CHAPTER 4

• 1231 - PALOREMECONO (Obligations are extinguished by:)

  1. Payment/Performance
  2. Loss of thing due
  3. Remission
  4. Merger of Rights of C/D or Confusion
  5. Compensation
  6. Novation
• 1231 - OTHER CAUSES/MODES OF EXTINGUISHMENT: (ANRESRESPRES)

  1. Annulment
  2. Rescission (1181)
  3. Fulfillment of Resolutory Condition (1210)
  4. Prescription (Extinctive - 6 yrs, 10 yrs, 4 yrs)
• 1231 - EXTINGUISHMENT OF OBLIGATIONS (CAUSES)

  1. Death of Party in Personal Obligations
  2. Mutual Desistance or Withdrawal
  3. Compromise
  4. Impossibility of Fulfillment
  5. FE  
• 1232 - Payment

  Not only be elivery of money but also the performance of obligation must be done.
• Ordinary parlance


  Refers to only delivery of money. It includes payment + giving/to do/ not to do - to extinguish the obligation.

  •  When D pays damage or penalty in lieu of fulfillment, payment in the sense is used. 
• 1232 - RULES IN PAYMENT

  1. Rule of Integriy
  2. Rule of Identity
  3. rule of Medium Quality
  4. Rule of Indivisibility 
• Rule of Integrity


  Rule in payment w/in Complete performance/payment of obligation must be done.
• XPN TO RULE OF INTEGRITY (PASS)

  1. Partly Liquidated (Computed/Agreed/Unliquidated - 1248)
  2. Acceptance (1235 - Waiver/Estoppel)
  3. Substantial performance (1234)
  4. Stipulation (1248)
• Rule of Identity

  Payment for Specific Thing. You cannot replace a specific thing because of its identity. 
• Rule of Medium Quality


  The quality of a generic thing delivered must not be superior or inferior.  
• Rule of Indivisiblity

  For Divisible Obligations. The payment whenever a thing is deemed indivisible is liquidated/divided. 
• 1233 - COMPLETE PERFORMANCE


  Debt shall not be understood unless thing has been completely delivered.
• Debt

  Obligation to deliver money, to deliver a thing, to do an act, or not to do in which a Debtor is liable for. 
• REQUISITES FOR PERFORMANCE OF PRESTATION (PAYMENT)

  1. Integrity of Prestation (complete delivery, partial/irregular does not extinguish oblig)
  2. Identity of Prestation (prestation due must be delivered)
• Burden of Payment


  The debtor is always burdened to prove extinguishment of obligation in form of receipt or proof of payment. Once proven, the burden shifts to the Creditor. 
• FORMS OF PAYMENT (Section 1.1)

  1. Complete Performance (1233) 
  2. Beneficial Reimbursement (1236)
  3. Reimburseent + Subrogation (1237)
• 1236 - Beneficial Reimbursement

  Creditor is not bound to accept payment by TP unless stipulated.

  If TP paid, they may demand reimbursement from debtor.

  XPN:

  1.  Solutio Indebiti
  2. Against will of Debtor, TP can only recover insofar payment beneficial to debtor
• 1236 - LIABLE TO PAY (PAYORS)

  1. Debtor
  2. Persons of Interest
  3. TP who has no Interest but there is Stipulation made 
• 1236 - Effect of Payment by TP

  1. If w/o Knowledge/Against will of D - Recovery is up to extent or amount of debt at the time of payment. (TP paid 1K, D alr paid 400, TP can only recover 600)
  2. If w/ knowledge of D - payor has rights of reimbursements or subrogation (transfer of rights from C to TP).
• 1237 - Reimbursement + Subrogation

  GR: You can only subrogate payment if consented by D. For the benefit of the Debtor. the TP w/o necessity paid is amply protected with the right to reimbursement and transfer of rights. TP becomes the new creditor.
• Reimbursement (1237)


  TP is entitled by reason of payment has merely right tob e refunded to extent of benefit by D.
• Surety (1237)


  Person who takes responsibility for performance of D's udnertaking. they are also the guarantor. 
• 1239/1241 - Payment by and to Incapacitated Pesroon / Payment to Person not Authorized

  GR (1241): Payment to IP/TP is not valid.

  EFF (1241): IP can demand payment again.

  XPN:

  1. Kept the thing
  2. Benefitted by Creditor.
• 1239 - Free Disposal of Thing

  Thign delivered is not subject to claim/lien of encumberance.
• Capacity to Alienate (1239) 

  The person has the capcaity to enter into a contract.

  XPN:

  1. Incapacitated People
• 1244 - RULE OF IDENTITY

  It applies only to Real Obligations (to give).

  GR: Specific Thing is unreplaceable.
• 1244 - XPNS TO RULE OF IDENTITY

  1. Stipulation
  2. Facultative (Substitute was made)
  3. Waiver/Acceptance by Creditor
• 1246 - RULE OF MEDIUM QUALITY

  Genus Nunquam Perit is applied when delivering.

  The thing should not be of inferior/superior quality.

  XPN:

  1. Stipulation Made
  2. Acceptance/Waiver
  3. Facultative obligation
• 1247 - Extrajudicial vs. Judicial Expenses

  Extra-Judicial Expenses - Debtor, it is out of court. Obligation is extinguished when payment is made. D is primarily benefitted.

  XPN (EJE): Stipulation who must bear expenses.

  Judicial Expenses - Paid by the losing party in court..

  XPN (JE): Both parties bear costs.

  XPN (JE): Court declares who pays.
• 1248 - RULE OF INTEGRITY.

  Stipulation was made when it comes to complete performance of obligation. It is instances when partial payment is valid. (Complete Performacne XPN)

  XPN: Pass is applied

  1. Partial Liquidation
  2. Agreement
  3. Stipulation
  4. Substantial eprformance
• 1249 - Legal Tender


  They are currency offered by D in the right amount n form of coins/cash/money. The creditor must accept payment of a debt in money.
• RA 8183 (1249)

  An act repealing Article 1249.

  All monetary obligations shall be settled in PESO.

  XPN: Transaction is stipulated in foreign currency at the tiem of payment. 
• 1249 - NOT LEGAL TENDERS (XPN: Stipulation was made) 

  1. Promissory Notes
  2. Checks
  3. Bill of Exchanges
  4. Other Mercantile Documents
• RA 11211 (1249)


  Legal Tender Limit of PH coins for Single Transaction.

  0.01 - 0.25 > 200 PHP Limit

  1 - 20 Coin Denomination > 2K PHP Limit 
• 1250 - BASIS OF PAYMENT IN CASE OF EXTRAORDINAY INFLATION/DEFILATION 

  GR: Value of Currency at the time of obligation was estalbished must be followed as basis of payment.
• SPECIAL FORMS OF PAYMENT

  1. Dacion en Pago/Datin in Payment (1245)
  2. Application of payment (1252)
  3. Legal Application of payment (1254)  
  4. Payment by Cession (1255)
  5. Tender of Payment & Consignation (1256)
• 1245 - Dation in Payment


  Aka Dacion En Pago/Adjudication/Payment in Kind/Datio in Solitum.

  It is conveyance of ownership of thing as an accepted equivalent of performance.

  Obligation of D is monetary, their payment is property.

  GR: Value of property is not enough, remaining payment is thru cash.
• 1252 - Application of Payment 


  It is the designation of debts w/c applied the payment made by D who has various debts of same kind in favor of one & same creditor.
• 1252 - APPLICATION OF PAYMENT RULES (in order) 

  1. Debtor Chooses
  2. If D does not choose, C chooses
  3. if both parties did not choose, Law chooses
  4. most Onerous Debt
  5. If Same Burden, Apply it proportionately.
• Legal Application of Payment (1252) 


  Law chooses most onerous obligation/payment (most difficult). Otherwise, it is applied proportionately.

  The law supplies the needs of the obligation