Art 1255
Cession or assignment in favor of creditors- it is a process by which a debtor transfers all the properties not subject to execution in favor of his creditors so that the properties not subject to execution in favor of his creditors so that the latter may sell them, and thus apply the proceeds to their credits.
Kinds or Classes of Assignment
a. Legal- the majority of creditors must agree; governed by the insolvency law b. Voluntary-all creditors must agree; this is referred to in Art 1255
Requisites for Voluntary Assignment:
a. More than 1 debt b. More then 1 creditor
c. Complete or partial insolvency of debtor
d. Abandonment of all debtor’s property not exempt from execution in favor of creditors (unless exemption is validly waived by the debtor)
e. Acceptance on consent on the part of the creditors (for it cannot be imposed upon an unwilling creditor)
Effect of Voluntary Assignment
a. The creditor do not become the owners; they are merely assignees with authority b. The debtor is released up to the amount of the net proceeds of the sale, unless
there is stipulation to the contrary. The balance remains collectible.
c. Creditor will collect credits in the order of preference agreed upon, or in default of agreement, in the order ordinarily established by law.
Cession Distinguished from Dation in Payment a. Dation in Payment
-Does not affect all the properties -Does not require plurality of creditors
-Only the specific or concerned creditor’s consent is required -May take place during the solvency of the debtor
Transfers ownership upon delivery -This is really an act of novation b. Cession
-In general, affects all the properties of the debtor -Requires more than 1 creditor
Requires the consent of all the creditors -Requires full or partial insolvency Does not transfer ownership Not an act of novation
Art 1256
Tender of Payment- the act of offering the creditor what is due him together with a demand that the creditor accept the same.
Consignation-the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment. It generally requires a prior tender of payment. It releases the debtor of his debt.
• In tender of payment and consignation, to extinguish the debtor’s obligation, one must comply with the requisites provided in Arts 1256-1258.
Art 1257 – In order that the consignation of the thing due may release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation.
The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment.
Essential Requisites for Consignation:
a. Existence of a valid debt
b. Valid prior tender, unless tender is excused c. Prior notice of consignation (before deposit0 d. Actual consignation (deposit)
e. Subsequent notice of consignation
Art 1258 – Consignation shall be made by depositing the thing 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.
Art 1259 – The expenses of consignation, when properly made shall be charged against the creditor.
Art 1260 – Once the consignation has been duly made, the debtor may ask the judge to order the cancellation of the obligation.
Before the creditor has accepted the consignation, or before a judicial declaration that the consignation has been properly made, the debtor may withdraw the thing or the sum deposited, allowing the obligation to remain in force.
If the consignation is duly (properly) made:
a. The debtor may ask the judge to order the cancellation of the obligation b. The running of interest is suspended
c. Before the creditor accepts, or before the judge declares that consignation has been made, the obligation remains
When debtor may withdraw the thing or sum consignated:
a. As a matter of right
1. Before the creditor has accepted the consignation
2. Or before there is a judicial declaration that the consignation had been properly made-obligation and accessory stipulation remain
b. As a matter of privilege
When after consignation had been properly made, the creditor authorizes the debtor to withdraw the thing.
Art 1261 – If the consideration having made, the creditor should authorize the debtor to withdraw the same, he shall lose every preference which he may have over the thing.
The co-debtors, guarantors and sureties shall be released.
Section 2 – Loss of the Thing due Loss- under this section, loss includes impossibility of performance When is there a loss?
a. When the object perishes (physically it is destroyed) b. When it goes out of commerce
c. When it disappears in such a way that:
• Its existence is unknown
• Or it cannot be recovered
Impossibility of Performance includes:
a. Physical impossibility
b. Legal impossibility- which is either
• Directly caused-when prohibited by law
• Indirectly caused- when the debtor is required to enter a military draft c. Moral impossibility- impracticability
Art 1262
An obligation which consists in the delivery of a determinate thing shall be extinguished it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay.
2 Kinds of Obligations “To Give”
a. Obligation to give a Generic Thing- obligation is not extinguished by loss or by fortuitous event because genus never perishes
b. Obligation to give a Specific Thing
Effect of Loss on an Obligation to Deliver a Specific Thing General Rule: the obligation is extinguished
Exceptions:
a. If the debtor is at fault
b. When the debtor is made liable for a fortuitous event because:
• Of a previous law
• Of a contract stipulation
• The nature of the obligation requires the assumption of risk on the part of the debtor
Examples of instances when the law requires liability even in the case of a fortuitous event:
a. When the debtor is in default
b. When the debtor has promised to deliver the same thing to 2 or more parties who do not have the same interest
c. When the obligation arises from a crime
d. When the borrower of an object has lent the thing to another who is not a member of his own household
e. When the thing loaned has been delivered with appraisal of the value, unless there is a stipulation exempting the borrower from responsibility in case of a fortuitous event
f. When the payee in solutio indebiti is in bad faith
Art 1263 –In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation.
Exceptions:
a. If the generic thing is delimited
b. If the generic thing has already been segregated or set aside in which case, it has become specific.
Art 1264 – The courts shall determine whether, under the circumstances, the partial loss of the obligation is so important as to extinguish the obligation.
Art 1265 – Whenever the thing is lost in the possession of the debtor, it shall be presumed that the loss was due to his fault, unless there is proof to the contrary, and without prejudice to the provisions of Article 1165. This presumption does not apple in case of earthquake, flood, storm or other natural calamity.
• In a case filed by the creditor, he doesn’t have to prove that the debtor was at fault, because it is already presumed.
• When presumption does not apply:
In case of earthquake, flood, storm or other natural calamity.
Art 1266 – The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor.
• This Article refers to a case when compliance of a personal obligation becomes, without the debtor’s fault:
a. A legal impossibility b. Or a physical impossibility
• The impossibility must be after the constitution of the obligation.
• If the act is subjectively impossible (for the debtor himself), but otherwise objectively possible (for all others), usually the obligation subsists, unless personal considerations are involved such as when only a particular company is prohibited by law to furnish work on a certain day.
Art 1267
• This Article refers to Moral Impossibility or Impracticability due to change of certain conditions (rebus sic stantibus) – also referred to as the Doctrine of the Frustration of the Commercial Object/”frustration of Enterprise”
• Real Obligations (to give) are not included in this Article
• General Rule- Impossibility of performance releases the obligor Requisites for Art. 1267:
a. The service must become so difficult that it was manifestly beyond the contemplation of BOTH parties. The difficulty could not possibly have been anticipated or foreseen.
b. One of the parties must ask for relief
c. The object must be a future service with future unusual change in conditions.
Art 1268
• This Article gives one instance where a fortuitous event does not extinguish the obligation.
• Exception: When the creditor is in Mora Accipiende (default on the part of the creditor)
Art 1269 – The obligation having been extinguished by the loss of the thing, the creditor shall have all the rights of action which the debtor may have against third persons by reason of the loss.
Section 3 – Condonation of Remission of the Debt
Art 1270 – Condonation or remission is essentially gratuitous and requires the acceptance of the obligor. It may be made expressly or impliedly.
Remission or Condonation- it is the gratuitous abandonment by the creditor of his rights.
Essential Requisites for Remission:
a. There must be an agreement since acceptance of the offer is required.
b. The parties must be capacitated and must consent.
c. There must be subject matter.
d. The cause of consideration must be “liberality”
e. The obligation remitted must have been demandable at the time of remission.
f. The remission must not be in officious.
g. Formalities of a donation are required in the case of an express remission.
h. Waivers or remissions are not to be presumed generally.
Classes of Remission:
a. As regards its effect or extent:
• Total
• Partial-only a portion is remitted or the remission may refer only to the accessory obligations
b. As regards its date of effectivity:
• inter vivos- during life
• mortis causa- after death c. As regards its form:
*Implied or Tacit- required no formality
Express of Formal- requires formalities of a donation if inter vivos; of a will or cordial if mortis causa
• Effect if Remission is not Accepted by the Debtor- This would not be remission.
If the creditor does not really collect within the statute of limitations, the debt may be said to have been extinguished by prescription.
Art 1271 – The delivery of a private document evidencing a credit, made voluntarily by the creditor to the debtor, implies the renunciation of the action the former had against the latter.
Art 1271 – tantamount to an implied Remission
Art 1272 – Whenever the private document in which the debt appears is found in the possession of the debtor, it shall be presumed that the creditor delivered it voluntarily, unless the contrary is proved.
Art 1273 – The renunciation of the principal debt shall extinguish the accessory obligation; but the waiver of the latter shall leave the former in force.
Art 1274 – It is presumed that the accessory obligation of pledge has been remitted when the thing pledged, after its delivery to the creditor, is found in the possession of the debtor, or of a third person who owns the thing.
• In a contract of pledge, delivery is mandatory so that the contract is perfected.