TRENDS AND UPDATES IN THE

LAW ON

OBLIGATIONS
and
CONTRACTS

Lecture Delivered by
Prof. Rubén F. Balane

OUTLINE OF LECTURE

OBLIGATIONS

I. Culpa Contractual / Culpa

Aquiliana
 2

A. Culpa Contractual

Employer/Owner liable –
Employee cannot be held
liable.

1. FGU v. Sarmiento, 386

SCRA 312 [2002]

2. Presumption of
Fault/Negligence –
arises from mere
breach.
a. FGU v. Sarmiento,
supra
b. LRTA v. Navidad,
397 SCRA 75 [2003]
c. Victory Liner v.
Gammad, 444 SCRA
355 [2004]
d. RCPI v. Verchez, 481
SCRA 384 [2006]
 3

B. Culpa Aquiliana

1. Employee & employer

solidarily liable

1.1 If employer sued,

employee not
indispensable party

a. Cerezo v. Tuazon,
426 SCRA 167
[2004]

2. Presumption of Fault /
Negligence
2.1 Employee’s Fault
/ Negligence must
be proved.
 4

a. LRTA v. Navidad,
supra

b. Viron v. De los
Santos, 345
SCRA 509 [2000]

2.2 Employer’s fault /

negligence
presumed.

a. LRTA v. Navidad,
supra
b. Viron v. De los
Santos, supra
c. MMTC v. CA, 386
SCRA 126 [2002]
d. Victory Liner v.
Heirs of
Malecdan, 94
SCRA 520 [2002]
 5

e. Pleyto v.
Lomboy, 432
SCRA 329 [2004]
f. Estacion v.
Bernardo, 483
SCRA 222
[2006]
g. Safeguard
Security v.
Tangco, 511
SCRA 67 [2006]
h. Mercury Drug v.
Baking, 523
SCRA 184 [2007]
i. PNR v. CA, 536
SCRA 147 [2007]
j. Mercury Drug v.
De Leon, 569
SCRA 432
[2008]
 6

k. Phil. Hawk Corp.

v. Lee, 612 SCRA
576 [2010)

2.2.1 Presumption
is rebuttable by
proof of due
diligence

a. Viron v. De los
Santos, supra

b. Sykl v.
Begasa, 414
SCRA 237
[2003]

c. Delsan v. C&A
Construction,
412 SCRA 524
[2003]
 7

d. Yambao v.
Zuñiga, 418
SCRA 266
[2003]

C. Quasi-delictual liability
may arise even where
there is an existing
contractual relationship.

1. Regino v. Pangasinan
Colleges, 443 SCRA 56
[2004]

1. YHT Realty v. CA, 451

SCRA 638 [2005]

3. Mindanao Terminal v.
Phoenix, 587 SCRA 429
[2009]
 8

(Evolution from
Cangco v. MRR, 38:768
[1918])

D. Civil Liability Arising

From Crime –
1. L.G. Foods v.
Agraviador, 503 SCRA
170 [2006]

II. Resolution / Rescission of

Obligations

The Four Questions:

(1) Must the right to
rescind be stipulated?
a. Magdalena Estate v.
Myrick, 71:344
[1941]
b. UP v. De Los
Angeles, 35 SCRA
102 [1970]
 9

c. Reyes v. Rossi, GR
159823, 18 February
2013 /691 SCRA 57

(2) Is it a last recourse?

a. UFC v. CA, 33 SCRA

1 [1970]
b. Cannu v. Galang,
459 SCRA 80 [2005]
– explicitly adopts
JBL concurrence in
UFC

(3) Must it be done

through court action?
a. UP v. De Los
Angeles, 35 SCRA
102 [1970]
b. Casiño v. CA, 470
SCRA 57 [2005]
 10

c. Regression – Ong v.
Bogñalbal, 501
SCRA 490 [2006]
d. Eds Manufacturing
v. Healthcheck, GR
162802, 9 October
2013 / 707 SCRA 133

(4) Is there a duty of

mutual restitution?

a. Magdalena Estate v.
Myrick, 71:344
[1941]
b. Velarde v. CA, 361
SCRA 57 [2001]
c. Gotesco v. Fajardo,
GR 201167, 27
February 2013 / 692
SCRA 319
 11

d. Fil-Estate v. Vertex,
698 SCRA 272
[2013]

III. Extinguishment of
Obligations

A. Payment or Performance

(1) Requirement of Identity

of Prestation

a. Cathay Pacific v.
Vazquez, 399 SCRA
207 [2003]

(2) Requirement of time of

performance

a. BPI v. CA, 490 SCRA

168 [2006]
 12

b. Lorenzo Shipping v.
BJ Marthel, 443
SCRA 163 [2004]
[Art. 1169]

(3) Payment of Money

debts – Art. 1249

a. Tibajia v. CA, 223

SCRA 163 [1993]

b. Citibank v.
Sabeniano, 504
SCRA 378 [2006]

A.1. Signs of Regression?

a. BPI v. Roxas, 536

SCRA 169 [2007]

Return to New
Pacific Timber v.
 13

Seneris, 101 SCRA

686 [1980]?

I. Validity of Contractual
Stipulations

A. 1. Duncan v. Glaxo, 438

SCRA 343 [2004]
[management
prerogative]

B. 1. Star Paper v. Simbol,

487 SCRA 228 [2006]
[reasonable business
necessity]

C. Escalation Clause--

1. Polotan v. CA, 296

SCRA 247 [1998]
 14

2. New Sampaguita
Builders v. PNB, 435
SCRA 565 [2004]

D. Non-Involvement
Clause—
1. Tiu v. Platinum, 517
SCRA 101 [2007]

V. Right of First Refusal –

Evolving jurisprudence

A. Definition

1. Villegas v. CA, 499

SCRA 276 [2006] – a
contractual grant of
first priority to buy in
the event the owner
decides to sell the
same.
 15

A. Enforceability

1. Equatorial Realty v.
Carmelo Bauermann,
264 SCRA 483 [1996]

B. Need for distinct

consideration

1. Equatorial Realty v.
Carmelo & Bauermann,
264 SCRA 483 [1996]

2. Parañaque Kings v.
CA, 268 SCRA 727
[1997]

3. Litonjua v. L & R Corp,

320 SCRA 405 [1999]

4. PUP V. CA, 368 SCRA

691 [2001]
 16

VI. Lease – Deprivación de

derecho vs. Deprivación de
mero hecho [Arts. 1654 /
1664]

1. Chua Tee Dee v. CA, 429

SCRA 418 [2004]

2. GQ Garments v. Miranda,
495 SCRA 741 [2006]

3. Bercero v. Capitol
Development, 519 SCRA
484 [2007]

VII. Excessive interest – Art.

1957

A. Usury Decriminalized:
 17

1. Liam Law v. Olympic

Sawmill, 129 SCRA 439
[1984]

“Interest may be charged

as lender and borrower
may agree upon.”

B. But excessive interest

cannot be charged:

1. Medel v. CA, 299 SCRA

481 [1998]

2. Pascual v. Ramos, 384

SCRA 105 [2002]

3. Poltan v. BPI Family,

517 SCRA 430 [2007]
 18

4. Heirs of Espiritu v.
Landrito, 520 SCRA
383 [2007]

5. Macalinao v. BPI, 600

SCRA 67 [2009]

6. Castro v. Tan, 605

SCRA 231 [2009]

7. David v. MOEC, GR
194785, 11 July 2012

VIII.Quasi-Delict

A. Negligence defined — the

failure to observe for the
protection of the interests
of another person that
degree of care,
precaution, and vigilance
which the circumstances
 19

justly demand, whereby

such other person suffers
injury.

1. PNR v. CA, 536 SCRA

147 [2007]

B. Liability of Registered
Owner of Motor Vehicle

1. Villanueva v. Domingo,
438 SCRA 485 [2004]
Cadiente v. Macas, 571
SCRA 105 [2008]

C. Establishment Not Liable

For Damage Caused by
Guards Assigned by
Security Agency

1. Sps. Mamaril v. BSP,

688 SCRA 437 [2013]
 20

D. Medical Malpractice:
Control Test / Apparent
Authority Doctrine /
Corporate Negligence
Doctrine / Captain of
the Ship Doctrine

1. Ramos v. CA, 321

SCRA 584 [1999] –
control test doctrine
2. Professional Services
v. Agana, 513 SCRA
478 [2007] – control
test / apparent
authority doctrine /
corporate negligence
doctrine

3. Nogales v. Capitol
Medical Center, 511
SCRA 204 [2006] –
 21

apparent authority
doctrine / ostensible
agency theory

4. Cantre v. Sps. Go, 522

SCRA 547 [2007] –
captain of the ship
doctrine

5. Li v. Sps. Soliman, 651

SCRA 32 [2011] –
doctrine of informed
consent

6. Cereno v. CA &
Olevere, GR 167366, 26
September 2012 / 682
SCRA 18

E. Abuse of Right – Arts. 19

& 21
 22

1. Paguio v. PLDT, 393

SCRA 379 [2002]

2. Carpio v. Valmonte,
438 SCRA 38 [2004]

3. Regino v. Pangasinan
Colleges, 443 SCRA 56
[2004]

4. Nikko Hotel v. Reyes

aka “Amay Bisaya”,
452 SCRA 532 [2005]

5. Uypitching v. Quiamco,
510 SCRA 172 [2006]

6. Diaz v. Davao Light &

Power Co., 520 SCRA
481 [2007]
 23

7. Cebu Country Club v.

Elizagaque, 542 SCRA
65 [2008]

8. Padillo v. Rural Bank,

689 SCRA 53 [2013]

IX. Legal Rate of Interest

1. Eastern Shipping v. CA,

234 SCRA 78 [1994]

2. CB Circular 416 v. Art.

2209

3. Circular 799 [1 July 2013]

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