executed on the car for security of the debt. Lim assigned his rights to Filinvest Credit Corporation (FCC). PAC defaulted on several of the payments, so FCC sent letters demanding that the payment be made. PAC instead delivered to FCC the car. PAC claimed that the delivery of the car to FCC extinguished the obligation. Held: the mere return of the vehicle does not constitute dation in the absence of evidence of the true intention of the parties. Dation is the transmission of the ownership of a thing by the debtor to the creditor as accepted equivalent of the performance of the obligation. The debtor offers another thing which the creditor accepts as equivalent payment. It’s really a sort of sale. The creditor buys the property, and he pays by charging it against the debtor’s debt. The elements of
Digests by 4A 2015
a sale are present – consent, object certain, and cause or consideration. Dacion is an objective novation, where the thing offered in lieu of money is accepted as an equivalent – this is the object certain – and the debt is considered as the purchase price. CONSENT is a prerequisite for the novation or sale to extinguish the obligation. This consent was not present here, since there is no indication that FCC intended or consented to the mere delivery being construed as actual payment, or dation.
Citizen’s Surety v. CA: Petitioner, a surety company, issued two surety bonds in behalf of respondent to guaranty the fulfillment of an obligation under a contract of sale the latter had entered into with the Singer. In consideration of the bonds, two indemnity agreements were executed by respondent followed by a deed of assignment executed on the same date. After respondent’s failure to comply with its obligation under the contract of sale, petitioner was compelled to pay under the surety bonds. When respondent failed to reimburse it, petitioner filed a collection suit. Respondent opposed the money claim, and asserted that the surety bonds and the indemnity agreements had been extinguished by the execution of the deed of assignment. Held: The transaction could not be dation in payment. When the deed of assignment was executed, the obligation of the assignor to refund the assignee had not yet arisen. There was no obligation yet on the part of the petitioner to pay Singer Sewing Machine Co. There was nothing to be extinguished on that date, hence, there could not have been a dation in payment. The deed of assignment cannot be regarded as an absolute conveyance whereby the obligation under the surety bonds was automatically extinguished. Respondent’s subsequent acts showed that the deed of assignment was intended merely as a security for the issuance of the two bonds. Partial payments were made after the execution of the deed of assignment to satisfy the
obligation under the two surety bonds. Moreover, a second real estate mortgage in favor of petitioner was executed by respondent. These circumstances showed that no debt was extinguished upon the execution of the deed of assignment, which was intended merely as another security for the issuance of the surety bonds.
b. Application of payments/ Imputacion (Articles 1252-1254)
• Designation of the debt of the debtor who has several obligations of the same kind to the creditor, to whom payment is made.
• Requisites: 1. Several debts 2. All must be due 3. Can’t pay all
• If the debts due are of the same nature and burden, the payment shall be applied to all of them proportionately.
• Application payment is the designation of the debt which is being paid by a debtor who has several obligations of the same kind in favor of the creditor to whom payment is made.
• The situation in application of payments is that a debtor owes his creditor. There are several debts due, but the debtor cannot pay all of the debts due.
• Example: A owes B P2000, P3000 and P10,000. A gives B P15,000. There is no application of payment here because it is equal to the total amount due.
Digests by 4A 2015
• The creditor can always not accept application of payments since the creditor cannot be
compelled to accept partial performance of the obligation. However, this may not be wise since the debtor may have other creditors.
• The rules on application of payment solve the problem of distributing the payment which is less than the total obligation.
• Rules in Application of Payment
• 1st Rule: Apply in accordance with the agreement
• 2nd Rule: If there is no agreement, the debtor has the right to apply • 3rd Rule: If the debtor does not choose, the creditor can choose. • 4th Rule: Apply to the most onerous debt (Article 1254, ¶1) • Rules to Determine Which is the More Onerous Obligation
1. An interest bearing obligation is more onerous than a non-interest bearing obligation. 2. An older debt is more onerous than a recent debt
3. An obligation where the party is bound as a principal is more onerous than an obligation is bound as a surety
4. An obligation which is secured is more onerous than an obligation which is unsecured 5. An obligation with a penal clause is more onerous than an obligation without a penal clause • 5th Rule: If equally onerous, apply proportionately (Article 1254, ¶2)
o Exception to the rule on indivisibility provided by the law! • What makes it special? Violates indivisibility and integrity.
Rapanut v. CA: Flunker decided to sell her property in Pasay. It was to be paid on installments.