Quiz No.

20 (April 30, 2018)

Coverage: Natural Obligations [Art. 1423-1430]) and Estoppel
[Art. 1431-1439]
Cases:

1. Borre vs. CA, G.R. No. L-57204, March 14, 1988, 158 SCRA
560

Albano (Estoppel) Art. 1436

A contract of lease was entered into by and between X and Y over a
house belonging to X. After a period of five years, Y discovered that
the land belongs to the State, hence, Y refused to further pay his
rentals to X contending that X is not entitled to the rentals. He further
asked for reimbursement of the rentals he previously paid. Is the
contention of Y correct? Why?

ANS. No, because a lessee or a bailee is estopped from asserting title

to the thing leased or received, as against the lessor or bailor. (Art.
1436, NCC; Borre vs. CA, G.R. No. L-57204, March 14, 1988, 158
SCRA 560). He cannot also question the title of the lessor because he
is estopped from doing so.

2. DBP vs. Adil, G.R. No. L-48889, May 11, 1988

Albano (Art. 1424)

X contracted a loan with the DBP in 1965 but failed to pay, hence, in
1966, the obligation became due and demandable. In1987, the DBP
unearthed his obligation and demanded payment. Upon receipt of the
demand letter, X paid the obligation together with its interest.
Advised that the action has already prescribed, he sued DBP for
reimbursement of whatever he had paid. Will the action prosper?
Why?

ANS. No, because when a right to sue upon a civil obligation has
lapsed by extinctive prescription, the obligor who voluntarily
performs the contract cannot recover what he has delivered or the
value of the service he has rendered. (Art.1424, NCC; DBP vs. Adil,
G.R. No. L-48889, May 11, 1988).
3. Mercado vs. Espiritu, 37 Phil. 215

Albano (Estoppel)
A and B entered into a contract whereby both parties benefited out of
it. At the time of the commencement of their rights, however, A was
a minor. Can he attack
the validity oTthe contract? Why?

ANS. No, because he is bound by the principle of estoppel from

doing so. (Mercado vs. Espiritu, 37 Phil. 215).

X, a minor, represented himself to be of age. He entered into a

contract. Thereafter, can he ask for its annulment on the ground of his
minority? Why?

ANS. No. In Mercado vs. Espiritu, 37 Phil. 215, it was said that
since the minor was under estoppel, he cannot question the validity of
the contract. (SiaSuan and Chiao vs. Alcantara, March 4, 1950).

4. Roblett Industrial Corporation vs. CA, et. al., G.R. No. 116682,
January 2, 1997, 77 SCAD 642, citing Panay Electric Co. vs. CA,
174 SCRA 500; Pureza vs. CA, G.R. No. 122053, May 15, 1998,
94 SCAD 303

A lease contract covering various construction equipment was

entered into by the parties. The lessor sent the lessee a statement of
account for unpaid rentals amounting to P342,909.38 which was
received by the lessee without any protest. The lessee did not
likewise controvert it; instead, it asked for ample time to source funds
to substantially settle the account. Can it later on deny? Why?

ANS. No, because it is in estoppel in pais. Estoppel in pais arises

when one, by his acts, representations or admissions, or by his own
silence when he ought to speak out, intentionally or through culpable
negligence, induces another to believe certain facts to exist and such
other rightfully relies and acts on such belief, so that he will be
prejudiced if the former is permitted to deny the existence of such
facts. (Roblett Industrial Construction Corp. vs. CA,et al., G.R.
No.116682, January 2, 1997, 77 SCAD 642, citing Panay Electric
Co. vs. CA, 174 SCRA 500; Pureza vs. CA, G.R. No. 122053,
May15, 1998, 94 SCAD 303).
5. Bucton vs. Gabar, 55 SCRA 499; Martin vs. Reyes, 91 Phil. 666

Albano (Estoppel) Art. 1459

A purchased from ABC Realty Corp. a parcel of land on installment
basis payable within two (2) years at the rate of P10,000.00 per
month. On the fourth (4th) month, he could no longer pay the
balance, hence, he talked to B, his brother-in-law, to help him pay. B
agreed but with the condition that A would sell onehalf (1/2) of the
land to B. They agreed and A executed a deed of sale over 1/2 of said
property subject to the condition that delivery shall be made after title
shall have been issued to A. Title was issued to A after full payment;
hence, B demanded the delivery of 1/2 of the land. A refused
contending that he could not have sold it when he was not yet the
owner. Is A’s contention correct? Why?

ANS. No, because a seller need not be the owner of the property at
the time of the perfection of the contract, but he must be the owner at
the time of the delivery. (Art. 1459, NCC).
Furthermore,whereonewhoisnot yet theowner of a property sells it to
another and subsequently acquires ownership over the same, such
title passes by operation of law to the buyer or grantee. (Art. 1434,
NCC; Bucton vs. Gabar, 55 SCRA 499; Martin vs. Reyes, 91 Phil.
666).

De Leon 1434
The purchaser is also deemed a purchaser in good faith.
(seeInquimboy vs. Vda. de Cruz, 108 Phil. 1054 [1960]; also Bucton
vs.Gabar, 55 SCRA 499 [1974].)

6. PBCOM vs. CA, et. al., G.R. No. 109803, April 20, 1998, 93
SCAD 601

Albano (Art. 1431 and 1342)

A contract of loan was entered into between the petitioner and private
respondent. The loan was intended to be for P300,000.00 only. The
wife of the respondent signed blank gapers/blank forms of real estate
mortgage where the amount of P3,000,000.00 was written in pencil.
It turned out that the respondent applied for a P3,000,000.00 loan and
that the paraphernal properties of the wife were mortgaged using the
blank forms signed by the wife. The bank did not investigate the
authority to mortgage, but granted the loan instead, without
undergoing the usual bank procedure. When informed of the
mortgage, she filed a suit to nullify the same as she did not authorize
her husband to do so. Her residence certificate was also spurious. At
the trial, it was shown that mortgage forms were signed in blank. The
RTC rendered judgment in favor of the plaintiff, which was affirmed
by the CA The bank contended before the SC that respondent/wife
was in estoppel from questioning the validity of the real estate
mortgage. Is the contention
correct? Why?

ANS. No. The “doctrine of equitable estoppel” does not apply to

respondent. Article 1431 provides that “through estoppel, an
admission or representation is rendered conclusive upon the person
making it and cannot be denied or disproved as against the person
relying thereon.” Implementing this substantive law, Section 2(a) of
Rule 131 provides: “Whenever a party has by his own declaration, act
or omission, intentionally and deliberately led another to believe a
particular thing true, and to act upon such belief, he cannot, in any
litigation arising out of such declaration, act or omission be permitted
to falsify it.” By its incorporation in the Civil Code, estoppel in our
jurisdiction has become an equitable defense that is both substantive
and remedial. Its successful invocation can therefore bar a right and
not merely its equitable enforcement.

The reason why estoppel does not apply to respondent is

because she did not deliberately mislead the bank to believe that she
was putting up her paraphernal properties to secure the P3,000,000.00
loan. It was her husband who made the misrepresentation. In fact, the
bank’s reliance on the mortgage application signed in blank is not a
reasonable reliance. As a banking institution, it was grossly negligent
when it took no step to verify whether she was offering her properties
as collateral; when it made no credit check on the debtor. The
business of a bank is affected with public interest and it should
observe a higher standard of diligence when dealing with the public.
Neither will it matter if the bank was misled by a third person to the
contract. Under Art. 1342, NCC, the misrepresentation of a third
person will vitiate consent if it has resulted in substantial mistake and
the same is mutual. (PBCOM vs. CA, et al., G.R. No.109803, April
20, 1998, 93 SCAD 601)
Other Possible Questions:
Albano Natural Obligations

Art. 1425, NCC

(In relation to question on DBP vs Adil) Suppose in the problem
above, there was payment of X’s obligation in 1986 by a friend, A,
without his knowledge and consent. Can A, the friend who made the
payment, ask for reimbursement from X? Can A recover from X?
Why?

ANS. No. Under the law, when without the knowledge or against the
will of the debtor, a third person pays a debt which the obligor is not
legally bound to pay because the action thereon has prescribed, but
the debtor voluntarily reimburses the third person, the obligor cannot
recover what he has paid.

Art. 1429, NCC

X, the father of Y, was indebted to Z in the amount of P1M during
his lifetime. He died without paying it. Y inherited from X properties
worth only P400,000.00. Y paid Z the amount of P1M one month
after X’s death. Can Y ask for the refund of what he paid to Z? Why?

ANS. No. Under the law, when a testate or intestate heir voluntarily
pays a debt of the decedent exceeding the value of the property which
he received by will or by the law of intestacy from the estate of the
deceased, the payment is valid and cannot be rescinded by the payer.

Art. 1430, NCC

Suppose in the problem above X executed a will but it was declared
void and the heirs paid a legacy to a friend of his father, can Y revoke
it or ask for a refund? Why?

ANS. No, because when a will is declared void because it has not
been executed in accordance with the formalities required by law, but
one of the intestate heirs, after the settlement of the debts of the
deceased, pays a legacy in compliance with a clause in the defective
will, the payment is effective and irrevocable.
Art. 1423, NCC
What are natural obligations? civil obligations?

ANS. Civil obligations give a right of action to compel their

performance. Natural obligations, not being based on positive law but
on equity and natural law, do not grant a right of action to enforce
their performance, but after voluntary fulfillment by the obligor, they
authorize the retention of what has been delivered or rendered by
reason thereof.

Q. What are the distinctions between natural and civil obligations?

ANS.
(1) Natural obligations are based on equity and natural law while
civil obligations are based on positive law;
(2) Natural obligations are not enforceable by court action while civil
obligations are enforceable by court action.
ESTOPPEL

Art. 1434, NCC

X lent his car to Y with the undertaking to return it on or before
January 31, 1992. Instead of returning it to X, Y sold and delivered
the car to Z. One week after, X and Y entered into a contract whereby
X sold the car to Y who, after acquiring ownership, went to Z seeking
to recover the car from the latter. Will Y’s action prosper? Why?

ANS. No, because he is bound by the principle of estoppel. Under the

law, when a person who is not the owner of a thing sells or alienates
and delivers it, and later the seller or grantor acquires title thereto,
such title passes by operation of law to the buyer or grantee.

Art.1431, NCC
What is estoppel?

ANS. It is a condition or state by virtue of which an admission or

representation is rendered conclusive upon the person making it, and
cannot be denied or disproved as against the person relying thereon.
Art. 1433, NCC
What are the kinds of estoppel?
ANS. They are: (1) estoppel in pais; (2) estoppel by deed.

Paras Art. 1425

A owes B P700,000. But the debt soon prescribes. Later C, against
the consent of A, pays B the P700,000. A here does not have to
reimburse C because he (A) has not at all been benefited by the
transaction. However, A later voluntarily reimburses C. May A now
recover what he has given to C?

ANS.: No more. This is the express provision of the law.

Art. 1426
A, a minor, entered into a contract with a suijuris, without the consent
of his (A’s) parents. In said contract, A received a car. This car was
afterwards destroyed by a fortuitous event. Later when the contract
was annulled, A returned voluntarily the value of the car although he
had not profited or benefited a single centavo from the car. Has he
now the right to demand that the price be returned?

ANS.: No more.

Art. 1427
Suppose the object is non-consumable, does the Article apply?

ANS.: Yes, if there has been loss by fortuitous event or alienation in

good faith (this is equivalent to spending or consuming it), if the
proceeds thereof have already been spent in good faith.
Art. 1428
A owes B P500,000. B brings a suit against A, but B loses the case
for insufficient evidence. No appeal is made from the decision, and
the judgment becomes final. Later, A paid B voluntarily the debt.
May A now recover from B what he (A) has paid?
ANS.: No.

Art. 1438
A has a diamond ring. He allowed B to assume apparent ownership
over the ring so that B might sell the same. Instead, B pledged the
ring with C to obtain a loan. The money lent was later handed over to
A. Later A attacks the validity of the pledge claiming that under the
law, the pledgee must be the owner thereof, and since B in this case
acted without authority, the pledge is invalid. Is A allowed to do this?

ANS.: No, A is not allowed to do this. His receipt of the sum for
which the pledge was made is an implied ratification of the pledge
and A is, therefore, in estoppel.

Jurado Art. 1423-1424

Problem — A borrowed from B P1,000 which amount B failed to
collect. After the debt has prescribed, A voluntarily paid B who
accepted the payment. After a few months, being in need of money,
A demanded the return of the P1,000 on the ground that there was a
wrong payment, the debt having already prescribed, B refused to
return the amount paid. May A succeed in collecting if he sues B in
court? Reason out your
answer. (1970 Bar problem)

ANS: A will not succeed in collecting the P1,000 if he sues B in

court. The case is expressly covered by Art. 1424 of the Civil Code
which declares that when a right to sue upon a civil obligation has
lapsed by extinctive prescription, the obligor who voluntarily
performs the contract cannot recover what he has delivered or the
value of the service he has rendered. Because of extinction
prescriptive, the obligation of A to pay his debt of P1,000 to B
became a natural obligation. While it is true that a natural obligation
cannot be enforced by court action, nevertheless, after voluntary
fulfillment by the obligor, under the law, the obligee is authorized to
retain what has been paid by reason thereof. (Art. 1423, Civil Code.)
Ulep
(Estoppel)
Tomas, Rene and Jose entered into a partnership under the firm name
“Manila Lumber”. Subsequently, upon mutual agreement, Tomas
withdrew from the partnership and the partnership was dissolved.
However, the remaining partners, Rene and Jose, did not terminate
the business of “Manila Lumber”. Instead of winding up the business
of the partnership and liquidating its assets, Rene and Jose continued
the business in the name of “manila Lumber" apparently without
objection from Tomas. The withdrawal of Tomas from the
partnership was not published in the newspapers. Could Tomas be
held liable for any obligation or indebtedness Rene and Jose might
incur while doing business in the name of “Manila Lumber” after his
withdrawal from the partnership? Explain.

ANS: Yes. Tomas can he held liable under the doctrine of estoppel.
But as regards the partner among themselves, only Rene are liable.
Tomas cannot be held liable since there was no proper notification or
publication. In the event that Tomas is made to pay the liability to
third person, he has right to seek reimbursement from Rene and Jose.
(Answer by UP LawCenter)