Taxation 1 Case Digests

 Tax 1 Lex Talionis Fraternitas Inc. Taxation 1 Case Digests

Pepsi-Cola vs Mun. of Tanauan (G.R. No. L-31156 Feb 27, 1976) The legislative power to create political corporations for purposes of local self-g self-gove overnm rnment ent courts courts with with it the power power to confer confer on such such local local  government agencies the power to tax.

Pepsi commenced a complaint with preliminary injunction before the CFI of Leyte for that court to declare Section 2 of R.A. 2264 (Local Autonomy Act) unconstitutional as an undue delegation of taxing authority as well as declare Municipal Ordinance Nos. 23 & 27 series of 1962 of Municipality of Tanauan, Leyte null and void. Municipal Ordinance 23 levies and collects from softdrinks producers and manufacturers a tai of 1/16th of a centavo for every bottle of softdrink corked. On the other other hand, hand, Munici Municipal pal Ordinance Ordinance 27 levies levies and collects collects on softdrinks softdrinks produced or manufactured manufactured within the territorial jurisdiction of the municipality a tax of 1 centavo on each gallon of volume capacity. Both are denominated as “municipal production tax”. Issues: a) WoN section 2 of R.A. 2264 is an undue delegation of power b) WoN Ordinances Ordinances 23 & 27 constitute constitute double double taxation taxation and impose percentag percentage e or specific specific tax c) WoN Ordinances 23 and 27 are unjust and unfair Held: Held: a) No, it is true true that that power power of taxatio taxation n is purely legislative legislative and which the central central legislative legislative body cannot delegate either to the executive or judicial department of the govern government ment without without infrin infringin gingg upon upon the theory theory of separation of powers but the exception lies in the case of municipal corporations to which the said theory does not apply. apply. Legisl Legislativ ative e concer concerns ns may be delegat delegated ed to local local governments governments in respect of matters of local concerns. By necess nece ssary ary implic implicati ation, on, the legisl legislativ ative e power power to create create

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political corporations for purposes of local self-government courts with it the power to confer on such local government agencies agencies the power to tax. The constitution constitution grants local government the autonomous authority to create their own sources of revenue and to levy taxes. b) No, the difference between the two ordinances clearly lies in the tax rate of the soft drinks produced: in Ordinance No. 23, it was 1/16 of a centavo for every bottle corked; in Ordinance No. 27, it is one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended as a plain substitute for the prior Ordinance No. 23, and operates as a repeal of the latter, even without words words to that effect. Plaintiff-appellant in its brief admitted that defendants-ap defendants-appellees pellees are only seeking seeking to enforc enforce e Ordinan Ordinance ce No. 27, series series of 1962. 1962. Undoubt Undoubtedl edly, y, the taxing taxing authori authority ty confer conferred red on local local governments under Section 2, Republic Act No. 2264, is broad enough as to extend to almost "everything, "everything, accepting accepting those which which are mentio mentioned ned therein. therein."" The limitat limitation ion applies applies,, particularly particularly to the prohibitio prohibition n against municipalities municipalities and municipal districts to impose "any percentage tax or other taxes in any form based thereon nor impose taxes on articles subject to specific tax except gasoline, under the provisions of the National Internal Revenue Code." For purposes of this particular limitation, a municipal ordinance which prescribes a set ratio between the amount of the tax and the volume of sale of the taxpayer imposes a sales tax and is null and void for for bein beingg outs outsid ide e the the powe powerr of the the muni munici cipa pali lity ty to enact. But, the imposition imposition of "a tax of one centavo (P0.01) (P0.01) on each each gallo gallon n of volum volume e capa capaci city ty"" on all all soft soft drink drinkss produced or manufactured under Ordinance No. 27 does not partake of the nature of a percentage tax on sales, or other taxes in any form based thereon. The tax is levied on the produce (whether sold or not) and not on the sales. The volume capacity of the taxpayer's production of soft drinks is considered solely for purposes of determining the tax rate on the products, but there is not set ratio between the volume

of sales and the amount of the tax. Nor can the tax levied be treated as a specific tax. Specific taxes are those imposed on specified articles, such as distilled spirits, wines, fermented liquors, products of tobacco other than cigars and cigarettes, matches firecrackers, firecrackers, manufactured manufactured oils and other fuels, coal, bunker fuel oil, diesel fuel oil, cinematographic films, playing cards, saccharine, saccharine, opium and other habit-forming habit-forming drugs. Soft drink is not one of those specified. specified. c) The tax of one (P0.01) on each gallon (128 fluid ounces, U.S.) U.S.) of volume volume capaci capacity ty on all softdr softdrink inks, s, produc produced ed or manuf manufac actu tured red,, or an equi equiva valen lentt of 1-½ 1-½ cent centav avos os per case, cannot be considered unjust and unfair. An increase in the tax alone would not support support the claim that the tax is oppressive, unjust and confiscatory. Municipal corporations are allowed much discretion discretion in determining determining the rates of imposable taxes. This is in line with the constitutional policy of acco accord rdin ingg the the wide widest st poss possib ible le auton autonom omyy to local local governments in matters of local taxation, an aspect that is given expression expression in the Local Tax Code (PD No. 231, July 1, 1973). Unless the amount is so excessive as to be prohibitive, cour courts ts will will go slow slow in writ writin ingg off off an ordi ordina nanc nce e as unreasonable. Reluctance should not deter compliance with an ordinance such as Ordinance No. 27 if the purpose of the law to further further strength strengthen en local local autonom autonomyy were were to be realized. CIR vs. Algue Inc. (G.R. No. L-28896 Feb 17, 1988) Taxes Taxes are the lifeblood lifeblood of the government government and so should should be collected  collected  without unnecessary hindrance. On the other hand, such collection should  be made in accordance with law as any arbitrariness will negate the very  reason reason for government government itself. itself. It is therefore therefore necessary necessary to reconcile reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved.

Philippine Sugar Estate Development Company appoints Algue as its agent authorizing it to sell its land, factories and oil manufac manufactur turing ing proces process. s. Family Family member memberss Guevar Guevara a et al

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 Tax 1 Lex Talionis Fraternitas Inc. worked for the formation of Vegetable Oil Investment Corp inducing persons to invest in it. After its incorporation largely through the promotion of Guevara et al, VOIC purchased PSEDC properties. For the sale, Algue received as agent a commission of 126k and it was from this commission that the 75k promotional fees were paid to Guevara et al. Issue: WON Sunga the collector of Internal Revenue correctly disallowed the 75k deduction claimed by private respondent Algue Algue as legiti legitimat mate e busine business ss expense expensed d in its income income tax returns

taxation and should dispel the erroneous notion that it is an arbitrary arbitrary method of exaction by those in the seat of power. But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed.

Held: No, claimed deduction was an ordinary reasonable reasonable or necessary business expense. Amount has been legitimately paid by Algue for actual services rendered. The payment was in the form of promotional promotional fee and collected collected by the payees for their in the creation of VOIC and its subsequent purchase of the properties of the PSEDC. It is immaterial that it was paid paid to the family family member memberss owning owning Algue Algue who render rendered ed services as the promotional fee was not excessive. Although the Solicitor General is correct when he said that the burden is on the taxpayer to prove the validity of claimed deduction. In the present case, however, SC find that the onus has been discharged satisfactorily. Algue has proved that the payment of fees was necessary and reasonable in the light of the efforts efforts exerte exerted d by the payees payees in induci inducing ng investo investors rs and promin prominent ent busines businessme smen n to ventur venture e in an experim experimenta entall enterpr enterprise ise and involv involved ed themse themselve lvess in a new busines businesss requiring millions of pesos. This was no mean feat and should be, as it was, sufficiently recompensed. It is said that taxes are what we pay for civilization civilization society. society. Without taxes, the government would be paralyzed for lack of the motive power to activa activate te and operat operate e it. Hence, despite despite the natural natural reluctance to surrender part of one's hard earned income to the taxing authorities, every person who is able to must contribute his share in the running of the government. The government government for its part, is expected expected to respond respond in the form of tangible and intangible intangible benefits intended to improve improve the lives of the people and enhance their moral and material values. values. This This symbio symbiotic tic relatio relationshi nship p is the rational rationale e of

Maceda vs ERB (G.R. No. 95203-05 Dec 18, 1990)

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The Energy Regulatory Board order authorizing the proceeds generated by  the increase in the prices of petroleum products to be deposited to the Oil Price Stabilization Fund is not an act of taxation.

The petitioners pray for injunctive relief, to stop the Energy Regulato Regu latory ry Board Board from from implem implementi enting ng its Order, Order, dated dated September 21, 1990, mandating a provisional increase in the prices of petroleum and petroleum products. The petitioner, Senator Ernesto Ernesto Maceda, also submits submits that the same was issued without proper notice and hearing in violation of Section 3, paragraph (e), of Executive Order No. 172; that the Board, in decreeing an increase, had created a new source source for the Oil Price Stabil Stabiliza izatio tion n Fund (OPSF), (OPSF), or otherwise that it had levied a tax, a power vested in the legislature, and/or that it had "re-collected", by an act of taxation, ad valorem taxes on oil which Republic Act No. 6965 had abolished. Issue: WON the Board authorizing the proceeds generated by the increase to be deposited to the OPSF is an act of taxation Held Held.. No. No. The The Board Board Orde Orderr autho authori rizi zing ng the the proc proceed eedss generated by the increase to be deposited to the OPSF is not an act of taxation. It is authorized by Presidential Decree No. 1956, as amended by Executive Order No. 137. Anent claims that that oil oil comp compani anies es canno cannott charg charge e new pric prices es for for oil oil

purchased purchased at old rates, suffice suffice it to say that the increase in question was not prompted alone by the increase in world oil prices arising from tension in the Persian Gulf. What the Court gathers from the pleadings as well as events of which it takes judicial notice, is that: (1) as of June 30, 1990, the OPSF has incurred a deficit of P6.1 Billion; (2) the exchange rate has fallen to P28.00 to $1.00; (3) the country's balance of payments is expected to reach $1 Billion; (4) our trade deficit deficit is at $2.855 Billion as of the first nine months of the year. Evidently, Evidently, authorities authorities have been unable to collect enough taxes necessary to replenish the OPSF as provided by Presid Presidenti ential al Decree Decree No. 1956, 1956, and henc hence, e, there there was no available alternative but to hike existing prices. The OPSF, as the Court held in the aforecited CACP cases, must not be understood understood to be a funding funding designed to guarantee guarantee oil firms' firms' profits although as a subsidy, or a trust account, the Court has no doubt that oil firms make money from it. As we held there, there, howeve however, r, the OPSF OPSF was establ establish ished ed precis precisely ely to protect the consuming public from the erratic movement of oil prices prices and to preclud preclude e oil companies companies from taking taking advantage advantage of fluctuations fluctuations occurring occurring every so often. As a buffer mechanism, it stabilizes domestic prices by bringing about about a uniform uniform rate rather rather than leavin leavingg pricin pricingg to the caprices of the market. Paras (dissenting): Anent the unconstitutional use of the taxing power, the decision of the majority says that "the Board Order authorizing the proceeds generated by the increases" is "authorized by Presidential Decree No. 1456, as amended by Executive Order No. 137". Assuming that such is authorized by law, still a law, no matter how imperative, cannot prevail over the Constitution Constitution which grants only to Congress Congress the power to tax. And indeed, there can be no denying the fact that when revenue is earned by the government government from the consuming public (except when only licenses are concerned) there is an exercise of the taxing power.

Victorias Milling vs PPA (G.R. No. 73705 Aug Aug 27, 1987) Berthing charges against a vessel are collectible regardless of the fact that mooring or berthing is made from a private pier or wharf. This is because the government maintains bodies of water in navigable condition and it is

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 Tax 1 Lex Talionis Fraternitas Inc. to support its operations in this regard that dues and charges are imposed   for the use of piers and wharves regardless of their ownership.

On April 28, 1981, the Iloilo Port Manager of respondent respondent Philippine Ports Authority (PPA for short) wrote petitioner Victorias Milling Co., requiring it to have its tugboats and barges barges underg undergo o harbor harbor formali formalitie tiess and pay entran entrance/ ce/ clearance fees as well as berthing fees effective May 1, 1981. PPA, likewise, likewise, requiring petitioner petitioner to secure secure a permit for cargo handling operations at its Da-an Banua wharf and remit 10% of its gross gross inco income me for for said said oper operat atio ions ns as the the government's government's share. To these demands, petitioner petitioner sent two (2) letters, both dated June 2, 1981, wherein it maintained that it is exempt from paying PPA any fee or charge because: (1) the wharf and an its facilities were built and installed in its land; (2) repair and maintenance thereof were and solely paid by it; (3) even the dredging and maintenance of the Malijao River Channel from Guimaras Strait up to said private wharf wharf are are bein beingg done done by peti petiti tion oner' er's equi equipm pment ent and and personnel; and (4) at no time has the government ever spent a single centavo for such activities. Petitioner further added that the wharf wharf was being used mainly to handle handle sugar sugar purchased from district planters pursuant to existing milling agreements. Issue: WON Victorias is exempted from the claimed fees and charges due to the fact that the port is privately owned Held: No, as correctly stated by the Solicitor General, the fees and charges PPA collects are not for the use of the wharf that petitioner owns but for the privilege of navigating in public waters, of entering and leaving public harbors and berthing on public streams or waters. In Compañia General de Tabacos de Filipinas vs. Actg. Commissioner of Customs (23 SCRA 600), this Court laid down the rule that berthing charges against a vessel are collectible regardless of the fact that mooring or berthing is made from a private pier or wharf. This is because the government maintains bodies of water water in navi navigab gable le cond condit itio ion n and and it is to supp suppor ortt its its

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operations in this regard that dues and charges are imposed for for the use use of pier pierss and wharv wharves es regar regardl dles esss of thei theirr owners ownership hip.. As to the requirem requirement ent to remit remit 10% of the handling charges, charges, Section Section 6B-(ix) 6B-(ix) of the Presidential Presidential Decree No. 857 authorized the PPA "To levy dues, rates, or charges for the use of the premises, works, appliances, facilities, or for services provided by or belonging to the Authority, or any organiz organizati ation on concer concerned ned with with port port operat operation ions." s." This This 10% government government share of earnings of arrastre arrastre and stevedoring stevedoring operators is in the nature of contractual compensation to which a person person desiring desiring to operate operate arrastre arrastre service must agree as a condition to the grant of the permit to operate. CIR vs Ateneo de Manila (G.R. No. 115349 Apr 18, 1997) While it is conceded that statutes providing for election contests are to be liberally construed to the end that the will of the people in the choice of   public officers may not be defeated by mere technical questions, the rule likewise stands, that in an election protest, the protestant must stand or   fall upon the issues he had raised in his original or amended pleading filed   prior to the lapse of the statutory period for filing of the protest.

Private Private respondent respondent is a non-stock, non-stock, non-profit educational educational institution institution with auxiliary units and branches branches all over the Philip Philippin pines. es. One such such auxiliar auxiliaryy unit unit is the Institu Institute te of Philip Philippin pine e Cultur Culture e (IPC), (IPC), which which has no legal legal person personali ality ty separate and distinct from that of private respondent. The IPC is a Philippine unit engaged in social science studies of Philip Philippin pine e society society and culture culture.. Occasi Occasiona onally lly,, it accepts accepts sponsorshi sponsorships ps for its research research activities activities from international international organizations, private foundations and government agencies. On July 8, 1983, private respondent received from petitioner Commissioner Commissioner of Internal Revenue a demand letter dated June 3, 1983, 1983, assess assessing ing privat private e respon responden dentt the sum of P174,043.97 for alleged deficiency contractor's tax, and an assessment dated June 27, 1983 in the sum of P1,141,837 for alleged deficiency income tax, both for the fiscal year ended March March 31, 31, 1978. 1978. Denyi Denying ng said said tax tax liab liabil ilit itie ies, s, priv private ate respondent sent petitioner a letter-protest and subsequently

filed with the latter a memorandum contesting the validity of the assessments. Issue: WON Ateneo de Manila University, through its auxiliary unit or branch, the Institute of Philippine Culture, performing the work of an independent contractor and thus subject to the 3% contractor's tax levied by then Section 205 of the National Internal Revenue Code? Held: No, Petitioner Commissioner of Internal Revenue erred in applying the principles principles of tax exemption exemption without first applying the well-settled doctrine of strict interpretation in the imposition imposition of taxes. It is obviously obviously both illogical and impractical impractical to determine determine who are exempted without first determining who are covered by the aforesaid provision. The Commis Commissio sioner ner should should have have determ determined ined first first if privat private e respondent was covered by Section 205, applying the rule of strict strict interp interpret retati ation on of laws imposing imposing taxes taxes and other other burdens on the populace, populace, before asking Ateneo to prove its exempti exemption on therefr therefrom. om. The Court Court takes takes this this occasi occasion on to reiterate the hornbook doctrine in the interpretation of tax laws that "(a) statute will not be construed as imposing a tax unless it does so clearly, expressly, expressly, and unambiguously unambiguously . . . (A) tax cannot be imposed without clear and express words for that purpose. purpose. Accordingly, Accordingly, the general rule of requiring requiring adherence to the letter in construing statutes applies with peculiar strictness to tax laws and the provisions of a taxing act are not to be extended by implication." Parenthetically, in answering the question of who is subject to tax statutes, it is basic that "in case of doubt, doubt, such statutes statutes are to be construed most strongly against the government and in favor of the subjects or citizens because burdens are not to be imposed imposed nor presumed presumed to be imposed beyond what statutes expressly expressly and clearly import. import. To fall under its coverage, Section 205 of the National Internal Revenue Code requires that the independent independent contractor contractor be engaged in the business business of selling its services. Hence, to impose the three percent contractor's tax on Ateneo's Institute of Philippine Culture, it should be sufficiently proven that the private respondent is

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 Tax 1 Lex Talionis Fraternitas Inc. inde indeed ed selli selling ng its its serv servic ices es for for a fee fee in purs pursui uitt of an independent business. And it is only after private respondent has been found clearly to be subject to the provisions of Sec. 205 that the question of exemption therefrom would arise. Only Only afte afterr such such cove covera rage ge is show shown n does does the the rule rule of constru constructi ction on — that that tax exempt exemption ionss are to be strict strictly ly construed against the taxpayer — come into play, contrary to petitioner's petitioner's position. position. There is no evidence evidence to prove prove that Ateneo's Institute of Philippine Culture ever sold its services for a fee to anyone or was ever engaged in a business business apart from and independently of the academic purposes of the university. Figuerres vs Mandaluyong (G.R. No. 119172 Mar 25, 1999) The presumption of validity in favor of a tax ordinance, its constitutionality  or legality should be upheld in the absence of evidence showing that the  procedure prescribed by law was not observed in their enactment.

Petitioner Belen C. Figuerres is the owner of a parcel of land, covered covered by Transfer Certificate Certificate of Title No. 413305, and located located at Amari Amarillo llo Street, Street, Barangay Barangay Mauway, Mauway, City City of Mandaluyong. Mandaluyong. In 1993, she received received a notice notice of assessment, assessment, dated October 20, 1993, from the municipal municipal assessor assessor of the then Municipality of Mandaluyong. The assessment, effective in the year 1994, was based on Ordinance Nos. 119 and 125, series of 1993, and Ordinance No. 135, series of 1994, of the Sanggun Sangguniang iang Bayan Bayan of Mandaluy Mandaluyong ong.. Ordina Ordinance nce No. 119, series of 1993, which was promulgated on April 22, 1993, contains a schedule of fair market values of the different classes of real property in the municipality. Ordinance No. 125, series of 1993, which was promulgated on November 11, 1993, 1993, on the other other hand, hand, fixes fixes the assess assessment ment levels appl applic icabl able e to such such clas classe sess of real real prop proper erty ty.. Final Finally ly,, Ordinance No. 135, series of 1994, which was promulgated on Februar Februaryy 24, 1994, amended amended Ordinanc Ordinance e No. 119, §6 by providing that only one third (1/3) of the increase in the market values applicable to residential lands pursuant to the said ordinance shall be implemented in the years 1994, 1995,

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and 1996. Petitioner brought a prohibition prohibition suit in the Court of Appeals Appeals against against the Assess Assessor, or, the Treasu Treasurer rer,, and the Sanggu Sangguni niang ang Bayan Bayan to stop stop them them from from enfo enforc rcin ingg the the ordinances in question on the ground that the ordinances were were invali invalid d for having having been been adopte adopted d alleged allegedly ly without without public hearings and prior publication or posting and without complying with the implementing rules yet to be issued by the Department of Finance. Issue: WON the contention of Figuerres is tenable Held: No, although the petitioner is right in contending that public hearings are required to be conducted prior to the enactment enactment of an ordinance imposing real property taxes, R.A. No. 7160, §186 provides that an ordinance levying taxes, fees, or charges "shall not be enacted without without any prior public hearing conducted for the purpose." However, it is noteworthy that apart from her bare assertions, petitioner Figuerres has not presented any evidence to show that no public hearings were conducted prior to the enactment of the ordi ordinan nances ces in ques questi tion on.. On the the other other hand, hand, the Municipality of Mandaluyong claims that public hearings were indeed indeed conduc conducted ted before before the subjec subjectt ordina ordinances nces were were adopted, adopted, although it likewise likewise failed to submit any evidence to establish this allegation. However, in accordance with the presum presumpti ption on of validi validity ty in favor favor of an ordinan ordinance, ce, their their constitutionality or legality should be upheld in the absence of evidence showing that the procedure prescribed by law was not observed in their enactment. The lack of a public hearing is a negative allegation essential to petitioner's cause of action in the present case. Hence, as petitioner is the party party assert asserting ing it, she has the burden of proof. proof. Since petitioner failed to rebut the presumption of validity in favor of the subject ordinances and to discharge the burden of proving that no public hearings were conducted prior to the enactme enactment nt thereo thereof, f, we are constra constraine ined d to uphold uphold their their constitutionality or legality.

That taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other. There is a material distinction between a tax and debt. Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity.

Petitioner Petitioner Philex Mining Corp. assails the decision decision of the Court of Appeals promulgated on April 8, 1996 in CA-G.R. SP No. 36975 affirming the Court of Tax Appeals decision in CTA Case No. 4872 dated dated March 16, 1995 ordering ordering it to pay the amount of P110,677,668.52 P110,677,668.52 as excise tax liability for the period from the 2nd quarter of 1991 to the 2nd quarter of 1992 plus 20% annual interest from August 6, 1994 until fully paid pursuant to Sections 248 and 249 of the Tax Code of 1977. The facts show that on August 5, 1992, the BIR sent a letter to Philex asking it to settle its tax liabilities for the 2nd, 3rd and 4th quarter of 1991 as well as the 1st and 2nd quarter of 1992 in the total amount of P123,821.982.52. In a letter dated August 20, 1992, Philex protested the demand for payment of the tax liabilities liabilities stating that it has pending claims for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount of P119,977,037.02 plus interest. Therefore these claims for tax credit/refund should be applied against the tax liabilities. In reply, the BIR, in a letter dated September 7, 1992, found no merit in Philex's positi position. on. Since these these pendin pendingg claims claims have not yet been been established or determined with certainty, it follows that no legal compensation can take place. Hence, the BIR reiterated its demand that Philex settle the amount plus interest within 30 days from the receipt of the letter. Philex was able to obtain its VAT input credit/refund not only for the taxable year 1989 to 1991 but also for 1992 and 1994. In view of the grant of its VAT input credit/refund, Philex now contends that the same same should, should, ipso jure, off-set off-set its excise excise tax liab liabil ilit itie iess sinc since e both both had alre already ady beco become me "due "due and demanda demandable, ble, as well well as fully fully liquid liquidated ated;" ;" henc hence, e, legal legal compensation can properly take place. ISSUE: WoN Philex’s contention is tenable

Philex Mining vs CIR (G.R. No. 125704 Aug 28, 1998)

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 Tax 1 Lex Talionis Fraternitas Inc. Held: Held: No, Philex’ Philex’ss content contention ion is not tenable tenable.. In severa severall instances prior to the instant case, SC have already made the pron pronou ounc ncem emen entt that that taxe taxess cann cannot ot be subj subjec ectt to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other. There is a material distinction between a tax and debt. Debts are due to the Government Government in its corporate corporate capacity, while taxes are due to the Government in its sovereign capacity. W e fi nd nd n o c og oge nt nt r ea ea so so n t o d ev ev ia ia te te f ro ro m t he he aforementioned distinction. Prescinding from this premise, in Francia Francia v. Intermediate Intermediate Appellate Court, we categorically categorically held that taxes cannot be subject to set-off or compensation, thus: “We have consistently ruled that there can be no offsetting of taxes against the claims that the taxpayer may  have against the government. A person cannot refuse to pay  a tax on the ground ground that that the governm government ent owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government.” The ruling in Francia has been

applied to the subsequent case of Caltex Philippines, Inc. v. taxpayer  Commission Commission on Audit, Audit, which reiterated reiterated that: “ a taxpayer  may not offset taxes due from the claims that he may have against against the government. government. Taxes cannot be the subject of  compensation because the government and taxpayer are not mutually creditors and debtors of each other and a claim for  taxes is not such a debt, demand, contract or judgment as is allowed to be set-off .” .”

CIR vs Central Vegetable (G.R. No. 107135 Feb 23, 1999) Tax burdens are not to be imposed or presumed to be imposed beyond what the statute statute expressly expressly and clearly clearly imports, imports, tax statutes being construed  construed  strictissimi juris against the government.

CENVOCO is a manufacturer of edible and coconut/coprameal cake and such such other other coconut coconut related related oil subject subject to the miller' miller's tax of 3%. Petiti Petitione onerr also also manufa manufactur ctures es lard, lard, detergent and laundry soap subject to the sales tax of 10%. In 1986, petitioner purchased a specified number of containers

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and packaging materials for its edible oil from its suppliers and paid the sales tax due thereon. After an investigation conducted conducted by respondent's respondent's Revenue Examiner, Examiner, Assessment Assessment Notice No. FAS-B-86-88-001661-001664 dated April 22, 1988 was issued against petitioner for deficiency miller's tax in the total amount of P1,575,514.70. On June 29, 1988, CENVOCO filed with CIR a letter dated June 27, 1988 requesting for reco recons nsid ider erati ation on of the the abov above e defic deficie ienc ncyy mill miller er's 's tax tax assessments assessments,, contending contending that the final provision provision of Section 168 of the Tax Code does not a apply to sales tax paid on containers and packaging materials, hence, the amount paid therefor should have been credited against the miller's tax assessed against it. CIR contends that Sec. 188 of the Tax Code provides that sales, miller's or excise taxes paid on raw materials or supplies used in the milling process shall not be allowed against the miller's tax due. Issue: WoN the sales tax paid by CENVOCO when it purchased containers and packaging materials for its milled products can be credit credited ed against against the defici deficiency ency miller’s miller’s tax due thereon Held: Yes, it can be credited against the deficiency miller’s miller’s tax tax due due ther thereo eon. n. The The law law reli relied ed upon upon by the the BIR BIR Commissioner Commissioner as the basis for not allowing Cenvoco's tax credit is just a proviso of Section 168 of the old Tax Code. The restriction restriction in the said proviso, proviso, however, is limited limited only to sales, miller's or excise taxes paid "on raw materials used in the the milli milling ng proc proces ess" s".. Under Under the the rules rules of stat statuto utory ry construction, exceptions, as a general rule, should be strictly but reasonably construed. They extend only so far as their language fairly warrants, and all doubts should be resolved in favor of the general provisions rather than the exception. Where Where a gener general al rule rule is esta establ blis ishe hed d by statu statute te with with exceptions, exceptions, the court will not curtail curtail the former nor add to the latter by implication. implication. The exception exception provided for in Section Section 168 of the old Tax Code Code should should thus be strictly strictly construed. Conformably, the sales, miller's and excise taxes paid on all other materials (except on raw materials used in

the milling milling proces process), s), such as the sales taxes paid on containers and packaging materials of the milled products under consideration, may be credited against the miller's tax due therefor. It is a basic rule of interpretation that words and phrases used in the statute, in the absence of a clear legislative intent to the contrary should be given their plain, ordi ordinar naryy and and comm common on usag usage e or meani meaning ng.. From From the the disquisition and rationalization aforequoted, containers and packaging packaging materials materials are certainly certainly not raw materials. Cans and tetrakpaks are not used in the manufacture of Cenvoco's finished products which are coconut, edible oil or coprameal cake. cake. Such Such fini finish shed ed prod produc ucts ts are are pack packed ed in cans cans and tetrapaks. It bears stressing that tax burdens are not to be imposed or presumed to be imposed beyond what the statute expressly and clearly imports, tax statutes being construed strictissimi juris against the government.

CIR vs Fireman’s Fund (G.R. No. L-30644 Mar 9 , 1987) There is no justification for the government which has already realized the revenue which is the object of the imposition of subject stamp tax, to require the payment of the same tax for the same documents. Enshrined in our basic legal principles is the time honored doctrine that no person shall unjustly enrich himself at the expense of another. It goes without saying that the government is not exempted from the application of this doctrine.

From From January January,, 1952 1952 to Decemb December, er, 1958, 1958, herein herein privat private e respondent respondent Fireman's Fund Insurance Insurance Company Company entered into variou variouss insura insurance nce contra contracts cts involv involving ing casualt casualty, y, fire fire and marine risks, for which the corresponding insurance policies were were issued. issued. From January January,, 1952 1952 to 1956, 1956, docume documentar ntaryy stamps were bought and affixed to the monthly statements of polici policies es issues issues;; and from from 1957 to 1958 1958 documen documentar taryy stamps were bought and affixed affixed to the corresponding corresponding pages of the policy register, instead of on the insurance policies issued. On July 3, 1959, respondent company discovered that its monthly statements of business business and policy policy register register were lost. The loss was reported to the Building Administration of Ayala Building and the National Bureau of Investigation on

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 Tax 1 Lex Talionis Fraternitas Inc. July 6, 1959. Herein petitioner was also informed of such loss by respondent company, through the latter's auditors, Sycip, Gorres and Velayo, in a letter dated July 14, 1959. After conducting an investigation of said loss, petitioner's examiner ascertained ascertained that respondent respondent company failed to affix the required documentary stamps to the insurance policies issued by it and failed to preserve its accounting records within the time prescribed by Section 337 of the Revenue Code by using loose leaf forms as registers of documentary stamps without written authority from the Commissioner of Internal Revenue as required by Section 4 of Revenue Regulations No. V-1. As a consequence of these findings, petitioner, in a letter dated December 7, 1962, assessed and demanded from petitioner the payment of documentary stamp taxes for the years 1952 to 1958 1958 in the the tota totall amoun amountt of P 79,8 79,806. 06.87 87 and plus compromise penalties, a total of P 81,406.87.

and paid for by the respondent Company. Neither is there any argument that the same were cancelled as required by law. It is a general rule in the interpretation of statutes levying levying taxes or duties, that in case of doubt, such statutes statutes are to be construed most strongly against the government and in favor of the subjects or citizens, because burdens are not to be imposed or presumed to be imposed beyond what stat statute utess expr expres essl slyy and and clear clearly ly impo import rt.. Ther There e is no justificatio justification n for the government government which has already realized the revenue which is the object of the imposition of subject stamp tax, to require the payment of the same tax for the same documents. Enshrined in our basic legal principles is the time time honore honored d doctri doctrine ne that that no person person shall unjust unjustly ly enrich himself at the expense of another. It goes without saying saying that the governmen governmentt is not exempted exempted from from the application of this doctrine.

Issue: WON respondent respondent company may be required to pay again the documentary documentary stamps it has actually purchased, affixed and cancelled Held: No, as correctly pointed out by respondent Court of Tax Appeals, under the National National Internal Revenue Code, documentary documentary tax is deemed paid by: (a) the purchase purchase of documentary stamps; (b) affixture of documentary stamps to the document or instrument taxed or to such other paper as may be indicated by law or regulations; and (c) cancellation of the stamps stamps as requir required ed by law. law. It will be observed observed however, that the over-riding purpose of these provisions of law is the collectio collection n of taxes. taxes. The three steps abovementi men tion oned ed are are but but the the means means to that that end. end. Thus, Thus, the the purchase of the stamps is the form of payment made; the affixture thereof on the document or instrument taxed is to insure that the corresponding tax has been paid for such document while the cancellation of the stamps is to obviate the possibility that said stamps will be reused for similar documents for similar purposes. In the case at bar, there appears to be no dispute on the fact that the documentary stamps corresponding to the various policies were purchased

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 Tax 1 Lex Talionis Fraternitas Inc. refinanced refinanced the matured obligation obligation and granted granted 3 foreign foreign currency denominated loans. Apart from interest, there are additional charges and penalties in case of default. After 10 years, DBP initiated for forclosure of mortgaged prop and the balance shoot up to P63M. Resp claim that reason for nonpayment is because because financial financial rehabilitatio rehabilitation n from a contract contract with the military didn’t push thru. Issue: WON the resp can claim without fault in default of the non-happening of the contract with the military. Held: NO. DBP is no party to resp and AFP’s contract. Resp can claim from AFP but without prejudice to its contract with DBP. DBP has given Resp all the possible options for payment. Source: Contract II. NATURE AND EFFECTS OF OBLIGATION A. Obl Obliga igation tion to giv give e

Held: The contract contract is deemed rescinded. rescinded. Rescission Rescission a relief allowed for protection of one of the contracting parties parties and even 3rd persons from injury or to protect some incompatible and prefe preferr rred ed right right by the cont contra ract ct.. Mayfa Mayfair ir has the the opportunity to negotiate. Dete Determ rmin inat ate e Thin Thing: g: Ther There e is a prob proble lem m beca becaus use e determination cannot be made bec prop is indivisible. You canno cannott pinp pinpoi oint nt whic which h is the the 25% of the the prop proper erty ty.. Determination of the exact portion of the building. De Leon vs. Soriano—bigyan ng palay si nanay.

Natural children of Soriano agreed that they are to deliver certain number of cavanes of palay each year to Soriano and shall only cease upon death of mother. But deliveries were of 3,400 cavanes and children claimed that due to Huk troubles in Central Luzon. Issue: WON inability to deliver was permissible due to force majeure

1. Det Determ ermina inate te Thi Thing ng

Extinguised based on delicts. Art. 89(1) of RPC, death of convict occurs before final judgment, extinguished. But only criminal liability is extinguished and also the civil liability directly directly arising from and based solely on offense. Claim for Civil liability survives if the same may also be predicated on a source of oblig other than delict. Source: Crimes or Delicts. Acts or omission. DBP vs CA –Restructuring of Debt

DBP granted PHUMACO and PHILICO an industrial loan for P2.5M, P2.5M, 2M in bonds bonds and 500k in cash. cash. Promis Promissor soryy note note executed executed and a mortgag mortgage e over over their their presen presentt and future properties. DBP granted another loan of 1.7M reflected in the amended mortgage contract. contract. After 7 yrs the outstanding outstanding balance was restructured bec Resp failed to pay. Resp still fail failed ed to pay pay under under the the rest restru ruct ctur ured ed paym payment ent.. DBP DBP

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Equatorial vs. Mayfair—Right of First Refusal

Carmelo owned a parcel of land with 2-storey building and leased said portions to Mayfair. On their contract, stipulation that Mayfair has 30-day exclusive option to purchase purchase the same should the lessor decide to sell the leased premises. But Carmelo Carmelo wanted wanted to sell sell the whole proper property. ty. He sold sold entire prop to Equatorial. Mayfair filed for annulment of sale bec of lack of consideration. Mayfair claimed that he told Carmelo that it is willing to purchase the same and that it has the right of first refusal. Issue: WON the sale can be nullified because of Mayfair’s action

Held: No. The object to be delivered was generic and set no bounds or limits to the palay to be paid. Any palay of the same quality can replace. Impossibility must consist in the nature of the thing to be done and not the inability of the party to do it.

Norkis vs. CA—Ako ang bumili ng motor i ba ang gumamit.

Nepales bought a motorcycle from Norkis and issued a chattel mortgage in favor of DBP. Invoice was issued and motorcycle was was regi regist ster ered ed by Nork Norkis is evid evidenc enced ed by rece receip ipts ts of registration. Motor was delivered to a certain Julian Nepales and an accident happened while being driven by a certain Payba. Norkis claims it cannot be held liable since ownership

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 Tax 1 Lex Talionis Fraternitas Inc. was already transferred to Nepales evidenced by the receipts and the invoice.

2. Generic Thing

car was carnapped carnapped while being road-tested. road-tested. Resp claims force majeure.

Norkis vs. CA

Issue: WON ownership was transferred to Nepales.

Issue: WON Resp will be liable for the carnapping. Generic thing: motorcycle

Held: No. No actually actually delivery nor constructiv constructive e one. The receipts of reg fees and the invoice is nothing but a detailed statement of the nature and quantity sold and not a bill of sale. Intent considered. Intent was not to transfer ownership but to facilitate execution of chattel mortgage.

PLDT vs. Jeturian—Pension bago gera.

PLDT adopted in 1923 a Plan for Emloyees Pension. In 1945 the BOD adopted a resolution discontinuing the pension plan. Hence this action of Resp.

Determinate Thing: The motorcycle was a generic thing. (?) Heirs of Juan San Andres vs. Rodriguez—Binili ko na ang nakapaligid na lupa.

JSA sold 345 sqm lot to Rodriguez. There was a deed of sale. JSA died and Rodriguez appointed administrator. The heirs engaged services of a geodetic engg and found out that resp has encroached the lot by 509 sqm. They sent letter to vacate. Resp claimed they bought the said portion of the lot the ff day when they first bought the 345 sqm lot. Proof of sale sale was was atta attache ched d and and that that paya payabl ble e in 5 year years. s. Resp Resp deposited the balance in court. Issue: WON there was a contract of sale. Held: Yes. There was a contract of sale which transferred the ownership to resp. Pet claimed that the object cannot be determined with sufficient certainty. Court held that it is capable of being determined w/o need for new contract and the receipts showed that payment was to the lot adjoining the prev paid paid lot lot on thre three e sides sides thereo thereof. f. The land is determinate determinate or determinable. determinable. Ownership transferred transferred by constru constructi ctive ve delive delivery ry which which is the executi execution on of public public document. Determinate Thing: The lot.

Issue: Issue: WON the pre-wa pre-warr employ employees ees are entitle entitled d to the pension. Held: Yes. But with the exception of those who died or left before the outbreak of the war. The pension plan was not a gratui gratuity ty but an induce inducement ment for employ employees ees to contin continue ue indefi indefinit nitely ely in servic service. e. The plan plan ripened ripened into a binding binding contract contract upon its implied implied acceptance of the employees. Acceptance is inferred from their entering the employ of the company company and staying staying after the plan was made known. PLDT argues that it can only be held liable under the conditions expressly set in the pension plan. But the Court held that the Company that violated the contract with its employees, by discontinuing the plan without their consent, is not in the position to insist upon the terms of the very contract they have breached.

Held: Yes. It was due to negligence premised on delay which is the the basi basiss of the the comp complai laint. nt. Carn Carnapp apping ing canno cannott be considered considered as fortuitous. fortuitous. It must be proved proved and established that it is an act of God. No other evidence but the police report. Even when Pet agreed to resked repair, can’t be taken as waiver bec he really has no other choice but to leave it since he can’t have it run. 3. Effect of Loss Bunge vs. Camenforte—Copra ko sa’yo binenta ko.

Plaintiffs filed to recover certain damages from the def bec of the latter’s failure to deliver Phil copra they agreed to deliver. A contract was entered into where the VPC sold 500 tons of Phil Copra to BC. The vendor would ship the copra to USA but even with demands, failed to do so. The vendee however believed in good faith that it shall be delivered so it sold the expected copra to EDOW. Bec vendor failed, vendee suffer suffered ed damages damages.. VPC denies denies contra contract ct and said said that Vicente, the manager who contracted had no authority to do so. Force majeure is also claimed since a storm destroyed the bodega. Issue: WON VPC is held liable.

CO vs. CA—pinagawa kong kotse, na-carnap.

Pet entruste entrusted d his car to Resp Resp to make same job repair repair services and supply of parts which was to be returned after 3 days as per the contract. Pet paid in full. After 3 days the vehicle can’t still be released due to failed battery so pet bought battery. When Pet was about to get it, resp said the

Held: Yes. Subject matter is Phil Copra, does not refer to any particular particular or specific specific copra. Since generic, obligation obligation can’t be deemed extinguished by the destruction/disappearance. Obligation subsists as long as commodity is available. Pet can also sell the copra which they expect to acquire in the future for purposes of speculation. Effect: Subsistence of obligation since generic object.

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 Tax 1 Lex Talionis Fraternitas Inc.

Ocena vs. Jabson—subdivision na kontrata, maling akala.

Resp filed a complaint for modification of the terms and conditi conditions ons of its subdiv subdivisi ision on contra contract ct with with petiti petitioner oners. s. All Allegat egation ionss are that that price price in oil and deriva derivativ tives es have have increased, increased, not within within the control control of the plaintiff. plaintiff. It will cause unjust enrichment to the pet. In the contract, the pet are guaranteed as landowners and that they will receive 40% of all cash receipts from the sale of the subdivision lots. Resp hinged their argument on 1267 when the service has become so difficult beyond contemplation, release from obligation. Issu Issue: e: WON WON there there is a suff suffic icie ient nt caus cause e of acti action on for for modification of the subdivision contract.

demand if unsold. The rings were not sold nor returned after demand. Thus this action. Issue: WON the contract was of sale or agency. Held: Of agency. There is no evidence that would tell that is was of sale. Their contract’s stipulation does not show it was of sale. Although resp was willing to give a different object, the debtor cannot cannot compel compel the credit creditor or to receiv receive e a diff diff object. To do: Deliver the rings, the specific rings.

**Woodhouse vs. Halili—Mission Softdrinks

P and D entered into an agreement that they will form a partner partnershi ship p for the bottli bottling ng and distri distribut bution ion of Missio Mission n softdr softdrink inks, s, P as manager manager and D as capita capitalis list. t. When the bottli bottling ng plant plant was in operat operation ion P wants wants to execute execute the partnership papers but D refuses. D claims that he was made to believe that P has the exclusive ownership of the bottling franchise. Issue: Issue: WON the misrep misrepres resenta entatio tion n of P can vitiate vitiate the contract.

Chavez vs. Gonzales—Dahil sa typewriter.

Held: No. Although P was guilty of misrepresentation, it was not the causal consideration or the principal inducement that led defendant defendant to enter into the partnersh partnership. ip. D may not be compelled to carry out the agreement which is to execute the partnership papers. papers. The defendant has obligation obligation to do and not to give. The D reduced the percentage of P from 30% to 15% bec of his misrepresentation.

Held: Held: No. Cited article article does does not grant the courts courts this authority to remake, modify or revise the contract. Their contract has a force of law and should there be substitution or modification, it should be amongst the parties themselves. A showing showing of mere inconvenience, inconvenience, unexpected unexpected impediments or increased expenses is not enough. Equity cannot relieve from bad bargains simply bec they are such.

P delivered to D a typewriter for D to repair. D was not able to repair the typewriter and asked for P6 for spare parts. parts. P went to D and demanded the typewriter which D gave in a wrapped package. When P opened it at home, he saw that the typewriter had missing parts and found it in shambles. P demanded missing parts, interior cover and P6. P brought it to a diff repair shop and spent P89.95. P filed for payment of P90 and damages.

Effect: The contract has the force of law.

Issue: WON D is liable for damages.

Ong vs. Bognalbal—She wants her Kenzo Tiles, now na.

Held: Yes. 1167 states that when a person is obliged to do something and fails to do the same, it shall be executed at his cost. What is poorly done be undone. D claims no period but Court held that fixing a period would only be a mere formality formality and would serve no purpose than to delay. Liable under 1170.

Bognal Bognalba ball was was an arch archit itec ectt hire hired d by Ong Ong who who was was a businesswom businesswoman an to construct her boutique. boutique. Bog agrees to furnish labor within 45 days and owner to pay every 2 weeks based on the accomplishment of work value. 4 th billing came and Ong refused to pay but reason was not clear on the record. She wanted to change Vinyl tiles to Kenzo flooring. Ong claimed Bog abandoned job. Issue: WON Bog be liable for abandoning job.

B. Ob Obli liga gatio tion n to do do Hahn vs. CA—I want these diamond rings.

To do: Specific performance – repair typewriter. Santos received 2 diamond rings with a total amount of 47K. She issu issued ed sepa separa rate te rece receip ipts ts ther theref efor ore e in whic which h she she acknowledged acknowledged that they have been delivered by Letty Hahn for sale on commission and that they would be returned upon

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Oceana vs Jabson—subdivision kontrata, maling akala.

To do: do: To give 40% of the the cash cash receip receipts ts from from sale of subdivision lots.

Obligation to do: Execute partnership contract.

Held: No. He is not liable but is not justified for doing so. 1191, it was a reciprocal obligation and there is power to rescind it in case one doesn’t comply with what is incumbent upon upon him. him. But this this articl article e should should be judici judicially ally invoked. invoked.

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 Tax 1 Lex Talionis Fraternitas Inc. Nova Novati tion on is not pres presum umed. ed. Ther There e must must be an expre express ss stipulation. Novation a. change of obj or principal conditions, b. substituting person of debtor c. subrogating 3 rd person in the rights of creditor. Liability is on the first infractor, 1192. There has been no contract novation that required Bog to finish the Kenzo flooring before the 4 th billing shall be paid. 1186. Condition shall be deemed fulfilled when the obligor voluntarily prevents the fulfillment. To do: Pay 4 th billing. (Reciprocal-di mo ginawa di ko rin gagawin-pero sabi nga ng court hindi pa rin yun justification, but only the first infractor shall be liable). C. Obl Obliga igation tion not to do do Fajardo vs. Freedom to Build—Wag dagdagan kung hindi bawasan!

FTB, owner-developer and seller of low-cost housing, sold to petitioner-spouses a house and lot. Restrictive covenant was contained in the contract, easement. No upward and front expansion which is contained in their Transfer Certificate. Pet’s Pet’s childr children en are to wed so extende extended d their their house house thus contravening contravening the terms of contract. contract. Pet filed, demolish demolish the unauth structures. Issue: WON resp has the auth to ask for demolition since ownersh ownership ip alread alreadyy transf transferr erred ed to the prop prop owners owners or homeowners association. Held: Yes. Restrictive Restrictive covenant covenant should should still be followed. followed. Although Although courts generally view restrictiv restrictive e covenant covenant with disfavor disfavor but sustain sustain them if reasonable, reasonable, not contrary contrary to public policy, law etc. Intent of developer was to provide safety, aesthetic and decent living conditions and prevent overcrowding. overcrowding. Art. 1168, when ob consists consists in not doing, obligor obligor does what was forbidden, forbidden, shall be undone at his expense.

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Not to do: Expand structures of house. D. Eff Effect ect of Bre Breach ach 1. Del Delay ay in Per Perfor forman mance ce Villaruel vs. Manila Motors—Kasalanan ng lawyer, naningil ng renta nung may gera.

Manila Motors and Villaruel entered into a contract whereby the former agreed to convey by lease to the latter some premises. The term of lease is 5 years. The premises were invaded by the Japanese and then the American occupied the same same buildi building. ng. The occupan occupants ts paid paid the same rate rate as the defendants after which they have vacated the premises. Def renewed contract for addtl 5 yrs. Pet, as per his lawyer’s advise, demanded for rental from the Def for the period when the Jap and the Americans occupied the premises. The premises was set on fire and the reason was unknown. Issue: WON Pet has power to demand rentals and recover the same due to default. Held: No. Art. 1554 of CC of Spain states the duties of a lessor. A. deliver to the lessee the subject matter b. make thereon, during the lease, all repairs necessary and maintain servic serviceabl eable e condit condition ion c. maintai maintain n lessee lessee in peaceful peaceful enjoyment of lease. 1560, lessor shall not be liable for any act of mere disturbance disturbance of 3 rd person but lessee would have direct action against trespassers. trespassers. No lessee would agree to pay rent for premises he could not enjoy. Delay in performance: It was the creditor who was in default or delay when it refused to get the payment given by the resp. Lopez vs. Tan Tioco—Ibenta mo ang asukal pag sinabi kong ibenta mo.

Lopez and Tan Tioco entered into a verbal contract that she’ll deliver deliver certain sugar to Tan Tioco which he obligated obligated himself to store until he receives instructions from her to sell them. She delivered the piculs of sugar and instructed to sell in on Sept 1904 but def did not do so. Pet filed action. Def denies allegations. Issue: WON the defendant was in default. Held Held:: Yes. Yes. He was was in defa default ult from the time time the the Pet Pet demanded to deliver or do something, or the fulfillment of the obligation. Neither the contract nor the law demands to make judicial demand than extrajudicial. The price of the sugar should be from the time she instructed instructed the def to sell them. Delay Delay in Perfor Performan mance: ce: Delay in selling selling the sugar sugar upon upon instructions. Dela Rosa vs. BPI—Atat BPI—Atat sa announcem announcement ent ng winners winners ng design contest.

BPI held this contest of designs and plans for the construction of a building. Prizes would be awarded not later than Nov. 30, 1921. Plaintiff took part in the said contest and after the date stipulated, the bank didn’t award prize nor made any announcement. Plaintiff filed. Issue: WON BPI was in default when it did not release the announcement on the date stipulated. Held: The bank cannot be held in default through the mere lapse of time. Plaintiff Plaintiff never demanded from bank and just filed the case in Court. A binding obligation may originate from from advert advertise isement mentss addres addressed sed to the gene general ral public public.. Demand will not be necessary only in certain conditions, but demand is indispens indispensable able as a general rule. Plaintiff Plaintiff has no cause of action bec he alleges that the contest didn’t push

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 Tax 1 Lex Talionis Fraternitas Inc. thru but in consideration of the evidence, the materials are on their way to New York and were sent to a technical committee. Delay: Bank was not in default. No demand. Lizares vs. Hernaez—Camarin was burned and l essee won’t pay.

Lizares Lizares and Hernaez Hernaez entered into a contract, contract, the former became the lessee of the two haciendas. Pet used one of the improvements improvements there which was a roofed roofed camarin used in manufacture of sugar. A fire occurred and destroyed the camarin camarin.. Pet demand demanded ed from from Def that he recons reconstru truct ct camarin. Def refused. Pet did not pay the rentals bec of nonconstruction of the camarin. Def claims Pet should be liable for the fire since he is the lessee when the fire occurred. Issue: WON plaintiff has responsibility to the damages caused by fire. Held. No. And so is the def. Force Majeure. But the plaintiff is in default default with regard to the non-payment non-payment of rentals due to nonnon-co cons nstr truc ucti tion on of cama camari rin. n. Alth Althoug ough h ther there e is presumption presumption against lessee when loss in the leased prop occurs, proof is necessary to prove he is not responsible. 1183. When a thing is lost while in the possession of the debtor, debtor, it is presumed that it loss occurred by his fault and not by fortuitous even in the absence of the contrary. Delay: Not in the Def for non-construction but in Plaintiff in non-payment of rentals.

Bachrach Bachrach Motor vs. Lee Tay—Kinuha Tay—Kinuha ng Kano ang truck niya, ayaw na niyang magbayad.

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Def executed and delivered to the plaintiff a promissory note payable in installments which represents the balance of one white chasses purchased by def from pet. The truck was delivered to the def. After the outbreak of war, the truck was one of the trucks trucks that that were were command commandeer eered ed by the USAFEE. Neither the plaintiff not def filed an official claim from the US govt.

after delivery to the buyer shall be borne by the buyer. Exempti Exemptions ons from from liabili liability ty due to fortuit fortuitous ous event: event: 1. determinate thing (in the present case, pecuniary in nature) 2. No stipulation holding him liable even in case of fortuitous

Issue: WON the commandeering of the truck exempts the def from payment of the obligation obligation represented represented by the prom note.

Equatorial vs. Mayfair—right of first refusal

Held: No. There is no principle of law by which the obligation was extinguis extinguished hed.. The interes interestt was not reduced reduced due to suspension since the pet was generous enough to compute only from 1948, the truck was commandeered in 1941. Def could have filed a claim from the US govt and he would have been paid but he failed to do so.

Delay: Non-payment of balance.

Delay: ***By ***By not giving to Mayfair the 30-day period of which it is entit entitled led to exer exerci cise se righ rightt of firs firstt refus refusal al upon upon communication of Carmelo that he would sell the property. Co vs. CA--carnap

Delay: Delay in delivering the car to Co after demand which is the premise of negligence of resp.

Delay: Non-payment of the prom note.

Aerospace vs. CA—Sulfuric Acid na ayaw pang kunin.

Lawyer Lawyerss Coop Coop Pub vs. Tabora Tabora—bu —bumil milii ng law books, books, nasunog.

Pet purchased from resp Philphos 500 MT of Sulfuric Acid. In their contract it was pet’s responsibility to get the acid from resp. Philphos Philphos demanded demanded that pet get the acid and pet chartered chartered a vessel vessel MT Sultan but the vessel was not able to get the whole volume bec it tilted. Resp sent a demand letter that the acid should be emptied or else petitioner will be liable for the storage and other incremental expenses if pet fails to do so. Pet chartered MT Sultan again but it tilted so never gotten the whole volume. Chartered another vessel Don Victor and asked Resp to deliver additional orders. Resp did not do so unless the remaining acid be emptied and that pet pet pay pay the the main mainte tenan nance ce and and stor storag age. e. Pet Pet file filed d and contended Resp is in default.

Tabora bought books from Pet and made partial payment. It was delivered to his law office. On the same date, a fire broke out in the office and destroyed destroyed the building including the books. Def doesn’t want to pay balance since the books were loss due to force majeure and the ownership has not been transferred to him yet. Issue: WON force majeure can be claimed by defendant from his non-fulfillment of obligation. Held: No. Ownership was already transferred to the buyer. Although there has been an agreement that the ownership shall remain with the seller until the price has been fully paid, it was only for the security of payment but in the very contract in was expressly agreed that the loss or damage

Issue: WON the Resp is in default. Held: No. The obligation to withdrew the 500MT of H2SO4 before Aug. 1989 and the resp was already ready to deliver deliver

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 Tax 1 Lex Talionis Fraternitas Inc. the same but it was Plaintif Plaintiff’s f’s fault for not charterin charteringg another another vessel vessel which which has the capaci capacity ty to withdr withdraw aw the volume. It has the duty of emptying the acid. Pet claim that it was due to a storm that’s why it can’t empty the storage but evidence proved that it was of the incapability of the vessels. There was an obligation on the pet to empty the storage. They were the ones in delay. Delay: Pet for not emptying the storage.

Delay: Non-payment of availement of accommodation. 2. Non-fulfillment Chavez vs. Gonzales

Non-fulfillment: The typewriter was not fixed. Telefast vs. Castro—dahil sa telegrama, mag-isa lang nang ilibing ang mama.

Selegna vs. UCPB—credit facility which ballooned.

Selegna, rep by spouses Edgardo and Zenaida Angeles were granted a credit facility for P70M by UCPB. As a security, pet executed real estate mortgages over several parcels of land. Pet also executed prom note every time they avail of credit facility. facility. In their credit agreement, it was stipulated stipulated that failure failure to pay any availm availment ent of the accomm accommoda odatio tion n or interest interest or any sum due shall constitute constitute an event of default which shall allow resp bank to declare as immediate and payable all outstanding outstanding availments together with accrued accrued interest. interest. Pet increased increased credit facility facility and they agreed to 21.75% interest interest per annum. Demand letters were sent upon failure to pay. Pet paid 10M as partial payment of accrued interes interest. t. UCPB UCPB applie applied d for extraextra-jud judici icial al forecl foreclosu osure re of petitio petitioners ners mortgag mortgaged ed proper properties ties.. The obliga obligatio tion n has ballooned ballooned to 132M and pet alleged that 10M as payment had the effect of updating and thereby averting the maturity of the obligation. Issue: WON the Pet were in default. Held: Yes. The contract is the law and the resp is justified in invoking the acceleration clause declaring the entire oblig due and payable. payable. The resp had the right right to foreclose foreclose the mortgages mortgages extra-judic extra-judicially. ially. Failure to furnish furnish a detailed detailed stat stateme ement nt of acco account unt does doesn’ n’tt ipso ipso fact facto o resu result lt in unliquidated obligation. Pet was in default.

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Issue: a. WON agreement to construct windmill included in the installation of a deep well. b. WON the pet is under the obligation to reconstruct the windmill.

Consolacion Bravo-Castro died in Pangasinan and on the same day the daughter sent a telegram to the US to inform the other siblings and dad about death of Mom. The Mom was interred by daughter alone. When she came back to the states, she found out that the telegram never reached her siblings. siblings. Telefast Telefast claimed force majeure majeure bec of technical technical and atmospheric factors but no evidence to support. Issue: WON force majeure applies. Held: No. No evidence to support. And even so, def should have have inform informed ed the plainti plaintiff ff that that it cannot cannot transm transmit it the telegra telegram. m. 1170 1170 and 2176, guilty guilty of fraud, fraud, negligenc negligence e or delay. 2217 for moral damages. Non-fulfillment: Sending of telegram. Tanguiling vs. CA—windmill na nasira sa wind.

A case involving proper interpretation of contract. JMI Engr and GM proposed proposed to resp Vicente to construct construct windmilling windmilling system for him. They agreed on the construction for P60K. P30K P30K DP and P15K instal installme lment. nt. Vincent Vincente e didn’t didn’t pay the remaining P15K bec he paid it to SPGMI who constructed the deep well to which the windmill would be attached. And even assuming that he owes pet P15K, it should have been offset by the collapse after a strong wind.

Held: a. No. It was not included in the agreement. Intention of the parties must be accorded primordial consideration and in case of doubt, contemporaneous and subsequent acts shall be principally considered. b. Yes. Pet claimed there is a strong wind but this is actually necessa nece ssary ry for the windmi windmill ll to turn. turn. It was just newly newly constructed, it should have not collapsed. Non-fulfillment: Payment of last installment. Perez vs. CA—niloko CA—niloko yung businessma businessman n at pinaalaga pinaalaga ang fishpond.

Juan Perez usufructuary of a parcel of land called Papaya Fishpon Fishpond d with with other other usufru usufructu ctuari aries. es. The usufru usufructu ctuari aries es entered into a contract leasing the fishpond to Luis Keh for a period of 5 years. The contract states that the lessee cannot sublease the fishpond nor assign his rights to anyone. But Crisostomo was persuaded by the pet Keh to take over the Papaya Papaya fishpo fishpond nd bec Cris Cris is a busines businessma sman. n. Execute Executed d a written agreement. Cris even paid the rentals until 1985, 10 years of taking care of the fishpond. In 1979 however, pet with with armed armed men went to fishpon fishpond d and showed showed that that Keh surrendered the fishpond to the usufructuaries. Issue: WON the resp is a sublessee of Keh which is barred by the lease contract. Held: Yes. He was a sublessee. But Perez and his counsel knew and acquiesced to that arrangement by their act of receiving from the resp rentals evidenced by the receipts which puts the pet in estoppel—which arises when one by his acts and representations and admission or by his own silence

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 Tax 1 Lex Talionis Fraternitas Inc. when he is oblige obliged d to speak speak out, out, intenti intentiona onally lly or thru thru culpable negligence induces another to believe certain facts to exist and such other rightfully relies and acts on such beli beliefs efs so that that he will will be prej prejudi udiced ced if the the form former er is permitted to deny the existence of such facts. 1168: Oblig is in not doing and obligor has done what is forbidden, shall be done at his expense. Non-fu Non-fulfi lfillm llment: ent: of the obligatio obligation n not to do which is to sublease the fishpond. 3. Fraud Board of Liquidators Liquidators vs. Heirs of Maximo Maximo Kalaw—Copr Kalaw—Copra a Trading, hindi na kelangan ng pirma ng Board of Directors.

Fraud: Fraud: There There is no fraud fraud becaus because e Kalaw Kalaw didn’t didn’t need the Board’s approval due to practice of trade. No negligence too on his part. ICB vs. Gueco—Joint Motion to Dismiss for the car.

Gueco spouses obtained a loan from UPC to purchase car and execu executed ted prom prom note note whic which h were were paya payabl ble e in mnth mnthly ly instal installmen lments ts and chattel chattel mortgag mortgage e over over car to serve serve as security security over the notes. Spouses defaulted in payment. payment. The payment was lowered but still no payment. Car was detained inside inside the bank’s bank’s compou compound. nd. Gueco went went to bank bank and negotiated and issued a manager’s check. But car was not released bec Gueco doesn’t want to sign Joint Motion to Dismiss claiming not in the contract that they have to sign.

Action against owners and operators of the commom carrier known as the Phil Rabbit Bus Lines filed by one passenger and the heirs of another who were injured as a result of the fall into a river in which they were riding. The mother of the pet drowned and the son Necessito was injured. Issue: WON the carrier is liable for damages. Held: Yes. Although resp claims that force majeure since knuckles were the reason for the accident and they have inspected inspected the knuckles, knuckles, does exercised diligence. Carrier claims claims liabil liability ity of manufac manufactur turer. er. Court Court said said that the inspec inspectio tion n done was merely merely visual visual and not meeting meeting the requirement of expected due diligence. Negligence: In not exercising the proper diligence required.

Nacoco is for the protection, preservation and development of the coconut industry. Kalaw is the manager and board chairman. Nacoco embarked on copra trading activities, thus entering into contracts. contracts. For 3 years, profited profited 3M but after 4 typhoons, typhoons, left the coconut lands devastated devastated throughout the country. It was not able to fulfill the contracts it has engaged in. Nacoco paid damages to one of the parties. Nacoco Nacoco now sues Kalaw for having approved the contracts. Issue: WON Kalaw is guilty of negligence for entering into contracts without prior approval of the Board of Directors. Held: Held: No. Consid Considerat eration ion of practi practice. ce. Corpor Corporate ate office officerr entrusted with the gen management and control of business has implied authority to make any contract or do other act wichi wichi is nece necessa ssary ry or approp appropria riate te to the conduc conductt of the ordinary business of the corporation. But there is a citation on the Nacoco’s by-laws requiring prior directorate approval of Nacoco contracts. Court considered practice of trade of short-sellling or forward sales. Prev contracts without prior auth from Board. And evidence showed that Kalaw actually handled the corp well for it to profit. Force majeure reason.

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Issue: WON the bank in not informing the spouses to sign motion to dismiss liable for damages for not releasing car. Held: No. Joint Motion to Dismiss for the spouses’ benefit and not for the bank. It would only state that the case would be dropped and that the spouses had fully settled his obligation thus thus the the dism dismis issa sall of the the case case.. Ther There e is no fraud fraud—n —no o intentional intentional and deliberate deliberate evasion of the normal fulfillment fulfillment of obligations. Fraud: In not stating that they have to sign Joint Motion to Dismiss but this is not considered Fraud. No intent and for the benefit of the Plaintiff.

4. Negligence Necessito vs. Paras—Knuckles killed the passengers.

5. Contravention of the tenor of the obligation Arrieta Arrieta vs. Naric—Burmese Naric—Burmese Rice, di naman naman pala kayang mag-open ng Letter of Credit.

Pet participated in the public bidding by Naric for the supply of 20K MT of Burmese rice. Her bidding being the highest, she was awarde awarded d the contract. contract. In 1952, 1952, entered entered into contract, Naric and Pet, sale of rice. Pet obligated herself to deliver to the latter the tons os Burmese rice and in turn corp corp has to pay for the importe imported d rice rice by means of an irrevocable irrevocable,, confirmed confirmed and assignable assignable letter of credit in US currency. It was only In July that def took first step to open letter of credit. Pet already made a tender to her supplier a 5% and this will be confiscated if L/C will not be received before Aug. 4. PNB informed Naric that L?C approved but has a condition that the 50% marginal cash deposit be paid. Naric was not in any financial position to meet the condition and wrote the pet about it. L/C was opened in Sept thus 5% deposi depositt was forfei forfeited ted.. When appell appellee ee failed failed to restor restore e cancelled Burmese rice she offered a sub but Naric rejected.

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 Tax 1 Lex Talionis Fraternitas Inc. Issue: WON Naric should be liable for damages. Held: Yes. Failure of the letter of credit to be opened in the contempl contemplated ated period period.. Immedia Immediate te cause cause of damages damages.. No necessary data but pet would not win bid had she not furnish them with it. Waiver bec Pet suggested suggested to sub it Thai rice. Waiver are not presumed. Express stipulation. Contravention: That Burmese Rice should be delivered and should not deliver another thing. Chavez vs. Gonzales

Contravention: That they agree that after 3 days, typewriter would be usable. E. Effect of fortuitous event Necessito vs. Paras

Effect Effect:: Not fortuit fortuitous ous since since knu knuckle ckless should should have have been inspected more than the visual inspection done. Ampang vs. Guinco—the bus that skidded.

Held: The accident was caused by an accident which was unforeseen and beyond the control of the company on its driver.

sugarcane during the 6 yrs of suspension was impossible of being performed. 6 yrs can’t be deducted from 30 yrs.

materials of inferior quality. Engr/archi will be held solidary liable if supervises construction.

La Mallorca vs. De Jesus—tire blow-out.

Fortuitous Event: Will not apply bec there is negligence.

Held: Cause of the blow-out was known. It was a mechanical defect of the conveyance or a fault in its equipment which was easily discoverable if the bus had been subjected to a more thorough or rigid check-up before it took the road that day. The bus was driving fast as was evidenced in the trial.

Austria Austria vs. CA—Naglakad CA—Naglakad mag-isa sa gabi, nanakawan nanakawan ng diamond pendant.

Nakpil Nakpil vs. CA—Eng CA—Engr/A r/Arch rchii pagguho ng bldg.

pati pati

Contra Contractor ctorss liable liable sa

Phil Bar Assoc decided to construct its building in INtramuros Mani Manila la.. Cons Constr truc ucti tion on was was un unde dert rtak aken en by UCCI UCCI on administrati administration on basis and the plans and specificat specifications ions of the buildi building ng were were prepar prepared ed by another another party Nakpil. Nakpil. It was completed in June 1966. In 1968, a strong earthquake hit Manila and building sustained major damages. As temporary remedy UCCI shoved up the building at its own expense. PBA commenced action against UCCI for the partial collapse of the building. Allegations were that there was a failure of the contractors to follow plans and specifications and violations by the defendants of the terms of the contract. Def then filed against 3rd party-archit party-architects ects who prepared prepared plans and specifications alleging collapse was due to the defect of it. Issue: WON UCCI and Nakpil be held liable.

Victoria Victoria Planters Planters vs. Victorias Victorias Milling—30 Milling—30 years years contract contract suspended due to Japanese Invasion.

Held: Held: 1174 reliev relieves es obligo obligorr from from fulfill fulfilling ing a contrac contractual tual obligation (fortuitous event). The stipulation in the contract that in the event of force majeure, the contract shall be deemed suspended during the said period does not mean that the happening of those events stops the running of the period agreed upon. It only relieves the parties from fulfilling their obligat obligation ion that time. time. To requir require e the pet to delive deliverr the

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Held: Yes. The case was referred to the Commissioner and found out that there were defects in plans and specifications and that that cont contra racto ctors rs fail failed ed to obse observ rve e requ requis isit ite e of workmanship and even the owners failed to observe requisite degree of supervision in the construction. Fortuitous even will not be applied applied bec there is negligence. negligence. 1723 will apply. Enginee Engineer/ r/ arch arch who drew up plans plans and spec liable liable for damages. Contractor liable if edifice falls within the same period on acct of defects in the construction or the use of

Abad acknowledged receiving from Austria one pendant with diamonds valued at P4,500 to be sold on commission basis or to be returned on demand. While walking home, Abad was robbed and her things were taken including pendant. Estafa. RTC ruled negligence. CA held that robbery was established, fortuitous event. Issue: WON Abad is liable for the loss of the pendant. Held: Held: No. It was undispu undisputed ted that Abad was a victim victim of robbery. robbery. Even when she walked alone at night knowing that she had with her the pendant and a large amount of money, the crimes then were not as prevalent as the present time. Fortuitous Fortuitous event: Robbery was unforeseen unforeseen and evidence established that it happened. Vasque Vasquez z vs. CA—sina CA—sinabi bi na sa captain captain na may bagyo, bagyo, tumuloy pa rin. Lumubog.

Pioneer Cebu left the port of Manila. The vessel encountered a typhoon and struck a reef and subsequently sank. Plaintiffs seek the recovery of damages due to the loss of children and other people due to voyage. There was a storm as def claims but it was established that the captain knew about it but still proceeded. Issue: WON fortuitous event shall be considered and exempt def from liability.

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 Tax 1 Lex Talionis Fraternitas Inc. Held: No. They already knew the risk they were taking. They already receive report of the typhoon but proceeded anyway. Def claim Art. 587 Code of Commerce, loss of vessel exempt liability. But it is cited there that the liability of the owner is limited limited to the value of the vessel vessel or to the insuranc insurance e thereon. It was held that the insurance of the vessel would be liable for the damages that the shipowner or agent be liable for the death of the passengers. Fortuitous Fortuitous Event: Will not apply bec captain had knowledge knowledge of the event thus making it not unforeseen. F. Usurious transactions Angel Angel Jose Jose Wareho Warehousi using ng Co vs. vs. Chelda Chelda—L —Loan oanss with with usurious interest, principal still enforced but interest not. (P20K+)

Angel Jose filed against Chelda, its capitalist partner for the recovery of the unpaid loans with legal interest and atty’s fees (P20K+). Def paid bal of P5.6K. Plaintiff charged and deducted from the loan usurious interest at the rate of 2% and 2.5% PER MONTH and consequently, as claimed by def should not be permitt permitted ed to recover recover under the law. RTCP1048.15 usurious interest which the payment was deducted from the interest and def claims that it should have been deducted from the principal obligation. Issue: a. WON in loans with usurious interest, the plaintiff may still recover the principal of the loan. b. WON the illegal illegal terms terms as to the paymen paymentt of interest interest renders nullity as to the payment of the principal debt.

b. Yes. Yes. Divisi Divisible ble contract, contract, that which which is illega illegall can be separated from legal ones and the latter may be enforced. Interest which would be allowed is the interest bec of delay and default due to the general provisions of the law. Usurious Usurious obligation: obligation: Principal only, usurious usurious interest interest not enforced. Briones vs. Cammayo—P1500 lang utang pero interest P3 00 per year-usurious.

Briones Briones filed against against Cammayo Cammayo to recove recoverr P1500. P1500. They executed a real mortgage as security for the loan of P1200 given by Cammayo upon usurious agreement and reserved to himself P300 payment of interest for a year. Plaintiff paid total sum of P330 but Cammayo refused to acknowledge it as payment for principal but for interest of loan for a year.

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Goldstar Minig vs. Lim Jimena—mining claims pinondohan, hindi na siya binayaran sa usapan.

Held: Yes. But only as to the principal. Ruling of Angel vs. Chelda.

Jimena lent to Lincallo money to purchase mining claims and they agreed that ½ f the proceeds shall be given to Jimena. Mining rights over part of the claim were assigned to Gold Star before WWII and copr paid Lincallo P5000 royalties. royalties. Lincal Lincallo lo entered entered contra contracts cts without without the knowledg knowledge e of Jimeana Jimeana.. Marque Marquezz contra contracte cted d with with Gold Gold Mining Mining and 45% should should go to Lincal Lincallo. lo. Another Another compan companyy contra contracte cted d and stipulated stipulated 43% would go to Lincallo. Jimena demanded part but he was not paid.

Usurious Usurious obligation: obligation: Principal only, usurious usurious interest interest not enforced.

Issue: WON Jimena has a cause of action against Gold Mine when it contracted only with Lincallo.

G. Presumption of interest and installments

Held: Yes. Art. 1177 provides provides that creditors creditors after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter (debtor) for the same purpose, save which are inherent inherent in his person. 1883: the principal principal may sue the person with whom the agent dealt with in his own name, when the transaction involves things belonging to the principal.

Issue: Issue: WON credit creditor or entitled entitled to collec collectt the princi principal pal obligation and interest.

***Hill vs. Veloso

***Vda De Ongsiako vs. Cabatuando

Held: a. Yes. Creditor may still recover principal of the loan. Loans with usurious interest interest are not totally void but only as to the the inte intere rest st.. Renunc Renuncia iati tion on of the the prin princi cipal pal woul would d extinguish extinguish accessory but waiver of the accessory accessory would not extinguish the principal.

product of such action, product action, and then obtain there therefrom from the satisfaction of his own credit. Double function: conserving the patrimony of the debtor by bringing into it property abandoned or neglected by him AND of making execution on such property effective thereafter. “Debtor’s debtor is my own debtor”. Debtor who is sued may set up against the plaintiff the same defense he could set up against his own cre credito ditor. r. If the action succeeds succeeds,, the pla plaint intiff iff is entitled only to so much as is needed to satisfy his credit; if there is any balance, it shall pertain to his debtor .

H. Action Subrogation Accion Sub Accion Subrog rogato atoria ria:: act action ion whi which ch the cre credit ditor or may exercise in the place of his negligent debtor in order to preserve or recover for the patrimony of the debtor the

AS: File against debtor of his debtor.

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 Tax 1 Lex Talionis Fraternitas Inc. Estate of Hernande Hernandez z vs. Luzon Luzon Surety—na Surety—namata matay y yung guarantor, namana rin yung utang niya.

Lichauco vs. Figueras-Hermanos—Lorchas, emergency and regular use.

Issue: Issue: WON Parks is the owner of the land bec of nonnonperformance of the condition of the mun of tarlac.

Luzon Surety filed against estate of Hemady based on 20 different different indemnity indemnity agreements and couterbounds couterbounds by the deceased in consideration of guaranteeing various principals in favor of different creditors. Hemady died and estate claim not liable bec of death.

Held: The amendment to the contract bet the plaintiff and def was was expre express ssly ly cond condit itio ioned ned on the the defs defs bein beingg the succes successfu sfull bidder bidderss at the letting letting and they were were not the winners. winners. Second contract has no force but the first one. No showing that they have given new life to the agreement.

Held: No. The action for revocation of a donation donation is 10 yrs. They have filed case case after 14 yrs. Although Although condition condition was not complied with, revocation should have been made before the sale of the land. Req: 1. consent of the donee of the revocation revocation 2. judicially judicially decreed. Onerous donations, donations, 10 yrs prescription.

Issue: WON death extinguishes obligation of the estate.

Wise & Co vs. Kelly—hindi naman sinabi na ibenta yung goods sa ganitong halaga.

Held: No. Obligations extinguished by death are: a. support b. parental auth c. usufruct d. contracts for a piece of work d. partnership partnership e. agency. Articles Articles that regulate guaranty or suret suretys yshi hip p conta contain in no prov provis isio ion n that that the the guar guarant antyy is extinguished extinguished upon the death of guarantor. guarantor. Art. 774 and 776 (succession and inheritance) state that heir succeed no only to the rights but also to the obligations. AS: Obligati Obligation on was subrogat subrogated ed to the heirs of the dead person.

A. PURE AND CONDITION CONDITIONAL AL OBLIGAT OBLIGATIONS IONS 1. Pure Obligations ng

utan utang g

afte afterr

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Held: The ticket sold has a notation that prize will be paid upon upon the the surr surren ender der of the the tick ticket. et. The The surr surrend ender er or presen presentati tation on of the ticket ticket is a condit condition ion preced precedent ent of payment.

Held: No. Although there is a need to fix a period bec the contra contract ct did not stipul stipulate ate period period when when to commenc commence e condition. However, in consideration of the facts, 50 years have lapsed for the condition to be complied with and CPU was not able to perform. SC ruled to reconvey to heirs the land.

Parks vs. Prov of Tarlac—nagdonate ng land for school and public park in 6 mos pero hindi ginawa.

Aguilar vs. Cititrust—yung hindi ko maintindihang kaso or baka hindi lang siya talaga relevant under this ti tle.

yrs, yrs,

Held: Every obligation whose performance performance does not depend upon a future or uncertain event or upon a past unknown unknown to the parties, it is demandable at once. 2. Conditional Obligations

Don Lopez donated land to CPU on the condition that it would be used for the establishment of a medical school and that CPU cannot sell or convey the land to any party. CPU failed to do so and even exchanged land with another with the NHA. Heirs filed for annulment of donation. Issue: WON donation annulled.

Santiago vs. Millar—nanalo sa sweepstakes pero nawala ang ticket.

III. KINDS OF OBLIGATION

Pay Pay vs. vs. Pala Palanc nca— a—na nani ning ngil il nagprescribe.

Held: No proof that Kelly has not turned over all the money received received from the sale of the merchandize merchandize so that Lim, the surety, has no liability. The condition is that Lim will pay if Kelly has not turned over all the sales of the merchandise but not that he shall pay if all the sales has not amounted to the original amount of obligation. There is no stipulation that the goods were to be sold at a certain price, or not less than what it should be.

CPU vs. CA—nagdona CA—nagdonate te ng land for medical school pero hindi ginawa. No period but 50 yrs na nakalipas di pa rin ginawa.

Cirer and Hill were owners of parcels of land and donated it to the municipality municipality of Tarlac on the condition condition that erection erection of a public school and a public park shall be commenced within the period of 6 months. Tarlac failed. Cicer and Hill sold land to Parks. Parks pray for annulment of donation.

b. Potes Potestative tative Mixed Condi Conditions tions Shotwell vs. Manila Motor—Banks were chartered to accept liability.

a. with suspen suspensive/ sive/resolu resolutory tory conditio conditions ns

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 Tax 1 Lex Talionis Fraternitas Inc. Held: The banks will not be liable since they didn’t accept that they will should liability. The lease was extinguished by the fire that occurred occurred and the chartered chartered banks being a sublessee of the Manila Motor which contracted lease also from Shotwell, Shotwell, will not be liable for the construction construction of the destroyed buildings. No potestative condition. Lease for the enjoyment of the premises. No fault on part of anyone. Smith Bell vs. Sotello Matti—i-deliver yung equipment pero depende sa gobyerno.

Held: The conditions did not depend upon the will of the debtor alone. There is no delay since there existed rigid restriction restrictionss during the that time of world war. It is a mixed one because dependent also of the will of the third person or the US govt whether to allow the delivery or not.

Trillana vs. Quezon Colleges—if I harvested fish.

The stipulation in this case was that the obligor would pay the full value value of a subscr subscript iption ion for shares shares in the Quezon Quezon College after she had harvested fish. Held: This condition is obviously depended upon the sole will of the obligor, and the conditional obligation is void, because it would have served to create an obligation to pay, the whole obligation is void. **When conditional obligation is void, then it would convert the obli obligat gatio ion n to a pure pure obli obligat gatio ion n whic which h woul would d be demandable at once. Osmena vs. Rama—If the house of strong materials is sold, I will pay my debt.

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Held: If the statement found in the acknowledgement should be regarded as a condition, it was a condition dependent upon the exclusive will of the debtor, and is, therefore, void. The ackno acknowl wled edgem gemen ent, t, ther theref efor ore, e, was an abso absolu lute te acknowledgemen acknowledgementt of the obligation obligation and was sufficient sufficient to prevent the statute of limitations from barring the action upon the original contract.

payment of the purchase price in the manner agreed upon. It was just an alternative period for the payment of the second installment.

Hermosa vs. Longara—as soon as I receive funds derived from the sale of my property in Spain.

Taylor vs. Uy Tieng—dapat may trabaho siya pero binawi ni Uy Tieng dahil di maganda sitwasyon. “FOR ANY REASON”

Held: The condition implies implies that the obligor has already decided to sell his house or at least that he had made his creditors to pay his indebtedness demandable is that the sale be consum consummat mated ed and the price price thereo thereoff remitt remitted ed to the islands. Not a purely potestative one, depending upon the will of the obligor, but partly upon chance, i.e. presence of the buyer of the property for the price and under conditions desired by the obligor.

Held: Held: “Should “Should the machine machinery ry to be install installed ed in the said factory fail, for ANY REASON, 6 months from the date hereof, this contract may be cancelled”. The def can rescind the contract bec their reason falls under “any reason”.

c. Imposs Impossible ible and Illicit condit conditions ions Luneta Motor Co. vs. Abad—if I recovered judgment in the action but he died during the trial.

Held: The obligation is subject to the condition that when the plaintiff recovered recovered judgment, judgment, they shall deliver the proper property ty so released released to the office officerr of the court court for the payment of said judgment of in default, pay its full value. Since Abad died, it has become a legal impossibility since no judgment shall be rendered. Galang Galang vs. CA—you CA—you pay 25% within 3 months months or upon the removal of the encargado.

Held: The removal of the encargado encargado was not a condition precedent to the fulfillment of the contract. What we have is a contract to sell wherein the ownership is retained or title until the fulfillment of a positive condition, normally the

d. positi positive ve and and negativ negative e conditions conditions 3. Constructive Fulfillment

But there there is no constr construct uctive ive fulfillme fulfillment nt on this case. Constructive fulfillment: condition shall be deemed fulfilled if the obligor intentionally impedes its fulfillment, has no application to the cases of the resolutory provision giving to the obligo obligorr a right right to cancel cancel contra contract ct upon upon contin contingenc gencyy within the control of the obligor. Herrera vs. Leviste—GSIS and Leviste Case. Teehankee’s Dissent.

Tehankee Tehankeess Dissen Dissent: t: Levist Leviste e was guilty of bad faith and violated the terms of the contract thus there is constructive fulfillment. Herrera was required by GSIS to submit papers to suppor supportt his assumptio assumption n but could could not be approv approved ed until until Herrera could submit a final deed of sale and Leviste did not execute this deed. He prevented the assumption of Herrera of the mortgage. Not only that, Leviste is in arrears for 14 months in its amortization and Herrera did not know that. 1186 and 1169 (reciprocal obligations). Tayag Tayag vs. CA—estop CA—estopped ped bec receip receiptt of paymen payments ts and knowledge of irregularities.

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 Tax 1 Lex Talionis Fraternitas Inc. Held: Held: The accept acceptance ance of the petiti petitione oners rs of the variou variouss payments payments even beyond beyond the period periodss agreed agreed upon, upon, was perceibved perceibved by the lower court as tantamount to faithful faithful performance of the obligation. 1186 applies to both obligees and obligors in reciprocal obligations even when the proviso only speaks of the obligor. Pet accepted the performance knowing its incompletenes incompletenesss and irregularity irregularity and without without expressing any protest or objection, the obligation is deemed to be complied with.

Retro Retroac acti tive ve:: From From the the momen momentt the the obli obliga gati tion on was was constituted, constituted, upon payment of full balance, retroact to that date.

Coronel vs. CA—Receipt of Downpayment

5.Preservation of Creditor’s Rights

Held: Intent of the parties has to be considered. It was a contract of sale and not a contract to sell. Contract of sale— ownersh ownership ip already already transf transferr erred ed upon upon fulfillm fulfillment ent of the suspensive condition. Absolute sale. Contract to sell-although suspensive condition was complied with, ownership will not automatically transfer. There is still a need to convey title to the prospective buyer by entering into a contract of absolute sale.

Art. 1188: The creditor may, before the fulfillment of the cond condit ition ion,, brin bring g the the appr appropr opria iate te acti action onss for for the the preservation of his right. The debtor may recover recover what during during the same time time he has paid paid by mistake mistake in case case of a suspen suspensiv sive e condition.

4. Retroactivity of Obligation

Ocejo vs. I nterbank—maswerteng nterbank—maswerteng assignee. Yung asukal na nasa ibang warehouse na kinuha ng banko.

Padilla vs. Paterno-his Paterno-his mom is the universal universal heir and not his wife-paraphernal.

Held: The ownership of the land is retained by the wife until she is paid the value of the lot, as a result of the liquidation of the conjugal partnership. There mere construction of the building building from common funds does not automatically automatically convey the ownership of the wife’s land to the conjugal partnership. The properties properties’’ conversion conversion from paraphernal paraphernal to conjugal conjugal assets would be deemed to retroact to the time the conjugal buildings were first constructed thereon or at the very latest, the time before the death of Narcisso Padilla that ended the partnership. partnership. The acquisition acquisition by the partnership partnership of theses properties was subject to the suspensive condition that their values would be reimbursed to the widow at the liquidation of the conjugal partnership; once paid, the effects of the

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fulfillment of the condition should be deemed to retroact to the date the obligation was constituted.

Held: It was the defendant corporation who had breached the contract. The plaintiff has written letters reminding the corp that the contract will be deemed rescinded if the corp would not fulfill its obligation.

Coronel vs. CA—Downpayment

6. Rescission in Reciprocal Obligations

Held: The thing sold not subject to condition that the buyer was the pay the price before the delivery. On demandability: No term having been stipulated on payment, it should be demandable at the time and place of the delivery of the thing sold. Demandable at once and failure to do so would entitle entitle obligo obligorr either either perfor performan mance ce or rescis rescissio sion. n. But rescission should be applied to the court for a decree for the rescission rescission of the contract. contract. No rescission rescission was made before before the insolvency of plaintiff, the assignee standing on the shoes of the buyer has a better right. Albert Albert vs. University University Publishing— Publishing—publis publishing hing the Revised Revised Penal Code.

Accg to Tolentiono: Rescission must be judicially invoked. Unless there is a stipulation of period when the contract would would be deemed deemed rescinded rescinded.. If one party is willin willingg to perform perform and the other is not extra-judicia extra-judiciall rescission rescission would suffice suffice if there is stipulation stipulation.. However, if there has been a performance already by one of the parties, rescission should already be judicially invoked regardless whether there is a stipulation stipulation or none, especially especially if the other party rejects rescission. UP vs. Delos Angeles—a Angeles—award ward of logging rights; rescission rescission without need of judicial suit.

Held: In the agreement, there is a stipulation that UP has “the right and power to consider the Logging Agreement date Dec 2 1960 rescinded without the necessity of a judicial suit. 1191’s 1191’s consider considerati ation: on: There is nothing nothing in the law that prohibits prohibits that parties parties from entering entering into agreement that violation violation of the terms of contract would cause cancellation cancellation thereof even without court intervention. intervention. BUT PROCEEDS PROCEEDS AT ITS RISK. Extra-judicial Extra-judicial resolution resolution will remain contestable contestable and subject to judicial invalidation, unless attack thereon shou should ld beco become me barr barred ed by acqu acquie iesc scenc ence, e, esto estopp ppel el or prescription. Roque vs. Lapuz—10 yrs to pay, I can pay anytime within the 10 years.

Held: Held: Qualif Qualificat ication ion for rescis rescissio sion: n: so substa substanti ntial al and fundamental to defeat the object of the parties. Absence of a formal deed of conveyance is a very strong indication that the parties did not intend immediate transfer of ownership and title, but only a transfer after full payment of the price.

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 Tax 1 Lex Talionis Fraternitas Inc. Intent of the parties was to have the obligation be paid in monthly installment.

Carrascoso vs. CA—notice of lis pendence but continued with the sale of the land.

Gaite vs. Fonacier—expiration of the surety, debtor loses the benefit of the period. Mining claim case.

Herrera vs. Leviste

1972-El Dorado sold to Carrascoso the parcel of land July 1975- Buy and Sell bet Carrasco and PLDT April 1977- Carrasco to PLDT May 30, 1977 PLDT to PLDTAC May 15, 1977-notice of lis pendens

Held: Held: 1198 states states when debtor debtor loses loses the benefit benefit of the period. period. The surety contract contract expired expired and Fonacier didn’t renew or replaced the surety. Sale of the ore was not a suspensive suspensive condition but a suspensive suspensive period, fixing the future date of the payment.

Held: Notice of Lis pendens, but still PLDT conveyed land to PLDTAC. PLDTAC. Where a contract contract is rescinded it is the duty of the Court to require both parties to surrender that which they may have respectively received and to place each other as far as practicable in his original situation. The exercise of the power to rescind extinguished the obligatory relation as if it had never been created, the extinction having a retroactive retroactive effect.

Qui vs. CA—factory was razed to the ground and failure of  lease to rebuild the building of the lessee. (the building to be constructed shall belong to the resp lessor after 20 yrs).

Tehankee’s dissent: Upon Leviste’s refusal to execute the deed of sale, Herrera has the option of specific performance or the rescission of the contract. Zuluet Zulueta a vs. vs. Marian Mariano—A o—Avel vellan lana a a movie movie direct director or made made movies for Zulueta for his political campaign, automatic rescission clause.

Held: There is an automatic rescission clause in the contract and the fact that pet has cancelled contract, resp has no right to remain in the premises. Extra-judicial rescission shall only take legal effect where the other party does not oppose it. Delta Motor Corp vs. Genuino—delivery of black iron pipes for iceplant and storage.

Held: Power to rescind under 1191 is not absolute. The act of a part part in treating treating a contra contract ct as cancele canceled d or resolved resolved on account of infractions by the other contracting party must be made known to the other and is always provisional subject to the scrutiny and review by the proper court. Delta –no manifestation that it had opted to rescind contract, it has possession of the two irons and the downpayment and has waived the performance of conditions of the contract when they opted to go on with the contract only with a much higher price. Ong vs. Bognalbal

Rescission: Upon the infraction of Ong, Bognalbal could have filed rescission of the contract or the performance of it.

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B. OBLIGATIONS WITH A PERIOD PNB vs. Lopez Lopez Vito—loan Vito—loan of spouses spouses when there there is a condition and a period stipulated.

Held: The non-fulfillment of the conditions of the contract renders the period ineffective, ineffective, and makes the obligation obligation demandable at the will of the creditor. Failure to pay would make make the the entir entire e obli obliga gati tion on due due and deman demanda dabl ble, e, so regardless of the period of other installments, def has to pay the entire obligation. Smith Bell vs. Matti

Held: There also was a stipulated period however there is also a condition which states that delivery would depend upon the US govt. Upon the lapse of the period and the condition bars the performance, def will not be liable.

Held: 1197. If obligation does not fix a period but from its nature and circumstance it can be inferred that a period was intended , the courts may fix the duration thereof. Will also fix period period when it depends depends upon upon will will of the debtor debtor.. In determ determini ining ng period period,, courts courts will will have have to consid consider er the circums circumstanc tances es and see if period period was contemp contemplate late.. The contract doesn’t stipulate a period, thus the court held that resp has to institute a judicial action to fix the period. (this case is an ejectment case so fixing a period was not alleged in the case). Sarmiento vs. Villasenor—loan with a pledge of a medal with with a diam diamon ond d in the the cent center er with with 10 diam diamon onds ds surrounding it, pair of diamond earrings, comb with 22 diamds, and two diamond rings! Daming diamonds!!!

Held: In a contract of loan with interest wherein a term was fixed for the payment thereof, it is presumed that said terms was established for the benefit of the creditor as well as that of the debtor, unless from its tenor or other circumstances it appears to have been stipulated for the benefit of one only. In such a case the debtor has no right to pay the debt before the lapse of said period, without the consent of the creditor, and demand the devolution devolution of the goods that were pledged to secure the payment. Only after the expiration of said

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 Tax 1 Lex Talionis Fraternitas Inc. period may the debtor make payment, and, therefore, the action for the recovery of the goods pledged arises only after the lapse of said for the purpose of the computation computation for he period of prescription of said actions. Daguhoy Enterprises vs. Ponce—nagsecure ng mortgage as guaraty sa loan sa isang corp tapos after ibigay yung loan, withdrew mortgaged properties then mortgage them again sa ibang corp for another loan. Madaya.

Held: Although the contract stipulates that loan payable in 6 years, but because of the failure to give and register the security agreed upon in the form of two deeds of mortgage, the obligation becomes pure and without condition thus due and immediately demandable. demandable. 1198, lost the benefit of the period.

Held: On the contract, it is stipulated that the lease may be renewed renewed after a period period of 5 years years under the terms and conditions as will be mutually agreed upon by the parties at the time of the renewal. renewal. 1197 and 1670 of the CC (fixing (fixing of period, and after 15 days of occupying the leased property and withou withoutt any notice notice from lessor lessor,, contra contract ct shall shall be renewed). renewed). It is understood understood that there there is an implied new new lease, not for the period of the original contract, but for the time established by 1682 and 1687. The other terms of the contrac contractt shall shall be revive revived. d. After After the expira expiratio tion n of the contract, the implied new lease could not possibly have the period of 5 years, but rather would have been a month-tomonth lease since the rentals were payable on a monthly basis. Pacific Banking Corp vs. CA—negosyo sa cultivation of fish and saltmaking bumagsak.

Victorias Planter, supra De Leon vs. Syjuco—gusto Syjuco—gusto ng magbayad magbayad ng debtor pero ayaw pang tanggapin ng creditor.

Held: Held: Consig Consignati nation on was not valid. valid. Req: a. debt debt due b. consignation has been made bec creditor to whom payment is made refused to accept, or was absent or incapacitated c. prev notice of consignation to the person interested in the performance d. amount due placed at the disposal of the court court 3. after after consig consignat nation ion had been been made, made, the person person interested was notified thereof. Reasons why creditor can’t be forced to accept payment a. may want to keep his money invested safely instead of having it in his hands. B. to protect himself of sudden decline on the purchasing power of the currency currency loaned. Unless creditor creditor consents, consents, debtor cannot accelerate payment. Millare vs. Hernando—yung bahay niya gusting gawing resto e ayaw niya nga.

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Held: An agreement to extend the time of payment in order to be valid must be for a definite definite time. The cause of action was for the fixing of the period. Song Fo vs. Oria—launch was sold but was shipwrecked, Song Fo did not insure and Oria did not secure.

Held: The launch was with Oria already and knowing that the launch has not been insured yet, sent it from Manila to Samar and on the trip it was shipwrecked. shipwrecked. The contract stipulates stipulates quarterly installments. Since the vessel is lost, Oria doesn’t want to pay. That unpaid installments of the purchase price of the launch, which under the express terms of the contract had not become due and payable at the time of the loss of the vessel, became due and payable under the provisions of articl article e 1129 1129 of the Civil Civil Code, Code, upon the failure failure of the purchaser, within a reasonable time after the loss of the launch, to offer either satisfactory security or to give bond to secu secure re the payme payment nt of the the unpa unpaid id inst instal allm lment ent of the purchase price.

C. ALTERNATIVE AND FACULTATIVE OBLIGATIONS Agonci Agoncillo llo vs. Javier Javier—An —Anast astaci acio o property to pay the debt.

Alano Alano mortga mortgagin ging g

his

Held: Anastacio was only a rep of his children, and his partial payment does not affect prescription prescription not for the benefit of the other other debtor debtors. s. The mortgag mortgage e was never never record recorded ed therefore therefore invalid. Action to recover recover has prescribed prescribed,, the action action to compel compel a convey conveyanc ance e of the house house and lot is likewise likewise barred as the agreement to make such conveyance was not an independent principal undertaking, but merely a subsidiary subsidiary alternative alternative pact relating to the method by which the debt might be paid. Ong Guan Can vs. Century—the insurance company doesn’t want to rebuild with the same materials.

Held: On the contract the insurance company obligated itself to either pay the amount to which the house was insured or rebuil rebuild d it. The debtor debtor must notify notify the credit creditor or of his election, stating which prestation he is disposed to fulfill. The effect of notice is to give the creditor, that is, the plainti plaintiff ff in the instant instant case, opport opportuni unity ty to expres expresss his consent, or to impugn the election made by the debtor, and only after said notice shall the election take legal effect when consented by the creditor, or impugned by the latter, when declared improper by the competent court. D. JOINT AND SOLIDARY Jaucian Jaucian vs. Queroi—surety Queroi—surety was solidarily solidarily liable, then surety died.

Held: The right of a guarantor or surety to insist on the exhaustion of the property of the principal debtor, before his

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 Tax 1 Lex Talionis Fraternitas Inc. own shall be taken in execution does not exist where the guarantor or surety is jointly and severally bound with the principal debtor. Ramos vs. Gibbon—Mining Claims, Possessory Rights of a Qualified Locator.

Held: The concurrence of two or more creditors or of two or more debtors with respect to the same obligation does not imply that each of the former is entitled to demand the performance of the obligation in its entirety or that each of the latter is bound to perform it. This shall be the case only when when the the expr expres essl slyy so prov provid ided ed by the the term termss of the the obli obligat gatio ion, n, and the part partie iess are are bound bound in soli solido do.. The The presumption, in the absence of the stipulation as to how certain debtors are bound, is that they are bound jointly. Versoza vs. Lim—Collision of Perla and Ban Yek.

Held: Held: Where Where a collisi collision on occurs occurs between between tow sea-go sea-going ing vessel vessels, s, caused caused exclusi exclusivel velyy by the careles carelessne sness ss of the navigating navigating officers in charge of one of the vessels, both the owner and the operating company directly in charge of the offending vessel are liable for the damage done. The rule that joint obligations are apportionab apportionable le unless otherwise otherwise specially provided has no application to obligations arising from tort. Persons who cooperate in the tortuous infliction of damage are jointly and severally liable. Contractual Obligations-joint Tortuous act-joint and severally liable Ronqui Ronquillo llo vs. vs. CA—food CA—foodstu stuff, ff, individ individua ually lly and jointl jointly, y, auct auction ion of furn furnitu iture ress on same same day day of hear hearin ing g for for reconsideration.

Held: Clearly then, by the express term of the compromise agreement and the decision based upon it, the defendants obligated obligated themselves themselves to pay their obligation, obligation, “individually “individually and jointly”. The term “individually” has the same meaning

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as “collectively”, “separately”, “distinctively”, respectively, and severa severally lly.. An agreem agreement ent to be indivi individua dually lly liable liable undoubt undoubtedly edly creates creates a several several obliga obligatio tion n and a severa severall obligation is one by which one individual binds himself to perform the whole obligation. Oritz Oritz vs. Cayano Cayanon— n—Bar Bartolo tolome me Ortiz, Ortiz, ayaw ayaw umalis umalis sa premises premises dahil sa mga improvements improvements na ginawa niya at hindi siya nakasama sa bidding. Nangolekta pa ng toll.

Held: Held: Presum Presumpti ption on when two person personss are liable under a contract or judgment and no mention of the specific liability of each for the entire obligation. With respect to the amount of reimbursement to be paid by Comintan, it appears that the dispos dispositi itive ve portio portion n of the decisi decision on was lacking lacking in specificity specificity,, as it merely provided provided Zamora Zamora and Comintan jointly liable therefore. When two persons are liable under a contrac contractt or under a judgme judgment, nt, no words words appear in the contrac contractt or judgmen judgmentt to make make each liable liable for the entire entire obliga obligatio tion, n, the presum presumpti ption on is that that their their obliga obligatio tion n is manco mancomm mmuna unada, da, and each each debt debtor or is liab liable le only only for for a proportionate proportionate part of the obligation. obligation. The judgment debt of 13K should be pro-rated in equal shares to Comintan and Zamora. Imperial Insurance vs. David—spouses bound themselves to be solidary and jointly liable, husband died.

Held: Held: If husband husband and wife wife bound bound themse themselves lves jointly jointly and severally, in case of his death her liability is still solidary and may be sued for the whole debt. The Rules of Court provide the procedure should the creditor desire to go against the deceased debtor, but there is nothing in the said provision makin makingg comp compli lianc ance e with with such such proc procedu edure re a cond condit itio ion n precedent precedent before an ordinary ordinary action against against the surviving solida solidary ry debtor debtors, s, should should the credit creditor or choose choose to demand demand payment from the latter, could be entertained to the extent that failure to observe the same would deprive the court jurisdicti jurisdiction on to take cognizance cognizance of the action against the

surviving debtors. CIVIL Code allows the creditor to proceed against any of the solidary debtors or some or all of them simultaneous simultaneously. ly. Hence, there is nothing improper in the creditor’s filing of an action against the surviving solidary debtors alone, instead of instituting a proceeding for the settlement of the estate of the deceased debtor wherein his claim could be filed. Inchausti vs. Yulo—magkakapatid na hindi pa nagkasundo sa remission na binigay.

Held: The remission of any part of the debt, made by the creditor in favor of one or more his solidary debtors, inures to the benefit of the rest of them, and these latter may utilize utilize in their favor the defense of remission. remission. The solidary solidary debtor debtor uncondi unconditio tionall nallyy obliga obligated ted or whose whose period period for payment has expired, may not, with respect to the part of the debt he is liable, plead the defense of prematurity of the action, which is personal to his co-debtors. BPI BPI vs. vs. McCo McCoy— y—Mc McCo Coy y paid paid all all the the debt debtss and and was was subrogated subrogated with the rights to contribution contribution from his codebtors.

Held: Where one of the several persons who are sued upon a joint joint and several several liabil liability ity elects to pay the whole, whole, such person is subrogated to the rights of the common creditor and may properly substituted in the same action as plaintiff for the purpose of enforcing contribution from his former associates under art. 1145. **But **But Ma’am said, this is not the same same meanin meaningg of real subrogation of rights. Chinese Chamber of Commerce vs. Pua Te Ching—Surety was jointly ans severally liable, principal died.

Held: Held: The surety surety may use against against the creditor creditorss all the defenses which the principal debtor is entitled and that are

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 Tax 1 Lex Talionis Fraternitas Inc. inherent in the debt, but not those purely personal to the debtor, to wit, those which may contribute to weaken or destroy the juridical bond existing between the creditor and the principal debtor, not any means of defense which may invalidate the original contract from which the tight or the action of the creditor against the security arises in this class of actins is not included the means of defense as to how the trial may be continued and the writ of execution issued in case of the death of the principal debtor which can not affect the original contract nor destroy the bond existing bet the creditor and the principal debtor, it being, therefore, an exception exception or means of defense defense no inherent inherent in the debt, but at the most, a purely personal one of the debtor or the successors-in-interest of the debtor. Int’l Finance vs. Imperial Textile—guarantee vs. surety

Held: Although it states “Guarantee”, the stipulations of the contract make it clear that “jointly and severally” phrase is the one used in the contract. Surety: person binds himself solidary with the principal principal debtor, primary liability Guaranty: contract whereby a person binds himself to the creditor creditor to fulfill fulfill the obligation obligation of the principal principal in case the latter should fail to do so, secondary liability. Construction Dev. Vs. Estrella—Bus was rammed and their knees are pinned to the seats in front of them.

Held: The bus company, its driver, the operator of the other vehicle vehicle and the driver driver of the vehicl vehicle e were were jointly jointly and severally liable to the injured passenger or the latter’s heirs. Nor should it make any difference that the liability of pet (bus owner) springs from contract while that of respondents (owner and driver of other vehicle) arises from quasi-delict. Bus owner-contract, owner and owner of other vehicle-quasidelict : both jointly and severally liable.

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E. DIVISIBLE AND INDIVISIBLE OBLIGATION Art. 1223-1225 F. OBLIGATION WITH A PENAL CAUSE Manila Racing vs. Manila Manila Jockey—f Jockey—forfeitu orfeiture re of what was partially paid.

Held: The clause of the contract referring to the forfeiture of the P100,00 already paid, should the purchases C fail to pay the subsequent installments, is valid, It is in the nature of a penal clause which be legally established by the parties. In its double purpose of insuring compliance with the contract and of otherwise otherwise measuring beforehand beforehand the damages which may result from non-compliance, it is not contrary to law, morals or public order bec it was voluntarily voluntarily and knowingly agreed upon by the parties. Viewing concretely concretely the true effects thereof in the present case, the amount forfeited constitutes constitutes only 8% of the stipulated stipulated price, which is not excessive if considered as the profit which would have been obtained obtained had the contract been complied with. There is, moreover, moreover, evidence that the defendants, because of this contract with C, had to reject other propositions to buy the same property. At any rate, the penal clause does away with the duty to prove the existence and measure of the damages caused by the breach. Caridad Est. vs. Santero—loan to be paid in 60 days and failure to do so, those already paid shall be forfeited.

Antichresis Antichresis:: a contract contract whereby whereby the creditor acquires the right to receive the fuirts of an immovable of his debtor with the obligation to apply them to the payment of interest if owing and thereafter to the principal of his credit. Penal ClauseL generally intended to substitute the indemnity for damages and the payment of interests in case of noncompliance of the obligation.

Held: The provisions in which the parties have indicated in the contrac contractt is a penal penal clause clause which which carrie carriess the expres expresss waiver of the vendee to any all sums he had paid when the vendor, vendor, upon his inability to comply with his duty, seeks to recover passions of the property, a conclusive recognition of the the righ rightt of the the vend vendor or to the said sums, sums, and and avoi avoid d unnecessary litigation designed to enforce fulfillment of the terms and conditions agreed upon. Said provisions are not unjust or inequitable and does not, as appellant contends, make the vendor unduly rich at his cost and expense. Bachrach Motors vs. Espiritu—obligation partly performed, 25% penalty, reduced. WHITE TRUCKS.

Held: Held: Interest Interest and penalty penalty are not the same. When the obligation has been partly performed, the CC authorizes the court to reduce the penalty thereon. Cabbarroguis vs. Vicente—jeep accident.

Held: The refusal of the defendant defendant to pay when the demand was made by plaintiff entitles the latter to interest on the penalty. 2210 provides that in the discretion of the court, interest may be allowed upon damages warded for breach of contract. This interest is recoverable from the time of delay, that is to say, from the date of demand, either judicial or extrajudicial. And if there is no showing as to when demand for payment was made, plaintiff must be considered to have made such demand only from the filing of the complaint. Hodges vs. JavellanaJavellana--icep -iceplant lant machinery machinery,, softdrint, softdrint, ice drop and fixture.

Held: The provisions in the contract contract between the parties parties relative to the compounding of interest partake the nature of a penal clause and under 1229, may be reduced by court if iniquitous or unconscionable.

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Pamintuan vs. CA—plastic sheetings

Held: The theory that penal and liquidated damages are the same cannot be sustained where the obligor is guilty of fraud in the fulfillment of his obligation. The penalty clause is strict strictly ly penal penal or cumulat cumulative ive in charac character ter and does does not partake the nature of liquidated damages when the parties agree. Concurring Antonio: A creditor in case of fraud by the obligor is entitled only to the stipulated penalty plus the difference bet the proven damages and such stipulated penalty. Robes-Francisco Realty vs. CFJ –

Held: A contract of sale which stipulate payment of interest at 4% per annum in case vendor fails to issue a certificate of title to vendee is not a penal clause because even without it vendee would be entitled entitled to interest at the legal rate of 6% per annum. It is therefore inconceivable inconceivable that the aforecited provision provision in the deed of sale is a penal clause clause which will will preclude an award of damages to the vendee Millan. Makati Makati Devt Corp vs. Empire Insurance Insurance Co.—you Co.—you should build a house on the lot or else.

Held: Mitigation of the penalty is allowed where there is partial partial payment payment of the obliga obligatio tion, n, the reduct reduction ion of the penalty penalty is justif justified ied.. This This is true true where where the indemn indemnity ity provided for is essentially a mere penalty , having for its object to compel compliance with the contract. Umali vs. Miclat—creation of an advertisement LAGRIMAS

Held: Under the law, a penalty takes the place of interests only if there is no stipulation to the contrary, and even then, damages may still be collected if the obligor obligor refuses to pay the penalty.

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