EXTINGUISHMENT OF OBLIGATIONS

A. Payment or Performance
1. Identity of Prestation
CATHAY PACIFIC V. VASQUEZ
But, just like other privileges, such priority could be waived. The Vazquezes should have been
consulted rst whether they wanted to avail themselves of the privilege or would consent to a
change of seat accommodation before their seat assignments were given to other passengers.
Normally, one would appreciate and accept an upgrading, for it would mean a better
accommodation. But, whatever their reason was and however odd it might be, the Vazquezes had
every right to decline the upgrade and insist on the Business Class accommodation they had
booked for and which was designated in their boarding passes. They clearly waived their priority or
preference when they asked that other passengers be given the upgrade. It should not have been
imposed on them over their vehement objection. By insisting on the upgrade, Cathay breached its
contract of carriage with the Vazquezes.
ASJ CORPORATION V. EVANGELISTA
To begin with, petitioners obligation to deliver the chicks and by-products corresponds to three
dates: the date of hatching, the delivery/pick-up date and the date of respondents payment. On
several setting reports, respondents made delays on their payments, but petitioners tolerated such
delay. When respondents accounts accumulated because of their successive failure to pay on
several setting reports, petitioners opted to demand the full settlement of respondents accounts as
a condition precedent to the delivery. However, respondents were unable to fully settle their
accounts. Respondents offer to partially satisfy their accounts is not enough to extinguish their
obligation. Under Article 1248 of the Civil Code, the creditor cannot be compelled to accept partial
payments from the debtor, unless there is an express stipulation to that effect. More so,
respondents cannot substitute or apply as their payment the value of the chicks and by-products
they expect to derive because it is necessary that all the debts be for the same kind, generally of a
monetary character. Needless to say, there was no valid application of payment in this case.
Furthermore, it was respondents who violated the very essence of reciprocity in contracts,
consequently giving rise to petitioners right of retention. This case is clearly one among the
species of non-performance of a reciprocal obligation. Reciprocal obligations are those which arise
from the same cause, wherein each party is a debtor and a creditor of the other, such that the
performance of one is conditioned upon the simultaneous fulllment of the other. moment one of
the parties fullls his obligation, delay by the other party begins.
LO V. KJS ECO-FRAMEWORK SYSTEM (Dation in Payment)
An assignment of credit is an agreement by virtue of which the owner of a credit, known as the
assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without the
consent of the debtor, transfers his credit and accessory rights to another, known as the assignee,
who acquires the power to enforce it to the same extent as the assignor could enforce it against
the debtor.[15] Corollary thereto, in dacion en pago, as a special mode of payment, the debtor
offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt.
[16] In order that there be a valid dation in payment, the following are the requisites: (1) There must
be the 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);
(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.[17] 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, payment for which is to be charged against the debtors debt. As
such, the vendor in good faith shall be responsible, for the existence and legality of the credit at the
time of the sale but not for the solvency of the debtor, in specied circumstances.[18] Hence, it may
well be that the assignment of credit, which is in the nature of a sale of personal property,[19]
produced the effects of a dation in payment which may extinguish the obligation.[20] However, as
in any other contract of sale, the vendor or assignor is bound by certain warranties. More
specically, the rst paragraph of Article 1628 of the Civil Code provides: The vendor in good faith
shall be responsible for the existence and legality of the credit at the time of the sale, unless it
should have been sold as doubtful; but not for the solvency of the debtor, unless it has been so
expressly stipulated or unless the insolvency was prior to the sale and of common knowledge.
From the above provision, petitioner, as vendor or assignor, is bound to warrant the existence and
legality of the credit at the time of the sale or assignment. When Jomero claimed that it was no
longer indebted to petitioner since the latter also had an unpaid obligation to it, it essentially meant
that its obligation to petitioner has been extinguished by compensation.[21] In other words,
respondent alleged the non-existence of the credit and asserted its claim to petitioners warranty
under the assignment. Therefore, it behooved on petitioner to make good its warranty and paid the
obligation.
DBP V. CA (Payment by Cession/Dation in Payment)
an assignment to guarantee an obligation is in effect a mortgage.
We nd no merit in DBPs contention that the assignment novated the promissory notes in that the
obligation to pay a sum of money the loans (under the promissory notes) was substituted by the
assignment of the rights over the shpond (under the deed of assignment). As correctly pointed out
by CUBA, the said assignment merely complemented or supplemented the notes; both could stand
together. The former was only an accessory to the latter. Contrary to DBPs submission, the
obligation to pay a sum of money remained, and the assignment merely served as security for the
loans covered by the promissory notes. Signicantly, both the deeds of assignment and the
promissory notes were executed on the same dates the loans were granted. Also, the last
paragraph of the assignment stated: The assignor further reiterates and states all terms,
covenants, and conditions stipulated in the promissory note or notes covering the proceeds of this
loan, making said promissory note or notes, to all intent and purposes, an integral part hereof.
Neither did the assignment amount to payment by cession under Article 1255 of the Civil Code for
the plain and simple reason that there was only one creditor, the DBP. Article 1255 contemplates
the existence of two or more creditors and involves the assignment of all the debtors property. Nor
did the assignment constitute dation in payment under Article 1245 of the civil Code, which reads:
Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money,
shall be governed by the law on sales. It bears stressing that the assignment, being in its essence
a mortgage, was but a security and not a satisfaction of indebtedness.
2. Proper Payee
CULABA V. CA
Payment is a mode of extinguishing an obligation. Article 1240 of the Civil Code provides that
payment shall be made to the person in whose favor the obligation has been constituted, or his
successor-in-interest, or any person authorized to receive it. In this case, the payments were
purportedly made to a supervisor of the private respondent, who was clad in an SMC uniform and
drove an SMC van. He appeared to be authorized to accept payments as he showed a list of
customers accountabilities and even issued SMC liquidation receipts which looked genuine.
Unfortunately for petitioner Francisco Culaba, he did not ascertain the identity and authority of the
said supervisor, nor did he ask to be shown any identication to prove that the latter was, indeed,
an SMC supervisor. The petitioners relied solely on the mans representation that he was collecting
payments for SMC. Thus, the payments the petitioners claimed they made were not the payments
that discharged their obligation to the private respondent.
PCIB V. CA
Article 1236 of the Civil Code applies in this instance. It provides that whoever pays for another
may demand from the debtor what he has paid, except that if he paid without the knowledge or
against the will of the debtor, he can recover only insofar as the payment has been benecial to the
debtor. PCIB is the debtor in this case, it having purchased along with MBC legally garnished
properties, while Atlas is the third person who paid the obligation of the debtor without the latters
knowledge and consent. Since Atlas readily paid NAMAWU without the knowledge and consent of
PCIB, Atlas may only recover from PCIB or, more precisely charge to PCIB, only the amount of
payment which has beneted the latter. Generally, the third person who paid anothers debt is
entitled to recover the full amount he had paid. The law, however, limits his recovery to the amount
by which the debtor has been beneted, if the debtor has no knowledge of, or has expressed his
opposition to such payment. Where the defenses that could have been set up by the debtor
against the creditor were existing and perfected, a payment by a third person without the
knowledge of the debtor cannot obligate the debtor to such third person to an amount more than
what he could have been compelled by the creditor to pay. Thus, if the debt has been remitted,
paid, compensated or prescribed, a payment by a third person would constitute a payment of what
is not due; his remedy would be against the person who received the payment under such
conditions, and not against the debtor who did not benet from the payment. [21] The trial court
correctly ruled that the overpayment amounting to P601,260.00 should be recovered from
NAMAWU. The remedy of Atlas in this case would be to proceed, not against PCIB, but against
NAMAWU who was paid in excess, applying the principle that no person can unjustly enrich
himself at the expense of another. [22]
JOSE BARITUA V. CA
There is no denying that the petitioners had paid their obligation petition arising from the accident
that occurred on November 7, 1979. The only question now is whether or not Alicia, the spouse
and the one who received the petitioners' payment, is entitled to it. Article 1240 of the Civil Code of
the Philippines enumerates the persons to whom payment to extinguish an obligation should be
made. Art 1240. Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it. Certainly there can
be no question that Alicia and her son with the deceased are the successors in interest referred to
in law as the persons authorized to receive payment.
The Civil Code states: Article 887. The following are compulsory heirs:
1. Legitimate children and descendants, with respect to their legitimate parents and ascendants;
2. In default of the foregoing, legitimate parents and ascendants with respect to their legitimate
children and decendants;
3. The widow or widower;
4. Acknowledged natural children and natural children by legal ction;
5. Other illegitimate children referred to in Article 287.
It is patently clear that the parents of the deceased succeed only when the latter dies without a
legitimate descendant. On the other hand, the surviving spouse concurs with all classes of heirs.
As it has been established that Bienvenido was married to Alicia and that they begot a child, the
private respondents are not successors-in- interest of Bienvenido; they are not compulsory heirs.
The petitioners therefore acted correctly in settling their obligation with Alicia as the widow of
Bienvenido and as the natural guardian of their lone child. This is so even if Alicia had been
estranged from Bienvenido. Mere estrangement is not a legal ground for the disqualication of a
surviving spouse as an heir of the deceased spouse. Neither could the private respondents, as
alleged creditors of Bienvenido, seek relief and compensation from the petitioners. While it may be
true that the private respondents loaned to Bienvenido the purchase price of the damaged tricycle
and shouldered the expenses for his funeral, the said purchase price and expenses are but money
16 Theseclaims against the estate of their deceased son. money claims are not the liabilities of the
petitioners who, as we have said, had been released by the agreement of the extra-judicial
settlement they concluded with Alicia Baracena Vda. de Nacario, the victim's widow and heir, as
well as the natural guardian of their child, her co-heir. As a matter of fact, she executed a "Release
Of Claim" in favor of the petitioners.
MONTECILLO V. REYNES
Montecillos Deed of Sale does not state that the P47,000.00 purchase price should be paid by
Montecillo to Cebu Ice Storage. Montecillo failed to adduce any evidence before the trial court
showing that Reynes had agreed, verbally or in writing, that the P47,000.00 purchase price should
be paid to Cebu Ice Storage. Absent any evidence showing that Reynes had agreed to the
payment of the purchase price to any other party, the payment to be effective must be made to
Reynes, the vendor in the sale. Article 1240 of the Civil Code provides as follows: Payment shall
be made to the person in whose favor the obligation has been constituted, or his successor in
interest, or any person authorized to receive it. Thus, Montecillos payment to Cebu Ice Storage is
not the payment that would extinguish Montecillo's obligation to Reynes under the Deed of Sale.
3. Proper Payor
JN DEVELOPMENT CORPORATION V. PHILIPPINE EXPORT AND FOREIGN LOAN
GUARANTEE CORPORATION
For the above reasons, there is no basis for petitioners claim that PhilGuarantee was a mere
volunteer payor and had no legal obligation to pay TRB. The law does not prohibit the payment by
a guarantor on his own volition, heedless of the benet of excussion. In fact, it recognizes the right
of a [43] guarantor to recover what it has paid, even if payment was made before the debt
becomes due,or if made without notice to the debtor, subject of course to some conditions.
The complaint a quo was led by PhilGuarantee as guarantor for JN, and its cause of action was
premised on its payment of JNs obligation after the latters default. PhilGuarantee was well within
its rights to demand reimbursement for such payment made, regardless of whether the creditor,
TRB, was subsequently able to obtain payment from JN. If double payment was indeed made, then
it is JN which should go after TRB, and not PhilGuarantee. Petitioners have no one to blame but
themselves, having allowed the foreclosure of the property for the full value of the loan despite
knowledge of PhilGuarantees payment to TRB. Having been aware of such payment, they should
have opposed the foreclosure, or at the very least, led a supplemental pleading with the trial court
informing the same of the foreclosure sale.
SECURITY BANK & TRUST COMPANY V. CA
What appears to have happened in this case is that there was an agreement that if Anita Diaz, the
drawer of the check, paid the capital gains tax, she would be reimbursed the amount she had paid
to Arboleda. Claiming that she had paid the capital gains tax, Diaz issued a stop payment order to
petitioner and asked for the return of the check she had issued to Arboleda. As she could not show
any receipt for payment, however, Arboleda refused to return the check. Arboleda instead cashed
the check and refused to pay its proceeds.
Even if petitioner is considered to have paid Anita Diaz in behalf of Arboleda, its right to recover
from Arboleda would be only to the extent that the payment benetted Arboleda, because the
payment (recrediting) was made without the consent of Arboleda. Since Arboleda denies owing any
obligation to Diaz, petitioner cannot ask for reimbursement. Thus, Art. 1236 of the Civil Code
states: The creditor is not bound to accept payment or performance by a third person who has no
interest in the fulllment of the obligation, unless there is a stipulation to the contrary. Whoever
pays for another may demand from the debtor what he has paid, except that if he paid without the
knowledge or against the will of the debtor, he can recover only insofar as the payment has been
benecial to the debtor.
4. Time of Performance
LORENZO SHIPPING V. BJ MARTHEL
Finally, the ten postdated checks issued in November 1989 by petitioner and received by the
respondent as full payment of the purchase price of the rst cylinder liner supposed to be delivered
on 02 January 1990 fail to impress. It is not an indication of failure to honor a commitment on the
part of the respondent. The earliest maturity date of the checks was 18 January 1990. As delivery
of said checks could produce the effect of payment only when they have been cashed,[45]
respondents obligation to deliver the rst cylinder liner could not have arisen as early as 02
January 1990 as claimed by petitioner since by that time, petitioner had yet to fulll its undertaking
to fully pay for the value of the rst cylinder liner. As explained by respondent, it proceeded with the
placement of the order for the cylinder liners with its principal in Japan solely on the basis of its
previously harmonious business relationship with petitioner.
BRICKTOWN DEVELOPMENT CORPORATION V. AMOR TIERRA DEVELOPMENT
CORPORATION
5. Burden of Proving Payment
G&M Philippines, Inc. V. Cuambot
One who pleads payment has the burden of proving it. The reason for the rule is that the pertinent
personnel les, payrolls, records, remittances and other similar documents which will show that
overtime, differentials, service incentive leave, and other claims of workers have been paid are
not in the possession of the worker but in the custody and absolute control of the employer. Thus,
the burden of showing with legal certainty that the obligation has been discharged with payment
falls on the debtor, in accordance with the rule that one who pleads payment has the burden of
proving it. [38] Only when the debtor introduces evidence that the obligation has been extinguished
does the burden shift to the creditor, who is then under a duty of producing evidence to show why
payment does [39] not extinguish the obligation. In this case, petitioner was unable to present
ample evidence to prove its claim that respondent had received all his salaries and benets in full.
6. Monetary Obligations
TIBAJIA V. CA
The provisions of law applicable to the case at bar are the following:
a. Article 1249 of the Civil Code which provides:
Art. 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 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.;
b. Section 1 of Republic Act No. 529, as amended, which provides:
Sec. 1. Every provision contained in, or made with respect to, any obligation which purports to give
the obligee the right to require payment in gold or in any particular kind of coin or currency other
than Philippine currency or in an amount of money of the Philippines measured thereby, shall be as
it is hereby declared against public policy null and void, and of no effect, and no such provision
shall be contained in, or made with respect to, any obligation thereafter incurred. Every obligation
heretofore and hereafter incurred, whether or not any such provision as to payment is contained
therein or made with respect thereto, shall be discharged upon payment in any coin or currency
which at the time of payment is legal tender for public and private debts.
c. Section 63 of Republic Act No. 265, as amended (Central Bank Act) which provides:
Sec. 63. Legal character Checks representing deposit money do not have legal tender power
and their acceptance in the payment of debts, both public and private, is at the option of the
creditor: Provided, however, that a check which has been cleared and credited to the account of
the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the
amount credited to his account.
From the aforequoted provisions of law, it is clear that this petition must fail.
In the recent cases of Philippine Airlines, Inc. vs. Court of Appeals Intermediate Appellate Court, 5
4 and Roman Catholic Bishop of Malolos, Inc. vs. this Court held that A check, whether a
manager's check or ordinary check, is not legal tender, and an offer of a check in payment of a
debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. The
ruling in these two (2) cases merely applies the statutory provisions which lay down the rule that a
check is not legal tender and that a creditor may validly refuse payment by check, whether it be a
manager's, cashier's or personal check.