Section 4. Confusion or Merger of Rights

Meaning:

Confusion or merger.

• A mode of extinguishing obligation.

• It occurs when the debtor and creditor are combined into one individual with regard to the same obligation.

• A person as a creditor cannot claim payment from himself who's his debtor. That just won't make sense. Thus, if the creditor and debtor merge into one, the obligation will extinguish.

Requisites of a valid Confusion or merger:

1. The creditor and debtor must merge into one.

2. The character who merges must be principal creditor and principal debtor. 

3. It must be complete up to the extent of concurrent amount or value.

Example:

Jolli is an only child.Yet his father doesn't want to spoil him.Instead of voluntarily giving him cash for the startup of his business he borrowed 100,000 from his daddy and executed a negotiable note in favor of his father. Unfortunately, his father died. As his father's heir, he became the creditor and debtor of himself. Thus, obligation is remitted and extinguished.

Merger - It is the meeting of one person of the qualities of creditor and debtor with respect to the same obligation.

Guarantor - is a person or an organization that promises to pay a debt owed by a second person, if the latter fails to repay it.

Effect of Merger on Guarantors

“Accessory follows the principal” (the guaranty being considered as the accessory obligation). The extinguishment of the accessory obligation (guaranty) does not carry with it that of the principal obligation (debt).

Effect of Merger in the person of Principal Debtor or Creditor

For Example

Reyes owes Tayong P400,000.00, guaranteed by Quezada. Tayong assigns his right to Mariel who assigns her right to Ernie, and Ernie assigns his right to Quezada 

Effect: Reyes obligation is extinguished. Quezada is released from her obligation. Quezada, the guarantor, was benefitted.

Effect of Merger in the person of Guarantor

For Example

Reyes owes Tayong P400,000.00, guaranteed by. Richard assigns his right to Mariel who assigns her right to Ernie, and Ernie assigns his Quezada right to Quezada.

Effect: Reyes still have to pay Quezada. However, the contract of guaranty is extinguished, but not Reyes obligation to pay the 

P400,000.00. Quezada, as the new creditor can demand payment from Reyes

Joint Obligations - An obligation of two or more partners to pay back a debt or be responsible in satisfying a liability, remember “to each his own” which means, the debtors will only be liable up to their shares. They can also be several creditors, wherein each creditor can only demand their share of the obligation from a debtor  

Solidary Obligations - An obligation between several debtors liable to only one obligation or they can be several creditors, where any of the solidary creditors may demand payment for the entire obligation from the debtors and each of the creditors has the right to reimbursement for their shares when the obligation is fulfilled. Remember “one for all, all for one.”

Examples: 

For Joint Obligations: 

Mimi and Mumu are joint debtors of Mama to the amount of P1,000,000. Mama can demand only P500,000 from Mimi, and only P500,000 from Mumu.

For Solidary Obligations: 

Mimi and Mumu are solidary debtors of Mama to the amount of P1,000,000. Mama can demand the whole P1,000,000 from Mimi.  in turn, after paying Mama, can ask reimbursement from Mumu to the amount of P500,000.