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TITLE I
OBLIGATIONS
(Arts. 1156-1304.)
Chapter I
GENERAL PROVISIONS
ARTICLE 1156. An obligation is a juridical necessity to give, to do or not to do. (n)
Meaning of obligation.
The term obligation is derived from the Latin word “obligatio” which means a “tying” or “binding.”
(1) It is a tie of law or a juridical bond by virtue of which one is bound in favor of another to render something — and this may consist in giving a thing, doing a certain act, or not doing a certain act.
(2) Manresa defines the term as “a legal relation established between one party and another, whereby the latter is bound to the fulfillment of a prestation which the former may demand of him.” ( Manresa 13.)
(3) Article 1156 gives the Civil Code definition of obligation, in its passive aspect. Our law merely stresses the duty of the debtor or obligor (he who has the duty of giving, doing, or not doing) when it speaks of obligation as a juridical necessity.
Meaning of juridical necessity.
Obligation is a juridical necessity because in case of non-compliance, the courts of justice may be called upon to enforce its fulfillment or, in default thereof, the economic value that it represents. In a proper case,
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the debtor may also be made liable for damages, which represent the sum of money given as a compensation for the injury or harm suffered by the creditor or obligee (he who has the right to the performance of the obligation) for the violation of his rights.
In other words, the debtor must comply with his obligation whether he likes it or not; otherwise, his failure will be visited with some harmful or undesirable legal consequences. If obligations were not made enforceable, then people can disregard them with impunity. If an obligation cannot be enforced, it may be only a natural obligation.
Nature of obligations under the Civil Code. Obligations which give to the creditor or obligee a right of action in courts of justice to enforce their performance are known as civil obligations. They are to be distinguished from natural obligations which, not being based on positive law but on equity and natural law, do not grant a right of action to enforce their performance although in case of voluntary fulfillment by the debtor, the latter may not recover what has been delivered or rendered by reason thereof. (Art.* 1423.)
Natural obligations are discussed under the Title dealing with “Natural Obligations.” (Title III, Arts. 1423-1430.)
Essential requisites of an obligation.
An obligation as defined in Article 1156 is constituted upon the concurrence of the four (4) essential elements thereof, namely:
(1) A passive subject (called debtor or obligor) or the person who is bound to the fulfillment of the obligation; he who has a duty;
(2) An active subject (called creditor or obligee) or the person who is entitled to demand the fulfillment of the obligation; he who has a right;
(3) Object or prestation (subject matter of the obligation) or the con- duct required to be observed by the debtor. It may consist in giving, doing, or not doing. (see Art. 1232.) Without the prestation, there is nothing to perform. In bilateral obligations (see Art. 1191.), the parties are reciprocally debtors and creditors; and
*Unless otherwise indicated, refers to article in the Civil Code.
Art. 1156
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Essential elements of cause of action.
(1) Its essential elements are: (a) a legal right in favor of a person (creditor/plaintiff) by whatever means and under whatever law it arises or is created; (b) a correlative legal obligation on the part of another (debtor/defendant) to respect or not to violate said right; and (c) an act or omission in breach or violation of said right by the defendant with consequential injury or damage to the plaintiff for which he may maintain an action for the recovery of damages or other appropriate relief. (see Ma-ao Sugar Central Co. vs. Bar- rios, 79 Phil. 66 [1948]; Teves vs. People’s Homesite and Housing Corp., 23 SCRA 1141 [1968]; Development Bank of the Phils. vs. Pundogar, 218 SCRA 118 [1993]; Parañaque King Enterprises vs. Court of Appeals, 269 SCRA 727 [1997]; Nadela vs. City of Cebu, 411 SCRA 315 [2003].) (2) If any of these elements is absent, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action. (San Lorenzo Village Assoc., Inc. vs. Court of Appeals, 288 SCRA 115 [1998]; Uy vs. Evangelista, 361 SCRA 95 [2001].) The presence of a cause of action rests on the sufficiency, and not on the veracity, of the allegations in the complaint, which will have to be examined during the trial on the merits. (Pioneer International, Ltd. vs. Guadiz, Jr., 535 SCRA 584 [2007].) The test is whether the material allegations of the complaint, assuming to be true, state ultimate facts which constitutes plaintiff’s cause of action such that plaintiff is entitled to a favorable judgment as a matter of law. (Rovels Enterprises, Inc. vs. Ocampo, 391 SCRA 176 [2002].)
(3) A cause of action only arises when the last element occurs, i.e., at the moment a right has been transgressed.
(a) It is to be distinguished from right of action or the right to commence and maintain an action, in that the former is governed by the procedural law while the latter depends on substantive law. The right of action springs from the cause of action, but does not accrue until all the facts which constitute the cause of action have occurred. (Multi-Realty Dev. Corp. vs. Makati Tuscany Condo- minium Corp., 491 SCRA 9 [2006]; Borbe vs. Calalo, 535 SCRA 89 [2007].) The action shall be brought in the name of the party who by law is entitled to the right to be enforced.
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(b) An obligation on the part of a person cannot exist without a corresponding right existing in favor of another, and vice-versa, for every right enjoyed by a person, there is a corresponding obligation on the part of another to respect such right.
ILLUSTRATIVE CASE: S rejected or cancelled a contract to sell his property even before the arrival of the period in the exercise of the option to buy by the purchaser who has already made a downpayment. Facts: S and B entered into a contract to sell, whereby B, after making a downpayment, was given the option to pay the balance of the purchase price of a parcel of land. Later, S “rejected the contract to sell’’ even before the arrival of the period for the exercise of said option on the ground that the terms and conditions of the contract are grossly disadvantageous and highly prejudicial to his interest. S sent two (2) checks to B in an apparent effort to return the downpayment. S contends that the complaint was prematurely filed because at the time of the institution of the complaint, B has yet to exercise his option under the “Option of Buyer’’ clause of the contract. Issue: Has B a cause of action against S for prematurity? Held: Yes. (1) All the elements of a cause of action are present. — First, there is a legal right in favor of B, i.e., the right to complete the payment of the purchase price should he choose to do so; there is an obligation on the part of S to sell the subject property exclusively to B upon full payment of the purchase price; and there was a breach of S’s obligation to sell the property, when S rejected the contract to sell even before B could exercise his option to buy notwithstanding that he had already made a downpayment. (2) S rejected contract to sell in no uncertain terms. — The fact that the rejection or cancellation of the contract by S was not made judicially or by notarial act (see Art. 1592.) is of no moment. It is enough for purposes of determining the existence of a cause of action that S has declared in no uncertain terms his refusal to be bound by the contract to sell. Such declaration, coupled with S’s act of returning B’s down payment, clearly indicates S’s rejection of the contract to sell. (Leberman Realty Corporation vs. Typingco, 293 SCRA 316 [1998].)
Cause of action based upon a written contract. Actions based upon a written contract should be brought within 10 years from the time the right of action accrues. (Art. 1144.) The accrual
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the defendant, and that certain events had made the arrangement inequitable, the cause of action for reformation would arise only when the contract appeared disadvantageous. (Naga Telephone Co. vs. Court of Appeals, 230 SCRA 351 [1994].)
(7) The nature of the product sold is a major factor in determining when the cause of action has accrued. For example, when fuel oil is delivered in drums, a buyer readily assumes that the agreed volume can be and actually is, contained in those drums. He is not expected to make a meticulous measurement of each and every delivery. In case of short deliveries, the cause of action will arise only from the discovery of the same with certainty. (Pilipinas Shell Petroleum Corporation vs. John Bordment, Ltd., supra .)
Injury, damage, and damages distinguished.
The words “injury,” “damage,’’ and “damages’’ are sometimes used synonymously, although there is a material difference among them.
(1) Injury is the illegal invasion of a legal right; it is the wrongful act or omission which causes loss or harm to another, while damage is the loss, hurt, or harm which results from the injury. On the other hand, damages denote the sum of money recoverable as amends for the wrongful act or omission; and
(2) Injury is the legal wrong to be redressed, while damages are the recompense or compensation awarded or recoverable for the damage or loss suffered. (Custodio vs. Court of Appeals, 253 SCRA 483 [1996].)
Existence of one without the other. There may be injury without damage and damage without injury. (1) Proof of loss for injury. — A wrongful violation of his legal right is not sufficient to entitle a person to sue another in a court of justice for the enforcement or protection of said right. As a rule, there must be, in addition, loss or damage caused to him by the violation of his right. But except for actual or compensatory damages (Art. 2199.), no pecuniary proof is necessary in order that moral, nominal, temperate, liquidated, or exemplary damages may be awarded. (Art. 2216.)
Art. 1156 GENERAL PROVISIONS
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(2) Liability for damages of a person for exercising his legal rights. — A person has the right to take all legal steps to enforce his legal and/ or equitable rights. One who makes use of his legal right does no in- jury. Qui jure suo utitur mullum damnum facit. If damage results from a person’s exercising his legal rights, it is damnum absque injuria (dam- age without injury). (Auyong Hian vs. Court of Appeals, 59 SCRA 110 [1974].) The plaintiff must establish that the damage to him resulted from a breach or violation of legal duty which the defendant owned to him; otherwise, the consequences must be borne by the plaintiff alone.
In other words, in order that the law will give redress for an act (or omission) causing damage, that act must be not only hurtful, but wrongful.^2 (Custodio vs. Court of Appeals, supra; see Philippine National Bank vs. Court of Appeals, 367 SCRA 198 [2001].)
ILLUSTRATIVE CASE: Acts of importer contesting forfeiture, delay in the delivery of goods to highest bidder. Facts: X imported certain goods. The Collector of Customs declared the goods forfeited in favor of the government and ordered the sale thereof at public auction. The bid of Y was approved and the goods were awarded to him. Under the law, X has the right to have the decision of the Collector of Customs reviewed by the Commissioner of Customs, and from the decision of the latter, to appeal to the Court of Tax Appeals (Secs. 2313, 402, Tariff and Customs Code.), and from the latter’s decision, to the Supreme Court. X will be prejudiced if the sale is not set aside. (see Art. 1397.) Issue: Is X liable to Y for damages from the consequent delay in the delivery of the goods? Held: Such delay is an incident to the exercise by X of his right to contest the forfeiture and the sale of his goods. (see Auyong Hian vs. Court of Appeals, supra.)
(^2) Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. The principle of damnum absque injuria does not apply when there is an abuse of a per- son’s right. Article 19 prescribes a “primordial limitation on all rights’’ by setting certain stan- dards that must be observed in the exercise thereof. It does not permit an abuse of rights which is committed when the defendant acts with bad faith or intent to prejudice the plaintiff in the exercise of a right. Such abuse will give rise to liability for damages. Good faith, how- ever, is presumed.
Art. 1156
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(4) Crimes or acts or omissions punished by law. — when they arise from civil liability which is the consequence of a criminal offense (Art. 1161.), e.g., the obligation of a thief to return the car stolen by him; the duty of a killer to indemnify the heirs of his victim; and
(5) Quasi-delicts or torts. — when they arise from damage caused to another through an act or omission, there being fault or negligence, but no contractual relation exists between the parties (Art. 2176.), e.g., the obligation of the head of a family that lives in a building or a part thereof to answer for damages caused by things thrown or falling from the same (Art. 2193.); the obligation of the possessor of an animal to pay for the damage which it may have caused. (Art. 2183.)
The enumeration by the law is exclusive; hence, there is no obligation as defined in Article 1156, if its source is not any of those enumerated.^3
Sources classified.
The law enumerates five (5) sources of obligations. They may be classified as follows:
(1) Those emanating from law; and (2) Those emanating from private acts which may be further subdivided into:
(a) those arising from licit acts, in the case of contracts and quasi-contracts; and (b) those arising from illicit acts, which may be either punishable by law in the case of delicts, or not punishable in the case of quasi-delicts. Actually, there are only two (2) sources: law and contracts, because obligations arising from quasi-contracts, crimes, and quasi-delicts are
(^3) The principle that no person may unjustly enrich himself at the expense of another is embodied in Article 22 of the Civil Code. This principle applies not only to substantive rights but also to procedural remedies. One condition for invoking this principle is that the aggrieved party has no other action based on contract, quasi-contract, crime, quasi-delict or any other provision of law. (Reyes vs. Lim, 408 SCRA 560 [2003]; A. Tolentino, Civil Code of the Philippines, 1990, pp. 77,82.) Article 22 provides: “Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.” A practice or custom is, as a general rule, not a source of a legally demandable or enforce- able right. (Makati Stock Exchange, Inc. vs. Campos (585 SCRA 120 [2009].)
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really imposed by law. (see Leung Ben vs. O’Brien, 38 Phil. 182 [1918].) Where the source of the obligation is a private act, the law merely recognizes or acknowledges the existence of the obligation.
ILLUSTRATIVE CASE: Liability of sheriff lawfully enforcing a judgment in an ejectment suit. Facts: A judgment was rendered by a justice of the peace court (now municipal court) in favor of X who brought an ejectment suit against Y, the owner of the house built on the land of X. Z, the deputy sheriff who executed the judgment, was obliged to remove the house of Y from the land according to the usual procedure in the action for ejectment. Issue: Is Y entitled to indemnity arising from the destruction of his house? Held: No proof has been submitted that a contract had been entered into between plaintiff (Y) and the defendants (X and Z) or that the latter had committed illegal acts or omissions or incurred in any kind of fault or negligence, from any of which an obligation might have arisen on the part of X and Z to indemnify Y. For this reason, the claim for indemnity, on account of acts performed by the sheriff, while enforcing a judgment, cannot under any consideration be sustained. (Navales vs. Rias, 8 Phil. 508 [1907].)
ART. 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been fore- seen, by the provisions of this Book. (1090)
Legal obligations.
Article 1158 refers to legal obligations or obligations arising from law. They are not presumed because they are considered a burden upon the obligor. They are the exception, not the rule. To be demandable, they must be clearly set forth in the law, i.e., the Civil Code or special laws. Thus:
(1) An employer has no obligation to furnish free legal assistance to his employees because no law requires this, and, therefore, an em- ployee may not recover from his employer the amount he may have paid a lawyer hired by him to recover damages caused to said employ- ee by a stranger or strangers while in the performance of his duties. (De la Cruz vs. Northern Theatrical Enterprises, 95 Phil. 739 [1954].)
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are not presumed. Only those expressly determined in the Civil Code or in special laws are demandable. Whatever right C may have against X either for the recovery of the money paid or for damages, it is clear that such payment gave him no title, either legal or equitable, to these vessels. (Martinez vs. Martinez, 1 Phil. 647 [1902].) Note: If X were a minor, the vessels would belong to C in ownership and usufruct under Article 161 of the old Civil Code. (now Art. 324.^5 ) Un- der Article 1448,^6 the payment may give rise to a gift or an implied trust.
ART. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. (1091a)
Contractual obligations.
The above article speaks of contractual obligations or obligations arising from contracts or voluntary agreements.
A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. (Art. 1305.) It is the formal expression by the parties of their rights and obligations they have agreed upon with respect to each other.
(1) Binding force. — Obligations arising from contracts are governed primarily by the agreement of the contracting parties. Once perfected, valid contracts have the force of law between the parties who are bound to comply therewith in good faith, and neither one may without the consent of the other, renege therefrom. (Tiu Peck vs. Court of Appeals, 221 SCRA 618 [1993].) In characterizing contracts as having the force of law between the parties, the law stresses the obligatory nature of a binding and valid agreement (William Golangco Construction Corporation vs. Phil. Commercial International Bank, 485 SCRA 293 [2006].), absent any allegation that it is contrary to law, morals, good customs, public order, or public policy. (Art. 1306.)
(^5) This provision is not contained in the Family Code. (^6) Art. 1448. There is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the benefi cial interest of the property. The former is the trustee, while the latter is the beneficiary. However, if the person to whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of the child.
Art. 1159 GENERAL PROVISIONS
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(a) The law,^7 recognizing the obligatory force of contracts (Arts. 1139, 1308, 1315, 1356.), will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof. (Art. 1170.) The mere proof of the existence of the contract and the failure of its compliance justify, prima facie , a corresponding right of relief.^8 (FGU Insurance Corp. vs. G.P. Sarmiento Trucking Corp., G.R. No. 141910, Aug. 6, 2002.) (b) In law, whatever fairly puts a person on inquiry is sufficient notice, where the means of knowledge are at hand, which if pursued by proper inquiry, the full truth might have been ascertained. Thus, where a purchaser of a memorial lot, on installment basis, had full knowledge of the terms and conditions of the sale, including the rules and regulations issued by the seller governing the memorial park, to which she obliged herself to abide, cannot later feign ignorance of said rules. (Dio vs. St. Ferdinand Memorial Park, Inc., 509 SCRA 453 [2006].) (c) If it occurs to one of the contracting parties to allege some defect in a contract as a reason for invalidating it, such alleged defect must be proved by him by convincing evidence since its validity or compliance cannot be left to will of one of them. (see Art. 1308.) “An experienced businessman who signs important le- gal papers cannot disclaim the consequent liabilities therefor after being a signatory thereon.’’ (Blade International Marketing Corp. vs. Court of Appeals, 372 SCRA 333 [2001].) It behooves every con- tracting party to learn and to know the contents of an instrument before signing and agreeing to it. (Dio vs. St. Ferdinand Memorial Park, Inc., supra .) (d) Courts have no alternative but to enforce contracts as they were agreed upon and written when the terms thereof are clear
(^7) The rule of lex loci contractus (the law of the place where the contract is made) governs in cases of Filipino workers whose employment contracts were approved by the Philippine Overseas Employment Administration (POEA) and were entered into and perfected in the Philippines. (Philippine Employment Services and Resources, Inc. vs. Paramo, 427 SCRA 732 [2004].) (^8) It has been consistently ruled that a bonus is not a demandable and enforceable obliga- tion, unless the giving of such bonus has been the company’s long and regular practice, i.e. , the giving of the bonus should have been done over a long period of time, and must be shown to have been consistent and deliberate. (Phil. Appliance Corp. vs. Court of Appeals, 430 SCRA 525 [2004].)
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one party from taking unfair advantage over the other. Evasion by a party of legitimate obligations after receiving the benefits under the contract would constitute unjust enrichment on his part. (see Royal Lines, Inc. vs. Court of Appeals, 143 SCRA 608 [1986].)
(5) Liability for breach of contract. — Although the contract imposes no penalty for its violation, a party cannot breach it with impunity. Our law on contracts recognizes the principle that actionable injury inheres in every contractual breach. (Boysaw vs. Interphil Promotions, Inc., 148 SCRA 635 [1987]; see Arts. 1170, 1191.) Interest may, in the discretion of the court, on equitable grounds, be allowed upon damages awarded for breach of contract. (see Art. 2210.)
The failure of either party to a contract to demand performance of the obligation of the other for an unreasonable length of time may render the contract ineffective where the contract does not provide for the period within which the parties may demand the performance of their respective undertakings but the parties did not contemplate that the same could be made indefinitely. (Villamor vs. Court of Appeals, 202 SCRA 607 [1991].) The mere failure of a party to respond to a demand letter in the absence of other circumstances making an answer requisite or natural does not constitute an implied admission of liability. (Phil. First Insurance Co., Inc. vs. Wallen Phils. Shipping, Inc., 582 SCRA 457 [2009].)
(6) Preservation of interest of promisee. — A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered. The remedy serves to preserve the interest of the promisee of having the benefit of his bargain, or in being reimbursed for loss caused by reliance on the contract, or in having restored to him any benefit that he has conferred on the other party.
The effect of every infraction is to create a new duty, that is, to make recompense to the one who has been injured by the failure of an- other to observe his contractual obligation unless he can show extenu- ating circumstances. (FGU Insurance Corporation vs. G.P. Sarmiento Trucking Corporation, 386 SCRA 312 [2002]; see Art. 1170.)
ILLUSTRATIVE CASES:
- Binding force of an oral agreement inconsistent with a prior written one. Facts: X verbally agrees to pay Y the balance of an account in advance, notwithstanding the different stipulation of a prior written agreement.
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Issue: Is X bound to perform said obligation? Held: Yes. Since he agreed to pay Y the balance of the account independently of the terms of the written contract, he must perform his obligation to pay according to the tenor of his verbal agreement which has the force of law between them. (Hijos de I. de la Rama vs. Inventor, 12 Phil. 45 [1908].) —-— —-— —-—
- Validity of contract stipulating that in case of failure of debtor to pay amount of loan, his property shall be considered sold to creditor. Facts: D borrowed from C money to be paid within a certain period, under the agreement that, if D fails to pay at the expiration of said period, the house and lot described in the contract would be considered sold for the amount of the loan. D failed to pay as promised. C brought action for the delivery of the house and lot. Issue: Are both contracts valid and, therefore, should be given effect? Held: Yes. The fact that the parties have agreed at the same time, in such a manner that the fulfillment of the promise of sale would depend upon the non-payment or return of the amount loaned has not produced any change in the nature and legal conditions of either contract, or any essential defect which would nullify them. As the amount loaned has not been paid and continues in possession of the debtor, it is only just that the promise of sale be carried into effect, and the necessary instruments be executed. That which is agreed to in a contract is law between the parties, and must be enforced. (Alcantara vs. Alinea, 8 Phil. 111 [1907].) Note: In the above case, the court found that no contract of mortgage, pledge, or antichresis was entered into. (see Arts. 2088, 2137.) —-— —-— —-—
- Validity of contract for attorney’s fees where amount stipulated is unreasonable. Facts: D executed a promissory note in favor of C for the purchase price of a truck sold by the latter. In the note, D bound himself to pay an additional 25% as attorney’s fees in the event of becoming it necessary for C to employ counsel to enforce its collection. Issue: Has the court the power to ignore the contract as to attorney’s fees, considering that a contract has the force of law between the contracting parties?
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—-— —-— —-—
- Corporation unconditionally undertook to redeem preferred shares at specified dates. Facts: The terms and conditions of the Purchase Agreement shows that the parties intended the repurchase of the preferred shares in question on the respective dates to be an absolute obligation made manifest by the fact that a surety was required to see to it that the obligation is fulfilled in the event of the corporation’s inability to do so. Defendant corporation contends that it is beyond its power and competence to redeem the preferred shares due to financial reverses. Issue: Can this contention serve as a legal justification for its failure to perform its obligation under the agreement? Held: No. The unconditional undertaking of the corporation does not depend upon its financial ability: it constitutes a debt which is defined “as an obligation to pay money at some fixed future time, or at a time which becomes definite and fixed by acts of either party and which they expressly or impliedly agree to perform in the contract.” The Purchase Agreement constitutes the law between the parties. (Lirag Textiles Mill, Inc. vs. Social Security System, 153 SCRA 338 [1987].)
ART. 1160. Obligations derived from quasi-contracts shall be subject to the provisions of Chapter 1, Title XVII, of this Book. (n)
Quasi-contractual obligations.
Article 1160 treats of obligations arising from quasi-contracts or contracts implied in law.
A quasi-contract is that juridical relation resulting from certain law- ful, voluntary and unilateral acts by virtue of which the parties become bound to each other to the end that no one will be unjustly enriched or benefited at the expense of another. (Art. 2142.)
It is not, properly, a contract at all. In a contract, there is a meeting of the minds or consent; the parties must have deliberately entered into a formal agreement. In a quasi-contract, there is no consent but the same is supplied by fiction of law. In other words, the law consid- ers the parties as having entered into a contract, irrespective of their intention, to prevent injustice. Corollarily, if one who claims having enriched somebody has done so pursuant to a contract with a third party, his cause of action should be against the latter, who, in turn,
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may, if there is any ground therefor, seek relief against the party ben- efited. (Cruz vs. J.M. Tuason & Co., Inc., 76 SCRA 543 [1977].)
Quasi-contracts are governed by the Civil Code, more particularly, by Articles 2142-2175, Chapter I, Title XVII.
ILLUSTRATIVE CASES:
- When a party benefited at the expense of another not liable to the latter. Facts: By virtue of an agreement between X and Y, X assisted Y in improving a large tract of land which was later declared by the court as belonging to C. Issue: Has X the right to be reimbursed by Z for X’s services and expenses on the ground that the improvements are being used and enjoyed by Z? Held: No. From the language of Article 2142, it is obvious that a presumed quasi-contract cannot emerge as against one party when the subject matter thereof is already covered by an existing contract with another party. X’s cause of action should be against Y who, in turn, may seek relief against Z. (Cruz vs. J.M. Tuazon Co., Inc., supra.) —-— —-— —-—
- Bank paid the seller of goods under an expired letter of credit but the goods subject thereof were voluntarily received and kept by the buyer which refused to pay the bank. Facts: X opened with B (bank) a domestic letter of credit (LC) in favor of Y for the purchase from the latter of hydraulic loaders. B paid Y for the equipment after the expiration of the letter of credit. X refused to pay B claiming that there was breach of contract by B which acted in bad faith in paying Y knowing that Y delivered the loaders to X after the expiry date of the subject LC. X offered to return the loaders to B which refused to take possession three (3) years after X accepted delivery, when B made a demand for payment. Issue: Was it proper for B to pay the LC which had long expired or been cancelled? Held: B should not have paid the LC which had become invalid upon the lapse of the period fixed therein. Be that as it may, X should pay B the amount B expended for the equipment belatedly delivered by Y and voluntarily received and kept by X. B’s right to seek recovery from X is
Art. 1160
