OB LI CON
Case Ticklers
I. DEFINITION AND CONCEPT
A. Definition
Art. 115 in relation to Art. 2236
B. Distinguished from natural obligation
Art. 1156 in relation to 1423
C. Elements
D. Sources of Obligation
Sagrada Orden Vs Nacoco –Kinuha ng Hapon
ang lupa.
Action to recover parcel of land owned by P, and
then because of Japanese war was acquired by
other parties, then possessed by the US govt thru
its custodian then possessed by the defendant
without agreement with the US or with the
plaintiff, and def then leased a part of the land.
Issue: WON defendant is liable to Sagrada and
must pay the rentals.
Held: No. If liable at all must arise from any of
the four sources of obligations. APA was a trustee
of the US and if def liable, not to plaintiff but to
US govt. But defendant not liable for rentals bec
no express agreement bet the APA and Nacoco.
Existence of implied agreement is contrary to
the circumstances.
Source: Contract. But there was none.
Pelayo vs. Lauron –husband vs. in-laws
1906-Pelayo complained against Lauron and
Abella. Pelayo a doctor, rendered service to
daughter-in-law then demanded P500 from def.
Issue: WON Lauron is liable.
Held: No. Husband liable. Art. 142 and 143 or
Family Code. Rendering medical assistance,
mutual oblig. Oblig not presumed. Those
expressly determined in the Code or in special
laws are the only demandable ones.
Source: Laws. Family Code.
Leung Ben vs. O’Brien - Gambling
O’ Brien filed an action in the court of CFGI of
Manila to recover from Leung Ben the sum of
P15,000 alleged to have been lost by O’Brien to
Leung Ben in a series of gambling, banking and
percentage games:
Issue: WON O’Brien can recover the money from
Leung Ben.
Held: Yes. Upon general principles, recognized
both in the civil and common law, money lost in
gambling and voluntary paid by the loser to the
winner cannot, in the absence of statute, be
recovered in a civil action. But Act. No. 1757 of
the Phil. Comm, which defines and penalized
different forms of gambling contains numerous
provisions recognizing the right to recover money
lost in gambling. It must therefore be assumed
that the action of plaintiff was based upon the
right to recovery given by section 7 of said Act,
which declares that an action may be brought
against the banker by any person losing money at
a banking or percentage game.
Source: Law. Phil Comm and Civil Code.
People’s Car Inc. vs. Commando Security
Service Agency. –Sekyu nangarap magdrive ng
kotseng hindi kanya, naaksidente.
P and D entered into a contract where D was
hired to render security services to P and
safeguard and protect business premise. One of
the guards of D took one of the cars under
custody of P and drove it and lost control. The
owner demands damages from P but P claims D
should be liable, solely.
Issue: WON P is liable to owner.
Held: Yes. Owner has no privy or contract with D
only with P. Owner can demand from P and P can
demand from D liabilities.
Source: Contract.
Pichel vs Alonzo – coconut fruits.
Board of Liquidators filed annulment of Deed of
Sale of Alonzo to Pichel. Accdg to the law which
awarded the land to Alonzo, RA 477, the land
cannot be encumbered to anybody. Alonzo sold
the coconut fruits of the coconut land.
Issue: WON there was a violation of the law
which gave the land to Alonzo.
Held. No. It was not the land that was
encumbered but the coconut fruits. Possession of
the coconut trees cannot be said to be the
possession and enjoyment of the land itself.
Accessory vs. Principal=transfer of accessory not
transfer of principal. Accessory follows principal
and not the other way around. Law does not
prohibit the disposition of industrial or natural
fruits.
Source: Law
**What are the essential elements of a contract
to make it valid?
Del Rio vs. Palanca – Hindi naman ikaw ang
tatay, bakit ka nagbibigay.
Del Rio wanted to recover money which he
furnished to the family of defendant for the
support and subsistence of the def’s 5 children.
Issue: WON P can recover money.
Held: No. There are qualifications: a) support
given to dependent of one who is bound to give
support but fails to do so b) support supplied by
a stranger c) support was given without the
knowledge of the person charged with the duty.
3rd req lacking. Def knew about support and even
disagrees with it.
Source: Law. Article 1894 of CC which gives
qualifications.
People vs. Ritter –Rape!
Rape of a 12-yr-old girl allegedly by Appellant
who inserted a foreign into her vagina causing
her death. Criminal case and civil case was filed
against the defendant.
Issue: WON def liable on both cases.
Held: No. Only with regard to the civil case.
Crim case requires evidence beyond reasonable
doubt. While civil cases require only
preponderance of evidence.
Source: Criminal offenses. Acts or omission
punished by the law.
**Institution of Civil Case while pending criminal
case, is reservation to the right to file the
former necessary or can file anytime within the
pendency of the criminal case?
Andamo vs IAC – Water Overflow
P owner of parcel of land adjacent to the land of
Missionaries of our Lady of Lasalletta. Latter
constructed waterpaths and contrivances which
eroded petitioner’s land and damaged crops,
plans. Criminal action was instituted and then
filed a civil action.
Issue: WON filing of the civil case was proper.
Held: Yes. Art. 2176, by fault or negligence.
Separate civil action lies against the offender in
a criminal act whether or not he is criminally
prosecuted and found guilty or not. Only that the
offended party not allowed to recover damages
on both scores.
Source: Quasi-Delict, Law.
** Distinguish civil liability arising from crime and
that from quasi-delict.
Federation of Free Farmers vs. CA—Palay
Increase
There are 4 parties in this case: a. FFF (union
representing the farmers) b. Planters (the group
which harvests the lands where the farmers
work) c. Santos and Tikol (individual planters) d.
Central or Victorias (milling corp, Planters bring
their harvest here to be milled).
The law, Sugar Act of 1952 - RA 809 stipulates
that any increase in the share of proceeds of
milled sugarcane and derivatives obtained by
planters from the Central, 60% of said increase
should be paid by planters to their respective
laborers.
1. FFF alleged that they have not been paid
from 1952-53 despite the 10% increase
and from 1953-1974 with the 4%
increase. CA ruled planters and Victorias
jointly and severally liable. FFF claimed
too that Planters and Victorias entered
into an agreement when they have no
legal right bec the law has already
provided the ratio of division.
2. Victorias claimed that they should not be
held jointly and severally liable. The
action filed was not founded on torts but
on either an obligation created by a
contract or by law, and even if on torts,
the action has prescribed. They have
paid the Planters so the Planters should
only be the one sued.
3. Planters claim they have freedom to
stipulate ration as they might agree. And
that they have paid the laborers.
Issue: a. WON Planters and Victorias should be
severally liable
b. WON agreement bet Planters and Victorias
were permissible under RA 809
Held: a. NO. Legal basis is that arising from law
which does not impose upon Centrals any
liability, whether expressly or impliedly, any
joint and several liability. No contract bet sugar
mill and the laborers. Principal liability on
Planters and secondarily on Dept or Labor.
b. YES. RA 809 applicable only in the absence of
a written milling agreement or in the absence of
any stipulation on the benefits which the
laborers are entitled.
Source: Law and Contract
**Brinas vs. People –Maling Sigaw ng Konduktor
Brinas convicted for double homicide thru
reckless imprudence but acquitted Bunecamino
(asst conductor) and Millan (engineman), Brinas
was the conductor. Brinas told the passengers
that they are near the town but before the
victims were able to alight, train already caught
up speed. During the pendency of the criminal
action, the heirs of deceased filed separate civil
action against Manila Railroad Company.
Issue: WON the civil action can be pursued on
the pendency of the civil action.
Held: Yes. Source of obligation is that of a culpa-
contractual and not an act or omission
punishable by law. Two different sources of
oblig. Institution of criminal action on the case
does not interrupt the separate civil action for
damages based on quasi-delict for the same
accident. Reckless Imprudence vs. Quasi-Delict.
Reckless imprudent—Principal, Art. 2176 person
who caused the crime liable, Art. 2180 solidary
liability of employer.
Source: Culpa-Contractual.
**Tan vs. Nifatan –Isa-isa na silang namamatay,
na-acquit pa.
Lim of a wealthy family was shot dead by the Tan
brothers. But the Tan brothers one by one died
before the instant petition could be filed. The
wife of Lim with the children instituted an action
for damages against charged 10 years from the
happening of the crime. Tan’s filed motion to
dismiss because of acquittal.
ISSUE: a. WON the action has prescribed.
b. WON civil action would still prosper even
when the accused were acquitted.
Held: a. No. Action for prescription for liabilities
and charges of crimes is 20 years.
b. Yes. The reason for acquittal was not stated or
explained and Art. 33 allows independent civil
action in case of physical injuries including
death. (ROC?).
10 years prescription for actions when source is
created by law. 5 years when not fixed by the
Code or other laws. 20 years for crimes or delicts
as source of obligations.
Source: Delict or Crimes.
People vs Abungan – namatay yung kriminal
Abungan convicted of murder sentenced to RP
and ordered to pay indemnity of P50,000.
Abungan died.
Issue: WON death of Abungan extinguishes his
criminal and civil liability
Held: Yes. Extinguised based on delicts. Art.
89(1) of RPC, death of convict occurs before
final judgment, extinguished. But only criminal
liability is extinguished and also the civil liability
directly arising from and based solely on offense.
Claim for Civil liability survives if the same may
also be predicated on a source of oblig other
than delict.
Source: Crimes or Delicts. Acts or omission.
DBP vs CA –Restructuring of Debt
DBP granted PHUMACO and PHILICO an industrial
loan for P2.5M, 2M in bonds and 500k in cash.
Promissory note executed and a mortgage over
their present and future properties. DBP granted
another loan of 1.7M reflected in the amended
mortgage contract. After 7 yrs the outstanding
balance was restructured bec Resp failed to pay.
Resp still failed to pay under the restructured
payment. DBP refinanced the matured obligation
and granted 3 foreign currency denominated
loans. Apart from interest, there are additional
charges and penalties in case of default. After 10
years, DBP initiated for forclosure of mortgaged
prop and the balance shoot up to P63M. Resp
claim that reason for non-payment is because
financial rehabilitation from a contract with the
military didn’t push thru.
Issue: WON the resp can claim without fault in
default of the non-happening of the contract
with the military.
Held: NO. DBP is no party to resp and AFP’s
contract. Resp can claim from AFP but without
prejudice to its contract with DBP. DBP has given
Resp all the possible options for payment.
Source: Contract
II. NATURE AND EFFECTS OF OBLIGATION
A. Obligation to give
1. Determinate Thing
Equatorial vs. Mayfair—Right of First Refusal
Carmelo owned a parcel of land with 2-storey
building and leased said portions to Mayfair. On
their contract, stipulation that Mayfair has 30-
day exclusive option to purchase the same
should the lessor decide to sell the leased
premises. But Carmelo wanted to sell the whole
property. He sold entire prop to Equatorial.
Mayfair filed for annulment of sale bec of lack of
consideration. Mayfair claimed that he told
Carmelo that it is willing to purchase the same
and that it has the right of first refusal.
Issue: WON the sale can be nullified because of
Mayfair’s action
Held: The contract is deemed rescinded.
Rescission a relief allowed for protection of one
of the contracting parties and even 3rd persons
from injury or to protect some incompatible and
preferred right by the contract. Mayfair has the
opportunity to negotiate.
Determinate Thing: There is a problem because
determination cannot be made bec prop is
indivisible. You cannot pinpoint which is the 25%
of the property. Determination of the exact
portion of the building.
De Leon vs. Soriano—bigyan ng palay si nanay.
Natural children of Soriano agreed that they are
to deliver certain number of cavanes of palay
each year to Soriano and shall only cease upon
death of mother. But deliveries were of 3,400
cavanes and children claimed that due to Huk
troubles in Central Luzon.
Issue: WON inability to deliver was permissible
due to force majeure
Held: No. The object to be delivered was generic
and set no bounds or limits to the palay to be
paid. Any palay of the same quality can replace.
Impossibility must consist in the nature of the
thing to be done and not the inability of the
party to do it.

Norkis vs. CA—Ako ang bumili ng motor iba ang
gumamit.
Nepales bought a motorcycle from Norkis and
issued a chattel mortgage in favor of DBP.
Invoice was issued and motorcycle was
registered by Norkis evidenced by receipts of
registration. Motor was delivered to a certain
Julian Nepales and an accident happened while
being driven by a certain Payba. Norkis claims it
cannot be held liable since ownership was
already transferred to Nepales evidenced by the
receipts and the invoice.
Issue: WON ownership was transferred to
Nepales.
Held: No. No actually delivery nor constructive
one. The receipts of reg fees and the invoice is
nothing but a detailed statement of the nature
and quantity sold and not a bill of sale. Intent
considered. Intent was not to transfer ownership
but to facilitate execution of chattel mortgage.
Determinate Thing: The motorcycle was a
generic thing. (?)
Heirs of Juan San Andres vs. Rodriguez—Binili
ko na ang nakapaligid na lupa.
JSA sold 345 sqm lot to Rodriguez. There was a
deed of sale. JSA died and Rodriguez appointed
administrator. The heirs engaged services of a
geodetic engg and found out that resp has
encroached the lot by 509 sqm. They sent letter
to vacate. Resp claimed they bought the said
portion of the lot the ff day when they first
bought the 345 sqm lot. Proof of sale was
attached and that payable in 5 years. Resp
deposited the balance in court.
Issue: WON there was a contract of sale.
Held: Yes. There was a contract of sale which
transferred the ownership to resp. Pet claimed
that the object cannot be determined with
sufficient certainty. Court held that it is capable CO vs. CA—pinagawa kong kotse, na-carnap.
of being determined w/o need for new contract
and the receipts showed that payment was to Pet entrusted his car to Resp to make same job
the lot adjoining the prev paid lot on three sides repair services and supply of parts which was to
thereof. The land is determinate or be returned after 3 days as per the contract. Pet
determinable. Ownership transferred by paid in full. After 3 days the vehicle can’t still be
constructive delivery which is the execution of released due to failed battery so pet bought
public document. battery. When Pet was about to get it, resp said
the car was carnapped while being road-tested.
Determinate Thing: The lot. Resp claims force majeure.
2. Generic Thing Issue: WON Resp will be liable for the
carnapping.
Norkis vs. CA
Held: Yes. It was due to negligence premised on
Generic thing: motorcycle delay which is the basis of the complaint.
Carnapping cannot be considered as fortuitous. It
PLDT vs. Jeturian—Pension bago gera. must be proved and established that it is an act
of God. No other evidence but the police report.
PLDT adopted in 1923 a Plan for Emloyees Even when Pet agreed to resked repair, can’t be
Pension. In 1945 the BOD adopted a resolution taken as waiver bec he really has no other
discontinuing the pension plan. Hence this action choice but to leave it since he can’t have it run.
of Resp.
3. Effect of Loss
Issue: WON the pre-war employees are entitled
to the pension. Bunge vs. Camenforte—Copra ko sa’yo binenta
ko.
Held: Yes. But with the exception of those who
died or left before the outbreak of the war. The Plaintiffs filed to recover certain damages from
pension plan was not a gratuity but an the def bec of the latter’s failure to deliver Phil
inducement for employees to continue copra they agreed to deliver. A contract was
indefinitely in service. The plan ripened into a entered into where the VPC sold 500 tons of Phil
binding contract upon its implied acceptance of Copra to BC. The vendor would ship the copra to
the employees. Acceptance is inferred from their USA but even with demands, failed to do so. The
entering the employ of the company and staying vendee however believed in good faith that it
after the plan was made known. PLDT argues shall be delivered so it sold the expected copra
that it can only be held liable under the to EDOW. Bec vendor failed, vendee suffered
conditions expressly set in the pension plan. But damages. VPC denies contract and said that
the Court held that the Company that violated Vicente, the manager who contracted had no
the contract with its employees, by authority to do so. Force majeure is also claimed
discontinuing the plan without their consent, is since a storm destroyed the bodega.
not in the position to insist upon the terms of
the very contract they have breached. Issue: WON VPC is held liable.
Held: Yes. Subject matter is Phil Copra, does not
refer to any particular or specific copra. Since
generic, obligation can’t be deemed
extinguished by the destruction/disappearance.
Obligation subsists as long as commodity is
available. Pet can also sell the copra which they
expect to acquire in the future for purposes of
speculation.
Effect: Subsistence of obligation since generic
object.
Ocena vs. Jabson—subdivision na kontrata,
maling akala.
Resp filed a complaint for modification of the
terms and conditions of its subdivision contract
with petitioners. Allegations are that price in oil
and derivatives have increased, not within the
control of the plaintiff. It will cause unjust
enrichment to the pet. In the contract, the pet
are guaranteed as landowners and that they will
receive 40% of all cash receipts from the sale of
the subdivision lots. Resp hinged their argument
on 1267 when the service has become so difficult
beyond contemplation, release from obligation.
Issue: WON there is a sufficient cause of action
for modification of the subdivision contract.
Held: No. Cited article does not grant the courts
this authority to remake, modify or revise the
contract. Their contract has a force of law and
should there be substitution or modification, it
should be amongst the parties themselves. A
showing of mere inconvenience, unexpected
impediments or increased expenses is not
enough. Equity cannot relieve from bad bargains
simply bec they are such.
Effect: The contract has the force of law.
B. Obligation to do
Hahn vs. CA—I want these diamond rings.
Santos received 2 diamond rings with a total
amount of 47K. She issued separate receipts
therefore in which she acknowledged that they
have been delivered by Letty Hahn for sale on
commission and that they would be returned
upon demand if unsold. The rings were not sold
nor returned after demand. Thus this action.
Issue: WON the contract was of sale or agency.
Held: Of agency. There is no evidence that would
tell that is was of sale. Their contract’s
stipulation does not show it was of sale.
Although resp was willing to give a different
object, the debtor cannot compel the creditor to
receive a diff object.
To do: Deliver the rings, the specific rings.
Chavez vs. Gonzales—Dahil sa typewriter.
P delivered to D a typewriter for D to repair. D
was not able to repair the typewriter and asked
for P6 for spare parts. P went to D and
demanded the typewriter which D gave in a
wrapped package. When P opened it at home, he
saw that the typewriter had missing parts and
found it in shambles. P demanded missing parts,
interior cover and P6. P brought it to a diff
repair shop and spent P89.95. P filed for
payment of P90 and damages.
Issue: WON D is liable for damages.
Held: Yes. 1167 states that when a person is
obliged to do something and fails to do the
same, it shall be executed at his cost. What is
poorly done be undone. D claims no period but
Court held that fixing a period would only be a
mere formality and would serve no purpose than
to delay. Liable under 1170.
To do: Specific performance – repair typewriter.
Oceana vs Jabson—subdivision kontrata, maling
akala.
To do: To give 40% of the cash receipts from sale
of subdivision lots.
**Woodhouse vs. Halili—Mission Softdrinks
P and D entered into an agreement that they will
form a partnership for the bottling and
distribution of Mission softdrinks, P as manager
and D as capitalist. When the bottling plant was
in operation P wants to execute the partnership
papers but D refuses. D claims that he was made
to believe that P has the exclusive ownership of
the bottling franchise.
Issue: WON the misrepresentation of P can
vitiate the contract.
Held: No. Although P was guilty of
misrepresentation, it was not the causal
consideration or the principal inducement that
led defendant to enter into the partnership. D
may not be compelled to carry out the
agreement which is to execute the partnership
papers. The defendant has obligation to do and
not to give. The D reduced the percentage of P
from 30% to 15% bec of his misrepresentation.
Obligation to do: Execute partnership contract.
Ong vs. Bognalbal—She wants her Kenzo Tiles,
now na.
Bognalbal was an architect hired by Ong who was
a businesswoman to construct her boutique. Bog
agrees to furnish labor within 45 days and owner
to pay every 2 weeks based on the
accomplishment of work value. 4th billing came
and Ong refused to pay but reason was not clear
on the record. She wanted to change Vinyl tiles
to Kenzo flooring. Ong claimed Bog abandoned
job.
Issue: WON Bog be liable for abandoning job.
Held: No. He is not liable but is not justified for
doing so. 1191, it was a reciprocal obligation and
there is power to rescind it in case one doesn’t
comply with what is incumbent upon him. But
this article should be judicially invoked.
Novation is not presumed. There must be an
express stipulation. Novation a. change of obj or
principal conditions, b. substituting person of
debtor c. subrogating 3rd person in the rights of
creditor. Liability is on the first infractor, 1192.
There has been no contract novation that
required Bog to finish the Kenzo flooring before
the 4th billing shall be paid. 1186. Condition shall
be deemed fulfilled when the obligor voluntarily
prevents the fulfillment.
To do: Pay 4th billing. (Reciprocal-di mo ginawa di
ko rin gagawin-pero sabi nga ng court hindi pa
rin yun justification, but only the first infractor
shall be liable).
C. Obligation not to do
Fajardo vs. Freedom to Build—Wag dagdagan
kung hindi bawasan!
FTB, owner-developer and seller of low-cost
housing, sold to petitioner-spouses a house and
lot. Restrictive covenant was contained in the
contract, easement. No upward and front
expansion which is contained in their Transfer
Certificate. Pet’s children are to wed so
extended their house thus contravening the
terms of contract. Pet filed, demolish the unauth
structures.
Issue: WON resp has the auth to ask for
demolition since ownership already transferred
to the prop owners or homeowners association.
Held: Yes. Restrictive covenant should still be
followed. Although courts generally view
restrictive covenant with disfavor but sustain
them if reasonable, not contrary to public policy,
law etc. Intent of developer was to provide
safety, aesthetic and decent living conditions
and prevent overcrowding. Art. 1168, when ob
consists in not doing, obligor does what was
forbidden, shall be undone at his expense.
Not to do: Expand structures of house.
D. Effect of Breach
1. Delay in Performance
Villaruel vs. Manila Motors—Kasalanan ng
lawyer, naningil ng renta nung may gera.
Manila Motors and Villaruel entered into a
contract whereby the former agreed to convey
by lease to the latter some premises. The term
of lease is 5 years. The premises were invaded
by the Japanese and then the American occupied
the same building. The occupants paid the same
rate as the defendants after which they have
vacated the premises. Def renewed contract for
addtl 5 yrs. Pet, as per his lawyer’s advise,
demanded for rental from the Def for the period
when the Jap and the Americans occupied the
premises. The premises was set on fire and the
reason was unknown.
Issue: WON Pet has power to demand rentals and
recover the same due to default.
Held: No. Art. 1554 of CC of Spain states the
duties of a lessor. A. deliver to the lessee the
subject matter b. make thereon, during the
lease, all repairs necessary and maintain
serviceable condition c. maintain lessee in
peaceful enjoyment of lease. 1560, lessor shall
not be liable for any act of mere disturbance of
3rd person but lessee would have direct action
against trespassers. No lessee would agree to
pay rent for premises he could not enjoy.
Delay in performance: It was the creditor who
was in default or delay when it refused to get
the payment given by the resp.
Lopez vs. Tan Tioco—Ibenta mo ang asukal pag
sinabi kong ibenta mo.
Lopez and Tan Tioco entered into a verbal
contract that she’ll deliver certain sugar to Tan
Tioco which he obligated himself to store until
he receives instructions from her to sell them.
She delivered the piculs of sugar and instructed
to sell in on Sept 1904 but def did not do so. Pet
filed action. Def denies allegations.
Issue: WON the defendant was in default.
Held: Yes. He was in default from the time the
Pet demanded to deliver or do something, or the
fulfillment of the obligation. Neither the
contract nor the law demands to make judicial
demand than extrajudicial. The price of the
sugar should be from the time she instructed the
def to sell them.
Delay in Performance: Delay in selling the sugar
upon instructions.
Dela Rosa vs. BPI—Atat sa announcement ng
winners ng design contest.
BPI held this contest of designs and plans for the
construction of a building. Prizes would be
awarded not later than Nov. 30, 1921. Plaintiff
took part in the said contest and after the date
stipulated, the bank didn’t award prize nor
made any announcement. Plaintiff filed.
Issue: WON BPI was in default when it did not
release the announcement on the date
stipulated.
Held: The bank cannot be held in default
through the mere lapse of time. Plaintiff never
demanded from bank and just filed the case in
Court. A binding obligation may originate from
advertisements addressed to the general public.
Demand will not be necessary only in certain
conditions, but demand is indispensable as a
general rule. Plaintiff has no cause of action bec
he alleges that the contest didn’t push thru but
in consideration of the evidence, the materials
are on their way to New York and were sent to a
technical committee.
Delay: Bank was not in default. No demand.
Lizares vs. Hernaez—Camarin was burned and
lessee won’t pay.
Lizares and Hernaez entered into a contract, the
former became the lessee of the two haciendas.
Pet used one of the improvements there which
was a roofed camarin used in manufacture of
sugar. A fire occurred and destroyed the
camarin. Pet demanded from Def that he
reconstruct camarin. Def refused. Pet did not
pay the rentals bec of non-construction of the
camarin. Def claims Pet should be liable for the
fire since he is the lessee when the fire
occurred.
Issue: WON plaintiff has responsibility to the
damages caused by fire.
Held. No. And so is the def. Force Majeure. But
the plaintiff is in default with regard to the non-
payment of rentals due to non-construction of
camarin. Although there is presumption against
lessee when loss in the leased prop occurs, proof
is necessary to prove he is not responsible. 1183.
When a thing is lost while in the possession of
the debtor, it is presumed that it loss occurred
by his fault and not by fortuitous even in the
absence of the contrary.
Delay: Not in the Def for non-construction but in
Plaintiff in non-payment of rentals.
Bachrach Motor vs. Lee Tay—Kinuha ng Kano
ang truck niya, ayaw na niyang magbayad.
Def executed and delivered to the plaintiff a
promissory note payable in installments which
represents the balance of one white chasses
purchased by def from pet. The truck was
delivered to the def. After the outbreak of war,
the truck was one of the trucks that were
commandeered by the USAFEE. Neither the
plaintiff not def filed an official claim from the
US govt.
Issue: WON the commandeering of the truck
exempts the def from payment of the obligation
represented by the prom note.
Held: No. There is no principle of law by which
the obligation was extinguished. The interest
was not reduced due to suspension since the pet
was generous enough to compute only from
1948, the truck was commandeered in 1941. Def
could have filed a claim from the US govt and he
would have been paid but he failed to do so.
Delay: Non-payment of the prom note.
Lawyers Coop Pub vs. Tabora—bumili ng law
books, nasunog.
Tabora bought books from Pet and made partial
payment. It was delivered to his law office. On
the same date, a fire broke out in the office and
destroyed the building including the books. Def
doesn’t want to pay balance since the books
were loss due to force majeure and the
ownership has not been transferred to him yet.
Issue: WON force majeure can be claimed by
defendant from his non-fulfillment of obligation.
Held: No. Ownership was already transferred to
the buyer. Although there has been an
agreement that the ownership shall remain with
the seller until the price has been fully paid, it
was only for the security of payment but in the
very contract in was expressly agreed that the
loss or damage after delivery to the buyer shall
be borne by the buyer. Exemptions from liability
due to fortuitous event: 1. determinate thing (in
the present case, pecuniary in nature) 2. No
stipulation holding him liable even in case of
fortuitous
Delay: Non-payment of balance.
Equatorial vs. Mayfair—right of first refusal
Delay: ***By not giving to Mayfair the 30-day
period of which it is entitled to exercise right of
first refusal upon communication of Carmelo
that he would sell the property.
Co vs. CA--carnap
Delay: Delay in delivering the car to Co after
demand which is the premise of negligence of
resp.
Aerospace vs. CA—Sulfuric Acid na ayaw pang
kunin.
Pet purchased from resp Philphos 500 MT of
Sulfuric Acid. In their contract it was pet’s
responsibility to get the acid from resp. Philphos
demanded that pet get the acid and pet
chartered a vessel MT Sultan but the vessel was
not able to get the whole volume bec it tilted.
Resp sent a demand letter that the acid should
be emptied or else petitioner will be liable for
the storage and other incremental expenses if
pet fails to do so. Pet chartered MT Sultan again
but it tilted so never gotten the whole volume.
Chartered another vessel Don Victor and asked
Resp to deliver additional orders. Resp did not do
so unless the remaining acid be emptied and that
pet pay the maintenance and storage. Pet filed
and contended Resp is in default.
Issue: WON the Resp is in default.
Held: No. The obligation to withdrew the 500MT
of H2SO4 before Aug. 1989 and the resp was
already ready to deliver the same but it was
Plaintiff’s fault for not chartering another vessel
which has the capacity to withdraw the volume.
It has the duty of emptying the acid. Pet claim
that it was due to a storm that’s why it can’t
empty the storage but evidence proved that it
was of the incapability of the vessels. There was
an obligation on the pet to empty the storage.
They were the ones in delay.
Delay: Pet for not emptying the storage.
Selegna vs. UCPB—credit facility which
ballooned.
Selegna, rep by spouses Edgardo and Zenaida
Angeles were granted a credit facility for P70M
by UCPB. As a security, pet executed real estate
mortgages over several parcels of land. Pet also
executed prom note every time they avail of
credit facility. In their credit agreement, it was
stipulated that failure to pay any availment of
the accommodation or interest or any sum due
shall constitute an event of default which shall
allow resp bank to declare as immediate and
payable all outstanding availments together with
accrued interest. Pet increased credit facility
and they agreed to 21.75% interest per annum.
Demand letters were sent upon failure to pay.
Pet paid 10M as partial payment of accrued
interest. UCPB applied for extra-judicial
foreclosure of petitioners mortgaged properties.
The obligation has ballooned to 132M and pet
alleged that 10M as payment had the effect of
updating and thereby averting the maturity of
the obligation.
Issue: WON the Pet were in default.
Held: Yes. The contract is the law and the resp is
justified in invoking the acceleration clause
declaring the entire oblig due and payable. The
resp had the right to foreclose the mortgages
extra-judicially. Failure to furnish a detailed
statement of account doesn’t ipso facto result in
unliquidated obligation. Pet was in default.
Delay: Non-payment of availement of
accommodation.
2. Non-fulfillment
Chavez vs. Gonzales
Non-fulfillment: The typewriter was not fixed.
Telefast vs. Castro—dahil sa telegrama, mag-isa
lang nang ilibing ang mama.
Consolacion Bravo-Castro died in Pangasinan and
on the same day the daughter sent a telegram to
the US to inform the other siblings and dad about
death of Mom. The Mom was interred by
daughter alone. When she came back to the
states, she found out that the telegram never
reached her siblings. Telefast claimed force
majeure bec of technical and atmospheric
factors but no evidence to support.
Issue: WON force majeure applies.
Held: No. No evidence to support. And even so,
def should have informed the plaintiff that it
cannot transmit the telegram. 1170 and 2176,
guilty of fraud, negligence or delay. 2217 for
moral damages.
Non-fulfillment: Sending of telegram.
Tanguiling vs. CA—windmill na nasira sa wind.
A case involving proper interpretation of
contract. JMI Engr and GM proposed to resp
Vicente to construct windmilling system for him.
They agreed on the construction for P60K. P30K
DP and P15K installment. Vincente didn’t pay the
remaining P15K bec he paid it to SPGMI who
constructed the deep well to which the windmill
would be attached. And even assuming that he
owes pet P15K, it should have been offset by the
collapse after a strong wind.
Issue: a. WON agreement to construct windmill
included in the installation of a deep well.
b. WON the pet is under the obligation to
reconstruct the windmill.
Held: a. No. It was not included in the
agreement. Intention of the parties must be
accorded primordial consideration and in case of
doubt, contemporaneous and subsequent acts
shall be principally considered.
b. Yes. Pet claimed there is a strong wind but
this is actually necessary for the windmill to
turn. It was just newly constructed, it should
have not collapsed.
Non-fulfillment: Payment of last installment.
Perez vs. CA—niloko yung businessman at
pinaalaga ang fishpond.
Juan Perez usufructuary of a parcel of land
called Papaya Fishpond with other
usufructuaries. The usufructuaries entered into a
contract leasing the fishpond to Luis Keh for a
period of 5 years. The contract states that the
lessee cannot sublease the fishpond nor assign
his rights to anyone. But Crisostomo was
persuaded by the pet Keh to take over the
Papaya fishpond bec Cris is a businessman.
Executed a written agreement. Cris even paid
the rentals until 1985, 10 years of taking care of
the fishpond. In 1979 however, pet with armed
men went to fishpond and showed that Keh
surrendered the fishpond to the usufructuaries.
Issue: WON the resp is a sublessee of Keh which
is barred by the lease contract.
Held: Yes. He was a sublessee. But Perez and his
counsel knew and acquiesced to that
arrangement by their act of receiving from the
resp rentals evidenced by the receipts which
puts the pet in estoppel—which arises when one
by his acts and representations and admission or
by his own silence when he is obliged to speak
out, intentionally or thru culpable negligence
induces another to believe certain facts to exist
and such other rightfully relies and acts on such
beliefs so that he will be prejudiced if the
former is permitted to deny the existence of
such facts. 1168: Oblig is in not doing and obligor
has done what is forbidden, shall be done at his
expense.
Non-fulfillment: of the obligation not to do
which is to sublease the fishpond.
3. Fraud
Board of Liquidators vs. Heirs of Maximo Kalaw
—Copra Trading, hindi na kelangan ng pirma ng
Board of Directors.
Nacoco is for the protection, preservation and
development of the coconut industry. Kalaw is
the manager and board chairman. Nacoco
embarked on copra trading activities, thus
entering into contracts. For 3 years, profited 3M
but after 4 typhoons, left the coconut lands
devastated throughout the country. It was not
able to fulfill the contracts it has engaged in.
Nacoco paid damages to one of the parties.
Nacoco now sues Kalaw for having approved the
contracts.
Issue: WON Kalaw is guilty of negligence for
entering into contracts without prior approval of
the Board of Directors.
Held: No. Consideration of practice. Corporate
officer entrusted with the gen management and
control of business has implied authority to make
any contract or do other act wichi is necessary or
appropriate to the conduct of the ordinary
business of the corporation. But there is a
citation on the Nacoco’s by-laws requiring prior
directorate approval of Nacoco contracts. Court
considered practice of trade of short-sellling or
forward sales. Prev contracts without prior auth
from Board. And evidence showed that Kalaw
actually handled the corp well for it to profit.
Force majeure reason.
Fraud: There is no fraud because Kalaw didn’t
need the Board’s approval due to practice of
trade. No negligence too on his part.
ICB vs. Gueco—Joint Motion to Dismiss for the
car.
Gueco spouses obtained a loan from UPC to
purchase car and executed prom note which
were payable in mnthly installments and chattel
mortgage over car to serve as security over the
notes. Spouses defaulted in payment. The
payment was lowered but still no payment. Car
was detained inside the bank’s compound. Gueco
went to bank and negotiated and issued a
manager’s check. But car was not released bec
Gueco doesn’t want to sign Joint Motion to
Dismiss claiming not in the contract that they
have to sign.
Issue: WON the bank in not informing the
spouses to sign motion to dismiss liable for
damages for not releasing car.
Held: No. Joint Motion to Dismiss for the
spouses’ benefit and not for the bank. It would
only state that the case would be dropped and
that the spouses had fully settled his obligation
thus the dismissal of the case. There is no fraud
—no intentional and deliberate evasion of the
normal fulfillment of obligations.
Fraud: In not stating that they have to sign Joint
Motion to Dismiss but this is not considered
Fraud. No intent and for the benefit of the
Plaintiff.
4. Negligence
Necessito vs. Paras—Knuckles killed the
passengers.
Action against owners and operators of the
commom carrier known as the Phil Rabbit Bus
Lines filed by one passenger and the heirs of
another who were injured as a result of the fall
into a river in which they were riding. The
mother of the pet drowned and the son
Necessito was injured.
Issue: WON the carrier is liable for damages.
Held: Yes. Although resp claims that force
majeure since knuckles were the reason for the
accident and they have inspected the knuckles,
does exercised diligence. Carrier claims liability
of manufacturer. Court said that the inspection
done was merely visual and not meeting the
requirement of expected due diligence.
Negligence: In not exercising the proper
diligence required.
5. Contravention of the tenor of the obligation
Arrieta vs. Naric—Burmese Rice, di naman pala
kayang mag-open ng Letter of Credit.
Pet participated in the public bidding by Naric
for the supply of 20K MT of Burmese rice. Her
bidding being the highest, she was awarded the
contract. In 1952, entered into contract, Naric
and Pet, sale of rice. Pet obligated herself to
deliver to the latter the tons os Burmese rice
and in turn corp has to pay for the imported rice
by means of an irrevocable, confirmed and
assignable letter of credit in US currency. It was
only In July that def took first step to open
letter of credit. Pet already made a tender to
her supplier a 5% and this will be confiscated if
L/C will not be received before Aug. 4. PNB
informed Naric that L?C approved but has a
condition that the 50% marginal cash deposit be
paid. Naric was not in any financial position to
meet the condition and wrote the pet about it.
L/C was opened in Sept thus 5% deposit was
forfeited. When appellee failed to restore
cancelled Burmese rice she offered a sub but
Naric rejected.
Issue: WON Naric should be liable for damages.
Held: Yes. Failure of the letter of credit to be
opened in the contemplated period. Immediate
cause of damages. No necessary data but pet
would not win bid had she not furnish them with
it. Waiver bec Pet suggested to sub it Thai rice.
Waiver are not presumed. Express stipulation.
Contravention: That Burmese Rice should be
delivered and should not deliver another thing.
Chavez vs. Gonzales
Contravention: That they agree that after 3
days, typewriter would be usable.
E. Effect of fortuitous event
Necessito vs. Paras
Effect: Not fortuitous since knuckles should have
been inspected more than the visual inspection
done.
Ampang vs. Guinco—the bus that skidded.
Held: The accident was caused by an accident
which was unforeseen and beyond the control of
the company on its driver.
Victoria Planters vs. Victorias Milling—30 years
contract suspended due to Japanese Invasion.
Held: 1174 relieves obligor from fulfilling a
contractual obligation (fortuitous event). The
stipulation in the contract that in the event of
force majeure, the contract shall be deemed
suspended during the said period does not mean
that the happening of those events stops the
running of the period agreed upon. It only
relieves the parties from fulfilling their
obligation that time. To require the pet to
deliver the sugarcane during the 6 yrs of
suspension was impossible of being performed. 6
yrs can’t be deducted from 30 yrs.
La Mallorca vs. De Jesus—tire blow-out.
Held: Cause of the blow-out was known. It was a
mechanical defect of the conveyance or a fault
in its equipment which was easily discoverable if
the bus had been subjected to a more thorough
or rigid check-up before it took the road that
day. The bus was driving fast as was evidenced in
the trial.
Nakpil vs. CA—Engr/Archi pati Contractors
liable sa pagguho ng bldg.
Phil Bar Assoc decided to construct its building in
INtramuros Manila. Construction was undertaken
by UCCI on administration basis and the plans
and specifications of the building were prepared
by another party Nakpil. It was completed in
June 1966. In 1968, a strong earthquake hit
Manila and building sustained major damages. As
temporary remedy UCCI shoved up the building
at its own expense. PBA commenced action
against UCCI for the partial collapse of the
building. Allegations were that there was a
failure of the contractors to follow plans and
specifications and violations by the defendants
of the terms of the contract. Def then filed
against 3rd party-architects who prepared plans
and specifications alleging collapse was due to
the defect of it.
Issue: WON UCCI and Nakpil be held liable.
Held: Yes. The case was referred to the
Commissioner and found out that there were
defects in plans and specifications and that
contractors failed to observe requisite of
workmanship and even the owners failed to
observe requisite degree of supervision in the
construction. Fortuitous even will not be applied
bec there is negligence. 1723 will apply.
Engineer/ arch who drew up plans and spec
liable for damages. Contractor liable if edifice
falls within the same period on acct of defects in
the construction or the use of materials of
inferior quality. Engr/archi will be held solidary
liable if supervises construction.
Fortuitous Event: Will not apply bec there is
negligence.
Austria vs. CA—Naglakad mag-isa sa gabi,
nanakawan ng diamond pendant.
Abad acknowledged receiving from Austria one
pendant with diamonds valued at P4,500 to be
sold on commission basis or to be returned on
demand. While walking home, Abad was robbed
and her things were taken including pendant.
Estafa. RTC ruled negligence. CA held that
robbery was established, fortuitous event.
Issue: WON Abad is liable for the loss of the
pendant.
Held: No. It was undisputed that Abad was a
victim of robbery. Even when she walked alone
at night knowing that she had with her the
pendant and a large amount of money, the
crimes then were not as prevalent as the present
time.
Fortuitous event: Robbery was unforeseen and
evidence established that it happened.
Vasquez vs. CA—sinabi na sa captain na may
bagyo, tumuloy pa rin. Lumubog.
Pioneer Cebu left the port of Manila. The vessel
encountered a typhoon and struck a reef and
subsequently sank. Plaintiffs seek the recovery
of damages due to the loss of children and other
people due to voyage. There was a storm as def
claims but it was established that the captain
knew about it but still proceeded.
Issue: WON fortuitous event shall be considered
and exempt def from liability.
Held: No. They already knew the risk they were
taking. They already receive report of the
typhoon but proceeded anyway. Def claim Art.
587 Code of Commerce, loss of vessel exempt
liability. But it is cited there that the liability of
the owner is limited to the value of the vessel or
to the insurance thereon. It was held that the
insurance of the vessel would be liable for the
damages that the shipowner or agent be liable
for the death of the passengers.
Fortuitous Event: Will not apply bec captain had
knowledge of the event thus making it not
unforeseen.
F. Usurious transactions
Angel Jose Warehousing Co vs. Chelda—Loans
with usurious interest, principal still enforced
but interest not. (P20K+)
Angel Jose filed against Chelda, its capitalist
partner for the recovery of the unpaid loans with
legal interest and atty’s fees (P20K+). Def paid
bal of P5.6K. Plaintiff charged and deducted
from the loan usurious interest at the rate of 2%
and 2.5% PER MONTH and consequently, as
claimed by def should not be permitted to
recover under the law. RTC-P1048.15 usurious
interest which the payment was deducted from
the interest and def claims that it should have
been deducted from the principal obligation.
Issue: a. WON in loans with usurious interest, the
plaintiff may still recover the principal of the
loan.
b. WON the illegal terms as to the payment of
interest renders nullity as to the payment of the
principal debt.
Held: a. Yes. Creditor may still recover principal
of the loan. Loans with usurious interest are not
totally void but only as to the interest.
Renunciation of the principal would extinguish
accessory but waiver of the accessory would not
extinguish the principal.
b. Yes. Divisible contract, that which is illegal
can be separated from legal ones and the latter
may be enforced. Interest which would be
allowed is the interest bec of delay and default
due to the general provisions of the law.
Usurious obligation: Principal only, usurious
interest not enforced.
Briones vs. Cammayo—P1500 lang utang pero
interest P300 per year-usurious.
Briones filed against Cammayo to recover P1500.
They executed a real mortgage as security for
the loan of P1200 given by Cammayo upon
usurious agreement and reserved to himself P300
payment of interest for a year. Plaintiff paid
total sum of P330 but Cammayo refused to
acknowledge it as payment for principal but for
interest of loan for a year.
Issue: WON creditor entitled to collect the
principal obligation and interest.
Held: Yes. But only as to the principal. Ruling of
Angel vs. Chelda.
Usurious obligation: Principal only, usurious
interest not enforced.
G. Presumption of interest and installments
***Hill vs. Veloso
***Vda De Ongsiako vs. Cabatuando
H. Action Subrogation
Accion Subrogatoria: action which the creditor
may exercise in the place of his negligent
debtor in order to preserve or recover for the
patrimony of the debtor the product of such
action, and then obtain therefrom the
satisfaction of his own credit. Double function:
conserving the patrimony of the debtor by
bringing into it property abandoned or
neglected by him AND of making execution on
such property effective thereafter. “Debtor’s
debtor is my own debtor”. Debtor who is sued
may set up against the plaintiff the same
defense he could set up against his own
creditor. If the action succeeds, the plaintiff is
entitled only to so much as is needed to satisfy
his credit; if there is any balance, it shall
pertain to his debtor.
Goldstar Minig vs. Lim Jimena—mining claims
pinondohan, hindi na siya binayaran sa usapan.
Jimena lent to Lincallo money to purchase
mining claims and they agreed that ½ f the
proceeds shall be given to Jimena. Mining rights
over part of the claim were assigned to Gold Star
before WWII and copr paid Lincallo P5000
royalties. Lincallo entered contracts without the
knowledge of Jimeana. Marquez contracted with
Gold Mining and 45% should go to Lincallo.
Another company contracted and stipulated 43%
would go to Lincallo. Jimena demanded part but
he was not paid.
Issue: WON Jimena has a cause of action against
Gold Mine when it contracted only with Lincallo.
Held: Yes. Art. 1177 provides that creditors after
having pursued the property in possession of the
debtor to satisfy their claims, may exercise all
the rights and bring all the actions of the latter
(debtor) for the same purpose, save which are
inherent in his person. 1883: the principal may
sue the person with whom the agent dealt with
in his own name, when the transaction involves
things belonging to the principal.
AS: File against debtor of his debtor.
Estate of Hernandez vs. Luzon Surety—
namatay yung guarantor, namana rin yung
utang niya.
Luzon Surety filed against estate of Hemady
based on 20 different indemnity agreements and
couterbounds by the deceased in consideration
of guaranteeing various principals in favor of
different creditors. Hemady died and estate
claim not liable bec of death.
Issue: WON death extinguishes obligation of the
estate.
Held: No. Obligations extinguished by death are:
a. support b. parental auth c. usufruct d.
contracts for a piece of work d. partnership e.
agency. Articles that regulate guaranty or
suretyship contain no provision that the guaranty
is extinguished upon the death of guarantor. Art.
774 and 776 (succession and inheritance) state
that heir succeed no only to the rights but also
to the obligations.
AS: Obligation was subrogated to the heirs of the
dead person.
III. KINDS OF OBLIGATION
A. PURE AND CONDITIONAL OBLIGATIONS
1. Pure Obligations
Pay vs. Palanca—naningil ng utang after 15 yrs,
nagprescribe.
Held: Every obligation whose performance does
not depend upon a future or uncertain event or
upon a past unknown to the parties, it is
demandable at once.
2. Conditional Obligations
a. with suspensive/resolutory conditions
Lichauco vs. Figueras-Hermanos—Lorchas,
emergency and regular use.
Held: The amendment to the contract bet the
plaintiff and def was expressly conditioned on
the defs being the successful bidders at the
letting and they were not the winners. Second
contract has no force but the first one. No
showing that they have given new life to the
agreement.
Wise & Co vs. Kelly—hindi naman sinabi na
ibenta yung goods sa ganitong halaga.
Held: No proof that Kelly has not turned over all
the money received from the sale of the
merchandize so that Lim, the surety, has no
liability. The condition is that Lim will pay if
Kelly has not turned over all the sales of the
merchandise but not that he shall pay if all the
sales has not amounted to the original amount of
obligation. There is no stipulation that the goods
were to be sold at a certain price, or not less
than what it should be.
Santiago vs. Millar—nanalo sa sweepstakes pero
nawala ang ticket.
Held: The ticket sold has a notation that prize
will be paid upon the surrender of the ticket.
The surrender or presentation of the ticket is a
condition precedent of payment.
Parks vs. Prov of Tarlac—nagdonate ng land for
school and public park in 6 mos pero hindi
ginawa.
Cirer and Hill were owners of parcels of land and
donated it to the municipality of Tarlac on the
condition that erection of a public school and a
public park shall be commenced within the
period of 6 months. Tarlac failed. Cicer and Hill
sold land to Parks. Parks pray for annulment of
donation.
Issue: WON Parks is the owner of the land bec of
non-performance of the condition of the mun of
tarlac.
Held: No. The action for revocation of a donation
is 10 yrs. They have filed case after 14 yrs.
Although condition was not complied with,
revocation should have been made before the
sale of the land. Req: 1. consent of the donee of
the revocation 2. judicially decreed. Onerous
donations, 10 yrs prescription.
CPU vs. CA—nagdonate ng land for medical
school pero hindi ginawa. No period but 50 yrs
na nakalipas di pa rin ginawa.
Don Lopez donated land to CPU on the condition
that it would be used for the establishment of a
medical school and that CPU cannot sell or
convey the land to any party. CPU failed to do so
and even exchanged land with another with the
NHA. Heirs filed for annulment of donation.
Issue: WON donation annulled.
Held: No. Although there is a need to fix a period
bec the contract did not stipulate period when
to commence condition. However, in
consideration of the facts, 50 years have lapsed
for the condition to be complied with and CPU
was not able to perform. SC ruled to reconvey to
heirs the land.
Aguilar vs. Cititrust—yung hindi ko
maintindihang kaso or baka hindi lang siya
talaga relevant under this title.
b. Potestative Mixed Conditions
Shotwell vs. Manila Motor—Banks were
chartered to accept liability.
Held: The banks will not be liable since they
didn’t accept that they will should liability. The
lease was extinguished by the fire that occurred
and the chartered banks being a sublessee of the
Manila Motor which contracted lease also from
Shotwell, will not be liable for the construction
of the destroyed buildings. No potestative
condition.
Lease for the enjoyment of the premises. No
fault on part of anyone.
Smith Bell vs. Sotello Matti—i-deliver yung
equipment pero depende sa gobyerno.
Held: The conditions did not depend upon the
will of the debtor alone. There is no delay since
there existed rigid restrictions during the that
time of world war. It is a mixed one because
dependent also of the will of the third person or
the US govt whether to allow the delivery or not.
Trillana vs. Quezon Colleges—if I harvested
fish.
The stipulation in this case was that the obligor
would pay the full value of a subscription for
shares in the Quezon College after she had
harvested fish.
Held: This condition is obviously depended upon
the sole will of the obligor, and the conditional
obligation is void, because it would have served
to create an obligation to pay, the whole
obligation is void.
**When conditional obligation is void, then it
would convert the obligation to a pure obligation
which would be demandable at once.
Osmena vs. Rama—If the house of strong
materials is sold, I will pay my debt.
Held: If the statement found in the
acknowledgement should be regarded as a
condition, it was a condition dependent upon the
exclusive will of the debtor, and is, therefore,
void. The acknowledgement, therefore, was an
absolute acknowledgement of the obligation and
was sufficient to prevent the statute of
limitations from barring the action upon the
original contract.
Hermosa vs. Longara—as soon as I receive
funds derived from the sale of my property in
Spain.
Held: The condition implies that the obligor has
already decided to sell his house or at least that
he had made his creditors to pay his
indebtedness demandable is that the sale be
consummated and the price thereof remitted to
the islands. Not a purely potestative one,
depending upon the will of the obligor, but partly
upon chance, i.e. presence of the buyer of the
property for the price and under conditions
desired by the obligor.
c. Impossible and Illicit conditions
Luneta Motor Co. vs. Abad—if I recovered
judgment in the action but he died during the
trial.
Held: The obligation is subject to the condition
that when the plaintiff recovered judgment,
they shall deliver the property so released to the
officer of the court for the payment of said
judgment of in default, pay its full value. Since
Abad died, it has become a legal impossibility
since no judgment shall be rendered.
Galang vs. CA—you pay 25% within 3 months or
upon the removal of the encargado.
Held: The removal of the encargado was not a
condition precedent to the fulfillment of the
contract. What we have is a contract to sell
wherein the ownership is retained or title until
the fulfillment of a positive condition, normally
the payment of the purchase price in the manner
agreed upon. It was just an alternative period
for the payment of the second installment.
d. positive and negative conditions
3. Constructive Fulfillment
Taylor vs. Uy Tieng—dapat may trabaho siya
pero binawi ni Uy Tieng dahil di maganda
sitwasyon. “FOR ANY REASON”
Held: “Should the machinery to be installed in
the said factory fail, for ANY REASON, 6 months
from the date hereof, this contract may be
cancelled”. The def can rescind the contract bec
their reason falls under “any reason”.
But there is no constructive fulfillment on this
case. Constructive fulfillment: condition shall be
deemed fulfilled if the obligor intentionally
impedes its fulfillment, has no application to the
cases of the resolutory provision giving to the
obligor a right to cancel contract upon
contingency within the control of the obligor.
Herrera vs. Leviste—GSIS and Leviste Case.
Teehankee’s Dissent.
Tehankees Dissent: Leviste was guilty of bad
faith and violated the terms of the contract thus
there is constructive fulfillment. Herrera was
required by GSIS to submit papers to support his
assumption but could not be approved until
Herrera could submit a final deed of sale and
Leviste did not execute this deed. He prevented
the assumption of Herrera of the mortgage. Not
only that, Leviste is in arrears for 14 months in
its amortization and Herrera did not know that.
1186 and 1169 (reciprocal obligations).
Tayag vs. CA—estopped bec receipt of
payments and knowledge of irregularities.
Held: The acceptance of the petitioners of the
various payments even beyond the periods
agreed upon, was perceibved by the lower court
as tantamount to faithful performance of the
obligation. 1186 applies to both obligees and
obligors in reciprocal obligations even when the
proviso only speaks of the obligor. Pet accepted
the performance knowing its incompleteness and
irregularity and without expressing any protest
or objection, the obligation is deemed to be
complied with.
Coronel vs. CA—Receipt of Downpayment
Held: Intent of the parties has to be considered.
It was a contract of sale and not a contract to
sell. Contract of sale—ownership already
transferred upon fulfillment of the suspensive
condition. Absolute sale. Contract to sell-
although suspensive condition was complied
with, ownership will not automatically transfer.
There is still a need to convey title to the
prospective buyer by entering into a contract of
absolute sale.
4. Retroactivity of Obligation
Padilla vs. Paterno-his mom is the universal
heir and not his wife-paraphernal.
Held: The ownership of the land is retained by
the wife until she is paid the value of the lot, as
a result of the liquidation of the conjugal
partnership. There mere construction of the
building from common funds does not
automatically convey the ownership of the wife’s
land to the conjugal partnership. The properties’
conversion from paraphernal to conjugal assets
would be deemed to retroact to the time the
conjugal buildings were first constructed thereon
or at the very latest, the time before the death
of Narcisso Padilla that ended the partnership.
The acquisition by the partnership of theses
properties was subject to the suspensive
condition that their values would be reimbursed
to the widow at the liquidation of the conjugal
partnership; once paid, the effects of the
fulfillment of the condition should be deemed to
retroact to the date the obligation was
constituted.
Coronel vs. CA—Downpayment
Retroactive: From the moment the obligation
was constituted, upon payment of full balance,
retroact to that date.
5.Preservation of Creditor’s Rights
Art. 1188: The creditor may, before the
fulfillment of the condition, bring the
appropriate actions for the preservation of his
right.
The debtor may recover what during
the same time he has paid by mistake in case
of a suspensive condition.
6. Rescission in Reciprocal Obligations
Ocejo vs. Interbank—maswerteng assignee.
Yung asukal na nasa ibang warehouse na
kinuha ng banko.
Held: The thing sold not subject to condition
that the buyer was the pay the price before the
delivery. On demandability: No term having been
stipulated on payment, it should be demandable
at the time and place of the delivery of the thing
sold. Demandable at once and failure to do so
would entitle obligor either performance or
rescission. But rescission should be applied to
the court for a decree for the rescission of the
contract. No rescission was made before the
insolvency of plaintiff, the assignee standing on
the shoes of the buyer has a better right.
Albert vs. University Publishing—publishing the
Revised Penal Code.
Held: It was the defendant corporation who had
breached the contract. The plaintiff has written
letters reminding the corp that the contract will
be deemed rescinded if the corp would not fulfill
its obligation.
Accg to Tolentiono: Rescission must be judicially
invoked. Unless there is a stipulation of period
when the contract would be deemed rescinded.
If one party is willing to perform and the other is
not extra-judicial rescission would suffice if
there is stipulation. However, if there has been a
performance already by one of the parties,
rescission should already be judicially invoked
regardless whether there is a stipulation or
none, especially if the other party rejects
rescission.
UP vs. Delos Angeles—award of logging rights;
rescission without need of judicial suit.
Held: In the agreement, there is a stipulation
that UP has “the right and power to consider the
Logging Agreement date Dec 2 1960 rescinded
without the necessity of a judicial suit. 1191’s
consideration: There is nothing in the law that
prohibits that parties from entering into
agreement that violation of the terms of
contract would cause cancellation thereof even
without court intervention. BUT PROCEEDS AT ITS
RISK. Extra-judicial resolution will remain
contestable and subject to judicial invalidation,
unless attack thereon should become barred by
acquiescence, estoppel or prescription.
Roque vs. Lapuz—10 yrs to pay, I can pay
anytime within the 10 years.
Held: Qualification for rescission: so substantial
and fundamental to defeat the object of the
parties. Absence of a formal deed of conveyance
is a very strong indication that the parties did
not intend immediate transfer of ownership and
title, but only a transfer after full payment of
the price. Intent of the parties was to have the
obligation be paid in monthly installment.
Herrera vs. Leviste
Tehankee’s dissent: Upon Leviste’s refusal to
execute the deed of sale, Herrera has the option
of specific performance or the rescission of the
contract.
Zulueta vs. Mariano—Avellana a movie director
made movies for Zulueta for his political
campaign, automatic rescission clause.
Held: There is an automatic rescission clause in
the contract and the fact that pet has cancelled
contract, resp has no right to remain in the
premises. Extra-judicial rescission shall only take
legal effect where the other party does not
oppose it.
Delta Motor Corp vs. Genuino—delivery of
black iron pipes for iceplant and storage.
Held: Power to rescind under 1191 is not
absolute. The act of a part in treating a contract
as canceled or resolved on account of infractions
by the other contracting party must be made
known to the other and is always provisional
subject to the scrutiny and review by the proper
court.
Delta –no manifestation that it had opted to
rescind contract, it has possession of the two
irons and the downpayment and has waived the
performance of conditions of the contract when
they opted to go on with the contract only with
a much higher price.
Ong vs. Bognalbal
Rescission: Upon the infraction of Ong, Bognalbal
could have filed rescission of the contract or the
performance of it.
Carrascoso vs. CA—notice of lis pendence but
continued with the sale of the land.
1972-El Dorado sold to Carrascoso the parcel of
land
July 1975- Buy and Sell bet Carrasco and PLDT
April 1977- Carrasco to PLDT
May 30, 1977 PLDT to PLDTAC
May 15, 1977-notice of lis pendens
Held: Notice of Lis pendens, but still PLDT
conveyed land to PLDTAC. Where a contract is
rescinded it is the duty of the Court to require
both parties to surrender that which they may
have respectively received and to place each
other as far as practicable in his original
situation. The exercise of the power to rescind
extinguished the obligatory relation as if it had
never been created, the extinction having a
retroactive effect.
B. OBLIGATIONS WITH A PERIOD
PNB vs. Lopez Vito—loan of spouses when
there is a condition and a period stipulated.
Held: The non-fulfillment of the conditions of
the contract renders the period ineffective, and
makes the obligation demandable at the will of
the creditor. Failure to pay would make the
entire obligation due and demandable, so
regardless of the period of other installments,
def has to pay the entire obligation.
Smith Bell vs. Matti
Held: There also was a stipulated period
however there is also a condition which states
that delivery would depend upon the US govt.
Upon the lapse of the period and the condition
bars the performance, def will not be liable.
Gaite vs. Fonacier—expiration of the surety,
debtor loses the benefit of the period. Mining
claim case.
Held: 1198 states when debtor loses the benefit
of the period. The surety contract expired and
Fonacier didn’t renew or replaced the surety.
Sale of the ore was not a suspensive condition
but a suspensive period, fixing the future date of
the payment.
Qui vs. CA—factory was razed to the ground
and failure of lease to rebuild the building of
the lessee. (the building to be constructed
shall belong to the resp lessor after 20 yrs).
Held: 1197. If obligation does not fix a period
but from its nature and circumstance it can be
inferred that a period was intended , the courts
may fix the duration thereof. Will also fix period
when it depends upon will of the debtor. In
determining period, courts will have to consider
the circumstances and see if period was
contemplate. The contract doesn’t stipulate a
period, thus the court held that resp has to
institute a judicial action to fix the period. (this
case is an ejectment case so fixing a period was
not alleged in the case).
Sarmiento vs. Villasenor—loan with a pledge of
a medal with a diamond in the center with 10
diamonds surrounding it, pair of diamond
earrings, comb with 22 diamds, and two
diamond rings! Daming diamonds!!!
Held: In a contract of loan with interest wherein
a term was fixed for the payment thereof, it is
presumed that said terms was established for the
benefit of the creditor as well as that of the
debtor, unless from its tenor or other
circumstances it appears to have been stipulated
for the benefit of one only. In such a case the
debtor has no right to pay the debt before the
lapse of said period, without the consent of the
creditor, and demand the devolution of the
goods that were pledged to secure the payment.
Only after the expiration of said period may the
debtor make payment, and, therefore, the
action for the recovery of the goods pledged
arises only after the lapse of said for the purpose
of the computation for he period of prescription
of said actions.
Daguhoy Enterprises vs. Ponce—nagsecure ng
mortgage as guaraty sa loan sa isang corp tapos
after ibigay yung loan, withdrew mortgaged
properties then mortgage them again sa ibang
corp for another loan. Madaya.
Held: Although the contract stipulates that loan
payable in 6 years, but because of the failure to
give and register the security agreed upon in the
form of two deeds of mortgage, the obligation
becomes pure and without condition thus due
and immediately demandable. 1198, lost the
benefit of the period.
Victorias Planter, supra
De Leon vs. Syjuco—gusto ng magbayad ng
debtor pero ayaw pang tanggapin ng creditor.
Held: Consignation was not valid. Req: a. debt
due b. consignation has been made bec creditor
to whom payment is made refused to accept, or
was absent or incapacitated c. prev notice of
consignation to the person interested in the
performance d. amount due placed at the
disposal of the court 3. after consignation had
been made, the person interested was notified
thereof. Reasons why creditor can’t be forced to
accept payment a. may want to keep his money
invested safely instead of having it in his hands.
B. to protect himself of sudden decline on the
purchasing power of the currency loaned. Unless
creditor consents, debtor cannot accelerate
payment.
Millare vs. Hernando—yung bahay niya gusting
gawing resto e ayaw niya nga.
Held: On the contract, it is stipulated that the
lease may be renewed after a period of 5 years
under the terms and conditions as will be
mutually agreed upon by the parties at the time
of the renewal. 1197 and 1670 of the CC (fixing
of period, and after 15 days of occupying the
leased property and without any notice from
lessor, contract shall be renewed). It is
understood that there is an implied new lease,
not for the period of the original contract, but
for the time established by 1682 and 1687. The
other terms of the contract shall be revived.
After the expiration of the contract, the implied
new lease could not possibly have the period of 5
years, but rather would have been a month-to-
month lease since the rentals were payable on a
monthly basis.
Pacific Banking Corp vs. CA—negosyo sa
cultivation of fish and saltmaking bumagsak.
Held: An agreement to extend the time of
payment in order to be valid must be for a
definite time. The cause of action was for the
fixing of the period.
Song Fo vs. Oria—launch was sold but was
shipwrecked, Song Fo did not insure and Oria
did not secure.
Held: The launch was with Oria already and
knowing that the launch has not been insured
yet, sent it from Manila to Samar and on the trip
it was shipwrecked. The contract stipulates
quarterly installments. Since the vessel is lost,
Oria doesn’t want to pay. That unpaid
installments of the purchase price of the launch,
which under the express terms of the contract
had not become due and payable at the time of
the loss of the vessel, became due and payable
under the provisions of article 1129 of the Civil
Code, upon the failure of the purchaser, within a
reasonable time after the loss of the launch, to
offer either satisfactory security or to give bond
to secure the payment of the unpaid installment
of the purchase price.
C. ALTERNATIVE AND FACULTATIVE
OBLIGATIONS
Agoncillo vs. Javier—Anastacio Alano
mortgaging his property to pay the debt.
Held: Anastacio was only a rep of his children,
and his partial payment does not affect
prescription not for the benefit of the other
debtors. The mortgage was never recorded
therefore invalid. Action to recover has
prescribed, the action to compel a conveyance
of the house and lot is likewise barred as the
agreement to make such conveyance was not an
independent principal undertaking, but merely a
subsidiary alternative pact relating to the
method by which the debt might be paid.
Ong Guan Can vs. Century—the insurance
company doesn’t want to rebuild with the
same materials.
Held: On the contract the insurance company
obligated itself to either pay the amount to
which the house was insured or rebuild it. The
debtor must notify the creditor of his election,
stating which prestation he is disposed to fulfill.
The effect of notice is to give the creditor, that
is, the plaintiff in the instant case, opportunity
to express his consent, or to impugn the election
made by the debtor, and only after said notice
shall the election take legal effect when
consented by the creditor, or impugned by the
latter, when declared improper by the
competent court.
D. JOINT AND SOLIDARY
Jaucian vs. Queroi—surety was solidarily liable,
then surety died.
Held: The right of a guarantor or surety to insist
on the exhaustion of the property of the
principal debtor, before his own shall be taken in
execution does not exist where the guarantor or
surety is jointly and severally bound with the
principal debtor.
Ramos vs. Gibbon—Mining Claims, Possessory
Rights of a Qualified Locator.
Held: The concurrence of two or more creditors
or of two or more debtors with respect to the
same obligation does not imply that each of the
former is entitled to demand the performance of
the obligation in its entirety or that each of the
latter is bound to perform it. This shall be the
case only when the expressly so provided by the
terms of the obligation, and the parties are
bound in solido. The presumption, in the absence
of the stipulation as to how certain debtors are
bound, is that they are bound jointly.
Versoza vs. Lim—Collision of Perla and Ban Yek.
Held: Where a collision occurs between tow sea-
going vessels, caused exclusively by the
carelessness of the navigating officers in charge
of one of the vessels, both the owner and the
operating company directly in charge of the
offending vessel are liable for the damage done.
The rule that joint obligations are apportionable
unless otherwise specially provided has no
application to obligations arising from tort.
Persons who cooperate in the tortuous infliction
of damage are jointly and severally liable.
Contractual Obligations-joint
Tortuous act-joint and severally liable
Ronquillo vs. CA—foodstuff, individually and
jointly, auction of furnitures on same day of
hearing for reconsideration.
Held: Clearly then, by the express term of the
compromise agreement and the decision based
upon it, the defendants obligated themselves to
pay their obligation, “individually and jointly”.
The term “individually” has the same meaning as
“collectively”, “separately”, “distinctively”,
respectively, and severally. An agreement to be
individually liable undoubtedly creates a several
obligation and a several obligation is one by
which one individual binds himself to perform
the whole obligation.
Oritz vs. Cayanon—Bartolome Ortiz, ayaw
umalis sa premises dahil sa mga improvements
na ginawa niya at hindi siya nakasama sa
bidding. Nangolekta pa ng toll.
Held: Presumption when two persons are liable
under a contract or judgment and no mention of
the specific liability of each for the entire
obligation. With respect to the amount of
reimbursement to be paid by Comintan, it
appears that the dispositive portion of the
decision was lacking in specificity, as it merely
provided Zamora and Comintan jointly liable
therefore. When two persons are liable under a
contract or under a judgment, no words appear
in the contract or judgment to make each liable
for the entire obligation, the presumption is that
their obligation is mancommunada, and each
debtor is liable only for a proportionate part of
the obligation. The judgment debt of 13K should
be pro-rated in equal shares to Comintan and
Zamora.
Imperial Insurance vs. David—spouses bound
themselves to be solidary and jointly liable,
husband died.
Held: If husband and wife bound themselves
jointly and severally, in case of his death her
liability is still solidary and may be sued for the
whole debt. The Rules of Court provide the
procedure should the creditor desire to go
against the deceased debtor, but there is nothing
in the said provision making compliance with
such procedure a condition precedent before an
ordinary action against the surviving solidary
debtors, should the creditor choose to demand
payment from the latter, could be entertained to
the extent that failure to observe the same
would deprive the court jurisdiction to take
cognizance of the action against the surviving
debtors. CIVIL Code allows the creditor to
proceed against any of the solidary debtors or
some or all of them simultaneously. Hence, there
is nothing improper in the creditor’s filing of an
action against the surviving solidary debtors
alone, instead of instituting a proceeding for the
settlement of the estate of the deceased debtor
wherein his claim could be filed.
Inchausti vs. Yulo—magkakapatid na hindi pa
nagkasundo sa remission na binigay.
Held: The remission of any part of the debt,
made by the creditor in favor of one or more his
solidary debtors, inures to the benefit of the rest
of them, and these latter may utilize in their
favor the defense of remission. The solidary
debtor unconditionally obligated or whose period
for payment has expired, may not, with respect
to the part of the debt he is liable, plead the
defense of prematurity of the action, which is
personal to his co-debtors.
BPI vs. McCoy—McCoy paid all the debts and
was subrogated with the rights to contribution
from his co-debtors.
Held: Where one of the several persons who are
sued upon a joint and several liability elects to
pay the whole, such person is subrogated to the
rights of the common creditor and may properly
substituted in the same action as plaintiff for the
purpose of enforcing contribution from his
former associates under art. 1145.
**But Ma’am said, this is not the same meaning
of real subrogation of rights.
Chinese Chamber of Commerce vs. Pua Te
Ching—Surety was jointly ans severally liable,
principal died.
Held: The surety may use against the creditors
all the defenses which the principal debtor is
entitled and that are inherent in the debt, but
not those purely personal to the debtor, to wit,
those which may contribute to weaken or
destroy the juridical bond existing between the
creditor and the principal debtor, not any means
of defense which may invalidate the original
contract from which the tight or the action of
the creditor against the security arises in this
class of actins is not included the means of
defense as to how the trial may be continued
and the writ of execution issued in case of the
death of the principal debtor which can not
affect the original contract nor destroy the bond
existing bet the creditor and the principal
debtor, it being, therefore, an exception or
means of defense no inherent in the debt, but at
the most, a purely personal one of the debtor or
the successors-in-interest of the debtor.
Int’l Finance vs. Imperial Textile—guarantee vs.
surety
Held: Although it states “Guarantee”, the
stipulations of the contract make it clear that
“jointly and severally” phrase is the one used in
the contract.
Surety: person binds himself solidary with the
principal debtor, primary liability
Guaranty: contract whereby a person binds
himself to the creditor to fulfill the obligation of
the principal in case the latter should fail to do
so, secondary liability.
Construction Dev. Vs. Estrella—Bus was
rammed and their knees are pinned to the
seats in front of them.
Held: The bus company, its driver, the operator
of the other vehicle and the driver of the vehicle
were jointly and severally liable to the injured
passenger or the latter’s heirs. Nor should it
make any difference that the liability of pet (bus
owner) springs from contract while that of
respondents (owner and driver of other vehicle)
arises from quasi-delict.
Bus owner-contract, owner and owner of other
vehicle-quasi-delict : both jointly and severally
liable.
E. DIVISIBLE AND INDIVISIBLE OBLIGATION
Art. 1223-1225
F. OBLIGATION WITH A PENAL CAUSE
Manila Racing vs. Manila Jockey—forfeiture of
what was partially paid.
Held: The clause of the contract referring to the
forfeiture of the P100,00 already paid, should
the purchases C fail to pay the subsequent
installments, is valid, It is in the nature of a
penal clause which be legally established by the
parties. In its double purpose of insuring
compliance with the contract and of otherwise
measuring beforehand the damages which may
result from non-compliance, it is not contrary to
law, morals or public order bec it was voluntarily
and knowingly agreed upon by the parties.
Viewing concretely the true effects thereof in
the present case, the amount forfeited
constitutes only 8% of the stipulated price, which
is not excessive if considered as the profit which
would have been obtained had the contract been
complied with. There is, moreover, evidence
that the defendants, because of this contract
with C, had to reject other propositions to buy
the same property. At any rate, the penal clause
does away with the duty to prove the existence
and measure of the damages caused by the
breach.
Caridad Est. vs. Santero—loan to be paid in 60
days and failure to do so, those already paid
shall be forfeited.
Antichresis: a contract whereby the creditor
acquires the right to receive the fuirts of an
immovable of his debtor with the obligation to
apply them to the payment of interest if owing
and thereafter to the principal of his credit.
Penal ClauseL generally intended to substitute
the indemnity for damages and the payment of
interests in case of non-compliance of the
obligation.
Held: The provisions in which the parties have
indicated in the contract is a penal clause which
carries the express waiver of the vendee to any
all sums he had paid when the vendor, upon his
inability to comply with his duty, seeks to
recover passions of the property, a conclusive
recognition of the right of the vendor to the said
sums, and avoid unnecessary litigation designed
to enforce fulfillment of the terms and
conditions agreed upon. Said provisions are not
unjust or inequitable and does not, as appellant
contends, make the vendor unduly rich at his
cost and expense.
Bachrach Motors vs. Espiritu—obligation partly
performed, 25% penalty, reduced. WHITE
TRUCKS.
Held: Interest and penalty are not the same.
When the obligation has been partly performed,
the CC authorizes the court to reduce the
penalty thereon.
Cabbarroguis vs. Vicente—jeep accident.
Held: The refusal of the defendant to pay when
the demand was made by plaintiff entitles the
latter to interest on the penalty. 2210 provides
that in the discretion of the court, interest may
be allowed upon damages warded for breach of
contract. This interest is recoverable from the
time of delay, that is to say, from the date of
demand, either judicial or extrajudicial. And if
there is no showing as to when demand for
payment was made, plaintiff must be considered
to have made such demand only from the filing
of the complaint.
Hodges vs. Javellana--iceplant machinery,
softdrint, ice drop and fixture.
Held: The provisions in the contract between the
parties relative to the compounding of interest
partake the nature of a penal clause and under
1229, may be reduced by court if iniquitous or
unconscionable.
Pamintuan vs. CA—plastic sheetings
Held: The theory that penal and liquidated
damages are the same cannot be sustained
where the obligor is guilty of fraud in the
fulfillment of his obligation. The penalty clause
is strictly penal or cumulative in character and
does not partake the nature of liquidated
damages when the parties agree.

Concurring Antonio: A creditor in case of fraud by

the obligor is entitled only to the stipulated
penalty plus the difference bet the proven
damages and such stipulated penalty.

Robes-Francisco Realty vs. CFJ –

Held: A contract of sale which stipulate payment

of interest at 4% per annum in case vendor fails
to issue a certificate of title to vendee is not a
penal clause because even without it vendee
would be entitled to interest at the legal rate of
6% per annum. It is therefore inconceivable that
the aforecited provision in the deed of sale is a
penal clause which will preclude an award of
damages to the vendee Millan.

Makati Devt Corp vs. Empire Insurance Co.—

you should build a house on the lot or else.

Held: Mitigation of the penalty is allowed where

there is partial payment of the obligation, the
reduction of the penalty is justified. This is true
where the indemnity provided for is essentially a
mere penalty , having for its object to compel
compliance with the contract.

Umali vs. Miclat—creation of an advertisement

LAGRIMAS

Held: Under the law, a penalty takes the place of

interests only if there is no stipulation to the
contrary, and even then, damages may still be
collected if the obligor refuses to pay the
penalty.