Extinguishment of Obligations (Art. 1231) Modes
Extinguishment of Obligations (Art. 1231) Modes
Extinguishment of Obligations (Art. 1231) Modes
1231) MODES:
1. By payment of performance;
2. By the loss of the thing due;
3. By condonation or remission of the debt;
4. By the confusion or merger of the rights of creditor and debtor;
5. By compensation;
6. By novation
(Annulment, rescission fulfilment of a resolutory condition, and prescription,
are governed elsewhere in this code.)
Requisites:
Recovery in such cases is allowed provided the ff. requisites are fulfilled:
Recovery in such cases is allowed provided the ff. requisites are fulfilled:
1. The debtor;
2. Any person who has interest on the obligation; or
3. A third person who has no interest in the obligation when there is
stipulation that he can make payment.
i. Creditor may refuse payment by a third person
B. If made WITH the knowledge of the debtor, shall have the rights
of reimbursement and subrogation, to recover what he has paid
and to acquire all the rights of the creditor.
1237, RIGHT OF A THIRD PERSON TO SUBROGATION
Burden of proof of benefit upon the debtor who paid, failure to prove
makes the obligation demandable.
Payment made to the creditor by the debtor after the latter has been
judicially ordered to retain the debt shall not be valid.
But shall be valid if payment was made after the order, but before it was
known to creditor.
(1) Creditor cannot DEMAND a thing of SUPERIOR quality (2) Debtor cannot
DELIVER a thing of INFERIOR quality
Benefit may be waived by (1) the creditor, (2) accepting inferior quality or by
(3) delivering superior quality.
If the parties have made a stipulation re the same, then their stipulation
shall be followed.
Except when (1) expressly stipulated; (2) when the debt is in part liquidated
and in part unliquidated; or (3) when different prestations in which the
obligation consists are subject to different terms or conditions which affect
some of them
All coins and notes issued by the Bangko Sentral ng Pilipinas constitute legal
tender for all debts.
(1) they have been cashed; or (b) unless they have been impaired
through the fault of the
creditor
1250, INFLATION AND DEFLATION
REQUISITES:
1. The debtor has the first choice; he must indicate at the time of
making payment, and not afterwards, which particular debt is being
paid.
a. If, in making use of his right, the debtor applied the payment
to a debt, he cannot later claim that it should be applied to
another debt.
b. The right to make the application once exercised is
irrevocable unless the creditor consents to the change.
2. If the debtor does not apply payment, the creditor may make the
designation by specifying in the receipt which debt is being paid.
3. The creditor has not also made the application, or if the application
is not valid, the debt, which is most onerous to the debtor among
those due, shall be deemed to have been satisfied.
4. If the debts due are the of the same nature and burden, the payment
shall be applied to all of them proportionately.
The debtor cannot choose to credit his payment to the principal before the
interest is paid. The payment must be applied first to the interest, whatever
balance is left can be credited to the principal.
In case no application of payment has been made by the debtor, then the
payment shall be applied:
Requisite: (1) there must be two or more creditors (2) the debtor must be
(partially) insolvent (3) the cession must be accepted by the
creditors.
Unless there is a stipulation to the contrary, the assignment does NOT make
the creditors the owners of the property of the debtor; and
The debtor is released from his obligation ONLY up to the net proceeds of the
sale of the property assigned. The debtor is still liable if there is a balance.
DATION CESSION
One creditor Several creditors
Does not presuppose insolvency Debtor is insolvent at time of
assignment
Does not involve all the property of Extends to all property of debtor
debtor subject to execution
Creditor becomes the owner Only acquires the right to sell the
thing and apply the proceeds to
their credit
An act of novation Not an act of novation
1256 TENDER OF PAYMENT AND CONSIGNATION
Tender of payment is the act, on the part of the debtor of offering the creditor the
thing or amount due, in his possession to be delivered at the time of the offer
Consignation is the act of depositing the thing or amount due with the proper
court when the creditor does not desire or cannot receive it, after complying with
the formalities required by law. It is always judicial and required a prior tender of
payment.
After the consignation is made, the interested party must also be notified
thereof. In a case this is fulfilled by service of summons with a copy of
complaint.
The purpose of second notice is to enable the creditor to withdraw the thing
or sum deposited in case he accepts the consignation.
May be withdrawn by the debtor: (1) Before the creditor has accepted the
consignation; or (2) Before a judicial declaration that the consignation has
been properly made, as he is still the owner of the same.
All expenses are paid by the debtor. If withdrawal with consent of creditor,
article 1261 applies.
1261 EFFECT OF WITHDRAWAL WITH CONSENT OF CREDITOR
a. the creditor shall lose every preference which he may have over the
thing; and
b. the co-debtors (referring to solidary debtors), guarantors, and
sureties shall be released.
The solidary debtors are released only from their solidary liability, but not
from their shares of the obligation, since unlike guarantors and sureties, they
are also principal debtors.
LOSS OF THE THING DUE
Loss of the thing due extends to both obligations to give and to do.
Debtor is still liable even for loss due to fortuitous event, based on the
principle genus nunquam perit, a generic thing never perishes.
Fortuitous event does not exempt debtor from liability, the obligation
subsists except:
Creditor is given the right to go against the third person responsible for the
loss. There is no need for an assignment from the debtor.
The RIGHTS of action of debtor are transferred to creditor from the moment
the obligation is extinguished, by operation of law to protect the interest of
creditor by reason of the loss.
CONDONATION OR REMISSION OF DEBT
Requisites:
1. must be gratuitous
2. must be accepted by the obligor
3. the parties must have capacity
4. it must not be inofficious
(no one can five more than that which he can give by will)
5. if made expressly, it must comply with the forms of donation.
(extent, form, and date of effectivity)
1271, PRESUMPTION OF WAIVER OF INDEBTEDNESS
If the document is found in the hands of the debtor, and it is now known
how he came into possession of the same, it is PRESUMED that the
document is voluntarily delivered
1273
If the thing pledged is later found in the hands of the debtor/third person,
only the ACCESSORY obligation of pledge is presumed remitted,
NOT THE OBLIGATION ITSELF, he shall continue to be indebted,
but he does not have to return the thing pledged.
CONFUSION OR MERGER OF RIGHTS1275, MEANING
Confusion or merger is the meeting in one person of the qualities of creditor and
debtor with respect to the same obligation.
Requisites: (1) It must take place between the principal debt and creditor (2) It
must be complete
The debts being distinct and separate from one another, the confusion will
extinguish only the share corresponding to the creditor or debtor in whom the
two characters concur.
COMPENSATION
CONFUSION COMPENSATION
One party who is a creditor and There are two persons involved, each
debtor of himself a creditor and debtor of the other
There is one obligation There are two obligations
Impossibility of payment Indirect payment
Kinds:
1. The parties are principal creditor and principal debtors of each other.
2. Both debts consist in a sum of money, or of consumable things of the
same kind and quality.
3. The two debts are due or demandable.
4. Two debts are liquidated.
5. No retention or controversy commenced by a third person.
-There is said to be a retention when the credit of one of the parties is
subject to the satisfaction of the claims of a third person.
The guarantor may set up compensation as regards what the creditor may
owe the principal debtor, but all the requisites in 1279 must be present.
1281, TOTAL AND PARTIAL COMPENSATION
PARTIAL: when debts are different in amounts, applied first to the smaller
debt, and partial to larger debt.
The parties may agree upon the compensation of debts which are not yet
due. No special requisites, it is sufficient that the contract, which declares
the compensation, is valid.
A party may set off his claim for damages against his obligation to the other
party by his right to said damages and the amount thereof.
1284, RESCISSIBLE OR VOIDABLE DEBTS
Are valid until they are judicially rescinded or voided. Prior to judicial
rescission or annulment, the debts may be compensated against each other.
The indemnity (such as transport, exchange rate) shall be paid by the person
who raises the defense of compensation.
3. Where one of the debts arises from a claim for support due by
gratuitous title (dwelling, clothing etc.)
Former obligation loses all its force and effect and only the new obligation
can be enforced if obligations are incompatible
(compatible means they can stand together, each one having an
independent existence.)
1293, KINDS OF PERSONAL NOVATION
Form:
Kinds:
IN DELEGACION, shall not give rise to any liability against the original
debtor, EXCEPT when said insolvency (1) was already existing and of public
knowledge, or (2) known to the debtor, WHEN he delegated his debt.
Accessory obligations may subsist only insofar as they may benefit third
persons who did not give their consent.
1297, EFFECT WHERE THE NEW OBLIGATION IS VOID
If the NEW obligation is void, the original one shall subsist, unless the
parties intended that the former relation should be extinguished in any
event.
If the NEW obligation is voidable, novation may take place, but the moment it
is voided, the original one will be enforced, unless the parties intended that
the former relation should be extinguished in any event.
Kinds:
1. When a creditor pays another creditor who is preferred, even without the
debtor’s knowledge.
2. When a third person, not interested in the obligation, pays with the
express or tacit approval of the debtor.
3. When, even without the knowledge of the debtor, a person interested in
the fulfillment of the obligation pays.
1303, EFFECTS OF LEGAL SUBROGATION
To transfer to the new creditor the credit and all the rights and actions that
could have been exercised by the former creditor.
The creditor to whom partial payment is made shall remain a creditor to the
extent of the balance of the debt.