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Dacion en Pago Vs Contract To Sell

The document discusses the differences between dacion en pago and voluntary surrender with a special power of attorney to sell. Dacion en pago involves transferring ownership of a property from a debtor to a creditor to satisfy a debt, while voluntary surrender involves transferring possession but retaining ownership and authorizing the creditor to sell the property on behalf of the debtor. The case discussed involved a debtor voluntarily surrendering a mortgaged vehicle to the creditor but retaining ownership. The creditor did not consent to accepting the vehicle as full payment based on the documents executed, and did not actually sell the vehicle, so the debt was not extinguished and the creditor could still demand payment.

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Nicole Santos
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1K views2 pages

Dacion en Pago Vs Contract To Sell

The document discusses the differences between dacion en pago and voluntary surrender with a special power of attorney to sell. Dacion en pago involves transferring ownership of a property from a debtor to a creditor to satisfy a debt, while voluntary surrender involves transferring possession but retaining ownership and authorizing the creditor to sell the property on behalf of the debtor. The case discussed involved a debtor voluntarily surrendering a mortgaged vehicle to the creditor but retaining ownership. The creditor did not consent to accepting the vehicle as full payment based on the documents executed, and did not actually sell the vehicle, so the debt was not extinguished and the creditor could still demand payment.

Uploaded by

Nicole Santos
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Dacion en Pago vs Voluntary Surrender with a Special Power of Attorney to Sell.

Dacion en pago, according to Manresa, is the transmission of the ownership of a thing by the debtor
to the creditor as an accepted equivalent of the performance of obligation. 4 In dacion en pago, as a
special mode of payment, the debtor offers another thing to the creditor who accepts it as equivalent of
payment of an outstanding debt. The undertaking really partakes in one sense of the nature of sale, that
is, the creditor is really buying the thing or property of the debtor, payment for which is to be charged
against the debtor's debt. As such, the essential elements of a contract of sale, namely, consent, object
certain, and cause or consideration must be present. In its modern concept, what actually takes place
in dacion en pago is an objective novation of the obligation where the thing offered as an accepted
equivalent of the performance of an obligation is considered as the object of the contract of sale, while the
debt is considered as the purchase price. 5 In any case, common consent is an essential prerequisite, be
it sale or innovation to have the effect of totally extinguishing the debt or obligation.

The evidence on the record fails to show that the mortgagee, the herein appellee, consented, or at
least intended, that the mere delivery to, and acceptance by him, of the mortgaged motor vehicle be
construed as actual payment, more specifically dation in payment or dacion en pago. The fact that
the mortgaged motor vehicle was delivered to him does not necessarily mean that ownership
thereof, as juridically contemplated by dacion en pago, was transferred from appellant to appellee. In
the absence of clear consent of appellee to the proferred special mode of payment, there can be no
transfer of ownership of the mortgaged motor vehicle from appellant to appellee. If at all, only
transfer of possession of the mortgaged motor vehicle took place, for it is quite possible that
appellee, as mortgagee, merely wanted to secure possession to forestall the loss, destruction,
fraudulent transfer of the vehicle to third persons, or its being rendered valueless if left in the hands
of the appellant.

A more solid basis of the true intention of the parties is furnished by the document executed by
appellant captioned "Voluntary Surrender with Special Power of Attorney To Sell" dated March 12,
1973, attached as Annex "C" of the appellant's answer to the complaint. An examination of the
language of the document reveals that the possession of the mortgaged motor vehicle was
voluntarily surrendered by the appellant to the appellee authorizing the latter to look for a buyer and
sell the vehicle in behalf of the appellant who retains ownership thereof, and to apply the proceeds of
the sale to the mortgage indebtedness, with the undertaking of the appellant to pay the difference, if
any, between the selling price and the mortgage obligation. With the stipulated conditions as stated,
the appellee, in essence was constituted as a mere agent to sell the motor vehicle which was
delivered to the appellee, not as its property, for if it were, he would have full power of disposition of
the property, not only to sell it as is the limited authority given him in the special power of attorney.
Had appellee intended to completely release appellant of its mortgage obligation, there would be no
necessity of executing the document captioned "Voluntary Surrender with Special Power of Attorney
To Sell." Nowhere in the said document can We find that the mere surrender of the mortgaged motor
vehicle to the appellee extinguished appellant's obligation for the unpaid price.

Appellant would also argue that by accepting the delivery of the mortgaged motor vehicle, appellee
is estopped from demanding payment of the unpaid obligation. Estoppel would not he since, as
clearly set forth above, appellee never accepted the mortgaged motor vehicle in full satisfaction of
the mortgaged debt.

Under the law, the delivery of possession of the mortgaged property to the mortgagee, the herein
appellee, can only operate to extinguish appellant's liability if the appellee had actually caused the
foreclosure sale of the mortgaged property when it recovered possession thereof. 6 It is worth noting
that it is the fact of foreclosure and actual sale of the mortgaged chattel that bar the recovery by the
vendor of any balance of the purchaser's outstanding obligation not satisfied by the sale. 7 As held by this
Court, if the vendor desisted, on his own initiative, from consummating the auction sale, such desistance
was a timely disavowal of the remedy of foreclosure, and the vendor can still sue for specific
performance. 8 This is exactly what happened in the instant case.

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