Lecture 7 Application of Payment

 how the payments will be made over those multiple debts

1st rule/GEN. RULE

 is the debtor who chooses how to apply the payment we will make
 this right applies only to those debts which are due demandable (so hindi sya pwede mag-apply ng payments to
debt which are not yet due)
 unless, there’s a stipulation to the contrary or when the application is made by the party for whose benefit the
term was constituted. (so if there is a debt which are not yet due because the term was not yet arrive but that
term was constituted for the benefit of one party then pwede siyang mag-apply ng debts to that debt kahit hindi
siya due) (pwede niyang ibigay yon sa creditor tapos if the debtor gave it to the creditor and creditor mix the
application and tinanggap niya yun, hindi na pwedeng irevoke or mag complain si debtor tungkol dun sa
application na ginagawa ni creditor.

RULES ON HOW PAYMENTS ARE APPLIED

1. The debtor has a first choice to make the application of payments of course subject to a contrary stipulation.
 once the debtor has made his choice, this is the irrevocable unless the creditor agrees na paltan ni debtor yung
choice niya.
2. The debtor does not make an application, pwedeng gawin ni creditor yun pero kailangan niyang mag issue ng
receipt as to how the creditor made the application of payment.
3. If there’s no application made or the application is invalid, the payment is applied to the most onerous debt.
(Onerous- a debt is most if it has a greater burden)

HOW DO WE DETERMINED WHICH IS THE MOST ONEROUS DEBT

(For ex. Ako, may dalawa akong utang kay dionisia, yung isa walang interest yung pangalawa may interest. In that case,
if no application was made the payment will be applied to the loan or to debt na may interest. That if interest, make it
more onerous, kase mas malaki yung burden pag may interest ang isang loan compare dun sa isang na wala. So if there
are 2 debts, one is interest bearing one has no interest iaapply yun sa interest bearing loan)

 between the sole debtor and the solidary debtor. (there only one debtor for one obligation and solidary debtors
in another obligations iaapply yung payments dun sa debt when there’s only one debtor) (for ex. Ako, kame ni
sol may utang kame kay dionisia tapos may separate akong utang kay dionisia. If I make payment and no
appicalication was made the payment will be applied to the debt na ako lang magisa kay dionisia kase that is
more onerous than the debt which sol and I will have proof againts the in favor of dionisia.
 if ever ther’s a sole debtor us another debt with this solidary debtors iaapply yun dun sa debt with the sole
debtor.
4. WHEN THERE IS COLLATERAL
 kapag may collateral it becomes more onerous as compared to an obligation when there is no collateral.

(dun sa utang ko kay dionisia, 2 utang yung isa nakasangla yung lupa ko, yung isa walang nakasangla mas onerous yung
may sangla.

 when there’s a penal clause (if one debt has a penal clause and another debt has no penal clause, application
will be made to the one with penal clause kase mas mabigat dun)
 that is how we determined which has more onerous obligation
 the debtor has a first choice which is irregularly unless the creditor agrees to a change in the application made
by the debtor
2. The debtor does not make an application, pwedeng iaaply ni creditor yun as long as siya ng resibo showing how the
creditor applied the payment made.

3. If there’s no application is made or the application is invalid the payment shall be applied to the most onerous debt.

 if the debt are equal nature and burden, then the payment shall be applied to then proportionately. (if may 2
akong utang kay dionisia, parehong may interest. Tapos same yung amount nung interst nila, the payment I will
make will be the both debt proportionately pero kung mas mataas yung interst nung isa compare dun sa isa edi
dun siya iaapply completely to the more onerous debt.
 application of payment neccesarry means that the payments made by the debtor is not sufficient cover all his
debts. (pero it must be sufficient to cover atleast one debt kase if it cannot cover atleast one debt, discretionary
na on the part of creditor kung tatanggapin niya yun.)
 if the debtor does not choose and the creditor makes the application through a receipt. In this case, may chance
parin si debtor na palitan yung application ni creditor through the receipt (i have 2 debts to dionisia. Hindi ako
nagbigay ng application, siya na yung magaapply binibigyan niya ako ng receipt. I can look at that receipt and
determine kung okay na yung application ni dionisia for me. If not pwede kong palitan kasi the first choice is
mine as the debtor. Kahit na hindi ko ginawa, I still have that right if the creditor made it through a recit at
pwede kung paltan dun sa recit.)
 If merong interest payment will be made first to the principal when the interest is full paid. (so kailangan mo
munang mabayadan yung buong interest before the principal can be paid) (this is mandatory meaning yun yung
kailangang sundin pero it can be waived. While kailangan siyang sundin, it depends on the party, on the debtor
actually kung susundin niya ang sa creditor kung tatanggapin niya yung payments to the principal

Default Rule- pag may interest iaaply mo na lahat sa interest bago bayaran yung sa principal but it can be waived by the
parties.

 if payment cannot be applied be according to the previous rules or from other circumstance, the payment
should apply to the most onerous obligation.
 If there are the same nature and burden, mutual application (tapos it cannot determined kung ano yung pinaka
onerous proportionate yung application.

RULES

1. So there’s only one debt or one credit, one debtor and one creditor but there are multiple debts at the same time. (so
the debt must be at the same time for the rules of application of payment to apply)

2. Payments may only be made to those debts which are already due, unless the agreement to the contarary na pwede
mong iaapply sa dipa due.

3. At the time of payment, si debtor yung mamimili kung saan siya magaapply ng payment.

Note: if the debtor declares on where he will pay, on what debt he will pay for, then the creditor does not make that
application based on the debtor’s directives, this will result in MORA ACCEPIENDI. Beacause the receipt not be made
based on the debtor’s choice of application. (for ex. Sabi ni debtor dito ko na iaapply ang payment sa loan A, pero ayaw
gawin ni creditor yun, iniapply nya sa loan B. There will be MORA ACCIPIENDI with respect to loan A. Delay on the part of
the creditor)

4. Once the right to apply the payments has been made, the application cannot be change unless the creditor consents,
na paltan
5. If the debtor does not make an application, the creditor mo may make the designation through a receipt (once the
application has been made through a recit by creditor, pwedeng paltan ito ni debtor, or pwede niyang tanggapin

6. Unless otherwise stipulated, payment for the principal upon interest bearing debt is not made unless the interest is
persatisfied. (so pag may interest ang utang, iaaply muna sa interest bago iaapply sa principal.

7. If the creditor does not an application, payment shall be applied to the most onerous obligation. (the most onerous
obligation is the one which has the heaviest burden)

8. When the debtor equally onerous or hindi madertimine kung ano yung pinaka onerous then a payment shall
remade/shall be applied proportionately.

Payment by Cession- is the assignment of party, is payment of a debt (it will release the debtor only in the amount of
the net proceeds of the thing assigned unless otherwise stipulated)

 so what happens in cession, is that (si debtor I-aauthorized niya yung creditor niya na ibenta yung isang
property tapos pag nabenta na yung property na yun, in proceeds nung sale will be applied to the debt.
 the proceed of the sale , yun lang yung amount na matatanggal dun sa obligation unless the duties agree
otherwise

Ano yung need para magkaroon ng payment by cession?

 First, there must be multiple creditors

 Second, the debtor is partially insolvent rule that he cannot make complete payment pero may property siya.
 Third, the assignment must involved all of the debtors property, so lahat ng property niyang, pwedeng ibenta ng
creditors niya para masettle yung utang
 Fourth, the payment by cession if be accoupled by the creditors

If you will notice, payment by cession is similar to dacion en pago

DIFFERENCE

Dacion- there is one creditor (hindi kailangan ng insolvent yung debtor) (hindi lahat ng properties ni debtor involved)
(the creditor becomes the owner of the property)

Payment by Cession- there are multiple creditors (required na insolvent yung debtor) (involve lahat ng properties niya)
(the creditors only get the right to sell the debtors property, tapos yung para sa makukulang sa pagbenta yun yung
iaapply sa credits nila)

 The most important thing to come in ber about is that the payment by cession is that the creditor of the
property, they only given the right to sell the property.
 General rule is that it extinguishes the obligation only to the extent of the value or the proceeds of the side
unless otherwise agreed upon.
 The main difference between dacion and cession.

Dacion- si creditor yung magiging may ari nung property

Cession- binibigyan lang ni creditor ng right na ibenta yung property ni insolvent debtor.

Tender and Consignation (tender- is the act of operating payment or performance) (consignation- is yung gagawin ni
debtor pag ang offers siya ng payment or performance tapos hindi tinanggap ni creditor.

2 STEPS TO TENDER AND CONSIGNATION

1. Tender (to offer)

2. Consignation (to deposit) consigntion- is the act of deposting due thing or amount due with the court after the
creditor refuses to receive it or fails to received it.

EFFECT OF CONSIGNATION

 Once consignation has been properly made it will release the debtor from liability over the obligation.
 Generally, for consignation to be valid even without prior tender and the tender must be refused.
 We cannot make a valid consignation if there’s no tender made (pero may instances where consignation can be
valid even without prior tender of payment.)

1. When the creditor is absent or unknown or is not in the place of payment (so kunwari bayarin na, dala mo na yung
pera mo iaabot mo na sa creditor pero wala siya dun. So, a creditor failed to received it. In that case, there’s no tender
required kase hindi mo nga mahanap yung tao pwede ka na mag consignation.

2. When is tender not required, when the creditor is incapacited to receive the payment tender due. (for ex. Naging due
na yung utang, magaabot na ng bayad si debtor pero nabaliw si creditor. In that case, wala ng capacity to receive si
creditor kase baliw na siya. Pwede ng ideposit or iconsign ni debtor yung payment sa court.

3. Tender is not required if the creditor refuses to give a receipt without just cost. (syempre magababayad ka, kailangan
iissuehan ka ng resibo and kung hindi siya magiissue ng resibo, wala siyang basis for not issuing the receipt pwede mong
iconsign yung debt in a court.)

4. Tender is not required when there all multiple persons claiming the same right to collect. (for ex. may utang nasa
ibang bansa yung pinaguutangan tapos may may taong lumapit sayo sayo, parehong nagpapakita sayo ng iauthorized
nung creditor mo. In that case, there are multiple persons claiming the right to collect, we don’t need to offer kase pag
inooffer mo kukunin niya. For sure, so icconsign mo nalang, para sila walang yung magaway sa korte kung sino yung
pwedeng maningil sa kanilang dalawa.)

5. When the title of the obligation has been lost (for ex. gumawa ka ng papel. I promised to pay dionisia on dec. 30,
tapos pagdating ng dec 30 nawawala na ni dionsia yung papel na yun. Just consign the payment to the court tapos
bahala na si dionisia maghanp nung papel para ma withdraw niya.)

ANO YUNG KAILANGANG MERON FOR CONSIGNATION TO BE VALID

1. The debt must be due and valid. (kung walang debt na due, edi hindi mo pa kailangang magbayad. Then you cannot
make payment of consignation)

2. There’s valid tender and subsequent refusal by creditor to receive payment without just cast.

3. Kailangan ng notice. The first noticeof consignation to the interested parties (before you make the actual consignation
in court kailangan mo munang bigyan ng notice yung interested party.)

INTERESTED PARTY- yung term kase merong guarantor, merong mga ibang tao na interested in the performance of the
obligation/ kailangan muna sila manotify ng bago ka mag consign, alam nila na magcoconsign ka na.

 After notice of consignation, yung actual consignation in court (bibigay mo na yung oera dun sa court. Sabihin
mo na ayaw mo tanggapin dito nalang ilalagay and then there,s a second notice to the interested party or
parties na you have already made actual consignation.

1. Actual Consignation
2. Second notice (yung consignation na ginawa mo, bago niyo tanggapin yung pera. Pag sinabi niyang “oh, valid tong
consignation mo, iwan mo na dun”)

 After the first notice, you will file a petition for consignation and then the court will determine if the
consignation is proper saka niya sasabihin yung sebtror ideposit

THERE’S ANOTHER INSTANCE WHEN TENDER, IT NOT REQUIRED PRIOR TO VALID CONSIGNATION

 Which is when creditor, previously notified to debtor na kahit magbigay siya ng bayad ay hindi tatanggapin.
 We went to requisites for validity, kung may wala ng isa dun, hindi na valid yung consignation kailangan munang
mag notice sa mga interested party bago ka magcoconsign kasi baka may ibang tao na maaapektuhan dun sa
pagcoconsign mo.
 If the process is not strictly complied with then the consignation with then the consignation will consider invalid.

HOW IS CONSIGNATION DONE?

 Pafile ka muna ng action to the court for consignation tapos idedeposit mo yung amount due sa court
 So it is done by depositing to the court tapos by giving proof of the tender and the notice of consignation. (so
hindi tatanggapin ng court yung pag coconsign mo unless you show proof that you made the tender or the
tender’s not required and that he made notice for consignation ) (tsaka lang tanggapin nung court yung deposit
mo)
 Consignation most comply with several requirements for payments

1. ARTICLE 1233-Payment is complete hindika pwedeng mag consign ng partial lang

ARTICLE 1234- Parties have free disposal of the thing, the capacity to alienable

ARTICLE 1244- About the value, with respect to determinate things

ARTICLE 1246- If it is generic, yung quality

ARTICLE 1248- Same sa partial performance

ARTICLE 1249- Sa stipulation currency

ARTICLE 1253- Payment ng interest before the principal

 So kailangan may compliance also aside from the process of consignation, ay yung compliance court this
requirements of payment

WHAT HAPPENS WHEN CONSIGNATION IS VALID?

 When the consignation is valid, since nasa extinguishedment tayo ng obligations. The valid consignation will
extinguish the obligation.
 Tapos yung cost mga cost na naenter ni debtor sa pagpapaconsign since hindi niya naman kasalanan yung kaya
siya dumaan sa proseso na yun ay the cost can be the charge dun sa creditor if the consignation is proper.
 If the consignation is proper, if there is complience with the requirement for payment under the civil code and
yung process with consignation
 Once the court consider the consignation as proper pwede niyo na Ipa extinguish yung obligation niya para wala
siyang iniisip (pero kung si debtor yung magbago ng isip, pwede niyang iwithdraw yung thing na kononsign niya
to keep the obligation intact.) (before the creditor accept to consignation or before the court consider the
consignation as proper) (so pag pag naideposit na ni deptor yung thing pwede niya pang iwithdraw yun bago
iaccept ni creditor yung consignation or bago ideclare ng court through a decision na proper yung consignation.)
  Kase kapag naconsign mo na through the proper way na yung obligation mo. So let the creditor deal with the
process

WHAT HAPPENS IF THE CREDITOR AUTHORIZE THE WITHDRAWAL AFTER THE CONSIGNATION HAS BEEN DONE?

 In that case, the creditor loses preference over the thing and the co debtors and guarantors and sureties will be
released from the obligation

WHAT DOES THIS MEAN WHEN A CREDITOR ONES REFERENCE OVER THE THING?

 Means na if there are other persons with interest over the thing which was deposit. (tapos may, he has a better
right, once the creditor authorized withdrawal of the consignation. Pantay pantay na siya, wala na siyang
preference, wala na siyang benefits over other creditors over the same thing.) (tapos yung mga co debtors, dito
na nagconsign marerelease din. Tapos kung merong nag guarantee or merong sureties yung mga third person na
nagsesecure ng debts they will also be released.

WHAT IF THE DEBT IS SOLIDARY?

 Release padin yung solidary debtors pero liable parin sila for their shares to the debtor who made the
consignation.

PROCESS OF CONSIGNATION

1. There’s a debt which is due and valid

2. There’s tender of payment made to the creditor (tender or offer win refuse) (tender’s not required)

3. Giving of the first notice of consignation to the interested parties

4. Filing for action of consignation and the deposit of the thing in court.

5. May second notice na nagawa yung consignation. After the second notice, maglalabas na yung court decisions niya
kung proper ba yung consignation niya or hindi

WHAT HAPPENS IF THERE’S NO FIRST NOTICE?

 If ther’s no first notice, this will not affect the validity of the consignation pero yung expenses na dapat ay si
creditor na yung magbabayad ay si debtor parin ang, hindi pwedeng singilin ni debtor sa creditor niya yun kase
the first notice.
 The purpose of the first notice is pera hindi na sila dumaan sa process of consignation or kung di mo ginawa yun
either idismiss ni court yung application mo na hindi ka nagfile ng first notice or tanggapin parin ni court pero
sabihinniya na hindi ka pwede maningil nung mga expensen mo sa mga creditor mo.