Summary of "Obligations 4: Fortuitous Events, Usury, Transmissibility (Nature & Effect of Obligations)"
Main ideas and lessons (with structured breakdown)
1) Fortuitous events (e.g., “fortuitous event” / “force majeure”)
Definition
Fortuitous events are events that:
- cannot be foreseen, or
- even if foreseen, are inevitable.
Two technical kinds:
- Fortuitous event per se / acts of man
- Acts that are independent of the will of the debtor, but not necessarily independent of the will of other humans.
- Example: armed robbery committed by armed men.
- Force majeure / acts of God
- Events totally independent of the will of all humans.
- Examples: earthquakes, volcanic eruptions.
For loan/enforcement purposes, “fortuitous event” and “force majeure” are treated as interchangeable.
General rule
A person is not liable for loss/damage caused by a fortuitous event.
Exceptions / when liability still exists even if the event is fortuitous
The debtor may still be liable if any of the following apply:
- The debtor is guilty of delay/default, fraud, negligence, or contravention of the terms of the obligation.
- Example: the debtor was supposed to deliver by a certain date, did not deliver on time, and the thing is later lost due to an earthquake.
- The debtor promised to deliver to two or more persons with different interests, and a fortuitous event caused loss.
- Rationale stated: the law penalizes the debtor’s bad faith.
- The obligation to deliver arises from a criminal offense.
- Ongoing performance / substitution concept
- Even if the specific thing agreed upon is lost, the debtor may still have to deliver another thing of the same kind and quality (from the class/generic category), so long as this fits the stated rule discussed.
- The parties stipulate that the debtor will be liable even for loss due to a fortuitous event.
Assumption of risk doctrine (volenti non fit injuria / “no wrong when there’s voluntary consent”)
If a debtor (or relevant party) knowingly enters an obligation with full awareness of risk, then:
- the instructor/other party is not held liable for resulting harm, including harm tied to fortuitous events.
Example: enrolling in a martial arts or knife fighting class, potentially signing a waiver; by entering, the person assumes known risks inherent in training.
Requisites for the general fortuitous-event rule to apply (debtor not liable)
The fortuitous event must be:
- Independent of the debtor’s will
- Not foreseeable (or unforeseeable) and unavoidable
- Of a character that makes normal compliance impossible
- The debtor must be free from participation or aggravation of the injury
- i.e., no concurrent negligence
- The fortuitous event must be the proximate and sole cause of the injury/loss
2) Usury (interest on loans)
Concept
Usury is generally described as contracting for or receiving an amount in excess of what the law allows for:
- interest on the loan
- the use of money, goods, or credits
Legal interest rate
Based on Central Bank Circular No. 799 (effective July 1, 2013):
- Legal interest rate = 6% per annum
Practice vs. usury law
- Banks/credit card companies may charge rates higher than 6% per annum.
- Example discussed:
- Credit card rate: 3.25% per month
- The speaker explains this is “higher than” 6% per year when converted, but argues it is still allowed because of a later circular.
Central Bank Circular No. 905 (and effect on usury law)
- Central Bank Circular No. 905 (enacted 1982, effective 1983, per the speaker):
- Suspended the usury law (as described)
- Specifically described as: removing the ceiling on interest rates for loans/balances, etc.
Result stated:
- People generally won’t be punished for charging usurious rates above the former legal ceiling.
Important Supreme Court limitation (interest can still be reduced if abusive)
Even with Circular 905’s suspension, the Supreme Court may equitably reduce interest if it is:
- iniquitous
- unconscionable
- inequitable
- described as shocking to the conscience
Cases mentioned:
- Alameda v. Court of Appeals
- Makalina v. BPI (spelling uncertain in subtitles)
3) Presumptions regarding receipts for principal/interest
General presumptions
- If a creditor receives or gives a receipt for the principal but does not indicate or reserve the creditor’s right to interest, it gives rise to a presumption:
- that the interest has been paid.
- If the principal is payable in installments and the creditor gives a receipt for a later installment, it gives a presumption:
- that prior installments were also paid.
Nature of these presumptions
- They are disputable presumptions (can be rebutted by proof).
- They are not conclusive.
When these presumptions do NOT apply
No presumption if:
- There is an oral or written reservation by the creditor of the right to interest or prior installments.
- The receipt does not state it is for a particular installment—so you cannot infer the date refers to that installment.
- The receipt covers only part of the principal (presumptions require a receipt for the whole principal).
- Payment of taxes for the current year does not presume payment of previous years’ taxes.
- There is proof that the contrary fact is true (e.g., non-payment is proven).
4) Remedies of a creditor to protect credit (protection of the creditor’s rights)
The speaker frames creditor remedies as being provided to protect the creditor’s credit.
A) Exhaustion of the debtor’s assets
- First remedy: the creditor should exhaust all the debtor’s assets/property.
- Example remedy mentioned: attachment.
B) Action subrogatoria (subrogatory action)
Meaning
- The creditor can be subrogated to the debtor’s rights (creditor acts in the place of the debtor to protect the debt).
Key clarification
- In action subrogatoria, the creditor does not become the creditor of the third person.
- The creditor merely acts in the debtor’s stead.
Requisites stated
- Action subrogatoria requires:
- There is an outstanding debt/credit owing from the debtor to that creditor.
- The creditor is prejudiced because the debtor fails to act against/seek payment from a third person who owes the debt.
- The creditor has exhausted the debtor’s properties (stated as an important condition).
C) Action pauliana (fraudulent transfers rescission)
Meaning
- The creditor can impugn/challenge acts of the debtor that are done to defraud the creditor.
- Method described: file an action for rescission of the fraudulent contracts.
Nature
- Described as a subsidiary remedy:
- the creditor must have exhausted all legal remedies first.
Requisites stated There must be:
- A prior credit of the creditor against the debtor.
- A subsequent transfer by the debtor to a third party (after the creditor’s credit).
- The creditor has no other legal remedy.
- The debtor’s act is fraudulent.
- The third party is an accomplice in the fraud.
- Speaker’s point: third-party transfers are generally valid in good faith; only those in bad faith/connivance are compelled to return the object.
5) Transmissibility of rights (and exceptions)
General rule
- Rights are transmissible.
Exceptions (when rights may not be transmitted)
- Prohibited by law
- Purely personal in nature, e.g.:
- agency contracts
- partnerships
- Stipulation by the parties
- Parties agree rights are not transmissible.
- Example given: gym memberships (cannot be transmitted)
Speakers / sources featured
- Speaker/Instructor: Not explicitly identified by name in the subtitles (only referenced indirectly with “refer to my episode on…” and similar phrases).
- Legal/official sources mentioned
- Central Bank Circular No. 799 (effective July 1, 2013)
- Central Bank Circular No. 905 (enacted 1982, effective 1983 per subtitle)
- Supreme Court cases:
- Alameda v. Court of Appeals
- Makalina v. BPI (spelling uncertain in subtitles)
Category
Educational
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