G.R. No. 204264. June 29, 2016.

MAIN TOPIC – Extinguishment of Obligations – Consignation


Maria Remedios Ang, owner of business named “Enhance Immigration and Documentation  Consultants” (EIDC), executed a Deed of Assignment transferring all of her business rights to  Figuera for P150,000.00. The parties also agreed that Ang shall pay the bills for electricity,  telephone, office rentals, and the employees’ salaries up to the month of December 2004. Without Ang’s consent, Figuera paid all the utility bills amounting to P107,903.21 and tendered  only the amount of P42,096.79 after deducting the paid expenses.  

Ang refused to accept Figuera’s payment and argued that she cannot be compelled to accept the  amount because it is not what was agreed upon. Thus, Figuera filed a complaint for specific  performance. 

The RTC ruled in Ang’s favor and explained that for the tender of payment and consignation to  be valid, Figuera must tender the full amount. The CA affirmed the RTC’s ruling, that there is  nothing in the Deed that grants Figuera the option to pay the utility bills and to deduct the  payment from the agreed consideration in the Deed. 

Figuera appealed that he had been subrogated to the rights of Ang’s creditor’s upon payment of  the utility bills even if the payment was made without Ang’s knowledge. 


(1) Whether or not the principles of legal subrogation and compensation should be applied. 

(2) Whether or not the consent or approval of the debtor is required, thus Figuera cannot  deduct the amount she paid for the utility bills from the P150,000.00 consideration 

(3) Whether or not there is a valid tender of payment and consignation for the remaining  amount of P42,096.79 


(1) YES. Article 1291 of the New Civil Code provides that the subrogation of a third person to the  rights of the creditor is one of the means to modify obligations. Subrogation, sometimes referred  to as substitution, is “an arm of equity that may guide or even force one to pay a debt for which  an obligation was incurred but which was in whole or in part paid by another.” It transfers to the  person subrogated the credit, with all the rights appertaining thereto, either against the debtor or  against third persons.

In the present case, Figuera claims that as the EIDC’s new owner, she is interested in fulfilling  Ang’s obligation to pay the utility bills. Since the payment of the bills was long overdue prior to  the assignment of business rights to Figuera, the failure to settle the bills would eventually result  in “the disconnection of the electricity and telephone services, ejectment from the office premises,  and resignation by some, if not all, of the company’s employees with the possibility of subsequent  labor claims for sums of money.” These utilities are obviously necessary for the continuation of  Figuera’s business transactions. 

(2) NO. The consent or approval of the debtor is required only if a third person who is not  interested in the fulfilment of the obligation pays such. On the other hand, no such requirement  exists in cases of payment by a creditor to another creditor who is preferred, and by a person  interested in the fulfilment of the obligation. Notably, Article 1302(1) and (3) does not require  the debtor’s knowledge. Therefore, legal subrogation took place despite the absence of Ang’s  consent to Figuera’s payment of the EIDC bills. Figuera is now deemed as Ang’s creditor by  operation of law. 

(3) YES. Tender of payment is the act of offering to the creditor what is due him, together with  the demand for the creditor to accept it. To be valid, the tender of payment must be a “fusion of  intent, ability, and capability to make good such offer, which must be absolute and must cover  the amount due.” Thus, Figuera’s tender of the remaining amount to Ang is valid and Ang  offered no valid justification in refusing to accept the tender of payment. Due to the creditor’s  refusal, without any just cause, to the valid tender of payment, the debtor is released from her  obligation by the consignation of the thing or sum due.


WHEREFORE, the Court GRANTS the petition for review on certiorari. The decision dated June  29, 2012 and resolution dated September 28, 2012 of the Court of Appeals in C.A.-G.R. CV No.  02480 are hereby REVERSED. 


Article 1278 of the New Civil Code states that there is compensation when two persons, in their  own right, are creditors and debtors of one another. These elements must concur for legal  compensation to apply: (1) each one of the debtors is bound principally, and that the debtor is at  the same time a principal creditor of the other; (2) both debts consist of a sum of money, or if the  things due be consumable, they be of the same kind and also of the same quality if the latter has  been stated; (3) both debts are due; (4) both debts are liquidated and demandable; and (5) there  be no retention or controversy over both debts commenced by third persons and communicated  in due time to the debtor. When all these elements are present, compensation takes effect by  operation of law and extinguishes both debts to the corresponding amount, even though both  parties are without knowledge of the compensation.