1) DEMAND

a. Philippine Export and Foreign Loan Guarantee Corporation v. Amalgamated Management

and Development Corporation (AMDC), G.R. No. 177729. September 28, 2011. (G)
FACTS:
The matter for resolution refers to the liability of persons who agree to be jointly and
solidarily liable with the main obligor.
Early 1982, AMDC obtained from the National Commercial Bank of Saudi Arabia
(NCBSA) a loan amounting to SR 3.3M (PhP 9M) to finance the working capital
requirements and the down payment for the trucks to be used in AMDC's hauling project in
the Middle East.
April 21, 1982, AMDC executed in favor of the petitioner a deed of undertaking, with
Cuevas and Saddul as its co-obligors. In the deed of undertaking, AMDC, Cuevas, and
Saddul jointly and severally bound themselves to pay to the petitioner, as obligee, whatever
damages or liabilities that the petitioner would incur by reason of the guaranty.
April 23, 1982, petitioner issued a letter of guaranty in favor of NCBSA as the lending bank
upon the request of AMDC. Amalgamated Motors Philippines Incorporated (AMPI),
acted as an accommodation mortgagor, and executed in favor of the petitioner a real estate
mortgage over 2 parcels of land located in Dasmarias, Cavite.
AMDC defaulted on the obligation. Upon demand, the petitioner paid the obligation to
NCBSA. By subrogation and pursuant to the Deed of Undertaking, petitioner then
demanded that AMDC, Cuevas and Saddul should pay the obligation, but its demand was
not complied with. Hence, it extra-judicially foreclosed the real estate mortgage. The
Provincial Sheriff of Cavite conducted a public auction, in which the petitioner acquired
the mortgaged properties as the highest bidder for P4,688,482.00 and P69,518.00.
The proceeds of the foreclosure sale were not sufficient to cover the guaranty because a
balance of P45,839,219.95 plus interest and other charges remained unpaid, the petitioner
sued AMDC, Cuevas and Saddul in the RTC to collect the deficiency.
AMDC and Cuevas admitted the existence of the real estate mortgage and deed of
undertaking, but raised defenses, as follows:
a) that they did not receive from the petitioner any demand for the payment of the loan;
b) that the interests, penalties, fees, charges, and attorney's fees were usurious, exorbitant,
unconscionable, and in violation of law;
c) that the value of the foreclosed properties was more than sufficient to pay the loan;
d) that the deficiency claim was unconscionable and unilaterally computed by the petitioner;
and
e) that they made several payments to the petitioner in the form of rental or otherwise.
Saddul submitted a separate answer, averring that he was not liable to the petitioner for any
amount because he did not benefit from the guaranty.
December 27, 2002, the RTC rendered its decision. Cuevas and Saddul are hereby
rendered absolved from the obligation as well as from the deficiency claim as a
consequence, the case against them is hereby dismissed. The cross-claim of defendant/crossclaimant defendant Saddul against defendant AMDC is hereby dismissed for lack of
sufficient basis.
April 30, 2007, the CA promulgated its assailed decision. The judgment of the Regional
Trial Court dated December 27, 2002 is hereby AFFIRMED
ISSUE:
Whether or not respondents were absolved of personal liability on the petitioner's deficiency
claim;
Whether or not respondents had not been notified of the guaranty period extension, and had
been thereby exonerated from liability on the deficiency claim;
Whether or not the petitioner's claim against respondents had already prescribed; and
Whether or not AMDC was liable to pay interest and penalty charge at the rate of only 6%
per annum instead of 16% per annum.

HELD
The deed of undertaking specifically stated that the grant of the extension of the guaranty
period did not extinguish the obligation of Cuevas and Saddul. The stipulation, which was
not illegal or immoral, necessarily bound Cuevas and Saddul.
A solidary obligation existed among AMDC, Cuevas and Saddul because they had
assented to be jointly and severally liable to the petitioner for whatever damages or
liabilities that it might incur by virtue of the guaranty. In a solidary obligation, each debtor
was liable for the entire obligation. The petitioner could compel any of the solidary obligors
to perform the entire obligation.
The letters granting the requests for extension of the guaranty period bore the approval and
signatures of Cuevas and Saddul. Having thus admitted their letters on the extension of the
guaranty period, Cuevas and Saddul could not anymore feign ignorance of the guaranty
extension.
The Civil Code provides that the obligor incurs in delay from the time the obligee judicially
or extrajudicially demands the fulfillment of the obligation (Art. 1169). The petitioner's
complaint to recover its deficiency claim from obligors AMDC, Cuevas and Saddul, being
a judicial demand, sufficed to render Cuevas and Saddul in delay in the payment of the
deficiency claim.
The 10-year period to recover a deficiency claim starts to run upon the foreclosure of the
property mortgaged, In view of the real property mortgage having been foreclosed on
February 22, 1988 and March 24, 1988, the petitioner's filing on February 17, 1994 of its
complaint to recover the deficiency claim was well within the 10-year prescriptive period
The law empowers the courts to reduce interest rates and penalty charges that are iniquitous,
unconscionable and exorbitant. Although the market value of the two parcels of land at the
time of the foreclosure sale and acquisition by the petitioner totaled PhP 15,225,000.00, the
parcels were sold to the petitioner for only PhP 4,758,000.00. The huge disparity between
the market value and the price realized at the foreclosure sale obviously gave a clear
financial advantage to the petitioner. To still fix the interest rate and penalty charge at 16%
per annum each would be plainly inequitable and oppressive. The Court agrees that
reducing the interest rate and penalty charge from 16% per annum to 6% per annum was
justified
b. Premiere Development Bank vs. Central Surety and Insurance Company, Inc. (G.R. No.
176246. February 13, 2009) (G)
FACTS:
August 20, 1999, respondent obtained an industrial loan of PhP 6M from petitioner with a
maturity date of August 14, 2000. This loan, evidenced by Promissory Note (PN), stipulates
payment of 17% interest per annum payable monthly in arrears and the principal payable on
due date. In addition, provides for a penalty charge of 24% interest per annum based on the
unpaid amortization/installment or the entire unpaid balance of the loan. In all, should
Central Surety fail to pay, it would be liable to Premiere Bank.
To secure payment of the loan, Central Surety executed in favor of Premiere Bank a Deed
of Assignment with Pledge covering Central Surety's Membership Fee Certificate
representing its proprietary share in Wack Wack Golf and Country Club Incorporated
(Wack Wack Membership). In both PN and Deed of Assignment, Constancio T.
Castaeda, Jr. and Engracio T. Castaeda, represented Central Surety and solidarily
bound themselves to the payment of the obligation.
Central Surety had another commercial loan with Premiere Bank in the amount of PhP
40,898,000.00 maturing on October 10, 2001. This loan was, likewise, evidenced by a PN
and secured by a real estate mortgage over Condominium Certificate. PN was availed of
through a renewal of Central Surety's prior loan. As with the PhP 6M loan and the
constituted pledge over the Wack Wack Membership, the PhP 40,898,000.00 loan with
real estate mortgage was transacted by Constancio and Engracio Castaeda on behalf of
Central Surety.

 August 22, 2000, Premiere Bank sent a letter to Central Surety demanding payment of the
PhP 6M loan.
September 20, 2000, Central Surety issued Bank of Commerce (BC) Check in the amount
of PhP 6M and payable to Premiere Bank. The check was received with the notation "full
payment of loan-Wack Wack", as reflected in Central Surety's Disbursement Voucher.
However, for undisclosed reasons, Premiere Bank returned BC Check to Central Surety,
and in its letter, demanded from the latter, not just payment of the PhP 6M loan, but also the
PhP 40,898,000.00 loan.
September 29, 2000, Central Surety, through its counsel, wrote Premiere Bank and retendered payment of the check. A separate letter with another BC Check in the amount of
PhP 2.6M was also tendered to Premiere Bank as payment for the Spouses Castaeda's
personal loan.
October 13, 2000, Premiere Bank responded and signified acceptance of Central Surety's
checks. The PhP 8.6M check payments were not applied in full to Central Surety's PhP
6M loan and the Spouses Castaeda's personal loan of PhP 2.6M. Premiere Bank also
applied proceeds thereof to a commercial loan taken out by Casent Realty and
Development Corporation (Casent Realty), and to Central Surety's loan, maturing on
October 20, 2001.
Strongly objecting to Premiere Bank's application of payments, Central Surety's demand
for the application of the check payments to the loans covered by PN Nos. 714-X and 714Y. Additionally, Central Surety asked that the Wack Wack Membership pledge, should be
released.
Premiere Bank responded and refused to accede to Central Surety's demand. Premiere
Bank insisted that the PN covering the PhP 6M loan granted Premiere Bank sole
discretion.
Central Surety filed a complaint for damages and release of security collateral, specifically
praying that the court render judgment declaring Central Surety's PhP 6M loan as fully
paid; and ordering Premiere Bank to release to Central Surety its membership certificate
of shares in Wack Wack;
July 12, 2005, The RTC ruled that the stipulation in the PN granting Premiere Bank sole
discretion in the application of payments, although it partook of a contract of adhesion, was
valid.
On appeal, the CA held that with Premiere Bank's letter dated August 22, 2000 specifically
demanding payment of Central Surety's PhP 6M loan, it was deemed to have waived the
stipulation in granting it the right to solely determine application of payments, and was,
consequently, estopped from enforcing the same.
ISSUE:
Whether Premiere Bank waived its right of application of payments on the loans of
Central Surety.
Whether the PhP 6M loan of Central Surety was extinguished by the encashment of BC
Check.
HELD:
Art. 1252 gives the right to the debtor to choose to which of several obligations to apply a
particular payment that he tenders to the creditor. But likewise granted in the same provision
is the right of the creditor to apply such payment in case the debtor fails to direct its
application.
The records show that Premiere Bank and Central Surety entered into several contracts of
loan, securities by way of pledges, and suretyship agreements. In at least 2 promissory notes
between the parties, Central Surety expressly agreed to grant Premiere Bank the authority
to apply any and all of Central Surety's payments, it is in the exercise of this express
authority under the Promissory Notes, and following Bangko Sentral ng Pilipinas
Regulations, that Premiere Bank applied payments made by Central Surety, as it deemed
fit, to the several debts of the latter.
When Central Surety directed the application of its payment to a specific debt, it knew it
had another debt with Premiere Bank, in the amount of PhP 40.898M. Central Surety is

aware that Promissory Note contains the same which grants the Premiere Bank authority to
apply payments made by Central Surety.
Being in receipt of amounts tendered by Central Surety, which were insufficient to cover
its more onerous obligations, Premiere Bank cannot be faulted for exercising the authority
granted to it under the Promissory Notes, and applying payment to the obligations as it
deemed fit. The Court will not disturb the finding of the lower court that Premiere Bank
rightly applied the payments that Central Surety had tendered. Corollary thereto, and upon
the second issue, the tender of the amount of PhP 6M by Central Surety, and the
encashment of BC Check did not totally extinguish the debt covered by PN No. 714-Y.
c. Megaworld Globus Asia, Inc. vs. Mila S. Tanseco, G.R. No. 181206. October 9, 2009. (D)
FACTS:
July 7, 1995, petitioner Megaworld Globus Asia, Inc. (Megaworld) and respondent Mila
S. Tanseco (Tanseco) entered into a Contract to Buy and Sell a 224 m 2 condominium unit
at a pre-selling project, "The Salcedo Park," located along Senator Gil Puyat Avenue,
Makati City.
The purchase price was PhP 16,802,037.32, to be paid as follows:
1. 30% less the reservation fee of PhP 100,000, or PhP 4,940,611.19, by postdated check
payable on July 14, 1995;
2. PhP 9,241,120.50 through 30 equal monthly installments of PhP 308,037.35 from August
14, 1995 to January 14, 1998; and
3. The balance of PhP 2,520,305.63 on October 31, 1998, the stipulated delivery date of the
unit; provided that if the construction is completed earlier, Tanseco would pay the
balance within 7 days from receipt of a notice of turnover.
Tanseco paid all installments due up to January, 1998, leaving unpaid the balance of PhP
2,520,305.63 pending delivery of the unit. Megaworld, however, failed to deliver the unit
within the stipulated period on October 31, 1998 or April 30, 1999, the last day of the 6month grace period.
April 23, 2002, Megaworld, by notice of turnover, informed Tanseco that the unit was
ready for inspection preparatory to delivery. Tanseco replied that in view of Megaworld's
failure to deliver the unit on time, she was demanding the return of PhP 14,281,731.70
representing the total installment payment she had made, with interest at 12% per annum
from April 30, 1999, the expiration of the 6-month grace period. Tanseco pointed out that
none of the excepted causes of delay existed.
In its Answer, Megaworld attributed the delay to the 1997 Asian financial crisis which was
beyond its control; and argued that default had not set in, Tanseco not having made any
judicial or extrajudicial demand for delivery before receipt of the notice of turnover.
May 28, 2003, the Housing and Land Use Regulatory Board's (HLURB) Arbiter
dismissed Tanseco's complaint for lack of cause of action, finding that Megaworld had
effected delivery by the notice of turnover before Tanseco made a demand.
September 28, 2007, the CA granted Tanseco's petition, that under Art. 1169 of the Civil
Code, no judicial or extrajudicial demand is needed to put the obligor in default if the
contract, as in the herein parties' contract, states the date when the obligation should be
performed; that time was of the essence because Tanseco relied on Megaworld's promise of
timely delivery when she agreed to part with her money; that the delay should be reckoned
from October 31, 1998, there being no force majeure to warrant the application of the April
30, 1999 alternative date; and that specific performance could not be ordered in lieu of
rescission as the right to choose the remedy belongs to the aggrieved party.
ISSUE:
Whether or not Tanseco had not shown any basis for the award of damages and attorney's
fees
HELD:
The Contract to Buy and Sell of the parties contains reciprocal obligations, i.e., to complete
and deliver the condominium unit on October 31, 1998 or 6 months thereafter on the part of

Megaworld, and to pay the balance of the purchase price at or about the time of delivery on
the part of Tanseco. Compliance by Megaworld with its obligation is determinative of
compliance by Tanseco with her obligation to pay the balance of the purchase price.
Megaworld having failed to comply with its obligation under the contract, it is liable
therefor.
In Megaworlds defense of Art. 1174, the Court cannot generalize the 1997 Asian
financial crisis to be unforeseeable and beyond the control of a business corporation. A real
estate enterprise engaged in the pre-selling of condominium units is concededly a master in
projections on commodities and currency movements, as well as business risks. The
fluctuating movement of the Philippine peso in the foreign exchange market is an everyday
occurrence, hence, not an instance of caso fortuito. Megaworld's excuse for its delay does
not thus lie.
d. Titan-Ikeda Construction & Devt. Corp. vs. Primetown Property Group, Inc. G.R. No.
158768. February 12, 2008 (G)
FACTS:
In 1992, respondent Primetown Property Group, Inc. awarded the contract for the
structural works of its 32-storey Makati Prime Tower (MPT) to petitioner Titan-Ikeda
Construction and Development Corporation. The parties formalized their agreement in a
construction contract dated February 4, 1993.
Upon the completion of MPT's structural works, respondent awarded the PhP 130M
contract for the tower's architectural works (project) to petitioner. Thus, on January 31,
1994, the parties executed a supplemental agreement.
June 30, 1994, respondent executed a deed of sale in favor of petitioner pursuant to the
"full-swapping" payment provision of the supplemental agreement.
September 1995, respondent engaged the services of Integratech, Inc. (ITI), to evaluate the
progress of the project.
September 7, 1995 report, ITI informed respondent that petitioner, at that point, had only
accomplished 31.89% of the project. ITI estimated that petitioner should have accomplished
48.71% of the project as of the October 12, 1995 takeover date. Petitioner repudiated this
figure but qualifiedly admitted that it did not finish the project. Records showed that
respondent did not merely take over the supervision of the project but took full control
thereof.
Petitioner consequently conducted an inventory. On the basis thereof, petitioner demanded
from respondent the payment of its balance amounting to PhP 1,779,744.85.
February 19, 1996, petitioner sent a 2nd letter to respondent demanding PhP 2,023,876.25.
This new figure included the cost of materials petitioner advanced from December 5, 1995
to January 26, 1996.
November 22, 1996, petitioner demanded from respondent the delivery of MPT's
management certificate and the keys to the condominium units and the payment of its
balance.
December 9, 1996, because respondent ignored petitioner's demand, petitioner filed a
complaint for specific performance in the Housing and Land Use Regulatory Board
(HLURB).
April 29, 1997, the HLURB rendered a decision in favor of petitioner. It ruled that the
instrument executed on June 30, 1994 was a deed of absolute sale. Thus, it ordered
respondent to issue MPT's management certificate and to deliver the keys to the
condominium units to petitioner.
July 2, 1997, respondent filed a complaint for collection of sum of money against petitioner
in the Regional Trial Court (RTC) of Makati City, Branch 58. It prayed for the
reimbursement of the value of the project's unfinished portion amounting to PhP
66,677,000.
The RTC found that because respondent modified the MPT's architectural design,
petitioner had to adjust the scope of work. The trial court thus allowed petitioner to set-off
respondent's other outstanding liabilities with respondent's excess payment in the project. It

concluded that respondent owed petitioner PhP 2,023,876.25. In addition, because

respondent refused to deliver the keys and the management certificate, the RTC found that
petitioner lost rental income amounting to $1,665,260.
Respondent appealed to the CA. The CA found that respondent fully performed its
obligation when it executed the June 30, 1994 deed of absolute sale in favor of petitioner.
Moreover, ITI's report clearly established that petitioner had completed only 48.71% of the
project as of October 12, 1995. Not only did it incur delay in the performance of its
obligation but petitioner also failed to finish the project.
ISSUE:
Whether or not there was delay on part of the petitioner
HELD:
Mora or delay is the failure to perform the obligation in due time because of dolo (malice)
or culpa (negligence). A debtor is deemed to have violated his obligation to the creditor from
the time the latter makes a demand. Once the creditor makes a demand, the debtor incurs
mora or delay.
Respondent never sent petitioner a written demand asking it to accelerate work on the
project and reduce, if not eliminate, slippage. If delay had truly been the reason why
respondent took over the project, it would have sent a written demand as required by the
construction contract. Moreover, according to the October 12, 1995 letter-agreement,
respondent took over the project for the sole reason that such move was part of its
(respondent's) long-term plan.
Respondent, on the other hand, relied on ITI's September 7, 1995 report. The construction
contract named GEMM, not ITI, as construction manager. Because petitioner did not
consent to the change of the designated construction manager, ITI's September 7, 1995
report could not bind it.
2) SOURCES OF OBLIGATION
a. Makati Stock Exchange, Inc. vs. Miguel V. Campos, G.R. No. 138814. April 16, 2009 (G)
FACTS:
10 February 1994, respondent Miguel V. Campos, filed with the Securities, Investigation
and Clearing Department (SICD) of the Securities and Exchange Commission (SEC), a
Petition against herein petitioners Makati Stock Exchange, Inc. (MKSE). Respondent,
sought:
a) the nullification of the Resolution which allegedly deprived him of his right to participate
equally in the allocation of Initial Public Offerings (IPO) of corporations registered
with MKSE;
b) the delivery of the IPO shares he was allegedly deprived of, and
c) the payment of PhP 2M as moral damages, PhP 1M as exemplary damages, and PhP .5M
as attorney's fees and litigation expenses.
14 February 1994, the SICD issued an Order granting respondent's prayer for the issuance
of a Temporary Restraining Order to enjoin petitioners from implementing or enforcing the
3 June 1993 Resolution.
11 March 1994, petitioners filed a Motion to Dismiss respondent's Petition in SEC Case,
based on the following grounds:
a) the Petition became moot due to the cancellation of the license of MKSE;
b) the SICD had no jurisdiction over the Petition; and
c) the Petition failed to state a cause of action.
31 May 1995, the SEC en banc nullified the 10 March 1994 Order of SICD granting a Writ
of Preliminary Injunction in favor of respondent. Likewise, in an Order dated 14 August
1995, the SEC en banc annulled the 4 May 1994 Order of SICD denying petitioners'
Motion to Dismiss, and accordingly ordered the dismissal of respondent's Petition before the
SICD.

 11 February 1997, the Court of Appeals promulgated its Decision, granting respondent's
Petition for Certiorari.
ISSUE:
Whether or not the respondent failed to state a cause of action.
HELD:
A cause of action is the act or omission by which a party violates a right of another. A
complaint states a cause of action where it contains three essential elements of a cause of
action, namely: (1) the legal right of the plaintiff, (2) the correlative obligation of the
defendant, and (3) the act or omission of the defendant in violation of said legal right. If
these elements are absent, the complaint becomes vulnerable to dismissal on the ground of
failure to state a cause of action.
There is no question that the Petition in SEC Case asserts a right in favor of respondent,
particularly, respondent's alleged right to subscribe to the IPOs of corporations listed in the
stock market at their offering prices; and stipulates the correlative obligation of petitioners
to respect respondent's right, specifically, by continuing to allow respondent to subscribe to
the IPOs of corporations listed in the stock market at their offering prices.
However, the terms right and obligation in respondent's Petition are not magic words that
would automatically lead to the conclusion that such Petition sufficiently states a cause of
action. Right and obligation are legal terms with specific legal meaning. A right is a claim or
title to an interest in anything whatsoever that is enforceable by law. A n obligation is
defined in the Civil Code as a juridical necessity to give, to do or not to do. For every right
enjoyed by any person, there is a corresponding obligation on the part of another person to
respect such right.
although the Petition in SEC Case does allege respondent's right to subscribe to the IPOs of
corporations listed in the stock market at their offering prices, and petitioners' obligation to
continue respecting and observing such right, the Petition utterly failed to lay down the
source or basis of respondent's right and/or petitioners' obligation.
A meticulous review of the Petition reveals that the allocation of IPO shares was merely
alleged to have been done in accord with a practice normally observed by the members of
the stock exchange.
A practice or custom is, as a general rule, not a source of a legally demandable or
enforceable right. Indeed, in labor cases, benefits which were voluntarily given by the
employer, and which have ripened into company practice, are considered as rights that
cannot be diminished by the employer. Nevertheless, even in such cases, the source of the
employees' right is not custom, but ultimately, the law, since Article 100 of the Labor Code
explicitly prohibits elimination or diminution of benefits.
3) JOINT AND SOLIDARY OBLIGATION
a. Heirs of George Y. Poe vs. Malayan Company, Inc. G.R. No. 156302. April 7, 2009
FACTS:
26 January 1996, George Y. Poe (George) while waiting for a ride to work in front of
Capital Garments Corporation, Ortigas Avenue Extension, Barangay Dolores, Taytay, Rizal,
was run over by a ten-wheeler Isuzu hauler owned by Rhoda Santos (Rhoda), and then
being driven by Willie Labrador (Willie). The said truck was insured with respondent
MICI
To seek redress for George's untimely death, his heirs and herein petitioners, namely, his
widow Emercelinda, and their children, filed with the RTC a Complaint for damages
against Rhoda and respondent MICI.
Rhoda and respondent MICI denied liability for George's death averring, among other
defenses, that:

a) the accident was caused by the negligent act of the victim George, who surreptitiously
and unexpectedly crossed the road, and despite the latter's effort to swerve the truck to the
right, the said vehicle still came into contact with the victim;
b) the liability of respondent MICI, if any, would attach only upon a judicial
pronouncement that the insured Rhoda and her driver Willie are liable;
c) the liability of MICI should be based on the extent of the insurance coverage as
embodied in Rhoda's policy; and
d) Rhoda had always exercised the diligence of a good father of a family in the selection
and supervision of her driver Willie.
February 28, 2000, RTC rendered a decision in favor of the heirs, ordering Rhoda & MICI
jointly and solidarily pay actual, moral, exemplary damages and attorneys fees to the heirs.
March 22, 2000 Rhoda & MICI filed a Motion for reconsideration of the RTC decision
averring that the RTC erred in ruling that the obligation of Rhoda and MICI was solildary
and that the computation of Georges loss of earning capacity was not in accord w/
established law and jurisprudence.
January 24, 2001, RTC issued an order amending its original decision (February 28,2000)
decision, ruling that Rhoda & MICI were not solidarily liable, dismissing the case against
MICI, and re computing the amount of actual damages due to the heirs, substantially
reducing the award.
Heirs filed a motion for reconsideration of the RTCs January 24, 2001 order.
June 15, 2001, RTC issued an order REINSTATING its February 28, 2000 decision, ruling
against Rhoda & MICI.
MICI filed a petition for Certiorari before the CA alleging on the part of the RTC in
denying its appeal and granting the Writ of Execution, as well has in holding MICI
solidarily liable with Rhoda.
June 26, 2000, CA granted the Petition for Certiorari.
November 29, 2000, CA denied the Heirs Motion for reconsideration.

ISSUE:
Whether or not MICI is solidarily liable with Rhoda to pay damages to the heirs.
HELD:
A solidary or joint and several obligation is one in which each debtor is liable for the entire
obligation, and each creditor is entitled to demand the whole obligation. In a joint
obligation, each obligor answers only for a part of the whole liability and to each obligee
belongs only a part of the correlative rights. Well-entrenched is the rule that solidary
obligation cannot lightly be inferred. There is solidary liability only when the obligation
expressly so states, when the law so provides or when the nature of the obligation so
requires.
MICI failed to present the insurance contract which it claimed, limited its liability. Such
failure, given the fact that it alone possesses the insurance contract, gives rise to the
presumption that the contents of the contract are adverse to MICI, and thus amount to an
implied admission that MICI had agreed to fully indemnity 3rd party liabilities.
Given the admission of respondent MICI that it is the insurer of the truck involved in the
accident that killed George, and in the utter absence of proof to establish both the existence
and the extent/amount of the alleged limited liability of respondent MICI as insurer, the
Court could only conclude that respondent MICI had agreed to fully indemnify third-party
liabilities.
Consequently, there is no more difference in the amounts of damages which petitioners can
recover from Rhoda or respondent MICI; petitioners can recover the said amounts in full
from either of them, thus, making their liabilities solidary or joint and several.
b. Herman C. Crystal vs. BPI, G.R. No. 172428. November 28, 2008
FACTS:

 28 March 1978, spouses Raymundo and Desamparados Crystal obtained a PhP

300,000.00 loan in behalf of the Cebu Contractors Consortium Co. (CCCC) from the
BPI-Butuan. The loan was secured by a chattel mortgage on heavy equipment and
machinery of CCCC. On the same date, the spouses executed in favor of BPI-Butuan a
Continuing Suretyship where they bound themselves as surety of CCCC in the aggregate
principal sum of not exceeding PhP 300,000.00.
29 March 1979, Raymundo Crystal executed a promissory note for the amount of PhP
300,000.00, also in favor of BPI-Butuan.
August 1979, CCCC renewed a previous loan, this time from BPI-Cebu City. The renewal
was evidenced by a promissory note dated 13 August 1979, signed by the spouses in their
personal capacities and as managing partners of CCCC. The promissory note states that the
spouses are jointly and severally liable with CCCC.
22 September 1977, before the original loan could be granted, BPI-Cebu City required
CCCC to put up a security. However, CCCC had no real property to offer as security for
the loan; hence, the spouses executed a real estate mortgage over their own real property.
3 October 1977, they executed another real estate mortgage over the same lot in favor of
BPI-Cebu City, to secure an additional loan of PhP 20,000.00 of CCCC.
28 February 1988, CCCC failed to pay its loans to both BPI-Butuan and BPI-Cebu City
when they became due. CCCC, as well as the spouses, failed to pay their obligations despite
demands. Thus, BPI resorted to the foreclosure of the chattel mortgage and the real estate
mortgage.
7 July 1981, Insular Bank of Asia and America (IBAA), offered to buy the lot subject of
the two (2) real estate mortgages and to pay directly the spouses' indebtedness in exchange
for the release of the mortgages. BPI rejected IBAA's offer to pay
BPI filed a complaint for sum of money against CCCC and the spouses before the RTC
Butuan, seeking to recover the deficiency of the loan of CCCC and the spouses with BPIButuan. The trial court ruled in favor of BPI.
10 April 1985, the spouses filed an action for Injunction With Damages. The spouses
claimed that the foreclosure of the real estate mortgages is illegal because BPI should have
exhausted CCCC's properties first, stressing that they are mere guarantors of the renewed
loans.
The trial court dismissed the spouses' complaint and ordered them to pay moral and
exemplary damages and attorney's fees to BPI. It ruled that since the spouses agreed to bind
themselves jointly and severally, they are solidarily liable for the loans; hence, BPI can
validly foreclose the two real estate mortgages.
The spouses appealed the decision of the trial court to the CA, but their appeal was
dismissed. The spouses moved for the reconsideration of the decision, but the CA also
denied their motion for reconsideration.
Petitioners who are the heirs of the spouses argue that the failure of the spouses to pay the
BPI-Cebu City was due to BPI's illegal refusal to accept payment for the loan loan from
BPI-Butuan would also be paid. Consequently, in view of BPI's unjust refusal to accept
payment of the BPI-Cebu City loan, the loan obligation of the spouses was extinguished

stipulation in the promissory note which states that a third person may fulfill the spouses'
obligation. Thus, it is clear that the spouses alone bear responsibility for the same.
A solidary obligation is one in which each of the debtors is liable for the entire obligation,
and each of the creditors is entitled to demand the satisfaction of the whole obligation from
any or all of the debtors. A liability is solidary "only when the obligation expressly so states,
when the law so provides or when the nature of the obligation so requires." Thus, when the
obligor undertakes to be "jointly and severally" liable, it means that the obligation is
solidary,
4) ART. 1159/1191/ MORA SOLVENDI
a. Raquel Santos vs. Court of Appeals,
b. Liga vs. Allegro Resources Corp., 575 SCRA 310
5) 1170/1174
a. Saludaga vs. Far Eastern University,
b. Sicam vs. Jorge,
6) SUSPENSIVE CONDITIONS
a. Insular Life Assurance Company Ltd. Vs. Toyota Bel Air, Inc.

ISSUES:
Whether or not the obligation of the spouses was extinguished.
HELD:
The contention has no merit. Petitioners rely on IBAA's offer to purchase the mortgaged lot
from them and to directly pay BPI out of the proceeds thereof to settle the loan. BPI's
refusal to agree to such payment scheme cannot extinguish the spouses' loan obligation. In
the first place, IBAA is not privy to the loan agreement or the promissory note between the
spouses and BPI. Contracts, after all, take effect only between the parties, their successors
in interest, heirs and assigns. Besides, under Art. 1236 of the Civil Code, the creditor is not
bound to accept payment or performance by a third person who has no interest in the
fulfillment of the obligation, unless there is a stipulation to the contrary. We see no