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EXTINGUISHMENT OF OBLIGATION 1. 2. 3. 4. PAYMENT OR PERFORMANCE LOSS OF THE THING DUE CONDONATION or REMISSION OF THE DEBT CONFUSION OR MERGER OF THE RIGHTS OF CREDITOR AND DEBTOR 5. COMPENSATION 6. NOVATION 7. RENUNCIATION OR WAIVER by the oblige or creditor 8. COMPROMISE 9. EXPIRATION of the resolutory term or period 10. DEATH of one of the contracting parties in certain Contracts. 11. AGREEMENT of both contracting parties or mutual assent or dissent.
EXTINGUISHMENT OF OBLIGATION
EXCEPTIONS 1) obligation is substantially performed in good faith. - as though there's strict and complete fulfillment, less damages suffered by the obligee. 2) obligee accepts the performance, knowing its incompleteness or irregularity and without expressing any protest or objection. 3) when obligation to give, to do or not to do is converted into an obligation to indemnify the obligee or creditor because or breach or nonfulfillment and the indemnity is finally paid in full. PERSONS WHO MAY PAY OBLIGATION - debtor himself - any third person PAYMENT BY THIRD PERSON - whether he has an interest in the obligation or not, and whether the payment was made with knowledge and consent of the debtor or not. Cannot be applied: - PACTO DE RETRO - third persons who pays the redemption price in sales with right of repurchase Reason: vendor a retro is not a debtor within the meaning of the law GR: the creditor is not bound to accept payment or performance by a third person EXP: - has interest in the fulfilment of the obligation. - there is a stipulation to the contrary. RIGHTS OF THIRD PERSON with knowledge and consent of debtor -->can recover from the debtor the entire amount which he has paid. He is subrogated to all of the rights of the creditor. Without the knowledge or against the will of the debtor. --> Recover only insofar as the payment has been Beneficial to the said debtor.
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EXTINGUISHMENT OF OBLIGATION
RIGHT OF REIMBURSEMENT - with knowledge and consent of debtor ---> third person can recover the entire amount he has paid -without knowledge or against the will ---> beneficial to the latter Reason: there is no reason why he can obligate the debtor to pay more than the amount which the said debtor would have been legally compelled to pay to the creditor. if obligation has been previously extinguished totally, third person who pays without knowledge of debtor ---> not able to recover anything from the latter if obligation previously extinguished partially ---> recover only that part which has not been extinguished because it is the only extent it has been beneficial to the debtor. Remedy of third person: to proceed against creditor who was unduly paid applying principle of unjust enrichment. "Can recover only insofar as the payment has been beneficial to the debtor" - when made against express will? Defense: by debtor only because it only affects its rights - may oppose payment before at the time the same was made, and not subsequent thereto. Subrogation - right available to the third person or payor, whereby he is entitled, not only to demand reimbursement from the debtor, but also to exercise all of the rights which the creditor could have exercised against the debtor and against third persons. Reimbursement - merely a personal action available to third person or payor against the debtor to recover from the latter what he has paid insofar as the payment has been beneficial to the said debtor. RIGHT OF SUBROGATION with knowledge and consent of debtor
---> third person subrogated to all of the rights which the creditor could have exercised, not only against the debtor, but even against third person. without the knowledge or against the will of the debtor ---> third person cannot compel the creditor to subrogate him in his rights, such as those arising from a mortgage, guaranty, or penalty.
GRATUITOUS PAYMENTS - if the payment is made by a third person who does not intend to be reimbursed by the debtor, the presumption arises that such payment is a donation. -as far as the creditor who has accepted the payment is concerned, the debtor's consent is immaterial; the payment is valid in any case. CAPACITY TO MAKE PAYMENT - Essential for validity of payment; free disposal of the thing due and capacity to alienate it. - no capacity to make payment even if creditor accepted it, may be annuled by a proper action in court at the instance of the payor or his legal representative, unless falls with exception. - obligation still subsist if creditor refuses to accept payment because he is aware of the payor's incapacity. TO WHOM PAYMENT MUST BE MADE 1) the person in whose favor the obligation has been constituted (Creditor at time of payment) 2) his successor in interest 3) any person authorized to receive it PERSONS AUTHORIZED TO RECEIVE PAYMENT - by the creditor - by law Example: guardian, executor, administrator of estate, assignee, liquidator PAYMENT TO UNAUTHORIZED PERSONS- invalid
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EXTINGUISHMENT OF OBLIGATION
---> debtor cannot fulfill his obligation by delivering a thing which is different from that which is due. (Even same or more valuable than what is due) obligation to do or not to do; object is determinate act of forbearance ---> Obligor cannot fulfil his obligation by substituting another act or forbearance. * if creditor accepts the delivery or substitution, such acceptance shall give rise to the delivery or substitution the same effect as a fulfillment or performance of the obligation. EXP: DATION EN PAGO (Dation in Payment) DATION EN PAGO - transmission if ownership of a thing by debtor to the creditor as an accepted equivalent of the performance of the obligation. - theres an objective novation of the previous obligation effected by a change of the object thereof. - special form of payment. Analogous to contract of sales. - once there is an agreement between the debtor and the creditor with regard to the thing which must be delivered by the former to the latter as the equivalent of the performance of the obligation, the law on sales shall govern. Effect of GENERIC OBJECT - creditor cannot demand a thing of the best quality neither can the debtor deliver a thing of the worst quality. --> The obligation can only be fulfilled by delivery of superior or inferior quality. EXPENSES OF PAYMENT - debtor ( extrajudicial expenses)- especially if changes domicile and in bad faith - ROC shall govern( Judicial costs)
PAYMENT TO POSSESSORS OF CREDIT - payment made to the original creditor by a debtor who is not aware of the fact that the credit has already been assigned to another person. - to assignee: in good faith Remedy of the creditor: proceed against the possessor of the credit to whom payment was improperly made. PAYMENT AFTER JUDICIAL ORDER OF RETENTION -NOT VALID WHAT MUST BE PAID GR: what is stipulated or had agreed upon obligation to give; determinate object
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EXTINGUISHMENT OF OBLIGATION
D) import- export and intl banking, financial investment and industrial transactions. Example page 250 LEGAL TENDER- currency used to pay all debts, whether public or private. Phil legal tender: all coins and notes issued by BSP PAYMENTS WITH JAPANESE MILITARY NOTES *Pre-war obligation: currency stipulated Payment: currency stipulated * if payment was made in Japanese military notes and the creditor refused to accept it, not valid even if theres consignation followed. *pre-war obligation: currency legal tender in Phils or no stipulation Payment: japanese notes is valid PAYMENTS WITH EMERGENCY NOTES - valid. Legal tender in those times. - issued by Commonwealth Government during the invasion or by recognized guerilla governments during the occupation. PAYMENTS WITH NEGOTIABLE PAPER -PN- not negotiable. No payment effect GR: creditor has right to refuse to accept on that payment. Therefore, no valid payment Example: cases page 254 Exp: 1) when the document has been cashed (check) 2) when it had been impaired through the fault of the creditor. Example: Paper or document executed by a third person and delivered by the debtor to the creditor. EFFECT OF EXTRAORDINARY INFLATION OR DEFLATION
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EXTINGUISHMENT OF OBLIGATION
SUBSECTION 1 - APPLICATION OF PAYMENT APPLICATION OF PAYMENT - designation of the debt to which the payment must be applied when the debtor has several obligations of the same kind in favor of the same creditor. REQUISITES 1) only one debtor and only one creditor 2) two or more debts of the same kind 3) all debts must be due 4) amount paid by the debtor must not be sufficient to cover the total amount of all debts. 1) ONE DEBTOR AND ONE CREDITOR Exception: o Does not militate against the possibility of extending the rules on application of payment to solidary obligations. reason: solidary debtor who paid may have obligations other than the solidary obligations here. o does not militate against extending the rules on application of payment to a case in which a person is indebted at the same time in separate and demandable sums to a partnership to the managing partner of partnership. 2) TWO OR MORE DEBTS OF THE SAME KIND Does not apply: Guarantor or surety whose liability is extended or confined only to a particular obligation Essential: each debt is identical or homogenous specie. --- monetary obligations. --- Obligations not identical specie at the time of their constitution, yet application of payment is possible if, at the time the designation or application is made, such obligation had already been converted into obligations to indemnify with damages by reason of breach or non fulfillment.
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EXTINGUISHMENT OF OBLIGATION
may exercise right even after the delivery of the receipt acknowledging payment, provided, of course, that such application is approved by the debtor. LIMITATION UPON RIGHT TO APPLY PAYMENT The creditor may impugn any application of payment which is contrary to the rule. 1253 applies only in absence or agreement to the contrary. LEGAL APPLICATION OF PAYMENT Applicable: o when payment cannot be applied in accordance with the rules o Application cannot be inferred from other circumstances. Not applicable: o An application can be deduced or inferred. RULES WHEN DEBTS ARE NOT OF SAME BURDEN 1) various debts; incurred at different dates oldest is more onerous 2) one debt bears interest and other does not, even if latter was incurred in later date first is more onerous or the debt with higher interest rate is more onerous 3) one debt is secured and other is not first is more onerous 4) debtor is bound as principal in one and as guarantor or surety to another principal- more onerous 5) debtor is bound as solidary debtor in one, and sole in another solidary- more onerous 6) solidary obligation: share which corresponds to a solidary debtor is more onerous 7) one obligation is for indemnity and other penalty indemnity is more onerous 8) one debt is liquidated, other is not liquidated debt is more onerous
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EXTINGUISHMENT OF OBLIGATION
Releases debtor for the net proceeds of the things ceded or assigned. Unless contrary intention
SUBSECTION 2 PAYMENT BY CESSION CESSION OR ASSIGNMENT special form of payment whereby the debtor abandons all of his property for the benefit of his creditors in order that from the proceeds thereof the latter may obtain payment of their credits. REQUISITES: PLURALITY OF DEBTS PARTIAL OR RELATIVE INSOLVENCY OF THE DEBTOR ACCEPTANCE OF THE CESSION BY THE CREDITORS KINDS: Contractual o Art. 1255 NCC regulated by Insolvency Law Judicial o Voluntary or involuntary DACION EN PAGO As to number of parties As to financial condition of parties As to object One creditor Not necessarily in state of financial difficulty Delivered is a thing as equivalent of performance of obligation PAYMENT BY CESSION Plurality of creditors It is necessary
EFFECT Only releases him from responsibility for the net proceeds of the property assigned. ***assignment does not transfer the ownership of the things or objects to the creditors; only possession and administration so that they can proceed with sale and from the proceeds thereof their respective credits are then paid. SUBSECTION 3 TENDER OF PAYMENT AND CONSIGNATION TENDER OF PAYMENT manifestation made by the debtor to the creditor of his decision to comply immediately with his obligation. CONSIGNATION deposit of the object of the obligation in a competent court in accordance with the rules prescribed by law after refusal or inability of the creditor to accept the tender of payment. Tender of payment Antecedent in consignation Consignation Principal act which produce the effects of payment of the obligation. Judicial in character
Extrajudicial character
in
GENERAL REQUISITES: 1. Person who pays 2. The person to whom payment is made 3. The object of the obligation 4. Time when payment or performance demandable
becomes
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EXTINGUISHMENT OF OBLIGATION
SPECIAL REQUISITES: (to produce the effects of payment) 1. There is debt due 2. Consignation has been made either because the creditor to whom tender of payment was made refused to accept the payment without just cause, or because any of the causes stated by law for effective consignation without previous tender of payment exists. 3. Previous notice of the consignation had been given to the persons interested in the fulfilment of the obligation 4. The thing or amount due had been placed at the disposal of judicial authority 5. After the consignation had been made, the persons interested in the fulfilment of the obligation had been notified thereof. SECOND REQUISITE: REQUIRED: 1) Tender of payment must have been made prior to the consignation 2) That it must have been unconditional 3) Creditor must have refused to accept payment without just cause. Example page 281 GR: previous tender of payment is necessary so that consignation shall produce the effect of payment EXCEPTIONS: 1) Creditor is absent or unknown or does not appear at the place of payment 2) When he is incapacitated to receive the payment at the time it is due 3) When without just cause, he refuses to give a receipt 4) When two or more persons claim the right to collect 5) When the title of the obligation has been lost.
EFFECT OF VALID TENDER OF PAYMENT -obligation is not extinguished unless it is completed by consignation. But has the effect of exempting the debtor from payment of interest and/or damages. THIRD REQUISITE: Separate and distinct from tender of payment which precedes it. A formal act manifested not only to the creditor, but also to other persons interested in the fulfilment of the obligation directly announcing the consignation which will be made as a result of the unjust refusal of the creditor to accept payment. FOURTH REQUISITE: Complied with if the debtor deposits the thing or amount, with clerk of court. accompanied by filing of complaint itself FIFTH REQUISITE: this notification is separate and distinct from the notification which is made prior consignation. NOTICE TO THE CREDITOR PRIOR AND AFTER CONSIGNATION IS REQUIRED. Reason: to enable the creditor to withdraw the goods or money deposited. It would be unjust to make him suffer the risk for any deterioration, depreciation or loss of such goods or money by reason of lack of knowledge of the consignation. ***upon compliance with all the requisites, two possible results: o Creditor may finally accept the thing or amount deposited payment is settled. o Refuses to accept the thing or amount or deposited or that he is not interested or that he is not known or that he is absent litigation will arise. Example: page 284 SUBJECT MATTER OF CONSIGANTION movables or immovable
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EXTINGUISHMENT OF OBLIGATION
- REQUISITES: Thing lost must be determinate. Thing is lost without any fault of the debtor. Thing is lost forever before the debtor has incurred in delay. **lost through fault of debtor: obligation is not extinguished. Thing is lost after the debtor has already incurred delay: debtor liable for indemnity for damages. EFFECT OF FORTUITOUS EVENT - Debtor cannot be held responsible. - The obligation is extinguished. EXCEPTIONS: 1) Debtor is liable even for fortuitous events 2) by stipulation of the parties 3) requires assumption of risk 4) loss partly due to the fault of debtor 5) loss occurred after debtor has incurred in delay 6) debtor promised to deliver the same thing to two or more persons who do not have the same interest. 7) Obligation to deliver arises from a criminal offense. 8) Obligation is generic. EFFECT OF LOSS IN GENERIC OBLIGATIONS TO GIVE - WILL NOT EXTINGUISHED OBLIGATION even without the debtors fault and before he has incurred in delay. - Based on principle that genus of the thing never perish. - The debtor can still be compelled to deliver a thing which must be neither of superior nor inferior quality. EFFECT OF PARTIAL LOSS - Tantamount to a complete loss or destruction, shall depend upon the sound discretion of the court. RULE IF THING IS IN DEBTORS POSSESSION - Disputable presumption that the loss was due to his fault. - The obligation is not extinguished; the debtor is still liable to the creditor for damages.
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EXTINGUISHMENT OF OBLIGATION
EFFECT OF RELATIVE IMPOSSIBILITY GR: release the obligor ***not a requirement that the contract be for future service with future unusual change. Doctrine of unforeseen events- parties stipulate in light of certain prevailing conditions, and once these conditions cease to exist, the contract also cease to exist. - the disappearance of the basis of the contract gives rise to a right to relief in favor of the party prejudiced. RULE IF OBLIGATION ARISES FROM CRIMINAL OFFENSE APPLICABLE: - there is an obligation of restitution of a certain and determinate thing on the part of the person criminally liable. - obligation arises by virtue of reparation or indemnification. *applicable to persons principally liable but also subsidiarily liable. * if the thing, the debtor shall bot be exempted from the payment of the price of the thing, whatever may be the cause for the loss. *If offered the thing to the obligee and the latter had refused to accept it without justification. TWO COURSES: 1) consignation- completely relieve himself for further liability 2) obligation shall still subsist EFFECT OF EXTINGUISHMENT OF OBLIGATION - all of the rights of action which the debtor may have against third persons by reason of the loss are transmitted by operation of law to the creditor. - such transmission is made from the moment of the extinguishment of the obligation.
EFFECT OF IMPOSSIBILITY OF PERFORMANCE IN OBLIGATIONS TO DO - extinguishment - must be legally or physically impossible to comply without the fault of the obligor before he has incurred in delay Otherwise, the obligations shall be converted into one of indemnity for damages, - impossibility must occurred after the constitution of the obligation Otherwise, obligation is ineffective from its inception. TWO IMPOSSIBILITY: 1) LEGAL IMPOSSIBILITY - when the law prohibits the performance or execution of the work agreed upon, law imposes duties of a superior character upon the obligor which are incompatible with the work agreed upon. 2) PHYSICAL IMPOSSIBILITY - arise principally from the death of the obligor, when the act to be performed requires his personal qualifications, or from the death of the obligee, when the act can be of possible benefit only to him. - intransmissible. - may also arise from accident, acts of debtor himself, acts of third persons EFFECT - obligor is released from the obligation - compliance with the prestation which constitutes the object of the obligation will prove dangerous to life or property. Example page 294 EFFECT OF OBLIGATIONS NOT TO DO - (rare) obligation is extinguished too. Same as to do
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EXTINGUISHMENT OF OBLIGATION
a) obligations to give (movable property) - if the remission is verbal, shall not be required since there is no transfer of property but merely a remission or condonation of an obligation to give personal property. - acceptance by debtor maybe implied or tacit, provided that the value of the debt which is condoned is not more than 5k. Obligations to give (immovable property) - art. 749 will apply B) obligations to do or not to do - in accordance with the less solemn formalities established in Art.748, *condoned in public instrument does not necessarily mean remission must also be in public instrument. FORM OF IMPLIED REMISSION -code is silent - can be deduced form their acts and intent of creditor ***an express remission which is formally defective cannot affect the obligee or creditor, unless new or other acts from which remission may be deduced should confirm the purpose expressed in the former. EFFECT IF DELIVERY OF EVIDENCE IF CREDIT TO DEBTOR - if the creditor voluntarily delivers the private document evidencing e credit to the debtor, there is a presumption that he renounces his right of action against the latter for the collection of said credit. REQUISITES( presumption will arise) 1) document evidencing credit must have been delivered by the creditor to the debtor 2) document must be a private document 3) delivery must be voluntary EFFECT OF REMISSION IN GENERAL - Extinguished obligation in its entirety or partially
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EXTINGUISHMENT OF OBLIGATION
JOINT OBLIG: share of the creditor who makes the remission and the corresponding share of the debtor in whose favor the remission is amde. SOLIDARY OBLIG: art. 1215, 1219, 1220 of the code EFFECT UPON ACCESSORY OBLIGATION - if remission refers to principal obligation: accessory oblig are extinguished - if refers to accessory oblig only: principal subsists. RULE ON PLEDGE - presumed: accessory obligation of pledge has been remitted when the thing pledge, after its delivery to the creditor, is found in the possession of the debtor or of a third person who owns the thing. - principal obligation for which pledge is a security is of course, not affected. SECTION 4 - CONFUSION OR MERGER OF RIGHTS CONFUSION--- (1275) merger of the characters of creditor and debtor in one and the same person by virtue of which the obligation is extinguished. --- meeting in one and the same person of the qualities of creditor and debtor with respect to one and the same obligation. * reason for extinguishment: impossibility of enforcing it since it would certainly be absurd for a person to enforce a claim against himself. And purpose of obligation is realized when qualities merged in one and same person REQUISITES: 1. Merger of the characters of creditor and debtor must be in the same person 2. It must take place in the person of either the principal creditor or the principal debtor 3. must be complete and definite --> means whether the merger refers to the entire obligation or only a Part thereof.
- Must be of such character that will be a complete and definite meeting of all the qualities of creditor and debtor which is affected by merger. KINDS 1. AS TO CAUSE OR CONSTITUTIONS a) INTER VIVOS - constituted by agreement of the parties b) MORTIS CAUSA - constituted by succession. 2. AS TO EXTENT OR EFFECT a) TOTAL - results in extinguishment of entire obligation b) PARTIAL - results in extinguishment of only part of obligation i) confusion refers only to part of obli ii) joint obligation
EFFECT UPON ACCESSORY OBLIGATIONS (1276) CONFUSION OR MERGER ON PRINCIPAL CREDITOR AND DEBTOR -obligation is extinguished (including accessory obligation) Reason: accessory obligation cannot exist without principal obligation CONFUSION OR MERGER ON subsidiary C or D such as GUARANTORS- obligation not extinguished ---there is only substitution of creditor and debtor --- provided guarantors BENEFITED on such confusion of rights *guarantor- creditor can demand performance of oblig from debtor Debtor- guarantor --- can demand directly from guarantor EFFECT UPON COLLECTIVE OBLIGATIONS(1277) JOINT OBLIGATIONS(1208) --presumption of equal division(essential characteristic) -- in case one of the debtors shall only refer to the share with corresponds to him. Partial extinguishment of the debt.
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EXTINGUISHMENT OF OBLIGATION
2) guaranty for the effectivity of credit Reason: still comply with formalities of payment--- can easily be prejudiced by fraud or insolvency of the other. DISTINGUISHED BY PAYMENT COMPENSATION - requisites different from payment - takes effect by operation of law - not necessary: capacity to give and to acquire - GR: partial PAYMENT - requisites diff - takes effect by act of parties - essential: capacity to give and to acquire - complete and indivisible DISTINGUISHED FROM CONFUSION COMPENSATION 1)2 persons - creditors and debtors of each other 2) num of obligations - at least 2 CONFUSION 1) one person who merged the qualities of creditor and debtor 2) only one obligation DISTINGUISHED FROM COUNTERCLAIM/ off-set COMPENSATION - two debts consist in money or fungibles or of the same kind and quality - debt must be liquidated - need not be pleaded COUNTERCLAIM/ set-off - not necessary in same kind - debts does not require to be liquidated - required to be pleaded to be effectual
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EXTINGUISHMENT OF OBLIGATION
BOUND AS PRINCIPALS Guarantor may set up compensation as regards what the creditor may owe the principal debtor. When both parties are not only mutually creditors and debtors in their own right, but are also principally bound as creditors and debtors, compensation shall then take place provided all requisites are present. Example: page 316 2) AS TO OBJECTS - only obligation to GIVE Reason: differences in the capacities of obligirs in oblig to do. - "consumables" - movables which cannot be used in a manner appropriate to their nature without being consumed. "Fungibles" - may be exchanged or compensated by another of the same kind and quality. 3) AS TO MATURITY Natural, conditional, oblig with period CANNOT BE COMPENSATED 4) LIQUIDATION AND DEMANDABILITY LIQUIDATED DEBTS - amount of which may be determined by a simple arithmetical operation Debts not liquidated- no compensation May be compensated to parts liquidated 5) CLAIMS OF THIRD PERSONS - no retention or controversy, commenced by third persons and communicated in due time to the debtor, over either of the debts. RETENTION- application of the credit of one of the parties to the satisfaction of e claims of a third person. - no compensation - there is an excess or balance remaining after the application of the credit, compensation will still take place but only to the extent that the credit is not affected by the retention.
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EXTINGUISHMENT OF OBLIGATION
NOVATION - substitution or change of an obligation by another, resulting in its extinguishment or modification, either by changing its object or principal conditions, or by substituting another in place of the debtor, or by subrogating a third person in the rights of creditor DISTINCTIVE CHARACTERISTIC --->through it extinguishes the obligation, it also give birth to another obligation. Two fold purpose/ functions: - extinguishment of old obligation - giving birth to new obligation to take the place of the old REQUISITES: 1) previous valid obligation 2) agreement of parties to the new obligation 3) extinguishment of the old obligation 4) validity of the new obligation CONCEPT EXTINCTIVE- old obligation is terminated by the creation of the new obligation that takes place of the former - results either by changing the object or principal conditions or by substituting the person of the debtor or subrogating a third person in the rights of the creditor. MODIFICATORY- old obligation subsists to the extent it remains compatible with the amendatory agreement. Example: page 326 KINDS 1) As to its essence a) objective or real
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EXTINGUISHMENT OF OBLIGATION
- only those changes of an essential not accidental character can effect a novation of the previous or original obligation. - reiterating or ratifying his obligation without changing its object or principal conditions, minor changes as to form, no novation of the obligation. FORM OF EXTINGUISHMENT Express- declaration in unequivocal terms that the old obligation is extinguished by the new which substitutes it. Tacit or implied - old and new obligations are incompatible on every point. NOVATION IS NEVER PRESUMED- must appear by express agreement of parties. it must be established that the old and new contracts are incompatible in all points, or that the will to novate appears by express agreement of the parties or in acts of similar import. Example page 331-332 EXPRESS NOVATION - so declared in unequivocal terms - intention to effect a novation clearly results from the terms of the agreement or is shown by a full discharge of the original debt. Otherwise, old contract remains in force and the new one is added to it. IMPLIED NOVATION -old and new obligation must be incompatible with each other on every point TEST OF INCOMPATIBILITY Whether or not both of them can stand together, each having its own independent existence. NO NOVATION-- If they can stand together, there is no incompatibility NOVATION- cannot stand together, with incompatibility - clear case of incompatibility between two contracts in the sense that they cannot stand together, such as there is a change, not
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EXTINGUISHMENT OF OBLIGATION
Requisites: 1) the initiative for the substitution must emanate from the new debtor 2) consent of the creditor to the substitution Kinds: 1) substitution with the knowledge and consent of the debtor 2) substitution without the knowledge or against the will of the old debtor. "Delegacion" - with the consent of the CREDITOR. At the instance of the old debtor with the concurrence of the new debtor. - the ORIGINAL DEBTOR offers and the creditor accepts a third person who consents to the substitution. - debtor offers and creditor accepts, a third person who consents to the substitution and assumes the obligation, thereby releasing the original debtor from the obligation. - intervention and the consent of all parties thereto would perforce be necessary. Requisites: 1) the initiative for the substitution must emanate from the old debtor 2) consent of the new debtor 3) acceptance by the creditor EXAMPLE page 340 When consent of creditor may be given? - law does not prescribe when. It may be given simultaneously or afterwards. - express or implied Example of novation of contract page 342 (stockholder example) EFFECT PAYMENT - original debtor shall reimburse to the new debtor whatever benefits he may have derived therefrom. Expromision: (real benefit to the original debtor) --- relationship shall be regulated by the rules regarding payment of a debt by a third person.
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EXTINGUISHMENT OF OBLIGATION
from his obligation to the creditor and at the same time of substituting the new debtor thereto. EXP: (1294- expromision; 1295- delegacion) EFFECT ON EXPROMISION -> WITH KNOWLEDGE AND CONSENT of original debtor --- the new debtor's insolvency or non-fulfillment of the obligation shall REVIVE the original debtor's liability to the creditor. -> WITHOUT KNOWLEDGE AND CONSENT of original debtor or against the will --- new debtor's insolvency or non-fulfillment of the obligation shall NOT REVIVE the original debtor's liability to the creditor.
EFFECT BY DELEGACION GR: the right of action of the creditor can no longer be revived. EXP: 1) when the insolvency of the new debtor was already existing and of public knowledge at the time when the original debtor delegated his debt. Necessary: condition that the insolvency of delegado was of public knowledge should exist at the time the delegacion was made, otherwise, delegante cannot held responsible since he himself was not aware of it. 2) when such insolvency was already existing and known to the original debtor when he delegated his debt. Purpose of exception: to prevent commission of fraud. EFFECT UPON ACCESSORY OBLIGATION GR: accessory obligation dependent on principal obligation cannot apply to novations effected by subrogating a third person in the rights of the creditir because if the effects of such novations are regulated by Arts. 1303 and 1304 of the NCC. EXP: stipulation constituted in favor of a third person
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EXTINGUISHMENT OF OBLIGATION
If only the condition affecting the second obligation is fulfilled, the effect is that there is no novation since the requisite of a previous valid and effective obligation would be lacking. If the conditions affecting both obligations are incompatible with each other, it is evident that the effect of such incompatibility is the extinguishment of the first obligation so that only one obligation remains. NOVATION BY SUBROGATION - second method of personal novation 2kinds: 1) CONVENTIONAL SUBROGATION - takes place by the agreement of original creditor, the third person substituting the original creditor, and the debtor. 2) LEGAL SUBROGATION - takes place by operation of law CONVENTIONAL SUBROGATION - must be clearly established in order that it may take effect. - it is essential that there must be an agreement of all parties with respect to the subrogation. REQUISITES: a) consent of the original creditor, B) of the third person who is subrogated to the rights if the original creditor C) debtor is required *assignment of rights
EFFECT IF OLD OBLIGATION IS CONDITIONAL 1) ORIGINAL OBLIGATION- suspensive or resolutory condition Then NEW OBLIGATION- subjected to same condition, unless otherwise stipulated. If the original obligation is conditional, the novation must also be conditional, and its efficacy shall, therefore, depend upon whether the condition which affects the first is complied with or not. *fulfillment or non-fulfillment of condition affects subsequent obligation Reason: previous obligation is placed in the same category as void obligation or an obligation which has already been extinguished.
2) if the conditions affecting both obligations can stand together, and they are all fulfilled, the new obligation becomes demandable. If only the condition affecting the first obligation is fulfilled, the previous obligation is revived, while the new obligation loses its force
DISTINCTION 1) As to rules which govern CONVENTIONAL - 1300-1304 ASSIGN- 1624-1627 2) as to necessity of debtor's consent CONVENTIONAL- debtor consent is required
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EXTINGUISHMENT OF OBLIGATION
- f he pays without the knowledge or against the will of the debtor, although he is entitled to demand reimbursement to the extent that the latter has been benefited by the payments, he is not subrogatef in the rights of the creditor. C) "person interested in the fulfillment of the obligation" ---> co debtor, guarantor, owner of the thing which is given as security,or one who has real right over the thing which is the object of the obligation. - co debtor who made the payment does not step into the shoes of the creditor because he cannot enforce against his co debtors the paymeny of the original obligation. EFFECT OF TOTAL SUBROGATION - applies to legal subrogation - all the rights which the original creditor had against the debtor or against third persons. EFFECT OF PARTIAL SUBROGATION - both rights shall co exist. - in case of conflict the original debtor right shall be preferred.
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