Modes of Extinguishment (Loss … to Novation)

[Follow the Outline]

Part One
Modified True or False.Consider the statement true only when it is absolutely true.
Explain ALL your answers.
1. It is presumed that the accessory obligation of pledge has been remitted when the thing pledged,
after its delivery to the creditor, is found in the possession of the debtor.

The ownership of the thing pledged is transmitted to the vendee or transferee as soon as the
pledgee consents to the alienation. a. TRUE, but take note that the pledgee shall continue in
possession. (Art. 2097)

Article 1274. It is presumed that the accessory obligation of pledge has been remitted when the
thing pledged, after its delivery to the creditor, is found in the possession of the debtor, or of a
third person who owns the thing

2. When the debt of a thing certain and determinate proceeds from a criminal offense, the debtor
shall not be exempted from the payment of its price, whatever may be the cause for the loss.

3. If a person should have against him several debts which are susceptible of compensation, the
rules on the consignation shall apply to the order of the compensation.

Article 1289. If a person should have against him several debts which are susceptible of
compensation, the rules on the application of payments shall apply to the order of the
compensation

False.

4. In partial compensation, no obligation is totally extinguished.

Article 1281. Compensation may be total or partial. When the two debts are of the same
amount, there is a total compensation. (n)

False. Compensation may be total or partial. In case of Partial Compensation when the
amounts are not equal. However there is still total compensation as to the debt with lower amount

5. Compensation shall take place in reciprocal obligations.

Article 1278. Compensation shall take place when two persons, in their own right, are
creditors and debtors of each other. (1195)

Article 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they
be of the same kind, and also of the same quality if the latter has been stated;
 (3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor

Reciprocal obligations are those which arise from the same cause, and in which each
party is a debtor and a creditor of the other, such that the obligation of one is dependent upon
the obligation of the other. They are to be performed simultaneously such that the
performance of one is conditioned upon the simultaneous fulfillment of the other.

False.

Different prestations, because the obligation arise from the same cause

Part Two
Multiple Choice. Choose the best answer.

1. In three of the following cases, compensation shall not be proper. Which may be the exception?
SUPPORT
a. Commodatum

Article 1287. Compensation shall not be proper when one of the debts arises from a depositum or
from the obligations of a depositary or of a bailee in commodatum

b. Support

Article 1287.

Compensation shall not be proper when one of the debts arises from a depositum or from the
obligations of a depositary or of a bailee in commodatum.

Neither can compensation be set up against a creditor who has a claim for support due by
gratuitous title, without prejudice to the provisions of paragraph 2 of article 301.

Article 301.

The right to receive support cannot be renounced; nor can it be transmitted to a third person.
Neither can it be compensated with what the recipient owes the obligor.

However, support in arrears may be compensated and renounced, and the right to demand the
same may be transmitted by onerous or gratuitous title

What cannot be the subject of legal compensation is a claim for support due by gratuitous title.
Another kin of support which is support in arrears may be the subject of compensation
c. Civil liability arising out of criminal offenses
 Article 1278. Compensation shall take place when two persons, in their own right, are creditors
and debtors of each other. (1195)

Article 1279. In order that compensation may be proper, it is necessary:

xxx
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the
same kind, and also of the same quality if the latter has been stated;

Civil liability from a criminal offense is not such a debt that can be the subject of compensation,
it is a recompense to the damages suffered by the offended party brought about by the unlawful
act of the offender.

d. Depositum
Depositum (not proper)
Article 1287. Compensation shall not be proper when one of the debts arises from a depositum or
from the obligations of a depositary or of a bailee in commodatum (WHY)

2. When an obligation is extinguished because of the passage of time, this is: ARRIVAL OF
RESOLUTORY PERIOD

a. Fulfillment of resolutory condition

Deals with a future or uncertain event not passage of time

b. Arrival of a resolutory period

Artile 1193 paragraph 2

Obligations with a resolutory period take effect at once, but terminate upon arrival of the day
certain

c. Novation

Article 1291.
Obligations may be modified by:
(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor.

Article 1292. In order that an obligation may be extinguished by another which substitute the
same, it is imperative that it be so declared in unequivocal terms,
or that the old and the new obligations be on every point incompatible with each other.

Novation extinguishes an obligation by its modification and replacement by a subsequent

one. Under the Civil Code obligation may be modified by (1) Changing their object or principal
conditions; (2) Substituting the person of the debtor; (3) Subrogating a third person in the rights
of the creditor.
Replacement by a subsequent one may be express or implied. Express if it be the
obligation is extinguished by another and declared in unequivocal terms and implied if the old
 and new obligations be on every point incompatible with each other, or when they cannot stand
together.

d. Rescission

Article 1191.
The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should
not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with
the payment of damages in either case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
period xxx

It is the the of breach of one of the parties of its obligation or failure to comply with what is
incumbent upon him in a reciprocal obligation which provides for the ground for extinguishment.
Further it is the courts that decrees rescission.

Rescission is not the proper answer in this case although it may through the passage of time one
of the parties may choose to rescind the contract. The passage of time in this case provides a
ground for the breach so it is really the breach of contract and not the passage of time which
makes rescission possible.

e. Dation in Payment

Article 1245.
(Dation in Payment Defined)

Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt

in money, shall be governed by the law of sales.

Dacion en pago extinguishes the obligation by alienation of a property in favor of the

creditor

3. This is a requisite in order that an obligation shall be extinguished by loss or destruction of the thing
due: THING LOST WITHOUT THE FAULT OF THE DEBTOR

a. That the thing is lost without the fault of the debtor

Article 1262.

An obligation which consists in the delivery of a determinate thing shall be extinguished if it

should be lost or destroyed without the fault of the debtor, and before he has incurred in delay.
 When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing
does not extinguish the obligation, and he shall be responsible for damages. The same rule applies
when the nature of the obligation requires the assumption of risk.

Article 1173.

The fault or negligence of the obligor consists in the omission of that diligence which is required by
the nature of the obligation and corresponds with the circumstances of the persons, of the time and of
the place.
When negligence shows bad faith, the provisions of articles 1171 and 2201, paragraph 2, shall
apply.

If the law or contract does not state the diligence which is to be observed in the performance, that
which is expected of a good father of a family shall be required.

b. That the thing lost is generic

Article 1263.
In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind
does not extinguish the obligation

Rationale: Genus nunquam perit (Genus does not perish)

Exceptions:
1. When the thing goes out of commerce;
2. By legal impossibility;
3. Limited Generic:
In such cases where the generic thing belongs to a particular group of thing and the loss
pertains to the whole group and NOT ONLY to the thing itself, then the obligation is
extinguished. E.g., A promise to deliver one of his horses and ALL the horses of the A died, the
obligation is extinguished.

c. That the thing is lost before the debtor has incurred in delay

Article 1262.

An obligation which consists in the delivery of a determinate thing shall be extinguished if it

should be lost or destroyed without the fault of the debtor, and before he has incurred in delay.

When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing
does not extinguish the obligation, and he shall be responsible for damages. The same rule applies
when the nature of the obligation requires the assumption of risk.

The thing lost must consist of delivery of a determinate thing

d. That the thing lost is specific

Article 1263.
In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind
does not extinguish the obligation
 Rationale: Genus nunquam perit (Genus does not perish)

Exceptions:
1. When the thing goes out of commerce;
2. By legal impossibility;
3. Limited Generic:
In such cases where the generic thing belongs to a particular group of thing and the loss
pertains to the whole group and NOT ONLY to the thing itself, then the obligation is
extinguished. E.g., A promise to deliver one of his horses and ALL the horses of the A died, the
obligation is extinguished.

4. Which of the following is not an element of legal compensation?

Article 1278.
Compensation shall take place when two persons, in their own right, are creditors and debtors of each
other. (1195)

Article 1279.
In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor
of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same
kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.

a. There is a controversy or adverse claim over any of the debts to be compensated

b. There are two or more debts of the same kind
c. There are two persons who are creditors and debtors of each other
d. Debts to be compensated are due and demandable
e.

5. In which of the examples given below may legal compensation take place?
(a. A owes B P1,000 payable October 31, 2016. B owes A P5,000 due on October 31, 2016.)

Article 1278.
Compensation shall take place when two persons, in their own right, are creditors and debtors of each
other. (1195)

Article 1279.
In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor
of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same
kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.

a. A owes B P1,000 payable October 31, 2016. B owes A P5,000 due on October 31, 2016.

Article 1281.

Compensation may be total or partial. When the two debts are of the same amount, there is a total
compensation.

Compensation may be total or partial. In case of Partial Compensation when the amounts are not equal.
However there is still total compensation as to the debt with lower amount.

Reckoning point, when demanded,

b. A owes B P1,000 with C as his guarantor. B owes C P1,000

Article 1279.
In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor
of the other;

One the requisites for compensation to take place is that the obligors be bound principally at he be at the
same time a creditor of the other

In the two obligations they are not mutual creditors and debtors of each other and neither are they bound
principally as creditor and debtor of one another.

c. A owes B P1,000 payable May 31, 2016. B to deliver to A 2 piculs of sugar worth P1,000 on May
31, 2016.

Article 1279
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind,
and also of the same quality if the latter has been stated

The debts are not both in the some of money nor are they of the same kind

d. A owes B P1,000 due on June 30, 2016. B owes A P1,000 due on June 30, 2016 but C has filed
an adverse claim against A.

Article 1279

(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.
 e. None of the above

Part Three
Give direct and concise but complete answers.
Cite authorities, if any.

1. A obliged himself to deliver a Toyota Altis to B. Before his obligation became due and
demandable, his Toyota Altis was totally destroyed. Was the obligation of A extinguished?

Article 1263.

In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind
does not extinguish the obligation. (n)

Genus nunquam peruit, genue never perishes

2. A obliged himself to deliver a Toyota Altis with Plate No. ABC123 to B. Before his obligation
became due and demandable, the Toyota Altis was totally destroyed. Will A be liable to B?

Article 1262.

An obligation which consists in the delivery of a determinate thing shall be extinguished if it

should be lost or destroyed without the fault of the debtor, and before he has incurred in delay.

When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the thing
does not extinguish the obligation, and he shall be responsible for damages. The same rule applies
when the nature of the obligation requires the assumption of risk

Article 1265.

Whenever the thing is lost in the possession of the debtor, it shall be presumed that the loss was
due to his fault, unless there is proof to the contrary, and without prejudice to the provisions of
article 1165. This presumption does not apply in case of earthquake, flood, storm, or other natural
calamity

It depends, there is a need to determine whether or not the loss was due to the fault of the debtor.

If without the fault, obligation is extinguished

If the be loss through a fortuitous event, generally the obligation is extinguished with the
exception of the following:
1. When the law so provides;
2. When stipulation so provides;
3. When the nature of the obligation requires the assumption of risk.

The defense of fortuitous event can only be availed of if the loss was without fault on the part of
the debtor

If in delay??

Liability for fortuiotu event provided for by law:

Article 1165.

Xxx If the obligor delays, or has promised to deliver the same thing to two or more persons who
do not have the same interest, he shall be responsible for any fortuitous event until he has effected
the delivery.

Article 1942.

The bailee is liable for the loss of the thing, even if it should be through a fortuitous event:
(1) If he devotes the thing to any purpose different from that for which it has been loaned;
(2) If he keeps it longer than the period stipulated, or after the accomplishment of the use
for which the commodatum has been constituted;
(3) If the thing loaned has been delivered with appraisal of its value, unless there is a
stipulation exempting the bailee from responsibility in case of a fortuitous event;
(4) If he lends or leases the thing to a third person, who is not a member of his household;
(5) If, being able to save either the thing borrowed or his own thing, he chose to save the
latter. (1744a and 1745)

Article 1979.

The depositary is liable for the loss of the thing through a fortuitous event:
(1) If it is so stipulated;
(2) If he uses the thing without the depositor's permission;
(3) If he delays its return;
(4) If he allows others to use it, even though he himself may have been authorized to use
the same. (n)

Article 2147.
The officious manager shall be liable for any fortuitous event: (1) If he undertakes risky
operations which the owner was not accustomed to embark upon; (2) If he has preferred his own
interest to that of the owner; (3) If he fails to return the property or business after demand by the
owner; (4) If he assumed the management in bad faith. (1891a)

Instances when there is no fortuitous event (events which cannot be foreseen and which though
foreseen are inevitable):

Malfunction of the break system – is not a fortuitous event since this could’ve been
prevented by a regular maintenance of the vehicle.

Robbery and Theft: are not considered Fortuitous Event for a pawnshop business or a
bank. (Sicam vs. Jorge)

Effect of fortuitous event in Reciprocal Obligations:

 the extinguishment of one party’s obligation due to loss due to a fortuitous event,
likewise extinguishes the other party’s obligation based on the principle of res perit domino (the
thing is lost to the owner).

3. Will partial loss of the thing/s to be delivered result in the total extinguishment of the obligation?

Article 1264.

The courts shall determine whether, under the circumstances, the partial loss of the object of the
obligation is so important as to extinguish the obligation

PartialLoss:
shall be determined by the court as so important to extinguish the obligation.

In doing so, intent of the parties must necessarily be considered.

E.g., A promised to deliver a cellphone with its casing. The cellphone was stolen
but A managed to save the casing. Would A still be liable to deliver the casing? Yes, if
the primary consideration of the creditor was to obtain the casing.

The test is whether the parties would not have entered into the obligation without the thing that
have been lost, then the obligation is extinguished.

4. When the performance of an obligation becomes so difficult, will that result in the
extinguishment of the obligation?

Article 1267.

When the service has become so difficult as to be manifestly beyond the contemplation of the
parties, the obligor may also be released therefrom, in whole or in part.

Difficulty of service authorizes release of obligor but does not authorize courts to modify or revise the
contract between the parties.
TRUE. Difficulty of service authorizes the release of the obligor but does not allow the courts to
remake, modify or revise the contract stipulated with the force of law, so as to substitute its own terms for
those covenanted by the parties themselves. (Occena v. Jabson)

OCCENA VS JABSON

Petitioner (landowner) and Respondent entered into a subdivision contract wherein the Petitioners are
granted a share of 40% of cash receipts from the sale of the subdivision lots.

RespondenT howevr in a complaint desires to modify the terms of the contract and for the court to fix a
different sharing ration on account of spiraling of prices and basic raw materials required for such
development work, the cost of development has risen to levels which are unanticipated, unimagined and
not within the remotest contemplation of the parties at the time said agreement was entered into. The
Respondent invoked Article 1267 of the Civil Code
ISSUE: Whether or not The modification by the Court of the terms of the agreement was proper
in this case (NO)
The general rule is that impossibility of performance releases the obligor. However, it is submitted that
when the service has become so difficult as to be manifestly beyond the contemplation of the parties, the
court should be authorized to release the obligor in whole or in part.

The intention of the parties should govern and if it appears that the service turns out to be so difficult as
have been beyond their contemplation, it would be doing violence to that intention to hold the obligor still
responsible. .

Respondent's complaint seeks not release from the subdivision contract but that the court "render
judgment I modifying the terms and Conditions of the Contract by fixing the proper shares that should
pertain to the herein parties out of the gross proceed., from the sales of subdivided lots of subject
subdivision". The cited article does not grant the courts this authority to remake, modify or revise the
contract or to fix the division of shares between the parties as contractually stipulated with the force of
law between the parties, so as to substitute its own terms for those covenanted by the partiesthemselves.

5. Is remission a form of donation? If it is, what would be the significance of such?

6. May there be partial extinguishment of an obligation by confusion?

Art. 1275.

The obligation is extinguished from the time the characters of creditor and debtor are merged in the same
person

Yes. If there are two debtors. As when only one of the debtors is merged with person of the creditor

Article 1215.

Novation, compensation, confusion or remission of the debt, made by any of the solidary creditors or with
any of the solidary debtors, shall extinguish the obligation, without prejudice to the provisions of article
1219.

The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable
to the others for the share in the obligation corresponding to them. (1143)

Article 1219. The remission made by the creditor of the share which affects one of the solidary debtors
does not release the latter from his responsibility towards the co-debtors, in case the debt had been totally
paid by anyone of them before the remission was effected

7. What are the kinds of compensation? Is facultative compensation a distinct kind of

compensation?
I.As to effects/extent: (classification of compensation)

a. Total – when the two obligations are of the same amount;

 Art. 1281.

Compensation may be total or partial. When the two debts are of the same amount, there is a total
compensation. (n)

b. Partial – when the amounts are not equal. This is total as to the debt with lower amount.

II. Cause or origin (classification of compensation)

1. Facultative - Deposit, Commodatum, Gratuitous support and civil liability from crime
Requires consent of one of the parties

Consent of only one is required

2. Legal - By operation of law; when all the requisites are present

Article 1279.

In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal
creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the
same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons
and communicated in due time to the debtor.

3. Conventional/Voluntary - by agreement of the parties.

Art. 1282.
The parties may agree upon the compensation of debts which are not yet due

With consent of both

4. Judicial – decreed by the court in a case where there is a counterclaim.

Art. 1283.
If one of the parties to a suit over an obligation has a claim for damages against the other, the
former may set it off by proving his right to said damages and the amount thereof. (n)

8. Legal compensation will take place if both debts are in money?

Article 1279.

In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal
creditor of the other;
 (2) That both debts consist in a sum of money, or if the things due are consumable, they be of the
same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons
and communicated in due time to the debtor.

Not necessarily. First because that the debts be in money is only one of the requisites by which
legal compensation can take place.
Second, the object of legal compenbsation is not limited to money but it may also include
consumable things which are of the sane kind and quality if the latter has been stated.

Obligations not arising from contract there may be compensation

What is case is this??

Not necessarily, because there other requisites that are to be complied with for there to be legal
compensation/ that the debts be due be in the sum of money is only one of the requisites

9. In PNB v. Ong Acero, was there legal compensation? Why or Why not?
In Francia v. IAC, was there legal compensation? Why or Why not?

In PNB vs Ong Acero, no legal compensation

Failure to prove indebtedness
Isabel anot a debtor of PNB
PNB claims that Isabela a debtor, only proved

In Francia obligation to pay rela property taxes are not subject to compensation; not mutal debtor
and creditors of each other
A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off
under the statutes of set-off, which are construed uniformly, in the light of public policy, to exclude the
remedy in an action or any indebtedness of the state or municipality to one who is liable to the state or
municipality for taxes. Neither are they a proper subject of recoupment since they do not arise out of the
contract or transaction sued on. … (80 C.J.S., 7374). “The general rule based on grounds of public policy
is well-settled that no set-off admissible against demands for taxes levied for general or local
governmental purposes. The reason on which the general rule is based, is that taxes are not in the nature
of contracts between the party and party but grow out of duty to, and are the positive acts of the
government to the making and enforcing of which, the personal consent of individual taxpayers is not
required. …” – Republic v. Mambulao Lumber Co. (4 SCRA 622)

10. Samantha sold all her business interest in a sole proprietorship to Sergio for the amount ofPhP 1
million. Under the sale agreement, Samantha was supposed to pay for all prior unpaid utility bills
incurred by the sole proprietorship. A month after the Contract to Sell was executed, Samantha
still had not paid the PhP 50,000 electricity bills incurred prior to the sale. Since Sergio could
not operate the business without electricity and the utility company refused to restore electricity
services unless the unpaid bills were settled in full, Sergio had to pay the unpaid electricity bills.
When the date for payment arrived, Sergio only tendered PhP 950,000 representing the full
purchase price, less the amount he paid for the unpaid utility bills. Samantha refused to accept
the tender on the ground that she was the one supposed to pay the bills and Sergio did not have
authorization to pay on her behalf.
(a) What is the effect of payment made by Sergio without the knowledge and
consent of Samantha? (2.5%)

Article 1236.

The creditor is not bound to accept payment or performance by a third person

who has no interest in the fulfillment of the obligation, unless there is a
stipulation to the contrary.

Whoever pays for another may demand from the debtor what he has paid, except
that if he paid without the knowledge or against the will of the debtor, he can
recover only insofar as the payment has been beneficial to the debtor.

Article 1237

Whoever pays on behalf of the debtor without the knowledge or against the will
of the latter, Cannot compel the creditor to subrogate him in his rights, such as
those arising from a mortgage, guaranty, or penalty.

Sergio is classified as a third person (who has an interest in the fulfillment of the
obligation and who paid without the consent of the debtor

As such he has the following rights among others:

As he paid without the consent of the Samantha, he can recover only insofar as the
payment has been beneficial to the debtor. So he can recover the P50,000

However since he paid without the knowledge or consent of Samantha, he cannot compel
the creditor to subrogate him in the latter’s rights

Person has an interest in the fulfillment, can be subrogated. Not withstanding the fact that
he paid without the consent of the debtor

Thus he may recover up to the amount of 50k and by virtue of legal compensation

(b) Is Samantha guilty of moraaccipiendi? (2.5%)

Delay
is the non-fulfillment of the obligation with respect to time.

Kinds of Delay:

1. Mora Solvendi- delay in the performance (on the part of the debtor);
 2. Mora Accipiendi- delay in the acceptance (on the part of the creditor);

3. Compensation Morae- mutual delay

Article 2201. xxx (2) In contracts & quasi-contracts, the damages for which the obligor
who acted in good faith is liable shall be those that are the natural & probable
consequences of the breach of the obligation, & which the parties have foreseen
or could have reasonably foreseen at the time the obligation was constituted. In
case of fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for all damages which may be reasonably attributed to the non-
performance of the obligation.

Mora Accipiendi is delay on the part of the creditor, it is delay in the acceptance,
Samantha however cannot be considered in delay as her refusal to receive the payment was
justified because a creditor cannot be compelled to accept partial payment. In this case since the
Sergio’s payment of the utility bills was done without the consent of Samantha, he cannot compel
Samantha’s creditor to subrogate him in the latter’s rights. And as he was not subrogated,
Samantha and Sergio cannot be considered as mutual creditors and debtors of each other. Thus
there can be no legal compensation and Sergio must pay the P1M in full before Samantha could
accept such payment, and he can recover the P50, only that he cannot automatically offset it to
the amount which he owed Samantha under Sales Agreement.

Yes. Mora Accipiendi is delay on the part of the debtor, to accept was is due to him.
Samantha is delay because her refusal was without just cause

11. What are the kinds of novation as to its nature?

1. Subjective
a) Substitution
i. Expromision
ii. Delegacion
b) Subrogation
2. Objecive
3. Mixed

12. What is expromision?

Expromission:

-- third person is substituted into the person of the original debtor, without the knowledge of the latter, but
with the consent of the creditor

Delegacion:

-- original debtor offers and the creditor accepts a third person top assume the obligation of the original
debtor

Expromision is a mode of Substitution of the Person of the Debtor wherein a third person is substituted
into the person of the original debtor, without the knowledge of the latter, but with the consent of
the creditor
13. In expromision, what will be the effects of payment by the new debtor?

If the novation is by expromission, and the new debtor pays the debt without the knowledge of the old
debtor, the former can recover only insofar as the payment has been beneficial to the old debtor.

If the novation is by delegacion, and the new debtor pays the obligation, he could demand from the old
debtor what he has paid.

14. In expromision, can the original debtor be compelled to pay if the new debtor was insolvent when
the creditor made the demand?

No,

Art. 1294.

If the substitution is without the knowledge or against the will of the debtor, the new debtor's insolvency
or non-fulfillment of the obligations shall not give rise to any liability on the part of the original
debtor. (n)

In case the new debtor became insolvent, can the new debtors liability be enforced against the old debtor
who has no knowledge of the novation?

If novation is by expromission, no liability for the new debtor’s insolvency can be enforced against the
old debtor, because the latter did not have the initiative in making the change, which might have
been made without his knowledge.

Art. 1295.

The insolvency of the new debtor, who has been proposed by the original debtor and accepted by the
creditor, shall not revive the action of the latter against the original obligor, except when said insolvency
was already existing and of public knowledge, or known to the debtor, when the delegated his debt.
(1206a) (DELEGACION)

Other modes which does not exempt the old debtor from liability due to the new debtor’s insolvency?

a. if the new debtor is only secondarily liable

b. if the third person is only an agent of the debtor
c. where the new debtor is bound solidarily with the old debtor

15. X, who has a savings deposit with Y Bank in the sum of P1,000,000.00, incurs a loan obligation
with the said Bank in the sum of P800,000.00 which has become due. When X tries to withdraw
his deposit, Y Bank allows only P200,000.00 to be withdrawn, less service charges, claiming that
compensation has extinguished its obligation under the savings account to the concurrent amount
of X’s debt. X contends that compensation is improper when one of the debts, as here, arises
from a contract of deposit. Assuming that the promissory note signed by X to evidence the loan
does not provide for compensation between said loan and his savings deposit, who is correct?
Article 1287.

Compensation shall not be proper when one of the debts arises from a depositum or from the obligations
of a depositary or of a bailee in commodatum. xxx

16. Baldomero leased his house with a telephone to Jose. The lease contract provided that Jose shall
pay for all electricity, water and telephone services in the leased premises during the period of the
lease. Six months later, Jose surreptitiously vacated the premises. He left behind unpaid telephone
bills for overseas telephone calls amounting to over P20,000.00. Baldomero refused to pay the said
bill on the ground that Jose had already substituted him as the customer of the telephone company.
The latter maintained that Baldomero remained, as his customer as far as their service contract was
concerned, notwithstanding the lease contract between Baldomero and Jose.
Who is correct, Baldomero or the telephone company? Explain .

17. Upon the proposal of a third person, a new debtor substituted the original debtor without the latter’s
consent. The creditor accepted the substitution. Later, however, the new debtor became insolvent
and defaulted in his obligation. What is the effect of the new debtor’s default upon the original
debtor?

This is a case of Expromision, substitution of the person of the debtor with the consent of the creditor but
without the former’s consent

Expromision is a mode of Substitution of the Person of the Debtor wherein a third person is substituted
into the person of the original debtor, without the knowledge of the latter, but with the consent of
the creditor

If novation is by expromission, no liability for the new debtor’s insolvency can be enforced against the
old debtor, because the latter did not have the initiative in making the change, which might have
been made without his knowledge.

Art. 1295.

The insolvency of the new debtor, who has been proposed by the original debtor and accepted by the
creditor, shall not revive the action of the latter against the original obligor, except when said insolvency
was already existing and of public knowledge, or known to the debtor, when the delegated his debt.
(1206a) (DELEGACION)

18. In the case of JAL v. Simangan, was there novation?

In Arco Pulp v. Lim, was there novation?