Extinguishment of Obligations (3)

Question 1

Grounds for Extinguishment of Obligations

1. Payment or Performance
2. Loss of the Thing Due
3. Condonation or Remission
   4. Confusion or Merger of Rights [Starting here]
4. Compensation
5. Novation
6. Others

Answer 1

Grounds for Extinguishment of Obligations

1. Payment or Performance
2. Loss of the Thing Due
3. Condonation or Remission
   4. Confusion or Merger of Rights [Starting here]
4. Compensation
5. Novation
6. Others

Question 2

171 - 196 (25 pages)

Question 3

A, B, and C obliged themselves to pay X and Y P 1,200,000.00 on December 30, 2018. The loan was evidenced by a Promissory Note dated December 30, 2013. Suppose T, a third person, pays the entire amount of the loan obligation to X & Y without the knowledge of A, B, and C, what will be the right/s of T?

Beneficial Reimbursement only
Full reimbursement and Subrogation
Full Reimbursement or Subrogation
Beneficial Reimbursement and Subrogation

Answer 3

Beneficial Reimbursement Only

Question 4

A, B, and C obliged themselves to pay X and Y P 1,200,000.00 on December 30, 2018. Instead of offering to pay cash, A, B and C offered to pay a Rolex wristwatch for the loan obligation that amounted to P 2,000,000.00, what law shall govern the transaction?

Sale
Donation
Barter
Law on Credit
Transaction

Answer 4

Sale

Question 5

When the debtor pays a commercial check to pay a loan obligation, it will extinguish the obligation at the time when:

the check is encashed or credited to creditor’s account

upon voluntary acceptance by creditor

upon presentment for payment in the bank

no correct answer is given

Answer 5

the check is encashed or credited to creditor’s account

Question 5

The FRIA of 2010 (RA 10142) is different from Payment by Cession in that the former may be voluntary and may be made upon the instance of the debtor.

True
False

Answer 5

True

Question 6

A guarantor may pay the obligor’s obligation because he is not a stranger to the contract.

True
False

Answer 6

True

Question 7

If the debtor who pays the creditor happens to be a minor, may the payment be considered valid?

Yes, if the creditor has used the money without knowing the debtor’s minority.

Yes, for as long as the creditor accepts it.

No, because payment by an incapacitated person is voidable

No, because payment by an incapacitated person is void.

Answer 7

es, if the creditor has used the money without knowing the debtor’s minority.

Question 8

APRIL 15 - ONLINE LECTURE

Answer 8

APRIL 15 - ONLINE LECTURE

Question 9

when is implied acceptance relevant?

implied - no objections

Answer 9

when payment is incomplete

ex. creditor is entitled to 10m, then debtor only pays 9.9m.

Question 10

What is Subrogation?

Answer 10

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.”

Question 11

right of a creditor arising from a penalty

Question 12

dacion en pago legal basis

Answer 12

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.”

Question 13

A, B, and C obliged themselves to pay X and Y P 1,200,000.00 on December 30, 2018. Instead of offering to pay cash, A, B and C offered to pay a Rolex wristwatch for the loan obligation that amounted to P 2,000,000.00, what law shall govern the transaction?

CORRECT ANSWER:
Sale

why isn’t it Barter?

Answer 13

if X & Y has an amount of 1.2million.
A B C own a rolex wrist watch.

since there is NO PRE-EXISTING OBLIGATION, this is simply an exchange of the 1.2 million and the rolex wrist watch.

the watch being delivered is not for the purposese of the obligation

Question 14

When the debtor pays a commercial check to pay a loan obligation, it will extinguish the obligation at the time when:

the check is encashed or credited to creditor’s account
upon voluntary acceptance by creditor
upon presentment for payment in the bank
no correct answer is given

COMMERCIAL CHECK is different from a manager’s check and a cashier’s check

Question 15

why is manager check and cashier’s check not of flegal tender yet

Answer 15

they are not legal tender is not issued from the BANKO SENTRAL NG PILIPINAS

Question 16

how much should the inflation be for 1250 to apply?

no answer yet because there was no case

Question 17

basis of a minor devtor

Answer 17

Art. 1427. When a minor between eighteen and twenty-one years of age, who has entered into a contract without the consent of the parent or guardian, voluntarily pays a sum of money or delivers a fungible thing in fulfillment of the obligation, there shall be no right to recover the same from the obligee who has spent or consumed it in good faith

Question 18

why is guarantor not a stranger to the contract? why is that

Answer 18

guarantor interested in the fulfilment of the obligation because the C can go after the G

Question 19

171 - 196 (25 pages)

Answer 19

171 - 196 (25 pages)

Question 20

What is extinguishment of obligation insofar as Confusion or Merger is concerned?

[elements]

Answer 20

[A]
The characters of creditor and debtor are merged in the same person (the creditor becomes also the debtor in the same debt)

[B]
1. Merger of the characters of creditor and debtor in one person;

2. In the person of the PRINCIPAL creditor [or] debtor;
3. Merger is complete and definite

Question 21

What does it mean to be a PRINCIPAL Debtor/Creditor?

Answer 21

It is to be directly involved in the contract

Pedro agrees to guarantee Juan’s repayment of the 10,000 pesos to Maria.

Pedro is not the principal debtor because he is not directly responsible for repaying the debt to Maria.

Pedro is not the principal creditor because he is not the one to whom the debt is owed.

Instead, Pedro is a subsidiary or accessory party to the contract, acting as a guarantor to ensure that Juan fulfills his obligation to repay the debt to Maria.

note
- in subsidiary & accessories to the obligations like guarantors, there is NO CONFUSION when there is merging

Question 22

Grounds for Extinguishment of Obligations

1. Payment or Performance
2. Loss of the Thing Due
3. Condonation or Remission
4. Confusion or Merger of Rights
5. Compensation
6. Novation
7. Others

Answer 22

Art. 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

Question 23

What is Compensation?

Answer 23

Two persons, in their own right, become creditors and debtors of each other
[1278]

Question 24

Compensation

|v|

Set-Off & Counterclaim

Answer 24

[Set-Off & CC]
- more appropriate in judicial compensation and therefore must be PLEADED

[Compensation]
- voluntary compensation only needs consent of parties

Question 25

In order compensation may be proper

or

elements of compensation

Answer 25

(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)

Question 26

In a lease agreement, the lessor is obligated to perform all repairs in the leased premises, including those caused by accident. When the lessee requests bathroom repairs due to damage, the lessor refuses, prompting the lessee to withhold rent payments. Subsequently, the lessor initiates eviction proceedings against the lessee for nonpayment of rent. In response, the lessee asserts a counterclaim, seeking reimbursement for the cost of the bathroom repairs undertaken independently.

Is this a legal compensation [or] judicial compensation?

Answer 26

In the scenario, it does not have all the elements of a legal compensation, that is, all debts are liquidated and demandable.

The rentals are liquidated and demandable because the amount is fixed in the contract

However, the lessee claim for reimbursement, specifically a claim for damages, a claim for damages is still to be proven in court In that situation, that is a counterclaim and not a legal compensation

Question 27

Figuera v Ang

1) Whether or not legal subrogation took place despite the absence of Ang’s consent to Figuera’s payment of the EIDC bills.

2) Whether or not there was a valid tender of payment and consignation.

Answer 27

1) Yes, there was legal subrogation. There is legal subrogation when a person interested in the fulfilment of the obligation pays, even without the knowledge of the debtor. There is compensation when

[2]
Yes, the tender of payment and consignation were valid. To be valid, the tender of payment must be absolute and must cover the amount due. In this case, the remaining amount due in Figuera’s obligation is P42,096.79. Due to the creditor’s refusal, without any just cause, to the valid tender of payment, the debtor is released from her obligation by the consignation of the thing or sum duen

Question 28

notes on Figuera v. Ang (classic case on compensation + subrogration)

Ang is the registered owner of a single proprietorship called EIDC, an immigration business owned by Ms Ang. On dec 16, 2004, Ang executed a deed of assignment of Business rights, transferring all to EIDC to Figuera for 150kpesos. Very important, in the contract, in addition to the assignment of rights, the parties also agreed that Ang shall pay the bills up to the Month of December 2004. I think this is just a usual provision in transfer of business rights. All utility bills should also be shouldered still by the Original Owner, and the parties shall have to fix for a specific date, including salaries of the employees. Apparently, Ang never paid or manifested her lack of willingness to pay the utility bills and the salaries of the employees, and probably, also, just to make sure that the business purchased by Figuera can run smoothly, Figuera paid the utility bills, amounting to 107903, without the consent of Ang. So, on Jan 17, 2005. when Figuera, was to pay Ang the amount of 150,000 which was the consideration for the sale of the Business, Figuera already deducted the amount he/she paid to utility bills in the amount of 107903 and so the balance was only 42,096.79, and was the remaining balance after deducting the bills paid by Figuera.

Answer 28

First, in the assignment of business rights, Figuera stood as Ang’s debtor for the consideration amounting 150k. Figuera, on the other hand, became Ang’s creditor for the amount of 107,903.21 through Figuera’s subrogation to the rights of Ang’s creditors against the latter.

Second, both debts consist of a sum of money, which are both due, liquidated, and demandable.

Finally, neither party alleged that there was any claim raised by third persons against said obligation.

In effect, even without the knowledge and consent of Ang or Figuera, their obligation as to the amount of 107,903.21 had already been extinguished. Consequently, Figuera owes Ang the remaining due amount of 42,096.79 (Figuera v. Ang)

Question 29

Enumerate Scenarios where there is NO COMPENSATION

Answer 29

1. Debts arising from contract of depositum [1962], when invoked by the depositary;
2. Debts arising from contract of commodatum [1933], when invoked by the bailee);
3. Claims for support due by gratuitous title [194FC] (EXC: support in arrears);
   - arears = support not given for x amount of months, may be subject for compensation
4. Obligations ex delicto
5. Certain obligation in favor of government.

Question 30

what is a deposit

Answer 30

[1962]
A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and of returning the same.

Question 31

what is a commodatum?

Answer 31

• type of loan where the very thing borrowed or loaned will be returned

[gpt]
Commodatum is a type of loan agreement wherein one party (the bailor or lender) delivers to another party (the bailee or borrower) a non-consumable item for temporary use. The bailee is allowed to use the item for a specific period of time but is required to return it to the bailor in the same condition.

Unlike in a MUTUUM, which involves lending fungible goods like money, in commodatum, the specific item itself is returned.

In simpler terms, commodatum is a loan of a non-consumable item, such as a book, tool, or equipment, with the understanding that it will be returned to the owner after its temporary use. This type of loan is typically gratuitous, meaning there is no expectation of payment or compensation for the use of the item

Question 32

note on depositum & commodatum

Is there compensation i n a case of depositum & commodatum?

[B] yes for BAILOR (in depository)

[A] NO for depository & bailee (in a commodatum), NO

when invoked by the depositary (depositum) and the bailee (commodatum) NO COMPENSATION SHALL TAKE PLACE shall take place because, claiming compensation on the part of the depositary/bailee would be tantamount to a breach of the trust reposed upon him.

Question 33

Compensation in Assignment of Credit
by the Creditor to an Assignee

note
this is relevant when debtor tries to off-set

Answer 33

WITH THE CONSENT OF DEBTOR; -Debtor cannot set up compensation!

WITH THE KNOWLEDGE BUT WITHOUT THE CONSENT OF DEBTOR; -Debtor can set up compensation regarding debts PRIOR to assignment!

WITHOUT THE KNOWLEDGE OF DEBTOR -Debtor can set up compensation for ALL debts maturing prior to his knowledge of assignment.

note
So, the debtor seeks compensation from the original creditor, not to make it harder for the creditor, but rather to address any outstanding claims or obligations owed by the original creditor that may affect the debt owed to the assignee. If the assignment was done with the consent of the debtor.

Question 34

Grounds for Extinguishment of Obligations

1. Payment or Performance
2. Loss of the Thing Due
3. Condonation or Remission
4. Confusion or Merger of Rights
5. Compensation
6. Novation
7. Others (farm dat pig)

Question 35

When does NOVATION take place?

Answer 35

when there is a:

1. new object [or] principal obligation, [or]
2. new debtor, [or]
3. new creditor

• or even a combination of all three

Question 36

Novation may be in the form

Answer 36

1. EXTINCTIVE
   - old obligation and related obligations are totally replaced with a new one
2. MODIfactory
   - new obligations on top of the old obligation
   - only part may have been modified

Question 37

when is there extinctive novation

Answer 37

There is extinctive novation, only when there is clear intent or intention to:

1. Create a new obligation
2. Extinguish the old obligation

Question 38

novation takes place when there is a new D, new C, or new object or a combination of those,

what are the elements of novation?

Answer 38

1. valid prior obligation
2. animus novandi (intent to extinguish [or] modify the old obligation
3. substantial difference (incompatibility test)
4. capacity & consent of ALL parties, except expromision
5. valid new obligation

Question 39

SUBSTANTIAL DIFFERENCE (INCOMPATIBILITY TEST)

Problem 1:
- novation simply modificatory

LE and LR entered into a Contract of Lease (CL1) involving LR’s apartment. The term of the lease is 5 years at 20,000 per month. Sub-lease is prohibited in the CL1.

Two years into the contract, LE and LR entered into another Contract of Lease (CL2) with a term of 5 years at 25,000 per month. The contract does not provide for a prohibition against subleasing.

Four years after CL1 was executed, LE subleases the apartment to SL for 30,000.00. May LR, the lessor, sue LE for breach of CL1?

Question 40

SUBSTANTIAL DIFFERENCE (INCOMPATIBILITY TEST)

Problem 2:
Contract to Lease and then Contract to Sell

Extinctive Novation

Answer 40

check notes for problem

Question 41

What are the Forms of Novation Affecting Debtor

Answer 41

Expromision

Delegacion

Question 42

What are the Forms of Novation Affecting Debtor> Expromision?

Answer 42

Initiative comes from the NEW debtor [and]

the creditor consents to the SUBSTITUTION

with the intention to release the original debtor) [very importnat]

note
If there is no clear intent to release the original debtor, there is no expromision to speak of. In other words, there is no new debtor to speak of, because there is only a new debtor by expromision if the requirements are present.

Question 43

What are the Forms of Novation Affecting Debtor> Delegacion

Answer 43

initiative comes from the OLD debtor [and] the new debtor and creditor accept the substitution

Question 44

Intention of Creditor releasing the original debtor from their obligation must clearly and unequivocally shown

as seen in the case of Odiamar v. Valencia

Issue
Whether or not petitioner should be held liable to respondent for the entire debt in the amount of P2,100,000.00.

Answer 44

The Court held that the fact that the creditor accepts payments from a third person, who has assumed the obligation, will result merely in the addition of debtors and not novation. At its core, novation is never presumed, and the animus novandi, whether totally or partially, must appear by express agreement of the parties, or by their acts that are too clear and unequivocal to be mistaken

Here, the intent to novate was not satisfactorily
proven by respondent. At best, petitioner only
manifested her desire to shoulder the debt of her
parents

Question 45

D owes C P10M. S, stranger to both D and C, promised to C that he (S) will shoulder D’s obligation within a period of 5 days. After five days, S could no longer be found.

A. May C still demand payment of 10m from D? Why or Why not?

B. Will your answer be the same if D knew of S’ promise to C?

C. Will your answer be the same if S did not only promise to shoulder D’s obligation, but in fact paid C 10M through a check but which bounced?

Answer 45

for both A B C

** The mere fact that the creditor receives a guarantee or accepts payment from a third person who has agreed to assume the obligation, [when there is no agreement that the first debtor shall be released from responsibility, does not constitute novation]**

Question 46

Rights of “New Debtor” upon Payment

[A] Expromision

[B]Delegacion

Answer 46

[A]
- Substitution with the knowledge and consent of old debtor: FULL REIMRBUSEMENT and SUBROGATION

-Substitution WITHOUT knowledge: -with consent of payment [Same] -without consent of payment [Beneficial Reimbursement only; NO Subrogation]

[B]
- Full Reimbursement & Subrogation

Question 47

Rights of the CREDITOR
in case of insolvency of NEW debtor

[A] Expromision

[B] Delegacion

Answer 47

In Expromision:
-Substitution WITHOUT knowledge or against the will of the old debtor, the creditor CANNOT go after the old debtor (old obligation is not revived).

In Delegacion:
- As a rule, no revival of old obligation, [except] when insolvency was already existing and known to the public or the old debtor at the time of delegacion

Question 48

Forms of Novation Affecting Creditor

question note
- scenario where there is NEW creditor

Answer 48

[A] Conventional Subrogation
- agreement of all parties
- all other related rights, actions and remedies appurtenant to that credit will also be placed in the new creditor, the one who have been subrogated to the original one.

[B] Assignment of Credit

• only “credit” (right to
  collect) is transferred,
  but there is no
  subrogation to all other
  rights and remedies of
  original creditor

note
assignee can file a case against original debtor by virtue of the right to collect assigned to him

BUT, this assignee cannot foreclose because what the assignee is allowed to do only is collection

Question 49

1. Conventional Subrogation: C has a P10M claim against D as evidenced by a PN and secured by a REM involving D’s building. T, with consent of D and C, paid C P10m.

A: T is now subrogated to the rights of C as against D. If D fails to pay T, the latter can foreclose the REM against D.

Answer 49

2. Assignment of Credit: C has a p10M claim against D as evidenced by a PN and secured by a REM involving D’s building. C, however, is also indebted to T in the same amount of p10m. C assigns his credit (with respect to D) to T.

A: T now may collect from D. If D fails to pay, T may only sue D for collection of Sum of money with damages, but cannot foreclose the REM.

Question 50

In Assignment of Credit, what are the remedies of assignee if debtor refuses to pay?

Answer 50

Even though assignee cannot foreclose (as the case may be),

assignee can still:
- file a COLLECTION suit [plus] damages, if any.

Question 51

What is Novation of Criminal Liability

Answer 51

aka Doctrine of Incipient Criminal Liability

-

Question 52

Before creditor would file a criminal case in court, debtor promised to pay the 10million, let us say, through a parcel land that D owns. However, C, did not accept the offer, and C eventually filed a criminal case. During the pendency of the case the parties now agreed, because C eventually agreed to just accept the parcel of land earlier offered by the Debtor.

May the Agreement entered into by Debtor and Creditor for the Creditor to receive the land of Debtor D, during the pendency of the case. Will that cause as a matter of law, the dismissal of the criminal case?

Answer 52

No.

It will however extinguish the civil liability of the criminal case.

While there is novation of the civil obligation, that novation cannot affect the criminal liability.

Question 53

What if the the agreement for the parcel of land was done BEFORE THE FILING OF A CASE IN COURT (before filing of information?

Answer 53

The doctrine of incipient criminal liability will take effect.

This will novate or bar (more appropriate term) the crim lia of the offender as basis for the State.

Question 54

judgment of court may be novated by a:

Answer 54

subsequent compromise agreement by the parties.

note
Even if the judgment of the court says, “debtor is mandated to pay 10million to the creditor”, but later on the parties have agreed that the creditor may only accept 8million. So despite the payment of 8million, the judgment may still be considered as having been satisfied if there has been a compromise agreement to that effect. So a compromise agreement may modify a judgment.