Bar Q and A #25

No, the obligation of Butch to Hagibis was not extinguished by the mere surrender of the SUV’s to the latter. 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. (Art. 1245) In dacion en pago, as a special mode of payment, the debtor offers another thing to the credtor who accepts it  as equivalent of payment of an outstanding debt. 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 debtor’s debt. As such, the essential elements of a contract of sale, namely, consent, object certain, and cause or consideration must be present. In dacion en pago, there is in reality an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price. In any case, common consent is an essential prerequisite, be it sale or innovation to have the effect of totally extinguishing the debt or obligation. (Filinvest Credit Corporation v. Philippine Acetylene Company, G.R. No. L-50449, January 30, 1982) There being no mention in the facts that Hagibis has given its consent to accept the SUCs as equivalent payment, the obligation of Butch is not thereby extinguished be mere delivery of the SUVs.

I will decide in favor of Jerico as there is no novation of the Construction Contract. Novation is never presumed, and may only take place when the following are present: (1) a previous valid obligation; (2) the agreement of all the parties to the new contract; (3) the extinguishment of the old contract; (4) validity of the new one. There must be consent of all the parties to the substitution, resulting in the extinction of the old obligation and the creation of a new valid one. In this case, the revision of the work schedule of Ivan and the subcontractors is not shown to be so substantial as to extinguish the old contract, and there was also no irreconcilable incompatibility between the old and new obligations. It has also been held in jurisprudence that a surety may only be relieved of his undertaking if there is a material change in the principal contract and such would make the obligation of the surety onerous. The principal contract subject of the surety agreement still exists, and Jojo is still bound as a surety.

a) A may avail the minority of B as a defense, but only for B’s share of P 10,000.00. A solidary debtor may avail himself of any defense which personally belongs to a solidary co-debtor, but only as to the share of that co-debtor.

b) A may avail of the condonation by X of C’s share of P 10, 000.00. A solidary debtor may, in actions filed by the creditor, avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him or pertain to his own share. With respect to those which personally belong to others, he may avail himself thereof only as regards that part of the debt for which the latter are responsible (Art. 1222).

c) A may not interpose the defense of insolvency of D as a defense. Applying the principle of mutual guaranty among solidary debtors, A guaranteed the payment of D’s share and of all the other co-debtors. Hence, A cannot avail of the defense of D’s insolvency.

d) The extension of six (6) months given by X to E may be availed of by A as a partial defense but only for the share of E, there is no novation of the obligation but only an act of liberality granted to E alone.

TRUE. Under the Civil Code, a co-owner may renounce his share in the co-owned property in lieu of paying for his share in the taxes and expenses for the preservation of the co-owned property. In effect, there is dacion en pago because the co-owner is discharging his monetary obligation by paying it with his non- monetary interest in the co-owned property. The fact that he is giving up his entire interest simply means that he is accepting the value of his interest as equivalent to his share in the taxes and expenses of preservation.

Compensation is a mode of extinguishing to the concurrent amount, the obligations of those persons who in their own right are reciprocally debtors and creditors of each other. (Tolentino, 1991 ed., p. 365, citing 2 Castan 560 and Francia v. IAC, 162 SCRA 753) It involves the simultaneous balancing of two obligations in order to extinguish them to the extent in which the amount of one is covered by that of the other. (De Leon, 1992, ed., p. 221, citing 8 Manresa 401)

Payment means not only delivery of money but also performance of an obligation. (Article 1232, Civil Code) In payment, capacity to dispose of the thing paid and capacity to receive payment are required for debtor and creditor, respectively: in compensation, such capacity is not necessary, because the compensation operates by law and not by the act of the parties. In payment, the performance must be complete, while in compensation there may be partial extinguishment of an obligation (Tolentino, supra).

a) No, because Gustavo is guilty of estoppel by laches. He led Felipe to believe he could pay by cashier’s check, and Felipe relied that such cahier’s check would be encashed thus extinguishing his obligation. Because of Gustavo’s inaction of more than six months the check became stale and Felipe will be prejudiced if he will be required to pay $100 at the exchange rate of P56 to $1.00. The exchange should be the rate at the time of payment.

b) Yes, if the payment is valid. Since the bank considered the cashier’s check as being stale for not having been encashed on time, then the cahsier’s check may be issued again. At any rate, non-payment of teh amount to Gustavo would constitute unjust enrichment.

c) Yes, Felipe can compel Gustavo to pay US$100 instead. Under the prior law, RA 529, as amended by R.A.4100, payment can only be in Philippine currency as it would be against publich policy, null and void and of no effect. However, under RA8183, payment may be made in the currency agreed upon by the parties, and the rate of exchange to be followed is at the time of payment. (C.F. Sharp & Co. Inc. vs. Northwest Airlines, Inc., 381 SCRA 314 [2002])

Y bank is correct. Art. 1287, Civil Code, does not apply. All the requisites of Art. 1279, Civil Code are present. In the case of Gullas vs. PNB (62 Phil. 519), the Supreme Court held: “The Civil Code contains provisions regarding compensation (set off) and deposit. These portions of Philippine law provide that compensation shall take place when two persons are reciprocally creditor and debtor of each other. In this connection, it has been held that the relation existing between a depositor and a bank is that of creditor and debtor. xxx As a general rule, a bank has a right of set off of the deposits in its hands for the payment of any indebtedness to it on the part of a depositor.” Hence, compensation took place between the mutual obligations of X and Y bank.

Stockton is correct. There is no right of compensation between his price of P10 million and Core Corp.’s unliquidated claim for damages. In order that compensation may be proper, the two debts must be liquidated and demandable. The case for the P10 million damages being still pending in court, the corporation has as yet no claim which is due and demandable against Stockton.

No, the bank is not correct. While the Bank is correct about the applicability of compensation, it was not correct as to the amount compensated. A bank deposit is a contract of loan, where the depositor is the creditor and the bank the debtor. Since Sarah is also the debtor of the bank with respect to the loan, both are mutually principal

debtors and creditors of each other. Both obligations are due, demandable and liquidated but only up to the extent of P300,000.00 (covering the unpaid third, fourth and fifth monthly installments). The entire one million was not yet due because the loan has no acceleration clause in case of default. And since there is no retention or controversy commenced by third person and communicated in due time to the debtor, then all the requisites of legal compensation are present but only up to the amount of P300,000.00. The bank, therefore, may deduct P300,000.00 from Sarah’s bank deposit by way of compensation.

1) Yes, Chito can demand payment on the 1991 promissory note in 1994. Although the 1978 promissory note for P1 million payable two years later or in 1980 became a natural obligation after the lapse of ten
(10) years, such natural obligation can be a valid consideration of a novated promissory note dated in 1991 and payable two years later, or in1993.

All the elements of an implied real novation are present:
a) An old valid obligation;
b) A new valid obligation;
c) Capacity of the parties;
d) Animus novandi or intention to novate; and
e) The old and the new obligation should be incompatible with each other on all material points (Article 1292). The two promissory notes cannot stand together, hence, the period of prescription of ten (10) years has not yet lapsed.

2) No. The mortgage being an accessory contract prescribed with the loan. The novation of the loan, however, did not expressly include the mortgage, hence, the mortgage is extinguished under Article 1296 of the NCC. The contract has been extinguished by the novation or extinction of the principal obligation insofar as third parties are concerned.