What are the different special forms of payment.

Explain each one

A. Dation in payment- Alienation by the debtor of a particular property in favor

of his creditor, with the latter’s consent, for the satisfaction of the former’s money
obligation to the latter, with the effect of extinguishing the said money obligation
Elements:
1. Existence of a money obligation;
2. Alienation to the creditor of a property by the debtor with the consent of the
former;
3. Satisfaction of the money obligation of the debtor.

Example: “A” owes “B” certain amount of money. “A” could not pay his money
obligation to “B”. “A” offered a property as payment for his money obligations. If
“B” agreed to accept the property as payment, there is dation in payment.

B. Application of payment- Designation of the particular debt being paid by the

debtor who has two or more debts or obligations of the same kind in favor of the
same creditor to whom the payment is made.
The right to make application of payments belongs primarily to the debtor, but it
must be made at the moment of payment. If he failed to exercise the right, the
creditor may exercise it by issuing a receipt wherein the debt paid is indicated. If
the debtor accepted the receipt without objection, then the payment is deemed
applied to the specific indebtedness mentioned in the receipt.
Requisites for a valid application of payments by the debtor:
1. There is only one debtor and one creditor;
2. The debtor owes the creditor two or more debts which are the same kind or
identical specie;
3. All the debts are due and demandable. Except when there is a stipulation to the
contrary or when the application is made by the party for whose benefit the term
has been constituted;
4. The payment made by the debtor is not sufficient to cover or settle all the debts.
Requisites for a valid application of payments by the creditor:
1. The debtor did not make any designation on which debt should be paid when he
made the payment;
2. The creditor issued a receipt expressing the application of payment to a
particular debt;
3. The debtor accepted the receipt without any objection.

Example: C owes D as follows:

(a) P15,000 payable on June 10
(b) P12,000 payable on June 20
(c) A specific iphone worth P20,000 to be delivered on June 20
(d) P10,000 payable on December 15.
On June 20 C paid D P15,000. C may apply the P15,000 to debt (a) or to debt (b)
and to a portion of debt (a) If C paid only P10,000, he cannot choose to apply his
payment to the debt which is higher, because D cannot be compelled to receive
partial payment. C cannot also apply his payment to debt (c) because it is not the
same kind. He must deliver the very thing agreed upon. Neither can he apply it to
debt (d) which is not yet due unless there is a stipulation to the contrary. An
application of payment made by the debtor without objection from the creditor is
binding upon the latter. His acquiescence is equivalent to an agreement and has the
force and efficacy of a contract.
If C does not make a choice, D can make the designation in the receipt with the
consent of C. C may also have the rights to change in case he wants to change the
designation.

C. Payment by cession- Debtor cedes his property to his creditors so that the latter
may sell the same and the proceeds realized applied to the debts of the debtor.
There will be no cession or assignment if the creditors do not agree to the
abandonment of the debtor’s property in their favor.
Requisites:
1. There is plurality of debts;
2. There is complete or partial insolvency on the part of the debtor;
3. There are at least two creditors;
4. There is acceptance of the cession or assignment by the creditors;
5. Property ceded or assigned is not exempt from execution.

Example: “E” is indebted to several creditors in the total amount of P8 million. Her
assets are not sufficient to pay all his debts.
With the consent of her creditors, “E” may assign property to them to be sold, to
satisfy their credits. If the net proceeds of the sale amount only to P7 million, “E”
is still liable for the balance of P1 million unless there is a stipulation that the
assignment shall be in full satisfaction of all her debts.

D. Tender of payment and Consignation

Tender of payment- definitive act of offering to the creditor what is due to him
together with the demand that the creditor accepts the same.
Tender of payment is a preparatory act which precedes consignation. The tender of
payment by itself does not cause the extinguishment of the obligation unless
completed by consignation.

Consignation- Act of depositing the object of the obligation with the court or
competent authority after the creditor has unjustifiably refused to accept the same
or is not in a position to accept it due to certain reasons or circumstances.
Requisites of consignation:
1. There is an existing valid debt which is already due;
2. There is a prior valid tender of payment to the creditor;
3. There is a refusal to accept the payment tendered without any valid reason on
the part of the creditor;
4. There is prior notice of consignation given to the persons interested in the
fulfillment of the obligation;
5. That the amount or the thing due is deposited with the court or competent
authority;
6. Subsequent notice of consignation is given to the persons interested in the
fulfillment of the obligation.

Example:
“F” borrowed Php 100, 000 from “G”. On the due date of the obligation, “F” offers
to pay the obligation but “G” refuses to accept the payment without any justifiable
reason.
In this case, The obligation of “F” will not be extinguished until he has made a
valid consignation. The refusal by “G” will not have the effect of payment but “F”
will be relieved from payment of any interest from the date of tender.
“F” then notified “G” that “F” will deposit the money in the court. “F” went to the
proper court, proved to the clerk of court’s satisfaction that there was valid tender
of payment, that “G”, the creditor unjustly refused to accept the payment and that,
there was a previous notice of consignation.  The clerk accepted the deposit. 
Thereafter, “F” gave notice to ”G” that amount had been deposited in court. “F”
obligation is extinguished upon valid consignation to the court.