Friday, February 24, 2012

There is dation in payment when property is alienated to the creditor in satisfaction of a debt in money. - G.R. No. 190375

G.R. No. 190375

"x x x.

Indeed, pursuant to Article 1232 of the Civil Code, an obligation is extinguished by payment or performance. There is payment when there is delivery of money or performance of an obligation.[20] Article 1245 of the Civil Code provides for a special mode of payment called dation in payment (dación en pago). 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 former’s 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 debtor’s 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]

x x x."