Art. 1232. Payment means not only the delivery of money but also the performance, in any other manner, of an obligation.
it is the fulfillment of the prestation due whc extinguishes the Ø by the realization of the purposes for whc it was constituted.
it is a juridical act whc is voluntary, licit and made with the intent to exting. d Ø;
it is made not only by 1 who owes money but also by 1 bound to do something or to refrain fr doing
• Thus, Payment is identical w/ Fulfillment. Requisites of Payment or Performance: [TOLENTINO]
1. the person who pays must have requisite capacity 2. the person to whom payment is made “
3. the thing to be paid in accordance w/ the Ø 4. the manner, time and place of payment, etc.
payment shd be made by the debtor to the creditor at the right time and place.
KINDS:
1. NORMAL when Db voluntarily performs
2. ABNORMAL when Db is forced by judicial proceeding
Balane:
Payment or Performance are used interchangeably. But technically,
Payment in obligations to give, Performance in obligations to do.
Payment/ performance is the paradigmatic mode of extinguishment of an obligation.
• It is the only normal way of extinguishing an obligation.
Art. 1233. A debt shall not be understood to have been paid unless the thing or service in w/c the obligation consists has been completely delivered or rendered, as the case may be.
Tolentino: This art. States Two requisites for Payment:
(1) Identity, of the prestation, & the very thing or service due must be delivered or released;
(2) its integrity prestation must be fulfilled completely
For BALANE: Art. 1233 states these requisites of payment – I. Re: The prestation
1. Identity 2. Integrity
3. Indivisibility II. Re: The parties
1. Payor/ obligor/ debtor 2. Payee/ obligee/ creditor III. Re: Time & place
Discussion:
I. With respect to prestation: 1. Identity
• If specific prestation, this requisite means that the very thing or service must be delivered. (Art. 1244.)
• If generic, the requisite requires the delivery of something of neither inferior or superior quality (Art. 1246). It must be something in the middle. In case of money, there are special rules:
Governing rule: RA 529 as amended by RA 4100
• In case of money debts, you will have to pay in legal tender in the Philippines. This law supersedes Art. 1249.
• If the parties stipulate that payment will be made in foreign currency, the obligation to pay is valid but the obligation to pay in foreign currency is void. Payment will be made in Phil. currency.
LEGAL TENDER – means such currency whc in a given ju’s can be used for payment of debts public & priv, &whc cannot be refused by Cr.
In the RP the ff are legal tender: (sec. 54, RA 265)
1. RP silver peso & half peso for debts of any amount, RP subsidiary silver coins 20 ¢& 10 ¢ for up to P20 debts, and RP minor nickel &copper coins for up to P2.00 debts; 2. RP Treasury certs., new Victory series (EO 25, s. 1944, already w/drawn fr circ)
3. All notes and coins issued by CB. Q: How do you convert?
A: In case of an obligation w/c is not a loan in foreign currency, if incurred bef. RA 529, conversion must be as of the time the obligation was incurred.
If incurred after RA 529 became effective, the conversion must be as of the time the obligation was incurred (Kalalo v. Luz) If the loan is in foreign currency, the conversion is as of the time of payment. (RA 529.)
Payment in negotiable paper This may be refused by the creditor. Payment in manager's check or certified check is not payment in legal tender. The ruling in Seneris has been reversed in the case of Bishop of Malolos. The Malolos ruling is better. I found it hard to accept that manager's check or certified check is good as legal tender. There are always risks to w/c cashier's checks are subject. What if after having issued a cashier's check, the drawee- bank closes, what happens to your cashier's check?
In any event, payment by check can be refused by the creditor. And even if payment by check is accepted by the creditor, the acceptance is only a provisional payment until the check is
(a) encashed or
(b) when through the fault of the creditor they have been impaired.
The case of Namarco v. Federation, 49 SCRA 238, interprets the phrase "when through the fault of the creditor, they have been impaired" as to apply only to a check used in payment if issued by a person other than the debtor.
Why? Bec. if the check was issued by the debtor himself, all that the debtor have to do is to issue another check.
Revaluation in case of extraordinary inflation or deflation (Art. 1250)
This rule has never been used. It was only during the Japanese occupation that there was a recognition of extraordinary inflation in this country.
Exceptions to the requirement of identity (i) Dacion en pago (Art. 1245.)
(ii) Novation
In both cases, there is a voluntary change in the object. 2.
Integrity There must be delivery of the entire prestation due. (Art. 1233) or completely fulfilled;
The exceptions to the requirement of integrity are:
1. In case of substantial performance in good faith (Art. 1234.) This is an equity rule.
2. In case of waiver of obligee/ creditor (Art. 1235.) 3. In case of application of payments if several debts are
equally onerous (Art. 1254, par. 2.) 3.
Indivisibility This means that the obligor must perform the prestation in one act & not in parts. (Art. 1248.)
There are several exceptions to this requirement: 1. In case or express stipulation. (Art. 1248.)
2. In case of prestations w/c necessarily entail partial performance. (Art. 1225, par. 2)
3. If the debt is liquidated in part & unliquidated in part. (Art. 1248.)
4. In case of joint divisible obligations (Art. 1208.)
5. In solidary obligations when the debtors are bound under different terms & conditions. (Art. 1211.)
6. In compensation when a balance is left. (Art. 1290.) 7. If the work is to be delivered partially, the price or
compensation for each part having been fixed. (Art. 1720.)
8. In case of several guarantors who demand the right of division. (Art. 2065.)
9. In case of impossibility or extreme difficulty of single performance.
II. With respect to the parties
There are two parties involved: 1. Payor/ obligor/ debtor 2. Payee/ obligee/ creditor Requirements:
1. Art. 1226 - 1238. Who should the payor be: a. Without need of the creditor's consent
1. The debtor himself 2. His heirs or assigns 3. His agent
4. Anyone interested in the fulfillment of the obligation, e.g., a guarantor
b. With the creditor's consent -- Anyone.
This is a departure fr. the rule in the Old Civil Code w/c did not require consent on the part of the creditor.
c. Effect of payment by a third person:
1. If the payment was w/ the debtor's consent, he becomes the agent of the debtor. The effect is subrogation (Articles 1236-1237.) Exception: If the person paying intended it to be a donation. (Art. 1238.)
2. If payment was w/o the debtor's consent, the third person may demand repayment to the extent that the debtor has been benefited. (Art. 1236, par. 2.) 2. Who may be the payee?
1. The obligee proper (Articles 1240, 1626.) 2. His successor or transferee (Art. 1240.) 3. His agent (ibid.)
4. Any third person subject to the following qualifications:
a. provided it redounded to the obligee's benefit & only to the extent of such benefit. (Art. 1241, par. 2.)
b. If it falls under Art. 1241, par. 2 nos. 1, 2 & 3, benefit is deemed to be total.
5. Anyone in possession of the credit. (Art. 1242.) In all these five (5) cases, it is required that the debt should not have been garnished. (Art. 1243.)
III. With respect to the time & place of payment: 1. When payment to be made: When due 2. Place (Art. 1251.)
Primary rule: As stipulated
Secondary rule: Place where the thing was at the time the obligation was constituted if the obligation is to deliver a determinate thing.
Tertiary rule: At the debtor's domicile Balane:
** Payment or Performance are used interchangeably.
But technically, payment is used in obligations to give whereas performance is used in obligations to do. Payment/ performance is the paradigmatic mode of extinguishment of an obligation. It is the only normal way of extinguishing an obligation.
Art. 1234. If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict & complete fulfillment, less damages suffered by the obligee.
Substantial Performance:
1. an attempt in GF to perform, w/o any willful or intentional departure fr it
2. deviation fr perf. of Ø must be slight, & omission or defect must be so technical & unimpt, & must not pervade the whole, must not be so material to the achievement of the very purpose of the parties;
3. party claiming substantial perf. must show attempt in GF
CASES on Payment:
J.M. TUASON V. JAVIER [31 S 829] - In the interest of justice & equity, court may grant the vendee a new term where he substantially performed in good faith according to Art. 1234, regardless of Art. 1592 of the same Code.
FACTS:
Contract to Sell bet. Plaintiff JM Tuazon and def. Ligaya Javier on a parcel of land in Sta. Msa Hts. Subd. On installment w/ down & interest of 10% p.a. Def. took poss’n of prop. After payment of 1st installment on execution of © in Sept. 1954 & pd. Mo.installmts until Jan. 1962. After subseq. Default by def. of monthly inst. Plaintf informed her that © has been rescinded. But def. refused to vacate. Thus, pltff filed case w/CFI-Rizal for judicial rescission of © and payment of arrears.
Based on Art. 1592, CFI found in favor of def. but made the latter pay arrears w/in 60 days, plus interests, attys fees, and that title shd be transferred after such payment w/costs at the expense of def.
Article 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term.
Thus pltff appealed for erroneous applic of 1592 b/c this is a © TO Sell not OF Sale.
ISSUE: WON CFI erred in NOT declaring herewith © rescinded. HELD: NO. What applies here is Art. 1234:
Art. 1234. If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict & complete fulfillment, less damages suffered by the obligee.
LEGARDA HERMANOS V. SALDANA [55 S 324] - The Court's doctrine in J.M. Tuason v. Javier is fully applicable to the present case, RE Substantial performance of © Ø in GF, Art. 1234.
FACTS: Contract to Sell bet. Plaintiff vendee, Felipe Saldana and Def.vendor, Legarda Hermanos, subdivision-owner, on 2 written ©’s, payable for 10yrs, 120 equal monthly installments w/ 10% interst p.a., fr. May 1948
resp. Saldana faithfully pd. For 8-yrs about 95-mos.instalmnts out of 120; he stopped paying fr. Filing of this case w/CFI-Manila in 1961; after his 1st 5yrs of paying, resp. called attention of vendors that he wanted to build a house on his lot but they have to start improvements on d subd, e.g. roads. Instead, he was informed of cancellation of © for failure to pay as stipulated, the 120installments and his payments were to be treated as rents. > LC dismissed resp.’s complaint, upheld the cancellation of the ©. Appellate court reversed, and ordered the conveyance of one of the 2 lots to defs. At the latter’s choice. It was found that the lots cud not be delivered bcoz they were still submerged in
water and there were no roads in the subdv. (for equity and justice)
ISSUE: WON cancellation here was proper?
HELD: NO. Applying Doctrine in JM Tuazon v. Javier
AZCONA V. JAMANDRE [151 S 317] -
FACTS: GUILLERMO AZCONA leased 80 Ha. Out of his 150 Ha pro-indiviso share in hacienda Sta. fe in Escalante, Negros Occ. To CIRILO JAMANDRE, decedent rep.by Administrator to his Estate;
> Yearly rental agreed: P7,200 for 3-agri.years fr. 1960, extendible to 1965 at lessee’s option. 1st annual rental due on Mar. 1960; but resp. did not pay for failure of Pet. To deliver possn of the prop. To him until he pd in Oct. 1960 of P7000; > In April 1961, Pet. Notified Resp. that © is deemed cancelled for failure to comply w/conditions therein;
> resp. filed complaint, def. filed counterclaim; both were dismissed by TC for pari de licto;
ISSUE: WON the payment of P7000, lacking of 200 fr the agreed annual rental of 7200, amounts to delay and ground for rescission
HELD: No. the receipt showed full payment as per contract; no mention of the short of 200; whc means that rental was reduced, perhaps b/c of the reduction of the 80Ha. By 16Ha. Used by Pet. As grazing land. But the rest of the © subsists.
xxx If the petitioner is fussy enough to invoke it now, it stands to reason that he would have fussed it too in the receipt he willingly signed after accepting, w/o reservation & apparently w/o protest only P7,000. Art. 1235 is applicable.
Petitioner says that he could not demand payment of the balance of P200 on 10/26/60, date of receipt bec. the rental for the crop year 1961-1962 was due on or before 1/30/61. But this would not have prevented him fr. reserving in the receipt his right to collect the balance when it fell due. Moreover, there is evidence in the record that when the due date arrived, he made any demand, written or verbal, for the payment of that amount. Art. 1235. When the obligee accepts the performance, knowing its incompleteness or irregularity, & w/o expressing any protest or objection, the obligation is deemed fully complied w/.
1. To whom payment 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.
ARAÑAS V. TUTAAN [127 S 828]
Payment by judgment debtor to the wrong party does not extinguish judgment debt.
FACTS: CFI-Rizal,Quezon declared petitioner-plaintiff sps. Arañas as owner of 400 shares of stocks in Universal Textile Mills, Inc. UTEX, whc the Corp-defendant issued to co-def. Gene Manuel and BR Castaneda, incl. stock dividends whc accrued to said shares. This court a quo rendered decision in August 1971. UTEX made a motion for clarification and such was answered in 1972 clearly directing UTEX to pay sps.petitioners as rightful owners of all accruing dividends from their stocks fr after the judgment by the court, and for the transfer of the disputed shares of stocks to the names of petitioner-sps. In lieu of the appeal filed by Manuel and Castaneda, UTEX failed to transfer the names of the shares and pay the dividends to petitioners. Thus, sps-pet asked for a writ of execution fr court a quo for payment of cash dividends fr 1972-1979 w/interest and to effect the transfer of the shares to them. Lower court granted such order but absolved UTEX of payment of cash dividends whc they have already paid to Manuel and Castaneda on the ground of equity.
ISSUE: WON UTEX shd be made to pay sps.Arañas the cash dividends fr 1972-1979 w/interests, after it has already paid the same to Manuel and Castañeda, despite knowledge of the court’s decision otherwise.
HELD:
The burden of recovering the supposed payments of the cash dividends made by UTEX to the wrong parties
Castaneda & Manuel squarely falls upon itself by its own action & cannot be passed by it to petitioners as innocent parties. *** It is elementary that payment made by a judgment debtor to a wrong party cannot extinguish the judgment obligation of such debtor to its creditor. xxx
A payment in order to be effective to discharge an obligation must be made to the proper parties.-- In general, a payment, in order to be effective to discharge an obligation, must be made to the proper person. Thus, payment must be made to the obligee himself or to an agent having authority, express or implied, to receive the particular payment. Payment made to one having apparent authority to receive the money will, as a rule, be treated as though actual authority had been given for its receipt.
Likewise, if payment is made to one who by law is authorized to act for the creditor, it will work a discharge. The receipt of money due on a judgment by an officer authorized by law to accept it will, therefore satisfy the debt.
xxx The theory is where a payment is made to a person authorized & recognized by the creditor, the payment to such a person so authorized is deemed payment to the creditor. xxx
Unless authorized by law or by consent of the obligee, a public officer has no authority to accept anything other than money in payment of an obligation under a judgment being executed. In the absence of an agreement, either express or implied, payment means the discharge of a debt or obligation in money & unless the parties so agree, a debtor has no rights, except at his own peril, to substitute something in lieu of cash as medium of payment of his debt. Consequently, Unless authorized by law or by consent of the obligee, a public officer has no authority to accept anything other than money in payment of an obligation under a judgment being executed. Strictly speaking, the acceptance by the sheriff of the petitioner's checks, in the case at bar, does not, per se, operate as a discharge of the judgment debt. [PAL V. CA (181 S 557)]
Tolentino:
Authority to receive: LEGAL or CONVENTIONAL
Legal: conferred by law, such as authority of guardian to inc. creditor (Cr), or the adm’r of estate
Conventional: autho. Fr. Cr himself, as when agent is appted. To collect fr. Debtor (Dr)
• Payment to wrong party does NOT extinguish oblig to Cr, if there is no fault or negligence w/c can be imputed to the latter, even when Db acted in utmost GF & by mistake as to the person of his Cr, or thru error induced by fraud of 3P, EXCEPT AS PROV. IN ART. 1241
• Deposit by Db in bank, in the name of & to the credit of Cr, w/o latter’s autho. Does NOT constitute payment; but when the Cr cannot be found in the place of payment, such deposit may be a valid excuse for not holding the Db in default
GR: Consignation in ct. of thing or amt. due, when properly made will ext. oblig.
Art. 1241. Payment to a person who is incapacitated to administer 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 persons 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