Confusion or Merger (RFBT 1) PDF

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CONFUSION OR MERGER OF RIGHTSART. 1275. The obligation is extinguished from the time the characters of creditor and debtor are merged in the same person.De Leon Meaning of confusion or merger Confusion or merger is the meeting in one person of the qualities of creditor and debtor with respect to the...

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CONFUSION OR MERGER OF RIGHTS ART. 1275. The obligation is extinguished from the time the characters of creditor and debtor are merged in the same person. De Leon Meaning of confusion or merger Confusion or merger is the meeting in one person of the qualities of creditor and debtor with respect to the same obligation. Reason or basis for confusion (1) The law treats confusion or merger as a mode of extinguishing obligations because if a debtor is his own creditor, enforcement of the obligation becomes absurd since a person cannot claim payment from himself. (2) Furthermore, when there is a confusion of rights, the purposes for which the obligation may have been created are deemed realized. Requisites of confusion For a valid confusion or merger to the place, it is necessary that: (1) It must take place between the principal debtor and creditor; (2) It must be complete and definite. EXAMPLES: (1) D owes C P1,000.00 for which D executed a negotiable promissory note1 in favor of C. C indorsed the note to X who, in turn, indorsed it to Y. Now, Y bought goods from the store of D. Instead of paying cash, Y just indorsed the promissory note to D. Here, D owes himself. Consequently, his obligation is extinguished by merger. (2) W (wife) has a claim against H (husband) for the support of their children C, etc. Subsequently, W died. H also died later. Since C, etc. as heirs of W (creditor) are also heirs of H (debtor), the obligation sued upon is extinguished. (3) C, mortgage-creditor, is the purchaser of the mortgaged property belonging to D, mortgage-debtor, which was sold at public auction after extra-judicial foreclosure. Under ordinary circumstances, if a person has a mortgage credit over a property which was sold in an auction sale, the only right left to him is to collect his mortgage credit from the purchaser, who becomes a debtor to the mortgagecreditor. In the example, there is a merger between the creditor and debtor in the person of C. (4) X and Y are the heirs of Z. In his will, Z gave to X a parcel of land in usufruct for ten years. The naked ownership to the same parcel was given to Y. Later, Y sold his interest in the land to X. In this case, the usufruct is naturally extinguished and X will now have full ownership over the land. (5) D borrowed money from C. As security, D mortgaged his land. Subsequently, D sold the land to C. In this case, the mortgage is extinguished, but the obligation subsists. The extinguishment of the accessory obligation does not carry with it that of the principal obligation. Extinction of real rights by confusion Real rights like usufruct, mortgage, pledge, right of repurchase, lease record, servitude, etc., may be extinguished by merger when any of such rights is merged with ownership which is the most comprehensive real right. The merger results in what is denominated as consolidation of ownership. This may take place by any of the causes which are sufficient to transmit title to an obligation, either by assignment, subrogation, and sale of inheritance. The most important and frequent cause is hereditary succession where the debtor inherits

from the creditor, subject to the rights of other creditors. It is not, however, strictly a merger in the sense used in Article 1275. Suarez Confusion or merger defined It is the meeting in one person of the qualities of creditor anddebtor with respect to the same obligation. Requisites for a valid merger 1. It must take place between the principal debtor and creditor. 2. The merger must be clear and definite 3. Obligations are the same or identical. Example: D obliges himself to pay C P10,000 by virtue of a negotiable promissory note executed by D to C. C endorsed the note to X, X to Y, Y to Z, and Z to D. D here, who is the principal debtor, becomes the creditor. The obligation of D is extinguished by merger or confusion. Effect to Guarantors ART. 1276. Merger which takes place in the person of the principal debtor or creditor benefits the guarantors, Confusion which takes place in the person of any of the latter does not extinguish the obligation. De Leon Effect of merger in the person of principal debtor or creditor. Merger in the person of the principal debtor or creditor extinguishes the obligation. Hence, the accessory obligation of guaranty is also extinguished in accordance with the principle that the accessory follows the principal. EXAMPLE: D is indebted to C with G as guarantor. The merger of the characters of debtor and creditor in D shall free G from liability as guarantor. Similarly, merger which takes place in the person of C benefits G because the extinction of the principal obligation carries with it that of the accessory obligation of guaranty. Effect of merger in the person of guarantor The extinguishment of the accessory obligation does not carry with it that of the principal obligation. Consequently, merger which takes place in the person of the guarantor, while it extinguishes the guaranty, leaves the principal obligation in force. EXAMPLE: Suppose, in the example above, C assigns his credit to X, who, in turn, assigns the credit to G, the guarantor. In this case, the contract of guaranty is extinguished. However, D’s obligation to pay the principal obligation subsists. G now, as the new creditor, can demand payment from D. Effect to Joint Obligation ART. 1277. Confusion does not extinguish a joint obligation except as regards the share corresponding to the creditor or debtor in whom the two characters concur. De Leon Confusion in a joint obligation In a joint obligation, there are as many debts as there are debtors and as many credits as there are creditors, the debts and/or credits being considered distinct and separate from one another. Each debtor has his own creditor to whom he is liable and confusion taking place in the person of any debtor or creditor does not affect the others. In other words, the confusion will extinguish only the share corresponding to the creditor or debtor in whom the two characters concur.

EXAMPLE: A, B, and C are jointly liable to D in the amount of P9,000.00 evidenced by a negotiable promissory note. D endorsed the note to E, who, in turn endorsed it to A. In this case, A’s share in the obligation is extinguished because of confusion in his person. However, the indebtedness of B and C in the amount of P3,000.00 each remains because as to them there is no confusion. Consequently, B and C would be liable to A, the new creditor, P3,000.00 each. Confusion in a solidary obligation Merger in the person of one of the solidary debtors shall extinguish the entire obligation because it is also a merger in the other solidary debtors. Remember that in a solidary obligation there is only one obligation and every debtor is individually responsible for the payment of the whole obligation. He who makes payment may claim reimbursement from his codebtors for the shares which correspond to them. EXAMPLE: In the example given, if the obligation of A, B, and C is solidary, the endorsement to A extinguishes the entire obligation of P9,000.00. A can demand reimbursement from B and C. Here, the basis of the right of A is not the original obligation which has been extinguished by the confusion which takes place in his person but the confusion itself. It is as if A paid the entire debt. He can, therefore, collect the proportionate shares belonging to B and C on an implied contract of reimbursement. Suarez Effect of merger and confusion 1. Obligation is extinguished. 2. If there is a guarantor and the merger is in the principal debtor the obligation is extinguished, the guarantor is released. Accessory follows the principal 3. If there is a guarantor and the merger is not on the principal debtor but only on the guarantor, the principal obligation is not extinguished but the accessory is extinguished. Confusion in joint and solidary obligations If the obligation is joint, only the share corresponding to the creditor or debtor in whom the two characters concur is extinguished Example: D1 and D2 are jointly indebted to C for P10,000. C endorsed the instrument to X, X to Y, Y endorsed back to D1only. In here, the obligation of D1 is extinguished and not D2.Instead, the right of D1 is to proceed against D2 and collectP5,000 If the obligation is solidary, the obligation is totally extinguished. Example: D1 and D2 are solidarily liable to C for P10,000. C endorsed to X, X to Y, Y endorsed back to D1. The obligation here is totally extinguished because the obligation is solidary and D1's right is to proceed against D2 and collect P5,000....