REQUISITES In relation to the aforequoted observation of the trial
court, We would like to make reference also to Article 11
G.R. No. L-15645 January 31, 1964
PAZ P. ARRIETA and VITALIADO ARRIETA, plaintiffs-
appellees,
vs.
NATIONAL RICE AND CORN CORPORATION, defendant-
appellant,
MANILA UNDERWRITERS INSURANCE CO., INC., defendant-
appellee.
FACTS:
Paz Arrieta is a rice dealer/importer. In May 1952, she
participated in a public bidding held by the National Rice
and Corn Corporation (NARIC). NARIC was looking for
someone to supply 20,000 metric tons of Burmese Rice.
Arrieta was the lowest bidder at $203 per metric ton
hence she won the bidding. So a contract was made
whereby Arrieta is to deliver the rice supply and NARIC is
to pay for the imported rice “by means of an irrevocable,
confirmed and assignable letter of credit in U.S. currency
in favor of the Arrieta and/or supplier in Burma,
immediately.” Arrieta then proceeded to contact her
supplier in Burma (Thiri Setkya) and arranged the sale of
the 20k metric ton of Burmese Rice, Arrieta promised
Setkya that he will be paid by NARIC on August 4, 1952.
Arrieta also made a 5% deposit (P200k) as advance
payment to Setkya.
Meanwhile, NARIC tried to open a letter of credit in the
amount of $3,614,000.00 with the Philippine National
Bank. PNB agreed to open the letter of credit but only on
the condition that NARIC deposits 50% of the said amount.
NARIC failed to do this and the letter of credit was not
opened when the obligation to pay Setkya became due.
Because of this, Arrieta lost the opportunity to profit from
the sale as the agreement was eventually forfeited. Her 5%
deposit was likewise forfeited pursuant to Burma laws.
ISSUE:
Whether appellant's failure to open immediately the letter
of credit in dispute amounted to a breach of the contract
of July 1, 1952 for which it may be held liable in damages.
HELD:
Yes. It is clear that what singularly delayed the opening of
the stipulated letter of credit and which, in turn, caused
the cancellation of the allocation in Burma, was the
inability of the appellant corporation to meet the
condition importation by the Bank for granting the same.
of the Civil Code which provides:
Those who in the performance of their obligation are
guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof, are liable in
damages.
Under this provision, not only debtors guilty of fraud,
negligence or default in the performance of obligations a
decreed liable; in general, every debtor who fails in
performance of his obligations is bound to indemnify for
the losses and damages caused thereby. The phrase "any
manner contravene the tenor" of the obligation includes
any illicit act which impairs the strict and faithful
fulfillment of the obligation or every kind or defective
performance.
The NARIC would also have this Court hold that the
subsequent offer to substitute Thailand rice for the
originally contracted Burmese rice amounted to a waiver
by the appellee of whatever rights she might have derived
from the breach of the contract. We disagree. Waivers are
not presumed, but must be clearly and convincingly
shown, either by express stipulation or acts admitting no
other reasonable explanation. In the case at bar, no such
intent to waive has been established.
UPON ALL THE FOREGOING, the decision appealed from is
hereby affirmed, with the sole modification that the award
should be converted into the Philippine peso at the rate of
exchange prevailing at the time the obligation was
incurred or on July 1, 1952 when the contract was
executed. The appellee insurance company, in the light of
this judgment, is relieved of any liability under this suit. No
pronouncement as to costs.
G.R. No. L-27782 July 31, 1970
OCTAVIO A. KALALO, plaintiff-appellee,
vs.
ALFREDO J. LUZ, defendant-appellant.
FACTS:
On November 17, 1959, plaintiff-appellee Octavio A. Kalalo
hereinafter referred to as appellee), a licensed civil
engineer doing business under the firm name of O. A.
Kalalo and Associates, entered into an agreement with
defendant-appellant Alfredo J. Luz a licensed architect,
doing business under firm name of A. J. Luz and
Associates, whereby the former was to render engineering
design services to the latter for fees, as stipulated in the
agreement. The services included design computation and
sketches, contract drawing and technical specifications of
all engineering phases of the project designed by O. A.
Kalalo and Associates bill of quantities and cost estimate,
and consultation and advice during construction relative to
the work.
On December 1 1, '1961, appellee sent to appellant a
statement of account to which was attached an itemized
statement of defendant-appellant's account (Exh. "1-A"),
according to which the total engineering fee asked by
appellee for services rendered amounted to P116,565.00
from which sum was to be deducted the previous
payments made in the amount of P57,000.00, thus leaving
a balance due in the amount of P59,565.00.
On May 18, 1962 appellant sent appellee a resume of fees
due to the latter. Said fees, according to appellant.
amounted to P10,861.08 instead of the amount claimed by
the appellee. On June 14, 1962 appellant sent appellee a
check for said amount, which appellee refused to accept
as full payment of the balance of the fees due him.
On August 10, 1962, appellee filed a complaint against
appellant, containing four causes of action. In the first
cause of action, appellee alleged that for services rendered
in connection with the different projects therein
mentioned there was due him fees in sum s consisting of
$28,000 (U.S.) and P100,204.46, excluding interests, of
which sums only P69,323.21 had been paid, thus leaving
unpaid the $28,000.00 and the balance of P30,881.25. In
the second cause of action, appellee claimed P17,000.00
as consequential and moral damages; in the third cause of
action claimed P55,000.00 as moral damages, attorney's
fees and expenses of litigation; and in the fourth cause of
action he claimed P25,000.00 as actual damages, and also
for attorney's fees and expenses of litigation.
In his answer, appellant admitted that appellee rendered
engineering services, as alleged in the first cause of action,
but averred that some of appellee's services were not in
accordance with the agreement and appellee's claims
were not justified by the services actually rendered, and
that the aggregate amount actually due to appellee was
only P80,336.29, of which P69,475.21 had already been
paid, thus leaving a balance of only P10,861.08. Appellant
denied liability for any damage claimed by appellee to
have suffered, as alleged in the second, third and fourth
causes of action.
Judgment is rendered in favor of plaintiff and against the
defendant, by ordering the defendant to pay plaintiff the
sum of P51,539.91 and $28,000.00, the latter to be
converted into the Philippine currency on the basis of the
current rate of exchange at the time of the payment of this
judgment, as certified to by the Central Bank of the
Philippines, from which shall be deducted the sum of
P69,475.46, which the defendant had paid the plaintiff,
and the legal rate of interest thereon from the filing of the
complaint in the case until fully paid for; by ordering the
defendant to pay to plaintiff the further sum of P8,000.00
by way of attorney's fees which the Court finds to be
reasonable in the premises, with costs against the
defendant. The counterclaim of the defendant is ordered
dismissed.
From the decision, this appeal was brought, directly to this
Court, raising only questions of law.
During the pendency of this appeal, appellee filed a
petition for the issuance of a writ of attachment under
Section 1 (f) of Rule 57 of the Rules of Court upon the
ground that appellant is presently residing in Canada as a
permanent resident thereof. On June 3, 1969, this Court
resolved, upon appellee's posting a bond of P10,000.00, to
issue the writ of attachment, and ordered the Provincial
Sheriff of Rizal to attach the estate, real and personal, of
appellant Alfredo J. Luz within the province, to the value of
not less than P140,000.00.
ISSUE:
1. Whether Kalalo is estopped from claiming fees
different from what was stated in the statement
of account.
2. Whether the balance owed by Luz on the
International Rice Research Institute (IRRI)
project should be paid in dollars or pesos.
3. Whether the amount due to Kalalo is only
P15,792.05.
4. Whether the attorney's fees awarded by the trial
court are reasonable.
HELD:
1.The court held that Kalalo was not estopped from
claiming fees different from what was stated in the
statement of account because Luz did not rely on the
statement and consistently denied the accounts stated
therein. Estoppel requires that the party invoking it has
been influenced and relied on the representations or
conduct of the other party, which was not the case here.
2.The court held that the balance owed by Luz on the IRRI
project should be paid in pesos at the free market rate of
exchange at the time of payment. Payment in dollars is
prohibited by Republic Act 529, and the court followed the
principle that the value in domestic money of a payment
made in foreign money is fixed with respect to the rate of
exchange at the time of payment.
Under the above-quoted provision of Republic Act 529, if
the obligation was incurred prior to the enactment of the
Act and require payment in a particular kind of coin or
currency other than the Philippine currency the same shall
be discharged in Philippine currency measured at the
prevailing rate of exchange at the time the obligation was
incurred. As We have adverted to, Republic Act 529 was
enacted on June 16, 1950. In the case now before Us the
obligation of appellant to pay appellee the 20% of
$140,000.00, or the sum of $28,000.00, accrued on August
25, 1961, or after the enactment of Republic Act 529.
It is Our considered view, therefore, that appellant should
pay the appellee the equivalent in pesos of the $28,000.00
at the free market rate of exchange at the time of
payment. And so the trial court did not err when it held
that herein appellant should pay appellee $28,000.00 "to
be converted into the Philippine currency on the basis of
the current rate of exchange at the time of payment of this
judgment, as certified to by the Central Bank of the
Philippines, ....”
3.The court did not consider the question of the
correctness or propriety of the amounts due to Kalalo for
the different projects because it was not raised in the
appeal. The parties had agreed to abide by the findings of
fact of the Commissioner, and the legal issues submitted
for resolution did not include the question of the amounts
due.
4.The court held that the trial court did not err in awarding
attorney's fees of P8,000.00. The estimate made by the
Commissioner was an opinion, not a finding of fact, and
the trial court had the authority to adopt, modify, or reject
the report of the Commissioner. The court considered the
reasons stated in the report and found the awarded
attorney's fees to be reasonable.
WHEREFORE, the decision appealed from is affirmed, with
costs against the defendant-appellant. It is so ordered.
G.R. No. L-27796 March 25, 1976
ST. PAUL FIRE & MARINE INSURANCE CO., plaintiff-
appellant,
vs.
MACONDRAY & CO., INC., BARBER STEAMSHIP LINES, INC.,
WILHELM WILHELMSEN MANILA PORT SERVICE and/or
MANILA RAILROAD COMPANY, defendants-appellees.
FACTS:
According to the records, on June 29, 1960, Winthrop
Products, Inc., of New York, New York, U.S.A., shipped
aboard the SS "Tai Ping", owned and operated by Wilhelm
Wilhelmsen 218 cartons and drums of drugs and medicine,
with the freight prepaid, which were consigned to
Winthrop-Stearns Inc., Manila, Philippines. Barber
Steamship Lines, Inc., agent of Wilhelm Wilhelmsen issued
Bill of Lading No. 34, in the name of Winthrop Products,
Inc. as shipper, with arrival notice in Manila to consignee
Winthrop-Stearns, Inc., Manila, Philippines. The shipment
was insured by the shipper against loss and/or damage
with the St. Paul Fire & Marine Insurance Company under
its insurance Special Policy No. OC-173766 dated June 23,
1960.
On August 7, 1960, the SS "Tai Ping" arrived at the Port of
Manila and discharged its aforesaid shipment into the
custody of Manila Port Service, the arrastre contractor for
the Port of Manila. The said shipment was discharged
complete and in good order with the exception of one (1)
drum and several cartons which were in bad order
condition. Because consignee failed to receive the whole
shipment and as several cartons of medicine were
received in bad order condition, the consignee filed the
corresponding claim in the amount of Fl,109.67
representing the C.I.F. value of the damaged drum and
cartons of medicine with the carrier, herein defendants-
appellees and the Manila Port Service. However, both
refused to pay such claim. consequently, the consignee
filed its claim with the insurer, St. Paul Fire & Marine
insurance Co. and the insurance company, on the basis of
such claim, paid to the consignee the insured value of the
lost and damaged goods, including other expenses in
connection therewith, in the total amount of $1,134.46
U.S. currency.
On August 5, 1961, as subrogee of the rights of the shipper
and/or consignee, the insurer, St. Paul Fire & Marine
Insurance Co., instituted with the Court of First Instance of
Manila the present action against the defendants for the
recovery of said amount of $1,134.46, plus costs.
On August 23, 1961, the defendants Manila Port Service
and Manila Railroad Company resisted the action,
contending, among others, that the whole cargo was
delivered to the consignee in the same condition in which
it was received from the carrying vessel; that their rights,
duties and obligations as arrastre contractor at the Port of
Manila are governed by and subject to the terms,
conditions and limitations contained in the Management
Contract between the Bureau of Customs and Manila Port
Service, and their liability is limited to the invoice value of
the goods, but in no case more than P500.00 per package,
pursuant to paragraph 15 of the said Management
Contract; and that they are not the agents of the carrying
vessel in the receipt and delivery of cargoes in the Port of
Manila.
On September 7, 1961, the defendants Macondray & Co.,
Inc., Barber Steamship Lines, Inc. and Wilhelm Wilhelmsen
also contested the claim alleging, among others, that the
carrier's liability for the shipment ceased upon discharge
thereof from the ship's tackle; that they and their co-
defendant Manila Port Service are not the agents of the
vessel; that the said 218 packages were discharged from
the vessel SS "Tai Ping" into the custody of defendant
Manila Port Service as operator of the arrastre service for
the Port of Manila; that if any damage was sustained by
the shipment while it was under the control of the vessel,
such damage was caused by insufficiency of packing, force
majeure and/or perils of the sea; and that they, in good
faith and for the purpose only of avoiding litigation
without admitting liability to the consignee, offered to
settle the latter's claim in full by paying the C.I.F. value of
27 lbs. caramel 4.13 kilos methyl salicylate and 12 pieces
pharmaceutical vials of the shipment, but their offer was
declined by the consignee and/or the plaintiff.
After due trial, the lower court, on March 10, 1965
rendered judgment ordering defendants Macondray & Co.,
Inc., Barber Steamship Lines, Inc. and Wilhelm Wilhelmsen
to pay to the plaintiff, jointly and severally, the sum of
P300.00, with legal interest thereon from the filing of the
complaint until fully paid, and defendants Manila Railroad
Company and Manila Port Service to pay to plaintiff, jointly
and severally, the sum of P809.67, with legal interest
thereon from the filing of the complaint until fully paid,
the costs to be borne by all the said defendants.
On April 12, 1965, plaintiff, contending that it should
recover the amount of $1,134.46, or its equivalent in
pesos at the rate of P3.90, instead of P2.00, for every
US$1.00, filed a motion for reconsideration, but this was
denied by the lower court on May 5, 1965. Hence, the
present appeal.
ISSUE:
Whether the appellant can collect an amount bigger that
what was stipulated in the bill of lading.
HELD:
No. A stipulation fixing or limiting the sum that may be
recovered from the carrier on the loss or
deterioration of the goods is valid, provided it is (a)
reasonable and just under the circumstances,
and (b) has been fairly and freely agreed upon. In this case,
it appears that the condition in the bill of lading was
reasonable and was freely and fairly agreed upon, hence
the shipper and consignee are bound by such stipulation.
St. Paul Fire & Marine Insurance Co., as insurer, after
paying the claim of the insured for damages under the
insurance, is subrogated merely to the rights of the
assured. As subrogee, it can recover only the amount that
is recoverable by the latter. Since the right of the assured,
in case of loss or damage to the goods, is limited or
restricted by the provisions in the bill of lading, a suit by
the insurer as subrogee necessarily is subject to like
limitations and restrictions.
Equally untenable is the contention of the plaintiff-
appellant that because of extraordinary inflation, it should
be reimbursed for its dollar payments at the rate of —
exchange on the date of the judgment and not on the date
of the loss or damage. The obligation of the carrier to pay
for the damage commenced on the date it failed to deliver
the shipment in good condition to the consignee.
The C.I.F. Manila value of the goods which were lost or
damaged, according to the claim of the consignee dated
September 26, 1960 is $226.37 and $324.33 or P456.14
and P653.53, respectively, in Philippine Currency. The peso
equivalent was based by the consignee on the exchange
rate of P2.015 to $1.00 which was the rate existing at that
time. We find, therefore, that the trial court committed no
error in adopting the aforesaid rate of exchange.
WHEREFORE, the appealed decision is hereby affirmed,
with costs against the plaintiff-appellant.
G.R. No. 105188 January 23, 1998
MYRON C. PAPA, Administrator of the Testate Estate of
Angela M. Butte, petitioner,
vs.
A.U. VALENCIA and CO. INC., FELIX PEÑARROYO, SPS.
ARSENIO B. REYES & AMANDA SANTOS, and DELFIN JAO,
respondents.
FACTS:
Sometime in June 1982, herein private respondents A.U.
Valencia and Co., Inc. (hereinafter referred to as
respondent Valencia, for brevity) and Felix Peñarroyo
(hereinafter called respondent Peñarroyo), filed with the
Regional Trial Court of Pasig, Branch 151, a complaint for
specific performance against herein petitioner Myron C.
Papa, in his capacity as administrator of the Testate Estate
of one Angela M. Butte.
The complaint alleged that on 15 June 1973, petitioner
Myron C. Papa, acting as attorney-in-fact of Angela M.
Butte, sold to respondent Peñarroyo, through respondent
Valencia, a parcel of land, consisting of 286.60 square
meters, located at corner Retiro and Cadiz Streets, La
Loma, Quezon City, and covered by Transfer Certificate of
Title No. 28993 of the Register of Deeds of Quezon City;
that prior to the alleged sale, the said property, together
with several other parcels of land likewise owned by
Angela M. Butte, had been mortgaged by her to the
Associated Banking Corporation (now Associated Citizens
Bank); that after the alleged sale, but before the title to
the subject property had been released, Angela M. Butte
passed away; that despite representations made by herein
respondents to the bank to release the title to the
property sold to respondent Peñarroyo, the bank refused
to release it unless and until all the mortgaged properties
of the late Angela M. Butte were also redeemed; that in
order to protect his rights and interests over the property,
respondent Peñarroyo caused the annotation on the title
of an adverse claim as evidenced by Entry No. P.E.-6118/T-
28993, inscribed on 18 January 1997.
The complaint further alleged that it was only upon the
release of the title to the property, sometime in April
1977, that respondents Valencia and Peñarroyo discovered
that the mortgage rights of the bank had been assigned to
one Tomas L. Parpana (now deceased), as special
administrator of the Estate of Ramon Papa, Jr., on 12 April
1977; that since then, herein petitioner had been
collecting monthly rentals in the amount of P800.00 from
the tenants of the property, knowing that said property
had already been sold to private respondents on 15 June
1973; that despite repeated demands from said
respondents, petitioner refused and failed to deliver the
title to the property. Thereupon, respondents Valencia and
Peñarroyo filed a complaint for specific performance,
praying that petitioner be ordered to deliver to
respondent Peñarroyo the title to the subject property
(TCT 28993); to turn over to the latter the sum of
P72,000.00 as accrued rentals as of April 1982, and the
monthly rental of P800.00 until the property is delivered
to respondent Peñarroyo; to pay respondents the sum of
P20,000.00 as attorney's fees; and to pay the costs of the
suit.
In his Answer, petitioner admitted that the lot had been
mortgaged to the Associated Banking Corporation (now
Associated Citizens Bank). He contended, however, that
the complaint did not state a cause of action. Petitioner
also asseverated that as a result of the filing of the case,
he was compelled to hire the services of counsel for a fee
of P20,000.00 for which respondents should be held liable.
Upon his motion, herein private respondent Delfin Jao was
allowed to intervene in the case. Making common cause
with respondents Valencia and Peñarroyo, respondent Jao
alleged that the subject lot which had been sold to
respondent Peñarroyo through respondent Valencia was in
turn sold to him on 20 August 1973 for the sum of
P71,500.00, upon his paying earnest money in the amount
of P5,000.00. He, therefore, prayed that judgment be
rendered in favor of respondents, the latter in turn be
ordered to execute in his favor the appropriate deed of
conveyance covering the property in question and to turn
over to him the rentals which aforesaid respondents
sought to collect from petitioner Myron V. Papa.
Respondent Jao, likewise, averred that as a result of
petitioner's refusal to deliver the title to the property to
respondents Valencia and Peñarroyo, who in turn failed to
deliver the said title to him, he suffered mental anguish
and serious anxiety for which he sought payment of moral
damages; and, additionally, the payment of attorney's fees
and costs.
For his part, petitioner, as administrator of the Testate
Estate of Angela M. Butte, filed a third-party complaint
against herein private respondents, spouses Arsenio B.
Reyes and Amanda Santos (respondent Reyes spouses, for
short). He averred, among other's that the late Angela M.
Butte was the owner of the subject property; that due to
non-payment of real estate tax said property was sold at
public auction the City Treasurer of Quezon City to the
respondent Reyes spouses on 21 January 1980 for the sum
of P14,000.00; that the one-year period of redemption had
expired; that respondents Valencia and Peñarroyo had
sued petitioner Papa as administrator of the estate of
Angela M. Butte, for the delivery of the title to the
property; that the same aforenamed respondents had
acknowledged that the price paid by them was insufficient,
and that they were willing to add a reasonable amount or
a minimum of P55,000.00 to the price upon delivery of the
property, considering that the same was estimated to be
worth P143,000.00; that petitioner was willing to
reimburse respondents Reyes spouses whatever amount
they might have paid for taxes and other charges, since
the subject property was still registered in the name of the
late Angela M. Butte; that it was inequitable to allow
respondent Reyes spouses to acquire property estimated
to be worth P143,000.00, for a measly sum of P14,000.00.
Petitioner prayed that judgment be rendered canceling the
tax sale to respondent Reyes spouses; restoring the
subject property to him upon payment by him to said
respondent Reyes spouses of the amount of P14,000.00,
plus legal interest; and, ordering respondents Valencia and
Peñarroyo to pay him at least P55,000.00 plus everything
they might have to pay the Reyes spouses in recovering
the property.
The lower court ruled in favor of the private respondents
and ordered Papa the conveyance or the property or if
not, its payment. Thereafter, Papa 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 CA affirmed with
modifications the lower court's
decision. It held that there was a consummated sale of the
subject property.

ISSUE:
Whether the sale in question was consummated is
grounded on speculation or conjecture, and is contrary to
the applicable legal principle.
HELD:
It is an undisputed fact that respondents Valencia and
Peñarroyo had given petitioner Myron C. Papa the
amounts of Five Thousand Pesos (P5,000.00) in cash on 24
May 1973, and Forty Thousand Pesos (P40,000.00) in
check on 15 June 1973, in payment of the purchase price
of the subject lot. Petitioner himself admits having
received said amounts, and having issued receipts
therefor. Petitioner's assertion that he never encashed the
aforesaid check is not substantiated and is at odds with his
statement in his answer that "he can no longer recall the
transaction which is supposed to have happened 10 years
ago." After more than ten (10) years from the payment in
party by cash and in part by check, the presumption is that
the check had been encashed. As already stated, he even
waived the presentation of oral evidence.
Granting that petitioner had never encashed the check, his
failure to do so for more than ten (10) years undoubtedly
resulted in the impairment of the check through his
unreasonable and unexplained delay.
While it is true that the delivery of a check produces the
effect of payment only when it is cashed, pursuant to Art.
1249 of the Civil Code, the rule is otherwise if the debtor is
prejudiced by the creditors unreasonable delay in
presentment. The acceptance of a check implies an
undertaking of due diligence in presenting it for payment,
and if he from whom it is received sustains loss by want of
such diligence, it will be held to operate as actual payment
of the debt or obligation for which it was given. It has,
likewise, been held that if no presentment is made at all,
the drawer cannot be held liable irrespective of loss or
injury unless presentment is otherwise excused. This is in
harmony with Article 1249 of the Civil Code under which
payment by way of check or other negotiable instrument is
conditioned on its being cashed, except when through the
fault of the creditor, the instrument is impaired. The payee
of a check would be a creditor under this provision and if
its non-payment is caused by his negligence, payment will
be deemed effected and the obligation for which the check
was given as conditional payment will be discharged.
Considering that respondents Valencia and Peñarroyo had
fulfilled their part of the contract of sale by delivering the
payment of the purchase price, said respondents,
therefore, had the right to compel petitioner to deliver to
them the owner's duplicate of TCT No. 28993 of Angela M.
Butte and the peaceful possession and enjoyment of the
lot in question.
WHEREFORE, the petition for review is hereby DENIED and
the Decision of the Court of Appeals, dated 27 January
1992 is AFFIRMED.
APPLICATION OF PAYMENTS
A.M. No. 21901-96 June 27, 1978
REPARATIONS COMMISSION, plaintiff-appellants,
vs.
UNIVERSAL DEEP-SEA FISHING CORPORATION and MANILA
SURETY AND FIDELITY CO., INC., defendant-appellants.
FACTS:
It is not disputed that the Universal Deep-Sea Fishing
Corporation, hereinafter referred to as UNIVERSAL for
short. was awarded six (6) trawl boats by the. Reparations
Commission as end-user of reparations goods. These
fishing boats, christened the M/S UNIFISH 1, M/S UNIFISH
2. M/S UNIFISH 3. M/S UNIFISH 4, M/S UNIFISH 5, and M/S
UNIFISH 6. were delivered to UNIVERSAL two at a time,
f.o.b. Japanese port.
The M/S UNIFISH 1 and M/S UNIFISH 2, with an aggregate
purchase price of P536,428.44, were delivered to
UNIVERSAL on November 20,1958, and the contract of
Conditional Purchase and Sale of Reparations Goods,
executed by and between the parties on February 12,
1960, provided among others, that "the first installment
representing 10% of the amount or FIFTY THREE
THOUSAND SIX HUNDRED FORTY TWO PESOS AND EIGHTY
FOUR CENTAVOS (P53,642.84) shall be paid within 24
months from the date of complete delivery thereof.
To guarantee the faithful compliance with the obligations
under said contract, a performance bond in the amount of
P53,643.00, with UNIVERSAL as principal and the Manila
Surety & Fidelity Co., Inc., as surety, was executed in favor
of the Reparations Commission. A Corresponding
indemnity agreement was executed to indemnify the
surety company for any damage, loss charges, etc., which
it may sustain or incur as a consequence of having become
a surety upon the performance bond.
The M/S UNIFISH 3 and M/S UNIFISH 4, with a total
purchase price of P687,777.76 were delivered to
UNIVERSAL on April 20, 1959 and the Contract of
Conditional Purchase and Sale Reparations Goods, dated
November 25, 1959, provided that "the first installment
representing 10% of the amount or SIXTY-EIGHT
THOUSAND SEVEN HUNDRED SEVENTY-SEVEN PESOS AND
SEVENTY-SEVEN CENTAVOS shall be paid within 24 months
from the date of complete delivery thereof.
A performance bond in the amount of P68,777.77, issued
by the Manila Surety & Fidelity Co., Inc., was also
submitted to guarantee the faithful compliance with the
obligations set forth in the contract, and indemnity
agreement was executed in favor of the surety company in
consideration of the said bond.
The delivery of the M/S UNIFISH 5 and M/S UNIFISH 6 is
covered by a contract for the Utilization of Reparations
Goods (M/S "UNIFISH 5" and M/S "UNIFISH 6") executed
by the parties on February 12, 1960. A performance bond
in judgment, amount of P54,500.00 issued by judgment,
Manila Surety & Fidelity Co., Inc., was submitted, and an
indemnity agreement was executed by UNIVERSAL in favor
of judgment, surety company.
On August 10, 1962, judgment, Reparations Commission
instituted judgment, present action against UNIVERSAL
and judgment, surety company to recover various
amounts of money due under these contracts. In answer,
UNIVERSAL claimed that judgment, amounts of money
sought to be collected are not yet due and demandable.
The surety company also contended that judgment, 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. With leave of courts first obtained,
judgment, surety company filed a third-party complaint
against Pablo S. Sarmiento, one of the indemnitors in
judgment, indemnity agreements. The third-party
defendant Pablo S. Sarmiento denied personal liability
claiming that he signed judgment, indemnity agreements
in question in his capacity as acting general manager of
UNIVERSAL. After appropriate proceedings and upon
judgment, preceding facts, judgment, trial court rendered
judgment, judgment hereinbefore stated. hence, this
appeal.
ISSUE:
Whether judgment, first installments under judgment,
three (3) contracts of conditional purchase and sale of
reparations goods were already due and demandable
when judgment, complaint was filed.
HELD:
Viewing judgment, contracts between judgment, parties in
judgment, light of the foregoing exposition, judgment, first
installment on judgment, M/S UNIFISH 1 and M/S UNIFISH
2 of judgment, amount of P53,642.84 was due on May 8,
1961, while judgment, first installments on judgment, M/S
UNIFISH 3 and M/S UNIFISH 4, and judgment, M/S UNIFISH
5 and M/S UNIFISH 6 in judgment, amounts of P68,777.77
and P54,500.00 were due on July 31, 1961 and October 17,
1961, respectively. Accordingly judgment, obligation of
UNIVERSAL to pay judgment, first installments on the
purchase price of judgment, six (6) reparations vessels was
already due and demandable when the present action was
commenced on August 10, 1962. Also due and demanded
from UNIVERSAL were the first of the ten (10) equal yearly
installments on the balance of the purchase price of the
M/S UNIFISH I and M/S UNIFISH 2 in the amount of
P56,597.20 and P72,565.68 on judgment, M/S UNIFISH 3
and M/S UNIFISH 4. The first accrued on May 8, 1962,
while judgment, second fell due on July 31, 1962.
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 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 in the amount of P53,643.00, but also
of the ten (10) equal yearly installments of P56,597.20 per
annum. 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 was committed in holding
judgment, surety company to judgment, full extent of its
undertaking.
Finally, We find no merit in judgment, claim of judgment,
third-party defendant Pablo S. Sarmiento that he is not
personally liable having merely executed judgment,
indemnity agreements in his capacity as acting general
manager of UNIVERSAL. Pablo S. Sarmiento appears to
have signed the indemnity agreement twice — the first, in
this capacity as acting general manager of UNIVERSAL, and
the second, in his individual capacity.
WHEREFORE, judgment, judgment appealed from is
hereby affirmed with judgment, modification that
judgment, UNIVERSAL Deep-Sea Fishing Corporation is
further ordered to pay judgment, Manila Surety & Fidelity
Co., Inc., judgment, amount of P7,251.42 for judgment,
premiums and documentary stamps on judgment,
performance bonds. Appellants shall pay proportionate
costs.
G.R. No. 123855 November 20, 2000
NEREO J. PACULDO, petitioner,
vs.
BONIFACIO C. REGALADO, respondent
FACTS:
On December 27, 1990, petitioner Nereo J. Paculdo
(hereafter Nereo) and respondent Bonifacio C. Regalado
(hereafter Bonifacio) entered into a contract of lease over
a 16,478 square meter parcel of land with a wet market
building, located along Don Mariano Marcos Avenue,
Fairview Park, Quezon City. The contract was for twenty
five (25) years, commencing on January 1, 1991 and
ending on December 31, 2015. For the first five (5) years of
the contract beginning December 27, 1990, Nereo would
pay a monthly rental of P450,000.00, payable within the
first five (5) days of each month at Bonifacio’s office, with
a 2% penalty for every month of late payment.
Aside from the above lease, petitioner leased eleven (11)
other property from respondent, ten (10) of which were
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 aggregate amount
of P1,020,000.00.
On account of petitioner’s failure to pay P361,895.55 in
rental for the month of May 1992, and the monthly rental
of P450,000.00 for the months of June and July 1992, on
July 6, 1992, respondent sent a demand letter to petitioner
demanding payment of the back rentals, and if no
payment was made within fifteen (15) days from receipt of
the letter, it would cause the cancellation of the lease
contract. Another demand letter followed this on July 17,
1992, reiterating the demand for payment and for
petitioner to vacate the subject premises.
Without the knowledge of petitioner, on August 3, 1992,
respondent mortgaged the land subject of the lease
contract, including the improvements which petitioner
introduced into the land amounting to P35,000,000.00, to
Monte de Piedad Savings Bank, as security for a loan in the
amount of P20,000,000.00.
On August 12, 1992, and on subsequent dates thereafter,
respondent refused to accept petitioner’s daily rental
payments.
On August 20, 1992, petitioner filed with the Regional Trial
Court, Quezon City an action for injunction and damages
seeking to enjoin respondent from disturbing his
possession of the property subject of the lease contract.
On the same day, respondent filed with the Metropolitan
Trial Court, Quezon City a complaint for ejectment against
petitioner.
On August 25, 1992, five (5) days after the filing of the
ejectment complaint, respondent moved to withdraw the
complaint on the ground that certain details had been
omitted in the complaint and must be re-computed.
On April 22, 1993, respondent re-filed the ejectment
complaint with the Metropolitan Trial Court, Quezon City.
Computed from August 1992 until March 31, 1993, the
monthly reasonable compensation that petitioner was
liable for was in the total sum of P3,924,000.00.
MTC ruled in favor of Regalado. The MTC ordered Paculdo
to vacate the leased premises and pay the back rental fees
with interest.
"1. Ordering the defendant and all persons claiming right
under him to vacate the leased premises located at Don
Mariano Marcos Avenue, Fairview Park, Quezon City,
Metro-Manila covered by Transfer Certificate of Title RT-
6883 of the Registry of Deeds of Quezon City;
"2. Ordering the defendant to pay the sum of P527,119.27
representing the unpaid monthly rentals as of June 30,
1992 plus 2% interest thereon;
"3. Ordering the defendant to pay the sum of P450,000.00
a month plus 2% interest thereon starting July 1992 and
every month thereafter until the defendant and all persons
claiming right under him shall have actually vacated the
premises and surrender possession thereof to the plaintiff;
"4. Ordering the defendant to pay the sum of
P5,000,000.00 as and for attorney’s fees; and
"5. Ordering the defendant to pay the costs of suit.
On February 19, 1994, respondent, with the support of
fifty (50) armed security guards forcibly entered the
property and took possession of the wet market building.
On July 6, 1994, the Regional Trial Court, Quezon City,
Branch 220 rendered a decision affirming in toto the
decision of the Metropolitan Trial Court.
Meanwhile, on July 21, 1994, petitioner filed a petition for
review with the Court of Appeals. He alleged that he had
paid the amount of P11,478,121.85 for security deposit
and rentals on the wet market building, but respondent,
without his consent, applied portions of the payment to
his other obligations. The vouchers and receipts indicated
that the payments made were for rentals. Thus, at the
time of payment petitioner had declared as to which
obligation the payment must be applied.
On February 10, 1995, the Court of Appeals promulgated
its decision finding that petitioner impliedly consented to
respondent’s application of payment to his other
obligations and, thus, dismissed the petition for lack of
merit.
On March 3, 1995, petitioner filed a motion for
reconsideration; however, on February 9, 1996 the Court
of Appeals denied the motion. Hence, the petition.
ISSUE:
Whether petitioner was truly in arrears in the payment of
rentals on the subject property at the time of the filing of
the complaint for ejectment.
HELD:
No. "Article 1252. He who has various debts of the same
kind in favor of one and the same creditor, may declare at
the time of making the payment, to which of them the
same must be applied. Unless the parties so stipulate, or
when the application of payment is made by the party for
whose benefit the term has been constituted, application
shall not be made as to debts which are not yet due.
If the debtor accepts from the creditor a receipt in which
an application of the payment is made, the former cannot
complain of the same, unless there is a cause for
invalidating the contract."
At the time petitioner made the payments, he made it
clear to 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, including a lease contract over eleven
(11) property in Quezon City and sale of eight (8) heavy
equipment, all the payments made, about P11,
000,000.00, were to be applied to rental and security
deposit on the Fairview wet market property.
There was no clear assent by petitioner to the change in
the manner of application of payment.1âwphi1 The
petitioner’s silence as regards the application of payment
by respondent cannot mean that he consented thereto.
There was no meeting of the minds. Though an offer may
be made, the acceptance of such offer must be
unconditional and unbounded in order that concurrence
can give rise to a perfected contract. Hence, petitioner
could not be in estoppel.
Assuming arguendo that, as alleged by respondent,
petitioner did not, at the time the payments were made,
choose the obligation to be satisfied first, respondent may
exercise the right to apply the payments to the other
obligations of petitioner. But this is subject to the
condition that the petitioner must give his consent.
Petitioner’s silence is not tantamount to consent. The
consent must be clear and definite.
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--no payment is to be made to a debt that is not
yet due and the payment has to be applied first to the
debt most onerous to the debtor.
In the instant case, the purchase price of the eight (8)
heavy equipment was not yet due at the time the payment
was made, for there was no date set for such payment.
Neither was there a demand by the creditor to make the
obligation to pay the purchase price due and demandable.
Hence, the application made by respondent is contrary to
the provisions of the law.
The lease over the Fairview wet market property is the
most onerous among all the obligations of petitioner to
respondent. It was established that the wet market is a
going-concern and that petitioner has invested about
P35,000,000.00, in the form of improvements, on the
property. Hence, petitioner would stand to lose more if
the lease would be rescinded, than if the contract of sale
of heavy equipment would not proceed.
The decision of the Court of Appeals was based on a
misapprehension of the facts and the law on the
application of payment. Hence, the ejectment case subject
of the instant petition must be dismissed, without
prejudice to the determination and settlement of the
money claims of the parties inter se.
WHEREFORE, the Court GRANTS the petition. The Court
REVERSES and SETS ASIDE the decision of the Court of
Appeals in CA-G. R. SP No. 34634.
ACCORDINGLY, the Court REVERSES the decision of the
Regional Trial Court and dismisses the complaint filed with
the Metropolitan Trial Court.
G.R. No. 118342 January 5, 1998
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
COURT OF APPEALS and LYDIA CUBA, respondents.
FACTS:
1. Plaintiff Lydia P. Cuba is a grantee of a Fishpond Lease
Agreement No. 2083 (new) dated May 13, 1974 from the
Government;
2. Plaintiff Lydia P. Cuba obtained loans from the
Development Bank of the Philippines in the amounts of
P109,000.00; P109,000.00; and P98,700.00 under the
terms stated in the Promissory Notes dated September 6,
1974; August 11, 1975; and April 4, 1977;
3. As security for said loans, plaintiff Lydia P. Cuba
executed two Deeds of Assignment of her Leasehold
Rights;
4. Plaintiff failed to pay her loan on the scheduled dates
thereof in accordance with the terms of the Promissory
Notes;
5. Without foreclosure proceedings, whether judicial or
extra-judicial, defendant DBP appropriated the Leasehold
Rights of plaintiff Lydia Cuba over the fishpond in question;
6. After defendant DBP has appropriated the Leasehold
Rights of plaintiff Lydia Cuba over the fishpond in question,
defendant DBP, in turn, executed a Deed of Conditional
Sale of the Leasehold Rights in favor of plaintiff Lydia Cuba
over the same fishpond in question;
7. In the negotiation for repurchase, plaintiff Lydia Cuba
addressed two letters to the Manager DBP, Dagupan City
dated November 6, 1979 and December 20, 1979. DBP
thereafter accepted the offer to repurchase in a letter
addressed to plaintiff dated February 1, 1982;
8. After the Deed of Conditional Sale was executed in favor
of plaintiff Lydia Cuba, a new Fishpond Lease Agreement
No. 2083-A dated March 24, 1980 was issued by the
Ministry of Agriculture and Food in favor of plaintiff Lydia
Cuba only, excluding her husband;
9. Plaintiff Lydia Cuba failed to pay the amortizations
stipulated in the Deed of Conditional Sale;
10. After plaintiff Lydia Cuba failed to pay the amortization
as stated in Deed of Conditional Sale, she entered with the
DBP a temporary arrangement whereby in consideration
for the deferment of the Notarial Rescission of Deed of
Conditional Sale, plaintiff Lydia Cuba promised to make
certain payments as stated in temporary Arrangement
dated February 23, 1982;
11. Defendant DBP thereafter sent a Notice of Rescission
thru Notarial Act dated March 13, 1984, and which was
received by plaintiff Lydia Cuba;
12. After the Notice of Rescission, defendant DBP took
possession of the Leasehold Rights of the fishpond in
question;
13. That after defendant DBP took possession of the
Leasehold Rights over the fishpond in question, DBP
advertised in the SUNDAY PUNCH the public bidding dated
June 24, 1984, to dispose of the property;
14. That the DBP thereafter executed a Deed of
Conditional Sale in favor of defendant Agripina Caperal on
August 16, 1984;
15. Thereafter, defendant Caperal was awarded Fishpond
Lease Agreement No. 2083-A on December 28, 1984 by
the Ministry of Agriculture and Food.
Defendant Caperal admitted only the facts stated in
paragraphs 14 and 15 of the pre-trial order.
Trial was thereafter had on other matters.
The trial court resolved the issue in favor of CUBA by
declaring that DBP's taking possession and ownership of
the property without foreclosure was plainly violative of
Article 2088 of the Civil Code which provides as follows:
Art. 2088. The creditor cannot appropriate the things given
by way of pledge or mortgage, or dispose of them. Any
stipulation to the contrary is null and void.
It disagreed with DBP's stand that the Assignments of
Leasehold Rights were not contracts of mortgage because
(1) they were given as security for loans, (2) although the
"fishpond land" in question is still a public land, CUBA's
leasehold rights and interest thereon are alienable rights
which can be the proper subject of a mortgage; and (3) the
intention of the contracting parties to treat the
Assignment of Leasehold Rights as a mortgage was
obvious and unmistakable; hence, upon CUBA's default,
DBP's only right was to foreclose the Assignment in
accordance with law.
The trial court also declared invalid condition no. 12 of the
Assignment of Leasehold Rights for being a clear case of
pactum commissorium expressly prohibited and declared
null and void by Article 2088 of the Civil Code. It then
concluded that since DBP never acquired lawful ownership
of CUBA's leasehold rights, all acts of ownership and
possession by the said bank were void. Accordingly, the
Deed of Conditional Sale in favor of CUBA, the notarial
rescission of such sale, and the Deed of Conditional Sale in
favor of defendant Caperal, as well as the Assignment of
Leasehold Rights executed by Caperal in favor of DBP,
were also void and ineffective.
As to damages, the trial court found "ample evidence on
record" that in 1984 the representatives of DBP ejected
CUBA and her caretakers not only from the fishpond area
but also from the adjoining big house; and that when
CUBA's son and caretaker went there on 15 September
1985, they found the said house unoccupied and
destroyed and CUBA's personal belongings, machineries,
equipment, tools, and other articles used in fishpond
operation which were kept in the house were missing. The
missing items were valued at about P550,000. It further
found that when CUBA and her men were ejected by DBP
for the first time in 1979, CUBA had stocked the fishpond
with 250,000 pieces of bangus fish (milkfish), all of which
died because the DBP representatives prevented CUBA's
men from feeding the fish. At the conservative price of
P3.00 per fish, the gross value would have been P690,000,
and after deducting 25% of said value as reasonable
allowance for the cost of feeds, CUBA suffered a loss of
P517,500. It then set the aggregate of the actual damages
sustained by CUBA at P1,067,500.
The trial court further found that DBP was guilty of gross
bad faith in falsely representing to the Bureau of Fisheries
that it had foreclosed its mortgage on CUBA's leasehold
rights. Such representation induced the said Bureau to
terminate CUBA's leasehold rights and to approve the
Deed of Conditional Sale in favor of CUBA. And considering
that by reason of her unlawful ejectment by DBP, CUBA
"suffered moral shock, degradation, social humiliation, and
serious anxieties for which she became sick and had to be
hospitalized" the trial court found her entitled to moral
and exemplary damages. The trial court also held that
CUBA was entitled to P100,000 attorney's fees in view of
the considerable expenses she incurred for lawyers' fees
and in view of the finding that she was entitled to
exemplary damages.
CUBA and DBP interposed separate appeals from the
decision to the Court of Appeals. The former sought an
increase in the amount of damages, while the latter
questioned the findings of fact and law of the lower court.
In its decision of 25 May 1994, the Court of Appeals ruled
that (1) the trial court erred in declaring that the deed of
assignment was null and void and that defendant Caperal
could not validly acquire the leasehold rights from DBP; (2)
contrary to the claim of DBP, the assignment was not a
cession under Article 1255 of the Civil Code because DBP
appeared to be the sole creditor to CUBA — cession
presupposes plurality of debts and creditors; (3) the deeds
of assignment represented the voluntary act of CUBA in
assigning her property rights in payment of her debts,
which amounted to a novation of the promissory notes
executed by CUBA in favor of DBP; (4) CUBA was estopped
from questioning the assignment of the leasehold rights,
since she agreed to repurchase the said rights under a
deed of conditional sale; and (5) condition no. 12 of the
deed of assignment was an express authority from CUBA
for DBP to sell whatever right she had over the fishpond. It
also ruled that CUBA was not entitled to loss of profits for
lack of evidence, but agreed with the trial court as to the
actual damages of P1,067,500. It, however, deleted the
amount of exemplary damages and reduced the award of
moral damages from P100,000 to P50,000 and attorney's
fees, from P100,000 to P50,000.
The Court of Appeals thus declared as valid the following:
(1) the act of DBP in appropriating Cuba's leasehold rights
and interest under Fishpond Lease Agreement No. 2083;
(2) the deeds of assignment executed by Cuba in favor of
DBP; (3) the deed of conditional sale between CUBA and
DBP; and (4) the deed of conditional sale between DBP
and Caperal, the Fishpond Lease Agreement in favor of
Caperal, and the assignment of leasehold rights executed
by Caperal in favor of DBP. It then ordered DBP to turn
over possession of the property to Caperal as lawful holder
of the leasehold rights and to pay CUBA the following
amounts: (a) P1,067,500 as actual damages; P50,000 as
moral damages; and P50,000 as attorney's fees.
The motion for reconsideration was denied.
ISSUE:
Whether Court of Appeals erred (1) in not holding that the
questioned deed of assignment was a pactum
commissorium contrary to Article 2088 of the Civil Code;
(b) in holding that the deed of assignment effected a
novation of the promissory notes; (c) in holding that CUBA
was estopped from questioning the validity of the deed of
assignment when she agreed to repurchase her leasehold
rights under a deed of conditional sale; and (d) in reducing
the amounts of moral damages and attorney's fees, in
deleting the award of exemplary damages, and in not
increasing the amount of damages.
HELD:
We agree with CUBA that the assignment of leasehold
rights was a mortgage contract.
It is undisputed that CUBA obtained from DBP three
separate loans totalling P335,000, each of which was
covered by a promissory note. In all of these notes, there
was a provision that: "In the event of foreclosure of the
mortgage securing this notes, I/We further bind
myself/ourselves, jointly and severally, to pay the
deficiency, if any."
Simultaneous with the execution of the notes was the
execution of "Assignments of Leasehold Rights" where
CUBA assigned her leasehold rights and interest on a 44-
hectare fishpond, together with the improvements
thereon. As pointed out by CUBA, the deeds of assignment
constantly referred to the assignor (CUBA) as "borrower";
the assigned rights, as mortgaged properties; and the
instrument itself, as mortgage contract. Moreover, under
condition no. 22 of the deed, it was provided that "failure
to comply with the terms and condition of any of the loans
shall cause all other loans to become due and demandable
and all mortgages shall be foreclosed." And, condition no.
33 provided that if "foreclosure is actually accomplished,
the usual 10% attorney's fees and 10% liquidated damages
of the total obligation shall be imposed." There is,
therefore, no shred of doubt that a mortgage was
intended.
Besides, in their stipulation of facts the parties admitted
that the assignment was by way of security for the
payment of the loans.
We find no merit in DBP's contention that the assignment
novated the promissory notes in that the obligation to pay
a sum of money the loans (under the promissory notes)
was substituted by the assignment of the rights over the
fishpond (under the deed of assignment). As correctly
pointed out by CUBA, the said assignment merely
complemented or supplemented the notes; both could
stand together. The former was only an accessory to the
latter. Contrary to DBP's submission, the obligation to pay
a sum of money remained, and the assignment merely
served as security for the loans covered by the promissory
notes. Significantly, both the deeds of assignment and the
promissory notes were executed on the same dates the
loans were granted.
We do not, however, buy CUBA's argument that condition
no. 12 of the deed of assignment constituted pactum
commissorium. The elements of pactum commissorium
are as follows: (1) there should be a property mortgaged
by way of security for the payment of the principal
obligation, and (2) there should be a stipulation for
automatic appropriation by the creditor of the thing
mortgaged in case of non-payment of the principal
obligation within the stipulated period.
Condition no. 12 did not provide that the ownership over
the leasehold rights would automatically pass to DBP upon
CUBA's failure to pay the loan on time. It merely provided
for the appointment of DBP as attorney-in-fact with
authority, among other things, to sell or otherwise dispose
of the said real rights, in case of default by CUBA, and to
apply the proceeds to the payment of the loan. This
provision is a standard condition in mortgage contracts
and is in conformity with Article 2087 of the Civil Code,
which authorizes the mortgagee to foreclose the mortgage
and alienate the mortgaged property for the payment of
the principal obligation.
At any rate, DBP's act of appropriating CUBA's leasehold
rights was violative of Article 2088 of the Civil Code, which
forbids a credit or from appropriating, or disposing of, the
thing given as security for the payment of a debt.
The fact that CUBA offered and agreed to repurchase her
leasehold rights from DBP did not estop her from
questioning DBP's act of appropriation. Estoppel is
unavailing in this case. As held by this Court in some cases,
estoppel cannot give validity to an act that is prohibited by
law or against public policy. Hence, the appropriation of
the leasehold rights, being contrary to Article 2088 of the
Civil Code and to public policy, cannot be deemed
validated by estoppel.
Instead of taking ownership of the questioned real rights
upon default by CUBA, DBP should have foreclosed the
mortgage, as has been stipulated in condition no. 22 of the
deed of assignment. But, as admitted by DBP, there was no
such foreclosure. Yet, in its letter dated 26 October 1979,
addressed to the Minister of Agriculture and Natural
Resources and coursed through the Director of the Bureau
of Fisheries and Aquatic Resources, DBP declared that it
"had foreclosed the mortgage and enforced the
assignment of leasehold rights on March 21, 1979 for
failure of said spouses [Cuba spouces] to pay their loan
amortizations." This only goes to show that DBP was
aware of the necessity of foreclosure proceedings.
In view of the false representation of DBP that it had
already foreclosed the mortgage, the Bureau of Fisheries
cancelled CUBA's original lease permit, approved the deed
of conditional sale, and issued a new permit in favor of
CUBA. Said acts which were predicated on such false
representation, as well as the subsequent acts emanating
from DBP's appropriation of the leasehold rights, should
therefore be set aside. To validate these acts would open
the floodgates to circumvention of Article 2088 of the Civil
Code.
Even in cases where foreclosure proceedings were had,
this Court had not hesitated to nullify the consequent
auction sale for failure to comply with the requirements
laid down by law, such as Act No. 3135, as amended.
We shall now take up the issue of damages.
We find that the alleged loss of personal belongings and
equipment was not proved by clear evidence. Other than
the testimony of CUBA and her caretaker, there was no
proof as to the existence of those items before DBP took
over the fishpond in question. As pointed out by DBP,
there was not "inventory of the alleged lost items before
the loss which is normal in a project which sometimes, if
not most often, is left to the care of other persons."
Neither was a single receipt or record of acquisition
presented.
The award of actual damages should, therefore, be struck
down for lack of sufficient basis.
In view, however, of DBP's act of appropriating CUBA's
leasehold rights which was contrary to law and public
policy, as well as its false representation to the then
Ministry of Agriculture and Natural Resources that it had
"foreclosed the mortgage," an award of moral damages in
the amount of P50,000 is in order conformably with Article
2219(10), in relation to Article 21, of the Civil Code.
Exemplary or corrective damages in the amount of
P25,000 should likewise be awarded by way of example or
correction for the public good. There being an award of
exemplary damages, attorney's fees are also recoverable.
WHEREFORE, the 25 May 1994 Decision of the Court of
Appeals in CA-G.R. CV No. 26535 is hereby REVERSED,
except as to the award of P50,000 as moral damages,
which is hereby sustained. The 31 January 1990 Decision
of the Regional Trial Court of Pangasinan, Branch 54, in
Civil Case No. A-1574 is MODIFIED setting aside the finding
that condition no. 12 of the deed of assignment
constituted pactum commissorium and the award of
actual damages; and by reducing the amounts of moral
damages from P100,000 to P50,000; the exemplary
damages, from P50,000 to P25,000; and the attorney's
fees, from P100,000 to P20,000. The Development Bank of
the Philippines is hereby ordered to render an accounting
of the income derived from the operation of the fishpond
in question.
G.R. No. L-50449 January 30, 1982
FILINVEST CREDIT CORPORATION, plaintiff-appellee,
vs.
PHILIPPINE ACETYLENE, CO., INC., defendant-appellant.
FACTS:
On October 30, 1971, the Philippine Acetylene Co., Inc.,
defendant-appellant herein, purchased from one
Alexander Lim, as evidenced by a Deed of Sale marked, a
motor vehicle described as Chevorlet, 1969 model with
Serial No. 136699Z303652 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 with 12 % interest per annum on each
unpaid installment, and attorney's fees in the amount
equivalent to 25% of the total of the outstanding unpaid
amount.
As security for the payment of said promissory note, the
appellant executed a chattel mortgage over the same
motor vehicle in favor of said Alexander Lim.
Subsequently, on November 2, 1971. 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.
Thereafter, the Filinvest Finance Corporation, as a
consequence of its merger with the Credit and
Development Corporation assigned to the new
corporation, the herein plaintiff-appellee Filinvest Credit
Corporation, all its rights, title, and interests on the
aforesaid promissory note and chattel mortgage which, in
effect, the payment of the unpaid balance owed by
defendant-appellant to Alexander Lim was financed by
plaintiff-appellee such that Lim became fully paid.
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 you (appellant) remit the
aforesaid amount in full in addition to stipulated interest
and charges or return the mortgaged property to my client
at its office at 2133 Taft Avenue, Malate, Manila within five
(5) days from date of this letter during office hours. "
Replying thereto, appellant, thru its assistant general-
manager, wrote back advising appellee of its decision to
"return the mortgaged property, which return shall be in
full satisfaction of its indebtedness pursuant to Article
1484 of the New Civil Code." Accordingly, the mortgaged
vehicle was returned to the appellee together with the
document "Voluntary Surrender with Special Power of
Attorney To Sell"
On April 4, 1973, appellee wrote a letter (Exh. H) to
appellant informing the latter that appellee cannot sell the
motor vehicle as there were unpaid taxes on the said
vehicle in the sum of P70,122.00. On the last portion of the
said letter, appellee requested the appellant to update its
account by paying the installments in arrears and accruing
interest in the amount of P4,232.21 on or before April 9,
1973.
On May 8, 1973, appellee, in a letter (Exh. 1), 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 on September 14, 1973.
In its answer, appellant, while admitting the material
allegations of the appellee's complaint, avers that appellee
has no cause of action against it since its obligation
towards the appellee was extinguished when in
compliance with the appellee's demand letter, it returned
the mortgaged property to the appellee, and that
assuming arguendo that the return of the property did not
extinguish its obligation, it was nonetheless justified in
refusing payment since the appellee is not entitled to
recover the same due to the breach of warranty
committed by the original vendor-assignor Alexander Lim.
ISSUE:
Whether the return of the mortgaged motor vehicle to the
appellee by virtue of its voluntary surrender by the
appellant totally extinguished and/or cancelled its
obligation to the appellee.
HELD:
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, according to
Manresa, 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" dated March 12, 1973, attached as Annex
"C" of the appellant's answer to the complaint. 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.
G.R. No. L-51767 June 29, 1982
LETICIA CO, assisted by her husband MUI YUK KONG, in
substitution of CITADEL INSURANCE & SURETY CO., INC.,
plaintiff-appellee,
vs.
PHILIPPINE NATIONAL BANK, defendant-appellant.
FACTS:
On November 10, 1961, the Standard Parts Manufacturing
Corporation, executed a real estate mortgage in favor of
herein defendant-appellant Philippine National Bank, over
properties covered by Transfer Certificates of Title Nos. T-
5108 and T-5320, both situated in Baguio City, as collateral
for a loan consideration of P500,000.00. On February 20,
1963, the same debtor corporation executed an amended
real estate mortgage to include as collateral for the
increase of the above loan to P1,000,000.00 a property
located at Pasong Tamo Extension within the Municipality
of Makati. Additionally, on February 20, 1963, the same
corporation executed in favor of PNB a chattel mortgage of
its personal properties listed on pages 96 to 108 of the
Record on Appeal. On pages 6-7 of appellant's brief it is
stated that as of July 19, 1974, the "borrowed loan" of
STANDARD totalled P4,296,803.56, and that the said
obligation was secured, as aforementioned, by the
mortgages on the Baguio and Makati real estates of
STANDARD and the chattel mortgage on its personal
properties above referred to.
When STANDARD failed to pay its obligation, PNB
extrajudicially foreclosed the mortgage on the Baguio
properties as well as the chattel mortgage on July 19,
1974, with PNB as the highest bidder for P1,514,305.00.
Subsequently, on August 8, 1974, PNB also foreclosed the
mortgage on the Makati property and purchased the
same, as highest bidder, for P1,363,000.00.
To Our mind then, the facts that are decisive herein are
the following:
1. The mortgages here in question were constituted way
back in 1961 to 1963.
2. The foreclosure sale of the Baguio properties and the
chattels took place on July 19, 1974 and that of the Makati
estate on August 8, 1974.
3. Citadel Insurance & Surety Co., Inc. (CITADEL, for short)
to whom STANDARD had in the meanwhile (or on February
20, 1976) transferred its rights in the mortgages here in
issue, wrote PNB on March 5, 1976 stating that it was
redeeming the Makati property, offering to pay therefor as
redemption price P1,621,970.00.
4.Immediately or on even date PNB rejected the above
tender, contending that the offered price was much lower
than P3,366,546.42, as of said date March 5, 1976, which
PNB maintained was the correct redemption price.
5. The Certificate of Sale dated August 8, 1974 covering
TCT No. 54474 was issued by the Sheriff of Rizal and
registered on March 14, 1976 in the Registry of Deeds.
(Page 8, PNB's brief) Notably, however, according to the
decision of the trial court, the certificate of sale was
registered on March 11, 1976. (Page 176, Record on
Appeal.)
6. On March 11, 1976, CITADEL filed the instant action
ISSUE:
1. Whether the redemption period has expired.
2. What is the correct redemption amount required
under the law.
3. Whether there was a valid and effective tender
of payment.
HELD:
The Supreme Court ruled in favor of Citadel, stating that
the redemption was made on time within the one-year
period from the date of the registration of the certificate
of sale.
The Court held that Act 3133 and Sections 29-32 of Rule 39
of the Rules of Court are the applicable legal precepts to
the right of redemption.
Let us not forget that the mortgage at issue was executed
in 1963. True it is that as underscored by counsel for PNB,
STANDARD, the predecessor-in-interest of CITADEL, who
signed the deed of mortgage agreed, and CITADEL is
bound by such agreement, "to abide and to be bound by
the provisions of the Charter of the PNB ". Specifically
paragraph (g) of said real estate mortgage provides:
(g) The mortgagor hereby waives the right granted him
under Section 119 of Commonwealth Act No. 141, known
as the Public Land Act, as amended and agrees to abide to
be bound by the provisions of Act No. 3135 or Act No.
2933, which amended Act No. 1612, or Republic Act No.
1300, as amended, known as the New Charter." (Page 15,
PNB's Brief.)
Going by the literal terms of this quoted provision,
STANDARD/CITADEL stand bound by the same. In other
words, paragraph (g) of the mortgage contract made the
provisions of Act No. 3135 or Act 2933, which amended
Act No. 1612, or Republic Act 1300, as amended, known as
the new Charter part and parcel of the mortgage contract.
Republic Act 1300 entitled "An Act Revising the Charter of
the Philippine National Bank" was approved and made
effective on June 16, 1955. It was therefore the law when
in 1963 the mortgage here in dispute was executed. It was
the very law that the above-quoted paragraph (g) of the
mortgage contract made reference to. In this connection,
evidently overlooked by counsel for PNB is that Republic
Act 1300 does not contemplate extrajudicial procedure.
Indeed, conventional legal and banking business sense
dictates that it must have been because of such omission
that paragraph (g) above had to expressly incorporate Act
3135 which provides for extrajudicial foreclosure. We
cannot, therefore, escape the conclusion that what
STANDARD agreed to in respect to the possible foreclosure
of its mortgage was to subject the same to the provisions
of Act 3135 should the PNB opt to utilize said law instead
of Republic Act 1300.
From all the foregoing, We are of the considered opinion
and so hold that STANDARD'S/CITADEL'S period of
redemption was up to March 10, 1976. That CITADEL filed
its complaint to compel PNB to accept its redemption only
on March 11, 1976 is of no moment. The unequivocal
tender of redemption was made in the letter of Francisco
S. Corpus, its President, of March 5, 1976 accompanied by
a manager's check of the Rizal Commercial Banking
Corporation a well known, big and reputable banking
institution, for the amount it believed it should pay as
redemption price. PNB rejected it on the sole and only
ground that it considered the amount insufficient. The
Court, therefore, holds that the redemption was made on
time, that is, within one year (or even twelve months)
from the date appearing as the date of the registration of
the certificate of sale.
The Court found that the amount tendered by Citadel was
the correct redemption price.
WHEREFORE, the judgment of the trial court against the
Philippine National Bank herein on appeal is hereby
modified and another one is hereby rendered in favor of
the said defendant-appellant bank in accordance with the
formula herein above stated, and, accordingly, upon
payment by LETICIA CO of the amount due it pursuant to
the above computation, PNB is hereby ordered to transfer
the title to the property in question to LETICIA CO. This
payment must be made within ten (10) days from the
finality of this judgment.
G.R. NO. 149756 February 11, 2005
MYRNA RAMOS, Petitioner, v. SUSANA S. SARAO and
JONAS RAMOS, Respondents.
FACTS:
On February 21, 1991, Spouses Jonas Ramos and Myrna
Ramos executed a contract over their conjugal house and
lot in favor of Susana S. Sarao for and in consideration of
P1,310,430. Entitled "DEED OF SALE UNDER PACTO DE
RETRO," the contract, inter alia, granted the Ramos
spouses the option to repurchase the property within six
months from February 21, 1991, for P1,310,430 plus an
interest of 4.5 percent a month. It was further agreed that
should the spouses fail to pay the monthly interest or to
exercise the right to repurchase within the stipulated
period, the conveyance would be deemed an absolute
sale.
On July 30, 1991, Myrna Ramos tendered to Sarao the
amount of P1,633,034.20 in the form of two manager’s
checks, which the latter refused to accept for being
allegedly insufficient. On August 8, 1991, Myrna filed a
Complaint for the redemption of the property and moral
damages plus attorney’s fees. On August 13, 1991, she
deposited with the RTC two checks that Sarao refused to
accept.
On December 21, 1991, Sarao filed against the Ramos
spouses a Petition "for consolidation of ownership in pacto
de retro sale", the civil cases were later consolidated and
jointly tried before RTC in Makati.
After trial, the RTC dismissed the Complaint and granted
the prayer of Sarao to consolidate the title of the property
in her favor. Aggrieved, Myrna elevated the case to the CA.
The appellate court sustained the RTC’s finding that the
disputed contract was a bonafide pacto de retro sale, not a
mortgage to secure a loan. It ruled that Myrna Ramos had
failed to exercise the right of repurchase, as the
consignation of the two manager’s checks was deemed
invalid. She allegedly failed (1) to deposit the correct
repurchase price and (2) to comply with the required
notice of consignation.
ISSUE:
Whether the honorable appellate court erred in affirming
the ruling of the court a quo that there was no valid tender
of payment of the redemption price neither [sic] a valid
consignation in the instant case.
HELD:
Tender of payment is the manifestation by debtors of their
desire to comply with or to pay their obligation. If the
creditor refuses the tender of payment without just cause,
the debtors are discharged from the obligation by the
consignation of the sum due. Consignation is made by
depositing the proper amount to the judicial authority,
before whom the tender of payment and the
announcement of the consignation shall be proved. All
interested parties are to be notified of the consignation.
Compliance with these requisites is mandatory.
The trial and the appellate courts held that there was no
valid consignation, because petitioner had failed to offer
the correct amount and to provide ample consignation
notice to Sarao. This conclusion is incorrect.
Note that the principal loan was P1,310,430 plus 4.5 per
cent monthly interest compounded for six months.
Expressing her desire to pay in the fifth month, petitioner
averred that the total amount due was P1,633,034.19,
based on the computation of Sarao herself. The amount of
P2,911,579.22 that the latter demanded from her to settle
the loan obligation was plainly exorbitant, since this sum
included other items not covered by the agreement. The
property had been used solely as secure ty for the
P1,310,430 loan; it was therefore improper to include in
that amount payments for gasoline and miscellaneous
expenses, taxes, attorney's fees, and other alleged loans.
When Sarao unjustly refused the tender of payment in the
amount of P1,633,034.20, petitioner correctly filed suit
and consigned the amount in order to be released from
the latter's obligation.
The two lower courts cited Article 1257 of the Civil Code to
justify their ruling that petitioner had failed to notify
Respondent Sarao of the consignation. This provision of
law states that the obligor may be released, provided the
consignation is first announced to the parties interested in
the fulfillment of the obligation.
The facts show that the notice requirement was complied
with. In her August 1, 1991 letter, petitioner said that
should the respondent fail to accept payment, the former
would consign the amount. This statement was an
unequivocal announcement of consignation. Concededly,
sending to the creditor a tender of payment and notice of
consignation - - which was precisely what petitioner did - -
may be done in the same act.
Because petitioners' consignation of the amount of
P1,633,034.20 was valid, it produced the effect of
payment. "The consignation, however, has a retroactive
effect, and the payment is deemed to have been made at
the time of the deposit of the thing in court or when it was
placed at the disposal of the judicial authority." “The
rationale for consignation is to avoid making the
performance of an obligation more onerous to the debtor
by reason of causes not imputable to him."
NOTE:
In a pacto de retro, ownership of the property sold is
immediately transferred to the vendee a retro, subject
only to the repurchase by the vendor a retro within the
stipulated period. The vendor a retro’s failure to exercise
the right of repurchase within the agreed time vests upon
the vendee a retro, by operation of law, absolute title to
the property. Such title is not impaired even if the vendee
a retro fails to consolidate title under Article 1607 of the
Civil Code.
On the other hand, an equitable mortgage is a contract
that -- although lacking the formality, the form or words,
or other requisites demanded by a statute -- nevertheless
reveals the intention of the parties to burden a piece or
pieces of real property as security for a debt. The essential
requisites of such a contract are as follows: (1) the parties
enter into what appears to be a contract of sale, but (2)
their intention is to secure an existing debt by way of a
mortgage. The nonpayment of the debt when due gives
the mortgagee the right to foreclose the mortgage, sell the
property, and apply the proceeds of the sale to the
satisfaction of the loan obligation.
In the present factual milieu, the vendor retained
possession of the property allegedly sold. Petitioner and
her children continued to use it as their residence, even
after Jonas Ramos had abandoned them. In fact, it
remained as her address for the service of court orders
and copies of Respondent Sarao’s pleadings.
The presumption of equitable mortgage imposes a burden
on Sarao to present clear evidence to rebut it. Corollary to
this principle, the favored party need not introduce proof
to establish such presumption; the party challenging it
must overthrow it, lest it persist. To overturn that prima
facie fact that operated against her, Sarao needed to
adduce substantial and credible evidence to prove that the
contract was a bona fide pacto de retro. This evidentiary
burden she miserably failed to discharge.
Contrary to Sarao’s bare assertions, a meticulous review of
the evidence reveals that the alleged contract was
executed merely as security for a loan.
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
FACTS:
Sometime in November 1970, petitioner Pedro de Guzman
a merchant and authorized dealer of General Milk
Company (Philippines), Inc. in Urdaneta, Pangasinan,
contracted with respondent for the hauling of 750 cartons
of Liberty filled milk from a warehouse of General Milk in
Makati, Rizal, to petitioner's establishment in Urdaneta on
or before 4 December 1970. Accordingly, on 1 December
1970, respondent loaded in Makati the merchandise on to
his trucks: 150 cartons were loaded on a truck driven by
respondent himself, while 600 cartons were placed on
board the other truck which was driven by Manuel
Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to
petitioner. The other 600 boxes never reached petitioner,
since the truck which carried these boxes was hijacked
somewhere along the MacArthur Highway in Paniqui,
Tarlac, by armed men who took with them the truck, its
driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against
private respondent in the Court of First Instance of
Pangasinan, demanding payment of P 22,150.00, the
claimed value of the lost merchandise, plus damages and
attorney's fees. Petitioner argued that private respondent,
being a common carrier, and having failed to exercise the
extraordinary diligence required of him by the law, should
be held liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a
common carrier and argued that he could not be held
responsible for the value of the lost goods, such loss
having been due to force majeure.
On 10 December 1975, the trial court rendered a Decision
finding private respondent to be a common carrier and
holding him liable for the value of the undelivered goods
(P 22,150.00) as well as for P 4,000.00 as damages and P
2,000.00 as attorney's fees.
The Court of Appeals reversed the judgment of the trial
court and held that respondent had been engaged in
transporting return loads of freight "as a casual occupation
— a sideline to his scrap iron business" and not as a
common carrier.
ISSUE:
Whether the private respondent was not a common
carrier.
HELD:
The Civil Code defines "common carriers" in the following
terms:
Article 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water,
or air for compensation, offering their services to the
public.
So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the
notion of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set
forth in the Civil Code. Under Section 13, paragraph (b) of
the Public Service Act, "public service" includes:
... every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged
in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system, gas, electric
light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications
systems, wire or wireless broadcasting stations and other
similar public services. ...
It appears to the Court that private respondent is properly
characterized as a common carrier even though he merely
"back-hauled" goods for other merchants from Manila to
Pangasinan, although such back-hauling was done on a
periodic or occasional rather than regular or scheduled
manner, and even though private respondent's principal
occupation was not the carriage of goods for others. There
is no dispute that private respondent charged his
customers a fee for hauling their goods; that fee
frequently fell below commercial freight rates is not
relevant here.
A certificate of public convenience is not a requisite for the
incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the
moment a person or firm acts as a common carrier,
without regard to whether or not such carrier has also
complied with the requirements of the applicable
regulatory statute and implementing regulations and has
been granted a certificate of public convenience or other
franchise.
Common carriers, "by the nature of their business and for
reasons of public policy" 2 are held to a very high degree
of care and diligence ("extraordinary diligence") in the
carriage of goods as well as of passengers. The specific
import of extraordinary diligence in the care of goods
transported by a common carrier is, according to Article
1733, "further expressed in Articles 1734,1735 and 1745,
numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common
carriers are responsible for the loss, destruction or
deterioration of the goods which they carry, "unless the
same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether international
or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character-of the goods or defects in the packing or-
in the containers; and
(5) Order or act of competent public authority.
In these circumstances, we hold that the occurrence of the
loss must reasonably be regarded as quite beyond the
control of the common carrier and properly regarded as a
fortuitous event. It is necessary to recall that even
common carriers are not made absolute insurers against
all risks of travel and of transport of goods, and are not
held liable for acts or events which cannot be foreseen or
are inevitable, provided that they shall have complied with
the rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court
of Appeals that private respondent Cendana is not liable
for the value of the undelivered merchandise which was
lost because of an event entirely beyond private
respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is
hereby DENIED and the Decision of the Court of Appeals
dated 3 August 1977 is AFFIRMED. No pronouncement as
to costs.
G.R. No. L-35381 October 31, 1972
TLG INTERNATIONAL CONTINENTAL ENTERPRISING, INC.,
petitioner,
vs.
HON. DELFIN B. FLORES, Presiding Judge, Court of First
Instance of Rizal, Branch XI, respondent.
FACTS:
Respondent in an order dated October 5, 1971, granted
petitioner's "Motion To Intervene" and admitted its
"Complaint In Intervention", in Civil Case No. 14880,
(Bearcon Trading Co., Inc. vs. Juan Fabella Et Al) of the
Court of First Instance of Rizal, Branch XI. The aforecited
case was an action for declaratory relief involving the
rights of Bearcon Trading Co., Inc. as lessee of the
premises of the aforesaid defendants. Petitioner
intervened as sub-lessee of Bearcon over the property,
and the purpose of its intervention was to protect its rights
as such sub-lessee and to enable it, during pendency of the
case, to make a consignation of the monthly rentals as it
was "at a loss as to who is lawfully and rightfully entitled to
receive payments of the monthly" rentals.
As a consequence of the admission of the "Complaint In
Intervention", petitioner deposited with the Clerk of Court
of the Court of First Instance of Rizal, the following sums
by way of rentals: .
October 27, 1971 P900.00
November 29, 1971 600.00
January 19, 1972 750.00
March 8, 1972 1,500.00
or a total of P3,750.00, which deposits are properly
covered by official receipts.
On October 20, 1971, defendants in Civil Case No. 14880,
filed with said Court, an "Omnibus Motion" in which they
prayed that the complaint, as well as the Complaint In
Intervention, be dismissed on the ground that the subject
matter thereof could be better ventilated in the ejectment
case filed by Juan Fabella against Bearcon Trading Co., Inc.
(Civil Case No. 3979) then pending before the municipal
court of Mandaluyong Rizal.
The court a quo under date of April 24, 1972 issued an
"Omnibus Order", dismissing both the complaint and the
complaint in intervention.
On May 27, 1972, petitioner filed its Motion to withdraw
the sums it deposited, as "the order dismissing the ... case
as well as the complaint in intervention without a
resolution having been made as to the right of the plaintiff
or the defendants to the rentals deposited by the
intervenor, left the intervenor without any recourse but to
apply for authority to withdraw the ... amount ... and turn
over the same to the defendants in accordance with the
understanding arrived at between the parties hereto". This
was denied by Respondent in its order of June 23, 1972.
The motion for reconsideration of petitioner was likewise
denied by Respondent on July 15, 1972.
Hence this petition for certiorari.
ISSUE:
Whether or not Respondent could authorize the
withdrawal of the deposits considering that according to
Respondent, the Court "has not ordered the intervenor to
make any deposit in connection" with the case.
HELD:
There is no question that in cases of consignation the
debtor is entitled as a matter of right to withdraw the
deposit made with the court, before the consignation is
accepted by the creditor or prior to the judicial approval of
such consignation. This is explicit from the second
paragraph of Article 1260 of the new Civil Code which
states that: "Before the creditor has accepted the
consignation, or before a judicial declaration that the
consignation has been properly made, the debtor may
withdraw the thing or the sum deposited, allowing the
obligation to remain in force".
In the case at bar, the case was dismissed before the
amount deposited was either accepted by the creditor or a
declaration made by the Court approving such
consignation. Such dismissal rendered the consignation
ineffectual (Bravo v. Barreras, 92 Phil. 679, 681). Under
such circumstances it was incumbent upon Respondent to
have allowed the withdrawal by petitioner of the sums of
money deposited by it with the Court.
Respondent nevertheless insists that the Court had no
authority to authorize its withdrawal since it "has not
ordered intervenor to make" the deposit. This contention
ignores the fact that the deposit was made by petitioner as
a consequence of the admission by the Court of its
"Complaint In Intervention". It must be noted that the
aforesaid deposit was made with and officially receipted
by the Clerk of Court. The deposit was made pursuant to
Article 1258 of the new Civil Code which states that:
"Consignation shall be made by depositing the things due
at the disposal of judicial authority, before whom the
tender of payment shall be proved, in a proper case, ...". It
was therefore money received by the Clerk of Court
pursuant to Section 6 of the Judiciary Act. (Rep. Act 296 as
Amended). From the moment the deposit was made by
petitioner, "the money remained under the control and
jurisdiction of the court and the former could not recover
it without an express order of restitution" (Manajero v.
Buyson Lampa, 61 Phil. 66, 69). In the light of the
aforecited statutory provisions and jurisprudence We find
no justification for Respondent's intransigent posture.
WHEREFORE, the orders dated June 23, 1972 and July 15,
1972 subject of the petition for certiorari are hereby set
aside and Respondent directed to grant the withdrawal of
the deposit in accordance with the foregoing. Without
pronouncement as to costs.
G.R. No. L-57552 October 10, 1986
LUISA F. MCLAUGHLIN, petitioner,
vs.
THE COURT OF APPEALS AND RAMON FLORES,
respondents.
FACTS:
On February 28, 1977, petitioner Luisa F. McLaughlin and
private respondent Ramon Flores entered into a contract
of conditional sale of real property. Paragraph one of the
deed of conditional sale fixed the total purchase price of
P140,000.00 payable as follows: a) P26,550.00 upon the
execution of the deed; and b) the balance of P113,450.00
to be paid not later than May 31, 1977. The parties also
agreed that the balance shall bear interest at the rate of
1% per month to commence from December 1, 1976, until
the full purchase price was paid.
On June 19, 1979, petitioner filed a complaint in the then
Court of First Instance of Rizal (Civil Case No. 33573) for
the rescission of the deed of conditional sale due to the
failure of private respondent to pay the balance due on
May 31, 1977.
On December 27, 1979, the parties submitted a
Compromise Agreement on the basis of which the court
rendered a decision on January 22, 1980. In said
compromise agreement, private respondent
acknowledged his indebtedness to petitioner under the
deed of conditional sale in the amount of P119,050.71,
and the parties agreed that said amount would be payable
as follows: a) P50,000.00 upon signing of the agreement;
and b) the balance of P69,059.71 in two equal installments
on June 30, 1980 and December 31, 1980.
As agreed upon, private respondent paid P50,000.00 upon
the signing of the agreement and in addition he also paid
an "escalation cost" of P25,000.00.
Under paragraph 3 of the Compromise Agreement, private
respondent agreed to pay one thousand (P l,000.00) pesos
monthly rental beginning December 5, 1979 until the
obligation is duly paid, for the use of the property subject
matter of the deed of conditional sale.
On October 15, 1980, petitioner wrote to private
respondent demanding that the latter pay the balance of
P69,059.71 on or before October 31, 1980. This demand
included not only the installment due on June 30, 1980 but
also the installment due on December 31, 1980.
On October 30, 1980, private respondent sent a letter to
petitioner signifying his willingness and intention to pay
the full balance of P69,059.71, and at the same time
demanding to see the certificate of title of the property
and the tax payment receipts.
Private respondent states on page 14 of his brief that on
November 3, 1980, the first working day of said month, he
tendered payment to petitioner but this was refused
acceptance by petitioner. However, this does not appear
in the decision of the Court of Appeals.
On November 7, 1980, petitioner filed a Motion for Writ of
Execution alleging that private respondent failed to pay
the installment due on June 1980 and that since June 1980
he had failed to pay the monthly rental of P l,000.00.
Petitioner prayed that a) the deed of conditional sale of
real property be declared rescinded with forfeiture of all
payments as liquidated damages; and b) the court order
the payment of Pl,000.00 back rentals since June 1980 and
the eviction of private respondent.
On November 14, 1980, the trial court granted the motion
for writ of execution.
On November 17, 1980, private respondent filed a motion
for reconsideration tendering at the same time a Pacific
Banking Corporation certified manager's check in the
amount of P76,059.71, payable to the order of petitioner
and covering the entire obligation including the
installment due on December 31, 1980. However, the trial
court denied the motion for reconsideration in an order
dated November 21, 1980 and issued the writ of execution
on November 25, 1980.
In an order dated November 27, 1980, the trial court
granted petitioner's ex-parte motion for clarification of the
order of execution rescinding the deed of conditional sale
of real property.
On November 28, 1980, private respondent filed with the
Court of Appeals a petition for certiorari and prohibition
assailing the orders dated November 21 and 27, 1980.
As initially stated above, the appellate court nullified and
set aside the disputed orders of the lower court stating
that:
The general rule is that rescission will not be permitted for
a slight or casual breach of the contract, but only for such
breaches as are substantial and fundamental as to defeat
the object of the parties in making the agreement. (Song
Fo & Co. vs. Hawaiian-Philippine Co., 47 Phil. 821)
In aforesaid case, it was held that a delay in payment for a
small quantity of molasses, for some twenty days is not
such a violation of an essential condition of the contract as
warrants rescission for non-performance.
In the case at bar, McLaughlin wrote Flores on October 15,
1980 demanding that Flores pay the balance of P69,059.71
on or before October 31, 1980. Thus it is undeniable that
despite Flores' failure to make the payment which was due
on June 1980, McLaughlin waived whatever right she had
under the compromise agreement as incorporated in the
decision of respondent court, to demand rescission.
ISSUE:
Whether the appellate court abused its judicial discretion
by disregarding the penal clause stipulated by the parties
in the compromise agreement.
HELD:
In the analogous case of De Guzman vs. Court of Appeals,
this Court sustained the order of the respondent judge
denying the petitioners' motion for execution on the
ground that the private respondent had substantially
complied with the terms and conditions of the
compromise agreement, and directing the petitioners to
immediately execute the necessary documents
transferring to the private respondent the title to the
properties (July 23, 1985, 137 SCRA 730). In the case at
bar, there was also substantial compliance with the
compromise agreement.
The tender made by private respondent of a certified bank
manager's check payable to petitioner was a valid tender
of payment. The certified check covered not only the
balance of the purchase price in the amount of
P69,059.71, but also the arrears in the rental payments
from June to December, 1980 in the amount of P7,000.00,
or a total of P76,059.71.
According to Article 1256 of the Civil Code of the
Philippines, if the creditor to whom tender of payment has
been made refuses without just cause to accept it, the
debtor shall be released from responsibility by the
consignation of the thing or sum due, and that
consignation alone shall produce the same effect in the
five cases enumerated therein; Article 1257 provides that
in order that the consignation of the thing (or sum) due
may release the obligor, it must first be announced to the
persons interested in the fulfillment of the obligation; and
Article 1258 provides that consignation shall be made by
depositing the thing (or sum) due at the disposal of the
judicial authority and that the interested parties shall also
be notified thereof.
In the case at bar, although as above stated private
respondent had preserved his rights as a vendee in the
contract of conditional sale of real property by a timely
valid tender of payment of the balance of his obligation
which was not accepted by petitioner, he remains liable
for the payment of his obligation because of his failure to
deposit the amount due with the court.
However, inasmuch as petitioner did not accept the
aforesaid amount, it was incumbent on private respondent
to deposit the same with the court in order to be released
from responsibility. Since private respondent did not
deposit said amount with the court, his obligation was not
paid and he is liable in addition for the payment of the
monthly rental of Pl,000.00 from January 1, 1981 until said
obligation is duly paid, in accordance with paragraph 3 of
the Compromise Agreement. Upon full payment of the
amount of P76,059.71 and the rentals in arrears, private
respondent shall be entitled to a deed of absolute sale in
his favor of the real property in question.
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED with the following modifications:
(a) Petitioner is ordered to accept from private respondent
the Metrobank Cashier's Check No. CC 004233 in her favor
in the amount of P76,059.71 or another certified check of
a reputable bank drawn in her favor in the same amount;
(b) Private respondent is ordered to pay petitioner, within
sixty (60) days from the finality of this decision, the rentals
in arrears of P l,000.00 a month from January 1, 1981 until
full payment thereof; and
(c) Petitioner is ordered to execute a deed of absolute sale
in favor of private respondent over the real property in
question upon full payment of the amounts as provided in
paragraphs (a) and (b) above. No costs.
SO ORDERED.
G.R. No. L-58961 June 28, 1983
SOLEDAD SOCO, petitioner,
vs.
HON. FRANCIS MILITANTE, Incumbent Presiding Judge of
the Court of First Instance of Cebu, Branch XII, Cebu City
and REGINO FRANCISCO, JR., respondents.
FACTS:
plaintiff-appellee-Soco, for short-and the 'defendant-
appellant-Francisco, for brevity- entered into a contract of
lease on January 17, 1973, whereby Soco leased her
commercial building and lot situated at Manalili Street,
Cebu City, to Francisco for a monthly rental of P 800.00 for
a period of 10 years renewable for another 10 years at the
option of the lessee. The terms of the contract are
embodied in the Contract of Lease (Exhibit "A" for Soco
and Exhibit "2" for Francisco). It can readily be discerned
from Exhibit "A" that paragraphs 10 and 11 appear to have
been cancelled while in Exhibit "2" only paragraph 10 has
been cancelled. Claiming that paragraph 11 of the Contract
of Lease was in fact not part of the contract because it was
cancelled, Soco filed Civil Case No. R-16261 in the Court of
First Instance of Cebu seeking the annulment and/or
reformation of the Contract of Lease. ...
Sometime before the filing of Civil Case No. R-16261
Francisco noticed that Soco did not anymore send her
collector for the payment of rentals and at times there
were payments made but no receipts were issued. This
situation prompted Francisco to write Soco the letter
dated February 7, 1975 (Exhibit "3") which the latter
received as shown in Exhibit "3-A". After writing this letter,
Francisco sent his payment for rentals by checks issued by
the Commercial Bank and Trust Company. Obviously,
these payments in checks were received because Soco
admitted that prior to May, 1977, defendant had been
religiously paying the rental. ....
1. The factual background setting of this case clearly
indicates that soon after Soco learned that Francisco sub-
leased a portion of the building to NACIDA, at a monthly
rental of more than P3,000.00 which is definitely very
much higher than what Francisco was paying to Soco
under the Contract of Lease, the latter felt that she was on
the losing end of the lease agreement so she tried to look
for ways and means to terminate the contract. ...
In view of this alleged non-payment of rental of the leased
premises beginning May, 1977, Soco through her lawyer
sent a letter dated November 23, 1978 (Exhibit "B") to
Francisco serving notice to the latter 'to vacate the
premises leased.' In answer to this letter, Francisco
through his lawyer informed Soco and her lawyer that all
payments of rental due her were in fact paid by
Commercial Bank and Trust Company through the Clerk of
Court of the City Court of Cebu (Exhibit " 1 "). Despite this
explanation, Soco filed this instant case of Illegal Detainer
on January 8, 1979. ...
2. Pursuant to his letter dated February 7, 1975(Exhibit"3")
and for reasons stated therein, Francisco paid his monthly
rentals to Soco by issuing checks of the Commercial Bank
and Trust Company where he had a checking account. On
May 13, 1975, Francisco wrote the Vice-President of
Comtrust, Cebu Branch (Exhibit "4") requesting the latter
to issue checks to Soco in the amount of P 840.00 every
10th of the month, obviously for payment of his monthly
rentals. This request of Francisco was complied with by
Comtrust in its letter dated June 4, 1975 (Exhibit "5").
Obviously, these payments by checks through Comtrust
were received by Soco from June, 1975 to April, 1977
because Soco admitted that an rentals due her were paid
except the rentals beginning May, 1977. While Soco
alleged in her direct examination that 'since May, 1977 he
(meaning Francisco) stopped paying the monthly rentals'
(TSN, Palicte, p. 6, Hearing of October 24, 1979), yet on
cross examination she admitted that before the filing of
her complaint in the instant case, she knew that payments
for monthly rentals were deposited with the Clerk of Court
except rentals for the months of May, June, July and
August, 1977. ...

Pressing her point, Soco alleged that 'we personally
demanded from Engr. Francisco for the months of May,
June, July and August, but Engr. Francisco did not pay for
the reason that he had no funds available at that time.'
(TSN-Palicte, p. 28, Hearing October 24, 1979). This
allegation of Soco is denied by Francisco because per his
instructions, the Commercial Bank and Trust Company,
Cebu Branch, in fact, issued checks in favor of Soco
representing payments for monthly rentals for the months
of May, June, July and August, 1977.
Taking into account the factual background setting of this
case, the Court holds that there was in fact a tender of
payment of the rentals made by Francisco to Soco through
Comtrust and since these payments were not accepted by
Soco evidently because of her intention to evict Francisco,
by all means, culminating in the filing of Civil Case R-
16261, Francisco was impelled to deposit the rentals with
the Clerk of Court of the City Court of Cebu. Soco was
notified of this deposit by virtue of the letter of Atty.
Pampio Abarientos dated June 9, 1977 (Exhibit "10") and
the letter of Atty. Pampio Abarientos dated July 6. 1977
(Exhibit " 12") as well as in the answer of Francisco in Civil
Case R-16261 (Exhibit "14") particularly paragraph 7 of the
Special and Affirmative Defenses. She was further notified
of these payments by consignation in the letter of Atty.
Menchavez dated November 28, 1978 (Exhibit " 1 "). There
was therefore substantial compliance of the requisites of
consignation, hence his payments were valid and effective.
Consequently, Francisco cannot be ejected from the
leased premises for non-payment of rentals. ...
As indicated earlier, the above decision of the Court of
First Instance reversed the judgment of the City Court of
Cebu, Branch 11, the dispositive portion of the latter
reading as follows:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiff, ordering the defendant, Regino Francisco, Jr.:
(1) To vacate immediately the premises in question,
consisting of a building located at Manalili St., Cebu City;
(2) To pay to the plaintiff the sum of P40,490.46 for the
rentals, covering the period from May, 1977 to August,
1980, and starting with the month of September, 1980, to
pay to the plaintiff for one (1) year a monthly rental of P
l,072.076 and an additional amount of 5 per cent of said
amount, and for so much amount every month thereafter
equivalent to the rental of the month of every preceding
year plus 5 percent of same monthly rental until the
defendant shall finally vacate said premises and possession
thereof wholly restored to the plaintiff-all plus legal
interest from date of filing of the complaint;
(3) To pay to the plaintiff the sum of P9,000.00 for
attorney's fee;
(4) To pay to the plaintiff the sum of P5,000.00 for
damages and incidental litigation expenses; and
(5) To pay the Costs.
According to the findings of fact made by the City Court,
the defendant Francisco had religiously paid to the plaintiff
Soco the corresponding rentals according to the terms of
the Least Contract while enjoying the leased premises until
one day the plaintiff had to demand upon the defendant
for the payment of the rentals for the month of May, 1977
and of the succeeding months. The plaintiff also
demanded upon the defendant to vacate the premises and
from that time he failed or refused to vacate his
possession thereof; that beginning with the month of May,
1977 until at present, the defendant has not made valid
payments of rentals to the plaintiff who, as a consequence,
has not received any rental payment from the defendant
or anybody else; that for the months of May to August,
1977, evidence shows that the plaintiff through her
daughter, Teolita Soco and salesgirl, Vilma Arong, went to
the office or residence of defendant at Sanciangko St.,
Cebu City, on various occasions to effect payment of
rentals but were unable to collect on account of the
defendant's refusal to pay; that defendant contended that
payments of rental thru checks for said four months were
made to the plaintiff but the latter refused to accept them;
that in 1975, defendant authorized the Commercial Bank
and Trust Company to issue checks to the plaintiff
chargeable against his bank account, for the payment of
said rentals, and the delivery of said checks was coursed
by the bank thru the messengerial services of the FAR
Corporation, but the plaintiff refused to accept them and
because of such refusal, defendant instructed said bank to
make consignation with the Clerk of Court of the City
Court of Cebu as regard said rentals for May to August,
1977 and for subsequent months.
The City Court further found that there is no showing that
the letter allegedly delivered to the plaintiff in May, 1977
by Filomeno Soon, messenger of the FAR Corporation
contained cash money, check, money order, or any other
form of note of value, hence there could never be any
tender of payment, and even granting that there was, but
plaintiff refused to accept it without any reason, still no
consignation for May, 1977 rental could be considered in
favor of the defendant unless evidence is presented to
establish that he actually made rental deposit with the
court in cash money and prior and subsequent to such
deposit, he notified the plaintiff thereof.
Notwithstanding the contradictory findings of fact and the
resulting opposite conclusions of law by the City Court and
the Court of First Instance, both are agreed, however, that
the case presents the issue of whether the lessee failed to
pay the monthly rentals beginning May, 1977 up to the
time the complaint for eviction was filed on January 8,
1979. This issue in turn revolves on whether the
consignation of the rentals was valid or not to discharge
effectively the lessee's obligation to pay the same. The City
Court ruled that the consignation was not valid. The Court
of First Instance, on the other hand, held that there was
substantial compliance with the requisites of the law on
consignation.
ISSUE:
HELD:
According to Article 1256, New Civil Code, if the creditor to
whom tender of payment has been made refuses without
just cause to accept it, the debtor shall be released from
responsibility by the consignation of the thing or sum due.
Consignation alone shall produce the same effect in the
following cases: (1) When the creditor is absent or
unknown, or does not appear at the place of payment; (2)
When he is incapacitated to receive the payment at the
time it is due; (3) When, without just cause, he refuses to
give a receipt; (4) When two or more persons claim the
same right to collect; (5) When the title of the obligation
has been lost.
Consignation is the act of depositing the thing due with the
court or judicial authorities whenever the creditor cannot
accept or refuses to accept payment and it generally
requires a prior tender of payment. (Limkako vs. Teodoro,
74 Phil. 313).
In order that consignation may be effective, the debtor
must first comply with certain requirements prescribed by
law. The debtor must show (1) that there was a debt due;
(2) that the consignation of the obligation had been made
because the creditor to whom tender of payment was
made refused to accept it, or because he was absent or
incapacitated, or because several persons claimed to be
entitled to receive the amount due (Art. 1176, Civil Code);
(3) that previous notice of the consignation had been given
to the person interested in the performance of the
obligation (Art. 1177, Civil Code); (4) that the amount due
was placed at the disposal of the court (Art. 1178, Civil
Code); and (5) that after the consignation had been made
the person interested was notified thereof (Art. 1178, Civil
Code). Failure in any of these requirements is enough
ground to render a consignation ineffective. (Jose Ponce
de Leon vs. Santiago Syjuco, Inc., 90 Phil. 311).
Without the notice first announced to the persons
interested in the fulfillment of the obligation, the
consignation as a payment is void.
Tender of payment must be distinguished from
consignation. Tender is the antecedent of consignation,
that is, an act preparatory to the consignation, which is the
principal, and from which are derived the immediate
consequences which the debtor desires or seeks to obtain.
Tender of payment may be extrajudicial, while
consignation is necessarily judicial, and the priority of the
first is the attempt to make a private settlement before
proceeding to the solemnities of consignation.
We hold that the respondent lessee has utterly failed to
prove the following requisites of a valid consignation: First,
tender of payment of the monthly rentals to the lessor
except that indicated in the June 9, l977 Letter, Exhibit 10.
In the original records of the case, We note that the
certification, Exhibit 11 of Filemon Soon, messenger of the
FAR Corporation, certifying that the letter of Soledad Soco
sent last May 10 by Commercial Bank and Trust Co. was
marked RTS (return to sender) for the reason that the
addressee refused to receive it, was rejected by the court
for being immaterial, irrelevant and impertinent per its
Order dated November 20, 1980. (See p. 117, CFI Records).
Second, respondent lessee also failed to prove the first
notice to the lessor prior to consignation, except the
payment referred to in Exhibit 10.
Third, respondent lessee likewise failed to prove the
second notice, that is after consignation has been made, to
the lessor except the consignation referred to in Exhibit 12
which are the cashier's check Nos. 478439 and 47907 CBTC
dated May 11, 1977 and June 15, 1977 under Official
Receipt No. 04369 dated July 6, 1977.
And the fourth requisite that respondent lessee failed to
prove is the actual deposit or consignation of the monthly
rentals except the two cashier's checks referred to in
Exhibit 12.
We, therefore, find and rule that the lessee has failed to
prove tender of payment except that in Exh. 10; he has
failed to prove the first notice to the lessor prior to
consignation except that given in Exh. 10; he has failed to
prove the second notice after consignation except the two
made in Exh. 12; and he has failed to pay the rentals for
the months of July and August, 1977 as of the time the
complaint was filed for the eviction of the lessee. We hold Certificate of Title No. 29327 covering Lot No. 882 of
that the evidence is clear, competent and convincing Hinigaran Cadastre, NegrosOccidental."
showing that the lessee has violated the terms of the lease
contract and he may, therefore, be judicially ejected. The CFI denied both motions. Thus, this appeal.

WHEREFORE, IN VIEW OF ALL THE FOREGOING, the ISSUE:

decision of the Court of First Instance of Cebu, 14th
Judicial District, Branch XII is hereby REVERSED and SET
ASIDE, and the derision of the City Court of Cebu, Branch II
is hereby reinstated, with costs in favor of the petitioner.
G.R. No. L-23563 May 8, 1969
CRISTINA SOTTO, plaintiff-appellee,
vs.
HERNANI MIJARES, ET AL., defendants-appellants.
FACTS:
The plaintiff filed a “Motion for Deposit” on November 13,
1962. She contends that in accordance with the contract
including the allied transactions as evidenced by other
documents, the balance indebtedness of the defendants in
favor of the plaintiff is the amount of P5,106.00 only of
which the defendants alleging that they have offered the
said amount to the plaintiff who refused to receive it; that
in view of the admission of the defendants of the same, it
is fitting and proper that the said amount of P5,106.00 be
deposited in the Office of the Clerk of Court of this
province or to deliver the same to the plaintiff and/or her
counsel.
Whether the CFI acted with authority and in the judicious
exercise of its discretion in ordering the defendants to
make the deposit but without the condition they had
stated.
HELD
No. Whether or not to deposit at all the amount of an
admitted indebtedness, or to do so under certain
conditions, is a right which belongs to the debtor
exclusively. If he refuses he may not be compelled to do
so, and the creditor must fall back on the proper coercive
processes provided by law to secure or satisfy his credit, as
by attachment, judgment and execution.
Consignation is a facultative remedy which the debtor may
or may not avail himself of. The debtor has the right to
withdraw the thing or sum deposited before the creditor
has accepted or before a judicial declaration that the
consignation has been properly made is given. If the
debtor has such right of withdrawal, he surely has the right
to refuse to make the deposit in the first place.

Defendants, in their "Opposition", signified their

willingness to deposit the amount provided that the
complaint be dismissed and that they be absolved of all
other liabilities, expenses and costs.

The CFI issued the following order: "Defendants are

hereby ordered to deposit said amount to the Clerk of
Court pending the final termination of this case."

Later, Sotto represented by new counsel filed a motion for

partial judgment on the pleadings with respect to the
amount of P5,106.00, modifying their previous request for
judicial deposit, which had already been granted.

On the other hand, defendants moved to reconsider the

order, explaining that through oversight they failed to
allege in their "Opposition" that the P5,106.00 was actually
secured by a real estate mortgage. They would thus
premise their willingness to deposit said amount upon the
condition "x x x that the plaintiff will cancel the mortgage
abovementioned and that the plaintiff be ordered to
return to the defendants Transfer Certificate of Title No.
29326 covering Lot No. 327 of Pontevedra and Transfer