Obligations with a period, A1193-1198, Civil Code

1. Concepts

Article 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day comes. Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain.
A day certain is understood to be that which must necessarily come, although it may not be known when.
If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated by the rules of the preceding Section. (1125a) (CIVIL CODE)

Obligations with a period – refers to obligations “whose fulfillment a day certain has been fixed” and thus “demandable only when that day comes.” (CIVIL CODE, Article 1193)

Examples:

1) Obligation to deliver a wedding cake on the day of the customer’s wedding

2) Obligation to pay the purchase price of Php50,000.00 upon complete delivery of 100 sacks of rice delivered on installments of five sacks

3) Obligation to sign Deed of Absolute Sale of a land after full payment by the buyer pursuant to a Contract to Sell

a. Obligations with a resolutory period

Article 1193. x x x Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain. x x x (1125a) (CIVIL CODE)

Cross-referenced with:

Article 1179. x x x
x x x
Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event. (1113) (CIVIL CODE, Paragraph 2)

Reading the Article 1193 and 1179, the following may be deduced:

1) Obligations with a resolutory period are pure obligations.

2) As pure obligations, they are immediately demandable.

3) Rights and obligations are then created in favor of each party.

4) If the resolutory period happens, rights and obligations that were created will be extinguished.

b. A day certain

Article 1193. x x x
A day certain is understood to be that which must necessarily come, although it may not be known when. x x x (1125a) (CIVIL CODE, Paragraph 2)

A day certain – refer to a day that “must necessarily come, although it may not be known when.” (CIVIL CODE, Paragraph 2, Article 1193)

A certain day – refers to a specific date, e.g. January 1, 2025.

NB: The term “a day certain” is not the same with the term “a certain day.” The term “a day certain” does not identify a specific date, but it is a day that will surely come. On the other hand, “a certain day” already identifies the specific date, e.g. January 1, 2025.

1) Uncertainty on the coming of a day

Article 1193. x x x
x x x
If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated by the rules of [Section 1 – Pure and Conditional Obligations]. (1125a) (CIVIL CODE, Paragraph 3)

See related:

Conditional obligations, A1179-A1188 Civil Code

2) Loss, deterioration, improvement

Article 1194. In case of loss, deterioration or improvement of the thing before the arrival of the day certain, the rules in article 1189 shall be observed. (n) (CIVIL CODE)
Article 1189. When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, the following rules shall be observed in case of the improvement, loss or deterioration of the thing during the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall be obliged to pay damages; it is understood that the thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered;
(3) When the thing deteriorates without the fault of the debtor, the impairment is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case;
(5) If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall have no other right than that granted to the usufructuary. (1122) (CIVIL CODE)

2. Presumption

Article 1196. Whenever in an obligation a period is designated, it is presumed to have been established for the benefit of both the creditor and the debtor, unless from the tenor of the same or other circumstances it should appear that the period has been established in favor of one or of the other. (1127) (CIVIL CODE)

3. Remedies

a. Recovery if unaware of period or mistaken belief

Article 1195. Anything paid or delivered before the arrival of the period, the obligor being unaware of the period or believing that the obligation has become due and demandable, may be recovered, with the fruits and interests. (1126a) (CIVIL CODE)

b. Court’s power to fix duration

The court has the power to fix duration in these instances:

1) If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended; and

2) When fixing a period depends upon the will of the debtor. (CIVIL CODE, Article 1197)

1) Obligation does not fix a period

Article 1197. If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof. x x x (1128a) (CIVIL CODE)

Article 1197 applies “when the obligation does not fix a period but from its nature and circumstances it can be inferred that a period was intended[.]” This provision allows the courts to fix the duration “because the fulfillment of the obligation itself cannot be demanded until after the court has fixed the period for compliance therewith and such period has arrived.” (Camp John Development Corporation v. Charter Chemical and Coating Corporation, G.R. No. 198849, August 7, 2019, Per Leonen, J.)

Article 1197 is part and parcel of all obligations contemplated therein. Hence, whenever a period is fixed pursuant to said Article, the court merely enforces or carries out an implied stipulation in the contract in question. In fact, insofar as contracts not fixing a period are concerned, said legal provision applies only if, from the nature and circumstances surrounding the contract involved, “it can be inferred that a period was intendedby the parties thereto. For this reason, the last paragraph of Article 1197, ordains that “in every case, the courts shall determine such period as may under the circumstances have been probably contemplated by the parties.” In other words, in fixing said period, the Court merely ascertains the will of the parties and gives effect thereto. (Deudor v. J.M. Tuason * Co., Inc., En Banc, G.R. No. L-13768, May 30, 1961, Per Concepcion, J.)

As stipulated in Article 1197, this Court must determine that the obligation does not fix a period or that the period is made to depend upon the will of the debtor, but it can be inferred from its nature and the circumstances that a period was intended. Then, it must be determined what period was probably contemplated by the parties. (Camp John Development Corporation v. Charter Chemical and Coating Corporation [2019], supra.)

The power of this Court to fix a period is discretionary. The surrounding facts of each case must be taken into consideration in deciding whether the fixing of a period is sanctioned. The discretion to fix an obligation’s period is addressed to this Court’s judgment and is tempered by equitable considerations. (Camp John Development Corporation v. Charter Chemical and Coating Corporation [2019], supra.)

In Central Philippine University v. Court of Appeals, this Court refused to fix a period because of the years that had already been allowed for the party to comply with the condition of the obligation. Doing so, it held, would be a mere technicality and formality, and would only cause further delay. (Camp John Development Corporation v. Charter Chemical and Coating Corporation [2019], supra.)

In Gregorio Araneta, Inc. v. Philippine Sugar Estates Development Company, Ltd., this Court held that if a reasonable period was agreed upon in a contract, all that the court should have done was determine if that reasonable time had already elapsed. (Camp John Development Corporation v. Charter Chemical and Coating Corporation [2019], supra.)

Central Philippine University v. CA, G.R. No. 112127, July 17, 1995, Per Bellosillo, J.:

• [W]hen the obligation does not fix a period but from its nature and circumstances it can be inferred that a period was intended, the general rule provided in Art. 1197 of the Civil Code applies, which provides that the courts may fix the duration thereof because the fulfillment of the obligation itself cannot be demanded until after the court has fixed the period for compliance therewith and such period has arrived.

• This general rule however cannot be applied considering the different set of circumstances existing in the instant case. More than a reasonable period of fifty (50) years has already been allowed petitioner to avail of the opportunity to comply with the condition even if it be burdensome, to make the donation in its favor forever valid. But, unfortunately, it failed to do so. Hence, there is no more need to fix the duration of a term of the obligation when such procedure would be a mere technicality and formality and would serve no purpose that to delay or lead to an unnecessary and expensive multiplication of suits. Moreover, under Art. 1191 of the Civil Code, when one of the obligors cannot comply with what is incumbent upon him, the obligee may seek rescission and the court shall decree the same unless there is just cause authorizing the fixing of a period. In the absence of any just cause for the court to determine the period of the compliance, there is no more obstacle for the court to decree the rescission claimed.

Gregorio Araneta, Inc. v. Philippine Sugar Estates Development Company, Ltd., En Banc, G.R. No. L-22558, May 31, 1967, Per Reyes, J.B.L., J.:

• If the contract so provided, then there was a period fixed, a “reasonable time”; and all that the court should have done was to determine if that reasonable time had already elapsed when suit was filed. If it had passed, then the court should declare that petitioner had breached the contract, as averred in the complaint, and fix the resulting damages. On the other hand, if the reasonable time had not yet elapsed, the court perforce was bound to dismiss the action for being premature. But in no case can it be logically held that under the plea above quoted, the intervention of the court to fix the period for performance was warranted, for Article 1197 is precisely predicated on the absence of any period fixed by the parties.

2) Period depends upon will of the debtor

Article 1197. x x x
The courts shall also fix the duration of the period when it depends upon the will of the debtor. x x x (1128a) (CIVIL CODE, Paragraph 2)

3) Miscellaneous

a) Contemplated by the parties
Article 1197. x x x
x x x
In every case, the courts shall determine such period as may under the circumstances have been probably contemplated by the parties. x x x (1128a) (CIVIL CODE, Paragraph 3)

The courts will look into the intention of the parties, as well as the surrounding and related circumstances, when fixing the period.

b) Non-changeable once period is fixed by court
Article 1197. x x x
x x x
x x x Once fixed by the courts, the period cannot be changed by them. (1128a) (CIVIL CODE, Paragraph 3)

As specifically worded in Article 1197, the parties cannot enter into a subsequent stipulation or agreement on the period once the court has fixed it. Otherwise stated, the parties are bound to the fixed period determined by the court.

4. Grounds for debtor to lose right to use period

Article 1198. The debtor shall lose every right to make use of the period:
(1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt;
(2) When he does not furnish to the creditor the guaranties or securities which he has promised;
(3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory;
(4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period;
(5) When the debtor attempts to abscond. (1129a) (CIVIL CODE)

a. Insolvency

Per Article 1198[1], the debtor loses every right to make use of the period “[w]hen after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the debt.”

People’s Bank and Trust Co. v. Dahican Lumber Company, En Banc, G.R. No. L-17500, May 16, 1967, Per Dizon, J.:

• [D]efendants claim that the action to foreclose the mortgages filed on February 12, 1953 was premature because the promissory note sued upon did not fall due until April 1 of the same year, concluding from this that, when the action was commenced, the plaintiffs had no cause of action. Upon this question the lower court says the following in the appealed judgment;

The other is the defense of prematurity of the causes of action in that plaintiffs, as a matter of grace, conceded an extension of time to pay up to 1 April, 1953 while the action was filed on 12 February, 1953, but, as to this, the Court taking it that there is absolutely no debate that Dahican Lumber Co., was insolvent as of the date of the filing of the complaint, it should follow that the debtor thereby lost the benefit to the period.

b. Non-furnishment of guaranties or securities

Per Article 1198[2], the debtor loses every right to make use of the period “[w]hen he does not furnish to the creditor the guaranties or securities which he has promised.”

Guaranty (plural: guaranties) – means “an undertaking to answer for the payment of a debt or the performance of a duty of another in case of the other’s default or miscarriage.” (Merriam-Webster Online Dictionary)

Security (plural: sureties) – means “something given, deposited, or pledged to make certain the fulfillment of an obligation.” (Merriam-Webster Online Dictionary)

Under a normal contract of guarantee, the guarantor binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. The guarantor who pays for a debtor, in turn, must be indemnified by the latter. (Trade and Investment Development Corporation v. Philippine Veterans Bank, G.R. No. 233850, July 1, 2019, Per Caguioa, J.)

c. Impairment of guaranties or securities

Per Article 1198[3], the debtor loses every right to make use of the period “[w]hen by his own acts he has impaired said guaranties or securities after their establishment, and when through a fortuitous event they disappear, unless he immediately gives new ones equally satisfactory.”

Gaite v. Fonacier, G.R. No. L-11827, July 31, 1961, Per Reyes, J.B.L., J.:

• [One of the issue was…] whether appellants, Fonacier and his sureties, still have the right to insist that Gaite should wait for the sale or shipment of the ore before receiving payment; or, in other words, whether or not they are entitled to take full advantage of the period granted them for making the payment.

• We agree with the court below that the appellant have forfeited the right to compel Gaite to wait for the sale of the ore before receiving payment of the balance of P65,000.00, because of their failure to renew the bond of the Far Eastern Surety Company or else replace it with an equivalent guarantee. The expiration of the bonding company’s undertaking on December 8, 1955 substantially reduced the security of the vendor’s rights as creditor for the unpaid P65,000.00, a security that Gaite considered essential and upon which he had insisted when he executed the deed of sale of the ore to Fonacier… The case squarely comes under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines:

“ART. 1198. The debtor shall lose every right to make use of the period:

x x x

(2) When he does not furnish to the creditor the guaranties or securities which he has promised.

(3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through fortuitous event they disappear, unless he immediately gives new ones equally satisfactory.

• Appellants’ failure to renew or extend the surety company’s bond upon its expiration plainly impaired the securities given to the creditor (appellee Gaite), unless immediately renewed or replaced.

• There is no merit in appellants’ argument that Gaite’s acceptance of the surety company’s bond with full knowledge that on its face it would automatically expire within one year was a waiver of its renewal after the expiration date. No such waiver could have been intended, for Gaite stood to lose and had nothing to gain barely; and if there was any, it could be rationally explained only if the appellants had agreed to sell the ore and pay Gaite before the surety company’s bond expired on December 8, 1955. But in the latter case the defendants-appellants’ obligation to pay became absolute after one year from the transfer of the ore to Fonacier by virtue of the deed…

• All the alternatives, therefore, lead to the same result: that Gaite acted within his rights in demanding payment and instituting this action one year from and after the contract… was executed, either because the appellant debtors had impaired the securities originally given and thereby forfeited any further time within which to pay; or because the term of payment was originally of no more than one year, and the balance of P65,000.00 became due and payable thereafter.

d. Violation of undertaking, which is consideration for period

Per Article 1198[4], the debtor loses every right to make use of the period “[w]hen the debtor violates any undertaking, in consideration of which the creditor agreed to the period.”

Corpus v. Alikpala, En Banc, G.R. No. L-23707, January 17, 1968, Per Reyes, J.B.L., J.:

• As we view the compromise agreement, the advance payment of the interest was plainly the main consideration for the creditor’s assent to delay payment of the balance of the purchase price (P100,000.00) up to December 15, 1965, despite previous default of the defendant-appellant. On that basis, the dishonor of the check representing the advance interest resulted in the forfeiture of the period given to pay the principal, as prescribed by Article 1198, paragraph 4 of the Civil Code of the Philippines…

De Los Reyes v. De Leon, En Banc, G.R. No. L-16217, May 25, 1964, Per Makalintal, J.:

• The fixing of the period for payment was obviously to insure, for the benefit of appellant, that such payment would be made in Philippine currency and not in Japanese fiat money; and for the benefit of appellees, so that their indebtedness would be reduced from P60,000.00 to only P30,000.00. Appellees did not lose their right to avail of the period for having violated “any undertaking in consideration of which the creditor agreed to the period” (Art. 1198, Civil Code). This is so because the timely payment of real estate taxes on the mortgaged property was clearly not the consideration which moved the parties to fix, as they did, the term or period for the payment of the indebtedness.

Development Bank of the Philippines v. Sta. Ines Melale Forest Products Corporation, G.R. No. 193068, February 1, 2017, Per Leonen, J.:

• We uphold the Court of Appeals’ finding that the failure to execute the share purchase agreement was brought about by [National Development Corporation] NDC’s delay in reviewing the financial accounts submitted by Galleon’s stockholders. The Memorandum of Agreement was executed on August 10, 1981, giving the parties no more than sixty days or up to October 9, 1981, to prepare and sign the share purchase agreement. However, it was only on April 26, 1982, or more than eight months after the Memorandum of Agreement was signed, did NDC’s General Director submit his recommendation on Galleon’s outstanding account. Even then, there was no clear intention to execute a share purchase agreement as compliance with the Memorandum of Agreement. Article 1186 of the Civil Code is categorical that a “condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfilment.” Considering NDC’s delay, the execution of the share purchase agreement should be considered fulfilled with NDC as the new owner of 100% of Galleon’s shares of stocks.

• The due execution of the share purchase agreement is further bolstered by Article 1198(4) of the Civil Code, which states that the debtor loses the right to make use of the period when a condition is violated, making the obligation immediately demandable…

e. Attempt to abscond

Per Article 1198[5], the debtor loses every right to make use of the period “[w]hen the debtor attempts to abscond.”

Abscond – means “to depart secretly and hide oneself.” (Merriam-Webster Online Dictionary)

NB: The mere attempt is sufficient to satisfy this condition. Otherwise stated, that the debtors successfully absconded is not necessary. So long as it is shown and established that the debtors made an attempt to abscond, then it is sufficient for purposes of losing their right to the period.

References

Chapter 1 – General Provisions, Title I, Book IV, Republic Act No. 386, Civil Code

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