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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Under the New Civil Code, Dation in Payment is a special form of payment whereby property is alienated to the creditor in satisfaction of a debt in money. Consignation, on the hand, shall be made by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases.
In dacion en pago or dation in payment, property is alienated to the creditor in satisfaction of a debt in money. 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.
As a mode of payment, dacion en pago 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 things as equivalent to the obligation, in which case the obligation is totally extinguished. It requires delivery and transmission of ownership of a thing owned by the debtor to the creditor as an accepted equivalent of the performance of obligation. There is no dacion in payment when there is no transfer of ownership in the creditor’s favor, as when the possession of the thing is merely given to the creditor by way of security. (Desiderio Dalisay Investments, Inc. v. SSS, G.R. No. 231053, April 4, 2018).
In the case of Dacquel v. Sps. Sotelo, G.R. No. 203946, August 4, 2021, the Supreme Court, citing Manresa, held that dacion en pago or dation in payment, is the transmission of the ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of obligation. In dacion en pago, as a special mode of payment, the debtor offers another thing to the creditor who accepts it as an equivalent of payment of an outstanding debt. 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, payment for which is to be changed against the debtor’s debt. As such, the essential elements of a contract of sale, namely, consent, object certain, and cause or consideration must be present.
In its modern concept, what actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price.
On the other hand, under Art. 1258 of the New Civil Code provides that consignation shall be made by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be proved.
In Dalton v. FGR Realty and Development Corporation, G.R. No. 172577, January 19, 2011, the Supreme Court enumerated the requisites of a valid consignation: (1) a debt due; (2) the creditor to whom tender of payment was made refused without just cause to accept the payment, or the creditor whom tender of payment was made refused without just cause to accept the payment, or the creditor was absent, unknown, or incapacitated, or several persons claimed the same right to collect, or the title of the obligation was lost; (3) the person interested in the performance of the obligation was given notice before consignation was made; (4) the amount was placed at the disposal of the court; and (5) the person interested in the performance of the obligation was given notice after the consignation was made.
The giving of notice to the persons interested in the performance of the obligation is mandatory. Failure to notify the persons interested in the performance of the obligation will render the consignation void. Substantial compliance is not enough for that would render only a directory construction to the law.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
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