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Obligations are extinguished:

(1) By payment or performance


(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and debtor;
(5) By compensation;
(6) By novation.
Other causes of extinguishment of obligations, such as annulment, rescission, fulfillment of a resolutory
condition, and prescription, are governed elsewhere in this Code. (1156a)
Ang mga obligasyon ay mawawala o matatapos kapag nangyari na ang mgasumusunod na bagay:
(1.) Sa pagbabayad o pag ganap;
(2.) Sa pagkawala ng bagay na kailangan ibayad o ibigay;
(3.) Sa pagbibigay ng kapatawaran o ng pagbabalewala ng utang;
(4.) Ang pagsasama sa iisang tao ng obligasyon ng pagiging nagpautang atumutang;
(5.) Palitan ng obligasyon;
(6.) Pagpapalit ng panibagong obligasyon.
Ang mga ibang dahilan ng pagkatapos o pagkawala ng obligasyon katulad ngannulment, rescission,
at pagsagawa o katuparan ng resolutory condition, and prescription, ay pinamamahalaan ng ibang artikulo
mula sa Code na ito.
Other causes of Terminating Obligations:
1.Waiver or Renunciation
2.Mutual Agreement
3.Compromise
4.Fulfillment of Resolutory Condition (Art 1179)
5.Expiration of Resolutory Term (Art 1139)
6.Prescriptio
7.Death of the debtor when the obligation is purely personal
8.Decision or will of one of the parties in certain contracts like agency, partnership
9.Happening of unforeseen events
10.Abandonment of the property charged with an obligation
**no case cited // Each paragraph shall be discussed under specific Articles going through the rest of Chapter 4
indicating each that were enumerated to extinguish obligation.
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Article 1232
Payment means not only the delivery of money but also the performance, in any other manner, of an
obligation.
Ang pagbabayad ay hindi lamang ang pagdadala ng pera ito rin ay may kasamang pagsasagawa, kahit sa ano
mang kaparaan, ng isang obligasyon.
‘Payment’ defined
Payment is that mode of extinguishing obligations which is consists of:

 The delivery of money, or


 The performance in any other manner of an obligation.
(Example: rendition of the required service)
Article 1233
A debt shall not be understood to have been paid unless the thing or service in which the obligation consists
has been completely delivered or rendered, as the case may be. (1157)
Ang utang ay hindi naiintindihang nabayaran na hangga’t ang bagay or serbisyo na nakapaloob sa obligasyon
ay buong nabigay na o nagawa na, alin man sa dalawang nabanggit.
Discussion:
Payment extinguishes debt.
Evidence of payment of burden of proof
Presentation of receipt is a good proof of payment. Therefore, a debtor can demand the issuance of a receipt from
the creditor once his debt is paid. Consignation may be requested by the debtor in case the creditor refused to
issue the receipt. The burden of proof of payment lies on the debtor, after the creditor has shown that the debt
exists.
Article 1237
Whoever pays on behalf of the debtor without the knowledge or against the will of the latter, cannot compel
the creditor to subrogate him in his rights, such as those arising from a mortgage, guaranty, or penalty.
(1159a)
Sinuman magbayad sa ngalan ng umutang ng hindi nito alam o hindi ayon sa kanyang kagustuhan, hindi mapipilit
ang nagpautang upang mapalitan sya sa kanyang mga karapatan, tulad ng mga bagay mula sa pagkasanla,
garantiya o multa.
DISCUSSION
Consequences of Payment Made By A Third Person Without The Knowledge or Against The Will of The Debtor

1. He can only recover the payment that is beneficial to the debtor.


2. He cannot place himself to have all the rights pertaining to the debtor
Article 1238
Payment made by a third person who does not intend to be reimbursed by the debtor is deemed to be a
donation, which requires the debtor’s consent. But the payment is in any case valid as to the creditor who
has accepted it. (n)

Ang bayad na ibinigay ng ikatlong tao para sa inutang ng isang tao na hindi na inaasahang maibalik ang
kabayaran sa kanya ay kinokonsidera na isang donasyon, na nangangailangan ng kaalaman ng nagpautang. Ito
ay may bisa kung sakalit tinanggap ito ng nagpautang.
Article 1239
In obligations to give, payment made by one who does not have the free disposal of the thing due and
capacity to alienate it shall not be valid, without prejudice to the provisions of Article 1427 under the
Title on “Natural Obligations.” (1160a)
Sa obligasyon ng pagbibigay, walang bisa ang pagbabayad na ginawa ng isang tao na walang kalayaan sa
pagbabayad ng bagay na may palugit, at may kakayahan na ilipat ang pagmamay-ari nito ng walang pagkiling
sa probisyon ng artikulo 1427 na sumasailalim sa titulo ng Natural na Obligasyon.
Discussion:
Free disposal of the thing due means that the thing to be delivered must not be subject to any claim or lien or
encumbrance of a third person (e.g. mortgage, pledge)
Capacity to alienate means that the person is not incapacitated to enter into contracts and for that matter, to make
a disposition of the thing due.
Illustrations:
Joana agreed to sell to Cardo a car. If the car set to be delivered by cardo by Joana owned by Lola Kap without
any agreement and authority to the Joana to sell the car , the same can be recovered by Lola Kap the payment is
not valid, Joana does not have free disposal of the car the thing to be delivered must not be subject to any claim
or lien or encumbrance of a third person
Article 1240
Payment shall be made to the person in whose favor the obligation has been constituted, or his successor
in interests, or any person authorized to receive.
Ang pagbabayad ay maaaring lang gawin sa taong kung saan ay may pabor ang obligasyon na kung anong
nilalaman, o sa kanyang tagapagmana na may interes, o kahit kaninong tao na pinahihintulutan na tumanggap.
Everett Steamship Corporation v. Bank of the Philippines Islands
Facts: Plaintiff is a corporation in Manila, the majority stockholders of which are American and British citizens,
Defendant is a banking corporation. Before December 1941, plaintiff had a current account with the defendant,
and on December 29, 1941, the plaintiff had a valid balance in its favor of P53, 175.51, Philippine currency.
During the Japanese occupation, the officers of the plaintiff corporation were interned by the Japanese Armed
Forces inside the UST compound. By order of the Japanese Military Administration, the defendant was made to
turn over the account of the plaintiff to the Bank of Taiwan, the depository of Enemy Properties. The Defendant
thus gave to the Bank of Taiwan a check in the sum of P53, 175.51. After liberation, plaintiff wanted to draw the
P53, 175.51 it thought it still had, from the defendant bank. The latter pleaded payment to the Bank of Taiwan.
Issue: May the plaintiff still recover from the defendant?
Held: “In the instance case, the issue involved is whether the Japanese Military Administration could validly
require the defendant-appellant to transfer to the Bank of Taiwan the balance of plaintiff’s current account with
the defendant.”
“In the Haw Pia case the same issue was involved. The Court ruled in the Haw Pia case that the collection by the
Bank of Taiwan of the China Banking Corporation’s credit from the latter’s debtor, by order of the Japanese
military administrator, was valid and released the defendant’s obligation to the plaintiff”.
Article 1241
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Payment to a person who is incapacitated to admnister his property shall be valid if he has kept the thing
delivered, or insofar as the payment has been beneficial to him.
Payment made to a third person shall also be valid insofar as it has redounded to the benefit of the
creditor. Such benefit to the creditor need not be proved in the following cases:
1.) If after the payment, the third person acquires the creditor’s rights;
2.) If the creditor ratifies the payment to the third person;
3.) If by the creditor’s conduct, the debtor has been led to believe that the third person had authority to
receive the payment. (1163a)
Ang kabayaran sa isang taong walang kakayahang pangasiwaan ang kanyang ari-arian ay balido kapag nabigay
nya ang bagay na hinihingi sa kanya, o hangga’t ang kabayaran ay naging benepisyal sa kanya.
Ang kabayarang ibinigay sa ikatlong tao ay balido hangga’t ang naging bunga nito ay benepisyal sa
inutangan. Ang benepisyong tinutuloy ay kinakailangang patunayan ng mga sumusunod:
1.) Kung pagkatapos ng kabayaran, ang pangatlong tao ay nakuha ang karapatan ng pinakautangan;
2.) Kung ni-ratify ng pinagkautangan ang kabayaran para sa pangatlong tao;
3.) Kung sa inaasal ng pinagkautangan, napaniwala niya ang may utang na ang pangatlong tao ang
may kapangyarihang tanggapin ang kabayaran.
Discussion:
Artile 1241 applies to payments made by the debtor with the intention to extinguish his debts. The rationale
behind this article is that, since the creditor is incapacitated and cannot administer his own property, the creditor
needs a legal representative or a guardian to receive the payment. If there is none, the debtor may consign the
thing in court so that he will be released from the obligation.
Moreover, Article 1241 is an exception to the rule made by Article 1240 that states “Payment shall be made to
teh person in whose favor the obligation has been constituted, or his successor in interest, or any prson authorized
to receive it.” Payment to a third person may still be valid as long the creditor is being benefited. Therefore, the
validity of the payment is co-extensive to the benefit the creditor receives. Nevertheless, this benefits require
evidence to establish the extent it was enjoyed.
Article 1242
Article 1242
Payment made in good faith to any person in possession of the credit shall release the debtor.
Ang pagbayad ng may utang na ginawa nang walang daya o malisya sa tao na may hawak ng utang ay
magpapalaya sa nangutang sa kaniyang obligasyon.
Discussion
This law is intended to protect the debtor from being required to pay again the payee.
Possession of credit
Possession of credit does not refer to the real creditor or his heirs, or the person authorized by him or by law
under Article 1240. It refers to the person who has the appearance of the creditor but who actually is not.
This is different from possession of the document representing the document. For example, if a document which
is payable to order or to a definite person is in the possession of someone but without any indorsement, the
possession is not of the credit but only of the title, and payment to the holder is not a valid payment.
The possession of credit means an actual and legal relation between the credit and the possessor of the
document. For example, an instrument payable to bearer is held by the person to whom it is intended.
Case Illustration
Ponente: C.J. Arellano
Facts:
Panganiban is the owner of a parcel of land. He sold the land to Gonzales with a right to repurchase. During the
war, Panganiban failed to find Gonzales, and the land was attached by the revolutionary government. Since
Panganiban has a right to repurchase, he paid the repurchase price to the revolutionary government in good
faith. It turned out however that Gonzales sold the land to Cuevas. Panganiban brought an action to recover the
land from Cuevas.
Issue: Whether or not Panganiban has the right to recover the land from Cuevas, given that he already paid the
repurchase price to the revolutionary government.
Held:
No. Article 1164 (in the New Civil Code it is Article 1242) cannot be used in this case because the payment to
the revolutionary government was an invalid payment. The government merely attached the property which
attachment merely prohibited its alienation. For the provision to be considered in this case, the revolutionary
government must be in the possession of the credit. However, it was not.
The remedy of Panganiban is to redeem the property from Cuevas by paying him the repurchase price.
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.
Ang bayad na ginawa sa nagpautang ng nangutang pagkatapos siyang mautusan ng hukuman na ibalik o bayaran
ang kanyang utang ay hindi katangap-tangap.
*Applicable only in “debts” or “credits” not in property.
*Garnishment – proceeding by which a debtor’s creditor is subject to the payment of his own debt to another.
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)
Ang nagpapautang ay hindi kabilang o nasasakop ng pagtanggap ng pagbabayad ng ikatlong tao na walang
kinalaman o interes sa kaganapan ng obligasyon, maliban kung mayroong kasunduan sa isang banda.
Ang sinumang nagbayad para sa iba ay maaaring makapaningil sa nangutang ng kanyang binayaran,
maliban na kung siya ay magbayad ng hindi alam at hindi ayon sa kagustuhan ng nagpautang, mababawi o
masisingil lamang niya ito kung ang pagbabayad ay may kapakinabangan sa inutang.
The general rule is that 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.
The rule applies even though the thing being offered as substitute is worth more than the very thing agreed to be
delivered.
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.
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)
Ang pagbabago sa pagbabayad, na kung saan ang pagaari ay nailipat sa nagpautang upang matugunan ang
nautang na salapi, ay dapat na mapamahalaan ayon sa batas ng bentahan
Discussion
There is dation in payment when property is alienated to the creditor in satisfaction of a debt in money. Indeed,
pursuant to Article 1232 of the Civil Code, an obligation is extinguished by payment or performance. There is
payment when there is delivery of money or performance of an obligation. Article 1245 of the Civil Code provides
for a special mode of payment called dation in payment (dación en pago).
There is dation in payment when property is alienated to the creditor in satisfaction of a debt in money. Here, the
debtor delivers and transmits to the creditor the former’s ownership over a thing as an accepted equivalent of the
payment or performance of an outstanding debt. In such cases,
Article 1245 provides that the law on sales shall apply, since the undertaking really partakes –in one sense of the
nature of sale; that is, the creditor is really buying the thing or property of the debtor, the payment for which is to
be charged against the debtor’s obligation. Dation in payment extinguishes the obligation to the extent of the
value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by
agreement – express or implied, or by their silence – consider the thing as equivalent to the obligation, in which
case the obligation is totally extinguished.
Article 1246
When the obligation consists in the delivery of 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 taken into consideration. (1167a)

Kung ang obligasyon ay may kinalaman sa pagdadala ng bagay na hindi tukoy at walang eksaktong
paglalarawan, ang nagpapautang ay hindi makakapag-aatas ng obligasyon na may mahigit na kalidad at hindi
rin naman pwedeng magbigay ang umutang na may mahina o mababang kalidad. Ang mga bagay na may
kinalaman sa obligasyon ay kailangang bigyan ng konsiderasyon.

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)
Maliban kung ito ay nasasaad, ang kinakailangan para sa extrajudicial na gastusin ay pananagutan ng
nangutang. Para naman sa judicial na gastusin ang panuntunan ng hukuman ang siyang masusunod.
Discussion:
If the parties have made a stipulation as to who will bear the expenses, then their stipulation shall be followed. Art.
1247 does not apply to expenses incurred by the creditor in going to the debtor’s domicile to collect (Art. 1251)
Losing Party party generally pays judicial cost generally pays judicial cost. These are the statutory amounts
allowed to party to an action. Under Rules of Court Sec. 1, Rule 142 , the costs of an action shall, as a rule be
paid by the loMsing party. The court may, however, for special reasons, adjudge that either party shall pay the
costs or that the same be divided as may be equitable.
**no case cited
Illustration:
Mr. Dimaano is the owner of an apartment entered into an entered into a lease agreement with Mr. Dela Cruz for
the amount of P3,000.00 to be paid every 5th of the month. However, Mr. Dela Cruz failed to make the payments
for 4 months despite oral demands. Mr. Dimaano wish to have Mr. dela Cruz vacate the property and collect the
unpayed rental fee. He then seek the service of Atty. Dela Torre and paid a fee of P5,000.00 . Two (2) demand
letters sent via registered mail and incurred P350.00 for such. Later on, Mr. Dela Cruz, forwarded his intent to
vacate the apartment and make the payment for his debt, which shall include the unpaid rental and the expenses
incurred upon hiring legal service.
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.
Maliban na lamang na may pagpapahayag ng istipulasyon na magkaroon ng bisa, ang nagpautang ay hindi
maaaring pilitin ng paunti unti na tumanggap ng prestasyon kung saan ang obligasyon ay nilalaman. Kahit pa
ang umutang ay hilingin na bumayad ng hindi pa buo.
Subalit, kung ang utang ay pinagbayaran ang ibang parte or hindi pa nabayaran, ang napautang ay maaaring
sapilitan at ang umutang ay maaaring bigyan ng epekto ang dati ng hindi na kinakailangan ng bayad ng nauna
na.

1. Performance Should be generally be complete


Under Art. 1233 of the Civil Code, a debt shall not be understood to have been paid unless the thing or service in
which the obligation consists has been completely delivered or rendered, as the case may be. Hence, partial
performance is not allowed generally under Art. 1248.

2. Exceptions
Partial performance is allowed:

1. When there is stipulation to this effect;


2. When the different prestations are subject to different conditions or different terms;
(Example: a debt payable in installments)

1. When a debt is in part liquidated and in part unliquidated, in which case performance of the liquidated part may
be insisted upon either by the debtor or the creditor.
(Examples: D owes C P3 million plus damages. Even if the amount of damages has not yet been ascertained, the
P3million is already known or liquidated. This is already demandable and payable.)

1. When a joint debtor pays his share or the creditor demands the same;
(NOTE: This is a complete payment of his share, but it is still a partial fulfillment of the whole obligation.)
1. When a solidary debtor pays only the part demandable because the rest are not yet demandable on account of
their being subject to different terms and conditions;
2. In case of compensation, when one debt is larger than the other, it follows that a balance is left.
3. When work is to be done by parts.
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)
[Ang kabayaran ng utang sa salapi ay naaayon sa pera na nakasaad, at kung hindi posible na ito ay mabigay sa
ganoong pera, ito ay isasalin sa pera na legal na pinaiikot sa Pilipinas.]
Ang pagbibigay ng promissory notes na kabayaran sa order o sa pagpapalit ng perang papel, o kahit na anong
pangkalakal na dokumento, ay magbubunga lamang ng epekto na nakapagbayad sa oras na ito ay napalitan ng
salapi, o kung sa pagkakamali ng pinagkautangan ito ay nasira.
Samantala, ang aksyon nanggaling sa orihinal na obligasyon ang dapat na ipagpaliban.
Discussion:
The rule is different when there is extraordinary inflation or deflation under Article 1250, wherein the value of
the currency at the time the obligation was established shall be the basis of payment, if there is an official
pronouncement or declaration of an extraordinary inflation or deflation.
Concept of Legal Tender
Legal tender refers to the currency which may be used for payments of debts whether public or private, and which
the creditor cannot refuse to accept. In the Philippines, the legal tender covers all notes and coins issued by the
Central Bank of the Philippines.
Also, under Presidential Decree No. 72, effective November 29, 1972, there is a limit in the use of coins as legal
tender to release the creditor from the burden of counting huge amounts of money in coins. The creditor will find
it troublesome not only to count them, but also to carry them. So, he may not accept coins as payment beyond
what the law allows.
1.) 1 centavo coins and 5 centavo coins are legal tender up to P20.00.
2.) Other coins (.10, .25, and P1) are legal tender up to P50.00
3.) Paper bills or money issued by the Central Bank are valid legal tenders for any amount unlike coins.
Payment in Negotible Documents
Examples of negotiable documents are checks, promissory notes payable to order or bills of exchange are not
considered as legal tenders. Therefore, the creditor has the right to refuse acceptance of these documents as
payment, even if they happen to be good. The law says that these papers shall produce the effect of payment only
when they have been encashed – which means they have been honored by the drawee bank and have been
exchanged with cash money.
Rule on payment in check
A check is not a legal tender, whether it is an ordinary check or manager’s check. The rule applies even if the
check was consigned in court. However, there are exceptions to this rule:
1. When a manager’s check was consigned with the court which the clerk of court endorsed to the Provincial
Treasurer and which then honored by the bank and credited to teh treasurer’s account;
2. When the creditor has accepted the debtor’s check for the repurchase of the latter’s property, the former cannot,
the following day refuse to accept the check anymore as payment. The creditor is under estoppel having induced
the debtor to believe that he had consented such form of payment;
3. When after the payment of the check in court the vendor a retro, the vendee a retro petitioned the court to
allow him to withdraw the amount in deposit, the payment in check is valid;
4. When the check had lost its value due to the fault of the creditor, such when he unreasonably delayed the
presentation of the check with the drawee bank for payment, the payment in check is valid;
5. When the foreign bill of exchange lost its value for the reason that the creditor had neglected to make a
protest. Had there been a timely protest, the debtor could have pursued the right of recourse against the parties
who are secondarily liable.
Case Illustration: Belisario vs. Natividad (60 Phil. 156)
Article 1250
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.
Sa pagkakataong ang sobra-sobrang pagtaas o pagbaba ng pera na nasa stipulasyon ay mangyayari, ang
halaga ng pera sa oras na nagawa ang obligasyon ang magiging batayan sa pagbayad, maliban lamang kung
iba ang napagkasunduan.
Discussion
The inflation or deflation in this case must be extraordinary, meaning it is not a universal trend which did not
spare the country.
Extraordinary inflation exists when there is a decrease or increase in the purchasing power of the Philippine
currency which is unusual of beyond the common fluctuation on the valued of said currency, and such increase
or decrease could not have been reasonably foreseen or was manifestly beyond the contemplation of the parties
at the time of the establishment of the obligation.
Necessity of official declaration
This provision only applies in extraordinary deflation or inflation. Hence, to distinguish it from ordinary
deflation or inflation, there must be an official pronouncement or declaration by competent authorities of the
existence of extraordinary inflation during a given period. Absent such, this provision does not apply.
Although this provision speaks of obligation, it does not apply to all obligations but only to contractual
obligations. It cannot be applied to obligations arising from torts.
R.A. No. 6426
The only exception to the secrecy of foreign currency deposits is in case of a written permission of the
depositor.
Ponente: J. Griño-Aquino
Facts:
In 1961, NAWASA entered into a contract with FPFC for the supply of pressure pipes. After delivery and
failure of NAWASA to pay in full, FPFC initiated a collection suit on 1967 at the CFI of Manila. The trial court
ruled in favor of FPFC, however NAWASA failed again to pay. On 1971, FPFC filed another complaint, this
time, seeking an adjustment of the unpaid balance in accordance with the value of the Philippine peso when the
decision was rendered in 1967.
NAWASA filed a motion to dismiss but it was not granted by the Court. However, the complaint filed by FPFC
was also dismissed. Appeal was originally brought by the FPFC to the Court of Appeals but since the principal
purpose of the action was to secure a judicial declaration that there exists extraordinary inflation within the
meaning of Article 1250 of the New Civil Code, it was forwarded to the Supreme Court, pursuant to Section 3,
Rule 50 of the Rules of Court.
While FPFC’s voluminous records and statistics proved that there has been a decline in the purchasing power of
the Philippine peso, this downward fall of the currency cannot be considered “extraordinary.” It is simply a
universal trend that has not spared our country.
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.
Ang kabayaran ay dapat gawin sa lugar kung saan itinalaga ang obligasyon.
Na walang nakasaad na stipulasyon at kung ang layunin ay magdala ng bagay, ang kabayaran ay dapat gawin
kung saan ang bagay sa sandaling ang obligasyon ay ginawa.
Sa kahit anong kaso ang lugar ng pagbabayad ay dapat sa tirahan ng nangutang.
Kung ang nagutang ay nagbago ng lugar na tinitirhan sa masamang intension/hangarin o pagkatapos siyang
mahuli sa pagbabayad, ang dagdag na gastos ay maipapataw sa kanya.
Ang probisyon na ito ay walang kinalalaman sa lugar na tinutukoy sa Rules of Court.
Venue of Payment

1. Specific place designated where payment shall be made.

2. If there is no agreement, the following rule shall apply: a. Delivery of


determinate thing – on the place where the thing might be at the time the obligation was
constituted. b. Other cases (delivery of money, generic
thing or to perform a personal obligation) – at the domicile of the debtor.
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.
Kapag ang isang tao na may iba’t ibang pagkakautang na may parehong uri, na pumapabor sa isang nagpautang,
ay maaari na sa oras ng pagbabayad, ay sabihin kung alin sa mga utang ang kabayaran ay in-aplay. Malilban
kung napagkasunduan ng partido, o kung ang pagbabayad ay ginawa ng isang partido na kung saan kung
kaninong kapakinangan ang termino ay binuo, ang aplikasyon ay hindi maaari sa utang na hindi pa dapat
bayaran.
Kung ang nangutang ay tinanggap mula sa nagpautang ang resibo na kung saan ang aplikasyon ng kabayaran
ay naisagawa, ang unang nabanggit ay hindi maaaring magreklamo, maliban kung may kadahilanan upang
ipawalang bisa ang kontrata.
Discussion:
Definitionofapplicationof payments.
It is the designation of the particular debt being paid by e 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.
Right to make application of payments primarily to the debtor .
The debtor has the right to choose which of the several due shall be paid. The right belongs primarily to the
debtor. But, there is a proper time for the designation of the payment. It must be made at the moment of
payment.
The creditor may have the right to apply to which of the several debts the payment was made by issuing
receipts, if the debtor failed to exercise his right. The payment is deemed applied to the specific indebtedness
mentioned in the receipt, if the debtor has accepted the receipt without objection.
Requisites for a valid application of payments by the debtor.
1. There is only one debtor and one creditor;
2. The debtor owes the creditor two or more debts which are of the same kind or identical specie;
3. All the debts are due and demandable;
4. The payment made by the debtor is not sufficient to cover or settle all the debts.
Requisites for a valid application of payments by the creditor.
1. The debtor did not make any designation on which debt should be paid when he made the payment;
2. The creditor issued a receipt expressing the application of the payment to a particular debt;
3. The debtor assented to the application of the payment to a particular debt.
Limitation of the preferential right of the debtor to choose the debt to be paid.
1. The debtor cannot apply to a debt not yet liquidated or due;
2. If the creditor is given a benefit of the period or term, which has not yet arrived, an application of payment
cannot be made by the debtor;
3. If there is a specific agreement as to which debts shall be paid first, the debtor cannot vary the agreement
without the consent of the creditor;
4. If there is principal obligation which bears interests, the debtor cannot pay the interest without first paying the
principal;
5. A debtor cannot choose to pay a bigger debt partially, when the payment made can be applied as full payment
to a smaller debt.
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)
Kapag ang utang ay nagkaroon na ng tubo, ang kabayaran ng puhunan ay dapat na hindi tanggapin hanggang
ang tubo ay hindi kasama.
Discussion
1) Interest must be paid first – obligatory(2) Effect if payment is credited to the principal – reduction of
principal(3) What interest is supposed to be paid(a) interest by way of compensation(b) interest by way of
damages due to default
Article 1254
When the payment cannot be applied in accordance with the preceding rules, or if application can not 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)

Kung ang kabayaran ay hindi magagamit sa mga naunang batas, o kung ang mga ito ay hindi maiaangkop sa
mga pagkakataon, ang utang na may kalakip na matinding obligasyon ng ang siyang dapat unahin.
At kung
sakalit ang mga obligasyon ay nakatakda na at kapareho ang kahalagahan na naunang obligasyon, ang mga
kabayaran ay kasing pantay at tumbas ng nabanggit.


Article 1255
The debtor may cede or assign his property to his creditors in payment of his debts. This cession, unless
there is stipulation to the contrary, shall only release the debtor from responsibility for the net proceeds of
the thing assigned. The agreements which, on the effect of the cession, are made between the debtor and
his creditors shall be governed by special laws. (1175a)
Ang nangutang ay maaaring italaga ang kanyang pag-aari sa kanyang inutangan para sa pagbabayad sa
kanyang inutangan ng inutang. Ang pagtatalaga, maliban kung may nasasaad na kasalungat, ay maari lang na
palayain ang nangutang sa kanyang responsibilidad para sa natitirang halagang bagay na itinalaga. Ang
kasunduan na epekto ng pagtatalaga, ay ginawa sa pagitan ng nangutang at nagpa-utang ay pinamamahalaan
ng espesyal na batas.
Discussion:
Payment by Cession is another special form of payment. It is assignment and abandonment of all the properties
of the debtor for the benefit of his creditors in order that the latter may sell the same and apply the proceeds
thereof to the satisfaction of their credits.
Classes of Cession or Assignment:

1. Voluntary or Contractual – cession or assignment by agreement of the parties


2. Involuntary or legal – cession or assignment which is governed by the insolvency law (Act 1956)
Requisites:

1. There is plurality of debts;


2. Debtor must be partial or completely insolvent;
3. There are at least 2 creditors;
4. There is acceptance of the cession or assignment by the creditors;
5. The property ceded or assigned must not exempt from execution.
Cession or Assignment /vs/ Dation:

1. Object: What is ceded is the universality of debtor’s property excluding those exempted from execution /vs/ What
is delivered is only a particular property considered as an equivalent of the performance of the obligation;
2. Number of Parties : There is plurality of creditors /vs/ There may be only one creditor
3. Financial Condition of debtor: Debtor is insolvent /vs/ Not necessarily insolvent. dation payment can take place
even when the debtor is solvent
4. Effect: Ownership is not transferred to the creditor /vs/ Ownership is transferred to the creditor upon delivery
5. Novation: Not an act of novation of the contract /vs/ an act of novation
Article 1256
If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor
shall be released from responsibility by the consignation of the thing or sum due.
Consignation alone shall produce the same effect in the following cases:

1. When the creditor is absent or unknown, or does not appear at the place of payment;
2. When he is incapacitated to receive the payment at the time it is due;
3. When, without just cause, he refuses to give a receipt;
4. When two or more persons claim the same right to collect;
5. When the title of obligation has been lost.
Kung ang nagpautang kung saan ang kabayaran ang ginawa at tinanggihan ang walang kadahilanan na
tanggapain ito, ang nangutang ay maaaring pakawalan sa kanyang responsibilidad sa pamamagitan ng
konsignasyon ng mga bagay o kabuuan na dapat bayaran.
Ang konsignasyon ay maaaring maglabas ng parehong epekto sa mga sumusunod na pangyayari.

1. Kung kailan ang nagpautang ay wala o hindi na Makita, o hindi na Makita sa lugar na magbabayaran.
2. Kung kailan sya ay walang kakayahan na tumanggap ng bayad kapag dumating na ang takdang panahon na
dapat ng bayaran.
3. Kung kalian, walang dahilan, ay tinanggihan nya na magbigay ng resibo;
4. Kung kalian dalawa o higit pang mga tao ay humahabol ng karapatan na kumolekta;
5. Kung kalian ang titulo ng obligasyon ay nawala.

Article 1257
In order that the consignation of the thing due may release the obligor, it must first be announced to the
persons interested in the fulfillment of the obligation.
The consignation shall be ineffectual if it is not made strictly in consonance with the provision which
regulate the payment.
Upang mapalaya ang may utang mula sa consignation ng kanyang pagkakautang, kinakailangan muna niyang
ipaalam ito sa mga taong interesado sa pagtupad ng obligasyon.
Ang consignation ay walang bisa kapag ito ay hindi ginawa sa paraang naaayon sa probisyon na nag-aayos ng
kabayaran.
Discussion:
The purpose of the announcement if to give the creditor the chance to accept the tender of payment and avoid
unnecessary litigation.
The article emphasises on the fact that consignation must be strictly made in consonance with the provisions of
the law in order for it to be effectual or valid.
Article 1258
Consignation shall be made by depositing the things due at the disposal of judicial authority, before
whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation
in other cases.
The consignation having been made, the interested parties shall also be notified thereof.
Ang consignation ay mangyayari sa pamamagitan ng pagdeposito sa korte ng bagay na obligasyong ibigay, at
ang korteng ito ay kung saan ang tender of payment ay kailangang patunayan, sa tamang kaso, at sa
paghahayag ng consignation ng iba pang kaso.
Discussion

Distinction Between Tender of Payment and Consignation

Basis Tender of Payment Consignation

It is the antecedent of It is the principal or consummating


1. Nature consignation or preliminary act to act for the extinguishment of the
consignation. obligation.

It does not by itself extinguish It extinguishes the obligation when


2. Effect
the obligation. declared valid.

It is judicial for it requires the filing


3. Character It is extrajudicial.
of complaint in court.

Requisites of Consignation:

1. Presence of existing valid debt which is due


2. Presence of prior valid tender of payment
3. Refusal of creditor to accept amount or thing tendered
4. Presence of prior notice of consignation
5. Actual deposit of the amount or thing in court or competent authority
6. Second notice after the making of the deposit is mandatory

Case Illustration:
Limkako vs De Teodoro 47 Phil 313 (1943)
Ponente: J. Ozaeta
Facts:
The Limkakos and David were co-owners of a property in Manila. The Limkakos mortgaged their property to
David who, before her death, donated the mortgage credit to her adopted daughters, de Teodoro and de Sison.
The Limkakos sold their mortgaged property to Sison. De Teodoro refused to have her mortgage credit payed
off, thus the Limkakos consigned the payment to the office of the clerk of court who, in turn, deposited the
check in the Insular Treasury as fiduciary funds.
The plaintiffs then brought this action to compel the Teodoros to accept the payment.
Issue: Whether or not the consignation is valid?
Held:
Yes.
Under Article 1176 of the Civil Code (now Article 1256 of the New Civil Code), if a creditor to whom tender of
payment has been made should refuse without reason to accept it, the debtor may relieve himself of liability by
the consignation of the thing due. Article 1177 of the Civil Code (now Article 1257 of the New Civil Code)
states that in order that the consignation of the thing due may release the obligor, previous notice thereof must
be given to the persons interested in the performance of the obligation. And under Article 1178 (now 1258 of
the New Civil Code), consignation shall be made by the delivery of the things due to the court, accompanied by
proof of tender, when required, and of notice of the consignation in other cases. After the consignation has been
made, the persons interested shall also be notified thereof.
There was a tender of payment and a refusal by Mrs. Teodoro due to her preference that she be the one to
purchase the property instead of Sison. The SC ruled that the refusal to accept the payment was invalid.
The second requisite for consignation to be valid is that the previous notice of the consignation be made to the
person interested in the performance of the obligation. The record of the case is silent on this point, but no
attack on the consignation is made by the defendants.
The third requisite is that after the consignation has been made, the person interested shall also be notified
thereof. This was fulfilled by the service of summons.
The consignation therefore is valid, hence, the Teodoros are required to accept the tendered payment.
Article 1259
The expense of consignation, when properly made, shall be charged against the creditor.
Ang mga gastos ng consignation, kapag maayos na nagawa, ay maipapataw laban sa nangutang.
*If the consignation is properly made the filling of the suit must bear the expenses of consignation like storage
fees, filling fees, attorney’s fees and other related expenses.
Article 1260
Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of the
obligation.
Before the creditor has accepted the consignation, or before the judicial declaration that the consignation
has been properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation
to remain in force.
Kapag ang pagkakatiwala ay naisagawa na, ang may utang ay maaaring hilingin sa hukom na ipag-utos na
kanselahin ang obligasyon.
Bago pa man tanggapin ng nagpautang ang pagkakatiwala, o bago pa man ipahayag ng hukuman na nagawa na
ang kasunduan sa pagkakatiwala, ang nangutang ay maaaring bawiin ang bagay o kabuuan ng kanyang
naideposito, pumapayag na ang obligasyon ay manatili pa rin.
Discussion:
Effect of valid consignation. When the consignation is properly effected, the court will order the cancellation of
the obligation upon motion duly filed by the debtor. When the validity of the consignation has been affirmed by
the court, the consignation shall have a retroactive effect. The obligation is deemed paid from the moment the
amount or the thing due has been actually placed at the disposal of the court. The running of interest if
stipulated is also deemed suspended at the same time.
Effect of improper consignation. If the consignation is not properly made the obligation stays as the attempted
consignation did not amount to payment.
Effect of dismissal of the consignation case. If the case has been dismissed by the court for any valid reason the
attempted consignation will have no favorable effect upon the debtor.
Withdrawal of the thong or sum deposited, when available. The debtor who made the deposit may still
withdraw the thing or sum of money he had deposited in court provided that:
A. The creditor has not yet accepted the thing or sum deposited;
B. That the court had not yet made a judicial declaration that the consignation had been properly made.
The reason why debtor may still withdraw the thing deposited is that he still owns the money or thing deposited
at the precise time.
Judicial approval is necessary to render consignation effective and valid. Without judicial approval, the amount
deposited continues to be under the disposition of the debtor. After the consignation has been approved, the
debtor may ask for the cancellation of the obligation.
Article 1261
If the consignation having been made, the creditor should authorize the debtor to withdraw the same, he
shall lose every preference which he may have over the thing. The co-debtors, guarantors and sureties shall
be released. (1181a)
Kapag nagkamali ang parehong partido at nagdulot ito ng pagkasira ng kanilang kasunduan, ang kanilang
kontrata ay maaaring baguhin.
Article 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)

Kung sakali’t ang obligasyon ay nauukol sa tukoy na bagay ang mga ito ay mawawalang bisa kung ito ay nasira
ng walang kinalaman ang umutang at hindi lumampas sa takdang panahon ang kabayaran.
Kung sakalit
nakasaad sa kasulatan na kahit dumating man ang hindi inaasahang pangyayari ay kailangan bayaran ang
inutang kahit nasira man o mawala ang kabayaran. Babayaran ng umutang ang bagay na kabayaran kahit
anuman ang mangyari.
Article 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)
Sa obligasyon na ihatid ang isang panlahat (Generic) na uri ng bagay, ang pagkawala o ang pagkasira ng ano
mang magkaka- uri ay hindi tumatapos ng obligasyon.
Discussion:
This Article is based from the principle that “genus never perish” (genus nunguan perit). The debtor can still be
compelled to deliver a thing of the same kind. The creditor, however, cannot demand a thing superior quality
neither that a debtor deliver a thing of inferior quality.
If a generic thing is delimited, that is, where there has been limitation of the generic object to a particular group
of things, the obligation is extinguished by the loss of that particular group from which the the prestation has to
be taken. [ill. Jane, the obligor has committed to deliver half ton of banana from her lakatan banana tree, but the
harvest was damaged by a pest. All the trees and growing fruits were destroyed. he obligaton is extinguished. In
effect when the banana had been particularized, the object of the obligation become determinate. Their loss
extinguishes the obligation.]
Article 1264
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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)
Ang Korte ang magsasaalam kung, sa ilalim ng mga pangyayari, ang bahagi na pagkawala ng bagay ng
obligasyon ay mahalaga upang tuluyan na mawala na ang obligasyon.
Illustration:
James is obliged himself to deliver to Jake a specific race horse. The horse met an accident as a result of which it
suffered a broken leg. The injury is permanent. Here, the partial loss is so important as to extinguish the obligation.
If the loss is due to the fault of James, he shall obliged to pay the value of the horse with indemnity for damages.
If the horse to be delivered is to be slaughtered by Jake, the injury is clearly not important. Even if there was fault
on the part of James, he can still deliver the horse with liability for damages, if any, suffered by Jake.
Article 1265
Whenever the thing is lost in the possession of the debtor, it shall be presumed that the loss was due to his
fault, 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.
Kapag ang bagay ay nawala sa mga kamay ng may utang, ito ay inaakalang nawala dulot ng kanyang
pagkakamali, maliban na lamang kung may makakapagpatunay sa taliwas nito, nang hindi nakakapinsala sa
probisyon ng Artikulo 1165. Ang sapantahang nabanggit ay hindi maaaring gamiting sa mga kaso ng lindol,
baha, bagyo, o anumang natural na kalamidad.
Discussion:
The presumption that the debtor is at fault if he is in the possession of the thing which got lost is rebuttable. Thus
, the debtor may prove that he was not at fault, but if he incurred delain in the process or he had promised to
deliver the thing to two or more persons with different interests, he will be liable even if the loss is due to fortuitous
events.
Furthermore, presumption does not apply in cases of loss or destruction due to natural calamity such as
earthquake, flood, or storm. In these cases, the debtor is generally not liable due fortuitous events as discussed in
Article 1174 in relation to Article 1262.
Article 1266
The debtor in obligation to do shall also be released when the prestation become legally or physically
impossible without the fault of the obligor.
Ang may obligasyong gumawa ay mapapawala sa kaniyang obligasyon kung ang prestation ay naging
imposible dahil sa legal o pisikal na aspeto, nang walang masasabing kasalanan ang may obligasyon.
Discussion:
Two kinds of impossibility are tackled in this provision, the legal and physical impossibility.
Legal impossibility arises when the act stipulated to be performed is subsequently prohibited by law.
Article 1267
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When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the
obligor may also be released therefrom, in whole or in part.
Kapag ang serbisyo ay naging mahirap upang maipahayag na lampas sa contemplation ng partido, ang
nangutang ay maari rin mapalaya, sa kabuoan o sa bahagi nito.
*This article refers to the difficulty of service or performance manifestly beyond the intention of the parties.
Article 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 maybe 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.
Kung ang utang ay bagay na natutukoy o determina ay nagmula sa kasong kriminal, ang nangutang ay
kailangan pa rin magbayad kahit ano pa man ang kadahilanan ng pagkawala ng bagay na ito. Maliban na
lamang kung ibinibigay na ito ng nangutang at hindi ito tinanggap ng nagpautang ng walang nararapat na
pangangatwiran.
Discussion:
The article applies only to an obligation to deliver a certain thing which is determinate, and which the obligation
arose out of the commission of a criminal offense committed by the debtor. If the thing is lost for whatever
reason the debtor shall pay for the value of the thing.
If the obligor had offered or tendered the delivery of the thing to the obligee, but the latter had unjustifiably
refused to accept it, and the thing got lost, the former is not liable anymore because the latter is in mora
accipiendi.
Article 1269
The obligation having been extinguished by the loss of the thing, the creditor shall have all the rights of
action which the debtor may have against third persons by reason of the loss. (1186)
Kapag pagkakatiwala ang napagkasunduan, ang nagpapautang ang may karapatang bumawi sa nangutang,
maaaring mawala sa kanya ang karapatan sa anumang kagustuhan nya sa bagay na ito. Ang kanyang mga
kasamahang nagpapautang, mga gumagarantiya at mga tagapanagot ay magiging malaya.
Discussion
Although the obligation is extinguished by los of a thing without the debtors fault, nevertheless, whatever action
the debtor may have against the third person by reason of the loss transferred to the creditor in order to safeguard
the interest of the latter. The right of action includes the insurance indemnity that may have been received from
the third person.
Illustration
Severino obliged himself to deliver to apolinario a specific carabao, without the permissio of severino, his
neighbor, pacifico took the carabao and used the same foe plowing. Later the carabao was lost through
pacifico’s fault. Severino’s obligation was extinguished. But apolinario acquired the right to file an action against
pacifico to recover the price of carabao.
Article 1270
Condonation or remission is essentially gratuitous, and requires the acceptance by the obligor. It may be
made expressly or impliedly.

Ang “condonation” ay isang pagpapatawad ng nagpautang sa umutang ito ay tinataguring isang pabuya sa
isang tao at kinakailangan naman ng pagtanggap ng dapat na siyang magbayad. Ito ay pwede ipakita sa
pamamagitan pahiwatig o pahayag.
Article 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.
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)
Ang paghahatid o pagdadala ng pribadong dokumento na nagpapatunay sa isang pagkakautang na ginawang
boluntaryo ng nagpautang sa nangutang, ay pinababatid ng pagtatakwil ng karapatan ng mga ginawa ng
nangutang sa kanya.
Kung para maipawalang bisa ang pagtatakwil ng karapatan kailangang angkinin na inofficious ito, ang
nangutang at ang kanyang tagapagmana ay maaaring sang-ayunan ito sa pamamagtan ng pagbibigay na ang
inihatid na dokumento ay ginawa sa kabutihan ng pagbabayad ng utang.
Discussion:
Presumption in case of voluntary delivery of indebtedness by creditor:
1)Pressumption of implied remission – the 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 he
debtor, the only logical interference is that he is renouncing his right.
2)Contrary Evidence – The pressumption is prima facieor rebuttable by contrary evidence. Evidence is admissible
to show otherwise, as when a receipt signed by the creditor was delivered only for examination by the debtor
client (lawyer) of the amount of attorney’s fee to be paid by the latter.
3)Extent of remission – If the obligation is joint, the pressumption of remission partains 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
presumption 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
Under second paragraph of Article 1271, the renunciation of the action which the creditor had against the debtor
maybe nullified or invalidate by showing that the waiver is inofficious. In other words the remission becomes
null and void upon proof that it is inofficious.
The debtor and his heirs may prove that the delivery of the document was really made in virtue of payment of the
debt and not remission.
Article 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)
Kung sakaling ang pribadong dokumento na kung saan na ang utang ay nakita at natagpuan sa pangangalaga
ng nangutang, nandoon ang pag-aakala na ang nagpautang ay dinala nya ito ng kusang loob, maliban na
lamang na ito ay nagpapatunay na sumasalungat.
Example:
Kristine owe Karen P20,000.00 evidenced by a promissory note. The note, signed by Kristine, is given to
Karen.
If the promissory note is voluntary delivered to Kristine, the presumption is that the debt must have been
remitted by Kristine.
If it is known that Kristine has not yet paid Karen, it must be presumed that the obligation has been remitted by
Karen.
Suppose it is not known how Kristine came into possession of the promissory note. The presumption is that it
was voluntarily delivered by Karen, unless Karen proves the contrary. (Art. 1272)
Remission is an act of liberality by virtue of which the obligee, without receiving any price or equivalent,
renounces the enforcement of the obligation, as a result of which it is extinguished in its entirety or in that part
or aspect of the same to which the remission refers.
Article 1273
The renunciation of the principal debt shall extinguish the accessory obligations; but the waiver of the
latter shall leave the former in force.
Ang pagtatakwil ng kabayaran sa prinsipal na utang ay makakapagpawalang bisa sa obligasyong
aksesoryal. Ngunit ang pag-waive ng obligasyong aksesoryal ay hindi nangangahulugang wala nang bisa ang
prinsipal na utang.
Discussion:
The accessory obligation is extinguished once the principal debt is remitted, because the existence of the accessory
obligation is dependent upon the existence of the principal obligation.
On the other hand, if the accessory obligation alone is extinguished, the principal obligation remains, because the
existence of the principal obligation is not dependent upon the accessory obligation.
Remission of principal debt, effect on accessory obligation
Pedro borrowed money from Juan, Maria guaranteed the payment of the loan. Juan remitted the entire
obligation of Pedro. THis remission extinguishes the whole obligation.
Remission of the accessory Obligation
Pedro borrowed money from Juan. To secure the loan, Maria was convinced to mortgage his property to
Juan. If Juan released the mortgage by remission, Maria’s property is freed from the obligation. But the
principal obligation of Pedro which is the loan, shalll remain without any collateral or security.
Article 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.
Maipapalagay na ang acessory obligation ng isang pledge ay naibalik kung, pagkatapos itong ibigay sa
inutangan, ito ay nasa poder ng nangutan, o sa taong nagmamay-ari nito.
Discussion:
Pledge is a contract by virtue of which the debtor delivers to the
creditor or to a third person a movable, or document
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 its fruits and accessions.
If the pledge was found in the possession of the debtor, or of the third person who owns the thing, the
presumption is that the pledge, as an accessory obligation, has been remitted. However, this presumption can be
rebutted by the creditor if he proves that the thing is stolen, returned for repairs, etc., in which case, there shall
be no remission.
Remission is an act of liberty, by virtue of which the obligee, without receiving any price or equivalent
renounces the enforcement of the obligation, as a result of which it is extinguished in its entirety or in that part
or aspect of the same to which the remission refers. Simply put, it is the gratuitous abandonment by the creditor
of his right.
Illustration:
Jay and Zola are friends. Jay borrowed money from Zola. However, Zola’s wife is stingy. To appease his wife,Jay
and Zola made a written contract stipulating that Jay’s motorcycle will be used by Zola until the money borrowed
is returned, which Zola presented to his wife. His wife allowed Zola to lend Jay the money and the motorcycle
was delivered to Zola. However, since they are friends, Zola let Jay borrow the motorcycle often, until the time
that the motorcycle was exclusively used by Jay. It is therefore presumed that the motorcycle is remitted until
Zola rebuts such presumption.
Article 1275
The obligation is extinguished from the time the characters of creditor and debtor are merged in the same
person.
Ang obligasyon ay mawawala simula sa oras na kung saan ang character ng nagpautang at ng nangutang ay
nagsama sa isang tao.
Dicussion:
Requisites for Confusion or Merger of Right

1. There is a merger in the same person of the characters of a creditor and a debtor.

2. The merger must be in the characters of a principal creditor and a principal debtor.

3. The merger is definite and complete. Partial merger is allowed. It is definite and complete up to the extent of the
concurrent amount or value.
Article 1279
In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal
creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same
kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor. (1196)
Para ang kompensasyon ay nararapat, dpat ito ay :
Upang maging wasto ang compensation, kinakailangan na:
(1) Bawat isa sa mga may utang ay obligado principally, at na siya din ang principal creditor nung isa;
(2) Kung ang parehong utang ay binubuo ng kabuuan ng pera, o ang bagay na dapat ibigay ay inilaan upang
gamitin, na pareho sila ng uri, at pareho din sila ng kalidad kung ang nahuli ay nakasaad;
(3) Kung ang dalawang utang ay dapat nang bayaran;
(4) Na ito ay liquidated at hinihingi
(5) Na wala sinuman sa mga ito mayroong anumang mga pagpapanatili o kontrobersya, na nagsimula sa
pamamagitan ng ikatlong tao at nakipag-ugnayan sa angkop na panahon sa may utang. (1196)
Discussion:
Article 1270 enumerates the requirements or requisites for legal compensation as follows:

1. “That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the
other” – that parties be mutual creditor and debtor of each other and their relatonship is a principal one, that is,
they are principal debtor and creditor of each other.
2. “That both debts consist in a sum of money, or the thing due are consumable, they be of the same kind, and also
of the same quality if the latter has been stated”. – When the debts consist of a money, there is not much of a
problem when it comes to compensation to the concurrent amount. It is a matter of mathematical computation.
3. “That the 2 debts are due” – Thelaw does not require that the parties obligations be incurred at the same time,
what the law requires only is that the obligations be due and demandable at the same time.
4. “That they be liquidated and demandable” – A debt is considered liquidated when its amount is clearly fixed. It
is unliquidated when the amount is not fixed because it is still subject to a dispute or to a certain condition
5. “That over neither of them there be any retention or controversy, commenced by third persons and communicated
in due to the debtor” – A debt or a thing cannot be subject of compensation if the same had been the subject of a
garnishment of which the debtor was timely notified. When a credit or property had been properly garnished or
attached, it is placed under a custodia legis. this means it cannot be disposed of without the approval of the court.
Consequently, compensation cannot operate because a third party is already involved whose claim will be
determined by the court
Article 1280
Notwithstanding the provisions of the preceding article, the guarantor may set up compensation as
regards what the creditor may owe the principal debtor. (1197)
Bagaman ang probisyon ng nauuna na artikulo, ang tagapanagot ay maaaring mag lagay ng sahod/bayad na
magpalagay kung ang nagpautang kung may utang sa pangunahing nangutang.
Article 1281
Compensation may be total or partial. When the two debts are of the same amount, there is a total
compensation.
Ang kabayaran ay maaaring buo o bahagya. Kapag ang dalawang utang ay pareho ng halaga, ang kabayaran
ay buo.
Illustrations:
Total Compensation
Juan and Pedro are good friends. One day, Juan borrowed P100 from Pedro to buy some groceries. The following
day, while they were eating at a restaurant, Pedro realized he left his wallet in the car and borrowed P100 from
Juan.
Juan and Pedro became both debtors and creditors. Since their debts are of the same amount (P100), the
compensation is total.
Partial Compensation
Juan and Pedro are good friends. One day, Juan borrowed P100 from Pedro to buy some groceries. The following
day, while they were eating at a restaurant, Pedro realized he left his wallet in the car and borrowed P80 from
Juan.
Juan and Pedro became both debtors and creditors. Since their debts are not of the same amount (P100), the
compensation is partial. The balance of P20 remains an obligation.
Article 1282
The parties may agree upon the compensation of debts which are not yet due.
Ang mga partido ay maaring magkasundo sa kompesasyon ng utang na hindi pa kailangang bayaran.
Discussion:
As a general rule, compensation becomes effective when both mutual debts are due. This provision is an
exception to the rule.
Article 1283
If one of the parties to a suit over an obligation has a claim for damages against the other, the former may
set it off by proving his right to said damages and the amount thereof.
Kung ang isa sa mga partido sa suit over sa obligasyon ay nagsad ng danyos/pinsala laban sa iba, maari nya
itong ipatigil sa pamamagitan ng pagpapatunay ng kanyang karapatan sa nasabing danyos/pinsala at ang halaga
nito.
Difference between Compensation and Set-off or Counterclaim
Compensation – take place by mere operation of law and extinguishes reciprocally the two debts as soon as they
exist simultaneously, while
Set-off or Counterclaim – must be pleaded to be effectual.
Article 1284
When one or both debts are rescissible or voidable, they may be compensated against each other before
they are judicially rescinded or avoided.
Kapag ang isa o parehong mga utang ay maaaring ikansela o ipawalang bisa, maaari nilang bayaran ang
bawat isa bago pa man ito ipawalang bisa o kanselahin ng hukuman. (n)
Discussion:
Before rescissible or voidable debts are judicially rescinded or annulled, they are valid debts. The parties may
opt not to rescind or annul them. Consequently, until they shall have been judicially declared void, they can be
compensated against each other.
If the prescriptive period for the rescission or annulment of the debts had already lapsed, there is automatic
compensation and the same will not disturbed anymore.
In other cases, if the debt is rescinded or annulled, the compensation is also automatically cancelled and there
shall be restitution of what each party had received before the rescission or annulment.