QUIZ NO.

2
Pure & Conditional Obligations [Art. 1179-1192]; Obligations with a Period [Art. 1193-1198];
Alternative & Facultative Obligations [Art. 1199-1206], Joint and Solidary Obligations [Art.
1207-1222]; Divisible and Indivisible Obligations [Art. 1223-1225]; and Obligations with a
Penal Clause [Art. 1226-1230]

January 27, 2018

I
In a case, there was a contract for the purchase of 36,000 cartoons specifically designed for the
business of exporting bananas. Allegedly, the defendant failed to manufacture and deliver the
boxes and that it repeatedly followed-up the immediate production of the boxes, but to no avail.
Hence, it filed a complaint for reimbursement of the amount paid. The defendant contended that
it has completed the manufacture of the boxes. The complaint was dismissed which was affirmed
on appeal. Will the action prosper and what is the nature of the action?

Answer: Albano, p. 407-408; Solar Harvest, Inc. vs. Davao Corrugated Cartoon Corp., G.R. No.
176868, July 26, 2010

No. The claim for reimbursement is actually one for rescission or resolution of contract under
Art. 1191, NCC, where the law provides that the power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.
The right to rescind a contract arises once the other party defaults in the performance of his
obligation. In determining when default occurs, Art. 1191 should be taken in conjunction with
Art. 1169 of the same law. There must be prior demand.

The “follow-up”, however, would not qualify as a demand for the fulfillment of the obligation,
hence, the action will not prosper.

II
A sold a parcel of land to B for P20,000. In the deed of sale, there is a stipulation that the
purchase price shall be paid on a certain date and that in case of failure to pay on such date, A
can rescind the contract. Suppose that B fails to pay on the date stipulated in the contract, is
Article 1191 of the Civil Code applicable? Why?

Answer: Jurado, p. 622; Hanlon vs. Hausermann, 40 Phil. 796; De la Rama Steamship Co. vs.
Tan, 99 Phil. 1034

No. Art. 1191 is not applicable. Where the contract itself contains a resolutory provision by
virtue of which the obligation may be cancelled or extinguished in case of breach, judicial
permission to rescind the contract is no longer necessary. The use of the word “implied” in the
article supports this conclusion. The right to rescind is “implied” only if not expressly granted;
no right can be said to be implied if expressly recognized. Consequently, in the instant case, Art.
1191 is not applicable. The rule that is applicable is found in Art. 1592 under the law on sales.

III
D borrowed P2,000 from C in 1958. The debt is evidenced by a promissory note executed by D
wherein he promised to pay as soon as he has the money or as soon as possible. C has made
repeated demands upon D for payment, but up to now no payment has been made. Suppose that
C will bring an action against D for payment of the debt, will the action prosper?

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Answer: Jurado, p. 628, Bar Question (1973); Gonzales vs. Jose, 66 Phil. 369; Patente vs.
Omega, 49 Off. Gaz. 4846; Conception vs. People, 74 Phil. 62; Ungson vs. Lopez, CA, 50 Off.
Gaz., 4297; Pages vs. Basilan Lumber Co., 104 Phil. 882

No, the action will not prosper. In similar cases decided by the Supreme Court (Gonzales vs.
Jose, 66 Phil. 369; Patente vs. Omega, 49 Off. Gaz. 4846), it was held where the debtor promises
to pay his obligation as soon as he has money or as soon as possible, the duration of the term or
period depends exclusively upon the will of the debtor; consequently, the only remedy of the
creditor is to bring an action against the debtor in accordance with Art. 1197 of the Civil Code
for purposes of asking the court to fix the duration of the term or period. It is only after the
duration of the term or period has been fixed by the court that any other action involving the
fulfillment or performance of the obligation can be maintained. This has always been the
consistent doctrine in this jurisdiction.

IV
A executed in favor of B a promissory note for P10,000, payable after two years, secured by a
mortgage on a certain building valued at P20,000. One year after the execution of the note, the
mortgaged building was totally destroyed by a fire of accidental origin. Can B demand from A
the payment of the value of the note immediately after the burning without waiting for the
expiration of the term? Reasons.

Answer: Jurado, p. 631; Bar Question [1932];

Yes, B can demand from A the payment of the value of the note immediately after the burning
without waiting for the expiration of the term, unless A immediately gives another security or
guaranty which is equally satisfactory. This is clear from the provision of No. 3 of Art. 1198 of
the Civil Code which declares that when by his own acts the debtor has impaired the guaranty or
security, or when through a fortuitous event the guaranty or security disappears, the debtor shall
lose the benefit of the term or period. It must be observed that there is a difference between the
effect of impairment and the effect of disappearance as applied to the security or guaranty. The
rules may be restated as follows: (1) If the guaranty or security is impaired through the fault of
the debtor, he shall lose his right to the benefit of the period; however, if it is impaired without
his fault, he shall retain his right. (2) If the guaranty or security disappears through any cause,
even without any fault of the debtor, he loses his right to the benefit of the period. In either case,
however, the debtor shall not lose his right to the benefit of the period if he gives a new guaranty
or security.

V
A sold his entire interest in 24,000 tons of iron ore to B for P75,000, P10,000 of which was
actually paid upon the signing of the contract. With respect to the balance of P65,000, it was
agreed that it “will be paid from the first amount derived from the sale of the ore”. To insure
payment thereof, B delivered to A a surety bond which provided that the liability of the surety
would automatically expire after the lapse of two years. In as much as the ore had not yet been
sold and the surety bond had expired without being renewed and the balance had not yet been
paid in spite of repeated demands, A finally brought an action against B for the recovery of said
balance. B, however, interposed the defense that his obligation to pay is conditional and that
inasmuch as the condition has not yet been fulfilled, therefore, it is not yet due and demandable.
Is the defense tenable?

Answer: Jurado, p. 632; Gaite vs. Foncier, 112 Phil. 728

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No, the defense is untenable. The sale of the iron ore is not a condition precedent to the payment
of the balance but only a suspensive term or period. There is no uncertainty whatsoever with
regard to the fact of payment; what is undetermined is merely the exact date of payment.
Normally, therefore, A will have to wait for the actual sale of the iron ore before he can demand
from B for the payment of the unpaid balance. However, inasmuch as by his own act, B has
impaired the guaranty or security after its establishment without giving another one which is
equally satisfactory, it is clear that he has now lost the benefit of the term or period.
Consequently, the case now falls squarely within the purview of pars. 2 and 3 of Article 1198 of
the Civil Code.

VI
D is obliged to give C, at D’s option, either object No. 1, object No. 2 or object No. 3. However,
objects No. 1 and 2 were destroyed by D’s own fault, and later object No. 3 is lost by a fortuitous
event. Should D be held liable?

Answer: Paras, p. 274; Art. 1204, NCC

No. D should not be held liable. D had all the right in the world to destroy objects Nos. 1 and 2,
since he was free not to select them. In destroying Nos. 1 and 2, he really made his choice and
the obligation to give has become a simple one – to give object No. 3. Loss of the object of a
simple obligation by fortuitous event should as a rule extinguish any liability. (To avoid
unfairness, however, it would seem that immediately after the loss of object No. 1 and object No.
2, the debtor must inform the creditor of this fact.)

VII
In the contract of sale, B purchased three lots from S (People’s Homesite and Housing Corp.)
which provided that only construction exclusively for “residential purposes” shall be built on the
property and the terms thereof to be binding upon the successors and assignees of the respective
parties. Subsequently, B sold two lots to Meralco which established a sub-station within the
property.

Because of “severe noise” from the sub-station, B filed a complaint for the rescission of the sale.
Has B the right of action against Meralco for violation of the restriction imposed in the contract
between S and B?

Answer: De Leon, p. 111; Manila Electric Company vs CA, 114 SCRA 173 [1982]

No. It is S which has the right of action against any assignee of B. S cannot rescind the contract
between B and Meralco because it was not a party to it. S’s redress would be to directly “seek
cancellation of the title of Meralco, and to repossess the property” as provided in its contract
with B.

VIII
R, donor, gratuitously granted to E (Province of Cavite) a portion of a fishery owned by R for the
construction of a road subject to the condition that E would fill up the space where to build the
road with mud taken from the higher portions of the fishery so it would have the same level. E
failed to fulfill the condition of the grant.

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R brought an action for the recovery of the value of the portion of the fishery granted and
damages covering the cost of digging up the higher portion of the fishery which E failed to
perform. Is R entitled to the damages claimed?

Answer: De Leon, p. 166-167; Osorio vs. Bennet and Prov. Board of Cavite, 41 Phil. 301 [1920]

No. The resolution of a contract and its performance are incompatible with each other. Having
elected the right to rescind, R cannot at the same time demand the fulfillment of the obligation. If
he could recover the cost of the digging, that would amount indirectly to the compliance by E
with the obligation. In that manner, R would at the same time be availing himself of the two
remedies of resolving the obligation and exacting its fulfillment.

IX
D, etc. executed in favor of C a document wherein they bound themselves to pay their
indebtedness to C, mortgaged their house and lot as security, and agreed to the cession of said
house and lot to C, transferring to her all their rights to the ownership and possession thereof, in
case of insolvency on their part. D, etc. paid no part of their indebtedness. Is the agreement to
convey the house and lot at an appraised valuation in the event of failure to pay the debt in
money at its maturity valid?

Answer: De Leon, pp. 218-219; Agoncillo and Mariano vs. Javier, 38 Phil. 424 [1918]

Yes. The agreement is simply an undertaking that if the debt is not paid in money, it will be paid
in another way. The agreement is not open to the objection that the stipulation is a pacto
commisorio. (See Art. 2088). It is not an attempt to permit the creditor to declare a forfeiture of
the security upon the failure of the debtors to pay the debt at maturity. It is simply provided that
if the debt is not paid in money, it be paid in another specific way by the transfer of property at a
valuation. The title to the property is not to be transferred to C ipso facto upon failure of D, etc.
to pay the debt at its maturity.

The obligations assumed by D, etc. were alternative and they had the right to elect which they
would perform.

X
A is obliged to give B this car or this ring or this cigarette case. Nothing is said in the contract as
to who was given the right of choice. Suppose B selects the car, is A bound by the choice made?

Answer: Paras, p. 268

No. A is not bound by the choice made because it is not B but A who, in the absence of any
stipulation, is given the right to choose the object he desires to give. (Art. 1200, NCC).

XI
A, B, and C borrowed P120,000 from X. This debt is evidenced by a promissory note wherein
the three bound themselves to pay the debt jointly and severally. However, according to the note,
A can be compelled to pay only on June 1, 2005; B can be compelled to pay only on June 1,
2006; while C can be compelled to pay only on June 1, 2007. On June 1, 2005, X made a
demand upon A to pay the entire indebtedness but the latter paid only P40,000. Subsequently,
because of A’s refusal to pay the balance, X brought an action against him for collection of the
amount. Will such action prosper? Reasons.

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Answer: Aquino, p. 395; Ynchausti vs. Yulo, 34 Phil. 978

No. The action will not prosper. Article 1211 of the New Civil Code provides that the solidary
character is not destroyed by the fact that the debtors are bound by different periods for payment.
Thus, the solidary nature of the obligation is not affected by the fact that the obligors in this case
are liable on different dates. In the present case, the share of each solidary debtor in the total
obligation of P120,000 is presumably P40,000. It is submitted that since each solidary debtor can
be compelled to pay on different dates, the right of the creditor to collect is limited to the
solidary debtor or debtors who obligation/s has/have matured and the recovery is limited to the
amount owed by the debtor or debtors who obligation/s has/have already matured. Hence, only A
is liable on June 1, 2005 and the liability is limited to P40,000. X will have to wait for June 1,
2006 when B’s obligation shall have matured, and for June 1, 2007 when C’s obligation shall
have matured. If X was able to recover P40,000 from A on or after June 1, 2005, he can collect
P40,000 from either A or B on June 1, 2006. If X was able to collect the P40,000 on June 1, 2006
(in addition to the amount he previously collected from A), he can again collect another P40,000
from either A or B or C on June 1, 2007.

XII
The Betis Furniture Co. undertook to deliver to Mr. Bagongkasal specified pieces of living room,
dining room and bedroom furniture, all made of narra, for a price stated in the contract. The
agreement had a penal clause that any violation of the contract would entitle the aggrieved party
to damages in the amount of P100,000. The furniture delivered by Betis was made, not of narra,
but of inferior wood. In a suit to recover damages, Mr. Bagongkasal was able to prove that the
actual damages he sustained amounted to P200,000. He demanded that amount plus P100,000
penalty or a total of P300,000. Betis, however, countered that if it were liable for damages at all,
the maximum award should not exceed P100,000 as stated in the penal clause of the contract.
Whose claim would you sustain? Why?

Answer. Aquino, p. 406-407

The claim of Betis should be sustained. Under Art. 1228, no proof of damage is necessary in
order for a penal clause to be enforced. Damages may be awarded in the concept of penalty in
the absence of proof provided that the penal clause was freely agreed upon.

XIII
A, B, and C borrowed money from X in the amount of P3,000.00 obligating themselves to pay
on June 30, 1991. When the obligation became due and demandable, X demanded from A the
full amount of the obligation. Is the action of X correct? Why?

Answer: Albano, pp. 417-418; Pimentel vs. Gutierrez, 14 Phil. 49

No, because the obligation is only a joint one. There is no presumption of solidarity; there is only
a presumption that the obligation is joint. Hence, the amount of P3,000.00 is presumed to be
divided into as many equal shares as there are debtors unless there is an agreement to the
contrary. There is solidarity only when the obligation says so or that the nature of the obligation
requires solidarity. In this case, since there is no agreement of solidarity, X cannot compel A to
pay the full amount of the obligation.

XIV
A, B, and C are solidary debtors of X. Twelve years later, after the obligation became due and
demandable, A paid X and later on asked for reimbursement of B’s and C’s shares. Is A correct?
Why?

Answer: Albano, p. 420

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No, because the obligation has already prescribed. The law says that payment by a solidary
debtor shall not entitle him to reimbursement from his co-debtors if such payment is made after
the obligation has prescribed or become illegal. (Art. 1218, NCC).

XV
A and B sold 1,000 sacks of rice to X and Y and, on X’s request, delivered them to him. X resold
the rice, without turning over any part of it or its price to Y. May Y compel A and B to deliver
what he bought? If so, to what extend?

Answer: Jurado, p. 641; Bar Question (1983)

Yes, Y may compel A and B to deliver what he bought from them. However, A and B can be
compelled to deliver only 250 sacks of rice each. The reason is simple. The obligation is joint.
Since the obligation does not state that it is solidary and since it is clear that the law or the nature
of the obligation does not require solidarity, therefore, the presumption is that the obligation is
joint – joint with respect to X and Y and joint with respect to A and B. Consequently, the
delivery by A and B of 1,000 sacks of rice to X did not extinguish their obligation to Y. Under
the law, they are still liable to Y. In other words, since the share of Y in the credit is presumed to
be to the extent of 500 sacks of rice, therefore, A is presumed to be liable to Y to the extent of
250 sacks of rice, while B is also presumed to be liable to Y to the extent of 250 sacks of rice.
(Art. 1207 and 1208, NCC).

XVI
Joey, Jovy and Jojo are solidary debtors under a loan obligation of P300,000.00 which has fallen
due. The creditor has, however, condoned Jojo’s entire share in the debt. Since Jovy has become
insolvent, the creditor makes a demand on Joey to pay the debt.
a) How much, if any, may Joey be compelled to pay?
b) To what extent, if at all, can Jojo be compelled by Joey to contribute to such payment?

Answer: Ulep, p. 103; Bar Problem (1998); Answer by UP Law Center

a) Joey can be compelled to pay only the remaining balance of P200,000, in view of the
remission of Jojo’s share by the creditor. (Art. 1219, Civil Code).
b) Jojo can be compelled by Joey to contribute P50,000. Art. 1217, par. 3, Civil Code
provides, “When one of the solidary debtors cannot, because of insolvency, reimburse his
share to the debtor paying the obligation, such share shall be borne by all his co-debtors,
in proportion to the debt of each”.

Since the insolvent debtor’s share which Joey paid was P100,000, and there are only two
remaining debtors – namely Joey and Jojo – these two shall share equally the burden of
reimbursement. Jojo may thus be compelled by Joey to contribute P50,000.00.

XVII
Under a contract, the obligation of A, B, and C was solidary. However, the judgment was
rendered against them, which has become final, was for the total amount sued without stating the
nature or extent of their liability. May judgment be executed on the property of C alone to satisfy
the entire obligation?

Answer: De Leon, p. 232; Oriental Commercial vs. Cebato, 60 Phil. 723 [1934]
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No. Each of the defendants is liable only for his proportionate part of the judgment which
superseded the action for the enforcement of the contract. A court has no power to amend a
judgment that has become final.

XVIII
Before the collection suit filed by B (bank), creditor, against the joint and solidary debtors could
be decided, A, one of the debtors dies.

After having been informed of the death, the court issued an order dismissing the case, citing
Section 6, Rule 86 of the Rules of Court which provides: “Solidary obligation of decedent. –
Where the obligation of the decedent is solidary with another debtor, the claim shall be filed
against the decedent as if he were the only debtor, without prejudice to the right of the estate to
recover contribution from the other debtor. In a joint obligation of the decedent, the claim shall
be confined to the portion belonging to him.” Is the dismissal of the case correct?

Answer: De Leon, p. 252-253, Phil. National Bank vs. Asuncion, 80 SCRA 321 [1977]

No. A cursory perusal of the cited provision reveals that nothing therein prevents a solidary
creditor from proceeding against the surviving solidary debtors. Said provision merely sets up
the procedure in enforcing collection in case a creditor chooses to pursue his claim against the
estate of the deceased solidary debtor.

To require the solidary creditor to proceed against the estate, making it a condition precedent for
any collection against the surviving debtor to prosper, would deprive him of his substantive
rights provided by Article 1216, “to proceed any one of the solidary debtors or some or all of
them simultaneously.” The choice is undoubtedly left to the solidary creditor.

XIX
A, B, and C are jointly liable to give a particular car worth P1.2 million in favor of D, E, F, and
G. A is insolvent and the debtors, therefore, cannot purchase the car to give to the creditors. D
and E have renounced their rights. The debtors are not in default. How much can each of the
creditors get from each of the debtors?

Answer: Paras, pp. 293-294

Since this is a joint and indivisible obligation and since the car cannot be given, it is converted
into an obligation to give indemnity for damages. Since this is a joint obligation, each debtor is
proportionately liable and each creditor is only entitled to his proportional credit.

P1.2M divided by 3 = P400,000 (the total debt of each debtor)

P400,000 divided by 4 = P100,000 (the credit belonging to each joint creditor, not from each
joint debtor)

A is insolvent and his share will not be included in the liability of B and C.

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Therefore:

a) D and E having renounced their rights, they get nothing.

b) F has not renounced his right, so he can get P100,00 from B and P100,000 from C. Over
A, F has the rights of creditor over an insolvent debtor.
c) G has exactly the same rights as F.

XX
A, B, and C are joint and several debtors of D. D allows C an extension of two years within
which to pay his portion of the indebtedness. Upon being sued by D, may A and B interpose the
defense of the extension of the time granted to C? Should A and B eventually pay the entire
obligation, may they compel C to reimburse them with his share without waiting for the two-year
extension granted to D? Reasons.

Answer: Paras, p. 312

Yes, A and B can set up the extension but only as partial defense, limited to C’s share. Hence,
they should now pay ALL minus C’s share. (See Inchausti vs. Yulo, 34 Phil. 978). If they paid
ALL (without deductions) they must wait for the two-year period before they can compel
reimbursement from C. This is because A and B merely stepped into the shoes of the creditor D,
and therefore C can plead against them the defense of extension of payment.

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