Article 1190: Obligation to return

Art. 1190. When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall return to each other what they received.

In case of loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article shall be applied to the party who is bound to return.

As for obligations to do and not to do, the provisions of the second paragraph of Article 1187 shall be observed as regards the effect of the extinguishment of the obligation.

The happening of the resolutory condition extinguishes the obligation. As a result, each party is bound to return what they received from each other since the purpose of the condition complied with is the extinguishment of the obligation to give by the giver and the right to keep by the receiver.
When the object of the obligation to give is lost, deteriorated or improved, the six (6) rules under Article 1189 apply. What are the six (6) rules?

[1] Lost without fault of the debtor extinguishes the obligation;
[2] Lost with the fault of the debtor gives rise to action for damages;
[3] Deterioration without fault of debtor, impairment is borne by creditor;
[4] Deterioration with the fault, the creditor may choose between rescission plus damages or fulfillment plus damages;
[5] Improvements by nature or time, the creditor benefits, and;
[6] Improvement at the expense of the debtor, the rules on usufruct shall govern.

It must be noted, however, that there seems to be a seventh rule: [7] Improvement partially by nature or time and partially at the expense of the debtor, the debtor may apply the rules on usufruct only to the extent of his contribution to the improvement of the thing.

Note: Usufruct is the right of one to enjoy and use the fruits of the thing borrowed. The principles of “usus” (user) and “fructus” (fruits) are combined in this limited real right. In simpler terms, usufruct is an agreement where the real owner of a thing confers right to use and enjoy such a thing to another person who shall also possess the right to derive profit from said thing.

In cases of obligations to do or not to do with resolutory conditions, the obligation is extinguished once the act to be done is done or deemed to be done or non-action is maintained or deemed to be in a condition where it will always be maintained. The effects of these shall be retroactive as provided by Article 1187. This means that is is as if the obligation has been complied with even from the beginning, even from the time of the constitution of the obligation.

After the fulfillment of the condition, which extinguishes the right to keep by the receiver in a resolutory condition, the receiver shall make a return of said thing’s fruits or interests. Nevertheless, he may deduct expenses he incurred for their production, gathering or preservation.

It must be remembered that Article 1189 lays down the rules on who shall be liable or who shall bear expenses in cases of loss, deterioration or improvement of the thing, object of the obligation. Moreover, a note must be made on the fact that courts are given by law the power of determination in issues of retroactivity of resolutory conditions. Finally, do not forget that are also given the power to set the time for the fulfillment of an obligation in cases when there is not express stipulation regarding the period of its satisfaction as provided for under Article 1197.

Incoming examples:

Ernesto and Michael are friends. Since Ernesto is concerned with Michael’s frequent visits to the casino, he gave the latter a brand new car with the condition that Michael will never go to any casino anymore. After two week, Michael went to the nearest casino, itching to spend some coins on the fruit machine.

Did the act of Michael in going to the casino extinguish Ernesto’s obligation to keep the car in Michael’s possession? Yes, Ernesto’s obligation has been extinguished.

Under the Civil code, if as agreed the happening of the future and unknown even extinguishes the obligation to give, the parties shall return to each other what they have received. In the case at bar, Michael went to the casino despite the condition that he should never go there. In so doing, Ernesto has acquired a return to get back the car which is the object of the obligation due to the nonfulfillment of the obligation not to do.

Let us suppose that the thing given to Michael was a bottle of a Class A whisky. Now, before the extinguishment of the obligation, the same improved, say the price of said whisky soared high in the mean time until after the extinguishment of the obligation. Should Michael benefit from such improvement?

No, of course not. Said improvement where not at the expense of Michael. Rather, they were by the whisky’s nature and by time. Article 1189 applies: “If the thing is improved by its nature or by time, the improvement shall inure to the benefit of the creditor.” Here, Ernesto is the creditor considering the action to recover the land.