Dan T.

Lim works in the business of supplying scrap papers, cartons, and other raw materials to factories engaged
in the paper mill business. He also delivered scrap papers to Arco Pulp and Paper Company, through its Chief
Executive Officer, Candida A. Santos. They agreed that Arco would either: (1) pay Dan T. Lim the value of the
raw materials or (2) deliver to him their finished products of equivalent value. When he delivered the raw
materials, Arco issued a post-dated check as partial payment. However, the check was dishonored for being drawn
against a closed account. On the same day, Arco and a certain Eric Sy executed a memorandum of agreement
where Arco bound themselves to deliver their finished products to the corporation owned by Eric Sy. Lim sent a
letter to Arco demanding the full payment, but no payment was made to him. Thereafter, he filed a complaint against
Arco. Arco argue that their obligation to Dan was already extinguished in view of the novation that took place in the
MOA. On the other hand, Lim contends that the novation did not take place because the original agreement was
an alternative obligation.
1. Was the original obligation between Arco and Lim an alternative obligation?
YES. The original obligation was actually an alternative obligation. Under the Article 1199 of the Civil Code, A
person alternatively bound by different prestations shall completely perform one of them. In an alternative
obligation, there is more than one object and the fulfillment of one is sufficient, determined by the choice of the
debtor who generally has the right of choice. The right of choice is extinguished when the debtor make his choice
known. The choice of the debtor must also be communicated to the creditor to give him the opportunity to express
his consent, or to impugn the election made by the debtor. In the case at bar, the original contract between the
parties was for Dan to deliver scrap papers to Arco Pulp and Paper. By agreement, Arco Pulp and Paper had the
option to either (1) pay the price or (2) deliver the finished products of equivalent value to Lim. When Arco tendered
a check to Lim in partial payment for the scrap papers, Arco exercised their option to pay the price. Hence, when
Lim received the check and deposited it, the same was considered his notice of Arcos option to pay. The MOA
merely shows that Arco opted to deliver the finished products to a third person instead. Since there was no novation,
Arcos alternative obligation to pay Lim remains valid and existing. Hence, Arco and its Chief Executive Officer are
solidarily liable to pay Lim.