OBLIGATIONS AND CONTRACTS

TABLE OF CONTENTSOBLIGATIONS AND CONTRACTS

TABLE OF CONTENTSOBLIGATIONS AND CONTRACTS

OBLIGATIONS GENERAL PROVISIONS

Ernesto Uypitching, et al. v. Ernesto Quiamco10Lourdes Dela Cruz v. Court of Appeals10Department of Health v. HTMC Engineers Co.10International Finance Corporation v. Imperial Textile Mills, Inc.11Sebastian Siga-An v. Alicia Villanueva11Makati Stock Exchange, Inc., et al. v. Miguel V. Campos, substituted By Julia Ortigas Vda. De Campos12Spouses Patricio and Myrna Bernales v. Heirs Of Julian Sambaan12Vitarich Corporation v. Chona Losin13CBK Power Company Limited vs. Commissioner of Internal Revenue13NATURE AND EFFECT OF OBLIGATIONS

Cortes v. Court of Appeals13Winifreda Ursal v. Court of Appeals, The Rural Bank of Larena (Siquijor), Inc. and Spouses Jesus Moneset and Cristita Moneset14Prudential Bank v. Chonney Lim14YHT Realty Corporation, Erlinda Lainez and Anicia Payam v. Court of Appeals and Maurice Mcloughlin14Schimtz Transport and Brokerage Corporation v. Transport Venture Inc.15Lapreciosisima Cagungun, et. al. v. Planters Development Bank15Radio Communication of the Philippines vs. Alfonso Verchez, et al.15Crisostomo Alcaraz v. Court of Appeals16Metropolitan Bank and Trust Company vs. Renato D. Cabilzo16Ma. Elizabeth Kind and Mary Ann King v. Megaworld Properties and Holdings, Inc.16Autocorp Group v. Intra Strata Assurance Corporation16J Plus Asia Development Corporation v. Utility Assurance Corporation17Polo S. Pantaleon v. American Express International, Inc.18Sps. Guanio v. Makati Shangri-La Hotel18Marques v. Far East Bank18Philippine Realty and Holding Corp. v. Ley Const. and Dev. Corp.19Gilat Satellite Networks, Ltd. v. United Coconut Planters Bank General Insurance Co., Inc.19Carlo F. Sunga v.Virjen Shipping Corporation, Nissho Odyssey Ship Management Pte. Ltd., And/Or Capt. Angel Zambrano20DIFFERENT KINDS OF OBLIGATIONS

PURE AND CONDITIONAL OBLIGATIONS

Sacobia Hills Development Corporation vs. Allan Ty20Carrascoso v. Court of Appeals21Spouses William And Jeanette Yao v. Carlomagno B. Matela21Spouses Jaime Benos And Marina Benos v. Spouses Gregorio Lawilao And Janice Gail Lawilao21Darrel Cordero, et al. vs. F.S. Management and Development Corporation22Yamamoto v. Nishino Leather Industries, Inc.22Spouses Jose T. Valenzuela and Gloria Valenzuela v. Kalayaan Development & Industrial Corporation22Solar Harvest, Inc. v. DavaoCorrugated Carton Corporation23Republic v. Holy Trinity Realty Development Corporation24Subic Bay Metropolitan Authority v. Court of Appeals24Sps. Fernando and Lourdes Viloria vs. Continental Airlines, Inc.24JOINT AND SOLIDARY OBLIGATIONSStronghold Insurance Company, Inc. v. Republic-Asahi Glass Corporation25Petron Corporation vs. Sps. Cesar Jovero and Erma F. Cudilla, et al.25Philippine Commercial International Bank v. CA25Crystal v. Bank of the Philippine Islands26The Heirs of George Y. Poe vs. Malayan Insurance Company, Inc.,26Alba v. Yupangco26Sps. Rodolfo Berot v. Felipe Siapno27Trade and Investment Development Corp. of the Philippines v. Asia Paces Corp.27Olongapo City, V. Subic Water And Sewerage Co., Inc.,27OBLIGATIONS WITH A PENAL CLAUSE

First Fil-Sin Lending Corporation v. Gloria D. Padillo28Filinvest Land, Inc. vs. Hon. Court of Appeals, Philippine American General Insurance Company and Pacific Equipment Corporation28Development Bank of the Philippines v. Family Foods Manufacturing Co. Ltd., and Spouses Julianco and Catalina Centeno28Ileana Dr. Macalinao v. Bank of the Philippine Islands29EXTINGUISHMENT OF OBLIGATIONS

PAYMENT OR PERFORMANCE

Jaime Biana v. George Gimenez29G & M (Phil.), Inc. vs. Willie Batomalaque29Abacus Securities Corporation v. Ruben U. Ampil30Almeda v. Bathala Marketing Industries, Inc.30ASJ Corporation v. Evangelista30Insular Life Assurance Company, Ltd. v. Toyota Bel-Air, Inc.31Dao Heng Bank, Inc. (Now Banco De Oro Universal Bank) v. Laigo31Royal Cargo Corporation v. DFS Sports Unlimited, Inc.32Allandale Sportsline, Inc. v. The Good Development Corporation32Annabelle Dela Pea and Adrian Villareal v. The Court of Appeals and Rural Bank of Bolinao, Inc.32D.B.T. Mar-Bay Construction, Incorporated v. Ricaredo Panes et al.33Rockville Excel International Exim Corporation v. Spouses Oligario Culla and Bernardita Miranda33Premiere Development Bank v. Central Surety & Insurance Company, Inc.33Cecilleville Realty and Service Corporation v. Acua34DBT Mar-Bay Construction, Inc. vs. Panes34Manuel Go Cinco and Araceli S. Go Cinco v. Court Of Appeals, Ester Servacio and Maasin Traders Lending Corporation35Land Bank of the Philippines vs. Alfredo Ong35Republic v. Thi Thu Thuy T. De Guzman35Dalton vs. FGR Realty and Development Corp36Elizabeth Del Carmen v. Sps. Sabordo36Erlinda Gajudo, Fernando Gajudo, Jr., Estelita Gajudo, Baltazar Gajudo And Danilo Arahan Chua v. Traders Royal Bank36Luzon Development Bank v. Enriquez37Telengtan Brothers & Sons, Inc. v. United States Lines, Inc. and the Court of Appeals37Simplicio A. Palanca v. Ulyssis Guides37LOSS OF THE THING DUE

Ayala Construction and Development Corporation v. Philippine Commercial International Bank38Raymundo S. De Leon vs. Benita T. Ong38CONDONATION OR REMISSION OF THE DEBTRuben Reyna V. COA38CONFUSION OR MERGER OF RIGHTS Cecilleville Realty and Service Corporation vs. Spouses Tito Acua and Ofelia B. Acua39Sps. Dominador R. Narvaez and Lilia W. Narvaez vs. Sps. Rose Ogas Alciso and Antonio Alciso39COMPENSATIONMavest (USA) Inc. and Mavest Manila Liaison Office vs. Sampaguita Garment Corporation39Manuel B. Aloria v. Estrellita B. Clemente40Premiere Development Bank v. Flores40Soriano v. People40United Planters Sugar Milling Co., Inc., (UPSUMCO) vs. Court of Appeals, et al.41Lao v. Special Plans, Inc.41Traders Royal Bank vs. Norberto Castaares and Milagros Castaares42Cesar V. Areza and Lolita B. Areza v. Express Savings Bank, Inc.42Mondragon Personal Sales, Inc. v. Victoriano S. Sola, Jr.42NOVATIONPhilippine Savings Bank v. Sps. Rodelfo Malanac Jr.43Isaisas F. Fabrigas and Marcelina R. Fabrigas v. San Francisco del Monte, Inc.43Sps. Francisco and Ruby Reyes v. BPI Family Savings Bank, Inc., And Magdalena L. Lometillo, in her capacity as Ex-Officio Provincial Sheriff for Iloilo44Gammon Philippines, Inc. v. Metro Rail Transit Development Corporation44Ek Lee Steel Works Corporation v. Manila Castor Oil Corporation45Sueno v. Land Bank of the Philippines45S.C. Megaworld Construction And Development Corporation v. Parado45Foundation Specialists, Inc., vs. Betonval Ready Concrete, Inc. and Stronghold Insurance Co., Inc.46Carolina Hernandez-Nievera v. Wilfredo Hernandez47Sime Darby Pilipinas, Inc. v. Goodyear Philippines, Inc.47Heirs of Servando Franco v. Sps. Gonzales47Roberto R. David vs. Eduardo C. David48First United Constructors Corporation vs. Bayanihan Automotiv48CONTRACTSGENERAL PROVISIONSAsian Construction and Development Corporation v. Tulabut48Tanay Recreation Center and Development Corp. v. Catalina Matienzo Fausto and Anunciacion Fausto Pacunayen49Litonjua v. Litonjua49Bortikey v. AFP Retirement and Separation Benefits System49GF Equity, Inc. vs. Arturo Valenzona50Tanay Recreation Center and Development Corp. v. Catalina Matienzo Fausto and Anunciacion Fausto Pacunayen50Tanay Recreation Center and Development Corp. v. Catalina Matienzo Fausto and Anunciacion Fausto Pacunayen51Sunace International vs. NLRC51Greater Metropolitan Manila Solid Waste Management Committee v. Jancom Environmental Corporation51Roxas v. Zuzuarregui, Jr.51Bonifacio Nakpil v. Manila Towers Development Corp.52Xavierville III Homeowners Association, Inc., v. Xavierville Ii Homeowners Association, Inc.,52William Golangco Construction Corporation v. Philippine Commercial International Bank53Spouses Anthony and Percita Oco v. Victor Limbaring53Rolando Limpo v. Court of Appeals53Caltex (Philippines), Inc., v. PNOC Shipping and Transport Corporation54Mr. & Mrs. George R. Tan v. G.V.T Engineering Services, Acting through its Owner/Manager Gerino V. Tactaquin54William Ong Genato vs. Benjamin Bayhon et al.54Vicenta Cantemprate et al. vs. CRS Realty Development Corporation et al.54National Power Corporation vs. Premier Shipping Lines, Inc.55Patricia Halaguea et al. vs. Philippine Airlines Incorporated55Sta. Lucia Realty & Development, Inc. vs. SPOUSES Francisco & Emelia Buenaventura55Sps. Isagani Castro and Diosdada Castro v. Angelina De Leon Tan, et. al.,56Narvaez vs. Alciso56Herald Black Dacasin vs.Sharon Del Mundo Dacasin56PNCC Skyway Traffic Management and Security Division Workers Organization (PSTMSDWO) vs. PNCC Skyway Corporation57Heirs of Mario Pacres, vs. Heirs of Cecilia Ygoa57Heirs of Fausto C. Ignacio v. Home Bankers Savings and Trust Company57Spouses Ignacio F. Juico and Alice P. Juico v. China Banking Corporation58Sps. Benjamin Mamaril v. The Boy Scout of the Philippines58Star Two (SPV-AMC), Inc. v. Paper City Corporation of the Philippines58Land Bank of the Philippines vs. Heirs of Spouses Jorja Rigor-Soriano and Magin Soriano59Rodolfo G. Cruz and Esperanza Ibias v. Atty. Delfin Gruspe59Philippine National Bank vs. Spouses Enrique Manalo and Rosalinda Jacinto, et al.59ESSENTIAL REQUISITES OF CONTRACTSSpouses Azaro M. Zulueta and Perla Sucayan-Zulueta v. Jose Wong, et al.59Paulo Ballesteros v. Rolando Abion60Estate of Orlando Llenado et al. vs. Eduardo Llenado et al.60CONSENTDandoy v. Tongson60Navotas Industrial Corporation V. Cruz, et al.61Epifania Dela Cruz, substituted by Laureana V. Alberto v. Sps. Eduardo C. Sison and Eufemia S. Sison61Perpetua vda. de Ape v. Court of Appeals and Genorosa Cawit Vda. De Lumayno62Reynaldo Villanueva vs. Philippine National Bank62Gaudencio Valerio et. al v. Vicenta Refresca et. al.62Heirs of Cayetano Pangan vs. Spouses Rogelio Perreras and Priscilla Perreras62Cornelia Baladad vs. Sergio A. Rublico and Spouses Laureano F. Yupano63Francisco Landicho et al. vs. Felix Sia63XYST Corp. v. DMC Urban Properties Development Inc.63Gloria Ocampo and Teresita Tan v. Land Bank of the Philippines et al.64Government ServiceInsurance System vs. Abraham Lopez64Sps. Ramon Lequin and Virginia Lequin vs. Sps. Raymundo Vizconde and Salome Lequin Vizconde65Spouses Exequiel Lopez and Eusebia Lopez v. Spouses Eduardo Lopez and Marcelina Lopez65Heirs Of Dr. Mario S. Intac v. Court of Appeals65Korean Air Co., Ltd. V. Yuson66Doa Rosana Realty and Development Corporation vs. Molave Development Corporation66Jocelyn M. Toledo vs. Marilou M. Hyden66ECE Realty and Development Inc. v. Rachel G. Mandap67OBJECT OF CONTRACTSAtty. Pedro M. Ferrer vs. Spouses Alfredo Diaz and Imelda Diaz67CAUSE OF CONTRACTS

J.L.T. Agro Inc. v. Balansag68Alvarez v. PICOP Resources68FORM OF CONTRACTSManuel Mallari and Millie Mallari v. Rebecca Alsol69Serafin Naranja et al. vs. Court of Appeals69REFORMATION OF INSTRUMENTSBenny Go v. Eliodoro Bacaron69INTERPRETATION OF CONTRACTSHoly Cross of Davao College, Inc. vs. Holy Cross of Davao Faculty Union Kampi70Agas vs. Sabico70Berman Memorial Park, Inc. and Luisa Chong v. Francisco Cheng70Rosalina Tagle v.Court of Appeals, Fast International Corporation and/or Kuo Tung Yu Huang71Martha R. Horrigan v. Troika Commercial, Inc.71Aurelio P. Alonzo and Teresita A. Sison v. Jaime and Perlita San Juan71Vicente Go v. Pura Kalaw, Inc.72Sps. Alvaro v. Sps. Returban72Ayala Inc. v. Ray Burton Corp72Laureano T. Angeles v. Philippine National Railways (PNR) And Rodolfo Flores73Elenita Ishida and Continent Japan Co., Inc. v. Antusa de Mesa-Magno, Firmo de Mesa et.al.73Heirs of the Deceased Carmen Cruz-Zamora v. Multiwood International, Inc.73Antipolo Properties v. Nuyda74Adriatico Consortium, Inc., et al. vs. Land Bank of the Philippines74Manila International Airport Authority v. Avia Filipinas International, Inc.,74RESCISSIBLE CONTRACTS

Oliverio Laperal and Filipinas Golf & Country Club, Inc. v.Solid Homes, Inc.75C-J Yulo & Sons, Inc. v.Roman Catholic Bishop of San Pablo, Inc.75Spouses Felipe and Leticia Cannu v. Spouses Gil And Fernandina Galang and National Home Mortgage Finance Corporation75Bienvenido M. Casino Jr. v. Court of Appeals76Pryce Corporation (Formerly Pryce Properties Corporation),v.Philippine Amusement And Gaming Corporation76Coastal Pacific Trading Inc., v. Southern Rolling Mills, Co., Inc. et al.77Pan Pacific Industrial Sales Co., v. Court of Appeals77Laurencio Ramel, et.al. v. Daniel Aquino and Guadaluper Abalahin77Union Bank of the Philippines v. Sps. Ong77Philippine Leisure and Retirement Authority v. Court of Appeals78Uniwide Holdings, Inc. v. Jandecs Transportation Co., Inc.78Bonrostro v. Luna79Armand O. Raquel-Santos and Annalissa Mallari v. Court of Appeals and Finvest Securities Co., Inc.79Heirs of Sofia Quirong v. Development Bank of the Philippines79G Holdings, Inc., v. National Mines and Allied WorkersUnion Local 103 (NAMAWU)80VOIDABLE CONTRACTSJorge Gonzales v. Climax Mining Ltd.80Felicitas Asycong and Teresa Polan v. Court of Appeals and Moller Lending Investor80Development Bank of the Philippines and Privatization and Management Office v. CA80Barceliza P. Capistrano vs. Darryl Limcuando and Fe S. Sumiran81Hernania Lani Lopez vs. Gloria Umale-Cosme81First Philippine Holdings Corporation vs. Trans Middle East (Phils.) Equities, Inc.82ECE Realty And Development Inc. v. Rachel G. Mandap82UNENFORCEABLE CONTRACTSSpouses Mario and Elizabeth Torcuator v. Spouses Remigio and Gloria Bernabe and Spouses Diosdado and Lourdes Salvador82Banco Filipino Savings v. Diaz83Lina Pealber vs. Quirino Ramos et al.83Ordua, et al. v. Fuentebella, et al.83Municipality of Hagonoy, Bulacan vs. Dumdum, Jr.84Rogelio Dantis,v. Julio Maghinang, Jr.84VOID OR INEXISTENTMenchavez vs. Teves84Department of Health v. C.V. Canchela & Associates, Architects (CVCAA), in Association With MCS Engineers Co., and A.O. Mansueto IV Electrical Engineering Services, and Luis Alina, Sheriff IV, RTC, Manila85The Manila Banking Corporation v. Edmundo S. Silverio and The Court of Appeals,85Lao v. Republic of the Philippines and the Government Service Insurance System86Potenciano Ramirez v. Ma. Cecilia Ramirez86Joaquin Villegas and Emma M. Villegas v. Rural Bank of Tanjay Inc.86Land Bank of the Philippines v. Eduardo M. Cacayuran87Queensland-Tokyo Commodities, Inc. vs. George87Anuel O. Fuentes and Leticia L. Fuentes vs. Conrado G. Roca87Domingo Gonzalo vs. John Tarnate, Jr.87

OBLIGATIONSCHAPTER 1. GENERAL PROVISIONSErnesto Uypitching, et al. v. Ernesto Quiamco

GR No. 146322, December 6, 2006

Corona, J.

ISSUE: Can an obligation to pay damages arise from an abuse of a right which is exercised to the prejudice or injury of another person as when a corporation seized a motorcycle with the assistance of policemen without a search warrant or order?

DOCTRINE: A blatant disregard for the lawful procedure for the enforcement of its right, to the prejudice of respondent violated the law as well as public morals, and transgressed the proper norms of human relations. Article 19, also known as the principle of abuse of right, prescribes that a person should not use his right unjustly or contrary to honesty and good faith, otherwise he opens himself to liability. There is an abuse of right when it is exercised solely to prejudice or injure another. The exercise of a right must be in accordance with the purpose for which it was established and must not be excessive or unduly harsh; there must be no intention to harm another. Otherwise, liability for damages to the injured party will attach.

Lourdes Dela Cruz v. Court of Appeals

G.R No. 139442, December 6, 2006

Velasco, Jr. J.:

ISSUE: Can a person under a contract of lease possess such land by tolerance even after the expiration of the contract of lease and after a demand to vacate.

DOCTRINE: Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Thus, initially petitioner as lessee is the legal possessor of the subject lot by virtue of a contract of lease. When fire destroyed her house, the Reyeses considered the lease terminated. It has been held that a person who occupies the land of another at the latters tolerance or permission, without any contract between them, is necessarily bound by an implied promise that he will vacate upon demand, failing which a summary action for ejectment is the proper remedy against them.

Department of Health v. HTMC Engineers Co.

G.R. No. 146120. January 27, 2006

Chico-Nazario,J.

ISSUE: Can a perfected contract be renounced unilaterally?

DOCTRINE: No. A contract properly executed between parties continues to be the law between said parties and should be complied with in good faith. There being a perfected contract, DOH cannot revoke orrenounce the same withoutthe consentofthe otherparty. Just as nobody can be forced to enterinto a contract,in the same manner, once a contract is entered into,noparty can renounce it unilaterally or without the consent of the other. It is a general principle of law that no one may be permitted to change his mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party. As no revision to the originalagreementwas ever arrived at,the terms of the original contract shall continue to govern over both the HTMC and the DOH with respect to the infrastructure projects as if no amendments were ever initiated. In the absence of a new perfected contractbetween HTMC and DOH,both parties shall continue to be bound by the stipulations of the original contract and all its natural effects.

International Finance Corporation v. Imperial Textile Mills, Inc.

G.R. No. 160324; November 15, 2005Panganiban,J.:

ISSUES:(1) What is the nature of the contract entered into between the parties denominated as Guarantee Agreement?

(2) Under Suretyship, what are the obligations of the parties under the contract?

DOCTRINES:(1) The terms of a contract govern the rights and obligations of the contracting parties. When the obligor undertakes to be "jointly and severally" liable, it means that the obligation is solidary.If solidary liability was instituted to "guarantee" a principal obligation, the law deems the contract to be one of suretyship.

The creditor in the present Petition was able to show convincingly that, although denominated as a "Guarantee Agreement," the Contract was actually a surety. Notwithstanding the use of the words "guarantee" and "guarantor," the subject Contract was indeed a surety, because its terms were clear and left no doubt as to the intention of the parties.

Theobligationsof the guarantors are meticulously expressed in the following provision:

"Section 2.01. The Guarantorsjointly and severally, irrevocably, absolutely and unconditionally guarantee, as primary obligors and not as sureties merely, the due and punctual payment of the principal of, and interest and commitment charge on, the Loan, and the principal of, and interest on, the Notes, whether at stated maturity or upon prematuring, all as set forth in the Loan Agreement and in the Notes."

The Agreement uses "guarantee" and "guarantors," prompting ITM to base its argument on those words. This Court is not convinced that the use of the two words limits the Contract to a mere guaranty. The specific stipulations in the Contract show otherwise.

(2) While referring to ITM as a guarantor, the Agreement specifically stated that the corporation was "jointly and severally" liable. To put emphasis on the nature of that liability, the Contract further stated that ITM was a primary obligor, not ameresurety. Those stipulations meant only one thing: thatat bottom, and to all legal intents and purposes, it was a surety.

Indubitably therefore, ITM bound itself to be solidarilyliable with PPIC for the latters obligations under the Loan Agreement with IFC. ITM thereby brought itself to the level of PPIC and could not be deemed merely secondarily liable.

Sebastian Siga-An v. Alicia VillanuevaG.R. No. 173227, January 20, 2009Chico-Nazario J.:ISSUE: Whether solutio indebiti applies to situations wherein there was a wrongful payment of interest?DOCTRINE: Yes. Under Article 1960 of the Civil Code, if the borrower of loan pays interest when there has been no stipulation therefor, the provisions of the Civil Code concerning solutio indebiti shall be applied. Article 2154 of the Civil Code explains the principle of solutio indebiti. Said provision provides that if something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. In such a case, a creditor-debtor relationship is created under a quasi-contract whereby the payor becomes the creditor who then has the right to demand the return of payment made by mistake, and the person who has no right to receive such payment becomes obligated to return the same. The quasi-contract of solutio indebiti harks back to the ancient principle that no one shall enrich himself unjustly at the expense of another. The principle of solutio indebiti applies where (1) a payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment; and (2) the payment is made through mistake, and not through liberality or some other cause. We have held that the principle of solutio indebiti applies in case of erroneous payment of undue interest.

Makati Stock Exchange, Inc., et al. v. Miguel V. Campos, substituted By Julia Ortigas Vda. De CamposG.R. No. 138814, April 16, 2009Chico-Nazario, J.:ISSUE: Whether the claim of a right or an obligation may be made even without identifying its source.

DOCTRINE: No. Right and obligation are legal terms with specific legal meaning. A right is a claim or title to an interest in anything whatsoever that is enforceable by law. An obligation is defined in the Civil Code as a juridical necessity to give, to do or not to do. For every right enjoyed by any person, there is a corresponding obligation on the part of another person to respect such right. Thus, Justice J.B.L. Reyes offers the definition given by Arias Ramos as a more complete definition:

An obligation is a juridical relation whereby a person (called the creditor) may demand from another (called the debtor) the observance of a determinative conduct (the giving, doing or not doing), and in case of breach, may demand satisfaction from the assets of the latter.

Therefore, an obligation imposed on a person, and the corresponding right granted to another, must be rooted in at least one of these five sources. The mere assertion of a right and claim of an obligation in an initiatory pleading, whether a Complaint or Petition, without identifying the basis or source thereof, is merely a conclusion of fact and law. A pleading should state the ultimate facts essential to the rights of action or defense asserted, as distinguished from mere conclusions of fact or conclusions of law. Thus, a Complaint or Petition filed by a person claiming a right to the Office of the President of this Republic, but without stating the source of his purported right, cannot be said to have sufficiently stated a cause of action. Also, a person claiming to be the owner of a parcel of land cannot merely state that he has a right to the ownership thereof, but must likewise assert in the Complaint either a mode of acquisition of ownership or at least a certificate of title in his name.

Spouses Patricio and Myrna Bernales v. Heirs Of Julian Sambaan

G.R. No. 163271, January 15, 2010Del Castillo, J.:ISSUE: Whether title to the subject parcel of land was transferred by virtue of a forged deed of absolute sale allegedly executed by the late Julian and Guillerma Sambaan in favor of Myrna Bernales and her husband.DOCTRINE: No. With the presentation of the forged deed, even if accompanied by the owners duplicate certificate of title, the registered owner did not thereby lose his title, and neither does the assignee in the forged deed acquire any right or title to the said property. The valid execution of the Deed of Absolute Sale will convey and transfer ownership in favor of appellants title based on the rule that by the contract of sale one of the contracting parties obligates himself to transfer ownership of and to deliver a determinate thing, and the other to pay therefor a sum certain in money or its equivalent. The fact that the assailed Deed was not signed by Julian and the signatures of Julian and Guillerma were forged per findings of the NBI Senior Document Examiner, it can therefore be inferred that the subsequent issuance of Transfer Certificate of Title No. T-14204 has no basis at all since ownership was not conveyed to appellants by reason of the forged Deed.

Vitarich Corporation v. Chona LosinG.R. No. 181560, November 15, 2010

Mendoza, J.:ISSUE: Whether Vitarich should be held liable for the conduct of its employee, Dericto, in taking out dressed chickens from the bodega of Vitarich and receiving the same but charging it as Charge Sales Invoice against its client, Losin.

DOCTRINE: No. Pursuant to Article 2180 of the Civil Code, that vicarious liability attaches only to an employer when the tortuous conduct of the employee relates to, or is in the course of, his employment. The question to ask should be whether at the time of the damage or injury, the employee is engaged in the affairs or concerns of the employer or, independently, in that of his own? Vitarich incurred no liability when Directos conduct, act or omission went beyond the range of his employment.

CBK Power Company Limited vs. Commissioner of Internal Revenue G.R. Nos. 198729-30 January 15, 2014

Sereno, C.J.:ISSUE: Whether the principle of solutio indebiti applies in a claim for the issuance of a tax credit certificate representing the latter's alleged unutilized input taxes on local purchases of goods and services attributable to effectively zero-rated sales to National Power Corporation (NPC) for the second and third quarters of 2005.

DOCTRINE: No. Devoid of merit is the applicability of the principle of solutio indebiti to the present case. According to this principle, if something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. In that situation, a creditor-debtor relationship is created under a quasi-contract, whereby the payor becomes the creditor who then has the right to demand the return of payment made by mistake, and the person who has no right to receive the payment becomes obligated to return it. The quasi-contract of solutio indebiti is based on the ancient principle that no one shall enrich oneself unjustly at the expense of another .There is solutio indebiti when: (1) Payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment; and (2) Payment is made through mistake, and not through liberality or some other cause. Though the principle of solutio indebiti may be applicable to some instances of claims for a refund, the elements thereof are wanting in this case. First, there exists a binding relation between petitioner and the CIR, the former being a taxpayer obligated to pay VAT. Second, the payment of input tax was not made through mistake, since petitioner was legally obligated to pay for that liability. The entitlement to a refund or credit of excess input tax is solely based on the distinctive nature of the VAT system. At the time of payment of the input VAT, the amount paid was correct and proper.CHAPTER 2. NATURE AND EFFECT OF OBLIGATIONSCortes v. Court of AppealsGR No. 126083. July 12, 2006

Ynares-Santiago, J.ISSUES: What is the effect if both parties incur in delay in a reciprocal obligation?

DOCTRINE: Considering that both parties were in delay and that their obligation was reciprocal, performance thereof must be simultaneous. The mutual inaction of Cortes and the Corporation therefore gave rise to a compensatio morae or default on the part of both parties because neither has completed their part in their reciprocal obligation. This mutual delay of the parties cancels out the effects of default such that it is as if no one is guilty of delay.

Winifreda Ursal v. Court of Appeals, The Rural Bank of Larena (Siquijor), Inc. and Spouses Jesus Moneset and Cristita Moneset

GR No. 142411. October 14, 2005

Austria-Martinez, J.:

ISSUE: Is the vendor liable for damages in reciprocal obligations?DOCTRINE: Wherethe vendee in the contract to sell also took possession of the property, the subsequent mortgage constituted by the owner over said property in favor of another person was valid since the vendee retainedabsolute ownershipover the property.At most, the vendee in the contract to sell was entitled only to damages pursuant to Art. 1169 of the Civil Code on reciprocal obligations.

Prudential Bank v. Chonney Lim

G.R. No. 136371 November 11, 2005

Tinga,J.:

ISSUE: Whether the failure of the banks employees to credit the deposit to respondents savings account constitutes actionable negligence in law.DOCTRINE: Article 1172 of the Civil Code ordains that responsibility arising from negligence in the performance of an obligation is demandable. The failure of the banks employees to credit the amount ofP34,000.00 to respondents savings account, resulting as it did in the dishonor of respondents checks, constitutes actionable negligence in law.From another perspective, the negligence of the bank constitutes a breach of duty to its client. It is worthy of note that the banking industry is impressed with public interest. As such, it must observe a high degree of diligence and observe lofty standards of integrity and performance. By the nature of its functions, a bank is under obligation to treat the accounts of its depositors with meticulous care and always to have in mind the fiduciary nature of its relationship with them.

YHT Realty Corporation, Erlinda Lainez and Anicia Payam v. Court of Appeals and Maurice McloughlinG.R. No. 126780. February 17, 2005

Tinga, J.:

ISSUE: When will the hotelkeepers/innkeepers liable for the effects of their guests?DOCTRINE: Article 2003 is controlling, thus:Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in Articles 1998 to 2001is suppressed or diminished shall be void.

Article 2003 was incorporated in the New Civil Code as an expression of public policy precisely to apply to situations such as that presented in this case. The hotel business like the common carrier's business is imbued with public interest. Catering to the public, hotelkeepers are bound to provide not only lodging for hotel guests and security to their persons and belongings. The twin duty constitutes the essence of the business. The law in turn does not allow such duty to the public to be negated or diluted by any contrary stipulation in so-called "undertakings" that ordinarily appear in prepared forms imposed by hotel keepers on guests for their signature.

In an early caseit was ruled that to hold hotelkeepers or innkeeper liable for the effects of their guests, it is not necessary that they be actually delivered to the innkeepers or their employees. It is enough that such effects are within the hotel or inn.With greater reason should the liability of the hotelkeeper be enforced when the missing items are taken without the guest's knowledge and consent from a safety deposit box provided by the hotel itself, as in this case.

Schimtz Transport and Brokerage Corporation v. Transport Venture Inc.G.R. No. 150255, April 22, 2005Carpio-Morales J:ISSUE: How must the liability of the common carrier, on one hand, and an independent contractor, on the other hand, be described?

DOCTRINE: It would be solidary. A contractual obligation can be breached by tort and when the same act or omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article 2194 of the Civil Code can well apply. In fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract. Stated differently, when an act which constitutes a breach of contract would have itself constituted the source of a quasi-delictual liability had no contract existed between the parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort to apply.

As for Black Sea, its duty as a common carrier extended only from the time the goods were surrendered or unconditionally placed in its possession and received for transportation until they were delivered actually or constructively to consignee Little Giant.

Parties to a contract of carriage may, however, agree upon a definition of delivery that extends the services rendered by the carrier. In the case at bar, Bill of Lading No. 2 covering the shipment provides that delivery be made to the port of discharge or so near thereto as she may safely get, always afloat. The delivery of the goods to the consignee was not from pier to pier but from the shipside of M/V Alexander Saveliev and into barges, for which reason the consignee contracted the services of petitioner. Since Black Sea had constructively delivered the cargoes to Little Giant, through petitioner, it had discharged its duty. In fine, no liability may thus attach to Black Sea.

Lapreciosisima Cagungun, et. al. v. Planters Development Bank

GR No. 158674. October 17, 2005

Chico-Nazario, J.:ISSUE: What is the degree of diligence required in the performance of an obligation?

DOCTRINE: The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a family. Article 1172 of the New Civil Code states that the degree of diligence required of an obligor is that prescribed by law or contract, and absent such stipulation then the diligenceof a family. In every case, the depositor expects the bank to treat his account with utmost fidelity, whether such accounts consists only of a few hundred pesos or of millions of pesos.

Radio Communication of the Philippines vs. Alfonso Verchez, et al.

G.R. No. 164349. January 31, 2006

Carpio Morales, J.:

ISSUE: Must a causal connection between the delay of the respondent in the performance of its duty and the injury suffered by the plaintiffs be proved in culpa contractual?

DOCTRINE: No. Inculpa contractual, the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief. The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof. A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered.

Crisostomo Alcaraz v. Court of Appeals

G.R. No. 152202. July 28, 2006

Puno, J.:ISSUE: Is a credit card holder liable to pay the interests and surcharges imposed by the bank for non-payment of his obligations absent any stipulation for such payment?DOCTRINE: No. Absence of any proof that the terms and conditions of the credit card use has been shown to its client, and failure to by respondent to show that an application form or document prior to the issuance of the credit card has been submitted or signed by the same, the client should not be condemned to pay the interest and charges provided under its terms and conditions.Metropolitan Bank and Trust Company vs. Renato D. Cabilzo

GR No. 154469. December 6, 2006

Chico-Nazario, J:ISSUE: Can a Banking Institution Who Relied To Another Banks indorsement of a check evade liability by failing to detect alterations made in a check.

DOCTRINE: No. The point is that as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. The appropriate degree of diligence required of a bank must be a high degree of diligence, if not the utmost diligence. In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such account consists only of a few hundred pesos or of millions.

Ma. Elizabeth Kind and Mary Ann King v. Megaworld Properties and Holdings, Inc.

G.R. No. 162895. August 16, 2006

Quisumbing, J.:

ISSUE: Is refund a remedy in case there is a defect in the object of the obligation?

DOCTRINE: There is nothing on record to show that the original structure was unstable. One who alleges a fact has the burden of proving it. Aside from the pictures and videos of the cracked perimeter fence, petitioners did not present any other evidence. These pictures and videos are insufficient to show that the townhouses foundation was structurally defective. The cracks could be merely superficial. Other than that, the presumption is that there was no irregularity regarding the approval of the building plan. Moreover, respondent presented an affidavit of a structural engineer attesting that the cracks and leaks on the perimeter fence do not affect the structural integrity of the townhouse. Absent any showing that the townhouse structure was unstable and unsafe for habitation, petitioners are not entitled to a refund.

Autocorp Group v. Intra Strata Assurance Corporation

G.R. No. 166662, 556 SCRA 250

ISSUES:

(1) Is demand necessary to make an obligation become due and demandable?

(2) Are defenses against the Bureau of Customs completely available against ISAC, since the right of the latter to seek indemnity from petitioner depends on the right of the BOC to proceed against the bonds?

DOCTRINE:

(1) Demand, whether judicial or extrajudicial, is not required before an obligation becomes due and demandable-a demand is only necessary in order to put an obligor in a due and demandable obligation in delay, which in turn is for the purpose of making the obligor liable for interests or damages for the period of delay.

(2) ISACs right to seek indemnity from petitioners does not constitute subrogation under the Civil Code, considering that there has been no payment yet by ISAC to the BOC. There are indeed cases in the aforementioned Article 2071 of the Civil Code wherein the guarantor or surety, even before having paid, may proceed against the principal debtor, but in all these cases, Article 2071 of the Civil Code merely grants the guarantor or surety an action to obtain release from the guaranty, or to demand a security that shall protect him from any proceedings by the creditor and from the danger of insolvency of the debtor. The benefit of subrogation, an extinctive subjective novation by a change of creditor, which transfers to the person subrogated, the credit and all the rights thereto appertaining, either against the debtor or against third persons, is granted by the Article 2067 of the Civil Code only to the guarantor (or surety) who pays.

ISAC cannot be said to have stepped into the shoes of the BOC, because the BOC still retains said rights until it is paid. ISACs right to file Civil Case No. 95-1584 is based on the express provision of the Indemnity Agreements making petitioners liable to ISAC at the very moment ISACs bonds become due and demandable for the liability of Autocorp Group to the BOC, without need for actual payment by ISAC to the BOC. But it is still correct to say that all the defenses available to petitioners against the BOC can likewise be invoked against ISAC because the latters contractual right to proceed against petitioners only arises when the Autocorp Group becomes liable to the BOC for non-compliance with its undertakings. Indeed, the arguments and evidence petitioners can present against the BOC to prove that Autocorp Groups liability to the BOC is not yet due and demandable would also establish that petitioners liability to ISAC under the Indemnity Agreements has not yet arisen.

J Plus Asia Development Corporation v. Utility Assurance CorporationG.R. No. 199650, 700 SCRA 134

ISSUE: Can delay take place even if the obligation to perform or complete the project was not yet demandable because the agreed completion date is yet to come?

DOCTRINE: Default or mora on the part of the debtor is the delay in the fulfillment of the prestation by reason of a cause imputable to the former. It is the non-fulfillment of an obligation with respect to time.In this jurisdiction, the following requisites must be present in order that the debtor may be in default: (1) that the obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance judicially or extrajudicially.

Since the parties contemplated delay in the completion of the entire project as can be seen in the Construction Agreement, the CA concluded that the failure of the contractor to catch up with schedule of work activities did not constitute delay giving rise to the contractors liability for damages.

Article 1374 of the Civil Code requires that the various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. Here, the work schedule approved by petitioner was intended, not only to serve as its basis for the payment of monthly progress billings, but also for evaluation of the progress of work by the contractor. Article 13.01 (g) (iii) of the Construction Agreement provides that the contractor shall be deemed in default if, among others, it had delayed without justifiable cause the completion of the project "by more than thirty (30) calendar days based on official work schedule duly approved by the OWNER."

Where a party to a building construction contract fails to comply with the duty imposed by the terms of the contract, a breach results for which an action may be maintained to recover the damages sustained thereby, and of course, a breach occurs where the contractor inexcusably fails to perform substantially in accordance with the terms of the contract.

Polo S. Pantaleon v. American Express International, Inc.G.R. No. 174269, May 8, 2009Tinga, J.:ISSUE: Whether delay by itself gives rise to moral damages.DOCTRINE: No. It should be emphasized that the reason why petitioner is entitled to damages is not simply because respondent incurred delay, but because the delay, for which culpability lies under Article 1170, led to the particular injuries under Article 2217 of the Civil Code for which moral damages are remunerative. Moral damages do not avail to soothe the plaints of the simply impatient, so this decision should not be cause for relief for those who time the length of their credit card transactions with a stopwatch. The somewhat unusual attending circumstances to the purchase at Coster that there was a deadline for the completion of that purchase by petitioner before any delay would redound to the injury of his several traveling companions gave rise to the moral shock, mental anguish, serious anxiety, wounded feelings and social humiliation sustained by the petitioner, as concluded by the RTC. Those circumstances are fairly unusual, and should not give rise to a general entitlement for damages under a more mundane set of facts.

Sps. Guanio v. Makati Shangri-La HotelGR No. 190601, February 7, 2011

ISSUE: Whether the doctrine of proximate cause is applicable to a breach of contract.DOCTRINE: No. The Court finds that since petitioners complaint arose from a contract, the doctrine of proximate cause finds no application to it, the latter applicable only to actions for quasi-delicts, not in actions involving breach of contract. Breach of contract is defined as the failure without legal reason to comply with the terms of a contract. The appellate court, and even the trial court, observed that petitioners were remiss in their obligation to inform respondent of the change in the expected number of guests. Petitioners failure to discharge such obligation thus excused respondent from liability for any damage or inconvenience occasioned thereby.

What applies in the present case is Article 1170 of the Civil Code which reads:

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any manner contravene the tenor thereof, are liable for damages.

Inculpa contractualthe mere proof of the existence of the contract and the failure of its compliance justify,prima facie, a corresponding right of relief. The law, recognizing the obligatory force ofcontracts, will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof. Abreach upon the contract confers upon the injured party a validcause for recovering that which may have been lost or suffered.The remedy serves to preserve the interests of the promissee that may include hisexpectation interest,which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed,or his reliance interest,which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made; or hisrestitution interest,which is his interest in having restored to him any benefit that he has conferred on the other party.Marques v. Far East BankG.R. No. 171379; January 10, 2011ISSUE: Whether FEBTC is estopped from claiming that the insurance premium in the contract has been paid, making it liable for damages.

DOCTRINE: Yes. In estoppel, a party creating an appearance of fact, which is false, is bound by that appearance as against another person who acted in good faith on it. InSantiago Syjuco, Inc. v. Castro,the Court stated that estoppel may arise from silence as well as from words. Estoppel by silence arises where a person, who by force of circumstances is obliged to another to speak, refrains from doing so and thereby induces the other to believe in the existence of a state of facts in reliance on which he acts to his prejudice.

As a consequence of its negligence, FEBTC must be held liable for damages pursuant to Article 1172 in relation to Article 2176 of the Civil Code which states whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Indisputably, had the insurance premium been paid, through the automatic debit arrangement with FEBTC, Maxilites fire loss claim would have been approved.Mondragon Leisure and Resorts Corporation v. Court of Appeals et al.

G.R. No.154188, June 15, 2005

Quisumbing, J.:ISSUE: In 1997, the Asian Financial crisis occurred. Is this a fortuitous event contemplated under Article 1174 such that a debtor cannot be held in default under a loan agreement?

DOCTRINE: No. To exempt the obligor from liability for a breach of an obligation by reason of a fortuitous event, the following requisites must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforeseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor. The following are excepted from the rule: (1) when the law expressly so specifies; (2) when it is otherwise declared by the parties; and (3) when the nature of the obligationrequires the assumption of risks. Every business venture involves risks.Risks are not unforeseeable; they are inherent in business. Hence, a corporation that enters into a loan agreement, being aware of the economic environment at the time it entered into such agreement, can be declared in default despite events such as the Asian financial crisis. It is not a fortuitous event so as to exonerate a party from its obligation.

Philippine Realty and Holding Corp. v. Ley Const. and Dev. Corp.G. R. No. 165548, June 13, 2011

ISSUE: Whether there is a fortuitous event that will exempt the obligor from liability for the breach of an obligation. DOCTRINE: Yes. Under Article 1174 of the Civil Code, to exempt the obligor from liability for a breach of an obligation due to an "act of God" or force majeure, the following must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforeseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor. The shortage in supplies and cement may be characterized as force majeure. In the present case, hardware stores did not have enough cement available in their supplies or stocks at the time of the construction in the 1990s. Likewise, typhoons, power failures and interruptions of water supply all clearly fall under force majeure. Since LCDC could not possibly continue constructing the building under the circumstances prevailing, it cannot be held liable for any delay that resulted from the causes aforementioned.

Gilat Satellite Networks, Ltd. v. United Coconut Planters Bank General Insurance Co., Inc.

G.R. No. 189563; April 7, 2014Sereno, CJ:ISSUE: Whether the delay started to run from the time it demanded the fulfillment of respondents obligation under the suretyship contract.DOCTRINE: Yes. As to the issue of when interest must accrue, the Civil Code is explicit in stating that it accrues from the time judicial or extrajudicial demand is made on the surety. This ruling is in accordance with the provisions of Article 1169 of the Civil Code and of the settled rule that where there has been an extra-judicial demand before an action for performance was filed, interest on the amount due begins to run, not from the date of the filing of the complaint, but from the date of that extra-judicial demand.60 Considering that respondent failed to pay its obligation on 30 May 2000 in accordance with the Purchase Agreement, and that the extrajudicial demand of petitioner was sent on 5 June 2000,61 we agree with the latter that interest must start to run from the time petitioner sent its first demand letter (5 June 2000), because the obligation was already due and demandable at that time.

Carlo F. Sunga v.Virjen Shipping Corporation, Nissho Odyssey Ship Management Pte. Ltd., And/Or Capt. Angel ZambranoGr no. 198640; April 23, 2014

Brion, J.:

ISSUE: Whether Sungas injury was a result of an accident.DOCTRINE: Yes. In Jarco Marketing Corporation, et al., v. Court of Appeals, SC ruled that an accident pertains to an unforeseen event in which no fault or negligence attaches to the defendant. It is "a fortuitous circumstance, event or happening; an event happening without any human agency, or if happening wholly or partly through human agency, an event which under the circumstances is unusual or unexpected by the person to whom it happens." In the present case, Sunga did not incur the injury while solely performing his regular duties; an intervening event transpired which brought upon the injury. To repeat, the two other oilers who were supposed to help carry the weight of the 200-kilogram globe valve lost their grasp of the globe valve. As a result, Sungas back snapped when the entire weight of the item fell upon him. The sheer weight of the item is designed not to be carried by just one person, but as was observed, meant to be undertaken by several men and expectedly greatly overwhelmed the physical limits of an average person. Notably, this incident cannot be considered as foreseeable, nor can it be reasonably anticipated. Sungas duty as a fitter involved changing the valve, not to routinely carry a 200-kilogram globe valve singlehandedly. The loss of his fellow workers group was also unforeseen in so far as Sunga was concerned.

CHAPTER 3. DIFFERENT KINDS OF OBLIGATIONSSECTION 1. PURE AND CONDITIONAL OBLIGATIONSSacobia Hills Development Corporation vs. Allan Ty

G.R. No. 165889. September 20, 2005

Ynares-Santiago, J.:

ISSUE: Can a non-existent obligation be the subject of rescission?

DOCTRINE: No. Ty did not pay the full purchase price which is his obligation under the contract to sell, therefore, it cannot be said that Sacobia breached its obligation. No obligations arose on its part because respondents non-fulfillment of the suspensive condition rendered the contract to sell ineffective and unperfected. Indeed, there can be no rescission under Article 1191 of the Civil Code because until the happening of the condition, i.e. full payment of the contract price, Sacobias obligation to deliver the title and object of the sale is not yet extant. A non-existent obligation cannot be subject of rescission. Article 1191 speaks of obligations already existing, which may be rescinded in case one of the obligors fails to comply with what is incumbent upon him.

Carrascoso v. Court of Appeals

G.R. No. 123672. December 14, 2005

Carpio Morales, J.:

ISSUE: May the partially unpaid seller rescind the sale for failure of the buyer to pay the balance of the purchase price of the property in the manner and within the period agreed upon?

DOCTRINE: Yes. Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other.The right of rescission of a party to an obligation under Article 1191 of the New Civil Code is predicated on a breach of faith by the other party who violates the reciprocity between them.

A contract of sale is a reciprocal obligation. The seller obligates itself to transfer the ownership of and deliver a determinate thing, and the buyer obligates itself to pay therefor a price certain in money or its equivalent The non-payment of the price by the buyer is a resolutory condition which extinguishes the transaction that for a time existed, and discharges the obligations created thereunder. Such failure to pay the price in the manner prescribed by the contract of sale entitles the unpaid seller to sue for collection or to rescind the contract.

Spouses William And Jeanette Yao v. Carlomagno B. Matela

G.R. No. 167767. August 29, 2006

Ynares-Santiago, J.:

ISSUE: May a court annul a contract on the ground that its object is a disastrous deal or an unwise investment? What is the role of the court in determining the liability of the contracting parties who are both guilty of violating the terms therein?

DOCTRINE: The well-entrenched doctrine is that the law does not relieve a party from the effects of an unwise, foolish or disastrous contract, entered into with full awareness of what he was doing and entered into and carried out in good faith. Such a contract will not be discarded even if there was a mistake of law or fact. Courts have no jurisdiction to look into the wisdom of the contract entered into by and between the parties or to render a decision different therefrom. They have no power to relieve parties from obligation voluntarily assumed, simply because their contracts turned out to be disastrous deals or unwise investments. However, in situations such as the one discussed above, where it cannot be conclusively determined which of the parties first violated the contract, equity calls and justice demands that we apply the solution provided in Article 1192 of the Civil Code.

Spouses Jaime Benos And Marina Benos v. Spouses Gregorio Lawilao And Janice Gail Lawilao

G.R. No. 172259, December 5, 2006

Ynares-Santiago, J.:

ISSUE: In reciprocal obligations in a pacto de retro sale, is the vendee precluded to pay even after the date agreed upon due to a cross-claim found in the answer?

DOCTRINE: Yes. While the vendors did not rescind the Pacto de Retro Sale through a notarial act, they nevertheless rescinded the same in their Answer with Counterclaim. Even a cross-claim found in the Answer could constitute a judicial demand for rescission that satisfies the requirement of the law.The counterclaim of the vendors in their answer satisfied the requisites for the judicial rescission of the subject Pacto de Retro Sale

Darrel Cordero, et al. vs. F.S. Management and Development Corporation

G.R. No. 167213. October 31, 2006

Carpio Morales, J.:

ISSUE: May the contract be rescinded in case of failure of a party to comply with its obligations under a contract, such as the obligation to pay the down payment of the purchase price in a contract to sell?

DOCTRINE: No. A contract to sell is not a contract of sale. Article 1191 applies only in reciprocal contracts. A contract to sell is not a reciprocal contract. Under a contract to sell, the seller retains title to the thing to be sold until the purchaser fully pays the agreed purchase price. The full payment is a positive suspensive condition, the non-fulfillment of which is not a breach of contract but merely an event that prevents the seller from conveying title to the purchaser. The non-payment of the purchase price renders the contract to sell ineffective and without force and effect. Nevertheless, while rescission does not apply in this case, petitioners may cancel the contract to sell, their obligation not having arisen.

Yamamoto v. Nishino Leather Industries, Inc.

G.R. No. 150283, 551 SCRA 447

ISSUE: Will an offer to a stockholder to that he could take out the Machinery in the corporation if he wanted to so, provided that the value of said machines would be deducted from his capital contribution, give rise to an obligation to the corporation to deliver said properties to the prior?

DOCTRINE: Without acceptance, a mere offer produces no obligation. Thus, under Article 1181 of the Civil Code, "in conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition." In the case at bar, there is no showing of compliance with the condition for allowing Yamamoto to take the machineries and equipment, namely, his agreement to the deduction of their value from his capital contribution due him in the buy-out of his interests in the corporation. Yamamotos allegation that he agreed to the condition remained just that, no proof thereof having been presented.

The machineries and equipment, which comprised Yamamotos investment in NLII, thus remained part of the capital property of the corporation.

Spouses Jose T. Valenzuela and Gloria Valenzuela v. Kalayaan Development & Industrial CorporationG.R. No. 163244, June 22, 2009Peralta, J.:

ISSUE: Whether there can be a rescission of contract if a positive suspensive condition under a contract to sell has not been complied with.

DOCTRINE: No. Under a contract to sell, the seller retains title to the thing to be sold until the purchaser fully pays the agreed purchase price. The full payment is a positive suspensive condition, the non-fulfillment of which is not a breach of contract, but merely an event that prevents the seller from conveying title to the purchaser. The non-payment of the purchase price renders the contract to sell ineffective and without force and effect.

Since the obligation of respondent did not arise because of the failure of petitioners to fully pay the purchase price, Article 1191 of the Civil Code would have no application.

The non-fulfillment by the respondent of his obligation to pay, which is a suspensive condition to the obligation of the petitioners to sell and deliver the title to the property, rendered the contract to sell ineffective and without force and effect. The parties stand as if the conditional obligation had never existed. Article 1191 of the New Civil Code will not apply because it presupposes an obligation already extant. There can be no rescission of an obligation that is still non-existing, the suspensive condition not having happened.

Solar Harvest, Inc. v. DavaoCorrugated Carton CorporationG.R. No. 176868 July 26, 2010Nachura,J.:ISSUE: Whether petitioner failed to establish a cause of action for rescission it being shown that respondent did not commit any breach of its contractual obligation. DOCTRINE: Yes, in reciprocal obligations, as in a contract of sale, the general rule is that no demand is generally necessary because, once a party fulfills his obligation and the other party does not fulfill his, the latter automatically incurs in delay.But when different dates for performance of the obligations are fixed the other party would incur in delay only from the moment the other party demands fulfillment of the formers obligation. Evident from the records and even from the allegations in the complaint was the lack of demand by petitioner upon respondent to fulfill its obligation to manufacture and deliver the boxes. The Complaint only alleged that petitioner made a follow-up upon respondent, which, however, would not qualify as a demand for the fulfillment of the obligation. Petitioners witness also testified that they made a follow-up of the boxes, but not a demand.Without a previous demand for the fulfillment of the obligation, petitioner would not have a cause of action for rescission against respondent as the latter would not yet be considered in breach of its contractual obligation.

International Hotel Corporation, v. Francisco Joaquin, Jr. and Rafael SuarezG.R. No. 158361. April 10, 2013Bersamin,J.:ISSUES:

(1) Will the absence of intent on the part of the obligor to pre-empt the fulfillment of the condition warrant the application of Art. 1186?

(2) Will substantial compliance warrant the application of Art. 1234?

DOCTRINE:

(1) No. This provision refers to the constructive fulfillment of a suspensive condition,whose application calls for two requisites, namely: (a) the intent of the obligor to prevent the fulfillment of the condition, and (b) the actual prevention of the fulfillment. Since the debtor had no intent to prevent the fulfillment of the condition, Art. 1186 cannot be applied.

(2) Generally, yes. Art. 1234 applies only when an obligor admits breaching the contractafter honestly and faithfully performing all the material elements thereof except for some technical aspects that cause no serious harm to the obligee.However, if incomplete performance amounts to a material breach of the contract, the same shall no longer be applicable.

In order that there may be substantial performance of an obligation, there must have been an attempt in good faith to perform, without any willful or intentional departure therefrom. The deviation from the obligation must be slight, and the omission or defect must be technical and unimportant, and must not pervade the whole or be so material that the object which the parties intended to accomplish in a particular manner is not attained. The non-performance of a material part of a contract will prevent the performance from amounting to a substantial compliance.

Conversely, the principle of substantial performance is inappropriate when the incomplete performance constitutes a material breach of the contract. A contractual breach is material if it will adversely affect the nature of the obligation that the obligor promised to deliver, the benefits that the obligee expects to receive after full compliance, and the extent that the non-performance defeated the purposes of the contract.

Republic v. Holy Trinity Realty Development Corporation

G.R. No. 172410, 551 SCRA 303

ISSUE: Will the effects of the fulfillment of a condition retroact to the date of the constitution of the obligation?

DOCTRINE: The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. Hence, when HTRDC complied with the given conditions, as determined by the RTC in its Order dated April 21, 2003, the effects of the constructive delivery retroacted to the actual date of the deposit of the amount in the expropriation account of DPWH.

Subic Bay Metropolitan Authority v. Court of AppealsG.R. No. 192885, July 4, 2012.

ISSUE: Whether SBMA is entitled to receive service fees pursuant to the contract despite failing to render the services required from them?

.

DOCTRINE: No. Reciprocalobligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other.For one party to demand the performance of the obligation of the other party, the former must also perform its own obligation.Accordingly, petitioner, not having provided the services that would require the payment of service fees as stipulated in the Lease Development Agreement, is not entitled to collect the same.

The records show that petitioner did not actually provide most of the services enumerated in the Lease and Development Agreement and that the obligation involved in the agreement was reciprocal in nature; therefore, private respondent's obligation to pay was dependent upon petitioner's performance of its reciprocal duty to provide the agreed service, and since petitioner failed to perform its part of the deal, it cannot exact compliance from private respondent of its duty to pay.

Sps. Fernando and Lourdes Viloria vs. Continental Airlines, Inc.

G.R. No. 188288. January 16, 2012.ISSUE: Whether annulment in Art 1390 is the same as rescission under Art. 1191.

DOCTRINE: No. Annulment and rescission are two inconsistent remedies. In resolution, all the elements to make the contract valid are present; in annulment, one of the essential elements to a formation of a contract, which is consent, is absent. In resolution, the defect is in the consummation stage of the contract when the parties are in the process of performing their respective obligations; in annulment, the defect is already present at the time of the negotiation and perfection stages of the contract. Accordingly, by pursuing the remedy of rescission under Article 1191, there was implied admission of the validity of the subject contracts, forfeiting their right to demand their annulment. A party cannot rely on the contract and claim rights or obligations under it and at the same time impugn its existence or validity. Indeed, litigants are enjoined from taking inconsistent positions.

The right to rescind a contract for non-performance of its stipulations is not absolute. The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental violations as would defeat the very object of the parties in making the agreement. Whether a breach is substantial is largely determined by the attendant circumstances.

Under Article 1192, in case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages.SECTION 4. JOINT AND SOLIDARY OBLIGATIONSStronghold Insurance Company, Inc. v. Republic-Asahi Glass Corporation

G.R. No. 147561. June 22, 2006

Panganiban,C.J.ISSUE: Is a suretys liability under a performance bond automatically extinguished by the death of the principal?DOCTRINE: No. A surety companys liability under the performance bond it issues is solidary. The death of the principal obligor does not, as a rule, extinguish the obligation and the solidary nature of that liability. As a general rule, the death of either the creditor or the debtor does not extinguish the obligation.Obligations are transmissible to the heirs, except when the transmission is prevented by the law, the stipulations of the parties, or the nature of the obligation. Only obligations that are personal or are identified with the persons themselves are extinguished by death.

Section 5 of Rule 86of the Rules of Court expressly allows the prosecution of money claims arising from a contract against the estate of a deceased debtor. Evidently, those claims are not actually extinguished.What is extinguished is only the obligees action or suit filed before the court, which is not then acting as a probate court.

The death of the principal debtor will not work to convert, decrease or nullify the substantive right of the solidary creditor. Evidently, despite the death of the principal debtor, [the obligee] may still sue petitioner alone, in accordance with the solidary nature of the latters liability under the performance bond.Petron Corporation vs. Sps. Cesar Jovero and Erma F. Cudilla, et al.

G.R. No. 151038. January 18, 2012ISSUE: Whether payment made by one of the solidary debtor is enough to extinguish the liability of all the co-debtors.

DOCTRINE: According to Article 1217 of the Civil Code, payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept. The debtor who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due however, no interest for the intervening period may be demanded.

Article 1208 provides for the share of solidary debtors which states that if from the law, or the nature of the wording of the obligations to which the preceding article refers the contrary does not appear,the credit of debt shall bepresumed to be divided into as many equal shares as there are creditors or debtors, the credits or debts being considered distinct from one another, subject to the Rules of Court governing the multiplicity of suits.

Philippine Commercial International Bank v. CA

G.R. No. 121989. January 31, 2006

Tinga, J.:ISSUE: In the absence of stipulation, how should the debtor (Atlas) satisfy his obligation with two solidary creditors (PCIB and MCB)?

DOCTRINE: Article 1208 of the Civil Code mandates the equal sharing of creditors in the payment of debt in the absence of any law or stipulation to the contrary. Thus, Atlas may satisfy his obligation by giving the payment to the two solidary creditors, as joint payees. Whatever share a solidary debtor failed to receive is an internal matter to be resolved by the solidary debtors themselves.

Crystal v. Bank of the Philippine Islands

G.R. No. 172428, 572 SCRA 697

ISSUE: Does a party who bind himself solidarily as guarantor only become secondarily liable to the creditor?

DOCTRINE: A solidary obligation is one in which each of the debtors is liable for the entire obligation, and each of the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. A liability is solidary only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires. Thus, when the obligor undertakes to be jointly and severally liable, it means that the obligation is solidary, such as in this case.

If solidary liabilities were instituted to guarantee a principal obligation, the law deems the contract to be one of suretyship; the surety is directly and equally bound with the principal.

The Heirs of George Y. Poe vs. Malayan Insurance Company, Inc., G.R. No. 156302, April 7, 2009Chico-Nazario, J.:

ISSUE: Whether a solidary obligation must be expressly stated to hold a party liable for the obligation.

DOCTRINE: A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation, and each creditor is entitled to demand the whole obligation. In a joint obligation, each obligor answers only for a part of the whole liability and to each obligee belongs only a part of the correlative rights. Well-entrenched is the rule that solidary obligation cannot lightly be inferred. There is solidary liability only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires.

Alba v. Yupangco

G.R. No. 188233

Carpio Morales, J:ISSUE: Whether the respondent has solidary liability with obligor-corporation despite the decision of the Labor Arbiter being silent as to the matter.

DOCTRINE: No, there is solidary liability only when the obligation expressly so states, when the law so provides, or when the nature of the obligation so requires. MAM Realty Development Corporation v. NLRC on solidary liability of corporate officers in labor disputes, enlightens: A corporation being a juridical entity, may act only through its directors, officers and employees. Obligations incurred by them, acting as such corporate agents are not theirs but the direct accountabilities of the corporation they represent. True solidary liabilities may at times be incurred but only when exceptional circumstances warrant such as, generally, in the following cases: 1.When directors and trustees or, in appropriate cases, the officers of a corporation:(a)vote for or assent to patently unlawful acts of the corporation;(b)act in bad faith or with gross negligence in directing the corporate affairs.

Asset Builders Corporation v. Stronghold Insurance Company, Incorporated G.R. No. 187116, October 18, 2010Mendoza, J.:ISSUE: Whether a guarantor who binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so is a solidary debtor?

DOCTRINE: Yes, if a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall be observed.In such case the contract is called a suretyship. As provided in Article 2047, the surety undertakes to be bound solidarily with the principal obligor. That undertaking makes a surety agreement an ancillary contract as it presupposes the existence of a principal contract. Although the contract of a surety is in essence secondary only to a valid principal obligation, the surety becomes liable for the debt or duty of another although it possesses no direct or personal interest over the obligations nor does it receive any benefit therefrom.

Sps. Rodolfo Berot v. Felipe Siapno G. R. No. 188944; July 9, 2014

ISSUE: Whether the mortgage may be considered solidary despite the absence of express terms making the obligation solidary.

DOCTRINE: No. Under Article 1207 of the Civil Code of the Philippines, the general rule is that when there is a concurrence of two or more debtors under a single obligation, the obligation is presumed to be joint. The law further provides that to consider the obligation as solidary in nature, it must expressly be stated as such, or the law or the nature of the obligation itself must require solidarity. Upon examination of the contents of the real estate mortgage, the Court found no indication in the plain wordings of the instrument that the debtors had expressly intended to make their obligation to respondent solidary in nature. Absent from the mortgage are the express and indubitable terms characterizing the obligation as solidary. Respondent was not able to prove by a preponderance of evidence that petitioners' obligation to him was solidary. Hence, applicable to this case is the presumption under the law that the nature of the obligation herein can only be considered as joint. It is incumbent upon the party alleging otherwise to prove with a preponderance of evidence that petitioners' obligation under the loan contract is indeed solidary in character.

Trade and Investment Development Corp. of the Philippines v. Asia Paces Corp.G.R. No. 187403, February 12, 2014

Perlas-Bernabe, J.

ISSUE: Will an extension of payment granted to a third party extinguish the suretyship in which one the parties is also a principal debtor to said third party?

DOCTRINE: No. The theory behind Article 2079 is that an extension of time given to the principal debtor by the creditor without the suretys consent would deprive the surety of his right to pay the creditor and to be immediately subrogated to the creditors remedies against the principal debtor upon the maturity date. The surety is said to be entitled to protect himself against the contingency of the principal debtor or the indemnitors becoming insolvent during the extended period.

Article 2079 of the Civil Code refers to a payment extension granted by the creditor to the principal debtor without the consent of the guarantor or surety. It will not apply in cases where the suretyship was entered to insure a debt transaction distinct and separate from the transaction upon which the extension for payment was made. The two sets of transactions should be treated separately and distinctly from one another following the civil law principle of relativity of contracts "which provides that contracts can only bind the parties who entered into it, and it cannot favor or prejudice a third person, even if he is aware of such contract and has acted with knowledge thereof.

Olongapo City, V. Subic Water And Sewerage Co., Inc.,

G.R. No. 171626, August 06, 2014

ISSUE: Can the Subic Water, who was not a party in the case, still be subjected to a writ of execution, since it was identified as OCWDs co-maker and successor-in-interest in the compromise agreement?

DOCTRINE: No. Solidary liability must be expressly stated; it is not presumed. Art. 1207 of the Civil Code provides, There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.

InPalmares v. Court of Appeals,the Court did not hesitate to rule that although a party to a promissory note was only labeled as a co-maker, his liability was that of a surety, since the instrument expressly provided for his joint and several liabilitywith the principal.

The law explicitly states thatsolidary liability is not presumed and must be expressly provided for.Not being a surety, Subic Water is not an insurer of OCWDs obligations under the compromise agreement. At best, Subic Water was merely a guarantor against whom petitioner can claim, provided it was first shown that: a) petitioner had already proceeded after the properties of OCWD, the principal debtor; b) and despite this, the obligation under the compromise agreement, remains to be not fully satisfied.

SECTION 6. OBLIGATIONS WITH A PENAL CLAUSEFirst Fil-Sin Lending Corporation v. Gloria D. Padillo

G.R. No. 160533. January 12, 2005

Ynares-Santiago,J.:

ISSUE: Whether the penalty charges of 1% per day of delay is unconscionable.DOCTRINE: As regards the penalty charges, the Court agrees with the Court of Appeals in ruling that the 1% penalty per day of delay is highly unconscionable. Applying Article 1229 of the Civil Code, courts shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with, or if it is iniquitous or unconscionable.Filinvest Land, Inc. vs. Hon. Court of Appeals, Philippine American General Insurance Company and Pacific Equipment Corporation

G.R. No. 138980. September 20, 2005Chico-Nazario, J.:ISSUE: Is there a difference between penalty and liquidated damages in cases where there has been partial or irregular compliance?

DOCTRINE: None. Courts may equitably reduce a stipulated penalty in the contract in two instances: (1) if the principal obligation has been partly or irregularly complied; and (2) even if there has been no compliance if the penalty is iniquitous or unconscionable in accordance with Article 1229 of the Civil Code. In cases where there has been partial or irregular compliance, as in this case, there will be no substantial difference between a penalty and liquidated damages insofar as legal results are concerned and that either may be recovered without the necessity of proving actual damages and both may be reduced when proper.

Development Bank of the Philippines v. Family Foods Manufacturing Co. Ltd., and Spouses Julianco and Catalina CentenoG.R. No. 180458; July 30, 2009Nachura, J.:

ISSUE: Whether the stipulated penalty charge of 8% per annum and interest rates of 18% and 22% per annum are unreasonable, iniquitous and unconscionable. DOCTRINE: No. Respondents own evidence shows that they agreed on the stipulated interest rates of 18% and 22%, and on the penalty charge of 8%, in each promissory note. It is a basic principle in civil law that parties are bound by the stipulations in the contracts voluntarily entered into by them. Parties are free to stipulate terms and conditions that they deem convenient, provided these are not contrary to law, morals, good customs, public order, or public policy. There is nothing in the records, and in fact, there is no allegation, showing that respondents were victims of fraud when they signed the promissory notes. Neither is there a showing that in their contractual relations with DBP, respondents were at a disadvantage on account of their moral dependence, mental weakness, tender age or other handicap, which would entitle them to the vigilant protection of the courts as mandated by Article 24 of the Civil Code.

Ileana Dr. Macalinao v. Bank of the Philippine IslandsG.R. No. 175490, September 17, 2009Velasco, Jr., J.:

ISSUE: Whether the reduction of interest rate should be upheld since the stipulated rate of interest was unconscionable and iniquitous, and thus illegal.

DOCTRINE: Yes. The interest rate and penalty charge of 3% per month should be equitably reduced to 2% per month or 24% per annum. Indeed, in the Terms and Conditions Governing the Issuance and Use of the BPI Credit Card, there was a stipulation on the 3% interest rate. Nevertheless, it should be noted that this is not the first time that this Court has considered the interest rate of 36% per annum as excessive and unconscionable. It was held in Chua vs. Timan: The stipulated interest rates of 7% and 5% per month imposed on respondents loans must be equitably reduced to 1% per month or 12% per annum. We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law. Since the stipulation on the interest rate is void, it is as if there was no express contract thereon. Hence, courts may reduce the interest rate as reason and equity demand. Thus, under the circumstances, the Court finds it equitable to reduce the interest rate pegged by the CA at 1.5% monthly to 1% monthly and penalty charge fixed by the CA at 1.5% monthly to 1% monthly or a total of 2% per month or 24% per annum in line with the prevailing jurisprudence and in accordance with Art. 1229 of the Civil Code.

CHAPTER 4. EXTINGUISHMENT OF OBLIGATIONSSECTION 1. PAYMENT OR PERFORMANCEA. APPLICATION OF PAYMENTSB. PAYMENT BY CESSIONC. TENDER OF PAYMENT AND CONSIGNATIONJaime Biana v. George GimenezG.R. No. 132768. September 9, 2005

Garcia,J.:

ISSUE: May redemption be made through tender of postdated checks?

DOCTRINE: Yes. A check may be used for the exercise of the right of redemption, the same being a right and not an obligation. The tender of a check is sufficient to compel redemption but it is not in itself a payment that relieves the redemptioner from his liability to pay the redemption price. Art. 1249 may not be applied.

G & M (Phil.), Inc. vs. Willie Batomalaque

G.R. No. 151849 June 23, 2005

Carpio Morales, J.ISSUE: Who has the burden of showing with legal certainty that the obligation has been discharged by payment?DOCTRINE: Debtor. It is settled that as a general rule, a party who alleges payment as a defense has the burden of proving it. On repeated occasions, this Court ruled that the debtor has the burden of showing with legal certainty that the obligation has been discharged by payment. To discharge means to extinguish an obligation,and in contract law discharge occurs either when the parties have performed their obligations in the contract, or when an event the conduct of the parties, or the operation of law releases the parties from performing. Thus, a party who alleges that an obligation has been extinguished must prove facts or acts giving rise to the extinction.

The fact of underpayment does not shift the burden of evidence to the plaintiff-herein respondent because partial payment does not extinguish the obligation. Only when the debtor introduces evidence that the obligation has been extinguished does the burden of evidence shift to the creditor who is then under a duty of producing evidence to show why payment does not extinguish the obligation.Abacus Securities Corporation v. Ruben U. Ampil

Gr. No. 160016. February 27, 2006

Panganiban, CJ.:

ISSUE: What is the duty of the principal for the advance payments made by the broker in accordance with the formers instructions?

DOCTRINE: Under Article 1236 of the Civil Code, he can demand from the principal what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor.

Almeda v. Bathala Marketing Industries, Inc.

G.R. No. 150806, 542 SCRA 470

ISSUE: Can the continuous erosion of the value of the Philippines peso for three to four years amount to extra-ordinary inflation as contemplated by Article 1250 of the Civil Code?

DOCTRINE: The erosion of the value of the Philippine peso in the past three or four decades, starting in the mid-sixties, is characteristic of most currencies-while the Supreme Court may take judicial notice of the decline in the purchasing power of the Philippine currency in the span of time, such downward trend of the peso cannot be considered as the extraordinary phenomenon contemplated by Article 1250 of the Civil Code; Absent an official pronouncement or declaration by competent authorities of the existence of extraordinary inflation during a given period, the effects of extraordinary inflation are not to be applied.

ASJ Corporation v. Evangelista

G.R. No. 158086, 545 SCRA 300

ISSUE: Was ASJs retention of the goods to be delivered on account of Evangelistas failure to pay the full amount plus service fees unjustified?DOCTRINE: To begin with, ASJs obligation to deliver the chicks and by-products corresponds to three dates: the date of hatching, the delivery/pick-up date and the date of respondents payment.On several setting reports, respondents madedelays on their payments, but petitioners tolerated such delay.When Evangelistas accounts accumulated because of their successive failure to pay on several setting reports, petitioners opted to demand the full settlement of respondents accounts as a condition precedent to the delivery.However, Evangelista was unable to fully settle their accounts.Evangelistas offer to partially satisfy their accounts is not enough to extinguish their obligation.Under Article 1248of the Civil Code, the creditor cannot be compelled to accept partial payments from the debtor, unless there is an express stipulation to that effect.More so, respondents cannot substitute or apply as their payment the value of the chicks and by-products they expect to derive because it is necessary that all the debts be for the same kind, generally of a monetary character.Needless to say, there was no valid application of payment in this case.

Furthermore, it wasEvangelista who violated the very essence of reciprocity in contracts, consequently giving rise to ASJs right of retention.This case is clearly one among the species of non-performance of a reciprocal obligation.Reciprocal obligations are those which arise from the same cause, wherein each party is a debtor and a creditor of the other, such that the performance of one is conditioned upon the simultaneous