*OBLICON*

As per Dean Vera's post (Tuesday, August 22, 2017)

Assignment for August 26, 2017
Articles 1231 to 1261
Cases:
Arrieta v. NARIC, 10 SCRA 79 (1964)
Kalalo v. Luz, 34 SCRA 377 (1940)
St. Paul Fire and Marine Insurance v. Macondray, 70 SCRA 122 (1976)
Papa v. A.V. Valencia, 284 SCRA 643 (1998)
PAL v. CA, 181 SCRA557 (1990)
Reparations Commission v. Universal Deep Sea Fishing, 83 SCRA 764 (1978)
Paculdo v. Regalado, 345 SCRA 134 (2000)
DBP v. CA, GR 118342, 05 Jan 1998
Filinvest Credit Corp. v. Philippine Acetylene, 111 SCRA 421 (1982)
De Guzman v. CA, 137 SCRA 730 (1985)
TLG International Continental Enterprising Inc. v. Flores, 47 SCRA 437 (1972)
McLaughlin v CA, 144 SCRA 693 (1986)
Soco v. Militante, 123 SCRA 160 (1983)
Sotto v. Mijares, 28 SCRA 17 (1969)
Pabugais v. Sahijwani, 423 SCRA 596 (2004)
Telengtan vs. U.S. Lines, G.R. No. 132284, February 28, 2006
Lopez vs. CA, 114 SCRA 671
Meat Packing vs. Sandiganbayan, 359 SCRA 409

Arrieta vs NARIC 10 SCRA 79 (1964)

FACTS
1. On May 19, 1952, plaintiff-appellee participated and won in the public bidding called by the NARIC for the
supply of 20,000 metric tons of Burmese rice.
2. Accordingly, on July 1, 1952, plaintiff- appellee Paz P. Arrieta and the appellant corporation entered into a
Contract of Sale of Rice, under the terms of which the former obligated herself to deliver to the latter 20,000
metric tons of Burmese Rice at $203.00 per metric ton, CIF Manila.
3. In turn, the defendant Corporation committed itself to pay for the imported rice "by means of an irrevocable,
confirmed and assignable letter of credit in U.S. currency in favor of the plaintiff- appellee and/or supplier in
Burma, immediately."
4. Despite the commitment to pay immediately "by means of an irrevocable, confirmed and assignable Letter of
Credit," however, it was only on July 30, 1952, or a full month from the execution of the contract, that the
defendant corporation, thru its general manager, took the first step to open a letter of credit by forwarding to
the Philippine National Bank its Application for Commercial Letter of Credit.
5. On the same day, July 30, 1952, Mrs. Paz P. Arrieta, thru counsel, advised the appellant corporation of the
extreme necessity for the immediate opening of the letter of credit since she had by then made a tender to her
supplier in Rangoon, Burma "equivalent to 5% of the F.O.B. price of 20,000 tons at $180.70 and in compliance
with the regulations in Rangoon this 5% will be confiscated if the required letter of credit is not received by
them before August 4, 1952."
6. It turned out however, the appellant corporation was not in any financial position to meet the condition, which
it candidly admitted in a communication with PNB. Consequently, the credit instrument applied for was opened
only on September 8, 1952 "in favor of Thiri Setkya, Rangoon, Burma, and/or assignee for $3,614,000.00,"(which
is more than two months from the execution of the contract) the party named by the appellee as beneficiary of
the letter of credit.
7. As a result of the delay, the allocation of appellee's supplier in Rangoon was cancelled and the 5% deposit,
amounting to 524,000 kyats or approximately P200,000.00 was forfeited.
8. In this connection, it must be made of record that although the Burmese authorities had set August 4, 1952 as
the deadline for the remittance of the required letter of credit, the cancellation of the allocation and the
confiscation of the 5% deposit were not effected until August 20. 1952, or, a full half month after the expiration
of the deadline. And yet, even with that 15-day grace, appellant corporation was unable to make good its
commitment to open the disputed letter of credit.
9. The appellee endeavored, but failed, to restore the cancelled Burmese rice allocation. When the futility of
reinstating the same became apparent, she offered to substitute Thailand rice instead to the defendant NARIC,
communicating at the same time that the offer was "a solution which should be beneficial to the NARIC and to
us at the same time."
 10. This offer for substitution, however, was rejected by the appellant in a resolution dated November 15, 1952.
Appellee sent a letter to the appellant, demanding compensation for the damages caused her in the sum of
$286,000.00, U.S. currency, representing unrealized profit. The demand having been rejected, she instituted this
case now on appeal.

ISSUE
WON the lower court erred in holding NARIC liable for damages for breach of contract

HELD
- YES. We do not think the appellant corporation can refute the fact that had it been able to put up the 50 c/o marginal
cash deposit demanded by the bank, then the letter of credit would have been approved, opened and released as early
as August 4, 1952. The letter of the Philippine National Bank to the NARIC was plain and explicit that as of the said date,
appellant's it "application for a letter of credit . . . has been approved by the Board of Directors with the condition that
50% marginal cash deposit be paid and that drafts are to be paid upon presentment." The liability of the appellant,
however, stems not alone from this failure or inability to satisfy the requirements of the bank. Its culpability arises from
its willful and deliberate assumption of contractual obligations even as it was well aware of its financial incapacity to
undertake the presentation.
- A number of logical inferences may be drawn from NARICs admission. First, that the appellant knew the bank
requirements for opening letters of credit; second, that appellant also knew it could not meet those requirements.
When, therefore, despite this awareness that it was financially incompetent to open a letter of credit immediately,
appellant agreed in paragraph 8 of the contract to pay immediately "by means of an irrevocable, confirmed and
assignable letter of credit," it must be similarly be held to have bound itself too answer for all and every consequences
that would result from the representation.
- In relation to the aforequoted observation of the trial court, We would like to make reference also to Article 1170 of
the Civil Code which provides:
"Those who in the performance of their obligation are guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor
thereof, are liable in damages.
- Under this provision, not only debtors guilty of fraud, negligence or default in the performance of obligations are
decreed liable: in general, every debtor who fails in the performance of his obligations is bound to indemnify for the
losses and damages caused thereby. The phrase "in any manner contravene the tenor" of the obligation includes any
illicit act which impairs the strict and faithful fulfillment of the obligation, or every kind of defective performance. (IV
Tolentino, Civil Code of the Philippines, citing authorities, p. 103.)
- The NARIC would also have this Court hold that the subsequent offer to substitute Thailand rice for the originally
contracted Burmese rice amounted to a waiver by the appellee of whatever rights she might have derived from the
breach of the contract. We disagree. Waivers are not presumed, but must be clearly and convincingly shown, either by
express stipulation or acts admitting no other reasonable explanation. (Ramirez vs. Court of Appeals, 98 Phil., 225; 52
Off. Gaz. 779). In the case at bar, no such intent to waive has been established.
- In the premises, however, a minor modification must be effected in the disposition portion of the decision appealed
from insofar as it expresses the amount of damages in U.S. currency and not in Philippine Peso. Republic Act 529
specifically requires the discharge of obligations only "in any coin or currency which at the time of payment is legal
tender for public and private debts." In view of that law, therefore, the award should be converted into and expressed in
Philippine Peso.

UPON ALL THE FOREGOING, the decision appealed from is hereby affirmed, with the sole modification that the award
should be converted into the Philippine peso at the rate of exchange prevailing at the time the obligation was incurred
or on July 1, 1952 when the contract was executed. The appellee insurance company, in the light of this judgment, is
relieved of any liability under this suit.
No pronouncement as to costs.
Octavio Kalalo vs Alfredo Luz
34 SCRA 337 Mercantile Law Negotiable Instruments Law Negotiable Instruments in General Sum Certain in
Money Currency To Be Used
Octavio Kalalo is an engineer whose services were contracted by Alfredo Luz, an architect in 1961. Luz contracted Kalalo
to work on ten projects across the country, one of which was an in the International Rice Research Institute (IRRI)
Research Center in Los Baos, Laguna. Luz was to be paid $140,000.00 for the entire project. For Kalalos work, Luz
agreed to pay him 20% of what IRRI is going to pay or equivalent to $28,000.00.
ISSUE: Whether or not Kalalo should be paid in US currency.
HELD: No. The agreement was forged in 1961, years before the passage of Republic Act 529 in 1950. The said law
requires that payment in a particular kind of coin or currency other than the Philippine currency shall be discharged in
Philippine currency measured at the prevailing rate of exchange at the time the obligation was incurred. Nothing in the
law however provides which rate of exchange shall be used hence it is but logical to use the rate of exchange at the time
of payment.

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NOTE: RA 529 has already been repealed by Republic Act 8183 which provides that every monetary obligation must be
paid in Philippine currency which is legal tender in the Philippines. However, the parties may agree that the obligation
or transaction shall be settled in any other currency at the time of payment. (The Philippine Negotiable Instruments
Law, De Leon and De Leon Jr., p. 29)

Myron Papa vs A.U. Valencia and Co., Inc.

284 SCRA 643 Mercantile Law Negotiable Instruments Law Consummation of Sale in Lieu of Check Payment
Myron Papa is the administrator of the estate of Angela Butte. In 1973, he sold a portion of said estate to Felix
Pearroyo through A.U. Valencia and Co., Inc. Pearroyo gave Papa P5,000.00 plus a check worth P40,000.00. However,
Papa was not able to deliver the certificate of title to Pearroyo. A litigation ensued and ten years after, Papa argued
that the sale between him and Pearroyo was never consummated because he did not encash the P40,000.00 check and
that the P5,000.00 cash was merely earnest money.
ISSUE: Whether or not Papa is correct.
HELD: No. After more than ten (10) years from the payment in part by cash and in part by check, the presumption is that
the check had been encashed. Granting that Papa had never encashed the check, his failure to do so for more than ten
(10) years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay. While
it is true that the delivery of a check produces the effect of payment only when it is cashed, pursuant to Article 1249 of
the Civil Code, the rule is otherwise if the debtor (Pearroyo) is prejudiced by the creditors (Papas) unreasonable delay
in presentment. The acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if
he from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment of the
debt or obligation for which it was given.
PAL, Inc. vs CA
G.R. No. L-49188
January 30, 1990

Facts:

Amelia Tan under the name and style of Able Printing Press commenced or filed a complaint for damages against
petitioner Philippine Airlines with the CFI Manila ruling in her favor. Upon appeal, the Court of Appeals upheld the
decision of the CFIs decision with only minor modifications as to the damages to be awarded to Amelia Tan. The
corresponding writ of execution was duly referred to Deputy Sheriff Emilio Z. Reyes for enforcement with checks in the
name of Sheriff Reyes. Four months later, Amelia Tan moved for the issuance of an alias writ of execution stating that
the judgment rendered by the lower court, and affirmed with modification by the Court of Appeals, remained
unsatisfied.

However, the Philippine Airlines answered that it has already satisfied its obligation, as evidenced by check vouchers
signed and received by Sheriff Reyes. The Court has summoned the sheriff to explain the delay but apparently he
absconded or disappeared.

Issues:

Is the payment rendered through a check made by PAL to the absconding sheriff in his name operate to satisfy the
judgment debt?

Who shall bear the loss for the amount encashed check by the absconding sheriff?

Held:

In general, a payment, in order to be effective to discharge an obligation, must be made to the proper person. Article
1240 of the Civil Code provides that, payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it.

Under ordinary circumstances, payment by the judgment debtor to the sheriff should be valid payment to extinguish the
judgment debt. There are circumstances, however, which compel a different conclusion such as when the payment
made by the petitioner to the absconding sheriff was not in cash or legal tender but in checks.

Article 1249 of the Civil Code provides that, the payment of debts in money shall be made in the currency stipulated,
and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the
effect of payment only when they have been cashed, or when through the fault of the creditor they have been
impaired.
In the meantime, the action derived from the original obligation shall be held in abeyance.

Consequently, unless authorized to do so by law or by consent of the obligee a public officer has no authority to accept
anything other than money in payment of an obligation under a judgment being executed. Strictly speaking, the
acceptance by the sheriff of the petitioners checks, in the case at bar, does not, per se, operate as a discharge of the
judgment debt.

Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does
not, by itself, operate as payment. A check, whether a managers check or ordinary check, is not legal tender, and an
offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or
creditor. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished
and remains suspended until the payment by commercial document is actually realized (Art. 1249, Civil Code, par. 3).
PAL created a situation which permitted the said Sheriff to personally encash said checks and misappropriate the
proceeds thereof to his exclusive personal benefit. For the prejudice that resulted, the petitioner himself must bear the
fault. As between two innocent persons, one of whom must suffer the consequence of a breach of trust, the one who
made it possible by his act of confidence must bear the loss. (Blondeau, et al. v. Nano, et al., L-41377, July 26, 1935, 61
Phil. 625).

Reparations Commission v. Universal Deep Sea Fishing (1978)

Petitioners:REPARATIONS COMMISSION, PLAINTIFFAPPELLANT

Respondents:UNIVERSAL DEEPSEA FISHING CORPORATION AND MANILA SURETY AND FIDELITY CO., INC., DEFENDANTS-
APPELLANTS, MANILA SURETY & FIDELITY CO., INC., THIRD-PARTY PLAINTIFF-APPELLEE, VS. PABLO S. SARMIENTO,
THIRD-PARTY DEFENDANT-APPELLANT

Ponente:CONCEPCION, JR.

Topic:Application

SUMMARY: (1-2 sentence summary of facts, issue, ratio and ruling)

FACTS:

- The Reparations Commission (RC) awarded 6 trawl boats to Universal which were delivered two at a time, each
delivery being covered by a Contract of Condition Purchase and Sale providing for identical schedules of
payments. The first installment represented 10% of the total cost was to be paid 24 months after delivery and
the balance of the total cost to be paid in 10 equal installments, which, in the schedule were numbered as "1",
"2", "3", etc., the first of which was due one year after the first installment.
- To guarantee the faithful compliance with the obligations under said contract, a performance bond of P53,
643.00, with Universalas principal and Manila Surety & Fidelity Co., Inc., as surety, was executed in favor of RC.
- On August 10, 1962, RC sued Universal and its surety to recover various amounts of money due under the
contracts.Universal claimed that the amounts were not yet due and demandable.The surety company also
contended that the action is premature, but set up a crossclaim against Universal for reimbursement of
whatever amount of money it may have to pay the plaintiff by reason of the complaint, including interest, and
for the collection of accummulated and unpaid premiums on the bonds with interest thereon. With leave of
court first obtained, the surety company filed a third-party complaint against Pablo S. Sarmiento, one of the
indemnitors in the indemnity agreements. Sarmiento denied personal liability claiming that he signed the
indemnity agreements in question in his capacity as acting general manager of Universal.
- The trial court rendered judgment against Universal. Hence, this appeal.
- Universal contended that there is an obscurity in the terms of the contracts in question which were caused by
RC as to the amounts and due dates of the first installments which should have been first fixed before a creditor
can demand its payment from the debtor.
- Universal points to the Schedule of Payment of the M/S UNIFISH 1 and M/S UNIFISH 2, which states that the
amount of first installment is P53,642.84 and the due date of its payment is May 8, 1961. However, the amount
of the first of the succeeding itemized installments is P56,597.20 and the due date is May 8, 1962. In the case of
the M/S UNIFISH 3 and M/S UNIFISH 4, the first installments are P68,777.77 and due in July, 1961 and
P72,565.68 and due in July, 1962, respectively. In the contract for the purchase and sale of the M/S UNIFISH 5
 and M/S UNIFISH 6, the amounts indicated as first installments are P54,500.00 and P57,501.57, and the due
dates of payment are October 17, 1961 and October 17, 1962, respectively.

ISSUE/S:

WoN the first installments under the 3 contracts of conditional purchase and sale of reparations goods were
already due and demandable when the complaint was filed
o YES.
o The terms of the contracts for the purchase and sale of the reparations vesselsare very clear and leave
no doubt as to the intent of the contracting parties. Thus, in the contract concerning the M/S UNIFISH 1
and M/S UNIFISH 2, the parties expressly agreed that the first installment representing 10% of the
purchase price or P53, 642. 84 shall be paid within 24 months from the date of complete delivery of the
vessels or on May 8, 1961, and the balance to be paid in ten (10) equal yearly installments. The amount
of P56,597.20 due on May 8, 1962, which is also claimed to be a "first installment," is but the first of the
ten (10) equal yearly installments of the balance of the purchase price (citing Reparations Commission
vs. Northern Lines, Inc., et al.).
WON Universal is liable for payment of premiums on the bonds executed by Manila Surety
o YES. The payment of premiums on the bonds to the surety company had been expressly undertaken by
UNIVERSAL in the indemnity agreements executed by it in favor of the surety company. The premium is
the consideration for furnishing the bonds. The obligation to pay the same subsists for as long as the
liability exists.
o Universal should pay P7,251.42 to Manila Surety.
WON the P10,000 down payment made by Universal to RC for UNIFISH 1 and 2 can be applied to the first
installment guaranteed by the surety
o NO.
o Manila Surety contends that the down payment of P10,000 made by Universal can be applied to the first
installment for UNIFISH 1 and 2 (an indebtedness guaranteed by Manila Surety), thus reducing its
liability from P53,643.00 to P43,642.00, because Art 1254 stipulates that where the creditor or debtor
does not specify to which liability a payment shall be applied, it shall be deemed to apply to the most
onerous debt [in this case, the most immediate, which is the first installment for UNIFISH 1 and 2].
o The Court held that Arts. 1252 to 1254 apply to persons owing several debts to one creditor, not to
sureties whose obligation is both contingent and singular.
o The standing obligation of Universal is not just the first installment, but also the 10 equal yearly
installments. Thus, given that both the first installment and the first of the 10 installments have both
accrued, the P10,000 down payment cannot be applied to just one of them.
o The Supreme Court found the terms of the contracts clear and left no doubt as to the intent of the
contracting parties that the first installment due 24 months after delivery was different from the first of
the ten (10) equal yearly installments of the balance of the purchase price (which are not designated as
"first", "second", "third", etc., installments).
WoN Sarmiento is personally liable having merely executed the indemnity agreements
o YES. Sarmiento appears to have signed the indemnity agreement twice the first, in his capacity as acting
general manager of UNIVERSAL, and the second, in his individual capacity.

PACULDO VS. REGALADO Case Digest

PACULDO VS. REGALADO

345 SCRA 134

FACTS: On December 27, 1990, petitioner Nereo Paculdo and respondent Bonifacio Regalado entered into a contract of
lease over a parcel of land with a wet market building, located at Fairview Park, Quezon City. The contract was for
twenty five (25) years, commencing on January 1, 1991 and ending on December 27, 2015. For the first five (5) years of
the contract beginning December 27, 1990, Nereo would pay a monthly rental of P450,000, payable within the first five
(5) days of each month with a 2% penalty for every month of late payment.

Aside from the above lease, petitioner leased eleven (11) other property from the respondent, ten (10) of which were
located within the Fairview compound, while the eleventh was located along Quirino Highway Quezon City. Petitioner
also purchased from respondent eight (8) units of heavy equipment and vehicles in the aggregate amount of Php 1,
020,000.

On account of petitioners failure to pay P361, 895.55 in rental for the month of May, 1992, and the monthly rental of
P450, 000.00 for the months of June and July 1992, the respondent sent two demand letters to petitioner demanding
payment of the back rentals, and if no payment was made within fifteen (15) days from the receipt of the letter, it would
cause the cancellation of the lease contract.

Without the knowledge of petitioner, on August 3, 1992, respondent mortgaged the land subject of the lease contract,
including the improvements which petitioner introduced into the land amounting to P35, 000,000.00, to Monte de
Piedad Savings Bank, as a security for a loan.

On August 12, 1992, and the subsequent dates thereafter, respondent refused to accept petitioners daily rental
payments.

Subsequently, petitioner filed an action for injunction and damages seeking to enjoin respondents from disturbing his
possession of the property subject of the lease contract. On the same day, respondent also filed a complaint for
ejectment against petitioner.

The lower court rendered a decision in favor of the respondent, which was affirmed in toto by the Court of Appeals.

ISSUE: Whether or not the petitioner was truly in arrears in the payment of rentals on the subject property at the time
of the filing of the complaint for ejectment.

RULING: NO, the petitioner was not in arrears in the payment of rentals on the subject property at the time of the filing
of the complaint for ejectment.
As found by the lower court there was a letter sent by respondent to herein petitioner, dated November 19, 1991, which
states that petitioners security deposit for the Quirino lot, be applied as partial payment for his account under the
subject lot as well as to the real estate taxes on the Quirino lot. Petitioner interposed no objection, as evidenced by his
signature signifying his conformity thereto.

Meanwhile, in an earlier letter, dated July 15, 1991, respondent informed petitioner that the payment was to be applied
not only to petitioners accounts under the subject land and the Quirino lot but also to heavy equipment bought by the
latter from respondent. Unlike in the November letter, the July letter did not contain the signature of petitioner.

Petitioner submits that his silence is not consent but is in fact a rejection.

As provided in Article 1252 of the Civil Code, the right to specify which among his various obligations to the same
creditor is to be satisfied first rest with the debtor.

In the case at bar, at the time petitioner made the payment, he made it clear to respondent that they were to be applied
to his rental obligations on the Fairview wet market property. Though he entered into various contracts and obligations
with respondent, all the payments made, about P11,000,000.00 were to be applied to rental and security deposit on the
Fairview wet market property. However, respondent applied a big portion of the amount paid by petitioner to the
satisfaction of an obligation which was not yet due and demandable- the payment of the eight heavy equipments.

Under the law, if the debtor did not declare at the time he made the payment to which of his debts with the creditor the
payment is to be applied, the law provided the guideline; i.e. no payment is to be applied to a debt which is not yet due
and the payment has to be applied first to the debt which is most onerous to the debtor.

The lease over the Fairview wet market is the most onerous to the petitioner in the case at bar.

Consequently, the petition is granted.

DBP v. CA (1998)

Petitioners:DEVELOPMENT BANK OF THE PHILIPPINES

Respondents:COURT OF APPEALS AND LYDIA CUBA

Ponente:DAVIDE, JR.

Topic:Dation in payment, 1245

SUMMARY: (1-2 sentence summary of facts, issue, ratio and ruling)

FACTS:

- Lydia Cuba is a granteefrom the government of a Fishpond Lease Agreement for a 44-ha fishpond in Bolinao,
Pangasinan.

- Cuba obtained loans from DBP and as security for the loans, she executed two Deeds of Assignment of her Leasehold
Rights.

- Cuba failed to pay her loans on time so the DBP, without foreclosure proceedings, appropriated the Leasehold Rights of
Cuba over the fishpond.

- After the appropriation, DBP executed a Deed of Conditional Sale of the Leasehold Rights in favor of Cuba.

- DBP accepted Cubas offer to repurchase.

- After the Deed of Conditional Sale was executed in favor of Cuba, a new Fishpond Lease Agreement was issued by the
MAF in favor of Cuba only, excluding her husband.

- Cuba failed to pay the amortizations stipulated in the Deed of Conditional Sale so she entered with the DBP a
Temporary Arrangement whereby in consideration for the deferment of the Notarial Rescission of Deed of Conditional
Sale, Cuba promised to make certain payments.

- DBP sent the Notice of Rescission through Notarial Act and took possession of the Fishpond Leasehold Rights.

- DBP then conducted a public bidding to dispose of the property, which Agripina Caperal won. DBP executed the Deed
of Conditional Sale in favor of Caperal and Caperal was awarded the Fishpond Lease Agreement by the MAF.

- Cuba filed a complaint before the RTC of Pangasinan against DBP and Caperal. It sought (1) the declaration of nullity of
DBPs appropriation of CUBAs rights, title, and interests over the fishpond, for violating Article 2088 of the Civil Code;
(2) the annulment of the Deed of Conditional Sale executed in her favor by DBP; (3) the annulment of DBPs sale of the
subject fishpond to Caperal; (4) the restoration of her rights, title, and interests over the fishpond; and (5) the recovery
of damages, attorneys fees, and expenses of litigation.

- The principal issue before the TC was whether the act of DBP in appropriating to itself CUBAs leasehold rights over the
fishpond without foreclosure proceedings was contrary to Article 2088 of the Civil Code and, therefore, invalid.

- CUBA insisted that it was.

- DBP stressed that it merely exercised its contractual right under the Assignments of Leasehold Rights, which
was not a contract of mortgage. Caperal sided with DBP.

- The TC resolved the issue in favor of CUBA by declaring that DBPs taking possession and ownership of the
property without foreclosure was plainly violative of Article 2088, which states: The creditor cannot
appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is
null and void. It disagreed with DBPs stand that the Assignments of Leasehold Rights were not contracts of
mortgage because (1) they were given as security for loans, (2) although the fishpond land in question is still a
public land, CUBAs leasehold rights and interest thereon are alienable rights which can be the proper subject of
a mortgage; and (3) the intention of the contracting parties to treat the Assignment of Leasehold Rights as a
mortgage was obvious and unmistakable; hence, upon CUBAs default, DBPs only right was to foreclose the
Assignment in accordance with law.
 - The TC also declared invalid condition no. 12 of the Assignment of Leasehold Rights for being a clear case of
pactum commissorium expressly prohibited and declared null and void by Article 2088 of the Civil Code. It then
concluded that since DBP never acquired lawful ownership of CUBAs leasehold rights, all acts of ownership and
possession by the said bank were void.

- Accordingly, the Deed of Conditional Sale in favor of CUBA, the notarial rescission of such sale, and the Deed of
Conditional Sale in favor of defendant Caperal, as well as the Assignment of Leasehold Rights executed by
Caperal in favor of DBP, were also void and ineffective.

- As to damages, the TC found ample evidence on record that in 1984 the representatives of DBP ejected
CUBA and her caretakers not only from the fishpond area but also from the adjoining big house; and that when
CUBAs son and caretaker went there on 15 September 1985, they found the said house unoccupied and
destroyed and CUBAs personal belongings, machineries, equipment, tools, and other articles used in fishpond
operation which were kept in the house were missing. The missing items were valued at about P550,000. It
further found that when CUBA and her men were ejected by DBP for the first time in 1979, CUBA had stocked
the fishpond with 250,000 pieces of bangus fish (milkfish), all of which died because the DBP representatives
prevented CUBAs men from feeding the fish. At the conservative price of P3.00 per fish, the gross value would
have been P690,000, and after deducting 25% of said value as reasonable allowance for the cost of feeds, CUBA
suffered a loss of P517,500. It then set the aggregate of the actual damages sustained by CUBA at P1,067,500.

- The TC further found that DBP was guilty of gross bad faith in falsely representing to the Bureau of Fisheries
that it had foreclosed its mortgage on CUBAs leasehold rights. Such representation induced the said Bureau to
terminate CUBAs leasehold rights and to approve the Deed of Conditional Sale in favor of CUBA. And
considering that by reason of her unlawful ejectment by DBP, CUBA suffered moral shock, degradation, social
humiliation, and serious anxieties for which she became sick and had to be hospitalized the TC found her
entitled to moral and exemplary damages. The TC also held that CUBA was entitled to P100,000 attorneys fees
in view of the considerable expenses she incurred for lawyers fees and in view of the finding that she was
entitled to exemplary damages.

- CUBA and DBP appealed to the CA. CUBAsought an increase in the amount of damages, while DBP questioned the
findings of fact and law of the lower court.

- The CA ruled that (1) the TC erred in declaring that the deed of assignment was null and void and that defendant
Caperal could not validly acquire the leasehold rights from DBP; (2) contrary to the claim of DBP, the assignment was not
a cession under Article 1255 of the Civil Code because DBP appeared to be the sole creditor to CUBA - cession
presupposes plurality of debts and creditors; (3) the deeds of assignment represented the voluntary act of CUBA in
assigning her property rights in payment of her debts, which amounted to a novation of the promissory notes executed
by CUBA in favor of DBP; (4) CUBA was estopped from questioning the assignment of the leasehold rights, since she
agreed to repurchase the said rights under a deed of conditional sale; and (5) condition no. 12 of the deed of assignment
was an express authority from CUBA for DBP to sell whatever right she had over the fishpond. It also ruled that CUBA
was not entitled to loss of profits for lack of evidence, but agreed with the TC as to the actual damages of P1,067,500. It,
however, deleted the amount of exemplary damages and reduced the award of moral damages from P100,000 to
P50,000 and attorneys fees, from P100,000 to P50,000.

- The CA thus declared as valid the following: (1) the act of DBP in appropriating Cubas leasehold rights and interest
under Fishpond Lease Agreement No. 2083; (2) the deeds of assignment executed by Cuba in favor of DBP; (3) the deed
of conditional sale between CUBA and DBP; and (4) the deed of conditional sale between DBP and Caperal, the Fishpond
Lease Agreement in favor of Caperal, and the assignment of leasehold rights executed by Caperal in favor of DBP. And, it
ordered DBP to turn over possession of the property to Caperal as lawful holder of the leasehold rights.

- In its petition before the SC, DBP assails the award of actual and moral damages and attorneys fees in favor of CUBA.
In her petition, CUBA contends that the CA erred (1) in not holding that the questioned deed of assignment was a
pactum commissorium contrary to Article 2088 of the Civil Code; (b) in holding that the deed of assignment effected a
novation of the promissory notes; (c) in holding that CUBA was estopped from questioning the validity of the deed of
assignment when she agreed to repurchase her leasehold rights under a deed of conditional sale; and (d) in reducing the
amounts of moral damages and attorneys fees, in deleting the award of exemplary damages, and in not increasing the
amount of damages.

ISSUE/S:

WoN the assignment of leasehold rights was a mortgage contract (as contended by Cuba)
o YES. In all of the promissory notes, there is a provision that in the event of foreclosure of the mortgage
securing this note, I/We further bind myself/ourselves, jointly and severally, to pay the deficiency, if
any. Moreover, in Condition No. 22 of the deed, it was provided that failure to comply with the terms
and condition of any of the loans shall cause all other loans to become due and demandable and all
mortgages shall be foreclosed. In the facts stipulated, it states that As security for loans, plaintiff Lydia
P. Cuba executed two Deeds of Assignment of her leasehold rights.
o We find no merit in DBPs contention that the assignment novated the promissory notes in that the
obligation to pay a sum of money the loans (under the promissory notes) was substituted by the
assignment of the rights over the fishpond (under the deed of assignment). The said assignment merely
complemented or supplemented the notes; both could stand together. Significantly, both the deeds of
assignment and the promissory notes were executed on the same dates the loans were granted. Also,
the last paragraph of the assignment stated: The assignor further reiterates and states all terms,
covenants, and conditions stipulated in the promissory note or notes covering the proceeds of this loan,
making said promissory note or notes, to all intent and purposes, an integral part hereof.
WoN the assignment amount to payment by cession under Article 1255 of theCivil Code
o NO. There was only one creditor, the DBP. Article 1255 contemplates the existence of two or more
creditors and involves the assignment of all the debtors property.
WoN the assignment constitute dation in payment under Article 1245 of the civil Code
o NO. The assignment, being in its essence a mortgage, was but a security andnot a satisfaction of
indebtedness.
o Article 1245: Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt
in money, shall be governed by the law on sales.
WoN condition no. 12 of the deed ofassignment constituted pactum commissorium
o NO.The elements of pactum commissorium are as follows: (1) there should be a property mortgaged by
way of security for the payment of the principal obligation, and (2) there should be a stipulation for
automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal
obligation within the stipulated period.
o Condition no. 12 did not provide that the ownership over the leasehold rights would automatically pass
to DBP upon CUBAs failure to pay the loan on time. It merely provided for the appointment of DBP as
attorney-in-fact with authority, among other things, to sell or otherwise dispose of the said real rights, in
case of default by CUBA, and to apply the proceeds to the payment of the loan. This provision is a
standard condition in mortgage contracts and is in conformity with Article 2087 of the Civil Code, which
 authorizes the mortgagee to foreclose the mortgage and alienate the mortgaged property for the
payment of the principal obligation.
WoN DBP exceeded the authority vested by condition no. 12 of the deed of assignment
o YES.As admitted by it during the pre-trial, it had [w]ithout foreclosure proceedings, whether judicial or
extrajudicial, appropriated the [l]easehold [r]ights of plaintiff Lydia Cuba over the fishpond in
question. Its contention that it limited itself to mere administration by posting caretakers is further
belied by the deed of conditional sale it executed in favor of CUBA.
o The fact that CUBA offered and agreed to repurchase her leasehold rights from DBP did not estop her
from questioning DBPs act of appropriation. Estoppel cannot give validity to an act that is prohibited by
law or against public policy. Hence, the appropriation of the leasehold rights, being contrary to Article
2088 of the Civil Code and to public policy, cannot be deemed validated by estoppel.
WoNthe actual damages was not proved by clear evidence
o Other than the testimony of CUBA and her caretaker, there was no proof as to the existence of those
items before DBP took over the fishpond. As pointed out by DBP, there was not inventory of the
alleged lost items before the loss which is normal in a project which sometimes, if not most often, is left
to the care of other persons. Neither was a single receipt or record of acquisition presented.
o Curiously, in her complaint dated 17 May 1985, CUBA included losses of property as among the
damages resulting from DBPs take-over of the fishpond. Yet, it was only in September 1985 when her
son and a caretaker went to the fishpond and the adjoining house that she came to know of the alleged
loss of several articles. Such claim for losses of property, having been made before knowledge of the
alleged actual loss, was therefore speculative.
o With regard to the award of P517,000 representing the value of the alleged 230,000 pieces of bangus
which died when DBP took possession of the fishpond in March 1979, the same was not called for. Such
loss was not duly proved; besides, the claim therefor was delayed unreasonably.
o In view, however, of DBPs act of appropriating CUBAs leasehold rights which was contrary to law and
public policy, as well as its false representation to the then Ministry of Agriculture and Natural
Resources that it had foreclosed the mortgage, an award of moral damages in the amount of P50,000
is in order conformably with Article 2219(10), in relation to Article 21, of the Civil Code. Exemplary or
corrective damages in the amount of P25,000 should likewise be awarded by way of example or
correction for the public good. There being an award of exemplary damages, attorneys fees are also
recoverable.
Filinvest Credit Corporation vs. Phil. Acetylene Co., 197 Phil 394

Facts:

Philippine Acetylene Co. Bought a Chevrolet 1969 model vehicle from Alexander Lim for 55,000 to be paid
through installment. To secure the payment, Filinvest Credit executed a chattel mortgage over the said vehicle
in favor of Lim, who later assigned all his rights, title and interest to the Plaintiff by virtue of Deed of Assignment
The defendant failed to pay 9 consecutive installments that pushed the plaintiff to issue a demand letter. The
latter replied, stating their desire to return the mortgaged property for their debts satisfaction. So the vehicle
was returned to the plaintiff together with the document Voluntary Surrender with Special Power of Attorney
to sell. The plaintiff had a hard time selling the thing due to the unpaid taxes imposed on the vehicle. So the
latter instituted an action for collection of a sum of money with damages, at the same time, they offered to
deliver back the motor vehicle to the appellant but the latter refused to accept it with the following defense:
The delivery of the motor vehicle to Filinvest extinguished its money obligation as it amounted to a dation in
payment. Assuming arguendo that the return did not extinguish, it was justified in refusing payment since the
appellee is not entitled to recover the same due to the breach of warranty committed by the original vendor-
assignor Alexander Lim.
 Issue:

WON there was dation in payment that extinguished Phil Acetylenes obligation.

Held:

The mere return of the mortgaged motor vehicle by the mortgagor does not constitute dation in payment. The
evidence on the record fails to show that the Filinvest consented, or at least intended, that the mere delivery to,
and acceptance by him, of the mortgaged motor vehicle be construed as actual payment, more specifically
dation in payment or dacion en pago
De Guzman v. CA

Facts:

Respondent Ernesto Cendana was a junk dealer. He buys scrap materials and brings those that he gathered to Manila for
resale using 2 six-wheeler trucks. On the return trip to Pangasinan, respondent would load his vehicle with cargo which
various merchants wanted delivered, charging fee lower than the commercial rates. Sometime in November 1970,
petitioner Pedro de Guzman contracted with respondent for the delivery of 750 cartons of Liberty Milk. On December 1,
1970, respondent loaded the cargo. Only 150 boxes were delivered to petitioner because the truck carrying the boxes
was hijacked along the way. Petitioner commenced an action claiming the value of the lost merchandise. Petitioner
argues that respondent, being a common carrier, is bound to exercise extraordinary diligence, which it failed to do.
Private respondent denied that he was a common carrier, and so he could not be held liable for force majeure. The trial
court ruled against the respondent, but such was reversed by the Court of Appeals.

Issues:

(1) Whether or not private respondent is a common carrier

(2) Whether private respondent is liable for the loss of the goods

Held:

(1) Article 1732 makes no distinction between one whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity. Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general population. It appears to the Court that private
respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for other
merchants from Manila to Pangasinan, although such backhauling was done on a periodic or occasional rather than
regular or scheduled manner, and even though private respondent's principal occupation was not the carriage of goods
for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee
frequently fell below commercial freight rates is not relevant here. A certificate of public convenience is not a requisite
for the incurring of liability under the Civil Code provisions governing common carriers.

(2) Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or
deterioration of the goods which they carry, "unless the same is due to any of the following causes only:

a. Flood, storm, earthquake, lightning, or other natural disaster or calamity;

b. Act of the public enemy in war, whether international or civil;

c. Act or omission of the shipper or owner of the goods;

d. The character of the goods or defects in the packing or in the containers; and

e. Order or act of competent public authority."

The hijacking of the carrier's truck - does not fall within any of the five (5) categories of exempting causes listed in Article
1734. Private respondent as common carrier is presumed to have been at fault or to have acted negligently. This
presumption, however, may be overthrown by proof of extraordinary diligence on the part of private respondent. We
believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are
reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or
force." we hold that the occurrence of the loss must reasonably be regarded as quite beyond the control of the common
carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not made
absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which
cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary
diligence.

LUISA F. MCLAUGHLIN V. C.A. & RAMON FLORES G.R. No. L-57552 October 10, 1986Facts:
-Petitioner Luisa F. McLaughlin and private respondent Ramon Flores entered into a contract of conditional sale of real
property. The deed ofconditional sale fixed the total purchase price of P140k payable as follows: a) P26k upon the
execution of the deed; and b) the balance of P113k tobe paid not later than May 1977.-Parties also agreed that the
balance shall bear interest at the rate of 1% per month to commence from December 1976, until the full purchaseprice
was paid. - In 1979, petitioner filed a complaint for the rescission of the deed of conditional sale due to the failure of
private respondent topay the balance due on May 31, 1977.-Later, the parties submitted a Compromise Agreement on
the basis of which the court rendered a decision. In said compromise agreement, privaterespondent acknowledged his
indebtedness to petitioner under the deed of conditional sale in the amount of P119k, and the parties agreed thatsaid
amount would be payable as follows: a) P50k upon signing of the agreement; and b) the balance of P69k in two equal
installments on June1980 and December 1980. As agreed upon, private respondent paid P50k upon the signing of the
agreement and in addition he also paid anescalation cost" of P25k.-Under paragraph 3 of the Compromise Agreement,
private respondent agreed to pay P1k monthly rental beginning December 1979 until theobligation is duly paid, for the
use of the property subject matter of the deed of conditional sale. Paragraphs 6 and 7 of the CompromiseAgreement
further state, that the parties agree that in the event the defendant (private respondent) fails to comply with his
obligations hereinprovided, the plaintiff (petitioner) will be entitled to the issuance of a writ of execution rescinding the
Deed of Conditional Sale of Real Property. Insuch eventuality, defendant (private respondent) hereby waives his right to
appeal to (from) the Order of Rescission and the Writ of Executionwhich the Court shall render in accordance with the
stipulations herein provided for. That in the event of execution all payments made bydefendant (private respondent)
will be forfeited in favor of the plaintiff (petitioner) as liquidated damages.-In October 1980, petitioner wrote to private
respondent demanding that the latter pay the balance of P69k. This demand included not only theinstallment due on
June 1980 but also the installment due on December 1980. Private respondent then sent a letter to petitioner signifying
hiswillingness and intention to pay the full balance of P69k, and at the same time demanding to see the certificate of
title of the property and the taxpayment receipts.-Private respondent holds that on the first working day of said month,
he tendered payment to petitioner but this was refused acceptance bypetitioner. Petitioner filed a Motion for Writ of
Execution alleging that private respondent failed to pay the installment due on June 1980 and thatsince June 1980 he
had failed to pay the monthly rental of P1k.-RTC granted the motion for writ of execution. It denied the motion for
reconsideration in an order dated November 21, 1980 and issued the writof execution on November 25, 1980. In an
order dated November 27, 1980, the trial court granted petitioner's ex-parte motion for clarification ofthe order of
execution rescinding the deed of conditional sale of real property.-CA nullified and set aside disputed orders of RTC
Issue:
 WON, the tender of payment made by Flores which was not accepted by McLaughlin made him not liable for further
payment of his obligation andthe rentals in arrear
Ruling:No.
According to Article 1256 of the Civil Code of the Philippines, if the creditor to whom tender of payment has been made
refuses without justcause to accept it, the debtor shall be released from responsibility by the consignation of the thing
or sum due, and that consignation alone shallproduce the same effect in the five cases enumerated therein; Article 1257
provides that in order that the consignation of the thing (or sum) duemay release the obligor, it must first be announced
to the persons interested in the fulfillment of the obligation; and Article 1258 provides thatconsignation shall be made
by depositing the thing (or sum) due at the disposal of the judicial authority and that the interested parties shall also
benotified thereof.
Tender of payment must be distinguished from consignation. Tender is the antecedent of consignation, that is, an act
preparatory to theconsignation, which is the principal, and from which are derived the immediate consequences which
the debtor desires or seeks to obtain.Tender of payment may be extrajudicial, while consignation is necessarily judicial,
and the priority of the first is the attempt to make aprivate settlement before proceeding to the solemnities of
consignationIn the case at bar, although as above stated private respondent had preserved his rights as a vendee in the
contract of conditional sale of realproperty by a timely valid tender of payment of the balance of his obligation which
was not accepted by petitioner, he remains liable for thepayment of his obligation because of his failure to deposit the
amount due with the court.Inasmuch as petitioner did not accept the aforesaid amount, it was incumbent on private
respondent to deposit the same with the court inorder to be released from responsibility. Since private respondent did
not deposit said amount with the court, his obligation was not paidand he is liable in addition for the payment of the
monthly rental of Pl,000.00 from January 1, 1981 until said obligation is duly paid, inaccordance with paragraph 3 of the
Compromise Agreement. Upon full payment of the amount of P76,059.71 and the rentals in arrears,private respondent
shall be entitled to a deed of absolute sale in his favor of the real property in question.

Soco vs. Militante, G.R. No. L-58961, 123 SCRA 160 , June 28, 1983

G.R. No. L-58961 June 28, 1983

SOLEDAD SOCO, petitioner,

vs.
HON. FRANCIS MILITANTE, Incumbent Presiding Judge of the Court of First Instance of Cebu, Branch XII, Cebu City and
REGINO FRANCISCO, JR., respondents.

Chua & Associates Law Office (collaborating counsel) and Andales, Andales & Associates Law Office for petitioner.

Francis M. Zosa for private respondent.

GUERRERO, J.:

The decision subject of the present petition for review holds the view that there was substantial compliance with the
requisites of consignation and so ruled in favor of private respondent, Regino Francisco, Jr., lessee of the building owned
by petitioner lessor, Soledad Soco in the case for illegal detainer originally filed in the City Court of Cebu City, declaring
the payments of the rentals valid and effective, dismissed the complaint and ordered the lessor to pay the lessee moral
and exemplary damages in the amount of P10,000.00 and the further sum of P3,000.00 as attorney's fees.

We do not agree with the questioned decision. We hold that the essential requisites of a valid consignation must be
complied with fully and strictly in accordance with the law, Articles 1256 to 1261, New Civil Code. That these Articles
must be accorded a mandatory construction is clearly evident and plain from the very language of the codal provisions
themselves which require absolute compliance with the essential requisites therein provided. Substantial compliance is
not enough for that would render only a directory construction to the law. The use of the words "shall" and "must"
which are imperative, operating to impose a duty which may be enforced, positively indicate that all the essential
requisites of a valid consignation must be complied with. The Civil Code Articles expressly and explicitly direct what must
be essentially done in order that consignation shall be valid and effectual. Thus, the law provides:

1257. In order that the consignation of the thing due may release the obligor, it must first be announced to the persons
interested in the fulfillment of the obligation.

The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment.

Art. 1258. Consignation shall be made by depositing the things due at the disposal of judicial authority, before whom the
tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases.

The consignation having been made, the interested parties shall also be notified thereof.

Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver
such currency, then in the currency which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the
effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in abeyance.

We have a long line of established precedents and doctrines that sustain the mandatory nature of the above provisions.
The decision appealed from must, therefore, be reversed.

The antecedent facts are substantially recited in the decision under review, as follows:

It appears from the evidence that the plaintiff-appellee-Soco, for short-and the 'defendant-appellant-Francisco, for
brevity- entered into a contract of lease on January 17, 1973, whereby Soco leased her commercial building and lot
situated at Manalili Street, Cebu City, to Francisco for a monthly rental of P 800.00 for a period of 10 years renewable for
another 10 years at the option of the lessee. The terms of the contract are embodied in the Contract of Lease (Exhibit
"A" for Soco and Exhibit "2" for Francisco). It can readily be discerned from Exhibit "A" that paragraphs 10 and 11 appear
to have been cancelled while in Exhibit "2" only paragraph 10 has been cancelled. Claiming that paragraph 11 of the
Contract of Lease was in fact not part of the contract because it was cancelled, Soco filed Civil Case No. R-16261 in the
Court of First Instance of Cebu seeking the annulment and/or reformation of the Contract of Lease. ...

Sometime before the filing of Civil Case No. R-16261 Francisco noticed that Soco did not anymore send her collector for
the payment of rentals and at times there were payments made but no receipts were issued. This situation prompted
Francisco to write Soco the letter dated February 7, 1975 (Exhibit "3") which the latter received as shown in Exhibit "3-
A". After writing this letter, Francisco sent his payment for rentals by checks issued by the Commercial Bank and Trust
Company. Obviously, these payments in checks were received because Soco admitted that prior to May, 1977,
defendant had been religiously paying the rental. ....

1. The factual background setting of this case clearly indicates that soon after Soco learned that Francisco sub-leased a
portion of the building to NACIDA, at a monthly rental of more than P3,000.00 which is definitely very much higher than
what Francisco was paying to Soco under the Contract of Lease, the latter felt that she was on the losing end of the lease
agreement so she tried to look for ways and means to terminate the contract. ...

In view of this alleged non-payment of rental of the leased premises beginning May, 1977, Soco through her lawyer sent
a letter dated November 23, 1978 (Exhibit "B") to Francisco serving notice to the latter 'to vacate the premises leased.'
In answer to this letter, Francisco through his lawyer informed Soco and her lawyer that all payments of rental due her
were in fact paid by Commercial Bank and Trust Company through the Clerk of Court of the City Court of Cebu (Exhibit "
1 "). Despite this explanation, Soco filed this instant case of Illegal Detainer on January 8, 1979. ...
2. Pursuant to his letter dated February 7, 1975(Exhibit"3") and for reasons stated therein, Francisco paid his monthly
rentals to Soco by issuing checks of the Commercial Bank and Trust Company where he had a checking account. On May
13, 1975, Francisco wrote the Vice-President of Comtrust, Cebu Branch (Exhibit "4") requesting the latter to issue checks
to Soco in the amount of P 840.00 every 10th of the month, obviously for payment of his monthly rentals. This request
of Francisco was complied with by Comtrust in its letter dated June 4, 1975 (Exhibit "5"). Obviously, these payments by
checks through Comtrust were received by Soco from June, 1975 to April, 1977 because Soco admitted that an rentals
due her were paid except the rentals beginning May, 1977. While Soco alleged in her direct examination that 'since May,
1977 he (meaning Francisco) stopped paying the monthly rentals' (TSN, Palicte, p. 6, Hearing of October 24, 1979), yet
on cross examination she admitted that before the filing of her complaint in the instant case, she knew that payments
for monthly rentals were deposited with the Clerk of Court except rentals for the months of May, June, July and August,
1977. ...

Pressing her point, Soco alleged that 'we personally demanded from Engr. Francisco for the months of May, June, July
and August, but Engr. Francisco did not pay for the reason that he had no funds available at that time.' (TSN-Palicte, p.
28, Hearing October 24, 1979). This allegation of Soco is denied by Francisco because per his instructions, the
Commercial Bank and Trust Company, Cebu Branch, in fact, issued checks in favor of Soco representing payments for
monthly rentals for the months of May, June, July and August, 1977 as shown in Debit Memorandum issued by Comtrust
as follows:

(a) Exhibit "6"-Debit Memo dated May 11, 1977 for P926.10 as payment for May, 1977;

(b) Exhibit"7"-Debit Memo dated June l5, 197 7for P926.10 as payment for June, 1977;

(c) Exhibit "8"-Debit Memo dated July 11, 1977 for P1926.10 as payment for July, 1977;

(d) Exhibit "9"-Debit Memo dated August 10, 1977 for P926. 10 as payment for August, 1977.

These payments are further bolstered by the certification issued by Comtrust dated October 29, 1979 (Exhibit "13").
Indeed the Court is convinced that payments for rentals for the months of May, June, July and August, 1977 were made
by Francisco to Soco thru Comtrust and deposited with the Clerk of Court of the City Court of Cebu. There is no need to
determine whether payments by consignation were made from September, 1977 up to the filing of the complaint in
January, 1979 because as earlier stated Soco admitted that the rentals for these months were deposited with the Clerk
of Court. ...

Taking into account the factual background setting of this case, the Court holds that there was in fact a tender of
payment of the rentals made by Francisco to Soco through Comtrust and since these payments were not accepted by
Soco evidently because of her intention to evict Francisco, by all means, culminating in the filing of Civil Case R-16261,
Francisco was impelled to deposit the rentals with the Clerk of Court of the City Court of Cebu. Soco was notified of this
deposit by virtue of the letter of Atty. Pampio Abarientos dated June 9, 1977 (Exhibit "10") and the letter of Atty. Pampio
Abarientos dated July 6. 1977 (Exhibit " 12") as well as in the answer of Francisco in Civil Case R-16261 (Exhibit "14")
particularly paragraph 7 of the Special and Affirmative Defenses. She was further notified of these payments by
consignation in the letter of Atty. Menchavez dated November 28, 1978 (Exhibit " 1 "). There was therefore substantial
compliance of the requisites of consignation, hence his payments were valid and effective. Consequently, Francisco
cannot be ejected from the leased premises for non-payment of rentals. ...

As indicated earlier, the above decision of the Court of First Instance reversed the judgment of the City Court of Cebu,
Branch 11, the dispositive portion of the latter reading as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff, ordering the defendant, Regino Francisco, Jr.:

(1) To vacate immediately the premises in question, consisting of a building located at Manalili St., Cebu City;
(2) To pay to the plaintiff the sum of P40,490.46 for the rentals, covering the period from May, 1977 to August, 1980,
and starting with the month of September, 1980, to pay to the plaintiff for one (1) year a monthly rental of P l,072.076
and an additional amount of 5 per cent of said amount, and for so much amount every month thereafter equivalent to
the rental of the month of every preceding year plus 5 percent of same monthly rental until the defendant shall finally
vacate said premises and possession thereof wholly restored to the plaintiff-all plus legal interest from date of filing of
the complaint;

(3) To pay to the plaintiff the sum of P9,000.00 for attorney's fee;

(4) To pay to the plaintiff the sum of P5,000.00 for damages and incidental litigation expenses; and

(5) To pay the Costs.

SOORDERED.

Cebu City, Philippines, November 21, 1980.

(SGD.) PATERNO D. MONTESCLAROS

Acting Presiding Judge

According to the findings of fact made by the City Court, the defendant Francisco had religiously paid to the plaintiff
Soco the corresponding rentals according to the terms of the Least Contract while enjoying the leased premises until
one day the plaintiff had to demand upon the defendant for the payment of the rentals for the month of May, 1977 and
of the succeeding months. The plaintiff also demanded upon the defendant to vacate the premises and from that time
he failed or refused to vacate his possession thereof; that beginning with the month of May, 1977 until at present, the
defendant has not made valid payments of rentals to the plaintiff who, as a consequence, has not received any rental
payment from the defendant or anybody else; that for the months of May to August, 1977, evidence shows that the
plaintiff through her daughter, Teolita Soco and salesgirl, Vilma Arong, went to the office or residence of defendant at
Sanciangko St., Cebu City, on various occasions to effect payment of rentals but were unable to collect on account of the
defendant's refusal to pay; that defendant contended that payments of rental thru checks for said four months were
made to the plaintiff but the latter refused to accept them; that in 1975, defendant authorized the Commercial Bank and
Trust Company to issue checks to the plaintiff chargeable against his bank account, for the payment of said rentals, and
the delivery of said checks was coursed by the bank thru the messengerial services of the FAR Corporation, but the
plaintiff refused to accept them and because of such refusal, defendant instructed said bank to make consignation with
the Clerk of Court of the City Court of Cebu as regard said rentals for May to August, 1977 and for subsequent months.

The City Court further found that there is no showing that the letter allegedly delivered to the plaintiff in May, 1977 by
Filomeno Soon, messenger of the FAR Corporation contained cash money, check, money order, or any other form of
note of value, hence there could never be any tender of payment, and even granting that there was, but plaintiff refused
to accept it without any reason, still no consignation for May, 1977 rental could be considered in favor of the defendant
unless evidence is presented to establish that he actually made rental deposit with the court in cash money and prior
and subsequent to such deposit, he notified the plaintiff thereof.

Notwithstanding the contradictory findings of fact and the resulting opposite conclusions of law by the City Court and
the Court of First Instance, both are agreed, however, that the case presents the issue of whether the lessee failed to
pay the monthly rentals beginning May, 1977 up to the time the complaint for eviction was filed on January 8, 1979. This
issue in turn revolves on whether the consignation of the rentals was valid or not to discharge effectively the lessee's
obligation to pay the same. The City Court ruled that the consignation was not valid. The Court of First Instance, on the
other hand, held that there was substantial compliance with the requisites of the law on consignation.

Let us examine the law and consider Our jurisprudence on the matter, aside from the codal provisions already cited
herein.
According to Article 1256, New Civil Code, if the creditor to whom tender of payment has been made refuses without
just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due.
Consignation alone shall produce the same effect in the following cases: (1) When the creditor is absent or unknown, or
does not appear at the place of payment; (2) When he is incapacitated to receive the payment at the time it is due; (3)
When, without just cause, he refuses to give a receipt; (4) When two or more persons claim the same right to collect; (5)
When the title of the obligation has been lost.

Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot
accept or refuses to accept payment and it generally requires a prior tender of payment. (Limkako vs. Teodoro, 74 Phil.
313).

In order that consignation may be effective, the debtor must first comply with certain requirements prescribed by law.
The debtor must show (1) that there was a debt due; (2) that the consignation of the obligation had been made because
the creditor to whom tender of payment was made refused to accept it, or because he was absent or incapacitated, or
because several persons claimed to be entitled to receive the amount due (Art. 1176, Civil Code); (3) that previous
notice of the consignation had been given to the person interested in the performance of the obligation (Art. 1177, Civil
Code); (4) that the amount due was placed at the disposal of the court (Art. 1178, Civil Code); and (5) that after the
consignation had been made the person interested was notified thereof (Art. 1178, Civil Code). Failure in any of these
requirements is enough ground to render a consignation ineffective. (Jose Ponce de Leon vs. Santiago Syjuco, Inc., 90
Phil. 311).

Without the notice first announced to the persons interested in the fulfillment of the obligation, the consignation as a
payment is void. (Limkako vs. Teodoro, 74 Phil. 313),

In order to be valid, the tender of payment must be made in lawful currency. While payment in check by the debtor may
be acceptable as valid, if no prompt objection to said payment is made (Desbarats vs. Vda. de Mortera, L-4915, May 25,
1956) the fact that in previous years payment in check was accepted does not place its creditor in estoppel from
requiring the debtor to pay his obligation in cash (Sy vs. Eufemio, L-10572, Sept. 30, 1958). Thus, the tender of a check to
pay for an obligation is not a valid tender of payment thereof (Desbarats vs. Vda. de Mortera, supra). See Annotation,
The Mechanics of Consignation by Atty. S. Tabios, 104 SCRA 174-179.

Tender of payment must be distinguished from consignation. Tender is the antecedent of consignation, that is, an act
preparatory to the consignation, which is the principal, and from which are derived the immediate consequences which
the debtor desires or seeks to obtain. Tender of payment may be extrajudicial, while consignation is necessarily judicial,
and the priority of the first is the attempt to make a private settlement before proceeding to the solemnities of
consignation. (8 Manresa 325).

Reviewing carefully the evidence presented by respondent lessee at the trial of the case to prove his compliance with all
the requirements of a valid tender of payment and consignation and from which the respondent Judge based his
conclusion that there was substantial compliance with the law on consignation, We note from the assailed decision
hereinbefore quoted that these evidences are: Exhibit 10, the letter of Atty. Pampio Abarintos dated June 9, 1977:
Exhibit 12, letter of Atty. Pampio Abarintos dated July 6, 1977; Exhibit 14, the Answer of respondent Francisco in Civil
Case R- 16261, particularly paragraph 7 of the Special and Affirmative Defenses; and Exhibit 1, letter of Atty. Eric
Menchavez dated November 28, 1978. All these evidences, according to respondent Judge, proved that petitioner lessor
was notified of the deposit of the monthly rentals.

We have analyzed and scrutinized closely the above exhibits and We find that the respondent Judge's conclusion is
manifestly wrong and based on misapprehension of facts. Thus-

(1) Exhibit 10 reads: (see p. 17, Records)

June 9, 1977
Miss Soledad Soco
Soledad Soco Retazo
P. Gullas St., Cebu City

Dear Miss Soco:

This is in connection with the payment of rental of my client, Engr. Regino Francisco, Jr., of your building situated at
Manalili St., Cebu City.

It appears that twice you refused acceptance of the said payment made by my client.

It appears further that my client had called your office several times and left a message for you to get this payment of
rental but until the present you have not sent somebody to get it.

In this connection, therefore, in behalf of my client, you are hereby requested to please get and claim the rental
payment aforestated from the Office of my client at Tagalog Hotel and Restaurant, Sanciangko St., Cebu City. within
three (3) days from receipt hereof otherwise we would be constrained to make a consignation of the same with the
Court in accordance with law.

Hoping for your cooperation on this matter, we remain.

Very truly yours,

(SGD.) PAMPIO A. ABARINTOS

Counsel for Engr. REGINO FRANCISCO, Jr.

We may agree that the above exhibit proves tender of payment of the particular monthly rental referred to (the letter
does not, however, indicate for what month and also the intention to deposit the rental with the court, which is the first
notice. But certainly, it is no proof of tender of payment of other or subsequent monthly rentals. Neither is it proof that
notice of the actual deposit or consignation was given to the lessor, which is the second notice required by law.

(2) Exhibit 12 (see p. 237, Records) states:

July 6, 1977

Miss Soledad Soco

Soledad Soco Reta
P. Gullas St., Cebu City

Dear Miss Soco:

This is to advise and inform you that my client, Engr. Regino Francisco, Jr., has consigned to you, through the Clerk of
Court, City Court of Cebu, Cebu City, the total amount of Pl,852.20, as evidenced by cashier's checks No. 478439 and
47907 issued by the Commercial Bank and Trust Company (CBTC) Cebu City Branch, dated May 11, 1977 and June 15,
1977 respectively and payable to your order, under Official Receipt No. 0436936 dated July 6,1977.

This amount represents payment of the rental of your building situated at Manalili St., Cebu City which my client, Engr.
Regino Francisco, Jr., is renting. You can withdraw the said amount from the Clerk of Court, City Court of Cebu, Cebu City
at any time.

Please be further notified that all subsequent monthly rentals will be deposited to the Clerk of Court, City Court of Cebu,
Cebu City.
Very truly yours,

(SGD.) PAMPIO A. ABARINTOS

Counsel for ENGR. REGINO FRANCISCO, JR.

The above evidence is, of course, proof of notice to the lessor of the deposit or consignation of only the two payments
by cashier's checks indicated therein. But surely, it does not prove any other deposit nor the notice thereof to the lessor.
It is not even proof of the tender of payment that would have preceded the consignation.

(3) Exhibit 14, paragraph 7 of the Answer (see p. 246, Records) alleges:

7. That ever since, defendant had been religiously paying his rentals without any delay which, however, the plaintiff had
in so many occasions refused to accept obviously in the hope that she may declare non-payment of rentals and claim it
as a ground for the cancellation of the contract of lease. This, after seeing the improvements in the area which were
effected, at no small expense by the defendant. To preserve defendant's rights and to show good faith in up to date
payment of rentals, defendant had authorized his bank to issue regularly cashier's check in favor of the plaintiff as
payment of rentals which the plaintiff had been accepting during the past years and even for the months of January up
to May of this year, 1977 way past plaintiff's claim of lease expiration. For the months of June and July, however,
plaintiff again started refusing to accept the payments in going back to her previous strategy which forced the defendant
to consign his monthly rental with the City Clerk of Court and which is now the present state of affairs in so far as
payment of rentals is concerned. These events only goes to show that the wily plaintiff had thought of this mischievous
scheme only very recently and filed herein malicious and unfounded complaint.

The above exhibit which is lifted from Civil Case No. R-16261 between the parties for annulment of the lease contract, is
self-serving. The statements therein are mere allegations of conclusions which are not evidentiary.

(4) Exhibit 1 (see p. 15, Records) is quoted thus:

November 28, 1978

Atty. Luis V. Diores

Suite 504, SSS Bldg.
Jones Avenue, Cebu City

Dear Compaero:

Your letter dated November 23, 1978 which was addressed to my client, Engr. Regino Francisco, Jr. has been referred to
me for reply.

It is not true that my client has not paid the rentals as claimed in your letter. As a matter of fact, he has been religiously
paying the rentals in advance. Payment was made by Commercial Bank and Trust Company to the Clerk of Court, Cebu
City. Attached herewith is the receipt of payment made by him for the month of November, 1978 which is dated
November 16, 1978.

You can check this up with the City Clerk of Court for satisfaction.

Regards.

(SGD.) ERIC MENCHAVEZ Counsel for Regino Francisco, Jr.

377-B Junquera St., Cebu City
(new address)
Again, Exhibit 1 merely proves rental deposit for the particular month of November, 1978 and no other. It is no proof of
tender of payment to the lessor, not even proof of notice to consign. We hold that the best evidence of the rental
deposits with the Clerk of Court are the official receipts issued by the Clerk of Court. These the respondent lessee utterly
failed to present and produce during the trial of the case. As pointed out in petitioner's Memorandum, no single official
receipt was presented in the trial court as nowhere in the formal offer of exhibits for lessee Francisco can a single official
receipt of any deposit made be found (pp. 8-9, Memorandum for Petitioner; pp. 163-164, Records).

Summing up Our review of the above four (4) exhibits, We hold that the respondent lessee has utterly failed to prove
the following requisites of a valid consignation: First, tender of payment of the monthly rentals to the lessor except that
indicated in the June 9, l977 Letter, Exhibit 10. In the original records of the case, We note that the certification, Exhibit
11 of Filemon Soon, messenger of the FAR Corporation, certifying that the letter of Soledad Soco sent last May 10 by
Commercial Bank and Trust Co. was marked RTS (return to sender) for the reason that the addressee refused to receive
it, was rejected by the court for being immaterial, irrelevant and impertinent per its Order dated November 20, 1980.
(See p. 117, CFI Records).

Second, respondent lessee also failed to prove the first notice to the lessor prior to consignation, except the payment
referred to in Exhibit 10.

In this connection, the purpose of the notice is in order to give the creditor an opportunity to reconsider his unjustified
refusal and to accept payment thereby avoiding consignation and the subsequent litigation. This previous notice is
essential to the validity of the consignation and its lack invalidates the same. (Cabanos vs. Calo, 104 Phil. 1058; Limkako
vs. Teodoro, 74 Phil. 313).

There is no factual basis for the lower court's finding that the lessee had tendered payment of the monthly rentals, thru
his bank, citing the lessee's letter (Exh. 4) requesting the bank to issue checks in favor of Soco in the amount of P840.00
every 10th of each month and to deduct the full amount and service fee from his current account, as well as Exhibit 5,
letter of the Vice President agreeing with the request. But scrutinizing carefully Exhibit 4, this is what the lessee also
wrote: "Please immediately notify us everytime you have the check ready so we may send somebody over to get it. "
And this is exactly what the bank agreed: "Please be advised that we are in conformity to the above arrangement with
the understanding that you shall send somebody over to pick up the cashier's check from us." (Exhibit 4, see p. 230,
Original Records; Exhibit 5, p. 231, Original Records)

Evidently, from this arrangement, it was the lessee's duty to send someone to get the cashier's check from the bank and
logically, the lessee has the obligation to make and tender the check to the lessor. This the lessee failed to do, which is
fatal to his defense.

Third, respondent lessee likewise failed to prove the second notice, that is after consignation has been made, to the
lessor except the consignation referred to in Exhibit 12 which are the cashier's check Nos. 478439 and 47907 CBTC dated
May 11, 1977 and June 15, 1977 under Official Receipt No. 04369 dated July 6, 1977.

Respondent lessee, attempting to prove compliance with the requisites of valid consignation, presented the
representative of the Commercial Bank and Trust Co., Edgar Ocaada, Bank Comptroller, who unfortunately belied
respondent's claim. We quote below excerpts from his testimony, as follows:

ATTY. LUIS DIORES:

Q What month did you say you made ,you started making the deposit? When you first deposited the check to the Clerk
of Court?

A The payment of cashier's check in favor of Miss Soledad Soco was coursed thru the City Clerk of Court from the letter
of request by our client Regino Francisco, Jr., dated September 8, 1977. From that time on, based on his request, we
delivered the check direct to the City Clerk of Court.
Q What date, what month was that, you first delivered the check to the Clerk of Court.?

A We started September 12, 1977.

Q September 1977 up to the present time, you delivered the cashier's check to the City Clerk of Court?

A Yes.

Q You were issued the receipts of those checks?

A Well, we have an acknowledgment letter to be signed by the one who received the check.

Q You mean you were issued, or you were not issued any official receipt? My question is whether you were issued any
official receipt? So, were you issued, or you were not issued?

A We were not issued.

Q On September, 1977, after you deposited the manager's check for that month with the Clerk of Court, did you serve
notice upon Soledad Soco that the deposit was made on such amount for the month of September, 1977 and now to the
Clerk of Court? Did you or did you not?

A Well, we only act on something upon the request of our client.

Q Please answer my question. I know that you are acting upon instruction of your client. My question was-after you
made the deposit of the manager's check whether or not you notified Soledad Soco that such manager's check was
deposited in the Clerk of Court from the month of September, 1977?

A We are not bound to.

Q I am not asking whether you are bound to or not. I'masking whether you did or you did not?

A I did not.

Q Alright, for October, 1977, after having made a deposit for that particular month, did you notify Miss Soledad Soco
that the deposit was in the Clerk of Court?

A No, we did not.

Q Now, on November, 1977, did you notify Soledad Soco that you deposited the manager's check to the City Clerk of
Court for that month?

A I did not.

Q You did not also notify Soledad Soco for the month December, 1977, so also from January, February, March, April,
May, June, July until December, 1978, you did not also notify Miss Soledad Soco all the deposits of the manager's check
which you said you deposited with the Clerk of Court in every end of the month? So also from each and every month
from January 1979 up to December 1979, you did not also serve notice upon Soledad Socco of the deposit in the Clerk of
Court, is that correct?

A Yes.
Q So also in January 1980 up to this month 1980, you did not instructed by your client Mr. and Mrs. Regino Francisco, jr.
to make also serve notice upon Soledad Soco of the Manager's check which you said you deposited to the Clerk of
Court?

A I did not.

Q Now, you did not make such notices because you were not such notices after the deposits you made, is that correct?

A Yes, sir.

Q Now, from 1977, September up to the present time, before the deposit was made with the Clerk of Court, did you
serve notice to Soledad Soco that a deposit was going to be made in each and every month?

A Not.

Q In other words, from September 1977 up to the present time, you did not notify Soledad Soco that you were going to
make the deposit with the Clerk of Court, and you did not also notify Soledad Soco after the deposit was made, that a
deposit has been made in each and every month during that period, is that correct?

A Yes

Q And the reason was because you were not instructed by Mr. and Mrs. Regino Francisco, Jr. that such notification
should be made before the deposit and after the deposit was made, is that correct?

A No, I did not. (Testimony of Ocanada pp. 32-41, Hearing on June 3, 1980).

Recapitulating the above testimony of the Bank Comptroller, it is clear that the bank did not send notice to Soco that the
checks will be deposited in consignation with the Clerk of Court (the first notice) and also, the bank did not send notice
to Soco that the checks were in fact deposited (the second notice) because no instructions were given by its depositor,
the lessee, to this effect, and this lack of notices started from September, 1977 to the time of the trial, that is June 3,
1980.

The reason for the notification to the persons interested in the fulfillment of the obligation after consignation had been
made, which is separate and distinct from the notification which is made prior to the consignation, is stated in Cabanos
vs. Calo, G.R. No. L-10927, October 30, 1958, 104 Phil. 1058. thus: "There should be notice to the creditor prior and after
consignation as required by the Civil Code. The reason for this is obvious, namely, to enable the creditor to withdraw the
goods or money deposited. Indeed, it would be unjust to make him suffer the risk for any deterioration, depreciation or
loss of such goods or money by reason of lack of knowledge of the consignation."

And the fourth requisite that respondent lessee failed to prove is the actual deposit or consignation of the monthly
rentals except the two cashier's checks referred to in Exhibit 12. As indicated earlier, not a single copy of the official
receipts issued by the Clerk of Court was presented at the trial of the case to prove the actual deposit or consignation.
We find, however, reference to some 45 copies of official receipts issued by the Clerk of Court marked Annexes "B-1 " to
"B-40" to the Motion for Reconsideration of the Order granting execution pending appeal filed by defendant Francisco in
the City Court of Cebu (pp, 150-194, CFI Original Records) as well as in the Motion for Reconsideration of the CFI
decision, filed by plaintiff lessor (pp. 39-50, Records, marked Annex "E ") the allegation that "there was no receipt at all
showing that defendant Francisco has deposited with the Clerk of Court the monthly rentals corresponding to the
months of May and June, 1977. And for the months of July and August, 1977, the rentals were only deposited with the
Clerk of Court on 20 November 1979 (or more than two years later)."... The deposits of these monthly rentals for July
and August, 1977 on 20 November 1979, is very significant because on 24 October 1979, plaintiff Soco had testified
before the trial court that defendant had not paid the monthly rentals for these months. Thus, defendant had to make a
hurried deposit on the following month to repair his failure. " (pp. 43-44, Records).
We have verified the truth of the above claim or allegation and We find that indeed, under Official Receipt No.
1697161Z, the rental deposit for August, 1977 in cashier's check No. 502782 dated 8-10-77 was deposited on November
20, 1979 (Annex "B-15", p. 169, Original CFI Records) and under Official Receipt No. 1697159Z, the rental deposit for July
under Check No. 479647 was deposited on November 20, 1979 (Annex "B-16", p. 170, Original CFI Records). Indeed,
these two rental deposits were made on November 20, 1979, two years late and after the filing of the complaint for
illegal detainer.

The decision under review cites Exhibits 6, 7, 8 and 9, the Debit Memorandum issued by Comtrust Bank deducting the
amounts of the checks therein indicated from the account of the lessee, to prove payment of the monthly rentals. But
these Debit Memorandums are merely internal banking practices or office procedures involving the bank and its
depositor which is not binding upon a third person such as the lessor. What is important is whether the checks were
picked up by the lessee as per the arrangement indicated in Exhibits 4 and 5 wherein the lessee had to pick up the
checks issued by CBTC or to send somebody to pick them up, and logically, for the lessee to tender the same to the
lessor. On this vital point, the lessee miserably failed to present any proof that he complied with the arrangement.

We, therefore, find and rule that the lessee has failed to prove tender of payment except that in Exh. 10; he has failed to
prove the first notice to the lessor prior to consignation except that given in Exh. 10; he has failed to prove the second
notice after consignation except the two made in Exh. 12; and he has failed to pay the rentals for the months of July and
August, 1977 as of the time the complaint was filed for the eviction of the lessee. We hold that the evidence is clear,
competent and convincing showing that the lessee has violated the terms of the lease contract and he may, therefore,
be judicially ejected.

The other matters raised in the appeal are of no moment. The motion to dismiss filed by respondent on the ground of
"want of specific assignment of errors in the appellant's brief, or of page references to the records as required in Section
16(d) of Rule 46," is without merit. The petition itself has attached the decision sought to be reviewed. Both Petition and
Memorandum of the petitioner contain the summary statement of facts; they discuss the essential requisites of a valid
consignation; the erroneous conclusion of the respondent Judge in reversing the decision of the City Court, his grave
abuse of discretion which, the petitioner argues, "has so far departed from the accepted and usual course of judicial
proceeding in the matter of applying the law and jurisprudence on the matter." The Memorandum further cites other
basis for petitioner's plea.

In Our mind, the errors in the appealed decision are sufficiently stated and assigned. Moreover, under Our rulings, We
have stated that:

This Court is clothed with ample authority to review matters, even if they are not assigned as errors in the appeal, if it
finds that their consideration is necessary in arriving at a just decision of the case. Also, an unassigned error closely
related to an error properly assigned or upon which the determination of the questioned raised by the error properly
assigned is dependent, will be considered by the appellate court notwithstanding the failure to assign it as an error."
(Ortigas, Jr. vs. Lufthansa German Airlines, L-28773, June 30, 1975, 64 SCRA 610)

Under Section 5 of Rule 53, the appellate court is authorized to consider a plain error, although it was not specifically
assigned by appellants." (Dilag vs. Heirs of Resurreccion, 76 Phil. 649)

Appellants need not make specific assignment of errors provided they discuss at length and assail in their brief the
correctness of the trial court's findings regarding the matter. Said discussion warrants the appellate court to rule upon
the point because it substantially complies with Section 7, Rule 51 of the Revised Rules of Court, intended merely to
compel the appellant to specify the questions which he wants to raise and be disposed of in his appeal. A clear
discussion regarding an error allegedly committed by the trial court accomplishes the purpose of a particular assignment
of error." (Cabrera vs. Belen, 95 Phil. 54; Miguel vs Court of Appeals, L- 20274, Oct. 30, 1969, 29 SCRA 760-773, cited in
Moran, Comments on the Rules of Court, Vol. 11, 1970 ed., p. 534).
Pleadings as well as remedial laws should be construed liberally in order that the litigants may have ample opportunity
to prove their respective claims, and that a possible denial of substantial justice, due to legal technicalities, may be
avoided." (Concepcion, et al. vs. The Payatas Estate Improvement Co., Inc., 103 Phil. 10 17).

WHEREFORE, IN VIEW OF ALL THE FOREGOING, the decision of the Court of First Instance of Cebu, 14th Judicial District,
Branch XII is hereby REVERSED and SET ASIDE, and the derision of the City Court of Cebu, Branch II is hereby reinstated,
with costs in favor of the petitioner.

SO ORDERED.

Makasiar (Chairman), Concepcion, Jr., Abad Santos, and De Castro, JJ., concur.

Aquino and Escolin JJ., concurs in the result,

G.R. No. L-23563 May 8, 1969

CRISTINA SOTTO, plaintiff-appellee,

vs.
HERNANI MIJARES, ET AL., defendants-appellants.

Arboleda and Arboleda for plaintiff-appellee.

Eugenio T. Sanicas for defendants-appellants.

MAKALINTAL, J.:

This is an appeal taken by herein defendants from that portion of the order of the Court of First Instance of Negros
Occidental dated March 20, 1963 in its Civil Case No. 6796 which requires them to deposit with the Clerk of Court the
amount of P5,106.00 within ten (10) days from receipt of said order. Originally appealed to the Court of Appeals, this
case was subsequently certified to this Court, the only issue being one of law.

In the aforesaid Civil case 1 plaintiff filed a "Motion for Deposit" on November 13, 1962, the pertinent portions of which
read:

2. That in accordance with the contract including the allied transactions as evidenced by other documents, the
balance indebtedness of the defendants in favor of the plaintiff is the amount of P5,106.00 only, Philippine
Currency ...;

3. That according to the answer of the defendants, the said claim of P5,106.00 is admitted ..., with the
defendants further alleging that they have offered the said amount to the plaintiff who refused to receive the
said amount;

4. That in view of the admission of the defendants of the same and in order to limit the other controversial issue
... it is fitting and proper that the said amount of P5,106.00 be deposited in the Office of the Clerk of Court of
this province or to deliver the same to the plaintiff and/or her counsel.

Defendants, in their "Opposition" dated November 23, 1962, signified their willingness to deposit the requested amount
provided that the complaint be dismissed and that they be absolved of all other liabilities, expenses and costs.

On November 26, 1962 the lower court issued the following order:

It appearing that the defendants have admitted the claim of the plaintiff in the sum of P5,106.00, as prayed for
by the counsel for the plaintiff the said defendants are hereby ordered to deposit said amount to the Clerk of
Court pending the final termination of this case.
On November 28, 1962 plaintiff this time represented by new counsel filed a motion for partial judgment on the
pleadings with respect to the amount of P5,106.00, modifying their previous request for judicial deposit, which had
already been granted. On the other hand, defendants moved to reconsider the order of November 26, explaining that
through oversight they failed to allege in their "Opposition" that the sum of P5,106.00 was actually secured by a real
estate mortgage. They would thus premise their willingness to deposit said amount upon the condition "... that the
plaintiff will cancel the mortgage abovementioned and that the plaintiff be ordered to return to the defendants Transfer
Certificate of Title No. 29326 covering Lot No. 327 of Pontevedra and Transfer Certificate of Title No. 29327 covering Lot
No. 882 of Hinigaran Cadastre, Negros Occidental."

On March 20, 1963 the lower court resolved both motions, in effect denying them and reiterating its previous order, as
follows:

WHEREFORE, the motion for partial judgment on the pleadings dated November 28, 1962 is hereby denied but
in its stead the defendants are hereby ordered to deposit with the Clerk of Court the amount of P5,106.00
within ten (10) days from receipt of this order subject to further disposition thereof in accordance with the
decision to be rendered after trial.

It is the foregoing order from which the present appeal has been taken. Since this case was submitted upon the filing of
the briefs, there has been no showing as to the outcome of the main case below for foreclosure of mortgage. The
decision therein, if one has been rendered, since no injunction was sought in or granted by this Court, must have
rendered this appeal moot and academic, considering that the defendants admit their indebtedness to the plaintiff but
object merely to their being compelled to deposit the amount thereof in court during the pendency of the foreclosure
case. However, no manifestation having been received on the matter, we shall proceed to the issues raised by the
parties.lawphi1.et

The first of said issue is procedural, and has been set up by the appellee as a roadblock to this appeal. She maintains that
the controverted order is interlocutory, since it does not dispose of the case with finality but leaves something still to be
done, and hence is unappealable. The remedy, it is pointed out, should have been by petition for certiorari. The point,
strictly speaking, is well taken; but this Court sees fit to disregard technicalities and treat this appeal as such a petition
and consider it on the merits, limiting the issue, necessarily, to whether or not the court below exceeded its jurisdiction
or committed a grave abuse of discretion in issuing the order complained of.

The defendants admit their indebtedness to the plaintiff, but only in the sum of P5,106.00. It seems that the controversy
refers to the plaintiff's additional claim for interest, attorney's fees and costs.

The defendants expressed their willingness to deposit the said amount in court, subject to the condition that the
mortgage they had executed as security be cancelled. The question, then, is: Did the court act with authority and in the
judicious exercise of its discretion in ordering the defendants to make the deposit but without the condition they had
stated? Whether or not to deposit at all the amount of an admitted indebtedness, or to do so under certain conditions,
is a right which belongs to the debtor exclusively. If he refuses he may not be compelled to do so, and the creditor must
fall back on the proper coercive processes provided by law to secure or satisfy his credit, as by attachment, judgment
and execution. From the viewpoint of the debtor a deposit such as the one involved here is in the nature of
consignation, and consignation is a facultative remedy which he may or may not avail himself of. If made by the debtor,
the creditor merely accepts it, if he wishes; or the court declares that it has been properly made, in either of which
events the obligation is ordered cancelled. Indeed, the law says that "before the creditor has accepted the consignation
or before a judicial declaration that the consignation has been properly made, the debtor may withdraw the thing or the
sum deposited, allowing the obligation to remain in force." 2 If the debtor has such right of withdrawal, he surely has the
right to refuse to make the deposit in the first place. For the court to compel him to do so was a grave abuse of
discretion amounting to excess of jurisdiction.

The order appealed from is set aside, without pronouncement as to costs.

Reyes, J.B.L., Dizon, Zaldivar, Sanches, Fernando, Teehankee and Barredo, JJ., concur.
Capistrano, J., took no part.
Concepcion, C.J., and Castro J., are on leave.

Footnotes

1
Civil Case No. 6796 is a proceeding to foreclose a real estate mortgage earlier executed by defendants in favor
of plaintiff in consideration of a P5,000.00 loan which the former had allegedly failed to pay.

2
Art. 1260, Civil Code.

TELENGTAN BROTHERS and SONS vs. UNITED STATES LINES Case Digest
TELENGTAN BROTHERS and SONS vs. UNITED STATES LINES

G.R.No. 132284

February 28,2006

FACTS: Petitioner is a domestic corporation while US Lines is a foreign corporation engaged in overseas shipping. It was
made applicable that consignees who fail to take delivery of their containerized cargo within the 10-day free period are
liable to pay demurrage charges. On June 22, 1981, US Lines filed a suit against petitioner seeking payment of
demurrage charges plus interest and damages. Petitioner incurred P94,000 which the latter refused to pay despite
repeated demands. Petitioner disclaims liability alleging that it has never entered into a contract nor signed an
agreement to be bound by it. RTC ruled that petitioner is liable to respondent and all be computed as of the date of
payment in accordance with Article 1250 of the Civil Code. CA affirmed the decision.

ISSUE: Whether the re-computation of the judgment award in accordance with Article 1250 of the Civil Code proper

RULING: The Supreme Court found as erroneous the trial courts decision as affirmed y the Court of Appeals. The Court
holds that there has been an extraordinary inflation within the meaning of Article 1250 of the Civil Code. There is no
reason for ordering the payment of an obligation in an amount different from what has been agreed upon because of
the purported supervention of an extraordinary inflation.

The assailed decision is affirmed with modification that the order for re-computation as of the date of payment in
accordance with the provisions of Article 1250 of New Civil Code is deleted.

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[G.R. No. 156846. February 23, 2004]

TEDDY G. PABUGAIS, petitioner, vs. DAVE P. SAHIJWANI, respondent.
YNARES-SANTIAGO, J.:

PROVISION:1260 (but in this case it was made not applicable)

DOCTRINE:A valid tender of payment in an amount sufficient to extinguish the obligation makes the consignation is
valid.

NATURE: CA reversed RTC.

FACTS:

1. Pursuant to an "Agreement And Undertaking", petitioner Teddy G. Pabugais, in consideration of the amount
P15,487,500.00, agreed to sell to respondent Dave P.Sahijwani a lot containing 1,239 square meters located
at Jacaranda Street, NorthForbes Park.

2. Respondent paid petitioner the amount of P600,000.00 as option/reservation fee and the balance of
P14,887,500.00 to be paid within 60 days from the execution of the contract, simultaneous with delivery of the
owner's duplicate Transfer Certificate of Title in respondent's name the Deed of Absolute Sale; the Certificate of
Non-Tax Delinquency on real estate taxes andClearance on Payment of Association Dues.

3. IF RESPONDENT FAILS to pay the balance of the purchase price: entitles petitioner to forfeit the P600,000.00
option/reservation fee; while non-delivery by the latter of the necessary documents obliges him to return to
respondent the said option/reservation fee with interest at 18% per annum.

4. Petitioner failed to deliver the required documents. In compliance with their agreement, he returned to
respondent the latter's P600,000.00 option/reservation fee by way of Far East Bank & Trust Company which
was, however, dishonored.

5. Petitioner: He twice tendered to respondent, through his counsel, the amount of P672,900.00 (representing the
P600,000.00 option/reservation fee plus 18% interest per annum computed from December 3, 1993 to August 3,
1994) in the form of a check but said counsel refused to accept the same (1 st-via messenger; 2nd-via DHL)
Because of these refusals, he wrote a letter saying saying that he is consigning the amount tendered with the
RTC Makati City.
6. Respondent: Admitted that his office received petitioner's letter but claimed that no check was appended
thereto. He averred that there was no valid tender of payment because no check was tendered and the
computation of the amount to be tendered was insufficient, because petitioner verbally promised to pay 3%
monthly interest and25% attorney's fees as penalty for default, in addition to the interest of 18% per annum on
the P600, 000.00 option/reservation fee.

(Extra stuff for paranoid people-> not really related but talks about consignment too.)
7. December 20, 2001: petitioner executed a Deed of Assignment in favor of Atty. De Guzman, Jr., part of the
P672,900.00 consigned with the TC as partial payment of the latters attorneys fees. January 7, 2002, petitioner
filed an Ex Parte Motion to Withdraw Consigned Money.This was followed by a Motion to Intervene filed by
Atty. De Guzman, Jr., praying that the amount consigned be released to him by virtue of the Deed of
Assignment.
8. Petitioners motion to withdraw the amount consigned was denied by the CA and the decision of the trial court
was affirmed with modification as to the amount of moral damages and attorneys fees.
9. On a motion for reconsideration, the CA declared the consignation as valid in an Amended Decision. It held that
the validity of the consignation had the effect of extinguishing petitioners obligation to return the
option/reservation fee to respondent. Hence, petitioner can no longer withdraw the same.-> PET. petitioned
that he can still withdraw.
ISSUES:
1. WON there was a valid consignation?
2. WON the petitioner can withdraw the amount consigned as a matter of right?

HELD:
1. YES.
If there is a valid tender of payment in an amount sufficient to extinguish the obligation, the consignation is valid.

Reasons why respondent did not accept payment:

(1) The check mentioned in the August 5, 1994 letter of petitioner manifesting that he is settling the obligation was
not attached to the said letter; and
(2) The amount tendered was insufficient to cover the obligation.

Clearly, respondent didnt accept the tender because of its alleged insufficiency not because the said check was
insufficient or that it was a managers check. But actually:
(1) Petitioner's tender of payment in the form of manager's check is valid even though it is not a legal tender since
he did not object to the form.
(2) The amount tendered is sufficient since it appears that only the interest of 18% per annum on the P600,000.00
option/reservation fee stated in the default clause of the "Agreement and Undertaking" was agreed upon by the
parties.

NOTE: Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor
cannot accept or refuses to accept payment and it generally requires a prior tender of payment.

2.
3. NO.
-Withdrawal of the money consigned would enrich petitioner and unjustly prejudice respondent.

Reliance on Article 1260 is MISPLACED. It provides that Once the consignation has been duly made, the debtor
may ask the judge to order the cancellation of the obligation

WHY? Respondent's prayer in his answer that the amount consigned be awarded to him is equivalent to an
acceptance of the consignation, which has the effect of extinguishing petitioner's obligation. Petitioner failed to
manifest his intention to comply with the "Agreement and Undertaking" by not delivering the necessary
documents and the lot subject of the sale to respondent in exchange for the amount deposited.

(EXTRA)With regard to Atty. De Guzman: withdrawal violates NCC 1491 which forbids lawyers from acquiring by
assignment, property and rights which are the object of any litigation in which they may take part by virtue of
their profession.Also, Rule 10 of the Canons of Professional Ethics provides that the lawyer should not purchase
any interest in the subject matter of the litigation which he is conducting. The assailed transaction falls within
the prohibition-> attorneys fees was executed during the pendency of this case with the CA. In his Motion to
Intervene, Atty. De Guzman, Jr., not only asserted ownership over said amount, but likewise prayed that the
same be released to him. That petitioner knowingly and voluntarily assigned the subject amount to his counsel
did not remove their agreement within the ambit of the prohibitory provisions. To grant the withdrawal would
be to sanction a void contract.

1.
2.
DISPOSITON: PETITION DENIED.

M e a t P a c k i n g C o r p o r a t i o n v . S a n d i g a n b a y a n
T e n d e r o f P a y m e n t a n d C o n s i g n a t i o n - E f f e c t
D i g e s t b y C a r m e l a F o j a s

Article 1256. If the creditor to whom tender of payment has been made refuses without justcause to accept it, the
debtor shall be released from responsibility by the consignation of thething or sum due.x x xFACTS:
1.

Meat Packing Corporation of the Philippines (MPCP) is a corporation wholly owned by GSIS.It is the owner of 3 parcels of
land in Pasig as well as the meat processing and packing plantthereon.2.

MPCP and Philippine Integrated Meat Corporation (PIMECO) entered into an Agreement:MPCP leased to PIMECO, under
a lease-purchase arrangement, its aforesaid property at anannual rental rate of P1,375,563.92. It is payable over 28
years commencing on the date ofexecution of the Agreement, or for a total consideration of P38,515,789.87.3.

The Agreements
rescission clause
: If the lessee-vendee (PIMECO) should
fail or default inthe payment of rentals
equivalent to the cumulative sum total of
3 annual installments
,the Agreement shall be
deemed automatically cancelled and forfeited
without need ofjudicial intervention.4.

MPCP and PIMECO entered into a

Supplementary and Loan Agreement
. In considerationof the additional expenditures incurred by MPCP for plant rehabilitation, the total contractprice of the
lease-purchase agreement was increased to
P93,695,552.59
, payable over aperiod of 28 years, at the annual rental rate of
P3,346,269.70
.5.

PCGG sequestered all the assets, properties, and records of PIMECO, including the meatpacking plant and the lease-
purchase agreement.6.

MPCP wrote a letter to PIMECO, giving notice of the rescission of the lease-purchaseagreement on the ground, among
others, of non-payment of rentals of more than P2M.7.

GSIS asked the PCGG to exclude the meat packing plant from the sequestered assets ofPIMECO because it is owned by
MPCP. However, PCGG denied the request. Likewise, MPCPsought the turnover to it of the meat packaging plant on the
ground that the lease-purchaseagreement had already been rescinded.
8.

PCGG ordered the transfer of the plant to GSIS, under the condition that the PCGGmanagement team might continue its
operations to complete outstanding orders.

9.

Sandiganbayan found that PCGG committed grave abuse of authority, power and discretionin unilaterally terminating
the lease-purchase agreement of PIMECO and MPCP, and inturning over its management, control, and operation to the
latter.10.

In its petition, PIMECO alleged that from 1981 to 1985, PIMECO has been regularly payingthe annual rentals in the
amount of P3,346,269.70; and that prior to its sequestration,PIMECO was able to pay MPCP the amount of
P846,269.70.11.

However, after its sequestration, the PCGG Management Team that took over the plantbecame erratic and irregular in
its payments of the annual rentals to MPCP, thus presentingthe danger that PIMECO may be declared in default in the
payment of rentals equivalent to 3annual installments and causing the cancellation of the lease-purchase
agreement. Hence,PIMECO prayed for a declaration that it is no longer bound by clause of the lease-purchaseagreement
on automatic cancellation and forfeiture.12.

In the meantime,
PCGG tendered to MPCP amounting to P5,000,000
, representing partialpayment of accrued rentals on the meat packing plant,
which MPCP refused to accept onthe theory that the lease-purchase agreement has been rescinded
.13.

Assailed resolution: Sandiganbayan approved the consignation by PCGG of the amount ofP5,000,000 after the MPCP
refused the tender of payment of the same.14.

While the unpaid rentals have reached P7,530,036.21, PCGGs tender of payment and
consignation of the amount of P5,000,000 averted the accumulation of the unpaid rentals to3 annual installments. Thus,
the petition for declaratory relief has become moot andacademic.
RELEVANT ISSUE:1.

Whether or not the lease-purchase agreement has been rescinded NOHELD:

1.

Consignation is the act of depositing the thing due with the court or judicial authoritieswhenever the creditor cannot
accept or refuses to accept payment, and it generally requiresa prior tender of payment. Tender is the antecedent of
consignation. Tender of payment maybe extrajudicial, while consignation is necessarily judicial, and the priority of the
first is theattempt to make a private settlement before proceeding to the solemnities of consignation.Tender and
consignation, where validly made, produces the effect of payment andextinguishes the obligation.

2.

Article 1256.
If the creditor to whom tender of payment has been made refuses without justcause to accept it, the debtor shall be
released from responsibility by the consignation of thething or sum due.3.

There was prior tender by PCGG of the amount of P5,000,000 for payment of the rentalsin arrears. MPCP

s refusal to accept the same, on the ground merely that its lease-purchase agreement with PIMECO had
been rescinded, was unjustified.
4.

PIMECO paid, and GSIS/MPCP received several amounts due under the lease-purchaseagreement, in total sum of
P15,921,205.83. Surely,
the acceptance by MPCP and GSIS ofsuch payments negates any rescission of the lease-purchase agreement.
5.

Under the terms of the lease-purchase agreement, the amount of arrears in rentals oramortizations must be equivalent
to the cumulative sum of three annual installments, inorder to warrant the rescission of the contract. Therefore, it must
be shown that PIMECOfailed to pay the aggregate amount of at least P10,038,809.10 before the lease-
purchaseagreement can be deemed automatically cancelled. Assuming in the extreme that, as allegedby MPCP, the
arrears at the time of tender on January 30, 1991 amounted to P12,578,171.00,
the tender and consignation of the sum of P5,000,000.00, which had the effect ofpayment, reduced the back rentals
to only P7,578,171.00, an amount less than theequivalent of three annual installments
. Thus, with the Sandiganbayans approval of the
consignation and directive for MPCP to accept the tendered payment,
the lease-purchaseagreement could not be said to have been rescinded
.