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Article 1243.

Payment made to the creditor by the debtor after the latter has been
judicially ordered to retain the debt shall not be valid. (1165)
(1) There must be an order to the judge to retain the debts because a third person filed a writ
of attachment or garnishment.

(2) 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 made. Such payment
is considered as made in bad faith.

(3) It is applicable only in “debts” or “credits” not in property.

Article 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. (1166a)
(1) The creditor shall be paid only what has been stipulated upon because the contract
between the contracting parties is the law between them. The contract shall be respected.

(2) The debtor cannot compel creditor to accept a different obligation.

(3) A thing different from that due cannot be offered or demanded against the will of the
creditor or debtor.

(4) Even though the thing being offered as substitute is worth more than the very thing
agreed to be delivered.

(5) Personal positive or negative obligations, an act or forbearance cannot be substituted by

another act unless the creditor consents. The consent shall constitute a waiver of right.

(6) There are instances when this article does not apply.

(3.1) In a facultative obligations.

(3.2) In cases of dation in payment and novation.
(3.3) When there is waiver by the creditor.
Article 1245. 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. (n)
(1) Dation is the mode of extinguishing an obligation whereby the debtor alienates property
in favor of the creditor for the satisfaction of a monetary obligation. In short, the
obligation is money, the payment is property.

(2) The other names for dation in payment are Datio in solutum, Adjudicacion en pago, and
Payment in kind.

(3) The creditor is really buying the property of the debtor, but the payment is to be charged
against the obligation of the debtor to the creditor, so it must be governed by the contract
of sales.

(4) The law of sales governs because dation in payment may be considered a specie of sale in
which the amount of the money debt becomes the price of the thing alienated.
(5) The conveyance is, in effect; a novation of the contract.
Article 1246. When the obligation consists in the delivery if an indeterminate or generic
thing, whose quality and circumstances have not been stated, the creditor cannot demand a
thing of superior quality. Neither can the debtor deliver a thing of inferior quality. The
purpose of the obligation and other circumstances shall be take into consideration. (1167a)
(1) Creditor cannot demand a thing of superior quality, unless of course, he wishes to accept
one and the debtor agrees to it.

(2) Debtor cannot deliver a thing of inferior quality, unless he wants to deliver one of
superior quality, but creditor cannot be compelled to receive a thing of superior quality.

(3) The superior or inferior rule is applicable only on generic or indeterminate thing as to
their quality, and not to quantity.

(4) The benefit of this article may be waived by the creditor or by accepting a thing of
inferior quality, and by the debtor by delivering a thing of superior quality.
Article 1247. Unless it is otherwise stipulated, the extrajudicial expenses required by the
payment shall be for the account of the debtor. With regard to judicial costs, the Rules of
Court shall govern. (1168a)
(1) The extrajudicial expenses incurred during the payment must be borne by the debtor,
unless otherwise stipulated.

(2) The reason is that the obligation is extinguished when payment is made and it is,
therefore, the debtor who is primarily benefited.

(3) Losing Party generally pays judicial cost generally pays judicial cost. These are the
statutory amounts allowed to party to an action.
Article 1248. Unless there is an express stipulation to that effect, the creditor cannot be
compelled partially to receive the prestations in which the obligation consists. Neither may
the debtor be required to make partial payments.

However, when the debt is in part liquidated and in part unliquidated, the creditor
may demand and the debtor may effect the payment of the former without waiting for the
liquidation of the latter. (1169a)

(1) Debt is considered paid only when the thing or service in which the obligation consists
has been completely delivered or rendered.

(2) There are instances when partial payment is allowed.

(2.1) When there is stipulation.

(2.2) When the obligation is subject to different terms or periods or conditions.

(2.3) Payment of the share of a debtor in a joint obligation.

(2.4) When work is to be done by parts.

(2.5) When the debt is in part liquidated and in part unliquidated.

Article 1249. The payment of debts in money shall be made in the currency stipulated, and
if it is not possible to deliver such currency, then in the currency to which is legal tender in
the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other

mercantile documents shall produce the effect of payment only when they have been
cashed, or when through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in
abeyance. (1170)

(1) Legal tender is that currency in which a debtor can compel a creditor to accept in
payment of a debt in money, when tendered by the debtor in the right amount.

(2) All bills are valid legal tender for any amount.

(3) A check is not a legal tender, even if it is a manager’s check. So, the creditor cannot be
compelled to accept it.

(4) Acceptance of a commercial document is equivalent to payment when:

(4.1) the creditor is in estoppels or he had previously promised he would accept a check.

(4.2) the check has lost its value because of the fault of the creditor.

(4.3) the check has been cashed.

(5) All monetary obligations shall be settled in the Philippine Currency which is legal tender
in the Philippines.

Article1250. In case an extraordinary inflation or deflation of the currency stipulated

should supervene, the value of the currency at the time of the establishment of the
obligation shall be the basis of payment, unless there is an agreement to the contrary. (n)

(1) Inflation is the sharp, sudden increase in value of money or credit or both without a
corresponding increase in business transactions.

(2) Deflation is the sudden decrease of the value of money.

(3) The basis of payment is the value of the currency at the time the obligation is constituted
and not at the time of payment.

Article 1251. Payment shall be made in the place designated in the obligation.
There being no express stipulation and if the undertaking is to deliver a determinate
thing, the payment shall be made wherever the thing might be at the moment the obligation
was constituted.

In any other case the place of payment shall be the domicile of the debtor.

If the debtor changes his domiciles in bad faith or after he has incurred in delay, the
additional expenses shall be borne by him.

These provisions are without prejudice to venue under the Rules of Court. (1171a)

(1) Place where the obligation shall be paid.

(1.1)If there is a stipulation, at the place designated.

(1.2) If there is no stipulation.

(1.2.a) Delivery of a specific or determinate thing, payment shall be made at the

place where the thing was at the time of the perfection.

(1.2.b) Delivery of indeterminate thing, delivery or payment must be made at the

domicile of the debtor.

(2) Venue is the place where a court suit or action must be filed or instituted.

(3) Domicile is the place where he has his true fixed permanent home and to which place he,
whenever he is absent, has the intention of returning.

(4) Residence is only an element of domicile.

Article 1252. He who has various debts of the same kind in favor of one and the same
creditor, may declare at the time of making the payment, to which of them the same must
be applied.

Unless the parties so stipulate, or when the application of payment is made by the
party for whose benefit the term has been constituted, application shall not be made as to
debts which are not due.

If the debtor accepts from the creditor a receipt in which an application of payment
is made, the former cannot complain the same, unless there is a cause for invalidating the
contract. (1172a)

(1) Application of payment is the designation of the debt to which should be applied to a
payment made by a debtor who owes several debts in favor of the same creditor.

(2) The requisites for application of payment are:

(2.1) Two or more debts.

(2.2) Of the same kind.

(2.3) One debtor and one creditor.

(2.4) All debts are due.

(2.5) Tendered payment is not sufficient to extinguish all obligations.

(3) When application of payment is applicable even if obligations are not yet due.

(3.1) When the parties stipulate

(3.2) When application is made by the party for whose benefit the period or term is

(4) The right to choose belongs to the debtor unless otherwise agreed upon.

(5) Once application of payment is made, it cannot be revoked except with the consent of
both parties.

Article 1253. If the debt produces interest, payment of the principal shall not be deemed to
have been made until the interests have been covered. (1173)

(1) In the payment of an obligation producing interest when the amount being paid is not
sufficient to cover the principal and interest due, the amount paid must apply firs to the
interest, the excess if owing, shall be applied to the principal obligation.

Article 1254. When the payment cannot be applied in accordance with the preceding rules,
or if application cannot be inferred from other circumstances, the debt which is most
onerous to the debtor, among those due, shall be deemed to have been satisfied.
If the
debts due are of the same nature and burden, the payment shall be applied to all of them
proportionately. (1174a)

(1) Rules if no application of payment is made.

(1.1) Apply it to the most onerous, in case the debts are of different in nature.

(1.2) If both are of the same nature and burden, apply them proportionately.

(2) Examples of more burdensome or more onerous debts.

(2.1) Older debts in case of running accounts.

(2.2) Interest bearing debts.

(2.3) Debts with a penalty.

(2.4) Debts secured by mortgage or by pledge.

(2.5) Exclusive debt is more onerous than that of a solidary debt.

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