Art. 1254.

When the payment cannot be applied in accordance with

the preceding rules, or if application cannot be inferred from other
circumstances, the debt which is most onerous to the debtor, among
those due, shall be deemed to have been satisfied.
If the debts due are of the same nature and burden, the payment
shall be applied to all of them proportionately. (1174a)

Application of payment to more onerous debts.

In case no application of payment has been made by the debtor and the
creditor, then the payment shall be applied to the most onerous debt, and if
the debts are of the same nature and burden, to all of them proportionately.
A debt is more onerous than another when it is more burdensome to the
debtor. No fixed rule can be laid down in determining which debt is more
onerous to the debtor since the condition of being more burdensome is a
question of relative appreciation. The Supreme Court, however, in various
decisions has given some rules which can be followed or used as a guide to
determine whether one debt is more burdensome than another.
(1) An interest-bearing debt is more onerous than a non-interest bearing debt
even if the latter is an older one. (Menzi & Co. vs. Quing Chuan, 69 Phil. 46
[1939].)
(2) A debt as a sole debtor is more onerous than as a solidary debtor.
(Commonwealth vs. Far Eastern Surety, 83 Phil. 305 [1969].) Accordingly,
where in a bond the debtor and surety have bound themselves solidarily, but
limiting the liability of the surety to a lesser amount than that due from the
principal debtor, any such payment as the latter may have made on account
of such obligation must be applied fi rst to the unsecured portion of the debt,
for, as regards the
principal debtor, the obligation is more onerous as to the amount not
secured. (Hongkong and Shanghai Banking Corp. vs. Aldanese, 48Phil. 990
[1926].)
(3) All things being equal, older debts are more onerous. (Phil.National Bank
vs. Veraguth, 50 Phil. 233 [1927]; Peoples Surety &Insurance Co., Inc. vs.
Gabriel & Sons Trans. Co., Inc., 9 SCRA 573[1963]; see Tan vs. Mendez, Jr.,
383 SCRA 202 [2002].)

(4) Debts secured by a mortgage or by pledge are more onerous than

unsecured debts (Mission de San Vicente vs. Reyes, 19 Phil. 525 [1911]; Sanz
vs. Lavin Brothers, 6 Phil. 299 [1906].);
(5) In a case, the unpaid rentals due from the purchaser of property occupied
by him were held more onerous than the balance of the price of the property
the provisional sale of which was cancelled by the seller for non-payment of
the installments; hence, the subsequent payment
of P100,000 was applied to the back rentals and not as additional payment
for the purchase price. (Espina vs. Court of Appeals, 334 SCRA 186 [2000].)
(6) Of two interest-bearing debts, the one with a higher rate is more onerous.
(7) An obligation with a penalty clause is more burdensome than one without
penalty clause.
ILLUSTRATIVE CASE:
MENZI & Co. Vs. Quing Chuan
69 Phil. 46
The court did not apply the down payment to creditor (seller) of debtor
(buyer) to the guaranteed portion of the debt and surety contended that this
was
contrary to Article 1254.
Facts: To guarantee the faithful compliance by B (buyer) with his
obligation under a conditional purchase and sale of six (6) trawl boats,
C executed performance bonds in favor of S (seller). In a suit fi led by S
against B and C for failure of B to pay the amortizations, the lower court
rendered a decision in favor of S.
C contended, among other things, that the court had erred in not
applying the sum of P10,000.00 paid as down payment on two (2) boats
by B to S to the guaranteed indebtedness, reasoning that under Article
1254 of the Civil Code, where there is no imputation (application) of
payment made by either the debtor or creditor, the debt which is the most
onerous to the debtor shall be deemed to have been satisfi ed; hence, the
amount paid as down payment on its two (2) boats should be applied to
the guaranteed portion of the debt.
Issue: Is this contention tenable?

Held: No. The rules contained in Articles 1252 to 1254 of the Civil Code
apply to a person owing several debts of the same kind to a single creditor.
They cannot be made applicable to a person whose obligation as a mere
surety is both contingent and singular, which in this case is the full and
faithful compliance with the terms of the contract of conditional purchase
and sale of reparations goods. x x x. (Reparations Commission vs. Universal
Deep-Sea Surety and Fidelity Co., Inc., 83 SCRA 764 [1978].) Where debts
subject to different burdens. Suppose the debts are subject to different
burdens (like one debt secured by a mortgage and the other with a penalty
clause) that it cannot be defi nitely determined which debt is most onerous
to the
debtor. To what debt should the payment be applied? To all of them
proportionately.