2019 Transcribed-Notes-Civil-Law-Special-Lecture-day-1_day 1 to 5 of the special lecture series PDF

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-a juridical necessity to give, to do or not to do (1156)Kinds of Obligations (as to prestations): Obligation to give Obligation to do Obligation not to do TN: It is essential to identify what kind of obligation because for example, there are certain rules/principles applicable only to obligations t...

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LAW ON OBLIGATIONS I. IN GENERAL A. Definition

-a juridical necessity to give, to do or not to do (1156) Kinds of Obligations (as to prestations): 1. Obligation to give 2. Obligation to do 3. Obligation not to do TN: It is essential to identify what kind of obligation because for example, there are certain rules/principles applicable only to obligations to give and there are different remedies for a different kind of obligation B. Kinds of Obligations as to Basis and Enforceability

Relevant provision: Article 1423. Obligations are civil or natural. Civil obligations give a right of action to compel their performance. Natural obligations, not being based on positive law but on equity and natural law, do not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize the retention of what has been delivered or rendered by reason thereof. Some natural obligations are set forth in the following articles. Kinds of obligations (as to basis and enforceability): 1. Civil – grants a right of action to demand fulfilment through court action. 2. Natural – do not grant a right of action TN: The definition in Art. 1156 pertains to civil obligations; the words “juridical necessity” means that this kind of obligation grants a right of action to demand fulfilment. Q: How is civil obligation distinguished from a natural obligation? Civil obligations can be distinguished from natural obligations in the following ways:

a) As to basis: civil obligations are based on positive law/man-made law, while natural obligations are based on natural law and equity b) As to enforceability: civil obligations give a right of action to compel their performance, while natural obligations do not grant a right of action to enforce their performance, but after voluntary fulfilment by the obligor, they authorize the retention of what has been delivered or rendered by reason thereof. TN: When asked to distinguish, DO NOT EVER GO INTO THE SIMILARITIES. Unless the examiner will ask you to compare and contrast. When you distinguish, you always have to consider ONLY ONE PARAMETER at a time. Example: one is red, the other is black (color). You don’t say one is red, the other is hard/solid. Tips: FORMULATE TEMPLATES because it is always how to begin your answer that is the hardest. And consider the points allotted for the item. If for 1 point only, do not enumerate all 7. Time is of the essence! Q: Give an example of natural obligation A common example of a natural obligation is an obligation where the right of action had already prescribed. (But there are other natural obligations mentioned in Arts. 1424-1430) Tip: When the question is formulated to say “give an example,” you must give only one. If it says “give examples,” you should at least give two. Q: Sara borrowed P50,000.00 from Julia and orally promised to pay it within 6 months. When Sara tried to pay her debt on the 8 th month, Julia demanded the payment of interest of 12% per annum because of Sara’s delay in payment. Sara paid her debt and the interest claimed by Julia. After rethinking, Sara demanded back from Julia the amount she had paid as interest. Julia claims she has no obligation to return the interest paid by Sara because it was a natural obligation which Sara voluntarily performed and can no longer recover. Do you agree? Explain. (4%) (2015 Bar Exam) In the aspect of loan, the issue here is whether Sara is liable to pay interest. There are 2 kinds of interest: (1) compensatory – compensation for the use, which has to be expressly stipulated in writing; (2) interest by way of damages – if the debtor is already in delay, even if not stipulated. In this case, Julia is not claiming for compensatory interest and she is not entitled to it because the stipulation was made orally. So Julia here was claiming for interest because according to her Sara is in delay.

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A: No, I do not agree with Julia.Julia has the obligation to return the interest paid by Sara.The controlling issue in this case is whether the debtor was really in delay, and the answer is no. As a rule, demand is necessary in order for delay to set in. No demand, no delay. Since it doesn’t appear from the facts that there was demand, therefore, the debtor was not yet in delay and therefore, the debtor doesn’t have the obligation to pay interest and consequently, there is no natural obligation. Absent any obligation, there is neither civil nor natural obligation. Thus, under the principle of solution indebiti, if the creditor received payment which he is not entitled, he is obliged to return it. TN: Most questions do not only focus on one topic. Like this question, it does not only talk about natural obligations, it also talks about loans, as well as delay. Tip: Focus on the question. Answer what is asked. In this question, it is asked if you agree, so just answer I agree/disagree with Julia. If asked to rule on the motion, do not answer “the action will prosper.” C. Essential Elements

4 basic elements: 1. Passive subject – debtor 2. Active subject – creditor 3. Prestation – not a thing; the object of the contract. (an object is often confused with a thing, but it is not a thing, it is a conduct) 4. Juridical tie – binds the parties; any of the sources of obligation Tip: in every problem, do not confuse the debtor from the creditor because if you do, even if you perfected all the principles, your answer is still wrong. You can make markings in your questionnaires. You can write “Jose – creditor” “Pedro – debtor” so that you will not be confused, especially if there are other people involved in the problem like guarantors, surety, etc. D. Sources of Civil Obligations

Relevant provision: Article 1157. Obligations arise from: (1) Law; (2) Contracts;

(4) Acts or omissions punished by law; and (5) Quasi-delicts. TN: The enumeration is exclusive. In other words, if a person has an obligation, it has to arise from one of the sources. Q: Saachi opened a savings bank account with Shanghainese Bank. He made an initial deposit of P100,000.00. Part of the bank opening forms that he was required to sign when he opened the account was a Holdout Agreement which provided that should he incur any liability or obligation to the bank, the bank shall have the right to immediately and automatically take over his savings account deposit. After he opened his account, the Shanghainese Bank discovered a scam wherein the funds in the account of another depositor in the bank was withdrawn by an impostor. Shanghainese Bank suspected Saachi to be the impostor, and filed a criminal case of esatafaagainst him. While the case was still pending with the Prosecutor’s office, the bank took over Saachi’s savings deposit on the basis of the Holdout Agreement. In this case, did the bank have the right to take over Saachi’s bank deposit? (2.5%) (2018 Bar Exam) In a way, the question here is whether the bank have a right to invoke the holdout clause in the Agreement. As discussed in the case of Metrobank v. Rosales, if the bank had the right invoke the holdout clause, respondents must have an obligation arising from one of the 5 sources of obligations. There is nothing in the contract which can be the basis of the right of the bank. The possible source of obligation is delict because a criminal complaint was filed. But the complaint in the prosecutor’s office was dismissed so there can be no civil liability arising from delict. A: No. Considering the facts of this case, the bank took over the deposit when the case was still pending before the Prosecutor’s office. It is the rule that a civil liability will arise only if there is already a conviction. Tip: Most case questions are based on actual decided cases. However, some examiners change the facts of the case, and sometimes the facts omitted are the important ones. Thus, your answer may not be the same with the SC ruling.

(3) Quasi-contracts;

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QUASI-CONTRACT - a juridical relation arising from lawful, voluntary and unilateral acts, and which has for its purpose the payment of indemnity to the end that no one shall unjustly enrich himself at the expense of another. (2012 Bar Exam)

money to buy new supplies of fish pry, to prepare the fishpond for the next drought. a. What is the juridical relation between X and Y during X’s absence?

Relevant provision:

Clearly, this is an example of negotiorum gestio.

Article 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.

Tip: if the answer to the question is a specific topic/principle, do not just give as answer the general topic/principle. Example in this case you do not just answer quasi-contract but you say what kind of quasi-contract it is. The more specific your answer is, the better.

- this provision talks about the requisites of quasi-contract: that the act which can be the basis of the obligation must be lawful, voluntary and unilateral. If there is a contract between the parties and there is an obligation arising from that contract, it cannot be the basis of a qua sicontractual obligation because it is not unilateral. TN:There are a many kinds of quasi-contract, most people only know 2 kinds (negotiorum gestio and solution indebiti) but there are “other quasicontracts” mentioned in Arts 2164-2175 Kinds of quasi-co ntract: 1. Negotiorum Gestio - Whoever voluntarily takes charge of the agency or management of the business or property of another, without any power from the latter, is obliged to continue the same until the termination of the affair and its incidents, or to require the person concerned to substitute him, if the owner is in a position to do so. This juridical relation does not arise in either of these instances: (1) When the property or business is not neglected or abandoned; (2) If in fact the manager has been tacitly authorized by the owner. (Art. 2144) TN: Under the Family Code, abandonment is presumed only after a period of 3months. Q: In fear of reprises from lawless elements in his brgy, X abandoned his fishpond, went to Manila and left for Europe. Seeing that the fish in the fishpond were ready for harvest, Y, who is in the business of managing fishponds on a commission basis, took possession of the property, harvested the fish and sold the entire harvest to Z. Thereafter, Y borrowed money from W and used the

b. Upon the return of X to the brgy, what are the obligations of Y to X as regards the contract with Z? Y is obliged to account for the proceeds of the sale and to deliver the proceeds to X. c. Upon return of X, what are the ___ of X as regards Y’s contract with W? The contract with W is a contract of loan. Although X is not a privy to the contract, he is bound by such contract because under the Civil Code, the owner would be bound by contracts entered into by the gestor which contracts are necessary for the management of the property. Therefore, X has the obligation to pay the creditor. d. What legal effect will result if X will expressly ratify? By express provision of the law, the rules on agency will apply to this juridical relationship. Y will be considered as agent of X. 2. Solutio Indebiti - If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. (Art 2154) TN: That the person received something when there is no right to demand is not the only requisite for this principle. Equally important is the requirement that it was delivered by mistake. Otherwise, if it was not by mistake, maybe it is a donation or any other juridical relation. Q: DPO went to a store to buy a pack of cigarettes worth P225.00 only. He gave the vendor, RRA, a P500-peso bill. The vendor gave him the pack plus P375.00 change. How is this situational relationship between DPO and RRA denominated?(2004 Bar Exam)

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It is a case of solutio indebiti. Under this principle, if something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises.

Relevant case: CBK Power Company Ltd. v. CIR (GR No. 193720-30, Jan 15, 2014, Sereno CJ) Facts: CBK filed an application for the issuance of tax credit certificate in the BIR claiming excessive input taxes. He argued that if the BIR will not issue the tax credit certificate, the government will be unjustly enriched at his expense. Thus his claim is based on the principle of solutio indebiti. Issue: Whether the principle of solutio indebiti is applicable in this case, thus entitling petitioner to its claim. Ruling: No. There are 2 requisites for the applicability of solutio indebiti in this case. First, did the government receive something which itdoesn’t have the right to demand? No – the government has all the right to demand payment from the taxpayer. Second, was the payment made by mistake? No – because CBK has the obligation to pay for the tax. Whether CBK is entitled to a tax credit certificate will be determined at the end of the year. Hence, solutio indebiti does not apply in this case. TN:While there are 5 sources of obligations, it is not true that an act can be the basis of a claim under only one source. For instance, if the act is punished by law, your claim can not only based on delict. A single act can be the basis of a claim sometimes from 2 or 3 sources. A common example is quasi-delict, delict and contract. Q: Simeon was returning to Manila after spending a weekend with his parents in Sariaya, Quezon. He boarded a bus operated by the Sabbit Bus Line (SBL) on August 30, 2013. In the middle of the journey, the bus collided with a truck coming from the opposite direction which was overtaking the vehicle in front of the truck. Though the driver of the SBL bus tried to avoid the truck, a mishap occurred as the truck hit the left side of the bus. As a result of the accident, Simeon suffered a fractured leg and was unable to report for work for one week. He sued SBL for actual and moral damages. SBL raised the defense that it was the driver of the truck who was at fault, and that it exercised the diligence of a good father of a family in the selection and supervision of its driver. Is SBL liable for actual damages? Moral damages? (2.5%) (2018 Bar Exams)

TN:Based on the facts, what Simeon filed was clearly not a criminal case. The answer to the question would depend on whether what source of obligation was used in the claim either contract or quasi-delict. You have to be very careful in determining what the cause of action is, because there are different rules, requisites and defenses applicable in a different cause of action. A: Actual damages – Yes; Moral damages – It depends In the case of Cangco v. Manila Railroad, the latter also raised the defense of diligence of a good father of a family in the selection and supervision of its employees but the SC rejected such defense stating that the action was not based on quasi-delict but for breach of contract. The instant case has similarity with the Cangco case. There is no question on the actual damages – it can be claimed both in quasi-delict and breach of contract cases. But it is very difficult to claim moral damages in breach of contract cases because in such cases, it is awarded only if there is bad faith or wanton disregard of the obligations of the parties to the contract. Here, there was only negligence. Unless if it be gross negligence, the aggrieved party is not entitled to moral damages. But in quasi-delict cases, it is very easy to claim moral damages because if there is injury caused by a quasidelictual act, it can be the basis of a claim for moral damages under Art 2219. TN:Gross negligence amounts to fraud. II. KINDS OF CIVIL OBLIGATIONS A. As to Perfection & Extinguishment

1. Pure 2. Conditional 3. With a term – a common question to this kind of obligation is: When would the obligation arise/demandable? Or extinguished? Or is the obligation valid? Q: Are the following obligations valid? Why? And if they are valid, when is the obligation demandable in each case? (2003 & 2017) a. If the debtor promises to pay as soon as he has the means to pay. To determine if it is valid or not, you first have to determine whether it is pure, conditional or with a term. This example is an obligation with a term. It

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will be demandable upon the expiration of the period fixed by the court. Thus, the creditor must go to court and ask the court to fix the period for this obligation. b. If the debtor promises to pay when he likes. This is a conditional obligation. It is dependent on the debtor and it may/may not happen. This is not a valid obligation because under Art 1182, when the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. Thus, it will never be demandable. TN: The condition here is a suspensive condition. It is not the condition here that is void, it is the obligation that is rendered void. Condition can never be void. Do not ever forget that a condition is just an event, but which may or may not happen. The most common condition used in exam questions is passing the bar exam. c. If the debtor promises to pay when he becomes a lawyer. This is an obligation with a condition, but it unlike the former, it is not dependent solely on the will of the debtor, or even on the will of anyone. It is valid and will be demandable upon the fulfilment of the condition. d. If the debtor promises to pay if his son, who is sick with cancer, does not die within one year. This is an obligation containing a negative condition (that something must not happen). This is a suspensive condition and it may happen. Clearly, this is a valid obligation but it will only be demandable if upon the expiration of the one-year period, the son is still alive. TN: Considering the principles in relation to these kinds of obligations, in conditional obligations, it is important to note the different kinds of conditions. And as to these kinds of conditions, the most important are 2 classes: suspensive/resolutory and potestative/casual/mixed. Suspensive – upon the happening of the condition, the obligation arises. There is no obligation until the condition is fulfilled. Example: “I will give you my car if you pass the bar exam.” Until you pass the bar, I am not yet obliged to give you my car. Resolutory – upon the happening of the condition, the obligation is extinguished; has exactly the same effect with obligations with a term/period. Example: “I will give you my car at the end of the year.” Is there an obligation already? Yes. But can you demand the giving of the car

tomorrow? No, you must wait until the end of the year because the obligation will only be due and demandable at the end of the year. Potestative – dependent solely on the part of either the debtor or the creditor. TN:To be void, it must be potestative/dependent only on the part of the debtor. Casual – by chance Mixed – partly potestative, partly casual. Example: passing the bar exam. Q: Pedro promised to give his grandson a car if the latter will pass the bar examinations. When his grandson passed the said examinations, Pedro refused to give the car on the ground that the condition was a purely potestative one. Is he correct or not?(2000) A: No, Pedro is not correct because passing the bar exams is not a purely potestative condition but a mixed one. There are a lot of factors to be considered in passing the bar exams. Even if, granting for the sake of argument that passing the bar exam is purely potestative, still the obligation would not be void because under Art 1182, the potestative obligation shall be void only if it potestative on the part of the debtor. Herein, the debtor was Pedro, not the grandson. And it was not Pedro who will take the bar exam. Thus, Art 1182 is inapplicable in this case, and therefore the obligation is not void. Q: In 1997, Manuel bound himself to sell Eva a house and lot which is being rented by another person, if Eva passes the 1998 ...