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February 8, 2016

Make-up class

Is there fraud? YES.


Is this fraud under 1170, 71? No.
Bcs fraud under 1171 involves
fraud in the performance.

BREACH OF OBLIGATIONS
If theres an obligation, may one of the
parties be held liable?
Not necessarily.

First, bcs maybe both of the parties are


obliged to comply with an obligation.
Pangalawa, even if one of them or the
debtor in an obligation failed to comply
with the obligation, maybe there was
no fault on his part, maybe it was due
to the fault of the creditor, or the
fortuitous event that was unforeseen,
or though foreseen are inevitable
under 1174.
There are also one other reason why
not every time there is an obligation, a
party thereto may be held liable. Bcs
under 1170 only those who are guilty
of fraud, negligence or delay, but also
those who in any manner contravene
the tenor thereof shall be held liable
for damages.
In other words, from this article, it is
clear that not only debtors can be held
liable. Kaya nga the law starts with the
word those. Even creditors, can be
guilty of fraud, hindi lang ang debtor.
Pwede rin sya maging guilty ng
negligence and in delay, known as
mora accipiendi. But it is not only bcs
there was fraud, negligence or delay,
in general, yung last phrase in
contravention of the tenor of the
obligation in whatever manner, would
cover performance. Is there complete
or imperfect performance, can be the
basis of liability.

Lets
start
with
obligations:

factors

affecting

1. FRAUD
Fraud can be classified generally into two.
Example: If A offered a RING for sale to B,
misrepresenting that it is a 24 Karat gold,
where in fact it was just gold-plated.

A while ago, ang scenario involving


the ring, pertains to fraud in
obtaining consent. If you notice,
yung fraud na ito is known as
Causal Fraud or Dolo Causante,
which is already under 1338, under
contracts.
In other words, there can only be
fraud in obtaining consent, if it is in
relation to Contracts. Whereas
yung fraud in the performance
under 1171, it doesnt matter from
what source of the obligation, it
can be from law, or others.
Of course, in contracts, it need not
only be causal fraud, it may also be
incidental fraud under 1344. This
fraud, will not affect the validity of
the contract, but it can be the basis
to hold the party who commit the
fraud liable for damages.
If you remember in causal fraud, it
would result to a voidable contract,
then annulment would be the
remedy.
Again in 1171, the fraud is in the
performance. Example, would be
culpa-contractual, fraud in the
performance of an obligation
arising from contract.
Question: If an action for specific
performance was filed, on the ground that
fraud was committed by the defendant in
the
performance
of
an
obligation.
However, the defendant was able to prove
to the court that the plaintiff executed a
waiver, stating that despite fraud on the
part of either parties, no action would be
filed by either. With this waiver, the
question is, will the action prosper?
The answer depends on WHEN the
waiver was executed in relation to
the fraudulent act.
Bcs if the waiver was executed
BEFORE the fraudulent act, that
would be considered as a waiver to
future fraud, and under the law, a

waiver to future fraud is void.


Simple lang naman ang reason
dyan, bcs it is considered against
public policy, otherwise. The party
to this contract would invite the
other party to commit fraud, cause
either way he will not be liable.
If the waiver was executed after
the fraudulent act, it would amount
to condonation,
therefore the
action will no longer prosper.

Walang tanong masyado sa fraud, lalo na


problem type na tanong, meron but very
objective. Cause ang fraud subjective, and
minsan
sobrang
haba
ng
tanong.
Negligence also, for similar resosns.
Whether an act is a negligent act or not, is
also subjective ang determination.
If you remember CANGO vs MRR, hindi
unanimous ang decision 2 of the justices
considered the act as negligent act.
But..first.. lets go to negligence.
2. NEGLIGENCE
Is negligence synonymous as to fault?
The answer is definitely not, if only
bcs under 1126, what would
constitute quasi delict is fault OR
negligence. In other words, fault is
not the same as negligence.
Also, the SC would make this
distinction by saying that, in fault,
there can be an intention to cause
harm to another, while negligence
is by mere omission which, I fully
support, bcs in tagalog, pag sinabi
nating its your fault, it means
kasalanan mo yan. Does it mean
negligence
mo
yan?
Not
necessarily. Pag sinabi nating fault,
pwedeng
malicious,
pwedeng
intentional. Diba?
Culpa, what is this word? Is it synonymous
to negligence?
Hindi din. Bcs culpa is considered
to be more encompassing, covered
nya ang fault and negligence. So
when you say culpa, kasama na
ang negligence dyan. Kaya culpa
contractual, covered ang fault and
negligence.

But the main issue here is, when would


an act be considered a negligent act?
Read again the case of CANGCO vs MRR,
is the act of Cangco, alighting from a
moving vehicle, is that a negligent act?
As I said, 2 justices considered the
ruling from the US that alighting
from a moving vehicle is a
negligent act. I have to remind
you pala, ang definition ng
negligence
ditto
ay
made
applicable to quasi-delict, kaya
impt not only in the performance of
obligation, but also in relation to
negligence as constituting an
independent source of obligation.
Now, again, sa 2 justices, parang
tama. Kasi had he not alighted
from a moving train, had he waited
for the train to stop, he would not
have been injured. It is a good
argument diba? Kaya lang, mali
talaga yung argument eh. Precisely
he did not wait for the train to be in
full stop. We are not talking about
that scenario, we are in a scenario
that he alighted from a moving
train. Bcs, ang mas maganda sana,
he should have waited, non
siquetor, it doesnt follow the
position of the majority. Buttama
ba ang majority of the justice, that
the act was not a negligent act? Eh
tumatakbo pa ang sasakyan eh.
Well the majority based on a rule,
now enshrined in Article 1173. To
be able to determine whether the
act is a negligent act or not, we
have to consider the NATURE of the
obligation which corresponds to the
circumstance as to the person, the
time and the place. Consider the
circumstances surrounding this act.
If you read the case, even without
considering 1173, I would already support
the decision of the majority. Before Cangco
alighted, there was another person who
alighted first, so ahead of Cangco.
Considering the scenario, the train was
about to stop, so pabagal ng pabagal,
therefore, dapat nung si Cangco na
bumaba, mas mabagal na, pero bat etong
taong to was not injured. Si Cangco was
injured? Therefore, it was not bcs of the

alighting from the moving vehicle per se


which was the negligent act. Something
must have happened somewhere else.
Applying 1173 as applied in this case, the
nature of the obligation, I would say that it
is impt bcs we have to consider the degree
of diligence that have to be observed. Lalo
na eto, common carrier ito. They must
exercise the highest degree of diligence.
By law, andyan ung common carriers to
exercise highest degree of diligence like
public utility. Gaya ng PLDT, Meralco
(Meralco vs. Ramos?), of course, doctors,
banks. Also, realty firms, like DMCI MDC.
But in Minadanao Terminal vs. Phoenix
Assurance: Stevedoring companies are
not required to exercise another degree of
diligence. Just ordinary diligence.
As to the circumstances as to the time and
place, this really was the basis of the
justices.
Of
course,
under
the
circumstances nga na the train was about
to stop. Otherwise, kung 150 kph pa ang
takbo, tas you would alight, siguro naman
sobra sobrang negligence nay an.
It cannot be said that Cango was
negligent. Why? Bcs Cangco was at his
prime at the time it was committed.
In other words, tama naman. He was
around 20 at the time, eh kung 92 years
old ka, tas pa stop na, tatalon ka padin,
may negligence talaga.
In fact the SC even considered the fact
that Cango was a male in concluding that
the act was not a negligent act, what has
the gender got to do with this? It was bcs
at the time the incident happened, mga
1920s to, women was wearing Kimono. So
it has something to do with the apparel. If
naka-Kimono ka tas tatalon ka, siguro
naman talagang maddisgrasya ka. Ang
negligence is a function of time.
Into the place, he was very much familiar
with the place, bcs everyday he will ride
the train, but ang isang factor ditto in
determining who is the negligent is the
TIME. It was nighttime, ultimately, the
employees of MRR are negligent bcs they
placed sacks of watermelon near the train.
Kaya nga his arm had to be amputated cos
bumaba sya, and sumabit sya don sa
sacks.

Also, the fact that the place was poorly lit.


If may watermelon tas well-lit naman,
makikita nya. Di na sya siguro tatalon.
Well kaya pala hindi na injure yung other
person na tumalon, bcs sa tinalunan nya,
walang watermelon. So it was really the
employees of MRR who were negligent.
Again, the person, time and the place.
One last. SLEEPING while at work. Is that a
negligent act?
Again, determine the nature of the
obligation. Kung obligasyon mong
mag bantay ng goods, ng bata,
baka yaya, or para mas maganda,
governess. Naman. Makatulog ka
lang 30 seconds, hulog na ang bata
sa stairs. Or nanakaw na lahat ng
binabantayan mo diba. But if
abogado ka, ang obligasyon mo
naman ay gumawa ng pleadings,
naman, kahit matulog ka ng 5hours
okay lang, basta ma pasa mo diba.
How impt yung nature of the obligation sa
determination? Kung driver ka ng bus,
nako, kung 5 seconds ka lang maiglip,
patay agad lahat ng pasahero mo diba?
Kaya I fully appreciate the drivers
papuntang baguio, bicol, kahit at least 3
inches na lang parang bangin na, at least,
wala ka sa bangin diba? Yung negligence
nakakamaty. Kaya wag masyado. Yung kay
Robredo, di sa nangangampanya k okay
Robredo ha, pero pagisipan nyo din. Last
year mga 40 govt employees talsik sa
trabaho. Bcs if you would sign a
certification that air worthy ang eroplano,
pero di man lang pinalipad ang eroplano
to check.
One other, basically there are 2 kinds of
negligence.
May
negiligence
in
the
performance
of
obligation,
Example dyan, culpa-contractual.
May negligence that constitute as
independent source of obligation,
ang example naman dyan ay quasidelict. Or culpa-aquialana. Or
culpa-criminal. Wala silang preexisting
obligation,
but
the
obligation would arise due to the
negligent act.

Finally, I would have to emphasize the


kinds of negligence as to the extent.
May simple negligent act, and
grossly negligent act.
How impt is this?
In the case of TELEFAST vs.
CASTRO,
makikita
nyo
ang
relevance nayan. Dito, for the
sending of a message through a
telegram, claiming moral damages.
In contracts, in order for the party
to be held liable for moral
damages, that party must have
acted in bad faith or was in wanton
disregard of his obligations. So bad
faith is not easy to prove. In fact,
good faith is the one presumed by
law. Kaya ang cause of action dito
sa TELEFAST was breach of
contract. Ang telegram na ito is to
inform the children and the
husband of the deceased, that this
person was already dead. Imagine,
telegram ito, you can just imagine
kelan pa ito ngyare. So, the
message was not received. Hindi
napadala, kaya this deceased was
buried by Sofia, one of the
daughters. The rest nalaman nila
after na. So they sued Telefast.
Telefasts defense was that it was
due to atmospheric pressure that
was beyond their control. Mukang
tama naman, you cant control that
naman. But nakahanap ng lusot
ang SC, it turned out that the
TELEFAST did not inform Sofia that
they failed to send the message.
SC considered this as a grossly
negligent act. Hindi mo nagawa,
sabihin mo sakin, so I couldve
done something diba. In our law,
gross negligence amounts to fraud.
Okay na yan. Most of the bar exam
questions ay nasa DELAY.
3. DELAY
Delay is also known as DEFAULT or MORA.
When a person is in delay, does it mean
that he did not perform the obligation?
Hindi naman. He may have
informed pero maybe, days or
months after the obligation was

due and demandable. This is why


its also called Non-Performance
with Respect to Time.
When would a person be considered in
delay?
An impt reqt is Demand. At least as
a rule. No demand, no delay.
But there are exceptions to this rule.
Madali lang naman.
If so stipulated, na din a kelangan
ng demand. Example, sa Credit
Card nyo, you will be liable in case
you fail to pay on due date, without
need of demand.
If the law so provides. Ecample
ditto, Agency and partnership. Sa
partnership to make good his
promises to the contribution if he
did not perform, he is already in
delay.
3rd, if the demand would be
useless. If due to the fault of the
debtor.
Example,
napaka
mamahaling babasagingvase, for
whatever reason, nabasag yung
vase, even before the due date,
dina kelangan demand, the debtor
is already liable for damages even
if thereis no demand.
Last paragraph 1169 in relation to
reciprocal obligations, if one of the parties
has already fulfilled his obligation, that
one party who did not is already in delay.
Again this is what the law provides.
However, this is subject to the stipulation
of the parties.
IF the seller had already delivered the
thing in a contract of sale, but the buyer
has not paid the price. Does it mean that
the buyer is already in delay?
Not necessarily, bcs pwede naming
nag usap sila that he will pay within
6 months. 1169 pertains to pure
obligations, demandable at once.
DELAY ON THE PART OF CR: Mora
accipiendi
Bakit sya in delay?
Maybe the creditor does not want
to accept the payment of the
debtor.

Eh bakit naman hindi tatanggapin ni


creditor?
Maybe bcs, it is not in compliance
with the quantity agreed upon.
o General rule is: Partial
performance
is
nonperformance
subject
to
stipulation. A
lso, maybe bcs the goods are of
inferior quality, or maybe the goods
are
damaged,
so
bakit
mo
tatanggapin
or
any
other
conditions?
So again, to be in mora accepiendi
it must be without just cause. So
dahil in delay sya, anong damage
ma-ccause
nun
sa
debtor?
Maraming possible reasons. Pano
kung gumamit pa sya ng barko,
eroplano and the expenses of the
transportation, mahal, pag hindi
tinanggap in some instances,
kelangan pa nya mag rent ng
warehouse. Thus, malaking gastos
if hindi tanggapin ng creditor.
But in the case of Agcaoili vs. GSIS, this
pertains to another kind of delay, this is in
relation to a housing unit na inapply ni
Agacaoili with GSIS, na gagawa ng bahay,
through its contractors (now wala ng
housing orojects ang GSISmangutang ka
nalang sa iba) ang ngangyare, based on
the agreement, dineliver ng gSIS ang
house but it was just a structure actally,
walang dingding, tubig, basta roof lang.
thus, Agcaoili knew that he cannot live
with that structure, he suspended the
payments of monthly amortizations. To
which, GSIS cancelled the agreement.
Obviously, ang ground in default si
Agcaoli.
The SC said that even if Agacoili
was in delay in the performance of
his obligation, which is to pay, GSIS
was
also
in
delay
in
the
performance of his obligation, to
deliver
a
habitable
house.
Therefore, both parties are in delay.
In contemplation of law, no one is
in delay, hence, GSIS has no right
to cancel the agreement.
In relation to demand. When a person
would follow up, or remind the other party.

Is that sufficient to constitute demand in


order for delay to set in?
No. Ang reminder is not a demand.
Kamusta na ang utang ko?
Another impt point, sagot ng mga kaklase
niyo parati: pumapasok to, an obligation
would become due upon demandpag
ganyan ang naisagot, papasok na ang
discussion na: in the first place, will there
be a valid demand If the obligation is not
yet due and demandable?
Diba hindi? There can never be a
valid demand if the obligation is
not yet due and demandable.
Obviously therefore, an obligation
does
not
become
due
and
demandable dahil sa demand. To
the contrary, kailangan due and
demandable bago ka makapag
demand.
Ex. an Obligation is to due and
demandable on Jan 31. Aba Jan 28 palang
nag demand na si creditor for the delivery
of the goods. Eh on feb 2 all the goods
were destroyed due to a fortuitous event,
while still in the possession of the debtor.
Can the debtor be held liable for the loss?
No. He can only be held liable, if he
was only in delay at the time of the
loss. Since the demand was not a
valid demand, he was not in delay.
Its as if there was no demand.
Bar question, with regards to the contract
of lease:
1 month ang kontrata pero nag start ang
feb 15, on march 15, the lessor demanded
for the return of the thing, but the lessee
failed to comply due to a mechanical
failure on his truck. The next day, it was
burned through a fire started from a
neighbor establishment. Wala syang
kasalanan. But ang tanong, can he be held
liable?
Again pag ganyan ang problem,
ang isipin mo.. Loss of the thing
due to a fortuitous event. Ang
general rule dyan ay 1174.
However, may exceptions don ha.
Hindi papasok ang stipulation,
Nature of the obligation involves
contract of risk, bcs the law so
provides. BAKA. Anong law ito? In
connection with the obligation to

deliver a determinate thing, such


thing is lost or destroyed due to a
fortuitous event, the debtor shall
be held liable if at the time of the
losshe was already in delay. Was
the lessee already in delay? Again,
in mar15 ang demand. Valid ba ang
demand? Hindi. Why, 1 month
under art 13 of civil code, 1 month
is 30 days. So. Demandable pa sya
on march 17, dahil February only
has 28 days.
As mentioned earlier, even if the debtor
failed to comply with his obligation, if the
reason for this non-compliance was due to
a fortuitous eventhe cannot be held
liable. But only as a rule. Bcs there are
exceptions.
Isipin
mo
parati
may
stipulation ba, assumption of risk, ask
yourselfis there a law which would
consider this person liable or responsible
despite the fact that there was a fortuitous
event under the circumstances? Ang sagot
dito. Alamin ang laws, 1165 example.
When a debtor, promised to deliver the
same thing to two or more persons who
does not have the same interests, and
thereafter, the thing was lost due to a FE,
liable pa din sya.
As you read laws tignan niyo ang mga
gantong provision, which a person can still
be held liable despite a fortuitous event
because the law so provides.
But out of this, ang isang paborito ay nasa
commodatum, sa aticle 1954.
Diba ang general rule nga if the
thing while in the possession of the
bailee/borrower
was
lost
or
destroyed due to a fortuitous event
while in the possession of the
bailee, the borrower cannot be held
liable. That is the general rule.
But by way of exception, that
article would tell us the scenarios.
The instances when the bailee can
be held liable. Kung lima ang nakaenumerate dyan, tatlo na ang nagappear sa bar exam. That is how
favorite that article is. Yung isang
libong
article
nga
hidni
pa
natatanong eh. Pero ito, three
times na. Example: Bcs the
borrower used the thing for another

purpose than that agreed upon by


the parties, tama nga naman din,
libe na nga eh nanghihiram ka na
rin lang tapos gagamitin mo sa
bagay diba, its a very reasonable
exception sa general rule. Check
niyo sa syllabus.
Sa cases, andito ang NTC VS. Court of
Appeals. Napaka interisado ng case na
to, and consistent ang Supereme Court
dito. In order for one to invoke fortuitous
event as a defense, there should be no
concurrent negligence nor bad faith on his
part, so he can invoke the defense of FE.
Ang nangyare dito, NAPOCOR released
water from a certain dam, as a result of
the release of the water, the properties of
the plaintiff at the foot of the dam was
destroyed. Obviously, ang defense ng NTC
was fortuitous eventkasi nga naman
may bagyo. They had to release the water
kasi mappuno na ang dam. Pag napuno
ang dam, baka sumabog yung dam,
magkkaron ng problem sa integrity ng
dam, and masisira ng buong buo. But,
tama ba ang defense? Was NAPOCOR held
liable?

NAPOCOR was held liable because


there was concurrent negligence on
NAPOCOR. When they released the
water, it was only when the dam
was full. Nung punong puno na.
dapat, bago pa mapuno yun dam,
they should have slowly released
the water. Bcs there had been
previous typhoon, much stronger
than that typhoon
pero
no
damages naman sa property ng
plaintiff. In other words, it was
because of the negligence of the
typhoon thats why damage was
caused to the plaintiff.

If the reason of the non-performance was


due to the act of the creditor, walang bago
dyan.
SICAM vs. JORGE is about a contract,
the owners of these pieces of jewelry sued
the owners of the pawnshop bcs they
could not return the jewelries to the
owner. Well ang defense nya, there was a
robbery. Claiming that it is a fortuitous

eventhe should not be held liable. Anong


naging ruling dito?
SC: They are liable.
Ang unusual dito sa case, he was
the only on who testified that there
was
a
robberyang
mga
empleyado niya wala. Even the
security guardhindi nagtestify
anong nangyari. Kung wala kang
security guard is already
a
negligent act. And for that, that is
already a concurring negligent act
and he cannot invoke fortuitous
event as a defense. But also,
maganda ang theory ng plaintiffs.
1st: It was proven that itong defendant
already contemplated na ang mga pieces
of jewelry ay ilalagay sa vault sa bangko,
obviously hindi niya ginawa. Second,
robbery is not an event that which could
not been foreseenalamo naman pala,
kaya nga kayo nag agree na ilagay don
kasi talaga naming maraming robberies.
So in a way, this cannot be considered an
unforeseen event due to the nature of the
business. In other words, robbery is not a
fortuitous event per se. It depends on the
circumstances.
2nd negligent act dito, kinclaim niya,
because afternoon ang robbery, it was
unexpected kaya hindi nakasara ang vault.

REMEDIES FOR BREACH OF


OBLIGATIONS
Usual questions in the bar under this topic:
WILL THE ACTION PROSPER?
And the premise here is that: there is
already a pending action filed. Unusual
ang if you are a lawyer, what action will
you file?
In answering questions such
always consider the following:

as

this,

1. WHO FILED THE CASE? Is he the


injured party?
If one who sued is not the injured
partythe action will not prosper.
Bcs remedies are granted only to
the agrrieved/injured.
Note however that, plaintiff is NOT
always the injured party.
o Being the plaintiff does not
necessarily make you the
CR or the DR. Minsan
inuunahan lang nung isa
yung proper party.
IF the plaintiff is the injured party,
take note a distinction:
o There was harm incurred,
there is a principle known as
Damnum Absque Injuria (he
suffered a damage when the
other party was exercising a
right) in this instance, even
if the plaintiff is the injured
party,
action
will
not
necessarily prosper.
o There was harm incurred
will the action prosper? Not
necessarily. Madami pang
reason. Next step..
2. WHAT IS THE CAUSE OF ACTION
FILED?
Determine if the Cause of Action is correct.
Because, even if you have a right under
the law, and you are injured, if the cause
of action filed is wrong, it will not prosper.
Just like in the ff cases:
o In Batchelder vs. Central Bank,
RA 1529 in relation to foreign
currency was in effect. any person
in this country who receives a
foreign currency is required to
surrender such currency with the

Central Bank within 24 hours. Not


a
confiscation,
but
papalitan
naman. Cause of Action filed was
based on a contract where in
fact, it was based on a BSP Circular,
hence
based
on
law.
Case
dismissed.
In Araneta vs. Phil Sugar
Estates:
in the agreement to
construct a road and the action is
for specific performancewill the
action prosper? No, bcs specific
performance is not the proper
remedy bcs the obligation is an
obligation to do. Case dismissed.
o To compel a person to do
something against his will,
constitutes
involuntary
servitude.

3. WHAT ARE THE REMEDIES?


VIP is 1191, majority f the questions in the
bar covered ng 1191.
In 1191, there are 2 remedies mentioned:
1. Fulfillment with damages, and
2. Rescission with damages.
Question:
1. If CR already invoked fulfillment as a
remedy, may he thereafter be allowed to
invoke rescission? YES! By express
provision of 1191 which states: he may
also seek rescission, even after he has
chosen fulfillment, if the latter should
become impossible.
Note: the impossibility should be
due to the fault of the debtor, since the
premise of this provision is that the CR is
injured.
2. If CR has already invoked Rescission,
can he be allowed to invoke Fulfillment
later on? 1191 does not provide because it
cannot happen. As discussed in the case
of Magdalena Estate vs. Myrick:
(In that case, it was ruled that:
Under article 1124 (now 1191) of
the Civil Code, petitioner may
choose between demanding the
fulfillment of the contract or its
resolution. These remedies are
alternative and not cumulative, and
the petitioner in this case, having
to cancel the contract, cannot avail
himself of the other remedy of

exacting
performance.
As
a
consequence of the resolution, the
parties should be restored, as far
as practicable, to their original
situation
(which
can
be
approximated only by ordering, as
we do now, the return of the
things which were the object of the
contract, with their fruits and of the
price, with its interest (article 1295,
Civil Code), computed from the
date of the institution of the action
positions, or, in the letter of the
Scotch law, to "approbate and
reprobate.")

on injury to the plaintiffs


economic
interests
as
described in 1380-1381.
*may only be invoked if there is
no other available remedy.
Prescribes in 4 years from the
time the right of action
accrued. (under 1389)

breach of faith, a v
between the parties.
*direct and principal act

Prescribes in 10 years
binding force of written

Gives the injured pa


between: 1. Fulfillmen
Rescission of the contra
The equivalent of Article 1191 in
the old code actually uses the term
resolution,
rather
than
the
present rescission, that such was
the
result
of
an
ineffective
translation. The court noted that
the action involved was an action
for Rescission and not Resolution.
Therefore, the prescriptive period
was 4 years under Art 1381.
I FOUND THE CASE!!! Heirs of
Sofia Quirong vs. DBP 2009

1. RESCISSION AS A REMEDY
In one case (look for it), an action
for rescission was filed, but the
defendant filed a motion to dismiss
on the ground that since the action
was filed more than 4 years from
the date of the contract therefore,
the action has already prescribed.
WHEN IS THERE FUNDAMENTAL/SERIOUS
In a particular case, the motion was
BREACH?
denied.
o In the case of Song Fo vs.
Reason: bcs ang premise niya, that
Hawaiian Comp.: in relation to
the law requires such action within
sale of molasses, on the date
4 years is based on a kind of
agreed upon the seller is asking for
rescission. It turned out that yung
the price, and the buyer failed to
cause of action niya is not under
pay. He failed to pay 19 days from
rescissible
contracts,
that
due
date.
Seller
claims
for
requirement that should be filed
rescission.
Is
the
rescission
valid?
within 4 years is applicable only in
NO. Bcs 19 days is not a
rescissible contracts. In other
fundamental breach? Base on
words, 1191 when should the
circumstances,
molasses,
hindi
action be fileddepends on so
naman
basta
basta
nasisira.
many factors. If in wrtg, filed within
10 years from the time the cause of
SC: The seller has no legal right to
action accrues.
rescind the contract of sale due to
To distinguish these two, the SC
failure to pay within the time
said: The remedy of rescission is
agreed upon by the parties. The
not confined to the rescissible
general rule is that rescission will
contracts under 1389, there are 2
not be permitted for a slight or
kinds of Rescission, distinguished
casual breach of the contract, but
as follows:
Rescission under 1381
Rescission under 1191 only for such breaches as are so
substantial and fundamental
What is required: LESION, What is required: substantial/fundamental
BREACH as to
defeat
the
object
of
the parties in
guardian entered a contract
making
the
agreement.
A delay in
involving the property of the
payment
for
a
small
quantity
of
ward, and the latter must suffer
molasses for some twenty days is
lesion more than of the
not such a violation of an essential
value.
contract was
It is a subsidiary* action based It is a principal actioncondition
based on of
the the
defendants

warrants
rescission
for
nonperformance. Not only this, but the
Hawaiian-Philippine Co. waived this
condition
when
it
arose
by
accepting payment of the overdue
accounts and continuing with the
contract.
o

CU: 60% performance. 40% nonperformance. Is there substantial


performance? Yes kasi 40% is a
serious breach.
Pag na perform mo 80%, 20% lang
hindi, slight breach lang yan.
UFC vs. Court of Appeals, Direct
and principal action. See the
Concurring opinion of JBL Reyes.
Classic case na tama ang principle
on the basis that Magdalo had not
complied
with
his
obligation,
therefore his action to rescission
should not prosper. (to transfer
formula) However, even assuming
that UFC did not comply with the
obligation, the plaintiff did not also
comply, he cannot claim to be the
injured party.

RESCISSON AS A REMEDY, may it be


granted by law? Yes. 1191, 1381
What if it is mutually agreed upon by the
parties? Yes.
Can Rescission be invoked extrajudicially or kelangan ba parati na
judicial?
o Yes, may be extra-judicial.
However,
it
is
always
subject to court intervention
to determine its validity. In
the case of UP vs. De Los
Angeles the court held
that: there is nothing in the
law
that
prohibits
the
parties from entering into
agreement that violation of
the terms of the contract
would cause cancellation
thereof, even without court
intervention. In other words,
it is not always necessary
for the injured party to
resort to court for rescission
of the contract.
When would effect of Rescission
start? From the time notice of the

rescissory act was given to the


other party.
The act of party in treating a
contract as cancelled or resolved
on account of infractions by the
other contracting party must be
made known to the other.
IF extra judicial rescission is
allowed, why is there still a need to
file an action? 1. To make it final.
2. An action may be necessary in
cases even if extrajudicial. Cause if
you want to recover something,
and the other party does not return
it.
(Effect
kasi
diba
mutual
restitution?) Court intervention is
needed to get it back.
The party who deems the contract
violated may consider it resolved
or rescinded, and act accordingly,
without previous court action, but
it proceeds at its own risk. For it is
only the final judgment of the
corresponding court that will
conclusively and finally settle
whether the action taken was or
was not correct in law.

2. FULFILLMENT AS A REMEDY
Consider the Nature of Obligation as to
PrestationRemedies:
a. Specific Performance
b. Substitute Performance
c. Equivalent
Performance
(practically, an action for damages)
Problem: A obliged himself to give to B a
9 inch GE Refrigerator with motor number
12345, located in his store. Also, a 14inch brand new Sony set TV and also to
repair the piano of A.
B did nothing of the three prestations.
Can the court compel A any of these
obligations? (In questions like this, the
question that the examiner is asking:
What are the remedies of B?) Pag more
than 1 ang tanong, answer it in the
order.
1. In the obligation to repair the piano
NO, since it is an obligation to do,
and no one can be compelled to do
anything against his willas it will
violate
his
right
against
involuntary servitude.

IF TO GIVEdetermine what kind of thing.


2. In
obligation
to
give
the
Refrigerator a determinate object,
one particularly designated or
physically segregated from the
same class.
YES, this being an obligation to
deliver
a
determinate
thing.
Specific performance is the remedy.
Provided, it is still possible to
perform.
3. In obligation to give TV Set a
generic object
NO. Under the law, in this kind of
obligation, the remedy is to ask
another person to deliver, at the
expense of B, plus damages.

The obligation is void. Thus, a discussion


on modes of extinguishment is irrelevant.
There can only be a relevant discussion of
the modes if there is a valid obligation.
Citizens Surety v. CA
In that case, Pascual Enterprises was
saying that it cannot be held liable under
the Indemnity Agreement because the
execution of the Deed of Assignment was
by way of dacion en pago which it
extinguished its obligation under the
Indemnity Agreement.
It turned out that the Indemnity
Agreement and the Deed of Assignment
were executed on the very same day. The
implication is that the surety company at
the time the Deed of Assignment was
executed was not yet liable under the
Suretyship agreement.
In a Suretyship agreement, you will only
be liable if the principal debtor defaulted.
Since it was executed on the same day,
there was no default yet.
Thus, the
Indemnity Agreement is only to indemnify
in case he cannot pay in the Suretyship
agreement.

MODES OF EXTINGUISHMENT
Obligations are extinguished by:
1. Payment or performance
2. Loss of the thing due
3. Condonation or remission of the debt
4. Confusion or merger of the rights of
creditor and debtor;
5. Compensation;
6. Novation
Other causes of extinguishment of
obligations
such
as
Annulment,
Rescission, Fulfillment of a resolutory
condition, and Prescription, are governed
elsewhere in this Code.
When the obligation involved is a
conditional obligation, where the condition
is suspensive and the fulfillment of the c is
dependent on the sole will of the debtor,
will the discussion on dacion en pago a
relevant matter?
No. Article 1182

Since there is no obligation to


extinguished at the time the Deed
Assignment was executed, it cannot
considered as dacion en pago. The
ruled that the Deed of Assignment
merely another security.

be
of
be
SC
is

Saura v. DBP
Mutual desistance is also a mode of
extinguishment.
Rationale: If an obligation may arise from
the mutual agreement f the parties then
an obligation may likewise be extinguished
by their mutual disagreement.
Tolentino:
As a rule, death does not extinguish the
obligation.
Uribe:
This rule is only applicable in obligations
arising from contracts
Article 1311

Obligations arising from contracts are


transmissible except when it involves
purely
personal
obligations
(which
extinguishes the obligation)
Is
fortuitous
event
a
mode
of
extinguishment?
NO. Though, it is relevant to loss of the
thing
due
or
impossibility
of
its
performance.
In other words, fortuitous event per se, is
not a mode of extinguishment simply
because not every time there is a
fortuitous event that the obligation will be
extinguished.
Is compromise agreement among the
other modes of extinguishment?
Uribe:
I cannot agree to that because it would fall
under condonation or novation.
Tolentino:
Among the
contracts

other

modes,

nullity

of

Uribe:
I disagree. How can nullity of contracts be
a mode of extinguished if there is no valid
obligation?

4. Place, date,
payment

time,

manner

of

PAYOR (person who pays)


AB
X (3rd person)
Will an obligation be extinguished if an
offer to pay came from a 3rd person?
It depends on whether B will accept what
was being offered by X because the
general rule is that the creditor cannot be
compelled to accept payment from a third
person unless it was stipulated.
P100,000
If X pays B, how much can X validly
demand from A?
It depends on whether or not X has an
interest in the fulfillment of the obligation.
Who has an interest?
Those who are subsidiarily obliged have
an interest pledgors, mortgagors,
guarantors, sureties, one made liable
under a penal clause
If X DOES NOT have an interest, X can
validly demand from A to the extent that
the latter has benefited.
If A couldnt pay, can X foreclose the
mortgage?
NO (Premise: He is a 3rd person who
doesnt have an interest in the fulfillment
of the obligation and the payment was
made without the knowledge or against
the will of A)

PAYMENT or PERFORMANCE
Payment is applicable to any kind of
obligation. Even obligations to do or not
to do can be extinguished by this mode
because it is synonymous to performance.
4 Rules:
1. Person who pays
2. Person to whom payment is made
3. Thing to be delivered or prestation to
be performed

Under the law, he cannot foreclose


because he will never be subrogated in
the rights of the creditor therefore, he
cannot exercise whatever right the
creditor had not only against the debtor
but every one of those subsidiarily liable.
If X HAS AN INTEREST and he pays B
who accepted the same. Can X foreclose
the mortgage?
Yes, because upon payment he will be
subrogated because this is payment of a
person who has interest.

Also, even if X does not have an interest in


the fulfillment of the obligation but when
he made the payment there was consent
by A, there will also be subrogation. Thus,
he can validly demand the entire amount
paid.
What if X and B agreed that upon
payment he will be subrogated?
As long as the payment of a 3 rd person
who does not have an interest was made
without the knowledge or against the will
of the debtor, he will NOT be subrogated
even if X and B agreed upon or stipulated
otherwise.
X paid B without the intention of seeking
reimbursement. However, 2 weeks after,
X demanded from B the return of the
amount he previously paid, can he validly
demand the return?
NO. The law expressly provides that B
can retain the amount paid. (indirect
donation:
void
donation
but
valid
payment)
However, if X dies, A would have to return
the entire amount to the estate since the
donation was void.
What if a 14-year old minor makes the
payment, is it valid? Can the creditor
retain the amount paid?
No. Minor does not have a capacity.
What if the payment was made by a
person suffering from civil interdiction?
Valid?
No, the payor must have free disposal of
his properties.
PAYEE (person to whom payment was
made)
Payment shall be made to:
1. person
in
whose
favor
the
obligation has been constituted; or
2. his successor in interest, or
3. any person authorized to receive it
in whose favor
-creditor
successor in interest
-heirs

authority to receive payment


-authority by law (sheriff, executors,
administrators, liquidators, receivers, etc)
-agents are creditors (but not in their own
right)
*As long as you have the power to
demand fulfillment, you are considered as
a creditor.
What if the payment was made to a wrong
party?
General Rule: Void thus it will not
extinguish the obligation
Exceptions:
1. If it redounded to the benefit of the
creditor
2. Payment made in good faith to a
person in possession of the credit
3. Payment was made to the creditor
after the assignment of credit to a 3rd
person but without knowledge of the
assignment
redounded to the benefit of the
creditor
XY
A
X is the debtor of Y but he made the
payment to A. As a general rule, it is void.
As a rule, X has the burden of proving that
the payment made to A redounded to the
benefit of Y
Exceptions:
Article 1241
1. If Y ratified the payment;
2. If the payment was made to A
because of the acts of Y which led X
to believe that A had the authority to
receive payment (estoppel)
3. If A acquired the rights of Y AFTER
the payment
made in good faith to a person in
possession of the credit
XY
Promissory Note is with A (wrong party)

Nonetheless, A demanded payment from X


who paid the same. Will that extinguish
the obligation of X to Y?
If the name indicated in the promissory
note is Ys name (without any deed of
assignment), then it will not extinguish the
obligation because it was not made to a
person in possession of the credit.
If the promissory note is payable to
bearer, then the obligation of X to Y shall
be extinguished as long as when X paid A,
he did it in good faith. (because he paid to
a person in possession of the credit)

Y refused.
X met the 22-year old son of Y and he
offered the P10,000 to Y which Y accepted
but the money which Y accepted was lost.
How can Y validly demand from X?
P20,000
This is clearly a payment to a wrong party
and does not fall under any of the
exceptions.

As long as X was not aware of the defect


of the title of A, it will extinguish his
obligation to Y.
New SC case:
Plaintiff was the one claiming ownership of
the land which was expropriated by
NAPOCOR. SC ordered NAPOCOR to pay,
thereafter, A appeared claiming that he is
the real owner of the land. Can NAPOCOR
again be compelled to pay?
NO. because NAPOCOR paid X in good
faith.
made to the creditor after the
assignment of credit to a 3rd person
but
without
knowledge
of
the
assignment
XY
A
Y assigned his interest to A but after the
assignment, X paid Y.
Will that extinguish to A even if it was
made to a wrong party?
Yes, as long as the payment was made
AFTER the assignment and without the
knowledge of such assignment.
What is As remedy, if any?
He can hold Y liable
X borrowed P20,000 to Y.
Thereafter, X offered to pay Y but only
P10,000.

2 Important Principles
1. Substantial
Performance
1234)
Tuason v. Javier
Legarda v. Saldaa

(Art.

Debt was payable in 10 years and the


debtor have already paid for 8 years.
Thus the creditor invoked rescission
as a remedy.
Was rescission a valid remedy?
NO because there was already a
substantial performance
The
remedy
can
be
performance plus damages

specific

Azcona v. Jamandre
As agreed upon in a contract of lease, the
amount to be paid on an annual basis was
P7,200.
Lessee paid only P7,000
evidenced by a receipt issued by the
lessor as per contract
The SC ruled that applying Article 1235,
despite that the payment was incomplete,
the creditor accepted the payment
knowing its incompleteness and without
objection or protest, the obligation is
deemed complied with.