Administración integral de riesgos

Reason: if not allowed to take the appropriate actions, there is a danger the creditor will receive nothing, as when the object is deliberately destroyed, or hidden, or alienated

a. To prevent loss/deterioration, enjoin and restrain acts of alienation or destruction by the debtor himself or by 3rd _persons b. Prevent concealment of the debtor’s properties which constitute the guaranty in case of nonperformance of the obligation c. Demand security in case the debtor becomes insolvent

d. To compel the acknowledgment of the debtor’s signature on a private document or the execution of the proper public documents for registration so as to affect 3rd _persons

e. Register the deeds of sale or mortgages evidencing the contract f. Set aside fraudulent alienations made by the debtor

g. Interrupt the period of prescription by actions against adverse possessors of the things which are the objects of the obligation Example:

ISSUES:

(a) Pending fulfillment of the conditions (such as the employee’s

service), do the employees have any right with respect to the pension plan? (b) Would financial losses during the war authorize abolition

of the plan? HELD:

(a) Pending fulfillment of the conditions, the employees have a right in expectancy, which the law protects. Hence, under Art. 1188, appropriate actions may be taken by them.

(b) Financial losses will not excuse abolition of the pension plan because the obligation to pay money is an obligation to give a GENERIC thing.

RIGHT OF DEBTOR TO RECOVER WHAT WAS PAID BY MISTAKE Reason: Solutio Indebiti, After all, the condition may not materialize

 The debtor is also entitled to fruits or legal interest if the creditor be in BAD FAITH, that is, if the creditor knew that payment was being made prior t the fulfillment of the condition

If not paid by mistake, can there be recovery?

1) If the condition is fulfilled, none (because of retroactivity)

2) If not fulfilled, there is recovery (for this would be unjust enrichment) unless a pure donation was intended [1189] comments

RULES ON LOSS, DETERIOARATION, AND IMPROVEMENTS DURING PENDENCY OF A SUSPENSIVE CONDITION (Art. 1189)

Improvement If by nature or by time inures to the

benefit of the creditor If at the expense of the debtor debtor’s right is only that or a usufructuary Requisites for application of 1189

1) The obligation must be a real obligation (to give) 2) The object is a specific or determinate thing 3) The obligation is subject to a suspensive condition 4) The condition is fulfilled

5) There is loss, deterioration, or improvement of the thing during the pendency of the happening of the condition LOSS

 Perishes

 Goes out of commerce

 Disappears, in such a way that its existence is unknown

 Disappears, in such a way that it cannot be recovered Effects of partial loss

 That would amount to loss important enough to be considered a complete loss (determined by the courts)  That would merely be considered a deterioration of the thing, in which case the rules on deterioration should apply Deterioration

 Any reduction or impairment in the substance or value of a thing which does not amount to a loss  If not imputable to the debtor, he is not liable for any damages

 But if due to fault of debtor, then creditor may either demand the thing or ask for rescission, w/ damages in either case Improvement of a thing

 Anything added to or incorporated in, or attached to the thing that is due, is an improvement.

 If caused by nature of the thing or by time, such as alluvion or deposits of soil on the edge of the land bordering a river, or the natural growth of trees or plants on a piece of land, the improvement shall inure to the benefit of the creditor (principle of retroactivity)

 If done at the expense of the debtor, rights of usufructuary (579, 580)- improvements may be removed without damage

1190. RESOLUTORY CONDITION HAPPENING; MUTUAL RESTITUTION

When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall return to each other what they have received

In case of loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article which shall be applied to the party who is bound to return

Kristine Confesor

As for obligations to do and not to do, the provisions of the second paragraph of Art. 1187 shall be observed as regards to the effect of the extinguishment of the obligation

[1190] Comments Rights of 3rd _Persons

- the happening of a resolutory condition does not ipso jure revest ownership in him; he merely becomes entitled to the delivery which would give him the ownership anew. (personal right)

Loss, Deterioration, Improvement

 before the RC happens, the party who has a right, is practically in the same position as one who has an obligation subject to a suspensive condition; there is the possibility that he may have to return or deliver the thing to the other party, and that possibility becomes a positive duty when the resolutory condition is fulfilled; in case of loss of the thing, deteriorations suffered by it, or improvements made thereon, the provisions of Article 1189 shall apply

Fruits and Interests

 no express provision unlike in reciprocal obligation where pending the happening of a suspensive condition, fruits and interests compensate each other and in unilateral obligations, the debtor shall keep the fruits received

 expenses incurred by the person obliged to make restitution should be deducted from the gross value of the fruits to be returned Protection of Rights

 party who would be entitled to restitution from the other in the event of resolutory condition is fulfilled, stands in the same position as a creditor in an obligation with a suspensive condition, in that he has expectancy of recovery of the thing.

 Pending the fulfillment of resolutory condition, therefore, he should be entitled to take the same steps and bring the same actions allowed to the creditor under the 1st _{para. of art. 1188 for the protection of his rights.}

1191. RECIPROCAL OBLIGATIONS

The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and

the rescission of the obligation,

with the payment of damages in either case.

He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed,

Unless there be just cause authorizing the fixing of the period.

This is understood to be without prejudice to the rights of 3rd _{person who have acquired the thing,} In accordance w/ articles 1385 and 1388 and the Mortgage Law.

[1191] Comments:

RECIPROCAL OBLIGATIONS

 Arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other.

 To be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfillment of the other Tacit Resolutory Condition

 Condition imposed exclusively by law, even if there is no corresponding agreement between the parties

 When one party has performed his part of the contract, the other party incurs in delay Declaration of Rescission by the Injured Party

 Does not require rescission by the courts

 Extrajudicial declaration by the creditor, electing rescission produces legal effect

 Mere failure of one party to perform his undertaking does not ipso jure produce the resolution of the contract; the party entitled to resolve should apply to the court for a decree of rescission or resolution

 In the absence of previous judicial decree declaring resolved the contract of sale of property by reason of the failure of the vendee to pay the stipulated price, the vendor cannot just recover possession of the property or sell the same to another person

NB:

 If the obligation has not yet been performedrescission by the party who is ready and willing to perform would suffice

 But where the injured party has already performed such as when property has already been delivered by him, he cannot by his own declaration rescind the contract and reacquire title to the property, if the other party opposes the rescission; court action must be taken

1192.

In case both parties have committed a breach of the obligation, The liability of the first shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, The same shall be deemed extinguished, and

Each shall bear his own damages.

RESCISSION/RESOLUTION (1191)

Kristine Confesor

(resolution in 1191 is a principal action)

J. Melo FACTS:

Spouses Galang obtained a loan from Fortune Savings and Loan Association (FSLA) for 173k to purchase a House and Lot. To secure payment, a real estate mortgage was constituted on the said property in favor of the bank. Subsequently, National Home Mortgage Finance Corp (NHMFC) purchased the mortgage loan of the spouses from FSLA for 173k.

Galang (wife) authorized her atty-in-fact to sell the H&L in favor of Leticia Cannu who agreed to buy the property for 120k and assume the balance of the mortgage obligations w/ the NHMFC and with CERF realty

Date Amount paid

July 19, 1990 40k March 13, 1190 15k April 6, 1991 15k November 28, 1991 5k Balance 45k Total75k

A deed of sale w/ Assumption of Mortgage obligation was made and entered into by the parties which stated among others that a consideration of 250k was received by the vendors. Cannus then immediately took possession of the property and paid 55k to NHMFC and paid the “equity” or second mortgage to CERF.

Despite requests from Timbang and Galang to pay the balance of 45k, or in the alternative vacate the property, Cannus refused. On the other hand, the Cannus informed the NHMFC of their assumption of mortgage which was not formally approved by the mortgagee.

Since Cannus failed to comply with their obligations, Galang paid 200k as full payment of her remaining mortgage loan with NMHFC. However, the release of the TCT in favor of the Galangs was held in abeyance due to the opposition made by the Cannus (they subsequently filed a specific performance against NMFHC)

NMFHC claimed that Cannus have no cause of action against it because they have not submitted the formal requirements. While Galangs said that their failure to fully pay the consideration and update the monthly amortizations with the NHMFC, they paid full the existing obligations as an initial step in the rescission and annulment of the Deed of Sale with Assumption of Mortgage.

RTC: no cause of action; admitted failure to pay 45k in consideration of the deed of sale w/ assumption of mortgage obligation (breach of contract); no legal personality since failed to comply with formal requirements

CA: breach is substantial; rescission is warranted and justified

Out of the 250k purchase price which was supposed to be paid on the day of the execution of the contract in July, 1990, they only paid in the span of 8 years from 1990 to present the amount of 75k.

Tender made by Cannus after the filing of the case in the amount of 278k cannot be considered as an effective mode of payment. It must not be by tender alone but by tender and consignation.

1990-1993 only six payments; not even sufficient for arrears and interests and penalties ISSUES:

1st _{error: Was the breach substantial so as to warrant rescission? Yes.} 2nd _{error: Was there non-compliance with the monthly amortization? Yes.} 3rd _{error: Did the facts and circumstances militate against rescission? No} 4th _{error: Is the action for rescission subsidiary? No}

HELD: #1: Yes

Art. 1191 the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.

Rescission will not be permitted for a slight or casual breach of the contract. Rescission may be had only for such breaches that are substantial and fundamental as to defeat the object of the parties in making the agreement. The question of whether a breach of contract is substantial depends upon the attending circumstances and not merely on the percentage of the amount not paid.

In this case, petitioner’s failure to pay the remaining balance of 45k is substantial. Even if assuming arguendo that it is the remaining balance left out of 250k or 18%, it is still substantial take together with the fact that the last payment was made only 18mos. before Galang paid the outstanding balance of the mortgage loan. The tender was only made 7months after the filing of the case; it is not legal payment unless it is completed by consignation.

#2: Yes

Petitioners were not religious in paying the amortization with the NHMFC, as admitted by them in a span of 3 years from 1990-93. There was no formal assumption of mortgage obligation with NHMFC because of the lack of approval on account of petitioner’s non- submission of requirements in order to be considered as assingnees/successors-in-interest over the property covered by the mortgage obligation.

#3. The Atty-in-fact made constant follow-ups after the last payment made on 1991 but petitioners did not pay. Galang in her answer stated that she ordered Cannus for the complete compliance of their obligation by paying the full amount of the consideration or in the alternative vacate the property in question.

Kristine Confesor