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Atlantic Gulf and Pacific Company of Manila, Inc. (AG & P) and Semirara Coal
Corporation filed a complaint for specific performance and damages against SSS. It
appeared that SSS offered AGP two ways to settle its delinquencies. First, to pay by
installment and second, by Dacion en Pago. AGP chose payment through dacion en
pago consisting of a lot they owned in Batangas.
On April 2001, SSS finally approved AGPs proposal of dacion en pago to sette
its delinquencies which amounted to about 29 million pesos. To effect immediate
transfer, both parties had to come up with a Deed of Assignment. SSS failed to come up
with it, and as such, AGP sent a draft of the Deed to SSS. It took almost two years for
SSS to respond to AGPs draft. And on such a time, the delinquencies ballooned to
about 40 million pesos due to interest. AGP was willing to settle the 29 million deficiency
but they believed that the 10 million debt due to interest was inequitable as they
believed that the principal debt had been extinguished through dacion. They are now
asking that SSS implement the dacion en pago.
SSS moved for dismissal. It was granted. CA reversed such a decision.
Issue: WON dacion en pago should be implemented

Yes. The Supreme Court absolutely adopted the CA decision.
Dacion en pago is the delivery and transmission of ownership of a thing by the
debtor to the creditor as an accepted equivalent of the performance of the obligation. It
is a special mode of payment where 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 debtors 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. In
any case, common consent is an essential prerequisite, be it sale or novation, to have
the effect of totally extinguishing the debt or obligation.
From the averments in their complaint, the appellate court observed that private respondents are
seeking to implement the Deed of Assignment which they had drafted and submitted to
SSS pursuant to the approval by SSS. The appellate court thus held that the subject of the complaint
is no longer the payment of the premium and loan amortization delinquencies, as well as the
penalties appurtenant thereto, but the enforcement of the dacion en pago. Thus, the trial court was
ordered to settle the controversy.