Here’s an in-depth analysis of Civil Law > Obligations and Contracts > Extinguishment of Obligations > Payment > Special Forms of Payment, meticulously tailored for a Philippine legal context.

I. Overview of Payment as a Mode of Extinguishing Obligations

In Philippine law, under the Civil Code of the Philippines, obligations may be extinguished in various ways, one of which is by payment or performance. Payment generally refers to the fulfillment of an obligation to deliver a sum of money or to perform a service. The debtor’s act of fulfilling this obligation extinguishes the debt. However, the law also recognizes Special Forms of Payment, which serve as alternative means to extinguish obligations, under specific circumstances.

II. Special Forms of Payment

Special forms of payment under Philippine law are ways in which obligations can be extinguished outside the regular methods of paying or performing obligations. These include dation in payment (dación en pago), application of payments, tender of payment and consignation, and cession in payment.

Dation in Payment (Dación en Pago)
- Definition and Nature: Dation in payment occurs when the debtor transfers ownership of a property to the creditor as a means of extinguishing a debt. It is a form of payment where instead of paying cash, the debtor offers something else to settle the obligation. This form of payment is considered as a novation of the obligation, where the original obligation is substituted with a new one.
- Requirements:
  1. Agreement: There must be an agreement between the debtor and creditor that the thing given in payment will extinguish the debt.
  2. Transfer of Ownership: The debtor must deliver and transfer ownership of the thing to the creditor.
  3. Capacity to Transfer: The debtor must have the legal capacity to dispose of the thing offered in dation.
  4. Thing Must Have Value: The value of the thing given must be proportionate to the amount of the debt. If the value does not match the debt, the creditor may either accept it as partial payment or refuse it.
- Legal Effect: Upon acceptance, the original debt is extinguished, and the creditor becomes the owner of the thing given in payment.
- Application in Practice: Dation in payment is commonly used in the settlement of debts involving property, particularly real estate.
Application of Payments (Aplicación de Pagos)
- Definition: Application of payments is a process by which a debtor who owes multiple debts to the same creditor designates which specific debt should be extinguished by a particular payment.
- Rules on Application:
  1. Debtor’s Right to Choose: The debtor has the primary right to designate which debt will be paid if he or she owes more than one debt to the same creditor.
  2. Creditor’s Choice if Debtor Doesn’t Choose: If the debtor does not make an application, the creditor may choose which debt will be applied with the payment.
  3. Default Rule: If neither the debtor nor the creditor makes an application, the payment is applied to the most onerous debt. If debts are of equal burden, it will be applied proportionately.
- Legal Effect: Once applied, the chosen debt is extinguished to the extent of the payment made, reducing the outstanding balance of that specific obligation.
- Limitations: The application of payments cannot be used to extinguish future debts or obligations not yet due.
Tender of Payment and Consignation
- Definition: Tender of payment is the offer by the debtor to pay the amount due, and consignation is the act of depositing the amount due with the court or other appropriate authority when the creditor refuses to accept payment.
- Conditions for Consignation:
  1. Valid Tender of Payment: A valid offer or tender of payment must have been made first by the debtor, and it must be unconditional and complete.
  2. Creditor’s Refusal: Consignation may proceed if the creditor unjustly refuses to accept the valid tender of payment.
  3. Judicial Deposit: The debtor must deposit the amount due with the proper court or agency.
  4. Notification of Consignation: The creditor must be notified of the consignation for it to be valid.
- Effects of Consignation:
  - Upon completion, consignation extinguishes the obligation as though payment had been made directly to the creditor.
  - If the court finds consignation valid, the debtor is released from the obligation.
- Practical Use: This form is commonly used when the creditor unjustly refuses to accept payment or when other circumstances prevent the debtor from directly paying the creditor.
Cession in Payment (Cession en Pago)
- Definition: Cession in payment involves a debtor assigning or surrendering all his or her assets to creditors so they may sell them and apply the proceeds to satisfy outstanding obligations.
- Requirements:
  1. Debtor’s Insolvency: Cession typically applies when the debtor is insolvent.
  2. Acceptance by Creditors: Creditors must agree to accept the assignment of assets to extinguish the debt.
  3. Assignment of All Assets: The debtor must assign all available assets for creditors to liquidate and distribute among themselves.
- Effects:
  - The debtor is generally discharged from obligations only up to the amount realized from the liquidation of assets.
  - It does not extinguish the debt in full unless creditors agree to accept the proceeds as complete payment.
  - Creditors receive payment proportionally based on the amounts owed.
- Application: Cession is typically used in cases of bankruptcy or insolvency as a way for the debtor to settle as many obligations as possible with existing assets.

III. Comparative Analysis of Special Forms of Payment

Special Form	Method	Effect	Typical Application
Dation in Payment	Transfer of ownership	Extinguishes debt upon creditor’s acceptance, substitutes original obligation	Real estate or valuable property settlements
Application of Payments	Choosing which debt to apply payment	Reduces the balance of selected debt; extinguishes debt to extent of payment	Situations with multiple debts to same creditor
Tender & Consignation	Offer to pay and deposit in court	Extinguishes debt if payment is valid and creditor unjustly refuses	Situations with creditor’s refusal
Cession in Payment	Assignment of all assets to creditors	Extinguishes debt to extent of asset liquidation; creditors paid proportionally	Bankruptcy or insolvency proceedings

IV. Conclusion

The Civil Code of the Philippines offers these special forms of payment to provide both debtors and creditors with flexible means of extinguishing obligations when straightforward payment is not possible or practical. Each form serves specific purposes and has unique legal implications, particularly relevant in cases involving insolvency, multiple debts, or refusal of payment.