Conditional Obligation

4. Herrera instituted suit against Leviste for "Injunction, Damages, and Cancellation of
M.D. Taylor (Plaintiff-Appelant) vs. Uy Tieng Piao & Tan Liuan (Defendant-Appellant) 43 phil 873, Annotation."
FACTS: On December 12, 1918, the plaintiff contracted his services to Tan Liuan & Co., as 1. Trial Court rendered lack of basis in fact and in law:
superintendent of an oil factory which the latter establishing in this city. The period of the contract i. Ordered payments made by petitioner to Leviste forfeited pursuant to their contract providing for
extended over two years from the date mentioned and the salary drate salary rate of P600 per month automatic forfeiture "in the event of failure to comply with any of the conditions contained therein,
during 1st year and P700 per month during the second year, with electric light and water for domestic particularly the payment of the scheduled amortizations."
consumption and a residence to live or in leu thereof of 60 per month at the time.
At the time this agreement was made, the machinery for the factory had not been acquired, though ten ISSUE:
expellers had been ordered from the U.S. as agreed, for any reason the machinery failed to arrived in the Can Herrera file petition for lack of merit?
city of Manila for the period of six months from the date given, the contract may be canceled by the party
of the second part. HELD:
The machinery stated in the contract did not arrive in the city of manila within the six month after the HERRERA’S PETITION FOR RECONSIDERATION DENIED.
making of the contract, and other equipment necessary for the factory. June 28,1919, the defendants
informed the plaintiff that they had decided to rescind the contract effective June 30th. The plaintiff 1. The GSIS has not benefited in any way at the expense of Herrera. What it received, by way of
instituted the action to recover damages in the amount of P13,000.00 covering salary and perquisite under redemption from Marcelo, was the mortgage loan it had extended plus interest and sundry charges.
the contract. 1. Neither has Marcelo and Leviste did not benefit due to expenses on mortgage.
ISSUE: Whether or not that the plaintiff-appellant may demand perquisites under the rescinded contract. 2. Herrera’s loss is attributable to his fault in:
HELD: Yes, it has been concluded that the Court of First Instance committed no error in rejecting the i. Not having been able to submit collateral to GSIS in substitution of the Paranaque Property;
plaintiff claim in so far as damages are sought for the period subsequent to the expiration of the first six ii. Not paying off the mortgage debt when GSIS decided to foreclose; and
months, but in the assessment of damages due for six months period, the trial judge evidently overlooked iii. Not making an earnest effort to redeem the property as a possible redemptioner.
the item of P60 specified in the plaintiff fourth assignment of error, which represent commutation of house
rental for the month of June 1919. this amount the plaintiff is clearly entitled to recover, in addition to the 2. HERRERA did not comply to the conditions of contract.
P300 awarded in the lower court. 1. He was not able to substitute the Parañaque Property with another collateral for the
The judgment of CFI is modified, the defendant shall pay the plaintiff the sum of P360 instead of P300 as GSIS loan.
allowed by the lower court.
3. Leviste was not in a financial position to redeem the foreclosed property
Herrera vs. Leviste 1. Has no other alternative, but to assign the right of redemption to a person willing
GR L-55744 and capable to assume the same, if only to protect his interest in the said property.
2. Appellant could have preserved and protected whatever right he may have to the
FACTS: LEVISTE OBTAINED LOAN FROM GSIS P1,900,000. Mortgaged 2 lots. property by tendering the redemption price to Marcelo.
Sold Buendia property to Herrera for P3,750,000.
1. Pay Leviste P11,900,000. Reciprocal Obligations
2. Assume Leviste’s indebtedness P1,900,000 to GSIS
3. Substitute Paranaque property with his own in 6 months. G.R. No. 188064, June 01 2011
ii. Leviste arranged conformity of GSIS to petitioner’s assumption of obligation. MILA A. REYES , Petitioner, VS. VICTORIA T. TUPARAN, Respondent.
1. CONTRACT TO SELL: failyre to comply shall render contract automatically cancelled, all payments
forfeited, plus rental and damages. FACTS: Mila A. Reyes (petitioner) filed a complaint for Rescission of Contract with Damages against
2. HERRERA only remitted P300,000 to GSIS despite receiving rentals P21,000 monthly and Victoria T. Tuparan (respondent) before the RTC.In her Complaint, petitioner alleged, among others, that
P800,000 in 4 years. she was the registered owner of a 1,274 square meter residential and commercial lot located in Karuhatan,
1. Requested GSIS for restructuring of the mortgage obligation because of his own Valenzuela City, and covered by TCT No. V-4130.
arrarages in the payment of the amortizations
2. GSIS replied that as a matter of policy, it could not act on his request unless he first Petitioner mortgaged the subject real properties to the Farmers Savings Bank and Loan Bank, Inc. (FSL
made proper substitution of property, updated the account, and paid 20% thereof to the GSIS. Bank) to secure a loan. Petitioner then decided to sell her real properties so she could liquidate her bank
loan and finance her businesses. As a gesture of friendship, respondent verbally offered to conditionally
3. GSIS sent notice to Leviste to foreclose mortgage by reason of default in payment of buy petitioner's real properties.
1. Application for foreclosure filed, properties sold at public auction with certificate in The parties and FSL Bank executed the corresponding Deed of Conditional Sale of Real Properties with
favor of GSIS. Assumption of Mortgage. Due to their close personal friendship and business relationship, both parties
2. Leviste assigned its right to redeem both foreclosed properties to respondent Jose chose not to reduce into writing the other terms of their agreement mentioned in paragraph 11 of the
Marcelo, Jr. (Marcelo for brevity). complaint.
3. Marcelo redeemed the properties from the GSIS by paying it the sum of
P3,232,766.94 for which he was issued a certificate of redemption. Respondent, however, defaulted in the payment of her obligations on their due dates. Instead of paying the
i. Paranaque property turned over to Levisted for P250,000.00 amounts due in lump sum on their respective maturity dates, respondent paid petitioner in small amounts
ii. Herrera informed GSIS of his right to redeem the foreclosed properties and asking that he be allowed to do from time to time.
so in installments.
1. GSIS had not favorably acted thereon.

prohibition. installments of P200. within a reasonable period of time. respondent. See. x x x. 185440 Respondent further averred that she successfully rescued the properties from a definite foreclosure by July 13. there can be no breach of contract to speak of because petitioner CA: CA reversed the RTC decision and found the NHA entitled to rescission.000. a substantial amount of the purchase price has already been paid.00. The Court agrees with the ruling of the courts below that the subject Deed of Conditional (4) Six days later or on March 27 Victor transferred ownership of the land to his illegitimate daughters. • This is understood to be without prejudice to the rights of third persons who have acquired the thing. acquisition of contractual rights and the performance of the obligation therein did not depend upon a future and uncertain event.00.000. Rosa Sy. absolute contract of sale with a term period. 1981. it is • Art.400. and Ida 26. The CA declared TCT has no obligation yet to turn over the title. Without respondent's full payment.000. the balance of the unpaid purchase . 1991 the NHA released the mortgage.200.The CA agreed with the RTC be alienated.00. The NHA and the Lalicons. Victor Alfaro. 1992. Lalicon v National Housing Authority GR No. 1990.000.000. amortization. on February 14. 1381.00 due on December 31. one of the mortgagees." • Art.00. (1124) Considering that out of the total purchase price of P4. It ruled that. 1990 is a contract to sell and not a contract of sale.000. Amparo Ong. x x x could not apply because the respondent's failure to pay the petitioner the balance of the purchase was not a breach of contract. on August 31.Respondent countered. The power to rescind obligations is implied in reciprocal ones. He may also seek rescission. respondent paid on several dates the first and second the latter should become impossible. (3) After full payment of the loan or on March 21. 1995 Victor mortgaged the land to Marcela Lao Chua.000. unless there be just cause authorizing the fixing of a period. there was only a slight or casual breach in the fulfillment of the obligation. who intervened. even after he has chosen fulfillment. The title and ownership of the subject properties remains with the petitioner until the respondent fully pays the balance of the purchase price and the assumed mortgage obligation. in accordance with Articles 1385 and 1388 and the Mortgage Law. happening of the positive suspensive condition. Respondent's failure to pay in full the purchase price is not the 277321 in the name of the Alfaros and all subsequent titles and deeds of sale null and void. with the payment of damages in either case.000.It is APPLICABLE LAW/S: only right and just to allow Tuparan to pay the said unpaid balance of the purchase price to Reyes. the lot herein sold and conveyed.00 remaining balance. through counsel. the NHA could no longer rescind its sale to them since its right to do so had already prescribed. The payments of the mortgage obligation with FSL Bank. however. The RTC also considered the Deed of Conditional deed of sale provided. however.00.00 each. the Alfaros ISSUE: Whether the agreement is a contract to sell and not a contract of sale. the remaining unpaid balance of Tuparan (respondent) is only ?805. if Out of the P1. that the Alfaros could sell the land within five years from the date of Sale of Real Property with Assumption of Mortgage executed by and among the two parties and FSL Bank its release from mortgage without NHA's prior written consent.200. (5) Sale with Assumption of Mortgage entered into by and among the two parties and FSL Bank on November On December 14. She. HELD: YES. 1991. sold the same to their son. that. or any part thereof.00.200. and not a contract of sale. in case one of the obligors Granting that a rescission can be permitted under Article 1191. considering the circumstances. respondent has already paid the substantial amount of P3. Thus: a contract to sell. It could not be considered a conditional sale because the PETITION DENIED. that the Deed of ISSUE: Whether or not the subsequent sales constituted breach in the obligation and may give rise to Conditional Sale was not cancelled by Vendor Reyes (petitioner) and that out of the total purchase price of rescission the subject property in the amount of ?4. 1997 Victor sold the property to Chua. The injured party may choose between the fulfillment and the rescission of the obligation. among others. 5.000. applying Article 1389 of the New Civil Code. and the value of the improvements they constructed on the property.00. plus interest. 1191. and the subsequent sale of the same to Chua. which was rejected by petitioner for the reason that the actual balance was P805. which is the respondent's full payment of the purchase price. transferred or encumbered within five (5) years from the date of release of herein mortgage that the contract entered into by the parties is a contract to sell but ruled that the remedy of rescission without the prior written consent and authority from the VENDOR-MORTGAGEE (NHA). while the mortgage on the land subsisted. among others. that the tripartite agreement erroneously designated by the petitioner price.000. but merely an event that prevented the seller (petitioner) from conveying title to the The mortgage and the restriction on sale were annotated on the Alfaros' title on April 14. offered to pay The court shall decree the rescission claimed. although the Alfaros clearly violated the five-year corresponding deed of absolute sale in favor of the respondent. the amount of P751.000. Thus. RESCISSION & PRESCRIPTION The RTC handed down its decision finding that respondent failed to pay in full the total purchase price of FACTS: (1) On November 25. cannot The CA rendered its decision affirming with modification the RTC Decision. the petitioner's obligation to sell the subject properties becomes demandable only upon the filed their respective appeals to the Court of Appeals (CA). It stated that the checks and receipts presented by respondent refer to her with Mortgage over a Quezon City lot in favor of the spouses Isidro and Flaviana Alfaro (the Alfaros). failed to pay the third and last installment of P800. the Court fully agrees with the CA when it resolved: "Considering. (2) About nine years later or on November 30. Except by hereditary succession. made in issue the corresponding deed of cancellation of mortgage and the petitioner shall execute the violation of NHA rules and regulations. The following contracts are rescissible: right and just to allow her to settle. 2011 paying the assumed mortgage plus interest and other finance charges. more or less. purchaser (respondent). 1980 the National Housing Authority (NHA) executed a Deed of Sale the subject real properties. (6) Subsequently. The Court agrees with the courts below that the respondent showed her sincerity and willingness to as a Deed of Conditional Sale of Real Property with Assumption of Mortgage was actually a pure and comply with her obligation when she offered to pay the petitioner the amount of P751. FSL Bank shall then RTC: 1990 sale of the land to their son Victor. leaving an unpaid balance of only P805.00 excluding the interest charges. Accordingly. Thereafter. It ordered breach of contract contemplated under Article 1191 of the New Civil Code but rather just an event that Chua to reconvey the subject land to the NHA but the latter must pay the Lalicons the full amount of their prevents the petitioner from being bound to convey title to the respondent. Nevertheless. the Court still cannot allow it for the reason should not comply with what is incumbent upon him.

under the name and Quality Paper and Plastic Products. (4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and approval of the litigants or of competent judicial authority. Arco Pulp and Paper. (5) All other contracts specially declared by law to be subject to rescission. novation took cause of action is founded upon the contract. Arco Pulp and Paper issued a even before the release of the mortgage violated that prohibition. Reyes must be taken to have elected to take that particular parcel and he is The five-year restriction against resale. 1992 when it learned of the Alfaros' forbidden sale of the property to Victor. 206806. and the claim by the plaintiff is to have the five parcels place. When he deposited the check. petitioners. The Lalicons claim that the NHA unreasonably ignored their letters that asked for consent to the does not appear that they have transferred said title to Reyes. with 6% interest per annum from the time of the finality of this Arco Pulp and Paper bound themselves to deliver their finished products to Megapack Container Corp. since mutual restitution is required in cases involving rescission under Article 1191. Graño (51 Phil.000 which was awarded to the Martinez heirs in Martinez vs. or. And the resale without the NHA's consent is a be required to pay the judgment for P8. June 25. and CANDIDA A. in case his right thereto should fail. containing approximately one thousand coconut trees. Santos. Alternative Obligations ESTANISLAO REYES vs. here at least within five years from the time he acquired it free from any encumbrance. if the latter suffer the lesion stated in the preceding number. 301). Inc. it was a basal assumption NHA's consent is a substantial breach. LIM.. We therefore reach the conclusion that Reyes should either have the land originally set Lalicons' request for exemption from the five-year restriction as to warrant their proceeding with the sale apart for him under clauses 4 and 8 of the contract. Lim sent a demand letter to Arco Pulp and Paper but no payment was made to him.. (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims ISSUE:Whether or not Reyes is entitled to the recovery of ownership of the five parcels of land subject due them. holding that a declaration of ownership in his own favor as against the defendants with respect to said parcels.] NHA sought annulment of the Alfaros' sale to Victor because they violated the five-year restriction against ARCO PULP AND PAPER CO. the raw materials would be supplied by Lim. owned by Eric Sy. adjudged to him in lieu of another parcel formerly supposed to contain one thousand trees and described in paragraph 8 of the contract between him and certain of the Martinez heirs. FACTS: Dan T. now estopped from asserting a contrary election to take the five parcels of land described in paragraph IX measures out the desired hold that the government felt it needed to ensure that its objective of providing of his complaint. and his right thereto has all along been recognized in the dispositions made by the court with HELD: (1) Lalicons' request for exemption from the five-year restriction was not granted.(1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by agreed to assure to him certain other land containing an equivalent number of trees in case he should so more than one-fourth of the value of the things which are the object thereof. They also claim that their failure to get NHA's prior written consent was claim for damages against the parties signatory to the contract of March 5. INC.s obligation to Lim. In our decision in Martinez vs.R.. the CA correctly ruled that such violation comes under Article doing business under the name and style of QUALITY PAPERS & PLASTIC PRODUCTS 1191 where the applicable prescriptive period is that provided in Article 1144 which is 10 years from the ENTERPRISES. but in a proviso to said clause. 302). the Lalicons very well knew that the Alfaros' sale of the property to their father. It results therefore that Reyes now has a resale of the subject property. No. for the value of the not such a substantial breach that warranted rescission. such sale provided in their contract. Quality Paper and Plastic Products. Hence. 32226 . (2) Action has not prescribed. The restriction clause is more of a condition on the sale of the property to the Alfaros rather than a condition on the mortgage constituted on However. (Arco Pulp and Paper) through its CEO and President. This when Arco Pulp and Paper and Eric Sy and entered into the memorandum of agreement. among others. No. substantial breach. DAN T. 287. elect. he should not when such consent was not immediately forthcoming. cartons. the title to the parcel of land elected by Reyes is in the heirs of Inocente Martinez and it it.R. Enterprises. it did so well within the 10-year prescriptive period. 287. beneficiary's ownerships for a reasonable length of time. Candida A. The parties allegedly agreed that Arco Pulp and Since the five-year prohibition against alienation without the NHA's written consent was annotated on the Paper would either pay Lim the value of the raw materials or deliver to him their finish products of property's title. He delivered scrap papers to Arco Pulp and Paper Company. that Reyes would obtain the thousand trees referred to. SEBASTIANA MARTINEZ ET AL. time the right of action accrues. and to obtain The RTC rendered a judgment in favor of Arco Pulp and Paper and dismissed the complained. (1291a) RULING:The prior history of the litigation shows that Reyes elected to take and hold the parcel described in clause 8. judgment. plus the value of the On the same day. to factories engaged in the (3) Lalicons and Chua were not buyers in good faith. [G. Lim alleged that when he delivered the raw materials. respondent. 1998. 1930. counted from the release of the property from the NHA mortgage. But the NHA had no obligation to grant the aforesaid property. FACTS: Estanislao Reyes filed an action against the Martinez heirs in which the plaintiff seeks. DECEMBER 29. vs. the parties contracting with Reyes . cheap housing for the homeless is not defeated by wily entrepreneurs. post-dated check. 1921. SANTOS.. paper mill business. equivalent value. Victor. Thus. and other raw materials. Since the NHA filed its action for annulment of sale on April 10. By this contract Reyes was to be given the parcel described in clause 8. Lim (Lim) works in the business of supplying scrap papers. 2014.. the NHA must return the full amount of the amortizations it received for the property. which extinguished Arco Pulp and Paper. and we are of the opinion that. and a certain Eric Sy executed a memorandum of agreement where improvements introduced on the same. The essence of the government's socialized housing program is to preserve the Graño (51 Phil. G. (2) Those agreed upon in representation of absentees. According to the memorandum. of this case. from various steps taken in the prior litigation. to recover five parcels of land. through his company. The NHA's right of action accrued on February 18. he filed a complaint for collection of sum of money. (4) Lastly. with the assurance that the check would not bounce. Resale without respect to said land. it was dishonored for being drawn against a closed account.

CV No. he would Facts: Plaintiff (SSS) approved the application of the defendant (Moonwalk) for an interim loan. . Because of this payment the obligation of Moonwalk was considered extinguished. and forthwith demanded payment from Moonwalk. The obligation between the parties was an alternative obligation. A penalty is demandable in case of non performance or late performance of the main obligation. mortgaged properties. If the demand for the payment of the penalty was finished products would be to a third person. What is sought to be enforced therefore is a penal clause of the determined by the choice of debtor who generally has the right of election. 95709 Moonwalk is not in default since there was no mora prior to the demand. obligation. Accessory obligation is dependent for its existence consented by the creditor. the principal obligation is the loan between the parties. Because of the demand for payment. finished products of equivalent value of respondent. hence obligation. the petition is DENIED in part. This choice was also shown by the terms of the memorandum of agreement. would either pay him the price of the raw materials or in the alternative. Issue/s: ISSUE: Whether the obligation between the parties was an alternative obligation. The accessory obligation of a penal clause is to enforce the main obligation of payment of the loan.968. In the present case. and by the latter’s act of cancelling the real estate mortgages executed in its favor by defendant moonwalk. during all the period when the principal obligation was still subsisting. deliver to him the finished products of equivalent value.500 as actual and compensatory. The rule on alternative Ruling: No. Moonwalk Development & Housing Corporation G. The decision in CA-G. By agreement. correctly identified the obligation between the parties as an alternative Therefore up to the time of the letter of SSS there was no demand for the payment of the penalty. when declared proper by a competent court. VICENTE 107 PHIL 340 FACTS: Plaintiff Cabarroguis. Lim argued that novation did not take place since the memorandum of agreement between After the settlement of the account. CABARROGUIS VS. SSS alleged that it committed an honest mistake in releasing Moonwalk (in the mortgage). on the existence of a principal obligation. In the letters to Moonwalk. What is sought to be recovered in this case is not the 12% interest on the loan but the 12% penalty for In an alternative obligation. According to the factual findings of the trial court and appellate court.31 to petitioner Arco Pulp and No. The choice of the debtor must also be communicated to the creditor who must receive Penal clause is an accessory obligation which the parties attach to a principal obligation for the purpose of notice of it since the object of this notice is to give the creditor… opportunity to express his consent. The right of election is contract entered into between the parties. there is more than one object.220. the debtor was no in mora in the payment of the penalty. the original contract between the parties was for respondent to deliver scrap papers worth Php7.On appeal. 1989) are same day. Arco Pulp and Paper. The last payment made by Moonwalk was based on the Statement of Account prepared by the SSS. must be a breach of the obligation either by total or partial non fulfillment or there is non-fulfillment in the petitioner Arco Pulp and Paper.00 as liquidated damages. (2) an interest of 12% on the principal obligation. extinguished when the party who may exercise that option categorically and unequivocally makes his or her choice known. and only after said notice shall the election take legal effect when not fulfilled or is irregularly or inadequately fulfilled. failure to pay on time the amortization. The loan pay an additional amount of 200. sustained physical injuries as a result of an Obligation with a Penal Clause accident when the AC jeepney of which she was a passenger hit another vehicle at a street corner. The appellate court. was released to the Moonwalk. and the fulfillment of one is sufficient. The CA reversed the RTC decision and ruled that the facts and circumstances in this case clearly showed Moonwalk replied in a letter that it had completely paid its obligations to SSS. a registered nurse and midwife. It was stipulated in the agreement that should defendant fail to complete payment within 60 days. had the option to either (1) pay the price or (2) deliver the point of time which is called mora or delay. For all papers. they exercised their options to pay the price. Moonwalk made a payment to SSS for the loan principal released to it. Defendant has paid a total amount of 1.500 leaving a balance of 1. The payment for this delivery became petitioner Arco Pulp and Paper’s obligation. therefore. obligation of real estate mortgages. with the plaintiff.000. as the debtor. the existence of an alternative obligation. exemplary and moral 1993) damages suffered by plaintiff. the real estate mortgages given by Moonwalk were released.R. SSS issued its statement of account showing total obligation of Moonwalk. Obligation was already extinguished by the payment by Moonwalk of its indebtedness to SSS obligation is governed by Article 1199 of the Civil Code. which was executed on the The demand for payment of the penal clause made by SSS in its demand letter (November 28. The memorandum declared in clear terms that the delivery of petitioner Arco Pulp and Paper’s therefore ineffective as there was nothing to demand. although there was late amortizations there was no demand made by the creditor. No. Whether or not the 12% penalty demandable even after the extinguishment of the principal obligation Whether or not Moonwalk was in default (mora) HELD: Yes. and When petitioner Arco Pulp and Paper tendered a check to respondent in partial payment for the scrap pursuant to said extinguishment. Respondent’s receipt of the check and his subsequent purposes therefor the principal obligation of Moonwalk was deemed extinguished as well as the accessory act of depositing it constituted his notice of petitioner Arco Pulp and Paper’s option to pay. after receiving the raw materials from respondent. and (3) the penalty of 12% for the late payment for after demand. In the present case. or to insuring the performance thereof by imposing on the debtor a special presentation in case the obligation is impugn the election made by the debtor. Moonwalk made a complete payment of its obligation. There Paper. To avoid court litigation. There is no mora or delay unless there is a demand. thereby extinguishing the option to deliver the finished made prior to the extinguishment because then the obligation of Moonwalk would consist of (1) principal product of equivalent value to respondent. defendant Vicente. DISPOSITIVE: WHEREFORE. SSS issued to Moonwalk the Release of Mortgage of Moonwalk’s Arco Pulp and Paper and Eric Sy was an exclusive and private agreement between them. 73345 (April 7. obligating himself to pay 2. If therefore the principal obligation does not exist the penalty being accessory cannot exist. owner and operator of the jeepney entered a compromise agreement Social Security System v. or if impugned by the latter. whereby petitioner. is AFFIRMED. for the payment of the penalty.R.

June 4. and an offer of breach of the compromise agreement. Applying the law. Court of Appeals [G. (2) when the debtor refuses to pay the penalty respondent. The Supreme Court stressed that. plaintiff must be the complaint until full payment? considered to have made such demand only from the filing of the complaint. notwithstanding repeated demands. it is evident that no interest can be awarded on the principal obligation of ISSUE: Whether or not payment by means of cashier’s check is considered payment in legal tender. and (3) when the obligor is guilty of fraud in the fulfillment of the withdrawn to satisfy the judgment obligation.200 with interest at legal interest on the amount of the penalty. the award of which is left to the discretion of the court. Tibajias filed a motion to lift the writ of execution on the obligation. in which case the creditor is entitled to interest on the amount of the penalty. Tibajia Jr. is the payment of the interest agreed upon or the legal interest. No. interest may be alleged upon damages awarded for breach of contract. A check. in the garnished funds deposited with the cashier of the Regional Trial Court of Pasig. the decision appealed from is affirmed. the discretion of the court. the only damage a creditor may recover. unless V. Eden Tan. And if there is no showing as to when demand for payment was made. whether a manager’s check or ordinary check. if the obligation consists in a sum of money. a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor.” . Defendant appealed to the Court of Defendant having refused to pay when demand was made by plaintiff. As defendant failed to pay. Extinguishment of Obligations (Payment/ Performance) contrary is stipulated (Article 2209). if the debtor incurs in delay. ground that the judgment debt had already been paid. refused to accept the payment made by the Tibajia spouses and instead insisted that imposed in the obligation. however. in addition to interest. with the modification that the interest shall be allowed on the amount of the penalty. Such as moral or exemplary damages. plaintiff brought a suit in the stipulated for default. No stipulation to the contrary was made and while defendant was sued for RULING: NO.R. takes a different aspect with respect to the penalty attached to the principal a manager’s. from the date of demand. Metro Manila be accordance with article 2209. The exceptions to this rule. Municipal Court of Davao and rendered judgment in favor of plaintiff. Wherefore.00 agreed upon having taken the place of the payment of such interest and the indemnity for damages. both the principal obligation and the penalty can be demanded by the creditor. This interest is recoverable from the time of delay that is to say. A check is not legal tender and that a creditor may validly refuse payment by check. As a rule. according FACTS:Tibajia spouses delivered to Sheriff the total money judgment in cashier’s check and cash. whether it be This case. 100290. It has been held that in obligations for the payment of a sum of money when a penalty is sanctioning the use of a check for the payment of obligations over the objection of the creditor. the penalty of 200. RULING: No. obligation. However.Private to the same article. either judicial or ISSUE: Did the lower court err in sentencing the defendant to pay interest from the date of the filing of extrajudicial. by this decision. are: (1) when the contrary is stipulated. is not legal tender. the penalty shall substitute the indemnity for damages and the payment of interests. the creditor may also claim other damages. The motion was denied. cashier’s or personal check. as provided in Article 1226 of the Civil Code. v. “We are not. It is well observe that Article 2210 of the Civil Code provides that in rate from the date of the filing of the complaint until full payment. the breach was not occasioned by fraud. the latter clearly is entitled to First Instance which ordered the defendant to pay the plaintiff the amount of 1. 1993] In obligations with a penal clause. defendant.