Law on Obligations and Contracts Chapter 2 PDF

# Chapter 2: Nature and Effect of Obligations **Art. 1163.** Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care. (1094a) ## Meaning of S...

# Chapter 2: Nature and Effect of Obligations **Art. 1163.** Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care. (1094a) ## Meaning of Specific or Determinate Thing The above provision refers to an obligation to give a specific or determinate thing. A thing is said to be specific or determinate when it is particularly designated or physically segregated from all others of the same class. (Art. 1459.) ### Examples: 1. The watch I am wearing. 2. The car sold by X. 3. My dog named "Terror." 4. The house at the corner of Rizal and Del Pilar Streets. 5. The Toyota car with Plate No. AAV 344. 6. This cavan of rice. 7. The money I gave you. ## Meaning of Generic or Indeterminate Thing A thing is generic or indeterminate when it refers only to a class or genus to which it pertains and cannot be pointed out with particularity. ### Examples: 1. a Bulova calendar watch. 2. a 2006 model Japanese car. 3. a police dog. 4. a cavan of rice. 5. the sum of P10,000.00 ## Specific Thing and Generic Thing Distinguished. 1. A determinate thing is identified by its individuality. The debtor cannot substitute it with another although the latter is of the same kind and quality without the consent of the creditor. (Art. 1244.) 2. A generic thing is identified only by its specie. The debtor can give anything of the same class as long as it is of the same kind. ### Examples: 1. If D's obligation is to deliver to C a Bulova calendar watch, D can deliver any watch as long as it is Bulova with calendar. But if D's obligation is to deliver to C a particular watch, the one D is wearing, D cannot substitute it with another watch without C's consent nor can C require D to deliver another watch without D's consent although it may be of the same kind and value. (see Arts. 1244, 1246.) 2. If D's obligation is to deliver to C one of his cars, the object refers to a class which in itself is determinate. Here, the particular thing to be delivered is determinable without the need of a new contract between the parties (see Art. 1349.); it becomes determinate upon its delivery. ## Duties of Debtor in Obligation to Give a Determinate Thing They are: 1. To preserve or take care of the thing due; 2. To deliver the fruits of the thing (see Art. 1164.); 3. To deliver its accessions and accessories (see Art. 1166.); 4. To deliver the thing itself (see Arts. 1163, 1233, 1244; as to kinds of delivery, Arts. 1497 to 1501.); and 5. To answer for damages in case of non-fulfillment or breach. (see Art. 1170.) ## Obligation to take care of the thing due. 1. **Diligence of a good father of a family.** In obligations to give (real obligations), the obligor has the incidental duty to take care of the thing due with the diligence of a good father of a family pending delivery. The phrase has been equated with ordinary care or that diligence which an average (a reasonably prudent) person exercises over his own property. 2. **Another standard of care.** However, if the law or the stipulation of the parties provides for another standard of care (slight or extraordinary diligence), said law or stipulation must prevail. (Art. 1163.) * **Common Carrier.** Under the law, for instance, a common carrier (person or company engaged in the transportation of persons and/or cargoes) is "bound to carry the passengers safely as far as human care and foresight can provide, using utmost (extraordinary) diligence of very cautious persons, with a due regard for all the circumstances." (Art. 1755.) In case of accident, therefore, the common carrier will be liable if it exercised only ordinary diligence or the diligence of a good father of a family. * **Banks.** Banks are duty bound to treat the deposit accounts of their depositors with the highest degree of care where the fiduciary nature of their relationship with their depositors is concerned. But such degree of diligence is not expected to be exerted by banks in commercial transactions that do not involve their fiduciary relationship with their depositors. (Reyes vs. Court of Appeals, 363 SCRA 51 [2001].) * **Contrary to public policy.** While parties may agree upon diligence which is more or less than that of a good father of a family, it is contrary to public policy (see Art. 1306.) to stipulate for absolute exemption from liability for any fault or negligence. (see Arts. 1173, 1174.) Thus, a stipulation exempting a carrier from liability for gross negligence is against public policy. (Heacock vs. Macondray, 32 Phil. 205 [1915]; see Arts. 1306, 1744, 1745.) 3. **Factors** to be considered. The diligence required depends upon the nature of the obligation and corresponds with the circumstances of the person, of the time, and of the place. (Art. 1173.) It is not necessarily the standard of care one always uses in the protection of his own property. As a general rule, the debtor is not liable if his failure to preserve the thing is not due to his fault or negligence but to fortuitous events or force majeure. (Art. 1174.) 4. **Reason for debtor's obligation.** The debtor must exercise diligence to insure that the thing to be delivered would subsist in the same condition as it was when the obligation was contracted. Without the accessory duty to take care of the thing, the debtor would be able to afford being negligent and he would not be liable even if the property is lost or destroyed, thus rendering illusory the obligation to give. (8 Manresa 35-37.) ## Duties of Debtor in Obligation to Deliver a Generic Thing. They are: 1. To deliver a thing which is of the quality intended by the parties taking into consideration the purpose of the obligation and other circumstances (see Art. 1246.); and 2. To be liable for damages in case of fraud, negligence, or delay, in the performance of his obligation, or contravention of the tenor thereof. (see Art. 1170.) **Art. 1164.** The creditor has a right to the fruits of the thing from the time the obligation to deliver it arises. However, he shall acquire no real right over it until the same has been delivered to him. (1095) ## Different Kinds of Fruits. The fruits mentioned by the law refer to natural, industrial, and civil fruits. 1. **Natural fruits** are the spontaneous products of the soil, and the young and other products of animals, e.g., grass; all trees and plants on lands produced without the intervention of human labor. 2. **Industrial fruits** are those produced by lands of any kind through cultivation or labor, e.g., sugar cane; vegetables; rice; and all products of lands brought about by reason of human labor. 3. **Civil fruits** are those derived by virtue of a juridical relation, e.g., rents of buildings, price of leases of lands and other property and the amount of perpetual or life annuities or other similar income. (Art. 442.) ## Right of Creditor to the Fruits. This article is a logical application of the basic principle stated in Article 712, paragraph two of the Civil Code that "Ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition." (see Arts. 734, 774, 777; Fidelity & Deposit Co. vs. Wilson, 8 Phil. 51 [1907].) By law, the creditor is entitled to the fruits of the thing to be delivered from the time the obligation to make delivery of the thing arises. The intention of the law is to protect the interest of the obligee should the obligor commit delay, purposely or otherwise, in the fulfillment of his obligation. In case of rescission, the parties are under "obligation to return the things which were the object of the contract, together with their fruits and the price with its interest." (Art. 1385.) ## When Obligation to Deliver Arises. 1. **Generally, the obligation to deliver the thing due and, consequently, the fruits thereof, if any, arises from the time of the perfection of the contract.** Perfection in this case refers to the birth of the contract or to the meeting of the minds between the parties. (Arts. 1305, 1315, 1319.) 2. **If the obligation is subject to a suspensive condition or period (Arts. 1179, 1189, 1193.), it arises upon fulfillment of the condition or arrival of the period.** However, the parties may make a stipulation to the contrary as regards the right of the creditor to the fruits of the thing. 3. **In a contract of sale, the obligation arises from the perfection of the contract even if the obligation is subject to a suspensive condition or a suspensive period where the price has been paid.** 4. **In obligations to give arising from law, quasi-contracts, delicts, and quasi-delicts, the time of performance is determined by the specific provisions of law applicable.** ### Example: S sold his horse to B for P15,000.00. No date or condition was stipulated for the delivery of the horse. While still in the possession of S, the horse gave birth to a colt. Who has the right to the colt? In a contract of sale "all the fruits shall pertain to the vendee from the day on which the contract was perfected." (Art. 1537, 2nd par.) Hence, B is entitled to the colt. This holds true even if the delivery is subject to a suspensive condition (see Art. 1179; e.g., upon the demand of B) or a suspensive period (see Art. 1193; e.g., next month) if B has paid the purchase price. But S has a right to the colt if it was born before the obligation to deliver the horse has arisen (Art. 1164.) and B has not yet paid the purchase price. In this case, upon the fulfillment of the condition or the arrival of the period, S does not have to give the colt and B is not obliged to pay legal interests on the price since the colt and the interests are deemed to have been mutually compensated. (see Art. 1187.) ## Meaning of Personal Right and Real Right. 1. **Personal right** is the right or power of a person (creditor) to demand from another (debtor), as a definite passive subject, the fulfillment of the latter's obligation to give, to do, or not to do. 2. **Real right** is the right or interest of a person over a specific thing (like ownership, possession, mortgage, lease record) without a definite passive subject against whom the right may be personally enforced. ## Personal Right and Real Right Distinguished While in personal right there is a definite active subject and a definite passive subject, in real right, there is only a definite active subject without any definite passive subject. A personal right is, therefore, binding or enforceable only against a particular person while a real right is directed against the whole world. ### Example: X is the owner of a parcel of land under a torrens title registered in his name in the Registry of Property. His ownership is a real right directed against everybody. There is no definite passive subject. If the land is claimed by Y who takes possession, X has a personal right to recover from Y, as a definite passive subject, the property. If the same land is mortgaged by X to Z, the mortgage, if duly registered, is binding against third persons. A purchaser buys the land subject to the mortgage which is a real right. ## Ownership Acquired by Delivery. Ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts by tradition (Art. 712.) or delivery. Delivery in sale may be actual or real, constructive or legal, or in any other manner signifying an agreement that the possession of the thing sold is transferred from the vendor to the vendee.3 (see Arts. 1496-1501.) The meaning of the phrase "he shall acquire no real right over it until the same has been delivered to him," is that the creditor does not become the owner until the specific thing has been delivered to him. Hence, when there has been no delivery yet, the proper action of the creditor is not one for recovery of possession and ownership but one for specific performance or rescission of the obligation. (see Art. 1165.) ### Illustrative Case: A document transfers to a person certain funds in the possession of another but there is no actual delivery of said funds. **Facts:** For the security of the Government, X Company (and another company) became a surety on the official bond of W, an employee of the Government for the sum of $15,000.00. W defaulted in the amount of $8,900.00 and X Company paid the Government the sum of $14,462.00. When W was apprehended, he had on his person $750.00 which amount was turned over to B, the Insular Treasurer. **Later, W signed a document transferring to T all his rights to said $785.00 for professional services rendered by the latter as attorney's fee. B was duly notified of the transfer.** **X filed an action against W to recover the sum of $785.00 in partial payment of the amount paid by X to the Government. T filed a complaint in intervention and claimed the money as his.** **Issue:** On the basis of these facts, will the complaint of T prosper? **Held:** No. (1) **Ownership was not acquired by T.** - The delivery of a thing constitutes a necessary and indispensable requisite for the purpose of acquiring the ownership of the same by virtue of a contract. The transfer by itself, and afterwards the notification to B, did not produce the effect of delivery to T of the funds so transferred. (see Arts. 1497, 1498, 1501.) To have this effect, it would have been necessary that the delivery of the funds had been made directly to T. Therefore, by reason of the non-delivery, T did not acquire the ownership of the property transferred to him by W. (2) **Mere personal right was acquired by T.** - It is only the jus ad rem, and not the jus in re, that was acquired by T by virtue of the transfer made by the consent of the transferor and the transferee but not consummated by the delivery which never came to pass and which delivery was the object of such transfer. (Fidelity & Deposit Co. vs. Wilson, 8 Phil. 51 [1907]; see also Cruzado vs. Bustos, 34 Phil. 17 [1915].) **Art. 1165.** When what is to be delivered is a determinate thing, the creditor, in addition to the right granted him by Article 1170, may compel the debtor to make the delivery. If the thing is indeterminate or generic, he may ask that the obligation be complied with at the expense of the debtor. If the obligor delays, or has promised to deliver the same thing to two or more persons who do not have the same interest, he shall be responsible for any fortuitous event until he has effected the delivery. (1096) ## Remedies of Creditor in Real Obligation. 1. **In a specific real obligation** (obligation to deliver a determinate thing), the creditor may exercise the following remedies or rights in case the debtor fails to comply with his obligation: * **Demand specific performance or fulfillment** (if it is still possible) of the obligation with a right to indemnity for damages; or * **Demand rescission or cancellation** (in certain cases) of the obligation also with a right to recover damages (Art. 1170.); or * **Demand the payment of damages only** (see Art. 1170.) where it is the only feasible remedy. In an obligation to deliver a determinate thing, the very thing itself must be delivered. (Art. 1244.) Consequently, only the debtor can comply with the obligation. This is the reason why the creditor is granted the right to compel the debtor to make the delivery. (Art. 1165, par. 1.) It should be made clear, however, that the law does not mean that the creditor can use force or violence upon the debtor. The creditor must bring the matter to court and the court will be the one to order the delivery. 2. **A generic real obligation** (obligation to deliver a generic thing), on the other hand, can be performed by a third person since the object is expressed only according to its family or genus. It is thus not necessary for the creditor to compel the debtor to make the delivery although he may ask for performance of the obligation. In any case, the creditor has a right to recover damages under Article 1170 in case of breach of the obligation. The manner of compliance with an obligation to deliver a generic thing is governed by Article 1246. Under the Constitution, no person shall be imprisoned for non-payment of debt. (Art. III, Sec. 20 thereof.) However, a person may be subject to subsidiary imprisonment for non-payment of civil liability adjudged in a criminal case. (see Art. 1161.) The constitutional prohibition refers to purely civil debt or one arising from contractual obligations only. ## Where Debtor Delays or Has Promised Delivery to Separate Creditors. Paragraph 3 gives two instances when a fortuitous event does not exempt the debtor from responsibility. It likewise refers to a determinate thing. An indeterminate thing cannot be the object of destruction by a fortuitous event because genus nunquam perit (genus never perishes). (see Arts. 1174, 1263.) Delay is discussed in Article 1169, and fortuitous events, in Article 1174. **Art. 1166.** The obligation to give a determinate thing includes that of delivering all its accessions and accessories, even though they may not have been mentioned. (1097a) ## Meaning of Accessions and Accessories. 1. **Accessions** are the fruits of, or additions to, or improvements upon, a thing (the principal), e.g., house or trees on a land; rents of a building; airconditioner in a car; profits or dividends accruing from shares of stocks; etc. The concept includes accession in its three forms of building, planting, and sowing (see Art. 445.), and accession natural, such as alluvion (see Art. 457.), avulsion (see Art. 459.), change of course of rivers (see Arts. 461-462.), and formation of islands. (see Arts. 464-465.) "Fruits of the thing" are specifically provided for in Article 1164. 2. **Accessories** are things joined to, or included with, the principal thing for the latter's embellishment, better use, or completion, e.g., key of a house; frame of a picture; bracelet of a watch; machinery in a factory; bow of a violin. Note that while accessions are not necessary to the principal thing, the accessory and the principal thing must go together but both accessions and accessories can exist only in relation to the principal. ## Right of Creditor to Accessions and Accessories. The general rule is that all accessions and accessories are considered included in the obligation to deliver a determinate thing although they may not have been mentioned. This rule is based on the principle of law that the accessory follows the principal. In order that they will be excluded, there must be a stipulation to that effect. Unless otherwise stipulated, an obligation to deliver the accessions or accessories of a thing does not include the latter. Thus, a sale of the improvements (e.g., house) upon a thing (e.g., land) is not sufficient to convey title or any right to the thing. (see Pornellosa vs. Land Tenure Administration, 1 SCRA 375 [1961].) But the lease of a building or house naturally includes the lease of the lot, and the rentals include those of the lot for the occupancy of a building or house not only suggests but also implies the tenancy or possession in fact of the land on which it is constructed. (Caleon vs. Agus Development Corp., 207 SCRA 748 [1992].) ## Accession as a Right Accession is also used in the sense of a right. In that sense, it may be defined as the right pertaining to the owner of a thing over its products and whatever is incorporated or attached thereto, either naturally or artificially. (3 Sanchez Roman 89; Art. 440.) Accession includes, therefore, the right to the fruits and the right to the accessory. It is one of the rights which go to make up dominion or ownership. (3 Manresa 166.) But it is not, under the law, a mode of acquiring ownership. (see Art. 712.) **Art. 1167.** If a person obliged to do something fails to do it, the same shall be executed at his cost. This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore, it may be decreed that what has been poorly done be undone. (1098) ## Situations Contemplated in Article 1167. Article 1167 refers to an obligation to do, i.e., to perform an act or render a service. It contemplates three situations: 1. The debtor fails to perform an obligation to do; or 2. The debtor performs an obligation to do but contrary to the terms thereof; or 3. The debtor performs an obligation to do but in a poor manner. ## Remedies of Creditor in Positive Personal Obligation. 1. **If the debtor fails to comply with his obligation to do, the creditor has the right:** * **To have the obligation performed by himself, or by another unless personal considerations are involved, at the debtor's expense; and** * **To recover damages. (Art. 1170.)** 2. **In case the obligation is done in contravention of the terms of the same or is poorly done, it may be ordered (by the court) that it be undone if it is still possible to undo what was done.** ## Performance by a Third Person. A personal obligation to do, like a real obligation to deliver a generic thing, can be performed by a third person. While the debtor can be compelled to make the delivery of a specific thing (Art. 1165.), a specific performance cannot be ordered in a personal obligation to do because this may amount to involuntary servitude which, as a rule, is prohibited under our Constitution. (Art. III, Sec. 18[2] thereof.) Where, however, the personal qualifications of the debtor are the determining motive for the obligation contracted (e.g., to sing in a night club), the performance of the same by another would be impossible or would result to be so different that the obligation could not be considered performed. Hence, the only feasible remedy of the creditor is indemnification for damages. But where the obligation can still be performed at the expense of the debtor notwithstanding his failure or refusal to do so, the court is not authorized to merely grant damages to the creditor. ### Illustrative Case: **Liability of Debtor Who Fails to Comply With an Obligation to Do.** **Facts:** A delivered to B, a typewriter repairer, a portable typewriter for routine cleaning and servicing. B was not able to finish the job after some time despite repeated reminders made by A. Finally, B returned the typewriter unrepaired, some of the parts missing. A had the typewriter repaired by F Business Machines, and the repair job cost him P58.75 for labor or service and P31.10 for the missing parts or a total of P89.85. The lower court rendered judgment ordering B to pay only P31.10. **Issue:** Is B liable also for P58.75, the cost of the service expended in the repair? **Held:** Yes. B contravened the tenor of his obligation (see Art. 1170.) because he not only did not repair the typewriter but returned it "in shambles." For such contravention, he is liable under Article 1167 for the cost of executing the obligation in a proper manner, which in the case should be the cost of the labor or service expended in its repair, because the obligation or contract was to repair it. In addition, he is liable under Article 1170 for the cost of the missing parts for in his obligation to repair the typewriter he was bound, but failed or neglected to return it in the same condition it was when he received it. (Chaves vs. Gonzales, 32 SCRA 547 [1970]; see Tanguilig vs. Court of Appeals, 266 SCRA 78 [1997].) **Art. 1168.** When the obligation consists in not doing, and the obligor does what has been forbidden him, it shall also be undone at his expense. (1099a) ## Remedies of Creditor in Negative Personal Obligation. In an obligation not to do, the duty of the obligor is to abstain from an act. Here, there is no specific performance. The very obligation is fulfilled in not doing what is forbidden. Hence, in this kind of obligation the debtor cannot be guilty of delay. (Art. 1169.) As a rule, the remedy of the obligee is the undoing of the forbidden thing plus damages. (Art. 1170.) However, if it is not possible to undo what was done, either physically or legally, or because of the rights acquired by third persons who acted in good faith, or for some other reason, his remedy is an action for damages caused by the debtor's violation of his obligation. (see 8 Manresa 58.) ### Example: S sold a land to B. It was stipulated that S would not construct a fence on a certain portion of his land adjoining that sold to B. Should S construct a fence in violation of the agreement, B can have the fence removed at the expense of S. **Art. 1169**. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extra-judicially demands from them the fulfillment of their obligation. However, the demand by the creditor shall not be necessary in order that delay may exist: 1. When the obligation or the law expressly so declares; 2. When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or 3. When demand would be useless, as when the obligor has rendered it beyond his power to perform. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins. (1100a) ## Meaning of Delay. The word delay, as used in the law, is not to be understood according to its meaning in common parlance. A distinction, therefore, should be made between ordinary delay and legal delay (default or mora) in the performance of an obligation. 1. **Ordinary delay** is merely the failure to perform an obligation on time. 2. **Legal delay or default or mora** is the failure to perform an obligation on time which failure, constitutes a breach of the obligation. ## Kinds of Delay (Mora). They are: 1. **Mora solvendi** or the delay on the part of the debtor to fulfill his obligation (to give or to do) by reason of a cause imputable to him; 2. **Mora accipiendi** or the delay on the part of the creditor without justifiable reason to accept the performance of the obligation; and 3. **Compensatio morae** or the delay of the obligors in reciprocal obligations (like in sale), i.e., the delay of the obligor cancels the delay of the obligee, and vice versa. ## No Delay in Negative Personal Obligation In an obligation not to do, non-fulfillment may take place but delay is impossible for the debtor fulfills by not doing what has been forbidden him. (see Art. 1168.) ## Requisites of Delay or Default by the Debtor. There are three conditions that must be present before mora solvendi can exist or its effects arise: 1. **Failure of the debtor to perform his (positive) obligation on the date agreed upon;** 2. **Demand (not mere reminder or notice) made by the creditor upon the debtor to fulfill, perform, or comply with his obligation which demand, may be either judicial (when a complaint is filed in court) or extra-judicial (when made outside of court, orally or in writing); and** 3. **Failure of the debtor to comply with such demand.** The above presupposes that the obligation is already due or demandable and liquidated. (see Art. 1279[4].) There is no delay if the obligation is not yet due or demandable. A debt is liquidated when the amount is known or is determinable by inspection of the terms and conditions of relevant documents. Failure to furnish a debtor a detailed statement of account does not ipso facto result in an unliquidated obligation. (Selegna Management and Dev. Corp. vs. United Coconut Planters Bank, 489 SCRA 125 [2006].) The creditor has the burden of proving that demand has been made. It is incumbent upon the debtor, to relieve himself from liability, to prove that the delay was not caused by his fault, i.e., there was no fraud or negligence on his part. (Arts. 1170, 1173, 1174.) ### Example: S obliged himself to deliver to B a specific refrigerator on December 10. If S does not deliver the refrigerator on December 10, he is only in ordinary delay in the absence of any demand from B although a period has been fixed for the fulfillment of the obligation. The law presumes that B is giving S an extension of time within which to deliver the refrigerator. Hence, there is no breach of the obligation and S is not liable for damages. If a demand is made upon S by B on December 15 and S fails to deliver the refrigerator, S is considered in default only from the date. If an action for specific performance is filed by B on December 20, the payment of damages for the default must commence on December 15 when he made the extra-judicial demand and not on December 20. In the absence of evidence as to such extra-judicial demand, the effects of default arise from the date of the judicial demand, that is, from the filing of the complaint. (see Compania General de Tabacos vs. Areza, 7 Phil. 455 [1907]; Lopez vs. Tan Tioco, 8 Phil. 693 [1907]; Queblar vs. Garduño and Martinez, 62 Phil. 879 [1936].) ### Illustrative Cases: 1. **Non-payment of taxes by mortgagor on mortgaged realty rendered entire loan due and payable but no demand was made either of the taxes or of loan itself.** **Facts:** As security for a loan, R executed a real estate mortgage in favor of E. R bound himself to pay on time the taxes on the mortgaged property; otherwise, the entire loan would become due and payable. R failed to pay the taxes as stipulated. No demand was made by E either in respect of the taxes or the loan itself, the only notice given to R being the letter received by him from E's lawyer to the effect that he was taking the necessary steps to foreclose the mortgage extrajudicially because the taxes had not been paid. **Acting on the foregoing communication, R paid the back taxes complained of.** **Issue:** Did R incur in delay in the payment of the taxes and the loan? **Held:** No, in view of the absence of previous demand for him to make such payment notwithstanding that the failure to pay the taxes rendered the entire loan due and demandable. None of the circumstances in Article 1169 which would dispense E from making the demand was present. In the light of the principal stipulation of the contract when the mortgage debt was to be paid, the non-payment of taxes was not a material breach of the contract. In any event, there was substantial compliance with the obligation in this particular aspect so as to arrest effectively the foreclosure sale. (De Los Reyes vs. De Leon, 11 SCRA 27 [1964].) 2. **Filing of foreclosure suit as equivalent to demand for payment.** **Facts:** B obliged himself to pay S the balance of the purchase price of a subdivision lot within two years from completion by S of the roads in said subdivision. S brought action to foreclose the real estate mortgage executed by B to secure the payment of the unpaid price. B contends lack of previous notice of the completion of the roads and the absence of a demand for payment. **Issue:** Is this contention of B tenable? **Held:** No. The filing of the foreclosure suit by S is sufficient notice to S of the completion of the roads and of S's desire to be paid the purchase price. (Enriquez vs. Ramos, 73 SCRA 116 [1976].) 3. **Buyer bound herself to pay the balance of the purchase price within a period of 10 years at a fixed monthly amortization.** **Facts:** Petitioners CL (buyer) bound herself to pay HF (seller) P107,750.00 as the total price of the lot purchased: P10,775 shall be paid at the signing of the contract as downpayment, the balance of P96,975 shall be paid within a period of 10 years at a monthly amortization of P1,747.30 to begin from December 7, 1985 with interest at 18% per annum based on the balance and corresponding penalty in case of default. CL failed to pay the installments after April 1, 1989. She claims, however, that the 10-year period for the payment of the whole purchase price has not yet elapsed. **Issue:** Did CL incur in delay when she failed to pay the monthly amortizations? **Held:** Yes. CL cannot ignore the provision on the payment of monthly installments by claiming that the 10-year period within which to pay has not elapsed. HF performed his part of the obligation by allowing CL to continue in possession and use of the property. Clearly, when CL did not pay the monthly amortizations in accordance with the terms of the contract, she was in delay and liable for damages. However, the default committed by CL in respect of the obligation could be compensated by the interests and surcharges imposed upon her under the contract in question. (Leaño vs. Court of Appeals, 369 SCRA 36 [2001].) ## Effects of Delay. 1. **Mora solvendi.** - The following are the effects: * **The debtor is guilty of breach of the obligation;** * **He is liable for interest in case of obligations to pay money (Art. 2209.) or damages in other obligations. (Art. 1170.) In the absence of extrajudicial demand, the interest shall commence from the filing of the complaint; and** * **He is liable even for a fortuitous event when the obligation is to deliver a determinate thing. (Arts. 1165, 1170.) However, if the debtor can prove that the loss would have resulted just the same even if he had not been in default, the court may equitably mitigate the damages. (Art. 2215[4].)** In an obligation to deliver a generic thing, the debtor is not relieved from liability for loss due to a fortuitous event. He can still be compelled to deliver a thing of the same kind (see Art. 1263.) or held liable for damages. (Art