Case: Raquiza v.

Afilada (9 SCRA 120) • The promissory note was found in the possession of the creditor although there was claim of payment by the debtor. The court said, such claim of payment by the debtor was not sufficient or strong enough to offset the presumption that the obligation has not been settled because ordinarily, when payment is made, the first thing the debtor would ask for is the return of the evidence of indebtedness which was not done in this case, and no valid and sufficient explanation was made why it was not recovered by the debtor if in effect, there was payment. Characteristics of Payment (different from requisites of payment): 1. Integrity of payment – Art. 1233 completely delivered or rendered; (in full) 2. Identity of payment – Art. 1244 The debtor of a thing cannot compel the creditor to receive a different one, although the latter may be of the same value as, or more valuable than that which is due. In obligations to do or not to do, an act or forbearance cannot be substituted by another act or forbearance against the obligee's will. ; no substitution 3. Indivisibility of payment – Art. 1248 not partial Integrity of payment • an obligation shall not be considered paid until after the thing due or the services agreed upon shall have been delivered or rendered in full. Complete performance is necessary to produce the effects of payment as would extinguish an obligation. This however, does not establish an absolute rule, it admits of two exceptions: a) substantial performance or compliance o there is no total compliance, otherwise, if there was, it will not come within the exception of the rule. The law allows full recovery despite the fact there is no full compliance with the obligation. This right to recover as if there is full compliance is subject to the rule that damages may be recovered in case of absence of full compliance. But what he can recover is less the damages suffered by the creditor. For this to apply, these requisites must be satisfied: i. attempt in good faith on the part of the debtor to comply with his obligation ii. the deviation is not substantial (only slight deviation) If the obligation is Reciprocal, from the total, you immediately deduct the damages suffered by the creditor. If the obligation is not Reciprocal, you must pay the damages first before the obligation be extinguished. b) waiver on the part of the creditor o there is total performance unlike the 1st exception. There is full compliance but not in accordance with the obligation. The performance rendered by the debtor is irregular. However, despite the irregularity in the performance of the obligation by the debtor, if the creditor accepts such performance, being aware of the irregularity, and does not protest such irregularity, the debtor may recover as if there has been full, regular compliance with the obligation o the defect must be known to the creditor ** Under the 1st exception, the creditor does not lose the right to recover damages. In fact, whatever the debtor may recover is less damages suffered by the creditor. Under the 2nd exception, no damages is awarded to the creditor. The debtor is allowed full recovery without incurring liability for damages. The reason for the difference lies in the basis. The basis of the right of the debtor to recover under the 1st exception is his attempt in good faith to comply with his obli. But despite this attempt in good faith, he was not able to comply with his obligation because of some resulting deviation, which, however, must be minor deviation and never substantial.

implied acceptance. 1427 on Natural Obligations Q: What does the law mean when it says. All that the law says is that it shall not be valid. even if the intended substitute be lesser in value or quality. • Exceptions: 1. not everyone can compel the creditor to accept payment. when an obli is partly liquidated and partly unliquidated the debtor may fulfill or perform that portion which has been liquidated without waiting for the liquidation of the unliquidated portion 3. neither one of the parties can object to the rendition of partial fulfillment of the obligation 2. If the payment made by . While anyone can make payment. under the general rule.The basis of the 2nd exception is waiver on the part of the creditor in accepting the irregular performance of the obligation without protesting. The creditor is not given the right to substitute an object with another. However. if the parties have agreed on partial performance. the payment made by him. The law does not say that the payment shall be void. neither may the creditor compel the debtor to render partial performance. Identity of payment • Under ART 1244. even if what he offers to give is more valuable than what has been agreed upon. “that it shall not be valid without prejudice to the provision of Art 1427”? A: This refers to an obli to give. • The object to be given or service to be performed is exactly that which has been agreed upon. this rule is not absolute. the debtor cannot accept the creditor to accept another thing in substitution of what has been agreed upon. He cannot compel the debtor to give another in substitution of what has been agreed upon. If the requirement that the payment be in full or impractical Q: To whom may payment be made? A: creditor His successor in interest Those authorized by him to receive Q: Who can compel a debtor to make payment? A: Whoever has an interest in the fulfillment of the obligation may compel a debtor to make payment Q: Is that the same as who can demand payment? Why? Why not? A: No. The law provides that it shall not be valid. what deprives the creditor to claim damages is his implied assent. tacit conformity to the performance of the obligation by the creditor which does not exist under the 1st exception. to the provision of Art. • Exception: dation on payment – where an object or property is alienated in favor of the creditor in satisfaction of a debt in money Indivisibility of payment • The debtor cannot compel the creditor to accept partial performance. If the obligation is to do or not to do – it is not necessary. not to an obli to and not to do. Under the 2nd exception. despite his knowledge of such irregularity. Q: What is the effect of payment when made by an incapacitated person or debtor? A: Capacity by the payor is necessary if the obligation is to give. shall not be valid. the obligation can be fulfilled or performed only by giving that which has been agreed upon. when the parties have agreed as to what is going to be the object of the prestation. so that if the one who pays is incapacitated because he does not have the capacity to dispose of his property. subject however. In the same way.

Q: Suppose it is not the obligor who is incapacitated but it is the obligee or creditor who is incapacitated. If instead of distributing the money to 3 rd persons. if payment is made by a 3rd person and there was acceptance by the creditor. 1427. this provision prevents recovery of what was paid when a person between the ages of 18 to 21 shall have entered into a contract without parental consent and performs his obli by delivering to his creditor what he is supposed to deliver.it does not mean that the payment is void. and the creditor consumes it in good faith.him shall not be considered valid by the law. So that is what is knowing is a dog. he can seek reimbursement from the debtor for what he paid but only to the extent of what had been .g. in the extinguishment of the oblgtn. If you pay to an insane person and immediately. **Whether or not there can be recovery: 1. Under the last phrase. there is no obli to return. or it has redounded to the benefit of the creditor. Q: What right(s) is given by law to the 3rd person? A: If made by him without the knowledge or against the will of the debtor. he sees a pig so he slaughtered the dog and eat it. there has been no retention nor benefit that accrued to the creditor. This is only applicable to obligations to give and not to do or to do since only in obligations to give that there is a transfer of ownership Q: At whose instance is it voidable? A: At the instance of the payor/debtor. So that. Is there payment? Was he benefitted by the payment? This is a mere sensual benefit which does not come within the context of the term “benefit” as contemplated by law. assuming that the 3rd person has no interest in the oblign such payment is valid once accepted by the creditor. what is essential is the acceptance by the creditor.. The consent of the creditor is not essential for validity. there can be recovery if what has been paid has not been consumed 2. payment is not valid and payment may be demanded again. “benefit” -any kind of benefit except sensual benefits. whatever was paid should be returned because the creditor cannot consider the payment as not valid and at the same time retain what has been paid by the doctor. the payment becomes valid. He derives pleasure and satisfaction. E. In other words he is the one who tends to gain benefit. then. Q: What is the effect of payment when it is made by a 3rd person? A: Payment made by a complete stranger in the contract shall be valid only if accepted by the creditor. the law provides for the exception. there will be no recovery if the payment has been consumed in good faith **When the law says that it is not valid . Q: Who has the burden of proof that benefit inured to the creditor? A: The debtor because if he succeeds in proving that it will result in the validity of the payment. is delivered to the creditor who is mentally deranged that whenever he looks at the dog. then the payment becomes valid. he keeps it so that it does not get lost. What it means is the payment is voidable. in which case. in which case. payment shall be valid. Under Art. Or even if he did not keep it but it redounded to his benefit. that insane person distributes what you paid to 3rd persons. and the dog. What will be the effect of payment if payment is made to him? A: The law provides that payment shall also be not valid unless the thing paid shall have been retained by or kept by the creditor. Therefore. and ulitimately.

the 3rd person acquires the right to recover from the creditor. there is only 2 effects: 1. hence. may the 3rd person recover what he has paid from the creditor? A: It depends. or made against his will and no benefit accrued to the creditor. So he cannot recover from the debtor and the creditor. Kinds of subrogation under the law: 1. right to be subrogated the 3rd person is allowed by law to step into the shoes of the original creditor. But. the 3rd person acquires no right of reimbursement. i. The only effect is that the 3rd person becomes subrogated into the rights of the creditor. the possibility of reimbursement conditioned to the existence of the benefit accruing to the creditor. the accessory obligation of guaranty is extinguished but not the principal obli. Conventional – can never be presumed .e. 2. But since no benefit accrued to the debtor. If the payment is made by a 3rd person with the knowledge of the debtor. if confusion should take place in the person of the guarantor. there is no right of reimbursement given to the 3 rd person. it is the acceptance of the creditor. it is by contract GUARANTY Art 2047 NCC • By guaranty a person. although payment was accepted. or pledge or any contract of guaranty except if the 3rd person who will pay is the guarantor himself. since in condoning.beneficial to the creditor. Legal – as a rule cannot be presumed When can this be presumed? a) When a creditor pays another creditor who is preferred b) When 3rd person not interested in the fulfillment of the oblign pays with the consent of the debtor expressly or impliedly. If the payment is without the knowledge of the debtor. c) When a rd person who has an interest in the fulfillment of the oblign pays even without the consent of the debtor 2.. The 3rd person can now exercise all the rights of the creditor with respect to guaranty. • In every contract of guaranty. If what the 3rd person paid is a natural oblign. the 3rd person shall be entitled to reimbursement. payment is valid. called the guarantor. **If the 3rd person pays without the consent or knowledge of the debtor.by agreement of the parties. on the part of the creditor. If no benefit had accrued to the creditor. much less can there be right of subrogation. the effect of the debtor’s consent to or awareness is not what gives validity. If what was paid was a condoned oblign so that at the time of payment. no oblign exists anymore. Q: If there was no consent on the part of the debtor. This is known as the RIGHT OF CONDITIONAL REIMBURSEMENT. there is no benefit to the debtor so that there is no right of reimbursement. the payment in the principle of solution indebiti. in which case he cannot guarantee the oblign of the original debtor as against himself because under the law on confusion. mortgage. there is only one effect. right to seek recovery (RIGHT OF ABSOLUTE REIMBURSEMENT) – whether or not payment redounded to the debtor’s benefit. the undertaking is to pay when the principal debtor cannot pay (which means after being exhausted) not when he does not pay • Guarantor is always entitled to the benefit of exhaustion except in those cases where right is not given by law . binds himself to the creditor to fulfill the oblign of the principal debtor in case the latter should fail to do so.

if by the acts of the creditor. the guarantor acquires right of subrogation.Q: If the guarantor is made to pay. the person acquires the right to of the creditor 2. In order to come under the XCP. there is payment by a person other than the original debtor. the right of the 3rd person now is to seek reimbursement but only to such extent that the . Therefore. As the contract is extinguished. a) If payment is made to one who acquired the rights of the creditor. what rights will he acquire as against the principal debtor? If principal debtors is not made a party? Is there any difference if the guaranty was consented to by the principal debtor? A: The rights are absolute reimbursement and subrogation. Q: Why does the law conclusively presume that the payment has redounded to the benefit of the creditor? A: GR: Payment must be made to the creditor or anyone who has the right to demand payment. that payment is considered by law as a donation which requires acceptance by the debtor. If a guarantor who is made to pay even if principal debtor is not made a party. payment is valid and there is no need to prove that benefit redounded to the creditor. the contract of guaranty is likewise extinguished. If payment was made with the consent of the debtor. can we not say that payment was made to the creditor? YES..” – equivalent to payment to the creditor Jan 5. In this instance. If the payment was made without the debtor’s knowledge against the will of the debtor. Q: What is the effect of payment made to a 3rd person? A: GR: payment not valid XCP: if such payment redounded to the benefit of the creditor. the 3rd person acquires the right of reimbursement plus the right of subrogation. the creditor ratified the payment 3. REASON: Guarantor has an interest in the fulfillment of the obligatiom Q: Why does he have an interest? A: Because the extinguishment of the obligation will definitely benefit the guarantor. the right of the 3rd person will depend on whether the principal debtor gave consent or with knowledge when payment was made. ** Here. the debtor had been led to believe that he had given the 3 rd person authority to receive payment In these 3 cases. such benefit is presumed by law. the one who effects payment is the debtor himself. 1987 When the 3rd person pays the oblign of the debtor without intention of seeking reimbursement. If that payment is made by a 3rd person with the intention of seeking reimbursement from the debtor. the burden of proof that payment redounded to the benefit of the creditor lies with the debtor himself. HE is the new creditor (by acquisition) b) Ratifies – equivalent to payment made to himself (ratification is an acknowledgment) c) “led to believe. Q: Is proof of such benefit necessary? A: GR: yes XCP: Such benefit is presumed by law (ART 1241): 1. even if the debtor does not give his consent to the contract of guaranty. guarantor is entitled to the right of reimbursement and subrogation. when after payment has been made.

his only right would be the same right which the law gives to a 3rd person who makes payment without the consent of the debtor. but the 3rd person has no intention of seeking reimbursement. The oblign is still extinguished because it was accepted by the creditor. it will become a case of solution indebiti (payment of something which is no longer due). If the debtor does not give his consent to the donation but does not oppose the payment. There is nothing to return. it is necessary that payment made by the 3rd person is accepted by the creditor to produce 2 effects: 1. so that before a donation may arise.. extinguishment of the principal oblign and 2. 1238. the 3 rd person becomes the donor and the debtor becomes the done.e. So if he compels the creditor to accept the 2nd payment. Q: Suppose the debtor does not give his consent to the payment made by a 3 rd person. the payment is valid. there is no oblign owing from the debtor to the 3rd person. **Under Art. he can only seek reimbursement if benefit inured to the principal debtor.debtor was benefitted by such payment. If the creditor does not accept the payment made by the 3 rd person. there is nothing more to pay. the 3rd person who effects the payment does not intend to be reimbursed. 1242. since the 3rd person does not intend to seek reimbursement. If there is no such oblign. i. there will be no donation. In so far as the 3rd person is concerned. Art. 2 conditions must be satisified: 1. The thing donated is the amount paid by the 3 rd person to the creditor. therefore. even if there is consent on the part of the debtor. If that payment by the 3 rd person is accepted by the creditor. there will be no donation but the oblign will be extinguished if the creditor accepts the payment. when the 3 rd person made the payment. In so far as the 3rd person is concerned. there will be no donation. So that if no benefit inured to the debtor no right of reimbursement accrues to the 3rd person. He cannot compel the creditor to return what he has received because the moment the creditor pay accepts payment made by the 3rd person. That the payment was made to a person who is in possession of the credit. If the debtor gives his consent or acceptance to the payment. it will be considered a donation made by him to the debtor which will require the latter’s consent or acceptance. and . there is nothing to consign. he had no plans of seeking reimbursement. **If the debtor opposes or does not give his consent to the donation and the fact of payment. But since in this case. Q: But is it not the right of the debtor not to be beholden to any party against his will? Can he make a consignation as to what was paid by a 3rd person in court? A: Consignation will not lie because consignation presupposes the existence of a valid oblign. However. neither does he accept the donation. He cannot compel the creditor to accept his own payment because by the extinguishment of the oblign by the payment of the 3rd person. If the 3rd person refuses to accept reimbursement he cannot be compelled. gives rise to a donation. what are the rights of the parties? Can the debtor compel the 3rd person to accept reimbursement? A: He cannot.  Payment made in good faith to any person in possession of the credit shall also extinguish the oblign Before the oblign may be extinguished. the oblign is extinguished. once accepted by or consented to by the debtor. He pays but does not plan to seek reimbursement from the debtor. it will extinguish the oblign. he acquires the right of subrogation plus the right of reimbursement. Q: What then is the remedy of the debtor? A: None.

while you extinguish. i. However. Notice that the law referred to possession of the credit. and in order that the effects of payment may be produced. Whoever possesses that note is merely in possession of the proof of the credit but not the credit itself. One of the characteristics of payment is identity of payment . The exception is DATION IN PAYMENT which takes place when the debtor alienates property in payment of a debt in money. Q: When is a person said to be in possession of the credit? A: When the right to enforce the oblign is given to him by virtue of the instrument. to extinguish but not to create a new obligation “in payment of a debt in money” . which means that the oblign must be complied with by performing the very prestation due. **It is practically the same as novation because there is a change of object. The consent of the debtor is always implied since he is the one who makes the alienation. 1245 --dation in payment . by delivering the very thing due as agreed upon in the contract. then he is said to be in possession of the credit. Q: Does dation in payment always extinguish an obligation? A: Unless otherwise stipulated by the parties. Q: In whose favor the property be alienated? A: in favor of the creditor Q: Should the property alienated be commensurate in value? A: No.e. Not necessary that it be of the same amount or value because this depends on the agreement of the parties. The payment was made in good faith **The mere fact that payment was made to a person who is in possession of the credit if there is no good faith on the part of the payor. Reason: creditor is receiving something different from what is due. Art. technically speaking. the dation shall extinguish the obligation in its entirety.2. because possession of the credit will depend upon the tenor of the note. But if he is merely in possession of proof that the credit exists.PURPOSE: Satisfy debt in money. that specifically named person is the only one who can be considered to be the possessor of the credit. you create a new oblign. If the promissory note is drawn for a specific person. any payment made to him will not necessarily mean extinguishment of the oblign. there is substitution of object. Wherein in dation in payment the parties have only one purpose in mind. There is no dation in payment without the consent of the creditor. For this provision to apply. The law does not distinguish. Mere possession of the promissory note will not mean possession of the credit. not possession of the proof of credit. But unless stipulation not manifest. the oblign is not extinguished because the payment is not valid. it is not novation because in novation . extinguish an obligation in money Q: What kind of property be delivered? A: Personal or Real. the dation in payment shall extinguish the total obligation. it is necessary that those 2 conditions must be satisfied.

When deprived in fact. squatters) Not the kind of deprivation under the Law on Sales that will authorize the enforcement of warranty against eviction Deprivation in Law Deprivation by virtue of a final judgment If u buy a piece of land and have not seen it. dation in payment is governed by the law on sales. . someone lays claim on the property you bought and told you he has a better right. Implied Warranties (Implied because the law provided for it): 1. Under the law. yur remedy is to notify the seller of the claim made by the 3rd person over the thing you bought. In case the buyer evicted on a part or whole of the property. Your remedy is to assert the right of ownership. The price is what is due. you should refuse to surrender the property. This is deprivation in law or eviction. still. A return of the property at the time of eviction. 1. Q: Dation in payment shall be governed by the law on sales. – Deprivation in fact. when someone does that. and the creditor. So that the debtor who alienates the property is considered as the vendor. Why? A: Because the assumption of the law is that there has been a sale between the parties. They call this judgment of eviction. If he becomes successful. he must determine what kind of deprivation took place. Purpose: for the seller to defend your right to own the property. there can be dation in payment. Warranty against hidden defects Warranty against eviction If you do not want to surrender the property. Even if the oblign does not involve payment of money. the court shall decide for him. there is dation in payment which will come under Barter which is also governed by Law on Sales. The creditor-vendee and the debtor-seller. in whose favor the property is alienated is considered the vendee. Remedy of the creditor is under the law on sales. The claimant should file a case. -If the buyer asked the court to deliver the fruits – he is also given the right to recover it. Does not necessarily follow that dation in payment can exist or take place in monetary oblign. Under the law on sales. deprivation in law Deprivation in fact No judgment at all.g. the remedy is to assert ownership 6months after. it simply involves take over of the possession and enjoyment of property (e. The price or consideration is the amount owed. Warranty against eviction 2. the law gives the buyer certain rights: 1. 6 months after sale you decided to visit it and found that squatters were already occupying your land. You are deprived of the land. Then he becomes duty bound now to present evidence that he has a better right than you. If the obligation does not involve payment of money. deprivation in fact or 2. In determining the remedy of the creditor in case of deprivation.

as having emanated from the sources enumerated above 2. warranty shall not apply. but the law also prohibits payment in Philippine legal tender. the creditor becomes entitled to recover the same amount but under the different concept. the right to recover the price paid plus interest thereon. then it must be paid in Philippine legal tender. 1249 -. lesbianism 4. will not revive the original oblign which remains extinguished. even if the debtor insists on a dation in payment. and international financial and banking institutions so long as the funds are identifiable. STD. The consent of the creditor is essential because it involves a substitution or change in the object of the obligation. their agencies and instrumentalities. He is recovering it not as a consequence of revival of the original obligation but he is recovering it as if it is the price he paid for the property alienated to him. by foreign governments.enumeration exclusive Dation is not the same as novation. and if that is not possible. which means.-Remedy is not to revive the obligation but to resort to the law on Sales and invoke against the warranty against eviction. Habitual Drunkenness . Since the amount owing is considered as the price. not applicable to marriage because it is a contract entered at the risk of the parties. transaction where the funds involved are the proceeds of loans or investments made directly or indirectly. Warranty against hidden defect/faults: The defect must be concealed or not apparent in the eyes. RA 529 appears to be all embracing. this was amended by a subsequent RA. which is RA 4100 and created exceptions to RA 529. Fraud under the Family Code: . an obligation involving payment of money must be paid in the currency agreed upon. Consent of the creditor is essential. In fact. If not apparent . homosexuality. The remedy of the creditor who is evicted from the property alienated by the debtor in satisfaction of the original debt. is to enforce the right of the vendee as provided for under the law on Sales. you bought at your own risk Apply only to sale of things. Remedy is to enforce the warranty. Art. because the obligation was extinguished by dation in payment. should it take place after dation in payment is made. if the computation thereof is based on a foreign currency. Under RA 4100 the exceptions are: 1. if the creditor refuses to accept there can be no dation in payment. This paragraph had been modified by RA 529 which prohibits agreements involving payment of an obligation payable in money in a currency or in gold other than Philippine legal tender. Moral turpitude 2. Girl pregnant of other man at time of marriage 3. Not only did the law prohibit such stipulation. ** There can be no dation in payment unless the creditor consents to it. import and export transaction . Under the codal provision.the first part has been modified by RA 529. through bona fide intermediaries or agents.annulment of marriage 1. Why? because if you bought it. Q: What is the effect of eviction? A: Eviction. however.

then that is still a violation. in dollars or "its equivalent in Philippine legal tender. While the liability of the NRCC was sustained by the SC.The Ministry of Labor and Employment (MOLE) directed the shipping company to pay the claims of employees concerned or seamen concerned. it was already repealed in toto. Case : Philippine International shipping Corp. The sole question to be resolved was "How shall the conversion to Philippine legal tender be determined?" RA 529 is silent. -payment of debts in checks. Under RA 8183. delivery of checks. " the resulting unfairness is the punishment for violating RA 529. Payment in mercantile documents : -. RA 529 and RA 4100 were repealed by RA 8183 (1996) RA 8183 – Roco Principal oppositor? GMA Uniform Currency Act is no longer in effect.the court ordered NRCC to pay Arrieta damages in dollars because the contract was in dollars. . if the obligation is contracted before the effectivity date of RA 529. He further adds: "Would this be not unfair. The law is clear. if the case but payable after the said act became effective. if he cannot pay on the basis of equivalent value. industrial and power development as may be determined by the National Economic Council which are financed by or through foreign funds 4. parties to a contract are now free to agree to any currency for the payment of an obligation Case: Arrieta v. even if the obli is paid or to be paid in Phil." The shipping company elevated the case to the SC on the ground that the decision is in violation of RA 529 because to direct them to pay the obligation using as basis the equivalent of dollars in pesos is indeed violative of RA 529 because RA 529 says. 1249." He concludes : " it may be unfair but that precisely is the punishment in violation of RA 529. will not produce the effects of payment until after the same have been encashed.. In this case. if you pay an obligation in promissory notes or bills of exchange. if it is going to be measured by its equivalent in foreign currency. NLRC -. Luz. yet the SC modified it by directing NRCC to pay not in dollars but in Philippine legal tender. ransactions affecting high-priority economic projects for agricultural. regardless of the kind of check. Case: Kalalo v. National Rice And Corn Corp. He says that the ruling of the SC in Kalalo and Philippine international shipping corporation cases are both wrong because they are patently on violation of RA 529.under the 2nd paragraph of Art. Legal tender. v. forward exchange transaction entered into between banks or between banks and individuals or juridical persons Q: Is the Uniform Currency Act still in effect (RA 4100)? A: No. -. under RA 529. 34 SCRA 337 -. the payment should be made on a one-to-one basis. --The SC held that it is not a violation because precisely. the obligation was contracted after RA 529 became effective. $1 to P1.3. what is being directed to be paid is not the foreign currency but only its equivalent. So that RA 529 may not be violated. delivery of these mercantile instruments shall not produce effects of payment until after they shall have been encashed. It mentions only computation or conversion of a foreign currency to Philippine legal tender on the basis of the prevailing exchange rate at the time of the establishment of the obligation if the obligation was contracted before the effectivity date of RA 529.Justice Caguioa disagrees. the obligation must be paid in Philippine legal tender on the basis of the prevailing exchange rate at the time of the establishment of the obligation.the question raised was. 10 SCRA 79 -.

Case: Co. PNB. legal or conventional. But a distinction was made: if the delivery of the manager's check was for the purpose of exercising a right of redemption. delivery of the manager's check produces the effects of payment.the check delivered is not a certified check but a manager's check and the court considered it as valid and immediately produced the effects of payment even before encashment. Certified check 4. . 1252 • Application of payment • This is another form of payment • This designation of the debt to which you want your payment to apply • When you make the designation. whether public or private. This case was elevated to the SC but there is no decision yet. it is only a representative of money. through Justice Paras. Sener S. -. but only when it is payable in a foreign currency. Art. you are making an application of payment. The law gives this right to the debtor and this takes place when a debtor has several debts which are all due but the payment he makes is not sufficient to cover all of them.the law speaks of extra-ordinary inflation or deflation. so it has no application whatsoever. Monotoc Realty Corp. 1250 does not apply when the obligation is payable in Philppine legal tender. Manager's check 2. • Who can make an application of payment? o Principally. it is the debtor. And since this is only possible in certified checks not in other kinds of checks.that currency which when offered by a debtor. Justice Caguioa and Justice Jurado agree with Justice Paras because the article refers to "currency" which means that the law was not referring to Philippine peso but a foreign currency. it is not money . The value of the currency at the time of the establishment of the obligation shall be the basis of determining the payment except when the parties have agreed otherwise. 1250 -. in a certified check. and credits the payee with said amount so that it is as good as if the check has already been encashed. the bank immediately debits the buyer with the value appearing in the check. The court made an exception in this case. Cashier's check 3. Traveller's check ** a check is not legal tender. It should be at the time of the establishment of the obligation and not at the time of payment. but only with respect certified checks because according to the court. if the obligation is payable in Philippine legal tender.Case: New Pacific Timber and Supply Co. So he is given the right to choose to which one of those due obligation he wants payment to apply. Different kinds of checks: 1. Case: Spouses Suapangco v. if the check involved is a certified check and the purpose of the payment is to extinguish an obligation the delivery of the check produces immediately the effects of payment. not the SC. when a person buys a certified check from bank. 114 SCRA 842 -. V. this doctrine applies only if the check involved is a certified check. declared for the 1st time that Art. If the purpose is to extinguish an obligation delivery of a certified check immediately produce the effects of payment.the Court of Appeals. V. Legal-tender . the creditor cannot refuse to accept payment of a debt. Art. 101 SCRA 686 --the court ruled.

then the payment shall be applied in accordance with law. that the payment shall be made to apply to the more burdensome oblig'n. and not to the P50. the one secured is more burdensome than the other.00 debt.00. we apply: 1. Q: When should an application for payment be made? A: At the time of payment. In effecting legal application of payment.00 debt. there can be payment by cession if one creditor objects. am compelling you to accept partial payment on the P100. One for P50. (b) as between an oblig'n which is secured and one which is not.The law does not give any exact definition but only examples in decided cases. (a) as between an oblig'n which is interest earning and one is not. and the receipt bears which debt the payment was applied. Right of application – principally given to the debtor. and this usually appears in the receipt. same burden – payment in proportion. (See Caguiao's book for more of these cases) 2. it may be transferred to the creditor If the debtor does not make an application of payment.This. the more burdensome rule. then I. in effect. then the right to make an application of payment is transferred to the creditor who is authorized to make an application of payment.. 2) you cannot apply a payment to a debt which is not yet due. I cannot say. The consent of all the creditors in payment or application payment is necessary and in moment by cession. 1255 --payment by cession whereby the debtor abandon his property in favor of the creditor so that the latter may dispose of the property in order to apply the same for the debts. If both parties. This rule is not applicable if the debtor or creditor makes the application of payment. When a creditor makes an application of payment. Proportional application of payment Art. he simply indicates to the debtor how he applied the payment. fail to make application of payment. . There are no limitations imposed by law in making application of payment.00 and the other P100. the interest earning oblig'n is more burdensome. "I want you to apply this on the P100.00.00 debt which is a violation of one of the characteristics of payment. In application of payment. If the debtor pays but has not chosen to which debt the payment should apply. but is applicable only in legal application of payment. This is not the same with dation in payment or application of payment. the application of payment by the creditor happens when he issues a receipt.e.How do you determine which of the oblig'ns more burdensome or more onerous? A ." I cannot do this because if I can compel you to accept this kind of payment.: i have 2 debts. however. Both debts are due. 3) you cannot make an application of payment if the contract itself already provides how payment is to be applied. i. Q .g. debtor and creditor. is not an absolute right. he simply tells the creditor to which debt he wants the payment to be applied. known as Legal Application of Payment. I pay only P50. When a debtor makes an application of payment. HOWEVER. E. These limitations are: 1) a debtor cannot make an application of payment in a manner to compel the creditor to accept partial payment.

it is found that the consignation was not proper then the obli will remain. What extinguishes the obli when the creditor claims what have been consigned or even if he does not claim. in 5 instances enumerated by law. In dation in payment. when the court makes a declaration that a so consignation was properly made. The mere act of depositing or placing the object of the obli under judicial control does not extinguish the obli because if the later on. Tender of payment always comes before consignation. although creditor may object to an inappropriate application of payment. There can be consignation without actual delivery of the thing due with the court as long as it is placed under judicial control or authority. there must be a valid obli which must be due. you can attain the same objective. **Consignation is the act of depositing the thing due or replacing it under judicial authority when the creditor refuses to accept the same without just cause. . the remedy of the debtor is to resort to voluntary insolvency. In other words. it precedes consignation. the making of an offer to pay is dispensed with by law and instead permits the immediate consignation of the thing due. there must be a valid tender of payment. 2. In payment by cession. a debtor cannot make a consignation without a prior tender of payment. Consignation per se does not also extinguish an obli. though sometimes it may be made judicially. This is allowed only in exceptional cases as provided by law. and the right to dispose the same. All that is essential is that there must be a valid obli and the same must be due because without a valid obli. **One basic difference or distinction between tender of payment and consignation is the time when it is made and how it is made. the properties which are exempt from execution are excluded but the exclusion is not automatic.consent of the creditor is not necessary. although sometimes consignation may be made even without prior tender of payment. If one creditor objects to the payment by cession. an offer to pay the obligation which is usually accompanied by simultaneous performance of the obli. and without a valid tender of payment . It must be claimed by the debtor. and the debtor may even incur delay. Tender of payment is extra-judicial. the property of the debtor does not pass title to the creditor but only the administration of the property abandoned. this is merely by way expectation rather than the general rule. But. It is not necessary that demand should first be made before one could make a tender of payment.How is consignation made? A– 1. In payment by cession. As a rule. these exempt properties are included. there is nothing to consign . The fact that the right to have them exempted was not exercised will amount to waiver of such right. Reason: consignation is allowed only after the creditor has refused to accept the thing due or performance of the obli without just cause. the property passes to the creditor to extinguish the oblign. Consignation is always judicial except in one instance. This is what extinguishes the obligation. 1256 • Tender of payment and consignation • Last form of payment is consignation **Tender of payment does not extinguish an obli because tender of payment is merely an offer to pay. January 7 Art. However. Q . consignation is permitted even without prior tender of payment. Unless it is claimed.

As also mentioned earlier. If the offer to pay is accepted by the creditor. is accepted by the creditor. Likewise. the manner in which the tender is made. consignation becomes proper.By law.refusal on the part of the creditor becomes justified. at the proper place. and the place where the offer is made. Such notice may come in any form but it is notice to the creditor. Once acceptance is refused justifiably. any refusal by the creditor to accept tender of payment become valid. Q . we said. a tender of payment becomes valid when it satisfies the requisites of payment. and in the proper manner. will it now make the tender of payment a mode of extinguishing an obli? Ans: NO. The moment these requisites are not fully met.When is a tender of payment said to be valid? A . what extinguishes the obli is not the offer but the payment. The debtor must give notice to the creditor. the basis for valid consignation disappears. Particularly with respect to the party making it. **The tender of payment must be made to the proper party at the proper time. then consignation becomes proper. which is accompanied by simultaneous performance. As mentioned. **Once a tender of payment. should the creditor without just cause refuse to accept a valid offer to pay. the time when the offer is made. the party whom it is made. Such notice may . the creditor refuses to accept an offer of payment. tender of payment does not extinguish an obli because it is a mere offer. If without valid reasons. the thing which is offered in payment of the obli. it must satisfy the characteristic of payment. It is absolute that tender of payment does not extinguish an obli.

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