On September 6, 2015, Mauro purchased from Antonio a motorcycle, as evidenced by a deed of sale. The purchase price was ₱88,700, with a down payment of ₱35,000, and the balance payable in 12 monthly installments, due and payable on the first day of each month starting December 1, 2015. As security for the balance, Mauro executed a chattel mortgage over the said motorcycle in favor of Antonio. However, Mauro failed to pay the monthly installments. After Antonio extrajudicially demanded payment for the balance, Mauro returned the property to Antonio. Is the return of the motorcycle equivalent to dación en pago? Discuss.
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No, Mauro's return of the motorcycle is not equivalent to dación en pago. Under Article 1245 of the Civil Code, dación en pago requires the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of
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Quick check
Under Article 1245 of the Civil Code, what is the legal nature of dación en pago?
Article 1245 defines dación en pago as a special mode of payment governed by the law on sales.
Which element is indispensable for the surrender of property to constitute a valid dación en pago?
Dación en pago requires mutual consent of both parties to extinguish the debt through property transfer.
What is the legal effect when a defaulting debtor merely surrenders a mortgaged motorcycle to the mortgagee?
Returning a mortgaged asset after default is merely preparatory to extrajudicial foreclosure sale.
Which body of law governs dación en pago under the Civil Code of the Philippines?
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Why was Mauro's return of the motorcycle to Antonio held not to be equivalent to dación en pago?
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Learn more about these topics
1. Dacion en Pago
Under Article 1245 of the Civil Code, dación en pago is a special mode of payment whereby property is alienated to the creditor in satisfaction of a debt in money. It is governed by the law on sales and requires the essential elements of a contract: consent, object, and cause. For dación en pago to exist, there must be a clear agreement between the parties that the delivery and transfer of ownership of the property shall completely extinguish the pre-existing monetary obligation of the debtor.
2. Creditor Consent Requirement
The transfer of ownership in dación en pago cannot be presumed or inferred solely from the unilateral act of the debtor in surrendering possession of a mortgaged property. Because dación en pago constitutes a novation of the original contract of loan, the express or implied consent of the creditor is indispensable. In the absence of an explicit acceptance by the creditor that the surrendered property serves as full satisfaction of the debt, no dación en pago is created under Philippine law.
3. Mortgaged Property Return
When a defaulting mortgagor surrenders or returns a mortgaged chattel to the mortgagee following a demand for payment, the legal character of the surrender is ordinarily preparatory to extrajudicial foreclosure. The return of the mortgaged asset merely places the property in the possession of the mortgagee to facilitate a public auction sale under the Chattel Mortgage Law. Unless the mortgagee agrees to accept ownership in full payment, the debtor remains liable for any deficiency after foreclosure.