PRESCRIPTION

OBLIGATIONS

I. DEFINITION

MAKATI STOCK EXCHANGE vs. CAMPOS, G.R. NO. 138814, April 16,2009

Respondent used the terms "right and obligation" in his Petition fromwhich he concluded that that such Petition sufficiently states a cause ofaction. Right and obligation are legal terms with specific legal meaning;A right is a claim or title to an interest in anything whatsoever that isenforceable by law, while an obligation is defined in the Civil Code as ajuridical necessity to give, to do or not to do and in the words of AriasRamos "An obligation is a juridical relation whereby a person (called thecreditor) may demand from another (called the debtor) the observance ofa determinative conduct (the giving, doing or not doing), and in case ofbreach, may demand satisfaction from the assets of the latter."

II. ELEMENTS OF AN OBLIGATION

DEGAÑOS vs. PEOPLE OF THE PHILIPPINES, G.R. NO. 162826,October 14, 2013

Degaños claims that his partial payments to the complainants novatedhis contract with them from agency to loan, thereby converting hisliability from criminal to civil. The incompatibility in novation must takeplace in any of the essential elements of the obligation, such as its object,cause or principal conditions thereof; otherwise, the change would be

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merely modificatory in nature and insufficient to extinguish the originalobligation.

ASUNCION vs. CA, G.R. NO. 109125, December 2, 1994

An obligation is a juridical necessity to give, to do or not to do (Art. 1156,Civil Code) and is constituted upon the concurrence of the essentialelements thereof, viz: (a) The vinculum juris or juridical tie which is theefficient cause established by the various sources of obligations (law,contracts, quasi-contracts, delicts and quasi-delicts); (b) the object whichis the prestation or conduct; required to be observed (to give, to do or notto do); and (c) the subject-persons who, viewed from the demandability ofthe obligation, are the active (obligee) and the passive (obligor) subjects.

III. DIFFERENT KINDS OF PRESTATIONS

SSS vs MOONWALK DEVELOPMENT & HOUSING CORPORATION,G.R. NO. 73345. April 7, 1993.

For failure to pay on time the amortization, SSS imposed the 12% penaltycontained in the penal clause of the contract entered into between theparties. Inpositive obligations, (to give and to do), the penalty isdemandable when the debtor is in mora; hence, the necessity of demandby the debtor unless the same is excused.

ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION vs.PHILIPPINE COMMERCIAL INTERNATIONAL BANK, G.R. NO. 153827April 25, 2006

The [petitioner] may have experienced financial difficulties because of the"1997 economic crisis" that ensued in Asia, however, the same does notconstitute a valid justification for the [petitioner] to renege on itsobligations to the [respondent], and [petitioner] cannot even find solace inArticles 1266 and 1267 of the New Civil Code, since it is applicable onlyto obligations "to do," and not obligations "to give." An obligation "to do"includes all kinds of work or service; while an obligation "to give" is aprestation which consists in the delivery of a movable or an immovable

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thing in order to create a real right, or for the use of the recipient, or forits simple possession, or in order to return it to its owner.

IV. CLASSIFICATION OF OBLIGATIONSAS TO BASIS AND ENFORCEABILITY1.NATURAL OBLIGATIONS

ANSAY vs. BOARD OF DIRECTORS, G.R. NO. L-13667, April 29, 1960

Appellants filed against appellees in the CFI a complaint praying for a20% Christmas bonus, contending that there exists a cause of action intheir complaint because their claim rests on moral grounds or what inbrief is defined by law as a natural obligation.

Article 1423 of the New Civil Code classifies obligations into civil ornatural, "Civil obligations are a right of action to compel theirperformance, while Natural obligations, not being based on positive lawbut on equity and natural law, do not grant a right of action to enforcetheir performance, but after voluntary fulfillment by the obligor, theyauthorize the retention of what has been delivered or rendered by reasonthereof".

DBP vs. CONFESSOR, G.R. NO. L-48889 May 11, 1989

Appellee refuses to pay his obligation despite his execution of a newpromissory note in consideration of a previous promissory note whichremained unpaid even after the lapse of 10 years on the ground ofprescription. When a debt is already barred by prescription, it cannot beenforced by the creditor but a new contract recognizing and assumingthe prescribed debt with full knowledge of the prescription would be validand enforceable and he thereby waives the benefit of prescription.

2. CIVIL OBLIGATIONS

ANSAY vs. NDC, G.R. NO. L-13667, April 29, 1960

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Appellants contend that there exists a cause of action in their complaintbecause their claim rests on moral grounds or what in brief is defined bylaw as a natural obligation. Article 1423 of the New Civil Code classifiesobligations into civil or natural. "Civil obligations are a right of action tocompel their performance. Natural obligations, not being based onpositive law but on equity and natural law, do not grant a right of actionto enforce their performance, but after voluntary fulfillment by theobligor, they authorize the retention of what has been delivered orrendered by reason thereof".

V. SOURCES OF OBLIGATIONS

ABS-CBN vs. OFFICE OF THE OMBUDSMAN, G.R. NO. 133347April 23, 2010

Petitioner asserts that a criminal complaint may continue and beprosecuted as an independent civil action. The claim for civil liabilitysurvives notwithstanding the death of accused, if the same may also bepredicated on a source of obligation other than delict. Article 1157 of theCivil Code enumerates these other sources of obligation from which thecivil liability may arise as a result of the same act or omission: a) law. b)contracts. c) quasi-contracts. d) xxx xxx xxx. e) quasi-delicts.

1. OBLIGATIONS ARISING FROM LAW

SALEN vs. BALCE, G.R. NO. L-14414, April 27, 1960

Delfin, the father, was held jointly and severally liable with his minor sonDante arising from the criminal act committed by the latter. The civilliability which the law imposes upon the father and, in case of his deathor incapacity, the mother, for any damages that may be caused by theminor children who live with them, is a necessary consequence of theparental authority they exercise over them which imposes upon theparents the "duty of supporting them, keeping them in their company,educating them in proportion to their means", while, on the other hand,gives them the "right to correct and punish them in moderation" .

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2. OBLIGATIONS ARISING FROM CONTRACTS

SALUDAGA vs. FEU, G.R. NO. 179337 April 30, 2008

Saludaga, a sophomore law student of respondent FEU filed a case fordamages against it after he was shot by one of the security guards onduty at the school premises. When an academic institution acceptsstudents for enrollment, there is a established contract between them,resulting in bilateral obligations which both parties are bound to complywith but which FEU failed to perform when it did not provide a safe andsecure environment to its students.

MERALCO vs RAMOY, G.R. NO. 158911, March 4, 2008

The respondents' cause of action against MERALCO is anchored on culpacontractual or breach of contract for the latter's discontinuance of itsservice to respondents. In culpa contractual the mere proof of theexistence of the contract and the failure of its compliance justify, primafacie, a corresponding right of relief from law, recognizing the obligatoryforce of contracts, the law will not permit a party to be set free fromliability for any kind of misperformance of the contractual undertaking ora contravention of the tenor thereof.

3. OBLIGATIONS ARISING FROM QUASI CONTRACT

CRUZ vs.TUASON, G.R. NO. L-23749 April 29, 1977

Cruz alleged that Tuason had been enriched at the expense of Cruz byvirtue of an agreement made by Cruz and the Deudors in the clearing,improving, subdividing and selling the large tract of land for the reasonsthat said improvements are being used and enjoyed by Tuason. Apresumed quasi-contract cannot emerge as against one party when the

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subject matter thereof is already covered by an existing contract withanother party.

A. NEGOTIORUM GESTIO

ADILLE vs. CA, G.R. NO. L-44546 January 29, 1988

Petitioner claims exclusive ownership on a land after exercising his rightof repurchase to the prejudice of the co owners. The redemption by oneco-heir or co-owner of the property in its totality does not vest in himownership over it but the petitioner, in taking over the property, did soeither on behalf of his co-heirs, in which event, he had constitutedhimself a negotiorum gestor under Article 2144 of the Civil Code, or forhis exclusive benefit, in which case, he is guilty of fraud, and must act astrustee, the private respondents being the beneficiaries, under the Article1456.

B. SOLUTIO INDEBITI

ANDRES vs. MANUFACTURERS HANOVER & TRUST CORPORATION,G.R. NO. 82670 September 15, 1989

Petitioner refuses to return the second remittance to the respondentbank when the respondent bank mistakenly remitted a certain amountfor a specific transaction twice on behalf of the buyer on the premise thatthe buyer still owes the petitioner money. For quasi-contract of solutioindebiti to apply the following requisites must concur: "(1) that he whopaid was not under obligation to do so; and, (2) that payment was madeby reason of an essential mistake of fact", hence petitioner must return tothe bank the amount which was mistakenly remitted for it is the buyernot the respondent bank who has the obligation to the petitioner and notthe bank.

PUYAT & SONS, INC. vs. CITY OF MANILA, G.R. NO. L-17447, April30, 1963

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The City Treasurer of Manila refused to refund the retail dealer's taxerroneously paid by the petitioner on it's belief that it was not exemptedfrom such, on the ground that the tax was voluntarily paid and notunder protest which was a condition sine qua non in order that a legalbasis may arise. Voluntariness is incompatible with mistake being acase of solutio indebiti, protest is not required as a condition sine quanon for its application.

4. OBLIGATIONS ARISING FROM DELICT

CINCO vs. CANONOY, G.R. NO. L-33171, May 31, 1979

Respondent Judge acted with grave abuse of discretion when he upheldthe Decision of the Lower court suspending the civil action based on aquasi-delict until after the criminal case is finally terminated. When thecivil action is based on an obligation not arising from the act or omissioncomplained of as a felony, such civil action may proceed independently ofthe criminal proceedings and regardless of the result of the latter.

5. OBLIGATIONS ARISING FROM QUASI DELICT

NAPOCOR vs. CA, G.R. NO. 124378, March 8, 2005

The negligence of NPC as a result of its inability to maintain the level ofwater in its dams has been satisfactorily and extensively established. Incrimes and quasi-delicts, the defendant shall be liable for all damages,which are the natural and probable consequences of the act or omissioncomplained of and it is not necessary that such damages have beenforeseen or could have reasonably been foreseen by the defendant.

NAPOCOR vs. THE HONORABLE COURT OF APPEALS, G.R. NO.124378. March 8, 2005

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NPC as a result of its inability to maintain the level of water in its dambrought damages to defendants but asserts that the damages, if any,were due to the heavy rains and should be regarded as a fortuitous event.Negligence or imprudence is human factor which makes the wholeoccurrence humanized, as it were, and removed from the rules applicableto acts of God

JIMENEZ vs. CITY OF MANILA, G.R. NO. 71049, May 29, 1987

Respondent alleged that it is the Asiatic Integrated Corporation that ismanaging the public market. Hence, it cannot be liable for the injuriessustained by the petitioner when he fell into an open drainage hole. TheCity of Manila is likewise liable for damages under Article 2189 of theCivil Code, respondent City having retained control and supervision overthe Sta. Ana Public Market and as tort-feasor under Article 2176 of theCivil Code on quasi-delicts Respondent City of Manila and AsiaticIntegrated Corporation being joint tort-feasors are solidarily liable underArticle 2194 of the Civil Code.

JIMENEZ vs. CITY OF MANILA, G.R. NO. 71049, May 29, 1987

Petitioner fell into the open drainage holes, causing him physical injuries,in a public market being managed by Asiatic Integrated Corporation butsuch public market is still under the control and supervision of the Cityof Manila. As a defense against liability on the basis of a quasi-delict,one must have exercised the diligence of a good father of a family. (Art.1173 of the Civil Code).

VI. NATURE AND EFFECTS OF OBLIGATION

A. OBLIGATION TO GIVE A DETERMINATE THING vs A GENERICTHING

SANCHEZ vs. RIGOS, G.R. NO. L-25494 June 14, 1972

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In his complaint, plaintiff alleges that, by virtue of the option underconsideration, "defendant agreed and committed to sell" and "the plaintiffagreed and committed to buy" the land described in the option, hence,plaintiff maintains that the promise contained in the contract is"reciprocally demandable. "A promise to buy and sell a determinate thingfor a price certain is reciprocally demandable and an accepted unilateralpromise to buy or to sell a determinate thing for a price certain is bindingupon the promissor if the promise is supported by a considerationdistinct from the price.

GAISANO CAGAYAN, INC. vs INSURANCE COMPANY OF NORTHAMERICA, G.R. NO. 147839, June 8, 2006

Petitioner’s argument is that it is not liable for the unpaid accountsbecause the fire is a fortuitous event. If the obligation is generic in thesense that the object thereof is designated merely by its class or genuswithout any particular designation or physical segregation from all othersof the same class, the loss or destruction of anything of the same kindeven without the debtor’s fault and before he has incurred in delay willnot have the effect of extinguishing the obligation, based on the principlethat the genus of a thing can never perish, (Genus nunquan perit) andan obligation to pay money is generic; therefore, it is not excused byfortuitous loss of any specific property of the debtor.

GAISANO CAGAYAN, INC. vs INSURANCE COMPANY OF NORTHAMERICA, G. R. NO. 147839, June 8, 2006

Petitioner’s argument is that it is not liable for the unpaid accountsbecause the fire is a fortuitous event. The rule that an obligor should beheld exempt from liability when the loss occurs thru a fortuitous eventonly holds true when the obligation consists in the delivery of adeterminate thing and there is no stipulation holding him liable even incase of fortuitous event and it does not apply when the obligation ispecuniary in nature.

B. FAILURE OF PERFORMANCE

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ART 1170

ARRIETA vs. NARIC, G.R. NO. L-15645, January 31, 1964

It is clear upon the records that the sole and principal reason for thecancellation of the allocation of rice contracted by the appellee herein inBurma, was the failure of the letter of credit to be opened by NARICwithin the contemplated period which resulted in the consequentdamage. Every debtor who fails in performance of his obligations due tofraud, negligence, or delay is bound to indemnify for the losses anddamages caused thereby.

TELEFAST vs. CASTRO, G.R. NO. 73867, February 29, 1988

Petitioner and private respondent entered into a contract whereby, for afee, petitioner undertook to send said private respondent's messageoverseas by telegram but which petitioner did not do, despiteperformance by said private respondent of her obligation by paying therequired charges. Those who in the performance of their obligations areguilty of fraud, negligence or delay, and those who in any mannercontravene the tenor thereof, are liable for damages.

C. DELAY1. MORA SOLVENDI

ART 11SANTOS VENTURA HOCORMA FOUNDATION, INC., vs. SANTOS, G.R.NO. 153004, November 5, 2004

When respondents wrote a demand letter to petitioner, the obligation wasalready due and demandable, and when the petitioner failed to pay itsdue obligation after the demand was made, it incurred delay. Delay asused in this article is synonymous to default or mora solvendi whichmeans delay in the fulfillment of obligations with respect to time and inorder for the debtor to be in default, it is necessary that the followingrequisites be present: (1) that the obligation be demandable and already

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liquidated; (2) that the debtor delays performance; and (3) that thecreditor requires the performance judicially or extrajudicially.

2. MORA ACCIPIENDI

MANUEL vs. CA, G.R. NO. 95469 July 25, 1991

Petitioner contends that private respondents are in mora accipiendi. Thefailure of the owners to collect or their refusal to accept the rentals arenot valid defenses, since consignation under such circumstances, isnecessary, and by this we mean one that is effected in full compliancewith the specific requirements of the law therefor.

3. COMPENSATIO MORAE

CORTES vs. CA, G.R. NO. 126083, July 12, 2006

Cortes’ admission agreed that the Corporation’s full payment of the sumwould depend upon his delivery of the TCTs of the three lots.Considering that their obligation was reciprocal, performance thereofmust be simultaneous and the mutual inaction of Cortes and theCorporation therefore gave rise to a compensation morae or default onthe part of both parties because neither has completed their part in theirreciprocal obligation.

UNLAD RESOURCES DEVELOPMENT CORPORATION vs. DRAGON,G.R. NO. 149338, July 28, 2008

Petitioners contend that they have fully complied with their obligationunder the Memorandum of Agreement but due to respondents’ failure toincrease the capital stock of the corporation to an amount that willaccommodate their undertaking, it had become impossible for them to

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perform their end of the Agreement. In reciprocal obligations, failure ofthe other party to perform the obligation renders the other party todemand fulfillment of the obligation or asked for the rescission of thecontract, but not simply not performing their part of the Agreement.

D. NEGLIGENCE1. DEGREE OF DILIGENCE

SICAM vs. JORGE, G.R. NO. 159617, August 8, 2007

Sicam exempts himself from liability on the ground that the robbery ofhis pawnshop is a fortuitous event which is by definition is anextraordinary event not foreseeable or avoidable. In order for a fortuitousevent to exempt one from liability, it is necessary that one has committedno negligence or misconduct that may have occasioned the loss androbbery per se, just like carnapping, is not a fortuitous event for it doesnot foreclose the possibility of negligence on the part of hereinpetitioners.

MERALCO vs. RAMOY, G.R. NO. 158911, March 4, 2008

The respondents' cause of action against MERALCO is anchored on culpacontractual or breach of contract for the latter's discontinuance of itsservice to respondents. Article 1173 also provides that the fault ornegligence of the obligor consists in the omission of that diligence whichis required by the nature of the obligation and corresponds with thecircumstances of the persons, of the time and of the place, hence, as apublic utility, MERALCO has the obligation to discharge its functionswith utmost care and diligence.

MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. vs.

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PHOENIX ASSURANCE COMPANY OF NEW YORK,MCGEE & CO.,INC., G.R. NO. 162467, May 8, 2009

Mindanao Terminal was required to observe ordinary diligence only inloading and stowing the cargoes of Del Monte Produce aboard M,VMistrau since there is nothing in the contract which requires a higherdegree of diligence. If the law or contract does not state the degree ofdiligence which is to be observed in the performance of an obligationthen that which is expected of a good father of a family or ordinarydiligence shall be required.

2. FORTUITOUS EVENT

NAKPIL & SONS v. CA, G.R. NO. L-47851 April 15, 1988

There was an earthquake which caused the building heavy damage butthe other nearby structures had less damages as compared to the saidbuilding, the architects, engineers and contractors are claimingfortuitous event as a defense. To be exempt from liability due to an act ofGod, the ff must occur:

1) cause of breach must be independent of the will of the debtor2) event must be unforeseeable or unavoidable3) event must be such that it would render it impossible for the debtor tofulfill the obligation4) debtor must be free from any participation or agG.R.avation of theindustry to the creditor.

3. EXTRAORDINARY INFLATION

ALMEDA vs. BATHALA MARKETING,G.R.NO.150806, January 28,2008

The lower court denied petitioner’s right to pass on to respondent theburden of paying the VAT and their right to collect the demandedincrease in rental, there being no extraordinary inflation or devaluationas provided for in the seventh clause of the contract. Extraordinary

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inflation exists when there is a decrease or increase in the purchasingpower of the Philippine currency which is unusual or beyond thecommon fluctuation in the value of said currency, and such increase ordecrease could not have been reasonably foreseen or was manifestlybeyond the contemplation of the parties at the time of the establishmentof the obligation.

4. BREACH FOR RESCISSION

UNIVERSAL FOOD CORPORATION vs. THE COURT OF APPEALS,G.R. NO. L-29155 May 13, 1970

Respondent patentee was dismissed as the permanent chief chemist ofthe corporation without any fault or negligence on his part after theexecution of the Bill of Assignment, prompting him to rescind thecontract. The general rule is that rescission of a contract will not bepermitted for a slight or casual breach, but only for such substantial andfundamental breach as would defeat the very object of the parties inmaking the agreement.

VII. KINDS OF CIVIL OBLIGATIONS

A. PURE OBLIGATIONS

ART 1179HONGKONG AND SHANGHAI BANKING CORP. vs. BROQUEZA, G.R.NO. 178610 November 17, 2010

Respondents executed undated promissory notes. They were not able topay the monthly amortizations of their respective loans, which weresuppose to be paid through salary deduction, to the petitioner because oftheir dismissal. Loans secured by their future retirement benefits towhich they are no longer entitled are reduced to unsecured and pure civilobligations and the absence of a period within which to pay theobligation, the fulfillment of which is demandable at once.

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PAY vs. PALANCA, G.R. NO. L-29900June 28, 1974

Oppositor-appellee alleged that the rights of the petitioner-creditor hadalready prescribed when the action based on a dated promissory notewas filed 15 years after. The wordings of the promissory note being "upondemand," the obligation was immediately due and had prescribed uponthe lapse of ten years from the date on the promissory note.

B. CONDITIONAL OBLIGATIONSSUSPENSIVE CONDITION183 SCRA 171Art. 1181

JAVIER vs. CA, G.R. No. L-48194 March 15, 1990

When a contract is subject to a suspensive condition, its birth andeffectivity can take place only if and when the event which constitutesthe condition happens or is fulfilled, and if the suspensive condition doesnot take place, the parties would stand as if the conditional obligationhad never existed.

HEIRS OF PAULINO ATIENZA vs. ESPIDOL, G.R. NO. 180665

First, since Espidol failed to pay the installment on a day certainfixed in their agreement, the Atienzas can afterwards validly cancel andignore the contract to sell because their obligation to sell under it did notarise. Since the suspensive condition did not arise, the parties stood asif the conditional obligation had never existed.

Second, it was not a pure suspensive condition in the sense that

the Atienzas made no undertaking while the installments were not yetdue. Mr. Justice Edgardo L. Paras gave a fitting example of suspensivecondition: “I’ll buy your land for P1,000.00 if you pass the last barexaminations.” This he said was suspensive for the bar examinationsresults will be awaited. Meantime the buyer is placed under noimmediate obligation to the person who took the examinations.

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Here, however, although the Atienzas had no obligation as yet toturn over title pending the occurrence of the suspensive condition, it wasimplicit that they were under immediate obligation not to sell the land toanother in the meantime. When Espidol failed to pay within the periodprovided in their agreement, the Atienzas were relieved of any obligationto hold the property in reserve for him.

REYES vs. TUPARAN, G.R. NO. 188064, June 1, 2011

The petitioner was rescinding the subject Deed of Conditional Salepursuant to Article 1191 of the Civil Code because of the respondent’sfailure,refusal to pay the balance of the total purchase price of thepetitioner’s properties within the stipulated period. The full payment ofthe purchase price is the positive suspensive condition, the failure ofwhich is not a breach of contract, but simply an event that prevented theobligation of the vendor to convey title from acquiring binding force.

SPS. SANTOS vs. CA, G.R. NO. 120820, August 1, 2000

In view of our finding in the present case that the aG.R.eement betweenthe parties is a contract to sell, it follows that the appellate court erredwhen it decreed that a judicial rescission of said aG.R.eement wasnecessary. In a contract to sell, the payment of the purchase price is apositive suspensive condition and failure to pay the price agreed upon isnot a mere breach, casual or serious, but a situation that prevents theobligation of the vendor to convey title from acquiring an obligatory force.

CONDITION PRECEDENT

PARKS vs. PROVINCE OF TARLAC, G.R. NO. L-24190, July 13, 1926

Appellant contends that a condition precedent having been imposed inthe donation and the same not having been complied with, the donation

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never became effective. The characteristic of a condition precedent isthat the acquisition of the right is not effected while said condition is notcomplied with or is not deemed complied with, consequently, when acondition is imposed, the compliance of which cannot be effected exceptwhen the right is deemed acquired, such condition cannot be a conditionprecedent but a condition subsequent.

RESOLUTORY CONDITION

ART 1181

CENTRAL PHILIPPINE UNIVERSITY vs. CA, G.R. NO. 112230. July17, 1995

Petitioner failed to comply to build a school on the donated land given bythe private respondent, which prompted the private respondent torescind the donation. On conditional obligations, the acquisition of rightsas well the extinguishment or loss of those already acquired shall dependupon the happening of the event which constitutes the condition, thus,when a person donates land to another on the condition that the latterwould build upon the land a school is such a resolutory one and if therewas no fulfillment with the condition such as what obtains in the instantcase, the donation may be revoked & all rights which the donee may haveacquired shall be deemed lost & extinguished.

C. OBLIGATIONS WITH A PERIOD

RADIOWEALTH FINANCE COMPANY vs. Spouses DEL ROSARIO, G.R.NO. 138739. July 6, 2000

Petitioner claimed that respondents are liable for the whole amount oftheir debt and the interest thereon, after they defaulted on the monthlyinstallments, due to acceleration clause therein. Respondents, on theother hand, countered that the installments were not yet due and

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demandable, evidenced by the blank space left for the date on which theinstallments should have commenced and theorized that fulfillment ofthe obligation is dependent on the sole will of the debtor, hence propercourt should first fix a period for payment. The act of leaving blank thedue date of the first installment did not necessarily mean that thedebtors were allowed to pay as and when they could, since the presenceof an acceleration clause and a late payment penalty, showed theintention of the parties that the installments should be paid at a definitedate, this is an obligation with a period.

LIM vs.PEOPLE OF THE PHILIPPINES, G.R. NO. L-34338 November21, 1984

Petitioner seeks the reversal of the decision of the lower court whichconvicted her of the crime of Estafa when she failed to give the proceedsof the sale of the tobacco in accordance with their agreement which saysthat ''...payment should be given as soon as the tobaccos are sold...'' andcontended that the court should first fix the period. It is clear in theaG.R.eement, that the obligation was immediately demandable as soonas the tobacco was disposed of hence, Article 1197 of the New Civil Code,which provides that the courts may fix the duration of the obligation if itdoes not fix a period, does not apply.

ART 1197

ARANETA, INC., vs.PHILIPPINE SUGAR ESTATES, G.R. NO. L-22558May 31, 1967

Araneta, who was not able to comply with his obligation to create sidestreets on the sides of the land which were sold to the PSE due to thepresence of squatters, questions the decision of the lower court orderinghim to comply with his obligation within 2 years from the finality of thedecision. It must be recalled that Article 1197 of the Civil Code involves atwo-step process, the Court must first determine that "the obligationdoes not fix a period", or from the nature and the circumstances it canbe inferred that a period was intended, because courts can not fix aperiod merely because in its opinion it is or should be reasonable and the

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complaint not having sought that the court should set a period, but mustset the time that the parties are shown to have intended.

4. OBLIGATIONS WITH A PENAL CLAUSE

SSS vs. MOONWALK DEVELOPMENT & HOUSING CORPORATION,G.R. NO. 73345, April 7, 1993.

Is the penalty demandable even after the extinguishment of the principalobligation? For all purposes the principal obligation of defendant-appellee was deemed extinguished as well as the accessory obligation ofreal estate mortgage, the penal clause which is also an accessoryobligation must also be deemed extinguished, it would be otherwise, ifthe demand for the payment of the penalty was made prior to theextinguishment of the obligation because by then the debtor would be inmora and therefore liable for the penalty.

THE BACHRACH MOTOR CO., INC., vs. ESPIRITU, G.R. NO. L-28497November 6, 1928

Defendant alleged that the decision of the lower court to pay 25 percentof the amount of the trucks in addition to the amount of the trucks plus12 per cent per annum is unconscionable and exceeds the rate fixed bylaw. The penalty agreed upon does not include the interest, and whichmay be demanded separetely and the penalty is not to be added to theinterest for the determination of whether the interest exceeds the ratefixed by the law, since said rate was fixed only for the interest.

ROBES-FRANCISCO REALTY & DEVELOPMENT CORPORATION vs.CFI, G.R. NO. L-41093, October 30, 1978

Petitioner corporation questions the award for nominal damages andattorney's fee since the contract agreed upon indicated an interest at 4%per annum of the total amount to be paid which should be considered aspenalty clause for failure to comply with the obligation hence, the vendeecannot recover more than what is agreed upon. Those who in the

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performance of their obligations are guilty of fraud, negligence, or delay,and those who in any manner contravene the tenor thereof, are liable fordamages and nominal damages are not intended for indemnification ofloss suffered but for the vindication or recognition of a right violated orinvaded.

5. RECIPROCAL OBLIGATION

AGCAOILI vs. GSIS, G.R. NO. L-30056, August 30, 1988

GSIS sold a house to Agcaoili, and required him to immediately occupy itunder pain of cancellation of the sale, but Agcaoili found out that thehouse was uninhabitable hence payment was suspended whichprompted GSIS to cancel the sale. It is axiomatic that "(i)n reciprocalobligations, neither party incurs in delay if the other does not comply oris not ready to comply in a proper manner with what is incumbent uponhim."

UNLAD RESOURCES DEVELOPMENT CORPORATION vs. DRAGON,G.R. NO. 149338, July 28, 2008

Petitioners contend that they have fully complied with their obligationunder the Memorandum of Agreement but due to respondents’ failure toincrease the capital stock of the corporation to an amount that willaccommodate their undertaking, it had become impossible for them toperform their end of the Agreement. In reciprocal obligations, failure ofthe other party to perform the obligation renders the other party todemand fulfillment of the obligation or asked for the rescission of thecontract, but not simply not performing their part of the Agreement.

AGCAOILI vs. GSIS, G.R. NO. L-30056, August 30, 1988

GSIS sold a house to Agcaoili, and required him to immediately occupy itunder pain of cancellation of the sale, but Agcaoili found out that thehouse was uninhabitable hence payment was suspended whichprompted GSIS to cancel the sale. It is axiomatic that "(i)n reciprocal

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obligations, neither party incurs in delay if the other does not comply oris not ready to comply in a proper manner with what is incumbent uponhim."

VIII. JOINT AND SOLIDARY OBLIGATIONS

SOLIDARY OBLIGATION

INIMACO vs. NLRC, G.R. NO. 101723, May 11, 2000

The absence of the word "solidary" in the dispositive portion of theDecision, renders the liability joint. Well-entrenched is the rule thatsolidary obligation cannot lightly be inferred, and there is a solidaryliability only when the obligation expressly so states, when the law soprovides or when the nature of the obligation so requires.

PNB vs. INDEPENDENT PLANTERS ASSOCIATION, INC., G.R. NO.L-28046. May 16, 1983

PNB assails the order of dismissal of the lower court dismissing itscomplaint against several solidary debtors on the gr.ound that one of thedefendants died during the pendency of the case and therefore thecomplaint, being a money claim based on contract, should be prosecutedin the testate or intestate proceeding for the settlement of the estate ofthe deceased. The choice is undoubtedly left to the solidary creditor todetermine against whom he will enforce collection and in case of thedeath of one of the solidary debtors, the creditor may, if he so chooses,proceed against the surviving solidary debtors without necessity of filinga claim in the estate of the deceased debtors.

JOINT OBLIGATIONS

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TOPIC: JOINT and SOLIDARY OBLIGATIONS

RONQUILLO vs.CA, G.R. NO. L-55138September 28, 1984

Respondent filed a modification of the order of the lower court in acollection case praying for the "execution of the decision in its entiretyagainst all defendants, jointly and severally." In the absence of a findingof facts that the defendants made themselves individually liable for thedebt incurred they are each liable only for one-fourth of said amount, theobligation being described as "individually and jointly".

JOINT and SOLIDARY OBLIGATIONS

CALANG vs. PEOPLE OF THE PHILIPPINES, G.R. NO. 190696August 3, 2010

Philtranco Bus has been held solidarily liable with its bus driver, Calang,when Calang accidentally collided with a jeepney killing a bystander andtwo jeepney passengers while other passengers were seriously injured.Since the cause of action against Calang was based on delict, Philtrancocannot be held jointly and severally liable with Calang, based on quasi-delict under Articles 2176 and 2180 of the Civil Code which pertain tothe vicarious liability of an employer for quasi-delicts that an employeehas committed.

IX. EXTINGUISHMENT OF OBLIGATIONSMODES OF EXTINGUISHING OBLIGATIONS

SAURA IMPORT and EXPORT CO., INC. vs. DEVELOPMENT BANK OFTHE PHILIPPINES, G.R. NO. L-24968 April 27, 1972

RFC turned down the request of Saura, Inc. for an additional loan whichprompted Saura, Inc. to ask that the mortgage be cancelled, which wasdone. The action thus taken by both parties was in the nature mutualdesistance — what Manresa terms "mutuo disenso" — which is a mode of

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extinguishing obligations, a concept that derives from the principle thatsince mutual aG.R.eement can create a contract, mutual disaG.R.eementby the parties can cause its extinguishment.

A. EXTINGUISHMENT BY PAYMENT OR PERFORMANCE

AZCONA vs. JAMANDRE, G.R. NO. L-30597, SCRA, June 30, 1987

The rental stipulated therein was P7,200.00 but payment beingacknowledged in the receipt was P7,000.00 only, yet no mention wasmade in the receipt of the discrepancy and, on the contrary, the paymentwas acknowledged "as per contract". When the obligee accepts theperformance, knowing its incompleteness or irregularity, and withoutexpressing any protest or objection, the obligation is deemed fullycomplied with.

J. M. Tuason & Co., Inc. vs. Javier, NO. L-28569, February 27, 1970

Apart from the initial installment of P396.12, paid upon the execution ofthe contract, the defendant religiously satisfied the monthly installmentsaccruing thereafter, for a period of almost eight (8) years and althoughthe principal obligation under the contract was P3,691.20, the totalpayments made by the defendant including stipulated interest,aggregated P4,134.08.

If the obligation has been substantially performed in good faith, theobligor may recover as though there had been a strict and completefulfillment, less damages suffered by the obligee.

ART 1240TO WHOM PAYMENT SHOULD BE MADE

SPOUSES MINIAN0 vs. CONCEPCION, G.R. 172825, October 11,2012

Admittedly, payment of the remaining balance of P200,000.00 was notmade to the creditors themselves, but rather, it was allegedly made to a

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certain Losloso who was the authorized agent of petitioners.Respondent’s obligation consists of payment of a sum of money, and ingeneral, a payment in order to be effective to discharge an obligation,must be made to the proper person, thus, payment must be made to theobligee himself or to an agent having authority, express or implied, toreceive the particular payment. Payment made to one having apparentauthority to receive the money will, as a rule, be treated as though actualauthority had been given for its receipt. If payment is made to one who bylaw is authorized to act for the creditor, it will work as a discharge.

ARANAS vs. TUTAAN, 127 SCRA 828

All dividends accruing to the said shares after the rendition of judgmentbelonged to Aranas but UTEX paid the co-defendants despite itsknowledge and understanding of the final judgment. It is elementarythat payment made by a judgment debtor to a wrong party cannotextinguish the obligation of such debtor to its creditor.

PAYMENT NOT IN PHIL CURRENCY

HYDRO RESOURCES vs. NATIONAL IRRIGATION ADMINISTRATION,G.R. NO. 160215, November 10, 2004

The contract between NIA and Hydro is an internationally tenderedcontract considering that it was funded by the International Bank forReconstruction and Development (IBRD). As a contract funded by aninternational organization, particularly one recognized by thePhilippines,3 the contract is exempt from the provisions of R.A. No. 529,as amended by. R.A. No. 4100 (Act To Assure Uniform Value to PhilippineCoin And Currency).

PONCE vs. THE HONORABLE COURT OF APPEALS, G.R. NO. L-49494May 31, 1979

The promissory note in question provided on its face for payment of theobligation in Philippine currency, but the aG.R.eement between theparties originally involved a dollar transaction.

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If there is any agreement to pay an obligation in a currency other thanPhilippine legal tender, the same is null and void as contrary to publicpolicy, pursuant to Republic Act No. 529, and the most that could bedemanded is to pay said obligation in Philippine currency, hence, acreditor herein cannot oblige the debtor to pay him in dollars, even if theloan were given in said currency.

KALALO vs. LUZ, G.R. NO. L-27782, July 31, 1970

Appellant claims that lower court erred in declaring and holding that thebalance owing from defendant-appellant to plaintiff-appellee on the IRRIProject should be paid on the basis of the rate of exchange of the U.S.dollar to the Philippine peso at the time of payment of judgment. Even ifthe obligation assumed by the defendant was to pay the plaintiff a sum ofmoney expressed in American currency, the indemnity to be allowedshould be expressed in Philippine currency at the rate of exchange at thetime of judgment rather than at the rate of exchange prevailing on thedate of defendant's breach.

LEGAL TENDER

TIBAJIA vs. CA, G.R. NO. 100290, June 4, 1993

Checks representing deposit money do not have legal tender power andtheir acceptance in the payment of debts, both public and private, is atthe option of the creditor.

ROMAN CATHOLIC vs. INTERMEDIATE APPELLATE COURT, G.R. NO.72110. November 16, 1990.

Since a negotiable instrument is only a substitute for money and notmoney, the delivery of such an instrument does not, by itself, operate aspayment. A check, whether a manager’s check or ordinary check, is notlegal tender, and an offer of a check in payment of a debt is not a validtender of payment and may be refused receipt by the obligee or creditor.

PAPA vs. VALENCIA, G.R. NO. 105188, January 23, 1998

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Petitioner received the payment partly in cash and partly in check butwas not able to encash the check, and now questions the said paymentafter 10 years. Respondents, on the other hand, want the petitioner todeliver to them the owner’s duplicate of the title and the peacefulpossession and enjoyment of the lot in question.

The geneal rule is delivery of a check produces the effect of payment onlywhen it is cashed, pursuant to Art. 1249 of the Civil Code. The rule doesnot apply, however, if the debtor is prejudiced by the creditor’sunreasonable delay in the presentment of the check. Acceptance of acheck implies an undertaking of due diligence in presenting it forpayment, and if he from whom it is received sustains loss by want ofsuch diligence, it will be held to operate as actual payment of the debt orobligation for which it was given.

B. CONSIGNATION

ART 1257SOCO vs. MILITANTE, G.R. NO. L-58961 June 28, 1983

Defendant authorized the Commercial Bank and Trust Company to issuechecks to the plaintiff for the payment of rentals, but the plaintiff refusedto accept them. In view of such refusal, defendant instructed said bankto make consignation with the Clerk of Court of the City Court, but thebank did not send notice to Soco that the checks will be deposited inconsignation with the Clerk of Court.

The purpose of the notice, which is essential to the validity of theconsignation, is in order to give the creditor an opportunity to reconsiderhis unjustified refusal and to accept payment thereby avoidingconsignation and the subsequent litigation, hence, failure to give suchnotice renders the consignation void.

DALTON vs. FG.R. and DEVELOPMENT CORP, G.R. NO. 172577January 19, 2011

The withdrawal by the creditor of the amounts consigned was subject tothe express reservation of assailing the validity of the consignation. Insuch case, the creditor is not deemed to have waived the claims he

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reserved against his debtor. When the amount consigned does not coverthe entire obligation, the creditor may accept it, reserving his right to thebalance.

ART 1258

SOCO vs. MILITANTE, G.R. NO. L-58961 June 28, 1983

If the creditor to whom tender of payment has been made refuses withoutjust cause to accept it, the debtor shall be released from responsibility byconsignation which is the act of depositing the thing due with the courtor judicial authorities but it generally requires a prior tender of payment.

ART 1259

SOCO vs. MILITANTE, G.R. NO. L-58961 June 28, 1983

Defendant contended that payments of rental thru checks were made tothe plaintiff but the latter refused to accept them, hence defendantauthorized the bank to make consignation with the Clerk of Court. Inorder to be valid, the tender of payment must be made in lawful currency,but payment in check by the debtor may be acceptable as valid, if noprompt objection to said payment is made.

SOCO vs. MILITANTE, G.R. NO. L-58961 June 28, 1983

The decision subject of the present petition for review holds the view thatthere was substantial compliance with the requisites of consignation andso ruled in favor of private respondent. Substantial compliance is notenough and the essential requisites of a valid consignation, underArticles 1256 to 1261 of the New Civil Code must be complied with fullyand strictly in accordance with the law and must be accorded amandatory construction.

Immaculata vs. Navarro, G.R. NO.L-42230, April 15, 1988

Respondents alleged that the offer to redeem was not sincere, becausethere was no consignation. The right to redeem is a RIGHT, not an

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obligation, therefore, there is no consignation required to preserve theright to redeem.

TENDER OF PAYMENT

SPOUSES CACAYORIN vs. ARMED FORCES AND POLICE MUTUALBENEFIT ASSOCIATION, INC., G.R. NO.171298, April 15, 2013

Petitioner alleged that the lack of prior tender of payment to theirconsignation case is because they were at a loss as to which between thetwo the Rural Bank or AFPMBAI was entitled to such a tender ofpayment. Article 1256 authorizes consignation alone, without need ofprior tender of payment, where the ground for consignation is that thecreditor is unknown, or does not appear at the place of payment; or isincapacitated to receive the payment at the time it is due; or when,without just cause, he refuses to give a receipt; or when two or morepersons claim the same right to collect; or when the title of the obligationhas been lost.

SPOUSES TEOFILO vs. REYES, G.R. NO. 150913, February 20, 2003

Petitioners failed to (a) offer a valid and unconditional tender of payment;(b) notify respondents of the intention to deposit the amount with thecourt; and (c) show the acceptance by the creditor of the amountdeposited as full settlement of the obligation, or in the alternative, adeclaration by the court of the validity of the consignation.

In order that consignation may be effective the debtor must show that (a)there was a debt due; (b) the consignation of the obligation had beenmade because the creditor to whom a valid tender of payment was maderefused to accept it; (c) previous notice of the consignation had beengiven to the person interested in the performance of the obligation; (d)the amount due was placed at the disposal of the court; and, (e) after theconsignation had been made the person interested was notified thereof.

SPOUSES CACAYORIN vs. ARMED FORCES AND POLICE MUTUALBENEFIT ASSOCIATION, INC., G.R. NO.171298 : April 15, 2013

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Petitioner alleged that the lack of prior tender of payment to theirconsignation case was because they were at a loss as to which betweenthe two the Rural Bank or AFPMBAI was entitled to such a tender ofpayment.

Article 1256 authorizes consignation alone, without need of prior tenderof payment, where the ground for consignation is that the creditor isunknown, or does not appear at the place of payment; or is incapacitatedto receive the payment at the time it is due; or when, without just cause,he refuses to give a receipt; or when two or more persons claim the sameright to collect; or when the title of the obligation has been lost.

C. DACION EN PAGO

CALTEX (PHILIPPINES), INC., vs. CA, G.R. NO. 72703, November 13,1992

Dation in payment does not necessarily mean total extinguishment of theobligation but only up to the value of the thing given and the obligation istotally extinguished only when the parties, by aG.R.eement, express orimplied, or by their silence, consider the thing as equivalent to theobligation.

PNB vs. PINEDA, G.R. NO. L-46658 May 13, 1991

Dation in payment is the delivery and transmission of ownership of athing by the debtor to the creditor as an accepted equivalent of theperformance of the obligation. The repossession of the machinery andequipment in question was merely to secure the payment of TCC's loanobligation and not for the purpose of transferring ownership thereof toPNB in satisfaction of said loan.

FILINVEST vs PHILIPPINE ACETYLENE, G.R. NO. L-50449 January30, 1982

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In the absence of clear consent of appellee to the proferred special modeof payment, there can be no transfer of ownership from appellant toappellee by mere delivery to and acceptance by him of the vehicle andshould not be construed as actual payment or more specifically, dacionen pago.

CITIZENS SURETY vs. COURT OF APPEALS, G.R. NO. L-48958 June28, 1988

In opposing the money claim, Respondent alleged that the surety bondsand the indemnity agreements had been extinguished by the execution ofthe deed of assignment, because this amounted to dation in paymentwhereby the former is considered to have alienated his property in favorof the latter in satisfaction of a monetary debt (Artide 1245). Thetransaction could not be dation in payment because the deed ofassignment was executed on December 4, 1959, the obligation of theassignor to refund the assignee had not yet arisen, hence, there was noobligation yet on the part of the petitioner.

D. COMPENSATION

SOLINAP vs. DEL ROSARIO, G.R. No. L-50638 July 25, 1983

For compensation to take place, it is required that the amount involvedbe certain and liquidated. Compensation cannot take place where one'sclaim against the other is still the subject of court litigation.

ART 1980BPI vs CA, G.R. NO. 136202, January 25, 2007

Petitioner, as a collecting agent, debited Salazar's account. The accountwas different from the original account to which the proceeds of thecheck were credited but both accounts belonged to Salazar. The debitedaccount was the account of the sole proprietorship she owns. The otheraccount was her personal account.

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A bank generally has a right of set-off over the deposits therein for thepayment of any withdrawals on the part of a depositor, because fixed,savings, and current deposits of money in banks and similar institutionsare governed by the provisions concerning simple loan, hence, therelationship between banks and depositors is that of creditor and debtor.Legal compensation under Article 1278 of the Civil Code may take placewhen all the requisites mentioned in Article 1279 are present.

GAN TION vs. HON. COURT OF APPEALS, G.R. NO. L-22490, May 21,1969

The award for attorney's fees is made in favor of the litigant, not of hiscounsel, hence, it is the litigant, not his counsel, who is the judgmentcreditor and who may enforce the judgment by execution, such credit,therefore, may properly be the subject of legal compensation.

ART 1278

PNB vs VDA. DE ONG ACERO, G.R. NO. L-69255, February 27, 1987

PNB's main thesis is that when it opened a savings account for ISABELA,it (PNB) became indebted to ISABELA, so that when ISABELA itselfsubsequently came to be indebted to it on account of ISABELA's breachof the terms of the Credit Agreement, ISABELA and PNB became at thesame time creditors and debtors of each other, thus compensationautomatically took place between them, in accordance with Article 1278of the Civil Code.

Compensation shall take when two persons, in their own right, arecreditors and debtors of each other and that compensation may transpireby operation of law, as when all the requisites therefor, set out in Article1279, are present. Nonetheless these legal provisions can not apply if ithas not proven by competent evidence that PNB is a creditor of ISABELA.

FRANCIA vs. IAC, G.R. NO. L-67649 June 28, 1988

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Francia contends that his tax delinquency has been extinguished by legalcompensation and claims that the government owed him when a portionof his land was expropriated, hence, his tax obligation had been set-offby operation of law.

The general rule based on grounds of public policy is well-settled that noset-off admissible against demands for taxes levied for general or localgovernmental purposes because taxes are not in the nature of contractsbetween the party and party but grow out of duty to, and are the positiveacts of the government to the making and enforcing of which, thepersonal consent of individual taxpayers is not required.

SYCIP vs. HONORABLE COURT OF APPEALS, G.R. NO. L-38711,January 31, 1985

Petitioner contends that respondent Court of Appeals erred in notapplying the provisions on compensation or setting-off debts despiteevidence showing that Lapuz, an agent of Albert Smith and/or Dr.Dwight Dill, owed him. Compensation takes place only when two personsin their own right are creditors and debtors of each other, and that eachone of the obligors is bound principally and is at the same time aprincipal creditor of the other.

MINDANAO PORTLAND CEMENT CORPORATION vs. CA, G.R. NO. L-62169, February 28, 1983

It is clear from the record that both corporations, petitioner MindanaoPortland Cement Corporation (appellant) and respondent Pacweld SteelCorporation (appellee), were creditors and debtors of each other, theirdebts to each other consisting in final and executory judgments of theCourt of First Instance in two (2) separate cases, ordering the payment toeach other of the sum of P10,000.00 by way of attorney's fees. The two (2)obligations, therefore, respectively offset each other, compensation havingtaken effect by operation of law and extinguished both debts to theconcurrent amount of P10,000.00, pursuant to the provisions of Arts.1278, 1279 and 1290 of the Civil Code, since all the requisites providedin Art. 1279 of the said Code for automatic compensation "even though

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the creditors and debtors are not aware of the compensation" were dulypresent.

THE INTERNATIONAL CORPORATE BANK INC. vs. IAC, G.R. NO. L-69560 June 30, 1988

Petitioner contended that, after extrajudicially foreclosing the mortgage,private respondent still owes the former an amount, by way of deficiency.Petitioner also claimed that it has the right to apply or set off privaterespondent's money market claim despite the fact that the validity of theextrajudicial foreclosure sale and petitioner's claim for deficiency are stillin question.

Article 1279 of the Civil Code requires among others, that in order thatlegal compensation shall take place, "the two debts be due" and "they beliquidated and demandable", because compensation is not proper wherethe claim of the person asserting the set-off against the other is not clearnor liquidated.

MONDRAGON vs. SOLA, JR., G.R. NO. 174882 January 21, 2013

Respondent reneged on his promise to pay petitioner. Petitionerthereafter withheld the payment of respondent's service fees and appliedthe same as partial payments of the debt by way of compensation.

Compensation is a mode of extinguishing to the concurrent amount theobligations of persons who in their own right and as principals arereciprocally debtors and creditors of each other. Legal compensationtakes place by operation of law when all the requisites are present, asopposed to conventional compensation which takes place when theparties aG.R.ee to compensate their mutual obligations even in theabsence of some requisites.

MONTEMAYOR vs. MILLORA, G.R. NO. 168251. July 27, 2011

Jesus contends that offsetting cannot be made because the judgment ofthe RTC failed to specify the amount of attorney’s fees and maintainsthat for offsetting to apply, the two debts must be liquidated or

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ascertainable and the trial court merely awarded to Vicente attorney’sfees based on quantum meruit without specifying the exact amountthereof. A debt is considered liquidated, not only when it is expressedalready in definite figures which do not require verification, but alsowhen the determination of the exact amount depends only on a simplearithmetical operation.

E. NOVATIONLBP vs. ONG, , G.R. NO. 190755, November 24, 2010

Land Bank faults the CA for finding that novation given that substitutionof debtors was made without its consent, thus, it was not bound torecognize the substitution under the rules on novation. Novation whichconsists in substituting a new debtor in the place of the original one,may be made even without the knowledge or against the will of the latter,but not without the consent of the creditor.

BOYSAW vs. INTERPHIL PROMOTIONS, G.R. NO. L-22590, March 20,1987

The assignment and transfer, first to Araneta, and subsequently, toappellant Yulo, Jr., of the managerial rights over Boysaw is without theknowledge or consent of Interphil. The consent of the creditor to thechange of debtors, whether in expromision or delegacion is an,indispensable requirement , since substitution of one debtor for anothermay delay or prevent the fulfillment of the obligation by reason of theinability or insolvency of the new debtor, hence, the creditor should agreeto accept the substitution in order that it may be binding on him.

CALIFORNIA BUS LINES, INC. vs. STATE INVESTMENT HOUSE, INC.,G.R. NO. 147950. December 11, 2003

There was no change in the object of the prior obligations in therestructuring agreement since it merely provided for a new schedule ofpayments and additional security giving Delta authority to take over themanagement and operations of CBLI in case CBLI fails to payinstallments equivalent to 60 days. With respect to obligations to pay asum of money, this Court has consistently applied the well-settled rule

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that the obligation is not novated by an instrument that expresslyrecognizes the old, changes only the terms of payment, and adds otherobligations not incompatible with the old ones, or where the new contractmerely supplements the old one.

AJAX MARKETING vs. HON. COURT OF APPEALS, G.R. NO. 118585September 14, 1995

In their interrelated first and second assignment of errors, petitionersargue that a novation occurred when their three (3) loans, which are allsecured by the same real estate property were consolidated into a singleloan of P1 million under Promissory Note, thereby extinguishing theirmonetary obligations and releasing the mortgaged property from liability.The well settled rule is that novation is never presumed and it will not beallowed unless it is clearly shown by express agreement, or by acts ofequal import, thus, to effect an objective novation it is imperative thatthe new obligation expressly declare that the old obligation is therebyextinguished, or that the new obligation be on every point incompatiblewith the new one.

F. RESCISSION

UNIVERSAL FOOD CORPORATION vs. CA, G.R. NO. L-29155, May13, 1970

Respondent patentee was dismissed as the permanent chief chemist ofthe corporation without any fault or negligence on his part after theexecution of the Bill of Assignment, prompting him to rescind thecontract. The general rule is that rescission of a contract will not bepermitted for a slight or casual breach, but only for such substantial andfundamental breach as would defeat the very object of the parties inmaking the agreement.

ART 1191

DEL CASTILLO Vda. DE MISTICA vs. SPOUSES NAGUIAT, G.R. NO.137909, December 11, 2003

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In the present case, the failure of respondents to pay the balance of thepurchase price within ten years from the execution of the Deed did notamount to a substantial breach. Under Article 1191 of the Civil Code,the right to rescind an obligation is predicated on the violation of thereciprocity between parties, brought about by a breach of faith by one ofthem however, rescission is allowed only where the breach is substantialand fundamental to the fulfillment of the obligation.

, PALAY vs. CLAVE , G.R. NO. L-56076 September 21, 1983

The contract agreed upon by the parties provided for automaticextrajudicial rescission upon default in payment without need of noticeand with forfeiture of all installments paid. Upon default of therespondent, petitioner rescinded the contract. Respondent questionedthe validity of the rescission. The judicial action for the rescission of acontract is not necessary where the contract provides that it may berevoked and cancelled for violation of any of its terms and conditions,however there should be at least a written notice sent to the defaulterinforming him of the rescission.

ART 1169,1191

SOLAR HARVEST, INC., vs DAVAO CORRUGATED CARTONCORPORATION, G.R. NO. 176868. July 26, 2010

The CA added that even assuming that the agreement was forrespondent to deliver the boxes, respondent would not be liable forbreach of contract as petitioner had not yet demanded from it thedelivery of the boxes. Without a previous demand for the fulfillment ofthe obligation, petitioner would not have a cause of action for rescissionagainst respondent as the latter would not yet be considered in breach ofits contractual obligation, since the right to rescind a contract arisesonce the other party defaults in the performance of his obligation.

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OSMEÑA III vs SSS, September 13, 2007

The Letter-Agreement, the SPA, the SSC resolutions assailed in thisrecourse, and the Invitation to Bid sent out to implement saidresolutions, all have a common subject: the Shares – the 187.84 MillionEPCIB common shares, which, as a necessary consequence of the BDO-EPCIB merger which saw EPCIB being absorbed by the surviving BDO,have been transferred to BDO and converted into BDO common sharesunder the exchange ratio set forth in the BDO-EPCIB Plan of Merger. Asthus converted, the subject Shares are no longer equity securityissuances of the now defunct EPCIB, but those of BDO-EPCI, which,needless to stress, is a totally separate and distinct entity from whatused to be EPCIB.

Under the law on obligations and contracts, the obligation to give adeterminate thing is extinguished if the object is lost without the fault ofthe debtor, and per Art. 1192 (2) of the Civil Code, a thing is consideredlost when it perishes or disappears in such a way that it cannot berecovered.

VILLAMAR vs. MANGAOIL, G.R. NO. 188661 : April 11, 2012

Petitioner alleged that the absence of stipulations in the aG.R.eementand absolute deed of sale entered into by Petitioner and Respondentexpressly indicating the consequences of the former's failure to deliverthe physical possession of the subject property and the certificate of titlecovering the same, the Respondent is not entitled to demand for therescission of their contract pursuant to Article 1191 of the NCC.

The power to rescind obligations is implied in reciprocal ones, in case oneof the obligors should not comply with what is incumbent upon him",this remains true notwithstanding the absence of express stipulations inthe agreement indicating the consequences of breaches which the partiesmay commit.

AYSON-SIMON vs. ADAMOS, G.R. NO. L-39378, August 28, 1984

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Defendants contend (1) that the fulfillment and the rescission of theobligation in reciprocal ones are alternative remedies, and plaintiffhaving chosen fulfillment in the Civil Case, she cannot now seekrescission; and (2) that even if plaintiff could seek rescission the action torescind the obligation has prescribed. The rule that the injured partycan only choose between fulfillment and rescission of the obligation, andcannot have both, applies when the obligation is possible of fulfillment, ifthe fulfillment has become impossible, Article 1191 (3) allows the injuredparty to seek rescission even after he has chosen fulfillment.

ART 1234ANGELES, ET AL vs. CALASANZ, G.R. NO. L-42283, March 18, 1985

The breach of the contract adverted to by the defendants-appellants is soslight and casual when we consider that apart from the initialdownpayment of P392.00 the plaintiffs-appellees had already paid themonthly installments for a period of almost nine (9) years. If theobligation has been substantially performed in good faith, the obligormay recover as though there had been a strict and complete fulfillment,less damages suffered by the obligee.

UP vs. DE LOS ANGELES, G.R. NO. L-28602, September 29,

In the first place, UP and ALUMCO had expressly stipulated in the"Acknowledgment of Debt and Proposed Manner of Payments" that, upondefault by the debtor ALUMCO, the creditor (UP) has "the right and thepower to consider, the Logging Agreement dated as rescinded without thenecessity of any judicial suit."

The party who deems the contract violated may consider it resolved orrescinded, and act accordingly, without previous court action, but itproceeds at its own risk, for it is only the final judgment of thecorresponding court that will conclusively and finally settle whether theaction taken was or was not correct in law.

G. RESTITUTION

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UNIVERSAL FOOD CORPORATION vs. THE COURT OF APPEALS,MAGDALO V. FRANCISCO, SR., and VICTORIANO N. FRANCISCO,G.R. NO. L-29155, May 13, 1970

Petitioner contends that the Court of Appeals erred in ordering thecorporation to return to the respondents the trademark and formula forMafran sauce. Rescission creates the obligation to return the thingswhich were the object of the contract.

C O N T R A C T S

I. A. DEFINITION

SPOUSES BALILA vs. IAC, G.R. NO. L-68477 October 29, 1987

A contract is a meeting of minds between two persons whereby one bindshimself with respect to the other to give something or render someservice, the Central Bank of the Philippines in the exercise of itsAdministrative power did not create any contractual obligations.

B. CONTRACTS AS A SOURCE OF OBLIGATIONS

BATCHELDER vs. THE CENTRAL BANK OF THE PHILIPPINES, G.R.NO. L-25071, July 29, 1972

Obligations arise from 1) law; 2) contracts; 3) quasi-contracts; 4) acts oromissions punished by law and 5) quasi-delicts, the circular issued bythe Central Bank has the force and effect of the law. Obligations arisingfrom law, however, is never presumed.

II. ESSENTIAL ELEMENTS OF A CONTRACT

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