EXTINGUISHMENT OF

OBLIGATIONS
Article 1231 enumerates the modes of
extinguishing obligations, and provides for
other causes as governed by other
provisions of the Civil Code. Articles 1232
to 1304 defines and expounds on the
circumstances, requisites and effects of
those modes.
Article 1231 enumerates six modes of extinguishing obligations , namely:
1) Payment or performance
2) Loss of the thing due
3) Condonation or remission of the debt
4) Confusion or merger of the rights of creditor and debtor
5) Compensation
6) Novation

It also provides that there may be other causes for the obligation to be
extinguished, including although not limited to
1) Annulment
2) Rescission
3) Fulfillment of a resolutory condition
4) Prescription

Although these causes are governed by other provisions.

 It may be appropriate to distinguish
between a mode and a cause.
MODE
a way or manner in which something occurs
or is experienced, expressed, or done.
So, I guess...
When we speak of mode of extinguishing an
obligation, there is something done by the
obligor , the intention being to terminate
the obligation.
This is just me, analyzing!
CAUSE
a person or thing that gives rise to an action,
phenomenon, or condition
So, I guess....
When we speak of a cause of extinguishment
of obligation, there is something that
happens, intentionally or otherwise, that
results in the termination of the obligation.
 PAYMENT OR PERFORMANCE
Art. 1232.
Payment means not only the delivery of money
but also the performance, in any other
manner, of an obligation. (n)
When we hear the word payment,
what we immediately visualize is the
delivery of money.
The civil code concept of payment is
much broader, as it encompasses all
manner of performing an obligation to
the satisfaction of the credit, whether
it is the delivery of money or thing, or
the performance of service.
Articles 1232 to 1254 expound on payment as a mode of extinguishing an
obligation. These provisions establish parameters and define circumstances of
payment to satisfy the obligation :

1. How payment is made

2.To whom payment is made
3.By whom payment is made
4.Where payment is made
 How payment is made
Art. 1235. When
Art. 1233. A debt shall Art. 1234. If the the obligee accepts
not be understood to obligation has been the performance,
have been paid unless substantially performed knowing its
the thing or service in in good faith, the obligor
which the obligation
incompleteness or
may recover as though irregularity, and
consists has been
completely delivered or
there had been a strict
without expressing
rendered, as the case and complete fulfillment,
any protest or
may be. (1157) less damages suffered by
the obligee. (n) objection, the
obligation is
Art. 1244. The debtor of a thing substantially deemed fully
complied with. (n)
cannot compel the creditor to
receive a different one, although the
latter may be of the same value as, Art. 1246. When the obligation consists in the delivery of an
or more valuable than that which is indeterminate or generic thing, whose quality and circumstances
due. have not been stated, the creditor cannot demand a thing of
In obligations to do or not to do, superior quality. Neither can the debtor deliver a thing of inferior
an act or forbearance cannot be quality. The purpose of the obligation and other circumstances
substituted by another act or shall be taken into consideration. (1167a)
forbearance against the obligee's
will. (1166a)
 In making payment, watch out for
these circumstances...
partial Property for Money
performance
Art. 1248. Unless there is an express stipulation to that
effect, the creditor cannot be compelled partially to
Art. 1245. Dation in payment, whereby property is
alienated to the creditor in satisfaction of a debt in
receive the prestations in which the obligation consists. money, shall be governed by the law of sales. (n)
Neither may the debtor be required to make partial
payments.
However, when the debt is in part liquidated and in part
unliquidated, the creditor may demand and the debtor
may effect the payment of the former without waiting for

notes
the liquidation of the latter. (1169a)
Bills and
Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to
deliver such currency, then in the currency which is legal tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall
produce the effect of payment only when they have been cashed, or when through the fault of the creditor they
have been impaired.
In the meantime, the action derived from the original obligation shall be held in the abeyance. (1170)
Art. 1250. In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of
the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an
agreement to the contrary. (n)
 Art. 1241. Payment to a person who is incapacitated to
administer his property shall be valid if he has kept the thing
delivered, or insofar as the payment has been beneficial to
him.

To a third person,
shall also be validprovided creditor
To any person in possession of Payment made to a third person
insofar as it has
credit Art. 1242. Payment made in good faith redounded to the benefit of the creditor.
to any person in possession of the
proved in the following cases:
benefited
Such benefit to the creditor need not be
credit shall release the debtor. (1164) (1) If after the payment, the third
person acquires the creditor's rights;
(2) If the creditor ratifies the

Except that
payment to the third person;
(3) If by the creditor's conduct, the
debtor has been led to believe that the third
person had authority to receive the payment.
(1163a)
 By whom payment is made
By the debtor or obligor, generally, but third persons may pay,
subject to the following ....

Right to Refuse, except when Right to Subrogation

stipulated Art. 1236. The creditor is not Art. 1237. Whoever pays on behalf of the
bound to accept payment or debtor without the knowledge or
performance by a third person
who has no interest in the
against the will of the latter, cannot
fulfillment of the obligation, compel the creditor to subrogate him
unless there is a stipulation to the in his rights, such as those arising
contrary. from a mortgage, guaranty, or
Right to
Whoever pays for another may penalty. (1159a)
demand from the debtor what he
Reimburs has paid, except that if he paid
without the knowledge or against
e-ment the will of the debtor, he can
Art. 1238. Payment made by a third person who
Right
does not intend to be reimbursed by the debtor is
recover only insofar as the
payment has been beneficial to
deemed to be a donation, which requires the to
debtor's consent. But the payment is in any case
the debtor. (1158a)
valid as to the creditor who has accepted it. (n) Accept

Art. 1239. In obligations to give, payment made by one who does not have the free disposal EXCEPTION
of the thing due and capacity to alienate it shall not be valid, without prejudice to the
provisions of Article 1427 under the Title on "Natural Obligations." (1160a)
 Where payment should be made
Article 1251

1. At the place stipulated There being no express

or agreed upon stipulation and if the
Payment shall be made in the undertaking is to deliver
place designated in the a determinate thing, the
obligation. payment shall be made
wherever the thing might
be at the moment the
In any other case the place
obligation was
of payment shall be the constituted.
domicile of the debtor. 2. At the location
If the debtor changes his
of determinate
domicile in bad faith or
after he has incurred in
thing at time of
delay, the additional constitution
expenses shall be borne by
him.
 Application of payment
pertains to the order by
which an obligor may satisfy
multiple debts in favor of the
same obligee. While the
same is governed by Articles
1252 to 1254, the payment
to be applied must still be in
accordance with the
provisions of Articles 1232 to
1251.
Art. 1252. He who has various debts of the same kind in favor of one and the
same creditor, may declare at the time of making the payment, to which of
them the same must be applied. Unless the parties so stipulate, or when the
application of payment is made by the party for whose benefit the term has been
constituted, application shall not be made as to debts which are not yet due.
If the debtor accepts from the creditor a receipt in which an application of the
payment is made, the former cannot complain of the same, unless there is a cause
for invalidating the contract. (1172a)

Rule 2. The payment cannot be

applied to debts not yet due,
unless there is a stipulation to
that effect or when the term is
constituted for the benefit of the
party applying payment.

Rule 3. Acceptance of receipt by debtor from

creditor indicating application of payment is
implied consent to such application, unless
contract is susceptible to invalidation.
Art. 1253. If the debt produces
interest, payment of the
principal shall not be deemed to
have been made until the
interests have been covered.
(1173) Art. 1254. When the payment cannot be
Most applied in accordance with the preceding
rules, or if application can not be inferred
onerous from other circumstances, the debt which is
most onerous to the debtor, among those
first due, shall be deemed to have been satisfied.
If the debts due are of the same nature and
burden, the payment shall be applied to all of
them proportionately. (1174a)
 the -ions of payment
There is dation in payment when property
is alienated to the creditor in satisfaction
of a debt in money.[21] Here, the debtor
delivers and transmits to the creditor the
formers ownership over a thing as an
accepted equivalent of the payment or
performance of an outstanding debt.[22] In
such cases, Article 1245 provides that the
law on sales shall apply, since 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, the payment for which is to be
charged against the debtors
obligation.[23] Dation in payment
extinguishes the obligation to the extent
of the value of the thing delivered, either
as agreed upon by the parties or as may
be proved, unless the parties by
agreement express or implied, or by
their silence consider the thing as
equivalent to the obligation, in which case
the obligation is totally extinguished.[24]
Assignment of property by the debtor to
his creditors, provided for in article 1255,
consignation
is similar to dation in payment in that
both are substitute forms of
performance of an obligation. Unlike the
assignment for the benefit of creditors,
however, dation in payment does not
involve plurality of creditors, nor the
whole of the property of the debtor. It
does not suppose a situation of financial
difficulties, for it may be made even by a
person who is completely solvent. It
merely involves a change of the object of
the obligation by agreement of the
parties and at the same time fulfilling the
same voluntarily. (8 Manresa 324). 12
Cession
Consignation is the act of depositing the
thing due with the court or judicial
authorities whenever the creditor cannot
accept or refuses to accept payment and
generally requires a prior tender of payment.
In order that consignation may be effective,
the debtor must show that: (1) there was a
debt due; (2) the consignation of the
obligation had been made because the
creditor to whom tender of payment was
made refused to accept it, or because he
was absent or incapacitated, or because
several persons claimed to be entitled to
receive the amount due or because the title
to the obligation has been lost; (3) previous
notice of the consignation had been given to
the person interested in the performance of
the obligation; (4) the amount due was
placed at the disposal of the court; and (5)
after the consignation had been made the
person interested was notified thereof.
Failure in any of these requirements is
enough ground to render a consignation
ineffective.
Consignation is made by depositing the
proper amount to the judicial authority,
before whom the tender of payment and the
announcement of the consignation shall be
proved. All interested parties are to be
notified of the consignation. It had been
consistently held that compliance with these
requisites is mandatory.
 Case in Point: Go Cinco vs. Court of
Appeals G.R. 151903, October 9, 2009
FACTS:
1. The Sps. Cinco has an outstanding loan with MTLC, covered by a promissory note and secured by
real estate mortgage on their lot and building.
2. To be able to pay the loan to MTLC, the Sps. Cinco applied for another loan with PNB, offering as
collateral the same properties mortgaged to MTLC. Their loan was approved in an amount
sufficient to cover the Sps. Cincos outstanding obligation to MTLC.
3. The Sps. Informed MTLC that their loan with PNB has already been approved, and that they will
pay their obligation with the proceeds from said loan, in due course, executed a Special Power of
Attorney in favor of MTLC for them to collect from PNB the proceeds of the sps. Approved loan.
MTLC accepted the SPA;
4. MTLC was able to verify the existence of the approved loan, but they also discovered that the
loan was to be secured by the same properties already mortgaged to them. They refused to
execute a cancellation of real estate mortgage required by PNB to be able to release the proceeds
of the loan in their favor, despite the SPA issued to them.
5. Since the Sps. Were already in default, MTLC proceeded with foreclosure proceedings. To stop
the foreclosure, the Sps. Filed a case for Specific Performance against MTLC.

ISSUE: WHETHER THE OBLIGATION OF THE SPS. GO CINCO TOWARDS MTLC HAD ALREADY BEEN
EXTINGUISHED BY PAYMENT.
 The Supreme Court ruled that the
obligation was not extinguished,
Payment as Mode of
explaining:
Extinguishing Obligations

Obligations are extinguished, among others, by payment or

performance, the mode most relevant to the factual situation in the
present case. Under Article 1232 of the Civil Code, payment means not
only the delivery of money but also the performance, in any other
manner, of an obligation. Article 1233 of the Civil Code states that a debt
shall not be understood to have been paid unless the thing or service in
which the obligation consists has been completely delivered or rendered,
as the case may be. In contracts of loan, the debtor is expected to deliver
the sum of money due the creditor. These provisions must be read in
relation with the other rules on payment under the Civil Code, which rules
impliedly require acceptance by the creditor of the payment in order to
extinguish an obligation.
 Refusal without just cause not
equivalent to payment
ARTICLE 1256. If the creditor to whom tender of payment has been made refuses
without just cause to accept it, the debtor shall be released from responsibility by
the consignation of the thing or sum due. [Emphasis supplied.]

In short, a refusal without just cause is not equivalent to payment; to have the
effect of payment and the consequent extinguishment of the obligation to pay, the
law requires the companion acts of tender of payment and consignation.

Tender of payment, as defined in Far East Bank and Trust Company v. Diaz Realty,
Inc.,[18] is the definitive act of offering the creditor what is due him or her, together
with the demand that the creditor accept the same. When a creditor refuses the
debtors tender of payment, the law allows the consignation of the thing or the
sum due. Tender and consignation have the effect of payment, as by consignation,
the thing due is deposited and placed at the disposal of the judicial authorities for
the creditor to collect.[19]
 Still, for the effort.... The Supreme Court considered
the act of the Go Cincos as the equivalent of a tender of
payment
Under thse circumstances, we hold that while no. completed tender of payment and consignation took
place sufficient to constitute payment, the spouses Go Cinco duly established that they have legitimately secured
a means of paying off their loan with MTLC; they were only prevented from doing so by the unjust refusal of
Ester to accept the proceeds of the PNB loan through her refusal to execute the release of the mortgage on the
properties mortgaged to MTLC. In other words, MTLC and Ester in fact prevented the spouses Go Cinco from
the exercise of their right to secure payment of their loan. No reason exists under this legal situation why we
cannot compel MTLC and Ester: (1) to release the mortgage to MTLC as a condition to the release of the
proceeds of the PNB loan, upon PNBs acknowledgment that the proceeds of the loan are ready and shall
forthwith be released; and (2) to accept the proceeds, sufficient to cover the total amount of the loan to MTLC, as
payment for Manuels loan with MTLC.

We also find that under the circumstances, the spouses Go Cinco have undertaken, at the very least, the
equivalent of a tender of payment that cannot but have legal effect. Since payment was available and was
unjustifiably refused, justice and equity demand that the spouses Go Cinco be freed from the obligation to pay
interest on the outstanding amount from the time the unjust refusal took place;[20] they would not have been
liable for any interest from the time tender of payment was made if the payment had only been accepted.Under
Article 19 of the Civil Code, they should likewise be entitled to damages, as the unjust refusal was effectively an
abusive act contrary to the duty to act with honesty and good faith in the exercise of rights and the fulfillment of
duty.