Pure obligations, A1179 Civil Code

1. Concepts

Article 1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once. x x x (1113) (CIVIL CODE)

Pure obligations – refer to obligations “whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties” and is thus “demandable at once.” (CIVIL CODE, Article 1179)

a. Non-dependent on future or uncertain event

Schenker v. Gemperle, En Banc, G.R. No. L-16449, August 31, 1962, Per Paredes, J.:

• [T]he obligation in question, is pure, because “its performance does not depend upon a future or uncertain event or upon a past event unknown to the parties” and as such, “is demandable at once” (Art. 1179, New York Code). It was so understood and treated by the defendant-appellee himself. The immediate payment by the plaintiff-appellant of his subscriptions, after the organization of the corporation, can only mean that the obligation should be immediately fulfilled. giving the defendant only such time as might reasonably be necessary for its actual fulfillment. The contract was to organize the corporation and to divide equally, after its organization, its capital stock.

Olivarez Realty Corporation v. Castillo, G.R. No. 196251, July 9, 2014, Per Leonen, J.:

• Benjamin Castillo was the registered owner of a 346,918-squaremeter parcel of land located in Laurel, Batangas, covered by Transfer Certificate of Title No. T-19972.4 The Philippine Tourism Authority allegedly claimed ownership of the sameparcel of land based on Transfer Certificate of Title No. T-18493.5 On April 5, 2000, Castillo and Olivarez Realty Corporation, represented by Dr. Pablo R. Olivarez, entered into a contract of conditional sale over the property. Under the deed of conditional sale, Castillo agreed to sell his property to Olivarez Realty Corporation for ₱19,080,490.00. Olivarez Realty Corporation agreed toa down payment of ₱5,000,000.00, to be paid according to [a schedule]…

• As to the “legitimate tenants” occupying the property, Olivarez Realty Corporation undertook to pay them “disturbance compensation,” while Castillo undertook to clear the land of the tenants within six months from the signing of the deed of conditional sale. Should Castillo fail to clear the land within six months, Olivarez Realty Corporation may suspend its monthly down payment until the tenants vacate the property. Paragraphs E and F of the deed of conditional sale provide:

E. That [Olivarez Realty Corporation] shall pay the disturbance compensation to legitimate agricultural tenants and fishermen occupants which in no case shall exceed ONE MILLION FIVE HUNDRED THOUSAND (₱1,500,000.00) PESOS. Said amountshall not form part of the purchase price. In excess of this amount, all claims shall be for the account of [Castillo];

F. That [Castillo] shall clear the land of [the] legitimate tenants within a period of six (6) months upon signing of this Contract, and in case [Castillo] fails, [Olivarez Realty Corporation] shall have the right to suspend the monthly down payment until such time that the tenants [move] out of the land[.]

• [SC RESOLUTION] Olivarez Realty Corporation’s obligation to pay disturbance compensation is a pure obligation. The performance of the obligation to pay disturbance compensation did not depend on any condition. Moreover, the deed of conditional sale did not give the corporation a period to perform the obligation. As such, the obligation to pay disturbance compensation was demandable at once. Olivarez Realty Corporation should have paid the tenants disturbance compensation upon execution of the deed of conditional sale.

• With respect to Castillo’s obligation to clear the land of the tenants within six months from the signing of the contract, his obligation was an obligation with a resolutory period. The obligation to clear the land of the tenants took effect at once, specifically, upon the parties’ signing of the deed of conditional sale. Castillo had until October 2, 2000, six months from April 5, 2000 when the parties signed the deed of conditional sale, to clear the land of the tenants.

• Olivarez Realty Corporation, therefore, had no right to withhold payments of the purchase price.

Hongkong and Shanghai Banking Corp. Ltd., v. Sps. Broqueza, G.R. No. 178610, November 17, 2010, Per Carpio, J.:

• Petitioners Gerong and [Editha] Broqueza (defendants below) are employees of Hongkong and Shanghai Banking Corporation (HSBC). They are also members of respondent Hongkong Shanghai Banking Corporation, Ltd. Staff Retirement Plan (HSBCL-SRP, plaintiff below). The HSBCL-SRP is a retirement plan established by HSBC through its Board of Trustees for the benefit of the employees.

• On October 1, 1990, petitioner [Editha] Broqueza obtained a car loan in the amount of Php175,000.00. On December 12, 1991, she again applied and was granted an appliance loan in the amount of Php24,000.00. On the other hand, petitioner Gerong applied and was granted an emergency loan in the amount of Php35,780.00 on June 2, 1993. These loans are paid through automatic salary deduction.

• Meanwhile [in 1993], a labor dispute arose between HSBC and its employees. Majority of HSBC’s employees were terminated, among whom are petitioners Editha Broqueza and Fe Gerong. The employees then filed an illegal dismissal case before the National Labor Relations Commission (NLRC) against HSBC.

• Because of their dismissal, petitioners were not able to pay the monthly amortizations of their respective loans. Thus, respondent HSBCL-SRP considered the accounts of petitioners delinquent. Demands to pay the respective obligations were made upon petitioners, but they failed to pay.

• [SC RESOLUTION] The Promissory Notes uniformly provide:

PROMISSORY NOTE

P_____ Makati, M.M. ____ 19__

FOR VALUE RECEIVED, I/WE _____ jointly and severally promise to pay to THE HSBC RETIREMENT PLAN (hereinafter called the “PLAN”) at its office in the Municipality of Makati, Metro Manila, on or before until fully paid the sum of PESOS ___ (P___) Philippine Currency without discount, with interest from date hereof at the rate of Six per cent (6%) per annum, payable monthly.

I/WE agree that the PLAN may, upon written notice, increase the interest rate stipulated in this note at any time depending on prevailing conditions.

I/WE hereby expressly consent to any extensions or renewals hereof for a portion or whole of the principal without notice to the other(s), and in such a case our liability shall remain joint and several.

In case collection is made by or through an attorney, I/WE jointly and severally agree to pay ten percent (10%) of the amount due on this note (but in no case less than P200.00) as and for attorney’s fees in addition to expenses and costs of suit.

In case of judicial execution, I/WE hereby jointly and severally waive our rights under the provisions of Rule 39, Section 12 of the Rules of Court.15

• In ruling for HSBCL-SRP, we apply the first paragraph of Article 1179 of the Civil Code…

• We affirm the findings of the MeTC and the RTC that there is no date of payment indicated in the Promissory Notes. The RTC is correct in ruling that since the Promissory Notes do not contain a period, HSBCL-SRP has the right to demand immediate payment. Article 1179 of the Civil Code applies. The spouses Broqueza’s obligation to pay HSBCL-SRP is a pure obligation. The fact that HSBCL-SRP was content with the prior monthly check-off from Editha Broqueza’s salary is of no moment. Once Editha Broqueza defaulted in her monthly payment, HSBCL-SRP made a demand to enforce a pure obligation.

b. Demandable at once

The Mercantile Insurance Co., Inc. v. DMCI-LAING Construction, Inc., G.R. No. 205007, September 16, 2019, Per Caguioa, J.:

• On the conditions for recovery, the Performance Bond states:

[T]his bond is conditioned x x x upon the OBLIGEE’s [DLCI’s] first demand, the SURETY [(Mercantile)] shall immediately indemnify [DLCI] notwithstanding any dispute to the effect that the principal has fulfilled its contractual obligation, the amount demanded; PROVIDED however, that the liability of [Mercantile] under this bond shall in no case exceed the x x x sum [of Php90,448,941.60. [Mercantile] further agrees to pay [DLCI] interest at the rate of 2% per month on the amount due from the date of rece[i]pt by [Mercantile] of [DLCI’s] first demand letter up to the date of actual payment.

• By these terms, Mercantile obligated itself to pay DLCI immediately upon demand, notwithstanding any dispute as to the fulfillment of Altech’s obligations under the Sub-Contract…

• While the Performance Bond in this case is “conditioned” upon DLCI’s first demand, a close reading of its terms unequivocally indicates that Mercantile’s liability thereunder consists of a pure obligation since such liability attaches immediately upon demand, and is neither dependent upon any future or uncertain event, nor a past event unknown to the parties.66 Thus, the Performance Bond is one that is callable on demand, wherein mere demand triggers Mercantile’s obligation (as surety) to indemnify DLCI (the obligee) the amount for which said bond was issued, that is, Php90,448,941.60.

• Accordingly, the requirement of “first demand” in this case should be understood in light of Article 1169, wherein the obligee is deemed to be in delay upon judicial or extra-judicial demand. Clearly, Mercantile’s liability became due upon its receipt of the First Call.

References

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

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