Cinco vs Court of Appeals were flimsy excuses so she could proceed with the

G.R. No. 151903 foreclosure of the mortgaged properties that were worth
FACTS: more than the amount due to MTLC. Thus, they conclude that
the acts of MTLC and of Ester amount to abuse of rights that
In December 1987, petitioner Manuel Cinco (Manuel) obtained
warrants the award of damages in their (spouses Go Cinco's)
a commercial loan in the amount of P700,000.00 from
respondent Maasin Traders Lending Corporation (MTLC). The favor.
loan was evidenced by a promissory note (monthly interest rate
MTLC and Ester claim that they were not aware of the loan
of 3% or 36% per annum and was payable within a term of
and the mortgage to PNB, and that there was no agreement
180 days or 6 months, renewable for another 180 days) dated
that the proceeds of the PNB loan were to be used to settle
December 11, 1987, and secured by a real estate mortgage
Manuel's obligation with MTLC. The SPA merely authorized
executed on December 15, 1987 over the spouses Go Cinco's
her to collect the proceeds of the loan. Since the MTLC loan
land and 4-storey building located in Maasin, Southern Leyte.
remained unpaid, they insist that the institution of the
As of July 16, 1989, Manuel's outstanding obligation with foreclosure proceedings was proper.
MTLC amounted to P1,071,256.66, which amount included
ISSUE:
the principal, interest, and penalties.
Whether or not the loan due the MTLC had been extinguished
To be able to pay the loan in favor of MTLC, the spouses Go
HELD: NO
Cinco applied for a loan with the Philippine National Bank,
Maasin Branch (PNB or the bank) and offered as collateral the Payment as Mode of Extinguishing Obligations
Obligations are extinguished, among others, by payment or
same properties they previously mortgaged to MTLC. The PNB
performance, the mode most relevant to the factual situation in
approved the loan application for P1.3 Million through a letter
dated July 8, 1989; the release of the amount, however, was the present case.
conditioned on the cancellation of the mortgage in favor of
Article 1232
MTLC.
payment means not only the delivery of money but also the
performance, in any other manner, of an obligation.
On July 20, 1989, Manuel executed a Special Power of
Attorney 7 (SPA) authorizing Ester to collect the proceeds of his
Article 1233
PNB loan. Ester again went to the bank to inquire about the
a debt shall not be understood to have been paid unless the thing
proceeds of the loan. This time, the bank's officers confirmed
or service in which the obligation consists has been completely
the existence of the P1.3 Million loan, but they required Ester
delivered or rendered, as the case may be.
to first sign a deed of release/cancellation of mortgage
before they could release the proceeds of the loan to her.
Outraged that the spouses Go Cinco used the same properties In the present case, Manuel sought to pay Ester by authorizing
her, through an SPA, to collect the proceeds of the PNB loan —
mortgaged to MTLC as collateral for the PNB loan, Ester
an act that would have led to payment if Ester had collected
refused to sign the deed and did not collect the P1.3 Million
loan proceeds. the loan proceeds as authorized. Admittedly, the delivery of
the SPA was not, strictly speaking, a delivery of the sum of
money due to MTLC, and Ester could not be compelled to accept
Ester instituted foreclosure proceedings against the spouses Go
Cinco on July 24, 1989. To prevent the foreclosure of their it as payment based on Article 1233. Nonetheless, the SPA
stood as an authority to collect the proceeds of the already-
properties, the spouses Go Cinco filed an action for specific
approved PNB loan that, upon receipt by Ester, would have
performance, damages, and preliminary injunction.
constituted as payment of the MTLC loan. Had
Ester presented the SPA to the bank and signed the deed of
The spouses Go Cinco alleged that foreclosure of the
release/cancellation of mortgage, the delivery of the sum of
mortgage was no longer proper as there had already been
settlement of Manuel's obligation in favor of MTLC. They money would have been effected and the obligation
extinguished. As the records show, Ester refused to collect and
claimed that the assignment of the proceeds of the PNB loan
allow the cancellation of the mortgage.
amounted to the payment of the MTLC loan. Ester's refusal to
sign the deed of release/cancellation of mortgage and to
a. Unjust Refusal to Accept Payment
collect the proceeds of the PNB loan were, to the spouses Go
Ester's claimed that as a prior mortgagee the spouses Go Cinco
Cinco, completely unjustified and entitled them to the
should have obtained her consent before offering the
payment of damages.
properties already mortgaged to her as security for the PNB
The spouses Go Cinco charge MTLC and Ester with bad faith loan is without merit. There is nothing legally objectionable in a
mortgagor's act of taking a second or subsequent mortgage on a
and ill-motive for unjustly refusing to collect the proceeds of
property already mortgaged; a subsequent mortgage is
the loan and to execute the deed of release of mortgage.
They assert that Ester's justifications for refusing the payment

pnglnn 1
recognized as valid by law and by commercial practice, subject
to the prior rights of previous mortgages. Section 4, Rule 68 of
the 1997 Rules of Civil Procedure on the disposition of the
proceeds of sale after foreclosure actually requires the
payment of the proceeds to, among others, the junior
encumbrancers in the order of their priority.
Under Article 2130 of the Civil Code, a stipulation forbidding
the owner from
alienating the immovable mortgaged is considered void.
Ester, therefore, could not validly require the spouses Go
Cinco to first obtain her consent to the PNB loan and
mortgage.
b. Unjust Refusal Cannot be Equated to Payment
Article 1256
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.
Refusal without just cause is not equivalent to payment; to have
the effect of payment and the consequent extinguishment of
the obligation to pay, the law requires the companion acts of
tender of payment and consignation.
Tender of payment is the definitive act of offering the creditor
what is due him or her, together with the demand that the
creditor accept the same.
When a creditor refuses the debtor's tender of payment, the
law allows the consignation of the thing or the sum due. Tender
and consignation have the effect of payment, as by
consignation, the thing due is deposited and placed at the
disposal of the judicial authorities for the creditor to collect.
In the case at bar, for Manuel was that he could not avail of
consignation to extinguish his obligation to MTLC, as PNB
would not release the proceeds of the loan unless and until
Ester had signed the deed of release/cancellation of
mortgage, which she unjustly refused to do. Hence, to
compel Ester to accept the loan proceeds and to prevent their
mortgaged properties from being foreclosed, the spouses Go
Cinco found it necessary to institute the present case for
specific performance and damages.
c. Effects of Unjust Refusal
No completed tender of payment and consignation took place
sufficient to constitute payment, the spouses Go Cinco duly
established that they have legitimately secured a means of
paying off their loan with MTLC; they were only prevented
from doing so by the unjust refusal of Ester to accept the
proceeds of the PNB loan through her refusal to execute the
release of the mortgage on the properties mortgaged to MTLC
the spouses Go Cinco have undertaken, at the very least, the
equivalent of a tender of payment that cannot but have
legal effect. Since payment was available and was
unjustifiably refused, justice and equity demand that the
spouses Go Cinco be freed from the obligation to pay interest
on the outstanding amount from the time the unjust refusal
took place; they would not have been liable for any interest
from the time tender of payment was made if the payment
had only been accepted.
Agner vs BPI Family Savings Bank Inc.
G.R. No. 182963
FACTS:
On February 15, 2001, petitioners spouses Deo Agner and
Maricon Agner executed a Promissory Note with Chattel
Mortgage in favor of Citimotors, Inc. The contract provides,
among others, that: for receiving the amount of
Php834,768.00, petitioners shall pay Php17,391.00 every
15th day of each succeeding month until fully paid; the loan is
secured by a 2001 Mitsubishi Adventure Super Sport; and an
interest of 6% per month shall be imposed for failure to pay
each installment on or before the stated due date. On the
same day, Citimotors, Inc. assigned all its rights, title and
interests in the Promissory Note with Chattel Mortgage to ABN
AMRO Savings Bank, Inc. (ABN AMRO), which, on May 31,
2002, likewise assigned the same to respondent BPI Family
Savings Bank, Inc.
For failure to pay four successive installments from May 15,
2002 to August 15, 2002, respondent, through counsel, sent to
petitioners a demand letter dated August 29, 2002, declaring
the entire obligation as due and demandable and requiring to
pay Php576,664.04, or surrender the mortgaged vehicle
immediately upon receiving the letter. As the demand was left
unheeded, respondent filed on October 4, 2002 an action for
Replevin and Damages before the Manila Regional Trial Court
(RTC)
Petitioners argue that: (1) respondent has no cause of action,
because the Deed of Assignment executed in its favor did not
specifically mention ABN AMRO's account receivable from
petitioners; (2) petitioners cannot be considered to have
defaulted in payment for lack of competent proof that they
received the demand letter; and (3) respondent's remedy of
resorting to both actions of replevin and collection of sum of
money is contrary to the provision of Article 1484 of the Civil
Code and the Elisco Tool Manufacturing Corporation v. Court
of Appeals ruling.
ISSUE:
Whether or not the obligation extinguished
HELD:
Burden of proof. Jurisprudence abounds that, in civil cases, one
who pleads payment has the burden of proving it; the burden
rests on the defendant to prove payment, rather than on the
plaintiff to prove non-payment. When the creditor is in
possession of the document of credit, proof of non-payment is
not needed for it is presumed. Respondent’s possession of the
Promissory Note with Chattel Mortgage strongly buttresses its
claim that the obligation has not been extinguished.
pnglnn 2

Indeed, when the existence of a debt is fully established by the
evidence contained in the record, the burden of proving that it
has been extinguished by payment devolves upon the debtor
who offers such defense to the claim of the creditor. The debtor
has the burden of showing with legal certainty that the
obligation has been discharged by payment.
The Civil Code in Art. 1169 provides that one incurs in delay
or is in default from the time the obligor demands the
fulfillment of the obligation from the obligee. However, the law
expressly provides that demand is not necessary under certain
circumstances, and one of these circumstances is when the
parties expressly waive demand. Hence, since the co-signors
expressly waived demand in the promissory notes, demand
was unnecessary for them to be in default
Navarro v. Escobido: prior demand is NOT a condition
precedent to an action for a writ of replevin, since there is
nothing in Section 2, Rule 60 of the Rules of Court that requires
the applicant to make a demand on the possessor of the
property before an action for a writ of replevin could be filed.
Bank of the Philippine Islands v. Spouses Royeca: x x x The
creditor's possession of the evidence of debt is proof that the
debt has not been discharged by payment. A promissory note
in the hands of the creditor is a proof of indebtedness rather
than proof of payment. In an action for replevin by a
mortgagee, it is prima facie evidence that the promissory note
has not been paid. Likewise, an uncanceled mortgage in the
possession of the mortgagee gives rise to the presumption that
the mortgage debt is unpaid.
Elisco Case: The remedies provided for in Art. 1484 are
alternative, not cumulative. The exercise of one bars the
exercise of the others. At the same time, it prayed for the
issuance of a writ of replevin or the delivery to it of the motor
vehicle
Compared with Elisco, the vehicle subject matter of this case
was never recovered and delivered to respondent despite the
issuance of a writ of replevin. As there was no seizure that
transpired, it cannot be said that petitioners were deprived of
the use and enjoyment of the mortgaged vehicle or that
respondent pursued, commenced or concluded its actual
foreclosure. The trial court, therefore, rightfully granted the
alternative prayer for sum of money, which is equivalent to the
remedy of "exacting fulfillment of the obligation." Certainly,
there is no double recovery or unjust enrichment to speak of.
Manila International Airport Authority vs Avia
Filipinas International, Inc.
G.R. No. 180168
FACTS:
In September 1990, herein petitioner Manila International
Airport Authority (MIAA) entered into a contract of lease with
herein respondent Avia Filipinas International, Inc. (AFIC),
wherein MIAA allowed AFIC to use specific portions of land as
well as facilities within the Ninoy Aquino International Airport
exclusively for the latter's aircraft repair station and chartering
operations. The contract was for one (1) year, beginning
September 1, 1990 until August 31, 1991, with a monthly
rental of P6,580.00.
In December 1990, MIAA issued Administrative Order No. 1,
Series of 1990, which revised the rates of dues, charges, fees or
assessments for the use of its properties, facilities and services
within the airport complex. The Administrative Order was made
effective on December 1, 1990. As a consequence, the monthly
rentals due from AFIC was increased to P15,996.50.
Nonetheless, MIAA did not require AFIC to pay the new rental
fee. Thus, it continued to pay the original fee of P6,580.00.
After the expiration of the contract, AFIC continued to use and
occupy the leased premises giving rise to an implied lease
contract on a monthly basis. AFIC kept on paying the original
rental fee without protest on the part of MIAA.
Three years after the expiration of the original contract of
lease, MIAA informed AFIC, through a billing statement dated
October 6, 1994, that the monthly rental over the subject
premises was increased to P15,966.50 beginning September 1,
1991, which is the date immediately following the expiration of
the original contract of lease. MIAA sought recovery of the
difference between the increased rental rate and the original
rental fee amounting to a total of P347,300.50 covering
thirty-seven (37) months between September 1, 1991 and
September 31, 1994. Beginning October 1994, AFIC paid the
increased rental fee. However, it refused to pay the lump sum
of P347,300.50 sought to be recovered by MIAA. For the
continued refusal of AFIC to pay the said lump sum, its
employees were denied access to the leased premises from
July 1, 1997 until March 11, 1998. This, notwithstanding, AFIC
continued paying its rentals. Subsequently, AFIC was granted
temporary access to the leased premises.
ISSUE:
Whether or not the payment given by the respondent to
extinguished his obligation valid
HELD: YES Article 1235
Article 1235
When the obligee accepts the performance knowing its
incompleteness or irregularity and without expressing any protest
or objection, the obligation is deemed fully complied with.
For failing to make any protest or objection, petitioner is
already estopped from seeking recovery of the amount claimed.
Respondent continued to pay and petitioner kept on receiving
the original rental fee of P6,580.00 without any reservations
or protests from the latter. Neither did petitioner indicate in
the official receipts it issued that the payments made by
pnglnn 3
respondent constitute only partial fulfillment of the latter's
obligations.
Article1306
The contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they
are not contrary to law, morals, good customs, public order, or
public policy.
Article 1374
The various stipulations of a contract shall be interpreted
together, attributing to the doubtful ones that sense which
may result from all of them taken jointly.
Indeed, in construing a contract, the provisions thereof should
not be read in isolation, but in relation to each other and in their
entirety so as to render them effective, having in mind the
intention of the parties and the purpose to be achieved. In the
present case, the Court finds nothing repugnant to law with
respect to the questioned provision of the contract of lease
between petitioners and respondent.
It should be read together with the provisions of Article VIII,
Paragraph 8.13, which provide that "[a]ny amendment,
alteration or modification of th[e] Contract shall not be valid and
binding, unless and until made in writing and signed by the
parties thereto.
It is clear from the foregoing that the intention of the parties is
to subject such amendment to the conformity of both petitioner
and respondent. In the instant case, there is no showing that
respondent gave his acquiescence to the said amendment or
modification of the contract.
There was no bill sent by the petitioner with respect to the
monthly rental between September 1991 and September
1994 therefore there is no basis for the justification. The
respondent issued bill only last October 1994 regarding the
amendment to the contract.
Article 1654 Paragraph 3
The lessor is obliged to maintain the lessee in the peaceful and
adequate enjoyment of the lease for the entire duration of the
contract.
Article 1658
The lessee may suspend the payment of the rent in case the lessor
fails to make the necessary repairs or to maintain the lessee in
peaceful and adequate enjoyment of the property leased.
Crystal vs Bank of the Philippine Islands
G.R. No. 172’28
FACTS:
On 28 March 1978, spouses Crystal obtained a P300, 000.00
loan in behalf of the Cebu Contractors Consortium Co. CCCC
from the BPI-Butuan. The loan was secured by a chattel
mortgage on heavy equipment and machinery of CCCC. On
the same date, the spouses executed in favor of BPI-Butuan a
Continuing surety ship where they bound themselves as surety
of CCCC in the aggregate principal sum of not exceeding
P300, 000.00. Thereafter, or on 29 March 1979, Raymundo
Crystal executed a promissory note for the amount of P300,
000.00, also in favor of BPI-Butuan. Sometime in August 1979,
CCCC renewed a previous loan, this time from BPI, Cebu City
branch BPI-Cebu City. However, CCCC had no real property
to offer as security for the loan; hence; the spouses executed a
real estate mortgage over their own real property. They
executed another real estate mortgage over the same lot in
favor of BPI-Cebu City, to secure an additional loan of
P20,000.00 of CCCC. CCCC failed to pay its loans to both
BPI-butuan and BPI-Cebu City when they became due. CCCC,
as well as the spouses, failed to pay their obligations despite
demands. Thus, BPI resorted to the foreclosure of the chattel
mortgage and the real estate mortgage. The foreclosure sale
on the chattel mortgage was initially stalled and done. BPI
filed a complaint for sum of money against CCCC and the
spouses before the Regional trial Court, seeking to recover the
deficiency of the loan of CCCC and the spouses with BPI-
Butuan before the Court.
Meanwhile, on 7 July 1981, Insular Bank of Asia and America
(IBAA), through its Vice-President for Legal and Corporate
Affairs, offered to buy the lot subject of the two (2) real estate
mortgages and to pay directly the spouses' indebtedness in
exchange for the release of the mortgages. BPI rejected IBAA's
offer to pay.
Petitioners who are the heirs of the spouses argue that the
failure of the spouses to pay the BPI-Cebu City loan of P120,
000.00 was due to BPI’s illegal refusal to accept payment for
the loan unless the P300, 000.00 loans from BPI-Butuan would
also be paid. Consequently, in view of BPI’s unjust refusal to
accept payment of the BPI-Cebu City loan, the loan obligation
of the spouses was extinguished, petitioners contend.
ISSUE:
Whether or not the obligation of the spouses extinguished
HELD: NO
In the first place, IBAA is not privy to the loan agreement or the
promissory note between the spouses and BPI. Contracts, after
all, take effect only between the parties, their successors in
interest, heirs and assigns.
Article 1236
The creditor is not bound to accept payment or performance by a
third person who has no interest in the fulfillment of the
obligation, unless there is a stipulation to the contrary.
We see no stipulation in the promissory note which states that a
third person may fulfill the spouses' obligation. Thus, it is clear
that the spouses alone bear responsibility for the same.
A solidary obligation is one in which each of the debtors is liable
for the entire obligation, and each of the creditors is entitled to
pnglnn 4
demand the satisfaction of the whole obligation from any or all
of the debtors.
A liability is solidary only when the obligation expressly so
states, when the law so provides or when the nature of the
obligation so requires Thus, when the obligor undertakes to be
"jointly and severally" liable, it means that the obligation is
solidary. More importantly, the promissory note, wherein the
spouses undertook to be solidarily liable for the principal loan,
partakes the nature of a surety ship and therefore is an
additional security for the loan.
With regards, to moral damages, BPI is not entitled to moral
damages. A juridical person is generally not entitled to moral
damages because, unlike a natural person, it cannot
experience physical suffering or such sentiments as wounded
feelings, serious anxiety, mental anguish or moral shock. The
Court of Appeals found BPI as "being famous and having
gained its familiarity and respect not only in the Philippines but
also in the whole world because of its good will and good
reputation must protect and defend the same against any
unwarranted suit such as the case at bench. Obviously, an
artificial person like herein Appellant Corporation cannot
experience physical sufferings, mental anguish, fright, serious
anxiety, wounded feelings, moral shock or social humiliation
which are basis of moral damages. A corporation may have
good reputation which, if besmirched may also be a ground
for the award of moral damages. Indeed, while the Court may
allow the grant of moral damages to corporations, it is not
automatically granted; there must still be proof of the
existence of the factual basis of the damage and its causal
relation to the defendant’s acts. This is so because moral
damages, though incapable of pecuniary estimation, are in the
category of an award designed to compensate the claimant
for actual injury suffered and not to impose a penalty on the
wrongdoer.
Cecilleville Realty and Service Corporation vs
Spouses Acuña
G.R. No. 162074
FACTS:
Sometime in September 1981, the defendants [Acuña spouses]
requested the plaintiff [Cecilleville] thru its President, Jose A.
Resurreccion, to lend to them for one (1) year, two (2) parcels
of land owned by the plaintiff as collaterals to secure a credit
line from the Prudential Bank and Trust Company
["Prudential"]. On September 21, 1981, thru a secretary's
certificate and by virtue of a board resolution, the plaintiff lent
to defendants the said owner's copies of certificate of title.
However, on September 28, 1991, defendant Ofelia B. Acuña
forged the signature of Lucia R. Reyes as corporate secretary.
By virtue of the fake secretary's certificate, the defendants
were able to obtain a personal loan from "Prudential" in the
sum of P610,000.00 with said certificates as collaterals and
upon signing a Real Estate Mortgage dated September 30,
1981 and two Promissory Notes dated October 7, 1981 and
October 15, 1981. Due to the defendants' default in the
payment of their indebtedness, "Prudential" threatened to
extra judicially foreclose the real estate mortgage on
plaintiff's properties thru a notice of auction sale. To avoid
foreclosure proceedings on its properties, the plaintiff was
forced to settle defendants' obligations to "Prudential" in the
amount of P3,367,474.42. Subsequently, several written
demands for reimbursement were sent by the plaintiff to the
defendants. Nevertheless, the defendants failed to pay their
obligation. Hence, the filing of the instant case.
Defendants contend that the instant complaint should be
dismissed on the grounds of prescription, laches and res
judicata. In accordance to Article 1146 of the Civil Code the
plaintiff should brought an action not later than 15 years if the
grounds is based on fraud or forgery of a secretary's
certificate. Moreover, the defendants argue that the plaintiff's
inordinate delay in the filing of the instant suit clearly shows
that it has abandoned its claim against the defendants
and therefore guilty of laches
ISSUE:
Whether or not Cecilleville is entitled for reimbursement of
what they paid to Prudential
HELD: YES
Cecilleville paid the debt of the Acuña spouses to Prudential as
an interested third party.
Article 1236
Whoever pays for another may demand from the debtor what he
has paid, except that if he paid without the knowledge or against
the will of the debtor, he can recover only insofar as the payment
has been beneficial to the debtor.
Even if the Acuña spouses insist that Cecilleville's payment to
Prudential was without their knowledge or against their will,
Article 1302 (3) Cecilleville still has a right to reimbursement,
When, even without the knowledge of the debtor, a person
interested in the fulfillment of the obligation pays, without
prejudice to the effects of confusion as to the latter's share.
Cecilleville clearly has an interest in the fulfillment of the
obligation because it owns the properties mortgaged to secure
the Acuña spouses' loan. When an interested party pays the
obligation, he is subrogated in the rights of the creditor.
Because of its payment of the Acuña spouses' loan, Cecilleville
actually steps into the shoes of Prudential and becomes entitled,
not only to recover what it has paid, but also to exercise all the
rights which Prudential could have exercised. There is, in such
cases, not a real extinguishment of the obligation, but a change
in the active subject.
pnglnn 5
 Spouses Dela Cruz vs Concepcion
G.R. No. 172825
FACTS:
On March 25, 1996, petitioners entered into a Contract to Sell
with respondent involving a house and lot in Antipolo City for a
2 million consideration.
Respondent made the following payments, to wit:
1. 500,000 by way of downpayment;
2. 500,000 on May 30, 1996;
3. 500,000 paid on January 22, 1997; and
4. 500,000 bounced check dated June 30, 1997 which
was replaced. (July 7)
Thus, Respondent was able to pay the 2 million total
obligation.
Before respondent issued the 500,000 replacement check, she
told petitioners that based on the computation of her
accountant as of July 6, 1997, her unpaid obligation which
includes interests and penalties was only 200,000. Petitioners
agreed with respondent. Despite repeated demands, petitioners
failed to collect the amounts they claimed. Hence, the complaint
for sum of money with damages filed with the RTC of Antipolo
Rizal. In her answer with Compulsory counterclaim and during
the presentation of evidence, respondent presented a receipt
purportedly indicating payment of the remaining balance of
200,000 to Losloso who allegedly received the same on behalf
of petitioners.
On March 8, 2014, the RTC rendered a decision in favor of
respondent. On appeal, the CA affirmed the decision with
modification by deleting the award of moral damages and
attorney's fees in favor of respondent. Aggrieved, petitioners
come before the Court in this petition for review on certiorari
under Rule 45.
ISSUE:
Whether or not the obligation is extinguished on the ground
that respondent paid to petitioner’s authorized agent
HELD: YES
Article 1240
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.
Payment made by the debtor to the person of the creditor or
to one authorized by him or by the law to receive it
extinguishes the obligation. When payment is made to the
wrong party, however, the obligation is not extinguished as to
the creditor who is without fault or negligence even if the debtor
acted in utmost good faith and by mistake as to the person of
the creditor or through error induced by fraud of a third
person.
In general, a payment in order to be effective to discharge an
obligation must be made to the proper person. Thus, payment
must be made to the oblige himself or to an agent having
authority, express or implied, to receive the particular payment.
Payment made to one having apparent authority to receive the
money will, as a rule, be treated as though actual authority
had been given for its receipt. Likewise, if payment is made to
one who by law is authorized to act for the creditor, it will
work a discharge. The receipt of money due on a judgment by
an officer authorized by law to accept it will, therefore, satisfy
the debt.
Admittedly, payment of the remaining balance of
P200,000.00 was not made to the creditors themselves.
Rather, it was allegedly made to a certain Losloso. Respondent
claims that Losloso was the authorized agent of petitioners, but
the latter dispute it.
Losloso's authority to receive payment was embodied in
petitioners' letter addressed to respondent, dated August 7,
1997, where they informed respondent of the amounts they
advanced for the payment of the 1997 real estate taxes. In
said letter, petitioners reminded respondent of her remaining
balance, together with the amount of taxes paid. Taking into
consideration the busy schedule of respondent, petitioners
advised the latter to leave the payment to a certain "Dori" who
admittedly is Losloso, or to her trusted helper. This is an
express authority given to Losloso to receive payment.
Since petitioner authorized Losloso to receive payment 1 or 2
times and it is shown in the receipt signed by petitioners' agent
and pursuant to the authority granted by petitioners to Losloso,
payment made to the latter is deemed payment to petitioners.
We find no reason to depart from the RTC and the CA
conclusion that payment had already been made and that it
extinguished respondent's obligations.
Tan Shuy vs Spouses Maulawin
G.R. No. 190375
FACTS:
Tan Shuy is engaged in the business of buying copra and corn
in the Fourth District of Quezon Province. According to Vicente
Tan (Vicente), son of petitioner, whenever they would buy
copra or corn from crop sellers, they would prepare and issue
a pesada in their favor. A pesada is a document containing
details of the transaction, including the date of sale, the weight
of the crop delivered, the trucking cost, and the net price of the
crop. He then explained that when a pesada contained the
annotation "pd" on the total amount of the purchase price, it
meant that the crop delivered had already been paid for by
petitioner.
Guillermo Maulawin (Guillermo), respondent in this case, is a
farmer-businessman engaged in the buying and selling of
copra and corn. On 10 July 1997, Tan Shuy extended a
loan to Guillermo in the amount of P420,000. In consideration
thereof, Guillermo obligated
pnglnn 6
himself to pay the loan and to sell lucad or copra to petitioner.
Vicente and Elena children of Tan Shuy are authorized to issue
pesada wherein they annotated “sulong” when partial
payment to the loan was made. Petitioner alleged tha
Guillermo only paid a total of P28, 500 and had an
outstanding balance of P391, 500. Meanwhile, respondent
averred that his loan was already paid because he
continuously delivered and sold copra to petitioner from April
1998to April 1999. Respondent said they had an oral
arrangement that the net proceeds thereof shall be applied as
installment payments for the loan, he alleged that his delivery
of copra amounted P420, 537.68. He bolster his claim, he
presented copies of pesadas issued by Elena and Vicente. He
pointed out that the pesadas did not contain the notation "pd,"
which meant that actual payment of the net proceeds from
copra deliveries was not given to him, but was instead applied
as loan payment. However, sometime he delivered corn and not
copra the worth of it was P41, 585.25. The total creditable
copra deliveries merely amounted to P378, 952.43, leaving a
balance of P41, 047.57 in his loan.
ISSUE:
Whether or not the delivery of copra amounted to installment
payments for the loan obtained by respondents from petitioner
HELD: YES
The subsequent arrangement between Tan Shuy and Guillermo
can thus be considered as one in the nature of dation in
payment. There was partial payment every time Guillermo
delivered copra to petitioner, chose not to collect the net
proceeds of his copra deliveries, and instead applied the
collectible as installment payments for his loan from Tan Shuy.
Article 1232
An obligation is extinguished by payment or performance.
There is payment when there is delivery of money or performance
of an obligation.
Article 1245 provides for a special mode of payment called
dation in payment (dación en pago).
There is dation in payment when property is alienated to the
creditor in satisfaction of a debt in money.
Here, the debtor delivers and transmits to the creditor the
former's ownership over a thing as an accepted equivalent of
the payment or performance of an outstanding debt.
Article 1245 provides that the law on sales shall apply, since
the undertaking really partakes — in one sense — of the
nature of sale; that is, the creditor is really buying the thing or
property of the debtor, the payment for which is to be charged
against the debtor's obligation.
Dation in payment extinguishes the obligation to the extent of
the value of the thing delivered, either as agreed upon by the
parties or as may be proved, unless the parties by agreement
— express or implied, or by their silence — consider the thing
as equivalent to the obligation, in which case the obligation is
totally extinguished.
Since he delivered corn sometime it is deducted to the total
amount of the exhibited pesadas. The total amount of
defendant's loan to the plaintiff is P420,000.00 and the
evidence on record shows that the actual amount of payment
made by the defendant from the proceeds of the copras he
delivered to the plaintiff is P378,952.43, the defendant is still
indebted to the plaintiff in the amount of P41,047.53
Vitarich Corporation vs Losin
G.R. No. 181560
FACTS:
Respondent Chona Losin (Losin) was in the fastfood and
catering services business named Glamours Chicken House.
Since 1993, Vitarich, particularly its Davao Branch, had been
her supplier of poultry meat.
In the months of July to November 1996, Losin’s orders of
dressed chicken and other meat products allegedly amounted
to P921,083.10. During this said period, Losin’s poultry meat
needs for her business were serviced by Rodrigo Directo
(Directo) and Allan Rosa (Rosa), both salesmen and authorized
collectors of Vitarich, and Arnold Baybay (Baybay), a
supervisor of said corporation.
On August 24, 1996, Directo’s services were terminated by
Vitarich without Losin’s knowledge. He left without turning over
some supporting invoices covering the orders of Losin. Rosa and
Baybay, on the other hand, resigned on November 30, 1996
and December 30, 1996, respectively. Just like Directo, they
did not also turn over pertinent invoices covering Losin’s
account.
On February 12, 1997, demand letters were sent to Losin
covering her alleged unpaid account amounting to P921,
083.10. It appears that Losin had issued three (3) checks
amounting to P288, 463.30 which were dishonored either for
reasons - Drawn Against Insufficient Funds (DAIF) or Stop
Payment.
On March 2, 1998, Vitarich filed a complaint for Sum of
Money against Losin, Directo, Rosa, and Baybay before the
RTC. On August 9, 2001, the RTC rendered its Decision8 in
favor of Vitarich, however the CA rendered the assailed
decision in favor of Losin.
ISSUE:
Whether or not there is already payment on the part of Locsin.
HELD: NO
As a general rule, one who pleads payment has the burden of
proving it. The burden rests on the debtor to prove payment,
rather than on the creditor to prove non-payment. The debtor
has the burden of showing with legal certainty that the
obligation has been discharged by payment.
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True, the law requires in civil cases that the party who alleges
a fact has the burden of proving it. Section 1, Rule 131 of the
Rules of Court provides that the burden of proof is the duty of a
party to prove the truth of his claim or defense, or any fact in
issue by the amount of evidence required by law. In this case,
however, the burden of proof is on Losin because she alleges
an affirmative defense, namely, payment. Losin failed to
discharge that burden.
After examination of the evidence presented, this Court is of
the opinion that Losin failed to present a single official receipt to
prove payment. This is contrary to the well-settled rule that a
receipt, which is a written and signed acknowledgment that
money and goods have been delivered, is the best evidence of
the fact of payment although not exclusive. All she presented
were copies of the list of checks allegedly issued to Vitarich
through its agent Directo, a Statement of Payments Made to
Vitarich, and apparently copies of the pertinent history of her
checking account with Rizal Commercial Banking Corporation
(RCBC). At best, these may only serve as documentary records
of her business dealings with Vitarich to keep track of the
payments made but these are not enough to prove payment.
Article 1249, paragraph 2
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 case at bar, no cash payment was proved. It was neither
confirmed that the checks issued by Losin were actually
encashed by Vitarich. Thus, the Court cannot consider that
payment, much less overpayment, made by Losin.
Premiere Development Bank vs Surety Central &
Insurance Company, Inc.
G.R. No. 176246
FACTS:
On August 20, 1999, respondent Central Surety & Insurance
Company obtained an industrial loan of P6, 000,000.00 from
petitioner Premiere Development Bank with a maturity date of
August 14, 2000. This P6,000,000.00 loan, evidenced by
Promissory Note (PN) No. 714-Y, stipulates payment of 17%
interest per annum payable monthly in arrears and the
principal payable on due date. In addition, PN No. 714-Y
provides for a penalty charge of 24% interest per annum
based on the unpaid amortization/installment or the entire
unpaid balance of the loan. In all, should Central Surety fail to
pay, it would be liable to Premiere Bank for: (1) unpaid
interest up to maturity date; (2) unpaid penalties up to
maturity date; and (3) unpaid balance of the principal.
To secure payment of the P6, 000,000.00 loan, Central Surety
executed in favor of Premiere Bank a Deed of Assignment with
Pledge covering Central Surety's Membership Fee Certificate
No. 217 representing its proprietary share in Wack Wack
Golf and Country Club Incorporated (Wack Wack
Membership). In both PN No. 714-Y and Deed of Assignment,
Constancio T. Castañeda, Jr. and Engracio T. Castañeda,
president and vice-president of Central Surety, respectively,
represented Central Surety and solidarily bound themselves to
the payment of the obligation.
Parenthetically, Central Surety had another commercial loan
with Premiere Bank in the amount of P40, 898,000.00
maturing on October 10, 2001. This loan was, likewise,
evidenced by a PN numbered 376-X and secured by a real
estate mortgage over Condominium Certificate of Title No.
8804, Makati City. PN No. 376-X was availed of through a
renewal of Central Surety's prior loan, then covered by PN No.
367-Z. 6 As with the P6,000,000.00 loan and the constituted
pledge over the Wack Wack Membership, the
P40,898,000.00 loan with real estate mortgage was
transacted by Constancio and Engracio Castañeda on behalf
of Central Surety.
On August 22, 2000, Premiere Bank sent a letter to Central
Surety demanding payment of the P6, 000,000.00. In
response Central Surety wrote a letter stating that they
informed Evangeline Veloira that they will pay their 6M loan
by the end of September due to economic crisis.
On September 22 Central Surety issued a check worth 6M to
pay their loan but Premiere Bank with undisclosed reason
returned the check and instead asked not just the payment of
6M but also the 40M loan to be paid within 10 days and
failure to do so will foreclose the respective securities, the
pledge and real estate mortgage.
September 29, 2000 Central resent the check. Same date,
personal loan of one of the solidary debtors from Central was
also paid, in the amount of P2.6M.
Premiere Bank then applied the payments to different loans of
Central Surety. Central Surety filed complaint for damages
asking the court to declare the P6M loan as fully paid.RTC
ruled in favor of Premiere Banko CA reversed RTC and said
the P6M loan was fully paid. CA said Premiere Bank waived its
right to apply payments when it specifically demanded payment
of the P6M loan.
ISSUE:
1. Whether or not the 6M loan of Central Surety is
extinguished by waiving the rights of the Premiere
Bank in applying the payments
2. Whether the release of the Wack Wack Membership
pledge is in order.
HELD: NO; NO
1. Article 1252
He, who has various debts of the same kind in favor of one and
the same creditor, may declare at the time of making the
payment, to which of them the same must be applied. Unless the
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parties so stipulate, or when the application of payment is made
by the party for whose benefit the term has been constituted,
application shall not be made as to debts which are not yet due.
If the debtor accepts from the creditor a receipt in which an
application of the payment is made, the former cannot complain
of the same, unless there is a cause for invalidating the contract.
Indeed, the debtor's right to apply payment has been
considered merely directory, and not mandatory, following this
Court's earlier pronouncement that the ordinary acceptation of
the terms 'may' and 'shall' may be resorted to as guides in
ascertaining the mandatory or directory character of statutory
provisions.
Article 1252 gives the right to the debtor to choose to which of
several obligations to apply a particular payment that he tenders
to the creditor. But likewise granted in the same provision is the
right of the creditor to apply such payment in case the
debtor fails to direct its application. This is obvious in Art.
1252, par. 2,: "If the debtor accepts from the creditor a receipt
in which an application of payment is made, the former cannot
complain of the same." It is the directory nature of this right and
the subsidiary right of the creditor to apply payments when the
debtor does not elect to do so that make this right, like any
other right, waivable.
Article 6 Rights may be waived, unless the waiver is contrary to
law, public order, public policy, morals or good customs, or
prejudicial to a third person with a right recognized by law.
A debtor, in making a voluntary payment, may at the time of
payment direct an application of it to whatever account he
chooses, unless he has assigned or waived that right. If the
debtor does not do so, the right passes to the creditor, who may
make such application as he chooses. But if neither party has
exercised its option, the court will apply the payment according
to the justice and equity of the case, taking into consideration all
its circumstances
Verily, the debtor's right to apply payment can be waived and
even granted to the creditor if the debtor so agrees. This was
explained by former Senator Arturo M. Tolentino, an
acknowledged expert on the Civil Code, thus:
The following are some limitations on the right of the debtor to
apply his payment:
xxx xxx xxx
5) When there is an agreement as to the debts which are to be
paid first, the debtor cannot vary this agreement.
 In the case at bench, the records show that Premiere Bank
and Central Surety entered into several contracts of loan,
securities by way of pledges, and surety ship agreements. In
at least two (2) promissory notes between the parties,
Central Surety expressly agreed to grant Premiere Bank the
authority to apply any and all of Central Surety's payments,
thus:
In case I/We have several obligations with [Premiere Bank],
I/We hereby empower [Premiere Bank] to apply without notice
and in any manner it sees fit, any or all of my/our deposits and
payments to any of my/our obligations whether due or not.
The 6M loan was past due and at demandable stage. By its
terms, Premiere Bank was entitled to declare said Note and all
sums payable there under immediately due and payable,
without need of "presentment, demand, protest or notice of any
kind". The subsequent demand made by Premiere Bank was,
therefore, merely a superfluity, which cannot be equated with a
waiver of the right to demand payment of all the matured
obligations of Central Surety to Premiere Bank.
It is an elementary rule that the existence of a waiver must be
positively demonstrated since a waiver by implication is not
normally countenanced. The norm is that a waiver must not only
be voluntary, but must have been made knowingly, intelligently,
and with sufficient awareness of the relevant circumstances and
likely consequences. There must be persuasive evidence to show
an actual intention to relinquish the right. Mere silence on the
part of the holder of the right should not be construed as
surrender thereof; the courts must indulge every reasonable
presumption against the existence and validity of such waiver.
2. Considering that the parties are bound by a contract
of adhesion, where Central Surety imposed a ready-made
contract on Premiere Bank, the latter had freedom to reject or
adhere to the contract. Central Surety, being a well-
established personality, would also not be considered as a
disadvantaged party. The contract between the parties falls on
the dragnet clause, which is one “specifically phrased to subsume
all debts of past and future origins.” The security clause in the
instant case is that of a continuing pledge, wherein the Wack
Wack Membership served as security for the standing
obligation, also for future advancements. Such security worth
15,000,000.00 pesos was clearly worth more than the
industrial loan worth 6,000,000.00 pesos, which was
understood to secure the ballooning debt of the Central Surety.
As all demandable obligations are yet to be fulfilled, the release
of the Wack Wack membership as security cannot yet to be
done as prayed for by Central Surety. Wherefore, the instant
petition is partially granted. The decision of the Court of
Appeals is set aside and the decision of the Regional Trial
Court of Makati is reinstated with modification.
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