Solidary Obligation instrument wherein the old is ratified, by changing only the term of payment and

Art. 1211 adding other obligations not incompatible with the old one.
Inchausti v. Yulo
G.R. No. L-7721, 25 March 1914 The obligation being solidary, the remission of any part of the debt made by a
creditor in favor of one or more of the solidary debtors necessarily benefits the
FACTS: others, and therefore there can be no doubt that, in accordance with the
provision of Art. 1215, 1222, the defendant has the right to enjoy the benefits of
This suit is brought for the recovery of a certain sum of money, the balance of a the partial remission. At present judgment can be rendered only as to P112,500.
current account opened by the firm of Inchausti & Company with Teodor Yulo
and after his death continued by Gregorio Yulo as principal representative of his
children. On Aug.12, 1909, Gregorio Yulo, in representation of his 3 siblings,
executed a notarial instrument, ratifying all the contents of the prior document of
Jan.26, 1908, severally and joint acknowledged their indebtedness for
P253,445.42, 10 % per annum, 5 installments. Plaintiff brought an action
againsta Gregorio for the payment of the said balance due. But on May 12, 1911,
3 siblings executed another instrument in recognition of the debt, reduced to
P225,000, interest reduced to 6% per annum, installments increased to 8.

They obligated themselves to pay but failed to pay right at the first instalment.
An action was brought against Gregorio Yulo. However, another notarial
instrument was executed by the Yulos inrecognition of the debt and the
obligation of payment, and then asking plaintiff to include in the filed suit Pedro
Yulo, and in that case, they’d procure all means for the judgment to be in favour
of the plaintiff. However, the court ruled in favour of Gregorio instead. Court
reversed the judgment and held that plaintiff cansue Gregorio Yulo alone since
the Yulos obligated themselves in solidum.

ISSUE:

Whether or not the contract constitute novation.

RULING:

The contract of May 12, 1911 does not constitute a novation of the former one of
Aug.12, 1909, with respect to the other debtors who executed this contract. First,
“in order that an obligation may be extinguished by another which substitutes it,
it is necessary that it should be so expressly declared or that the old and the new
be incompatible in all points(art. 1292). It is always necessary to state that it is
the intentionof the contracting parties to extinguish the former obligation by the
new one.” The obligation to pay a sum of money is not novated in a new
Art. 1217 to 1220
Quiombing v. CA
G.R. No. 93010, 30 August 1990
FACTS:
On August 30, 1983, Nicencio Tan Quiombing and Dante Biscocho, as the First
Party, jointly and severally bound themselves in a “Construction and Service
Agreement” to construct a house for private respondents Francisco and
Manuelita Saligo, as the Second Party, for the contract price of P137,940.00,
which the latter agreed to pay. On October 10, 1984, Quiombing and Manuelita
Saligo entered into a second written agreement under which the latter
acknowledged the completion of the house and undertook to pay the balance of
the contract price in the manner prescribed in the said second agreement. On
November 19, 1984, Manuelita Saligo signed a promissory note for P125,363.50
representing the amount still due from her and her husband, payable on or
before December 31, 1984, to Nicencio Tan Quiombing.
On October 9, 1986, Quiombing filed a complaint for recovery of the said
amount, plus charges and interests, which the private respondents had
acknowledged and promised to pay but had not, despite repeated demands.
Instead of filing an answer, the defendants moved to dismiss the complaint on
February 4, 1987, contending that Biscocho was an indispensable party and
therefore should have been included as a co-plaintiff.
ISSUE:
Whether or not Biscocho is an indispensable party in the case.
RULING:
Article 1212 of the Civil Code provides:
Each one of the solidary creditors may do whatever may be useful to the others,
but not anything which may be prejudice to the latter. Suing for the recovery of
the contract price is certainly a useful act that Quiombing could do by himself
alone.
A joint obligation is one in which each of the debtors is liable only for a
proportionate part of the debt, and each creditor is entitled only to a
proportionate part of the credit. A solidary obligation is one in which each debtor
is liable for the entire obligation, and each creditor is entitled to demand the
whole obligation. Hence, in the former, each creditor can recover only his share
of the obligation, and each debtor can be made to pay only his part; whereas, in
the latter, each creditor may enforce the entire obligation, and each debtor may
be obliged to pay it in full.
The essence of active solidarity consists in the authority of each creditor to claim
and enforce the rights of all, with the resulting obligation of paying every one
what belongs to him; there is no merger, much less a renunciation of rights, but
only mutual representation.
The question of who should sue the private respondents was a personal issue
between Quiombing and Biscocho in which the spouses Saligo had no right to
interfere. It did not matter who as between them filed the complaint because the
private respondents were liable to either of the two as a solidary creditor for the
full amount of the debt. Full satisfaction of a judgment obtained against them by
Quiombing would discharge their obligation to Biscocho, and vice versa; hence, it
was not necessary for both Quiombing and Biscocho to file the complaint.
Inclusion of Biscocho as a co-plaintiff, when Quiombing was competent to sue by
himself alone, would be a useless formality.
Parenthetically, it must be observed that the complaint having been filed by the
petitioner, whatever amount is awarded against the debtor must be paid
exclusively to him, pursuant to Article 1214. This provision states that “the
debtor may pay any of the solidary creditors; but if any demand, judicial or
extrajudicial, has been made by any one of them, payment should be made to
him.
If Quiombing eventually collects the amount due from the solidary debtors,
Biscocho may later claim his share thereof, but that decision is for him alone to
make. It will affect only the petitioner as the other solidary creditor and not the
private respondents, who have absolutely nothing to do with this matter. As far
as they are concerned, payment of the judgment debt to the complainant will be
considered payment to the other solidary creditor even if the latter was not a
party to the suit.
Although he signed the original Construction and Service Agreement, Biscocho
need not be included as a co-plaintiff in the complaint filed by the petitioner
against the private respondents. Quiombing as solidary creditor can by himself
alone enforce payment of the construction costs by the private respondents and
as a solidary debtor may by himself alone be held liable for any possible breach
of contract that may be proved by the private respondents. In either case, the
participation of Biscocho is not at all necessary, much less indispensable.
Inciong v. CA
G.R. No. 96405, 26 June 1996
FACTS:
In February 1983, Rene Naybe took out a loan from Philippine Bank of
Communications (PBC) in the amount of P50k. For that he executed a promissory
note in the same amount. Naybe was able to convince Baldomero Inciong, Jr. and
Gregorio Pantanosas to co-sign with him as co-makers. The promissory note went
due and it was left unpaid. PBC demanded payment from the three but still no
payment was made. PBC then sue the three but PBC later released Pantanosas from
its obligations. Naybe left for Saudi Arabia hence can’t be issued summons and the
complaint against him was subsequently dropped. Inciong was left to face the suit.
He argued that that since the complaint against Naybe was dropped, and that
Pantanosas was released from his obligations, he too should have been released.a
ISSUE:
Whether or not Inciong should be held liable.
RULING:
Yes. Inciong is considering himself as a guarantor in the promissory note. And he was
basing his argument based on Article 2080 of the Civil Code which provides that
guarantors are released from their obligations if the creditors shall release their
debtors. It is to be noted however that Inciong did not sign the promissory note as a
guarantor. He signed it as a solidary co-maker.
A guarantor who binds himself in solidum with the principal debtor does not become
a solidary co-debtor to all intents and purposes. There is a difference between a
solidary co-debtor and a fiador in solidum (surety). The latter, outside of the liability
he assumes to pay the debt before the property of the principal debtor has been
exhausted, retains all the other rights, actions and benefits which pertain to him by
reason of the fiansa; while a solidary co-debtor has no other rights than those
bestowed upon him.
Because the promissory note involved in this case expressly states that the three
signatories therein are jointly and severally liable, any one, some or all of them may
be proceeded against for the entire obligation. The choice is left to the solidary
creditor (PBC) to determine against whom he will enforce collection. Consequently,
the dismissal of the case against Pontanosas may not be deemed as having
discharged Inciong from liability as well. As regards Naybe, suffice it to say that the
court never acquired jurisdiction over him. Inciong, therefore, may only have recourse
against his co-makers, as provided by law.
Vigilla v. Phil. College of Criminology, Inc.
G.R. No. 200094, 10 June 2013
FACTS:
The petitioners work for the Philippine College of Criminology Inc. (PCCr) as janitors,
janitress, and supervisor in its maintenance department. The petitioners were made
to understand by the respondent PCCr that they are under the Metropolitan Building
Services, Inc. (MBMSI) which is a corporation engaged in providing janitorial services.
PCCr terminated the services of MBMSI on 2009 which resulted in the dismissal of
the petitioners. An illegal dismissal complaint was then filed against PCCr by the
petitioners contending that it is their real employer and not MBMSI. Subsequently,
the PCCr submitted to the Labor Arbiter waivers, releases, and quitclaims that were
executed by the petitioners in favor to MBMSI.
The Labor Arbiter and NLRC ruled in favor of the petitioner, however upon filing the
petition for review on certiorari before the Court of Appeals, the CA ruled that the
quitclaims, releases, and waivers executed by the petitioners in favor to MBMSI
redounds to the benefit of PCCr by virtue of solidary liability under Article 1217 of the
New Civil Code. The petitioners contend that under Article 106 of the Labor Code a
labor-only contractor’s liability is not solidary as it is the employer who should be
directly responsible to the supplied worker.
ISSUE:
Whether or not the quitclaims, releases, and waivers executed by the petitioners in
favor to MBMSI redounds to the benefit of PCCr?
RULING:
Yes. The Supreme Court held that the basis of the solidary liability of the principal
with those engaged in labor-only contracting is the last paragraph of Article 106 of
the Labor Code that provides, “In such cases of labor-only contracting, the person or
intermediary shall be considered merely as an agent of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were
directly employed by him.”
It also pointed out D.O. No. 18-A, s. 2011 section 27 providing for the effects
of labor-only contracting “where upon the finding by competent authority of labor-
only contracting shall render the principal jointly and severally liable with the
contractor to the latter’s employees, in the same manner and extent that the principal
is liable to employees directly hired by him/her, as provided in Article 106 of the
Labor Code.
Hence, the PCCr’s solidary liability was already expunged by virtue of the
releases, waivers and quitclaims executed by the petitioners in favor of MBMSI by
virtue of Article 1217 of the Civil Code providing that “payment made by one of the
solidary debtors extinguishes the obligation.”
Diamond Builders v. Country Bankers
G.R. No. 171820, 13 December 2007
FACTS:
Rogelio Acidre (sole proprietor of Diamond Builders) was sued by Marceliano
Borja for breach of his obligation to construct a residential and commercial
building.
Rogelio entered into a compromise agreement with Borja.
Rogelio in order to secure himself entered into surety bond with Country
Bankers. Under the Surety Bond, Rogelio and his spouse and other petitioners,
in this case, signed an indemnity agreement consenting to their joint and several
liabilities to Country Bankers should the surety bond be executed uponRogelio
violates the compromise agreement.
A writ of execution was issued against Country Bankers for violation of Rogelio to
the compromise agreement.
Country bankers paid the surety bond and ask for reimbursement from
petitioners. Petitioners refused to pay. Country bankers filed a complaint about
the sum of money against petitioners.
ISSUE:
W/N Country Bankers is entitled to reimbursement?
RULING:
YES. Art. 1217 of the Civil Code recognizes the right of reimbursement from a
co-debtor (principal co-debtor in case of suretyship) in favor of one who paid the
surety.
Only payments made after the obligation has prescribed or became illegal shall
not entitle a solidary debtor for reimbursement (in accordance with Art. 1218).
Obligation with a Penal Clause
Country Bankers Insurance v. CA
G.R. No. 85161, 9 September 1991
FACTS:
Sy (petitioner) leased theaters owned by Oscar Ventanilla Enterprises
Corporation (OVEC) (respondent). Despite numerous demands and a
supplemental agreement, Petitioner failed to pay the monthly rentals and
amusement taxes as stipulated in their contract. Respondent thereafter
repossessed said properties in accordance with their written agreement. Sy filed
to enjoin said action of OVEC.
ISSUE:
WON the repossession is valid.
RULING:
Yes. The repossession is valid as the same constitutes a penal clause.
Article 1226 of the Civil Code provides that as a general rule, in obligations with
a penal clause, the penalty shall substitute the indemnity for damages and the
payment of interests in case of non-compliance.
There is no merit in petitioners’ argument that the forfeiture clause stipulated in
the lease agreement would unjustly enrich the respondent at the expense of
petitioners is contrary to law, morals, good customs, public order or public
policy. A provision which calls for the forfeiture of the remaining deposit still in
the possession of the lessor, without prejudice to any other obligation still owing,
in the event of the termination or cancellation of the agreement by reason of the
lessee’s violation of any of the terms and conditions of the agreement is a penal
clause that may be validly entered into. The petition is denied.
Defenses available to a solidary debtor against the creditor – Art. 1222 the provisions of Section 21, Rule 3 of the Rules of Court. As held in Calma v.
Alipio v. CA Tañedo, after the death of either of the spouses, no complaint about the
G.R. No. 134100, 29 September 2000 collection of indebtedness chargeable against the conjugal partnership
FACTS:
can be brought against the surviving spouse. Instead, the claim must be made in
(1) Respondent Romeo Jaring was the lessee of a 14.5 hectare fishpond in Barito, the proceedings for the liquidation and settlement of the conjugal property. The
Mabuco, Hermosa, Bataan. The lease was for a period of five years ending on reason for this is that upon the death of one spouse, the powers of
September 12, 1990. On June 19, 1987, he subleased the fishpond, for the administration of the surviving spouse ceases and is passed to the administrator
remaining period of his lease, to the spouses Placido and Purita Alipio and the appointed by the court having jurisdiction over the settlement of estate
Manuel Spouses. proceedings. Indeed, the surviving spouse is not even a de facto administrator
(2) The sublessees only satisfied a portion thereof, leaving an unpaid balance of such that conveyances made by him of any property belonging to the partnership
P50,600.00. prior to the liquidation of the mass of conjugal partnership property is void. the
inventory of the Alipios’ conjugal property is necessary before any claim
(3) Purita Alipio moved to dismiss the case on the ground that her husband, chargeable against it can be paid. Needless to say, such power exclusively
Placido Alipio, had passed away on December 1, 1988. pertains to the court having jurisdiction over the settlement of the decedent’s
RTC: Surviving spouse should pay. The trial court denied petitioner’s motion on estate and not to any other court.
the ground that since petitioner was herself a party to the sublease contract, she
could be independently impleaded in the suit together with the Manuel spouses (2) The obligation is joint. Indeed, if from the law or the nature or the wording of
and that the death of her husband merely resulted in his exclusion from the the obligation the contrary does not appear, an obligation is presumed to be only
case. joint, i.e., the debt is divided into as many equal shares as there are debtors,
each debt being considered distinct from one another. Clearly, the liability of the
CA: Surviving spouse should pay. It is noted that all the defendants, including sublessees is merely joint. Since the obligation of the Manuel and Alipio spouses
the deceased, were signatories to the contract of sub-lease. The remaining is chargeable against their respective conjugal partnerships, the unpaid balance
defendants cannot avoid the action by claiming that the death of one of the of P50,600.00 should be divided into two so that each couple is liable to pay the
parties to the contract has totally extinguished their obligation. amount of P25,300.00.

ISSUE:

(1) Whether a creditor can sue the surviving spouse for the collection of a debt
which is owed by the conjugal partnership of gains, or

(2) Whether such claim must be filed in proceedings for the settlement of the
estate of the decedent.

RULING:

(1) Surviving spouse is not liable. The conjugal partnership of gains is liable. It
is clear that Climaco had a cause of action against the persons named as
defendants therein. It was, however, a cause of action for the recovery of
damages, that is, a sum of money and the corresponding action is, unfortunately,
one that does not survive upon the death of the defendant, in accordance with

Lafarge Cement Phil v. Continental Cement
G.R. No. 155173, 23 November 2004
FACTS:
In the Letter of Intent (LOI) executed by both parties, Petitioner Lafarge Cement
Philippines, Inc. on behalf of its affiliates and other qualified entities agreed to
purchase the cement business of Respondent Continental Cement Corporation.
Both parties entered into a Sale and Purchase Agreement knowing that
respondent has a case pending with the Supreme Court. In anticipation of future
liability, the parties allegedly agreed to retain from the purchase price a certain
amount to be deposited in an account for payment to the complainant who sued
respondent herein. Upon the finality of the decision of the said case wherein
liability was imposed to the respondent, petitioner allegedly refused to apply the
sum for payment despite repeated instructions of the Respondent. Respondent
filed a Complaint with Application for Preliminary Attachment against
petitioners.
Petitioners filed their Answer and Compulsory Counterclaims denying all the
allegations and alleged that respondent`s majority stockholder (Lim) which is also
the company president and the corporate secretary (Mariano), influences
respondent to file the baseless complaint and procured the Writ of Attachment in
bad faith. Hence, petitioners prayed that both the president and corporate
secretary be held jointly and solidarily liable with respondent. RTC dismissed
petitioner`s counterclaims.
The general rule that a defendant cannot by a counterclaim bring into the action
any claim against persons other than the plaintiff admits of an exception under
Section 14, Rule 6 which provides that when the presence of parties other than
those to the original action is required for the granting of complete relief in the
determination of a counterclaim or cross-claim, the court shall order them to be
brought in as defendants, if jurisdiction over them can be obtained.
The foregoing procedural rules are founded on practicality and convenience. They
are meant to discourage duplicity and multiplicity of suits. This objective is
negated by insisting — as the court a quo has done — that the compulsory
counterclaim for damages be dismissed, only to have it possibly re-filed in a
separate proceeding. Respondents Lim and Mariano are real parties in interest to
the compulsory counterclaim; it is imperative that they be joined therein.
Moreover, in joining Lim and Mariano in the compulsory counterclaim,
petitioners are being consistent with the solidary nature of the liability alleged
therein.
WHEREFORE, the Petition is GRANTED and the assailed Orders REVERSED.
The court of origin is hereby ORDERED to take cognizance of the counterclaims
pleaded in petitioners Answer with Compulsory Counterclaims and to cause the
service of summons on Respondents Gregory T. Lim and Anthony A. Mariano.

ISSUE:

May defendants in civil cases implead in their counterclaims persons who were
not parties to the original complaint?

RULING:

Counterclaims are defined in Section 6 of Rule 6 of the Rules of Civil Procedure

as any claim which a defending party may have against an opposing party. They
are generally allowed in order to avoid a multiplicity of suits and to facilitate the
disposition of the whole controversy in a single action, such that the defendants
demand may be adjudged by a counterclaim rather than by an independent suit.
The only limitations to this principle are (1) that the court should have
jurisdiction over the subject matter of the counterclaim, and (2) that it could
acquire jurisdiction over third parties whose presence is essential for its
adjudication.
Divisible and Indivisible Obligations
Capalla v. COMELEC
G.R. No. 201112, 23 October 2012
FACTS:
The Comelec and Smartmatic-TIM entered into a Contract for the Provision of an
Automated Election System for the May 10, 2010 Synchronized National and
Local Elections (AES Contract) which is a Contract of Lease with Option to
Purchase (OTP) the goods listed therein consisting of the Precinct Count Optical
Scan (PCOS), both software and hardware. The Comelec opted not to exercise the
same except for 920 units of PCOS machines. Subsequently, the Comelec issued
Resolution resolving to seriously consider exercising the OTP subject to certain
conditions. It issued another Resolution resolving to exercise the OTP in
accordance with the AES Contract.Later, the COMELEC issued Resolution
resolving to accept Smartmatic-TIM’s offer to extend the period to exercise the
OTP. The agreement on the Extension of the OTP under the AES Contract
(Extension Agreement) was eventually signed. Finally, it issued Resolution
resolving to approve the Deed of Sale between the Comelec and Smartmatic-TIM
to purchase the latter’s PCOS machines to be used in the upcoming elections.
The Deed of Sale was forthwith executed.
Clearly, under the AES Contract, the Comelec was given until December 31,
2010 within which to exercise the OTP the subject goods listed therein including
the PCOS machines. The option was, however, not exercised within said period.
But the parties later entered into an extension agreement giving the Comelec
until March 31, 2012 within which to exercise it. With the extension of the
period, the Comelec validly exercised the option and eventually entered into a
contract of sale of the subject goods. The extension of the option period, the
subsequent exercise thereof, and the eventual execution of the Deed of Sale
became the subjects of the petitions challenging their validity in light of the
contractual stipulations of respondents and the provisions of RA 9184.
As the Court simply held in the assailed decision that the moment the
performance security is released, the contract would have ceased to exist.
However, since it is without prejudice to the surviving provisions of the contract,
the warranty provision and the period of the option to purchase survive even
after the release of the performance security. While these surviving provisions
may have different terms, in no way can we then consider the provision on the
OTP separate from the main contract of lease such that it cannot be amended
under Article 19. Thus, not only the option and warranty provisions survive but
the entire contract as well. In light of the contractual provisions, the SC
sustained the amendment of the option period.

ISSUE:

Whether or not assailed resolutions and transactions entered are valid.

RULING:

Yes. The SC decided in favor of respondents and placed a stamp of validity on the
assailed resolutions and transactions entered into. Based on the AES Contract,
the Court sustained the parties’ right to amend the same by extending the option
period. Considering that the performance security had not been released to
Smartmatic-TIM, the contract was still effective which can still be amended by
the mutual agreement of the parties, such amendment being reduced in writing.
To be sure, the option contract is embodied in the AES Contract whereby the
Comelec was given the right to decide whether or not to buy the subject goods
listed therein under the terms and conditions also agreed upon by the parties.
Obligation with a Penal Clause performance of the so-called “special condition” and thus encourage home
building among lot owners in the Urdaneta Village.

Makati Dev’t Corp. v. Empire Insurance Co.
G.R. No. L-21780, 30 June 1967
FACTS:
On March 31, 1959, the Makati Development Corporation sold to Rodolfo P.
Andal a lot. A so-called “special condition” contained in the deed of sale provides
that “the VENDEE/S shall commence the construction and complete at least
50% of his/her/their/its residence on the property within two (2) years to the
satisfaction of the VENDOR and, in the event of his/her/their/its failure to do so
will be forfeited in favor of the VENDOR by the mere fact of failure of the
VENDEE/S to comply with this special condition.” To ensure faithful compliance
with this “condition,” Andal gave a surety bond the sum of P12,000 in case Andal
failed to comply with his obligation under the deed of sale.
Considering that a house had been built shortly after the period stipulated, the
substantial, if tardy, performance of the obligation, having in view the purpose of
the penal clause, fully justified the trial court in reducing the penalty.
The stipulation, in this case, to commence the construction and complete at least
50 percent of the vendee’s house within two years cannot be construed as
imposing a strictly personal obligation on Andal. To adopt such a construction
would be to limit Andal’s right to dispose of the lot. There is nothing in the deed
of sale restricting Andal’s right to sell the lot at least within the two-year period
and we think it plain that a reading of such a limitation on one of the rights of
ownership must rest on more explicit language in the contract. It cannot be left
to mere inference.

Andal did not build his house; instead, he sold the lot to Juan Carlos. As neither
Andal nor Juan Carlos built a house on the lot within the stipulated period, the
Makati Development Corporation, sent a notice of claim to the Empire Insurance
Co. advising it of Andal’s failure to comply with his undertaking. Demand for the
payment was refused, whereupon the Makati Development Corporation filed a
complaint against the Empire Insurance Co. to recover on the bond in the full
amount, plus attorney’s fees. In due time, the Empire Insurance Co. filed its
answer with a third-party complaint against Andal.

ISSUE:
WHETHER OR NOT Andal is entitled to pay the surety bond of Php12,000 as a
penal sanction.

RULING:
No. The so-called “special condition” in the deed of sale is, in reality, an
obligation1 — to build a house at least 50 percent of which must be finished
within two years. It was to secure the performance of this obligation that a penal
clause was inserted. Here the trial court found that Juan Carlos had finished
more than 50 percent of his house or barely a month after the expiration of the
stipulated period. There was, therefore, a partial performance of the obligation
within the meaning and intendment of article 1229. The penal clause, in this
case, was inserted not to indemnify the Makati Development Corporation for any
damage it might suffer as a result of a breach of the contract but rather compel
Chapter 4 Extinguishment of Obligation Check acceptance implied an undertaking of due diligence in presenting it for
payment. If the person who receives it sustains loss by want of this diligence, this
Art. 1249 will operate as the actual payment of the debt or obligation for which the check
was given. The debtor cannot now be held liable if non-presentment of the check
was through the fault of the creditor.
Papa v. Valencia
G.R. No. 105188, 23 January 1998

FACTS:

A parcel of land was allegedly sold to respondent Penarroyo by petitioner acting

as attorney-in-fact of Anne Butte. The purchaser, through Valencia, made a
check payment in the amount of P40,000 and in cash, P5,000. Both were
accepted by petitioner as evidenced by various receipts. It appeared that the said
property has already been mortgaged to the bank previously together with other
properties of Butte.

When Butte passed away, the Penarroyo demanded that the title to the property
be conveyed to him, however, the bank refused. Hence, the filing of a suit for
specific performance by private respondents against the petitioner. The lower
court ruled in favor of the private respondents and ordered herein petitioner the
conveyance or the property or if not, its payment. The petitioner appealed the
lower court’s decision alleging that the sale was not consummated as he never
encashed the check given as part of the purchase price.

The Court of Appeals affirmed with modifications the lower court’s decision. It
held that there was a consummated sale of the subject property despite.

ISSUE:

Whether or not the check is a valid tender of payment.

Whether or not there was a valid sale of the subject property

RULING:

Yes. While it is true that the delivery of check produces payment only when
encashed (pursuant to Art. 1249, Civil Code), the rule is otherwise if the debtor is
prejudiced by the delay in presentment. In this case, the petitioner alleges that
he did not present the check, ten years after the same was paid to him as part of
the purchase price of the property.
 whether a manager’s check or ordinary check, is not legal tender, and an offer of
PAL v. Court of Appeals a check in payment of a debt is not a valid tender of payment and may be refused
receipt by obligee or creditor. Mere delivery of checks does not discharge the
obligation under a judgment. The obligation is not extinguished and remains
G.R. No. L-49188, 30 January 1990 suspended until the payment by the commercial document is actually realized
(Art. 1249, Civil Code, par. 3).
FACTS:

Amelia Tan was found to have been wronged by Philippine Air Lines (PAL). She
filed her complaint in 1967. After ten (10) years of protracted litigation in the
Court of First Instance and the Court of Appeals, Ms. Tan won her case. Almost
twenty-two (22) years later, Ms. Tan has not seen a centavo of what the courts
have solemnly declared as rightfully hers. Through absolutely no fault of her
own, Ms. Tan has been deprived of what, technically, she should have been paid
from the start, before 1967, without the need of her going to court to enforce her
rights. And all because of PAL did not issue the checks intended for her, in her
name. Petitioner PAL filed a petition for review on certiorari the decision of Court
of Appeals dismissing the petition for certiorari against the order of the Court of
First Instance (CFI) which issued an alias writ of execution against them.
Petitioner alleged that the payment in check had already been effected to the
absconding sheriff, satisfying the judgment.

ISSUE:

Whether or Not payment made to the absconding sheriff by check in his name
extinguishes the judgment debt.

RULING:

No. Payment must be made to the obligee himself or to an agent having

authority, express or implied, to receive the particular payment. The payment
made by the petitioner to the absconding sheriff was not in cash or legal tender
but in checks. The checks were not payable to Amelia Tan or Able Printing Press
but to the absconding sheriff. In the absence of an agreement, either express or
implied, payment means the discharge of a debt or obligation in money and
unless the parties so agree, a debtor has no rights, except at his own peril, to
substitute something in lieu of cash as a medium of payment of his debt. Strictly
speaking, the acceptance by the sheriff of the petitioner’s checks, in the case at
bar, does not, per se, operate as a discharge of the judgment debt. The check as
a negotiable instrument is only a substitute for money and not money, the
delivery of such an instrument does not, by itself, operate as payment. A check,
Application of Payments contingent and singular, which in this case is the full and faithful compliance
with the terms of the contract of conditional purchase and sale of reparations
goods. The obligation included the payment, not only of the first installment but
Reparations Commission v. Universal Deep Sea Fishing also of the ten (10) equal yearly installments. The amount of P10,000.00 was,
indeed, deducted from judgment, amount of P53,643.00, but then judgment, first
of judgment, ten (10) equal yearly installments had also accrued, hence, no error
A.M. No. 21901-96, 27 June 1978 was committed to holding judgment, surety company to judgment, the full extent
of its undertaking.
FACTS:

Universal Deep Sea Fishing acquired 6 trawl boats by the Reparations

Commission to be delivered two at a time and a Contract Purchase and Sale of
Reparations Goods between the parties. The Manila Surety & Fidelity Co. Inc.
was the surety of UNIVERSAL to indemnify the Reparations in case of damage or
loss. Now after the Reparations have given all the boats they were now filing a
suit against UNIVERSAL and the Manila Surety to pay the amount of the boats.
The surety company now contends that the action is premature, but set up a
cross-claim against UNIVERSAL for reimbursement of whatever amount of money
it may have to pay judgment, plaintiff by reason of judgment, complaint,
including interest, and for judgment, collection of accumulated and unpaid
premiums on judgment, bonds with interest thereon.

ISSUE:

Whether or not the paying of the down payment by UNIVERSAL to Reparations

Commission guaranteed indebtedness.

RULING:

Surety company, under Article 1254 of judgment, Civil Code, where there is no
imputation of payment made by either judgment, debtor or creditor, The debt
which is the most onerous to the debtor shall be deemed to have been satisfied,
so that the amount of P10,000.00 paid by UNIVERSAL as down payment on the
purchase of the, M/S UNIFISH 1 and M/S UNIFISH 2 should be applied to the
guaranteed portion of the debt, this releasing part of the liability hence the
obligation of the surety company shall be only P43,643.00, instead of
P53,643.00.

The rules contained in Articles 1252 to 1254 of judgment, Civil Code apply to a
person owing several debts of judgment, same kind to a single creditor. They
cannot be made applicable to a person whose obligation as a mere surety is both
Application of Payments
Paculdo v. Regalado
G.R. No. 123855, 20 November 2000
FACTS:
Petitioner Nereo Paculdo and respondent Bonifacio Regalado entered into a
contract of lease over a parcel of land. Aside from the lease, petitioner leased
eleven (11) other property from the respondent, ten (10) of which was located
within the Fairview compound, while the eleventh was located along Quirino
Highway Quezon City. Petitioner also purchased from respondent eight (8) units
of heavy equipment and vehicles.
In the case at bar, at the time petitioner made the payment, he made it clear to
the respondent that they were to be applied to his rental obligations on the
Fairview wet market property. Though he entered into various contracts and
obligations with respondent, all the payments made, were to be applied to rental
and security deposit on the Fairview wet market property. However, respondent
applied a big portion of the amount paid by petitioner to the satisfaction of an
obligation which was not yet due and demandable which is the payment of heavy
equipment.
Under the law, if the debtor did not declare at the time he made the payment to
which of his debts with the creditor the payment is to be applied, the law
provided the guideline; i.e. no payment is to be applied to a debt which is not yet
due and the payment has to be applied first to the debt which is most onerous to
the debtor.

On account of petitioner’s failure to pay rent for the month of May and the
monthly rental for the months of June and July the respondent sent two demand
letters to petitioner demanding payment of the back rentals, and if no payment
was made within fifteen (15) days from the receipt of the letter, it would cause the
cancellation of the lease contract. Without the knowledge of petitioner,
respondent mortgaged the land subject of the lease contract, including the
improvements which petitioner introduced into the land amounting to Monte de
Piedad Savings Bank, as a security for a loan. Respondent refused to accept
petitioner’s daily rental payments.

ISSUE:

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

RULING:

NO, the petitioner was not in arrears in the payment of rentals on the subject
property at the time of the filing of the complaint about ejectment.

As provided in Article 1252 of the Civil Code, the right to specify which among
his various obligations to the same creditor is to be satisfied first rest with the
debtor.
Payment by Cession / Dation in Payment the third person who contracted is unaware of the authority conferred by the
principal on the agent and he has been deceived, the latter is liable for damages.

Development Bank of the Philippines v. Court of Appeal
G.R. No. 118342, 5 January 1998
FACTS:
Juan B. Dans, together with his wife Candida, his son and daughter-in-law,
applied for a loan of P500,000.00 with the Development Bank of the Philippine
on May 1987. The loan was approved by the bank in August 1987 but in the
reduced amount of P300,000. As the principal mortgagor, Dans, then 76 years of
age, was advised by DBP to obtain a mortgage redemption insurance (MRI) with
the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool).
On September 3, 1987, Dans died of cardiac arrest. DBP MRI notified DBP was
not eligible for the coverage of the insurance for he was beyond the maximum age
of 60. The wife, Candida, filed a complaint to the RTC against DBP and DBP MRI
pool for the ‘Collection of Sum of money with Damages’. Prior to that, DBP offered
Mrs. Dans a refund of the MRI payment but she refused for insisting that the
family must receive the amount equivalent of the loan. DBP also offered and ex
gratia for a settlement worth P30,000 but Mrs. Dans refused to take it.
The DBP’s liability, however, cannot be for the entire value of the insurance
policy. To assume that were it not for DBP’s concealment of the limits of its
authority, Dans would have secured an MRI from another insurance company,
and therefore would have been fully insured by the time he died, is highly
speculative. Considering his advanced age, there is no absolute certainty that
Dans could obtain an insurance coverage from another company. It must also be
noted that Dans died almost immediately, i.e., on the nineteenth day after
applying for the MRI, and on the twenty-third day from the date of release of his
loan.
Wherefore, petitioner DBP is ORDERED: (1) to REIMBURSE respondent Estate of
Juan B. Dans the amount of P1,476.00 with legal interest from the date of the
filing of the complaint until fully paid; and (2) to PAY said Estate the amount of
Fifty Thousand Pesos (P50,000.00) as moral damages and the amount of Ten
Thousand Pesos (P10,000.00) as attorney’s fees. With costs against petitioner.

ISSUE:

Whether or not the DBP MRI Pool should be held liable on the ground that the
contract was already perfected.

RULING:

No. DBP MRI Pool is not liable. Though the power to approve the insurance is
lodged to the pool, it did not approve the application of Mr. Dans. Thus, there
was no perfected contract between the insurance pool and Mr. Dans.

In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and
the second as an insurance agent. As an insurance agent, DBP made believed
that the family already fulfilled the requirements of the said insurance although
DBP had a full knowledge that the application would never be approved. DBP
acted beyond the scope of its authority for accepting applications for the MRI. If

Filinvest Credit Corporation v. Philippine Acetylene
G.R. No. L-50449, 10 January 1982
FACTS:
Philippine Acetylene Co., Inc. purchased from Alexander Lima motor vehicle
described as Chevorlet 1969 model for P55,247.80 with a down payment of
P20,000.00 and the balance of P35,247.80 payable, under the terms and
conditions of the promissory note at a monthly installment of P1,036.70 for
thirty-four (34) months, due and payable on the first day of each month starting
December 1971 through and inclusive September 1, 1974. As security for the
payment of the said promissory note, the appellant executed a chattel mortgage
over the same motor vehicle in favor of said Alexander Lim. Subsequently,
Alexander Lim assigned to the Filinvest Finance Corporation all his rights, title,
and interests in the promissory note and chattel mortgage by virtue of a Deed of
Assignment.
Appellant failed to comply with the terms and conditions set forth in the
promissory note and chattel mortgage since it had defaulted in the payment of
nine successive installments. Appellee then sent a demand letter whereby its
counsel demanded that appellant remit the amount in full in addition to
stipulated interest and charges or return the mortgaged property to his client’s
office within five (5) days from the date of this letter during office hours.
Appellant wrote back advising appellee of its decision to “return the mortgaged
property and accordingly, the mortgaged vehicle was returned to the appellee
together with the document “Voluntary Surrender with Special Power of Attorney
To Sell”.
Appellee wrote a letter to appellant informing the latter that appellee cannot sell
the motor vehicle as there were unpaid taxes on the said vehicle requested the
appellant to update its account by paying the installments in arrears and
accruing interest. Appellee offered to deliver back the motor vehicle to the
appellant but the latter refused to accept it, so appellee instituted an action for
collection of a sum of money with damages in the Court of First Instance of
Manila.
ISSUE:
Whether or not the return of the mortgaged motor vehicle to the appellee by
virtue of its voluntary surrender by the appellant totally extinguished and/or
canceled its obligation to the appellee.
RULING:
Appellant’s contention devoid of persuasive force. The mere return of the
mortgaged motor vehicle by the mortgagor, the herein appellant, to the
mortgagee, the herein appellee, does not constitute dation in payment or dacion
en pago in the absence, express or implied of the true intention of the parties.
Dacion en pago is the transmission of the ownership of a thing by the debtor to
the creditor as an accepted equivalent of the performance of obligation. In dacion
en pago, as a special mode of payment, 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 debt. 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 innovation
to have the effect of totally extinguishing the debt or obligation.
The evidence on the record fails to show that the mortgagee, the herein appellee,
consented, or at least intended, that the mere delivery to, and acceptance by him,
of the mortgaged motor vehicle be construed as actual payment, more specifically
dation in payment or dacion en pago. The fact that the mortgaged motor vehicle
was delivered to him does not necessarily mean that ownership thereof, as
juridically contemplated by dacion en pago, was transferred from appellant to
appellee. In the absence of clear consent of appellee to the proferred special mode
of payment, there can be no transfer of ownership of the mortgaged motor vehicle
from appellant to appellee. If at all, only transfer of possession of the mortgaged
motor vehicle took place, for it is quite possible that appellee, as mortgagee,
merely wanted to secure possession to forestall the loss, destruction, fraudulent
transfer of the vehicle to third persons, or its being rendered valueless if left in
the hands of the appellant.
A more solid basis of the true intention of the parties is furnished by the
document executed by appellant captioned “Voluntary Surrender with Special
Power of Attorney To Sell”. An examination of the language of the document
reveals that the possession of the mortgaged motor vehicle was voluntarily
surrendered by the appellant to the appellee authorizing the latter to look for a
buyer and sell the vehicle in behalf of the appellant who retains ownership
thereof, and to apply the proceeds of the sale to the mortgage indebtedness, with
the undertaking of the appellant to pay the difference, if any, between the selling
price and the mortgage obligation. With the stipulated conditions as stated, the
appellee, in essence was constituted as a mere agent to sell the motor vehicle
which was delivered to the appellee, not as its property, for if it were, he would
have full power of disposition of the property, not only to sell it as is the limited
authority given him in the special power of attorney. Had appellee intended to
completely release appellant of its mortgage obligation, there would be no
necessity of executing the document captioned “Voluntary Surrender with Special
Power of Attorney To Sell.” Nowhere in the said document can. We find that the
mere surrender of the mortgaged motor vehicle to the appellee extinguished
appellant’s obligation for the unpaid price.