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Extinguishment of Obligations ObliCon
Extinguishment of Obligations ObliCon
PAYMENT – Not only the delivery of money but includes - There is dispute as to the requirement of capacity of
the performance of an obligation in any other manner. the debtor and creditor for the validity of payment.
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Some say the need for the capacity of both is the debtor may have been benefited
absolute, while some qualify and distinguish (conditional reimbursement).
between obli to give and obli to do or not to do.
*If payment was made with the consent of the
o In obli to give, where there is a juridical debtor, the 3rd person acquires the right of
transaction where ownership, dominium or title absolute reimbursement and he is subrogated
of the thing being given is involved, capacity into the rights of the creditor.
becomes necessary because incapacitated
persons cannot effectively transfer ownership - Kinds of subrogation:
from himself to the creditor. o Conventional – never presumed; agreement of
the parties
- It can be said that the capacity of both the creditor o Legal – GR: cannot be presumed. XPN: (a) when
and debtor is essential. The capacity of the debtor is a creditor pays another creditor who is
necessary to be able to effectively transfer title of preferred; (b) 3rd person who is not interested
the object given to the creditor. The capacity of the in the fulfillment of the obli pays with the
creditor is also equally necessary to be able to give consent of the debtor; (c) 3 rd person who has an
a valid release from the obli. interest in the fulfillment pays even without the
consent of the debtor.
o GR: Payment to incapacitated creditor is invalid.
o XPN: Such remains valid if: - Rights of guarantor against the debtor: absolute
1. The payment redounds to the benefit of the reimbursement and subrogation.
creditor, and;
2. The creditor retains or keeps the thing paid - Payment made to a 3rd person is invalid, except if
such payment redounded to the benefit of the
- “Benefit” in XPN #1 refers to any kind of benefit creditor. Debtor must prove such benefit, except if:
EXCEPT sensual benefit. After payment, the 3rd person acquires the
creditor’s rights.
- Payment made by an incapacitated person will not Creditor ratifies the payment to the 3rd person.
be valid, neither will it be void. It is simply voidable. By the creditor’s conduct, the debtor has been
led to believe that the 3rd person had authority
- There can be recovery if what has been paid has not to revive the payment.
been consumed. In other words, payment is
annullable. But there can be no recovery if the - If a 3rd person pays without intention of seeking
payment has been consumed in good faith, in which reimbursement, such payment is considered by law
case, the payment becomes valid. as a donation which must be accepted by the
debtor. If debtor does not give his consent, there is
- Payment made by a 3rd person is valid only if no donation, and the 3rd person acquires the right to
accepted by the creditor. Consent of debtor is not reimbursement and subrogation. If debtor opposes,
necessary for the validity of such payment, but it there will be no donation, and the 3 rd person
becomes essential in determining the rights of the acquires the right to reimburse to the extent which
3rd person against the debtor. the debtor was benefited.
- Effect of payment by 3rd person: Payment is valid if - The debtor cannot compel the 3rd person to accept
accepted by the creditor. reimbursement.
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XPN: (a) parties have agreed on partial - If both parties fail to make application, the
performance More Burdensome Rule will apply.
(b) Obli is partly liquidated and partly - Limitations on the right to apply:
unliquidated Debtor can’t make application of payment
in a manner as to compel the creditor to
Dation in Payment – debtor alienates property in accept partial payment.
payment of a debt in money. If there is a stipulation on how to apply
payment, such must be followed.
- Does not apply only to debts in money; If obli is interest-earning, payment shall not
governed by the Law on Sales; Barter is also be applied to the principal without first
covered by the Law on Sales. applying it on the interest.
GR: Application on payment can’t be made
- Eviction will not revive the orig obli. Remedy of on debts that are not due. XPN: (a) parties
the creditor who is evicted is to enforce the so stipulate; (b) when the application is
right of the vendee under the Law on Sales – made by the party for whose benefit the
right to recover the price paid plus interest term has been constituted.
thereon.
Cession
- Deprivation in law (deprivation by virtue of a
- Debtor abandons property in favor of the
final judgment) will fall under the Law on Sales
creditor so that the latter may dispose of the
and gives rise to the enforcement of warranty
property in order to apply the same to the
against eviction.
debts.
- There can be no dation in payment without the
- If one creditor objects to the payment by
consent of the creditor because it involves a
cession, the remedy for the debtor is voluntary
substitution or change in the object of the obli.
insolvency to attain the same objective.
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payment, is made. (Also, there must have - If the creditor claims the thing w/o reservation,
been no legal representative) it will extinguish obli. If he claims it w/ certain
Creditor, without just cause, refuses to give reservations, then his withdrawal will only
a receipt. partially extinguish the obli.
2 or more persons claim the right to collect.
Title of the obli has been lost. - Consignation is not proper if what is involved is
the right of option or the right of redemption
- Obli is extinguished when (a) creditor claims the because there is no debt due.
thing consigned, or (b) the court declares that
the consignation was properly made. Loss of the thing due
- Effect depends:
- 2-notice rule: 1st notice: notice of the intent to o Specific – (a) due to the fault of debtor
consign. 2nd notice: notification informing the
– not extinguished; (b) not due to the
creditor of the consignation of the thing.
fault of debtor – extinguished
Absence of one of these notices will constitute a
XPN: Exceptions to loss due to
valid defect and will invalidate the consignation.
fortuitous event.
o Generic – not extinguished.
- Consignation may be made judicially or extra-
judicially. Extra-judicial consignation, is
- Loss of obli to do occurs when there is
governed by BP 25, which refers to rentals in
impossibility of performance or difficulty of
arrears. Extra-j is done through opening an
performance.
account in a bank in the name of the creditor or
lessor to enable such person to withdraw/claim
- Impossibility of performance happens when
what has been deposited. In extra-j, the debtor
such performance is impossible because it is
can’t withdraw the thing. Judicial consignation
against laws (legal impossibility) or the laws of
is obviously done with the court.
nature (physical impossibility).
- If deposit is made in a place that is not the
- There is difficulty of performance when the obli
proper place of payment, the court held in the
requires extraordinary effort that goes beyond
case of Chua Kay v. Lim Chang that in case of
the contemplation of the parties.
loss of the thing, even if due to fortuitous event,
such will not extinguish the obli.
Condonation or remission of the debt
- The debtor may withdraw what has been
deposited during the pendency of the case - It is an act of liberality; it is in the nature of a
because he still owns the thing. However, the donation.
obli will subsist. He may also withdraw even
after the consignation is declared proper, - Not the same as renunciation because
provided that the creditor consents to the renunciation or waiver is a unilateral act while
withdrawal. In this case, the obli will remain but condonation or remission requires bilateral act
the creditor will lose his preference over the because the law requires acceptance of the
object and the parties interested in the condonation.
fulfillment of the obli will have to be released
from the obli. - Condonation may be done impliedly (in any
form), or expressly (must satisfy the requisites
- The creditor may prevent the debtor from prescribed by law with respect to form under
withdrawing by claiming what has been the law on donation).
deposited.
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Effect of condonation:
- The characters of debtor and creditor meet in - Parties must be bound principally in their own
one and the same person. rights (XPN: Guarantor who is allowed by law to
claim compensation with respect to what the
Effect of confusion that occurs in the person of the creditor owes the principal debtor)
debtor - Both debts must consist of a sum of money or if
fungible goods, although the law uses
- If there is only one debtor and one creditor, the “consumable”, they must be the same kind and
obli is automatically extinguished. quality (Not necessary that they be of the same
- If there is plurality of debtors, and the amount for compensation may be partial or
confusion occurs in the person of a debtor, total. If one of the debts is in money and the
depends on the nature of the obli: other is in goods, there can be no
o Joint obli – what is extinguished is only compensation, only dation)
the share of that debtor in the obli. - Both debts must be due
o Solidary obli – obli is extinguished - They be liquidated and demandable
- Over neither of them there be any retention or
- If confusion takes place in the person of the controversy, commenced by 3rd persons and
guarantor, this shall extinguish only the contract communicated in due time to the debtor
of guaranty, but not the principal obli.
*In legal compensation, it is necessary that all
Compensation requisites must concur in order for compensation to
take place. But in conventional compensation, no,
- Two persons or two parties are debtors and
because the law allows compensation even if one
creditors of each other. (Not necessarily
debt is not due or liquidated as long as both parties
reciprocal, but it is bilateral)
agree.
- Not the same as confusion. In confusion, there Facultative compensation – Kinds of oblis that come
is only one obli involved, while in under it: Obli arising from:
compensation, there are at least two oblis
involved. In confusion, there is only one party - Deposits
involved because the characters of debtor and - Commodatum
creditor meet in one and the same person. - Support
Whereas in compensation, there are two - Civil liability arising from crime
parties involved.
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