Oblicon * They further failed to pay 2 more promissory notes, hence prompting a debt

Dacion en pago restructuring for two months

PH Lawin Bus, Co. v CA
G.R No. 130972
January 23, 2002
Pardo, J.
Summary of THE CASE and the FACTS relevant to the case:
General Doctrine or what it says about the topic:
PROVISIONS APPLICABLE:
● Art. 1245
Dation in payment, whereby property is alienated to the creditor in satisfaction of a
debt in money, shall be governed by the law of sales
○ Digested Provision
■ This article defines dation in payment as the alienation
of property in lieu of a debt in money
■ It is alienated in favour of the creditor
■ Provision is governed by the law on sales
○ Interpretation of the Court of the provision
■ Jurisprudence on provision/Courts application
■ Additional insights by court
■ Difference to other rulings etc. (If applicable)
Full FACTS:
Case is a petition assailing the CA decision of sentencing the petitioner to be jointly
and solidarity liable to Advance Capitol Corporation (ACC)
1. ACC extended to LAWIN a loan for P8M, payable within a year
* to guarantee this loan, the following were executed:
a. Deed of chattel mortgage over 9 buses
b. Joint and several undertaking with Master Tours and Travel Corp
c. Joint and several undertaking with the Tans
2. Out of the P8M, P1.8M was paid and LAWIN was able to avail additional P2M
loan
* they failed to pay this and thus renewed it to become due in the future (Feb.
1991)
3. Succeeding failures on the part of LAWIN to pay off their debts prompted the
plaintiff to foreclose the mortgaged buses
* after this, demand letters were sent to LAWIN to pay their obligations but
they still did not comply
ISSUES w/ HOLDING & RATIO
WN there was dacion en pago between the parties upon the transfer of the mortgaged
buses
—NO
Court refused to review the case, stating that it is not a trier of facts. They state that
the issue raised is factual.
Nonetheless, they agree with the CA that no dacion en pago took place.
In dacion en pago:
1. property is alienated to the creditor in satisfaction of a debt in money
2. It 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”
3. Obligation is extinguished to the extent of the value of the thing delivered
a. As agreed upon by the parties OR
b. May be proved by the parties’ conduct that they consider the thing as
equivalent to the obligation
Art. 1245 of the CC states that the law on sales governs the agreement of dacion en
pago. A contract of sale is perfected at the moment that there is a meeting of the minds
upon the objects of the contract and its price.
In this case, there is no meeting of the minds between the parties on whether the
loan of the petitioners would be extinguished by dacion en pago.
Proof used for the existence of dacion en pago:
mere testimony of Tan that he proposed to extinguish obligation by the surrender of
the buses
The receipts show that the two buses were delivered to respondent in order that it
would take custody for the purpose of selling the same. The receipts themselves in
fact show that petitioners deemed respondent as their agent in the sale of the two
vehicles whereby the proceeds thereof would be applied in payment of petitioners’
indebtedness to respondent.
Such an agreement
negates transfer of absolute ownership over the property to respondent, as in a sale.
Ruling on the topic:
IN VIEW WHEREOF, the Court DENIES the petition and AFFIRMS the decision of
the Court of Appeals MODIFICATION as follows:
with WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE.
In lieu thereof, judgment is hereby rendered ordering defendants- appellees to pay,
jointly and severally, plaintiff-appellant Advance Capital Corp. the following
amounts:
(1) P16,484,994.42, the principal obligation under the two promissory notes plus 12%
per annum from the finality of this decision until fully paid;
(2) P50,000.00 as attorney’s fees;
(3) Costs of suit.