Article 1242

Article 1242

Payment made in good faith to any person in possession of the credit shall
release the debtor.

Ang pagbayad ng may utang na ginawa nang walang daya o malisya sa tao na may
hawak ng utang ay magpapalaya sa nangutang sa kaniyang obligasyon.

Discussion

This law is intended to protect the debtor from being required to pay again the payee.

Possession of credit

Possession of credit does not refer to the real creditor or his heirs, or the person
authorized by him or by law under Article 1240. It refers to the person who has the
appearance of the creditor but who actually is not.

This is different from possession of the document representing the document. For
example, if a document which is payable to order or to a definite person is in the
possession of someone but without any indorsement, the possession is not of the credit
but only of the title, and payment to the holder is not a valid payment.

The possession of credit means an actual and legal relation between the credit and the
possessor of the document. For example, an instrument payable to bearer is held by the
person to whom it is intended.

Case Illustration

Panganiban vs Cuevas 7 Phil 477 (1907)

Ponente: C.J. Arellano

Facts:

Panganiban is the owner of a parcel of land. He sold the land to Gonzales with a right to
repurchase. During the war, Panganiban failed to find Gonzales, and the land was
attached by the revolutionary government. Since Panganiban has a right to repurchase,
he paid the repurchase price to the revolutionary government in good faith. It turned out
however that Gonzales sold the land to Cuevas. Panganiban brought an action to
recover the land from Cuevas.

Issue: Whether or not Panganiban has the right to recover the land from Cuevas, given
that he already paid the repurchase price to the revolutionary government.

Held:

No. Article 1164 (in the New Civil Code it is Article 1242) cannot be used in this case
because the payment to the revolutionary government was an invalid payment. The
government merely attached the property which attachment merely prohibited its
alienation. For the provision to be considered in this case, the revolutionary government
must be in the possession of the credit. However, it was not.

The remedy of Panganiban is to redeem the property from Cuevas by paying him the
repurchase price.