APPLICATION OF PAYMENT

a) Definition
Application of Payment is the designation of the debt to which should be applied a payment made by a debtor who owes several
debtors in favor of the same creditor.
b) Requisites
b.1) Application of Payment by Debtor (Generally)
(1) There must be two or more debts of the same ind!
(") There must be only one debtor and only one creditor!
(#) All of the debts must be due $unless the contrary has been stipulated%! and
(&) The payment is insufficient to e'tinguish all the debts.
b.") Application of Payment by (reditor ()'ception)
(1) The debtor did not mae any designation on which debt should be paid when he made the payment!
(") The creditor issued a receipt e'pressing the application of the payment to a particular debt! and
(#) The debtor assented to the application made by the creditor by accepting the receipt without any ob*ection
b) Rules
(a) The right to make application of payment BELONGS PRIMRIL! to the "EBTOR
(#) If the "R $ILE" to e%erci&e the right' the (R may e%erci&e it B! ISS)ING RE(EIPT *herein the "EBT PI" i&
IN"I(TE"+
(c) If the "R ha& ((EPTE" the receipt i&&,e- #y the (R .IT/O)T OB0E(TION' then the P!MENT i& "EEME" PPLIE" to
the &pecific in-e#te-ne&& mentione- in the receipt+
(d) The D+ (A,,-T APP./ the payment to an 0,.1201DAT)D D)3T or D0)4
0,.)55
(d.1) there is a contrary stipulation4 or
(d.") he is given the benefit of the period or term
(e) 1f the (+ is G16), T7) 3),)81T -8 T7) P)+1-D or term4 which has not yet arrived4 an application of payment (A,,-T
3) 9AD) by the D+
(f) 1f there is a specific agreement as to which debts shall be paid first4 the D+ cannot vary the agreement without consent of the
(+.
(g) If there i& a principal o#ligation *hich #ear& intere&t' the "R cannot pay the intere&t& *itho,t fir&t paying the principal (rt+
1234' N(()+
(h) pplica#ility of rt+ 1235' N((6
(h+1) .hen application of payment (NNOT BE M"E in accor-ance *ith rt+ 1232 an- 12347 or
(h+2) .hen the application of payment (NNOT BE IN$ERRE" from other circ,m&tance&
RULE: the "EBT *hich i& MOST ONERO)S to the "R' among tho&e -,e' S/LL BE "EEME" to ha8e #een
STIS$IE"+
(h+4) .hen the "EBTS -,e RE O$ T/E SME NT)RE an- B)R"EN
RULE: the P!MENT &hall #e PPLIE" to LL O$ T/EM 9PROPORTIONTEL!:

DATION IN PAYMENT (DACION EN PAGO)
a) Definition
Dation in Payment is a special form of payment whereby property is alienated by the debtor to the creditor in satisfaction of a
monetary debt.
According to 9anresa4 it is the transmission of the ownership of a thing by the debtor to the creditor an accepted e:uivalent of the
performance of an obligation.
b) Requisites
(1) )'istence of a money obligation!
(") Alienation to the creditor of a property by the debtor with consent of the former! and
(#) 1t should not pre*udice other creditors!
(&) The debtor should not be *udicially declared insolvent! and
(;) The essential re:uisites of a contract of sale must concur.
b) Rules:
(a) The .aw on 5ales shall govern dation in payment
(b) The dation in payment e'tinguishes the whole obligation $unless otherwise provided by the contracting parties%
(c) 1f the (+ is evicted from the property4 the original obligation4 which was terminated4 is not ipso *ure reinstated.
(d) 1f the (+ is evicted from the property4 the (+ can only recover the benefits provided under Art. 1;;;4 to wit<
a. The return of the value which the thing sold had at the time of the eviction4 be it greater than or less than the price of
sale!
b. The income or fruits4 if he has ordered to deliver them to the party who won the suit against him!
c. The cost of the suit which caused the eviction4 and in proper case4 those of the suit brought against the vendor for
warranty!
d. The e'penses of the contract4 if the vendee has paid them!
e. The damages and interests4 and ornamental e'penses if the sale was made in bad faith.
PAYMENT Y CE!!ION
a) Definition
Payment by (ession is a special form of payment whereby the debtor cedes his property to his creditors so the latter may sell the
same and the proceeds reali=ed shall be applied to the debts of the debtor.
b) Requisites
(1) There is plurality of debts!
(") There is complete or partial insolvency on the part of the debtor!
(#) There is at least two creditors!
(&) There is acceptance of the cession or assignment by the creditors! and
(;) Property ceded or assigned is not e'empt from e'ecution.
b) Rules:
GENERAL R"LE: If there i& a ;LI" (ESSION' the "R i& RELESE" from RESPONSIBILIT! )P TO T/E E<TENT O$ T/E
NET PRO(EE"S O$ T/E PROPERT!+ 7ence4 if there is a balance4 the same remains collectible.
E#CEPTION: ,nle&& there i& a STIP)LTION TO T/E (ONTRR!
EFFECT OF CE!!ION: The (+s D- ,-T 3)(-9) ->,)+5! they are merely A551G,))5 with authority to sell
TENDER OF PAYMENT AND CON!IGNATION
a) Definition
Tender of Payment is a manifestation made by the debtor to the creditor of his decision to comply immediately with his obligation
with a demand that the creditor accept the same.
(onsignation refers to the act of depositing the ob*ect 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.
b) Requisites
b.1) Tender of Payment
(1) 1t must be made before the act of consignation!
(") 1t must be unconditional! and
(#) The full amount including the interests due must have been offered in legal tender.
b.") (onsignation
(1) There is an e'isting valid debt which is already due!
(") There is a prior valid tender of payment to the creditor save when tender is dispensable!
(#) There is refusal to accept the payment without any valid reason on the part of the creditor!
(&) There is a prior notice of consignation given to the persons interested in the fulfillment of the obligation!
(;) That the amount or the thing due is deposited with the court or competent authority! and
(?) 5ubse:uent notice of consignation is given to the persons interested in the fulfillment of the obligation.
b) Rules:
(a) (ases wherein tender of payment is not necessary (Art. 1";?4 "
nd
par4 ,(()
(a.1) >hen the (+ is A35),T or 0,@,->,4 or D-)5 ,-T APP)A+ at the place of payment!
(a.") >hen the (+ is 1,(APA(1TAT)D to receive the payment at the time it is due!
(a.#) >hen4 >1T7-0T A05T (A05)4 the (+ +)805)5 to G16) A +)()1PT!
(a.&) >hen T>- or 9-+) persons claim the same right to collect! and
(a.;) >hen the T1T.) of the -3.1GAT1-, has been .-5T
(b) (onse:uences of the Deposit to a (ourt
(b.1) the amount or property is placed in Bcustodia legisC
(b.") the property cannot be alienated or disposed without *udicial approval!
(b.#) if the property is perishable4 the court may order its sale!
(b.&) the property is e'empted from attachment or e'ecution!
(b.;) when the property consigned consists of real estate which cannot actually be placed in the hands of the court4 the D+
becomes the agent of the court.
(c) -nce the consignation has been duly effected4 there is ,- A0T-9AT1( (A,()..AT1-, of the obligation. A A0D1(1A.
-+D)+ of (A,()..AT1-, -8 T7) -3.1GAT10-, upon motion of duly filed by the debtor is necessary.
(d) >hen the 8ali-ity of con&ignation ha& #een affirme- by the court4 the (-,51G,AT1-, shall have a +)T+-A(T16) )88)(T4
that is4 the obligation is D))9)D PA1D 8+-9 T7) 9-9),T the amount or thing due has been actually placed at the
disposal of the court.
(e) 1f the con&ignation i& not properly ma-e4 the -3.1GAT1-, 5TA/5.
(f) 1f the con&ignation ha& #een -i&mi&&e- #y the co,rt for any 8ali- rea&on4 the attempted consignation will have ,-
8A6-+A3.) )88)(T upon the D+.
(g) The e'penses of consignation4 when properly made4 shall be charged against the (+.