ARTICLE 1168

• Article 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.

• -this article also known as NEGATIVE

OBLIGATION OF PRESTATION , that is not to
do a certain thing or act.
• Example:
• Kristia bought a land from Bryan, it is stipulated in
the contract of sale that Bryan will not build a
fence on a certain portion of his land adjoining that
sold to Kristia.

If Bryan constructs a fence in violation of the

agreement, Kristia can bring an action to have the
fence removed at the expense of Bryan.

Crisostomo and Vicente Asuncion [G.R. No. 107737.

October 1, 1999]

• Facts:
• Juan Perez et al is a usufructuary of a parcel of land. The usufructuaries entered
into a contract leasing the fishpond to Luis Keh . Paragraph 5 of the lease contract
states that the lessee cannot sublease the fishpond nor assign his rights to anyone.
Ming Cosim and Luis Crisostomo two persuaded private respondent to take over
the operation of Papaya Fishpond as petitioner Lee and his partner, petitioner Luis
Keh, were allegedly losing money in its operation. Private respondent having
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acceded to the proposal, he and petitioners Lee and Keh executed a written
agreement denominated as pakiao buwis whereby private respondent would take
possession of the Papaya Fishpond.

• Issue:
• Whether or not, Luis Keh is liable for breach of contract under Article 1168.
•

• Ruling:
• Article 1168 of the Civil Code provides that when an obligation consists
in not doing and the obligor does what has been forbidden him, it shall
also be undone at his expense. The lease contract prohibited petitioner
Luis Keh, as lessee, from subleasing the fishpond. In entering into the
agreement for pakiao-buwis with private respondent, not to mention the
apparent artifice that was his written agreement with petitioner Lee on
January 9, 1978, petitioner Keh did exactly what was prohibited of him
under the contract to sublease the fishpond to a third party.
• That the agreement for pakiao-buwis was actually a sublease is borne
out by the fact that private respondent paid petitioners Luis Keh and
Juan Perez, through petitioner Tansinsin the amount of annual rental
agreed upon in the lease contract between the usufructuaries and
petitioner Keh. Petitioner Keh led private respondent to unwittingly
incur expenses to improve the operation of the fishpond. By operation of
law, therefore, petitioner Keh shall be liable to private respondent for
the value of the improvements he had made in the fishpond or for
P486,562.65 with interest of six percent (6%) per annum from the
rendition of the decision of the trial court on September 6, 1989.

• Article 1169.Those obliged to

deliver or to do something
incur in delay from the time
the obligee judicially or
extrajudicially demands from
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them the fulfillment of their
obligation.

• “No demand, no delay.” This rule is spelled out by

Article 1169 of the Civil Code, where those obliged to
deliver or to do something incur a delay from the time
the obligee (or the person to whom an obligation is
owed) judicially or extrajudicially demands fulfillment
of the obligation.
• In a situation where a debtor defaults on his payment of a
loan, the law requires that a demand has to be made by
the creditor before the debtor can be considered delayed
on his payments, except if the contract itself provided
that no demand is necessary for delay to exist. If no
demand was made, then the loan has not yet become due
and demandable, and any foreclosure of property used as
collateral for the loan would be considered premature.

• When it comes to tax assessments, however, there is a twist to the

rule. In the case of assessment notices, if there is no demand for
payment, not only is there no delay on the part of the taxpayer,
but there is actually no valid assessment to speak of.
• This position was reiterated in a recent decision of the Court of
Tax Appeals (CTA Case No. 8694 dated June 28, 2018) where
the deficiency tax assessment was set aside and cancelled
because the Final Assessment Notice (FAN) did not contain a
specific date or period within which the alleged tax liabilities
must be paid. In that decision, the court emphasized that the due
date for payment of the tax liabilities is indispensable in an
assessment as it dictates the time when the penalties, surcharge
and interest begin to accrue. If the date of payment is uncertain,
then there is no definite demand on the taxpayer to immediately
pay the assessed tax liabilities.

• The due process requirements in the issuance of

deficiency taxes are laid down in Revenue
Regulations (RR) No. 12-1999, as amended by
RR Nos. 18-2013 and 7-2018. The regulations
provide that a formal letter of demand (FLD) and
FAN calling for the payment of deficiency taxes
shall state the facts, laws, rules and regulations
or jurisprudence on which the assessment is
based; otherwise, the notices shall be void. The
taxpayer shall have 30 days from receipt of the
FLD and FAN to file an administrative protest.

• Significantly, the Supreme Court in earlier

rulings categorically pronounced that an
assessment should contain not only the detailed
computation of tax liabilities, but also a demand
for payment within a prescribed period. It further
mentioned that an assessment, in the context of
the National Internal Revenue Code, is “a
written notice and demand made by the Bureau
of Internal Revenue (BIR) to the taxpayer for the
settlement of the due tax liability that is there:
definitely set and fixed.”

• Referring back to the recent CTA case, the

deficiency tax assessment was cancelled
because it did not comply with the
additional requirement that there should be
sufficient demand for payment by the BIR.
In this case, there was an undated FAN
assessing the taxpayer for deficiency taxes
and this was deemed null and void because
the due dates on the assessment notices for
all assessment items were left blank or
unspecified.

• What can be gathered from this case is that taxpayers

can raise a defense against an assessment if there is
no demand for payment made. Failure to comply
with the additional requirement of demand proves
fatal to the assessment. Thus, even if the issues
raised in the assessments have merit, taxpayers can
still check if the FLD/FAN contains a specific due
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date for the payment of the deficiency taxes. If there
is none, they can protest that the assessed amount is
not collectible because payment was not actually
demanded by the BIR. Applying the decisions of the
courts, in such cases, taxpayers can firmly say, “No
demand, no pay.”

• Article 1170 of the Civil Code of the

Philippines [provides] that: 'Those
who in the performance of their
obligations are guilty of fraud,
negligence, or delay, and those who
in any manner contravene the
tenor thereof are liable for damages.
'

• This document discusses various grounds for liability to

pay damages under Philippine law. It covers four main
grounds:

• 1.fraud
• 2.negligence
• 3.delay,
• 4. and contravention of obligations.

MA. LUISA A. PINEDA, Petitioner vs. VIRGINIA ZUÑIGA

VDA. DE VEGA, Respondent
G.R. No. 233774 April 10, 2019

• Petitioner filed a complaint dated June 10, 2005 against

respondent, praying for the payment of the latter's principal
obligation and the interest thereon or, in default of such payment,
the foreclosure of the property subject of a real estate mortgage.
• In her complaint, petitioner alleged that, on March 25, 2003,
respondent borrowed from her ₱500,000.00 payable within one
year with an interest rate of 8% per month.To secure the loan,
respondent executed a real estate mortgage (2003 Agreement)
over a parcel of land covered by Transfer Certificate of Title No.
T-339215, together with all the buildings and improvements
existing thereon (Property), in petitioner's favor. On the loan's
maturity, respondent failed to pay her loan despite demand. As of
May 2005, the unpaid accumulated interest amounted to
₱232,000.00.

In her answer, respondent denied petitioner's

material allegations and countered that the complaint
was dismissible for lack of prior barangay conciliation
proceeding and for failure to join her husband as a
party. She also argued that the interest rate agreed
upon was excessive and unconscionable, thus
illegal. She further denied receiving ₱500,000.00 from
petitioner and claimed that the said amount was the
accumulated amount of another obligation she earlier
secured from petitioner.

• In her reply, petitioner averred that

respondent's husband did not need to be joined
because the transaction did not involve him
and although the agreement was to charge an
interest rate of 8% per month, what was
actually charged was just 4% per month.
Petitioner admitted that the original loan
which respondent obtained in 2000 was only
₱200,000.00 with an undertaking to pay 3%
interest per month.

In the written interrogatories addressed to petitioner, she

admitted that the ₱500,000.00 indicated in the 2003
Agreement referred to a previously executed undated real
estate mortgage (undated Agreement) between the parties
which secured respondent's loan of ₱200,000.00 from her.

After the parties underwent mediation proceedings, which

turned out to be unsuccessful, the case was set for
hearing. Despite the leeway provided by the RTC,
respondent failed to formally offer her evidence.

RTC Ruling
The dispositive portion of the RTC Decision states:
WHEREFORE, in the light of the foregoing, the defendant is hereby
ordered to pay plaintiff the loaned amount of P200,000 plus the
interest of 12% per annum from September 3, 2004, the date the
defendant received the demand letter from the plaintiff, dated
August 2004, until the finality of the decision and the satisfaction
of the amount due. She is also ordered to pay the plaintiff the
amount of P50,000 as nominal damages and P30,000 as
attorney's fees.
In default of payment, the mortgaged property, together with all the
buildings and improvements existing thereon, shall be foreclosed
and sold and the proceeds of their sale shall be applied to the
payment of the amounts due the plaintiff, including damages and
attorney's fees.
SO ORDERED.

The CA Decision reversed and set aside the RTC Decision and
dismissed the complaint.The CA found that petitioner failed to
prove that prior demand had been made upon respondent for
the full payment of the latter's obligation. While the complaint
alleged and petitioner testified that demand was sent to
respondent by registered mail and received on September 7,
2004, the registry return card evidencing such receipt was not
specifically and formally offered in evidence. The CA noted
that what petitioner presented was a copy of the said demand
letter with only a photocopy of the face of a registry return
card which was claimed to refer to the said letter. According
to the CA, it thoroughly reviewed petitioner's formal offer and
found no reference to the registry receipt card or any
competent proof, like a postman certificate or the testimony of
the postman, that respondent actually received the demand
letter. The CA concluded that for failing to prove the requisite
demand under Article 1169 of the Civil Code, respondent
could not be considered in default and petitioner's case must
fail.

SUPREME COURT Decision

• WHEREFORE, the Petition is hereby PARTLY GRANTED. The

Decision of the Court of Appeals dated March 21, 2017 and its
Resolution dated August 30, 2017 in CA-G.R. CV No. 106404
are REVERSED and SET ASIDE. The Decision dated April 30,
2015 of the Regional Trial Court of Malolos City, Bulacan, Branch
17 in Civil Case No. 526-M-2005 is PARTLY
REINSTATED insofar as the order against respondent Virginia
Zuñiga vda. de Vega to pay petitioner Ma. Luisa A. Pineda the
loaned amount of ₱200,000.00 and ₱30,000.00 as attorney's fees is
concerned. Respondent Virginia Zuniga vda. de Vega is also ordered
to pay petitioner Ma. Luisa A. Pineda interest on the loaned amount
at the rate of 12% per annum from the filing of the original
complaint up to June 30, 2013 and 6% per annum from July 1, 2013
until the finality of this Decision; and on the total amount due on the
Decision's finality, interest of 6% per annum from such date of
finality until full payment thereof.
• SO ORDERED.

ARTICLE 1171
Responsibility arising from
fraud is demandable in all
obligations. Any waiver of an
action for future fraud is void.

• According to time of commission, fraud may be past or

future. The fraud referred to in this article is the fraud
that refers to the fulfillment of an obligation rather than
the fraud which is the origin of the obligation.
• Two different articles refer to two different frauds or
dolos:
• Dolo causante or causal fraud (Article 1338) is a
deception of a serious character employed by one party
and without which the other party would not have
entered into a contract. This is when fraud used to
induce a person to agree to a contract. This kind of fraud
is a ground for annulment of the contract plus damages

• Example:

There was an ad offering work to

female college graduates to work
as English tutors to rich Hong
Kong families but in truth that
was recruitment to work in a red
light district or pleasure district.

• Dolo incedente or incidental fraud (Article 1144) those

which are not serious in character and without which the
other party would still have entered into the contract.

• Example:
• Anne enter into a contract to deliver 500 cavans of rice to
Noel with a price per cavan of 1,300 pesos, Anne
delivered 400 cavans but withheld the delivery of the
remaining, stating that the price went up and priced the
rice to 1,600 per cavan. The fraud here is dolo incidental
because it is committed to the existing contract.

• Case:
MARIANO C. PAMINTUAN vs. COURT OF
APPEALS and YU PING KUN CO., INC
• G.R. No. L-26339. December 14, 1979

• Facts:
Mariano Pamintuan was in an agreement with Yu Ping
Kun Co., Inc. to sell plastic sheetings imported by the
former from Japan through a barter license he had for the
export of white flint corn to Toyo Menka Kaisha, Ltd.
While the plastic sheetings were arriving in Manila,
Pamintuan informed the President of Yu Ping Kun Co.,
Inc. that he was in dire need of cash with which to pay
his obligations to the Philippine National Bank.

• Consequently, the two parties fixed a price to the

plastic sheetings regardless of the kind, quality or
actual invoice value thereof and based it on dividing
the total price of the shipment with its aggregate
quantity. After the shipments arrived in Manila (4
shipments in total), Pamintuan only delivered a
portion or 224, 150 yards of the expected 339, 440
yards of plastic sheetings he received to Yu Ping
Kun’s warehouse.
• Furthermore, he delivered plastic sheetings of inferior
quality that were valued at a lesser price than what Yu
Ping Kun had paid.

• Subsequently, Yu Ping Kun filed an action to enforce a

provision in their contract of sale which states that any
violation of the stipulations of that contract would entitle the
aggrieved party to liquidated damages in the amount of 10,
000 Php from the offending party.