Arco Pulp and Paper Co, v.

Lim

G.R. No. 206806, 25 June 2014

FACTS:

Lim works in the business of supplying scrap papers, cartons, and other raw materials, under the name
Quality Paper and Plastic Products, Enterprises, to factories engaged in the paper mill business. Lim
delivered scrap papers to Arco Pulp and Paper Company, Inc. The parties allegedly agreed that Arco Pulp
and Paper would either pay Dan T. Lim the value of the raw materials or deliver to him their finished
products of equivalent value. Arco Pulp and Paper and a certain Eric Sy executed a memorandum of
agreement where Arco Pulp and Paper bound themselves to deliver their finished products to Megapack
Container Corporation, owned by Eric Sy. The liability of Arco Pulp was now transferred to Megapack in
paying Lim. Dan T. Lim sent a letter to Arco Pulp and Paper demanding payment but no payment was
made to him. Now Lim filed a case against Arco Pulp. The Arco Pulp now contends that their agreement
was novated because of the MOA agreed upon Sy and Arco.

ISSUE:

Whether or not the obligation between the parties was an alternative obligation

RULING:

Yes. The rule on alternative obligations is governed by Article 1199 of the Civil Code, which states:

Article 1199. A person alternatively bound by different prestations shall completely perform one of
them.

The creditor cannot be compelled to receive part of one and part of the other undertaking.

In an alternative obligation, there is more than one object, and the fulfillment of one is sufficient,
determined by the choice of the debtor who generally has the right of election.” The right of election is
extinguished when the party who may exercise that option categorically and unequivocally makes his or
her choice known.