Notes: Obligations

General Provisions

1156. obligation- juridical necessity to give, to do or not to do

civil obligation- perfect obligation; sanction is judicial process
natural obligation- duty not to recover what has voluntarily been paid although payment was no longer
required; sanction is the law but only because conscience had originally motivated the payment
moral obligation- sanction is conscience and morality or the law of the church
requisites or elements
active subject- obligee or creditor; he who possesses or can enforce the right
passive subject- obligor or debtor
object or prestation- subject matter
efficient cause- vinculum or juridical tie; reason why the obligation exists
Ang Yu Asuncion v CA
general classifications
sanction
civil- judicial process
natural- law
moral- conscience/morality or the law of the church
subject matter or presentation or object
real- obligation to give
personal- to do or not to do
affirmativeness or negativeness
positive- to give or to do
negative- not to do
persons obliged
unilateral- only one party is bound; gratuitous donation
bilateral- both parties; contract of sale, onerous donation
obligation
cause of action- an act or omission of one party in violation of the right of the other; identical when there is an
identity in the facts essential to the maintenance of the two actions or where the same evidence will sustain
both actions; breach of obligation; reason for suing
legal right of the plaintiff
correlative obligation of the defendant
act or omission of the defendant in violation of said legal right
subject matter- item with respect to which the controversy has arisen or concerning which the wrong has been
done
De la Rama v Mendiola- res judicata because object of both is the Agreement to Buy and Sell and
efficient cause is the failure to reconvey
Bachrach Corporation v CA- not res judicata; can proceed independently as one is not a bar to the
other; one is about the lease contract while the other is the compromise agreement

1157. Sources of Obligations

1158. Law- obligations ex lege; not presumed (must have a specific provision), only those expressly
determined are demandable, regulated by the precepts of the law which established them or by this Book
Pelayo v Lauron- no juridical tie because no law or contract; husband should pay even if he was not
the one who called the doctor as he is obliged to support his wife which includes medical attendance
De la Cruz v Northern Theatrical Enterprises- no legal obligation only moral; employer is ordinarily not
required to furnish his employees with legal assistance as obligations are not presumed thus must be
clearly set forth in the law
1159. Contracts- obligations ex contractu; have the force of law between the contracting parties and must be
complied with in good faith (must fulfill the terms); before a contract can be enforced it must first be valid, the
right of the parties to stipulate is limited
Manzano v Lazaro
William Golangco Construction Corp v PCIB- compliance in good faith means that we must interpret
not by the letter that killeth but by the spirit that giveth life
Dio v St. Ferdinand Memorial Park
NHA v CA & Grace Baptist Church
Tiu Peck v CA
 1160. Quasi-contracts- obligations ex quasi-contractu; juridical relation resulting from a lawful, voluntary and
unilateral act and which has for its purpose the payment of indemnity to the end that no one shall be unjustly
enriched or benefitted at the expense of another
types
negotiorum gestio- unauthorized management; reimbursement must be made when a person
voluntarily takes charge of another’s abandoned business or property without the owner’s
authority
solutio indebiti- undue payment; duty to return when something is received when there is no
right to demand it and it was unduly delivered thru mistake; no pre-existing contract
BPI v Sarmiento- no duty to return arising from solution indebiti as legally entitled to the sum
Perez v Pomar- presumptive consent based on quasi-contract
Reyes v Lim- cannot rescind if not willing to return
Rodzssen Supply v Far East Bank & Trust Co- return what was unjustly paid
1161. Delicts- obligations ex delicto or ex maleficio; Art 100 RPC: Every person criminally liable for a felony is
also civilly liable (restitution, reparation, indemnification)
People v Catubig- civil liability unaffected because not crime against state but private person
1162. Quasi-delicts or Torts or Culpa Aquilina- obligation ex quasi-delicto or ex quasi-maleficio
fault or act of negligence which causes damage to another there being no pre-existing contractual
relations between the parties
negligence- omission of that diligence which is required by the circumstances of person, place, and
time; question of fact
test: would a prudent man foresee harm to the person injured as a reasonable consequence of
the course about to be pursued?
reasonable foresight of harm followed by the ignoring of the admonition born of this provision
is the constitute fact of negligence
requisites
fault or negligence attributable to the person charged
damage or injury
direct relation of cause and effect between the fault or negligence and the damage or
injury (proximate cause)
Air France v Carrascoso- act can stand as a separate action or actionable tort permitting the
application of the principles of torts despite the pre-existing contract
Enumeration by law is exclusive
Makati Stock Exchange v Campos

Nature and Effect of Obligations

1163. Every person obliged to give something is also obliged to take care of it with the proper diligence of a
good father of a family (ordinary diligence)
Applicability: specific / determinate things
Standard of care
GR: diligence of a good father of a family
EXC: law or contract provides for a different standard of care
Factors to consider
nature of the obligation
circumstances of person, time, and place
Piczon v Piczon
1164-1166. Obligations to give
Determinate things
Real right- power over a specific thing and is binding on the whole world
Personal right- power demandable by one person over another; has the right to demand
delivery
Kinds of delivery
Actual delivery or tradition- property changes hands physically
Constructive delivery- physical transfer is implied
traditio simbolica- keys of a bodega
traditio longa manu- delivery by mere consent or pointing out of the object;
"extending of the hand”
traditio brevi manu- delivery by short hand; possessor of a thing not as owner
become the possessor as owner
traditio constitutum possessorium- possessor as an owner retains possession
no longer as owner but in some other capacity
 tradition by the execution of legal forms and solemnities- execution of a public
instrument selling land
Obligation to deliver arises
no term or condition: perfection of the contract
with term or condition: moment the term arrives or the condition happens
San Lorenzo Development Corp v CA
Real obligations- to give (generic or specific)
Generic or indeterminate- refers only to a class, genus and cannot be pointed out with
particularity
Specific or determinate- capable of particular determination
Remedies (cannot demand extrajudicially)
specific
specific performance + damages (whether generic or specific)
rescission or cancellation + damages (some cases)
damages
generic
performance + damages
delivery by 3rd person at debtor’s expense + damages
damages
Fortuitous events
generic: never extinguished; genus never perishes
specific: extinguished (converted to damages)
EXC: obligor delays (legal delay with demand), guilty of bad faith
(promised to 2 or more people)
Delay
legal delay/default- virtual nonfulfillment of the obligation (there must be
demand; no demand = no default)
ordinary delay- non-performance at the stipulated time; no demand yet
Personal obligations- to do or not to do
Caleon v Agus Development- sub-lease; apartment is accession
Specific things
Rights of creditor (GR: include accessories and accessions even if not specifically stated)
what the obligation to give a determinate thing includes
accessories- added for better use or enjoyment
accessions- improvements
1167-1168. Obligation to do/not to do
Positive personal obligations- to do
Negative personal obligations- not to do
Remedies of creditor if debtor fails to do
executed at debtor’s expense (not specific performance because involuntary servitude)
damages
Thing may be ordered undone
made poorly
obligation is a negative one (if possible)
Chavez v Gonzales
Tanguilig v CA

1169-1170. Delay or mora

signifies the idea of delay in the fulfillment of an obligation with respect to time
requisites
obligation is demandable and already liquidated
obligor or debtor delays performance
creditor requires the performance judicially or extrajudicially
kinds of delay SAM
mora solvendi- default on the part of the debtor; delay of the obligor or debtor to perform his
obligation; none in negative and natural obligations
ex re- obligation to give
ex persona- obligation to do
mora accipiendi- default on the part of the creditor; delay of the obligee or creditor to accept
the delivery of the thing which is the object of the obligation
compensatio morae- both parties are in default in a reciprocal obligation thus neither are in
default
when demand is not needed to put debtor in default LOTUX
 when the law so provides (tax payment as Tax Code provides)
when the obligation expressly so provides (demand not necessary to incur default)
when time is of the essence of the contract / when the fixing of the time was the controlling
motive for the establishment of the contract- no need to categorically state that time is of the
essence as the intent is sufficient as long as it is implied
when demand would be useless, as when the obligor has rendered it beyond his power to
perform- disposed of it in favor of another, destroyed the object, is hiding
when the obligor has expressly acknowledged that he really is in default- asking for extension
is not express acknowledgement
grounds for liability
fraud (deceit or dolo)- intentional evasion of fulfillment
negligence (fault or culpa)
default (or mora)- if imputable to the debtor
violation of the terms of the obligation (violatio)- exc when excuse in proper cases by
fortuitous events
kinds of damages (should be paid by those responsible for them; not enough that the damage be
capable of proof but must be actually proved with a reasonable degree of certainty pointing out
specific facts that afford a basis for measuring whatever compensatory damages are borne)
moral- for mental and physical anguish
exemplary- corrective or to set an example
nominal- to vindicate a right when no other kind of damages may be recovered
temperate- when the exact amount of damages cannot be determined
actual- actual losses as well as unrealized profit
liquidated- predetermined beforehand by agreement
Piczon v Piczon
Philippine Charter Insurance Corporation v Central Colleges of the Philippines
Palmares v CA
Binalbagan Tech v CA
Barzaga v CA
Financial Building Corporation v Rudlin International Corporation
Tanguilig v CA
Aerospace Chemical Industries v CA
1171. Responsibility from fraud / dolo
attendant of bad faith, deliberate intention to cause damage or prejudice
time of commission: fraud may be past or future (liability for past fraud may be waived)
meaning:
fraud in obtaining consent (may be causal or merely incidental)
fraud in performing a contract
dolo causante- vitiates consent
dolo incidente
Far East Bank & Trust Co v CA & Luna- simple negligence only not to inform; “hot card"
1172. Responsibility from negligence / culpa
gross negligence can never be excused in advance because contrary to public policy; simple
negligence may be excused or mitigated
negligence only absent proof of intent
kinds of negligence according to source of obligation
culpa contractual / contractual negligence- breach of contract; negligence in performance of
obligation
culpa aquiline / civil negligence / tort / quasi-delict; act or omission causing damage
culpa criminal- commission of a crime or delict; civil liability arising from criminal negligence
PNB v CA & Pujol- culpa contractual; bank to exercise extraordinary care; equitable estoppel;
damages not intended to enrich complainant; combo account
Southeastern College v CA & Dimaano- purely fortuitous; no prior negligence to humanize; roof
typhoon
1173. Degree of diligence
Roman Law
slight diligence - grave negligence / culpa lata
ordinary diligence - ordinary negligence / culpa levis
great diligence - slight negligence / culpa levissima
Civil Code
agreed upon by the parties
required by the law
good father of a family
Samson v CA- bad faith not merely bad judgment or honest mistake; caveat emptor; haberdashery
renewal
Dioquino v Laureano- fortuitous event not liable for damages; no requirement of diligence beyond that
provided by human care and foresight; windshield stoned
Jarco Marketing Corporation v CA- civil negligence; child conclusively presumed incapable of
negligence; no contributory negligence as reasonable and usual; department store counter
People v Fallorina- accident is an occurrence that happens outside the sway of our will; lies beyond
the bond of humanly foreseeable consequences; shot kite flyer
Philippine Airlines v CA- gross negligence by common carrier supposed to exercise highest degree of
care; tumor
La Mallorca v CA- death cause by negligence and want of utmost diligence of very cautious persons;
carrier-passenger relation continues until passenger has had a reasonable time tor opportunity to leave
the premises; bus
1174. Fortuitous events / caso fortuito
those events which could be foreseen or which though foreseen were inevitable (ordinary and
extraordinary)
act of God- absolutely independent of human intervention
act of man / force majuere- arises from legitimate or illegitimate acts of persons other than the
obligor (armed invasion, attack by bandits)
essential characteristics
independent of the will of the debtor- freedom from participation or aggravation
impossibility of foreseeing or avoiding even if foreseen
renders it impossible to fulfill obligation in a normal manner
GR: exempted from any liability whatsoever for inability to comply with obligation
EXC:
expressly declared by the law (ex. in bad faith or in default)
expressly declared by stipulation or contract
 nature of the obligation requires the assumption of risk (doctrine of created risk)
Asian Construction & Dev Corp v PCIB- financial difficulties not fortuitous and does not constitute
valid justification to renege on obligations
Fil-Estate Properties v Go- fluctuations in the market and currency an everyday occurrence
thus foreseeable; condo
Victorias Planters Asso v Victorias Milling Co- fortuitous event relieves parties from fulfilling obligation
not stop running of prescription; not entitled to demand performance during the period cannot later on
demand fulfillment; sugar cane
Ace-Agro Dev Corp v CA & Cosmos- no cause for terminating at most only temporary suspension of
work; bottling
1175. Usurious transactions
interest in excess of that provided by Usury Law (indefinitely suspended) contracting for or receiving
something in excess of the amount allowed by law for the loan or use of money, goods, chattels or
credit; exaction of excessive interest
kinds
moratory interest- interest given for compensation or use of the money
compensatory interest- interest given by way of damages
test: unconscionable (shocking to the conscience) or not
Cauton v CA- not given carte blanche authority to raise interest rates to such levels as to
enslave debtors and lead to a hemorrhaging of their assets; contrary to morals if not against the law
Liam Law v Olympic Sawmill Co- usury law indefinitely suspended; may agree; not proven usurious
1176. Presumptions (disputed by proof to the contrary)
interest has been paid from receipt of the principal by the creditor without reservation with respect to
the interest (before: common practice to pay interest first)
installments have been paid from the receipt of a later installment of a debt without reservation as to a
prior installment (date must be specified)
Manila Trading & Supply Co v Medina- receipts did not recite which corresponding month the payment
was for; presumption is only prima facie
Ledesma v Realubin- proven as fact that prior installments were not paid; presumption pro tanto
cannot prevail over proven fact; Caltex
1177. Remedies of the creditor (rights) [successive not alternative]
exact payment / fulfillment (specific performance / performance)
exhaust debtor’s properties- debtor is liable with all his present and future property for the fulfillment of
his obligations subject to exemptions provided by law (Art 2236)
accion subrogatoria / subrogatory action- exercise all right and actions except those inherent in the
person; get receivables from debtor’s debtor
accion pauliana- impugn or rescind acts or contracts done to defraud creditors; sales or donations
Adorable v CA- successive not alternative; recession is a subsidiary remedy
1178. Transmissibility of rights (assigned | inherited)
GR: rights are transmissible
EXC: (must be clearly proved)
law provides otherwise
contract provides otherwise
obligation is purely personal

Different Kinds of Obligations

1179-1192. Pure and conditional obligations

1180. “pay when my means permit me to do so” deemed as an obligation with a period; payment does
not depend on debtor’s will; matter of time not happening
remedy is not to bring an action to demand payment but to ask the court to fix the duration of
the term of period as it is only then that the action for fulfillment or performance will prosper
demandable at once
pure obligation
resolutory condition
resolutory period
pure- one without a condition or a term; demandable at once provided no absurdity
conditional (future and uncertain)
1181. suspensive- conditions precedent / antecedent; happening of the condition gives rise to
the obligation; efficacy or obligatory force is subordinated to the happening of a future
and uncertain event; if condition does not take place then as if no conditional obligation
ever existed because no contract perfected
 Insular Life Assurance v Toyota Bel-Air- stand as if no conditional obligation ever
existed if condition not fulfilled; cannot be compelled to comply with obligation
Coronel v CA- suspensive condition was fulfilled thus due and demandable; contract
of sale because no reservation of ownership
1181. resolutory- conditions subsequent; happening of the condition extinguishes the
obligation; rights already acquired are lost once the condition is fulfilled
Central Philippine University v CA- cause of action arises with the expiration of a
reasonable period; courts to fix period as not demand until then; school donation
Jacinto v Kaparaz- possession immediately delivered with no reservation of title
Ducusin v CA- need of the premises constitutes cause of action; not dependent solely
on the will of debtor but also on 3rd persons
1182. potestative- facultative condition; depends on the exclusive will of one of the parties
if also suspensive- void condition and obligation because illusory
if also resolutory- valid
obligation is immediately demandable
already obliged from the start; only extinguishment depends on debtor not
existence; benefits creditor regardless
not a mere hope / expectancy
protestative on part of creditor- valid
Rustan Pulp v IAC- nature of suspension is conditioned upon debtor’s sole
determination of sufficiency of supplies; illusory resumption of deliveries
Osmeña v Rama- void because dependent solely on her will; based on choice of
words
1182. casual- depends on chance or hazard or the will of third persons
1182. mixed- partly will of one of parties and partly on chance or will of a third person
Naga Telephone v CA- mixed because depends partly on the will of the debtor and
partly on chance
1183. impossible- not capable of fulfillment due to the nature or operation of the law or morals
or public policy or due to a contradiction in its terms (physical, illegal)
positive- void condition and obligation
negative- disregard the condition but obligation remains because can always be
fulfilled; deemed to be without a condition “if nebula after 30 mins then impossible”
EXC: if pre-existing then obligation subsists
1184. positive- perform
1185. negative- omit
1186. Constructive fulfillment / presumed fulfillment
deemed fulfilled when the debtor voluntarily prevents its fulfillment
reason- one must not profit by his own fault
requisites
voluntarily made- intent to prevent maliciously or not
actually prevents- intention and prevention must concur; exc if lawful
suspensive
Ong v Bogñalbal- condition deemed fulfilled as can no longer be performed if another contractor
finished the flooring; obligation to pay now pure
Tayag v CA- can no longer pay as sister of creditor paid
1187. Fulfillment of conditions
suspensive
obligation becomes effective from the day the obligation was constituted (retroacts);
exc fruits or interests (natural, industrial, civil) & period of prescription
unilateral- debtor gets the fruits and interests unless there is a contrary intent
reciprocal- deemed to compensate each other for convenience and practical
effectiveness
preventing a resolutory condition is beneficial to creditor because obligation continues; act must be
directly attributable to prevention
Enriquez v Ramos- entire obligation by express terms was to become due and demandable as streets
deemed completed by ocular inspection; filing of case sufficient notice (judicial notice)
1188. Preservation of rights
actions to preserve creditor’s rights (expectancy)
reason: danger the creditor will receive nothing as when the object is deliberately destroyed,
hidden or alienated
preservation not preference over other creditor
ex. ask of security, ask the court to prevent alienation or concealment, annotated in the title
 right of debtor to recover what was paid by mistake
reason: condition may not materialize and in the meantime the debtor has lost the use of the
object; solutio
if not by “mistake” (done deliberately)
condition is fulfilled: no recovery because of retroactivity
condition is not fulfilled: recovery (unjust enrichment) unless pure donation intended
1189. Rules in case of loss, deterioration or improvement during the pendency of condition (interim: promise
made -> condition happening)
applies only if (1) suspensive condition is fulfilled and (2) object is specific
applicable to resolutory but reversed since demandable at once (obligation to return or no return +
damages)
lost
without fault of debtor: obligation extinguished
fault: obliged to pay damages
perishes, goes out of commerce, disappears in such a way that its existence is unknown or it
cannot be recovered
partial loss: amount to a loss important enough to be considered a complete loss otherwise
only deterioration of the thing
deteriorates
without fault: creditor bears impairment
fault: rescission + damages or fulfillment + damages
improved
nature or time: inure to the benefit of creditor
expense of debtor: creditor owns; no other right for debtor than that granted to the
usufructuary (right to enjoy)
1190. Resolutory condition
effects
obligation is extinguished
parties should restore to each what they have received
return the fruits or interest thereon after deducting expenses
apply rules of Art 1189 for whoever has the duty to return
courts are given the power to determine the retroactivity of the fulfillment of
resolutory conditions
1191. Rescission in reciprocal obligations
power to rescind: right to cancel the contract or reciprocal obligations in case of non-fulfillment on the
part of one; predicated on breach of faith violative of the reciprocity between the parties not injury to
economic interests
exists only in reciprocal obligations: reciprocally obliged to give or do something; cause must be
identical and the obligations should arise simultaneously; the obligation or promise of each party is the
cause or consideration for the obligation or promise of the other
can be demanded only if the plaintiff is ready, willing and able to comply with his own
obligation and the other is not
the right to rescind is not absolute
trivial causes or slight breaches
Court finds just cause for fixing the period within which the debtor can comply
property is now in the hands of an innocent third party who has lawful possession of
the same
needs judicial approval in some cases (when there has already been delivery of the object)
implied to exist and therefore does not need to be expressly stipulated on
may be waived, expressly or impliedly
choice of fulfillment or rescission
rights are alternative not conjunctive
cannot demand rescission and still insist on the performance of subordinate stipulations
may seek rescission if fulfillment impossible
extrajudicial rescission must be expressly stipulated
Tan v CA- judicial as no stipulation for extrajudicial; slight delay not enough; not own fault
Velarde v CA- non-payment is substantial breach; mutual restitution
Siy v CA- alternative not conjunctive; cannot ask for performance and rescission
UP v De Los Angeles- express stipulation with notice
Palay Inc v Clave- no notice; notice indispensable and cannot be waived as against public policy
1192. Both parties in breach in reciprocal obligations
liability of the first infractor shall be equitably tempered by the courts (tempered because second
infractor also breached, also derived or thought he would derive some advantage by his own act or
 neglect)
if first infractor cannot be determined the contract shall be deemed extinguished and each shall bear
his own damages (presumed that both at about the same time tried to reap some benefit)
Camus v Price- in pari delicto because could not determine

Obligation With A Period

1193. period / term

period-certain length of time which determines the effectivity or the extinguishment of obligations;
space of time which has an influence on obligations as a result of a judicial act and either suspends
their demandableness or produces their extinguishment; obligations are subjected one way or another
to the expiration of said term
requisites
future
certain but can be extended (if eliminated by subsequent mutual agreement then the
obligation becomes pure and immediately demandable
physically and legally possible (otherwise void)

kinds
definite- exact date or time is known and given
indefinite- date of happening is unknown but will surely happen (death)
legal- period granted under the provisions of the loan
conventional or voluntary- agreed upon / stipulated
judicial- fixed by the courts
ex die- suspensive effect; obligation begins only from a day certain
in diem- resolutory effect; obligation remains valid up to a time certain
day certain- that which must necessarily come although it may not be known when
period of prescription- from the time the terms of the obligation arrives for it is only from that date that
it is due and demandable
 extension of a period- evidence must be shown by debtor
fortuitous event- relieves the parties from fulfillment of their respective obligations but shall not stop
the running of the term or period agree upon
moratorium laws- declared unconstitutional; to obtain a postponement of the period within which to
pay off obligations; suspension of payment; act of grace
period stated in the law is indefinite
continuation will be unreasonable and oppressive to creditors
1194. Rules in case of loss, deterioration or improvement during interim
observe rules in 1189
1195. Recover premature payment (obligations to give)
requisites
unaware of the period
must have believed that the obligation has become due and demandable
creditor was in bad faith
knowledge by the debtor of prematureness is implied waiver
no recovery as required to pay sooner of later and at fault for premature payment
period for recovery
what was paid- before the debt matures
fruits and interest- up to 5 years after maturity
before maturity: payment - return
after maturity: payment - maturity
1196. Benefit of term (exclude first, include last)
GR: both debtor and creditor; debtor cannot pay prematurely and creditor cannot demand prematurely
creditor is interested in the interest and debtor is given enough time to pay
creditor is interested in keeping his money safely invested with debtor as depository, or when
the creditor wants to protect himself from the dangers of currency depreciation
only applies when the parties have agreed not when the courts are authorized to fix a
reasonable time
EXC
debtor only- required to pay only at the end but may pay even before; can pay and creditor
cannot demand
creditor only- can demand at any time even before the term expires and cannot be compelled
to accept premature payment; can demand and debtor cannot pay
1197. Conventional period
determine the period probably contemplated but the parties; such period fixed by the courts cannot be
changed by them
mere silence of the obligation with regard to the term or period does not necessarily mean the courts
are empowered to fix the duration
ask the court to fix the period as fulfillment of the obligation itself cannot be demanded until after the
court has fixed the period for its compliance (not performance of fulfillment of obligation; precluded
from enforcing obligation; specific performance cannot be demanded at the same time that the court
is asked to fix the period such action for performance being premature)
may file an action for the fixing of the period and specific performance at the same time if
shown that a separate action would be a mere formality as no additional proofs will be
presented and would serve no purpose other than to delay
there can be no breach of contract or failure to perform so long as the period has not yet been fixed
court may fix the period even if not specifically asked so long as the prayer includes such other and
further relief as may appear just and equitable
does not modify or amend the obligation concerned but merely enforces an implied stipulation in the
contract; considered as part and parcel or automatically incorporated in all obligations contemplated
therein
fix- once fixed the period becomes part of the contract thus the courts cannot change it; once parties
consent to the period it acquires the nature of a covenant or becomes the law governing the contract
compromise agreement approved has the same force and effect as a decision; if parties change the
period by mutual agreement or disregard it then the obligation becomes pure and demandable at once
inferred that a period was intended
will of the debtor
cannot fix
no term was intended
lost the right to have the period fixed (Chaves v Gonzales-returned)
specific period is provided for in the law (employment contract)
when what appears to be a term is really a condition
period within which to ask the court to have the period fixed has already prescribed
 must be brought within the proper prescriptive period for specific performance if a
period has originally been fixed but to be counted from the perfection of the contract;
extrajudicial demand is not essential cause of action to have the period fixed
contract of lease expired and was not renewed- courts cannot fix a period
1198. Debtor loses benefit of the period
term is extinguished and the obligations is demandable at once
insolvency (unless gives a guaranty or security)
does not have to be judicially declared; as long as assets are less than liabilities
(proven by creditor)
EXC: moratorium law then debtor who happens to be insolvent may still take
advantage of said moratorium
does not furnish the guaranty promised
makes a mortgage in favor of another person instead
mortgaging 2 parcels of land instead of 3
impairs the guaranty by his own acts after establishment or it disappears through a fortuitous
event (unless replaces immediately)
fails to renew surety, mortgaged building burns
violates any undertaking in consideration of which the creditor agreed to the period
debtor attempts to abscond
Gaite v Fonacier- suspensive term not condition; lost right to make use of period as impaired security
from failure to renew; iron ore
Fernandez v CA- period for the benefit of both thus mutual consent to renew; rent
Abesamis v Woodcraft Works Inc- no demand or delay before expiration; waiver because assured
transportation; logs
Araneta v Phil Sugar Estates Development- period probably contemplated not arbitrary; cannot fix
because there was already a period; squatters
Radiowealth Finance Co v Del Rosario- courts cannot fix a period if already existing; date of checks is
period agreed upon; monthly amortization
Allen v Province of Albay- waived contract time by own actions (1) delay (2) quarantine (3) modified;
bridge construction

Alternative / Facultative Obligations- Distributive as only one is demandable

1199. Alternative / facultative obligations

one where out of the two or more prestations only one is due
completely perform one presentation; creditor cannot be compelled to receive parts
1200. Right of choice
GR: belongs to the debtor
EXC:
expressly granted to creditor
expressly granted to a third person (though not expressly recognized it is not contrary to law,
morals, good customs, public order or public policy
limitation:
impossible
unlawful
could not have been the object of the obligation (not contemplated, not in choices, or acquired
a new character distinct from that contemplated)
1201. Notification / communication of choice
means: orally or in writing, expressly or impliedly (performance of one of the obligations) provided the
other party is properly notified
consent or concurrence of the other party not necessary for the selection to take affect
burden of proof upon him who made the selection
requisites
made properly
made with full knowledge
made voluntarily and freely
made in due time
made to all the proper persons
made without conditions (unless agreed to)
may be waived (expressly or impliedly)
effect
obligation becomes a simple obligation
election once made is binding; cannot renounce choice
 reason
inform the creditor that the obligation is now a simple one, no longer alternative, and if already
due for the creditor to receive the object being delivered if tender of the same has been made
Ong Guan Can (error)- in order to give the creditor opportunity to express his consent or to
impugn the election made by the debtor (debtor is really being deprived of his right)
1202. Lose right of choice when only one is possible
1203. Lose right due to creditor’s acts
may rescind + damages
not automatically rescinded; may allow the contract to remain in force insofar as the possible choice or
choices are involved

1204. Alternatives lost through debtor’s fault

right to choose belonged to debtor
loss or impossibility happened before selection
indemnity- value of the thing lost last or service which last became impossible
damages may also be awarded
1205. Creditor chooses
communication: obligation ceases to be alternative
does not apply when contract does not state whom the right is given as default is debtor
creditor loses right only one is practicable: simple
if creditor delays in choosing then debtor does not incur delay; debtor may compel creditor to accept
with resultant damages if any

rules during interim (to give and to do)

one lost through fortuitous event: choose from remaining
one lost through fault of debtor
remainder + damages?
price of lost + damages?
all lost through fault of debtor: price of any + damages
1206. Facultative
only one prestation has been agreed upon but obligor may render another in substitution; only
one presentation is agreed upon but if debtor fails to deliver such then obligation may still be complied
by delivering another presentation
loss or deterioration of the thing intended as substitute through negligence of debtor does not render
him liable
once the substitution has been made then the obligor is liable for the loss of the substitute on account
of his delay, negligence, or fraud

Alternative Facultative

objects due several objects due only one object due

delivery of one of the prestations delivery of another prestation in

compliance
which are alternatively due substitution of that which is due

choice debtor, creditor, third person debtor

effect of
loss of that which is due is sufficient to
fortuitous all must be lost to extinguish
extinguish
loss

effect of loss of any before choice made may loss of substitute before choice made
culpable loss give rise to liabiity does not give rise to liability
Joint or Solidary

1207. Presumption not solidary (collective obligations)

solidary liability only when
stipulation in the contract
law declares (tort, quasi-contracts, obligations of devisees and legatees, bailees in
commodatum, liability of offenders of a felony)
nature of the obligation requires
joint: to each his own
each obligor answers only for a part of the whole liability and to each obligee belongs only a
part of the correlative rights
bound to render compliance with his proportionate part
solidary / joint & several: one for all, all for one
relationship between active and passive subjects is so close that each of the former or of the
latter may demand fulfillment of or must comply with the whole obligation
bound to render entire compliance with the presentation which constitutes the object of the
obligation
may be joint debtors and solidary creditors (character of the creditors or debtors determine their
respective rights and liabilities

1208. Presumption joint

effects
debt shall be divided into as many shares as there are creditors and debtors; principle of
mutual agency does not apply
credits or debts will be distinct from one another (subject to the ROC governing the multiplicity
of suits)
joint debtor cannot be compelled to answer for the liability of others; damages for
breach must be borne by he who damaged alone
joint creditor cannot act in representation of the others
vitiated consent on the part of one debtor does not affect the others
insolvency of one debtor does not make the others responsible for his share
demand by the creditor on one joint debtor puts him in default, but not the others since the
debts are distinct
when the creditor interrupts the running of the prescription period by demanding judicially
from one the others are not affected
defense of one debtor are not necessarily available to the others
liabilities of partners
contract: joint or pro rata
crime or quasi-delict: solidary (together with the partnership)
liabilities of agents
GR: joint even if appointed at the same time
EXC: solidary has been agreed upon
liabilities of co-principals in agency: solidary
liabilities of spouses
joint after conjugal funds have been exhausted
liabilities of violators of Arts on Human Relations (19-22)
solidary based on the nature of the obligation since either penal or contrary to morals
liability of employer for employee’s tort: primary (not subsidiary) and solidary

1209. Joint indivisible obligation

indivisible- object
joint- tie, proportionately liable
no creditor can act in representation of the others or do an act prejudicial to the others
if beneficial then the act of one is enough (ex. interruption or period of prescription)
no debtor can be made to answer for the liability of others
fulfillment requires the consent of all debtors although each for his part; collective action for creditors
required for acts which may be prejudicial
creator must proceed against all the joint debtors
demand must be made on all the joint debtors
if any of the joint debtors are insolvent the others shall not be liable; obligation to pay
monetary damages not indivisble
delivery must be made to all joint creditors unless one specifically authorized
 each joint creditor is allowed to renounce his proportionate credit
demand on one joint creditor is not a demand by the others; credits are still independent of
one another
breach/refusal by one
obligation can no longer be performed
converted into one of indemnity or damages
debtors who were ready to fulfill not liable in excess of corresponding portion of the price
1210. Indivisibility does not necessarily mean solidary & vice versa
indivisibility- subject matter
solidarity- tie
active- creditors
passive- debtors
mixed- both
conventional- agreement
legal- impose by law
1211. Solidary despite different terms or conditions
uniform- debtors bound by the same stipulations and clauses
varied/otherwise- obligors though liable for the same prestations are not subject to the same
secondary stipulations and clauses
creditor may recover that part which is pure and unconditional
suspend the right to demand payment for the remainder until expiration of the term or
fulfillment of the condition; can then claim from all solidary debtors
1212. Beneficial and prejudicial acts of solidary creditors
beneficial- ex. judicial demand to interrupt the running of the prescription
prejudicial- ex. remission or condonation (liable to other creditors)
valid as to debtors because mutual agency
indemnify as to other creditors
1213. Assignment by solidary creditor
GR: cannot assign
EXC: all others consent; assignment to one of the other creditors
implies mutual agency and confidence; prejudicial acts of assignee or substitute endanger the
rights of other creditor thus consent necessary
1214. Whom debtor pays
GR: any of the solidary creditors
EXC: solidary creditor who demands
payment to any other creditor will not extinguish the obligation insofar as the payee’s share is
concerned
only the debtors on whom such demand is made is bound
1215. Effects
novation- modification of an obligation by changing its object or principal conditions, substituting the
person of the debtor, subrogating the person of the debtor, or by subrogating a third person in the
rights of the creditor
debtor who does not consent is not bound except insofar as he has been benefited
creditor must reimburse other creditors prejudiced (share benefits also if ever)
extension of time to the principal debt without the suety’s consent will release the surety from
the contract
compensation- that which takes place when two persons in their own right are creditors and debtor of
each other
total compensation automatically extinguishes the obligation whether known or unknown to
the parties (liable to other parties)
partial compensation- solidary obligation still subsists
confusion / merger
that which takes place when the characters of the creditor and debtor are merged in the same
person
solidary obligation is extinguished but other debtors still indebted
remission / waiver
act of liberality whereby a creditor condones the obligation
total: other debtor does not have to reimburse for remission was gratuitous and nothing was
given
partial: individual shares of other debtors not diminished but all are still benefitted as the
solidary debt is diminished; partial remission is a defense for the other debtors if asked to pay
for the entire obligation
1216. Whom creditor may proceed
 any, some, or all simultaneously
if creditor sues only one there is no waiver against those not yet sued; may be proceeded against later
does not apply to joint but applies to passive solidarity and mixed solidarity

1217. Effects of payment- delivery of the thing or rendition of the service which is the object of the obligation
solidary obligation to pay is extinguished; converted to joint obligation to reimburse (basis is fact of
payment not the original contract)
creditor can demand from debtor even if has not offered to pay
if a debtor pays during the pendency of a case then such debtor is changed from defendant to plaintiff
to collect reimbursement
interest between debtors to begin from time or payment after maturity
before payment the right of a solidary debtor to reimbursement is only contingent and conditional
1218. Payment after prescription or declaration of illegality
with knowledge: cannot recover
without knowledge: solution indebiti
1219. Remission after total payment
can recover reimbursement to prevent fraud and to give justice to the paying debtor
since payment extinguishes the obligation there is nothing more to remit
still has to bear part of the burden of insolvency of other debtor even if share has been remitted as he
only does not need to reimburse own share
1220. Whole remitted
essentially gratuitous thus no reimbursement so as not to induce fraud and partiality
1221. Loss of object or impossibility of performance of solitary debt
without fault- extinguished
with fault of any- responsible for price, damages and interest; action against guilty or negligent
debtor; mutual agency and confidence
fortuitous with delay- responsible for price, damages and interest
1222. Defenses
complete (derived form the nature of the obligation
personal to the debtor sued
GR: complete
EXC: partial if non-fulfillment of condition or non-arrival of term; still liable except for own
share in the meantime
personal to the others- partial
Divisible and indivisible

1223 Divisible or indivisible

divisible- capable of partial performance
quantitative
qualitative
intellectual or moral- exists merely in mind not in physical reality
indivisible
conventional
natural or absolute
legal

1224. Joint indivisible

object is indivisible; parties merely bound jointly
effect of non-compliance: converted to a monetary action for indemnity
if solidary: can demand whole from one; latter can later recover
1225. Deemed
deemed indivisible
definite things
not susceptible of partial performance
if so provided by law
if such was the intention of the parties concerned
deemed divisible (illegal: legal terms may subsist if can be separated)
execution of a certain number of days of work
accomplishment of work by metrical units
pay a certain amount in installments
work susceptible of partial performance
1226. Penal Clause
GR: penalty shall substitute the indemnity for damages and payment for interests i case of non-
compliance
EXC:
express stipulation to the effect that damages or interest may still be recovered (must prove
existence and measure of the damages)
debtor is sued for refusal to pay the penalty imposed
debtor is guilty of fraud in the fulfillment of the obligation (no renunciation of an action to
enforce liability for future fraud
definition: coercive means to obtain from the debtor compliance; accessory undertaking to assume
greater liability in case of breach; attached to obligations in order to ensure their performance
penalty may be enforced only when it is demandable (breach or nonfulfillment); may be reduced
does away with the duty to prove the existence and measure of the damage caused by the breach
 voluntarily and knowingly agreed upon thus not contrary to law, morals or public order
purpose:
ensuring compliance/performance (general)
liquidate the amount of damages to be awarded; measure beforehand the damages which
may result (compensatory)
punish non-compliance/breach (punitive)
kinds
legal
conventional
subsidiary- only the penalty may be asked
joint- both the principal contract and the penal clause can be enforced

Penal Clause Condition

obligation although accessory does not constitute

an obligation

may become demandable in default of the unperformed principal never demandable

obligation and sometimes jointly with it

1227. Not alternative

 GR: debtor cannot excuse himself from the performance of the obligation by paying the penalty
EXC: right has been expressly reserved for him (implied reservations is not allowed)
reason: fulfillment will become alternative
GR: creditor cannot demand fulfillment and satisfaction of the penalty at the same time
EXC: right has been clearly granted him (can be tacit or implied)
if creditor chose fulfillment and performance becomes impossible then penalty may be
enforced
1228. No proof required
proof of actual damages suffered by creditor not necessary to enforce penal clause upon evidence of
the violations of the conditions stipulated
more as a punishment for the infraction thereof than a mere security, lawful means of repairing losses
and damages
identical with liquidated damages
1229. Reduction of penalty
partial performance
irregular performance
unconscionable or iniquitous (even if no performance)
penalty clause may even be deleted
substantial performance in good faith
penalty clause suffered from fatal infirmity
exceptional circumstances so warrant
1230. Effect of nullity
principal obligation nullified- penal clause null because no more use for existence
penal clause nullified- principal obligation can stand alone and the void penal clause is disregarded

Conflicting modification on 26 November 2016 at 11:48:58 PM:

General Provisions

1156. obligation- juridical necessity to give, to do or not to do

civil obligation- perfect obligation; sanction is judicial process
natural obligation- duty not to recover what has voluntarily been paid although payment was no longer
required; sanction is the law but only because conscience had originally motivated the payment
moral obligation- sanction is conscience and morality or the law of the church
requisites or elements
active subject- obligee or creditor; he who possesses or can enforce the right
passive subject- obligor or debtor
object or prestation- subject matter
efficient cause- vinculum or juridical tie; reason why the obligation exists
Ang Yu Asuncion v CA
general classifications
sanction
civil- judicial process
natural- law
moral- conscience/morality or the law of the church
subject matter or presentation or object
real- obligation to give
personal- to do or not to do
affirmativeness or negativeness
positive- to give or to do
negative- not to do
persons obliged
unilateral- only one party is bound; gratuitous donation
bilateral- both parties; contract of sale, onerous donation
obligation
cause of action- an act or omission of one party in violation of the right of the other; identical when there is an
identity in the facts essential to the maintenance of the two actions or where the same evidence will sustain
both actions; breach of obligation; reason for suing
legal right of the plaintiff
 correlative obligation of the defendant
act or omission of the defendant in violation of said legal right
subject matter- item with respect to which the controversy has arisen or concerning which the wrong has been
done
De la Rama v Mendiola- res judicata because object of both is the Agreement to Buy and Sell and
efficient cause is the failure to reconvey
Bachrach Corporation v CA- not res judicata; can proceed independently as one is not a bar to the
other; one is about the lease contract while the other is the compromise agreement

1157. Sources of Obligations

1158. Law- obligations ex lege; not presumed (must have a specific provision), only those expressly
determined are demandable, regulated by the precepts of the law which established them or by this Book
Pelayo v Lauron- no juridical tie because no law or contract; husband should pay even if he was not
the one who called the doctor as he is obliged to support his wife which includes medical attendance
De la Cruz v Northern Theatrical Enterprises- no legal obligation only moral; employer is ordinarily not
required to furnish his employees with legal assistance as obligations are not presumed thus must be
clearly set forth in the law
1159. Contracts- obligations ex contractu; have the force of law between the contracting parties and must be
complied with in good faith (must fulfill the terms); before a contract can be enforced it must first be valid, the
right of the parties to stipulate is limited
Manzano v Lazaro
William Golangco Construction Corp v PCIB- compliance in good faith means that we must interpret
not by the letter that killeth but by the spirit that giveth life
Dio v St. Ferdinand Memorial Park
NHA v CA & Grace Baptist Church
Tiu Peck v CA
1160. Quasi-contracts- obligations ex quasi-contractu; juridical relation resulting from a lawful, voluntary and
unilateral act and which has for its purpose the payment of indemnity to the end that no one shall be unjustly
enriched or benefitted at the expense of another
types
negotiorum gestio- unauthorized management; reimbursement must be made when a person
voluntarily takes charge of another’s abandoned business or property without the owner’s
authority
solutio indebiti- undue payment; duty to return when something is received when there is no
right to demand it and it was unduly delivered thru mistake; no pre-existing contract
BPI v Sarmiento
Perez v Pomar- presumptive consent based on quasi-contract
Reyes v Lim
Rodzssen Supply v Far East Bank & Trust Co
1161. Delicts- obligations ex delicto or ex maleficio; Art 100 RPC: Every person criminally liable for a felony is
also civilly liable (restitution, reparation, indemnification)
People v Catubig- civil liability unaffected because not crime against state but private person
1162. Quasi-delicts or Torts or Culpa Aquilina- obligation ex quasi-delicto or ex quasi-maleficio
fault or act of negligence which causes damage to another there being no pre-existing contractual
relations between the parties
negligence- omission of that diligence which is required by the circumstances of person, place, and
time; question of fact
test: would a prudent man foresee harm to the person injured as a reasonable consequence of
the course about to be pursued?
reasonable foresight of harm followed by the ignoring of the admonition born of this provision
is the constitute fact of negligence
requisites
fault or negligence attributable to the person charged
damage or injury
direct relation of cause and effect between the fault or negligence and the damage or
injury (proximate cause)
Air France v Carrascoso
Enumeration by law is exclusive
Makati Stock Exchange v Campos
Nature and Effect of Obligations

1163. Every person obliged to give something is also obliged to take care of it with the proper diligence of a
good father of a family (ordinary diligence)
Applicability: specific / determinate things
Standard of care
GR: diligence of a good father of a family
EXC: law or contract provides for a different standard of care
Factors to consider
nature of the obligation
circumstances of person, time, and place
Piczon v Piczon
1164-1166. Obligations to give
Determinate things
Real right- power over a specific thing and is binding on the whole world
Personal right- power demandable by one person over another; has the right to demand
delivery
Kinds of delivery
Actual delivery or tradition- property changes hands physically
Constructive delivery- physical transfer is implied
traditio simbolica- keys of a bodega
traditio longa manu- delivery by mere consent or pointing out of the object;
"extending of the hand”
traditio brevi manu- delivery by short hand; possessor of a thing not as owner
become the possessor as owner
traditio constitutum possessorium- possessor as an owner retains possession
no longer as owner but in some other capacity
tradition by the execution of legal forms and solemnities- execution of a public
instrument selling land
Obligation to deliver arises
no term or condition: perfection of the contract
with term or condition: moment the term arrives or the condition happens
San Lorenzo Development Corp v CA
Real obligations- to give (generic or specific)
Generic or indeterminate- refers only to a class, genus and cannot be pointed out with
particularity
Specific or determinate- capable of particular determination
Remedies (cannot demand extrajudicially)
specific
specific performance + damages (whether generic or specific)
rescission or cancellation + damages (some cases)
damages
generic
performance + damages
delivery by 3rd person at debtor’s expense + damages
damages
Fortuitous events
generic: never extinguished; genus never perishes
specific: extinguished (converted to damages)
EXC: obligor delays (legal delay with demand), guilty of bad faith
(promised to 2 or more people)
Delay
legal delay/default- virtual nonfulfillment of the obligation (there must be
demand; no demand = no default)
ordinary delay- non-performance at the stipulated time; no demand yet
Personal obligations- to do or not to do
Caleon v Agus Development- sub-lease; apartment is accession
Generic things
Rights of creditor (GR: include accessories and accessions even if not specifically stated)
what the obligation to give a determinate thing includes
accessories- added for better use or enjoyment
accessions- improvements
1167-1168. Obligation to do/not to do
Positive personal obligations- to do
Negative personal obligations- not to do
Remedies of creditor if debtor fails to do
executed at debtor’s expense (not specific performance because involuntary servitude)
damages
Thing may be ordered undone
made poorly
obligation is a negative one (if possible)
Chavez v Gonzales
Tanguilig v CA

1169-1170. Delay or mora

signifies the idea of delay in the fulfillment of an obligation with respect to time
requisites
obligation is demandable and already liquidated
obligor or debtor delays performance
creditor requires the performance judicially or extrajudicially
kinds of delay SAM
mora solvendi- default on the part of the debtor; delay of the obligor or debtor to perform his
obligation; none in negative and natural obligations
ex re- obligation to give
ex persona- obligation to do
mora accipiendi- default on the part of the creditor; delay of the obligee or creditor to accept
the delivery of the thing which is the object of the obligation
compensatio morae- both parties are in default in a reciprocal obligation thus neither are in
default
when demand is not needed to put debtor in default LOTUX
when the law so provides (tax payment as Tax Code provides)
when the obligation expressly so provides (demand not necessary to incur default)
when time is of the essence of the contract / when the fixing of the time was the controlling
motive for the establishment of the contract- no need to categorically state that time is of the
essence as the intent is sufficient as long as it is implied
when demand would be useless, as when the obligor has rendered it beyond his power to
perform- disposed of it in favor of another, destroyed the object, is hiding
when the obligor has expressly acknowledged that he really is in default- asking for extension
is not express acknowledgement
grounds for liability
fraud (deceit or dolo)- intentional evasion of fulfillment
negligence (fault or culpa)
default (or mora)- if imputable to the debtor
violation of the terms of the obligation (violatio)- exc when excuse in proper cases by
fortuitous events
kinds of damages (should be paid by those responsible for them; not enough that the damage be
capable of proof but must be actually proved with a reasonable degree of certainty pointing out
specific facts that afford a basis for measuring whatever compensatory damages are borne)
moral- for mental and physical anguish
exemplary- corrective or to set an example
nominal- to vindicate a right when no other kind of damages may be recovered
temperate- when the exact amount of damages cannot be determined
actual- actual losses as well as unrealized profit
liquidated- predetermined beforehand by agreement
Piczon v Piczon
Philippine Charter Insurance Corporation v Central Colleges of the Philippines
Palmares v CA
Binalbagan Tech v CA
Barzaga v CA
Financial Building Corporation v Rudlin International Corporation
Tanguilig v CA
Aerospace Chemical Industries v CA
1171. Responsibility from fraud / dolo
attendant of bad faith, deliberate intention to cause damage or prejudice
 time of commission: fraud may be past or future (liability for past fraud may be waived)
meaning:
fraud in obtaining consent (may be causal or merely incidental)
fraud in performing a contract
dolo causante- vitiates consent
dolo incidente
Far East Bank & Trust Co v CA
1172. Responsibility from negligence / culpa
gross negligence can never be excused in advance because contrary to public policy; simple
negligence may be excused or mitigated
negligence only absent proof of intent
kinds of negligence according to source of obligation
culpa contractual / contractual negligence- breach of contract; negligence in performance of
obligation
culpa aquiline / civil negligence / tort / quasi-delict; act or omission causing damage
culpa criminal- commission of a crime or delict; civil liability arising from criminal negligence
effects
good faith- liable only for the natural and probable consequences of the breach of the
obligation and which the parties have foreseen or cld have reasonably foreseen
bad faith- responsible for all damages which may be reasonably attributed to the
nonperformance; any waiver or renunciation made in anticipation of such negligence is null
and void
contributory negligence- reduce or mitigate the damages to be recovered from the debtor
a result of the breach; utmost importance to determine whether the negligence of the
creditor was a proximate cause of the accident or merely contributory to his own negligence
other mitigating
plaintiff also contravened
plaintiff derived some benefit
loss would have resulted in any event
defendant has done his best to lessen the plaintiff’s injury
PNB v CA
Southeastern College v CA & Dimaano- necessary the he are free from any previous negligence or
misconduct by reason of which the loss may be occasioned; whether it be from active intervention,
neglect, or failure to act the whole occurrence is humanized and removed form the rules applicable
to acts God
1173. Degree of diligence
Roman Law
slight diligence - grave negligence / culpa lata
ordinary diligence - ordinary negligence / culpa levis
great diligence - slight negligence / culpa levissima
Civil Code
agreed upon by the parties
required by the law
good father of a family
Samson v CA
Dioquino v Laureano
Jarco Marketing Corporation v CA
People v Fallorina
Philippine Airlines v CA
La Mallorca v CA
1174. Fortuitous events / caso fortuito
those events which could be foreseen or which though foreseen were inevitable (ordinary and
extraordinary)
act of God- absolutely independent of human intervention
act of man / force majuere- arises from legitimate or illegitimate acts of persons other than the
obligor (armed invasion, attack by bandits)
essential characteristics- fortuitous event must be the sole cause; entire exclusion of human agency
from the cause of injury or loss
independent of the will of the debtor- freedom from participation or aggravation
impossibility of foreseeing or avoiding even if foreseen
renders it impossible to fulfill obligation in a normal manner
free from any participation in the aggravation of the injury
GR: exempted from any liability whatsoever for inability to comply with obligation
EXC:
expressly declared by the law (ex. in bad faith or in default)
expressly declared by stipulation or contract
nature of the obligation requires the assumption of risk (doctrine of created risk)- ordinarily
requires knowledge and appreciation of the risk and a voluntary choice to encounter it;
doctrine that no wrong is done to one who consents (volenti non fit injuria)
object is lost partly due to fault of debtor
object is lost after debtor delays
bad faith
obligation arises form criminal offense
obligation is generic
Asian Construction & Dev Corp v PCIB
Fil-Estate Properties v Go
Victorias Planters Asso v Victorias Milling Co
Ace-Agro Dev Corp v CA
1175. Usurious transactions (indefinitely suspended)
interest in excess of that provided by Usury Law (indefinitely suspended) contracting for or receiving
something in excess of the amount allowed by law for the loan or use of money, goods, chattels or
credit; exaction of excessive interest
6% default- BP Circular No 799
kinds
moratory interest- interest given for compensation or use of the money
compensatory interest- interest given by way of damages
test: unconscionable (shocking to the conscience) or not
Cauton v CA
Liam Law v Olympic Sawmill Co- not given carte blanche authority to impose any interest rate they
want; must not be unconcionable
 1176. Presumptions (disputed by proof to the contrary)
interest has been paid from receipt pf the principal by the creditor without reservation with respect to
the interest (before: common practice to pay interest first)
installments have been paid from the receipt of a later installment of a debt without reservation as to a
prior installment (date must be specified)
Manila Trading & Supply Co v Medina
Ledesma v Realubin
1177. Remedies of the creditor (rights) [successive not alternative]
exact payment / fulfillment (specific performance / performance)
exhaust debtor’s properties- debtor is liable with all his present and future property for the fulfillment of
his obligations subject to exemptions provided by law (Art 2236)
accion subrogatoria / subrogatory action- exercise all right and actions except those inherent in the
person; not a change of creditors merely acts in the name and for the account of the debtor; get
receivables from debtor’s debtor
indebted to the creditor
prejudiced by the inaction or failure of the debtor to proceed
pursued or exhausted all the properties
accion pauliana- impugn or rescind acts or contracts done to defraud creditors; based on the principle
that the property of the debtor whether present or future stands as a guaranty for the payment of the
obligation; sales or donations
Adorable v CA
1178. Transmissibility of rights (assigned | inherited)
GR: rights are transmissible
EXC: (must be clearly proved)
law provides otherwise
contract provides otherwise
obligation is purely personal (by their very nature)

Different Kinds of Obligations

1179-1192. Pure and conditional obligations

1180. “pay when my means permit me to do so” deemed as an obligation with a period; payment does
not depend on debtor’s will; matter of time not happening
demandable at once
pure obligation
resolutory condition
resolutory period
pure- one without a condition or a term; demandable at once provided no absurdity
conditional (future and uncertain)- validity and fulfillment of contracts cannot be left to the will of one
of the contracting parties
1181. suspensive- conditions precedent / antecedent; happening of the condition gives rise to
the obligation; efficacy or obligatory force is subordinated to the happening of a future
and uncertain event; if condition does not take place then as if no conditional obligation
ever existed because no contract perfected; mere hope or expectancy which is however
protected by law
Insular Life Assurance v Toyota Bel-Air
Coronel v CA
Central Philippine University v CA
Jacinto v Kaparaz
Ducusin v CA
1181. resolutory- conditions subsequent; happening of the condition extinguishes the
obligation; rights already acquired are lost once the condition is fulfilled
1182. potestative- facultative condition; depends on the exclusive will of one of the parties
if also suspensive- void condition and obligation because illusory
if also resolutory- valid; debtor is naturally interested in the fulfillment of the condition
since only then can he reacquire the rights vested in the creditor
obligation is immediately demandable
already obliged from the start; only extinguishment depends on debtor not
existence; benefits creditor regardless
not a mere hope / expectancy
potestative on part of creditor- valid (although law is silent)
Rustan Pulp v IAC
 Osmeña v Rama
Naga Telephone v CA
1182. casual- depends on chance or hazard or the will of third persons
1182. mixed- partly will of one of parties and partly on chance or will of a third person
1183. impossible- not capable of fulfillment due to the nature or operation of the law or morals
or public policy or due to a contradiction in its terms (physical, illegal)
positive- void condition and obligation
negative- disregard the condition but obligation remains because can always be
fulfilled; deemed to be without a condition “if nabuta after 30 mins then impossible”
EXC: if pre-existing then obligation subsists only condition is void
1184. positive- perform
1185. negative- omit
1186. Constructive fulfillment / presumed fulfillment
reason- one must not profit by his own fault
requisites
voluntarily made- intent to prevent maliciously or not
actually prevents- intention and prevention must concur; exc if lawful
suspensive
1187. Fulfillment of conditions
suspensive
obligation becomes effective from the day the obligation was constituted (retroacts);
condition is only accidental not essential; effects must logically retroact to the moment
the essential elements have taken place and not to the moment the accidental
element took place
exc fruits or interests (natural, industrial, civil) & period of prescription
unilateral- debtor gets the fruits and interests unless there is a contrary intent
reciprocal- deemed to compensate each other for convenience and practical
effectiveness
preventing a resolutory condition is beneficial to creditor because obligation continues; act must be directly
attributable to prevention
1188. Preservation of rights
protection of expectant rights to the eventual fulfillment
actions to preserve creditor’s rights (expectancy)
reason: danger the creditor will receive nothing as when the object is deliberately destroyed,
hidden or alienated
preservation not preference over other creditor
ex. ask of security, ask the court to prevent alienation or concealment, annotated in the title
right of debtor to recover what was paid by mistake
reason: condition may not materialize and in the meantime the debtor has lost the use of the
object; solutio
if not by “mistake” (done deliberately)
condition is fulfilled: no recovery because of retroactivity
condition is not fulfilled: recovery (unjust enrichment) unless pure donation intended
1189. Rules in case of loss, deterioration or improvement during the pendency of condition (interim: promise
made -> condition happening)
applies only if (1) suspensive condition is fulfilled and (2) object is specific
applicable to resolutory but reversed since demandable at once (obligation to return or no return +
damages)
lost
without fault of debtor: obligation extinguished
fault: obliged to pay damages
perishes, goes out of commerce, disappears in such a way that its existence is unknown or it
cannot be recovered
partial loss: amount to a loss important enough to be considered a complete loss otherwise
only deterioration of the thing
deteriorates
without fault: creditor bears impairment
fault: rescission + damages or fulfillment + damages
improved
nature or time: inure to the benefit of creditor
expense of debtor: creditor owns; no other right for debtor than that granted to the
usufructuary (right to enjoy)
ask reimbursement for necessary expenses
 right to remove such improvements if possible
set off improvements against any damage to the property
1190. Resolutory condition
effects of fulfillment- signifies the nonexistence of the obligation thus must not give rise to any effect
obligation is extinguished
parties should restore to each what they have received (return as far as practicable to their
original situation)
return the fruits or interest thereon after deducting expenses for production, gathering and
preservation
apply rules of Art 1189 for whoever has the duty to return
courts are given the power to determine the retroactivity of the fulfillment of
resolutory conditions
effect of non-fulfillment- rights are consolidated or become absolute in character
1191. Rescission in reciprocal obligations
power to rescind: right to cancel the contract or reciprocal obligations in case of non-fulfillment on the
part of one; predicated on breach of faith violative of the reciprocity between the parties not injury to
economic interests
exists only in reciprocal obligations: reciprocally obliged to give or do something; cause must be
identical and the obligations should arise simultaneously; the obligation or promise of each party is the
cause or consideration for the obligation or promise of the other
can be demanded only if the plaintiff is ready, willing and able to comply with his own
obligation and the other is not
the right to rescind is not absolute
court is given the discretionary power to fix the period within which the obligor in
default may be permitted to comply with what is incumbent upon him
trivial causes or slight breaches
just cause for fixing the period within which the debtor can comply
property is now in the hands of an innocent third party who has lawful possession of
the same
needs judicial approval in some cases (when there has already been delivery of the object)
implied to exist and therefore does not need to be expressly stipulated on (thus does not apply
to obligation with a resolutory provision where judicial resolution not necessary)
may be waived, expressly or impliedly
choice of fulfillment or rescission
rights are alternative not conjunctive
cannot demand rescission and still insist on the performance of subordinate stipulations
may seek rescission if fulfillment impossible
extrajudicial rescission must be expressly stipulated
Tan v CA
Velarde v CA
Siy v CA
UP v De Los Angeles
Palay Inc v Clave
1192. Both parties in breach in reciprocal obligations
liability of the first infractor shall be equitably tempered by the courts (tempered because second
infractor also breached, also derived or thought he would derive some advantage by his own act or
neglect)
if first infractor cannot be determined the contract shall be deemed extinguished and each shall bear
his own damages (presumed that both at about the same time tried to reap some benefit)
Camus v Price

Obligation With A Period

1193. period / term

period-certain length of time which determines the effectivity or the extinguishment of obligations;
space of time which has an influence on obligations as a result of a judicial act and either suspends
their demandableness or produces their extinguishment; obligations are subjected one way or another
to the expiration of said term
requisites
future
certain but can be extended (if eliminated by subsequent mutual agreement then the
obligation becomes pure and immediately demandable
physically and legally possible (otherwise void)
 kinds
definite- exact date or time is known and given
indefinite- date of happening is unknown but will surely happen (death)
legal- period granted under the provisions of the loan
conventional or voluntary- agreed upon / stipulated
judicial- fixed by the courts
ex die- suspensive effect; obligation begins only from a day certain
in diem- resolutory effect; obligation remains valid up to a time certain
day certain- that which must necessarily come although it may not be known when
period of prescription- from the time the terms of the obligation arrives for it is only from that date that
it is due and demandable
extension of a period- evidence must be shown by debtor
moratorium laws- declared unconstitutional; to obtain a postponement of the period within which to
pay off obligations; suspension of payment; act of grace
period stated in the law is indefinite
continuation will be unreasonable and oppressive to creditors
1194. Rules in case of loss, deterioration or improvement during interim
observe rules in 1189
1195. Recover premature payment
requisites
unaware of the period
must have believed that the obligation has become due and demandable
creditor was in bad faith
knowledge by the debtor of prematureness is implied waiver
no recovery as required to pay sooner of later and at fault for premature payment
period for recovery
what was paid- before the debt matures
fruits and interest- up to 5 years after maturity
before maturity: payment - return
after maturity: payment - maturity
 1196. Benefit of term (exclude first, include last)
GR: both debtor and creditor; debtor cannot pay prematurely and creditor cannot demand prematurely
creditor is interested in the interest and debtor is given enough time to pay
creditor is interested in keeping his money safely invested with debtor as depository, or when
the creditor wants to protect himself form the dangers of currency depreciation
only applies when the parties have agreed not when the courts are authorized to fix a
reasonable time
EXC
debtor only- required to pay only at the end but may pay even before; can pay and creditor
cannot demand
creditor only- can demand at any time even before the term expires and cannot be compelled
to accept premature payment; can demand and debtor cannot pay
1197. Conventional period
determine the period probably contemplated but the parties; such period fixed by the courts cannot be
changed by them
ask the court to fix the period as fulfillment of the obligation itself cannot be demanded until after the
court has fixed the period for its compliance
court may fix the period even if not specifically asked so long as the prayer includes such other and
further relief as may appear just and equitable
specific performance cannot be demanded at the same time that the court is asked to fix the period
such action for performance being premature
does not modify or amend the obligation concerned but merely enforces an implied stipulation in the
contract; considered as part and parcel or automatically incorporated in all obligations contemplated
therein
fix- once fixed the period becomes part of the contract thus the courts cannot change it; compromise
agreement approved has the same force and effect as a decision; if parties change the period by
mutual agreement or disregard it then the obligation becomes pure and demandable at once
inferred that a period was intended
will of the debtor
cannot fix
no term was intended
lost the right to have the period fixed (Chaves v Gonzales-returned)
specific period are provided for in the law (employment contract)
when act appears to be a term is really a condition
period within which to ask the court to have the period fixed has already prescribed
must be brought within the proper prescriptive period for specific performance if a
period has originally been fixed but to be counted from the perfection of the contract;
extrajudicial demand is not essential cause of action to have the period fixed
1198. Debtor loses benefit of the period
term is extinguished and the obligations is demandable at once
insolvency (unless gives a guaranty or security)
does not have to be judicially declared; as long as assets are less than liabilities
(proven by creditor)
EXC: moratorium law then debtor who happens to be insolvent may still take
advantage of said moratorium
does not furnish the guaranty promised
makes a mortgage in favor of another person instead
mortgaging 2 parcels of land instead of 3
impairs the guaranty by his own acts after establishment or it disappears through a fortuitous
event (unless replaces immediately)
fails to renew surety
violates any undertaking in consideration of which the creditor agreed to the period
debtor attempts to abscond
Gaite v Fonacier
Fernandez v CA
Abesamis v Woodcraft Works Inc
Araneta v Phil Sugar Estates Development
Radiowealth Finance Co v Del Rosario
Allen v Province of Albay

Alternative Obligations

1199. Alternative / facultative obligations

 one where out of the two or more presentations only one is due
completely perform one presentation; creditor cannot be compelled to receive parts
1200. Right of choice
GR: belongs to the debtor
EXC: creditor when such right has been expressly granted to him
limitation:
impossible
unlawful
could not have been the object of the obligation
1201. Notification / communication of choice
means: orally or in writing, expressly or impliedly (performance of one of the obligations)
requisites
made properly
made with full knowledge
made voluntarily and freely
made in due time
made to all the proper persons
made without conditions (unless agreed to)
may be waived (expressly or impliedly)
effect
obligation becomes a simple obligation
election once made is binding; cannot renounce choice
reason
inform the creditor that the obligation is now a simple one, no longer alternative, and if already
due for the creditor to receive the object being delivered if tender of the same has been made
Ong Guan Can (error)- in order to give the creditor opportunity to express his consent or to
impugn the election made by the debtor (debtor is really being deprived of his right as creditor
effectively chooses)
1202. Lose right of choice when only one is possible
1203. Lose right due to creditor’s acts
may rescind + damages
not automatically rescinded; may allow the contract to remain in force insofar as the possible choice or
choices are involved

1204. Alternatives lost through debtor’s fault

right to choose belonged to debtor
loss or impossibility happened before selection
indemnity- value of the thing lost pastor service which last became impossible
damages may also be awarded
1205. Creditor chooses
communication: obligation ceases to be alternative
does not apply when contract does not state whom the right is given as default is debtor
creditor loses right only one is practicable: simple
if creditor delays in choosing then debtor does not incur delay; debtor may compel creditor to accept
with resultant damages if any

rules during interim (to give and to do)

one lost through fortuitous event: choose from remaining
one lost through fault of debtor
remainder + damages
price of lost + damages
all lost through fault of debtor: price of any + damages
 LOSS
Creditor’s choice
Fortuitous event
all lost- extinguished
some lost- choose from remaining
one remains- choose remaining; simple

LOSS
Creditor’s choice
Debtor’s fault
all lost- value of any + damages
some lost- choose from remaining OR value of any lost + damages
one remains- remaining OR any lost + damages

1206. Facultative
only one prestation has been agreed upon but obligor may render another in substitution (debtor’s
choice always)
loss or deterioration of the thing intended as substitute through negligence of debtor does not render
him liable
once the substitution has been made then the obligor is liable for the loss of the substitute on account
of his delay, negligence, or fraud
EX.
no substitution & principal lost- extinguished
no substitution & substitute lost- specific principal to be given; obli subsists
after substitution & principal lost- substitute to be given; obli subsists
after substitution & substitute lost (FE)- extinguished
after substitution & substitute lost- extinguished

Joint or Solidary -ability of creditor to demand; relationship with each other

1207. Presumption not solidary

solidary liability only when
stipulation in the contract
nature of the obligation requires
law declares (tort, quasi-contracts, obligations of devisees and legatees, bailees in
commodatum, liability of offenders of a felony)
joint: to each his own
each obligor answers only for a part of the whole liability and to each obligee belongs only a
part of the correlative rights
Sesbreño v CA- cannot go directly against Pilipinas (mere custodian) because must go
first against PhilFinance who was not impleaded
 solidary / joint & several: one for all, all for one
relationship between active and passive subjects is so close that each of the former or of the
latter may demand fulfillment of or must comply with the whole obligation
Palmares v CA & MB Lending- signed as surety thus insurer of debt (not solvency); right to
proceed against surety exists independently; surety not entitled to notice
PBC v IAC & Regala- solidarily liable for entire indebtedness; “Guarantor’s Undertaking” in
substance a contract of surety; can be liable to the same extent as principal debtor
Ronquillo v CA & So- “individually and jointly” implies solidary
Quiombing v CA- any creditor can file against any debtor as beneficial act; issue of
reimbursement personal between debtors and between creditors
Inciong v CA- creditor can sue any of the solidary debtors; can choose who to demand and
collect from
may be joint debtors and solidary creditors (character of the creditors or debtors determine their
respective rights and liabilities

1208. Presumption joint- because least onerous

effects
debt shall be divided into as many shares as there are creditors and debtors
credits or debts will be distinct from one another (subject to the ROC governing the multiplicity
of suits)
vitiated consent on the part of one debtor does not affect the others
insolvency of one debtor does not make the others responsible for his share
demand by the creditor on one joint debtor puts him in default, but not the others since the
debts are distinct
when the creditor interrupts the running of the prescription period by demanding judicially
from one the others are not affected
defense of one debtor are not necessarily available to the others
liabilities of partners
contract: joint or pro rata
crime or quasi-delict: solidary (together with the partnership)
liabilities of agents
GR: joint even if appointed at the same time
EXC: solidary has been agreed upon
liabilities of co-principals in agency: solidary
liabilities of spouses
joint after conjugal funds have been exhausted
liabilities of violators of Arts on Human Relations (19-22)
solidary based on the nature of the obligation since either penal or contrary to morals
liability of employer for employee’s tort: primary (not subsidiary) and solidary

1209. Indivisible joint obligation

indivisible- object
joint- tie, proportionately liable
no creditor can do an act prejudicial to the others
no debtor can be made to answer for the others
fulfillment requires the consent of all debtors although each for his part; collective action for creditors
required for acts which may be prejudicial
creator must proceed against all the joint debtors
demand must be made on all the joint debtors
if any of the joint debtors are insolvent the others shall not be liable; obligation to pay
monetary damages not indivisble
delivery must be made to all joint creditors unless one specifically authorized
each joint creditor is allowed to renounce his proportionate credit
demand on one joint creditor is not a demand by the others; credits are still independent of
one another
1210. Indivisibility does not necessarily mean solidarity & vice versa (no presumption)
indivisibility- subject matter
solidarity- tie
active- creditors
passive- debtors
mixed- both
conventional- agreement
legal- impose by law
1211. Solidarity despite different terms or conditions
uniform- debtors bound by the same stipulations and clauses
otherwise- obligors though liable for the same prestations are not subject to the same secondary
stipulations and clauses
creditor may recover that part which is pure and unconditional
suspend the right to demand payment for the remainder until expiration of the term or
fulfillment of the condition; can them claim from all solely debtors
1212. Beneficial and prejudicial acts of solidary creditors
beneficial- ex. judicial demand to interrupt the running of the prescription
prejudicial- ex. remission or condonation (liable to other creditors)
1213. Assignment by solidary creditor
GR: cannot assign
stranger- because all for one, one for all thus assignee can collect entire amount; implies
mutual agency and confidence; prejudicial acts of assignee or substitute endanger the rights
of other creditor
EXC: all others consent, assigned to one of the other creditors (valid without consent already trusted)
1214. Whom debtor pays
GR: any of the solidary creditors
EXC: solidary creditor who demands
payment to any other creditor will not extinguish the obligation insofar as the payee’s share is
concerned
only the debtors on whom such demand is made is bound (WRONG: law made no distinction
thus pay ONLY to demanding creditor)
1215. Effects
novation- modification of an obligation by changing its object or principal conditions, substituting the
person of the debtor, subrogating the person of the debtor, or by subrogating a third person in the
rights of the creditor
debtor who does not consent is not bound except insofar as he has been benefited
creditor must reimburse other creditors prejudiced
extension of time to the principal debt without the suety’s consent will release the surety from
the contract
compensation- that which takes place when two persons in their own right are creditors and debtor of
each other; off-setting of debts
total compensation automatically extinguishes the obligation whether known or unknown to
the parties (liable to other parties)
partial compensation- solidary obligation still subsists
confusion / merger
that which takes place when the characters of the creditor and debtor are merged in the same
person
solidary obligation is extinguished but other debtors still indebted
remission / waiver / codonation
act of liberality whereby a creditor condones the obligation
total: other debtor does not have to reimburse for remission was gratuitous and nothing was
given
partial: individual shares of other debtors not diminished but all are still benefitted as the
solidary debt is diminished
1216. Whom creditor may proceed (solidary)
any, some, or all simultaneously
if creditor sues only one there is no waiver against those not yet sued; may be proceeded against later
does not apply to joint but applies to passive solidarity and mixed solidarity
 1217. Effects of payment- delivery of the thing or rendition of the service which is the object of the obligation
solidary obligation to pay is extinguished; converted to joint obligation to reimburse (basis is fact of
payment not the original contract) + interest if they delay reckoned from date of maturity
creditor can demand from debtor even if has not offered to pay
if a debtor pays during the pendency of a case then such debtor is changed from defendant to plaintiff
to collect reimbursement
1218. Payment after prescription or declaration of illegality
with knowledge: cannot recover because no longer legal obliged to pay but still paid
without knowledge: solution indebiti
1219. Remission after total payment
can recover reimbursement to prevent fraud and to give justice to the paying debtor
since payment extinguihes the obligation there is nothing more to remit
still has to bear part of the burden of insolvency of other debtor even if share has been remitted as he
only does not need to reimburse own share
1220. Whole remitted
essentially gratuitous thus no reimbursement so as not to induce fraud and partiality
1221. Loss of object of solitary debt (demand on one solidary debtor is demand upon all)
without fault (FE, illegal)- extinguished
with fault of any- responsible for price, damages and interest; action against guilty or negligent debtor
for damages and interest; mutual agency and confidence
fortuitous with delay- responsible for price, damages and interest
1222. Defenses- to not pay total or part of obligation
complete (derived from the nature of the obligation)
personal to the debtor sued
GR: complete
EXC: partial if non-fulfillment of condition or non-arrival of term; still liable except for own
share in the meantime
personal to the others- partial

Divisible and indivisible

1223 Divisible or indivisible prestation

solidary =/= indivisible
joint =/= divisible
true test: susceptibility to be performed partially
divisible- capable of partial performance
quantitative
qualitative
intellectual or moral- exists merely in mind not in physical reality
Government v Isip- divisible; completion of construction divided into phases
indivisible (has to demand from all)
 conventional
natural or absolute
legal

1224. Joint indivisible

object is indivisible; parties merely bound jointly
effect of non-compliance: converted to a monetary action for indemnity
if solidary: can demand whole from one; latter can later recover
1225. Deemed
deemed indivisible (nature, law, agreement); can be indivisible by agreement despite divisibility in
nature)
definite things
not susceptible of partial performance
if so provided by law
if such was the intention of the parties concerned
deemed divisible (illegal: legal terms may subsist if can be separated)
execution of a certain number of days of work
accomplishment of work by metrical units
pay a certain amount in installments
work susceptible of partial performance

Obligations with a Penal Clause- obligation with an accessory undertaking

1226. Penal Clause

GR: penalty shall substitute the indemnity for damages and payment for interests in case of non-
compliance
EXC: (pay penalty + damages and interest)
express stipulation to the effect that damages or interest may still be recovered
debtor refuses to pay the penalty imposed
debtor is guilty of fraud in the fulfillment of the obligation (no renunciation of an action to
enforce liability for future fraud
definition: coercive means to obtain from the debtor compliance; accessory undertaking to assume
greater liability in case of breach; attached to obligations in order to ensure their performance
penalty may be enforced only when it is demandable; may be reduced
debtor to take grater liability in case of non-compliance
does away with the duty to prove the existence and measure of the damage caused by the breach
voluntarily and knowingly agreed upon thus not contrary to law, morals or public order
purpose:
ensuring compliance
prior liquidation of damages (measuring beforehand the damages which may result)
 punish non-compliance
kinds
legal
conventional
subsidiary- only the penalty may be asked
joint- both the principal contract and the penal clause can be enforced
Suatengco v Reyes- AF proper because penal; express stipulation agreed; courts do not have the right
to increase because altering terms (only reduce); not necessary to prove actual damages

Penal Clause Condition

obligation although accessory does not constitute

an obligation

may become demandable in default of the unperformed principal never demandable

obligation and sometimes jointly with it

1227. Not alternative

GR: debtor cannot excuse himself from the performance of the obligation by paying the penalty
EXC: right has been expressly reserved for him (implied reservations is not allowed)
reason: fulfillment will become alternative
 GR: creditor cannot demand fulfillment and satisfaction of the penalty at the same time
EXC: right has been clearly granted him
if creditor chose fulfillment and performance becomes impossible then penalty may be
enforced
1228. No proof required
proof of actual damages suffered by creditor not necessary to enforce penal clause upon evidence of
the violations of the conditions stipulated (because already liquidated)
more as a punishment for the infraction thereof than a mere security, lawful means of repairing losses
and damages
1229. Reduction of penalty (by the Court)
partial performance
irregular performance
unconscionable or iniquitous
Titan Construction v Uni-field- exorbitant; liq and AF serve same purpose; reduced basis of
penalty
Ruiz v CA & Torres- nature of liq is penal; unconscionable; not given carte blanche authority
SSS v Moonwalk- accessory; extinguished along with principal; waiver because no demand;
not gain or loss; delay on both; cannot enforce penalty because accepted
Allen v Albay- liquidated damages clause waived
State Investment House v CA- merely a reduction not a deletion; clearly recouped;
clearly unconscionable as should have stopped imposing penalty upon foreclosure
Solangon v Salazar- not given carte blanche authority; although not usurious must be equitably
reduced; contrary to morals if not against the law whether as indemnity or penalty
Barons Marketing v CA- constitutes a penal clause; manifestly unconscionable as penalty in
addition to interest
Manila Racing v Manila Jockey- penal clause may be legally established by the parties; not
contrary as voluntarily agreed upon; not excessive considering profit
Ligutan v CA & Security Bank- reduction as partially complied (even if relatively not
unconscionable); reasonable per agreement; took into account other factors; no hard and fast
rule as case-to-case basis
1230. Effect of nullity (accessory follows the principal)
principal obligation nullified- penal clause null because no more use for existence because accessory
undertaking
penal clause nullified- principal obligation can stand alone and the void penal clause is disregarded

Payment or Performance

1231. Extinguishment of Obligations

voluntary
performance
payment or performance
consignation
substitution of performance
compensation
novation
changing the object or principal condition
substituting the person of the debtor
subrogating a third person in the right of the creditor
dacion en pago (datio in solutum)
agreement to release
subsequent obligation
unilateral waiver
natural waiver
remission
mutual dissent (disenso)
compromise
simulataneous with creation of obligation
resolutory term or extinctive period
resolutory condition or condition subsequent
involuntary causes
failure to bring an action (ex. prescription of right to bring action)
 resolutory condition / condition subsequent (ex. merger / confusion, death, change in civil
status)
reason of the object (ex. impossibility of performance, loss of the thing due)
others
renunciation or waiver by the creditor
compromise
expiration of the resolutory term or period
death of one of the contracting parties in purely personal obligations
the will of one of the contracting parties in certain contracts
mutual assent or dissent; agreement of both
1232. Payment or performance of the obligation
mode of extinguishing obligations
delivery of money or
performance in any other manner of an obligation
broadest: fulfillment of the obligation either voluntarily or involuntarily
most limited: fulfillment of the obligation by the delivery of a sum of money
if no pre-existing obligation exists then strictly speaking there is no payment
creditor has to expressly or impliedly accept payment for it to properly exist; may reject for valid
reasons
payment under a void judgment is also null and void

1233. Completeness of payment (GR)

debt shall not be understood to have been paid unless the thing or service in which the obligation
consists has been completely delivered or rendered
requisites for valid payment
very thing or service contemplated must be paid (thing contemplated is that which is paid or
delivered)
fulfillment must be complete (completely paid or delivered)
how payment is made
monetary obligation- delivery of the money (in full unless stipulated otherwise)
indebtedness- unconditional and legally enforceable obligation for the payment of
money (includes tax)

delivery of a thing or things- delivery

personal undertaking- performance

not doing of something- refraining from doing
burden of proof
existence of debt- alleged creditor
proving payment- debtor
ex. prove through receipt thus justified in demanding issuance of receipt when debt is
paid
promissory note still in creditor’s possession- presumption that it has not yet been
paid
1234. Substantial Performance (EXC)
if the obligation has been substantially performed in good faith the obligor may recover as though
there had been strict and complete fulfillment less damages suffered by the obligee
no fault and pay only what was received (deduction)
obligee is benefitted so obligor should be allowed to recover as if there had been a strict and
complete fulfillment less damages as just compensation for the relative breach
substantial performance or compliance is a performance according to the fair intent of the contract
with an attempt in good faith to perform in a sense
follows that the right to rescind cannot be used simply because there have been slight breaches of the
obligation
1235. Waiver and estoppel (EXC)
obligation deemed duly complied with
incomplete or irregular performance
accepts the performance (take as satisfactory or agree to incomplete or irregular performance)
knowing its incompleteness or irregularity
without expressing any protest or objection
protest or objection- qualified acceptance of incomplete or irregular performance (ex. receipt for partial
payment, acceptance of performance after the time of maturity provided surety or guarantor consents)
Pagsibigan v CA- substantial performance; accepted incomplete or irregular performance despite
 knowledge thus estoppel or deemed waived; accessory obligation necessarily extinguished
Tayag v CA- acceptance of payments even beyond the period tantamount to faithful performance; did
not immediately file to rescind thus estopped

1236. Right to refuse payment or performance by 3rd person (remedy)

creditor can refuse payment or performance by a 3rd person who has no interest in the fulfillment of
the obligation
EXC: stipulation to the contrary, 3rd person has an interest in the fulfillment (co-debtor,
guarantor, joint debtor); bound on an accessory obligation
reason: should not be compelled to accept payment from a 3rd person whom he may dislike
or distrust; can accept by choice -> valid payment & obligation extinguished
3rd person: not a party to a contract, if benefited by way of extinguishment of accessory
obligation
3rd person may demand from the debtor what he has paid
payment by a 3rd person (rights/ interests)
with interest (presumed consent) or knowledge and consent (express or tacit) of debtor- full
reimbursement and subrogation
without interest, knowledge OR against his will- beneficial reimbursement (personal action to
recover what he has said insofar as the payment has been beneficial; no reason why he can
obligate the debtor to pay more than he would have been legally compelled to pay the creditor)
same rights for those who pay without knowledge and against will
can recover from creditor (not innocent debtor) otherwise undue payment or solutio
indebiti
other instances for recovery
debt has prescribed
debt has been completely remitted
debt has already been paid
legal compensation had already taken place
in both reimbursement and subrogation there can be recovery of what has been paid
not necessarily the amount of the credit
1237. No subrogation
3rd person without interest who pays without knowledge or against the will of the debtor cannot
compel the creditor to subrogate him in his rights
only right is reimbursement up to the amount the debtor benefitted, not subrogation
subrogation- act of putting somebody into the shoes of the creditor; enabled to exercise all the rights
and actions that could have been exercised by the creditor against third persons
mortgage- cannot foreclose
guaranty- cannot proceed against guarantor for payment
penalty or penal clause
1238. Donation
deemed a donation (requires debtor’s consent)- payment by 3rd person who does not intend to
be reimbursed
valid in any case as to the creditor who accepted & obligation extinguished
governed by rules on ordinary donations otherwise Arts. 1236 & 1237 will govern (Law of
Donation)
reason for consent: no one should be compelled to accept the generosity of another
if no consent then may still recover even if did not originally intend to be reimbursed as there
was not real donation
only to the extent that the debtor was benefitted

1239. Payment by an incapacitated person

GR: invalid- payment by persons who do not have the free disposal of the thing due and the capacity
to alienate
payment is not valid if accepted; obligation subsists
creditor cannot be compelled to accept (consequently consignation is not possible)
remedy of consignation would not be proper
EXC: minor between 18 and 21 who voluntarily pays a sum of money of delivers a fungible thing in
fulfillment of an obligation- no right to recover the same from the obligee who has spent or consumed
it in good faith (can recover remaining amount)
1240. Payment to whom (exclusive)
person in whose favor the obligation has been constituted (creditor at the time of payment not the
original creditor)
 successor-in-interest / assignee
person authorized (by agreement or law)
GR: if not authorized then invalid
Montecillo v Reynes- lacking requisite of a valid contract produces no effect; must pay to one who
constituted, successor or authorized and authorization was not proven
PNB v CA- authorization not proven and debt not paid until delivery complete
Panganiban v Cuevas- pay to the person in whose favor the obligation was constituted, his assigns, or
one he authorizes; consignation ineffective without prior tender of payment
BPI v CA- obligation extinguished only upon payment to the proper parties
1241. Payment to incapacitated or unauthorized persons (EXC)
incapacitated- valid
kept the thing delivered
insofar as it is beneficial (beneficial reimbursement for that which is applied or spent for some
rational, necessary, or useful purpose)
one who made the payment has burden of proving benefit
proof of investment not necessary only proof of benefit
no benefit- payment not valid and representative or ward himself can demand a new
payment
unauthorized- valid; cannot be invoked without conclusive proof of the benefit to the creditor
insofar as it has redounded to the benefit of the creditor (beneficial reimbursement)
3rd person acquires the creditor’s rights after payment (impostor-agent becomes
owner of company-creditor)
creditor ratifies the payment
estoppel when debtor has been led to make the payment by creditor’s conduct
delivery to the messenger of the payee is not yet delivery to payee unless duly authorized
1242. Payment made in good faith to possessor of credit (EXC)
requisites for valid payment
made in good faith (presumed)
payee must be in possession of the credit itself (not merely the document evidencing credit;
color of title)
ex: note payable to bearer (not note payable to a specific person because then not
possessor of credit only instrument), presumed heir collected credits of estate
(obligation extinguished)
may apply to the payment made to the original creditor by a debtor who is not aware that the credit
has already been assigned
may apply to the payment made to an assignee although the assignment is afterwards rescinded or
annulled

1243. Payment after judicial order to retain

invalid: obligation subsists
attachment
injunction- judicial process by virtue of which a person is generally ordered to retain from
doing something
garnishment- proceeding by which a debtor’s creditor is subjected to the payment of his own
debt to another; debtors debtor is ordered not to pay the latter so that preference would be
given to the latter’s creditor
credit may be given to the clerk, sheriff or other proper officer of the court
payment during pendency- defeat cured by dismissal of garnishment proceedings; no
need for second payment as undue enrichment
interpleader- certain person in possession of certain property wants claimant to litigate among
themselves for the same
court issues order prohibiting payment to either; payment is invalid as debtor cannot
claim good faith as there is an ulterior motive
1244. Different object (GR)
GR: requisite of payment that the thing contemplated is that which is paid or delivered
debtor cannot compel receipt of a different object although it is of the same value or more
valuable
act or forbearance cannot be substituted against obligee’s will
reason: terms of the contract form the law between the parties and the subject matter cannot be
changed without the consent of the parties
EXC:
facultative obligations
alternative
 dation in payment
novation
consent / waiver by the creditor (expressly or impliedly) [acceptance has the same effect
as fulfillment or performance
1245. Dation in payment (EXC)
datio in solutum / adjudicación en pago
mode of extinguishing an obligation whereby the debtor alienates in favor of the creditor property for
the satisfaction of monetary debt
governed by Law of Sales because the transfer or conveyance of ownership of a thing as an accepted
equivalent of performance really partakes in one sense of the nature of sale (pre-existing obligation is
a loan; no cash so offers property instead; as if payment in advance)
only debts in money
valid dation
creditor consents (sale presupposes consent)
will not prejudice the other creditors (may lead to connivance with creditors to defraud other
creditors)
debtor is not judicially declared insolvent (otherwise to be administered by assignee)

Dation in Payment Sale

pre-exisitng credit (debt) no pre-exisiting credit

extinguishes obligations gives rise to obligations

cause or consideration is extinguishment of debt and acquisition cause or consideration is price and
of the object offered in credit obtaining of object

greater freedom and determination of

less freedom in determining price (because pre-existing)
price

giving of object in lieu of credit may extinguish completely or only giving of the price generally ends the
partially the credit obligation of the buyer

1246. Quality of generic things

GR when quality and circumstances not stated
creditor cannot demand a thing of superior quality
EXC: may demand and accept one of inferior quality
debtor cannot deliver a thing of inferior quality
EXC: may deliver one of superior quality as long as not of a different kind
question of relative appreciation thus law declares whether the obligation has been complied with in
case of disagreements
reason: principle of equity in applying justice in a case where there is a lack of precise declaration;
question of relative appreciation in that one party appreciated the same thing as the other party does
void if kind and quantity cannot be determined without need of a new agreement; object of every
contract must be determinate as to its kind; fact that quantity is not determined shall not be
an obstacle provided it is possible to determine the same without need of a new agreement
1247. Extrajudicial expenses
GR: debtor pays for extrajudicial expenses incurred during payment
EXC: stipulation to the contrary
reason: debtor who primarily benefits as his obligation is extinguished
judicial costs
GR: winning party
EXC: courts shall have the power for special reasons to adjudge that either party shall pay the
 costs of an action or that the same be divided as may be equitable

1248. Complete performance

GR: creditor cannot be compelled partially to receive the prestations in which the obligation consists
nor the debtor required to make partial payments; debt shall not be understood to have been paid
unless the thing or service has been completely delivered or rendered
identity- only the presentation agreed upon and no other must be complied with
completeness- completely delivered or rendered
indivisibility
EXC:
stipulation to the contrary
different prestations subject to different conditions or terms (ex. installments)
debt is in part liquidate and in part unliquidated (performance of the liquidated part may be
insisted upon)
EX. P10,000 principal (demandable) + damages of profit for December thus on Dec 15
option to accept or can insist on P10,000 but not profit
joint debtor pays his share or the creditor demands the same (share- complete
payment, obligation- partial)
solidary debtor pays only the part demandable as the rest are not yet demandable
compensation when one debt is larger than the other
work is to be done in parts
1249. Legal tender
that which a debtor may compel a creditor to accept in payment of the debt
currency stipulated
Philippine legal tender- if no currency stipulated (currency which may be used for the payment
of all debts; notes and coins issued by the CB)
amended by RA 529; obligations incurred after which are for the purpose of payment in
foreign currency
amount in Phil money to be measured by gold or foreign currency should be null, void and of
no effect
PNs payable to order, bills of exchange, mercantile documents- produce the effect of payment only
when they have been (1) cashed / cleared upon deposit or (2) when impaired through creditor’s fault;
not legal tender thus can validly refuse even if good
FEBTC v Diaz Realty Inc- valid tender of payment presumed from acceptance
and encasement of check; creditor had the option and discretion to accept check as tender
of payment therefore estopped from claiming otherwise
1250. Inflation
no inflation or deflation: usually time of payment conversion rate is the basis
GR: extraordinary inflation or deflation- value of the currency at the time of the establishment of the
obligation shall be the basis
inflation- sharp sudden increase of money or credit or both without a corresponding increase
in business transaction
decrease or increase in the purchasing power of the currency which is unusual or
beyond the common fluctuation
could not have been reasonably foreseen or was manifestly beyond the contemplation
of the parties
EXC: agreement to the contrary
non-applicability
no foreign currency can be stipulated today thus literally construed Art 1250 cannot be made
use of
doubtful whether what we are experiencing today may already be classed in the category
of “extraordinary”
EX: P1,000,000 becomes P2,000,000; pay presently P500,000
EX: 1,000,000 becomes P250,000; pay presently P4,000,000
1251. Payment made where
agreement: stipulation- place designated
type: undertaking to deliver a determinate thing- wherever the thing might be at the moment of
constitution of the obligation
type: generic, money, personal obligation- domicile of the debtor
additional expenses borne by debtor for changing domicile in bad faith or incurring delay
without prejudice to venue under the ROC

Application of Payments
1252. Application
designation of the debt to which should be applied a payment made by a debtor who owes several
debts; to show which debt is being paid and is being extinguished
GR. debtor given preferential right to select which debt he is paying
EXC.
valid prior but contrary agreement
cannot choose to pay part of the principal ahead of the interest
EXC. creditor consents
GR. once application is made it cannot be revoked
EXC. both parties agree and 3rd persons are not prejudiced
made be made at the time when payment is made not afterwards (creditor may exercise even after
delivery of delivery acknowledging payment
if creditor refuses proper application by debtor then mora accipiendi
requisites for application
severalty of debts
same kind
same debtor in favor of the same creditor (only one debtor and only one creditor)
all debts due
EXC. parties stipulate
EXC. application of payment is made by the party in whose benefit the term has been
constituted
payment not enough to extinguish all debts
manner of application (successive)
debtor makes the designation
creditor makes it by so stating in the receipt- void if without knowledge and consent of debtor
debtor does not apply or object
debtor renounces right of choice by accepting express and unmistakable application
of creditor without protest
debtor signs monthly bank statements which specified application
EXC. partner-creditor
collects in own name- proportionate to amounts
account of partnership- fully applied to account of partnership
EXC. surety or solidary guarantor- only has one debt and it is contingent on the
principal debtor’s failure to pay; payments made cannot be made to apply to apply to
obligations for which he is not subsidiarily or solidarily liable
operation of law (Art 1254)
neither debtor or creditor makes or if application is not valid
obligation void- application and payment void
vitiated consent in accepting receipt- voidable
while the debtor decides for himself the creditor only proposes to the debtor who may or may
not agree

after application -> irrevocable

EXC. creditor consents and no 3rd parties prejudiced
special forms of payments
application of payments / imputation
dation in payment / adjudicacion en pago / datio in solutum
assignment in favor of creditors / cession
tender of payment and consignation
1253. Interest must be paid first
principal shall not be deemed to have been made until the interests have been covered; applies
to interest due and interest on future installments if such interests are eventually not paid on time; all
interest as law makes not distinction
interest by way of compensation
interest by way of damages due to default
GR. obligatory: debtor cannot insist this payment be credited to the principal
EXC. creditor agrees
Caltex v IAC- interest must be paid first before principal and payment of interest charges separate from
principal obligation as expressly stipulated
1254. Rules when no voluntary application
cannot be applies in accordance with preceding articles (preference of debtor must be followed
first) or cannot be inferred from other circumstances
different natures- most onerous (no hard and fast rule)
 older (does not matter if no interest)
interest-bearing
higher interest
debts secured by mortgage or by pedge
debts with a penalty clause
advances for subsistence
a debt incurring delay
exclusive debt (not solidary)
same nature and burden or cannot be definitely determined which is more onerous-
proportionately / pro rata
Espina v CA- payments to be applied first to the most onerous obligations
Tan v Mendez Jr-
Lopez v CA & Philamgen-

Payment by Cession

1255. Cession of assignment

process by which a debtor transfers all the property not subject to execution in favor of his creditors to
be sold and thus applied to the credits
kinds or classes
legal/judicial- majority of creditors must agree; governed by Insolvency Law
voluntary/contractual- all creditors must agree
requisite
more than one debt
more than one creditor
complete or partial insolvency
abandonment of all debtor’s property not exempt (EXC. exemption validly
waived)
EXC. family home (note exceptions)
EXC. amount needed by the debtor to support himself and those he is
required by law to support (EXC. if not reserved then cession not void
but merely reducible)
acceptance or consent by creditors (cannot be imposed)
effect
creditors merely assignees with right to sell; do not become owners
debtor released up to amount of net proceeds of sale (EXC. contrary
stipulation)
creditors will collect credits in order of preference agreed upon otherwise
established by law
Lopez v CA

Cession Dation in Payment

properties
generally all not all
affected

plurality requires more than one creditor can be one creditor

specific or concerned creditor must

consent all must consent
consent

even if solvent (because essentially a

insolvency requires full or partial insolvency
novation)

merely assigns; abandons right to

ownership ownership transferred upon delivery
dispose
 novation no yes

Tender of Payment and Consignation

1256. Tender and consignation

release from obligation / extinguishment of debt

GR. prior tender of payment refused without just cause
EXC. consignation will produce the same effect (sufficient without a prior tender)
absent or unknown or does not appear at the place of payment (no judicial declaration
necessary)
incapacitated to receive at the time it is due (unless has legal representative and fact
known to debtor)
refuses to give a receipt without just cause
2 or more persons claim the same right to collect (action in interpleader); since whom
to offer payment unknown
title (written document) of the obligation has been lost
creditor previously notified that he would not accept any payment
GR. consignation must follow tender of payment
EXC. mere tender is sufficient as only it is needed; payment is purely voluntary thus there really
exists no debt and no obligation; if not accepted then no need to consign
option
pacto de retro
legal redemption- only a right not duty
tender of principal must be accompanied by tender of interest otherwise not valid
requisites for valid tender of payment (otherwise justified refusal) [6]
must be the very object agreed upon
made in legal tender (lawful currency) if monetary (actually paid not intention or desire)
must include whatever interest is due (or any tax and assessments paid properly by the
creditor)
must be unconditional
EXC. accepted by creditor without protest
obligation must already be due
must be in full satisfaction not merely partial payment thereof (complete, regular)
running of interest
consignation delayed- run until the principal is paid
consignation immediately follows refusal of check for reasons other than it is not legal tender
interest does not run from the date of tender as it was made in good faith, the check
could be readily converted to cash as funds sufficient & cause for refusal not because
not legal tender
debt not extinguished as consignation not valid
Eternal Gardens Memorial Park v CA- 2 or more claimants one of the grounds for consignation; remedy
of consignation founded on justice and equity which produces the effect of payment to prevent the
obligation from becoming more onerous
Rayos v Reyes- there must be a valid and existing debt; no existing debt so no need to consign; there
must be a valid offer of full payment, prior notice, and acceptance or court declaration
Badayos v CA- merely exercising right of redemption so tender of payment enough
Adelfa Properties Inc v CA- actual tender not mere intent, offer is at most only a notice; valid and
existing obligation not a mere right thus valid tender and consignation necessary to extinguish
De Mesa v CA- consignation without proper tender valid since allowed by lower court after previous
tenders refused; exception due to equity thus procedure foregone

1257. Consignation notice

prior notice: to give the creditor a chance to reconsider his refusal to accept payment; reconsider prior
refusal thus avoid consignation and litigation
must first be announced to the persons interested in the fulfillment of the obligation otherwise
consignation void
EXC. creditor traveling and cannot be located because notice useless
EXC. if the sum to be deposited is the sum due under final judgment
better to state
tender had been made (date & place)
tender unjustifiably rejected
deposit in court is being contemplated
subsequent notice: enable the creditor to withdraw the money or goods deposited with the
judicial authorities to make use of it
mandatory thus void without
form: formal notice advisable but can be mere filing of complaint and service summons
accompanied by copy of complaint

requisites for consignation (strict compliance for validity)

existence of a valid debt/debt due
mortgage debt
EXC. option- no valid debt only privilege
EXC. legal redemption & conventional redemption- as yet no debt
EXC. alleged debt has prescribed
EXC. debt null and void- illegal cause or consideration, etc
valid prior tender (EXC. excused)
prior notice (formal act to all persons concerned since tender is a friendly and private act
which by itself does not suggest consignation follows)
actual consignation / actual deposit with the proper judicial authorities / placed at the disposal
of judicial authorities
depositing the very thing that is due
proper judicial authority
accompanied by proof: tender duly made and/or prior notice already sent
not necessary for the court to determine whether the refusal was with or
without a just cause upon consignation
subsequent notice (EXC. if the consignation was accompanied by the corresponding
 complaint for specific performance or for cancellation and other parties furnished copies
thereof
effect of deposit
property is “in custodia legis” / custody of the court
exempted from attachment and execution (cannot be used for other debts to other creditors;
deposited for a specific creditor)
court may order sale if perishable by nature
consignor practically makes himself the agent or receiver of the court- particularly if
the property cannot actually be placed in the hands of the court or when the object involved is
real property (promise to the court to take care and not dispose)
consignation presuppose the existence of a suit to compel acceptance by creditor

1258. Manner of consignation

things due must be deposited with the proper judicial authorities

proof that tender had previously been made and/or creditor previously notified

1259. Creditor bears expenses

expenses include those for preservation or warehousing of the goods pending litigation
GR: if properly made then creditor because consignation caused by creditor’s refusal
EXC: if not properly made then debtor

1260. Effects of consignation

if duly made (obligation remains before the creditor accepts or before the judge declares consignation
properly made)
may ask the judge to order the cancellation of the obligation (judicial approval not needed if all
the essential requisites for valid consignation present)
Prayer: to stop interest if interest bearing
waiver: if one requisite lacking obligation can still be cancelled if creditor does not
object
running of interest is suspended
if not duly made
obligation remains because consignation not effective
in default if debt was already due during consignation
debtor may withdraw
as a matter of right (obligation remains; not extinguished)
before creditor accepts (if immediately accepted with or without reservations to further
claims then cannot)
before judicial declaration of proper consignation (while ongoing)
as a matter of privilege (obligation in force; creditor loses preference over the thing, no longer
exempt, if the debt had a surety then creditor can no longer go after because released)
creditor authorizes withdrawal
consignation produces no effect if case in which consignation was made is dismissed or if there is
failure to reconstitute the case
1261. Withdrawal after consignation
matter of privilege as creditor has accepted or court already approved
effects
obligation remains
creditor loses the preference/priority over the thing
solidary co-debtors, guarantors and sureties are released
EXC. they consented
solidary co-debtors released only from the solidarity not from own individual shares
since principal debtors

Loss of the Thing Due

1262. Effects of loss: specific

GR: extinguishes the obligation
determinate
without the fault of debtor
before incurring delay
EXC:
 debtor is made liable for a fortuitous event (converted to monetary obligation for damages)
provision of law (delay, contravention, generic)
contractual obligation
doctrine of assumption of risk- debtor
debtor is at fault
incurred in delay
obligation is generic
bad faith
arises from a crime
borrower lent the thing to another who is not a member of his own household
thing loaned has been delivered with appraisal of the value
payee in solutio indebiti is in bad faith
real obligation: loss (must be after constitution of obligation but prior to fulfillment; if prior to
constitution then void because no subject matter)
perishes
goes out of commerce
disappears in such a way that
its existence is unknown
it cannot be recovered
personal obligation: impossibility of performance
physical impossibility
legal impossibility
directly- prohibited by law
indirectly- debtor is required to enter a military draft
moral impossibility- impracticability
claim for loss must be made after the date of discharge of the last package from the carrying vessel
before such date
premature and speculative: without basis
EXC proper: prior information or discovery of shortage or damage to the goods

1263. Effects of loss: generic

GR: obligation subsists because genus never perishes
EXC (extinguished):
generic thing is delimited
generic thing has already been segregated or set aside thus it has become specific
obligation to pay money is generic hence failure to raise funds is not a defense nor is it excused
because the debtor has lost certain specific property due to a fortuitous event (if a specific mortgage is
lost the generic monetary obligation subsists
Yu Tek Co v Gonzales- generic so not extinguished; executory until segregated or delivered and risk
remains with seller since promise to sell only
1264. Partial loss
judicial determination: whether partial loss of the object is so important as to extinguish the obligation
(equivalent to a complete loss)
1265. Presumption of fault
GR: debtor presumed to be at fault if the thing is lost in his possession
EXC:
proof to the contrary
natural calamity: earthquake, flood, storm
includes fire if proven purely accidental
1266. Personal obligations
without fault
before incurring in delay (after constitution before fulfillment)
compliance becomes impossible
legal impossibility
direct- furnishing work on Sundays when it has been prohibited)
indirect/subjective- obligation usually subsists unless personal considerations are
involved such as when a particular company is prohibited to furnish work on a certain
day
physical impossibility (intransmissible and consequently extinguished by mere fact of death)
death of the obligor when the act to be performed requires his personal qualifications
death of the obligee when the act can be of possible benefit only to him
mere accident
acts of the debtor himself in which there is no fault
 acts of third persons affecting the debtor’s capacity to execute the work agreed upon
loss through a fortuitous event in reciprocal obligations
GR: obligation that was not extinguished subsists (EX. obligation to pay even if no delivery)
EXC:
lease- both lease and rental payments extinguished
contracts for a piece of work- worker cannot ask for price; debtor bears risk
partial impossibility- judicial determination

1267. Moral impossibility or impracticability

doctrine of frustration of the commercial object/doctrine of frustrated enterprise
service becomes so difficult as to be manifestly beyond the contemplation of the parties: the obligor
may be released in whole or in part
service must become so difficult as to be manifestly beyond the contemplation of both
parties- difficulty could not possibly have been foreseen not merely difficulty to foresee or that
neither foresaw
one of the parties must ask for relief
object must be a future service with future unusual change in conditions
does not include aleatory contract- dependent on chance
intention of the parties should govern and if it becomes so difficult as to have been beyond their
contemplation then it would be doing violence to that intention to hold the obligor still responsible
rebus sic stantibus- disappearance of the basis of the contract gives rise to a right to relief in favor of
the party prejudiced
Labayen v Talisay Silay Milling Co- impossible things or services cannot be the subject matter of
contract and debtors shall be relieved when the undertaking becomes legally or physically impossible;
against public policy and law if harmful or undesirable performance forced; moral impossibility
1268. Criminal offenses
GR: loss of specific thing in obligations arising from criminal offenses (restitution, reparation,
indemnification) does not extinguish obligation; liable even if fortuitous event
EXC: mora accipiendi (refuses to accept without justification)
consign or
keep the thing in his possession- due diligence still required but not liable for loss due to
fortuitous events
also those subsidiarily liable
1269. Loss by 3rd persons (specific thing)
rights the debtor may have against 3rd persons by reason of the loss is transferred to the creditor, the
obligation having been extinguished (obligation of debtor extinguished)
otherwise debtor would unduly profit in that the obligation is extinguished and he can recover
from the 3rd person
rights of action include the insurance indemnity that may have been received
EX. insured object destroyed thus creditor can collect indemnity from insurer
EX. creditor can collect the compensation due by reason of expropriation

Condonation or Remission

1270. Condonation or remission

essentially gratuitous and requires acceptance by the obligor either expressly or impliedly
subject to rules which govern officious donations
express condonation required to comply with the forms of donation
gratuitous abandonment by the creditor of his right
incudes downward change in price (upward is novation)
requisites
agreement- since acceptance is required; no acceptance then no remission but can still be
extinguished through prescription
parties must be capacitated and must consent- courts or Congress cannot condone interest
unless creditor consents
subject of remission
cause or consideration must be liberality
remission must not be inofficious- otherwise reducible only so that the legitimes of the
compulsory heirs would not be impaired
formalities of a donation- express remission, not implied; must be accepted as one cannot
impose generosity upon debtor; if not accepted then can still enforce obligation as long as not
yet prescribed
 waivers or remissions must be clearly and convincingly shown- generally not to be presumed
classes
effect or extent
total
partial (portion, accessory)
date of effectivity
inter vivos
mortis causa
form
implied or tacit- conduct sufficient
express or formal- requires the formalities of a donation if inter vivos; will or codicil if
mortis causa
waiver applies only to the properties mentioned in the agreement

1271. Presumption of remission (Implied)

delivery of private document evidencing a credit made voluntarily by the creditor implies renunciation
should be claimed to be officious to nullify this waiver; prove the delivery was made in virtue of
payment of the debt
example of implied remission (also voluntary destruction of the instrument by creditor; not mere fact of
omission of a certain debt or the name of the debtor from an inventory made by the creditor
private document since public document copies are easily obtainable being public records
private documents- notarized; 1 copy kept by notary public another given to the court;
presumption of authenticity and remedy of perjury since sworn statements
all documents have the full force and effect of law
remission or renunciation is presumed from delivery of the private instrument; merely disputable not
conclusive
presumption of remission prevails over presumption of payment
1272. Presumption of voluntary delivery (Implied)
presumption when private document in which the debt appears is found in the possession of the
debtor; unless contrary proved
joint- only share
several- whole obligation
disputable or prima facie- overcome if able to prove the real reason why the debtor had in his
possession the receipt
private document still in the hands of the creditor evidences debt has not yet been paid unless rebutted
by receipt of payment
Velasco v Masa- presumption of condonations and presumption of voluntary delivery
Lopez v Tambunting- presumption prime facia and rebuttable; presumption cannot stand against
sufficient proof to the contrary
1273. Renunciation
accessory follows the principal
principal debt- extinguish the accessory obligation
accessory obligation (EX. penalty)- does not remit the principal
1274. Remission of pledge (pawn)
presumed that the accessory obligation of pledge has been remitted when the thing pledged is found
in the possession of the debtor or 3rd person who owns the thing
only the accessory obligation of pledge is presumed remitted
presumption disputable
reason: essential in pledge that the thing be delivered to the creditor or to a third person by common
agreement
3rd person does not own the thing- presumption does not arise

Merger or Confusion

1275. Merger
obligation is extinguished from the time the characters of the creditor and the debtor are merged in the
same person
meeting in one person the qualities of creditor and debtor with respect to the same person
reason: enforcement of the obligation becomes absurd since one cannot claim against himself
requisites
should take place between the principal debtor and creditor
none if between guarantor and creditor; only accessory extinguished
 none if debtor and creditor represent juridical entities even if the officers of both are
the same
merger must be clear and definite
very obligation involved must be the same or identical
none if debtor acquires certain rights from the creditor with respect to other things
transfer of rights: no merger as merely transfers to a third person rights belonging to both the debtor
and the creditor but not the credit as against the debt
consolidation of ownership: real rights such as usufruct over property may be extinguished by merger
when the naked owner himself becomes the usufructuary
revocability: obligation is revived if the reason for the confusion ceases
mortgagee becomes the owner of the mortgaged property: mortgage is naturally extinguished but the
principal obligation may remain
Sochayseng v Trujillo- confusion as petitioner who was finally the creditor for the burial expenses
which is to be paid from the paraphernal property became the successor thus becoming the debtor for
the burial expenses
1276. Effects of merger
merger of debtor and creditor: benefits the guarantor
effect of merger on guarantors: accessory follows the principal; guaranty is extinguished if there is a
merger with respect to the principal debt
Yek Tong Lin v Yusingco- accessory extinguished due to confusion when mortgagor became the owner
of the mortgage; cannot foreclose own property
1277. Merger in joint obligations
confusion does not extinguish a joint obligation except as regards the share corresponding to the
creditor or debtor in whom the two characters concur
reason: debts are distinct and separate from each other

Compensation

1278. Compensation
two persons in their own right are creditors and debtors of each other
figurative operation of weighing 2 obligations simultaneously in order to extinguish them to the extent
in which the amount of one is covered by the other; extinguishment in the concurrent amount of the
obligations of those persons who are reciprocally debtors and creditors of each other
abbreviated payment with a double purpose
facility of payment
guaranty for the effectiveness of the credit
kinds or classes
effect of extent
total
partial
origin or cause
legal- by operation of law and need not be pleaded
voluntary or conventional
judicial- set-off; must be pleaded and can only be effective by an order from the court
facultative- one of the parties has the choice
no compensation
debtor of a corporation cannot compensate his debt with his share of stock in the corporation
since the corporation is not considered his debtor
government and taxpayer are not mutually creditors of each other thus no offsetting of taxes
against the claims that the taxpayer may have against the government
mere intermediary as he is not a debtor of the petitioners
1279. Legal compensation requisites
affirmative requisites
[1] each one of the obligors be bound principally and that he be at the same time a principal
creditor of the other
there must be a relationship of debtor and creditor
there must be two debts and two credits
they must generally be bound as principals (not subsidiary or in their representative
capacity)
[2] both debts consist in a sum of money, or if the things due be consumable, they be of the
same kind, and also of the same quality if the latter has been stated
consumable = fungible (susceptible of substitution)
[3] the 2 debts be due
due means the period has arrived or the condition has been fulfilled
[4] they be liquidated and demandable
demandable means that neither of the debts has prescribed or that the obligation is
not invalid or illegal
if one of the debts has already prescribed there can be no compensation
liquidated- amount known
if still unliquidated there can be no compensation yet

negative requisites
[5] over neither of them there be any retention or controversy commenced by any 3rd persons
and communicated in due time to the debtor (not the subject of court litigation)
no compensation if still the subject of court litigation; controversy must first be
resolved
no waiver of the compensation
not prohibited by law
debts arising from a deposit
obligations of a depositary
obligations of a bailee in commodatum
claim for future support due by gratuitous title
civil liability arising from a penal offense
damages suffered by a partnership thru the fault of a partner cannot be compensated
with profits and benefits which he may have earned for the partnership by his industry
EXC: extraordinary efforts in other activities of the partnership unusual profits
have been realized
1280. Guarantor sets up compensation (EXC)
guarantor may set up compensation as regards what the creditor may owe the principal debtor
(guarantor is subsidiarily not principally bound)
reason: extinguishment of principal obligation extinguishes the guaranty which is merely an accessory
obligation
1281. Total compensation
when the 2 debts are of the same amount
1282. Conventional or voluntary compensation
the parties may agree upon the compensation of debts which are not yet due
no requisites applicable; sufficient that the agreement be valid
legal capacity
freely give their consent
1283. Judicial compensation, set-off or counterclaim
if one of the parties to a suit over an obligation has a claim for damages against the other, the former
may set it off by proving his right to said damages and the amount thereof
requisites of Art. 1279 must be present except that at the time of pleading the claim need not yet be
liquidated
pleading or proof of the counterclaim must be made as the court cannot of its own accord declare the
compensation; the compensation takes place by the judgment as to the date the compensation was
pleaded
GR: jurisdiction of the court regarding the value of the demand depends upon the totality of the
demand in all the causes of action irrespective of whether the plural cases arose out of the same or
different transactions
EXC: where the claim joined under the same complaint are separately owned by or due to
different parties in which case each separate claim furnishes the jurisdictional test
EXC: where not all the causes of action joined are demands or claims for money
1284. Compensation in rescissible or voidable debts
 may be compensated until rescinded or voided
decree of rescission retroacts: to avoid unfairness if rescission or annulment is later on decreed
by the court; as if no compensation ever took place

1285. Effect of assignment

assignment made with the consent the debtor
GR: compensation cannot be set up because consent operates as a waiver
EXC: right to the compensation (that has already taken place) is reserved [only exception]
assignment made with the knowledge but without consent or against the will
GR: compensation can be set up regarding debts previous to the cession or assignment /
debts maturing before the assignment (before notice)
assignment without the knowledge of the debtor [no knowledge no consent because duh]
GR: debtor can set up compensation as a defense for all debts maturing prior to his
knowledge (whether the debts matured before or after the assignment)
crucial time is the time of knowledge not the time of assignment itself
reason: prevention of fraudulent deprivation of the benefits of total and partial
compensation
1286. Compensation by operation of law
even though the debts may be payable at different places
indemnity for expenses of transportation (goods)
indemnity for expenses of exchange (money)
whoever claims compensation must pay for the exchange rate of currency
foreign exchange: conversion of an amount of money or currency of one country into an equivalent
amount of money or currency of another
1287. No legal compensation
debt arises from a depositum
reason: prevent breach of trust and confidence
facultative: depositor can claim compensation (creditor)
arises from the obligation of a depositary [for safekeeping not loan]
reason: prevent breach of trust and confidence
facultative: depositor can claim compensation (creditor)
obligations:
obliged to keep the thing safely and to return it when required
depositary cannot deposit the thing with a 3rd person unless there is a contrary
stipulation
if deposit is allowed then the depositary is liable for the loss if the 3rd person is
manifestly careless or unfit
depositary is responsible for the negligence of his employees
depositary cannot make use of the thing deposited without the express permission of
the depositor otherwise liable for damages
EXC: preservation of the thing requires its use the it must be used but only for
that purpose
arises from the obligations of a bailee in commodatum (the borrower of property who pays nothing for
the loan)
reason: prevent breach of trust and confidence
facultative: lender can claim compensation (creditor)
arises from a claim for support due to a gratuitous title [legally due]
support in arrears may be compensated
future support cannot be compensated as this is vital to the life of the recipient
1288. No compensation if arises from a crime
reason: satisfaction of such obligation is imperative
facultative: victim allowed to claim compensation who happens to be indebted to the
accused ;prohibition is limited to the accused to prevent his escaping liability by pleading prior credits
against the offended party
1289. Rules for compensation
if a person should have against him several debts susceptible of compensation then the rules on the
application of payments shall apply to the order of compensation
1290. Automatic compensation
GR: legal compensation takes place automatically if all requested of Art. 1279 are present
accessory obligation also extinguished
extinguishes both debts to the concurrent amount
EXC: there has been a valid waiver thereof
Silahis v IAC & De Leon- lacking requisites of two debts which are due and liquidated thus
 compensation by operation cannot take place; compensation cannot extend to unliquidated
obligations as there is still a disputed claim arising from breach of contract for which the liability is yet
to be clear
BPI v Reyes- legal compensation takes place by operation of law and its effects arise on the very day
all the requisites concur

Novation

1291. Novation
the substitution or change of an obligation by another which extinguishes or modifies the first; the
substitution not of a new paper or note but of a new obligation in lieu if an old one the effect of which
was to pay, dissolve, or otherwise discharge it (affects creation not performance)
changing their object or principal conditions (changing period would only be a partial novation
as it merely affects the performance not the creation of the obligation);
substituting the person of the debtor
subrogating a 3rd person in the right of the creditor
requisites (never presumed; must have an express agreement that debtor was already discharged from
his liability)
existence of a valid old obligation
void or non-existent: nothing to novate
voidable: possible provided the obligation has not yet been annulled
intent to extinguish or to modify the old obligation by a substantial difference (extinguishment
or modification itself is a result of the novation thus mode of extinguishment)
capacity and consent of all the parties
EXC: expromision where the old debtor does not participate
valid new obligation

kinds:
object or purpose
real or objective (changing the object or principal conditions)
personal or subjective (change of persons)
substituting the person of the debtor (expromision or delegacion)
subrogating to a 3rd person the rights of the creditor (conventional or legal
subrogation)
mixed
form of its constitution
express
implied (essentially incompatible with each other)
extent or effect (doubt: merely modificatory presumed)
total or extinctive novation
partial or modificatory (imperfect or improper novation)- obligation remains except
insofar as it has been modified
partial novation is only a relative extinction as it merely modifies the old
obligation
EX. slight alterations or modifications in the construction plans of a building,
new contract merely contains supplementary agreement, additional interest
agreed upon, additional security given, providing for a method of payment,
public instrument executed to confirm a valid contract, place of payment
changed or variation in the amount of partial payments
dual function: extinguishes an obligation & creates a new one in lieu of the old one
novation is not one of the means recognized by the RPC whereby criminal liability can be
extinguished- novation has been invoked to reverse convictions in cases where an underlying contract
initially defined the relation of the parties
Diongzon v CA & PP- change in mode of payment is not novation; novation does not apply where the
offer is an empty promise; novation does not extinguish criminal liability
Sandico v Paras- no previous valid obligation as already paid so extinguished; downward change in
price is not novation but partial remission; essential in novation that one obligation is extinguished and
another created; Sec 10 Rule 39 of the ROC another person may be designated by the courts at the
debtor’s expense
1292. Express and implied novation
express- declared in unequivocal terms
 implied- complete or substantial incompatibility; not presumed as clear proof of novation must be
given; done by making substantial changes in
object or subject matter of the contract
EX. car instead of ring
cause or consideration of the contract
EX. upward change in price
EXC. downward change implies partial remission
principal terms or conditions of the contract
EX. conditional obligation to simple obligation, reduction of the term
People’s Bank & Trust Company v Syvel’s Incorporated & Syyap- novation is never presumed and must
be stipulated in unequivocal terms; can have as many securities thus real estate mortgage added
security and did not extinguish chattel mortgage; express stipulation that old security subsists
Cruz v Malolos- subsequent agreement cannot novate by implication unless materially and
substantially incompatible on every point; interpret in such a way as to give life to both; intent of the
parties shown by clear language used prevails over post facto explanations; hornbook principle

1293. Passive personal or subjective novation

kinds of personal or subjective novation:
passive- change of debtor
active- change of creditor
passive subjective novation
expromision: initiative comes from a 3rd person
initiative must come from a 3rd person
new debtor and the creditor must consent
old debtor must be excused or released from his obligation
old debtor’s consent or knowledge is not required
mere written statement of a widow that she hoped to pay part of her
husband’s bank debt is not expromision
delegacion: initiative comes from the (old) debtor for it is he who delegates another to pay the
debt and thus he excuses himself; replacement of the old debtor by a new debtor, who (the old
debtor) has proposed him to the creditor and which replacement has been agreed to by said
creditor and by said new debtor
initiative comes from the old debtor
all the parties concerned must consent or agree
delegante- original debtor
delegado- new debtor
payment gives him rights to reimbursement + subrogation OR
beneficial reimbursement
delegatario- creditor
may be given in any form
may be express or implied from his acts
may be before or after the new debtor has given his consent
may be conditional bit the condition has to be fulfilled (otherwise no
valid delegacion)
Quinto v PP- no substitution as consent of creditor is required in both forms and without it
there is not extinctive novation; receiving from 3rd person not assumed extinctive as no
agreement to release original debtor
1294. Expromision: effect of insolvency or non-fulfillment by the new debtor
shall not give rise to any liability on the part of the original debtor
reason: expromision was brought about without his initiative (substitution was without the knowledge
or against the will of the debtor; old debtor took no part in the substitution)
must clearly release old debtor
right of new debtor: beneficial reimbursement
1295. Delegacion: effect of insolvency by the new debtor
GR: shall not revive the action of the creditor against the old creditor
EXC: when at the time of the delegation
insolvency was already existing and of public knowledge
known to the debtor

article does not apply if there really was no extinctive novation

3rd person was only an agent, messenger, or employee
only a guarantor or a surety
 merely agreed to make himself solidarily liable
new debtor merely agreed to make himself jointly or partly responsible
refers only to insolvency not to other causes of non-fulfillment; other causes: old debtor is not liable
right of new creditor: full reimbursement + subrogation

1296. Effect on accessory obligation

principal obligation extinguished due to novation extinguishes also the accessory obligations
reason: accessory obligations are distinct thus should not be prejudiced without consent
EXC: accessory obligation may subsist only insofar as they may benefit 3rd persons (
stipulations pour autrui) who did not give their consent
EXC: accessory obligations may remain as accessory to the new obligation if the debtors of
the accessory obligations consent
EXC: cases of novation by subrogation of the creditor
applies in particular to extinctive novation
modificatory novation then guarantors and sureties who did not consent are liable only for
more onerous: original obligation
less onerous: lesser obligation

1297. Effect of void new obligation

GR: original obligation shall subsist as there is no novation since new obligation not effective (EX. new
obligation conditional and condition does not materialize)
EXC: parties intended that the former relation should be extinguished in any event
voidable: valid until annulled thus old obligation is novated; if annulled then whatever novation has
taken place will naturally have to be set aside (defects on elements)

1298. Effect of void old obligation

void: no valid novation

voidable and already annulled: no novation
voidable and not yet annulled: yes provided that
annulment may be claimed only by the debtor
when ratification validates acts which are voidable
old obligation extinguished by loss
fortuitous event: novation is void for there would be no obligation to novate
debtor liable: monetary obligation may be the subject of novation
prescribed obligation: valid novation because waiver since a prescribed debt constitutes a moral or
natural obligation thus may be the cause or consideration of a new obligation
EXC: defense of prescription set up by the debtor
voidable obligation of novation by expromision: debtor is released for the substitution was not done
though his initiative
EXC: new debtor sues old debtor after payment for beneficial reimbursement then latter may
set up whatever defenses he could have set against the creditor (EX. minority or fraud)

1299. Effect of conditional original obligation

GR: conditions attached to the original obligation are also attached to the new obligation
EXC: contrary stipulation
reason: if the condition (suspensive) old obligation is not fulfilled then the new obligation never arose
therefore there would be nothing to novate
1300. Subrogation [active subjective novation]
extinctive subjective novation by change of the creditor is the transfer to a 3rd person of all the rights
appertaining to the creditor [going after securities]
kinds:
cause or origin
conventional or voluntary subrogation- clearly established (otherwise as if no
subrogation) and requires an agreement and the consent of the original parties and of
the creditor
legal- not presumed (EXC. case expressly mentioned in the law) and takes place by
operation of law
extent
total
partial- there would now be 2 or more creditors
1301. Conventional subrogation
consent of all parties required
debtor- becomes liable under the new obligation and old obligation ends
old creditor- credit is affected
new creditor- becomes a party to the obligation
assignment of a savings deposit in a bank is not a withdrawal but a sort of subrogation with the
account being continued in the name of the assignee
assignment of credit presumed if doubt as to conventional subrogation

1302. Legal subrogation

presumed when
a creditor pays another creditor who is preferred, even without the debtor’s knowledge
a 3rd person not intersted in the obligation pays with the express and tacit approval of the
debtor [consent: full reimbursement + subrogation]
a person interested in the fulfillment of the obligation pays, even without the knowledge of a
debtor, without prejudice to the effects of confusion as to the latter’s share [guaranty, surety]
1303. Effects of subrogation
subrogation transfers to the person subrogated the credit with all the rights thereto appertaining either
 against the debtor or against 3rd persons subject to stipulation in a conventional subrogation
obligation subsists as it has not yet been extinguished or paid
suspensive condition: the new creditor cannot collect until after the condition is fulfilled
1304. Partial subrogation
there are two creditors
the old creditor: remains liable as to the balance
new creditor: creditor to the extent of what he has paid
original creditor should be preferred inasmuch as he is granted by the law preferential right to recover
the remainder over the person subrogated in his place by virtue of partial payment of the same credit
only in the assets remaining with the debtor not those already transferred to others