De La Salle University - Graduate School of Business

A Case Analysis on

G.R. No. 166704             December 20, 2006

AGRIFINA AQUINTEY, petitioner, 
vs.
SPOUSES FELICIDAD AND RICO TIBONG, respondents.

Submitted by:

Vidar Halvorsen

Submitted to:

Dean Atty. Joe-Santos B. Bisquera

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Table of Contents

1.0 Background of the Case ....................................................................................... 3

2.0 Statement of the Problem ..................................................................................... 6

3.0 Objectives ………………………………………………………..……………………6

4.0 Areas of Consideration ......................................................................................... 7

5.0 Alternative Courses of Action …. …………………………………………………… 7

6.0 Conclusion ...........................................................................................................13

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1.0 BACKGROUND

On may 6, 1999 Agrifina Aquintey filed a complaint with the RTC of Baguio City for
sum of money and damages against the spouses Felicidad and Rico Tibon. The
issue at hand was a matter of loans in the total amount of 773,000 Php.

These were loans accumulated over time, and which petitioner claimed the
defendant had interests between 6% and 7%. The case were made on a list of the
following claims of loans[ CITATION Sup \l 1044 ]

Amount Date Obtained Interest Per Due Date

Mo.
P 100,000.00 May 11, 1989 6% August 11, 1989
4,000.00 June 8, 1989 - -
50,000.00 June 13, 1989 6% On demand
60,000.00 Aug. 16, 1989 7% January 1990
205,000.00 Oct. 13, 1989 7% January 1990
128,000.00 Oct. 19, 1989 7% January 1990
2,000.00 Nov. 12, 1989 6% April 28, 1990
10,000.00 June 13, 1990 - -
80,000.00 Jan. 4, 1990 - -
34,000.00 - 6% October 19, 1989
100,000.00 July 14, 1989 5% October 1989

Of these loans, the plaintiff claimed she had lost receipts of 3, to the amount
of 100.000 php, 34.000 php and 2.000 php.

The plaintiff claimed the defendant was only able to pay 122,600php of
these debts.

During the RTC case, it also became clear the money the defendant hand
borrowed from the plaintiff, was used to re-loan to other clients at a higher
rate of interest, thus generating income/surplus from the transactions.

This relationship turned sour when the plaintiff started arguing the defendant
were making more money than her in these money-lending operations. She

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asked the defendant to pay back her dues, before the maturity of the loans,
as she ( the plaintiff) needed money to buy a house and lot in Manila. Of
advice from the plaintiff, the defendant acquired help from Atty. A-ayo who
suggested the defendant indorse the accounts of her debtor to the plaintiff
so the plaintiff be the one to collect debts of the defendants clients’
accounts.

In the timespan between Aug. 1990 to Oct. 1990, the defendant issued
deeds of assignments ( obligations) where she transferred and assigned the
plaintiff the total amount of 546,459 php. These deeds were duly notarized
by Atty. A-ayo.

The following debtors of Felicidad executed promissory notes where they

obliged themselves to pay directly to Agrifina. These were also handed over
to the plaintiff along with promissory notes of the same.

Account Date of Instrument Date Payable

Debtors
Juliet & Tommy Tibong P50,000.00 August 7, 1990 November 4, 1990 and
February 4, 1991
Corazon Dalisay 8,000.00 August 7, 1990 No date
Rita Chomacog 4,480.00 August 8, 1990 September 23, 1990
Antoinette Manuel 12,000.00 October 19, 1990 March 30, 1991
Rosemarie Bandas 8,000.00 August 8, 1990 February 3, 1991
Fely Cirilo 63,600.00 September 13, 1990 No date
Virginia Morada 62,379.00 August 9, 1990 February 9, 1991
Carmelita Casuga 59,000.00 August 28, 1990 February 28, 1991
Merlinda Gelacio 17,200.00 August 29, 1990 November 29, 199026
Total P284,659.00
[ CITATION Sup \l 1044 ]

Following the executing of the deeds, the plaintiff were able to collect the amount of
301,000 php. The Defendant also narrated she had collected a sum of 250,000 from
one of her debtors, and remitted this payment to the plaintiff.

In april 1990, the plaintiff then tried to collect the remaining balance, but were told by
the defendant to wait until she had money.
At that point, when the defendant reneged on her promise, the plaintiff took the case

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to the barangay captain. No settlement came from that case. Therefore, the issue
was field as a case with the RTC.

On the defendents case, ( Tibong ) the response was she had conformed to as much
as was possible, showing her intent to settle the case as best possible.

The RTC ruled in favor of the plaintiff, ordering the following :

1. P472,000 as actual obligation with the stipulated interest of 6% per month

from May 11, 1999 until the said obligation is fully paid. However, the amount
of P50,000 shall be deducted from the total accumulated interest for the same
was already paid by the defendant as admitted by the plaintiff in her complaint,

2. P25,000 as attorney's fees,

3. [T]o pay the costs.

[ CITATION Sup \l 1044 ]

In the Court of Appeals, the outcome was modified to :

“ Defendants-appellants are hereby ordered to pay the balance of the total

indebtedness in the amount of P51,341.00 plus the stipulated interest of 6%
per month from May 11, 1999 until the finality of this decision.”

This decision was based on the promissory notes, the actual payments made by the
defendant and the debtors given to the plaintiff. The adjustment to the total sum on
loans accumulated was based on the failing to present receipts for the 3 loans
mentioned earlier.

Both parties moved for reconsideration, but the motion was dismissed on December
21, 2004.

In the Supreme Court, the case was commented, and again adjusted. This time on
grounds of Novation with backgrounds in cases like
Vda. de Jayme v. Court of Appeals ( Dacio en pago ),
 City National Bank of Huron, S.D. v. Fulle and  
Di Franco v. Steinbaum.[ CITATION Sup \l 1044 ]

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The Supreme court also used the issue of dacion en pago ( the delivery and
transmission of ownership of a thing by the debtor to the creditor as an
accepted equivalent of the performance of the obligation)[ CITATION Sup \l
1044 ]
to clarify the bases of the ruling.

Conclusively, the Supremecourt denied the petition. and on the case that the plaintiff
had no rights to attempt collecting from both the defendant and her clients. With
regards to the sum to be paid back, the amount was adjusted to 33.841 php as the
Supreme court argued final balance was only 33.841 php.

2.0 STATEMENT OF THE PROBLEM.

1 ) Did the Supreme Court rule in line with the fairness and equity principle, and

2) was there issues in this case that was not covered, which should have been
covered?

3.0 OBJECTIVES

This report will attempt to shed light on the usage of the laws / provisions used in the
case. It will also look at an issue which was not covered in the comments of the
supreme court. Finally, it will conclude the writers standpoint on the case, based on
the information given, the laws involved and the usage of these as the writer sees
them.

4.0 ANALYSIS OF THE CASE

In order to better understand the case, one have to look at the provisions of the law.

Civil Code, Section 11, Rule 8:

SEC. 11. Allegations not specifically denied deemed admitted. – Material averment in
the complaint, other than those as to the amount of unliquidated damages, shall be
deemed admitted when not specifically denied. Allegations of usury in a complaint to
recover usurious interest are deemed admitted if not denied under oath.

SEC. 10. Specific denial. – A defendant must specify each material allegation of fact
the truth of which he does not admit and, whenever practicable, shall set forth the
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substance of the matters upon which he relies to support his denial. Where a
defendant desires to deny only a part of an averment, he shall specify so much of it
as is true and material and shall deny only the remainder. Where a defendant is
without knowledge or information sufficient to form a belief as to the truth of a
material averment made in the complaint, he shall so state, and this shall have the
effect of a denial.

Usury responds to the unjustness and unfairness of the petitioner attempting to claim
from both the defendant and her former clients. Such an action would be highly unfair
and amount to unjust enrichment on the part of the plaintiff.

Art. 1231(b) New Civil Code:

Art. 1231. Obligations are extinguished:

(1) By payment or performance:

(2) By the loss of the thing due:
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and debtor;
(5) By compensation;
(6) By novation.

The Supreme court also quote in City National Bank of Huron, S.D. v. Fuller, the
Circuit Court of Appeals ruled that the theory of novation is that the new debtor
contracts with the old debtor that he will pay the debt, and also to the same
effect with the creditor, while the latter agrees to accept the new debtor for the
old. A novation is not made by showing that the substituted debtor agreed to pay the
debt; it must appear that he agreed with the creditor to do so. Moreover, the
agreement must be based on the consideration of the creditor's agreement to
look to the new debtor instead of the old. It is not essential that acceptance of the
terms of the novation and release of the debtor be shown by express agreement.
Facts and circumstances surrounding the transaction and the subsequent conduct of
the parties may show acceptance as clearly as an express agreement, albeit implied.
[ CITATION Sup \l 1044 ]

This relate to how the plaintiff in reality is ending one contract while securing the
other, in the relation to securing the loans she gave to the defendants.

Thereby, when the defendant hands over the obligations of HER clients to the
plaintiff, the plaintiff simultaneously ends that part of her claim on the defendant.
Novation consists therefore of the 4 following steps[ CITATION Sup \l 1044 ]:

(1) a previous valid obligation;

(2) an agreement of all parties concerned to a new contract;
(3) the extinguishment of the old obligation; and
(4) the birth of a valid new obligation.
Novation is merely modificatory where the change brought about by any subsequent
agreement is merely incidental to the main obligation (e.g., a change in interest rates
or an extension of time to pay); in this instance, the new agreement will not have the

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 effect of extinguishing the first but would merely supplement it or supplant some but
not all of its provisions

Now, in this relation, the novation also means when the creditor accepts a novation from his/her
debtor, the creditor’s claim on his/her debtor ceases.
The meaning of novation in this case then relate to the plaintiff losing her claim on the defendant
when she accepted the novations.

Calculating then the value of these novations, the money paid beforehand, and the 250.000 the
defendant collected and remitted to the plaintiff, one sees the remaning sum that should be paid.

This also collaborate with the idea of Dacion en Pago, which the Supreme court quote from Vda. De
Jayme v. Court of Appeals.

“dacion en pago is the delivery and transmission of ownership of a thing by the

debtor to the creditor as an accepted equivalent of the performance of the obligation.
It is a special mode of payment where the debtor offers another thing to the creditor
who accepts it as equivalent of payment of an outstanding debt. 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, payment for which is to be charged against the
debtor's obligation. As such, the essential elements of a contract of sale, namely,
consent, object certain, and cause or consideration must be present. In its modern
concept, what actually takes place in dacion en pago is an objective novation of the
obligation where the thing offered as an accepted equivalent of the performance of
an obligation is considered as the object of the contract of sale, while the debt is
considered as the purchase price. In any case, common consent is an essential
prerequisite, be it sale or novation, to have the effect of totally extinguishing the debt
or obligation.”

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The requisites for dacion en pago are:
(1) there must be a performance of the prestation in lieu of payment (animo
solvendi) which may consist in the delivery of a corporeal thing or a real right or a
credit against the third person;
(2) there must be some difference between the prestation due and that which is
given in substitution (aliud pro alio); and
(3) there must be an agreement between the creditor and debtor that the obligation is
immediately extinguished by reason of the performance of a prestation different from
that due[ CITATION Sup \l 1044 ]

All these prerequisites were in place in this case, and as such we can but agree with
the Supreme Court.

On the subject of whether or not there were issues not covered in the claim which
should have been addressed by the Supreme court, we need to look at the base of
the claim, the loans themselves.

As stated initially, the loans were made on interest rates of 5 % and 6%.
At the time of this case, the Usury law was still in action, citing a maximum of 5.5%
interest per month, or 66%p.a.
As this was in breach of the usury law at the time, the Supreme court erred in not
addressing this issue. Thou the usury law was “ legally inexistent” when the S.c
handled the case, it was active at the time of the incidents. Therefore, a note on this
should have been made, and potentially seen in lieu of the amount ruled as balance.

5.0 ALTERNATIVE COURSES OF ACTION

Considering the facts stated in this case, and the errors the writer believe has been made, the
alternative action the supreme court should have taken, would be to address the issue of interest
agreed upon in the initiation of the obligations. Ass the Usury law was in effect at the time, and one
would presume both the plaintiff and her clients had paid back according to the interests made in
their respective obligations, this has given the plaintiff an unlawful income which should have been
counted against the claim.
The initial report state the case took form when the plaintiff learned the defendant was making more
money on her business than the plaintiff herself was. Thou there is no law preventing someone to be
a better businessperson than the other, the law at the time did state an upper limit on interests legal.
Based on this, the excess interest taken by the plaintiff to the defendant should have been taken into
account and deducted from the final balance claim.

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6.0 CONCLUSION

Based on the facts of the case, and the laws, provisions, and other cases mentioned
by the Supreme Court, the writer of this report finds the following:

1) The Supreme court ruled correctly in denying the case. There was enough
basis in the provisions of the law, and enough jurisprudence to secure solid
ruling. However :
2) The Supreme Court erred in not addressing the issue on interest. The usury
law was in action at the time of the loans being initiated, and should as such
have been addressed, potentially held against balance of the defendant.

7.0 BIBLIOGRAPHY

Arrelano Law foundation. (n.d.).

http://www.lawphil.net/judjuris/juri2006/dec2006/gr_166704_2006.html. Retrieved from Arrelano
Law Foundation.

Wiki philippine law projecct. (n.d.). www.phbar.org. Retrieved from

http://phbar.org/wikilaw/index.php?title=Usury

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