Civ-Oblicon-Digests - Notes for obligations and contracts PDF

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1. GENERAL PROVISIONS ON OBLIGATIONS (ARTS. 1156-1162) 1 SOURCESEMMA P. NUGUID V. CLARITA S. NICDAOG. No. 150785, September 15, 2006 FACTS:  Accused Clarita S. Nicdao is charged with having committed 14 counts of Violation of BP 22. The criminal complaints allege that sometime in 1996, from April t...

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CIV LAW REVIEW - OBLICON DIGESTS determining culpability. The terms and conditions surrounding the 1. GENERAL PROVISIONS ON OBLIGATIONS (ARTS. 1156-1162) issuance of the checks are also irrelevant.” 1.4 SOURCES EMMA P. NUGUID V. CLARITA S. NICDAO G.R. No. 150785, September 15, 2006 FACTS:  Accused Clarita S. Nicdao is charged with having committed 14 counts of Violation of BP 22. The criminal complaints allege that sometime in 1996, from April to August thereof, Nicdao and her husband of Vignette Superstore approached Nuguid and asked her if they could borrow money to settle some obligations. Having been convinced by them and because of the close relationship of respondent to petitioner, the latter lent the money. Thus, every month, she was persuaded to release P100k to the accused until the total amount reached P1.15M.  As security, respondent gave petitioner 14 open dated Hermosa Savings Bank checks with the assurance that if the entire amount is not paid within 1 year, petitioner can deposit the checks.  In June 1997, petitioner together with Samson Ching demanded payment of the sums, but respondent refused to acknowledge the indebtedness. Thus, petitioner deposited all the checks in the bank of Samson Ching totaling P1.15M since all the money given by her to respondent came from Samson Ching. The checks were all returned for having been drawn against insufficient funds (DAIF).  A verbal and written demand was made upon respondent, but to no avail. Hence, a complaint for violation of BP 22 was filed against respondent.  MTC found respondent guilty of the charges against her. RTC affirmed. CA reversed the decision of the lower courts and acquitted respondent. ISSUE: WON respondent remains civilly liable for the sum of P1,150,000? HELD: NO. From the standpoint of its effects, a crime has a dual character: (1) as an offense against the State because of the disturbance of the social order and (2) as an offense against the private person injured by the crime unless it involves the crime of treason, rebellion, espionage, contempt and others (wherein no civil liability arises on the part of the offender either because there are no damages to be compensated or there is no private person injured by the crime). What gives rise to the civil liability is really the obligation of everyone to repair or to make whole the damage caused to another by reason of his act or omission, whether done intentionally or negligently and whether or not punishable by law. Extinction of penal action does not carry with it the eradication of civil liability, unless the extinction proceeds from a declaration in the final judgment that the fact from which the civil liability might arise did not exist. On one hand, as regards the criminal aspect of a violation of BP 22, suffice it to say that: “the gravamen of BP 22 is the act of making and issuing a worthless check or one that is dishonored upon its presentment for payment [and] the accused failed to satisfy the amount of the check or make arrangement for its payment within 5 banking days from notice of dishonor. The act is malum prohibitum, pernicious and inimical to public welfare. Laws are created to achieve a goal intended to guide and prevent against an evil or mischief. Why and to whom the check was issued is irrelevant in

On the other hand, the basic principle in civil liability ex delicto is that every person criminally liable is also civilly liable, crime being one of the five sources of obligations under the Civil Code. A person acquitted of a criminal charge, however, is not necessarily civilly free because the quantum of proof required in criminal prosecution (proof beyond reasonable doubt) is greater than that required for civil liability (mere preponderance of evidence). In order to be completely free from civil liability, a person’s acquittal must be based on the fact that he did not commit the offense. If the acquittal is based merely on reasonable doubt, the accused may still be held civilly liable since this does not mean he did not commit the act complained of. It may only be that the facts proved did not constitute the offense charged. Acquittal will not bar a civil action in the following cases: (1) where the acquittal is based on reasonable doubt as only preponderance of evidence is required in civil cases; (2) where the court declared the accused’s liability is not criminal but only civil in nature and (3) where the civil liability does not arise from or is not based upon the criminal act of which the accused was acquitted. In this petition, we find no reason to ascribe any civil liability to respondent. As found by the CA, her supposed civil liability had already been fully satisfied and extinguished by payment. The statements of the appellate court leave no doubt that respondent, who was acquitted from the charges against her, had already been completely relieved of civil liability: Petitioner admitted having received cash payments from petitioner on a daily basis but argues that the same were applied to interest payments only. It however appears that petitioner was charging respondent with an exorbitant rate of interest. In any event, the cash payments made were recorded at the back of the cigarette cartons by petitioner in her own handwriting as testified to by respondent and her employees. Indeed, the daily cash payments reveal that respondent had already paid her obligation to petitioner in the amount of P5.78M and that she stopped making further payments when she realized that she had already paid such amount. Moreover, we find no evidence was presented by the prosecution to prove that there was a stipulation in writing that interest will be paid by respondent on her loan obligations, as required under Article 1956 of the Civil Code. The obligation of respondent has already been extinguished long before the encashment of the subject checks. A check is said to apply for account only when there is still a pre-existing obligation. In the case at bench, the pre-existing obligation was extinguished after full payment was made by respondent.

2. PRESTATIONS (ARTS. 1163-1168) 2.3 CONSEQUENCES OF FAILURE TO COMPLY W/

BUENAVENTURA ANGELES V. URSULA TORRES CALASANZ G.R. No. L-42283 March 18, 1985 FACTS:

CIV LAW REVIEW - OBLICON DIGESTS  Ursula Torres Calasanz and Tomas Calasanz entered into a contract to sell a piece of land with Buenaventura Angeles and Teofila Juani for the amount of P3,920.00 plus 7% interest per annum. Angeles & Juani made a downpayment of P392.00 upon the execution of the contract. They promised to pay the balance in monthly installments of P 41.20 until fully paid, the installments being due and payable on the 19th day of each month. Angeles & Juani paid the monthly installments until July 1966, when their aggregate payment already amounted to P4,533.38. On numerous occasions, the defendants (Calsanz) accepted and received delayed installment payments from the plaintiffs (Angeles & Juani).  In 1966, the defendants-appellants wrote the plaintiffs a letter requesting the remittance of past due accounts. Defendants cancelled the said contract because the plaintiffs failed to meet subsequent payments. The plaintiffs' letter with their plea for reconsideration of the said cancellation was denied by the defendants  The plaintiffs filed Civil Case to compel the defendants to execute in their favor the final deed of sale alleging inter alia that after computing all subsequent payments for the land in question, they found out that they have already paid the total amount of P4,533.38 including interests, realty taxes and incidental expenses for the registration and transfer of the land.  The defendants alleged that the plaintiffs violated par. 6 of the contract to sell when they failed to pay and/or offer to pay the monthly installments corresponding to the month of August 1966 for more than 5 months, thereby constraining the defendants-appellants to cancel the said contract. ISSUE: WON the contract to sell has been validly cancelled by the defendants? HELD: NO. Article 1191 is explicit. In reciprocal obligations, either party the right to rescind the contract upon the failure of the other to perform the obligation assumed thereunder. Moreover, there is nothing in the law that prohibits the parties from entering into an agreement that violation of the terms of the contract would cause its cancellation even without court intervention. Well settled is, however, the rule that a judicial action for the rescission of a contract is not necessary where the contract provides that it may be revoked and cancelled for violation of any of its terms and conditions. The rule is that it is not always necessary for the injured party to resort to court for rescission of the contract when the contract itself provides that it may be rescinded for violation of its terms and conditions, was qualified by this Court in University of the Philippines v. De los Angeles: “Of course, it must be understood that the act of a party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional, being ever subject to scrutiny and review by the proper court. If the other party denies that rescission is justified, it is free to resort to judicial action in its own behalf, and bring the matter to court. Then, should the court, after due hearing, decide that the resolution of the contract was not warranted, the responsible party will be sentenced to damages; in the contrary case, the resolution will be affirmed, and the consequent indemnity awarded to the party prejudiced. In other words, the party who deems the contract violated may consider it resolved or rescinded, and act accordingly, without previous court action, but it proceeds at its own risk. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law.

The right to rescind the contract for non-performance of one of its stipulations, therefore, is not absolute. The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement. The breach of the contract adverted to by the defendants is so slight and casual when we consider that apart from the initial downpayment of P392.00 the plaintiffs had already paid the monthly installments for a period of almost 9 years. In other words, in only a short time, the entire obligation would have been paid. To sanction the rescission made by the defendants-appellants will work injustice to the plaintiffs and would unjustly enrich the defendants. We agree with the plaintiffs that when the defendants, instead of availing of their alleged right to rescind, accepted and received delayed payments of installments, though the plaintiffs have been in arrears beyond the grace period mentioned in paragraph 6 of the contract, the defendants waived and are now estopped from exercising their alleged right of rescission. Plaintiffs contend that the contract herein is a contract of adhesion. We agree. The contract to sell entered into by the parties has some characteristics of a contract of adhesion. The defendants drafted and prepared the contract. The plaintiffs, eager to acquire a lot upon which they could build a home, affixed their signatures and assented to the terms and conditions of the contract. They had no opportunity to question nor change any of the terms of the agreement. It was offered to them on a "take it or leave it" basis. While generally, stipulations in a contract come about after deliberate drafting by the parties thereto, there are certain contracts almost all the provisions of which have been drafted only by one party, usually a corporation. Such contracts are called contracts of adhesion, because the only participation of the party is the signing of his signature or his "adhesion" thereto. Insurance contracts, bills of lading, contracts of sale of lots on the installment plan fall into this category. The contract to sell, being a contract of adhesion, must be construed against the party causing it.

ADELFA S. RIVERA V. FIDELA DEL ROSARIO G.R. No. 144934. January 15, 2004 FACTS:  Respondents Fidela, et al. were the registered owners of a parcel of land. Fidela borrowed P250k from Mariano Rivera and to secure the loan, she and Mariano Rivera agreed to execute a deed of REM and an agreement to sell the land. Mariano went to his lawyer to have 3 documents drafted: the Deed of REM, a Kasunduan (Agreement to Sell), and a Deed of Absolute Sale.  The Kasunduan provided that the children of Mariano Rivera, herein petitioners, would purchase the land for a consideration of P2M, to be paid in 3 installments. It also provided that the Deed of Absolute Sale would be executed only after the 2nd installment is paid and a postdated check for the last installment is deposited with Fidela.

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Mariano Rivera then went to his lawyer bringing with him the signed documents. He also brought Fidela and her son Oscar, so that the latter two may sign the mortgage and the

CIV LAW REVIEW - OBLICON DIGESTS Kasunduan there. Although Fidela intended to sign only the Kasunduan and the REM, she inadvertently affixed her signature on all 3 documents. Mariano then gave Fidela the amount for the 1st installment. Later, he also gave Fidela a check for the 2nd installment. Mariano also gave Oscar several amounts upon the latter’s demand for the payment of the balance despite his lack of authority to receive payments under the Kasunduan. Fidela entrusted the owner’s copy of TCT to Mariano to guarantee compliance with the Kasunduan.  When Mariano unreasonably refused to return the TCT, respondents caused the annotation on TCT of an Affidavit of Loss of the owner’s duplicate copy of the title. However, Mariano then registered the Deed of Absolute Sale and got a new TCT.  Respondents then filed a complaint asking that the Kasunduan be rescinded for failure of the Riveras to comply with its conditions, with damages. They also sought the annulment of the Deed of Absolute Sale on the ground of fraud.  Respondents claimed that Fidela never intended to enter into a deed of sale at the time of its execution and that she signed the said deed on the mistaken belief that she was merely signing copies of the Kasunduan. ISSUE: WON the Deed of Absolute Sale is valid and binding? HELD: NO. The deed is void in its entirety. Rescission of reciprocal obligations under Article 1191 of the New Civil Code should be distinguished from rescission of contracts under Article 1383 of the same Code. Both presuppose contracts validly entered into as well as subsisting, and both require mutual restitution when proper, nevertheless they are not entirely identical. While Article 1191 uses the term rescission, the original term used in Article 1124 of the old Civil Code, from which Article 1191 was based, was resolution. Resolution is a principal action that is based on breach of a party, while rescission under Article 1383 is a subsidiary action limited to cases of rescission for lesion under Article 1381 of the New Civil Code. Obviously, the Kasunduan does not fall under any of those situations mentioned in Article 1381. Consequently, Article 1383 is inapplicable. Hence, we rule in favor of the respondents. May the contract entered into between the parties, however, be rescinded based on Article 1191? A careful reading of the Kasunduan reveals that it is in the nature of a contract to sell, as distinguished from a contract of sale. In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; while in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. In a contract to sell, the payment of the purchase price is a positive suspensive condition, the failure of which is not a breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. Respondents in this case bound themselves to deliver a deed of absolute sale and clean title covering Lot No. 1083-C after petitioners have made the second installment. This promise to sell was subject to the fulfillment of the suspensive condition that petitioners pay P750,000 on August 31, 1987, and deposit a postdated check for the third installment of P1M. Petitioners, however, failed to complete payment of the second installment. The non-fulfillment of the condition rendered the contract to sell

ineffective and without force and effect. It must be stressed that the breach contemplated in Article 1191 of the New Civil Code is the obligor’s failure to comply with an obligation already extant, not a failure of a condition to render binding that obligation. Failure to pay, in this instance, is not even a breach but an event that prevents the vendor’s obligation to convey title from acquiring binding force. Hence, the agreement of the parties in the instant case may be set aside, but not because of a breach on the part of petitioners for failure to complete payment of the second installment. Rather, their failure to do so prevented the obligation of respondents to convey title from acquiring an obligatory force. Coming now to the matter of prescription. Contrary to petitioners’ assertion, we find that prescription has not yet set in. Article 1391 states that the action for annulment of void contracts shall be brought within four years. This period shall begin from the time the fraud or mistake is discovered. Here, the fraud was discovered in 1992 and the complaint filed in 1993. Thus, the case is well within the prescriptive period. SPOUSES BARREDO V. SPOUSES LEAÑO [G.R. No. 156627. June 4, 2004] FACTS:  Barredo Spouses bought a house and lot with the proceeds of a P50k loan from the SSS which was payable in 25 years and an P88k loan from the Apex Mortgage and Loans Corporation which was payable in 20 years. To secure the twin loans, they executed a first mortgage over the house and lot in favor of SSS and a second one in favor of Apex.  Barredo Spouses later sold their house and lot to respondents Spouses Leaño by way of a Conditional Deed of Sale with Assumption of Mortgage. The Leaño Spouses would pay the Barredo Spouses P200k, P100k of which would be payable on July 15, 1987, while the balance of P100k would be paid in 10 equal monthly installments after the signing of the contract. The Leaño Spouses would also assume the first and second mortgages and pay the monthly amortizations to SSS and Apex beginning July 1987 until both obligations are fully paid.  In accordance with the agreement, the purchase price of P200k was paid to the Barredo Spouses who turned over the possession of the house and lot in favor of the Leaño Spouses. 2 years later, Barredo Spouses initiated a complaint before the RTC seeking the rescission of the contract on the ground that the Leaño Spouses despite repeated demands failed to pay the mortgage amortizations to the SSS and Apex, causing the Barredo Spouses great and irreparable damage. The Leaño Spouses, however, answered that they were up-to-date with their amortization payments to Apex but were not able to pay the SSS amortizations because their payments were refused upon the instructions of the Barredo Spouses.  Meanwhile, allegedly in order to save their good name, credit standing and reputation, the Barredo Spouses took it upon themselves to settle the mortgage loans and paid the SSS. They also settled the mortgage loan with Apex. They also paid the real estate property taxes for the 1987 up to 1990.  Petitioners argue that the terms of the agreement called for the strict compliance of 2 equally essential and material obligations on the part of the Leaño Spouses, namely, the payment of the P200,000.00 to them and the payment of the mortgage amortizations to the SSS and Apex. Respondents Leaño Spouses, however, contend that they were only obliged to assume the amortization payments of the Barredo Spouses with

CIV LAW REVIEW - OBLICON DIGESTS the SSS...