Example:

D is indebted to C in the amount of

P1,000. On the date of the maturity of the
obligation, payment was made by D to T, a
third person.
In this case, D is still liable to C. If T
delivered P700 to C, the payment by D is
valid only to the extent of P700. But D must
prove the delivery to C. Such proof, however,
is not necessary if, after the payment, T
acquired C’s right against D, or C ratified the
payment to T, or if before payment, D has
been led to believe by C’s conduct or fault
 ART. 1242. Payment
made in good faith to
any person in
possession of the credit
shall release the debtor.
(Art. 1242, NCC)
Payment to third person in
possession of credit
This article gives another instance when
there is a valid payment to a third person.
It must be observed that the “possession”
referred to under the above provision is
possession of the credit itself and not merely of
the document or instrument evidencing the
credit. Hence, mere possession of the instrument
(unless transferable by delivery) does not entitle
the holder to payment nor does payment
release the debtor. Furthermore, the payer must
act in good faith, that is, in the honest belief that
he is making a valid payment and that the
payee is the owner of the credit. Good faith is
presumed.
Example:
D is indebted to C in the amount of P1,000 which indebtedness
is evidenced by a promissory note signed by D in favor of C. C lost the
promissory note which was later found by T who demanded payment
from D.
Payment to T is not valid because T is the processor merely of
the document evidencing the credit and not of the credit itself.
If the promissory note is payable to bearer or holder, the
obligation will be extinguished if D pays T in good faith.
Similarly, if the promissory note was indorsed by C to T, under a
private agreement that T would not collect from D, payment by D in
good faith to T will also extinguish the debt. The right of C will be against
T.
 ART. 1243. Payment
made to the creditor by
the debtor after the
latter has been judicially
ordered to retain the
debt shall not be valid.
(Art. 1243, NCC)
When payment to creditor not valid.
In an action against the debtor who is
the creditor of another, the latter (the
debtor-stranger), during the pendency of
the case, may be ordered by the court (or
by any competent authority though it be
administrative) to retain the debt until the
right of the plaintiff, the creditor in the main
litigation is resolved.
Payment made subsequently by the
debtor-stranger shall not be valid if the
plaintiff wins the case and cannot collect
from the debtor to whom the payment is
Example:
D owes C P1,000. E, in turn owes D P1,000. In an action by C
against D, E, upon petition of C, may be ordered by the court hot to
pay D and to retain the debt in the meantime. In this case, the debt of E
is said to be “garnished” or is subjected to payment to C.
Any payment made by E to D in violation of the judicial order is
considered invalid under this article. In other words, C may still hold E
liable for the debt. Of course, should E be made to pay C, a quasi-
contractual obligation on the part of D is created, which is to return the
amount he had received from E. The payment by E to C shall extinguish
the obligation of D to C.
But the payment by E to D shall be valid if made after the order
of retention but before it is known to him. If D is also indebted to F, the
latter has no right to question the payment by E in violation of the order
of retention.
 ART. 1244. The debtor of a thing
cannot compel the creditor to receive a
different one, although the latter may be
of the same value as, or more valuable
than that which is due.
In obligations to do or not to do, an
act or forbearance cannot be substituted
by another act or forbearance against the
obligee’s will. (Art. 1244, NCC)
Every prestation due must be
complied with
1. The first paragraph refers to a real
obligation to deliver a specific thing. A thing
different from that due cannot be offered or
demanded against the will of the creditor or
debtor, as the case may be.

2. The second paragraph refers to personal

(positive and negative) obligations. The act
to be performed or the act prohibited
cannot be substituted against the obligee’s
will.
Example:
D obliged himself to deliver
to C a specific horse. D cannot
require C to accept another
horse although it commands a
higher price; neither can C
require D to deliver another
horse belonging to D although it
can be sold only at a much
lower price.