DEC. 12, 2013 ART. 1231: mode of extinguishment of the obligation. Various modes of extinguishing the obligation.

ion. Is this enumeration exclusive? o NO, there are other ways. Those mentioned are the PRINCIPLE ways of extinguishing an obligation.

FIRST MODE: PAYMENT OR PERFORMANCE Does this refer solely to the delivery of a sum of money? o NO. There are other normal voluntary fulfilments of obligation. A obliged himself to deliver B something, and A did: PAID. o A obliged himself to render a service to B, and A did: PAID.

Different from persons interested: debt secured by a mortgage as a security for debt. Valid? YES (as in guarantors, sureties). Supposing the third person is a joint debtor with me, can the third person compel the creditor to receive the payment? o YES. Joint debtors are persons interested. If the third person is not a person interested but offered to pay As debt in full and B agreed. WHAT RIGHTS DOES THE THIRD PERSON HAVE? o With As consent: full reimbursement and subrogation. If the debt is secured by a guarantor, then the third person can also ask for full reimbursement and subrogation of rights against the guarantor. o Without As consent. o D C

BASIC PRINCIPLES IN CONNECTION TO PAYMENT. G COMPLETENESS: debt not considered paid as long as to the thing / service is not complete. To this rule of completeness and integrity, the law admits two modifications. o There are situations that although the payment or the rendering of the service is not complete, they were still considered paid. EXCEPTIONS: 1. Substantial performance in good faith (Art. 1234). If the debtor complies with the obligation in a substantial manner in good faith, minus the damages. If A obliged himself to deliver B 100 bottles of red wines, but despite exhausting all of his means, A was only able to provide 98 bottles, then Art. 1234 is applicable. DIESEL VS. UPSI: the construction company has finished 97.56% of the building, the SC held that such is already a substantial compliance. If only 60% was finished, then probably Art. 1234 cannot be invoked. 2. The creditor accepts without any objection the payment despite the irregularity or incompleteness (Art. 1235). Based on the principle of estoppel. If the creditor said, okay na yan, then the debtor is deemed to have complied with the obligation. The creditor is not allowed to change his mind. WHO CAN PAY THE OBLIGATION? 1. The debtor himself or his legal representative. 2. Any third person. CAN A THIRD PERSON PAY AN OBLIGATION? o A owes B P1M. C paid the obligation to A. Can B legally refuse to accept Cs payment? YES. Whats wrong with that? TRUST and CONFIDENCE. Why does the law give prerogative to B not to accept payment from a third person? REASON: the creditor might not want anything to do with the third person. Its a matter of trust: fake money, bouncing checks. The creditor might have his own personal reasons for his refusal, and such cannot be taken against him. CAN A CREDITOR ACCEPT PAYMENT FROM A THIRD PERSON? o YES. If here is no compulsion, then the payment is valid. X

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Payment of X to C with the knowledge and consent of D: subrogation and reimbursement. Payment of X to C without the knowledge and consent of D: a. X D: payment was to the benefit of the debtor: subrogation. b. If D had earlier paid P4k out of his debt of P12k: i. X D: only P8k was beneficial to him, despite X paying P12k. what X can claim is only what was beneficial to D (P8k only). ii. X C: X can recover the excess payment from C; unjust enrichment. c. Can X G? NO. there was no subrogation of Cs rights to X. The third person, having not obtained the consent of the debtor, certainly cannot be subrogated to the rights of C, which includes the right to go after G. D C

G X There was no partial payment and the payment of X was made with the knowledge of D. X intended his payment of Ds debt as a gift. X told D, do not worry about it. You do not even have to reimburse it. But D does not want to accept the gift for some reason. Will there be a valid gift in the light of Ds refusal? NO. Basic principle of donation: there is a right to refuse for no one can force a gift down your throat (personal human dignity). NO VALID DONATION. Can X return to C to ask his money back? o NO. C has already accepted in. X cannot demand its return. Can X now go after D? o YES. Will X be subrogated to the rights of C? o NO, since Xs payment is done without Ds knowledge.

NOTE: ART. 1239: in obligations to give, payment made by one who does not have the free disposal of the thing due and capacity to alienate it shall not be valid. Without prejudice to Art. 1427 (natural obligation). Minor between 18 to 21 the age of majority has already been lowered so this is no longer a valid exception.

ART. 1240: answers the question to whom payment must be made. 1. 2. 3. The person in whose favour the obligation has been constituted (creditor). His successor in interest. Any person authorized to receive it by law or by the creditor at the time when payment is due and not when the obligation was constituted. Is the creditor the only one authorized to appoint a person to receive payment? o NO. The law can also appoint such. HAW PIA VS. CHINA BANKING: petitioner borrowed from the bank. When the WWII broke out, China Bank was considered as an enemy asset and was sequestered by the Japanese authorities. They designated the Bank of Taiwan (liquidator bank) and it was authorized to accept payments. The petitioner paid to the Bank of Taiwan his debt during the war. After the war, China Bank is trying to collect from the petitioner. o Under the norms of international law: VALID. o MORAL OF THE STORY: the authority need not come from the creditor. In this case, it came from international law. PAYMENT MADE TO SOMEBODY ELSE NOT VALID. o A has a business and was getting goods from B, so A is indebted to B. C came to A, saying that he was Bs collector, so A paid C. it turned out, C was an impostor A was required to pay B again. o MORAL: make sure that the persons claiming as agents of your creditor are real agents Supposing A borrowed P10M to B. when the debt became due, A went to B with a bayong of money. A left it to B. Unknown to A, B was already crazy during that time. B then used the money as pangatong, all of it. Can A be required to pay again? o YES. Art. 1241: when payment is valid: 1. Kept. 2. Beneficial (but using the money as pangatong is not the rational use of money). If payment is made to a 3rd person, GENERALLY, the payment is VALID if it redounded to the benefit of the creditor. o EXCEPTIONS (RES): 1. Ratification. 2. Estoppel. 3. Subrogation. Payment made to a third person in possession of the credit: VALID. o A was indebted to B. To whom will A pay? To B. o Unknown to A, B assigned the credit to C. will A be justified to still pay to B? YES; good faith. A will still be released from his debt as he made a VALID PAYMENT, despite not being able to pay C.

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There is no dation unless ownership is transferred from the debtor to the creditor. If there is none, then, such is only a security.

ART. 1243: One needs to follow a court order asking him not to pay (as in a notice of garnishment or attachment). Otherwise, he needs to pay again. MORAL: follow court orders.

ART. 1244: if the object is particular the same one agreed upon must be delivered. DATION: happens when the debtor has outstanding debt of money and he is having liquidation problems. If A is indebted to B, and A does not have cash, one of As property can be alienated B. o As the accepted equivalent of the monetary obligation: 1. There must be an agreement.