I

Sarah had a deposit in a savings account with Banco De Oro

in the amount of five million pesos (P5,000,000.00). To buy a new
car, she obtained a loan from the same bank in the amount of
P1,200,000.00, payable in twelve monthly installments. Sarah
issued in favor of the bank postdated checks, each in the amount of
P100,000.00 to cover the twelve monthly installment payments. On
the third, fourth, and fifth months, the corresponding checks
bounced.

The bank then declared the whole obligation due, and

proceeded to deduct the amount of one million pesos
(P1,000,000.00) from Sarah’s deposit after notice to her that this is
a form of compensation allowed by law. Is the bank correct?
Explain.

II

Rosario obtained a loan of P100,000.00 from Jennifer, and

pledged her diamond ring. The contract signed by the parties
stipulated that if Rosario is unable to redeem the ring on due date,
she will execute a document in favor of Jennifer providing that the
ring shall automatically be considered full payment of the loan.

Is the contract valid? Explain.

III

X was the owner of an unregistered parcel of land in

Cabanatuan City. As she was abroad, she advised her sister Y via
overseas call to sell the land and sign a contract of sale on her
behalf.

Y thus sold the land to B1 on March 31, 2001 and executed a

deed of absolute sale on behalf of X. B1 fully paid the purchase
price.

B2, unaware of the sale of the land to B1, signified to Y his

interest to buy it but asked Y for her authority from X. Without
informing X that she had sold the land to B1, Y sought X for a
written authority to sell.

X e-mailed Y an authority to sell the land. Y thereafter sold

the land on May 1, 2001 to B2 on monthly installment basis for two
years, the first installment to be paid at the end of May 2001.

Who between B1 and B2 has a better right over the land?

Explain.

IV

Roy and Carlos both undertook a contract to deliver to Sam in

Manila a boat docked in Subic. Before they could deliver it,
however, the boat sank in a storm. The contract provides that
fortuitous event shall not exempt Roy and Carlos from their
obligation. Owing to the loss of the motor boat, such obligation is
deemed converted into one of indemnity for damages. Is the liability
of Roy and Carlos joint or solidary?

In 1978, Bobby borrowed P1,000,000.00 from Chito payable in

two years. The loan, which was evidenced by a promissory note,
was secured by a mortgage on real property. No action was filed by
Chito to collect the loan or to foreclose the mortgage. But in 1991,
Bobby, without receiving any amount from Chito, executed another
promissory note which was worded exactly as the 1978 promissory
note, except for the date thereof, which was the date of its
execution.

1. Can Chito demand payment on the 1991 promissory note in

1994?

2. Can Chito foreclose the real estate mortgage if Bobby fails to

make good his obligation under the 1991 promissory note?

VI
 A, B and C formed a partnership for the purpose of contracting
with the Government in the construction of one of its bridges. On
June 30, 1992, after completion of the project, the bridge was
turned over by the partners to the Government. On August 30,
1992, D, a supplier of materials used in the project sued A for
collection of the indebtedness to him. A moved to dismiss the
complaint against him on the ground that it was the ABC
partnership that is liable for the debt. D replied that ABC
partnership was dissolved upon completion of the project for which
purpose the partnership was formed.

Will you dismiss the complaint against B if you were the

judge?

VII

A diamond ring and a female cow were pledged to secure a

loan in the amount of P100,000.00. The pledged appeared in a
public instrument. A month later, the cow gave birth. When the
amount of the loan was not paid upon its maturity date, the pledgee
caused to be sold at a public auction the ring, the cow and the
cow’s offspring and the amount of P150,000.00 was realized. The
pledgor, upon learning of the sale, demanded from the pledgee the
excess in the price over and above the amount of the principal
obligation, claiming that he is entitled to the excess and that the
offspring was not included in the pledge. The pledgee refused to
comply with the demand. How would you decide this conflict? Give
your reasons.

VIII

Merle offered to sell her automobile to Violy for P600,000.00.

After inspecting the automobile, Violy offered to buy it for
P500,000.00. This offer was accepted by Merle. The next day,
Merle offered to deliver the automobile, but Violy being short of
funds, secured postponement of the delivery, promising to pay the
price “upon arrival of the steamer, Helena”. The steamer however
never arrived because it was wrecked by a typhoon and sank
somewhere off the Coast of Samar.

1. Is there a perfected contract in this case? Why?

2. Can Merle compel Violy to pay the purchase price and to

accept the automobile? Why?

IX

The Betis Furniture Co., undertook to deliver to Mr.

Bagongkasal specified pieces of living room, dining room and
bedroom furniture, all made of narra, for a price stated in the
contract. The agreement had a penal clause that any violation of
the contract would entitle the aggrieved party to damages in the
amount of P100,000.00. The furniture delivered by Betis was
made, not of narra, but of inferior wood.

In a suit to recover damages, Bagongkasal was able to prove

that the actual damages he sustained amounted to P200,000.00.
He demanded that amount plus the P100,000.00 penalty or a total
of P300,000.00. Betis, however, countered that if it were liable for
damages at all, the maximum award should not exceed
P100,000.00 as stated in the penal clause of the contract.

Whose claim would you sustain? Why?

As the result of the collision between a public service

passenger bus and a cargo truck owned by D. X sustained physical
injuries and Y died. Both X and Y were passengers of the bus.
Both drivers were at fault, and so X and Z, the only heir and
legitimate child of the deceased Y, sued the owners of both vehicles.

a. May the owner of the bus raise the defense of having exercised
the diligence of a good father of a family?

b. May D raise the same defense?

 XI

Are the following obligations valid, why, and if they are valid,
when is the obligation demandable in each case?

a) If the debtor promises to pay as soon as he has the means to

pay;

b) If the debtor promises to pay when he likes.

XII

A, B, C, D and E made themselves solidarily indebted to X for

the amount of P50,000.00. When X demanded payment from A, the
latter refused to pay on the following grounds:

(a) B is only 16 years old;

(b) C has already been condoned by X.

State the effect of each of the above defenses put up by A on

his obligation to pay X, if such defenses are found to be true.

XIII

Dielle, Karlo and Una are general partners in a merchandising

firm. Having contributed equal amounts to the capital, they also
agree on equal distribution of whatever net profit is realized per
fiscal period. After two years of operation, however, Una conveys
her whole interest in the partnership to Justine, without the
knowledge and consent of Dielle and Karlo.

Is the partnership dissolved?

What are the rights of Justine, if any, should she desire to

participate in the management of the partnership and in the
distribution of a net profit of P360,000.00 which was realized after
her purchase of Una’s interest?

XIV

In two separate documents signed by him, Juan Valentino

“obligated” himself each to Maria and to Perla, thus –

“To Maria, my true love , I obligate myself to give you

my one and only horse when I feel like it.”

-and-

“To Perla, my true sweetheart, I obligate myself to pay

you the P500.00 I owe you when I feel like it.”

Months passed but Juan never bothered to make good his

promises. Maria and Perla came to consult you on whether or not
they could recover on the bases of the foregoing settings.

What would your legal advice be?

XV

Rosa was leasing an apartment in the city. Because of the

Rent Control Law, her landlord could not increase the rental as
much as he wanted to, nor terminate her lease as long as she was
paying her rent. In order to force her to leave the premises, the
landlord stopped making repairs on the apartment, and caused the

water and electricity services to be disconnected. The difficulty of

living without electricity and running water resulted in Rosa’s
suffering a nervous breakdown. She sued the landlord for actual
and moral damages.

Will the action prosper?

 XVI

Rommel was issued a certificate of title over a parcel of land in

Quezon City. One year later Rachelle, the legitimate owner of the
land, discovered the fraudulent registration obtained by Rommel.
She filed a complaint against Rommel for reconveyance and cause
the annotation of a notice of lis pendens on the certificate of title
issued to Rommel. Rommel now invokes the indefeasibility of his
title considering that one year has already elapsed from its
issuance. He also seeks the cancellation of the notice of lis
pendens.

Will Rachelle’s suit for reconveyance prosper? Explain.

XVII

“C”, a Filipino resident of the U. S., sent to his father “D” in

Manila $500.00 through “X” Bank which had a branch in Manila.
Due to mistake of the employees of the Bank, “D” was paid
$5,000.00 instead of $500.00. Upon discovery of the mistake, the
Bank demanded from “D” the return of the $4,500.00. “D” refused
and the Bank sued him.

Is the Bank entitled to recover from “D”?

XVIII

“O”, a very popular movie star was under contract with “P”
Movie Productions to star exclusively in the latter’s films for two
years. “O” was prohibited by the contract to star in any film
produced by another producer, “X” Film Co. induced “O” to break
her contract with “P” Movie Productions by giving her twice her
salary. “P” Movie Productions sued “X” Film. Co. for damages. “X”
Film Co. contended that it had a right to compete for the services of
“O” and that her contract with “P” Movie Productions was in
restraint of trade and a restriction on her freedom of contract.
 Whose contention would you sustain?

XIX

“S” executed a Deed of Sale of a parcel of land in favor of “T”

reserving for himself the right to repurchase the same within five
years from the date of the contract. The contract provided that
during the repurchase period “S” will retain possession of the land
as lessee and pay the land taxes thereon. The consideration for the
sale was P10,000.00 but the land was worth double the price. “S”
failed to repurchase the land within the agreed period and “T”
applied to the Court for the consolidation of his title. “S” opposed
the application and claimed that he had the right to repurchase the
land.

Whose stand should be upheld?

XX

T borrowed P10,000.00 from a bank executing a promissory

note therefore wherein it is expressly stated that the note is due 120
days thereafter. On the date of maturity T pays only the very small
amount of P200.00 plus interest in advance for the renewal of the
note for another 60 days. For almost two years the bank was very
lenient with T and allowed him to renew his note in the same
manner more than 10 times until finally the bank management had
to make demand for payment of the balance of P8,000.00 after the
expiration of the date of last renewal. Upon T’s failure to pay, the
bank filed an action for collection of said balance. T raised the
defense that the action is premature because the bank by its
conduct had impliedly agreed that the payment of the note is to be
made as the financial means of T warrants. Should the defense be
sustained? Why?