SUBSECTION 2.

— Payment by Cession

ART. 1255.

• Concept: Payment by cession is a special form of payment where a debtor assigns or abandons all their property to
creditors to pay off debts. This allows creditors to sell the property and use the proceeds to satisfy the debtor's obligations.

Requisites of Payment by Cession

1. Multiple Creditors: There must be two or more creditors involved. This indicates that the debtor owes money to more
than one party.
o Example: If a business owes money to three suppliers and cannot fully pay them, payment by cession might be
an option.
2. Partial Insolvency of the Debtor: The debtor must be partially insolvent, meaning they cannot pay off their debts in full.
o Example: A person with debts totaling $100,000 but only has $70,000 in assets is considered partially insolvent.
3. Acceptance by Creditors: The creditors must agree to accept the cession as a form of payment.
o Example: If a debtor offers to assign their assets to creditors and they agree, this constitutes acceptance.

Effect of Payment by Cession

• The assignment of property doesn't make the creditors the owners. Instead, they have the right to sell the property and
use the net proceeds to satisfy the debt. The debtor is only released from the obligation equivalent to the proceeds. If
there’s a shortfall, the debtor remains liable unless otherwise agreed.
o Example: If a debtor’s assets sell for $50,000 but they owe $70,000, they still owe $20,000 unless the creditors
agree to waive the balance.

Dation in Payment vs. Cession

1. Number of Creditors:
o Dation: Typically involves one creditor.
o Cession: Involves multiple creditors.
2. Debtor’s Insolvency:
o Dation: Debtor doesn’t need to be insolvent.
o Cession: The debtor is typically insolvent.
3. Scope of Property:
o Dation: Usually involves specific property.
o Cession: Involves all the debtor's property subject to execution.
4. Ownership:
o Dation: The creditor becomes the owner of the property.
o Cession: Creditors can only sell the property and are not the owners.
5. Nature:
o Dation: Is an act of novation (a new obligation replacing the old one).
o Cession: Is not an act of novation.

SUBSECTION 3. — Tender of Payment and Consignation

ART. 1256.

• Tender of Payment: The debtor offers to pay the creditor the amount or thing due. It is crucial that the debtor has the
money or item ready at the time of the offer.
o Example: If John owes Mary $500, he must have the $500 in hand when he offers to pay her.
• Consignation: This is when the debtor deposits the money or item with the court if the creditor refuses or cannot accept
payment. Consignation can release the debtor from their obligation.
o Example: If Mary refuses to accept the $500 without a valid reason, John can deposit the money with the court
to fulfill his obligation.

Requisites of a Valid Consignation

1. Valid Debt: There must be a legitimate debt that is due.

o Example: If John owes Mary $500 due today, this is a valid debt.
2. Tender of Payment and Refusal: The debtor must first offer to pay, and the creditor must refuse without a justifiable
reason.
o Example: John offers to pay Mary the $500, but she refuses to accept it for no good reason.
3. Notice of Consignation: The debtor must notify all interested parties that they plan to consign the payment.
o Example: John must inform Mary and any other parties involved that he is consigning the $500 to the court.
4. Actual Consignation: The debtor must actually deposit the money or item with the court.
o Example: John deposits the $500 with the court.
5. Subsequent Notice of Consignation: After consignation, the debtor must notify the interested parties that the
consignation has been made.
o Example: After depositing the $500, John must inform Mary and any other interested parties that he has done
so.

Examples of Consignation

1. Debtor Owes Money: John owes Mary $500 and offers to pay, but Mary refuses without just cause. John consigns the
money with the court to be released from his obligation.
2. Contractual Payment: John has a right to cancel a contract with Mary upon payment of $1,000. This amount is not a
debt, but consideration for the right to cancel. John doesn’t need to consign the $1,000—tendering the payment is
enough.

When Tender of Payment is Not Required

 • There are situations where the debtor can proceed directly to consignation without first tendering payment, such as when
the creditor is absent, refuses to accept without reason, or when the debt's title has been lost.

Requirements for Valid Tender of Payment

1. Compliance with Rules: The tender must follow legal rules on payment.
2. Unconditional Payment: The offer to pay must be unconditional and cover the full amount.
3. Actual Tender: The debtor must actually make the payment, not just express the intent to pay.
• Example: If John is ready to pay Mary $500 unconditionally and offers it to her, this constitutes a valid tender of payment.
If Mary refuses without cause, John can proceed to consignation.

ART. 1257: Consignation Procedure and Requirements

Key Points of ART. 1257:

1. Prior Notice Requirement: Before consignation (the act of depositing something owed, like money or goods, with a
judicial authority) can effectively release the debtor from their obligation, prior notice must be given to all interested
parties.
o Interested Parties: These could include guarantors, mortgagees, co-debtors, or any other party with a stake in
the obligation’s fulfillment.
2. Purpose of Notice:
o The notice is meant to give the creditor a chance to reconsider their refusal to accept payment, knowing they
may bear the costs of consignation. It also makes the creditor aware of the risk of loss if the consigned item is
lost.
o Example: If John owes money to Mary and offers to pay, but Mary refuses without a valid reason, John must
notify Mary and any co-signers or guarantors before he can proceed with consignation.
3. Compliance with Payment Regulations: Consignation must strictly follow the rules governing payment.
o Example: Payment should be made in legal tender (like cash). A bank check might not be accepted unless
explicitly agreed upon.
o Example: If John tries to consign $500 using a personal check and not cash, the consignation might be invalid
unless Mary had agreed to accept a check.

ART. 1258: Execution of Consignation

1. Judicial Authority: Consignation must be done by depositing the owed item or sum with the proper judicial authority. This
deposit effectively serves as proof that the debtor has made a genuine effort to fulfill their obligation.
o Example: John deposits the $500 he owes Mary with the court after she refuses to accept it.
2. Notice After Consignation: After the deposit, the debtor must notify the interested parties (like the creditor) that
consignation has been made.
o Example: After depositing the money with the court, John must inform Mary that the payment has been
consigned.
3. Purpose: This gives the creditor an opportunity to accept the consigned payment or challenge it if they believe it was not
done correctly.

ART. 1259: Expenses of Consignation

1. Who Pays for Consignation?

o If consignation is properly made, the expenses are charged to the creditor, as the consignation was
necessitated by their refusal to accept payment.
o If the consignation was not done correctly, the expenses fall on the debtor.
o Example: If John’s consignation is correct, Mary will bear the costs associated with it. If John made a mistake in
the process, he would have to pay the costs.

ART. 1260: Validity of Consignation

1. When is Consignation Valid?

o Creditor Accepts Without Objection: If the creditor accepts the consigned payment without raising any
issues.
o Court Declares It Valid: If the creditor objects and the court finds the consignation valid.
o Creditor’s Silence: If the creditor neither accepts nor objects, and the court, after a hearing, cancels the
obligation.
o Example: If Mary does not object or accept the $500 consigned by John, and the court later rules the
consignation valid, John's obligation would be considered fulfilled.
2. Effect on the Debtor:
o Once the consignation is ruled valid, the debtor can ask the court to cancel the obligation. However, the debtor
retains the right to withdraw the consigned amount before the creditor accepts it or before the court issues a
ruling. If the debtor withdraws the consigned amount, the original obligation remains in force.
o Example: John can ask the court to cancel his debt after consigning the $500, but he can also choose to
withdraw the money before Mary accepts it or before the court issues a ruling, in which case he still owes Mary
$500.

ART. 1261: Withdrawal with Creditor's Consent

1. Consequences of Withdrawal:
o If the creditor allows the debtor to withdraw the consigned amount, the creditor loses any special preference or
priority they may have had over the consigned item.
o Additionally, any co-debtors, guarantors, or sureties are released from their obligations.
o Example: If Mary tells John he can withdraw the $500 he consigned, Mary loses any priority over the funds, and
any guarantor who promised to pay if John didn't will also be released from their responsibility.
2. Effect on Co-Debtors:
o Co-debtors are only released from their joint liability, not from their individual share of the debt.
o Example: If John and Jane both owe Mary $500 jointly and John consigns his share, both could be released
from joint liability, but Jane still owes her portion individually.

Example 1:
 • Scenario: D owes C ₱50,000, with G as a guarantor. D attempts to pay C, but C refuses the payment. Consequently, D
makes a consignation (deposits the money with the court). Later, D withdraws the deposit after obtaining C's consent.
• Result: Under Article 1261, when C consents to the withdrawal, C loses any preference or priority over the amount, and
G, the guarantor, is released from his obligation.

Explanation:

• When C consents to the withdrawal, it indicates that C no longer insists on keeping the payment consigned. As a result, C
cannot claim any priority over the deposited amount, and the guarantor G is no longer liable since the original obligation
was essentially nullified by the withdrawal.

Example 2:

• Scenario: If D and G are solidarily liable to C (meaning both are equally responsible for the entire ₱50,000 debt), G would
be released from his solidary liability due to the withdrawal of the consignation. However, G would still owe C ₱25,000,
representing his share of the debt.
• Result: G is only released from the joint (solidary) responsibility but remains liable for his individual portion of the debt.

Explanation:

• This example clarifies that even if G is released from the solidary liability due to the withdrawal of consignation, G's
individual responsibility for his share of the debt remains unless explicitly discharged.

Extinguishment of Obligation Due to Loss of the Thing

Article 1262: Loss of a Determinate Thing

Article 1262 of the Civil Code discusses the extinguishment of obligations when the subject matter of the obligation, a determinate
(specific) thing, is lost. A determinate thing is an item that is individually determined or specifically identified (e.g., a specific car, a
particular piece of artwork).

• Extinguishment of the Obligation:

o The obligation to deliver a determinate thing is extinguished if it is lost or destroyed without the fault of the
debtor and before the debtor has incurred delay.
o If the debtor is responsible for the loss (due to fault or delay), the obligation is not extinguished, and the debtor
remains liable.
• Exceptions to Extinguishment:
o Liability for Fortuitous Events: If the law or a contract stipulates that the debtor is liable even for fortuitous
events (unexpected and unavoidable events), the loss of the thing does not extinguish the obligation. The
debtor will be responsible for damages.
o Assumption of Risk: If the nature of the obligation requires that the debtor assumes the risk (e.g., obligations
arising from dangerous or risky activities), the loss of the thing will not extinguish the obligation, and the debtor
will still be liable.
• When a Thing is Considered Lost:
o A thing is deemed lost when it perishes, goes out of commerce, or disappears in such a way that its existence is
unknown or it cannot be recovered (as defined in Article 1189, par. 2).

Requisites for Extinguishment of Obligation Due to Loss

To extinguish an obligation due to the loss of a determinate thing under Article 1262, three requisites must be met:

1. Specific Obligation: The obligation must involve the delivery of a specific or determinate thing.
2. No Fault of Debtor: The loss must occur without the fault of the debtor.
3. No Delay by Debtor: The debtor must not have been in delay at the time of the loss.

Exceptions to Extinguishment: When Liability Persists Despite Loss

In certain cases, the loss of the thing does not extinguish the obligation, and the debtor remains liable:

1. When the Law Provides: Certain laws (e.g., Articles 1170, 1165 [par. 3], and 1263) may require the debtor to remain
liable despite the loss.
2. Contractual Stipulation: The contract may specify that the debtor is liable even if the thing is lost.
3. Nature of the Obligation: When the obligation inherently involves the assumption of risk (e.g., obligations in risky or
hazardous activities), the debtor remains liable.
4. Obligation Arising from Crime: If the obligation to deliver a specific thing arises from a crime, the debtor remains liable
for the loss.

Article 1263: Effect of Loss of a Generic Thing

• Generic Things: Generic things are defined by their class or category, not by specific identity (e.g., "100 bags of rice"
rather than "this specific bag of rice").
• No Extinguishment of Obligation: The loss or destruction of a generic thing does not extinguish the obligation. The
principle "genus nunquam perit" (a generic thing never perishes) applies. The debtor must still deliver another item of the
same kind, even after a loss.

Article 1264: Partial Loss of a Specific Thing

• Court’s Discretion: The courts have the discretion to determine whether a partial loss of a specific thing is significant
enough to extinguish the obligation. They assess whether the partial loss so diminishes the value or utility of the thing that
it is equivalent to a total loss.
• Example: If the obligation is to deliver a specific racehorse, and the horse suffers a permanent injury like a broken leg,
the court may determine that the injury is so significant that the obligation is extinguished. If the injury does not affect the
 purpose of the delivery (e.g., if the horse is to be slaughtered), the obligation may not be extinguished, although the
debtor may still be liable for damages.

Summary

• Article 1262 addresses when an obligation to deliver a determinate thing is extinguished due to loss, with specific
conditions.
• Article 1263 clarifies that the loss of a generic thing does not extinguish an obligation, as the debtor can still deliver a
similar item.
• Article 1264 allows the courts to determine if partial loss of a specific thing is significant enough to extinguish the
obligation, considering the circumstances of the case.

Additional Provisions on Loss of the Thing and Impossibility of Performance

Article 1265: Presumption of Fault in Loss of Thing in Debtor's Possession

Article 1265 introduces a presumption that if a thing is lost while in the possession of the debtor, it is presumed that the loss was
due to the debtor's fault unless proven otherwise. This presumption exists because the debtor, having control over the thing, is in
the best position to explain the circumstances of its loss.

• Debtor’s Responsibility: The creditor does not need to prove the debtor's fault. Instead, the burden is on the debtor to
prove that the loss was not due to their negligence.
• Exception for Natural Calamities: The presumption of fault does not apply if the loss was caused by natural disasters
such as earthquakes, floods, or storms. In these cases, it is generally assumed that the debtor is not at fault.

Examples:

1. Borrowed Car: If a debtor borrows a car and reports that it was stolen without any fault on their part, the presumption is
that the debtor was at fault unless they can prove otherwise.
2. Fire Accident: If a debtor's house burns down accidentally and the borrowed item was inside, the presumption of fault is
reversed, and the creditor must prove the debtor's fault.

Article 1266: Impossibility of Performance

Article 1266 addresses situations where an obligation to do something (an obligation "to do") becomes legally or physically
impossible without the fault of the obligor (debtor). In such cases, the obligation is extinguished.

• Physical Impossibility: Occurs when it becomes physically impossible for the obligor to perform the obligation due to
circumstances beyond their control (e.g., incapacitation, death).
• Legal Impossibility: Arises when the performance becomes impossible due to a change in the law or other legal
prohibitions, even if it is still physically possible.

Examples:

1. Physical Impossibility: A painter who loses their arms in an accident is physically incapable of fulfilling an obligation to
paint a picture.
2. Legal Impossibility: A contractor who agrees to build a commercial building but later cannot proceed because the area is
legally rezoned as residential.

Article 1267: Difficulty of Performance

Article 1267 provides that when the performance of an obligation has become so difficult as to be manifestly beyond the
contemplation of the parties, the obligor may be released from the obligation, either in whole or in part. This principle applies when
the difficulty of performance, although not rendering it impossible, has increased to an extent that it would be unreasonable to
expect the obligor to perform as initially agreed.

• Court's Discretion: The court has the discretion to determine whether the increased difficulty justifies the release of the
obligor from their obligation.

Article 1268: Obligation from a Criminal Offense

Article 1268 deals with obligations arising from criminal offenses, particularly focusing on the scenario where the obligation is to
deliver a specific and determinate thing (e.g., a stolen item). The key points are:

1. No Exemption from Payment Due to Loss:

o If a specific thing is lost or destroyed, the debtor (who has committed a crime) is not exempted from paying the
value of the thing, regardless of the cause of the loss.
o This rule applies even in cases of fortuitous events, where normally a debtor would be relieved of their
obligation.
2. Exception - Creditor's Refusal Without Justification:
o The debtor may be exempt from liability if the creditor unjustifiably refuses to accept the thing when it is offered
back. This refusal must be without any valid reason.
o In such cases, the debtor is not required to consign the item formally, but must still exercise due diligence to
protect the item.

Example:

• If D steals a car from C and later, the car is destroyed in a fire without any fault of D, D would still be liable to pay the
value of the car. However, if D offers the car back to C and C refuses to accept it without a valid reason, D may be exempt
from liability.

Article 1269: Rights of the Creditor After Loss of the Thing

Article 1269 provides the creditor with certain protections when an obligation to deliver a specific thing is extinguished due to its
loss. The article grants the creditor the right to pursue any actions the debtor might have had against a third party responsible for the
loss.

1. Creditor’s Rights Against Third Parties:

o When an obligation is extinguished because the specific thing is lost, the creditor automatically inherits the
debtor’s rights to pursue any third party responsible for the loss.
o This transfer of rights happens by operation of law, meaning the creditor does not need any formal assignment
from the debtor.
2. Application in Insurance:
o This rule is particularly relevant in situations involving insurance, where the creditor might have the right to claim
against an insurance company if the loss of the item was insured.

Example:

• S is supposed to deliver a specific horse to B, but the horse is lost due to the fault of a third party, T. While S’s obligation
to B is extinguished, B can directly sue T to recover the value of the horse and any damages, using the rights that
originally belonged to S.

Article 1270: Condonation or Remission of Debt

Condonation or Remission:

• Definition: Condonation or remission is the voluntary and gratuitous relinquishment by the creditor of their right to
demand fulfillment of an obligation from the debtor. It is essentially a form of donation, as the creditor gives up a right
without receiving anything in return.

Requisites for a Valid Condonation or Remission:

1. Gratuitous Nature: The act must be done without any form of compensation or consideration.
2. Acceptance by the Obligor: The debtor must accept the remission, making it a bilateral act.
3. Capacity of Parties: Both the creditor (who forgives the debt) and the debtor (who accepts the forgiveness) must have
the legal capacity to act.
4. Not Inofficious: The remission must not infringe on the rights of compulsory heirs (e.g., children), meaning it should not
go beyond what the creditor could have legally given away through a will.
5. Compliance with Forms of Donation: If the remission is made expressly (i.e., explicitly stated), it must comply with the
formalities required for donations. This means it needs to be documented in the appropriate legal form, particularly if it
involves significant amounts or properties.

Kinds of Remission:

1. Extent:
o Complete: Covers the entire obligation.
o Partial: Only a portion of the obligation is forgiven.
2. Form:
o Express: Made verbally or in writing, explicitly stating the remission.
o Implied: Inferred from the actions or conduct of the creditor (e.g., handing over the document of indebtedness).
3. Date of Effectivity:
o Inter vivos: Takes effect during the lifetime of the creditor.
o Mortis causa: Takes effect upon the death of the creditor, following the rules for wills.

Effect of Inofficious Remission:

• Remission is considered inofficious if it exceeds what the creditor could legally give away through a will, thus reducing the
portion reserved for compulsory heirs. In such cases, the court may reduce the remission to protect the rights of the heirs.

Example:

• If a parent condones a debt owed by a child, but the condonation exceeds what the parent could have bequeathed in their
will, the heirs could contest it, and the court might reduce the condonation to protect the legitime (the portion of the estate
reserved for compulsory heirs).

Article 1271: Implied Remission Through Delivery of Document

Implied or Tacit Remission:

• Voluntary Delivery of Document: If a creditor voluntarily delivers a private document (e.g., a promissory note)
evidencing the debt to the debtor, it implies that the creditor is waiving their right to collect on the debt. This is considered
an implied remission.
• Legal Presumption: The law presumes that by giving the debtor the document, the creditor renounces their right to
demand payment. This presumption holds because if the debt were still outstanding, the creditor would need the
document to enforce the debt.
• Exceptions: This presumption does not apply to public documents since copies can be easily obtained from public
records, and delivery of the document might not indicate remission.

Joint vs. Solidary Obligations:

• Joint Obligation: The presumption of remission applies only to the debtor who receives the document.
• Solidary Obligation: The presumption applies to the entire obligation.

Nullifying the Waiver:

 • Claim of Inofficiousness: If it is claimed that the remission is inofficious (i.e., unjustly affects the rights of heirs), the
debtor or his heirs can argue that the delivery of the document was actually in payment of the debt, not a waiver of the
obligation.

Example:

• If a creditor gives the debtor a private note that proves the debt, it may be presumed that the debt is forgiven. However, if
the creditor later claims that the remission was excessive and harms other heirs' rights, the debtor can prove that the
document was given as proof of payment, not as a gift or forgiveness of the debt.

1. Presumption of Voluntary Delivery (Art. 1272)

Explanation:

• Ordinarily, the Document’s Possession: Typically, the creditor holds the document evidencing the debt, which implies
that the debt is still outstanding. The burden of proof is on the debtor to show that the debt has been paid if the document
is in their possession.
• Presumption When Document is with Debtor: If the document is found with the debtor and it is unclear how the debtor
came into possession of it, the presumption is that the creditor voluntarily delivered it. This assumption implies that the
debt might have been settled.
• Presumption of Remission: When the document is found with the debtor, it creates a presumption of remission (or
cancellation) of the debt. However, it is debated whether this presumption should directly lead to the assumption of
payment instead.

Example:

• Scenario: A promissory note evidences a debt of P1,000. The note, signed by the debtor (D), is initially given to the
creditor (C).
• If Note is Delivered to Debtor: If the promissory note is voluntarily delivered to D, it is presumed that D has paid C.
• If D Has Not Paid: If it is established that D has not paid, it is presumed that C has remitted the debt.
• Unknown Possession: If it is not clear how D obtained the note, it is presumed that it was voluntarily delivered by C,
unless C can prove otherwise.

2. Effect of Renunciation of Accessory Obligation (Art. 1273)

Explanation:

• Accessory Follows the Principal: Accessory obligations (e.g., guarantees) are dependent on the existence of the
principal obligation (e.g., the main debt). If the principal debt is extinguished, the accessory obligations also end.
• Principal Obligation’s Independence: However, the principal obligation can exist without the accessory obligations.

Example:

• Scenario: D owes C P1,000 with G as the guarantor.

• Renunciation of Debt: If C forgives the P1,000 debt of D, the guaranty by G is also extinguished.
• Renunciation of Guarantee: If only G’s guaranty is forgiven, D’s obligation to pay P1,000 remains in force.

3. Presumption of Remission of Pledge (Art. 1274)

Explanation:

• Pledge Basics: In a pledge, the pledged item must be delivered to the creditor or a third party by mutual agreement. The
pledge secures the principal obligation.
• Presumption When Pledged Item is Found with Debtor: If the pledged item is found in the possession of the debtor or
a third person who owns it, it is presumed that the pledge has been remitted. This means the accessory pledge obligation
is considered cancelled, but the debtor still owes the principal debt.
• Contrary Evidence: The presumption of remission can be challenged with evidence showing that the creditor agreed to
the return of the pledged item or other contrary evidence.

Example:

• Scenario: D pledges a diamond ring to C as security for a loan.

• If Ring is Found with D: If the ring is later found with D, it is presumed that C has remitted the pledge and D is no longer
required to return the ring.
• Contrary Evidence: C can prove that the ring was returned to D upon D’s request, thus the pledge has not been
remitted.

Confusion or Merger of Rights

Art. 1275: Extinguishment of Obligation by Confusion or Merger

Explanation:

• Confusion or Merger: This occurs when a person simultaneously holds both the roles of creditor and debtor for the same
obligation. For example, if someone owes a debt to themselves, the obligation becomes void because it is nonsensical for
one to claim payment from oneself.
• Legal Basis: The law treats confusion or merger as a method for extinguishing obligations because it eliminates the need
for enforcement when the roles of creditor and debtor are merged. It also implies that the purpose of the obligation has
been fulfilled.
Requisites of Confusion:

1. Must be Between Principal Parties: The confusion must occur between the principal debtor and creditor. The roles must
be merged in the same person concerning the principal debt.
2. Complete: The merger must be complete, meaning that the same individual must fully assume both roles of creditor and
debtor.

Examples:

1. Example 1:
o Scenario: D owes C P10,000. D issued a promissory note to C. C later endorsed the note to E, who then
endorsed it to F. F buys goods from D and instead of paying cash, endorses the note back to D.
o Outcome: D now owes himself (as he is both the debtor and the creditor of the same note). The obligation is
extinguished by confusion or merger.
2. Example 2:
o Scenario: X and Y are heirs of Z. Z’s will gave X usufruct (right to use) over a parcel of land for ten years and
gave Y the naked ownership. Y later sells his interest in the land to X.
o Outcome: X now holds both the usufruct and the naked ownership. Thus, the usufruct is extinguished and X
becomes the full owner of the land.
3. Example 3:
o Scenario: D borrows money from C and mortgages his land as security. D later sells the land to C.
o Outcome: The mortgage (accessory obligation) is extinguished because D and C are now the same person in
terms of the land. However, the principal obligation (the debt) remains in force. The extinguishment of the
accessory obligation does not cancel the principal debt.

Art. 1276: Effect of Merger in the Person of the Principal Debtor or Creditor

Explanation:

• Benefit to Guarantors: When the merger happens in the person of the principal debtor or creditor, it benefits any
guarantors. This means that if the principal debtor’s obligation is extinguished due to merger, any guarantors are also
relieved of their obligations.
• Confusion in Other Persons: If the merger occurs in someone other than the principal debtor or creditor, it does not
extinguish the obligation. Only merger in the principal parties affects the obligation’s existence.

Effect on Accessory Obligations:

• Extinguishment of Accessory Obligations: When the principal obligation is extinguished due to confusion, any
accessory obligations, such as guarantees, are also extinguished. This follows the principle that accessory obligations are
dependent on the existence of the principal obligation.

1. Confusion of Rights

Art. 1275: Confusion or Merger

Explanation:

• Confusion or Merger: This occurs when the roles of creditor and debtor merge in the same person. As a result, the
obligation is extinguished because one cannot enforce a debt against oneself.
• Basis for Extinguishment: The law sees this situation as illogical for enforcement. Moreover, the purposes of the
obligation are considered fulfilled.

Examples:

1. Confusion of Rights for Guarantors:

o Scenario: D is indebted to C with G as the guarantor. If D becomes both the creditor and debtor (e.g., through
buying C’s debt), the obligation is extinguished. Consequently, G, the guarantor, is freed from liability.
o Further Scenario: If C assigns his credit to E, and E assigns it to G (the guarantor), the guarantee is
extinguished. However, D's obligation to pay the principal remains, and G can now demand payment from D.

Art. 1276: Effect on Guarantors

Explanation:

• Guarantor’s Liability: If confusion happens in the person of the principal debtor or creditor, it benefits the guarantors,
extinguishing their guarantee as well.
• Effect on Principal Obligation: When confusion occurs in the guarantor's person, it only extinguishes the guarantee, not
the principal obligation.

Example:

• Scenario: C’s credit is assigned to E, who then assigns it to G (the guarantor). The guarantee is extinguished, but D’s
obligation to pay remains in effect. G, now a creditor, can seek payment from D.

2. Confusion in Joint and Solidary Obligations

Art. 1277: Confusion in Joint Obligations

Explanation:

• Joint Obligation: Each debtor and creditor is separately responsible for their share. Confusion affecting one person does
not affect others; it only extinguishes the obligation related to the person in whom the roles of creditor and debtor have
merged.
Example:

• Scenario: A, B, and C owe D P9,000. D endorses the note to E, who then endorses it to A. If A, now a debtor and
creditor, experiences confusion, A’s share (P3,000) is extinguished. B and C remain liable for their shares (P3,000 each)
and would owe this amount to A, who has become the new creditor.

Art. 1277: Confusion in Solidary Obligations

Explanation:

• Solidary Obligation: In solidary obligations, if one debtor experiences confusion (merges roles of debtor and creditor),
the entire obligation is extinguished because each debtor is individually liable for the whole amount.
• Reimbursement: The debtor who pays the full debt can claim reimbursement from co-debtors for their share.

Example:

• Scenario: A, B, and C have a solidary obligation to pay P9,000. If the note is endorsed to A, the entire debt is
extinguished due to confusion in A’s person. A can then claim reimbursement from B and C for their respective shares of
P3,000 each.