Art.

1157
De la Cruz v. Northern theatrical lines, Inc. No. L-7089. August 31, 1954
Damages caused to employee by a stranger can not be recovered from employer giving legal assistance
to employee is not a legal but a moral obligation.—A claim of an employee against his employer for
damages caused to the former by a stranger or outsider while said employee was in the
performance of his duties, presents a novel question which under present legislation can not
be decided in favor of the employee. While it is to the interest of the employer to give legal
help to, and defend, its employees charged criminally in court, in order to show that he was,
not guilty of any crime either deliberately or through negligence, because should the
employee be finally held criminally liable and he is found to be insolvent, the employer
would be subsidiarily liable, such legal assistance might be regarded as a moral obligation but
it does not at present count with the sanction of man-made laws. If the employer is not
legally obliged to give legal assistance to its employee and provide him with a lawyer,
naturally said employee may not recover from his employer the amount he may have paid a
lawyer hired by him.
Sagrada Orden de Predicadores del Santisimo Rosario de Filipinas vs. National
Coconut Corporation, No. L-3756. June 30, 1952
RENTALS FOR USE AND OCCUPATION OF ENEMY PROPERTY.—A party
allowed by the United States Alien Property Custodian to occupy and use the enemy
property is not liable to pay rentals therefor to the pre-war owner prior to the annulment of
the enemy's title to the property even when the enemy acquired it by duress, because there
was no privity (of contract or obligation) between the Alien Property Custodian and the
enemy owner, the former's title being based, by legal provision, on the right to seize enemy
property. The occupant's obligation to pay rentals, like any other obligation, must arise from
law, contract, quasi-contract, crime, or negligence (article 1089, Spanish Civil Code). If
occupant took possession of the property with the permission of the Alien Property
Custodian, without any express or implied agreement between them that rentals would be
paid for the use and occupation of the enemy property, none may be recovered by the pre-
war owner. As to the rentals collected by said occupant from its lessee, the same should
accrue to it, as a possessor in good faith.
Art. 1163
Bishop of Jaro v. De la Pena, No. 6913. November 21, 1913
*the trustee in this case commingled the funds entrusted with his personal account which
was later on confiscated by the authorities during the war when he was detained as a political
prisoner.
Although the Civil Code states that "a person obliged to give something is also
bound to preserve it with the diligence pertaining to a good father of a family" (art. 1094), it
also provides, following the principle of the Roman law, major casus est, cui humana infirmitas
resistere non potest, that "no one shall be liable for events which could not be foreseen, or
which having been foreseen were inevitable, with the exception of the cases expressly
mentioned in the law or those in which the obligation so declares." (Art. 1105.)
By placing the money in the bank and mixing it with his personal funds De la Peña
did not thereby assume an obligation different from that under which he would have lain if
such deposit had not been made, nor did he thereby make himself liable to repay the money
at all hazards. If the money had been forcibly taken from his pocket or from his house by
the military forces of one of the combatants during a state of war, it is clear that under the
provisions of the Civil Code he would have been exempt from responsibility. The fact that
he placed the trust fund in the bank in his personal account does not add to his
responsibility. Such deposit did not make him a debtor who must respond at all hazards.
Art. 1169
Barzaga v. CA, GR No. 115129, 12 February 1997
*in this case, Barzaga ordered construction materials from the defendant in order to
build a niche for his deceased wife who wished to be buried before Christmas. The issue
here was delay whether the defendant is liable for damages due to the delay in delivery
(barzaga was 2 and half days late in building the niche for his wife due to the delay in
delivery). He contended that there was no agreement as to the time of delivery therefor there
was no delay
Contrary to the appellate court’s factual determination, there was a specific time
agreed upon for the delivery of the materials to the cemetery. Petitioner went to private
respondent’s store on 21 December precisely to inquire if the materials he intended to
purchase could be delivered immediately. But he was told by the storekeeper that if there
were still deliveries to be made that afternoon his order would be delivered the following
day. With this in mind Barzaga decided to buy the construction materials the following
morning after he was assured of immediate delivery according to his time frame. The
argument that the invoices never indicated a specific delivery time must fall in the face of the
positive verbal commitment of respondent’s storekeeper.
The appellate court appears to have belittled petitioner’s submission that under the
prevailing circumstances time was of the essence in the delivery of the materials to the grave
site. However, we find petitioner’s assertion to be anchored on solid ground. The niche had
to be constructed at the very least on the twenty-second of December considering that it
would take about two (2) days to finish the job if the interment was to take place on the
twenty-fourth of the month. Respondent’s delay in the delivery of the construction materials
wasted so much time that construction of the tomb could start only on the twenty-third. It
could not be ready for the scheduled burial of petitioner’s wife. This undoubtedly prolonged
the wake, in addition to the fact that work at the cemetery had to be put off on Christmas
day.
Pantaleon v. American Express International, G.R. No. 174269, 25 August 2010 (MR)
In more concrete terms, when cardholders use their credit cards to pay for their purchases, they merely
offer to enter into loan agreements with the credit card company—only after the latter approves the purchase
requests that the parties enter into binding loan contracts.—Although we recognize the existence of a
relation-ship between the credit card issuer and the credit card holder upon the acceptance
by the cardholder of the terms of the card mem-bership agreement (customarily signified by
the act of the cardholder in signing the back of the credit card), we have to distinguish this
contractual relationship from the creditor-debtor relation-ship which only arises after the
credit card issuer has approved the cardholder’s purchase request. The first relates merely to
an agreement providing for credit facility to the cardholder. The latter involves the actual
credit on loan agreement involving three contracts, namely: the sales contract between the
credit card holder and the merchant or the business establishment which accepted the credit
card; the loan agreement between the credit card issuer and the credit card holder; and the
promise to pay between the credit card issuer and the merchant or business establishment.
From the loan agreement perspective, the contractual relationship begins to exist only upon
the meeting of the offer and acceptance of the parties involved. In more concrete terms,
when cardholders use their credit cards to pay for their purchases, they merely offer to enter
into loan agreements with the credit card company. Only after the latter approves the
purchase requests that the parties enter into binding loan contracts, in keeping with Article
1319 of the Civil Code.
Default; Requisites; Since the credit card company has no obligation to approve the purchase
requests of its credit cardholders, the cardholder cannot claim that the former defaulted in its obligation—
without a demandable obligation, there can be no finding of default.—Since American Express
International, Inc. (AMEX) has no obligation to approve the purchase requests of its credit
cardholders, Pantaleon cannot claim that AMEX defaulted in its obligation. Article 1169 of
the Civil Code, which provides the requisites to hold a debtor guilty of culpable delay, states:
“Article 1169. Those obliged to deliver or to do something incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation.”
x x x. The three requisites for a finding of default are: (a) that the obligation is demandable
and liquidated; (b) the debtor delays performance; and (c) the creditor judicially or
extrajudicially requires the debtor’s performance. Based on the above, the first requisite is no
longer met because AMEX, by the express terms of the credit card agreement, is not
obligated to approve Pantaleon’s purchase request. Without a demandable obligation, there
can be no finding of default.
The Court holds that AMEX is neither contractually bound nor legally obligated to act on its
cardholders’ purchase requests within any specific period of time, much less a period of a “matter of
seconds”—the standard therefore is implicit and, as in all contracts, must be based on fairness and
reasonableness, read in relation to the Civil Code provisions on human relations.—In light of the
foregoing, we find and so hold that AMEX is neither contractually bound nor legally
obligated to act on its cardholders’ purchase requests within any specific period of time,
much less a period of a “matter of seconds” that Pantaleon uses as his standard. The
standard therefore is implicit and, as in all contracts, must be based on fairness and
reasonableness, read in relation to the Civil Code provisions on human relations, as will be
discussed below.
Art. 1173
Syquia v. CA, 217 scra 624, 27 January 1993
*plaintiffs sued a cemetery after water seeped in the vault containing the remains of their
deceased relative. Cemetery contends that in their contract they guaranteed that the vault
would be sealed not waterproof. They also bore a hole in the vault because if it has no hole
the vault will (sic) float and the grave would be filled with water.
In the absence of stipulation or legal provision providing the contrary, the diligence to be observed in the
performance of the obligation is that which is expected of a good father of a family.—The law defines
negligence as the “omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of the time and of the
place.” In the absence of stipulation or legal provision providing the contrary, the diligence
to be observed in the performance of the obligation is that which is expected of a good
father of a family.
The court held that in this case the cemetery exercised the required diligence of a good
father of a family by boring the hole. Except for the foreman’s opinion that the concrete
vault may float should there be a heavy rainfall, from the above-men-tioned explanation,
private respondent has exercised the diligence of a good father of a family in preventing the
accumulation of water inside the vault which would have resulted in the caving in of earth
around the grave filling the same with earth.
Mindanao Terminal and Brokerage v. Phoenix Assurance company of New York, GR
No. 162467, 8 May 2009
Common Carriers; Contracts; Damages.—As it is clear that Mindanao Terminal had duly
exercised the required degree of diligence in loading and stowing the cargoes, which is the
ordinary diligence of a good father of a family, the grant of the petition is in order.
Article 1173 of the Civil Code is very clear that if the law or contract does not state
the degree of diligence which is to be observed in the performance of an obligation then that
which is expected of a good father of a family or ordinary diligence shall be required.
Mindanao Terminal, a stevedoring company which was charged with the loading and
stowing the cargoes of Del Monte Produce aboard M/V Mistrau, had acted merely as a labor
provider in the case at bar. There is no specific provision of law that imposes a higher degree
of diligence than ordinary diligence for a stevedoring company or one who is charged only
with the loading and stowing of cargoes. It was neither alleged nor proven by Phoenix and
McGee that Mindanao Terminal was bound by contractual stipulation to observe a higher
degree of diligence than that required of a good father of a family.
Distinction between an arrastre and a stevedore
There is a distinction between an arrastre and a stevedore. Arrastre, a Spanish word
which refers to hauling of cargo, comprehends the handling of cargo on the wharf or
between the establishment of the consignee or shipper and the ship’s tackle. The
responsibility of the arrastre operator lasts until the delivery of the cargo to the consignee.
The service is usually performed by longshoremen. On the other hand, stevedoring refers to
the handling of the cargo in the holds of the vessel or between the ship’s tackle and the
holds.
*arrastre – diligence equivalent to common carriers; stevedores, ordinary diligence
Art. 1174
Nakpil v. CA, No. L-47896. October 3, 1986
Requisites for exemption from liability due to an “act of God.”—To exempt the obligor from
liability under Article 1174 of the Civil Code, for a breach of an obligation due to an “act of
God,’ the following must concur: (a) the cause of the breach of the obligation must be
independent of the will of the debtor; (b) the event must be either unforseeable or
unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and (d) the debtor must be free from any participation in, or
aggravation of the injury to the creditor. *in this case, the defendants were found to be
negligent having made substantial deviations from plans and specifications (in construction
of a structure), having failed to observe requisite workmanship in construction, and the
architect made plans that contain defects and inadequacies.
One who creates a dangerous condition cannot escape liability although an act of God may have
intervened.—Relative thereto, the ruling of the Supreme Court in Tucker v. Milan (49 O.G.
4379, 4380) which may be in point in this case, reads: “One who negligently creates a
dangerous condition cannot escape liability for the natural and probable consequences
thereof, although the act of a third person, or an act of God for which he is not responsible,
intervenes to precipitate the loss.” As already discussed, the destruction was not purely an
act of God. Truth to tell hundreds of ancient buildings in the vicinity were hardly affected by
the earthquake. Only one thing spells out the fatal difference; gross negligence and evident
bad faith, without which the damage would not have occurred.
Same: Same; Liability of architect and contractor for collapse of building is solidary.—
WHEREFORE, the decision appealed from is hereby MODIFIED and considering the
special and environmental circumstances of this case, We deem it reasonable to render a
decision imposing, as We do hereby impose, upon the defendant and the third-party
defendants (with the exception of Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra, p.
10) indemnity in favor of the Philippine Bar Association of FIVE MILLION
(P5,000,000.00) Pesos to cover all damages (with the exception of attorney’s fees)
occasioned by the loss of the building (including interest charges and lost rentals) and an
additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for attorney’s fees,
the total sum being payable upon the finality of this decision. Upon failure to pay on such
finality, twelve (12%) per cent interest per annum shall be imposed upon afore-mentioned
amounts from finality until paid. Solidary costs against the defendant and third-party
defendants (except Roman Ozaeta).
Tanguilig v. CA, G.R. No. 117190, 2 January 1997
*petitioner in this case claims the collapse of the windmill he constructed was due to a
fortuitous event
Petitioner failed to show that the collapse of the windmill was due solely to a
fortuitous event. Interestingly, the evidence does not disclose that there was actually a
typhoon on the day the windmill collapsed. Petitioner merely stated that there was a “strong
wind.” But a strong wind in this case cannot be fortuitous—unforseeable nor unavoidable.
On the contrary, a strong wind should be present in places where windmills are constructed,
otherwise the windmills will not turn.
The appellate court correctly observed that “given the newly-constructed windmill
system, the same would not have collapsed had there been no inherent defect in it which
could only be attributable to the appellee.” It emphasized that respondent had in his favor
the presumption that “things have happened according to the ordinary course of nature and
the ordinary habits of life.” This presumption has not been rebutted by petitioner.
Sia v. CA, G.R. No. 102970. May 13, 1993
Although flooding could be considered a fortuitous event, failure of the bank to give notice to the
renter of such fact makes it liable for damages, its negligence caused to aggravate injury or damage to the
renter; Case at bar.—Unfortunately, however, the public respondent failed to consider that in
the instant case, as correctly held by the trial court, SBTC was guilty of negligence. The facts
constituting negligence are enumerated in the petition and have been summarized in this
ponencia. SBTC’s negligence aggravated the injury or damage to the petitioner which
resulted from the loss or destruction of the stamp collection. SBTC was aware of the floods
of 1985 and 1986; it also knew that the floodwaters inundated the room where Safe Deposit
Box No. 54 was located. In view thereof, it should have lost no time in notifying the
petitioner in order that the box could have been opened to retrieve the stamps, thus saving
the same from further deterioration and loss. In this respect, it failed to exercise the
reasonable care and prudence expected of a good father of a family, thereby becoming a
party to the aggravation of the injury or loss. Accordingly, the aforementioned fourth
characteristic of a fortuitous event is absent x x x The destruction or loss of the stamp
collection which was, in the language of the trial court, the “product of 27 years of patience
and diligence” caused the petitioner pecuniary loss; hence, he must be compensated therefor.
Republic v. Luzon Stevedoring, No. L-21749. September 29, 1967
Presumption of negligence; Case at bar—Considering that the Nagtahan bridge was an
immovable and stationary object and uncontrovertedly provided with adequate openings for
the passage of water craft, including barges like those of appellant's, it is undeniable that the
unusual event that the barge, exclusively controlled by appellant, rammed the bridge
supports raises a presumption of negligence on the part of appellant or its employees
manning the barge or the tugs that towed it. In the ordinary course of events, such a thing
does not happen if proper care is used. In Anglo American Jurisprudence, the inference
arises by what is known as the “res ipsa loquitur” rule.
Same; Meaning of “caso fortuito” or “force majeure”. —Caso fortuito or force majeure
(which in law are identical in so far as they exempt an obligor from liability) by definition are
extra-ordinary events not foreseeable or avoidable, “events that could not be foreseen, or
which, though foreseen, were inevitable” (Art. 1174, Civil Code). It is, therefore, not enough
that the event could not have been foreseen or anticipated, as is commonly believed, but it
must be one impossible to foresee or to avoid. The mere difficulty to foresee the
happening is not impossibility to foresee the same: “un hecho no constituye caso fortuito
por la sola circunstancia de que su existencia haga mas dificil o mas onerosa la accion
diligente del presento ofensor.”
Sicam v. Jorge, G.R. No. 159617. August 8, 2007.
Pawnshops; Robbery; Robbery per se, just like carnapping, is not a fortuitous event; Merely
presenting the police report on the robbery committed based on the report of the employees of the pawnshop
owner is not sufficient to establish robbery.—Robbery per se, just like carnapping, is not a fortuitous
event. It does not foreclose the possibility of negligence on the part of herein petitioners. In
Co v. Court of Appeals, 291 SCRA 111 (1998), the Court held: It is not a defense for a repair
shop of motor vehicles to escape liability simply because the damage or loss of a thing
lawfully placed in its possession was due to carnapping. Carnapping per se cannot be
considered as a fortuitous event. The fact that a thing was unlawfully and forcefully taken from
another’s rightful possession, as in cases of carnapping, does not automatically give rise to a fortuitous event.
To be considered as such, carnapping entails more than the mere forceful taking of another’s property. It must
be proved and established that the event was an act of God or was done solely by third parties and that
neither the claimant nor the person alleged to be negligent has any participation. In accordance with the Rules
of Evidence, the burden of proving that the loss was due to a fortuitous event rests on him who invokes it—
which in this case is the private respondent. However, other than the police report of the alleged
carnapping incident, no other evidence was presented by private respondent to the effect
that the incident was not due to its fault. A police report of an alleged crime, to which only
private respondent is privy, does not suffice to establish the carnapping. Neither does it
prove that there was no fault on the part of private respondent notwithstanding the parties’
agreement at the pre-trial that the car was carnapped. Carnapping does not foreclose the
possibility of fault or negligence on the part of private respondent. Just like in Co, petitioners
merely presented the police report of the Parañaque Police Station on the robbery
committed based on the report of petitioners’ employees which is not sufficient to establish
robbery. Such report also does not prove that petitioners were not at fault.
*one of the factors that the court considered was the lack of insurance covering the
pawnshop however, the court ruled that there was no obligation under CB circulars for
pawnshops to be insured. Even so, the court nevertheless found the pawnshop liable
because of the rising criminality occurring during the time, there was doubt whether the
pawnshop had a security guard and the fact that the vault which was supposed to be closed
to secure the items therein was left partly open giving the robbers an “easier” way of
acquiring the articles inside (They did not exercise the required diligence thus they are liable).
Art. 1177
Adorable v. CA, G.R. No. 119466. November 25, 1999
Same; Same; Rescission; Sales; Loans; Creditors do not have such material interest as to allow them
to sue for rescission of a contract of sale—theirs is only a personal right to receive payment for the loan, not a
real right over the property subject of the deed of sale.—We hold that, as creditors, petitioners do not
have such material interest as to allow them to sue for rescission of the contract of sale. At
the outset, petitioners’ right against private respondents is only a personal right to receive
payment for the loan; it is not a real right over the lot subject of the deed of sale.
Same; Same; Same; Same; Prerequisites to an Action for Re-scission of an Allegedly Fraudulent
Sale.—The following successive measures must be taken by a creditor before he may bring
an action for rescission of an allegedly fraudulent sale: (1) exhaust the properties of the
debtor through levying by attachment and execution upon all the property of the debtor,
except such as are exempt by law from execution; (2) exercise all the rights and actions of
the debtor, save those personal to him (accion subrogatoria); and (3) seek rescission of the
contracts executed by the debtor in fraud of their rights (accion pauliana). Without availing
of the first and second remedies, i.e., exhausting the properties of the debtor or subrogating
themselves in Francisco Bareng’s transmissible rights and actions, petitioners simply
undertook the third measure and filed an action for annulment of the sale. This cannot be
done.
Same; Same; Same; Same; An action for rescission is a subsidiary remedy—it cannot be instituted
except when the party suffering damage has no other legal means to obtain reparation for the same.—
Indeed, an action for rescission is a subsidiary remedy; it cannot be instituted except when
the party suffering damage has no other legal means to obtain reparation for the same. Thus,
Art. 1380 of the Civil Code provides: The following contracts are rescissible: . . . . (3) Those
undertaken in fraud of creditors when the latter cannot in any other manner collect the
claims due them.
Same; Same; Same; Same; In order that one who is not obligated in a contract either principally or
subsidiarily may maintain an action for nullifying the same, his complaint must show the injury that would
positively result to him from the contract in which he has not intervened, with regard at least to one of the
contracting parties.—Nor do petitioners enjoy any preference to buy the questioned property.
In Aldecoa v. Hongkong and Shanghai Banking Corporation, it was held that in order that
one who is not obligated in a contract either principally or subsidiarily may maintain an
action for nullifying the same, his complaint must show the injury that would positively
result to him from the contract in which he has not intervened, with regard at least to one of
the contracting parties.
Khe Hong Cheng Et Al v. CA, G.R. No. 144169. March 28, 2001
 Rescission; Accion Pauliana; Obligations and Contracts; Prescription; Since Article 1389 of the
Civil Code is silent as to when the prescriptive period would commence, the general rule, i.e., from the moment
the cause of action accrues, therefore, applies.—Article 1389 of the Civil Code simply provides that,
“The action to claim rescission must be commenced within four years.” Since this provision
of law is silent as to when the prescriptive period would commence, the general rule, i.e.,
from the moment the cause of action accrues, therefore, applies. Article 1150 of the Civil
Code is particularly instructive: Art. 1150. The time for prescription for all kinds of actions,
when there is no special provision which ordains otherwise, shall be counted from the day
they may be brought. Indeed, this Court enunciated the principle that it is the legal
possibility of bringing the action which determines the starting point for the computation of
the prescriptive period for the action.
Same; Same; Same; Requisites; An action to rescind or an accion pauliana must be of last resort,
availed of only after all other legal remedies have been exhausted and have been proven futile.—Article
1383 of the Civil Code provides as follows: Art. 1383. An action for rescission is subsidiary;
it cannot be instituted except when the party suffering damage has no other legal means to
obtain reparation for the same. It is thus apparent that an action to rescind or an accion
pauliana must be of last resort, availed of only after all other legal remedies have been
exhausted and have been proven futile. For an accion pauliana to accrue, the following
requisites must concur: 1) That the plaintiff asking for rescission has a credit prior to the
alienation, although demandable later; 2) That the debtor has made a subsequent contract
conveying a patrimonial benefit to a third person; 3) That the creditor has no other legal
remedy to satisfy his claim, but would benefit by rescission of the conveyance to the third
person; 4) That the act being impugned is fraudulent; 5) That the third person who received
the property conveyed, if by onerous title, has been an accomplice in the fraud.
Same; Same; Same; Prescription; Land Titles; To count the four-year period to rescind an allegedly
fraudulent contract from the date of registration of the conveyance with the Register of Deeds would run
counter to Article 1383 of the Civil Code as well as settled jurisprudence.—Petitioners’ argument that
the Civil Code must yield to the Mortgage and Registration Laws is misplaced, for in no way
does this imply that the specific provisions of the former may be all together ignored. To
count the four-year prescriptive period to rescind an allegedly fraudulent contract from the
date of registration of the conveyance with the Register of Deeds, as alleged by the
petitioners, would run counter to Article 1383 of the Civil Code as well as settled
jurisprudence. It would likewise violate the third requisite to file an action for rescission of
an allegedly fraudulent conveyance of property, i.e., the creditor has no other legal remedy to
satisfy his claim.
Same; Same; Same; Same; An accion pauliana presupposes the following—1) a judgment; 2) the
issuance by the trial court of a writ of execution for the satisfaction of the judgment; and 3) the failure of the
sheriff to enforce and satisfy the judgment of the court.—An accion pauliana thus presupposes the
following: 1) A judgment; 2) the issuance by the trial court of a writ of execution for the
satisfaction of the judgment; and 3) the failure of the sheriff to enforce and satisfy the
judgment of the court. It requires that the creditor has exhausted the property of the debtor.
The date of the decision of the trial court is immaterial. What is important is that the credit
of the plaintiff antedates that of the fraudulent alienation by the debtor of his property. After
all, the decision of the trial court against the debtor will retroact to the time when the debtor
became indebted to the creditor.
Same; Same; Same; Same; Where the judgment creditor filed its complaint for accion pauliana barely a
month from its discovery that the defendant had no other property to satisfy the judgment award against him,
its action for rescission of the deeds of donation clearly had not yet prescribed.—As mentioned earlier,
respondent Philam only learned about the unlawful conveyances made by petitioner Khe
Hong Cheng in January 1997 when its counsel accompanied the sheriff to Butuan City to
attach the properties of petitioner Khe Hong Cheng. There they found that he no longer had
any properties in his name. It was only then that respondent Philam’s action for rescission of
the deeds of donation accrued because then it could be said that respondent Philam had
exhausted all legal means to satisfy the trial court’s judgment in its favor. Since respondent
Philam filed its complaint for accion pauliana against petitioners on February 25, 1997,
barely a month from its discovery that petitioner Khe Hong Cheng had no other property to
satisfy the judgment award against him, its action for rescission of the subject deeds clearly
had not yet prescribed.
Manila Banking Corp v. Silverio, G.R. No. 132887. August 11, 2005.
Same; Same; Same; Actions; The remedy of accion pauliana is available when the subject matter is
a conveyance, otherwise valid, undertaken in fraud of creditors.—Contrary to the position taken by the
Court of Appeals, TMBC need not look farther than the subject properties to protect its
rights. The remedy of accion pauliana is available when the subject matter is a conveyance,
otherwise valid undertaken in fraud of creditors. Such a contract is governed by the rules on
rescission which prescribe, under Art. 1383 of the Civil Code, that such action can be
instituted only when the party suffering damage has no other legal means to obtain
reparation for the same. The contract of sale before us, albeit undertaken as well in fraud of
creditors, is not merely rescissible but is void ab initio for lack of consent of the parties to be
bound thereby.
Same; Same; Same; Words and Phrases; “Void Contracts” and “Rescissible Contracts,”
Distinguished; A void or inexistent contract is one which has no force and effect from the very beginning, as if
it had never been entered into; Rescissible contracts are not void ab initio, and until set aside in an
appropriate action, rescissible contracts are respected as being legally valid, binding an in force.—A void or
inexistent contract is one which has no force and effect from the very beginning, as if it had
never been entered into; it produces no effect whatsoever either against or in favor of
anyone. Rescissible contracts, on the other hand, are not void ab initio, and the principle,
“quod nullum est nullum producit effectum,” in void and inexistent contracts is inapplicable. Until
set aside in an appropriate action, rescissible contracts are respected as being legally valid,
binding and in force. Tolentino, a noted civilist, distinguished between these two types of
contracts entered into in fraud of creditors, thus: Absolute simulation implies that there is
no existing contract, no real act executed; while fraudulent alienation means that there is a
true and existing transfer or contract. The former can be attacked by any creditor, including
one subsequent to the contract; while the latter can be assailed only by the creditors before
the alienation. In absolute simulation, the insolvency of the debtor making the simulated
transfer is not a prerequisite to the nullity of the contract; while in fraudulent alienation, the
action to rescind, or accion pauliana, requires that the creditor cannot recover in any other
manner what is due him. Finally, the action to declare a contract absolutely simulated does
not prescribe (articles 1409 and 1410); while the accion pauliana to rescind a fraudulent
alienation prescribes in four years (article 1389). *thus Manila Banking need not to exhaust
the properties of Silverio.
Metrobank v. International Exchange Bank, G.R. No. 176008. August 10, 2011.
 An action to rescind, or an accion pauliana, must be of last resort, availed of only after the creditor
has exhausted all the properties of the debtor not exempt from execution or after all other legal remedies have
been exhausted and have been proven futile.—Jurisprudence is clear that the following successive
measures must be taken by a creditor before he may bring an action for rescission of an
allegedly fraudulent contract: (1) exhaust the properties of the debtor through levying by
attachment and execution upon all the property of the debtor, except such as are exempt by
law from execution; (2) exercise all the rights and actions of the debtor, save those personal
to him (accion subrogatoria); and (3) seek rescission of the contracts executed by the debtor in
fraud of their rights (accion pauliana). It is thus apparent that an action to rescind, or an accion
pauliana, must be of last resort, availed of only after the creditor has exhausted all the
properties of the debtor not exempt from execution or after all other legal remedies have
been exhausted and have been proven futile.
Art. 1191
Philippine Amusement Enterprises v. Natividad, No. L-21876. September 29, 1967
Rescission; Judicial action.—Under Article 1191 of the New Civil Code, the right to
resolve reciprocal obligations, in case one of the obligors fail to comply with that which is
incumbent upon him, is deemed to be implied. But in the absence of a stipulation to the
contrary this right must be invoked judicially; it cannot be exercised solely on a party’s own
judgment that the other has committed a breach of the obligation. Hence, where there is
nothing in the contract of lease empowering the defendants to rescind it without resort to
the courts, the defendants’ action in unilaterally terminating the contract is unjustified.
Same; Breach must be substantial—Rescission by judicial action under Article 1191 of
the New Civil Code will be ordered only where the breach complained of is so substantial as
to defeat the object of the parties in entering into the agreement. It will not be granted
where the breach is slight or casual.
University of the Philippines v. De Los Angeles, No. L-28602, 29 September 1970.
Civil Law; Obligations and Contracts; Rescission; Effect of unilateral rescission without court
intervention.—In the first place, UP and ALUMCO had expressly stipulated in the
“Acknowledgment of Debt and Proposed Manner of Payment” that, upon default by the
debtor ALUMCO, the creditor (UP) has “the right and the power to consider the Logging
Agreement dated 2 December 1960 as rescinded without the necessity of any judicial suit.”
As to such special stipulation, and in connection with Article 1191 of the Civil Code, this
Court stated in Froilan vs. Pan Oriental Shipping Co., et al., L-11897, 31 October 1964, 12
SCRA 276: “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.
Laperal v. Solid Homes, G.R. No. 130913. June 21, 2005
Civil Law; Contracts; Rescission; Mutual restitution is required in cases involving rescission under
Article 1191.—Mutual restitution is required in cases involving rescission under Article 1191.
In Velarde vs. Court of Appeals, this Court, in no uncertain terms, squarely ruled on this matter:
x x x Rescission creates the obligation to return the object of the contract. It can be carried
out only when the one who demands rescission can return whatever he may be obliged to
restore (citing Co v. Court of Appeals, 312 SCRA 528, August 17, 1999; and Vitug, Compendium
of Civil Law and Jurisprudence, 1993 revised ed., p. 556). To rescind is to declare a contract void
at its inception and to put an end to it as though it never was. It is not merely to terminate it
and release the parties from further obligations to each other, but to abrogate it from the
beginning and restore the parties to their relative positions as if no contract has been made
(citing Ocampo v. Court of Appeals, 233 SCRA 551, June 30, 1994).
Same; Same; Same; Court finds no justification to sustain petitioners’ position that said Article
1385 does not apply to rescission under Article 1191.—Since Article 1385 of the Civil Code
expressly and clearly states that “rescission creates the obligation to return the things which
were the object of the contract, together with their fruits, and the price with its interest,” the
Court finds no justification to sustain petitioners’ position that said Article 1385 does not
apply to rescission under Article 1191.
Sta. Lucia Realty v. Uyecio, G.R. No. 176217, 13 August 2008.
Sales; Rescission; Words and Phrases; “Contract to Sell” and “Contract of Sale,”
Distinguished.—A word on the application by the HLURB, the OP, and the appellate court of
Article 1191 of the Civil Code on rescission. The case involves contracts to sell, not a
contract which absolutely conveys real property. Distinguishing the two contracts, the Court,
in Rillo v. Court of Appeals, held: x x x In a contract to sell real property on installments, the
full payment of the purchase price is a positive suspensive condition, the failure of which is
not considered a breach, casual or serious, but simply an event which prevented the
obligation of the vendor to convey title from acquiring any obligatory force. The transfer of
ownership and title would occur after full payment of the purchase price. We held in Luzon
Brokerage Co., Inc. v. Maritime Building Co., Inc. that there can be no rescission of an obligation
that is still non-existent, the suspensive condition not having happened.
Same; Same; Articles 1191 of the Civil Code does not thus apply to a contract to sell since there
can be no rescission of an obligation that is still non-existent, the suspensive condition not having occurred—
cancellation is the correct remedy.—Articles 1191 of the Civil Code does not thus apply to a
contract to sell since there can be no rescission of an obligation that is still non-existent, the
suspensive condition not having occurred. In other words, the breach contemplated in
Article 1191 is the obligor’s failure to comply with an obligation already extant, like a
contract of sale, not a failure of a condition to render binding that obligation. Cancellation,
not rescission, of the contract to sell is thus the correct remedy in the premises.
Nissan Car Lease v. Lica Management, G.R. No. 176986, 13 January 2016
Same; Same; Same; Same; Whether a contract provides for it or not, the remedy of rescission is always
available as a remedy against a defaulting party.—Whether a contract provides for it or not, the
remedy of rescission is always available as a remedy against a defaulting party. When done
without prior judicial imprimatur, however, it may still be subject to a possible court review.
In Golden Valley Exploration, Inc. v. Pinkian Mining Company, 726 SCRA 259 (2014), we
explained: This notwithstanding, jurisprudence still indicates that an extrajudicial
rescission based on grounds not specified in the contract would not preclude a party
to treat the same as rescinded. The rescinding party, however, by such course of action,
subjects himself to the risk of being held liable for damages when the extrajudicial rescission
is questioned by the opposing party in court. This was made clear in the case ofU.P. v. De los
Angeles, wherein the Court held as follows: Of course, it must be understood that the act of
a 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 and is always provisional,
being ever subject to scrutiny and review by the proper court. If the other party
denies that rescission is justified, it is free to resort to judicial action in its
own behalf, and bring the matter to court. Then, should the court, after due hearing,
decide that the resolution of the contract was not warranted, the responsible party
will be sentenced to damages; in the contrary case, the resolution will be affirmed, and the
consequent indemnity awarded to the party prejudiced. In other words, 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. x x x (Emphasis and
underscoring in the original) The only practical effect of a contractual stipulation allowing
extrajudicial rescission is “merely to transfer to the defaulter the initiative of instituting suit,
instead of the rescinder.”
Same; Same; Same; Same; The rule is the same even if the parties’ contract expressly allows extrajudicial
rescission. The other party denying the rescission may still seek judicial intervention to determine whether or
not the rescission was proper.—The rule is the same even if the parties’ contract expressly allows
extrajudicial rescission. The other party denying the rescission may still seek judicial
intervention to determine whether or not the rescission was proper. Having established that
LMI can extrajudicially rescind its contract with NCLPI even absent an express contractual
stipulation to that effect, the question now to be resolved is whether this extrajudicial
rescission was proper under the circumstances. As earlier discussed, NCLPI’s nonpayment
of rentals and unauthorized sublease of the leased premises were both clearly proven by the
records. We thus confirm LMI’s rescission of its contract with NCLPI on account of the
latter’s breach of its obligations.