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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.

The basis of the 2nd exception is waiver on the part of the creditor in accepting the irregular performance of the obligation without protesting, despite his knowledge of such irregularity. Under the 2nd exception, what deprives the creditor to claim damages is his implied assent, implied acceptance, tacit conformity to the performance of the obligation by the creditor which does not exist under the 1st exception. Identity of payment Under ART 1244, when the parties have agreed as to what is going to be the object of the prestation, the obligation can be fulfilled or performed only by giving that which has been agreed upon. The creditor is not given the right to substitute an object with another. He cannot compel the debtor to give another in substitution of what has been agreed upon, even if the intended substitute be lesser in value or quality. In the same way, the debtor cannot accept the creditor to accept another thing in substitution of what has been agreed upon, even if what he offers to give is more valuable than what has been agreed upon. The object to be given or service to be performed is exactly that which has been agreed upon. However, this rule is not absolute. 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, neither may the creditor compel the debtor to render partial performance. Exceptions: 1. if the parties have agreed on partial performance, neither one of the parties can object to the rendition of partial fulfillment of the obligation 2. 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. 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. While anyone can make payment, not everyone can compel the creditor to accept payment. 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. If the obligation is to do or not to do it is not necessary. The law provides that it shall not be valid, subject however, to the provision of Art. 1427 on Natural Obligations Q: What does the law mean when it says, that it shall not be valid without prejudice to the provision of Art 1427? A: This refers to an obli to give, not to an obli to and not to do. The law does not say that the payment shall be void. All that the law says is that it shall not be valid, so that if the one who pays is incapacitated because he does not have the capacity to dispose of his property, the payment made by him, under the general rule, shall not be valid. If the payment made by

him shall not be considered valid by the law, then, 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. Under the last phrase, the law provides for the exception. Under Art. 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, and the creditor consumes it in good faith., in which case, there is no obli to return. **Whether or not there can be recovery: 1. there can be recovery if what has been paid has not been consumed 2. there will be no recovery if the payment has been consumed in good faith **When the law says that it is not valid - it does not mean that the payment is void. What it means is the payment is voidable. 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. Q: Suppose it is not the obligor who is incapacitated but it is the obligee or creditor who is incapacitated. 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, or it has redounded to the benefit of the creditor, in which case, the payment becomes valid. E.g. If you pay to an insane person and immediately, that insane person distributes what you paid to 3rd persons, there has been no retention nor benefit that accrued to the creditor. Therefore, payment is not valid and payment may be demanded again. If instead of distributing the money to 3 rd persons, he keeps it so that it does not get lost, then the payment becomes valid. Or even if he did not keep it but it redounded to his benefit, payment shall be valid. benefit -any kind of benefit except sensual benefits. So that is what is knowing is a dog, and the dog, is delivered to the creditor who is mentally deranged that whenever he looks at the dog, he sees a pig so he slaughtered the dog and eat it. He derives pleasure and satisfaction. 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. 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, and ulitimately, in the extinguishment of the oblgtn. In other words he is the one who tends to gain benefit. 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 consent of the creditor is not essential for validity, what is essential is the acceptance by the creditor. So that, if payment is made by a 3rd person and there was acceptance by the creditor, assuming that the 3rd person has no interest in the oblign such payment is valid once accepted by 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 can seek reimbursement from the debtor for what he paid but only to the extent of what had been

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

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

debtor was benefitted by such payment. So that if no benefit inured to the debtor no right of reimbursement accrues to the 3rd person. **Under Art. 1238, the 3rd person who effects the payment does not intend to be reimbursed. He pays but does not plan to seek reimbursement from the debtor. If that payment by the 3 rd person is accepted by the creditor, the payment is valid, it will extinguish the oblign. However, since the 3rd person does not intend to seek reimbursement, it will be considered a donation made by him to the debtor which will require the latters consent or acceptance. If the creditor does not accept the payment made by the 3 rd person, even if there is consent on the part of the debtor, there will be no donation, so that before a donation may arise, it is necessary that payment made by the 3rd person is accepted by the creditor to produce 2 effects: 1. extinguishment of the principal oblign and 2. gives rise to a donation, once accepted by or consented to by the debtor. If the debtor gives his consent or acceptance to the payment, the 3 rd person becomes the donor and the debtor becomes the done. The thing donated is the amount paid by the 3 rd person to the creditor. If the debtor does not give his consent to the donation but does not oppose the payment, there will be no donation. The oblign is still extinguished because it was accepted by the creditor. In so far as the 3rd person is concerned, he acquires the right of subrogation plus the right of reimbursement. **If the debtor opposes or does not give his consent to the donation and the fact of payment, there will be no donation but the oblign will be extinguished if the creditor accepts the payment. In so far as the 3rd person is concerned, 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. i.e., he can only seek reimbursement if benefit inured to the principal debtor. Q: Suppose the debtor does not give his consent to the payment made by a 3 rd person, neither does he accept the donation, but the 3rd person has no intention of seeking reimbursement, what are the rights of the parties? Can the debtor compel the 3rd person to accept reimbursement? A: He cannot. If the 3rd person refuses to accept reimbursement he cannot be compelled. 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. But since in this case, when the 3 rd person made the payment, he had no plans of seeking reimbursement, therefore, there is no oblign owing from the debtor to the 3rd person. If there is no such oblign, there is nothing to consign. Q: What then is the remedy of the debtor? A: None. He cannot compel the creditor to return what he has received because the moment the creditor pay accepts payment made by the 3rd person, the oblign is extinguished. There is nothing to return. He cannot compel the creditor to accept his own payment because by the extinguishment of the oblign by the payment of the 3rd person, there is nothing more to pay. So if he compels the creditor to accept the 2nd payment, it will become a case of solution indebiti (payment of something which is no longer due). Art. 1242. Payment made in good faith to any person in possession of the credit shall also extinguish the oblign Before the oblign may be extinguished, 2 conditions must be satisified: 1. That the payment was made to a person who is in possession of the credit; and

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

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

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

3. ransactions affecting high-priority economic projects for agricultural, industrial and power development as may be determined by the National Economic Council which are financed by or through foreign funds 4. 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. 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, it was already repealed in toto. Under RA 8183, parties to a contract are now free to agree to any currency for the payment of an obligation Case: Arrieta v. National Rice And Corn Corp., 10 SCRA 79 -- the court ordered NRCC to pay Arrieta damages in dollars because the contract was in dollars. While the liability of the NRCC was sustained by the SC, yet the SC modified it by directing NRCC to pay not in dollars but in Philippine legal tender. So that RA 529 may not be violated. Case: Kalalo v. Luz, 34 SCRA 337 -- the question raised was, under RA 529, if the obligation is contracted before the effectivity date of RA 529, if the case but payable after the said act became effective, 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. In this case, the obligation was contracted after RA 529 became effective. The sole question to be resolved was "How shall the conversion to Philippine legal tender be determined?" RA 529 is silent. 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. Case : Philippine International shipping Corp. v. NLRC -- The Ministry of Labor and Employment (MOLE) directed the shipping company to pay the claims of employees concerned or seamen concerned, in dollars or "its equivalent in Philippine legal tender." 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, even if the obli is paid or to be paid in Phil. Legal tender, if it is going to be measured by its equivalent in foreign currency, then that is still a violation. --The SC held that it is not a violation because precisely, what is being directed to be paid is not the foreign currency but only its equivalent. -- Justice Caguioa disagrees. 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. The law is clear, if he cannot pay on the basis of equivalent value, the payment should be made on a one-to-one basis, $1 to P1. He further adds: "Would this be not unfair." He concludes : " it may be unfair but that precisely is the punishment in violation of RA 529. " the resulting unfairness is the punishment for violating RA 529. Payment in mercantile documents : -- under the 2nd paragraph of Art. 1249, if you pay an obligation in promissory notes or bills of exchange, delivery of these mercantile instruments shall not produce effects of payment until after they shall have been encashed. -payment of debts in checks, delivery of checks, regardless of the kind of check, will not produce the effects of payment until after the same have been encashed.

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

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

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

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