EXTINGUISHMENT OF

OBLIGATIONS
LLB1, GROUP 1
 PAYMENT OR PERFORMANCE

• PAYMENT IS THE FULFILLMENT OF THE

OBLIGATION BY THE REALIZATION OF THE
PURPOSES FOR WHICH IT WAS CONSTITUTED
(JURADO, 2010). (1998, 2009 BAR)
 CHARACTERISTICS OF PAYMENT

• 1. INTEGRITY

• 2. IDENTITY

• 3. INDIVISIBILITY
 KINDS OF PAYMENT

• NORMAL
WHEN THE DEBTOR VOLUNTARILY PERFORMS THE PRESTATION STIPULATED;

• ABNORMAL
WHEN HE IS FORCED BY MEANS OF A JUDICIAL PROCEEDING, EITHER TO COMPLY WITH THE
PRESTATION OR TO PAY THE INDEMNITY (TOLENTINO, 1991).
 REQUISITES OF A VALID PAYMENT

• THE PERSON WHO PAYS THE DEBT MUST BE THE DEBTOR;

• THE PERSON TO WHOM PAYMENT IS MADE MUST BE THE CREDITOR;
• THE THING TO BE PAID OR TO BE DELIVERED MUST BE THE PRECISE THING OR THE THING
REQUIRED TO BE DELIVERED BY THE CREDITOR;
• THE MANNER (IF EXPRESSLY AGREED UPON), TIME, AND PLACE OF PAYMENT, ETC.;
• ACCEPTANCE BY THE CREDITOR.
 IDENTITY OF PRESTATION

• REAL OBLIGATION
• SPECIFIC REAL OBLIGATION
• GENERIC REAL OBLIGATION
• PERSONAL OBLIGATION
• OBLIGATION TO PAY MONEY
 MOOT COURT

CITIBANK VS SABENIANO
 WHAT IS?

• CURRENCY
• LEGAL TENDER
• DEMAND DEPOSITS
• INSTRUMENTS/EVIDENCES OF CREDIT
 EFFECTS OF INFLATION

• EXTRAORDINARY INFLATION
• EXISTS WHEN THERE IS A DECREASE OR INCREASE IN THE PURCHASING POWER OF THE
PHILIPPINE CURRENCY WHICH IS UNUSUAL OR BEYOND THE COMMON FLUCTUATION IN THE
VALUE OF SAID CURRENCY AND SUCH DECREASE OR INCREASE COULD NOT HAVE BEEN
REASONABLY FORESEEN OR WAS MANIFESTLY BEYOND THE CONTEMPLATION OF THE PARTIES
AT THE TIME OF THE ESTABLISHMENT OF THE OBLIGATION (TOLENTINO, 2002).
 INTEGRITY OF PRESTATION

• 1. STRICT PAYMENT FOR THE ENTIRE PRESTATION (ARTICLE 1248)

• 2. SUBSTANTIAL PAYMENT/PERFORMANCE (ARTICLES 1234-1235)
 MOOT COURT

VITARICH VS LOSIN
 WHO MAY DEMAND PAYMENT?

• PERSONS ENTITLED TO RECEIVE THE PAYMENT:

• THE PERSON IN WHOSE FAVOR THE OBLIGATION HAS BEEN CONSTITUTED;
• HIS SUCCESSOR IN INTEREST; OR
• ANY PERSON AUTHORIZED TO RECEIVE IT (NCC, ART. 1240).
 WHO MAY DEMAND PAYMENT?
PAYMENT TO AN UNAUTHORIZED PERSON
• GR: PAYMENT TO AN UNAUTHORIZED PERSON IS NOT A VALID PAYMENT (NCC, ART. 1241).
WHO MAY DEMAND PAYMENT?
PAYMENT TO A THIRD PERSON
 MOOT COURT

PCIB VS CA
 WHO MUST PAY?

• THE FOLLOWING PERSONS MAY EFFECT PAYMENT AND COMPEL THE CREDITOR TO ACCEPT
THE PAYMENT:
• 1. DEBTOR HIMSELF;
• 2. HIS HEIRS AND ASSIGNS;
• 3. HIS AGENTS AND REPRESENTATIVES;
• 4. PERSONS HAVING INTEREST IN THE OBLIGATION; OR
• 5. PAYMENT BY A THIRD PERSON.
 WHO MUST PAY?
PAYMENT MADE BY THIRD PERSONS
• GR: THE CREDITOR IS NOT BOUND TO ACCEPT PAYMENT OR PERFORMANCE BY A THIRD
PERSON.
• XPNS:
• 1. CONTRARY STIPULATION (NCC, ART. 1236).
 WHERE PAYMENT MUST BE MADE?

• GR: PAYMENT MUST BE MADE IN THE PLACE DESIGNATED IN THE OBLIGATION (NCC, ART.
1251).
• XPN: IF THERE IS NO EXPRESS DESIGNATION OR STIPULATION IN THE OBLIGATION:
• 1. DELIVER A SPECIFIC/DETERMINATE THING
• AT THE PLACE WHERE THE THING WAS AT THE PERFECTION OF THE CONTRACT.

• 2. GENERIC THING
• AT THE DOMICILE OF THE DEBTOR
WHEN PAYMENT MUST BE MADE?
 SPECIAL FORMS OF PAYMENT
DATION IN PAYMENT

• ALIENATION BY THE DEBTOR OF A PARTICULAR PROPERTY IN FAVOR OF HIS CREDITOR, WITH

THE LATTER’S CONSENT, FOR THE SATISFACTION OF THE FORMER’S MONEY OBLIGATION TO
THE LATTER, WITH THE EFFECT OF EXTINGUISHING THE SAID MONEY OBLIGATION.
•
 SPECIAL FORMS OF PAYMENT
DACION EN PAGO
• THE REQUISITES FOR DACION EN PAGO ARE:
• 1. THERE MUST BE A PERFORMANCE OF THE PRESTATION IN LIEU OF PAYMENT (ANIMO SOLVENDI)
WHICH MAY CONSIST IN THE DELIVERY OF A CORPOREAL THING OR A REAL RIGHT OR A CREDIT
AGAINST THE THIRD PERSON;
• 2. THERE MUST BE SOME DIFFERENCE BETWEEN THE PRESTATION DUE AND THAT WHICH IS GIVEN IN
SUBSTITUTION (ALIUD PRO ALIO); AND
• 3. THERE MUST BE AN AGREEMENT BETWEEN THE CREDITOR AND DEBTOR THAT THE OBLIGATION IS
IMMEDIATELY EXTINGUISHED BY REASON OF THE PERFORMANCE OF A PRESTATION DIFFERENT
FROM THAT DUE (CALTEX PHILIPPINES, INC. V. IAC, G.R. NO. 72703, NOVEMBER 13, 1992).
 MOOT COURT

•LUZON DEVELOPMENT BANK VS ENRIQUEZ

 SPECIAL FORMS OF PAYMENT
PAYMENT BY CESSION

• DEBTOR CEDES HIS PROPERTY TO HIS CREDITORS SO THE LATTER MAY SELL THE SAME AND THE
PROCEEDS REALIZED APPLIED TO THE DEBTS OF THE DEBTOR.
 SPECIAL FORMS OF PAYMENT
PAYMENT BY CESSION
• CIRCUMSTANCES EVIDENCING PAYMENT BY CESSION
• DEBTOR ABANDONS ALL OF HIS PROPERTY FOR THE BENEFIT OF HIS CREDITORS IN ORDER
THAT FROM THE PROCEEDS THEREOF, THE LATTER MAY OBTAIN PAYMENT OF CREDITS.
• REQUISITES:
• 1. PLURALITY OF DEBTS;
• 2. PARTIAL OR RELATIVE INSOLVENCY OF THE DEBTOR; AND
• 3. ACCEPTANCE OF THE CESSION BY THE CREDITORS
DATION IN PAYMENT V. PAYMENT IN CESSION
DATION IN PAYMENT PAYMENT IN CESSION

Number of creditors

Maybe one creditor. Plurality of creditors.

Financial condition of the debtor

Not necessarily in state of Debtor must be partially or relatively

financial difficulty. insolvent.
 DATION IN PAYMENT V. PAYMENT IN CESSION
Object

Thing delivered is considered as Universality or property of debtor is what is

equivalent of performance. ceded.

Extent of the extinguishment

Payment extinguishes obligation to
the extent of the value of the thing Merely releases debtor for net proceeds of
delivered as agreed upon, proved things ceded or assigned, unless there is
or implied from the conduct of the contrary intention.
creditor.
 DATION IN PAYMENT V. PAYMENT IN CESSION

Ownership
Ownership is transferred to CR
Ownership is not transferred.
upon delivery.
Novation
An act of novation. Not an act of novation.
Presumption of insolvency
Does not presuppose insolvency. Presupposes insolvency.
 SPECIAL FORMS OF PAYMENT
APPLICATION OF PAYMENT

• DESIGNATION OF THE PARTICULAR DEBT BEING PAID BY THE DEBTOR WHO HAS TWO OR
MORE DEBTS OR OBLIGATIONS OF THE SAME KIND IN FAVOR OF THE SAME CREDITOR TO
WHOM THE PAYMENT IS MADE .
 SPECIAL FORMS OF PAYMENT
APPLICATION OF PAYMENT
• REQUISITES:
• 1. THERE IS ONLY ONE DEBTOR AND CREDITOR;
• 2. THE DEBTOR OWES THE CREDITOR TWO OR MORE DEBTS;
• 3. DEBTS ARE OF THE SAME KIND OR IDENTICAL NATURE;
• E.G. BOTH DEBTS ARE MONEY OBLIGATIONS OBTAINED ON DIFFERENT DATES.
• 4. ALL DEBTS ARE DUE AND DEMANDABLE, EXCEPT:
• A. WHEN THERE IS MUTUAL AGREEMENT BETWEEN THE PARTIES (TOLENTINO, 2002);
• B. THE APPLICATION IS MADE BY THE PARTY FOR WHOSE BENEFIT THE TERM HAS BEEN CONSTITUTED [NCC, ART. 1252(1]).
• 5. THE PAYMENT MADE IS NOT SUFFICIENT TO COVER ALL OBLIGATIONS.
 MOOT COURT

ASJ CORPORATION VS EVANGELISTA

 SPECIAL FORMS OF PAYMENT
TENDER OF PAYMENT
• VOLUNTARY ACT OF THE DEBTOR WHEREBY HE OFFERS TO THE CREDITOR FOR ACCEPTANCE
THE IMMEDIATE PERFORMANCE OF THE FORMER’S OBLIGATION TO THE LATTER.
 MOOT COURT

DALTON VS FGR REALTY AND DEVELOPMENT CORP

 SPECIAL FORMS OF PAYMENT
CONSIGNATION

• ACT OF DEPOSITING THE OBJECT OF THE OBLIGATION WITH THE COURT OR COMPETENT
AUTHORITY AFTER THE CREDITOR HAS UNJUSTIFIABLY REFUSED TO ACCEPT THE SAME OR IS
NOT IN A POSITION TO ACCEPT IT DUE TO CERTAIN REASONS OR CIRCUMSTANCES.
 TENDER OF PAYMENT V. CONSIGNATION
TENDER OF PAYMENT CONSIGNATION
Nature

Antecedent of consignation or Principal or consummating act for the

preliminary act to consignation. extinguishment of the obligation.
Effect
It does not by itself extinguish the It extinguishes the obligation when
obligation. declared valid.
Character
Judicial for it requires the filing of
Extrajudicial. a complaint in court (Pineda,
2000).
LOSS OF THE THING DUE