Kinds of Obligation (2)

Question 1

Joint & Solidary (1207-1222)
Divisible & Indivisible (1223-1225)
With Penal Clause (1226-1230)

Question 2

2194
“The responsibility of two or more persons who are liable for quasi-delict is SOLIDARY”

what do you call A & B insofar as that provision is concerned

Answer 2

also called as JOINT tort feasors

Question 3

other SOLIDARY LIABILITY

“Art. 1723. The ENGR [or] ARCHITECT who drew up the plans and specifications for a building is liable for damages if within fifteen years from the completion of the structure, the same should collapse by reason of a defect in those plans and specifications, or due to the defects in the ground.

The CONTRACTOR is likewise responsible for the damages if the edifice falls, within the same period, on account of defects in the construction or the use of materials of inferior quality furnished by him, or due to any violation of the terms of the contract.

If the ENGR [or] ARCHITECT supervises the construction, he shall be solidarily liable with the CONTRACTOR.”

• if engr. or Archi supervises,

[2]
If partner acted in lined with the function and business of partnership

[3]
Law providings solidarily liability

Question 4

1207 “ states, or when the law or the nature of the obligation requires solidarity.”

nature of obligation, in order to give full effect, solidarity is more appropriate nature of the obligation.

Employee’s Compensation Act. Under this, the employer is mandated by law to be an insurer of teh death or injury of its workers provided the conditions are met

worksmen compensatino actdoesn’t provide the liabilty of the employee (taxi driver is tortfeasor) SC ruled, the effect is solidarily liable and NOT joint.

so if emplyer pays medical expenses of the yee, YER is entitled to reimbursement of the expenses. (this subrogation is found in the law) the SC interpretated it as solidary.

Answer 4

in 1208, there are only under these 3 that there could be solidary otherwise this is the most important rule:

Art. 1208.
If from the law, or the nature or the wording of the obligations to which the preceding article refers the contrary does not appear, the credit or debt shall be PRESUMED to be divided into as many shares as there are creditors or debtors, the credits or debts being considered distinct from one another, subject to the Rules of Court governing the multiplicity of suits

• in a JOINT obligataoin, it is to be divided in equal shares

Question 5

A & B bound themselves to pay X the amount of P600,000.00. The obligation is already due and demandable. When X demanded for payment from A, how much should A give to X? Why?

Answer 5

A may only pay X the amount of 300,000.00 unless B has authorized A to pay the full amount.

apply solidarity if the obligation expressly provides for

Question 6

the oppostie principel of solidary = JOINT (distinct and separate)

what is the principle of solidary obligation

Answer 6

Solidary (principle of MUTUAL AGENCY)

anyone of the solidary debtors or any of the solidary creditors is a representative of the others
agent - means representative.

Question 7

A is the debtor of X and Y in the amount of P600,000.00. The obligation is already due and demandable. When X demanded payment from A, how much should X collect? Why?

Answer 7

X may only collect from A the amount of 300k unless Y has authorized X to collect he full amount

Question 8

A, B, and C obliged themselves to pay X and Y P600,000.00 on December 30, 2023. The loan is evidenced by a Promissory Note dated December 30, 2018. Also, D, a common friend of the obligors(debtors), executed a Chattel Mortgage over his car which is valued at P 900,000.00. G, another common friend of the debtors, signed in the Promissory Note as guarantor. Stipulated in the Promissory Note are (a) payment of fixed interest (monetary interest) in the sum of P120,000.00.

Suppose that A, B, & C are joint debtors and X & Y are solidary creditors and X made a demand from A, how much could X collect from A?

question note
- every time there is loan, you must ask won there is an expressed declaration of the obligation of the debtors of the credits of the creditors
- 2 or more debtors signing “I promise to pay” indicates SOLIDARITY
- loan obligation, assume JOINT OBLIGATION
- signed as ‘guarantor’ we do not know G’s actual obligation

Answer 8

when using word ‘DEAMND’ by a solidary creditor, he can bring the claim of Y

after X gets the 200k, X was also representing the claim of Y so X must give 100k to Y. (unless stipulated otherwise)

Question 9

[C]
Suppose that A became insolvent and X demands from B, how much should B give to X? Why?

note
- assume joint obligation.

Answer 9

implications
- A is incapable, who will shoulder the debt of the insolvent debtor?
- because of the distinct and separate principle amount, the other debtors cannot be made to shoulder

Question 10

[D]
Suppose that X remits the obligations of A, B, and C, what will happen to the obligations?

1212. Each one of the solidary creditors may do whatever may be useful to the others, but not anything which may be prejudicial to the latter.

beneficial - mutual agency with the benefits, the effect
prejudicial - no effect.

question note

Answer 10

if you have solidary creditor and remissions the debt, he can do that by ooperation of law.

with 1212, that solidary crditor who remissioned, shall be liable to pay as to not prejudice the other CREDITOR if the other creditor’s did not consent.

(no need authority for condonation because by virtue of operation of law)

Question 11

[E]

Suppose that A successfully negotiated for remission of his obligations to X and Y, what will happen to the obligations of A, B and C?

Question 12

[F]

What is the nature of G’s obligation or undertaking as guarantor?

nomenclature does not govern or control

what is the nature of the obligationo of a co-maker?

Answer 12

there is no provision in the civil code for a co-maker. therefore, the nature of the obligation shall depend on the text of the contract

just becase he is named as ‘guarantor’ doesn’t make him a guarantor, check the promissory note or loan agreement.

guarantor - subsidairy (C can only go after G after exhausinting [principle of excussion] (2058)

mere refulsa ot py by solidary debtor, will entitle the creditor to go after the other debtors.

surety - liability is solidary (C

Question 13

[G]

When may the creditors go after G for the payment of the obligation?

read 2047 & 2058
surety - solidary liable
guarantor - subsidiarily

Question 14

A, B and C obliged themselves to deliver to X and Y a new SUV worth P1.8M on March 18, 2024. Suppose that A, B, and C failed to deliver the SUV, how may X and Y compel A, B and C to deliver the SUV? Why?

question note
- plurality of D & C
- the thing is indivisible (not like cash that can be divided)

lecture
THING of the obligation |v| PRESTATION of the obligation

Question 15

THING of the obligation |v| PRESTATION of the obligation

thing - SUV
prestation - the Juridical relation of the debtors in relation to the creditors
- delivery of the SUV is the prestation,

why is this relevant?
- possible the thing is indivisible but the prestation is JOINT

Answer 15

Art. 1209. If the division is impossible (like a car can’t be divided), the right of the creditors may be prejudiced only by their collective acts, and the debt can be enforced only by proceeding against all the debtors. If one of the latter should be insolvent, the others shall not be liable for his share. (1139)

• if ABC fail to deliver the SUV, how may X compel?

X & Y should go after A B C and demand to them all . If a demand to A only, it will not put A in DEFAULT.

if you file a case, you must include all of them

Question 16

A, B, & C are solidary debtors of X in the amount of P600,000.00 as evidenced by a Promissory Note (PN). However, when the PN was signed, C was still a minor and was not represented by a guardian.

How much can X collect from C?

Answer 16

generally, since it is SOLIDARY, you don’t need to implead all debtors BUT SINCE there is a minor,

Question 17

OBLIGATION WITH A PENAL CLAUSE

Art 1226

Answer 17

ART. 1226. In obligations with a penal clause, the PENALTY SHALL SUBSTITUTE the indemnity for damages [and] the payment of interests in case of noncompliance, if there is no stipulation to the contrary.

Nevertheless, DAMAGES shall be paid if:
- the obligor refuses to pay the penalty or
- is guilty of fraud in the fulfillment of the obligation.

The penalty may be ENFORCED ONLY when it is DEMANDABLE in accordance with the provisions of this Code.

Question 18

Facts: A clause in a deed of sale provides for the refund of the purchase price plus 4% interest per annum should the vendor fail to give the transfer certifi cate of title within six (6) months from date of full payment.

Issue: Is the clause a penal clause?

Answer 18

Held: No. Without said clause the vendee could recover legal interests under Article 2209 of the Civil Code which is even more than the 4% provided for in the clause.

Therefore, it does not preclude the recovery of actual/nominal damages by the vendee.

(Robes-Francisco Realty & Dev. Corp. vs. CFI and Millan, 86 SCRA 59 [1978].)

Question 19

PENAL CLAUSE |v| CONDITION

Answer 19

1. The PC constitutes an obligation although accessory, while the latter does not; and
2. PC is demandable in DEFAULT while a Condition is NOT demandable

note
2 - Therefore, the former may become demandable in default of the unperformed obligation and sometimes jointly with it, while the latter is never demandable.

Question 20

Suppose S makes the following promises to B:

(a) to convey to B house X, and if he fails, to pay B P500,000.00

(b) to pay P500,000.00, if he fails to convey to B house X

(c) to convey house X to B or pay him P500,000.00

(d) to convey house X to B with the right to substitute the same with the payment of P500,000.00

identify each kind of obligation

Answer 20

a - with penal clause
b - conditional
c - alternative
d - facultative

Question 21

S promised to deliver a specific car to B. The contract carried a penal clause that in case of non-compliance, S would have to pay a penalty of P20,000.00. S did not deliver the car and, as a consequence, B suffered damage in the amount of P15,000.00.

[a]
B proved that damages suffered is greater than 20k, can he recover as much?

[b]
is B entitled to damages with a penal provision?

[c]
can B recover legal interest on top of the penalty provided?

[d] if S is guilty of fraud, what is the effect?

[e] relevance of proof in fraud

Answer 21

[a]
In this case, the penalty of P20,000.00 shall be paid. B cannot recover more than P20,000.00, the penalty stipulated, even if he proves that the damages suffered by him is P25,000.00.

[b]
The penalty substitutes the indemnity for the damage of P15,000.00, unless there is a stipulation to the contrary in which case, B may also recover the damages proved by him.

IOW If there is a stipulation in the contract that allows the injured party (B) to claim both the penalty and additional damages

[c]
If S REFUSES (1226) to pay the penalty, B may recover LEGAL INTEREST thereon, the interest representing new damages brought about by the nonpayment of the penalty.

• legal interest considered new damages caused by nonpayment

[d]
If S is guilty of fraud (not mere fault) in the fulfillment of his obligation, he is also liable for the DAMAGES caused thereby in conformity with Article 1171.

[e]
Proof of the fraud and the existence and amount of damages is incumbent upon B.

But B need not prove fraud to recover the penalty.

Question 22

ART. 1227. The debtor cannot exempt himself from the performance of the obligation by paying the penalty, save in the case where this right has been expressly reserved for him. Neither can the creditor demand the fulfi llment of the obligation and the satisfaction of the penalty at the same time, unless this right has been clearly granted him.

if B, the creditor, demands S, the debtor, to deliver the car as per their contract, and if due to circumstances beyond B’s control (such as a natural disaster or theft), the performance of the obligation (delivery of the car) becomes impossible. what are the remedies of Creditor?

Answer 22

1227 continues “However, if after the creditor has decided to require the fulfillment of the obligation, the performance thereof should become impossible without his (C) fault, the penalty may be enforced.”

Question 23

1. Lessee invokes satisfaction of penalty as a defense to action by lessor for rescission of contract violated by former.

Facts: E (lessee) bound himself “not to make any construction upon the property leased without the permission of R (lessor), and in case he should do, it shall be for the benefi t of the property, without any right to ask for reimbursement for its cost.” In violation of this clause, E made some additions to the property.

Issue: Can R rescind the contract of lease even if E is wiling to forfeit the improvements made on the property in favor of R?

Answer 23

Held: Yes. In an obligation with a penal clause, the penalty cannot, as a general rule, serve as a defense for the purpose of leaving the principal obligation unfulfilled. (see Cui vs. Sun Chan

(1227.) The debtor cannot exempt himself from the performance of the obligation by paying the penalty, save in the case where this right has been expressly reserved for him

Question 24

2. Stipulated penalty was set-off against any amount due from or retained by the creditor under the contract.

1. X agreed to build a chapel for Y for P16,000.00.
2. The contract stipulated that if either party fails to comply with any stipulations of the contract, they must pay the other party a penalty of P4,000.00.
3. Y paid only P12,000.00 of the P16,000.00 contract price, leaving a balance of P4,000.00.
4. X constructed the chapel, but it was done with a complete lack of knowledge of construction techniques and materials, resulting in deficiencies.
5. Y, as a result, withheld payment of the remaining P4,000.00 due to X, claiming that the construction was not satisfactory.

Issue: May Y be permitted to claim the stipulated penalty and at the same time keep the balance of the contract price.

Answer 24

Held: No. The damages to which Y is entitled under the contract must be set-off (balance/offset) against the portion of the contract price which has been retained in his hands, with the result that neither party can recover anything from the other

Question 25

GEN: Penal Clause is Subsidiary not Joint SUBSIDIARY penal clause: The penalty is secondary to the main obligation and serves as compensation in case of breach, but it does not replace the main obligation. JOINT penal clause: The penalty is integrated with the main obligation, and the breach of either results in the enforcement of both.

Question 26

PENALTY |v| LIQUIDATED DAMAGES

Answer 26

they are treated the same legally but in Title XVIII LD - agreed upon parties P - punitive in nature

Question 27

When can courts reduced the penalty in provided in the penalty clause?

Answer 27

1229 1. when there is **partial or irregular performance** 2. when penalty is **iniquitous or unconscionable** - reduced even with no performance at all

Question 28

*1. 5 of the 20 guns lost were recovered.* Facts: X, etc. (municipal offi cials) failed to return the 20 arms entrusted to them. This failure constituted a violation of the conditions of the bond given and made them subject to the penalty provided therein. It appears that 5 of the 20 guns were recovered by third parties with the aid of X, etc. (municipal officials). Issue: Should X, etc. be made liable for the full amount of the bond?

Answer 28

Held: The judgment of the trial court for the sum of P2,000 the full amount of the bond, should be reversed, and the recovery reduced to P1,500. (Gov’t. vs. Punzalan,

Question 29

*2. A greater part of the indebtedness has been paid.* Facts: The stipulation is that D, debtor, shall pay P2,000 by way of indemnification, in the event of his failure to pay all or any part of an indebtedness of P102,200 and that C, creditor, should find it necessary to have recourse to the courts for the recovery of the money lent. It appears that the principal indebtedness has been amply secured by a chattel mortgage, that the greater of the indebtedness has been paid at the time the action was brought, that D tendered payment in full-pending the proceedings in the trial court and deposited the amount together with 15% interest with the clerk of court, and substantial payments had been made by D long prior to the institution of the action. Issue: Should D be made liable for the full amount of P2,000 as penalty?

Answer 29

Held: The trial court properly exercised the discretion conferred upon him by Article 1229 by modifying the penalties prescribed under the contract so as to limit the right of B to interest at the rate of 15% upon the last installments which had become overdue under the terms of the contract.

Question 30

*5. Payment of the stipulated penalty would amount to a clearly iniquitous deprivation of property.* Facts: A and B bought a parcel of land from C (for P716,573.00)with the unpaid balance of the purchase price of P576,573.00) secured by a mortgage thereon. Later, A sold his interest in the land to B, A receiving P22,285.00 with the balance of P22,285.00 to be paid within eight (8) months. It was agreed that in case of failure to pay the balance, B would pay a penalty of P6,367.00 annually for the next period of three (3) years, plus interest at the legal rate on the balance and the penalties unpaid. B failed to pay not only the balance of their obligation to C but also the balance of his obligation to A. It appears that B was the one who paid out of his personal funds the down payment of P140,000.00 with the understanding that A would reimburse B his 1/2 (P70,000.00) share. The sum of P20,000.00 was the only amount paid by A to and/or invested with B. Issue: Is A entitled to the penalties and the interests stipulated?

Answer 30

Held: No. A more than broke even on his investment of P20,000.00 when he received from B the sum of P22,285.00. Justice and morality cannot consent to and sanction a clearly iniquitous deprivation of property repulsive to the common sense of man. (De Cortez vs. Venturanza)

Question 31

what is the doctrine of **Strict Construction**

Answer 31

Doctrine of Strict Construction: This doctrine means that when interpreting contracts with penal clauses, the courts will closely SCRUTINIZE THE LANGUAGE of the contract and INTERPRET IT **STRICTLY against enforcing the penalty**, especially if the penalty is punitive in nature. **Penalty vs. Indemnity**: The key distinction here is between a genuine indemnity provision, which aims to compensate the non-breaching party for actual damages suffered due to the breach of contract, and a penalty clause, which aims to punish the breaching party and ensure compliance with the contract.

Question 32

*Purpose of penalty stipulated is not to indemnify but to induce performance.* Facts: The contract of sale of a residential lot stipulates that B (vendee) must complete construction within two years from the date (March 31, 1959) of the sale 50% of his residence on the lot, and in the event of his failure to comply with this “special condition,” B would pay S (vendor) the sum of P12,000.00 for which B gave a surety bond. B did not build the house, instead he sold the lot to C. S made a demand for the payment of P12,000.00 as neither B nor C built a house on the lot within the stipulated period. It appeared that even before the target date (March 31, 1961), the entire area was already fenced with a stone wall and building materials were also stocked in the premises and by the end of April, 1961, C had finished very much more than the required 50% stipulated. Issues: (1) What is the nature of the so-called “special condition” in the contract of sale? (2) Should B be held liable for the full amount of his bond?

Answer 32

(1) It is in reality a penal clause to secure the performance of B’s obligation. (2) No. There was partial performance of the obligation within the meaning and intendment of Article 1229. The penal clause in this case was inserted not to indemnify S for any damage it might suffer as a result of a breach of the contract but rather to compel performance of the so called “special condition” and to encourage home building — among lot owners in the area Considering that a house had been built after the period stipulated, the substantial, if tardy, performance of the obligation, having in view the purpose of the penal clause, justifi ed the reduction (by the trial court) of the penalty to P1,500 (plus 12% interest from the time of the fi ling of the complaint plus P500.00 for attorney’s fees and costs). The stipulation cannot be construed as imposing a strictly personal obligation on the vendee (B). To adopt such a construction would be to limit his right to dispose of the lot. Such restriction cannot be left to mere inference.

Question 33

if PRINCIPAL is VOID so will the penal clause be void. what instance will the nullity of the principal amount will result to the penalty still enforceable

Answer 33

if NULLITY of the principal obligation is due to the fault of the **debtor who acted in BAD FAITH, by reason of which the creditor suffered damages on EQUITABLE GROUNDS**, the penalty may be enforced.