A44ording to Arti4le %7%# (% of t9e Ci0il Code6 t9e guilty parties to an illegal 4ontra4t4annot re4o0er from one anot9er and are not entitled to an affirmati0e relief be4ause t9eyare in pari deli4to or in e=ual fault! An a44epted e>4eption arises w9en its appli4ation4ontra0enes well'establis9ed publi4 poli4y! )9e pre0ention of un?ust enri49ment is are4ogniFed publi4 poli4y of t9e State6 for Arti4le ## of t9e Ci0il Code e>pli4itly pro0idest9at KPe0ery person w9o t9roug9 an a4t of performan4e by anot9er6 or any ot9er means6a4=uires or 4omes into possession of somet9ing at t9e e>pense of t9e latter wit9out ?ust or legal ground6 s9all return t9e same to 9im!K

In t9e instant 4ase6 )arnate pro0ided t9e e=uipment6 labor and materials for t9e pro?e4t in4omplian4e wit9 9is obligations under t9e sub4ontra4t and t9e deed of assignment and it

was BonFalo as t9e 4ontra4tor w9o re4ei0ed t9e payment for 9is 4ontra4t wit9 t9e32W.! ,ot to afford relief will make a tra0esty of t9e ?usti4e to w9i49 )arnate wasentitled for 9a0ing suffered from BonFalos un?ust enri49ment!

.en4e6 )arnate is entitled to 9is 4laims be4ause BonFalo would be un?ustly enri49ed att9e e>pense of )arnate if t9e latter was to be barred from re4o0ering be4ause of t9e rigidappli4ation of t9e do4trine of in pari deli4to!



)octrin$ o+ In %ari )$licto/ (n#st nric-$nt

VII!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; 3o4trine of In 2ari 3eli4to;/n?ust +nri49ment

So#rc$ : Loria 0s! uOoF6 *r!G.%. o. 19&6, 8toer 1#, 16

Contrib#tor : eli4or6 *oreyna ae

'>>>>'

%ROBL':

L 0isited in 9is offi4e and in0ited to ad0an4e 2#6$$$6$$$!$$ for a sub4ontra4t of a2$6$$$6$$$!$$ ri0er'dredging pro?e4t in Buinobatan! L represented t9at 9e would makearrangements su49 t9at + Corporation6 owner of oonsout9 Constru4tion and3e0elopment Corporation6 would turn out to be t9e lowest bidder for t9e pro?e4t andoonsout9 would sub4ontra4t #$M or 2%$6$$$6$$$!$$ wort9 of t9e pro?e4t to !.owe0er6 oonsout9 allegedly finis9ed dredging wit9out sub4ontra4ting ! So6 demanded t9e return of 9is money but L did not 4omply 4ontending t9at t9e parties are in pare deli4to be4ause t9e 4ontra4t was 0oid being a 0iolation of t9e Anti'Braft and Corrupt2ra4ti4es A4t! Is t9e 4ontention of L t9at t9e parties are in pare deli4to 0alidG Is t9ere ane>4eption to in pare deli4to ruleG

S(GGST) ANS*R :

,o6 LJs 4ontention is not 0alid!

/nder t9e do4trine of in pari deli4to6 no a4tion arises6 in e=uity or at law6 from an illegal4ontra4t! ,o suit 4an be maintained for its spe4ifi4 performan4e6 or to re4o0er t9e property agreed to be sold or deli0ered6 or t9e money agreed to be paid6 or damages for its 0iolation!

.owe0er6 t9e appli4ation of t9e do4trine of in pari deli4to is not always rigid! Ane>4eption to t9e do4trine is w9en its appli4ation 4ontra0enes well'establis9ed publi4 poli4y! )9e pre0ention of un?ust enri49ment is a re4ogniFed publi4 poli4y of t9e State! It



is6 t9erefore6 an e>4eption to t9e appli4ation of t9e in pari deli4to do4trine! L was un?ustlyenri49ed! .e retained Js money wit9out 0alid basis or ?ustifi4ation! /nder Arti4le ## of t9e Ci0il Code of t9e 29ilippines6 L must return t9e 2#6$$$6$$$!$$ to !



2ting#is-$nt o+ Obligations

VIII!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; +>tinguis9ment of -bligations

So#rc$ : etro Con4ast Steel Corporation 0s! Allied Dank CorporationG.%. o. 1&&+1, )eemer 6, 13

Contrib#tor : ai4o6 a! ,oelle

'>>>>'

%ROBL':

Armageddon Arsenal (Armageddon6 a 4orporation engaged in t9e business of manufa4turing steel6 obtained se0eral loans from Amigo Dank (Amigo amounting to@ifty illion 2esos (2 $6 $$$6 $$$!$$!W9en Armageddon failed to settle t9eir obligations6 Amigo sent demand letters seeking payment of t9e said loans but to no a0ail!Amigo was prompted to file a 4omplaint for 4olle4tion of sum of money! In order to settlet9eir debts6 Armageddon offered t9e sale of t9eir remaining ma49ineries and e=uipment toAmigo w9i49 t9e latter6 9owe0er6 refused! Amigo ad0ised t9em to sell t9e e=uipment andapply t9e pro4eeds of t9e sale to t9eir outstanding obligations! Abaniko Corporation(Abaniko e>pressed interest in buying t9e e=uipment! Wit9 t9e alleged 4onformity of Amigo6 t9roug9 Atty! Atom Aurillo6 a member of Amigos legal department6 aemorandum of Agreement(oA was drawn between Armaggedon and Abaniko under w9i49 Abaniko obligated itself to pur49ase t9e 9ea0y e=uipment for a total 4onsiderationof 2 #$6$$$6$$$!$$! /nfortunately6 Abaniko reneged on all its obligations!

Armageddon asserts t9at t9eir loan obligations to Amigo 9ad already been e>tinguis9eddue to Abanikos failure to perform its own obligations pursuant to t9e oA! 1ule on t9e4ontention of Armageddon!

S(GGST) ANS*R :

Armageddons 4ontention is not tenable!



Arti4le %#8% of t9e Ci0il Code states t9at obligations are e>tinguis9ed eit9er by paymentor performan4e6 t9e loss of t9e t9ing due6 t9e 4ondonation or remission of t9e debt6 t9e4onfusion or merger of t9e rig9ts of 4reditor and debtor6 4ompensation or no0ation!

Armageddons loan obligations to Amigo Dank remainsubsisting for t9e reason t9at

Armageddon 9as not been able to pro0e t9att9e same 9ad already been paid or6 in anyway6 e>tinguis9ed! )9e notion t9at t9e oA would9a0e any rele0an4e to t9e performan4eof Armageddons obligations to Amigo s9ould be dispelled! )9e oA is a sale of assets4ontra4t6 w9ile Armageddons obligations to Amigo arose from 0arious loan transa4tions!Absent any s9owing t9at t9e terms and 4onditions of Armageddons transa4tions 9a0e been6 in any way6 modified or no0ated by t9e terms and 4onditions in t9e oA6 said4ontra4ts s9ould be treated separately and distin4tly from ea49 ot9er6 su49 t9at t9ee>isten4e6 performan4e or brea49 of one would not depend on t9e e>isten4e6 performan4eor brea49 of t9e ot9er!



2ting#is-$nt o+ Obligations/ Co"$nsation

I!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; +>tinguis9ment of -bligations; Compensation

So#rc$ : Soriano 0s! 2eopleG.%. o. 191=+, August 16, 13

Contrib#tor : Labella6 argaret

'>>>>'

%ROBL':

Adelaida Soriano was 49arged wit9 t9e 4rime of estafabut on appeal6 was a=uitted of t9e4rime 49arged on t9e ground of reasonable doubt! .owe0er6 s9e was ordered to pay pri0ate 4omplainant Consola4ionAlagao t9e sum of se0enty'four t9ousand6 eig9t 9undredse0en pesos (2576<$5!$$ as payment for t9e remaining balan4e of t9e 4as9 0alue of t9e8< sa4ks of 4orn grains!

If you were t9e ?udge6 rule on w9et9er t9e Court 4orre4tly appliedt9e prin4iple of set'off or 4ompensation6 or 4ommitted errors in t9e 4omputation of Sorianos 4i0il liability!1eason out6 gi0en t9e following details:

Adelaida Soriano was engaged in t9e business of buying 4orn grits6 among ot9ers6 fromt9e publi4 under t9e business name of A & 1 Soriano )rading! -n @ebruary %76 +0elynAlagao (+0elyn6 daug9ter of pri0ate 4omplainant Consola4ionAlagao (Alagao6 as borrower'mortgagor6 e>e4uted a KContra4t of Loan Se4ured by 1eal +state ortgagewit9 Spe4ial 2ower to Sell ortgage 2roperty wit9out *udi4ial 2ro4eedingsK in fa0or of Adelaida Soriano as lender'mortgagee! )9e instrument pro0ides for a 27$6$$$ loanse4ured by a par4el of land 4o0ered by -riginal Certifi4ate of )itle ,o! 2'#7lo4ated in3on Carlos6 Dukidnon6 registered in +0elyns name! It likewise pro0ides t9at t9e loanwas to be paid two years from t9e date of e>e4ution of t9e 4ontra4t6 and t9at +0elynagrees to gi0e petitioner R of e0ery 9ar0est from 9er 4ornland until t9e full amount of t9eloan 9as been paid6 starting from t9e first 9ar0est! 3uring pre'trial6 it was admitted byAlagao t9at s9e did not only re4ei0e 27$6$$$ as pro0ided in t9e 4ontra4t of loan but2%658$ in t9e form of fertiliFers and 4as9 ad0an4es!



-n September 6 %76 Alagao and some 4ompanions deli0ered 8< sa4ks of 4orn grainsto Soriano6 w9o prepared a 0ou49er indi4ating t9at Alagao 9ad re4ei0ed t9e amount of 2<6$5 as full payment for t9e 8< sa4ks of 4orn grains! Alagao signed said 0ou49er e0en if s9e only re4ei0ed 286$$$! A44ording to Alagao6 7 of t9e 8< sa4ks would ser0eas partial payment of 9er 27$6$$$'loan wit9 Soriano w9ile t9e remaining balan4e will

4ome from t9e 2<6$5 4as9 s9e was supposed to re4ei0e as payment for t9e 4orn grainss9e deli0ered so s9e 4an redeem 9er daug9ters land title!

)9e Court ruled t9at t9e prose4ution failed to establis9 t9at petitioner made false pretenses6 fraudulent a4ts or fraudulent means to indu4e Alagao to deli0er to 9er t9e 8<sa4ks of 4orn grains! In fa4t6 in Alagaos testimony6 s9e admitted t9at s9e deli0ered t9e4orn grains to petitioner be4ause t9e latter was demanding payment from 9er and s9ewanted to pay 9er obligation of 27$6$$$ to petitioner so t9at s9e 4ouId!get ba4k t9e titleof 9er daug9ters mortgaged property and t9e balan4e of t9e total 4as9 0alue of t9e 8<sa4ks of 4orn! )9us6 t9e Court9eId6 in t9e absen4e of de4eit6 petitioners liability is only4i0il!

In determining Sorianos 4i0il liability6 t9e CA dedu4ted from 2<6$5 t9e total 0alue of t9e 8< sa4ks of 4orn grains deli0ered to 9er t9e 286$$$ s9e 9ad paid Alagao and t9e256<$$ w9i49 t9e CA 4onsidered as t9e 0alue of t9e 7 sa4ks of 4orn grains w9i49 Alagaointended as partial payment for t9e 27$6$$$ loan6 t9us lea0ing t9e balan4e of 2576<$5!

-n appeal6 Soriano 4omes beforet9e Court =uestioning errors in t9e 4omputation of 9er 4i0il liability6 4iting t9e lower 4ourts failure to apply 4orre4tly t9e prin4iple of set'off or 4ompensation! S9e prays t9at6 in applying set'off or 4ompensation6 Alagaos indebtednessto 9er is 27$6$$$!$$ instead of 2%658$!$$ as stipulated during pre'trial! 3e4ide andreason if t9e petition s9ould prosper!

S(GGST) ANS*R :

"es6 t9e petition is meritorious!Compensation is a mode of e>tinguis9ing to t9e4on4urrent amount6 t9e debts of persons w9o in t9eir own rig9t are 4reditors and debtorsof ea49 ot9er! )9e ob?e4t of 4ompensation is t9e pre0ention of unne4essary suits and payments t9roug9 t9e mutual e>tin4tion by operation of law of 4on4urring debts! Arti4le%#5 of t9e Ci0il Code pro0ides for t9e re=uisites for 4ompensation to take effe4t:

A1)! %#5! In order t9at 4ompensation may be proper6 it is ne4essary:(%)9at ea49 one of t9e obligors be bound prin4ipally6 and t9at 9e be at t9esame time a prin4ipal 4reditor of t9e ot9er;(# )9at bot9 debts 4onsist in a sum of money6 or if t9e t9ings due are4onsumable6 t9ey be of t9e same kind6 and also of t9e same =uality if t9elatter 9as been stated;(8 )9at t9e two debts be due;(7 )9at t9ey be li=uidated and demandable;



( )9at o0er neit9er of t9em t9ere be any retention or 4ontro0ersy64ommen4ed by t9ird persons and 4ommuni4ated in due time to t9e debtor!

If I were t9e ?udge6 I would rule t9at all t9e abo0e re=uisites for 4ompensation are presentin t9e instant 4ase!

@irst6 petitioner Soriano and Alagao are debtors and 4reditors of ea49 ot9er! It isundisputable t9at t9ey owe ea49 ot9er sums of money! 2etitioner owes 2<6$5 for t9e0alue of t9e 4orn grains deli0ered to 9er by Alagao in September %7 w9ile Alagao owes petitioner 2%658$ by 0irtue of a loan e>tended by t9e latter in @ebruary %7!

Se4ond6 bot9 debts 4onsist in a sum of money! )9ere is no issue as to t9e 2<6$5 debt bySoriano t9at it 4onsists a sum of money! As to t9e 2%658$ re4ei0ed by Alagao from 9er6t9oug9 w9at was e>tended 4onsisted of 4as9 ad0an4es and fertiliFers6 t9ere is no disputet9at said amount is payable in money!

)9ird6 bot9 debts are due! /pon deli0ery of t9e 8< sa4ks to 9er6 Soriano was under t9eobligation to pay for t9e 0alue t9ereof as buyer! As to Alagaos debt6 t9e 4ontra4t of loan pro0ided t9at it is payable in @ebruary %! )9oug9 it was not yet due in September %7 w9en s9e deli0ered t9e 8< sa4ks of 4orn grains to petitioner6 it e0entually be4amedue at t9e time of trial of t9e instant 4ase!

@ourt96 bot9 debts are li=uidated and demandable! A debt is li=uidated w9en t9e amountis known or is determinable by inspe4tion of t9e terms and 4onditions of rele0antdo4uments! )9ere is no dispute t9at t9e 0alue of t9e 8< sa4ks of 4orn grains is 2<6$5!As to Alagaos debt6 t9e loan amount 4ould not 9a0e been only 27$6$$$ sin4e during pre'trial6 Alagao 9erself admitted t9at s9e did not only re4ei0e27$6$$$ but 2%658$ in t9eform of 4as9 ad0an4es and fertiliFers from petitioner! It is well settled t9at an admissionmade in a stipulation of fa4ts at pre'trial by t9e parties is 4onsidered a ?udi4ial admissionand6 under t9e 1ules of Court6 re=uires no proof!

Lastly6 neit9er of t9e debts are sub?e4t of a 4ontro0ersy 4ommen4ed by a t9ird person!)9ere are no t9ird'party 4laims wit9 respe4t to Alagaos 2%658$ loan! As to petitioners2<6$5 debt representing t9e 8< sa4ks of 4orn grains6 Alagao 4laims t9at s9e is not t9esole owner of all t9e 8< sa4ks! )9is 4laim of Alagao6 9owe0er6 was ne0er substantiatedand a perusal of t9e information for estafa s9ows t9at t9e sub?e4t 4orn grains are allowned by 9er! oreo0er6 t9e alleged ot9er owners 9a0e not 4ommen4ed any a4tion to prote4t t9eir 4laim o0er it! )9us6 t9e 2<6 $5 debt 4annot be 4onsidered sub?e4t of a4ontro0ersy by a t9ird person!

Wit9 t9e presen4e of all t9e re=uisites mentioned in Arti4le %#56 legal 4ompensationtook effe4t by operation of law as pro0ided in Arti4le %#$ of t9e Ci0il Code6 to wit:



A1)! %#$! W9en all t9e re=uisites mentioned in Arti4le %#5 are present6 4ompensationtakes effe4t by operation of law6 and e>tinguis9es bot9 debts to t9e 4on4urrent amount6e0en t9oug9 t9e 4reditors and debtors are not aware of t9e 4ompensation!



2ting#is-$nt o+ Obligations/ %a,$nt

!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; +>tinguis9ment of -bligations; 2ayment

So#rc$ : Dognot 0s! 11I Lending CorporationG.%. o. 19166, !eptemer 16, 16

Contrib#tor : 2arilla6 3a0e +dward Velas=ueF

'>>>>'

%ROBL':

Sometime in September %6 applied for and obtained a loan of 2$$6$$$!$$ from "Company6 payable on ,o0ember 8$6 %! )9e loan was e0iden4ed by a promissory noteand was se4ured by a post dated 49e4k dated ,o0ember 8$6 %!

+0iden4e on re4ord s9ows t9at renewed t9e loan se0eral times on a mont9ly basis! .e paid a renewal fee of 2$6$$$ for ea49 renewal6 issued a new post'dated 49e4kas se4urity6and e>e4uted andNor renewed t9e promissory note pre0iously issued! )9e " C-mpany ont9e ot9er 9and6 4an4elled and returned to t9e petitioner t9e post'dated 49e4ks issued prior to t9eir renewal!

Subse=uently6 t9e loan was again renewed on a mont9ly basis (until *une 8$6 %56 ass9own by t9e -ffi4ial 1e4eipt ,o! %78 dated ay 6 %5! )9e petitioner purportedly paid t9e renewal fees and issued a post'dated 49e4k dated *une 8$6 %5 as se4urity!

Se0eral days before t9e loans maturity6 s wife6 T6 went to " Companys offi4e andapplied for anot9er renewal of t9e loan! rs! Dognot6 9owe0er6 ne0er issued a new post'dated 49e4k! Conse=uently6 t9e respondent sent t9e petitioner follow'up lettersdemanding payment of t9e loan6 plus interest and penalty 49arges! )9ese demands wentun9eeded!

" Company filed a 4omplaint for a sum of money against 6 alleging t9at t9at t9e loanrenewal payable on *une 8$6 %5 applied for by 6 remained unpaid!



4laimed t9at t9e 4omplaint states no 4ause of a4tion be4ause t9e respondents 4laim 9ad been paid6 wai0ed6 abandoned or ot9erwise e>tinguis9ed!

3e4ide w9et9er t9e obligation 9as already been e>tinguis9ed by payment!

S(GGST) ANS*R :

,o6 t9e obligation is not e>tinguis9ed sin4e no e0iden4e was presented to establis9 t9efa4t of payment!

*urispruden4e pro0ides6 t9at one w9o pleads payment 9as t9e burden of pro0ing it; t9e burden rests on t9e defendant to pro0e payment6 rat9er t9an on t9e plaintiff to pro0e non' payment!

Arti4le %#76 paragrap9 # of t9e Ci0il Code pro0ides:

)9e deli0ery of promissory notes payable to order6 or bills of e>49ange or ot9er mer4antile do4uments s9all produ4e t9e effe4t of payment onlyw9en t9ey 9a0e been 4as9ed6 or w9en t9roug9 t9e fault of t9e 4reditor t9ey 9a0e been impaired!

I, t9e present 4ase6 failed to present any e0iden4e t9at " Company 9ad in fa4ten4as9ed 9is 49e4k and applied t9e pro4eeds to t9e payment of t9e loan! ,eit9er did 9e present offi4ial re4eipts e0iden4ing payment6 nor any proof t9at t9e 49e4k 9ad beendis9onored!



ra#0

I!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; @raud

So#rc$ : )anke9 0s! 3e0elopment Dank of t9e 29ilippinesG.%. o. 1&169, ovemer 11, 13

Contrib#tor : 3igaum6 Lu4ks ae

'>>>>'

%ROBL':

A and D are brot9ers! A 9as a s9ipping 4orporation! .e approa49ed 9is brot9er and asked9im if 9e would like to ?oin in 9is 4ompany and t9e latter a44epted 9is offer! .e ga0e Dfree %6$$$ s9ares wort9 2% illion as a new sto4k9older and promised D t9at 9e will gi0e9is son a position in t9e 4ompany! A upon analyFing t9e finan4ial status of t9e 4orporationrealiFed t9at 9e needs to a4=uire a new 0essel for t9e operation of 9is business6 so 9ee>e4uted a promissory note signed by 9im and D and t9e ot9er members of t9e board of dire4tors in fa0or of 3e0elopment Dank of t9e 29ilippines (3D2 for t9e loan amountingto 2$ illion w9i49 was e0entually granted!

Alt9oug9 D was made a sto4k9older6 9e was not treated as one! .e was only able toattend t9e board meeting only on4e and was not allowed a44ess to t9e finan4ialstatements of t9e 4orporation! )9is prompted D to se0ere all ties wit9 t9e 4orporation anddemanded t9at 9e be released from any and all liability of t9e 4orporation spe4ially wit9t9e promissory note e>e4uted in fa0or of 3D2 w9i49 9e signed on t9e ground of fraud!.e was made to belie0e t9at as a sto4k9older 9e s9ould be able to e>er4ise t9e rig9tsafforded to 9is position in t9e 4orporation but was depri0ed from e>er4ising it! .e furt9er alleged t9at 9e was only made a sto4k9older in order to 9elp s9are t9e burden embodiedin t9e promissory note!

Was t9ere 4ausal fraud employed in t9e e>e4ution of t9e said promissory noteG

S(GGST) ANS*R :

,o6 t9ere was no 4ausal fraud employed w9en D signed t9e promissory note!



Causal fraud referred to in Arti4le %88< of t9e Ci0il Code6 are t9ose de4eptions or misrepresentations of a serious 49ara4ter employed by one party and wit9out w9i49 t9eot9er party would not 9a0e entered into t9e 4ontra4t!

)9ere was no dolo4ausante or fraud used nor employed by A on D w9en t9e latter signedt9e said promissory note! )9ere was no s9owing in t9e 4ase at bar t9at A employed anymeans to defraud D w9en 9e affi>ed 9is signature! Instead6 9e 0oluntarily signed su49instrument knowing fully well t9e 4onse=uen4es of affi>ing 9is signature in t9e promissory note!)9e e>4lusion of D from t9e management in t9e affairs of t9e s9ipping4orporation 4onstituted fraud in4idental to t9e performan4e of t9e obligation!In BeraldeF6t9is Court defined in4idental fraud as Ht9ose w9i49 are not serious in 49ara4ter andwit9out w9i49 t9e ot9er party would still 9a0e entered into t9e 4ontra4t!



Int$r$st/ %r$station

II!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; Interest; 2restation

So#rc$ : Derna0ideF 0s! Sal0ador G.%. o. 1&3331, )eemer 11, 13

Contrib#tor : ButierreF II6 Cedri4

'>>>>'

%ROBL':

erriam approa49ed and asked 2aulino for a loan t9at s9e would use to repur49ase 9er property in )alisay City w9i49 was fore4losed by t9e Se4urity Dank Corporation(Se4urity Dank! )o se4ure t9e loan6 erriam was re=uired to e>e4ute a real estatemortgage6 a promissory note and a deed of sale! In t9e said promissory note6 it wasagreed t9at t9e mont9ly interest would be M per mont9! .owe0er6 erriam defaulted in9er obligation under t9e promissory note! All t9e postdated 49e4ks w9i49 s9e 9ad issuedto pay for t9e interests were dis9onored! )9is de0elopment prompted 2aulino to send ademand letter wit9 a 4orresponding statement of a44ount! /nfortunately6 t9e demand fellon deaf ears w9i49 4onstrained 2aulino to file a 4omplaint for sum of money wit9damages wit9 prayer for issuan4e of preliminary atta49ment on t9e ground t9at indeed6wit9 t9e suspension of t9e /sury Law and t9e remo0al of interest 4eiling6 t9e parties arefree to stipulate t9e interest rates to be imposed on monetary obligations! -n t9e ot9er 9and6 erriam argued t9at t9e stipulated interest was un4ons4ionable as it would amountto $M per annum! If you were t9e ?udge6 9ow would you rule in t9is issueG

S(GGST) ANS*R :

I would rule in fa0or of erriam!

)9e Law pro0ides t9at stipulated interest rates are illegal if t9ey are un4ons4ionable andt9e Court is allowed to temper interest rates w9en ne4essary! In e>er4ising t9is 0ested power to determine w9at is ini=uitous and un4ons4ionable6 t9e Court must 4onsider t9e4ir4umstan4es of ea49 4ase! W9at may be ini=uitous and un4ons4ionable in one 4ase6 may be ?ust in anot9er! Wit9 t9e suspension of t9e /sury Law and t9e remo0al of interest



4eiling6 t9e parties are free to stipulate t9e interest rates to be imposed on monetaryobligations! .owe0er6 w9ile t9e Supreme Court re4ogniFes t9e rig9t of t9e parties to enter into 4ontra4ts6 t9is rule is not absolute!

In t9e 4ase at bar6 t9e interest rate of M per mont96 w9i49 w9en summed up would rea49

$M per annum6 was null and 0oid for being e>4essi0e6 ini=uitous6 un4ons4ionable ande>orbitant6 4ontrary to morals6 and t9e law! )9us6 t9e interest rate of M per mont9 w9i49was t9e basis in 4omputing s obligation was redu4ed to M per annum!



5#0g$nt on Co"rois$

III!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; *udgment on Compromise

So#rc$ : Badrina 0s! Salaman4aG.%. o. 1+6#=, (une 11, 16

Contrib#tor : Armenion6 1amy

'>>>>'

%ROBL':

)9e Spouses 1udy and Bra4e died intestate6 lea0ing a par4el of land! ar6 *o?o6 Dong6and iriam are siblings and 9eirs of Spouses 1udy and Bra4e! )9e four siblings di0idedt9e property among t9emsel0es t9roug9 an e>tra?udi4ial settlement! Subse=uently6iriam wai0ed 9er s9are o0er t9e property in fa0or of 9er siblings! Dong filed a4omplaint for partition against 9is siblings ar and *o?o before t9e 1egional )rial Court!/pon being referred to mediation6 t9e parties entered into a 4ompromise agreement! -nApril %$6 #$$86 t9e 1egional )rial Court appro0ed t9e 4ompromise agreement! Dased ont9e entry of ?udgment6 t9e 4ase be4ame final and e>e4utory on April %$6 #$$8! De4ause of t9e attitude of 9er 4o'9eirs6 Dong mo0ed for t9e p9ysi4al partition of t9e property beforet9e 1egional )rial Court! S9e prayed for t9e p9ysi4al partition of t9e property instead of 9a0ing it sold! ar and *o?o opposed t9e motion! Will t9e motion for t9e p9ysi4al partition of t9e property filed by Dong prosperG

S(GGST) ANS*R :

,o! )9e motion will not prosper! Arti4le #$85 of t9e Ci0il Code pro0ides t9at a4ompromise 9as upon t9e parties t9e effe4t and aut9ority of res ?udi4ata! A ?udgment on4ompromise agreement is a ?udgment on t9e merits! It 9as t9e effe4t of res ?udi4ata6 and isimmediately final and e>e4utory unless set aside be4ause of falsity or 0i4es of 4onsent! Int9is 4ase6 t9ere was no issue as to t9e fa4t t9at t9e parties freely entered into t9e4ompromise agreement! )9ere was also no dispute about t9e 4larity of its terms! Some of t9e parties simply do not wis9 to abide by t9e 4ompromise agreements terms! )9erefore64ourts 4annot entertain a4tions in0ol0ing t9e same 4ause of a4tion6 parties6 and sub?e4tmatter wit9out 0iolating t9e do4trines on bar by prior ?udgment and immutability of



?udgments6 unless t9ere is e0iden4e t9at t9e agreement was 0oid6 obtained t9roug9 fraud6mistake or any 0i4e of 4onsent6 or would disrupt substantial ?usti4e!



L$gal Co"$nsation

IV!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; Legal Compensation

So#rc$ : /nion Dank of t9e 29ilippines 0s! 3e0elopment Dank of t9e

29ilippinesG.%. o. 1+1###, (anuar4 , 16

Contrib#tor : )irol6 ark *ason

'>>>>'

%ROBL':

@oodmasters6 In4! (@I 9ad outstanding loan obligations to bot9 /nion Danks prede4essor'in'interest6 Dan4om 3e0elopment Corporation (Dan4om6 and to 3D2! -nay #%6 %56 @I and 3D26 among ot9ers6 entered into a 3eed of Cession of 2roperty In2ayment of 3ebt (da4ion en pago w9ereby t9e former 4eded in fa0or of t9e latter 4ertain properties (in4luding a pro4essing plant in arilao6 Dula4an Ppro4essing plant in

4onsideration of t9e following: (a t9e full and 4omplete satisfa4tion of @Is loanobligations to 3D2; and (b t9e dire4t assumption by 3D2 of @Is obligations to Dan4omin t9e amount of2%56$$$6$$$!$$ (assumed obligations!

3D2 also entered into a separate agreement wit9 Dan4om (Assumption Agreementw9ereby t9e former: (a 4onfirmed its assumption of @Is obligations to Dan4om; and (bundertook to remit up to 8$M of any and all rentals due from @I to Dan4om (sub?e4trentals w9i49 would ser0e as payment of t9e assumed obligations6 to be paid in mont9lyinstallments! eanw9ile6 on ay #86 %56 @I assigned its lease9old rig9ts under t9eLease Agreement to @oodmasters Worldwide6 In4! (@W; w9ile on ay 6 %<76 Dan4om4on0eyed all its re4ei0ables6 in4luding6 among ot9ers6 3D2s assumed obligations6 to/nion Dank!

/nion Dank filed a motion to seek affirmation t9at legal 4ompensation 9ad taken pla4e inorder to effe4ti0ely offset (a its own obligation to return t9e funds it pre0iously re4ei0edfrom 3D2 wit9 (b 3D2s assumed obligations under t9e Assumption Agreement! .owwould you resol0e t9e motionG



S(GGST) ANS*R :

I will deny t9e motion!

Art! %#5! In order t9at 4ompensation may be proper6 it is ne4essary:(% )9at ea49 one of t9e obligors be bound prin4ipally6 and t9at 9e be att9e same time a prin4ipal 4reditor of t9e ot9er;(# )9at bot9 debts 4onsist in a sum of money6 or if t9e t9ings due are4onsumable6 t9ey be of t9e same kind6 and also of t9e same =uality if t9elatter 9as been stated;(8 )9at t9e two debts be due;(7 )9at t9ey be li=uidated and demandable;( )9at o0er neit9er of t9em t9ere be any retention or 4ontro0ersy64ommen4ed by t9ird persons and 4ommuni4ated in due time to t9e debtor!

)9e rule on legal 4ompensation is stated in Arti4le %#$ of t9e Ci0il Code w9i49 pro0idest9at Kw9en all t9e re=uisites mentioned in Arti4le %#5 are present6 4ompensation takeseffe4t by operation of law6 and e>tinguis9es bot9 debts to t9e 4on4urrent amount6 e0ent9oug9 t9e 4reditors and debtors are not aware of t9e 4ompensation!K

.owe0er6 legal 4ompensation 4ould not 9a0e taken pla4e between t9ese debts for t9eapparent reason t9at re=uisites 8 and 7 under Arti4le %#5 of t9e Ci0il Code are not present!



Liabilit, o+ a Soli0ar, )$btor

V!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; Liability of a Solidary 3ebtor

So#rc$ : ,o0ateknika Land Corporation 0s! 29ilippine ,ational Dank G.%. o. 1+616, /arh 13, 13

Contrib#tor : Apatan6 1osane

'>>>>'

%ROBL':

Corporation A signed toget9er wit9 Corporation D and C a loan agreement wit9 Dank !)9e borrowers bound t9emsel0es to be ?ointly and se0erally liable to Dank for t9e full payment of t9eir obligations! As 4ollateral for t9e loan6 Corporation A agreed to e>e4ute areal estate mortgage 4ontra4t 4o0ering a par4el of land in its name in fa0or of Dank !Se0eral drawdowns6 e0iden4ed by promissory notes made by Corporation D and C duringt9e effe4ti0ity of t9e abo0ementioned loan do4uments! )9e debt rea49ed its ma>imum4redit limit and be4ame due! 3espite repeated demands made by Dank 6 t9e loanremained unpaid! Dank was t9en 4onstrained to file petitions for e>tra?udi4ialfore4losure o0er t9e properties 4o0ered by t9e 1eal +state mortgage to w9i49 CorporationA ob?e4ted! It reasoned t9at it 4ould not be bound be4ause it ne0er benefited from loanand a4ted merely as a t9ird'party mortgagor and t9at its sto4k9olders did not properlyaut9oriFe t9e e>e4ution of a mortgage o0er its properties! Is t9e 4ontention of CorporationA 4orre4tG W9y or w9y not!

S(GGST) ANS*R :

Corporation As 4ontention is not 4orre4t! )9e Ci0il Code pro0ides t9at a 4ontra4t dulye>e4uted is t9e law between t9e parties and t9ey are obliged to 4omply fully and notsele4ti0ely wit9 its terms!

Corporation A 4ould not e0ade liability e0en if it did not benefit from t9e pro4eeds of t9eloan or merely a4ted as t9ird'party mortgagor and t9at its sto4k9olders did not properlyaut9oriFe t9e e>e4ution of a mortgage o0er its properties be4ause t9e pro0isions in t9eloan agreement re0eals t9at Corporation A bound itself to be solidarily liable for t9e loans



made by its 4o'borrowers! As su49 Dank 4ould properly demand payment from any of t9e borrowers6 in4luding Corporation 6 regardless of w9et9er it a0ailed of t9e 4redit lineor not!

Corporation A6 as a solidary debtor6 4an be made to answer for t9e promissory notes

e>e4uted by Corporation D and C!



Noation

VI!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; ,o0ation

So#rc$ : S!C! egaworld Constru4tion and 3e0elopment Corporation 0s!

2aradaG.%. o. 19396, !eptemer 11, 13

Contrib#tor : )rias6 2arker

'>>>>'

%ROBL':

S!C! egaworld Constru4tion and 3e0elopment Corporation boug9t ele4tri4al lig9tingmaterials from Benlite Industries6 a sole proprietors9ip owned by +ngineer Luis /!2arada for its 1ead'1ite pro?e4t in Canlubang6 Laguna! )9e petitioner was unable to payfor t9e abo0e pur49ase on due date6 but blamed it on its failure to 4olle4t under its sub'4ontra4t wit9 t9e +n0iro Uleen )e49nologies6 In4! (+n0iro Uleen! It was 9owe0er able to

persuade +n0iro Uleen to agree to settle its abo0e pur49ase6 but after paying t9erespondent 2#$6$$$!$$ on *une #6 %6 7 +n0iro Uleen stopped making furt9er payments6 lea0ing an outstanding balan4e of 2<%6#5!$$! It also ignored t9e 0ariousdemands of t9e respondent6 w9o t9en filed a suit in t9e 1)C6 to 4olle4t from t9e petitioner t9e said balan4e6 plus damages6 4osts and e>penses!

)9e petitioner denied liability6 4laiming t9at it was released from its indebtedness to t9erespondent by reason of t9e no0ation of t9eir 4ontra4t6 w9i496 it reasoned6 took pla4ew9en t9e latter a44epted t9e partial payment of +n0iro Uleen in its be9alf6 and t9erebya4=uies4ed to t9e substitution of +n0iro Uleen as t9e new debtor in t9e petitionerJs pla4e!

IS ).+ C-,)+,)I-, -@ 2+)I)I-,+1 C-11+C)G

S(GGST) ANS*R :

,o6 t9e 4ontention of t9e S!C! egaworld Constru4tion and 3e0elopment Corporation isnot 4orre4t!



,o0ation is a mode of e>tinguis9ing an obligation by 49anging its ob?e4ts or prin4ipalobligations6 by substituting a new debtor in pla4e of t9e old one6 or by subrogating a t9ird person to t9e rig9ts of t9e 4reditor! #5 It is Kt9e substitution of a new 4ontra4t6 debt6 or obligation for an e>isting one between t9e same or different parties!K #< Arti4le %#8 of

t9e Ci0il Code defines no0ation as follows:

Art! %#8! ,o0ation w9i49 4onsists in substituting a new debtor in t9e pla4e of t9e original one6 may be made e0en wit9out t9e knowledge or against t9e will of t9e latter6 but not wit9out t9e 4onsent of t9e 4reditor!2ayment by t9e new debtor gi0es 9im rig9ts mentioned in Arti4les %#8and %#85!

)9us6 in order to 49ange t9e person of t9e debtor6 t9e former debtor must be e>presslyreleased from t9e obligation6 and t9e t9ird person or new debtor must assume t9e formerJs pla4e in t9e 4ontra4tual relation! # Arti4le %#8 speaks of substitution of t9e debtor6

w9i49 may eit9er be in t9e form of e>promision or delega4ion6 as seems to be t9e 4ase9ere! In bot9 4ases6 t9e old debtor must be released from t9e obligation6 ot9erwise6 t9ereis no 0alid no0ation!

In general6 t9ere are two modes of substituting t9e person of t9e debtor: (% e>promisionand (# delega4ion! In e>promision6 t9e initiati0e for t9e 49ange does not 4ome from and may e0en be made wit9out t9e knowledge of t9e debtor6 sin4e it 4onsists of a t9ird personJs assumption of t9e obligation! As su496 it logi4ally re=uires t9e 4onsent of t9et9ird person and t9e 4reditor! In delega4ion6 t9e debtor offers6 and t9e 4reditor a44epts6 at9ird person w9o 4onsents to t9e substitution and assumes t9e obligation; t9us6 t9e4onsent of t9ese t9ree persons are ne4essary! Dot9 modes of substitution by t9e debtor re=uire t9e 4onsent of t9e 4reditor!

@rom t9e 4ir4umstan4es obtaining below6 we 4an infer no 4lear and une=ui0o4al 4onsent by t9e respondent to t9e release of t9e petitioner from t9e obligation to pay t9e 4ost of t9elig9ting materials! In fa4t6 from t9e letters of t9e respondent to +n0iro Uleen6 it 4an besaid t9at 9e retained 9is option to go after t9e petitioner if +n0iro Uleen failed to settlet9e petitionerJs debt! As t9e trial 4ourt 9eld:

)9e settled rule is t9at no0ation is ne0er presumed6but must be 4learly and une=ui0o4allys9own! In order for a new agreement to supersede t9e old one6 t9e parties to a 4ontra4tmust e>pressly agree t9at t9ey are abrogating t9eir old 4ontra4t in fa0or of a new one!)9us6 t9e mere substitution of debtors will not result in no0ation6 and t9e fa4t t9at t9e4reditor a44epts payments from a t9ird person6 w9o 9as assumed t9e obligation6 willresult merely in t9e addition of debtors and not no0ation6 and t9e 4reditor may enfor4e t9eobligation against bot9 debtors! If t9ere is no agreement as to solidarity6 t9e first and newdebtors are 4onsidered obligated ?ointly!



%#r$ an0 Con0itional Obligations

VII!

Ciil La! To"ic : -bligations and Contra4ts; 2ure and Conditional -bligations

So#rc$ : Swire 1ealty 3e0elopment Corporation 0s! "uG.%. o. &133, /arh +, 1#

Contrib#tor : 1epaso6 *urdelyn

'>>>>'

%ROBL':

Lea9 Sy and Clark Corporation entered into a Contra4t to Sell on 4o0ering one residential4ondominium unit6 lo4ated at in akati City6 wit9 an area of %85!8$ s=uare meters for t9etotal 4ontra4t pri4e of 256%685%!<$6 payable in e=ual mont9ly installments! Sy likewise pur49ased a parking lot in t9e same 4ondominium building for 2$$6 $$$!$$! Sy paid t9efull pur49ase pri4e of 256%685%!<$ for t9e unit w9ile making a down payment of 2#$6$$$!$$ for t9e parking lot! .owe0er6 notwit9standing full payment of t9e 4ontra4t pri4e6 petitioner failed to 4omplete and deli0er t9e sub?e4t unit on time! Is res4ission of t9e 4ontra4t proper in t9e instant 4aseG

S(GGST) ANS*R :

"es6 res4ission of t9e 4ontra4t is proper in t9e instant 4ase! Arti4le %%% of t9e Ci0il Codesan4tions t9e rig9t to res4ind t9e obligation in t9e e0ent t9at spe4ifi4 performan4e be4omes impossible! It pro0ides t9at t9e power to res4ind obligations is implied inre4ipro4al ones6 in 4ase one of t9e obligors s9ould not 4omply wit9 w9at is in4umbentupon 9im! )9e in?ured party may 49oose between t9e fulfillment and t9e res4ission of t9eobligation6 wit9 t9e payment of damages in eit9er 4ase! .e may also seek res4ission6 e0enafter 9e 9as 49osen fulfillment6 if t9e latter s9ould be4ome impossible! )9e 4ourt s9allde4ree t9e res4ission 4laimed6 unless t9ere be ?ust 4ause aut9oriFing t9e fi>ing of a period! In t9e 4ase at bar6 it is e0ident t9at t9ere was brea49 on t9e part of Clark Corporation to deli0er t9e 4ondominium unit on time! .en4e6 res4ission is proper in t9einstant 4ase!



#asi7Contract Sol#tio In0$biti9

VIII!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; Quasi'Contra4t (SolutioIndebiti

So#rc$ : etropolitan Dank & )rust Company 0s! Absolute anagement

CorporationG.%. o. 1&6+9, (anuar4 +, 13

Contrib#tor : 2atatag6 Arnel

'>>>>'

%ROBL':

A Corporation made ad0an4e payment to D Corporation for t9e pur49ase of plywood int9e sum of 2%6$$$6$$$!$$ 4o0ered by D)C C9e4k ,o! %#87! )9e 49e4k was 4rossed6and was made payable to D Corporation!.owe0er it turned out t9at etrobank depositedt9e 49e4k to t9e A44ount of C .ardware Supply6 a sole proprietor owned by 3 on t9e

latters assuran4e t9at t9e arrangement of t9e 9andling of t9e 49e4k was wit9 knowledgeand 4onsent of D Corporation!etrobank a44eded to t9is arrangement be4ause 3 was t9egeneral manger and 9as substantial interest of A Corporation and t9at t9e latter allowed 3to manage t9e 4orporation wit9 a relati0e free 9and! Can etrobank re4o0er t9e 0alue of t9e 49e4k from C .ardware SupplyG

S(GGST) ANS*R :

"es be4ause t9ere e>ists =uasi'4ontra4t between etrobank and C .ardware! A =uasi'4ontra4t in0ol0es a ?uridi4al relation t9at t9e law 4reates on t9e basis of 4ertain 0oluntary6unilateral and lawful a4ts of a person6 to a0oid un?ust enri49ment enun4iated in Arti4le#%7 of t9e Ci0il Code w9i49 embodies t9e 4on4ept of solutioindebiti! )9is arises w9ensomet9ing is deli0ered t9roug9 mistake to a person w9o 9as no rig9t to demand it! Itobligates t9e latter to return w9at 9as been re4ei0ed t9roug9 mistake!Solutioindebiti 9astwo indispensable re=uisites: first6 t9at somet9ing 9as been unduly deli0ered t9roug9mistake; and se4ond6 t9at somet9ing was re4ei0ed w9en t9ere was no rig9t to demandit!In t9e 4ase at bar6 t9e re=uisites of solutioindebiti 9a0e been fulfilled! @irst6 etrobank



a4ted in a manner akin to a mistake w9en it deposited t9e D Corporation 49e4k to C.ardwares a44ount; be4ause of 3s 4ontrol o0er D Corps operations6 etrobank assumed t9at t9e 49e4ks payable to D Corp 4ould be deposited to C .ardwares a44ount!Se4ond6 C .atrdware 9ad no rig9t to demand and re4ei0e t9e 49e4ks t9atwere depositedto its a44ount! )9is 4ondition 4reated an obligation on t9e part of C .ardware6 t9roug9

its sole proprietor6 36 to return t9e amount of t9e 49e4k to etrobank in order to a0oidun?ust enri49ment on its part!



R$con$,anc$

I!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; 1e4on0eyan4e

So#rc$ : /y 0s! Court of AppealsG.%. o. 1&319=, !eptemer 1=, 1#

Contrib#tor : +smeOa6 Uimberly arie

'>>>>'

%ROBL':

W9en will an a4tion for 1e4on0eyan4e be properly filedG

S(GGST) ANS*R :

In an a4tion for re4on0eyan4e6 t9e de4ree of registration is respe4ted as in4ontro0ertible!W9at is soug9t instead is t9e transfer of t9e property6 w9i49 9as been wrongfully or erroneously registered in anot9er personJs name6 to its rig9tful and legal owner6 or to onewit9 a better rig9t! .owe0er6 su49 re4ourse 4annot be a0ailed of on4e t9e property 9as passed to an inno4ent pur49aser for 0alue! @or an a4tion for re4on0eyan4e to prosper6 t9e property s9ould not 9a0e passed into t9e 9ands of an inno4ent pur49aser for 0alue!



R$sol#tor, %$rio0

!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; 1esolutory 2eriod

So#rc$ : Salonte 0s! Commission on AuditG.%. o. &369, August 1+, 16

Contrib#tor : Andales6 TiaFel

'>>>>'

%ROBL':

)9e City of innipins entered into a 'year 4ontra4t wit9 -ut4ast Constru4tion toundertake t9e Citys re4lamation pro?e4t!

)9e parties also agreed t9at -ut4ast Constru4tion will use a portion of a par4el of land of t9e City of innipins to be used by t9em in t9e 4onstru4tion of t9eir offi4es to 9ouse its personnel to super0ise t9e City of innipins 1e4lamation 2ro?e4t!

/pon t9e 4ompletion of t9e City of innipins 1e4lamation 2ro?e4t6 all impro0ementsintrodu4ed by -ut4ast Constru4tion to t9e portion of t9e par4el of lande>isting upon t9e4ompletion of t9e said City of innipins 1e4lamation 2ro?e4t s9all ipso fa4to belong tot9e City of innipins in owners9ip as 4ompensation for t9e use of said par4el of land by-ut4ast Constru4tion wit9out any rental w9atsoe0er!

2ursuant to t9e agreement6 -ut4ast Constru4tion pro4eeded to 4onstru4t t9e 9ousing unitsand ot9er fa4ilities!

Si> years elapsed but t9e re4lamation pro?e4t is still underway! In t9e meantime6 a roadwidening pro?e4t was initiated by t9e 3epartment of 2ubli4 Works w9i49 will affe4t t9e9ousing units and ot9er fa4ilities built by -ut4ast Corporation for its personnelsuper0ising t9e re4lamation pro?e4t!

)9ereby6 t9e road widenings pro?e4t dire4torentered into an agreement wit9 -ut4astCorporation w9ereby t9e latter would demolis9 t9e impro0ements outside of t9e boundary of t9e road widening pro?e4t and6 in return6 re4ei0e t9e total amount of 292 %million in 4ompensation!



W9en t9e City of innipins learned of t9e transa4tion t9ey 4ontended t9at t9e payments9ould be made to t9e City6 being t9e lawful owner of t9e properties at t9e time t9e payment was made!

@or t9eir part6 -ut4ast Constru4tion 4ountered t9at as long as t9e 1e4lamation 2ro?e4t 9asnot yet been turned o0er6 t9e owners9ip of t9e said impro0ements still belongs to t9em!

If you were t9e ?udge6 9ow would you rule on t9e opposing 4laims of t9e partiesin0ol0edG

S(GGST) ANS*R :

If I were t9e ?udge6 I would rule in fa0or of -ut4ast Corporation!

)9e Ci0il Code pro0ision on obligations wit9 a period is rele0ant!

Arti4le %%8 t9ereof pro0ides:

-bligations for w9ose fulfillment a day 4ertain 9as been fi>ed6 s9all be demandable onlyw9en t9at day 4omes!

-bligations wit9 a resolutory period take effe4t at on4e6 but terminate upon arri0al of t9eday 4ertain!

A day 4ertain is understood to be t9at w9i49 must ne4essarily 4ome6 alt9oug9 it may not be known w9en!

If t9e un4ertainty 4onsists in w9et9er t9e day will 4ome or not6 t9e obligation is4onditional6 and it s9all be regulated by t9e rules of t9e pre4eding Se4tion!

)9e 'year period pro0ided for pro?e4t 4ompletion6 or6 wit9 like effe4t6 termination of t9e4ontra4t was a mere estimate and 4annot be 4onsidered a period or a Kday 4ertainK in t9e4onte>t of t9e afore=uoted Art! %%8!

oreo0er6 e0en if we 4onsider t9e allotted years wit9in w9i49 -ut4ast Constru4tionwas supposed to 4omplete t9e re4lamation pro?e4t6 t9e lapse t9ereof does notautomati4ally mean t9at -ut4ast Corporation was in delay!

As may be noted6 t9e City of innipins ne0er made a demand for t9e fulfillment of itsobligation under t9e Contra4t of 1e4lamation!

Arti4le %% of t9e Ci0il Code on t9e intera4tion of demand and delay and t9e e>4eptionsto t9e re=uirement of demand rele0antly states:



Arti4le %%! )9ose obliged to deli0er or to do somet9ing in4ur in delay from t9e time t9eobligee ?udi4ially or e>tra?udi4ially demands from t9em t9e fulfillment of t9eir obligation!

.owe0er6 t9e demand by t9e 4reditor s9all not be ne4essary in order t9at delay may e>ist:

(% W9en t9e obligation or t9e law e>pressly so de4lares; or

(# W9en from t9e nature and t9e 4ir4umstan4es of t9e obligation it appears t9at t9edesignation of t9e time w9en t9e t9ing is to be deli0ered or t9e ser0i4e is to be renderedwas a 4ontrolling moti0e for t9e establis9ment of t9e 4ontra4t; or

(8 W9en demand would be useless6 as w9en t9e obligor 9as rendered it beyond 9is power to perform!

In re4ipro4al obligations6 neit9er party in4urs in delay if t9e ot9er does not 4omply or isnot ready to 4omply in a proper manner wit9 w9at is in4umbent upon 9im! @rom t9emoment one of t9e parties fulfills 9is obligation6 delay by t9e ot9er begins!

In t9e instant 4ase6 t9e re4ords are bereft of any do4ument w9en4e to dedu4e t9at t9e Cityof innipins e>a4ted from -ut4ast Corporation t9e fulfillment of its obligation under t9ere4lamation 4ontra4t! And to be sure6 not one of t9e e>4eptions to t9e re=uisite demandunder Art! %% is establis9ed6 let alone asserted!

As it were6 t9e agreement of t9e parties states t9at t9e stru4tures built by -ut4astConstru4tion on t9e property of t9e City will belong to t9e latter only upon t9e4ompletion of t9e pro?e4t! Clearly6 t9e 4ompletion of t9e pro?e4t is a suspensi0e 4onditiont9at 9as yet to be fulfilled! /ntil t9e 4ondition arises6 owners9ip of t9e stru4tures properly pertains to -ut4ast Constru4tion!



Soli0ar, Obligation

I!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; Solidary -bligation

So#rc$ : Spouses Derot 0s! SiapnoG.%. o. 199+66, (ul4 +, 16

Contrib#tor : 3e los Santos6 ,aiFa ae

'>>>>'

%ROBL':

A6 D6 and C 4ontra4ted a loan from C in t9e amount of 29p8$$6$$$ wit9 annual interestof 7M per annum! A 4ertain par4el of land was mortgaged to 4o0er as a se4urity! )9e4ontra4t pro0ides: HAll debtors6 for a single loan6 bind t9emsel0es to 4ede6 transfer and4on0ey by way of real estate mortgage all t9eir rig9ts6 interest and parti4ipation in t9esub?e4t par4el of land in4luding t9e impro0ements t9ereon in fa0or of t9e plaintiff andt9at s9ould t9ey fail to perform t9eir obligation t9e mortgage will be fore4losed!

A died in #$%8! W9en t9e load be4ame due6 t9e debtors defaulted prompting t9emortgagee to institute fore4losure pro4eedings! In t9e 4ourse of t9e pro4eeding6 t9edebtors admitted t9at a load was obtained among t9em! )9e 4ourt ruled t9at t9eir obligation is solidary! Is t9e obligation solidaryG

S(GGST) ANS*R :

,-! )9e obligation is not solidary6 but ?oint! /nder t9e law6 w9en t9ere is a 4on4urren4eof two or more debtors under a single obligation6 t9e obligation is presumed to be ?oint!@urt9er6 for it to be 4onsidered as solidary6 it must be made e>pressly by law6 or by t9enature of t9e obligation itself!

In t9e instant 4ase6 t9e testimony of debtors admitting t9at t9ey 4ontra4ted a loanestablis9ed only t9e e>isten4e of t9e load! .en4e6 t9ere being no e>press term of solidarity6 t9e presumption of ?oint liability will apply! It is in4umbent upon t9e partyalleging to pro0e ot9erwise wit9 a preponderan4e of e0iden4e t9at obligation under t9eloan 4ontra4t is indeed ?oint and se0eral6 or solidary!





T$n0$r o+ %a,$nt

II!

Ciil La! To"ic : -bligations and Contra4ts; )ender of 2ayment

So#rc$ : ,etlink Computer In4! 0s! 3elmoG.%. o. 1=9&, (une 19, 16

Contrib#tor : Lumantas6 *essa @ait9

'>>>>'

%ROBL':

+ri4 S! 3elta worked as a44ount manager tasked to 4an0ass and sour4e 4lients and4on0in4e t9em to pur49ase t9e produ4ts and ser0i4es of ,etfli4k! .e was able to generatesales wort9 286$$$6$$$!$$6 more or less6 from w9i49 9e earned 4ommissions amountingto 286<!< and /SE56<<!8$! .e t9en re=uested payment of 9is 4ommissions6 but ,etfli4k refused and only ga0e 9im partial 4as9 ad0an4es 49argeable to 9is 4ommissions!Later on6 ,etfli4k began to nitpi4k and fault find6 like stressing 9is supposed absen4esand tardiness! In order to for4e 9im to resign6 it issued se0eral memoranda detailing 9issupposed infra4tions of t9e 4ompanyJs attendan4e poli4y and 9e was later on illegallydismissed! 3elta filed a 4omplaint for illegal dismissal in w9i49 t9e Labor ruled in 9isfa0or and ordered t9e payment of bot9 of 9is peso and dollar 4ommissions! ,etfli4k 4ontends t9at t9e 4ommissions s9ould only be payable in pesos sin4e as found in our 29ilippine laws6 all monetary obligations s9all be settled in 29ilippine 4urren4y w9i49 ist9e legal tender in t9e 29ilippines! Is ,etfli4ks 4ontention 4orre4tG

S(GGST) ANS*R :

,o6 ,etfli4ks 4ontention is not 4orre4t! As a general rule6 all obligations s9all be paid in29ilippine 4urren4y! .owe0er6 t9e 4ontra4ting parties may stipulate t9at foreign4urren4ies may be used for settling obligations! )9is notwit9standing6 t9e pra4ti4e of a4ompany of paying its sales agents in /S dollars must be taken into 4onsideration!

.en4e6 in t9e a4tual 4ase of ,etlink Computers 0s! 3elmo6 t9e 4ourt ruled t9at alt9oug9t9ere was no written 4ontra4t between ,etlink and 3elmo stipulating t9at t9e latterJs4ommissions would be paid in /S dollars! )9e absen4e of t9e 4ontra4tual stipulationnotwit9standing6 ,etlink was still liable to pay 3elmo in /S dollars be4ause t9e pra4ti4e



of paying its sales agents in /S dollars for t9eir /S dollar'denominated sales 9ad be4omea 4ompany poli4y!



:ali0 %a,$nt

III!

Ciil La! To"ic : -bligations and Contra4ts; -bligations; Valid 2ayment

So#rc$ : ,ational 2ower Corporation 0s! Ibra9imG.%. o. 1&#9=3, 2eruar4 19, 1#

Contrib#tor : Solatorio6 Carol

'>>>>'

%ROBL':

)9e City of arawi is o44upying a par4el of land wit9 w9i49 A & D 9a0e separate 4laimso0er t9e property! As owners9ip was first establis9ed 9en4e t9e City of arawi initiatedan e>propriation 4ase in w9i49 a de4ision is rendered against A! eanw9ile6 D filed a4omplaint for owners9ip wit9 )1- against City of arawi w9i49 )1- was appro0ed byt9e 4ourt6 but resolution for owners9ip wasstill pending! ,otwit9standing t9e )1-6 t9eCity of arawi made a payment to A pursuant to a writ of e>e4ution in fa0or of A! D fileda 4ase against City of arawi alleging bad fait9 on its part! Was t9ere a 0alid payment byt9e City of arawi to AG

S(GGST) ANS*R :

"es! Arti4le %#7# of t9e Ci0il Code pro0ides t9at H2ayment made in good fait9 to any person in possession of t9e 4redit s9all release t9e debtor! Arti4le %#7# of t9e Ci0il Codeis an e>4eption to t9e rule t9at a 0alid payment of an obligation 4an only be made to t9e person to w9om su49 obligation is rig9tfully owed! It 4ontemplates a situation w9ere adebtor pays a Hpossessor of 4redit i!e!6 someone w9o is not t9e real 4reditor but appears6under t9e 4ir4umstan4es6 to be t9e real 4reditor! In su49 s4enario6 t9e law 4onsiders t9e payment to t9e Hpossessor of 4redit as 0alid e0en as against t9e real 4reditor taking intoa44ount t9e good fait9 of t9e debtor!Abeing t9e ?udgment 4reditor as well as t9eregistered owner of t9e sub?e4t land at t9e timemay be 4onsidered as a Hpossessor of 4redit! .en4e6 t9e City of arawis payment to A for t9e sub?e4t land as a 4onse=uen4eof t9e writ of e>e4ution 4ould still 0alidly e>tinguis9 its obligation to pay for t9e sameand do not 4onstitute bad fait9 on its part!



CONTRACTS

Contracts as La! b$t!$$n t-$ %arti$s

VIII!

Ciil La! To"ic : -bligations and Contra4ts; Contra4ts; Contra4ts as Law between t9e2arties

So#rc$ : al0ar 0s! Uraft @ood 29ils!6 In4!G.%. o. 193+#, !eptemer +, 13

Contrib#tor : )abada6 Ian 1ene

'>>>>'

%ROBL':

,aiFa eniano (,aimie filed a 4omplaint for illegal suspension and illegal dismissalagainst respondents 1uby Sabanal @oods (29ils!6 In4! (1S@2I andNor ara -dessaSIl0a! W9ile 9er appeal was pending in t9e Supreme Court6 s9e and respondents enteredinto a 4ompromise agreement6 w9ereby s9e was paid 27$6$$$6$$$ in addition to t9e

2%76##6%#!%# earlier paid to 9er! S9e later filed a motion to dismissNwit9draw 4ase but before it 4ould be a4ted upon6 a motion for inter0ention to prote4t attorneys rig9ts wasfiled by Drian *oel Salise *r! and 1affy Lim "ee of Longos Salise "ee and Asso4iates(LS"A6 t9roug9 its -f 4ounsel6 retired Supreme Court Asso4iate *usti4e .e4tor delDando! )9e motion soug9t6 among ot9ers6 t9at bot9 ,aimie and 1S@2I be 9eld andordered to pay ?ointly and se0erally t9e inter0enors 4ontingent fees!

In opposing t9e motion6 ,aimie 4laimed t9at t9eir dismissal was based on a ?ustifiable4ause be4ause t9e law firm is merely in0ol0ed in preparation and submission of pleadingsand ot9er papers in4idental to t9e 4ases or litigations in 4ourt! 3oes t9is 4ontention findmeritG

S(GGST) ANS*R :

,o6 t9e 4ontention is not 4orre4t! In t9e Case of al0ar 0s! Uraft @oods t9e Court ruledt9at t9e pra4ti4e of law is not limited to t9e 4ondu4t of 4ases or litigations in 4ourt butembra4ed also t9e preparation of pleadings and ot9er papers in4idental to t9e 4ases or



litigations as well as t9e management of su49 a4tions and pro4eedings on be9alf of t9e4lients! In t9e absen4e of t9e lawyers fault6 4onsent or wai0er6 a 4lient 4annot depri0e t9elawyer of 9is ?ust fees already earned in t9e guise of a ?ustifiable reason! .ere6 ,aimienot only downplayed t9e wort9 of t9e inter0enors legal ser0i4e to 9er but also attemptedto 4amouflage 9er intent to defraud 9er lawyer by offering e>4uses t9at were not only

in4onsistent wit9 9er a4tions but6 most importantly6 fell s9ort of being ?ustifiable!

)9e stipulations of t9e written agreement between ,aimie and t9e inter0enors6 not being4ontrary to law6 morals6 publi4 poli4y6 publi4 order or good 4ustoms6 were 0alid and binding on 9er! )9ey e>pressly ga0e rise to t9e rig9t of t9e inter0enor to demand4ompensation! In a word6 s9e 4ould not simply walk away from 9er 4ontra4tualobligations toward t9e Inter0enor6 for Arti4le %% of t9e Ci0il Code pro0ides t9atobligations arising from 4ontra4ts 9a0e t9e for4e of law between t9e parties and s9ould be4omplied wit9 in good fait9!



2ist$nc$ o+ a %$r+$ct$0 Contract

I!

Ciil La! To"ic : -bligations and Contra4ts; Contra4ts; +>isten4e of a 2erfe4tedContra4t

So#rc$ : @irst -ptima 1ealty Corporation 0s! Se4uritron Se4urity Ser0i4es6 In4!G.%. o. 1++=69, (anuar4 9, 1#

Contrib#tor : Isidro6 3alisay

'>>>>'

%ROBL':

3oes t9e prior payment of earnest money e0en before t9e property owner 4an agree tosell 9is property6 bind t9e owner to t9e obligations of a seller under an ot9erwise perfe4ted 4ontra4t of saleG

S(GGST) ANS*R :

,o! W9ere anoffer to pur49ase t9e sub?e4t property was ne0er a44epted by t9e owner atany instan4e6 e0en after negotiations were 9eld between t9em6 t9ere is no sale to speak of!KW9en t9ere is merely an offer by one party wit9out a44eptan4e of t9e ot9er6 t9ere is no4ontra4t!K2erfe4tion of a 4ontra4t of sale takes pla4e upon t9e 4on4urren4e of t9e essential elementsof t9e sale; namely6 (% 4onsent or t9e meeting of t9e minds of t9e parties; (# ob?e4t or sub?e4t matter of t9e 4ontra4t; and (8 pri4e or 4onsideration of t9e sale!

Sin4e t9ere is no perfe4ted sale between t9e parties6 respondent 9ad no obligation to make payment t9roug9 t9e 49e4k; nor did it possess t9e rig9t to deli0er earnest money to petitioner in order to bind t9e latter to a sale! As 4ontemplated under Art! %7<# of t9eCi0il Code6 Kt9ere must first be a perfe4ted 4ontra4t of sale before we 4an speak of earnest money!K KW9ere t9e parties merely e>49anged offers and 4ounter'offers6 no4ontra4t is perfe4ted sin4e t9ey did not yet gi0e t9eir 4onsent to su49 offers! +arnestmoney applies to a perfe4ted sale!K



ra#0

!

Ciil La! To"ic : -bligations and Contra4ts; Contra4ts; @raud

So#rc$ : +C+ 1ealty and 3e0elopment6 In4! 0s! andapG.%. o. 1+=19, !eptemer 1, 16

Contrib#tor : Cal0o6 ario 3ennis

'>>>>'

%ROBL':

ADC 1ealty is a 4orporation engaged in t9e building and de0elopment of 4ondominiumunits! Sometime in #$$6 it started t9e 4onstru4tion of a 4ondominium pro?e4t 4alled)ower 2ark Condominium Duilding lo4ated along 2asay City! .owe0er6 printedad0ertisements were made indi4ating t9erein t9at t9e said pro?e4t was to be built inakati City! elinda C9iu agreed to buy a unit from t9e abo0e pro?e4t by paying areser0ation fee and6 t9ereafter6 downpayment and mont9ly installments! Sometime in3e4ember #$6 #$$ s9e and t9e representati0es of ADC 1ealty e>e4uted a Contra4t toSell6 w9i49 indi4ated t9at t9e 4ondominium pro?e4t is to be lo4ated in 2asay City! After more t9an two years from t9e e>e4ution of t9e C)S6 s! C9iu wrote a demand letter for t9e return of 28$6 $$$!$$ representing payments made on t9e ground t9at s9e dis4o0eredt9at t9e pro?e4t was not in akati City as indi4ated in t9e ad0ertisements; ADC 1ealtysent a letter informing 9er t9at 9er unit is ready for o44upan4y! )9us6 s! C9iu filed a4omplaint wit9 .L/1D seeking for annulment of 4ontra4t6 return of 9er payments anddamages! .L/1D dismissed t9e 4omplaint and dire4t t9e parties to fulfill t9e terms and4onditions of t9eir 4ontra4t6 w9i49 de4ision was affirmed by t9e -ffi4e of t9e 2resident!/pon appeal6 CA re0erses t9e de4ision; it annulled t9e 4ontra4t between t9e parties! ADCordered to return t9e payments made wit9 legal interest! It 9eld t9at petitioner employedfraud and ma49inations to indu4e respondent C9iu to enter into a 4ontra4t wit9 it ande>pressed doubt on t9e due e>e4ution of t9e Contra4t to Sell between t9e parties!

Is t9e Court of Appeals 4orre4tG

S(GGST) ANS*R :



,o6 t9e CA is not 4orre4t!*urispruden4e 9as s9own t9at in order to 4onstitute fraud t9at pro0ides basis to annul 4ontra4ts6 it must fulfill two 4onditions!@irst6 t9e fraud must bedolo4ausanteor it must be fraud in obtaining t9e 4onsent of t9e party! )9is is referred to as4ausal fraud! )9e de4eit must be serious! )9e fraud is serious w9en it is suffi4ient toimpress6 or to lead an ordinarily prudent person into error; t9at w9i49 4annot de4ei0e a

prudent person 4annot be a ground for nullity! )9e 4ir4umstan4es of ea49 4ase s9ould be4onsidered6 taking into a44ount t9e personal 4onditions of t9e 0i4tim!Se4ond6 t9e fraudmust be pro0en by 4lear and 4on0in4ing e0iden4e and not merely by preponderan4et9ereof! In t9e present 4ase6 ADC 1ealty is guilty of false representation of a fa4t! )9is ise0iden4ed by its printed ad0ertisements indi4ating t9at its sub?e4t 4ondominium pro?e4t islo4ated in akati City w9en6 in fa4t6 it is in 2asay City! .owe0er6 t9e misrepresentationmade in its ad0ertisements does not 4onstitute 4ausal fraud w9i49 would 9a0e been a0alid basis in annulling t9e Contra4t to Sell between t9e parties!

In any 4ase6 e0en assuming t9at t9e misrepresentation 4onsists of fraud w9i49 4ould be aground for annulling t9eir Contra4t to Sell6 respondentJs a4t of affi>ing 9er signature to

t9e said Contra4t6 after 9a0ing a4=uired knowledge of t9e propertyJs a4tual lo4ation6 4an be 4onstrued as an implied ratifi4ation t9ereof! 1atifi4ation of a 0oidable 4ontra4t isdefined under Arti4le %88 of t9e Ci0il Code as follows: Art! %88! 1atifi4ation may beeffe4ted e>pressly or ta4itly! It is understood t9at t9ere is a ta4it ratifi4ation if6 wit9knowledge of t9e reason w9i49 renders t9e 4ontra4t 0oidable and su49 reason 9a0ing4eased6 t9e person w9o 9as a rig9t to in0oke it s9ould e>e4ute an a4t w9i49 ne4essarilyimplies an intention to wai0e 9is rig9t!



Int$r"r$tation o+ a Contract

I!

Ciil La! To"ic : -bligations and Contra4ts; Contra4ts; Interpretation of a Contra4t

So#rc$ : +?er4ito 0s! -riental Assuran4e CorporationG.%. o. 1+++, (ul4 9, 1#

Contrib#tor : -4at6 ylene

'>>>>'

%ROBL':

A issued a Surety Dond in fa0or of D to guarantee t9e Companys payment of airlineti4kets pur49ased on 4redit! -n t9e same day6 C and 3 e>e4uted a 3eed of Indemnity infa0or of A effe4ti0e for % year from its issuan4e until %$ ay #$$$! It was renewed for anot9er year6 from %$ ay #$$$ to %$ ay #$$%! )9e 3eed of Indemnity 4ontained astipulation t9at C was aut9oriFing A to grant or 4onsent to t9e grant of any e>tension64ontinuation6 in4rease6 modifi4ation6 49ange or alteration6 andNor renewal of t9e original bond! C 0oluntarily signed t9e agreement!

eanw9ile6 D was de4lared in default for failure to pay its obligations amounting to67<76$<!5! A disbursed t9e amount of 8 million in lieu of t9e surety bond! A senddemand letters to C and 3 for reimbursement of 8 million pursuant to indemnityagreement! Is C liableG

S(GGST) ANS*R :

"+S! )9e 4ontra4t of indemnity is t9e law between t9e parties! It is a 4ardinal rule in t9einterpretation of a 4ontra4t t9at if its terms are 4lear and lea0e no doubt on t9e intentionof t9e 4ontra4ting parties6 t9e literal meaning of its stipulation s9all 4ontrol! Clearly6 asfar as A is 4on4erned6 C 9as e>pressly bound 9imself to t9e 4ontra4t6 w9i49 pro0ides for t9e terms granting aut9ority D to renew t9e original bond! )9e terms of t9e 4ontra4t are4lear6 e>pli4it and une=ui0o4al! )9erefore6 t9e subse=uent a4ts of D6 t9at led to t9erenewal of t9e surety bond are binding on C as well!



'#t#alit, o+ Contracts

II!

Ciil La! To"ic : -bligations and Contra4ts; Contra4ts; utuality of Contra4ts

So#rc$ : 29ilippine ,ational Dank 0s! Spouses analoG.%. o. 1&6633, 2eruar4 6, 16

Contrib#tor : Amores6 +rnesto iguel D!

'>>>>'

%ROBL':

Spouses Ariel and +ri4 ermaid (Spouses ermaid applied for an All'2urpose Credit@a4ility in t9e amount of 2%6$$$6$$$!$$ wit9 3isney ,ational Dank (3,D to finan4e t9e4onstru4tion of t9eir 9ouse! After 3,D granted t9eir appli4ation6 t9ey e>e4uted a 1eal+state ortgage in fa0or of 3,D o0er t9eir property!It was agreed upon t9at t9e Spouses ermaid would make mont9ly payments on t9einterest!

)9e 4redit agreement e>e4uted su44in4tly stipulated t9at t9e loan would be sub?e4ted tointerest at a rate Kdetermined by t9e Dank to be its prime rate plus appli4able spread6 pre0ailing at t9e 4urrent mont9!K )9is stipulation was 4arried o0er to or adopted by t9esubse=uent renewals of t9e 4redit agreement!

3,D failed to spe4ify t9e interest rate but still t9e Spouses 4ontinued to pay interestwit9out protest!

After t9e Spouses ermaid failed to settle t9eir unpaid a44ount6 3,D fore4lose t9emortgage!

Spouses argue t9at t9ey s9ould not be paying t9e interest sin4e t9e agreement 4ontra0enest9e prin4iple of mutuality of 4ontra4ts under t9e Ci0il Code!-n t9e ot9er 9and6 3,D 4laims t9at t9e Spouses ermaidJs 4ontinuous payment of interest wit9out protest indi4ated t9eir assent to t9e interest rates imposed!

Is t9e 4ontention of t9e spouses tenableG



S(GGST) ANS*R :

"es6 t9eir 4ontention is meritorious!

Arti4le %8$< of t9e Ci0il Code e>presses w9at is known in law as t9e prin4iple of mutuality of 4ontra4ts! It pro0ides t9at Kt9e 4ontra4t must bind bot9 t9e 4ontra4ting parties; its 0alidity or 4omplian4e 4annot be left to t9e will of one of t9em!K

)9is binding effe4t of a 4ontra4t on bot9 parties is based on t9e prin4iple t9at t9eobligations arising from 4ontra4ts 9a0e t9e for4e of law between t9e 4ontra4ting parties6and t9ere must be mutuality between t9em based essentially on t9eir e=uality under w9i49 it is repugnant to 9a0e one party bound by t9e 4ontra4t w9ile lea0ing t9e ot9er freet9erefrom!

*urispruden4e pro0ides t9at any 4ontra4t w9i49 appears to be 9ea0ily weig9ted in fa0or of

one of t9e parties so as to lead to an un4ons4ionable result6 t9us partaking of t9e nature of a 4ontra4t of ad9esion6 is 0oid! oreo0er6 any obs4urity will be 4onstrued against t9e party w9o prepared t9e 4ontra4t; t9e latter being presumed t9e stronger party to t9eagreement6 and w9o 4aused t9e obs4urity!

In t9e 4ase at bar6 based on t9e stipulation in t9e agreement6 3,D failed to spe4ifi4allyindi4ate t9e rates of interest in t9e 4redit agreement but arrogated unto itself t9e sole prerogati0e to determine and in4rease t9e interest rates imposed on t9e Spouses ermaid!Su49 a unilateral determination of t9e interest rates 4ontra0ened t9e prin4iple of mutualityof 4ontra4ts embodied in Arti4le %8$< of t9e Ci0il Code!

)9us6 t9e spouses 4annot be bound by t9e agreement for payment of interest!



Noation

III!

Ciil La! To"ic : -bligations and Contra4ts; Contra4ts; ,o0ation

So#rc$ : A4e @oods6 In4! 0s! i4ro 2a4ifi4 )e49nologies Co!G.%. o. =, )eemer 11, 13

Contrib#tor : Legaspo6 ar?e

'>>>>'

%ROBL':

)I2S Company sent a letter'proposal to BC Corporation for t9e deli0ery and sale of produ4ts! )9e latter a44epted t9e formers proposal! )I2S t9en deli0ered t9e produ4ts andissued an in0oi4e stating6 inter alia6 t9at Ktitle to sold property is reser0ed in )I2SCompany until full 4omplian4e of t9e terms and 4onditions of abo0e and payment of t9e pri4e! )I2S demanded payment of t9e pur49ase pri4e6 9owe0er6 remained un9eededinstead BC Corporation sent )I2S a Letter stating t9at it 9as been returning t9e sub?e4t produ4ts! It also lodged a Complaint against )I2S praying t9at t9e latter pull out from its premises t9e sub?e4t produ4ts and 4laiming t9at t9e In0oi4e 1e4eipt 49aned t9e nature of t9e transa4tion making it a 4ontra4t to sell! 1ule on t9e matter!

S(GGST) ANS*R :

)9ere is no no0ation on t9e original 4ontra4t of t9e parties!

A 4ontra4t is w9at t9e law defines it to be6 taking into 4onsideration its essential elements6and not w9at t9e 4ontra4ting parties 4all it! )9e real nature of a 4ontra4t may bedetermined from t9e e>press terms of t9e written agreement and from t9e4ontemporaneous and subse=uent a4ts of t9e 4ontra4ting parties! .owe0er6 in t9e4onstru4tion or interpretation of an instrument6 t9e intention of t9e parties is primordialand is to be pursued!

ore so6 it is wort9y to note t9at no0ation is ne0er presumed6 and t9e animus no0andi6w9et9er totally or partially6 must appear by e>press agreement of t9e parties6 or by t9eir a4ts t9at are too 4lear and une=ui0o4al to be mistaken!



Benerally6 in0oi4es are issued at t9e 4onsummation stage of t9e 4ontra4t and not its perfe4tion6 and 9a0e been e0en treated as do4uments w9i49 are not a4tionable per se6alt9oug9 t9ey may pro0e suffi4ient deli0ery! It must appear t9at t9e parties 9a0e e>presslyagreed t9e 49ange in t9e nature of t9e transa4tion! Absent any 4lear indi4ation t9at t9e

title reser0ation stipulation was a4tually agreed upon does not in any way affe4t t9enature of t9e parties original agreement!



%$r+$ction

IV!

Ciil La! To"ic : -bligations and Contra4ts; Contra4ts; 2erfe4tion

So#rc$ : .eirs of @austo C! Igna4io 0s! .ome Dankers Sa0ings and )rust Co!G.%. o. 1&&&93, (anuar4 3, 13

Contrib#tor : "gna4io 6 arie Angelee

'>>>>'

%ROBL':

Alma aureen was t9e owner of se0eral par4els of land w9i49 were su44essfullyfore4losed by A,C Dank after s9e (Alma failed to pay t9e loan it obtained from t9e bank! S9e likewise failed to redeem it on time! 3espite t9e lapse of su49 period and t9e4onsolidation of titles in t9e name of t9e bank6 Alma offered to repur49ase t9e properties!)9e bank sent 9er a letter w9i49 4ontained t9e terms and 4onditions of t9e repur49ase!Later6 Alma sent t9e bank a letter laying down a different set of terms and 4onditions!Alma t9en re=uested t9e bank to release t9e land to 9er but t9e bank turned down 9er re=uest! )9is prompted 9er to 4ause t9e annotation of an ad0erse 4laim on t9e titles of t9eland! .owe0er6 before su49 annotation6 t9e bank 9ad already sold t9e land to Caren 3eValle! Alma filed a 4omplaint and argued t9at t9e bank a4ted in bad fait9 w9en it sold t9eland to a t9ird person after it entered into a 4ontra4t for repur49ase wit9 9er! A,C Danks4ontention was t9at no 4ontra4t was made between t9em! 3e4ide on t9e perfe4tion of t9e4ontra4t for t9e repur49ase of t9e land!

S(GGST) ANS*R :

)9e 4ontra4t was not perfe4ted! Contra4ts t9at are 4onsensual in nature6 like a 4ontra4t of sale6 are perfe4ted upon mere meeting of t9e minds! -n4e t9ere is 4on4urren4e betweent9e offer and t9e a44eptan4e upon t9e sub?e4t matter6 4onsideration6 and terms of payment6 a 4ontra4t is produ4ed! )9e offer must be 4ertain! )o 4on0ert t9e offer into a4ontra4t6 t9e a44eptan4e must be absolute and must not =ualify t9e terms of t9e offer; itmust be plain6 une=ui0o4al6 un4onditional6 and wit9out 0arian4e of any sort from t9e proposal!



A =ualified a44eptan4e6 or one t9at in0ol0es a new proposal6 4onstitutes a 4ounter'offer and is a re?e4tion of t9e original offer! Conse=uently6 w9en somet9ing is desired w9i49 isnot e>a4tly w9at is proposed in t9e offer6 su49 a44eptan4e is not suffi4ient to generate4onsent be4ause any modifi4ation or 0ariation from t9e terms of t9e offer annuls t9e offer!

In t9e present 4ase6 Almas a44eptan4e was =ualified as s9e laid down a different set of terms and 4onditions! )9erefore6 t9ere was no meeting of t9e minds and ne4essarily t9e4ontra4t was not perfe4ted!



%riit, o+ Contracts

V!

Ciil La! To"ic : -bligations and Contra4ts; Contra4ts; 2ri0ity of Contra4ts

So#rc$ : Strong9old Insuran4e Co!6 In4! 0s! Spouses StroemG.%. o. 6=9+, (anuar4 1, 1#

Contrib#tor : Da=uero6 .ope Cesely

'>>>>'

%ROBL':

Spouses Storm entered into an -wners'Contra4tor Agreement wit9 Assist & Company6In4! (Assist for t9e 4onstru4tion of a two'storey 9ouse on t9e lot owned by t9e former inAntipolo6 1iFal! )9e latter se4ured t9e 2erforman4e Dond in t9e amount of 276$$6$$$!$$from Stronger Insuran4e Company6 In4! (Stronger and bound t9emsel0es ?ointly andse0erally to pay t9e Spouses t9e agreed amount in t9e e0ent t9at t9e 4onstru4tion pro?e4tis not 4ompleted! )9 pro?e4t was not finis9ed on time6 subse=uently res4inded t9eagreement6 and t9en 9ired an independent appraiser to e0aluate t9e progress of t9e4onstru4tion pro?e4t! Stronger sent a letter to Assist re=uesting t9at t9e 4ompany settle itsobligations wit9 t9e Spouses Storm! ,o response was re4ei0ed from Assist! SpousesStrong filed a Complaint for brea49 of 4ontra4t and for sum of money wit9 a 4laim for damages against Assist and Stronger! Stronger argues t9at t9e trial 4ourt did not a4=uire ?urisdi4tion o0er t9e 4ase in 0iew of t9e arbitration 4lause in t9e agreement and4onsidering t9at (1!A! <5 e>pli4itly 4onfines t9e 4ourts aut9ority only to pass upon t9eissue6 and t9at t9ey 4annot be 9eld liable as t9ey are not pri0y to t9e 4ontra4t between t9eSpouses Storm and Assist & Co6 In4! Is Stronger Insuran4e Co!6 In4!s 4laim tenableG

S(GGST) ANS*R :

,o6 t9e 4laim is not tenable! It is in t9e -wners'Contra4tor Agreement t9at t9e arbitration4lause is found! )9e 4onstru4tion agreement was signed only by t9e Spouses and t9e4ontra4tor6 Assist! As 9eld in t9e 4ase of S)1-,B.-L3 I,S/1A,C+ C-!6 I,C!6 VS!S2-/S+S S)1-+6 B!1! ,o! #$7<6 *anuary #%6 #$%6 basi4 is t9e rule t9atKContra4ts take effe4t only between t9e parties6 t9eir assigns and 9eirsK! ,ot being a partyto t9e 4onstru4tion agreement6 Stronger 4annot in0oke t9e arbitration 4lause and t9us6



4annot in0oke t9e ?urisdi4tion of t9e CIAC! oreo0er6 t9e in0o4ation of t9e arbitration4lause defeats t9e purpose of arbitration in relation to t9e 4onstru4tion business! )9e state9as 4ontinuously en4ouraged t9e use of dispute resolution me49anisms to promote partyautonomy! .owe0er6 w9ere a surety in a 4onstru4tion 4ontra4t a4ti0ely parti4ipates in a4olle4tion suit6 as in t9e 4ase of Stronger6 it is estopped from raising ?urisdi4tion later!

Assuming t9at Stronger is pri0y to t9e 4onstru4tion agreement6 t9ey 4annot be allowed toin0oke arbitration at t9is late stage of t9e pro4eedings sin4e to do so would go against t9elawJs goal of prompt resolution of 4ases in t9e 4onstru4tion industry!



VI!

Ciil La! To"ic : -bligations and Contra4ts; Contra4ts; 2ri0ity of Contra4ts

So#rc$ : .onrado 0s! BA ,etwork @ilmsG.%. o. 6&, (anuar4 16, 1#

Contrib#tor : Beli6 C9eska arie

'>>>>'

%ROBL':

C3B @ilms entered into a K)V 1ig9ts AgreementK wit9 +li Bold under w9i49 petitioner6as li4ensor of 8 films6 granted to C3B @ilms t9e e>4lusi0e rig9t to tele4ast t9e 8 filmsfor a period of t9ree years! )wo of t9e films 4o0ered by t9e Agreement were +0angelineUatorse and Dubot for w9i49 C3B @ilms paid 2%! million ea49! BA @ilms sued +li to4olle4t 2%! million representing t9e fee it paid for +0angeline Uatorse (2%! million anda portion of t9e fee it paid for Dubot (28$6$$$! C3B alleged t9at it only remitted2$$6$$$ to t9e owner of Dubot6 *a4kie W9ite keeping for 9imself t9e balan4e of 28$6$$$! +li alleged t9at 9e 9ad settled 9is obligation to W9ite! 3oes BA @ilms 9a0ean interest in making sure t9at +li 4omplied wit9 its payment terms wit9 *a4kieG

S(GGST) ANS*R :

,o6 BA being a stranger in t9e 4ontra4t between +li and *a4kie6 9as no interest! )9eK)V 1ig9ts AgreementK was a li4ensing 4ontra4t6 t9e essen4e of w9i49 is t9e transfer by+li6 t9e li4ensor6 to BA6 t9e li4ensee6 for a fee of t9e e>4lusi0e rig9t to tele4ast t9e filmslisted in t9e Agreement! A stipulation for payment of H4ommission to t9e li4ensor isin4ongruous to t9e nature of su49 4ontra4ts! Conse=uently6 BA @ilms is no moreentitled to 4omplain of any brea49 by petitioner of 9is 4ontra4ts wit9 t9e film owners t9ant9e film owners are for any brea49 by BA @ilms of its Agreement wit9 +li!



R$cissibl$ Contracts

VII!

Ciil La! To"ic : -bligations and Contra4ts; Contra4ts; 1e4issible Contra4ts

So#rc$ : 2lanters 3e0elopment Dank 0s! Spouses LopeFG.%. o. 19=33, 8toer 3, 13

Contrib#tor : Canasa6 *o9n 2aul

'>>>>'

%ROBL':

AA obtained a loaned from DD (bank in t9e amount of # for t9e 4onstru4tion of a two'storey 4ommer4ial building but sub?e4t to t9e agreement t9at 9e will submita44omplis9ment reports! De4ause 9e needs to finis9 t9e said building =ui4kly so t9at 9e4an starts to earn money from it6 9e was e>tended anot9er # from t9e said bank but only%! was paid first but t9e $$6$$$ was not released sin4e AA 0iolated t9eir loanagreement as t9ere was no a44omplis9ment reports submitted to t9em! AA filed a4omplaint before t9e 4ourt for t9e res4ission of t9e 4ontra4t! Will t9e a4tion prosperG

S(GGST) ANS*R :

,o! )9e a4tion will not prosper6 it 9as been 9eld t9at res4ission will not be permitted for aslig9t or 4asual brea49 of t9e 4ontra4t! In t9e present 4ase6 t9e total amount of loane>tended to AA was 8! from 76 t9e remaining amount of $$6$$$ was only a slig9tor 4asual brea49 of t9e 4ontra4t!



(n$n+orc$abl$ Contracts

VIII!

Ciil La! To"ic : -bligations and Contra4ts; Contra4ts; /nenfor4eable Contra4ts

So#rc$ : Iglesia @ilipina Independiente 0s! .eirs of Dernardino )aeFaG.%. o. 1&+#+&, 2eruar4 3, 16

Contrib#tor : 1amireF6 Bemma

'>>>>'

%ROBL':

)9e 49ur49 Supreme Dis9op sold t9e 49ur49s par4el of land wit9out t9e 4onformity andappro0al of all t9e 49ur49 entities listed in t9e Canons! A 4omplaint for t9e annulment of t9e sale was filed against t9e buyer! Will t9e 4ase prosperG

S(GGST) ANS*R :

"es6 t9e 4ase will prosper!

)9e 4ase 4learly falls under t9e 4ategory of unenfor4eable 4ontra4ts mentioned in Art!%7$8 (% of t9e Ci0il Code w9i49 pro0ides6 t9us H t9e following 4ontra4ts areunenfor4eable unless t9ey are ratified :

(% t9ose entered into in t9e name of anot9er person by one w9o 9as gi0en no aut9ority or legal representation or w9o 9as a4ted beyond 9is powers!

/nder t9e fa4ts of t9e 4ase6 t9e 49ur49 entities listed in t9e Canons s9ould gi0e itsappro0al to t9e transa4tion! )9us6 w9en t9e Supreme Dis9op e>e4uted t9e 4ontra4t of sale 9e a4ted beyond 9is powers!



:oi0 Contract

I!

Ciil La! To"ic : -bligations and Contra4ts; Contra4ts; Void Contra4t

So#rc$ : Dorromeo 0s! inaG.%. o. 1+3&6&, (une #, 13

Contrib#tor : LogroOo6 *osep9 Alfie

'>>>>'

%ROBL':

Dorromeo boug9t an agri4ultural land from Bar4ia w9i49 t9e latter a4=uired t9roug9 23#5 -peration Land )ransfer (-L)! Subse=uently6 to 9is surprise6 Dorromeo learned t9atan eman4ipation patent was issued to inas fa0or! Dorromeo filed for t9e 4an4ellationof inas title on t9e basis t9at said property was 0alidly sold to 9im! Is 9is petitiontenableG

S(GGST) ANS*R :

,-6 23 #5 pro9ibits t9e transfer of owners9ip o0er tenanted ri4e andNor 4orn lands after-4tober #%6 %5# e>4ept only in fa0or of t9e a4tual tenant tillers t9ereon6 w9i49Dorromeo was not! )9e sale by Bar4ia to 9im is null and 0oid! .e 4annot assert any rig9to0er t9e sub?e4t land 9olding be4ause 9is title springs from a null and 0oid sour4e! A 0oid4ontra4t is e=ui0alent to not9ing; it produ4es no 4i0il effe4t; and it does not 4reate6modify or e>tinguis9 a ?uridi4al relation!



:oi0abl$ Contracts

L!

Ciil La! To"ic : -bligations and Contra4ts; Contra4ts; Voidable Contra4ts

So#rc$ : )9e 1oman Cat9oli4 C9ur49 0s! 2anteG.%. o. 1&6119, April 11, 1

Contrib#tor : *aen6 Dea arie

'>>>>'

%ROBL':

"T @oundation sold a 8#'s=uare meter (#% meter lot under its H@or t9e 2oor 2rogram to *uan 3ela CruF after a series of 4onferen4es and on t9e belief t9at t9e latter is an a4tual o44upant of t9e lot! 3ela CruF t9en used t9e lot as 9is passageway!

# years later6 "T @oundation sold a #$$'s=uare meter lot6 w9i49 in4luded 3ela CruFlot6 to 2edro Santos! 2edro t9en fen4ed 9is property w9i49 in turn blo4ked *uans a44essto 9is property!

*uan filed a petition for t9e annulment of t9e sale between "T @oundation and 2edroSantos arguing t9at 9e was a buyer in good fait9! In its answer6 "T @oundation allegedt9at its 4onsent to t9e 4ontra4t was obtained by fraud w9en *uan6 in bad fait96misrepresented t9at 9e 9ad been an a4tual o44upant of t9e lot sold to 9im6 w9en in trut969e was merely using t9e 8#'s=uare meter lot as a passageway from 9is 9ouse to t9e town proper!

Is t9e 4ontra4t of sale 0oidable on t9e ground of mistakeG

S(GGST) ANS*R :

,o!

W9ere 4onsent6 9owe0er6 is gi0en t9roug9 mistake6 0iolen4e6 intimidation6 undueinfluen4e6 or fraud6 t9e 4ontra4t is deemed 0oidable! .owe0er6 not e0ery mistake rendersa 4ontra4t 0oidable! )9e Ci0il Code 4larifies t9e nature of mistake t9at 0itiates 4onsent:



Arti4le %88%! In order t9at mistake may in0alidate 4onsent6 it s9ould refer to t9e substan4e of t9e t9ing w9i49 is t9e ob?e4t of t9e 4ontra4t6 or tot9ose 4onditions w9i49 9a0e prin4ipally mo0ed one or bot9 parties toenter into t9e 4ontra4t!

istake as to t9e identity or =ualifi4ations of one of t9e parties will 0itiate4onsent only w9en su49 identity or =ualifi4ations 9a0e been t9e prin4ipal4ause of t9e 4ontra4t!

A simple mistake of a44ount s9all gi0e rise to its 4orre4tion!

@or mistake as to t9e =ualifi4ation of one of t9e parties to 0itiate 4onsent6 two re=uisitesmust 4on4ur:

%! t9e mistake must be eit9er wit9 regard to t9e identity or wit9 regard to t9e

=ualifi4ation of one of t9e 4ontra4ting parties; and#! t9e identity or =ualifi4ation must 9a0e been t9e prin4ipal 4onsideration for t9e4elebration of t9e 4ontra4t!

)9e a4tual o44upan4y or residen4y of a buyer o0er t9e land does not appear to be ane4essary =ualifi4ation t9at t9e C9ur49 re=uires before it 4ould sell its land! .ad t9is been indeed its poli4y6 t9en neit9er *uan or2edor would =ualify as buyers of t9e 8#'s=uare meter lot6 as none of t9em a4tually o44upied or resided on t9e lot! We note in t9isregard t9at t9e lot was only a #>%'meter strip of rural land used as a passageway from2antes 9ouse to t9e muni4ipal road!

We find it unlikely t9at *uan 4ould su44essfully misrepresent 9imself as t9e a4tualo44upant of t9e lot; t9is was a fa4t t9at t9e organiFation 4ould easily 0erify 9ad it4ondu4ted an o4ular inspe4tion of its own property!

Documents

Book 4 - Obligation and Contracts_v3.docx