OBLICON NOTES

Article. 1156.

An obligation is a juridical necessity to give, to do or not to do.

Obligation – The requirement to do what is imposed by law, promise, or contract. Obligation is

synonymous with duty. It’s a tie which binds us to pay or to do something agreeably to the laws and
customs of the country. According to Arias Ramos, obligation is nothing more than the duty of a person
(debtor or obligor) to satisfy a specific and demandable claim of another person (creditor or obligee)
which if breached is enforced in court.

Article. 1157.

OBLIGATION ARISE FROM;

1. LAW- There is obligation when it was imposed by the law.

2. CONTRACTS- When the both parties arise from stipulation.

contract of marriage or ordinary contract

3. QUASI-CONTRACTS- This are judicial relation arising from certain lawful, voluntary and unilateral acts
by virtue of which the parties become bound to each other based on the principle that no one shall be
unjustly enriched or benefited at the expenses of another.

TWO KINDS OF QUASI-CONTRACTS

The obligation to return money paid by mistake or which is not due.

1. Solutio Indebiti, exist when;

a) Something is recieved;

b) When there is no right to demand it;

c) It was unduly delivered through mistake.

2. Negotiorum Gestio, Which exist when one:

a) Voluntary takes charge of the agency or management of the business or property of another.

b) Without any power from the latter.

 4. ACTS OR OMISSIONS PUNISHED BY LAW- Civil liability is arised and it is the consequences of the
criminal offense committed.

5. QUASI DELICTS- When they arise from damages caused to another,there being fault or
negligence,giving rise to the obligation to pay for the damage done. There must be no pre-existing
contractual relation between the parties.

Article 1158

March 26, 2016

Obigations derived from law are not presumed.  Only those expressly determined in this
Code or in special laws are demandable, and shall be regulated by the precepts of the law
which establishes them; and as to what has not been foreseen, by the provisions of this
Book. (1090)

Ang mga obligasyon na hango sa batas ay hindi inaakala.  Ang mga obligasyon lamang na
hayagang nakasaad sa Code na ito at sa mga espesyal na batas ang may bisa, at pinapatakbo
ng mga utos ng batas na nagtatag ng mga ito; para sa mga obligasyon na hindi inaasahan, sila
ay bibigyang bisa ng probisyon ng Libro na ito.

Discussion:

When obligations are not expressly provided by law, they cannot be presumed to exist – thus
making the not demandable nor enforaceable.

When the act itself is the source of the obligation and not the law:

1. The law merely acknowledges the existence of an obligation generated by an act;

2. It constitutes a contract, quasi-contract, delict or quasi-delict;
3. Its only purpose is to regulate the obligation which did not arise from the law.

When the source of the obligation is the law itself:

1. The law creates the obligation;

2. The act upon which it is based is nothing more than a mere factor for determining the moment
when it becomes demandable.
Article 1159

OBLIGATIONS ARISING FROM CONTRACTS HAVE THE FORCE OF LAW

BETWEEN THE CONTRACTING PARTIES AND SHOULD BE COMPLIED WITH IN
GOOD FAITH.

          Ang mga obligasyon na nag simula sa mga kontrata at nagkaroon ng bisa sa batas sa
pagitan ng mga nagkasundong partido ay dapat gampanan ito ng may mabuting kalooban.

*Distinction between Obligation and Contract

Obligation – is a judicial necessity to give, to do or not to do (1156), while

Contract – is the meeting of the minds between two persons whereby one bind himself with
respect to the other, to give something or to render some services. (Art.1305)

Obligation Arising from contracts – it is an established doctrine of law and sustained by the
settled practice of the courts, that a man obligates himself to do that to which he promises to be
bound, because that which is agreed to in a contract is the law between such contracting parties.
This rule, however, is subject to a condition that a court is not contrary to law, morals, good
customs, public order, or public policy.

Article 1160.

Obligations derived from quasi-contract shall be subject to the provisions of Chapter 1, Title
XVII, of this book. By: Evelyn Balaoro
Explanation:

A quasi-contract is not the same as a contract because in quasi-contract there is no consent and
the same is supplied by fiction of law, while in case of contract, consent is essential for its
validity.  The principle involved in quasi-contract is no person shall be unjustly enriched or
benefited in the expense of another

Example:

Pedro, the owner of the citrus orchard, went to Boracay for a vacation, leaving nobody to take
care of his orchard.  During his absence, a strong typhoon hit in the Philippines damaging his
orchard and causing the citrus fruits to fall.  Ramon, a neighbor of Pedro, gathered the fruits and
sold the same at the best obtainable price.  He also tended the orchard, incurring expenses to
minimize the damage caused by typhoon.  In this case, Ramon acted as an officious manager of
the abandoned property of Pedro without the latter’s consent.  Ramon became liable to pay Pedro
the expenses incurred for voluntary administration of Pedro’s property for the reason that no one
shall unjustly be enriched or benefited at the expense of another.

ARTICLE 1161
Civil obligations arising from criminal offenses shall be governed by penal laws, subject to the
provisions of Article 2177, and of the pertinent provisions of Chapter 2, Preliminary Title, on
Human Relations, and of Title XVIII of the Book, regulating damages.

By: Evelyn Balaoro

Explanations:

Civil Obligations Arising from Crimes

This provision refers to civil obligations arising from crimes. Under the law “every person
criminally liable for a felony is also civilly liable”. The civil liability arising out of the
commission of crime includes: (1) restitution (2) reparation of damage caused and (3)
indemnification of consequential damages.

Example

Mang Kanor is found guilty by the court of theft of colored television belonging to Mang Wally. 
Aside from sentencing him imprisonment, the court also orders Mang Kanor to return the
colored television (restitution), or if he has disposed of the same, to pay its value (reparation) and
other damages (indemnification) suffering by Mang Wally.

Article 1162
Obligations derived from quasi-delicts shall be governed by the provisions of Chapter 2,
Title XVII of this Book, and by special laws. (1093a)

Ang mga obligasyon na nagmula sa quasi-delicts ay nasasakupan ng probisyon ng

Chapter 2, Title XVII ng Aklat na ito, at ng mga espesyal na batas.
Discussion:

A quasi delict is an act or omission by a person which causes damage to another giving
rise to an obligation to pay for the damage done, there being fault or negligence but
there isno pre existing contractual relation between the parties. Requisites of Quasi
delict.

Before a person can be held liable for quasi delict, the following requisites must be
present:

1. There must be an act or omission;

2. There must be fault or negligence

3.  There must be damage caused;

4. There must be a direct relation of cause and effect between the act or omission and
the damage; and

[Link] is no pre existing contractual relation between the parties.

Crime Distinguished from Quasi delict.

1. In crime, there is criminal or malicious intent or criminal negligence, while in quasi

delict, there is only negligence;

2. In crime, the purpose is punishment, while in quasi delict, indemnification of the

offended party;

3. Crime affects public interest, while quasi delict concerns private interest In crime,
there are generally two liabilities: criminal and civil, while in quasi delict, there is only
civil liability;

4. Criminal liability can not be compromised or settled by the parties themselves, while
the liability for quasi delict can be compromised as any other civil liability;

5. In crime, the guilt of the accused must be proved beyond reasonable doubt, while in
quasi de1ict the fault or negligence of the defendant need only be proved by
preponderance (i.e., superior or greater weight) of evidence.
ARTICLE 1163
Art. 1163 Every Person obliged to give something is also obliged to take care of it with
proper diligence of a good father of a family unless the law or the stipulation of the
parties requires another standard of care.

Reason for provision – the obligation to deliver the thing would be illusionary if the
debtor and will pertain to another it is a condition suitable for its enjoyment by the
obligee for the purpose of contemplated.

Diligence Required – preserving the thing ,law requires the diligence of a good father of
a family

Effect of Breach – the obligation to preserve the thing to be delivered has its sanction in
the liability for damages imposed upon the debtor who fails the exercise of diligence of a
good father of a family preserving the thing. But if the failure of the debtor to preserve
the thing is due to no fault or negligence of his but fortuitous event or force. He is
exempte from the responsibility

ENGRACIO OBEJERA and MERCEDES INTAK, plaintiffs-appellees,

vs.
IGA SY, defendant-appellant.

Pedro Panganiban for appellant.

Jose Mayo Librea for appellees.

JARANILLA, J.:

By virtue of the appeal filed against the decision of the Court of First Instance of
Batangas annulling, on the ground of force and intimidation, the deed of transfer
executed on April 9, 1942 (Exhibit Y), whereby the plaintiffs and appellees agreed to
transfer to the defendant and appellant their property assessed at P2,230 in case they
failed to return to the defendant on December 31, 1942 the balance of P3,697 and
pieces of jewelry worth P400 allegedly deposited with the plaintiffs on January 2, 1942,
the above-entitled case was submitted to this court for review.

On December 13, 1941, plaintiffs and defendant sought refuge in the house of Leon
Villena, barrio lieutenant of Dalig, Batangas, Batangas, on account of the Japanese
invasion of the Philippines. plaintiffs and defendant, after consultation with their host
Leon Villena, decided to hide their things and valuables in a dug-out belonging to Leon
Villena about thirty meters away from his house. The defendant placed in said dug-out
her money allegedly amounting to P5,021 and jewelry worth P400 in her own container;
Leon Villena and his wife also placed therein their own things; the plaintiffs also placed
their things and money allegedly amounting to P3,000. They did this at night and
covered the dug-out with palay belonging to Leon Villena and the defendant Iga Sy.

On February 18, 1942, at the instance of the defendant who desired to move to another
house, the plaintiffs and the defendant, together with Leon Villena, among others, went
to the dug-out to take out the defendant’s container and discovered, to their
consternation, that their money and things, except for a few papers, had been lost.

One day during the first week of April, 1942, the defendant reported the loss of her
money and jewels, causing the arrest and investigation of Leon Villena, two others and
the plaintiff Engracio Obejera, who where released shortly after, except Engracio
Obejera who was released only on April 19, 1942 after he, with his wife, had consented
to execute Exhibit Y which document was sought to be annulled by the plaintiffs and
appellees herein. The defendant and appellant contends that she deposited her money
and jewelry with the plaintiffs and that the plaintiffs, a/cknowledging liability for the loss
of her money and jewelry, offered to transfer their property under Transfer Certificate of
Title No. 666 and accordingly executed the document in question. On the other hand,
the plaintiffs deny the alleged deposit, deny knowledge of the loss of the defendant’s
money and jewelry, and claim that their consent to the deed of transfer was obtained
through violence and intimidation.

After a careful consideration of the nine assignments of error and examination of the
evidence of this case, the contention of the defendant and appellant cannot be
sustained.

The alleged deposit cannot be believed and is contrary to the ordinary course of nature
and the ordinary habits of life

that the plaintiffs and the defendant only sought refuge in his house; that neither the
plaintiffs nor the defendant had, therefore, control over, or absolute and exclusive
access, to the dug-out, as proved by the fact that when the defendant decided to take
her things with her because she was going to move to another house, two days before
the discovery of the loss,

Under these circumstances, it is hard to believe that plaintiff Engracio Obejera would
assume responsibility over the defendant’s things hidden in a place not belonging to him
but to Leon Villena, in whose house they only sought refuge and were like guests, and
especially at a time when the confusion and fear resulting from the Japanese invasion
and fast advance so gripped everyone that nobody could be sure of his own things and
even of his life.

the Supreme Court held:

In this bailment ordinary care and diligence are required of the bailee and he is not
liable for the inevitable loss or destruction of the chattel, not attributable to his fault. If
while the bailment continues, the chattel is destroyed, or stolen, or perishes, without
negligence on the bailee’s part, the loss as in other hirings, falls upon the owner, in
accordance with the maxim res perit domino

Article 1164.
The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises.
However, he shall acquire no real right over it until the same has been delivered to him.

The general rule is that the creditor has the right to the fruits of the thing from the time the
obligation to deliver it arises.
Ownership over the thing though, is only required when such an object is delivered to him. The
essential element therefore of ownership is delivery. Therefore, although the creditor has the
right has the right to the fruits of a thing from the time the obligation to deliver the thing itself
arises, his ownership will start when the thing is delivered to him.
WHEN OBLIGATION TO DELIVER THE FRUITS ARISES
Example:
 
Anne sold her dog to Janine for 15,000 pesos and while in the possession of Anne, the dog gave
birth to a puppy in which Janine is the one entitled to the puppy if Janine has already paid the
amount of 15, 000 pesos to Anne.
PERSONAL RIGHT  is the right or power of a person to demand from another — to give, to
do, or not to do.
REAL RIGHT is a power over a specific thing (like the right of ownership or possession) and is
binding on the whole world.
Example:
 
If Anne was a creditor to a house and Janine was the debtor and both agreed that the payment for
the rent of the house would be monthly. Janine upon paying is what we call REAL RIGHT. But
upon Anne expecting Janine to pay every month is what we call PERSONAL RIGHT.
Case
A. A. ADDISON vs. MARCIANA FELIX and BALBINO TIOCO
G.R. No. L-12342. August 3, 1918.
 FISHER, J.
Facts:
Petitioner Addison sold four parcels of land to Defendant spouses Felix and Tioco located in
Lucena City. Respondents paid P3, 000.00 for the purchase price and promised to pay the
remaining by installment. The contract provides that the purchasers may cancel the contract
within one year after the issuance of title on their name.
The petitioner went to Lucena for the survey designaton and delivery of the land but only 2
parcels were designated and 2/3 of it was in possession of a Juan Villafuerte.
The other parcels were not surveyed and designated by Addison.
Addison demanded from petitioner the payment of the first installment but the latter resists that
there was no delivery and as such, they are entitled to get back the 3,000 purchase price they
gave upon the execution of the contract.
 
Issue:
 
Whether or not there was a valid delivery.
Ruling:
The record shows that the plaintiff did not deliver the thing sold. With respect to two of the
parcels of land, he was not even able to show them to the purchaser; and as regards the other
two, more than two-thirds of their area was in the hostile and adverse possession of a third
person.
 
It is true that the same article declares that the execution of a public instruments is equivalent to
the delivery of the thing which is the object of the contract, but, in order that this symbolic
delivery may produce the effect of tradition, it is necessary that the vendor shall have had such
control over the thing sold that, at the moment of the sale, its material delivery could have been
made. It is not enough to confer upon the purchaser the ownership and the right of possession.
The thing sold must be placed in his control. When there is no impediment whatever to prevent
the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic
delivery through the execution of a public instrument is sufficient. But if there is an impediment,
delivery cannot be deemed effected.

Article 1165
When what is to be delivered is a determinate things, the creditor, in addition to the right
granted him by Article 1170, may compel the debtor to make the delivery.
If the thing is indeterminate or generic, he may ask that the obligation be
complied with at the expense of the debtor.

If the obligor delays, or has promised to deliver the same thing to two or more
persons who do not have the same interest, he shall be responsible for fortuitous
event until he has effected the delivery.

Kapag kung ano ang upang maihatid ay isang maliwanag na bagay, ang
pinagkakautangan , bilang karagdagan sa kanan ipinagkaloob sa kanya ng Article
1170, maaaring pilitin ang may utang upang gawin ang paghahatid.

Kung ang bagay ay hindi tiyak o generic , maaari niyang hilingin na ang obligasyon na
nakasunod sa sa kapinsalaan ng ang may utang .

 Kung ang obligor pagkaantala, o ipinangako upang maihatid ang parehong bagay sa
dalawa o higit pang mga tao na hindi magkaroon ng parehong interes , siya’y magiging
responsable para sa di-inaasahang pangyayari hanggang sa siya ay maapektuhan ang
paghahatid.

 Yu Tek v. Gonzales

Facts: A obligated himself to sell for a definite price a certain specified quantity of sugar
of a given quality, without designating a particular lot.

Issue: In case the sugar is lost by a fortuitous event, who bears loss prior to delivery,
the seller or the buyer?

Held: In this case, the seller bears the loss because what was delivered was not a
specific thing, but a generic thing. And genus never perishers. Incidentally, the sale here
cannot be said to have been already perfected because of the lack of physical
segregation from the rest of the sugar.

Article 1166
The obligation to give a determinate thing includes that of delivery of all its accessions
and accessories, even thouh they may not have been mentioned. (1097a)

Kasama sa obligasyon na magbigay ng determinadong bagay ang pagbibigay ng lahat

ng accessions at accessories nito kahit na hindi sila nabanggit.
 Discussion:

Accession – includes everything produced by a thing, as well as all incorporated or

attached with it, may it be natural or artificial

Accession discreta – right to the fuits

Accession continua – includes both accession natural (i.e. alluvial

deposits) and accession industrial (i.e. those built, planted or sowed on the land of the
landowner)

Accessories – includes things that are united or attached as ornaments to the principal
thing, for the latter’s use or perfection (i.e. spare tire of a car, television antennas,
cellphone chargers, moviehouse chairs, etc.)

Note: Although the delivery of determinate thing includes all its accessions and
accessories, the parties in the contract may stipulate that certain accessions or
accessories may not be included in the delivery.  Both parties have the freedom to
stipulate such things.

ARTICLE 1167
Article 1167. If a person obliged to do something fails to do it, the same shall be
executed at his cost.

This same rule shall be observed if he does it in contravention of the tenor of the
obligation. Furthermore, it may be decreed that what has been poorly done be
undone.

Article 1167 refers to an obligation to do, that is, to perform an act or render a service. It
contemplates three situations:

1. The debtor fails to perform an obligation to do.

2. The debtor performs an obligation to do but contrary to the terms thereof.
3. The debtor performs an obligation to do in poor manner.

Performance at debtor’s cost. 

If the debtor fails to comply with his obligation to do, the creditor has the right:
 to have the obligation performed by himself, or by another, at the debtor’s expense.
 to recover damages.

In case the obligation is done in contravention  of the terms or is poorly done, it may be
ordered (by the court) that it shall be reversed if still possible.

Personal Compulsion.

If no law was implemented that regards to the cause of action. Then the only sanction of
civil obligations is compensation for the damages.

Indemnification for Damages.

If the obligation to do cannot be done by another, in case of non-performance the only

feasible remedy of the creditor is indemnification for damages.

Case Illustration

Chavez vs. Gonzales, 32 SCRA 547

Facts:

July 1963, Rosendo Chavez, plaintiff, brought his typewriter to Fructuoso Gonzales,
defendant, a typewriter repairman for the cleaning and servicing of the said typewriter.
Three months later, the plaintiff paid P6.00 to the defendant for the purchase of spare
parts. Because of the delay of the repair the plaintiff decided to recover the typewriter
from the defendant which was wrapped like a package. When he opened and
examined it, the interior cover and some parts and screws were missing. October 29,
1963 the plaintiff sent a letter to the defendant for the return of the missing parts, the
interior cover and the sum of P6.00. The following day, the defendant returned to the
plaintiff only some of the missing parts, the interior cover and the P6.00.

August 29, 1964, the plaintiff had his typewriter repaired by Freixas Business Machines,
that cost him a total of P89.85. A year later, the plaintiff filed an action before the City
Court of Manila, demanding from the defendant the payment for total of P1,190.00 for
damages including attorney’s fees. The defendant made no denials.

The repair invoice shows that the missing parts had a total value of P31.10 only.
Wherefore, judgment is hereby rendered ordering the defendant to pay the plaintiff the
sum of P31.10, and the costs of suit.

Chaves appealed, because it only awarded  the value of the missing parts of the
typewriter, instead of the whole cost of labor and materials that went into the repair of
the machine. It is clear that the defendant-appellee contravened the tenor of his
obligation because not only did he not repair the typewriter but returned it “in shambles”.

IN VIEW OF THE FOREGOING REASONS, the appealed judgment is hereby modified,

by ordering the defendant-appellee to pay, as he is hereby ordered to pay, the plaintiff-
appellant the sum of P89.85, with interest at the legal rate from the filing of the
complaint. Costs in all instances against appellee Fructuoso Gonzales.

Issue:

Whether or not the defendant is liable for the total cost of repair.

Held:

Yes. For such contravention, he is liable under Article 1167 of the Civil Code. For the
cost of executing the obligation in a proper manner. The cost of the execution of the
obligation in this case should be the cost of the labor or service expended in the repair
of the typewriter.

Article 1168
When the obligation consists in not doing, and the obligor does what has been
forbidden him, it shall also be undone at his expense.

Kapag ang obligasyon ay obligasyong hindi gawin ang isang bagay, at ginawa ng may
obligasyon ang ipinagbabawal, ito ay kailangang ipasawalang bisa ng gumawa gamit
ang sariling gastos.

Discussion:

This article pertains to negative personal obligation, or the obligation not to do. In
addition to the obligation of the obligor to undo the forbidden act of thing, he may also
be made liable for damages caused by doing that which was forbidden.
Article 1169
“No demand, no delay.” This rule is spelled out by “No demand, no delay.” This rule is
spelled out by Article 1169 of the Civil Code, where those obliged to deliver or to do
something incur a delay from the time the obligee (or the person to whom an obligation
is owed) judicially or extrajudicially demands fulfillment of the obligation.

In a situation where a debtor defaults on his payment of a loan, the law requires that a
demand has to be made by the creditor before the debtor can be considered delayed on
his payments, except if the contract itself provided that no demand is necessary for
delay to exist. If no demand was made, then the loan has not yet become due and
demandable, and any foreclosure of property used as collateral for the loan would be
considered premature.

When it comes to tax assessments, however, there is a twist to the rule. In the case of
assessment notices, if there is no demand for payment, not only is there no delay on the
part of the taxpayer, but there is actually no valid assessment to speak of.

This position was reiterated in a recent decision of the Court of Tax Appeals (CTA Case
No. 8694 dated June 28, 2018) where the deficiency tax assessment was set aside and
cancelled because the Final Assessment Notice (FAN) did not contain a specific date or
period within which the alleged tax liabilities must be paid. In that decision, the court
emphasized that the due date for payment of the tax liabilities is indispensable in an
assessment as it dictates the time when the penalties, surcharge and interest begin to
accrue. If the date of payment is uncertain, then there is no definite demand on the
taxpayer to immediately pay the assessed tax liabilities.

The due process requirements in the issuance of deficiency taxes are laid down in
Revenue Regulations (RR) No. 12-1999, as amended by RR Nos. 18-2013 and 7-2018.
The regulations provide that a formal letter of demand (FLD) and FAN calling for the
payment of deficiency taxes shall state the facts, laws, rules and regulations or
jurisprudence on which the assessment is based; otherwise, the notices shall be void.
The taxpayer shall have 30 days from receipt of the FLD and FAN to file an
administrative protest.

Significantly, the Supreme Court in earlier rulings categorically pronounced that an

assessment should contain not only the detailed computation of tax liabilities, but also a
demand for payment within a prescribed period. It further mentioned that an
assessment, in the context of the National Internal Revenue Code, is “a written notice
and demand made by the Bureau of Internal Revenue (BIR) to the taxpayer for the
settlement of the due tax liability that is there: definitely set and fixed.”
Applying the decision of the Supreme Court, merely notifying the taxpayer of his tax
liabilities is not enough. The FLD/FAN should not only show a computation of tax
liabilities and the details of the assessment, but it should also contain a clear
unequivocal demand for payment by indicating the definite date or period for payment of
the assessed taxes. The Supreme Court, in effect, provided an additional requirement
for an assessment to be considered valid, apart from those laid down under the
regulations.

Referring back to the recent CTA case, the deficiency tax assessment was cancelled
because it did not comply with the additional requirement that there should be sufficient
demand for payment by the BIR. In this case, there was an undated FAN assessing the
taxpayer for deficiency taxes and this was deemed null and void because the due dates
on the assessment notices for all assessment items were left blank or unspecified.

What can be gathered from this case is that taxpayers can raise a defense against an
assessment if there is no demand for payment made. Failure to comply with the
additional requirement of demand proves fatal to the assessment. Thus, even if the
issues raised in the assessments have merit, taxpayers can still check if the FLD/FAN
contains a specific due date for the payment of the deficiency taxes. If there is none,
they can protest that the assessed amount is not collectible because payment was not
actually demanded by the BIR. Applying the decisions of the courts, in such cases,
taxpayers can firmly say, “No demand, no pay.”
of the Civil Code, where those obliged to deliver or to do something incur a delay from
the time the obligee (or the person to whom an obligation is owed) judicially or
extrajudicially demands fulfillment of the obligation.

In a situation where a debtor defaults on his payment of a loan, the law requires that a
demand has to be made by the creditor before the debtor can be considered delayed on
his payments, except if the contract itself provided that no demand is necessary for
delay to exist. If no demand was made, then the loan has not yet become due and
demandable, and any foreclosure of property used as collateral for the loan would be
considered premature.

When it comes to tax assessments, however, there is a twist to the rule. In the case of
assessment notices, if there is no demand for payment, not only is there no delay on the
part of the taxpayer, but there is actually no valid assessment to speak of.

This position was reiterated in a recent decision of the Court of Tax Appeals (CTA Case
No. 8694 dated June 28, 2018) where the deficiency tax assessment was set aside and
cancelled because the Final Assessment Notice (FAN) did not contain a specific date or
period within which the alleged tax liabilities must be paid. In that decision, the court
emphasized that the due date for payment of the tax liabilities is indispensable in an
assessment as it dictates the time when the penalties, surcharge and interest begin to
accrue. If the date of payment is uncertain, then there is no definite demand on the
taxpayer to immediately pay the assessed tax liabilities.

The due process requirements in the issuance of deficiency taxes are laid down in
Revenue Regulations (RR) No. 12-1999, as amended by RR Nos. 18-2013 and 7-2018.
The regulations provide that a formal letter of demand (FLD) and FAN calling for the
payment of deficiency taxes shall state the facts, laws, rules and regulations or
jurisprudence on which the assessment is based; otherwise, the notices shall be void.
The taxpayer shall have 30 days from receipt of the FLD and FAN to file an
administrative protest.

Significantly, the Supreme Court in earlier rulings categorically pronounced that an

assessment should contain not only the detailed computation of tax liabilities, but also a
demand for payment within a prescribed period. It further mentioned that an
assessment, in the context of the National Internal Revenue Code, is “a written notice
and demand made by the Bureau of Internal Revenue (BIR) to the taxpayer for the
settlement of the due tax liability that is there: definitely set and fixed.”

Applying the decision of the Supreme Court, merely notifying the taxpayer of his tax
liabilities is not enough. The FLD/FAN should not only show a computation of tax
liabilities and the details of the assessment, but it should also contain a clear
unequivocal demand for payment by indicating the definite date or period for payment of
the assessed taxes. The Supreme Court, in effect, provided an additional requirement
for an assessment to be considered valid, apart from those laid down under the
regulations.

Referring back to the recent CTA case, the deficiency tax assessment was cancelled
because it did not comply with the additional requirement that there should be sufficient
demand for payment by the BIR. In this case, there was an undated FAN assessing the
taxpayer for deficiency taxes and this was deemed null and void because the due dates
on the assessment notices for all assessment items were left blank or unspecified.

What can be gathered from this case is that taxpayers can raise a defense against an
assessment if there is no demand for payment made. Failure to comply with the
additional requirement of demand proves fatal to the assessment. Thus, even if the
issues raised in the assessments have merit, taxpayers can still check if the FLD/FAN
contains a specific due date for the payment of the deficiency taxes. If there is none,
they can protest that the assessed amount is not collectible because payment was not
actually demanded by the BIR. Applying the decisions of the courts, in such cases,
taxpayers can firmly say, “No demand, no pay.”
Article 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. (1101)

Ang mga nagsasagawa ng kanilang obligasyon na may kasalanan ng fraud,

nagligence, o delay o balam at sa mga nagsasagawa ng kanilang obligasyon na hindi
ayon sa napagkasunduan ay mananagot sa mga danyos.

 Discussion

Fraud – A false representation of a matter of fact—whether by words or by conduct, by

false or misleading allegations, or by concealment of what should have been disclosed
—that deceives and is intended to deceive another so that the individual will act upon it
to her or his legal injury.

Negligence – Conduct that falls below the standards of behavior established by law for
the protection of others against unreasonable risk of harm. A person has acted
negligently if he or she has departed from the conduct expected of a reasonably prudent
person acting under similar circumstances.        .

Article 1171.
 Responsibility arising from fraud is demandable in all obligations. Any waiver of an action for
future fraud is void.

According to time of commission, fraud may be past or future. The fraud referred to in this

article is the fraud that refers to the fulfillment of an obligation rather than the fraud which is the
origin of the obligation.
Two different articles refer to two different frauds or dolos:
 Dolo causante or causal fraud (Article 1338) is a deception of a serious character employed by one
party and without which the other party would not have entered into a contract.  
This is when fraud used to induce a person to agree to a contract. This kind of fraud is a ground
for annulment of the contract plus damages
Example:
There was an ad offering work to female college graduates to work as English tutors to rich
Hong Kong families but in truth that was recruitment to work in a red light district or pleasure
district.
 Dolo incedente or incidental fraud (Article 1144) those which are not serious in character and
without which the other party would still have entered into the contract.
Example:
Anne enter into a contract to deliver 500 cavans of rice to Noel with a price per cavan of 1,300
pesos, Anne delivered 400 cavans but withheld the delivery of the remaining, stating that the
price went up and priced the rice to 1,600 per cavan. The fraud here is dolo incidental because it
is committed to the existing contract.
Case: 
MARIANO C. PAMINTUAN vs. 
COURT OF APPEALS and YU PING KUN CO., INC 
G.R. No. L-26339. December 14, 1979.
AQUINO, J.
Facts:
Mariano Pamintuan was in an agreement  with Yu Ping Kun Co., Inc. to sell plastic sheetings
imported by the former from Japan through a barter license he had for the export of white flint
corn to Toyo Menka Kaisha, Ltd. While the plastic sheetings were arriving in Manila, Pamintuan
informed the President of Yu Ping Kun Co., Inc. that he was in dire need of cash with which to
pay his obligations to the Philippine National Bank.
Consequently, the two parties fixed a price to the plastic sheetings regardless of the kind, quality
or actual invoice value thereof and based it on dividing the total price of the shipment with its
aggregate quantity. After the shipments arrived in Manila (4 shipments in total), Pamintuan only
delivered a portion or 224, 150 yards of the expected 339, 440 yards of plastic sheetings he
received to Yu Ping Kun’s warehouse.
Furthermore, he delivered plastic sheetings of inferior quality that were valued at a lesser price
than what Yu Ping Kun had paid.
Subsequently, Yu Ping Kun filed an action to enforce a provision in their contract of sale which
states that any violation of the stipulations of that contract would entitle the aggrieved party to
liquidated damages in the amount of 10, 000 Php from the offending party.
Issue:
Whether or not Pamintuan committed fraud in the performance of his obligation.

Ruling:
Yes, the petitioner is guilty of fraud and should pay the damages to the defendant.
Pamintuan’s contention cannot be sustained because the second sentence of article 1226 itself
provides that “nevertheless, damages shall be paid if the obligor is guilty of fraud in the
fulfillment of the obligation”. “Responsibility arising from fraud is demandable in all
obligations” (Art. 1171).
The Court also found that Pamintuan was guilty of fraud because (1) he was able to make the
company agree to change the manner of paying the price by falsely alleging that there was a
delay in obtaining confirmation of the suppliers’ acceptance of the offer to buy; (2) he caused the
plastic sheetings to be deposited in the bonded warehouse of his brother and control the disposal
of the goods; (3) he overpriced the plastic sheetings which he delivered to the company.
ARTICLE 1172
CONTRACTUAL NEGLIGENCE

Responsibility  arising from negligence in the performance of every kind of obligation is

also demandable, but such liability may be regulated by the courts, according to the
circumstances.(1103)

LIABILITY OF THE EMPLOYER

  In cases involving culpa contractual, could the employee and his employer be held
both liable solidarily for damages?

The Supreme Court held that both the driver and the owner were jointly and solidary
liable for the resulting damages.

The Court of Appeals held that the liability arising from culpa contractual cannot be
divided nor extended to persons who have nothing to do with the obligation.

The employee cannot be sentenced to pay for damages despite of his negligence
because the responsibility for his acts lodged on the part of his master (para 4, Art.2180
and Art.1170 of Civil Code)

MITIGATION OF DAMAGES

The court is given a discretion to mitigate liability according to circumstances on cases

arising from culpa contractual while no such discretion is given by the Code in dealing
with liability arising from cases involving culpa acquiliana.

In Del Prado vs Manila Electric, the court held that the contributory negligence on the
part of the plaintiff  in attempting to board a moving car  although not the proximate
cause of the accident was treated as mitigating circumstance under Article 1172 since it
was contributory to the said accident.

In San Pedro Bus Line, Et Al. vs Navarro, it was held that it is enough to prove the
existence of contract of carriage ; to show that the plaintiff took the vehicle to be
conducted towards his destination and that accident took place that caused him injuries.
Success of action is not necessary to prove their liability.
 DEFENSE OF EMPLOYER

In liability arises from culpa acquiliana, not involving a breach of contract of existing
obligation, an employer or master may be exempt from liability( para 8, Art.2180 of Civil
Code) by proving the exercise of diligence to prevent the damage. This defense is not
available in liability of the master arising from breach of contractual duty(culpa
contractual).

In Gutierrez vs Gutierrez, the court held that the father/owner of the automobile is liable
for damages because the negligence of his minor was his responsibility (para 2,
Art.2180). The liability of the owner of the passenger truck for his employee’s
negligence was based on contract. Both of the defendants were held liable for the
damages suffered by the plaintiff.

In De Guia vs Manila Electric, it was held that the defendant incurred liability for failure
to comply to deliver the plaintiff safely and securely to his destination. The delinquency
involved negligence of its employee (a culpa contractual/transportation contract). The
defense of exercising due diligence in this case is not available.

STIPULATION ON LIABILITY FOR NEGLIGENCE

Types :

1. Graduating responsibility of the debtor by determining the degree of diligence which may be
more or less than the standard fixed by law (Para 2 Art.1173)
2. Imposing a liability for fault or negligence where the law does not impose it. Valid, unless law
dispenses fault or negligence as a matter of public policy.

EXEMPTION FROM LIABILITY

Two Kinds of Stipulation Exempting from Liability

1. A party to a contract is relieve from the effects of his fault or negligence by a third
person;
2. One of the party to the contract renounces in advance the right to enforce liability arising
from fault or negligence of the other.

Stipulations exempting from liability for gross negligence are void  because such
negligence amounts to a fraud. Stipulation exempting from liability for simple negligence
can be accepted as a general principle subject to the discretionary regulation of the
court regarding such liability. However, no stipulation exempting from liability for
negligence shall be sanctioned when there is strong reason against it, for instance, if it
amounts to a stipulation by virtue of which the validity and fulfillment of the contract are
left to the will of one of the parties.

It is only limited to cases where there is real equality in the bargaining power  of the
contracting parties.

Contract of Adhesion – a contract where the parties are manifestly in such an

inequality of positions that one could not freely bargain with the other in the
determination of the terms in contract.

Examples :

Contracts with transportation Companies

Contracts of Employment

Irresponsibility clauses or stipulations exempting one party from liability for

damages due to other’s negligence, should , therefore be taken with great caution ,
because they may in effect become an encouragement of negligence which may
occasion considerable loss to society and to the interested party. They might create
opportunity for bad faith and left the wrong doer laughing at the law with impunity.

In Ysmael & Co. vs Barretto, it was held that the common carrier cannot limit its liability
for the injury or loss of goods  shipped, where such injury or loss is caused by its own
negligence.

G.R. No. 34840           September 23, 1931

NARCISO GUTIERREZ, plaintiff-appellee,
vs.
BONIFACIO GUTIERREZ, MARIA V. DE GUTIERREZ, MANUEL GUTIERREZ,
ABELARDO VELASCO, and SATURNINO CORTEZ, defendants-appellants.

MALCOLM, J.:

This is an action brought by the plaintiff in the Court of First Instance of Manila against
the five defendants, to recover damages in the amount of P10,000, for physical injuries
suffered as a result of an automobile accident. On judgment being rendered as prayed
for by the plaintiff, both sets of defendants appealed.
FACTS

  Sometime in February 1930, a vehicular accident involving a passenger truck and an

automobile took place at along the Talon Bridge, Manila South Road in the Municipality
of Las Pinas, Rizal. The truck which was owned by Saturnino Cortez was driven by
Abelardo Velasco when the accident occurred while the automobile which  was owned
by Mr and Mrs Manuel Gutierrez was driven by their 18 year old son Bonifacio
Gutierrez.

While the two parties involved in the accident blame each other, plaintiff Narciso
Gutierrez held both parties liable for the injuries he sustained.

ISSUE

Whether or not the civil liabilities  imposed upon the defendants were tenable.

HELD

Yes. Under paragraph 2, Article 2180 of the Civil Code it states that “ The father and , in
the case of his death or incapacity, the mother , are responsible for the damages
caused by the minor children who live in their company.” It was conceded in  this case
that Bonifacio Gutierrez’s incompetence in driving and negligence contributed to the
occasion of the accident. However, the guarantee given by the father at the time when
the younger Gutierrez was given the license to operate that automobile held the former
responsible for the acts of the latter. The theory of the law is that the running of the
machine by a child to carry other members of the family is within the scope of the
owner’s business, so that he is liable for the negligence of the child because of the
relationship of master and servant.

The liability of Saturnino Cortez, the owner of the truck, and of his chauffeur Abelardo
Velasco rests on a different basis, namely, that of contract which, as sufficiently
demonstrated by the allegations of the complaint, not controverted, and the evidence
presented concerning the position of the truck on the bridge, the speed in operating the
machine, and the lack of care employed by the chauffeur.

The judgment appealed from was modified in favor of the plaintiff with cost against the
defendants jointly and severally.

QUESTIONS (Art.1172)
1. What will be the effect on the liability of the employer if the injury suffered by the plaintiff is
caused by a contributory negligence?

Answer: That will be considered a mitigating circumstances in considering his liability.

2. What will be the consequence if a person is succumb  to a Contract of Adhesion?

Answer: It will be at the disadvantage of the injured party because the other party will
have the power to dictate the terms of the contract since there will be no equality in the
bargaining power.

Article 1173
The fault or negligence of the obligor consists in the omission of that diligence
which is required by the nature of the obligation and corresponds with the
circumstances of the person, of the time and of the place. When negligence
shows bad faith, the provisions of Articles 1171 and 2201, paragraph 2, shall
apply.

If the law or contract does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be required.

 Ang kasalanan o kapabayaan ng obligor ay binubuo sa pagkukulang ng na sipag na

kung saan ay kinakailangan sa pamamagitan ng likas na katangian ng obligasyon at
tumutugma sa mga pangyayari ng mga tao, ng oras at ng lugar. Kapag kapabayaan ay
nagpapakita masamang hangarin, ang mga probisyon ng Artikulo 1171 at 2201, talata 2
, ay dapat mag-apply.

Kung ang batas o kontrata ay hindi ipinapahayag na kung saan ay na-obserbahan sa

pagganap, na kung saan ay inaasahan ng isang mahusay na ama ng isang pamilya ay
dapat atasan .

 Far East Bank and Trust Co. v. Estrella O. Querimit

Facts: Respondents filed a complaint against petitioner bank and certain officials of the
latter, alleging that the they refused to allow her to withdraw her time deposit evidenced
by four certificates of deposit in the total amount of $60,000. The trial court ordered
petitioner-bank and its officials to allow respondent to withdraw her time deposit plus
accrued interests. The Court of Appeals (CA) affirmed the decision of the trial court with
the modification that petitioner-bank was solely liable because the latter has a
personality separate from its officers and stockholders. On appeal, the Supreme Court
affirmed the CA.

Held: Petitioner-bank failed to prove that it had already made payment considering that
the subject certificates of deposit were still in the possession of the depositors. The
principle that payment, in order to discharge a debt, must be made to someone
authorized to receive it is applicable to the payment of certificates of deposit. Petitioner
should, thus, not have paid respondent’s husband or any third party the amount of the
time deposit without requiring the surrender of the certificates of deposit. Laches would
also not defeat respondent’s claim as she did not withdraw her deposit because she
relied on petitioner bank’s assurance that the interest would accumulate annually even
after maturity of the time deposit and she set aside the money therein for the retirement.

Article 1174
Except in cases expressly specified by the law, or when it is otherwise declared
by stipulation, or when the nature of the obligation requires the assumption of
risk, no person shall be responsible for those events which could not be
foreseen, or which, though foreseen, were inevitable. (1105a)

Maliban sa mga kasong nasasaad sa batas, o ayon sa mga napagusapan, o kung ang
kalikasan ng pananagutan ay nangangailangan ng nakikinitang panganib, walang
sinumang tao ang may pananagutan ukol sa mga pangyayaring hindi inaasahan o kung
ito man ay inaasahan ay hindi mapipigilan o maiiwasan.

Discussion:

This article is a continuance to ART. 1173. ART. 1174 explains a fortuitous event that
may have arise during the event of doing the obligation. It is an event which cannot be
foreseen such as sudden coming of a storm which considered an Acts of God or known
as majeure or any other unexpected event such as robbery, insurrection which is
considered Acts of man.

The Philippine Civil Code distinguishes between two kinds of fortuitous events namely:

1. Ordinary fortuitous events or those which are common and which the contracting
parties could reasonably foresee e.g. rain.
2. Extra-ordinary fortuitous events which are uncommon and which the contracting
parties could not have reasonably foreseen e.g. earthquake, fire, unusual flood.

To be declared that such circumstances are fortuitous events the following must be
considered:

1. The event must be independent of the human will or the debtor

2. The event could not be foreseen, or if foreseen, is inevitable

3. The event must be of such a character as to render it impossible for the debtor to
comply with his obligation in a normal manner

4. The debtor must be free from any participation in, or the aggravation of, the injury to
the creditor, that is, there is no concurrent negligence on his part.

In case of fortuitous event there are still rules to be observed: When expressly specified
by law. : a) the debtor is guilty of fraud, negligence, or delay, or contravention of the
tenor of the obligation. (Arts. 1170. 1165, par.3)

Example : S is obliged to deliver a specific horse to B on August 10. S did not deliver
the horse on said date. If, on August 11, the horse died because it was hit by lightning,
S is not liable if no demand was made by B. His obligation was extinguished. If the
horse died after a demand was made by B, S is liable for damages because he is guilty
of (legal) delay. In this case the obligation of S to deliver the horse is also extinguished
but it is converted into monetary obligation to pay damages. (Art.1165).b) the debtor has
promised to deliver the same (specific)thing to two or more persons who do not have
the same interest. Example: If S sold and promised to deliver.

ARTICLE 1175
Art. 1175. Usurious transactions shall be govern by special laws.

Interest. Interest is the charge for the privilege of borrowing money or the income from
lending the money to the borrower. It can either be MORATORY, one which is a result
from the delay of payment or performance of an obligation or COMPENSATORY, a)
penalty or indemnity for damages imposed by law or by the courts and b) giving money
or its equivalent in return for something.
 Usury Defined. Usury is the practice of making unethical/illegal monetary loans that
unfairly enrich the lender.

Special Law on Usury. The Usury Law, also known as Act. 2655, too effect on the
1st day of May 1916. This law provided a legal rate of interest of 6% annually and a
contractual rate of not more than 12% annually if the loan is secured and 14% if not so
secured. The Usury Law was legally ineffective during the Martial Law under the Res.
No. 224 on December 3, 1982 and justified thru Central Bank Circular. No. 905 dated
January 1, 1983.

CASE DIGEST page 135

G.R. No. 26085             August 12, 1927

SEVERINO TOLENTINO and POTENCIANA MANIO, plaintiffs-appellants,

vs.
BENITO GONZALEZ SY CHIAM, defendants-appellee.

Araneta and Zaragoza for appellants.

Eusebio Orense for appelle.

JOHNSON, J.:

FACTS:

Before November 28, 1922, Severino Tolentino and Potenciana  Manio purchased a

parcel of land in Tarlac owned by Luzon Rice Mills, Inc., amounting to P25,000.00. Both
parties agreed to settle full payments in three installments.

1. First installment of P2, 000.00 was duly paid on or before May 2, 1921
2. Second installment of P8, 000.00 was duly paid on or before May 31, 1921
3. Third installment of P15,000 at 12% interest due on or before Nov 30,1922

One of the conditions of the contract of purchase was that if Tolentino and Manio failed
to pay the balance of any of the installments on the date agreed upon, the property
bought would revert to the original owner.

On Nov 7, 1922, a representative of vendor of said property wrote Manio, notifying her
that if the balance of said indebtedness was not paid, they would recover the property
with damages for non-compliance with the condition of the contract of purchase.
 Tolentino and Manio borrowed money from Benito Gonzales Sy Chiam to satisfy their
indebtedness to the vendor. Gonzales agreed to lend the P17,500 upon condition that
they execute and deliver to him a pacto de retro of the property. The contract includes a
contract of lease on the property whereby the lessees as vendors apparently bound
themselves to pay rent at the rate of P375 per month and whereby “Default in the
payment of the rent agreed for two consecutive months will terminate this lease and will
forfeit our right of repurchase, as though the term had expired naturally”.
Upon maturation of loan, Tolentino defaulted payment and Gonzales demanded
recovery of land. Tolentino’s argument: that the pacto de retro sale is a mortgage and
not an absolute sale and that the rental price paid during the period of the existence
of the right to repurchase, or the sum of P375 per month, based upon the value of the
property, amounted to usury.

ISSUE:

Whether or not a tenant may charge his landlord with a Usury Law upon the ground that
the amount of rent he pays, based upon the real value of the property, amount to a
usurious rate of interest.

HELD:

1. A tenant cannot charge his landlord, upon the ground that the amount of rent he pays, based
upon the real value of the property, amounts to a usurious interest. Also, the said law was for
loan and not for renting a place/property.

ARTICLE 1176
The receipt of the principal by the creditor,without reservation with respect to the
interest,shall give rise to the presumption that said interest has been paid.

The receipt of a later installments of a debt without reservation as to prior

installments,shall likewise raise the presumption that such installments have
been paid.

What is Presumption?

Meaning the inference of a fact not actually known arising from its usual connection with
another which known or proved.
 Inference-Act or process of conducting from evidence or premises.

Two kinds of presumption

1) Conclusive presumption- one which cannot be contradicted, like the presumption

that every is conclusively presumed to know the law. (see art 3)

2) Disputable (or rebuttable) presumption– One which can be contradicted by

presenting proof to the contrary.

Example of Article 1176 para.1

Mr. A borrowed the amount of 5000 from Mr.B with the interest rate of 5% per month.
After three months, A paid 5000 to Mr.B as payment for the principal amount borrowed.
Mr. B recieved the amount without making any reservation as to the collection of
interest.

Presumption:  As if Mr.A paid the interest before the principal.

Example of Article 1176 para.2

Mr X borrowed P15000 from Mr. Y payable by installment within three months in the
amount of P5,000 per month.

Ist month- Not paid

2nd month- Mr.Y received the amount of 5000 for the 2nd month without making any
reservation as to the collection of the first installment.

Presumption: Mr.X is presumed to have paid the first installment

RIZAL COMMERCIAL BANKING CORPORATION VS PEDO P BUENAVENTURA

FACTS:

 Respondent Buenaventura and his first wife owned a townhouse unit in Quezon City.
 December 27 1994 they obtained loan from petitioner. They mortgaged the townhouse for the
security of the loan. Under the agreement the respondent was to pay RCBC a fixed monthly
payment with adjustable for five years.
 For this matter the respondent open an account with RCBC Binondo Branch from which the
bank was to deduct the monthly amortization.
 On April 9 1999- Respondent received a notice of Public Auction of the mortgaged town house
unit. He then wrote a letter to ATTY. Basconcillo,the Notary Public conducting of the Public
Auction demanding for the cancellation of Public Auction. However,the Notary Public proceeded
with the Public sale on May 25 1999,where RCBC emerged as the highest bidder.
 September 28 2000- The Notary Public Certificate of sale was registered with the registered of
deeds.
 September 18 2001-Respondent filed with the RTC Quezon City for the annulment of sale and
damages against RCBC.

ISSUE:

Whether or not there was a payment on the said agreement between the parties.

HELD:

ARTICLE 1176  

The receipt of the principal by the creditor,without reservation with respect to the
interest,shall give rise to the presumption that said interest has been paid.

The receipt of a later installments of a debt without reservation as to prior

installments,shall likewise raise the presumption that such installments have been paid.

Respondent pass books indicate that RCBC continued to receive his payment even
after it made demands for him to pay his pass accounts,and even after the auction sale.
RCBC cannot deny RECEIPT of payments,even when it claims that the deposit were
“NOT WITHDRAWN” it is not the respondent fault that RCBC did not withdraw the
money he deposited. His obligation under the mortgage agreement was to deposit his
payment in the savings account he had opened fo that purpose, in order that RCBC
may debit the amount of his monthly liabilities therefrom. He complied with his part of
agreement. This bolsters the conclusion of the CA that respondent had no unpaid
installment and was not in defaults as would warrant the application of the accelaration
clause and the subsequent foreclosure and auction sale of the property.

Article 1177
The 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 for the same purpose, save those which are inherent in his person; they
may also impugn the acts which the debtor may have done to defraud them.
(1111)

Ang mga pinagkakautangan, pagkatapos ipaglaban ang kanyang pagmamay-ari na

nasa may utang upang ma-satisfy ang claims nito ay maaaring gamitin ang kanyang
karapatan na dalhin lahat ng aksyon ng may utang para sa katulad na layunin, maliban
na lamang sa mga likas na karapatan sa isang tao; maaari rin nilang ikondena ang mga
aksyon na ginawa ng may utang upang lokohin sila.

Discussion:

Accion subrogatoria is an action where the creditor hose claims had not been fully
satisfied, may go after the debtors (third persons) of the defendant-debtor.

Accion pauliana is an action where the creditor files an action in court for the rescission
of acts or contracts entered into by the debtor designed to defraud the former.

Article 1178.
Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there
has been no stipulation to the contrary.

General Rule:
All rights that are acquired by virtue of an obligation are transmissible. 
Subject to such laws, all rights acquired by virtue of an obligation are transmissible. Heirs shall
be liable only to the extent of what they stand to inherit.
Transmissibility is that character whereby an act, a deed or a title whereby it passes on to one’s
heirs or assigns.
Intransmissible rights are rights that do not pass on to one’s heirs or assigns. 
Exceptions:
(1) Prohibited by law. — When prohibited by law, like the rights in partnership, agency, and
commodatum which are purely personal in character.
(a) By the contract of partnership, two or more persons bind themselves to contribute money,
property or industry to a common fund, with the intention of dividing the profits among
themselves. (Art. 1767.)
(b) By the contract of agency, a person binds himself to render some service or to do something
in representation or on behalf of another, with the consent or authority of the latter. (Art. 1868.)
(c) By the contract of commodatum, one of the parties delivers to another something not
consumable so that the latter may use the same for a certain time and return it.
(2) Prohibited by stipulation of parties. — When prohibited by stipulation of the parties, like
the stipulation that upon the death of the creditor, the obligation shall be extinguished or that the
creditor cannot assign his credit to another. The stipulation against transmission must not be
contrary to public policy. Such stipulation, being contrary to the general rule, should not be
easily implied, but must be clearly proved, or at the very least, clearly implied from the
provisions of the contract itself.

Article 1305.
A contract is a meeting of minds between two persons whereby one binds himself, with respect to the
other, to give something or to render some service.

All contracts are agreement but not all agreements are contracts

Article. 38
Criminal law- is a system of laws concerned with punishment of individuals who commit crimes.

Article 1231
Obligations are extinguished:
(1) By payment or performance;

(2) By the loss of the thing due;

(3) By the condonation or remission of the debt;

(4) By the confusion or merger of the rights of creditor and debtor;

(5) By compensation;

(6) By novation.
Other causes of extinguishment of obligations, such as annulment, rescission,
fulfillment of a resolutory condition, and prescription, are governed elsewhere in
this Code. (1156a)
Ang mga obligasyon ay mawawala o matatapos kapag nangyari na ang mga sum
usunod na bagay:

(1.) Sa pagbabayad o pag ganap;

(2.) Sa pagkawala ng bagay na kailangan ibayad o ibigay;

(3.) Sa pagbibigay ng kapatawaran o ng pagbabalewala ng utang;

(4.) Ang pagsasama sa iisang tao ng obligasyon ng pagiging nagpautang at umutang;

(5.) Palitan ng obligasyon;

(6.) Pagpapalit ng panibagong obligasyon.

Ang mga ibang dahilan ng pagkatapos o pagkawala ng obligasyon katulad

ng annulment, rescission, at pagsagawa o katuparan ng resolutory condition,
and prescription, ay pinamamahalaan ng ibang artikulo mula sa Code na ito.

Other causes of Terminating Obligations:

[Link] or Renunciation

[Link] Agreement

[Link]

[Link] of Resolutory Condition (Art 1179)

[Link] of Resolutory Term (Art 1139)

[Link]

[Link] of the debtor when the obligation is purely personal

[Link] or will of one of the parties in certain contracts like agency, partnership

[Link] of unforeseen events

[Link] of the property charged with an obligation

ARTICLE 1200

The right of choice belongs to the debtor, unless it has been expressly granted to the
creditor.

The debtor shall have no right to choose those prestations which are impossible,
unlawful or which could not have been the object of the obligation. (1132)

ARTICLE 1201

The choice shall produce no effect except from the time it has been communicated.
(1133)

ARTICLE 1202

The debtor shall lose the right of choice when among the prestations whereby he is
alternatively bound, only one is practicable. (1134)
ARTICLE 1203

If through the creditor’s acts the debtor cannot make a choice according to the terms of
the obligation, the latter may rescind the contract with damages. (n)

ARTICLE 1204

The creditor shall have a right to indemnity for damages when, through the fault of the
debtor, all the things which are alternatively the object of the obligation have been lost,
or the compliance of the obligation has become impossible.

The indemnity shall be fixed taking as a basis the value of the last thing which
disappeared, or that of the service which last became impossible.

Damages other than the value of the last thing or service may also be awarded. (1135a)

ARTICLE 1205

When the choice has been expressly given to the creditor, the obligation shall cease to
be alternative from the day when the selection has been communicated to the debtor.

Until then the responsibility of the debtor shall be governed by the following rules:

(1) If one of the things is lost through a fortuitous event, he shall perform the obligation
by delivering that which the creditor should choose from among the remainder, or that
which remains if only one subsists;

(2) If the loss of one of the things occurs through the fault of the debtor, the creditor may
claim any of those subsisting, or the price of that which, through the fault of the former,
has disappeared, with a right to damages;

(3) If all the things are lost through the fault of the debtor, the choice by the creditor shall
fall upon the price of any one of them, also with indemnity for damages.
The same rules shall be applied to obligations to do or not to do in case one, some or all
of the prestations should become impossible. (1136a)

ARTICLE 1206

When only one prestation has been agreed upon, but the obligor may render another in
substitution, the obligation is called facultative.

The loss or deterioration of the thing intended as a substitute, through the negligence of
the obligor, does not render him liable. But once the substitution has been made, the
obligor is liable for the loss of the substitute on account of his delay, negligence or
fraud. (n)

Source: [Link]
obligations/section-3-alternative-obligations/
lternative and Facultative
Obligations
SECTION 3. - Alternative
Obligations
Art. 1199. A person
alternatively bound by different
prestations shall completely
perform one of
them.
The creditor cannot be
compelled to receive part of one
and part of the other
undertaking.
Art. 1200. The right of choice
belongs to the debtor, unless it
has been expressly granted to
the
creditor.
The debtor shall have no right
to choose those prestations
which are impossible, unlawful
or
which could not have been the
object of the obligation.
Art. 1201. The choice shall
produce no effect except from
the time it has been
communicated.
Art. 1202. The debtor shall lose
the right of choice when among
the prestations whereby he is
alternatively bound, only one is
practicable
lternative and Facultative
Obligations
SECTION 3. - Alternative
Obligations
Art. 1199. A person
alternatively bound by different
prestations shall completely
perform one of
them.
The creditor cannot be
compelled to receive part of one
and part of the other
undertaking.
Art. 1200. The right of choice
belongs to the debtor, unless it
has been expressly granted to
the
creditor.
The debtor shall have no right
to choose those prestations
which are impossible, unlawful
or
which could not have been the
object of the obligation.
Art. 1201. The choice shall
produce no effect except from
the time it has been
communicated.
Art. 1202. The debtor shall lose
the right of choice when among
the prestations whereby he is
alternatively bound, only one is
practicable
Alternative and Facultative Obligations

SECTION 3. - Alternative Obligations

Art. 1199. A person alternatively bound by different prestations shall completely perform one of
[Link] creditor cannot be compelled to receive part of one and part of the other undertaking.

Art. 1200. The right of choice belongs to the debtor, unless it has been expressly granted to the
[Link] debtor shall have no right to choose those prestations which are impossible, unlawful or
which could not have been the object of the obligation.

Art. 1201. The choice shall produce no effect except from the time it has been communicated.

Art. 1202. The debtor shall lose the right of choice when among the prestations whereby he is
alternatively bound, only one is practicable.

Art. 1203. If through the creditor's acts the debtor cannot make a choice according to the terms of the
obligation, the latter may rescind the contract with damages.

Art. 1204. The creditor shall have a right to indemnity for damages when, through the fault of the
debtor, all the things which are alternatively the object of the obligation have been lost, or
thecompliance of the obligation has become impossible.

The indemnity shall be fixed taking as a basis the value of the last thing which disappeared, or that of
the service which last became [Link] other than the value of the last thing or service may
also be awarded.

Art. 1205. When the choice has been expressly given to the creditor, the obligation shall cease tobe
alternative from the day when the selection has been communicated to the debtor.

Until then the responsibility of the debtor shall be governed by the following rules:

(1) If one of the things is lost through a fortuitous event, he shall perform the obligation by delivering
that which the creditor should choose from among the remainder, or that which remains if only one
subsists;

(2) If the loss of one of the things occurs through the fault of the debtor, the creditor may claim any of
those subsisting, or the price of that which, through the fault of the former, has disappeared, with a
right to damages;

(3) If all the things are lost through the fault of the debtor, the choice by the creditor shall fall upon the
price of any one of them, also with indemnity for [Link] same rules shall be applied to obligations
to do or not to do in case one, some or all of the prestations should become impossible.

Art. 1206. When only one prestation has been agreed upon, but the obligor may render another in
substitution, the obligation is called [Link] loss or deterioration of the thing intended as a
substitute, through the negligence of the obligor, does not render him liable. But once the substitution
has been made, the obligor is liable for the loss of the substitute on account of his delay, negligence or
fraud.
Discussion:

Kinds of obligation according to [Link] are:

(1) Simple obligation. — one where there is only one prestation, e.g., S obliged himself to deliver to B a
piano; S promised to repair the car of B.

(2) Compound obligation. — one where there are two or more prestations. It may be.

(a) Conjunctive obligation. — one where there are several prestations and all of them are due; or

(b) Distributive obligation. — one where one of two or more of the prestations is due. It maybe
alternative (Art. 1199.) or facultative. (Art. 1206.)

Meaning of alternative obligation.

An alternative obligation is one wherein various prestations are due but the performance of one of them
is sufficiently determined by the choice which, as a general rule, belongs to the debtor.

EXAMPLE: D borrowed from C P10,000. It was agreed that D could comply with his obligation by giving C
P10,000, or a color television set, or by painting the house of C. The delivery of the P10,000, or a color
television set, or the painting of the house of C, is sufficient tocomply with the obligation. Performance
must be complete. C cannot be compelled to accept, forinstance, P5,000 and half of the television,
thereby establishing a co-ownership between them, orP5,000, and the painting of a part of his house.
(Art. 1199, par. 2.)

ART. 1200. The right of choice belongs to the debtor, unless it has been expressly granted to the
creditor. The debtor shall have no right to choose those prestations which are impossible, unlawful or
which could not have been the object of the obligation.

(a) Once the notice of the election has been given to the creditor, the obligation ceases to be alternative
and becomes simple.

(b) Such choice once properly made and communicated is irrevocable and cannot, therefore, be
renounced.

ART. 1202. The debtor shall lose the right of choice when among the prestations whereby he is
alternatively bound, only one is practicable.

Effect when only one prestation is [Link] more than one is practicable, it is Article 1200 that will
apply. The obligation is still alternativebecause the debtor still retains the right of choice. Under Article
1202, if only one is practicable (e.g., the others have become impossible), the obligation is converted
into a simple one.
ART. 1203. If through the creditor’s acts the debtor cannot make a choice according to the terms of the
obligation, the latter may rescind the contract with damages.

It is the very nature of an alternative obligation that the debtor can make his choice without the consent
of the creditor. Hence, the right given the debtor to rescind the contract and recover damages if,
through the creditor’s fault, he cannot make a choice according to the terms of the obligation. The
debtor, however, is not bound to rescind.

EXAMPLE: D borrowed from C P20,000.00. It was agreed that instead of P20,000.00, D could deliver a
ring, or a car, or a house. If through the fault of C, the ring is destroyed, D can rescind the contract if he
wants. In case of rescission, the amount of P20,000.00 must be returned by D with interest. C, in turn,
must pay D the value of the ring plus damages. D, instead of rescinding the contract, may choose the car
or house with a right to recover the value of item one with damages. If D chooses ring, his obligation is
extinguished. C is not liable for damages.

ART. 1204. The creditor shall have a right to indemnity for damages when, through the fault of the
debtor, all the things which are alternatively the object of the obligation have been lost, or
thecompliance of the obligation has become impossible. The indemnity shall be fixed taking as a basis
the value of the last thing which disappeared, or that of the service which last became impossible.
Damages other than the value of the last thing or service may also be awarded.

EXAMPLE: D borrowed from C P20,000.00. It was agreed that instead of P20,000.00, D could deliver a
ring, or a car, or a house.

Rules in case of loss or impossibility before choice is communicated

1. If only one or some are lost through a fortuitous event or through the debtor’s fault, the debtor may
deliver any of the remainder, or that which remains if only one subsists.

2. If all are lost through a fortuitous event, the obligation is extinguished.

3. If all are lost through the debtor’s fault, the debtor shall pay the value of the last thing thatwas lost
plus [Link] all except one are lost through the debtor’s fault and the remaining item is subsequently
lost through a fortuitous event, then the debtor’s obligation is extinguished.

4. If all except one are lost through a fortuitous event, and the remaining item is subsequently lost
through the debtor’s fault, the debtor shall pay damages.

lternative and Facultative

Obligations
SECTION 3. - Alternative
Obligations
Art. 1199. A person
alternatively bound by different
prestations shall completely
perform one of
them.
The creditor cannot be
compelled to receive part of one
and part of the other
undertaking.
Art. 1200. The right of choice
belongs to the debtor, unless it
has been expressly granted to
the
creditor.
The debtor shall have no right
to choose those prestations
which are impossible, unlawful
or
which could not have been the
object of the obligation.
Art. 1201. The choice shall
produce no effect except from
the time it has been
communicated.
Art. 1202. The debtor shall lose
the right of choice when among
the prestations whereby he is
alternatively bound, only one is
practica
lternative and Facultative
Obligations
SECTION 3. - Alternative
Obligations
Art. 1199. A person
alternatively bound by different
prestations shall completely
perform one of
them.
The creditor cannot be
compelled to receive part of one
and part of the other
undertaking.
Art. 1200. The right of choice
belongs to the debtor, unless it
has been expressly granted to
the
creditor.
The debtor shall have no right
to choose those prestations
which are impossible, unlawful
or
which could not have been the
object of the obligation.
Art. 1201. The choice shall
produce no effect except from
the time it has been
communicated.
Art. 1202. The debtor shall lose
the right of choice when among
the prestations whereby he is
alternatively bound, only one is
practicable