SECTION 2.

— Loss of the Thing Due

JART. 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. (1182a)

When a thing is considered lost.

It is understood that a thing is lost when it perishes, or goes out
of commerce or disappears in such a way that its existence is
unknown or it cannot be recovered. (Art. 1189, par. 2.)
Loss of a determinate thing under Article 1262 (par, 1.) is
the equivalent of impossibility of performance in obligations to
do referred to in Article 1266. But "loss of the thing due," as
used in Article 1231(1) and the above section subtite, extends to both
obligations to give and obligations to do.

When loss of thing will extinguish

an obligation to give.
In order that an obligation may be extinguished by the loss
of the thing, the following requisites must be present:
 234

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I Art. 1263
EXTINGUISHMENT OF OBLIGATIONS
Loss of the Thing Due
De 235

SIX The obligation is to deliver a specific or

determinate thing;
(27 The loss of the thing occurs without the fault of
the debtor; and
(3) The debtor is not guilty of delay.
When loss of thing will not extinguish
liability. . There are cases, however, when the loss of
the specific thing even in the absence of fault and delay will not exempt
the debtor from liability. They are:
Hy when the law so provides (Arts. 1170, 1165 [par. 3],
1263.);
127 when the stipulation so provides;
(37 when the nature of the obligation requires the
assumption of risk (par. 2; see Art. 1174.); and
147 when the obligation to deliver a specific thing arises
from a crime. (see Art. 1268.)
ART. 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)

Effect of loss of a generic thing.

The above article is an example of a case where the
debtor is liable even for a fortuitous event because the law says
so.
It is based on the principle that a generic thing never
perishes (genus nunquam perit). The debtor can still be
compelled to deliver a thing of the same kind. The creditor,
however, cannot demand a thing of superior quality and neither
can the debtor deliver a thing of inferior quality. (see Art
1246.)

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236
THE LAWON OBLIGATIONS AND
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EXAMPLES:
(1) S promised to deliver 100 cavans of rice to B. 1770 100 cavans of
rice which s intended to deliver were lost in a flood.
S is liable to B because his obligation is to deliver a generic thing, and it can
still be paid from other sources.
(2) Suppose the obligation of S is to deliver 100 cavans of rice from
 the harvest made by him and such harvest is completely losi or
destroyed, is the obligation
extinguished?
Yes, because the rice stipulated to be delivered is cost fined to a particular
class and may thus be considered a determinate thing.

ART. 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. (n)

Effect of partial loss of a specific thing.

There is partial loss when only a portion of the thing is lost
or destroyed or when it suffers depreciation or deterioration. Partial loss is the
equivalent of difficulty of performance in obligations to do. (Art. 1207.)
In case of partial loss, the court is given the discreties aerebate parte
whether under the circumstances it is so important in relanon to the whole
as to extinguish the obligation. In other words the court will decide
whether the partial loss is such as to be equivalent to a complete
or total loss.

EXAMPLE:
S obliged himself to deliver to B a specific race horse The horse
met an accident as a result of which it sulke broken leg. The injury is
permanent. Here, the partiallo
so important as to extinguish the obligation.

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 EXTINGUISHMENT OF OBLIGATIONS
Los of the Thing, Due
237

If the loss is due to the fault of S, ke shall be obliged to pay the value of the
horse with indemnity for damages.
If the horse to be delivered is to be slaughtered by B, the injury is
clearly not important. Even if there was fault on the part of S, he can still deliver the
horse with liability for damages, if any, suffered by B.
ART. 1265. Whenever the thing is lost in the possession
of the debtor, it shall be presumed that the loss was due to
his faust, 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. (1183a)
Presumption of fault in case of loss
of thing in possession of debtor.
The article establishes a disputable presumption of fault
whenever the thing to be delivered is lost in the possession of the debtor. This
presumption is reasonable because the debtor who has the custody and care
of the thing can easily explain the circumstances of the loss. The creditor has no
doty to show that the debtor was at fault.
Under the third paragraph of Article 1165, the obligor who is
not at fault is still liable in case he is guilty of delay Et has promised to
deliver the same thing to two or more persons who do not have the
same interest.
When presumption not applicable.
"In case of natural calamities, the presumption of fault Ses
not apply. Lack of fault on the part of the debtor is more
zsely. So it is unjust to presume negligence on his part."
Heport of the Code Commission, p. 133.)

EXALIPLES.
(!) D borrowed the car of C. On the due date of the
obligation, D told that the car was stolen and that he was

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238
Art. 1266
THE LAW ON OBLIGATIONS AND
CONTRACTS

not at fault. That is not enough to extinguish D's obligation. It is

presumed that the loss was due to his fault. Hence, he is liable unless he proves
the contrary.
(2) Suppose the house of D was destroyed because of fire. It is
admitted that there was a fire and it was accidental and that the car
D is not liable unless C
was in the house at the time it occurred. Here,
proves fault on the part of D. (Arts.
1174, 1262.) CONCEPT The obligation of extinguish from the
ART. 1266. The debtor in obligations to rery do shall
also be released when the prestation be becomes
legally or physically impossible without the fault of the
obligor. (1184a)

Effect of impossibility of performance.

This article refers to a case when, without the debtor's fault,
the obligation becomes legally or physically impossible.
 The impossibility of performance will result in the extinction of
the obligation.
This impossibility must take place after the constitution of the
obligation. If the obligation is impossible from the very beginning,
the obligation is void. (see Arts. 1183, 1348.) In such case, there
is no obligation to be extinguished..

Kinds of impossibility.
(1) In purely personal obligations, when the personal
qualifications of the obligor are involved, physical impossibility
takes place when, for example, the obligor dies or
becomes physically incapacitated to perform the obligation,
(2) Legal impossibility occurs when the obligation cannot
be performed because it is rendered impossible by
provision of law, although physically it may be possible of
performance. Note that Article 1266 makes express
reference to obligations to do or to personal
obligations.

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239

Art. 1267
EXTINGUISHMENT OF OBLIGATIONS
Loss of the Thing Due
 EXAMPLES:
Amouth Saash C D obliged himself to
paint a picture for C to be 'finished within a month. One week after the
obligation was constituted, D met an accident, as a result of which,
his arms were amputated.
Here, the obligation of D has become physically impossible. D
is, therefore, released from his obligation.
24 Dagreed to construct a commercial building for C. The
government refused to issue a building permit because the area
has been declared by law as a residential zone.
The obligation of D is, therefore, extinguished because it has
become legally impossible. Here, the performance of the
prestation is directly prohibited by law.
637 D agreed to appear as counsel of C in a case. Sub sequently, D
was appointed judge of the Regional Trial Court. Under the law, judges of
Regional Trial Courts are prohibited from engaging in the practice of law.
D is, therefore, released from his obligation. Here, the law makes the
execution im possible by imposing upon D duties of a superior
character which așe incompatible with the performance of the
obligation contracted by him. (see 8 Manresa 355.)

+ ART. 1267. When the service has become

lso difficult a's to be manifestly beyond the
Ycontemplation of the parties, the obligor may| (also
be released therefrom, in whole or in part.)
(n)
Effect of difficulty of performance.
The general rule is that impossibility of
performance releases the obligor.
When the performance of the service has
become so difficult as to be manifestly beyond the
contemplation of both parties, the court is authorized to release
the obligor in whole or in part. It would be doing violence to
the intention of the parties to hold the obligor still
responsible. (see Report of the Code Commission, p. 133.) There
is an element of the

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Art. 1268
240
THE LAW ON OBLIGATIONS AND
CONTRACTS

unforeseen or fortuitous event in the situation covered by

Article 1276. (see Art. 1174.)
Article 1267 is applicable not only to (personal) obligations to do but
also to (real) obligations to give or deliver. (see Art. 1156.)

EXAMPLE:
D agreed to construct a road near a mountain. A very strong typhoon
caused an avalanche making the construction of the road dangerous to
human lives which was not foreseen or contemplated by the
parties.
In this case, D may be released, in whole or in part, from his obligation
to continue with the construction.
ART. 1268. 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, unless the thing having been offered
by him to the person who should receive it, the latter refused
without justification to accept it. (1185)
 Effect of fortuitous event where obligation
proceeds from a criminal offense.
Article 1268 is another instance where a fortuitous event
does not exempt the debtor from liability. (Arts. 1174, 1262.)
The obligation subsists except when the creditor refused to
accept the thing (e.g., property stolen from him) without
justification, after it had been offered to him. Consignation is
not necessary. The debtor, however, must still exercise due
diligence,
EXAMPLE:
D stole the jeep of C. Here, D has the obligation to return
the jeep to C. The obligation of D arises from an act
punishable by law. (Art. 1157.)

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Art. 1269
EXTINGUISH-IMENT OF OBLIGATIONS
Loss of the Thing Due
241

Even if the jeep is destroyed without the fault of D, he shall be

liable for the payment of its price. The exception to the rule is when Cis in mora
accipiendi. (see Art. 1169.) In either case, D is liable if the loss is due to his fault.

ART. 1269. The obligation having been lextinguished

by the loss of the thing, the creditor shall have all the rights of
action which the debtor may have against third persons by I
 reason of the loss. (1186)

Bight of creditor to proceed against

third persons.
Under the above article, the creditor is given the right to
proceed against the third person responsible for the loss. There is no
need for an assignment by the debtor. The rights of action of the debtor are
transferred to the creditor from the moment the obligation is
extinguished, by operation of law to protect the interest of the latter
by reason of the loss.
The rule in Article 1269 finds frequent application in
insurance."
EXAMPLE:
S is obliged to deliver to B a specific horse. The horse is
lost through the fault of T.
The obligation of S is extinguished and he is not liable to B. Such being
the case, S would not be interested in going after T. The law, however,
protects B by giving him the right to bring an action against T to
recover the price of the horse with damages.

-
-
-

'Art. 2207. If the plaintiff's property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the wrong or
breach of contract complained of, the insurance company shall be subrogated to the
rights of the insured against the wrongdoer or the person who has violated the contract If
the amount paid by the insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency from the person
causing the loss or injury.
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SECTION 3. — Condonation or Remission

of Debt

TART. 1270. Condonation or remission is

essentially gratuitous, and requires the accep
tance by the obligor. It may be made expressly or
impliedly.
1 One and the other kind shall be subject to the
rules which govern inofficious donations. Express condonation
shall, furthermore, comply with the
forms of donation. (1187) Meaning
of condonation or remission.
Condonation or remission is the gratuitous
abandonment by the creditor of his right against the debtor.
(4 Roman 422.)
It is thus a form of donation,
Requisites of condonation or remission.
The requisites are the following: + It
It must be gratuitous;
(2) It must be accepted by the obligor;
! 3 The parties must have capacity;
(4) It must not be inofficious; and
157 If made expressly, it must comply with the
forms of donations. Kinds of remission: Allkatina
They are:
C
u rative (1)
As to its extent: donatione
claration
donations
i
donations
- АуацЮ 1-2

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Art. 1271
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THE LAW ON OBLIGATIONS AND
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(a) Complete. — when it covers the entire obliga tion; or

(b) Partial. — when it does not cover the entire obligation.
(2) As to its fornil
(a) Express. — when it is made either verbally or in
writing; or
(b) Implieii. — when it can only be inferred from conduct.
(3) As to its date of effectivity
(a) Inter vidos. – when it will take effect during the lifetime of
the donor; or
(b) Mortis causa. — when it will become effective upon the
death of the donor. It must comply with the
formalities of a will. Effect of
inofficious remission.
T! 176 62 om na emission:
C olor While a person may make donations, no one can give
more than that which he can give by will; otherwise, the excess shall
be inofficious and shall be reduced by the court accordingly.
As a rule, testamentary dispositions which impair the legitime
shall be reduced on petition of the heirs (see Art. 887.)
insofar as they are inofficious or excessive. (In the matter
of the Estate of Don Isidro Aragon, 88 Phil. 107.)
Incidentally, legitime is that part of the testator's property
which he cannot dispose of because the law bas reserved it for
certain heirs (like the children with respect to their parents)
who are, therefore, called compulsory heirs. (Art. 886.)
ART. 1271. The delivery of a private document
evidencing a credit, made voluntarily by the
 creditor to the debtor, implies the renunciation
of the action which the former had against the
latter. /

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Art.
1271
EXTINGUISHMENT OF OBLIGATIONS
Condonation or Remission of Debt
245

1 If in order to nullify this waiver it should be claimed to

be inofficious, the debtor and his heirs may uphold it by
proving that the delivery of the document was made in
virtue of payment of the debt. (1188)
Presumption in case of voluntary delivery of
document of indebtedness by creditor.
(1) Presumption of implied remission. - This article gives
an example of implied or tacit remission. If the debt is not yet paid, the
creditor would need the document to enforce payment. In case he
voluntarily delivers it to the debtor, the only logical inference is that
he is renouncing his right.
; (2) Contrary evidence. – The presumption is prima facie or
rebuttable by contrary evidence. Evidence is admissible to show
otherwise, as when a receipt signed by the credi tor was delivered only for
examination by the debtor client (lawyer) of the amount of attorney's
fees to be paid by the latter.
 (3) Extent of remission. – If the obligation is joint,
the presumption of remission pertains only to the share of
the debtor who is in possession of the document; if solidary, to
the total obligation.
(4) Presumption applicable only to private
document. - Article 1271 speaks of a private document. The legal pre
sumption of remission does not apply in the case of a public
document because it is easy to obtain a copy of the same,
being a public record.

Payment, not remission of debt.

Under the second paragraph of Article 1271, the
renun ciation of the action which the creditor had against the
debtor may be nullified or invalidated by a showing that
the waiver is inofficious. In other words the remission
becomes null and void upon proof that it is inofficious.

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The debtor or his heirs may prove that the delivery of the
document was really made in virtue of payment of the debt and not
of remission.

ART. 1272. Whenever the private document in which the debt

appears is found in the possession of the debtor, it shall be
presumed that the creditor delivered it voluntarily, unless
the contrary is proved. (1189)

Presumption in case document found

in possession of debtor.
Ordinarily, the document evidencing the debt is in the possession of
the creditor. He has in his favor the legal presumption that his credit is as
yet uncollected, unless the debtor proves satisfactorily, by one of the rules
recognized in law, that he has already paid the claim.
If the document is later found in the hands of the debtor and it is not
known how he came into possession of the same, the presumption is that it
was voluntarily delivered by the creditor. This presumption of voluntary
delivery, in turn, gives rise to the presumption of remission. (Art.
1271.)
It is believed, however, that the presuinption of voluntary
delivery should give rise to the presumption of payment and only when it
is known that indeed there is no payment should there be a
presumption of remission.

EXAMPLE:
D owes C P1,000.00 evidenced by a promissory nole. The note,
signed by D, is given to C.
If the promissory note is voluntarily delivered to D, the
presumption is that the debt must have been paid by D.
If it is known that D has not yet paid C, it must be pre sumed that
the obligation has been remitted by C. (Art. 1271.)
Suppose it is not known how D came into possession of the
 promissory note. The presumption is that it was vol

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Amie Jone R- Miranda Ame game

meranda
247
Arts. 1273-1274
EXTINGUISHMENT OF OBLIGATIONS
Condonation or Remission of Debt

untarily delivered by C, unless C proves the contrary.

(Art. 1272.)
1

ART. 1273. The renunciation of the principal debt shall

extinguish the accessory obligations; but the waiver of the
latter shall leave the former
in force. (1190) Effect of renunciation of
the principal debt
of the accessory obligation.
The above provision follows the rule that the
accessory follows the principal. While the accessory obligations cannot
exist without the principal obligation, the latter may exist without
the former. (see Art. 1230.)

EXAMPLE:
D owes C P1,000.00 with Gas guarantor. The principal debt
 here is the P1,000.00, while the accessory obligation is the guaranty
of G.
The remission of the debt of D by C shall extinguish the
guaranty of G. But if only the guaranty of G is condoned, the
obligation of D shall remain in force.

ART. 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. (1191a)
Presumption in case thing pledged found
in possession of debtor.
In a contract of pledge, it is necessary that the
thing pledged be placed in the possession of the creditor,
or of
.Pledge is a contract by virtue of which the debtor delivers to the creditor
or to a third person a movable or instrument evidencing incorporeal rights for the purpose
of securing the fulfillment of a principal obligation with the understanding that when the
obligation is fulfilled the thing delivered shall be returned with all ils fruits and accessions.

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Art. 1274
'TI-T LAWON OBLIGATIONS AND
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a third person by common agreement. (Art. 2093.) A
third person who is not a party to the principal obligation
may secure the latter by pledging his own property.
(Art. 2085, last par.)
If the thing pledged is later found in the hands of the
debtor or the third person only the accessory obligation
of pledge is presumed remilled, not the obligation itself.
The debtor shall continue to be indebted but he does not
have to return the thing pledged. The presumption yields
to contrary evidence. It does not arise if the third person
in possession of the thing pledged does not own the
same.

EXAMPLE:
Ddelivers to Chis diamond ring in pledge to
guarantee the payment of a loan. Jf later on the ring is
found in the possession of D, the presumption is that
C has agreed to the loan without the pledge.
C may prove that he returned the ring to D upon the
latter's request to be delivered back to him,

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 SECTION 4. — Confusion or Merger
of Rights

FART. 1275. The obligation is extinguishech) from the

time the characters of creditor and debtor are merged in the
same person. (1192a) s

Meaning of confusion or merger.

Coufusion or merger is the meeting in one person of
the qualities of creditor and debtor with respect to the
same obligation. (4 Sanchez Roman 421.)

Reason or basis for confusion.

(1) The law treats confusion or merger as a mode of
extinguishing obligations because if a debtor is his own
creditor, enforcement of the obligation becomes absurd since
a person cannot claim payment from himself.
+27 Furthermore, when there is a confusion of rights, the
purposes for which the obligation may have been created
are deemed realized. (see 8 Manresa 388; Sochayseng vs.
Trujillo, 31 Phil. 153.)

Requisites of confusion.
For a valid confusion or merger to take place, it is
necessary that:
on. It must take place between the principal debt and
creditor; and
♡ It must be complete.
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Art, 1276
EXTINGUISHMENT OF OBLIGATIONS
Confusion or Meryer of Rights
251

EXAMPLES:
(1) D owes C P10,000,00, for which D executed a negotiable
promissory noted in favor of Ci Cindorsed the note to E who, in turn,
indorsed it to F. Now Fbought goods from the store of D. Instead of paying
Here, D owes himself,
cash, Findorsed the promissory note to D, i
Consequently, his obligation is extinguished by merger.
(2) Xand Yare the heirs of Z. In his will, Z gave to Xa parcel of
land in usufruct for ten years. The naked ownership to the same
parcel was given to Y. Later, Y sold his interest in the land to X
In this case, the usufruct is naturally extinguished and X will
now have full ownership over the land.
(3) D borrowed money from C. As security, D mortgaged
his land. Subsequently, D sold the land to C.
In this case, the mortgage is extinguished, but the obliga
tion subsists. The extinguishment of the accessory obligation does
not carry with it that of the principal obligation.
JART. 1276. Merger which takes place in the person
of the principal debtor or creditor benefits/ the guarantors.
W Confusion which takes place in the person of / any
of the latter does not extinguish the obliga-/ | tion. (1193) /
Effect of merger in the person of principal
debtor or creditor.
Merger in the person of the principal debtor or creditor
extinguishes the obligation. Hence, the accessory obligation of
guaranty is also extinguished in accordance with the principle
that the accessory follows the principal..

- 'Under Section 50 of the Negotiable Instruments Law (Act No. 2031.), where
an instrument is negotiated back to a prior party, such party rnay reissue and further negotiate
the same. This niay be considered as an exception to the rule in Article 1275.

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EXAMPLE:
D is indebted to C with Gas guarantor. The merger of the
characters of debtor and creditor in D shall free G from liability as
guarantor,
Similarly, merger which takes place in the person of C benefits G
because the extinction of the principal obligation
carries with it that of the accessory obligation of guaranty. Effect
of merger in the person
of guarantor.
The extinguishment of the accessory obligation does not carry
 with it that of the principal obligation. Consequently, merger,
which takes place in the person of the guarantor, while it
extinguishes the guaranty, leaves the principal obli gation in
force.
EXAMPLE:
Suppose, in the example above, C assigns his credit to
E who, in turn, assigns the credit to G, the guarantor.
In this case, the contract of guaranty is extinguished. However, D's
obligation to pay the principal obligation subsists.
G now, as the new creditor, can demand payment from D.

JART. 1277. Confusion does not extinguish a joint

obligation except as regards the share
corresponding to the creditor or debtor in whom the two
characters concur. (1194) [

Confusion in a joint obligation.

Inajoint obligation, there are as many debts as there are
debtors and as many credits as there are creditors, the debts and/or
credits being considered distinct and separate from one
another. (Art. 1208.)
Each debtor has his own creditor to whom he is liable and
confusion taking place in the person of any debtor or creditor
does not affect the others. In other words, the confusion will
extinguish only the share corresponding to
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Art. 1277
253
EXTINGUISHMENT OF OBLIGATIONS
Confusion or Merger of Rights

the creditor or debtor in whom the two characters concur. (Art.

1277.)
EXAMPLE:

A, B and Care jointly liable to D in the amount of

P9,000.00 evidenced by a negotiable promissory note. D indorsed the
note to E, who, in turn, indorsed it to A.
In this case, A's share in the obligation is extinguished because
of confusion in his person. However, the indebtedness of B and Cin the amount of
P3,000.00 cach remains, because as to them there is no confusion. Consequently,
Band C would be liable to A, the new creditor, P3,000.00 each.

Confusion in a solidary obligation.

Merger in the person of one of the solidary debtors shall
extinguish the entire obligation because it is also a merger in the other
solidary debtors. (Art. 1215.) Remember that in a solidary
obligation there is only one obligation and every debtor is
individually responsible for the payment of the whole
obligation.
He who makes payment may claim reimbursement from his
co-debtors for the shares which correspond to them. (Art. 1217,
par. 2.)
EXAMPLE;

In the example given, if the obligation of A, B, and C is

solidary, the indorsement to A extinguishes the entire obligation
of P9,000,00. A can demand reimbursement from B and C..
 Here, the basis of the right of A is not the original obligation
which has been extinguished by the confusion which takes place in his
person but the confusion itself. It is as if A paid the entire debt. He can,
therefore, collect the proportionate shares belonging to B and C on
an implied contract of reimburse
Inent.

-o0o

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