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1. Active Subject the obligee or creditor one who has the right and power to
demand
the performance of the obligation.
2. Passive Subject the obligor or debtor one who is obliged to perform the
obligation.
3. Object or Prestation subject matter of the obligation that consists of the
prestation to give, to or not to do. The objects of contract are things, right or
services.
4. Juridical or Legal Tie It is also known as efficient cause, which binds the
parties to the obligation. Another name is VINCULUM JURIS.
7. Meaning of Juridical Necessity:
II.
(Obligation to give)
Isaac Rimando and Moises Reyes signed a contract whereby Isaac Rimando
obliged himself to
deliver to Moises Reyes a Toyota Corolla 2008 model on
November 12, 2008.
physician or other person aiding him, unless the service has been rendered out of
pure generosity.
5) Art. 2168. When, during a fire, flood, storm, or other calamity, property is
saved from destruction by another person without knowledge of the owner, the
latter is bound to pay the former just compensation.
6) Art. 2174. When, in a small community a majority of the inhabitants of age
decided upon a measure for protection against lawlessness, fire, flood, storm or
other calamity, anyone who objects to the plan and refuses to contribute to the
expenses shall be liable to pay his share of said expenses.
Difference between Quasi-contract and Natural Obligation:
Quasi-contracts are certain lawful, voluntary and unilateral acts which give
rise to the juridical relations of the party to the end that no person shall be
unjustly enriched or benefited at the expense of another while natural obligations
are those not based on positive law but on equity and natural law. They are not
demandable in the courts of justice however when they are voluntarily performed
or fulfilled, they can already be retained and the debtor cannot recover what has
been paid or performed.
Example: If the debtor pays by mistake or not knowing that the condition or
period has not yet arrived, he can recover based on undue payment (quasicontract). A debtor paid his creditor knowing that his obligation to pay has
already expired cannot anymore recover what he paid by reason of natural
obligation.
E. Delict as a source of obligation
This is an act or omission punishable by law. The principle is that if a person
committed an act or omitted to do an act and the act or omission is punishable
by law he is civilly-liable. (Art. 1161)
a) Felony or crime: It is an act or omission punishable by law. A violation of the
Revised Penal Code is called a felony while violation of any penal statutes
including the Revised Penal Code is called a crime.
b) Rules governing Delicts:
1) Philippine revised Penal code and other penal laws subject to the provisions of
Article 2177 of the Civil Code.
2) Chapter II, Preliminary Title, on Human Relations of the Civil Code.
3) Civil Code on damages, Title 18 of Book IV
c) Civil Liability Arising from Delicts or Acts or Omissions Punishable by
Law:
a. Restitution The thing itself shall be restored.
b. Reparation of the damage caused- The court determines the amount of
damage taking into consideration the value of the thing, improvements
and fruits and reparation shall be made accordingly.
c. Indemnification for Consequential Damages- It shall include not only
those suffered by the injured party but also those suffered by his family
and third person by reason of the crime.
d) Commission of a crime as a source of an obligation.
Every person who is criminally liable is also civilly liable under Art. 100 of the
Revised Penal Code. If a person therefore is guilty of the crime charged he
must not only be imprisoned but he shall also answer for damages as a civil
obligation. Such civil obligation is a necessary consequence of a criminal
responsibility and it to be declared and enforced in the same criminal
proceeding except when the injured party reserved his right to file the civil
action independently from the criminal action. (Sec. I, Rule III, Revised Rules of
Court)
e) Enforcement of Civil liability arising from crimes or delicts:
Ordinarily, when the offended party files the criminal action, he is deemed to
have filed simultaneously the civil action for the civil liability of the offender
unless he reserves his right to institute a separate civil action of the civil
liability of the offender. Meaning the civil liability shall be heard separately
from the criminal action.
F.
C.) Meaning of Proximate Cause: Adequate and efficient cause which in the
natural order of events necessarily produces the damage or injury complained
of
D.) What are the different kinds of Culpa (Negligence)?
a) Culpa contractual (Contractual negligence)- negligence in the
performance of the contract.
Example: A passenger in a taxi who was not able to bring the passenger
to his destination due to the malicious act of the driver which caused the
delay or damage to the vehicle. This is culpa contractual because of the
existence of contract of carriage between the owner of the taxi and the
passenger.
b) Culpa Aquiliana (Civil Negligence) wrong or negligence committed
independent of a contract and without criminal intent.
Example: A pedestrian was hit by an over speeding taxi and suffered
physical injuries. This is an example of culpa aquiliana because of the
absence of any contractual relation between the pedestrian and owner of
the taxi.
c) Culpa Criminal (Criminal negligence) Those resulting to the commission
of the crime punishable under Article 365 of the Revised Penal Code)
II. NATURE AND EFFECT OBLIGATIONS (ARTS. 1163-1178)
1. Duty to preserve the thing.
Illustration
D is obliged to deliver 5 bags of powder soap to C 7 days from their agreement. On
due date, D delivered 5 bags of powder soap mixed with chalk. What is the status of
the agreement between D and C?
* The agreement is valid. The fraud was committed during the performance
of the obligation and not during the agreement of the parties. This is a case of
incidental fraud (dolo incidente) not causal fraud (dolo causante).
c. Negligence (Culpa)
d. Contravention of the tenor of the obligation (Art. 1170)
Concept of Damage and Damages:
Note: Usury law has not been repealed but merely suspended. Only Congress
can repeal laws.
Rules on interest payments:
The rule is no interest shall be due unless it has been expressly stipulated
in writing.
There being a stipulation as to interest but the rate is not fixed, then the
creditor may only recover the legal rate.
Meaning of legal Rate: Legal rate of interest is that rate which will prevail in
the absence of any special agreement as to the rate of interest between the
parties to a contract.
Central Bank Circular on Interest Rates.
Previously the Monetary Board of the Central Bank issued December 3, 1982,
Circular No. 905, fixing the rates of interest on loans or forbearance of money
goods or credit. Section 1 of the circular provides as follows:
The rate of interest, including commissions, premiums, fees and other
charges on a loan or forbearance of any money, goods or credits, regardless of
maturity and whether secured or unsecured that may be charged or collected by
any person, whether natural or juridical shall not be subject to any ceiling
prescribed under or pursuant to the Usury Law as amended.
New Rule on Legal Interest:
The Bangko Sentral Issued Circular No. 799
Series of 2013 dated July 1, 2013. It provides:
The Monetary Board in its Resolution No. 796
dated May 16, 2013 approved the following
revisions governing the rate of interest in the
absence of stipulation in loan contracts,
thereby amending Section 2of Circular No. 905,
Series of 1982:
Section 1. The Rate of interest for the loan or
forebearance of any money, goods or credit
and the rate allowed in judgments, in the
absence of an express contract as to such rate
of interest, shall be six percent (6%) per
annum
Section 2. In view of the above, Subsection
X305.1 of the Manual of Regulations for Banks
and Sections 4305Q.1, 4305S.3, and 4303P.1 of
the Manual of Regulations for Non-Bank
Financial Institutions are hereby amended
accordingly.
This Circular shall take effect on July 1,
2013
Applicable Presumptions:
Meaning of Presumption By presumption is meant the inference as to the
existence of certain facts which if not contradicted is considered true.
PURE OBLIGATION
Pure Obligation is defined as one whose performance does not depend on a
future or
uncertain event, or upon a past event unknown to the parties, hence
demandable at once. (Art.1179) In other words, this is one, which contains
neither period nor a condition; hence the obligation is effective immediately.
Examples:
Ill pay you P20,000 on demand.
Ill pay you P20,000.
CONDITIONAL OBLIGATION
Conditional obligation is one where there is a condition imposed.
Meaning of condition It is an uncertain event, which wields an influence on
a legal
relationship.
Characteristics of condition:
A. It refers to future and uncertain event.
B. It may also refer to past event but unknown to the parties.
A condition is either:
a)) Suspensive the happening of the condition give rise to an
obligation.
Example : Ill buy you a land for P 1M if you pass the CPA Board
Exam in October 2009.
(This is suspensive for the result has to be awaited) See Article
1181
b) Resolutory the happening of the condition extinguishes the
obligation.
Example : Ill give you my land now, but should you fall in the CPA
Board this coming October
2009, your ownership will cease and it shall revert back
to me. (Article 1181)
Therefore, there are three (3) instances when an obligation and demandable
at once thus:
a) When it is a pure obligation and
b) When the obligation has a resolutory condition.
c) When the obligation is subject to a resolutory period.
CLASSIFICATION OF CONDITIONS
As to effect:
1. Suspensive the happening of the condition give rise to the
obligation.
2. Resolutory the happening of the condition extinguishes the
obligation.
As to cause or origin:
1. Potestative depends upon the will of the one of the contracting
parties.
a) If it is suspensive and dependent on the will of the debtor
(Example: Ill sell you my car if I like), both the condition and
obligation are VOID. (Article
1182)
b) Where the condition depends upon will of creditor, obligation is
valid.
Example: I will pay you upon your demand.
c) Where resolutory condition depends upon the will of the debtor, the
obligation is valid.
Example is pacto de retro sale. The position of the debtor
when the condition is
resolutory is exactly the same as of the creditor when the
condition is suspensive.
2. Casual depends on chance or hazard or the will of third person
VALID
Example; Ill give you P 10,000 if I win 1st prize in the
lotto.
3. Mixed depends party on the will of one of the parties and party
on chance or will
of the 3rd person (If I pass the bar) VALID
Example: I will give you P 10,000 if you marry Miss Black or if I
win the lotto.
As to divisibility:
1. Divisible capable of partial performance
2. Indivisible not capable of partial performance because of the nature of
the thing or
because of the intention of parties.
As to mode:
1. Positive an act is to be performed.
The condition that some event happen at a determinate time shall
extinguish the obligation as soon
as the time expires or it has become indubitable that he event will not
take place. (Art. 1184)
2. Negative something will be omitted.
If condition is negative which means the event will not happen at a
determinate time. The obligation shall become effective and binding from
the moment the time indicated has lapsed without the event taking place; or
from the moment it has become evident that the event cannot occur,
although the time indicated has not yet elapsed. (art. 1185)
As to form:
1. Express the condition is stated.
2. Implied - the condition is merely inferred.
As to possibility:
1. Possible capable of fulfillment in nature and in law
2. Impossible not capable of fulfillment due to nature or due to the
operation of the
law or morals or public policy; or due to a contradiction in its
terms.
Note is condition is impossible, legally or physically obligation is also void.
If condition is negative, that is not to do an impossible thing, the condition is
disregarded and the
obligation is rendered pure and valid.
As to numbers:
1. Conjunctive if all the conditions must be performed
2. Alternative if only a few of the conditions have to be performed.
Constructive Fulfillment of a Condition
If the debtor prevents voluntarily the fulfillment of the condition the said act
would result to
CONSTRUCTIVE FULFILLMENT SAID CONDITION UNDER Art. 1186.
Note: It is not even required that debtor is in bad faith. It is sufficient that he
prevented the
happening of the condition.
An action for rescission can proceed from either Article 1191 or Article
1381. It has been held that Article 1191 speaks of rescission in reciprocal
obligations within the context of Article 1124 of the Old Civil Code which uses the
term resolution. Resolution applies only to reciprocal obligations such that a
breach on the part of one party constitutes an implied resolutory condition which
entitles the other party to rescission. Resolution grants the injured party the option
to pursue, as principal actions, either a rescission or specific performance of the
obligation, with payment of damages in either case.
Rescission under Article 1381, on the other hand, was taken from Article
1291 of the Old Civil Code, which is a subsidiary action, not based on a partys
breach of obligation.[4]The four-year prescriptive period provided in Article 1389
applies to rescissions under Article 1381.
Rule when both parties are guilty of breach
Art. 1192. In case both parties have committed a breach of the obligation, the
liability of the first infractor shall be equitably tempered by the courts. If it
cannot be determined which of the parties first violated the contract, the same
shall be deemed extinguished, and each shall bear his own damages.
Application of the pari delicto rule
Condition
As to fulfillment
It is sure to happen or the event would
necessarily happen
As to influence on the obligation:
It is uncertain event
As to time:
Refers to the future.
Illustration:
NOTE:
In the absence of stipulation, when there are multiplicity of parties or
collective obligation, said obligation is presumed JOINT. Meaning, the share in
the obligation is specified, the correlative rights and obligation of the parties are
known.
Implications:
a) There are as many debts as there are debtors;
b) There are as many credits as there are creditors;
c) The debts/credits are considered distinct and separate from one another.
d) Each creditor is entitled only for a proportionate part of the credit.
e) Each debtor is liable only for his proportionate part of the debt.
Presumption established under Article 1208 is only disputable.
Other terms for joint obligation:
a) mancomunada
b) mancomunada simple
c) proportionately
d) pro-rata
Examples:
Joint obligation
A, B and C jointly executed a promissory note worded as
follows:
We promise to pay to the order of X P9,000.00
Sgd. A, B and C
Solidary obligation each debtor is liable for the entire obligation and each
creditor is
entitled to demand the whole obligation.
Example:
1.
A, B, & C jointly executed a promissory note worded as
follows:
I promise to pay to the order of X P9,000.000
Sgd. A, B & C
X can collect the entire P 9,000 from any of A, B or C.
2. A, B and C joint debtors are obliged to give x, Y and Z, solidary creditors of P
18,000. How much can X collect and from whom?
X being a solidary creditor
can entirely collect P 18,000. But since A, B and c are joint debtors, X may
collect only P 6,000 from each of them. After collecting the sum of P 18,000, X
must give Y and Zs share of P 6,000.
3. A, B and C solidary debtor are obliged to give X,Y and Z joint creditors of P
18,000. How much may A be made liable? A being a solidary debtor may be
held liable for P 18,000. But since the creditors are merely joint ones, each one
of them can collect from A up to P 6,000.
Rules in case of Dual Nature of Obligation
If the obligation of the debtors is joint and the right of the creditors is solidary, or if
the obligation of the debtors is solidary and right of creditors is joint, the rules on
joint and solidary obligation shall be applied in determining the liabilities and rights
of the debtors and creditors as the case maybe.
A. Joints debtors and solidary creditors (Active solidarity)
A, B, C and D, joint debtors are liable to X, Y and Z, solidary creditors, in the amount
of P 36,000. Any one of the creditors can collect the entire amount of P 36,000 but
each one of debtors can be held liable for not more than P 9,000. Thus X can collect
P 36,000 but he can collect not more than 9,000 from A, 9,000 from B, 9,000 from C
and 9,000 from D. After X has collected the P 36,000, he must give P 12,000 each
to Y and Z.
B. Solidary debtors and Joint Creditors (Passive Solidarity)
A, B, C and D, solidary debtors are liable to X, Y and Z, joint creditors in the amount
of P 36,000. Anyone of the debtor can be held liable for the entire amount of P
36,000, but each of the creditors can collect only up to 12,000. Thus X, Y and Z can
collect 12,000 from A alone. After A has made the payment of P 36,000, he can
demand reimbursement of P 9,000 each from B, C and D
Illustrations:
1. A, B, C and D are obliged to give X, Y and Z P12,000. X may collect from A how
much?
* P1,000. When the obligation is silent, it is presumed joint.
2. A, B, C and D, joint debtors are obliged to give X, Y, and Z, solidary creditors,
P12,000. How much may X collect from A?
* P 3,000. As a solidary creditor, X may collect the whole amount owed by the
joint debtor A.
Solidarity may exist although the creditor and debtor may not be bound in the
same manner
same period and conditions. ( Art. 1211)
Each one of the solidary creditors may do whatever may be useful to others but
not anything that is prejudicial to the others ( Art. 1212). A solidary creditor
cannot assign his rights without the consent of the others (Art. 1213)
Essential feature is Mutual Agency.
The debtor may pay any one of the solidary creditors; but if any demand, judicial or
extrajudicial, has been made by one of them, payment should be made to him.
(Article 1214)
Novation, compensation, confusion or remission of the debt, made by any of the
solidary creditors or with any of the solidary debtors, shall extinguish the obligation,
without prejudice to the provisions of Article 1219. The creditor who may have
executed any of these acts, as well as he who collects the debt, shall be liable to the
others for the share in the obligation corresponding to them. ( Article 1215)
Illustrations: Renunciation
1. A, B and C are solidary debtors of X, Y and Z, solidary creditors, in the amount of
P2,700. X renounces the whole obligation without the consent of Y and Z. The
debtors accepted the renunciation. What is the legal effect of the renunciation?
* The whole obligation is extinguished, however X shall be liable to the
corresponding shares of the other co-creditors as they have agreed upon.
2. A, B and C are solidary debtors of X in the amount of P3,000. X renounces the
share of A and A accepts the renunciation. Thereafter B becomes insolvent. What is
the legal effect of the renunciation?
* A will be liable for P500, while C will be liable for P1,500 (P1,000 + P500).
Since the remaining obligation is P2,000 after the renunciation of As share, and
thereafter B becomes insolvent, A and C would have to absorb the debt
corresponding to B in the amount of P1,000. This shall be divided equally by A and
C.
Solidary creditors can collect from some or all of the debtors at one given time. If
the creditor fails to collect from one debtor, he can go against the other or others,
until the whole obligation is paid. It was held that the creditor may sue any of the
solidary debtors or all of them simultaneously. An action instituted against one shall
not a bar to those, which may be subsequently brought against others, as long as
the debt has not been entirely satisfied (Article 1216)
Payment made by one of the solidary debtors extinguishes the obligation. If two or
more solidary debtors offer to pay, the creditor may choose which offer to accept.
He who made the payment may claim from his co-debtors only the share which
corresponds to each, with the interest for the payment already made. If the
payment is made before the debt is due, no interest for the intervening period may
be demanded.
When one of the solidary debtors cannot, because of his insolvency, reimburse his
share to the debtor paying the obligation, such share shall be borne by all his codebtors, in proportion to the debt of each. ( Article 1217)
Note:
In action filed by the creditors, a solidary debtor may avail of the following
defenses:
Defenses derived from the nature of the obligation which
constitute total defenses, such as
- absolute simulated contract
- illegal cause or consideration
- illegal object or subject matter
- non-fulfillment of the suspensive conditions
- other defenses which will nullify the contract which is the basis of
creditors action.
Defenses personal in nature which may constitute a total or
partial defense
- factor which vitiate consent such as minority, insanity, fraud,
violence, intimidation, etc.
Defenses personal to the other co-debtors which will constitute
a partial defense for the solidary debtor being sued, thus exempting
him from paying the proportionate share of the co-debtor whose
personal defense he is invoking.
He is exempted to pay the
proportionate share of the invoking co-debtor but is still liable of his
share and of those co-debtors whose shares are not in question.
Illustration:
A, B and C are solidary debtors of X in the amount of P30,000. C was insane at the
time the obligation was constituted. What is the legal effect?
* X may collect from either A or C P20,000. Art. 1222 provides that a solidary
debtor may avail himself of the partial defense of the insanity of C. Such defense is
personal to C and would therefore affect only the part of the debt to which C may be
responsible.
deliver five tons of sand and gravel. The debtors are obliged to deliver one
ton each.
c) Analogous thing which by their nature are susceptible of division.
b. Even when there has been no performance when the penalty agreed
upon is iniquitous or unconscionable. (Article 1229)
Obligations are extinguished by: (Enumeration under Article 1231 of the Civil
Code)
a) Payment or performance
b) Loss of the thing due
c) Condonation or remission
d) Confusion or merger of rights of the creditor and debtor
e) Compensation
f) Novation
Other causes of extinguishment of obligations are (h) annulment, (I)
rescission, (j) fulfillment of a resolutory condition and (k) prescription. The
following are found in other chapters of the Civil Code.
PAYMENT OR PERFORMANCE
Payment (ART.1232-1261) means not only the delivery of money but also the
performance, in any other manner, of an obligation. (Art.1232)
General Rule:
1233)
Exceptions:
a. Recovery allowed in case of substantial performance in good faith. (Art.
1234)
b. Recovery allowed when incomplete or irregular performance is waived.
(Art.1235)
c.
Instances when partial performances are allowed. (art. 1248)
- when there is an express stipulation to that effect.
- When the debt is part liquidated (definitely and determined or
computed) and in part liquidated.
- When the prestations in which the obligation consists are subject to
different terms or conditions which affect some of them.
3. Third person cannot compel the creditor to accept payment or performance of an
obligation except:
a) When it is made by a third person who has interest in the fulfillment of the
obligation;
b) When there is a stipulation to the contrary (Art.1236, CC). In this case, the
creditor
waives his right to refuse to deal with strangers to the obligations
Illustration:
D borrowed P10,000 from C with G as guarantor. Subsequently, D paid C P 2,000.
Unknown to D, T a third person paid C P10,000 believing that D still owed C such
amount. What is the legal effect of the payment by T?
* T can recover P8,000 from D, the law provides that only the amount to
which the creditor has benefited could be reimbursed to the third person paying if
the payment was without knowledge of the creditor. If D cannot pay, T cannot go
after G to collect. (1236)
4.
If a third person pays an obligation with the knowledge and consent of the
debtor he can recover from the debtor the entire amount, which he has paid
(reimbursement) and he is subrogated of all the rights of the creditor.
Subrogation of the rights, such as those arising from a mortgage, guaranty or
penalty (Art. 1237). If payment was made without the consent of the debtor, he
can recover only insofar as the payment has been beneficial to the debtor.
5. Payment made by a third person who does not intend to be reimbursed by the
debtor is deemed to be a donation, which requires the debtor's consent. But the
payment is in any case valid as to the creditor who has accepted it. (Art. 1238)
D owes C P10,000. T offers to pay Ds obligation and tells D that D need not
reimburse him. However, D does not give his consent to Ts offer not to be
reimbursed. C, nonetheless, accepts the payment from T. Was the payment valid?
* The payment is valid insofar as C is concerned. The case is deemed to be a
donation, however to be constituted as such Ds consent is necessary. (1238)
6. Art. 1239. In obligations to give, payment made by one who does not have the
free disposal of the thing due and capacity to alienate it shall not be valid, without
prejudice to the provisions of Article 1427 under the Title on "Natural Obligations."
a.
Free disposal of the thing due means that the thing to be delivered must
not be subject to any claim or lien or encumbrance of a third person.
b. Capacity to alienate means that the person is not incapacitated to enter into
a contract and for that reason, to make a disposition of the thing due.
7. Art. 1240. Payment shall be made to the person in whose favor the obligation has
been constituted, or his successor in interest, or any person authorized to receive it.
a. Creditor
b. His successor in interest
c. Person authorized to receive it. It refers to both authorized by the
creditor or authorized by the court such as the guardian, executor or
administrator of the estate)
5. Payment to an incapacitated person is valid only if the latter kept the thing
delivered or insofar as the payment has been beneficial to him. Payment made
to third person shall be valid insofar as it redounded to the benefit of the
creditor. It is presumed in the following:
a) If after the payment, the third person acquires the creditors rights
(Subrogation of the payer in the creditors right).
b) If the creditor ratifies the payment to the third person (Ratification
by the creditor).
c) If by the creditors conduct, the debtor has been led to believe that
the third person had authority to receive payment. (Estoppel on the
part of the creditor) (Art.1241 par.2)
D obtained a loan of P10,000 from C who was in his right mind at the time he
granted the loan. On due date, D paid his obligation of P10,000 to C who had since
become insane. C lost P4,000 of the amount he received and spent P6,000 for his
food and other necessary expenses. Was the obligation extinguished?
* The obligation is extinguished up to P6,000 only. Payment of an
obligation to an incapacitated person shall be valid when the person has kept
the thing delivered and only insofar as the payment has been beneficial to
him. (1241)
6. Art. 1242. Payment made in good faith to any person in possession of the
credit shall release the debtor.
7. Art. 1243. Payment made to the creditor by the debtor after the latter has
been judicially ordered to retain the debt shall not be valid.
8. Art. 1244. The debtor of a thing cannot compel the creditor to receive a
different one, although the latter may be of the same value as, or more
valuable than that which is due. In obligations to do or not to do, an act or
forbearance cannot be substituted by another act or forbearance against the
obligee's will.
9. Payment of debts in money shall be made only in the Philippine currency which
the legal tender pursuant to Art. 1249 of the Civil Code in relation to Republic Act
No. 8183. Obligation shall now be payable in the legal tender in the Philippines.
Legal tender means the currency which the debtor may compel his creditor to
accept payment of his debt. However, the parties may stipulate that the
payment may be made in currency under than the legal tender of Philippines at
the time of payment. ( R.A. No. 8183)
Previously coins are legal tender under the New Central Bank Act:
a. Centavo (0.25) and above is legal tender up to P 50.00
b. Centavo (0.10) and below is legal tender up to P 20.00
c. All coins P 1.00 and above including bills are legal tender up to any amount
But pursuant to Section 52 of Republic Act No.. 7653 (The New Central Bank
Act), "Legal Tender Power - All notes and coins issued by the Bank shall be
fully guaranteed by the Government of the Republic of the Philippines and
shall be legal tender in the Philippines for all debts, both public and private. "
This might mean, all notes and coins being served or issued by the Central
Bank of the Philippines When Offered in payment extinguishes the debt is
legal
tender.
One Peso coin is no longer valid tender of payment to any amount.
According to BSP Circular No.. 537 issued by the Central Bank of the
Philippines on July 18, 2006, pursuant to Section 52 of RA 7653 (New Central
Bank Act) and the Monetary Board Resolution No.. 862 dated 6 July 2006, "the
maximum amount of coins to be considered as legal tender is adjusted as
Follows:
1. One thousand pesos (P1, 000.00) for denominations of 1, Piso, Piso 5, and
10 pesos coins; and
2. One hundred pesos (P100.00) for denominations of 1-cent, 5-cent, 10-cent,
25-cent coins.
10. In case of extraordinary inflation and deflation of the Philippine currency
should supervene the basis of the value of the currency for payment shall be the
value of the currency at the time of the establishment of the obligation. Unless
there is a stipulation to the contrary (Art. 1250)
Value of the currency at the time of the establishment of the obligation is
computed by using the following formula.
Amount to be paid at maturity =
Amount of Obligation
value of the debt to fall to P 500,000 on the date of maturity. Following the
above formula:
A = ( 1 million/500,000.00) x P 1Million
=2xP1M
= P 2 Million is the equivalent value of P 1 M in the date of maturity
Suppose that before maturity of the loan, an extra-ordinary deflation supervened
causing the value of the debt to rise to P 4 Million on the date of the maturity of
the loan, how much must D pay C on maturity?
A = ( 1M/4 M) x 1 M
= P 250,000 equivalent value of P 1 M on the date of maturity
11. What are the different special forms of payment?
a) Dation in Payment or dacion en pago (Art. 1245)
b) Application of Payment ( Arts. 1252-1254)
c) Payment by Cession (Art.1255)
d) Tender of Payment and Consignation Arts. 1256-1261)
12. Dation in Payment of Dacion en pago, adjudicacion en pago or datio in solutum
is a special form of payment where the debtor conveys to the creditor ownership
a thing belonging to him as accepted equivalent to payment or performance of
the obligation.
Dation in payment is governed by the law on sales.
Where there are various debts, which are due and they were
incurred at different dates the oldest are more onerous.
Where there are various debts, which are due and they were
incurred at different dates the oldest are more onerous.
Where one bears interest and the other does not, the former is
more onerous
Where one s secured the other is not, the former is more onerous
Where the debtor is bound as principal in one and as guarantor or
surety in another, the former is more onerous
Where the debtor is bound as solidary debtor in one and as a sole
debtor in another, the former is more onerous.
b) If the debts due are of the same nature and burden, the payment shall
be applied to all of them proportionately
-
Illustrations:
1. D owes C the following debts: P4,000 due on May 1; P4,000 due on May 8; P4,000
due on May 15; P4,000 due on May 22; P4,000 due on May 29; and P4,000 due on
June 5. The debts represented the price of magazines which were delivered to D on
a weekly basis. Of the six debts, the one due on May 22 is secured by a pledge of
Ds ring. By agreement of the parties, C may demand payment even before the due
date of the debt. As of May 31, D had not paid any of the six debts. On May 31, D
wanted to make payment but he had only P4,000. How is the payment to be
applied?
* Since no agreement as to which debts should be settled first and absent the
fact that the creditor has not issued any receipt applying the amount to any of the
debts to which the debtor has not protested and there was no cause of invalidating
the same, and the period is for the benefit of the creditor then the P4,000 should be
applied to the one due on May 22 since it is most burdensome.
2. Refer to no. 1, Assuming that D did not designate the debt to be paid when he
remitted the amount of P4,000 to C on May 31. C issued a receipt for the payment
he received from D but he did not also designate the debt that was being paid. How
would the payment be applied?
* The payment shall be applied to the debt due on May 22 since it is the most
onerous.
14. Payment by Cession or Assignment it is a special form of payment
whereby the debtor
abandons all of his property for the
benefit of his
creditor in order that from the proceeds
thereof the latter may obtain payment
of their
credits. Also known as voluntary
cession or
insolvency.
There is no transfer of ownership but merely grants the creditors of a debtor to
sell properties of said insolvent debtor and apply the proceeds to their respective
credit. Debtor is released only up to the net proceeds of the sale. He remains
liable to the creditor as to the remaining balance unless otherwise agreed to
release him to his entire obligation.
Compare Cession from Insolvency under FRIA.
Cession has no court
intervention while Fria whether rehabilitation or Insolvency (Voluntary or
Involuntary or whether court supervised or not) requires court intervention.
DISTINCTIONS:
a. Physical loss when a thing perishes as when the house is burned and
reduced to ashes.
b. Legal loss when the thing goes out of commerce.
c. Civil loss when the thing disappears in such a way that its existence is
unknown or even if known, it cannot be recovered, whether as a matter of
fact or of law.
d. Physical or legal impossibility
Art. 1266. The debtor in obligations to do shall also be released when the
prestation becomes legally or physically impossible without the fault of the
obligor.
e. Difficulty of performance
Art. 1267. When the service has become so difficult as to be manifestly
beyond the contemplation of the parties, the obligor may also be released
therefrom, in whole or in part
In order that an obligation shall be extinguished by the loss or destruction of
the thing if is essential that the following requisites must concur:
a) The thing, which is lost, is specific or determinate
b) The thing is loss without any fault of the debtor if that thing is lost through the
fault of the debtor the obligation is transformed into an obligation to indemnify
the obligee or creditor for damages.
c) The debtor is not guilty of delay
Exceptions to the above rule are as follows:
a) When by law the obligor is liable for fortuitous events (Arts. 1174 and 1262
par 2)
b) When by stipulation the obligor is liable even for fortuitous events. (Arts 1174
and 1262
par 2)
c) When the nature of the obligation requires the assumption of risk. (Arts. 1174
and 1262
par 2)
d) When the loss of the thing is due party to the fault of the debtor (Art 1262 par
1 CC)
e) When the loss of the thing occurs after the debtor has incurred in delay. (Art
1262 par.1
and Art 1135 par. 3)
f) When debtor promised to deliver the same thing to two or more persons who
do not
have the same interest (Art. 1165 par 3)
g) When the obligation is generic (Art.1263)
h) When the debt of a certain and determinate thing proceeds from a criminal
offense (Art
1268)
Art. 1265 provides that whenever the thing is lost in the possession of the debtor,
it shall be presumed that the loss was due to his fault, unless there is proof to
the contrary, and without prejudice to the provisions of article 1165. This
presumption does not apply in case of earthquake, flood, storm, or other natural
calamity.
Art. 1269 provides that the obligation having been extinguished by the loss of the
thing, the creditor shall have all the rights of action which the debtor may have
against third persons by reason of the loss. This right is transferred by operation
of law.
17. CONDONATION AND REMISSION (Arts. 1270 1274) Is an act of liberality
by virtue of which the obligee, without receiving any price or equivalent,
renounces the enforcement of the obligation as a result of which it is
extinguished in its entirely or in that part or aspect of the same to which the
remission refers. It is gratuitous abandonment by the creditor of his right.
Requisites:
a) It must be gratuitous
b) It must be accepted by the obligor
c) The parties must have capacity.
d) It must not be Inofficious; and
e) If made expressly, it must comply with the forms of donations.
Otherwise, remission or condonation
is not valid.
Example:
a) Express Condonation involving real property must be in public
instrument together with the acceptance of donee.
b) Express Condonation of personal property amounting to P
5,000 above must be in writing together with the acceptance
of donee
Important principles on Remission:
1. While a person may make donations, no one can give more
than which he can give by will; otherwise, the excess shall
be Inofficious and shall be reduced by the Court as it may
impair the legitime of the compulsory heirs of the donor.
2. The delivery of a private document evidencing credit made
voluntarily by the creditor gives a disputable presumption
that there is a renunciation of the action which the creditor
has against the debtor. (Art. 1271) Example of implied
remission
3. Whenever the private document is found in possession of
the debtor, it is presumed that the creditor delivered the
document voluntarily. (Art. 1272).
4. If the thing pledged is found in the possession of the
debtor, there is a disputable presumption that the contract
of pledge has been renounced. This however does not
extend to the principal contract. Example of Implied
remission
18.
Merger in the person of one of the solidary debtor shall extinguish the entire
obligation because it is also merger in the other solidary debtors. Merger in joint
obligation pertains only to the share of the debtor to which merger takes place.
Only the share corresponding to the creditor or debtor in whom the characters
concur. The creditor or debtor whose share was subject to confusion actually
becomes the new creditor of the other joint debtors pertaining to their share in
the original obligation.
19. COMPENSATION Compensation may be defined as a mode of extinguishing
in their concurrent amount those obligations persons who in their own right are
creditors and debtors of each other.
Requisites for legal compensation under Article 1279:
a) There must be two parties, who in their own right, are principal creditors and
principal
debtors of each other. (Arts. 1278, 1279. No. 1)
b) Both debts must consist in money, or if the things due are fungibles
(consumables), they
must be of the same kind and quality (Art. 1279. NO.2)
c) Both debts must be due (Art. 1279. NO. 3)
d) Both debts must be liquidated and demandable ( Art 1279 NO. 4)
e) There must be no retention or controversy commenced by third persons over
either of
the debts and communicated in due time to the debtor (Art.1279 NO. 5 CC)
f) The compensation must not be prohibited by law (Arts 1278, 1288)
Under Article 1290 When all the requisites mentioned in Article 1279
are present, compensation takes effect by operation of law, and extinguishes
both debts to the concurrent amount, even though the creditors and debtors
are
not
aware
of
the
compensation.
Guarantor cannot set up compensation. Exception:
D owes C P20,000 with G as Guarantor. C, on the other hand, owes D, P15,000. Both
debts are already due but D is insolvent. Can compensation take place?
* Yes. A guarantor can set up compensation as regards what the creditor may
owe the principal debtor. However, C may still collect from G P5,000.
Instances when legal compensation is not allowed by law:
a. When one of the debts arises from depositum or from the obligation of a
depositary or of a bailee in commodatum.
b. Where one of the debts arises from a claim for support due by gratuitous
title.
c. Where on of the debts consists in civil liability from a penal offense.
Illustration/Exception:
Francis, husband and Mitch, wife are legally separated. By order of the court which
decreed the legal separation, Francis is obliged to give a monthly support of
P20,000 to Mitch payable in advance within the first five days of the month. Mitch
owes Francis P20,000 by way of loan. On the other hand, Francis has not yet given
Mitchs support for P20,000 for the preceding month and another P20,000 for the
present month. All the debts are due. Can compensation take place?
* Yes. If Mitch demands her support for the current month, Francis may claim
compensation as regards the loan that Mitch owes him.
Different classification of Compensation:
a) Legal when it takes place by operation of law from the moment all of the
requisites
Conventional Subrogation
Extinguishes the obligation and creates a
new one
Requires debtors consent
The defect of the old obligation may be
cured in such a way that the new
obligation becomes entirely valid. Thus
here, there is no right to present against
new creditor any defense which he, the
debtor or could have set up against the
old creditor.
Here, somebody makes payment in
behalf of the debtor with the latters
consent.