Without any colorable title recognized by law, the rule of laches and

prescription will never apply.

ObliCon Reviewer – Midterms
PRESCRIPTION OF OWNERSHIP AND OTHER REAL RIGHTS
Y1S2
Followed from Dean Mel’s Pointers
By Santos, G
Kind of Ownership Condition Prescription Date
PRESCRIPTION OAP of movable Uninterrupted 4 years
property Possession + GF
 Prescription – purpose is to suppress fraudulent and stale claims OAP of personal Uninterrupted 8 years
from springing up at great distances and surprising the parties or property possession
their representatives when the facts have become obscure from the Movables possessed Can never be acquired through prescription
lapse of time or the defective memory or death or removal of through a crime
witnesses. OAP of immovable Just and valid title + in 10 years
 Two Kinds: Acquisitive vs. Extinctive property a concept of an owner
 Acquisitive is the acquisition of a right by the lapse of time while EAP of immovable Uninterrupted adverse 30 years
extinctive is where rights and actions are lost by the lapse of time. property possession only. No
 How is prescription different from laches? need of a valid and just
Prescription is a matter of time, laches is a question of inequity. title.
Prescription is a matter of time; laches is considered the effect of the
delay. Laches applies independently of prescription, so that laches
is successfully interposed even if a shorter time has elapsed and the  Acquisitive can either be: Ordinary Acquisitive Prescription and
prescriptive period has not yet expired. Extraordinary Acquisitive Prescription.
 Requisites of laches: (4)  Possession must be in the concept of an owner (P, P, U). It must be
 GR: A registered owner has a right to eject any person illegally adverse, meaning that the possessor must assert dominion on the
occupying his property. This right is imprescriptible and can never be property to the exclusion of all others.
barred by laches.  Art. 1124. Judicial summons shall be deemed not to give rise to
Heirs of Nieto v. Meycauayan – Those who occupy the land of interruption:
another at the latters tolerance or permission, without any contact 1. It should be void for lack of legal solemnities
between them, are necessarily bound by an implied promise that the 2. If the plaintiff should desist from the complaint or should allow
occupants will vacate the property upon demand. If the possession the proceedings to lapse
of the land is merely tolerated by its lawful owner, the right to recover 3. If the possessor should be absolved the from the complainant.
possession is never barred by laches.  NOTE! Any express or tacit recognition which the possessor may
 E! IMPT CASE! Catholic Bishop of Balanga vs. CA – SC held that a make of the owner’s right also interrupts possession. Hence, he
registered land owner may lose his right to recover the possession cannot consider himself the owner if he recognizes somebody else
of his registered property by reason of laches. HOWEVER, there as having a superior right as an owner of his property.
must be a colorable title involved which the deed of donation.  MIDTERMS Answer: Although prescription will not apply to
registered property, the doctrine of laches is applicable in cases
where the possessor or transferee apparently obtained the property
from some apparent mode of conveyance such as donation or sale.
However, if he cannot prove any mode of acquisition, laches will not
apply.
  NOTE! A void donation may be the basis of a claim of ownership  Art 1155. The prescriptions of actions are interrupted when:
which may ripen into title by prescription. As long as it complies with 1. Filed before the court
the requisites of the statute of limitations. 2. Written extrajudicial demand by the creditors
3. Written acknowledgement if the debt by the debtor
PRESCRIPTION OF ACTIONS  “Would commence to run anew” –
 NOTE! While a civil case interrupts the prescription, its dismissal or
Action Prescription Date voluntary abandonment by the plaintiff leaves the parties in exactly
To recover movables 8 years the same position as though no action had been commenced at all.
 Cause of Action elements: (3)
Unless acquired through OAP a. A right in favor of the plaintiff by whatever means and under
which is 4y whatever law it arises or is created
b. An obligation in the part of the named defendant to respect or
Mortgage 10 years such right
Immovable property 30 years c. An act or omission on the part of such defendant violative of the
Upon a written contract 10 yeas right of the plaintiff or constituting a breach of the obligation of
Upon an obligation created by law 10 years the defendant to the plaintiff.

Upon a judgment 10 years OBLIGATIONS – GENERAL PROVISIONS

Upon an oral contract 6 years
Upon a quasi contract 6 years  An obligation is a juridical necessity to give, to do, not to do.
Upon an injury to the rights of the 4 years  Elements of an obligation: juridical tie, object/prestration, parties
plaintiff  Effect of an obligation? Obligations arising from the contracts have
Upon a quasi delict 4 years the force of law between the contracting parties and should be
Forcible entry and detainer 1 year complied with in good faith. From the moment the contract is
perfected, the parties are bound not only what has been expressly
Defamation 1 year stipulated, but also its consequences.
 Solutio indebtii – kind of a quasi-contract. Occurs if something is
Enforcement of obligations to pay Runs from the last payment of received when there is no right to demand it, and it has been unduly
principal w/ interest, or annuity annuity/interest delivered through mistake, thereby giving rise to the obligation to
Demand fulfillment of the Commences from the time return what has been unduly received.
obligations declared by a judgment judgment became final
Accounting runs from the day the who should render the same NATURE AND EFFECT OF OBLIGATIONS
persons should cease in their functions  When is a proper diligence of a good father of a family relevant?
Actions arising from the result of the When the result was recognized by When the prestation is to give, unless the law or stipulation of the
accounting agreement of the interest in the parties requires another standard of care. (See Art. 1163)
parties.
It connotes a determinate object which is definite, known, and has
already been decided and particularly specified as the matter to be
given from among the same things belonging to the same kind.
 The period during which the oblige was prevented by a fortuitous
event from enforcing his right is not reckoned against him. When the NOTE! If the law or contract does not state the diligence which is
prescription is interrupted, all the benefits acquired from the supposed to be given, what is expected is a good father of the family.
possession cease and when the prescription starts anew, it will
entirely be a new one. Common carries = extraordinary diligence
 Bank = highest degree of diligence 2. Delay in the performance by the debtor
 There is no real right enforceable or binding prior to the delivery of 3. The creditor makes an extrajudicial/judicial demand requiring
the object of prestation. The real right accrues when the thing/object payment or performance of the obligation.
of the prestation is delivered to the creditor.
 Generic vs. Determinate Delay or default – committed by the debtor – mora solvendi |
Generic can be any object belonging to the same kind. In the evenr committed by the creditor – mora accipiendi
there is non-delivery of the a generic thing, creditor may have it
accomplished or delivered in any reasonable and legal way, charging Will delay occur in reciprocal obligations? NO. Neither party incurs in
all expenses in connection w/ such fulfillment to the debtor. delay if the other does not comply with in a proper manner that is
incumbent upon him. The moment of the parties fulfills his
For non-delivery of a determinate thing, the remedy is to FILE AN obligations, delay by the other party begins.
ACTION to COMPEL the performance of the debtor to make the
delivery. Jurisprudence on Demand:

GR in cases for fortuitous events: debtor is relieved from his a. REMEMBER! Default only occurs after judicial or extrajudicial
obligation to give if the object is lost through a fortuitous event. demand.
E: A FE will not excuse an obligor if the (1) obligor delays, and if he b. inaccurateness of the amount in the demand letter will not nullify
(2) has promised to deliver the same thing to two or more persons the effect of such demand. The excess amount in such a
who do not have the same interest. demand does not nullify the demand itself.
 IMPT CASE! Chavez vs. Gonzales, the SC ruled that defendant c. Commencement of a suit is a sufficient demand. An obligor is
contravened the tenor of his obligation because he did not repair the liable for damages from the time of judicial or extra judicial
typewriter, but returned it in shambles. demand, and not from the time the object of prestation is to be
delivered.
Defendant virtually admitted non-performance of the contract by d. Selegna Management and Development Corporation vs United
returning the typewriter with the essential parts missing. Hence, he Coco Planters Bank – When creditors receive partial payment,
is liable not only for the missing parts but also for the cost of the they are not ipso fact deemed to have abandoned their prior
execution of the obligation. demand for full payment. E! their acceptance must be made
 “At the cost” – See Art 1167. It implies the right to have somebody under circumstances that indicate their intention to consider the
else perform the obligation and the right to charge the expenses performance complete and to renounce their right arising from
thereof to the debtor. the defect. (1235 in connection w/ 1248. Creditors cannot be
 IMPT! Art 1169. Demand by the creditor is not necessary when in completed to accept partial payments, however, it does not
order that delay may exist: prohibit them from acing such payment)
 GR: The law does not make as an prerequisite an extrajudicial
1. Obligation or law expressly so declares demand before filing a suit. Why? Even before the demand the
2. When the nature and circumstances of the obligation appears obligation is already due and demandable.
that the designation of the time when the thing is to be delivered  E! 3 CASES where an extrajudicial demand should be first made
or the service to be rendered was a controlling motive for the prior to filing a civil suit:
establishment of the contract (time if os the essence) 1. Stipulation of the parties
3. When demand would be useless, when the obligor has rendered 2. Ejectment cases, where the ground is the failure of the lessee
it beyond his power to control. to pay rent or comply with the condition of lease.
EE: If the lease is with a period, and the period already expired
and such expiration is the cause for ejectment, the lessor can
When will delay occur? Requisites: immediately file the case without need of ejd.
1. Obligation is demandable and liquidated 3. Consignment cases
 Bricktown Devt Corp case – A grace period is a right. Not an a. The cause of the breach of the obligation must be
obligation of the debtor. The grace period is effective without further independent of the will of the debtor
need of demand either calling for the payment of the obligation or for b. The event must either be unforeseeable or unavoidable.
honoring a right. c. Event must be such to render it impossible for the debtor to
fulfill his obligation in a normal manner
It must not be likened to an obligation, the nonpayment of which d. Debtor must be free from any participation or aggravation
would generally require judicial or extrajudicial demand. of the injury.
TAKE NOTE! To be exempt from liability for loss through a
fortuitous e, one must be free from any previous negligence
 IMPT! AMEX Case – SC held that the contractual relationship from or misconduct which that loss or damage may have been
the creditor and debtor relationship rises only after the credit card occasioned.
issuer has approved the cardholders purchase request.
 IMPT! Sia vs. CA – Bank’s negligence aggravated the injury or
The use of a credit card to pay for a purchase is only an offer to the damage to the petitioner which resulted from the loss or destruction
credit card company to enter into a loan agreement with the credit of the stamp collection. Fourth characteristic of an FE is absent, and
card holder. Before the credit card issuer accepts this offer, no 1170 comes to the succor for petitioner collectioner of stamps.
obligation relation to the loan agreement exists between them. There  Victoria Planters Association Case – in cases of FEs, the contract
must be a demandable obligation to presuppose the existence of shall be deemed suspended during said period, does not mean that
default. the happening of those events stops the running of the period agreen
upon.
MIDTERMS ANSWER: From the moment the credit card is swiped,
the credit card holder is merely offering to enter into a loan It only relieves the parties from fulfillment of their respective
agreement with the credit card company. From there, the bank has obligations during that time. Hence, to add the years upon
the choice to accept or reject the offer of the loan based on the credit resumption of the contract is in fact an extension of the contract.
stand of the credit hard holder. There is no obligation on the part of  Even if there is a FE event, a person can still be held responsible for
the creditor to accept. Hence, the credit card holder cannot demand the performance of his obligation if:
such obligation for no obligation exists at all – the bank cannot be
said to incur in delay. 1. 1165 – if the obligor delays or has promised to deliver the same
thing to two or more persons who do not have the same interest
 Art. 1170 – SOURCES OF LIABILITY: 2. 1268 – when the debt of a thing certain and determinate
1. Fraud proceeds from a criminal offense, unless the thing offered to the
2. Negligence person who should receive it, the latter refuses w/o justification.
3. Delay 3. 552 – Possessor in bad faith shall be liable for deterioration or
4. Those who in any manner contravene the tenor thereof loss in every case.
4. 129(6) of the FC –the loss or deterioration of movables used for
- Damages can be awarded to any person who may have been the benefit of the family, belonging to either spouses, even to
prejudiced in the performance of the obligation as a result of ^. due to a fortuitous even, shall be paid to the said spouse from
- IMPT! If any of the four co-exists with a FE, the obligor cannot the conjugal funds, if any.
be excused from being liable on his obligation. 5. When the parties declare that they shall be liable even for loss
- In relation w/ Art 1174: of fortuitous event
GR: no one should be held accountable for fortuitous cases – 6. When the bailee in commodatum is liable for the loss of the thing
those situations that could not be foreseen, or which though 7. When the nature of the obligation requires the assumption of
foreseen, were inevitable. risk, the person obliged to perform the obligation shall likewise
not be excused should a fortuitous event.
Requisites of FE:
  Bailee in commodatum – one who acquires the use of a thing loand,  Power to Rescind – to rescind does not merely mean to terminate a
but not its fruits. contract and to release the parties from further obligations to each
See reqs on pg 150 other. It means to abrogate the contract from the beginning and to
 1171. Responsibility arising from fraud is demandable in all restore the parties to their relative positions as if no contract has
obligations. Any waiver for future action is void. been made. Rescission under 1191 is predicated on the breach of
faith by any of the parties to a contract that violates the reciprocity
IMPT! 1171 necessarily involves a valid agreement but in the between them. No breach of faith = no rescission
performance of the same, fraud is committed.
 The following measures must be taken by a creditor before he may BEST – Rescission is designed to restore the parties in their former
bring an action for recession of an allegedly fraudulent sale: situations.
See regs on page 153
 1178: GR: All rights acquired in virtue of an obligation are What is the effect of a valid rescission? To return the things which is
transmissible. the object of the contract. Hence, rescission can only be made when
E: the one who demands rescission can return whatever he/she may
1. The person who transmits the right cannot transfer greater rights be obliged to restore.
than he himself has by virtue of the obligation.  IMPT! Under 1191, in case of non-compliance in reciprocal
2. The transmissibility of rights may be limited, or altogether obligations, the aggrieved party has an implied power to rescind
prohibited by stipulation of the parties. the contract. (Dean Mel says it should be stated as resolved;
3. No transmission can be made of a particular right if the personal termination of the obligation under 1191 is resolution but they are
qualifications or circumstances of the transferor is a material used interchangeably)
ingredient attendant in the law.
Power to rescind is not absolute and must be based on a serious or
PURE AND CONDITIONAL OBLIGATIONS substantial breach of an obligation as to defeat the object of the
parties in making the agreement. It will not be granted where the
 Art. 1182. When the fulfillment of the condition depends upon the breach is slight or casual.
sole will of the debtor, the conditional obligation shall be void.
 Potestative Suspensive Condition – If the fulfillment of the condition QUESTION – why is going to court necessary? In the implied power
depends upon the sole will of the debtor, it is essentially a condition to rescind can only be enforced through court action, in the absence
b/c whether debtor will or will not fulfill the obligation us a future and of stipulation to the contrary. The decision of the court is the
uncertain event. operative act of rescission.
Such stipulation is absolutely void, there are no exceptions to the
rule. QUESTION – what is the time period of a substantial breach?
 NOTE! If it gives birth to the obligation, the condition and the According to Velarde vs. CA, 20 days/1w/1m may indeed be casual
obligation are void provided that time was not of the essence
E to the rule: If the PSC is imposed not on the birth of the obligation
but on its fulfillment, only the condition is avoided, leaving affected
the obligation. TAKE NOTE! Power to rescind need not be implied in all cases. It
can be expressly stipulated in the contract. The law does not prohibit
(CHECK DIAGRAM) parties from entering into an agreement providing that that violation
SAMPLEX ANSWER – of the terms of the contract shall cause the rescission thereof w/o
court intervention. (facultative resolutory condition)

 1192. In case both parties have committed a breach of the obligation,

the liability of the first shall be equitably tempered by the courts.
 Penalizes the first violator only if such violator can first be 3. The payment is dependent on the debtor’s means or as the
determined. The subsequent violator will not be held liable. However, states it “when his means permit him to do so”.
the liability of the first violator shall be equitably tempered by the 4. Instead of issuing a decree of rescission, the court finds just
court as the injury of the first violator had not been so great if not for cause for issuing a period
the subsequent infraction of such other party violator. 5. When there is a potestative suspensive condition dependent
upon the fulfillment of the obligation.
What if the law states that it cannot be determined which of the 6. When in RO, the court finds a just cause to fix a period.
parties first violated the contract? The obligation shall be deemed  When does the debtor lose his benefit to a period
extinguished. 1. After the obligation has been contracted, the debtor becomes
insolvent unless he gives a guaranty or security for the debt
OBLIGATIONS WITH A PERIOD 2. When he does not furnish to the creditor the guaranties or
securities which he promosed
 Period – designates a particular time which is certain to happen as 3. When by his own acts he has impaired said guarantees or
the moment when the obligation will either be effective(suspensive) securities after their establishment, when through a FE they
or extinguished(resolutory). disappear, unless he immediately gives a new one equally
 Manila International Airport Authority vase – Courts have no power satisfactory
to make a contract for the parties nor can they construe contracts in 4. Debtor violates any undertaking, in consideration of which the
such a manner as to change the terms of the contracts not creditor agreed to the period
contemplated by the parties. 5. When the debtor attempts to abscond
 Art. 1194. In case of loss, deterioration, or improvement of the thing
before the arrival of the day certain, rules in Art 1189 will be ALTERNATIVE OBLIGATIONS
observed:  What are alternative obligations?
1. The thing is lost without the fault of the debtor, the obligation
shall be extinguished. Alternative obligations are when there is a choice of multiple
2. Thing is lost through the fault of the debtor, he shall be obliged prestrations, either to give, to do, or not to do. The right of choice
to pay damages; thing is lost when it perishes, or goes out of belongs to the debtor, unless he it has been expressly granted to the
commerce, or disappears in a way that its existence is unknown creditor. The debtor shall have no right to choose a prestations which
or it cannot be recovered are impossible, unlawful, or which could not have been the object of
3. When the thing deteriorates w/o the fault of the debtor, the the obligation. Furthermore, the debtor shall lose the right of choice
impairment is to be borne by the creditor when among the prestations, whereby he is alternatively bound, only
4. If it deteriorates through the fault of the debtor, the creditor may one is practicable.
choose between the rescission of the obligation and its
fulfillment, with indemnity for damages in either case Partial performance cannot give rise to the extinguishment of the
5. If the thing is improved by its nature or by time, the improvement obligation. The debtor must fulfill one of the alternative obligations
shall inure to the benefit of the creditor completely to be considered fulfillment of the obligation.
6. If it is improved at the expense of the debtor, he shall have no
other right than granted to the usufructuary. In an alternative obligation, the choice shall produce no effect except
- In connection w/ 1205, 1262-1269 from the time it has been communicated to the creditor.
 When can the courts fix a period?  1205. Law provides the situations when the choice has been
1. 1197(1) – Obligation does not fix a period but from its nature and expressly given to the creditor:
circumstances it can be inferred that a period was intended, the 1. One of things lost is through fortuitous even, the debtor shall
courts may fix the duration thereof. perform the obligation by delivering which the creditor should
2. 1197(2) – Duration of the period when it depends upon the will choose from among the remainder, or what remains if only one
of the debtor. subsists.
 2. If the loss of one of the things occurs through the fault of the  Joint obligation – In a joint obligation, debtors are obliged to pay only
debtor, the creditor may claim any of those subsisting, or the their share in the credit. The presumption of the law is that an
price of which of the thing disappeared + damages obligation is always joint. Unless there is no specification as to their
3. If all the things are lost through the fault of the debtor, the choice proportionate share in the credit or the debt, the creditors and the
of the creditor shall fall upon the price of any of them. debtors in a joint obligation shall be entitled or shall make payment
4. Expressly stipulated in the contract in equal proportions.
Facultative-Alternative Obligations – when only one prestation has - Situation if one of the debtors become insolvent in a joint
been agreed upon, but the obligor may render another in substitution. indivisible obligation: check drawing haha
When the substitute is lost through the negligence of the debtor, it  TAKE NOTE! Solidary and invisibility are not the same. Solidary
does not affect the principal obligation and hence, the debtor will not means the the nature of the obligation attaching to the obligor while
be liable. invisibility refers to the nature of the object of the prestation.
 The relationship between and among solidary creditors is one of
However, if there is bad faith in the part of the debtor will depends on mutual trust. It means that each solidary creditor will be confident that
the sitch. If the substitution prestation is the MAIN REASON WHICH his solidary co-creditors will only act for good of all solidary creditors,
INDIUCED THE CREDITOR TO ENTER INTO A CONTACT W/ THE and that they will not act to prejudice the others. Hence, a solidary
DEBTOR, and the latter did not intend to constitute it w/ a substitute. creditor cannot assign his rights without the consent of the other.
Such is an act of fraud, which could make the whole contract  IMPT! Art. 1214. Any one of the SC may accept full performance of
voidable. the obligation.
 QUESTION – What is the difference between the loss of the choice
of the creditor/choice of the debtor? The right of choice is given to HOWEVER, if one of the SC makes the demand, whether judicially
the debtor. Since the debtor is the passive subject of the obligation, or extrajudicially, payment must be made to such SC.
he can choois There only 4 instances when the law proves the
creditor is given the choice of the debtor. CONSEQUENTLY, once a court case been filed by one SC, the
debtor cannot pay another SC who is not included in the case.
JOINT AND SOLIDARY OBLIGATIONS Payment will not be considered as valid. This is based on the view
that the basis of a solidary obligation momentarily ceases, and the
 Solidary obligation – there are debts or obligations incurred by two debtor must only pay the one who, at the moment of demand, seeks
or more debtors in favor of two or more creditors, and giving anyone, the full payment of the obligation.
some, or all the creditors the right to demand from anyone, some, or
all of the debtors the satisfaction of the total obligation and not merely EXTINGUISHMENT OF OBLIGATIONS
the share of each debtor in the obligation.
 IMPT! Two powers of the solidary creditor: SEC 1 – Payment or Performance
1. Choose from when to collect
2. Chose how much to collect  Complete delivery or service must comprise everything that is
 SIGNATURE RULE: “I promise” / “I hereby bind myself” + signatories necessary to satisfy the obligation consistent w/ the object of the
of the debtor below such w/o identifying the body or content of the same. Anything less than a complete performance may essentially
body itself signifies that the signatory must be considered to have be considered a breach in the obligation.
acknowledged that the “I” in the document was merely referring to  1243. Substantial performance of the obligation is not complete
each of them individually. Hence, the obligation is solidary. performance. It constitutes a breach of the obligation and the legal
treatment when such performance occurs, the obligor may recover
HOWEVER, if the phrase “I promise to pay” identified the particular as though there have been strict complete fulfillment, less damages
person referred to as I, then even if there are a number of signatures suffered by the employee.
in the promissory notes, it is clear that the others cannot be held
liable as joint and solidary debtors.
 Doctrine of substantial performance – the part unperformed must not 1238. Payment made a by a third person who does not intent to be
destroy the value or purpose of the contract + it must have been done reimbursed by the debtor is deemed to be a donation, which requires
in good faith the debtor’s consent. Payment in any case is valid to the creditor who
 BOOMERANG / CIRCLE EXAMPLE: has accepted it.
Different from 1234. Under Art 1235, it connotes the waiver of the
obligee of damages arising from the breach of the contract which Under Art 1240, payment made to any person authorized by law to
resulted in the incompleteness or irregularity of the obligation. receive it extinguishes the obligation. When a payment is made to
the wrong party, the obligation is not extinguished even of if the
By not expressing any protest or objection, the oblige accepts the debtor acted in GF. Hence, a payment in order to be valid, must be
performance of the obligation as FULLY COMPLIED despite his made to the proper person.
knowledge of the irregularity. Hence, such irregularity is cured by his
acceptance. E of 1240: Art. 1242!! Payment made in good faith to a third person
who is in possession of the credit shall release the debtor. It
Q – is a receipt of a partial payment an acceptance? Esguerra v. contemplates a situation where a debtor pays a possessor of the
Villanueva, the SC held that as long as as the acts of the creditor at credit, someone is not the real creditor but appears under the
the time of the irregular payment by the debtor OR within a circumstances, to be the real creditor.
reasonable time thereafter, shows that the creditor is not satisfied w/
the payment, the obligation shall not be deemed extinguished. - 5 situations: see page 281

Q – what is “acceptance” within the purview of 1235? Acceptance  E! to the rule on payments to incapacitated persons: Payment made
must be made under circumstances that indicate their intention to to a person who is incapacitated to administer his property shall be
consider the performance complete and to renounce their claim valid if he has kept the thing thing delivered OR the payment has
arising from the debt. been beneficial to him.
 The benefit to the creditor for payment made by a third person must
IMPT CASE! MIAA vs. Avia Filipinas International – when the obligee always be proven except in 3 cases:
accepts the performance knowing its incompleteness or irregularity, 1. After the payment, the 3rd person acquires the creditor’s right.
w/o expressing any objection, the obligation is deemed fully complied 2. When the creditor ratifies the payment to the originally
with. unauthorized 3rd person
3. Benefit to the creditor need to not to be proven, when the credit’s
 Payment made by a 3rd Party Rules conduct the debtor has been led to believe that the 3 rd person
has authority to receive the payment.
1236. Creditor is not bound to accept payment or performance by a  Art. 1245. Dacion in payment, whereby property is alienated to the
third person, who has no interest in the fulfillment of the obligation, creditor in satisfaction of a debt in money, shall be governed by the
unless there is a stipulation to the contrary. law on sales.

Whoever pays for another may demand from the debtor what he has Dacion en pago – delivery and transmission of ownership of a thing
paid, EXCEPT if he paid w/o the knowledge of the debtor OR against by the debtor to creditor as an accepted equivalent of the
the will of the debtor, he shall only recover insofar the payment has performance of the obligation.
been beneficial to the debtor.
- A mode of extinguishing an obligation partakes the nature of the
1237. Whoever pays on behalf of the debtor w/o the knowledge or sale whereby property is alienated to the creditor in satisfaction
against the will of the latter, cannot compel the creditor to of a debt in money. Common consent is required to in order to
SUBROGATE HIM in his RIGHTS, such as those arising from a extinguish the obligation.
mortgage, guaranty, penalty. - BEST – the debtor offers another thing to the creditor who
accepts it as equivalent of payment of an outstanding debt. It
 partakes a nature of sale, since the creditor is really buying the
thing or property of the debtor, payment for which is to be QUESTION – When can partial payment be made?
charged against the debtor’s debt.
- NOTE! The dation in payment extinguishes the obligation to the 1. If there is an express stipulation in the contract
extent of the value of the delivered, unless the parties by EE: Even if there is no express stipulation, partial payment can
agreement, express or implied, or by their silence, consider the be effective if the creditor accepts such partial payment and
thing as equivalent in which case the obligation is totally benefits therefrom.
extinguished. 2. If the debt is partly liquidated and partially unliquidated.
- Requisites:  GR: The law is specific that in the fulfillment of an obligation by
1. There must be performance of the prestation in lieu of payment money, only payment of cash will extinguish the obligation.
payment - animo solvendi PN, BoE, checks are given to pay a debt, such debt will not be
2. There must be some difference between the the prestation extinguished unless these mercantile documents are encashed.
due and which is given in substitution – aliud pro alio CURE: FEB and Trust Company v Diaz – obligee fully accepts the
3. There must be an agreement between the creditor and the check as payment after the obligor’s manifestation that it had been
debtor that the obligation is merely extinguished by reason given to settle an obligation, the oblige shall be estopped from
of the performance of a prestation different from that due. denouncing the efficacy of the tender of payment.
 NOTE! If a creditor does not present the check for payment and the
 Dacion en pago vs pactum commisorium bank upon which the check for payment has been drawn collapses
or fails to the point that it cannot meet the demands for payment, the
Before the creditor becomes the owner of the property collateralized debtor will be discharged. (C does not present check for payment +
to secure the debt, an intervening agreement subsequent and bank collapses/has no funds = discharge of the debtor)
independent from the original contract is entered into by c and d  1250. In case of an extraordinary inflation or deflation of the currency
to have the property collaterized in the original agreement as stipulated should supervene, the value of the currency at the time of
payment for the debt, thereby extinguishing the obligation. the establishment shall be the basis of payment.
- Applies only to cases where a contract or agreement is involved.
In pactum commisorium, the parties agree, generally in one single It does not apply where the obligation to pay arises from law,
contact, in the event that the debtor fails to pay the debt, the independent of the contract.
mortgaged or pledged property of the debtor shall be owned by the - An agreement is needed for the effect of an EI to be taken into
owner. This is void, in accordance with the rule that any property account to alter the value of the currency at the time the
made as a security for a loan must always be foreclosed or obligation has been established
subjected to a sale by public bidding in case it shall be used to satisfy - GR: Value of peso at the time of the establishment of the
the debt wholly or partially of the debtor. obligation shall control and be the basis of payment of
 IMPT! According to 1248, when the debt is in part liquidated and in contractual obligations
part unliquidated, the creditor may demand and the debtor may E: It is only when there is a contrary agreement that EI will make
effect the payment of the former without waiting for the liquidation of the value of the currency at the time of payment, not the
the latter. establishment of the obligation, the basis of payment.
 1251. No express stipulation and if the undertaking is to deliver the
NOTE! Creditors cannot be compelled to accept partial payment, it determinate thing, the payment shall be made wherever the thing
does not prohibit them from accepting such partial payments. might be at the moment the obligation was constituted.
 1252. Gives the right to the debtor to choose to which of the several
Ex: Debtor is bound to perform an obligation of delivering 1k and obligations to apply a particular payment that he tenders to the
from whatever money he will get from the estate of his deceased creditor. However, it is granted the right of the creditor to apply such
father. The creditor may demand payment and the debtor may pay payment in case the debtor fails to direct its application.
the 1k without waiting for the determination of the proceeds from the
estate.
  1176(presumption of interest – the receipt of the principal by the Consignation alone shall produce the same effect in the following
creditor without reservation w/respect to interest. Creditor shall give cases: AIR25 (Debtor can immediately go to court w/o tendering of
rise to the presumption that the interest has been paid) vs 1253 (If payment)
debt produces interest, payment of the principal shall not be deemed
to have been made until the interests have been covered.) 1. When the creditor is absent or unknown, does not appear at the
place of payment
Nunelon Marquez v Elisan Credit Corporation Case – Under 1176, a 2. When he is incapacitated to receive the payment at the time it is
doubt arises on the part of the creditor w/n the interest is waived b/c due
the creditor accepts the payment for the principal 3. W/O just cause, he refuses to give a receipt
4. 2 or more persons claim the same right to collect
5. When the title of the obligation has been lost

CESSION What is the purpose of notice in consignation? In order to give the

creditor the opportunity to reconsider his unjustified refusal and to
 When the law states that the debtor may cede his property, it refers accept payment thereby avoiding consignation and the subsequent
not only to the cession of a number of properties of the debtor to all litigation.
of the properties of the debtor which are susceptible of and not
exempted by law from being alienated. IMPT! Consignation has a retroactive effect. The payment is
deemed to have been made at the time of the deposit of the money
TAKE NOTE! Cession does not mean absolute extinguishment in court or when it was placed at the disposal of judicial authorities.
compared to dacion en pago. The obligation of the debtor shall only
be extinguished up to the extent that the proceeds are able to satisfy An acceptance w/ a reservation is valid. If there is no reservation, it
the claim of the debtors. means the creditor waives his other claims under the contract.

CONSIGNATION LOSS OF THE THING DUE

 Consignation – the act of depositing the the thing due with the court  Under Art 1267, when the service has become so difficult as to be
or judicial authorities whenever the creditor cannot accept or refuses manifestly beyond the contemplation of the parties, the obligor may
to accept payment and it generally requires a prior tender of be released therefrom, in whole or in part.
payment.
Requisites:
Requisites of consignation: 1. Event or change in the circumstance could not have been
1. There is a debt due foreseen at the time of the execution of the contract
2. Consignation of the obligation has been made because to whom 2. It makes the performance of the contract extremely difficult bit
tender of payment was made refused to accept it, or b/c he was not impossible
absent or incapacitated, or b/c several persons claimed to be 3. It must not be due to the act of any of the parties
entitled to receive the amount due 4. The contract is for a future prestation
3. Previous notice of the consignation had been given to the
person interested in the performance of the obligation QUALIFER – The difficulty of performance under 1267 should ebe
4. Amount due was placed at the disposal of the court such that one party would be placed at a disadvantage by the
5. After the consignation had been made the person interested unforeseen event. Mere inconvenience, or unexpected impediments,
was notified thereof. or increased expenses will not relieve the obligor from an
undertaking that it has knowingly and freely contracted.
  Rebus sic stantibus – Under this theory, the parties stipulate in the indebtedness from himself as there is confusion which extinguished
light of certain prevailing conditions, and once these conditions the obligation.
cease to exist, the contract also ceases to exist. It is only in  An indebtedness by a D and a 3rd person is extinguished if there is a
absolutely exceptional changes of circumstances that equity merger of the characters of the debtor and creditor.
demands assistance for the debtor.
NOTE! Merger of the guarantor and the creditor does not extinguish
NOTE! Jurisprudence dictates that Art 1267 is not an absolute the obligation. It only extinguishes the accessory obligation. Same
application of rebus sic stantibus b/c it would endanger the security goes with D and guarantor.
of contractual relations. Parties to a contract are presumed to have  1277. Confusion does not extinguish a joint obligation except as
assumed the risks of unfavorable circumstances. regards the share corresponding to the creditor or debtor in whom
the two characters concur.
MIDTERMS ANWER: Naga Telephone Co. vs. CA – The continued
enforcement of the contract had manifestly gone beyond the COMPENSATION
contemplation of the parties so much that the respondent should  Mode of extinguishing an obligation whereby parties are mutually
be released from the contract to avoid petitioner’s unjust enrichment creditors and debtors of each other such that if they exactly owe each
at respondent’s expense. other the same amount and the requisites under 1279 are present,
they do not have to make actual payment to each other, in a sense
The term “service” used in 1267 must be referred to the performance that they do not have to hand money, as extinguishment of the
of the obligation. obligation by operation of law.
 Art. 1247 Requisites of compensation: (5)
CONDONATION 1. Each one of the obligors be bound principally, and he be at the
 There is a previous demandable obligation but the obligee decides same a principal creditor of the other
not to enforce the debtor’s performance anymore. It requires the - Taxes are not debts for purposes of legal compensation to make
implied or express consent of the obligor. In effect, condonation or the parties mutual debtors and creditors of each other.
remission of a debut is a donation of the obligee’s credit in favor of
the debtor. No set off is admissible against demands for taxes levied for
 A promissory note in the hands of the creditor is proof of general or local govt purposes. The taxes are not in the nature
indebtedness rather than proof of payment. If a creditor delivers a of contracts between the parties but a grow out of a duty to and
PM to the debtor, the law provides that such act will be considered a are positive acts of the govt.
renunciation and implies that the creditor is no longer interested in 2. That both debts consist in a sum of money, or if the things due
the debt. are consumable, they be of the same kind, and also of the same
 Pledge – involves a movable property constituted by the owner of quality
such property who has free disposal of it, to secure the fulfillment of - No compensation if one debt involves a sum of money and the
a principal obligation and such contract is perfected only upon other the delivery of a particular thing.
delivery of the thing pledged to the creditor.
- If the pledge is in possession of the debtor, there is a Consumable – susceptible of substitution. Ex: treasury bills.
presumption that the accessory obligation has been remitted. Insular Investment Case Trust Corporation Case – both are govt
securities, while having different interest rates and dated of
CONFUSION/MERGER maturity, each have been assigned a certain face value to
determine their monetary equivalent.
 The obligation is extinguished from the time the characters of c and 3. Two debts are due
d are merged in the same person. Ex: son owes his father 10k, and - NOTE! Debts do not need to be contracted at the same time.
the father dies leaving the son a part of his estate which is valued at However, the parties can STIPULATE/AGREE that
10k. There is a merger for the c and d. The son cannot collect
 compensation can be made even as to debts which are not yet
due.
4. That they be liquidated and demandable
- Compensation cannot take place where one of the debts is not
liquidated / where there is a balance of interest.
5. That over neither of them by any retention or controversy,
commenced by 3rd persons and communicated in due time to  Instances when the court can legally intrude in the agreement of the
the debtor. parties:
 IMPT! The guarantor may set up compensation as regards what the
creditor may owe the principal creditor. If the creditor does against 1. Courts can change the penalty clause or interests stipulated in
the guarantor, the g can resist payment by invoking compensation the contracts when such is unconscionable or iniquitous as to
between the creditor and the principal debtor. constitute an undue deprivation of the debtor of his property
 Compensation may be total or partial. Total compensation arises 2. In RO, the courts can fix a period when there is a just cause to
when the mutual debts of the parties to each other are equal. Partial do so.
compensation arises when the debts are not equal and the debts are 3. When a debtor binds himself to give something yet it infringes
extinguished to the concurrent amount. on the legitimes of his heirs
 1282. Parties may agree upon compensation which is not yet due. 4. When there are stipulations in the contract that the are
GR: Compensation can only be made when the debts are due and ambiguous in its face, the courts may change the stipulations
demandable. and make them more precise taking into consideration the
E: Contractual obligation – parties may agree upon the circumstances and intent of the parties.
compensation of debts which are not yet due. (which is 1282) 5. Courts shall determine w/ under the circumstances, the partial
 Voidable debt under 1284 – valid until annulled. If all the requisites loss of the object of the obligation is so impt as to extinguish the
for a valid compensation are present before a contract is rescinded whole obligation. (Under 1264, it only applies to partial loss. If
or annulled, compensation can occur by operation of law. the loss is partial and circumstances so warrant, the court may
 Art. 1285. One of the creditors assigns his credit to a third person: consider it as a complete loss which extinguishes the obligation.
However, this can only happen if partial loss is so impt it
extinguishes the whole obligation)