NATURE AND EFFECTS (OBLI-GOLDEN NOTES)

Principle of Balancing of Equities in Actions for Specific Performance

In decreeing specific performance, equity requires not only that the contract be just and equitable in its provisions, but that the consequences of specific performance likewise be just and equitable. The general rule is that this equitable relief will not be granted if, under the circumstances of the case, the result of the specific performance of the contract would be harsh, inequitable, and oppressive or result in an unconscionable advantage to the plaintiff.

Personal Right

The right or power of a person to demand from another, as a definite passive subject, the fulfillment of the latter’s obligation to give, to do or ot to do. There is a definite active subject and a definite passive subject. Binding and enforceable only against a particular person

Real Right

The right or interest of a person over a specific thing (ownership, possession, mortgage), without a definite subject against whom the right may be personally enforced. Only a definite active subject without any passive subject. Directed against the whole world.

Voluntary and Involuntary

Forms of Breach of Obligation

Default, Fraud, Negligence, Breach through contravention of the tenor thereof

Voluntary breach, debtor is liable for damages if he is guilty of

Fortuitous event

Involuntary breach of contract, not liable for damages as a rule.

Effects of Breach of Obligation

If a person obliged to do something fails to do it, the same shall be executed at his cost. The same shall e observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone. (1168)

(1) Where the effects of the act not to do are definite in character (2) Where it would be physically or legally impossible to undo what has been undone

Instances where the remedy under Art 1168 is not available.

Ordinary Delay

Mere failure to perform an obligation at the stipulated time

Extraordinay delay/Legal Delay

This delay equates to nonfulfillment of the obligation and arises after the extrajudicial or judicial demand has been made upon the debtor.

Mora Solvendi Ex re

Default in real obligations

Mora Solvendi Ex personae

Default in personal obligations

Renunciation (express/implied) or Prescription

Causes of cessation of the effects of mora

(1) Obligation pertains to the debtor (2) Obligation is determinate, due, demandable and liquidated, (3) Obligation has not been performed on its maturity date (4) There is judicial or extrajudicial demand by the creditor (5) Failure of the debtor to comply with such demand

Requisites of Moral Solvendi

Natural Obligations and Obligations not to do

Non-applicability of Mora solvendi

(1) Law expressly so declares (2) Contract stipulates that demand is not necessary (3) From the nature and the circumstances of the obligation, time is of the essence (4) Demand would be useless when the obligor has rendered it beyond his power to perform

When demand is not necessary

(1) Offer of Performance, (2) Offer must be to Comply with the prestation and it should be performed (3) Refusal of the creditor without just cause

Requisites of Mora Accipiendi

Specific Performance, Resolution of the Contract, Damages

Remedies of the Defrauded Party

Negligence (1173)

Omission of the diligence which is required by the nature of the obligation

Contributory Negligence of the Creditor

Reduces or mitigates the damage he can recover unless his act is the proximate cause of the event.

An occurrence or happening which could not be foreseen, or even if foreseen, is inevitable

Fortuitous Event or Caso Fortuito

(1) Cause of breach is independent of the will of the debtor (2) Event is unforeseeable or unavoidable (3) Occurrence renders it impossible for the debtor to fulfill his obligation in a normal manner (4) Debtor is free from any participation

Requisites of Fortuitous event

Law, Nature, Stipulation, The debtor is guilty of breach, the debtor promised the same thing to two or more persons, the debtor contrubuted to the loss, the possessor is in bad faith

Liability for loss due to fortuitous event

Genus nun quam peruit

Genus never perishes

Specific performance, substituted performance, Rescission, Damages, Subsidiary remedies of creditors

Remedies for breach of obligation

Accion subrogatoria, Accion Pauliana, Accion directa

subsidiary remedies of creditors

Exhaustion of the properties of the debtor, Accion subrogatoria, Accion pauliana

Remedies in connection with specific performance

Exhaustion of properties

The creditor must first try to collect from the debtor’s assets that can be seized or sold under the law (properties not exempt from attachment). Only after these assets are exhausted can the creditor seek other remedies.

Accion subrogatoria

An indirect action brought in the name of the debtor by the creditor to enforce the former’s rights; except for personal rights, rights inherent in the person of the debtor, and properties exempt from execution

Accion pauliana

rescissory action, an action to impugn or assail the acts done or contracts entered into by the debtor in fraud of his creditor

Substitute performance

Remedy of the creditor in case of nonperformnce by the debtor where another party performs the obligation or the same is performed at the expense of the debtor

No substitution, only damages

Substitute performance for purely personal obligations

Rescission

It refers to the cancellation of the contract or reciprocal obligation in case of breach on the part of one, which breach is violative of the reciprocity between the parties. This is properly called resolution. The breach must be serious enough to break the balance or reciprocity of the contract — meaning the other party no longer has to fulfill their part.

This cancellation frees both parties from their obligations under the contract.

Characteristics of the Right to Rescind

(1) It can be demanded only if plaintiff is ready, willing and able to comply with his own obligation, and defendant is not,(2) it is not absolute, (3) it needs judicial approval in absence of a stipulation, (4) it is subject to judicial review, (5) it may be waived (6) it is implied to exist in reciprocal obligations, need not be expressly stipulated

Moral, Exemplary, Nominal, Temperate, Actual, Liquidated

Kinds of Damages (MENTAL)

Moral Damages

Compensation for mental anguish, physical suffering and emotional distress

Exemplary Damages

Given to punish the wrongdoer and deter others from doing the same

Nominal

A small amount awarded when a right was violated but no real loss happened

Temperate Damages

Damages fixed by the court as reasonable compensation for actual but moderate injury

Actual Damages

Also called compensatory damages, for the real and actual loss suffered by the plaintiff

Liquidated damages

Damages agreed upon in advance by the parties in the contract.

Accion Subrogatoria

An action whereby the creditor, whose claim has not been fully satisfied, may go after the defendant debtor’s debtor (third person). (Art. 1177, NCC)It is different and distinct from active subjective subrogation governed by Arts. 1300 to 1304. In the latter, there is change of creditors, whereas in the former there is no change of creditors; the creditor merely acts in the name and for the account of the debtor after exhausting the assets of the latter but not enough to satisfy the claims of the creditor.

(1) The debtor’s assets must be insufficient, (2) The creditor must have pursued all properties of the debtor (3) The right of action must not be purely personal (4) The debtor whose right of action is exercised must be indebted to the creditor

Requisites of Accion Subrogatoria

Effects of Surogatory Action

(1) The creditor may exercise the subrogatory action on behalf of the debtor not only up to the amouunt of his credit but in its totality (2) The bringing of action does not entitle the creditor to preference (3) The defendant may avail himself of all defenses available against the creditor.

Accion Pauliana

An action where the creditor files in court for the rescission of acts or contracts entered into by the debtor designed to defraud the former. (Art. 1177, NCC)

Requisites of Accion Pauliana (P-A-P-I-L)

1. Defendant must be indebted to plaintiff 2.) The fraudulent act performed by the debtor subsequent to the contract gives advantage to another 3.)The creditor is prejudiced by such act 4.) The creditor must have pursued all properties of the debtor subject to execution 5.) The creditor has no other legal remedy.

Accion Directa

The right of a person to go directly against another person who is not privy to the contract