EXTINGUISHMENT OF OBLIGATIONS
WHAT IMPOSSIBILITY OF PERFORMANCE INCLUDES 1. Physical impossibility;
2. Legal impossibility;
Directly – prohibited by law;
Indirectly – e.g when debtor is required to enter a military draft.
3. Moral impossibility
Art. 1262. An obligation which consists in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay.
When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing does not extinguish the obligation, and he shall be responsible for damages. The same rule applies when the nature of the obligation requires the assumption of risk. (1182a)
2 Kinds of Obligation “to give”
1. to give a generic thing;
2. to give a specific thing EFFECT OF LOSS
GEN. RULE: Obligation is extinguished EXCEPTIONS
1. If debtor is at fault;
2. When debtor is made liable for fortuitous event because of:
Provision of law;
Contractual stipulation;
Nature of obligation requires the assumption of risk (debtor)
INSTANCES when Law requires Liability even in case of Fortuitous Event:
1. Debtor is in default;
2. When debtor has promised to deliver the same thing to 2 or more persons who do not have the same interest;
3. Obligation arises from a crime;
4. When borrower has lent the thing to another who is not a member of his own HH;
5. When thing loaned has been delivered with appraisal of value unless stipulated exempting borrower from responsibility;
6. When payee in solutio indebiti is in bad faith.
Q: What about partial loss? Will that extinguish the obligation? It depends. Why? Generally, if the partial loss is due to a fortuitous event, the obligor has to deliver the object at its deteriorated state.
But if the loss is such that led the parties to enter into the contract, then there is extinguishment of the obligation. For instance, you bought a lot at Royal Pines because of the view that it affords. And then a high rise hotel was constructed which obstructed the view. Is there total loss? No, but there is extinguishment of the obligation.
CO vs. CA
It must likewise be emphasized that pursuant to Articles 1174 and 1262 of the New Civil Code, liability attaches even if the loss was due to a fortuitous event if "the nature of the obligation requires the assumption of risk". 14Carnapping is a normal business risk for those engaged in the repair of motor vehicles. For just as the owner is exposed to that risk so is the repair shop since the car was entrusted to it. That is why, repair shops are required to first register with the Department of Trade and Industry (DTI) 15 and to secure an insurance policy for the "shop covering the property entrusted by its customer for repair, service or maintenance" as a pre-requisite for such registration/accreditation. 16 Violation of this statutory duty constitutes negligence per se. 17 Having taken custody of the vehicle private respondent is obliged not only to repair the vehicle but must also provide the customer with some form of security for his property over which he loses immediate control. An owner who cannot exercise the seven (7) juses or attributes of ownership the right to possess, to use and enjoy, to abuse or consume, to accessories, to dispose or alienate, to recover or vindicate and to the fruits . is a crippled owner. Failure of the repair shop to provide security to a motor vehicle owner would leave the latter at the mercy of the former. Moreover, on the assumption that private respondent's repair business is duly registered, it presupposes that its shop is covered by insurance from which it may recover the loss. If private respondent can recover from its insurer, then it would be unjustly enriched if it will not compensate petitioner to whom no fault can be attributed.
Otherwise, if the shop is not registered, then the presumption of negligence applies.
CIPRIANO vs. CA
Petitioner contends that the fire which destroyed private respondent's car was a fortuitous event for which he cannot be held responsible. In support of his argument, he cites the following provisions of the Civil Code:
Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable.
Art. 1262. An obligation which consists in the delivery of a determinate thing shall be extinguished if it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay.
When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing does not extinguish the obligation, and he shall be responsible for damages. The same rule applies when the nature of the obligation requires the assumption of risk.
The contention is without merit. The issue in this case is whether petitioner was required to insure his business and the vehicles received by him in the course of his business and, if so, whether his failure to do so constituted negligence, rendering him liable for loss due to the risk required to be insured against. We hold that both questions must be answered in the affirmative.
We have already held that violation of a statutory duty is negligence per se. In F.F. Cruz and Co., Inc. v. Court of Appeals, 9 we held the owner of a furniture shop liable for the destruction of the plaintiff's house in a fire which started in his establishment in view of his failure to comply with an ordinance which required the construction of a firewall. InTeague v. Fernandez, 10 we stated that where the very injury which was intended to be prevented by the ordinance has happened, non-compliance with the ordinance was not only an act of negligence, but also the proximate cause of the death.
Indeed, the existence of a contract between petitioner and private respondent does not bar a finding of negligence under the principles of quasi-delict, as we recently held inFabre v. Court of Appeals. 11 Petitioner's negligence is the source of his obligation. He is not being held liable for breach of his contractual obligation due to negligence but for his negligence in not complying with a duty imposed on him by law. It is therefore immaterial that the loss occasioned to private respondent was due to a fortuitous event, since it was petitioner's negligence in not insuring against the risk which was the proximate cause of the loss.
Thus, P.D. No. 1572, 1 requires service and repair enterprises for motor vehicles, like that petitioner's, to register with Department of Trade and Industry. As condition for such registration or accreditation, Ministry Order No. 32 requires covered enterprises to secure insurance coverage. Rule III of this Order provides in pertinent parts: 12
REQUIREMENTS FOR ACCREDITATION
1) Enterprises applying for original accreditation shall submit the following:
1.1 List of machineries/equipment/tools in useful condition;
1.2 List of certified engineers/accredited technicians mechanics with their personal data;
1.3 Copy of Insurance Policy of the shop covering the property entrusted by its customer for repair, service or maintenance together with a copy of the official receipt covering the full payment of premium:
1.4 Copy of Bond referred to under Section 7, Rule III of this Rules and Regulations;
1.5 Written service warranty in the form prescribed by the Bureau;
1.6 Certificate issued by the Securities and Exchange Commission and Articles of Incorporation or Partnership in case of corporation or partnership;
1.7 Such other additional documents which the Director may require from time to time.
8 INSURANCE POLICY
The insurance policy of the following risks like theft, pilferage, fire, flood and loss should cover exclusively the machines, motor vehicles, heavy equipment, engines, electronics, electrical airconditioners, refrigerators, office machines and data processing equipment, medical and dental equipment, other consumer mechanical and industrial equipment stored for repair and/or service in the premises of the applicant.
There is thus a statutory duty imposed on petitioner and it is for his failure to comply with this duty that he was guilty or negligence rendering him liable for damages to private respondent. While the fire in this case may be considered a fortuitous event, 13 this circumstance cannot exempt petitioner from liability for loss.
Art. 1263. In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation. (n)
GEN. RULE: Genus never perishes EXCEPTIONS
1. If the generic thing is delimited;
2. If generic thing has been segregated or set aside – it becomes specific now.
e.g. MONEY
CAGAYAN vs. INCA
Petitioner's argument that it is not liable because the fire is a fortuitous event under Article 1174 of the Civil Code is misplaced. As held earlier, petitioner bears the loss under Article 1504 (1) of the Civil Code.
Moreover, it must be stressed that the insurance in this case is not for loss of goods by fire but for petitioner's accounts with IMC and LSPI that remained unpaid 45 days after the fire. Accordingly, petitioner's obligation is for the payment of money. As correctly stated by the CA, where the obligation consists in the payment of money, the failure of the debtor to make the payment even by reason of a fortuitous event shall not relieve him of his liability. The rationale for this is that the rule that an obligor should be held exempt from liability when the loss occurs thru a fortuitous event only holds true when the obligation consists in the delivery of a determinate thing and there is no stipulation holding him liable even in case of fortuitous event. It does not apply when the obligation is pecuniary in nature.
Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation." If the obligation is generic in the sense that the object thereof is designated merely by its class or genus without any particular designation or physical segregation from all others of the same class, the loss or destruction of anything of the same kind even without the debtor's fault and before he has incurred in delay will not have the effect of extinguishing the obligation. This rule is based on the principle that the genus of a thing can never perish. Genus nunquan perit. An obligation to pay money is generic; therefore, it is not excused by fortuitous loss of any specific property of the debtor.
Thus, whether fire is a fortuitous event or petitioner was negligent are matters immaterial to this case. What is relevant here is whether it has been established that petitioner has outstanding accounts with IMC and LSPI.
With respect to IMC, the respondent has adequately established its claim. Exhibits "C" to "C-22" show that petitioner has an outstanding account with IMC in the amount ofP2,119,205.00. Exhibit "E" is the check voucher evidencing payment to IMC. Exhibit "F" is the subrogation receipt executed by IMC in favor of respondent upon receipt of the insurance proceeds. All these documents have been properly identified, presented and marked as exhibits in court. The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent as insurer and IMC as the insured, but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim. Respondent's action against petitioner is squarely sanctioned by Article 2207 of the Civil Code which provides:
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the
contract. x x x
Petitioner failed to refute respondent's evidence.
As to LSPI, respondent failed to present sufficient evidence to prove its cause of action. No evidentiary weight can be given to Exhibit "F Levi Strauss", a letter dated April 23, 1991 from petitioner's General Manager, Stephen S. Gaisano, Jr., since it is not an admission of petitioner's unpaid account with LSPI. It only confirms the loss of Levi's products in the amount of P535,613.00 in the fire that razed petitioner's building on February 25, 1991.
Moreover, there is no proof of full settlement of the insurance claim of LSPI; no subrogation receipt was offered in evidence. Thus, there is no evidence that respondent has been subrogated to any right which LSPI may have against petitioner. Failure to substantiate the claim of subrogation is fatal to petitioner's case for recovery of the amount ofP535,613.00.
Art. 1264. The courts shall determine whether, under the circumstances, the partial loss of the object of the obligation is so important as to extinguish the obligation. (n)
Art. 1265. Whenever the thing is lost in the possession of the debtor, it shall be presumed that the loss was due to his fault, unless there is proof to the contrary, and without prejudice to the provisions of article 1165.
This presumption does not apply in case of earthquake, flood, storm, or other natural calamity. (1183a)
Art. 1266. The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor. (1184a)
Article 1266 refers to impossibility in obligations to do when the prestation has become legally or physically impossible without the fault of the obligor. The impossibility must arise after the constitution of the obligation. Because if it were prior or at the time of the inception, the nullity of the contract. Legal/physical impossibility must be after the constitution of obligation.
Effect of Loss Thru Fortuitous Event in Reciprocal Obligation GEN. RULE: The obligation that was not extinguished by the fortuitous event remains.
EXCEPTIONS:
1. In case of lease – if object is destroyed, both lease and rent are extinguished;
2. In contracts for a piece of work.
Note from transcription: what are the forms of impossibility?
1. It might be physical, when by reason of its nature the act cannot be performed.
2. Second, legal: a law is subsequently passed making the act illegal.
3. Objective when the act or service itself, without considering the person of the obligor, becomes impossible. It is the act itself.
4. The last is subjective which is the opposite of objective. The act or service cannot be done by the obligor, and the reason why you entered into the obligation is the person who would perform the act or the service.
Q: What happens if there is temporary impossibility?
A: You merely wait for the impossibility but you still have to comply with the obligation. Exception is if the obligation is to be performed at a definite time, and that time is within the period of that impossibility, so the obligation is extinguished.
Q: What happens if the debtor has complied with the obligation then here comes this temporary impossibility by reason of a circumstance or a situation. Is he entitled to the payment of his performance of what he has partially performed?
A: Yes, of course, unless it is an indivisible obligation. If it turns out the impossibility has become permanent, and you have not yet paid, then you have to pay, unless there is extinguishment of the obligation (falling under 1234 and 1235),
ASIAN CONST. AND DEV’T CORP. vs. PHIL COM INT’L BANK The [petitioner] may have experienced financial difficulties because of the “1997 economic crisis” that ensued in Asia. However, the same does not constitute a valid justification for the [petitioner] to renege on its obligations to the [respondent]. The [petitioner]
cannot even find solace in Articles 1266 and 1267 of the New Civil Code for, as declared by our Supreme Court:
It is a fundamental rule that contracts, once perfected, bind both contracting parties, and obligations arising therefrom have the force of law between the parties and should be complied with in good faith. But the law recognizes exceptions to the principle of the obligatory force of contracts. One exception is laid down in Article 1266 of the Civil Code, which reads: ‘The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor.’
Petitioner cannot, however, successfully take refuge in the said article, since it is applicable only to obligations “to do,” and not obligations “to give.” An obligation “to do” includes all kinds of work or service; while an obligation “to give” is a prestation which consists in the delivery of a movable or an immovable thing in order to create a real right, or for the use of the recipient, or for its simple possession, or in order to return it to its owner.
xxx xxx xxx
In this case, petitioner wants this Court to believe that the abrupt change in the political climate of the country after the EDSA
Revolution and its poor financial condition “rendered the performance of the lease contract impractical and inimical to the
corporate survival of the petitioner.” (Philippine National Construction Corporation versus Court of Appeals, et
al.,272 SCRA 183, at pages 191-192, supra)
The [petitioner] even failed to append any “Affidavit” to its
“Opposition” showing how much it had received from its construction contracts and how and to whom the said collections had been appended. The [petitioner] had personal and sole knowledge of the aforesaid particulars while the [respondent] did not
Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part. (n)
Refers to moral impossibility or impracticability due to change of certain conditions;
Refers to personal obligation (or obligations to do) and not real ( to give)
Does not cover highly speculative contracts or agreements such as stocks and aleatory contracts such as insurance contracts
Based on the doctrine of unforeseen events or rebus sic stantibus REQUISITES:
1. Even or change of circumstances could not have been forseen at the time of the execution of the contract;
2. Performance is extremely difficult but not impossible;
3. The impossibility was not due to acts of any of the parties 4. The prestation refers to a future one, not an immediate
fulfillment;
OSMENA vs. SSS
Under the law on obligations and contracts, the obligation to give a determinate thing is extinguished if the object is lost without the fault of the debtor. And per Art. 1192 (2) of the Civil Code, a thing is considered lost when it perishes or disappears in such a way that it cannot be recovered. In a very real sense, the interplay of the ensuing factors: a) the BDO-EPCIB merger; and b) the cancellation of subject Shares and their replacement by totally new common
Under the law on obligations and contracts, the obligation to give a determinate thing is extinguished if the object is lost without the fault of the debtor. And per Art. 1192 (2) of the Civil Code, a thing is considered lost when it perishes or disappears in such a way that it cannot be recovered. In a very real sense, the interplay of the ensuing factors: a) the BDO-EPCIB merger; and b) the cancellation of subject Shares and their replacement by totally new common