By: Algy Riguer
Meaning of application of payments.
Application of payments is the designation of the debt to which should be applied the payment made by a debtor who has various debts of the same kind in favor of one and the same creditor.
Requisites of application of payments.
The requisites are:
(1) There must be one debtor and one creditor;
(2) There must be two or more debts;
(3) The debts must be of the same kind;
(4) The debts to which payment made by the debtor has been applied must be due; and
(5) The payment made must not be sufficient to cover all the debts. Application as to debts not yet due.
The application of payments as to debts not yet due cannot be made unless:
(1) there is a stipulation that the debtor may so apply; or
(2) it is made by the debtor or creditor, as the case may be, for whose benefit the period has been constituted.
EXAMPLES: D owes C as follows:
(a) P1,500.00 payable on September 5;
(b) P1,200.00 payable on September 20;
(c) A specific table worth P2,000.00 to be delivered on September 20; and
(d) P1,000.00 payable on October 15.
On September 20, D paid C P1,500.00. D may apply the P1,500.00 to debt (a), or to debt (b) and (if C does not object) to a portion of debt (a). If D paid only P1,000.00, he cannot choose to apply his payment to the P1,500.00 debt because C cannot be compelled to receive partial payment. D cannot properly apply his payment to debt (c) because it is not of the same kind. He must deliver the thing agreed upon. Neither can he apply it to debt (d) which is not yet due unless there is a stipulation to the contrary or he has the benefit of the period. 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.
Kung ang utang ay lumilikha ng interes, ang pagbabayad ng prinsipal ay hindi dapat ituring na nagawa hanggang sa ang mga interes ay mabayaran.
Article 1253 NCC | speaks of…
Payment of interest
- Once it is admitted that the obl. bears int., partial payments are to be applied first on the acct. of the int. then to reduce the prin.
- This is obligatory and CANNOT be dispensed w/ exc. by mutual agreement.
- The creditor may oppose an appl. of payment made by the debtor contrary to this rule.
What interests are covered?
- Interest from delay is NOT part of obl. It is an independent liab. arising from non-perf.
- Applies to compensatory interest (stipulated as earnings of the amt. due under the obl.)
– HOWEVER, there should be NO distinction when the law makes NO distinction
- Interest from default arises bcos. of non-perf. by the debtor.
To allow the debtor to apply his payment to the capital w/o first satisfying the int. would be to place him in a better position than the debtor who has NOT incurred delay.
Article 1253 NCC | example:
- Arthur was granted a loan by a bank, but failed to settle. 6 mos. ago, somebody sent him a msg. tru Facebook demanding to collect over ₱200,000. He attempted to negotiate. The bank agreed to process his loan for a max. amnesty if he has consistently paid ₱10,000 a mo. for 6 mos. After 6 mos., they gave him the amt. w/c they said contains the max. amnesty and it still showed over ₱200,000. His monthly payment is deducted fr. the int. and pen. but NOT on the prin. Unless he has an agrmt. that the payments he made were to be applied to the prin., the Art. 1253 will apply.
If the debts due are of the same nature and burden, the payment shall be applied to all of them proportionately.
By: Jeirome Domingo
OBLIGATIONS AND CONTRACTS 