Topic: Extinguishment of Obligations by Payment under Philippine Civil Law

Under the Philippine Civil Code, obligations are extinguished in various ways, one of which is through payment or performance. This method of extinguishment is specifically addressed in Articles 1232 to 1251 of the Civil Code. Payment is a broad legal concept that entails fulfilling the object of an obligation, and understanding it requires a meticulous look into each element involved.

1. Definition and Nature of Payment

Payment is broadly defined as the fulfillment of an obligation, specifically by delivering the object or rendering the service required by the obligation. In legal parlance, payment is synonymous with performance and applies not only to monetary obligations but also to other types of prestations, such as delivering a particular object or rendering a service.

2. Essential Requisites of Payment

For payment to effectively extinguish an obligation, several essential requisites must be present:

Identity: The exact prestation (i.e., the very thing or service promised) must be delivered or performed.
Integrity or Completeness: Payment must cover the entire prestation, unless the creditor has agreed to accept partial performance.
Indivisibility: Unless otherwise agreed, payment must be made in one whole act, not in parts.
Capacity of the Payor: Payment must be made by a person who has the capacity to dispose of the thing to be delivered or to perform the act required.
Capacity of the Payee: Payment must be made to the creditor, his successors, or authorized representatives.

3. Who Can Make Payment

Generally, payment can be made by the debtor or any third party interested in the extinguishment of the obligation. However, a third party who makes a payment without the knowledge or against the will of the debtor can only recover the payment as permitted by law and is subject to the provisions on subrogation.

4. To Whom Payment Should Be Made

For payment to effectively extinguish an obligation, it must be made to the proper party:

Creditor or his successor: Payment to the creditor or a legal representative of the creditor will extinguish the obligation.
Authorized agent: Payment to an authorized agent is binding on the creditor.
Insolvency situation: If the creditor is insolvent or unable to administer his property, payment should be made to a court-appointed guardian or administrator.

If payment is made to an unauthorized person, it generally does not extinguish the obligation unless the creditor subsequently ratifies it or benefits from the payment.

5. When and Where Payment Should Be Made

The time and place of payment are critical in the performance of obligations:

Time of Payment: Payment should be made as agreed by the parties. If there is no stipulation on time, payment is due upon demand.
Place of Payment: The place of payment should be as agreed upon. In the absence of an agreement, the debtor must pay at the creditor's place of business, or if none, at the creditor’s domicile.

6. Form of Payment

There is generally no specific form required for payment unless the nature of the obligation or a specific provision of law requires otherwise (e.g., public documents for certain transactions, like sale of real estate). The form must conform to what has been agreed upon by the parties or what is necessary for the purpose of the payment.

7. Special Rules Governing Specific Forms of Payment

Monetary Obligations: Payment in money is governed by specific rules. Payment of debts in money must be made in legal tender. If the debtor offers a different currency, the creditor may accept or reject it.
Payment by Check or Promissory Note: A check or promissory note does not constitute payment unless it has been cashed or the debtor is responsible for the non-payment due to bad faith or gross negligence.

8. Partial Performance and Dation in Payment

Partial Performance: The creditor is not generally bound to accept partial payment unless the parties have stipulated otherwise.
Dation in Payment (Dación en Pago): This occurs when the debtor, with the creditor's consent, delivers something other than what was originally due. This acts as a form of alienation where the creditor essentially receives property instead of cash, thereby extinguishing the obligation.

9. Consignation in Payment

If the creditor unjustly refuses to accept payment, the debtor may deposit the payment in court (referred to as consignation). Consignation requires strict compliance with procedural requisites:

The debtor must notify the creditor of the intention to consign.
The debtor must then deposit the amount or thing due with the proper judicial authority.
Finally, the debtor must inform the creditor that consignation has been made. Consignation, once accepted by the court, will extinguish the obligation.

10. Application of Payments

When a debtor has several debts and makes a payment insufficient to cover all, the rules on application of payments apply:

Debtor's choice: The debtor has the first right to designate which debt the payment will apply to.
Creditor’s choice: If the debtor does not specify, the creditor may apply the payment to any of the debts.
Rules of Law: In the absence of both designations, the law applies the payment first to the debt that is most onerous to the debtor, or to debts that are due if all are equally burdensome.

11. Subrogation in Payment

Subrogation occurs when a third party pays the obligation of the debtor with the consent of the creditor, effectively stepping into the shoes of the creditor and acquiring the rights of the latter. Subrogation can be conventional (by agreement of the parties) or legal (by operation of law).

12. Effects of Payment

Once valid payment is made, the obligation is completely extinguished. The creditor cannot subsequently demand the same obligation, as the debtor is legally discharged. Payment also extinguishes any accessory obligations, like interest, unless otherwise stipulated.

In summary, extinguishment of obligations by payment involves compliance with the strict requisites provided under the Civil Code. Understanding the legal nuances and requirements associated with payment ensures not only that the obligation is properly extinguished but also that the rights and duties of both the debtor and the creditor are clearly defined and observed.