Saturday, January 28, 2017

Case Doctrines in Civil Law II

CASE DOCTRINES IN LABOR LAW REVIEW II
Compiled by Glenn Rey D. Anino

Juris Doctor

University of Cebu

OBLIGATIONS

(part 1)

QUASI-DELICT

Tactaquin vs. Palileo, 21 SCRA 346, September 29, 1967

Remedial law; Motion to dismiss based on bar by prior judgment.Where plaintiff-appellant suffered
physical injuries and her daughter died as a result of an automobile accident, and defendant-appellee
had been prosecuted for homicide, with serious physical injuries thru reckless negligence, found guilty,
and sentenced to pay damages, the present civil action for damages involving the same accident is
already barred by prior judgment, because plaintiff cannot recover damages twice for the same act or
omission of the defendant.

Same; Reservation to institute separate civil action for damages.Where the record tends to show
that the reservation to institute a separate civil action for damages was made after defendant-appellee
had already pleaded guilty and after the private prosecutor had entered his appearance jointly with
the prosecuting attorney in the course of the criminal proceedings, such reservation must be deemed
legally ineffective. [Tactaquin vs. Palileo, 21 SCRA 346(1967)]

Padua vs. Robles, 66 SCRA 485 , August 29, 1975

Judgment; Interpretation of; Sufficiency and efficacy of judgment tested by its substance rather than
its form.The sufficiency and efficacy of a judgment must be tested by its substance rather than its
form. In construing a judgment, its legal effects including such effects that necessarily follow because
of legal implications, rather than the language used, govern. Also, its meaning, operation, and
consequences must be ascertained like any other written instrument. Thus, a judgment rests on the
intention of the court as gathered from every part thereof, including the situation to which it applies
and the attendant circumstances.

Same; Same; Adoption of interpretation which achieves moral justice where statement in judgment in
question susceptible of two or more interpretations.The statement on the civil liability of the driver
must surely have a meaning; and even if the statement were reasonably susceptible of two or more
interpretations, that which achieves moral justice should be adopted, eschewing the other
interpretations which in effect would negate moral justice.

Same; Same; Judges; Judges should exercise extreme degree of care in formulation of dispositive
portion of decision.It is not amiss at this juncture to emphasize to all magistrates in all levels of the
judicial hierarchy that extreme degree of care should be exercised in the formulation of the dispositive
portion of a decision, because it is this portion that is to be executed once the decision becomes final.
The adjudication of the rights and obligations of the parties, and the dispositions made as well as the
directions and instructions given by the court in the premises in conformity with the body of the
decision, must all be spelled out clearly, distinctly and unequivocally, leaving absolutely no room for
dispute, debate or interpretation.

Criminal law; Civil liability in negligence cases; Option of offended party to file action for
enforcement of civil liability based on culpa criminal or action for recovery of damages based on culpa
aquiliana; Prohibition against recovery of damages twice for the same negligent act or omission.Civil
liability coexists with criminal responsibility. In negligence cases, the offended party (or his heirs) has
the option between an action for enforcement of civil liability based on culpa criminal under article
100 of the Revised Penal Code and an action for recovery of damages based on culpa aquiliana under
article 2177 of the Civil Code. The action for enforcement of civil liability based on culpa criminal
section 1 of Rule 111 of the Rules of Court deems simultaneously instituted with the criminal action,
unless expressly waived or reserved for a separate application by the offended party. Article 2177 of
the Civil Code, however, precludes recovery of damages twice for the same negligent act or omission.
[Padua vs. Robles, 66 SCRA 485(1975)]

Singson vs. Bank of the Philippine Islands, 23 SCRA 1117 , June 27, 1968

Civil law; Tort; Damages; Existence of a contract between the parties is not a bar to the commission
of a, tort by the one against the other.It has been repeatedly held: that the existence of a contract
between the parties does not bar the commission of a tort by the one against the other and the
consequent recovery 01 damages therefor (Cangco v. Manila Railroad, 38 Phil. 768; Yamada v. Manila
Railroad, 33 Phil. 8; Vasquez v. Borja, 74 Phil. 560). Indeed, this view has been, in effect, reiterated in
a comparatively recent case. Thus, in Air France vs. Carrascoso, L-21438, Sept. 28, 1966, involving an
airplane passenger who, despite his first-class ticket, had been illegally ousted from his first-class
accomodation and compelled to take a seat in the tourist compartment, was held entitled to recover
damages from the air-carrier, upon the ground of tort on the latters part, for, although the relation
between a passenger and a carrier is contractual both in origin and nature the act that breaks the
contract may also be a tort. [Singson vs. Bank of the Philippine Islands, 23 SCRA 1117(1968)]

Malipol vs. Tan, 55 SCRA 202 , January 21, 1974

Default; Trial court has discretion to set aside an order of default.It is within the sound discretion of
the court to set aside an order of default and to permit a defendant to file his answer and to be heard
on the merits even after the reglementary period for the filing of the answer has expired, but it is not
error, or an abuse of discretion, on the part of the court to refuse to set aside its order of default and
to refuse to accept the answer where it finds no justifiable reason for the delay in the filing of the
answer. x x x Unless it is shown clearly that a party has justifiable reason for the delay the court will
not ordinarily exercise its discretion in his (defendants) favor. In the instant case, the appellants have
not shown that they exercised such diligence as an ordinary prudent person would exercise to have the
answer filed within the reglementary period. The damages asked for in the complaint amounts to
P36,600.00. Lily Lim Tan, who is a business woman, should have considered the matter a serious one.
But, for reasons she did not explain, she referred the complaint to her lawyer only after the lapse of
ten (10) days from receipt thereof. She should have considered that four days might not be sufficient
time for her lawyer to prepare and file the answer. x x x Because Atty. Chavez assured her, in their
telephone conversation that he would take care of the complaint, appellant Lily Lim Tan took for
granted that the answer would be filed on time. Said appellant should have checked before the
expiration of the period for filing the answer whether the complaint was really taken care of, or not.
But this, Lily Lim Tan failed to do, and this is another instance showing her lack of concern over the
complaint.

Same; Where mistake in delay to file answer not appreciated. The mistake, according to appellants,
consisted in Atty. Chavez having told Atty. de Castro on June 10, 1966 that appellants received the
summons and complaint on May 30, 1966. Even if Atty. Chavez had told Atty. de Castro the correct
date, that is, that appellants received the summons on May 19, 1966, the answer could not have been
filed on time by Atty. de Castro, because the reglementary period for filing the answer expired on June
3, 1966, and it was already June 10, 1966 when the complaint was endorsed by Atty. Chavez to Atty.
de Castro.

Same; Where accident as ground for failure to file answer on time not appreciated.The record does
not show that Atty. Chavez was suffering from an abnormal mind on May 30, 1966. His actuations on
May 30 were those that could be expected of a normal person. Atty. Chavez asked the employee of Lily
Lim Tan about the date when his employer received the summons and complaint, and because the
employee could not give him the desired information he placed a long distance telephone call to Lily
Lim Tan to ask about said date. This action of Atty. Chavez showed that he was very much aware that
the reglementary period within which the answer should be filed was to be computed from the date of
the receipt of the summons and the complaint.

Same; Lawyers; Client bound by lawyers mistakes.The appellants are bound by the mistakes, and
may suffer by the negligence, of their lawyer.

Same; Same; Suicide; Commission of suicide by lawyer no proof he was abnormal at a prior date.The
fact that Atty. Chavez committed suicide on June 17, 1966 does not necessarily prove that he was
abnormal, incompetent or insane on May 30, 1966. Although there is a judicial declaration that a sane
man would not commit suicide, cognizance is nevertheless taken of the fact that circumstances at
some given time may impel a person to commit suicide. The probative value of suicide in determining
the sanity of a person is dependent on the factual situation in each case. Such matters as the reasons
for the act of self-destruction, the circumstances indicating the persons state of mind at the time, and
other pertinent facts must be considered. The appellants had not indicated to the trial court any
circumstance from which it could form an opinion on the mental condition of Atty. Chavez before he
committed suicide. No error committed in refusing to set aside order of default.

Same; New trial; Motion to lift order of default treated as motion for new trial.Let it be noted that
the lower court rendered its decision on July 1, 1966, and the appellants received notice of said
decision on August 23, 1966. The decision would have become final on September 22, 1966. On
September 21, 1966 the appellants filed their motion to lift the order of default and for new trial. The
motion of the appellants, therefore, was in the nature of a motion for new trial based on fraud,
accident, mistake or excusable negligence under par. (a) of Section 1 of Rule 37 of the Rules of Court.

Same; Same; An affidavit of merit attached to a motion for new trial should state facts, not mere
opinion or conclusions of law.Under section 2 of Rule 37 the moving party must show that he has a
meritorious defense. The facts constituting the movants good and substantial defense, which he may
prove if the petition were granted, must be shown in the affidavit which should accompany the motion
for a new trial. x x x In the instant case the allegations in the motion that defendants have good and
valid defenses, namely: that the accident which gave rise to the case was caused by force majeure;
that defendant Labsan is absolutely without fault in the accident that gave rise to the case; and that
defendant Lily Lim Tan has exercised due diligence required of a good father of a family to prevent
damage are mere conclusions which did not provide the court with any basis for determining the nature
and merit of the probable defense. An affidavit of merit should state facts, and not mere opinion or
conclusions of law.

Civil law; Quasi-delict; In actions for quasi-delict the employer is solidarily liable with the employee
for damages. The action in the instant case was brought not to demand civil liability arising from a
crime. The complaint makes no mention of a crime having been committed, much less of the driver
having been convicted of a crime. But there is an allegation in the complaint that Labsan was the
authorized driver of the Lily Lim Tan in connection with her gasoline business. The instant action,
therefore, was based, as the complaint shows, on quasi-delict. Under Article 2180 of the Civil Code,
which treats of quasi-delicts, the liability of the owners and managers of an establishment or
enterprise for damages caused by their employees is primary and direct, not subsidiary. The employer,
however, can demand from his employee reimbursement of the amount which he paid under his
liability. [Malipol vs. Tan, 55 SCRA 202(1974)]

Marcia vs. Court of Appeals, 120 SCRA 193 , January 27, 1983

Actions, Tort; Criminal Procedure; No independent civil action for damages may be filed where
injuries resulted from criminal negligence. Article 33 of the new Civil Code applies only to injuries
intentionally committed.The above article speaks only of defamation, fraud and physical injuries.
The injuries suffered by herein petitioners were alleged to be the result of criminal negligence; they
were not inflicted with malice. Hence, no independent civil action for damages may be instituted in
connection therewith. Further, Section 3 (c), Rule 111 of the Rules of Court states that (c) Extinction
of the penal action does not carry with it extinction of the civil, unless the extinction proceeds from a
declaration in a final judgment that the fact from which the civil might arise did not exist. Otherwise
stated, unless the act from which the civil liability arises is declared to be non-existent in the final
judgment, the extinction of the criminal liability will not carry with it the extinction of the civil
liability.

Same; Same; Same; Judgment; Where a civil action was separately filed based on injuries arising from
reckless driving, but the driver was acquitted in the criminal case on the ground that he was not
negligent and that the case is a pure accident the civil action for damages should be dismissed.
Relative to the admissibility of the documents, to wit; (a) the records of the criminal case against Paje,
(b) the decision of the Court of Appeals acquitting the latter; and (c) copy of the brief of the
respondent Paje as accused-appellant, suffice it to say that since petitioners cause of action is based
on the alleged recklessness and imprudence of respondent Paje, it necessarily follows that his acquittal
by the Court of Appeals and its declaration that the mishap was pure accident are relevant and
material evidence. In fact, the lower court may even take judicial notice of the decision of the Court
of Appeals in said criminal case.

Fernando vs. Court of Appeals, 208 SCRA 714 , May 08, 1992

Civil Law; Negligence; Definition of; Under the Law, a person who by his omission causes damage to
another, there being negligence is obliged to pay for the damage done.Negligence has been defined
as the failure to observe for the protection of the interests of another person that degree of care,
precaution, and vigilance which the circumstances justly demand, whereby such other person suffers
injury (Corliss v. Manila Railroad Company, L-21291, March 28, 1969, 27 SCRA 674, 680). Under the law,
a person who by his omission causes damage to another, there being negligence, is obliged to pay for
the damage done (Article 2176, New Civil Code).

Same; Same; To be entitled to damages for an injury resulting from the negligence of another, a
claimant must establish the relation between the omission and the damage; Definition of Proximate
cause.To be entitled to damages for an injury resulting from the negligence of another, a claimant
must establish the relation between the omission and the damage. He must prove under Article 2179 of
the New Civil Code that the defendants negligence was the immediate and proximate cause of his
injury. Proximate cause has been defined as that cause, which, in natural and continuous sequence
unbroken by any efficient intervening cause, produces the injury, and without which the result would
not have occurred (Vda. de Bataclan, et al. v. Medina, 102 Phil. 181, 186). Proof of such relation of
cause and effect is not an arduous one if the claimant did not in any way contribute to the negligence
of the defendant. However, where the resulting injury was the product of the negligence of both
parties, there exists a difficulty to discern which acts shall be considered the proximate cause of the
accident. [Fernando vs. Court of Appeals, 208 SCRA 714(1992)]

Metro Manila Transit Corp. vs. Court of Appeals, 223 SCRA 521 , June 21, 1993

Remedial Law; Civil Procedure; Petition for review on certiorari under Rule 45 of the Rules of Court;
The Supreme Court in Lacsamana vs. The Intermediate Appellate Court, et al. allows a petition for
review on certiorari from a decision rendered by the Court of Appeals under Sec. 1, Rule 45 of the
Revised Rules of Court to be filed within 15 days from notice of judgment or of the denial of the
motion for reconsideration filed in due time and paying at the same time the corresponding docket
fee.We digress to reiterate, in view of erroneous submissions that we continue to receive, that in the
case of a petition for review on certiorari from a decision rendered by the Court of Appeals, Section 1,
Rule 45 of the Rules of Court, which has long since been clarified in Lacsamana vs. The Hon. Second
Special Cases Division of the Intermediate Appellate Court, et al., allows the same to be filed within
fifteen (15) days from notice of judgment or of the denial of the motion for reconsideration filed in due
time, and paying at the same time the corresponding docket fee. In other words, in the event a
motion for reconsideration is filed and denied, the period of fifteen (15) days begins to run all over
again from notice of the denial resolution. Otherwise put, if a motion for reconsideration is filed, the
reglementary period within which to appeal the decision of the Court of Appeals to the Supreme Court
is reckoned from the date the party who intends to appeal received the order denying the motion for
reconsideration. Furthermore, a motion for extension of time to file a petition for review may be filed
with this Court within said reglementary period, paying at the same time the corresponding docket fee.

Same; Evidence; It is now well-settled that while the findings of fact of the Court of Appeals are
entitled to great respect, and even finality at times, that rule is not inflexible and is subject to well
established exceptions.At this juncture, it suffices to note that factual findings of the trial court may
be reversed by the Court of Appeals, which is vested by law with the power to review both legal and
factual issues, if on the evidence of record, it appears that the trial court may have been mistaken
particularly in the appreciation of evidence, which is within the domain of the Court of Appeals. The
general rule laid down in a plethora of cases is that such findings of fact by the Court of Appeals are
conclusive upon and beyond the power of review of the Supreme Court. However, it is now well-settled
that while the findings of fact of the Court of Appeals are entitled to great respect, and even finality
at times, that rule is not inflexible and is subject to well established exceptions, to wit: (1) when the
conclusion is a finding grounded entirely on speculation, surmises and conjectures; (2) when the
inference made is manifestly mistaken, absurd or impossible; (3) where there is grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact
are conflicting; (6) when the Court of Appeals, in making its findings, went beyond the issues of the
case and the same are contrary to the admissions of both appellant and appellee; (7) when the findings
of the Court of Appeals are contrary to those of the trial court; (8) when the findings of fact are
conclusions without citation of specific evidence on which they are based; (9) when the facts set forth
in the petition, as well as in the petitioners main and reply briefs are not disputed by the respondents
and (10) when the findings of fact of the Court of Appeals are premised on the supposed absence of
evidence and are contradicted by the evidence on record.

Civil Law; Obligations and Contracts; Quasi-delict; Where the injury is due to the concurrent
negligence of the drivers of the colliding vehicles, the drivers and owners of said vehicles shall be
primarily, directly and solidarily liable for damages and it is immaterial that one action is based on
quasi-delict and the other on culpa-contractual.With the allegation and subsequent proof of
negligence against the defendant driver and of an employer-employee relation between him and his co-
defendant MMTC in this instance, the case is undoubtedly based on a quasi-delict under Article 2180.
When the employee causes damage due to his own negligence while performing his own duties, there
arises the juris tantum presumption that the employer is negligent, rebuttable only by proof of
observance of the diligence of a good father of a family. For failure to rebut such legal presumption of
negligence in the selection and supervision of employees, the employer is likewise responsible for
damages, the basis of the liability being the relationship of pater familias or on the employers own
negligence. As early as the case of Gutierrez vs. Gutierrez, and thereafter, we have consistently held
that where the injury is due to the concurrent negligence of the drivers of the colliding vehicles, the
drivers and owners of the said vehicles shall be primarily, directly and solidarity liable for damages and
it is immaterial that one action is based on quasi-delict and the other on culpa contractual, as the
solidarity of the obligation is justified by the very nature thereof.

Same; Same; Same; Defense of due diligence in the selection and supervision of employees; The mere
formulation of various company policies on safety without showing that they were being complied
with is not sufficient to exempt petitioner from liability arising from negligence of its employees.In
order that the defense of due diligence in the selection and supervision of employees may be deemed
sufficient and plausible, it is not enough to emptily invoke the existence of said company guidelines
and policies on hiring and supervision. As the negligence of the employee gives rise to the presumption
of negligence on the part of the employer, the latter has the burden of proving that it has been
diligent not only in the selection of employees but also in the actual supervision of their work. The
mere allegation of the existence of hiring procedures and supervisory policies, without anything more,
is decidedly not sufficient to overcome such presumption. We emphatically reiterate our holding, as a
warning to all employers, that (t)he mere formulation of various company policies on safety without
showing that they were being complied with is not sufficient to exempt petitioner from liability arising
from negligence of its employees. It is incumbent upon petitioner to show that in recruiting and
employing the erring driver the recruitment procedures and company policies on efficiency and safety
were followed. Paying lip-service to these injunctions or merely going through the motions of
compliance therewith will warrant stern sanctions from the Court.

Same; Same; Same; Damages; Art. 2211 of the Civil Code provides that in quasi-delicts, interest as a
part of the damages may be awarded in the discretion of the court and not as a matter of right.
Finally, we believe that respondent court acted in the exercise of sound discretion when it affirmed
the trial courts award, without requiring the payment of interest thereon as an item of damages just
because of delay in the determination thereof, especially since private respondent did not specifically
pray therefor in her complaint. Article 2211 of the Civil Code provides that in quasi-delicts, interest as
a part of the damages may be awarded in the discretion of the court, and not as a matter of right. We
do not perceive that there have been intentional dilatory maneuvers or any special circumstances
which would justify that additional award and, consequently, we find no reason to disturb said ruling.

Libi vs. Intermediate Appellate Court, 214 SCRA 16 , September 18, 1992

Civil Law; Damages; Liability of parents for damages caused by their minor children under Article 2180
of the Civil Code.In imposing sanctions for the so-called vicarious liability of petitioners, respondent
court cites Fuellas vs. Cadano, et al. which supposedly holds that (t)he subsidiary liability of parents
for damages caused by their minor children imposed by Article 2180 of the New Civil Code covers
obligations arising from both quasi-delicts and criminal offenses, followed by an extended quotation
ostensibly from the same case explaining why under Article 2180 of the Civil Code and Article 101 of
the Revised Penal Code parents should assume subsidiary liability for damages caused by their minor
children. The quoted passages are set out two paragraphs back, with pertinent underscoring for
purposes of the discussion hereunder. Now, we do not have any objection to the doctrinal rule holding
the parents liable, but the categorization of their liability as being subsidiary, and not primary, in
nature requires a hard second look considering previous decisions of this court on the matter which
warrant comparative analyses. Our concern stems from our readings that if the liability of the parents
for crimes or quasidelicts of their minor children is subsidiary, then the parents can neither invoke nor
be absolved of civil liability on the defense that they acted with the diligence of a good father of a
family to prevent damages. On the other hand, if such liability imputed to the parents is considered
direct and primary, that diligence would constitute a valid and substantial defense. We believe that
the civil liability of parents for quasi-delicts of their minor children, as contemplated in Article 2180 of
the Civil Code, is primary and not subsidiary. In fact, if we apply Article 2194 of said code which
provides for solidary liability of joint tortfeasors, the persons responsible for the act or omission, in
this case the minor and the father and, in case of his death or incapacity, the mother, are solidarily
liable. Accordingly, such parental liability is primary and not subsidiary, hence the last paragraph of
Article 2180 provides that (t)he responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good father of a family to prevent
damage.

Criminal Law; Civil liability of parents for crimes committed by their minor children.Accordingly,
just like the rule in Article 2180 of the Civil Code, xxx the civil liability of the parents for crimes
committed by their minor children is likewise direct and primary, and also subject to the defense of
lack of fault or negligence on their part, that is, the exercise of the diligence of a good father of a
family. That in both quasi-delicts and crimes the parents primarily respond for such damages is
buttressed by the corresponding provisions in both codes that the minor transgressor shall be
answerable or shall respond with his own property only in the absence or in case of insolvency of the
former. Thus, for civil liability ex quasi delicto of minors, Article 2182 of the Civil Code states that (i)f
the minor causing damage has no parents or guardian, the minor x x x shall be answerable with his own
property in an action against him where a guardian ad litem shall be appointed. For civil liability ex
delicto of minors, an equivalent provision is found in the third paragraph of Article 101 of the Revised
Penal Code, to wit: Should there be no person having such x x x minor under his authority, legal
guardianship or control, or if such person be insolvent, said x x x minor shall respond with (his) own
property, excepting property exempt from execution, in accordance with civil law.

DELICTS

People vs. Sendaydiego, 81 SCRA 120 , January 20, 1978

Criminal Procedure; Rules that criminal action should be prosecuted under direction and control of
fiscal and that provincial fiscal shall represent the province in any court not violated with appearance
of private prosecutors considering their authority to appear, Case at bar.It is contended that the
trial court erred in allowing private prosecutors Millora and Urbiztondo to prosecute the case, thereby
allegedly subjecting the accused to proceedings marked by undue publicity, prejudgment, bias and
political self-interest. x x x At the commencement of the preliminary investigation, the counsel for the
accused auditor inquired whether Atty. Millora was authorized by the provincial board to act as private
prosecutor in representation of the province of Pangasinan, the offended party. Atty. Millora replied
that there was a board resolution designating him as private prosecutor. The acting provincial
commander, who filed the complaints, manifested to the trial court that he had authorized Atty.
Millora to act as private prosecutor. x x x At the commencement of the trial on Feb. 23, 1970 the city
fiscal, an assistant provincial fiscal, and Atty. Millora, the private prosecutor, appeared for the
prosecution. The city fiscal moved that the private prosecutor (Millora) be authorized to conduct the
examination subject to our (the fiscals) control and supervision. At the hearing on April 23, 1970 the
same city fiscal moved that Atty. Urbiztondo be authorized to examine the prosecution witnesses under
his supervision and control. The trial court granted the motion. The record shows that at every hearing
the provincial fiscal, the city fiscal or an assistant fiscal were present together with the private
prosecutor. Under the foregoing circumstances, we believe that there was substantial compliance with
the rule that the criminal action should be prosecuted under the direction and control of the fiscal
and that the provincial fiscal shall represent the province in any court.
Same; Judgment; Decision convicting accused based on unassailable probative value of documents
presented, not on bias and prejudice; Penalties; When penalty of reclusion perpetua not imposable.
The observation of accused Sendaydiegos counsel, that the imposition of reclusion perpetua could
have been the result of the undue publicity, prejudgment, bias and political self-interest which
attended the proceedings, is not well-founded. The trial courts decision dispels any doubt as to its
impartiality. The evidence in the three cases is mainly documentary. The unassailable probative value
of the documents involved, rather than bias and prejudice, was the decisive factor on which the trial
court anchored the judgment of conviction. Moreover, as already adverted to, Sendaydiegos death had
rendered moot the issue as to the propriety of the imposition of reclusion perpetua. And, x x x,
reclusion perpetua cannot be imposed in these cases (malversation thru falsification) because the
crimes committed were not complex.

Same; Same; Trial courts conclusion that the two accused were guilty beyond reasonable doubt for
committing conspiracy is correct; Case at bar.Several circumstances indicate that Sendaydiego
conspired with the other accused Samson. Donato N. Rosete, the assistant provincial treasurer,
testified that, contrary to the usual procedure, he affixed his initial to paragraph 3 of the vouchers
after Sendaydiego had signed it. Rosete adhered to that unusual procedure because the interested
party, Samson, who hand-carried the vouchers, approached Rosete after he (Samson) had conferred
with the provincial treasurer and Samson told Rosete to initial the voucher because it was areglodo na
(already settled) since the treasurer had already signed the voucher. x x x. Rosetes testimony and
affidavit confute appellant Sendaydiegos contention that the trial court erred in finding that he signed
the questioned vouchers before Rosete had placed his initial in them. After the treasurer had signed
the voucher, Rosetes duty to initial it was only ministerial.

Same; Same; Charge of gross negligence against the accused provincial treasurer has been proven by a
prosecution.Sendaydiegos counsel stressed that no gross negligence can be imputed to the treasurer
(malversation is a crime which can be committed by means of dolo or culpa and the penalty in either
case is the same). This argument does not deserve serious consideration because the facts proven by
the prosecution show that he had a tie-up with Samson and that he acted maliciously in signing the six
questioned vouchers.

Same; Same; Evidence; Acquittal; Acquittal of one accused does not mean acquittal of other accused
since evidence presented and charges against the accused (one as accomplice, and the other as
principal) are different; Documentary and oral evidence also presented established their criminal
liability.The last contention put forward for Sendaydiego (accused) is that, because the trial court
acquitted the auditor, then the treasurers exoneration follows as a matter of course. We see no merit
in that contention because the evidence for the prosecution against Sendaydiego is not the same as its
evidence against the auditor. For that reason, the auditor was charged only as an accomplice, whereas,
the treasurer was charged as a principal. The auditor based his defense on the undeniable fact that the
treasurer had approved the six vouchers for pre-audit and payment before they were passed upon by
the auditor. In short, the auditor was misled by the treasurers certification which the auditor
apparently assumed to have been made in good faith when in truth it was made in bad faith. We are
convinced after a minutiose examination of the documentary and oral evidence and an unprejudiced
consideration of the arguments of Sendaydiegos learned counsel that his criminal liability was
established beyond reasonable doubt and, therefore, the civil liability of his estate for the amounts
malversed was duly substantiated.

Same; Preliminary investigation; A CFI judge who conducted the preliminary investigation of a case is
not barred from trying the same case on the merits; That judge can try the case without bias and
prejudice is assumed.Our searching study of the record fails to sustain Samsons insinuation that he
was prejudiced by the fact that the Judge, who conducted the preliminary investigation, was the one
who tried the case and convicted him. Judge Bello tried the case fairly. His conduct of the trial does
not show that he had already prejudged their guilt. Section 13, Rule 112 of the Rules of Court, in
allowing a Court of First Instance to conduct a preliminary investigation, does not disqualify it from
trying the case after it had found probable cause and after the fiscal, as directed by the Court, had
filed the corresponding information. The rule assumes that the judge, who conducted the preliminary
investigation, could impartially try the case on the merits. We cannot assume that judges as a rule are
opinionated and narrow-minded insomuch that they would invariably be iron-bound by their findings at
the preliminary investigation. The case of a Judge of the Court of First Instance, who conducts a
preliminary investigation and then tries the case on the merits, is similar to a situation where an
inferior court conducts a preliminary investigation of a grave or less grave offense falling within the
concurrent jurisdiction of the Court of First Instance and the inferior court. In such a case the inferior
court after terminating the preliminary investigation is not obligated x x x to remand the case to the
Court of first Instance for trial. The inferior court has the option to try the case on the merits. The
assumption is that the inferior court can try the case without any ingrained bias or undue prejudice.

Remedial Law; Appeal; Criminal Law; Extinction of criminal liability; Survival of civil liability; Death
of an accused-appellant after final judgment of a trial court but before the judgment had become
final and executory due to pendency of an appeal extinguished his criminal liability but his civil
liability survives.The death of appellant Sendaydiego during the pendency of his appeal or before the
judgment of conviction rendered against him by the lower court became final and executory
extinguished his criminal liability, meaning his obligation to serve the personal or imprisonment
penalties and his liability to pay the fines or pecuniary penalties. x x x The claim of complainant
Province of Pangasinan for the civil liability survived Sendaydiego because his death occurred after
final judgment was rendered by the Court of First Instance of Pangasinan, which convicted him of three
complex crimes of malversation through falsification and ordered him to indemnify the Province. x x x

Same; Same; Jurisdiction; Dismissal of appeal of deceased accused as to his criminal liability; The
Supreme Court continues to exercise appellate jurisdiction over an accuseds possible civil liability for
the money claims of claimant arising from criminal acts complained of, as if no criminal case had been
instituted; Filing of a separate civil action to recover civil liability not necessary.Notwithstanding the
dismissal of the appeal of the deceased Sendaydiego insofar as his criminal liability is concerned, the
Court Resolved to continue exercising appellate jurisdiction over his possible civil liability for the
money claims of the Province of Pangasinan arising from the alleged criminal acts complained of, as if
no criminal case had been instituted against him, thus making applicable, in determining his civil
liability, Article 30 of the Civil Code x x x, and, for that purpose, his counsel is directed to inform this
Court within ten (10) days of the names and addresses of the decedents heirs or whether or not his
estate is under administration and has a duly appointed judicial administrator. Said heirs or
administrator will be substituted for the deceased insofar as the civil action for the civil liability is
concerned x x x the title of this case should be amended to show its civil aspect. x x x Sendaydiegos
appeal will be resolved only for the purpose of showing his criminal liability which is the basis of the
civil liability for which his estate would be liable.

Vda. de Paman vs. Seeris, 115 SCRA 709 , July 30, 1982

Criminal Law; Reckless Imprudence; Subsidiary liability of an employer under Art. 103, Revised Penal
Code, enforceable in the same criminal case where award was made; Execution; Proceeding for
enforcement of the subsidiary liability part of proceeding for execution of judgment; Control by court
of processes of execution.Against the foregoing considerations, Section 1, Rule 111 of the Rules of
Court provides, however, that when a criminal action is instituted, the civil action for recovery of civil
liability arising from the offense charged is impliedly instituted with the criminal action, unless the
offended party expressly waives the civil action or reserves his right to institute it separately. That
means as if two actions are joined in one as twins, each one complete with the same completeness as
any of the two normal persons composing the twins. It means that the civil action may be tried and
prosecuted, with all the ancillary processes provided by law. Said provision will be rendered
meaningless if the subsidiary civil liability is not allowed to be enforced in the same proceeding. To
remedy the situation and thereby afford due process to the alleged employer, this Court directed the
court a quo in Pajarito vs. Seeris (supra) to hear and decide in the same proceeding the subsidiary
liability of the alleged owner and operator of the passenger bus. It was explained therein that the
proceeding for the enforcement of the subsidiary liability may be considered as part of the proceeding
for the execution of the judgment. A case in which an execution has been issued is regarded as still
pending so that all proceedings on the execution are proceedings in the suit. There is no question that
the court which rendered the judgment has a general supervisory control over its process of execution,
and this power carries with it the right to determine every question of fact and law which may be
involved in the execution.

Same; Same; Same; Institution of separate and independent action to enforce employers subsidiary
liability unnecessary as it will prolong agony of victims heirs; Judgment of conviction sentencing a
defendant employer to pay indemnity conclusive upon employer in an action for enforcement of
employers subsidiary liability as to the civil liability and as to its amount.Moreover, it has been
invariably held that a judgment of conviction sentencing a defendant employer to pay an indemnity in
the absence of any collusion between the defendant and the offended party, is conclusive upon the
employer in an action for the enforcement of the latters subsidiary liability not only with regard to the
civil liability, but also with regard to its amount. This being the case, this Court stated in Rotea vs.
Halili, 109 Phil. 495 that the court has no other function than to render decision based upon the
indemnity awarded in the criminal case and has no power to amend or modify it even if in its opinion
an error has been committed in the decision. A separate and independent action is, therefore,
unnecessary and would only unduly prolong the agony of the heirs of the victim.
 Petralba vs. Sandiganbayan, 200 SCRA 644 , August 16, 1991

Criminal Law; Malversation of public funds; Death of accused; Extinguishment of criminal liability.
Under Article 89 of the Revised Penal Code, death of the convict extinguishes criminal liability x x x.
Criminal liability does not only mean the obligation to serve the personal or imprisonment penalties but
it also includes the liability to pay the fines or pecuniary penalties. Pecuniary liability is extinguished
only when the death of the offender occurs before final judgment. (Art. 89(1), Revised Penal Code). In
the case at bar, petitioner Richard V. Petralba died pending appeal and before any final judgment
therein. Hence, the death of Richard V. Petralba extinguished his personal and pecuniary (such as the
fine) liabilities.

Same; Same; Same; Civil liability.Extinction of criminal liability does not necessarily mean that the
civil liability is also extinguished. In People vs. Navoa, 132 SCRA 410, and in People vs. Sendaydiego, 81
SCRA 120, We ruled that only the criminal liability (including the fine, which is pecuniary, but not civil)
of the accused is extinguished by his death, but the civil liability remains. The claim of the government
for the civil liability survives Petralba but only if the offense can be proved.

Villegas vs. Court of Appeals, 271 SCRA 148 , April 11, 1997

Remedial Law; Criminal Procedure; Actions; The rule established was that the survival of the civil
liability depends on whether the same can be predicated on sources of obligations other than delict.
Fortunately, this Court has already settled this issue with the promulgation of the case of People v.
Bayotas (G.R. No. 102007) on September 2, 1994, viz.: It is thus evident that as jurisprudence evolved
from Castillo to Torrijos, the rule established was that the survival of the civil liability depends on
whether the same can be predicated on sources of obligations other than delict. Stated differently, the
claim for civil liability is also extinguished together with the criminal action if it were solely based
thereon, i.e., civil liability ex delicto. x x x x x x x x x (I)n recovering damages for injury to persons
thru an independent civil action based on Article 33 of the Civil Code, the same must be filed against
the executor or administrator of the estate of deceased accused (under Sec. 1, Rule 87, infra) and not
against the estate under Sec. 5, Rule 86 because this rule explicitly limits the claim to those for funeral
expenses, expenses for the last sickness of the decedent, judgment for money and claims arising from
contract, express or implied.

Same; Same; Same; Death of the accused pending appeal of his conviction extinguishes his criminal
liability as well as the civil liability based solely thereon.Death of the accused pending appeal of his
conviction extinguishes his criminal liability as well as the civil liability based solely thereon. As opined
by Justice Regalado, in this regard, the death of the accused prior to final judgment terminates his
criminal liability and only the civil liability directly arising from and based solely on the offense
committed, i.e., civil liability ex delicto in senso strictiore.
Same; Same; Same; The claim for civil liability survives notwithstanding the death of the accused, if
the same may also be predicated on a source of obligation other than delict.Corollarily, the claim for
civil liability survives notwithstanding the death of (the) accused, if the same may also be predicated
on a source of obligation other than delict. Article 1157 of the Civil Code enumerates these other
sources of obligation from which the civil liability may arise as a result of the same act or omission: a)
Law; b) Contracts; c) Quasi-contracts; d) x x x x x x x x x e) Quasi-delicts.

Same; Same; Same; The statute of limitations on the civil liability is deemed interrupted during the
pendency of the criminal case.The private offended party need not fear a forfeiture of his right to
file this separate civil action by prescription, in cases where during the prosecution of the criminal
action and prior to its extinction, the private of fended party instituted together therewith the civil
action. In such case, the statute of limitations on the civil liability is deemed interrupted during the
pendency of the criminal case, conformably with (the) provisions of Article 1155 of the Civil Code, that
should thereby avoid any apprehension on a possible privation of right by prescription.

Same; Same; Same; Where both proceedings were terminated without final adjudication, the civil
action of the offended party under Article 33 may yet be enforced separately.The Bayotas ruling,
however, makes the enforcement of a deceased accuseds civil liability dependent on two factors,
namely, that it be pursued by filing a separate civil action and that it be made subject to Section 1,
Rule 111 of the 1985 Rules on Criminal Procedure, as amended. Obviously, in the case at bar, the civil
action was deemed instituted with the criminal. There was no waiver of the civil action and no
reservation of the right to in-stitute the same, nor was it instituted prior to the criminal action. What
then is the recourse of the private offended party in a criminal case such as this which must be
dismissed in accordance with the Bayotas doctrine, where the civil action was impliedly instituted with
it? The answer is likewise provided in Bayotas, thus: Assuming that for lack of express reservation,
Belamalas civil action for damages was to be considered instituted together with the criminal action
still, since both proceedings were terminated without final adjudication, the civil action of the
offended party under Article 33 may yet be enforced separately.

Heirs of the Late Teodoro Guaring, Jr. vs. Court of Appeals, 269 SCRA 283 , March 07, 1997

Actions; Quasi-Delicts; Torts; Criminal Law; Acquittal of the accused, even if based on a finding that
he is not guilty, does not carry with it the extinction of the civil liability based on quasidelict.It is
now settled that acquittal of the accused, even if based on a finding that he is not guilty, does not
carry with it the extinction of the civil liability based on quasi-delict. Thus, in Tayag v. Alcantara, it
was held: . . . a separate civil action lies against the offender in a criminal act, whether or not he is
criminally prosecuted and found guilty or acquitted, provided that the offended party is not allowed, if
he is actually charged also criminally, to recover damages on both scores, and would be entitled in
such eventuality only to the bigger award of the two, assuming the awards made in the two cases vary.
In other words, the extinction of civil liability referred to in Par. (c), Section 3, Rule 111 [now Rule
111, 2(b)], refers exclusively to civil liability founded on Article 100 of the Revised Penal Code,
whereas the civil liability for the same act considered as a quasidelict only and not as a crime is not
extinguished even by a declaration in the criminal case that the criminal act charged has not happened
or has not been committed by the accused. . . .

Same; Same; Same; Same; It was error for the Court of Appeals to skip the review of the evidence in
the instant case for damages based on quasi-delict and instead base its decision on the findings of the
trial court in the criminal case, in the process disregarding the fact that the present case had been
instituted independently of the criminal case, and that the petitioners herein took no part in the
criminal prosecution.In the present case, the dispositive portion of the decision of the RTC in the
criminal case reads: WHEREFORE, the Court, entertaining reasonable doubt as to his guilt, the accused
is hereby acquitted, of the offense of reckless imprudence resulting to double homicide and damage to
property as charged in the Information, without pronouncement as to costs. SO ORDERED. It was thus
error for the appellate court to skip the review of the evidence in this case and instead base its
decision on the findings of the trial court in the criminal case. In so doing, the appellate court
disregarded the fact that this case had been instituted independently of the criminal case and that
petitioners herein took no part in the criminal prosecution. In fact this action was filed below before
the prosecution presented evidence in the criminal action. The attention of the Court of Appeals was
called to the decision in the criminal case, which was decided on September 7, 1990, only when the
decision of the trial court in this case was already pending review before it (the Court of Appeals).

Same; Same; Same; Same; Due Process; It is unfair to bind petitioners to the result of the criminal
action when the fact is that they did not take part therein.It is unfair to bind petitioners to the
result of the criminal action when the fact is that they did not take part therein. That the witnesses
presented on behalf of the petitioners are different from those presented by the prosecution should
have brought home to the appellate court the fundamental unfairness of considering the decision in the
criminal case conclusive of the civil case.

LOSS DUE TO FORTUITOUS EVENT

Austria vs. Court of Appeals, 39 SCRA 527 , June 10, 1971

Words and phrases; Requisites of fortuitous event.It is recognized in this jurisdiction that to
constitute a caso fortuito that would exempt a person from responsibility, it is necessary that (1) the
event must be independent of the human will (or rather, of the debtor's or obligor's); (2) the
occurrence must render it impossible for the debtor to fulfill the obligation in a normal manner; and
that (3) the obligor must be free of participation in, or aggravation of, the injury to the creditor (Reyes
& Puno, Outline of Philippine Civil Law, Vol. IV, pages 25-26, citing Lasam v. Smith, 45 Phil. 657, 661).
A fortuitous event, therefore, can be produced by nature, e.g., earthquakes, storms, floods, etc., or
by the act of man, such as war, attack by bandits, robbery, (Tolentino, Civil Code of the Philippines,
Vol. IV, 1962 ed., page 117, citing 3 Salvat 83-84), provided that the event has all the characteristics
ennumerated above.

Agency; Receipt of thing for sale on commission basis; Robbery as defense against civil action for loss
of thing.Where MA received from GA a pendant with diamonds to be sold on commission basis, which
MA later on failed to return because of a robbery committed upon her, it is not necessary that there be
a conviction for robbery for MA to be relieved from civil liability of returning the pendant under Art,
1174, New Civil Code, as it would only be sufficient to establish that the unforseeable event, the
robbery in this case, did take place without any concurrent fault on the debtor's part, and this can be
done by preponderant evidence. To require, moreover. prior conviction in order to establish robbery as
a fact, would demand proof beyond reasonable doubt to prove a fact in a civil case.

KINDS OF CONDITIONS

Tible vs. Aquino, 65 SCRA 207 , July 22, 1975

Civil law; Contracts; Novation; Mere extension of payment does not result in a novation.Here,
evidence of a nature that approaches the approximation of moral certainty, and not merely
preponderance of evidence, indicates the real transaction that took place between Aquino and Tible
was that Tible borrowed P50,000.00 from Aquino before Tible bought 2,000 hectares of timberland
from Aquino for an agreed consideration of P107,000.00. Respondent Appellate Courts ruling relative to
the four promissory notes (Exhs. A, A-1, A-2, A-3) as executed by Tible in favor of Aquino to
pay the balance of the agreed consideration of the sale, that the subsequent agreement between
Aquino and Tible as to another mode of payment by giving the latter more time to pay does not
necessarily constitute novation as contemplated in Article 1291 of the New Civil Code on the well
settled principle on novation that a mere extension of payment and the addition of another obligation
not incompatible with the old one is not a novation thereof, is well-buttressed by the evidence and
We find no compelling reason to overturn the same.

Same; Same; There is a void conditional obligation where the efficacy of the contract depends on the
will of the debtor.Neither do We see any reason to disagree with respondent Appellate Courts ruling
that the condition that payment of amounts embodied in the promissory notes shall be dependent
upon Tibles operation of the forest concession be acquired from Aquino is undoubtedly a void
conditional obligation since its fulfillment is made to depend upon the exclusive will of the debtor,
Tible (Art. 1115, Civil Code). The payment of the remaining balance of the purchase price of the
2,000 hectares of timberland cannot be made to depend on the exclusive will of the debtor, Tible,
whether or not he will operate the timber concession.

Jurisdiction; Estoppel; A party is estopped from disputing the jurisdiction of a court after invoking it
himself.Petitioners argument that the trial court erred in giving due course to Aquinos claim for
P30,000.00 since it was filed about eleven months after the date of the first publication of the notice
to creditors hardly deserves consideration at this time. When the trial court accepted the claim, what
the petitioner did, instead of questioning the trial courts jurisdiction on the matter, was to file a
counterclaim against claimant Aquino, wherein she was sustained by the trial court, and she urged the
respondent Appellate Court to affirm it when claimant Aquino appealed the trial courts order. It is
now late in the day to question the timeliness of the filing of the claim.

WHEN NO PERIOD IS FIXED

Central Philippine University vs. Court of Appeals, 246 SCRA 511 , July 17, 1995

Donations; Onerous Donations; Words and Phrases; An onerous donation is one executed for a valuable
consideration which is considered the equivalent of the donation itself.We find it difficult to sustain
the petition. A clear perusal of the conditions set forth in the deed of donation executed by Don Ramon
Lopez, Sr., gives us no alternative but to conclude that his donation was onerous, one executed for a
valuable consideration which is considered the equivalent of the donation itself, e.g., when a donation
imposes a burden equivalent to the value of the donation. A gift of land to the City of Manila requiring
the latter to erect schools, construct a childrens playground and open streets on the land was
considered an onerous donation. Similarly, where Don Ramon Lopez donated the subject parcel of land
to petitioner but imposed an obligation upon the latter to establish a medical college thereon, the
donation must be for an onerous consideration.

Same; Same; Obligations; Conditional Obligations; When a person donates land to another on the
condition that the latter would build upon the land a school, the condition imposed is not a condition
precedent or a suspensive condition but a resolutory one.Under Art. 1181 of the Civil Code, on
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. Thus, when a
person donates land to another on the condition that the latter would build upon the land a school, the
condition imposed was not a condition precedent or a suspensive condition but a resolutory one.

Same; Same; Same; Same; If there is no fulfillment or compliance with the resolutory condition, the
donation may now be revoked and all rights which the donee may have acquired under it shall be
deemed lost and extinguished.It is not correct to say that the schoolhouse had to be constructed
before the donation became effective, that is, before the donee could become the owner of the land,
otherwise, it would be invading the property rights of the donor. The donation had to be valid before
the fulfillment of the condition. If there was no fulfillment or compliance with the condition, such as
what obtains in the instant case, the donation may now be revoked and all rights which the donee may
have acquired under it shall be deemed lost and extinguished.
Same; Same; Same; Same; Statute of Limitations; Prescription; Where the time within which the
condition should be fulfilled depends upon the exclusive will of the donee, its absolute acceptance
and the acknowledgment of its obligation provided in the deed of donation are sufficient to prevent
the statute of limitations from barring the action for annulment of donation.The claim of petitioner
that prescription bars the instant action of private respondents is unavailing. The condition imposed by
the donor, i.e., the building of a medical school upon the land donated, depended upon the exclusive
will of the donee as to when this condition shall be fulfilled. When petitioner accepted the donation, it
bound itself to comply with the condition thereof. Since the time within which the condition should be
fulfilled depended upon the exclusive will of the petitioner, it has been held that its absolute
acceptance and the acknowledgment of its obligation provided in the deed of donation were sufficient
to prevent the statute of limitations from barring the action of private respondents upon the original
contract which was the deed of donation.

Same; Same; Same; Same; Same; Same; Actions; A cause of action arises when that which should have
been done is not done, or that which should not have been done is done, and in cases where there is
no special provision for such computation, recourse must be had to the rule that the period must be
counted from the day on which the corresponding action could have been instituted.Moreover, the
time from which the cause of action accrued for the revocation of the donation and recovery of the
property donated cannot be specifically determined in the instant case. A cause of action arises when
that which should have been done is not done, or that which should not have been done is done. In
cases where there is no special provision for such computation, recourse must be had to the rule that
the period must be counted from the day on which the corresponding action could have been
instituted. It is the legal possibility of bringing the action which determines the starting point for the
computation of the period. In this case, the starting point begins with the expiration of a reasonable
period and opportunity for petitioner to fulfill what has been charged upon it by the donor.

Same; Same; Same; Same; Same; Same; Same; When the obligation does not fix a period but from its
nature and circumstances it can be inferred that a period was intended, the courts may fix the
duration thereof.Thus, when the obligation does not fix a period but from its nature and
circumstances it can be inferred that a period was intended, the general rule provided in Art. 1197 of
the Civil Code applies, which provides that the courts may fix the duration thereof because the
fulfillment of the obligation itself cannot be demanded until after the court has fixed the period for
compliance therewith and such period has arrived.

Same; Same; Same; Same; Same; Same; Same; There is no more need to fix the duration of a term of
the obligation when more than a reasonable period of fifty (50) years has already been allowed the
donee to avail of the opportunity to comply with the condition in the donation.This general rule
however cannot be applied considering the different set of circumstances existing in the instant case.
More than a reasonable period of fifty (50) years has already been allowed petitioner to avail of the
opportunity to comply with the condition even if it be burdensome, to make the donation in its favor
forever valid. But, unfortunately, it failed to do so. Hence, there is no more need to fix the duration of
a term of the obligation when such procedure would be a mere technicality and formality and would
serve no purpose than to delay or lead to an unnecessary and expensive multiplication of suits.
Same; Same; Same; Same; Same; Same; Same; Rescission; When obligor cannot comply with what is
incumbent upon him, the obligee may seek rescission, and in the absence of any just cause for the
court to determine the period of the compliance, there is no more obstacle for the court to decree the
rescission claimed.Moreover, under Art. 1191 of the Civil Code, when one of the obligors cannot
comply with what is incumbent upon him, the obligee may seek rescission and the court shall decree
the same unless there is just cause authorizing the fixing of a period. In the absence of any just cause
for the court to determine the period of the compliance, there is no more obstacle for the court to
decree the rescission claimed.

Same; Same; Same; Same; Contracts; Doubts referring to incidental circumstances of a gratuitous
contract should be resolved in favor of the least transmission of rights and interests.Finally, since
the questioned deed of donation herein is basically a gratuitous one, doubts referring to incidental
circumstances of a gratuitous contract should be resolved in favor of the least transmission of rights
and interests.

Gregorio Araneta, Inc. vs. Phil. Sugar Estates Development Co., Ltd., 20 SCRA 330 , May 31, 1967

Obligations; Contracts; Sale; Pleadings; When court should not fix the period for performing an
obligation.Where the issue raised in the pleadings was whether the seller of the land was given in the
contract of sale a reasonable time within which to construct the streets around the perimeter of the
land sold, the court, in an action for specific performance to compel the construction of said. streets
or for recovery of' damages, cannot fix a period within which the seller should construct the streets.
The court should determine whether. the parties had agreed that the seller should have reasonable
time to perform its part of the bargain. If the contract so provided, then there was a period fixed, a
"reasonable time", and all that the court should have done was to determine if that reasonable time
had already elapsed when the suit was filed. If it had passed, then the court should' declare that the
petitioner had breached the contract, as averred in the complaint. and fix the resulting damages. On
the other hand, if the reasonable time had not yet elapsed, the court perforce was bound to dismiss
the action for being premature. But in no case can it be logically held that, under the pleadings, the
intervention of the court to fix the period for performance was warranted, for Article 1197 of the New
Civil Code is precisely predicated. on the absence of any period fixed by the parties.

Same; Pleading and practice; When amendment of complaint is necessary.If the complaint did not ask
that a period for the performance of an obligation be fixed, and the court wants to fix a period, it
cannot proceed to do so unless the complaint is first amended.
Same; Specific performance; Power of court to fix period.Article 1197 of the New Civil Code involves
a two-step process. The court must first determine that the obligation does not fix a period (or that
the period depends upon the debtor's will) and that the intention of the parties, as may be inferred
from the nature and circumstances of the obligation, is to have a period for its performance. The
second step is to ascertain the period probably contemplated by the parties. The court cannot
arbitrarily fix a period out of thin air.

Same; Period within which obligation to construct streets on land occupied by squatters should be
performed.Where the seller obligated itself to construct streets around the perimeter of the land
sold (site of the Santo Domingo Church in Quezon City) and the parties were aware that the land, on
which the streets would be constructed, was occupied by squatters, the time for the performance of
the seller's obligation should be fixed at the date that all the squatters on the affected areas are finally
evicted therefrom. While this solution would render the date of performance indefinite, still the
circumstances of the case admit of no other reasonable view. This very indefiniteness explains why the
contract did not specify any exact period of performance. The ruling that the obligation should be
performed within two years is not warranted. [Gregorio Araneta, Inc. vs. Phil. Sugar Estates
Development Co., Ltd., 20 SCRA 330(1967)]

PASSIVE SOLIDARITY

Philippine National Bank vs. Asuncion, 80 SCRA 321 , November 23, 1977

Obligations and contracts; Joint and solidary obligations; Right of creditor to proceed against any one
of the solidary debtors or some or all of them, simultaneously.Article 1216 of the New Civil Code
gives the creditor the right to proceed against anyone of the solidary debtors or some or all of them
simultaneously. The choice is undoubtedly left to the solidary creditor to determine against whom he
will enforce collection. In case of the death of one of the solidary debtors, he (the creditor) may, if he
so chooses, proceed against the surviving solidary debtors without necessity of filing a claim in the
estate of the deceased debtors. It is not mandatory for him to have the case dismissed as against the
surviving debtors and file his claim against the estate of the deceased solidary debtor. For, to require
the creditor to proceed against the estate, making it a condition precedent for any collection action
against the surviving debtors to prosper, would deprive him of his substantive rights provided by Article
1216 of the New Civil Code.

Statutory construction; A substantive law cannot be amended by a procedural law.If Section 6, Rule
86 of the Revised Rules of Court were applied literally, Article 1216 of the New Civil Code would, in
effect, be repealed since under the Rules of Court, petitioner has no choice but to proceed against the
estate of the deceased only. Obviously, this provision diminishes the Banks right under the New Civil
Code to proceed against any one, some or all of the solidary debtors. Such a construction is not
sanctioned by the principle, which is too well settled to require citation, that a substantive law cannot
be amended by a procedural rule. Otherwise stated, Section 6, Rule 86 of the Revised Rules of Court
cannot be made to prevail over Article 1216 of the New Civil Code, the former being merely
procedural, while the latter, substantive. Moreover, no less than the New Constitution of the
Philippines, in Section 5, Article X, provides that rules promulgated by the Supreme Court should not
diminish, increase or modify substantive rights.

WHO SHOULD MAKE PAYMENT

Tibajia, Jr. vs. Court of Appeals, 223 SCRA 163 , June 04, 1993

Civil Law; Republic Act No. 529; Central Bank Act; Payment; A check is not legal tender and that a
creditor may validly refuse payment by check, whether it be a managers, cashiers or personal
check.From the aforequoted provisions of law, it is clear that this petition must fail. In the recent
cases of Philippine Airlines, Inc. vs. Court of Appeals and Roman Catholic Bishop of Malolos, Inc. vs.
Intermediate Appellate Court, this Court held thatA check, whether a managers check or ordinary
check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of
payment and may be refused receipt by the obligee or creditor. The ruling in these two (2) cases
merely applies the statutory provisions which lay down the rule that a check is not legal tender and
that a creditor may validly refuse payment by check, whether it be a managers, cashiers or personal
check.

Filipino Pipe and Foundry Corp. vs. NAWASA, 161 SCRA 32 , May 03, 1988

Civil Law; Obligations & Contracts; Extraordinary Inflation, defined.Extraordinary inflation exists
when there is a decrease or increase in the purchasing power of the Philippine currency which is
unusual or beyond the common fluctuation in the value of said currency, and such decrease or increase
could not have been reasonably foreseen or was manifestly beyond the contemplation of the parties at
the time of the establishment of the obligation. (Tolentino Commentaries and Jurisprudence on the
Civil Code Vol. IV, p. 284.)

Same; Same; Same; Example of extraordinary inflation.An ex-ample of extraordinary inflation is the
following description of what happened to the deutschmark in 1920: More recently, 111 the 1920s
Germany experienced a case of hyperinflation. In early 1921. the value of the German mark was 4.2 to
the U.S. dollar. By May of the same year, it had stumbled to 62 to the U.S. dollar. And as prices went
up rapidly, so that by October 1923, it had reached 4.2 trillion to the U.S. dollar! (Bernardo M.
Villegas & Victor R. Abola, Economics, An Introduction [Third Edition]). As reported, prices were going
up every week, then every day, then every hour. Women were paid several times a day so that they
could rush out and exchange their money for something of value before what little purchasing power
was left dissolved in their hands. Some workers tried to beat the constantly rising prices by throwing
their money out of the windows to their waiting wives, who would rush to unload the nearly worthless
paper. A postage stamp cost millions of marks and a loaf of bread, billions. (Sidney Ruthberg, The
Money Balloon New York: Simon and Schuster, 1975, p, 19, cited in Economics, An Introduction by
Villegas & Abola, 3rd Ed.)

Same; Same; Same; Decline in the purchasing power of the Philippine peso cannot be considered
extraordinary, since it is a universal trend and worldwide occurrence.The trial court pointed out,
however, that this is a worldwide occurrence, but hardly proof that the inflation is extraordinary in the
sense contemplated by Article 1250 of the Civil Code, which was adopted by the Code Commission to
provide a just solution to the uncertainty and confusion as a result of contracts entered into or
payments made during the last war. (Report of the Code Commission, 132133.) While appellants
voluminous records and statistics proved that there has been a decline in the purchasing power of the
Philippine peso, this downward fall of the currency cannot be considered extraordinary. It is simply a
universal trend that has not spared our country.

APPLICATION OF PAYMENT

Reparations Commission vs. Universal Deep-Sea Fishing Corp., 83 SCRA 764 , June 27, 1978

Civil Law; Contracts of conditional purchase and sale; First Installments under contracts of conditional
purchase and sale of reparations goods already due and demandable when complaint for recovery of
various amounts of money due under the contracts were filed; Interpretation of contracts; Terms of
contracts for purchase and sale of reparations vessel very clear and leave no doubt as to the intention
of the contracting parties; case at bar.The terms of the contracts for the purchase and sale of the
reparations vessels, however, are very clear and leave no doubt as to the intent of the contracting
parties. Thus, in the contract concerning the M/S UNIFISH 1 and M/S UNIFISH 2, the parties expressly
agreed that the first installment representing 10% of the purchase price or P53,642.84 shall be paid
within 24 months from the date of complete delivery of the vessels or on May 8, 1961, and the balance
to be paid in ten (10) equal yearly installments. The amount of P56,597.20 due on May 8, 1962, which
is also claimed to be a first installment, is but the first of the ten (10) equal yearly installments of
the balance of the purchase price. xxx Viewing the contracts between the parties xxx the first
installment on the M/S UNIFISH 1 and M/S UNIFISH 2 of the amount of P53,642.84 was due on May 8,
1961, while the first installments on the M/S UNIFISH 3 and M/S UNIFISH 4, and the M/S UNIFISH 5 and
M/S UNIFISH 6 in the amounts of P68,777.77 and P54,500.00 were due on July 31, 1961 and October 17,
1961, respectively. Accordingly, the obligation of UNIVERSAL to pay the first installments on the
purchase price of the six (6) reparations vessels was already due and demandable when the present
action was commenced on August 10, 1962. Also due and demanded from UNIVERSAL were the first of
the ten (10) equal yearly installments on the balance of the purchase price of the M/S UNIFISH 1 and
M/S UNIFISH 2 in the amount of P56,597.20 and P72,565.68 on the M/S UNIFISH 3 and M/S UNIFISH 4.
The first accrued on May 8, 1962, while the second fell due on July 31, 1962.

Remedial Law; Sureties; Indemnity agrrements; Premiums; concept of; Since payment of premiums on
performance bonds to the surety company had been expressly undertaken by the corporation in the
indemnity agreements executed by it in favor of the surety company, Universal shall pay the
premiums to the surety company.The claim of the surety company to the effect that the trial court
erred in not awarding it the amount of P7,231.42 as premiums on the performance bonds is well taken.
The payment of premiums on the bonds to the surety company had been expressly undertaken by
UNIVERSAL in the indemnity agreements executed by it in favor of the surety company. The premium is
the consideration for furnishing the bonds and the obligation to pay the same subsists for as long as the
liability of the surety shall exist. Hence, UNIVERSAL should pay the amount of P7,251.42 to the surety
company.

Civil Law; Articles 1252 to 1254 of the Civil Code applicable to a person owing several debts of the
same kind to a single creditor, but cannot be made applicable to a person whose obligation as mere
surety is both contingent and singular, which is full and faithful compliance with the terms of the
contract of conditional purchase and sale of reparations goods.The rules contained in Articles 1252
and 1254 of the Civil Code apply to a person owing several debts of the same kind to a single creditor.
They cannot be made applicable to a person whose obligation as a mere surety is both contingent and
singular, which in this case is the full and faithful compliance with the terms of the contract of
conditional purchase and sale of reparations goods. The obligation included the payment, not only of
the first installment in the amount of P53,643.00, but also of the ten (10) equal yearly installments had
also accrued; hence, no error was committed in holding the surety company to the full extent of its
undertaking. Finally, We find no merit in the claim of the third-party defendant Pablo S, Sarmiento
that he is not personally liable having merely executed the indemnity agreements in his capacity as
acting general manager of UNIVERSAL. Pablo S. Sarmiento appears to have signed the indemnity
agreement twicethe first, in his capacity as acting general manager of UNIVERSAL, and the second in
his individual capacity. xxx

Same; Indemnity agreements; When defendant executed indemnity agreements in his capacity not only
as acting general manager but also in his individual capacity and as shown by the acknowledgment, he
is also personally liable under the indemnity agreements.Besides, the acknowledgment stated that
Pablo S. Sarmiento for himself and on behalf of Universal Deep-Sea Fishing Corporation personally
appeared before the notary and acknowledged that the document is his own free and voluntary act and
deed.

KINDS OF COMPENSATION/SET OFF/JUDICIAL

Gan Tion vs. Court of Appeals, 28 SCRA 235 , May 21, 1969

Attorney's fees; Award is in favor of litigant not of his counsel.An award for attorney's fees is made
in favor of the litigant, not of his counsel, and the litigant, not his counsel, is the judgment creditor
who may enforce the judgment for attorney's fees for execution.
Civil law; Obligations; Extinguishment of obligations; Compensation; Award for attorney's fees as
subject of legal compensation.An award for attorney's fees is a proper subject of legal compensation.

OBLIGATIONS WHICH CANNOT BE COMPENSATED

International Corporate Bank, Inc. vs. IAC, 163 SCRA 296 , June 30, 1988

Obligations and Contracts; Foreclosure of Mortgage; Requisites of Legal Compensation under Art. 1279
of Ciuil Code.Petitioner contends that after foreclosing the mortgage, there is still due from private
respondent as deficiency the amount of P6.81 million against which it has the right to apply or set off
private respondent's money market claim ofPl,062,063.83. The argument is without merit. As correctly
pointed out by the respondent Court of Appeals"Compensation shall take place when two persons, in
their own right, are creditors and debtors of each other. (Art. 1278, Civil Code). 'When all the
requisites mentioned in Art. 1279 of the Civil Code are present, compensation takes effect by
operation of law, even without the consent or knowledge of the debtors.' (Art. 1290, Civil Code).
Article 1279 of the Civil Code requires among others, that in order that legal compensation shall take
place, 'the two debts be due' and 'they be liquidated and demandable.' Compensation is not proper
where the claim of the person asserting the set-off against the other is not clear nor liquidated;
compensation cannot extend to unliquidated, disputed claim arising from breach of contract.
(Compania General de Tabacos vs. French and Unson, 39 Phil. 34; Lorenzo & Martinez vs. Herrero, 17
Phil. 29). "There can be no doubt that petitioner is indebted to private respondent in the amount
ofPl,062,063.83 representing the proceeds of her money market investment. This is admitted. But
whether private respondent is indebted to petitioner in the amount of P6.81 million representing th$
deficiency balance after the foreclosure of the mortgage executed to secure the loan extended to her,
is vigorously disputed. This circumstance prevents legal compensation from taking place." (CA Decision,
Rollo, pp. 112-113).

Same; Same; Same; Requirement that debts ?nust be liquidated and demandable not yet been met
since the validity ofthe extrajudicial foreclosure and petitioners claim for deficiency still in
question.It must be noted that Civil Case No. 83-19717 is still pending consideration at the RTC
Manila, for annulment of Sheriff s sale on extrajudicial foreclosure of private respondent's property
from which the alleged deficiency arose. (Annex"AA", Rollo, pp. 181-189). Therefore, the validity of the
extrajudicial foreclosure sale and petitioner's claim for deficiency are still in question, so much so that
it is evident, that the requirement of Article 1279 that the debts must be liquidated and demandable
has not yet been met. For this reason, legal compensation cannot take place under Article 1290 of the
Civil Code.

Scune; Same; Pleadings; Statutojy Construction; Liberal Construction ofthe rules and pleadiiigs;
Controlling to effect substantial justice.Petitioner now assails the motion of the plaintiff (now
private respondent) filed in the trial court for the release of the proceeds of the money market
investment, arguing that it is deficient in form, the same being unverified (Petitioner's Memorandum,
Rollo, p. 266). On this score, it has been held that "as enjoined by the Rules of Court and the
controlling jurisprudence, a liberal construction of the rules and the pleadings is the controlling
principle to effect substantial justice.

EFFECT OF ASSIGNMENT OF CREDIT

Perez vs. Court of Appeals, 127 SCRA 636 , February 20, 1984

Contracts; Obligations; No legal compensation can take place where the loan instruments to be set-off
are not yet due and demandable.Since, on the respective dates of maturity, specifically, August 6,
1974 and August 13, 1974, respectively, Ramon C. Mojica was still the holder of those bills, it can be
safely assumed that it was he who had asked for the roll-overs on the said dates. MEVER was bound by
the roll-overs since the assignment to it was made only on September 9, 1974. The inevitable result of
the roll-overs of the principals was that Bill No. 1298 and Bill No. 1419 were not yet due and
demandable as of the date of their assignment by MOJICA to MEVER on September 9, 1974, nor as of
October 3, 1974 when MEVER surrendered said Bills to CONGENERIC. As a consequence, no legal
compensation could have taken place because, for it to exist, the two debts, among other requisites,
must be due and demandable.

Same; Same; Appeal; Supreme Court may, on appeal, consider a factual issue not raised in the trial
court nor assigned as errors on appeal.We note that the xerox copies of Bill No. 1298 and Bill No.
1419 attached by MEVER to its Brief do not contain the roll-over notations. However, MEVERs own
exhibits before respondent Appellate Court, Exhibits 3 and 3-A, do show those notations and
MEVER must be held bound by them. And although this issue may not have been squarely raised below,
in the interest of substantial justice, this Court is not prevented from considering such a pivotal factual
matter that had been overlooked by the Courts below. The Supreme Court is clothed with ample
authority to review palpable errors not assigned as such if it finds that their consideration is necessary
in arriving at a just decision.

Same; Same; Words and Phrases; Money Market defined.There is another aspect to this case. What
is involved here is a money market transaction. As defined by Lawrence Smith the money market is a
market dealing in standarized short-term credit instruments (involving large amounts) where lenders
and borrowers do not deal directly with each other but through a middle man or dealer in the open
market. It involves commercial papers which are instruments evidencing indebtedness of any
person or entity . . ., which are issued, endorsed, sold or transferred or in any manner conveyed to
another person or entity, with or without recourse. The fundamental function of the money market
device in its operation is to match and bring together in a most impersonal manner both the fund
users and the fund suppliers. The money market is an impersonal market, free from personal
considerations. The market mechanism is intended to provide quick mobility of money and
securities.
Same; Same; In money market transactions, no notice is given to borrower or issuer of commercial
paper of its sale to the investor. Art. 1285, 1st paragraph of N.C.C. applicable in such cases as to bar
legal compensation between debtor and assignee of creditors rights.The impersonal character of the
money market device overlooks the individuals or entities concerned. The issuer of a commercial paper
in the money market necessarily knows in advance that it would be expeditiously transacted and
transferred to any investor/lender without need of notice to said issuer. In practice, no notification is
given to the borrower or issuer of commercial paper of the sale or transfer to the investor.

Same; Same; Same.Accordingly, we find no applicability herein of Article 1285, 3rd paragraph of the
Civil Code. Rather, it is the first paragraph of the same legal provision that is applicable: ART. 1285.
The debtor who has consented to the assignment of rights made by a creditor in favor of a third
person, cannot set up against the assignee the compensation which would pertain to him against the
assignor, unless the assignor was notified by the debtor at the time he gave his consent, that he
reserved his right to the compensation. [Perez vs. Court of Appeals, 127 SCRA 636(1984)]

KINDS OF NOVATION

Magdalena Estates, Inc. vs. Rodriguez, 18 SCRA 967 , December 17, 1966

Guaranty and suretyship; Interest; Where creditors receipt of payment by surety did not extinguish.
obligation to pay interest.The 'creditors' receipt of the sum of P5,000 from the surety as a payment of
its. obligation under its bond did not extinguish the principal debtors'. obligation to pay the
accumulated' interests on the said sum of P5,000. There was no waiver or condonation of the 'interest
due from the principal debtors, which was not a part of the surety's liability.

Same; Surety's liability cannot be extended by implication.The liability of the surety cannot be
extended, by implication, beyond the terms of the contract.

Obligations; Application of payment.The rules contained in Articles 1252 and 1254 of the New Civil
Code apply to a person owing several debts of the same kind to a single creditor. They cannot be made
applicable to a person whose obligation as a mere surety is both contingent and singular; his liability is
confined to such obligation, and he is entitled to have all payments made applied exclusively to said
obligation and to no other. Besides Article 1253 of the New Civil Code is merely directory and not
mandatory.

Same; Novation; Novation by presumption is not favored.Novation by presumption has never been
favored. To be sustained, it needs to be established that the old and new obligations are incompatible
on all points, or that the will to novate appears by express agreement of the parties or in acts of
similar import. Thus, an obligation to pay a sum of money is not novated in a new instrument wherein
the old is ratified, by changing only the terms of payment and adding other obligations, not
incompatible with the old ones, or wherein the old contract is merely supplemented by the new one.

Same; When creditor's acceptance of payment from a third person does not release principal debtor.
The mere fact that the creditor receives a guaranty or accepts payments from a third person, who has
agreed to assume the obligation, when there is no agreement that the first debtor shall be released
from responsibility, does not constitute novation, and the creditor can still enforce the obligation
against the original debtor. This rule applies to a surety bond, which is not a new and separate
contract but an accessory of a promissory note. [Magdalena Estates, Inc. vs. Rodriguez, 18 SCRA
967(1966)]

Millar vs. Court of Appeals, 38 SCRA 642 , April 30, 1971

Civil law; Obligations and contracts; Compromises; Novation; Defense of implied novation requires
clear and convincing proof of incompatibility between the two obligations.The defense of implied
novation requires clear and convincing proof of complete incompatibility between the two obligations.
The law requires no specific form for an effective novation by implication. The test is whether the two
obligations can stand together. If they cannot, incompatibility arises, and the second obligation
novates the first. If they can stand together, no incompatibility results and novation does not take
place.

Same; Same; Same; Same; Where new obligation merely reiterates or ratifies old obligation.Where
the new obligation merely reiterates or ratifies the old obligation, although the former effects but
minor alterations or slight modifications with respect to the cause or object or conditions of the latter,
such changes do not effectuate any substantial incompatibility between the two obligations. Only those
essential and principal changes introduced by the new obligation producing an alteration or
modification of the essence of the old obligation result in implied novation. In the case at bar, the
mere reduction of the amount due in no sense constitutes a sufficient indicium of incompatibility,
especially in the light of (a) the explanation by the petitioner that the reduced indebtedness was the
result of the partial payments made by the respondent before the execution of the chattel mortgage
agreement and (b) the latters admissions bearing thereon.

Cochingyan, Jr. vs. R&B Surety and Insurance Co., Inc., 151 SCRA 339 , June 30, 1987
Civil Law; Obligations and Contracts; Novation defined.Novation is the extinguishment of an
obligation by the substitution or change of the obligation by a subsequent one which terminates it,
either by changing its object or principal conditions, or by substituting a new debtor in place of the old
one, or by subrogating a third person to the rights of the creditor. Novation through a change of the
object or principal conditions of an existing obligation is referred to as objective (or real) novation.
Novation by the change of either the person of the debtor or of the creditor is described as subjective
(or personal) novation. Novation may also be both objective and subjective (mixed) at the same time.
In both objective and subjective novation, a dual purpose is achievedan obligation is extinguished and
a new one is created in lieu thereof.

Same; Same; Same; Novation is never presumed.If objective novation is to take place, it is imperative
that the new obligation expressly declare that the old obligation is thereby extinguished, or that the
new obligation be on every point incompatible with the old one. Novation is never presumed: it must
be established either by the discharge of the old debt by the express terms of the new agreement, or
by the acts of the parties whose intention to dissolve the old obligation as a consideration of the
emergence of the new one must be clearly discernible.

Same; Same; Same; If old debtor is not released, no novation occurs and the third person who assumed
the obligation becomes a codebtor or surety or a co-surety.Again, if subjective novation by a change
in the person of the debtor is to occur, it is not enough that the juridical relation between the parties
to the original contract is extended to a third person. It is essential that the old debtor be released
from the obligation, and the third person or new debtor take his place in the new relation. If the old
debtor is not released, no novation occurs and the third person who has assumed the obligation of the
debtor becomes merely a co-debtor or surety or a co-surety.

Same; Same; Same; Novation is not implied when the parties to the new obligation expressly negated
the lapsing of the old obligation.Neither can the petitioners anchor their defense on implied
novation. Absent an unequivocal declaration of extinguishment of a pre-existing obligation, a showing
of complete incompatibility between the old and the new obligation (and nothing else) would sustain a
finding of novation by implication. But where, as in this case, the parties to the new obligation
expressly recognize the continuing existence and validity of the old one, where, in other words, the
parties expressly negated the lapsing of the old obligation, there can be no novation. The issue of
implied novation is not reached at all.

Same; Same; Same; Article 2079 of the Civil Code, not applicable; Case at bar.The Indemnity
Agreement speaks of the several indemnitors apply[ing] jointly and severally (in solidum) to the [R & B
Surety]to become SURETY upon a SURETY BOND demanded by and in favor of [PNB] in the sum of
[P400,000.00] for the faithful compliance of the terms and conditions set forth in said SURETY BOND
. This part of the Agreement suggests that the indemnitors (including the petitioners) would become
co-sureties on the Security Bond in favor of PNB. The record, however, is bereft of any indication that
the petitioners-indemnitors ever in fact became cosureties of R & B Surety vis-a-vis the PNB. The
petitioners, so far as the record goes, remained simply indemnitors bound to R & B Surety but not to
PNB, such that PNB could not have directly demanded payment of the Principal Obligation from the
petitioners. Thus, we do not see how Article 2079 of the Civil Codewhich provides in part that [a]n
extension granted to the debtor by the creditor without the consent of the guarantor extinguishes the
guarantycould apply in the instant case. The petitioner-indemnitors are, as it were, secondtier
parties so far as the PNB was concerned and any extension of time granted by PNB to any of the first-
tier obligors (PAGRICO, R & B Surety and the trustor[s]) could not prejudice the second-tier parties.

Same; Same; Same; Same; Theory behind Art 2079 is that an extension of time given to the principal
debtor by the creditor without the suretys consent would deprive the latter of his right to pay the
creditor and to be immediately subrogated to the creditors remedies against the principal debtor upon
original maturity.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 original 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. The
underlying rationale is not present in the instant case.

Same; Same; Same; Indemnity clauses held enforceable and not against any public policy.The last
issue can be disposed of quickly, Clauses (b) and (c) of the Indemnity Agreements (quoted above) allow
R & B Surety to recover from petitioners even before R & B Surety shall have paid the PNB. We have
previously held similar indemnity clauses to be enforceable and not violative of any public policy. The
petitioners lose sight of the fact that the Indemnity Agreements are contracts of indemnification not
only against actual loss but against liability as well. While in a contract of indemnity against loss an
indemnitor will not be liable until the person to be indemnified makes payment or sustains loss, in a
contract of indemnity against liability, as in this case, the indemnitors liability arises as soon as the
liability of the person to be indemnified has arisen without regard to whether or not he has suffered
actual loss. Accordingly, R & B Surety was entitled to proceed against petitioners not only for the
partial payments already made but for the full amount owed by PAGRICO to the PNB.