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A mortgage on Lot No. 1 is in the name of creditor B. Debtor A pays P1,000,000 to D, a real estate broker who claims to collect payments for B but has no express authorization to receive payments. D does not hand the money to B or any creditor and keeps it. B later asserts that the payment was not received by him and demands further payment. In light of the significance of a payee’s good faith, what is the effect on A’s obligation to B?

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The payment extinguishes the obligation only if the payee is the creditor or authorized to receive payment on behalf of the creditor; good faith alone is not controlling. The debt is discharged if the creditor ratifies the payment after the fact in writing. The debt is discharged if the payee is a broker who has previously collected payments for the creditor, even without written authorization. The creditor is obliged to recognize the payment if he later indicates that he accepts the funds.

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