46. Metro Concast Steel Corp, SPS DYCHIAO v.
Allied Bank Corporation  The fact of Allied Bank’s representation has not been proven. It
G.R. No. 177921, December 4, 2013 Topic: Extinguishment of Obligations |
Ponente: J. Perlas-Bernabe | Author: Laureta
Doctrine: Article 1231 of the Civil Code states that obligations are extinguished
either by payment or performance, the loss of the thing due, the condonation
or remission of the debt, the confusion or merger of the rights of creditor and
debtor, compensation or novation.
Facts:
1. Metro Concast (MC) through its officers (petitioners) obtained
several loans from Allied Bank. These loan transactions were
covered by a promissory note and separate letters of credit/trust
receipts (with varying interest rates).
2. MC failed to settle, hence Allied Bank filed a complaint for
collection of sum of money. Petitioners admitted their
indebtedness to Allied Bank but denied liability for the interests
and penalties charged.
3. MC alleged that the economic reverses suffered by the economy in
1998 and the devaluation of the peso against the US dollar
contributed greatly to the downfall of the steel industry leading to
MCs cessation.
4. In order to settle their debts petitioners offered the sale of MC’s
remaining assets, consisting of machineries and equipment, to
Allied Bank which was refused. Allied Bank advised them to sell the
equipment and apply the proceeds of the sale to their outstanding
obligations. There were no buyers, so the equipment was reduced
into ferro scrap or scrap metal over the years.
5. In 2002, Peakstar Oil Corporation, represented by one Crisanta
Camiling, expressed interest in buying the scrap metal. During the
negotiations with Peakstar, petitioners claimed that Atty. P. Saw, a
member of Allied Bank’s legal department, acted as the latter’s
agent. Eventually, with the alleged conformity of Allied Bank,
through Atty. Saw, a Memorandum of Agreement was drawn
between Metro Concast, represented by petitioner Jose Dychiao,
and Peakstar, through Camiling, under which Peakstar obligated
itself to purchase the scrap metal for a total consideration of ₱34M.
6. Peakstar reneged on all its obligations under the MoA. In this
regard, petitioners alleged that: (a) their failure to pay their
outstanding loan obligations to Allied Bank must be considered as
force majeure ; and (b) since Allied Bank was the party that
accepted the terms and conditions of payment proposed by
Peakstar, petitioners must therefore be deemed to have settled
their obligations to Allied Bank.
7. Petitioners argue that their loan obligation is extinguished due to
Peakstar’s failure to perform its own obligations to MC pursuant to
the MoA. Petitioners classify Peakstar’s default as a form of force
majeure in the sense that they have, beyond their control, lost the
funds they expected to have received from the Peakstar (due to the
MoA) which they would, in turn, use to pay their own loan
obligations to Allied Bank.
Issue: W/N obligations under the subject PN and trust receipts have already
been extinguished? NO
Ruling:
Article 1231 of the Civil Code states that obligations are extinguished either by
payment or performance, the loss of the thing due, the condonation or
remission of the debt, the confusion or merger of the rights of creditor and
debtor, compensation or novation.
The MoA has no relevance to the performance of petitioners’ obligations to
Allied Bank.
 The MoA is a sale of assets contract, while petitioners’ obligations
to Allied Bank arose from various loan transactions.
 Absent any showing that the terms and conditions of the latter
transactions have been, in any way, modified or novated by the
terms and conditions in the MoA, said contracts should be treated
separately and distinctly from each other, such that the existence,
performance or breach of one would not depend on the existence,
performance or breach of the other.
The issue on whether or not Allied Bank expressed its conformity to the assets
sale transaction between Metro Concast and Peakstar is irrelevant.
cannot be deemed as a defense to exculpate petitioners from their
loan obligations to Allied Bank.
Peakstar’s breach of its obligations to MC arising from the MoA cannot be
classified as a fortuitous event under jurisprudential formulation.
 To constitute a fortuitous event, the following elements must
concur: (a) the cause of the unforeseen and unexpected occurrence
or of the failure of the debtor to comply with obligations must be
independent of human will; (b) it must be impossible to foresee
the event that constitutes the caso fortuito or, if it can be foreseen,
it must be impossible to avoid; (c) the occurrence must be such as
to render it impossible for the debtor to fulfill obligations in a
normal manner; and (d) the obligor must be free from any
participation in the aggravation of the injury or loss.
 While it may be argued that Peakstar’s breach of the MoA was
unforseen by petitioners, the same us clearly not "impossible"to
foresee or even an event which is independent of human will."
Neither has it been shown that said occurrence rendered it
impossible for petitioners to pay their loan obligations to
The performance or breach of the MoA bears no relation to the performance
or breach of the subject loan transactions, they being separate and distinct
sources of obligations.
 The fact of the matter is that petitioners’ loan obligations to Allied
Bank remain subsisting for the basic reason that the former has not
been able to prove that the same had already been paid or, in any
way, extinguished.
FROM INTERNET LANG
Topic: Test to Determine the Nature of Counterclaim
G.R. No. L-22578 January 31, 1973
National Marketing Corporation vs. Federation of United NAMARCO
Distributor’s Inc.
Facts:
1. NAMARCO and the FEDERATION entered into a Contract of Sale.
NAMARCO was authorized to import the following items with the
corresponding dollar value totalling $2,001,031.00. Among the
goods covered by the Contract of Sale were 2,000 cartons of PK
Chewing Gums, 1,000 cartons of Juicy Fruit Chewing Gums, 500
cartons of Adams Chicklets, 168 cartons of Blue Denims, and 138
bales of Khaki Twill.
2. To insure the payment of those goods by the FEDERATION, the
NAMARCO accepted three domestic letters of credit.
3. FEDERATION received from the NAMARCO the 2,000 cartons of PK
Chewing Gums, 1,000 cartons of Juicy Fruit Chewing Gums, and
500 cartons of Adams Chicklets, all with a total value of
P277,357.91, under the condition that the cost thereof would be
paid in cash through PNB Domestic L/C No. 600570; and on
February 20, 1960, the FEDERATION received from the NAMARCO
the 168 cartons of Blue Denims and 183 bales of Khaki Twill, with
a total value of P135,891.82 and P197,804.12, respectively, under
the condition that the cost thereof would be paid in cash through
PNB Domestic L/C Nos. 600606 and 600586, respectively.
4. FEDERATION filed a complaint against the NAMARCO for specific
performance and damages, alleging that after the NAMARCO had
delivered a great portion of the goods listed in the Contract of
Sale, it refused to deliver the other goods mentioned in the said
contract.
a. In its answer, NAMARCO has refused and declined to
accept the cash payments by the FEDERATION.
According to NAMARCO, the Contract of Sale was not
validly entered into by the NAMARCO and, therefore, it
is not bound by the provisions thereof.
b. NAMARCO tried to encash the three domestic letters
but PNB denied.
 i. The common condition of the three letters
of credit is that the sight drafts drawn on
them must be duly accepted by the
FEDERATION before they will be honored by
the Philippine National Bank. But the said
drafts were not presented to the
FEDERATION for acceptance.
ii. NAMARCO demanded from the
FEDERATION the payment of the total
amount of P611,053.35, but the latter failed
and refused to pay the said amount. CFI
Manila promulgated its decision ordering
the NAMARCO to specifically perform its
obligation in the Contract of Sale, by
delivering to the FEDERATION the
undelivered goods. SC affirms
5. Then, NAMARCO instituted the present action (Civil Case No.
46124) alleging, that the FEDERATION'S act or omission in refusing
to satisfy the former's valid, just and demandable claim has
compelled it to file the instant action; and praying that the
FEDERATION be ordered to pay the NAMARCO the sum of
P611,053.35, representing the cost of merchandise mentioned in
the preceding paragraph, with interest.
a. FEDERATION: being a compulsory claim, in that it arose
out of or is necessarily connected with the transaction
or occurrence that is the subject matter of the action
of the previous civil case, it must’ve been set up in
accordance with rule 10 sec 4. Failure to set up a
counterclaim precludes NAMARCO from instituting an
independent action.
b. NAMARCO: claim for recovery of the cost of
merchandise is not connected with the suit for specific
performance and evidence would not support or refute
both. Ergo, it is not counterclaim
Issue:
WoN the present suit instituted by NAMARCO is a counterclaim. Hence,
barred by previous suit. (short version)
Whether or not this action of NAMARCO for the collection of the payment of
the merchandise delivered to, but not yet paid by, the FEDERATION, is
already barred as a consequence of the failure of NAMARCO to set it up as a
counterclaim in the previous case, (Civil Case No. 42684) (long version lol)
Held:
Rule on compulsory counterclaim [barred when not set up]: (1) that it arises
out of, or is necessarily connected with, the transaction or occurrence that is
the subject matter of the opposing party's claim (2) that it does not require
for its adjudication the presence of third parties of whom the court cannot
acquire jurisdiction; and (3) that the court has jurisdiction to entertain the
claim.
Rule on permissive counterclaim [not barred if not set up]: logical connection
with the subject matter but the court has no jurisdiction or it requires for
adjudication the presence of 3rd parties.
Test to determine:
1. Issue identity –
2. that the counterclaim is compulsory if it would be barred by res
judicata
3. same evidence or substantial identity in the evidence relating to
the claim and counterclaim
4. the logical relationship between the claim and counterclaim
(compelling test of compulsariness)
a. It is the one circumstance without which neither party
could have found it necessary to seek relief.
It must be noted that one of the requisites for the application of the rule on
compulsory counterclaim is that the counterclaim should at least be
connected with or must arise out of the transaction or occurrence which
gave rise to the opposing party's claim.
While the refusal of NAMARCO to deliver the remainder of the goods
contracted for in its "trade assistance agreement" with FEDERATION, is the
important link in the chain of facts and events that constituted the
transaction upon which Federation's cause of action was based in Civil Case
No. 42684, it is not even a part of the transaction constituting the subject
matter of NAMARCO's present suit. For the action of FEDERATION on March
2, 1960, to compel NAMARCO to recognize the validity of their agreement
and deliver the remainder of the goods to be paid "on cash basis" in no way
involved the payment of the merchandise worth P609,014.73, already
delivered and paid for in cash by means of the domestic letters of credit. Such
non-payment by FEDERATION was a matter which was distinct and separate
from and had no logical relationship with the subject matter of FEDERATION's
own suit. These two claims are separate and distinct, as they involve totally
different factual and legal issues and do not represent the same "basic
controversy".
The right of the NAMARCO to the cost of the goods existed upon delivery of
the said goods to the FEDERATION which, under the Contract of Sale, had to
pay for them Therefore, the claim of the NAMARCO for the cost of the goods
delivered arose out of the failure of the FEDERATION to pay for the said
goods, and not out of the refusal of the NAMARCO to deliver the other goods
to the FEDERATION.
Additional discussion:
An after-acquired counterclaim, is one of the recognized exceptions to the
general rule that a counterclaim is compulsory and must be asserted if it
arises out of the same transaction as the opposing party's claim.
Thus a party who fails to interpose a counterclaim although arising out of or
is necessarily connected with the transaction or occurrence of the plaintiff's
suit but which did not exist or mature at the time said party files his answer is
not thereby barred from interposing such claim in a future litigation.
Doctrine: "We have indicated that a counterclaim is compulsory if it bears a
"logical relationship" to an opposing party's claim. Zion v. Sentry Safety
Control Corp., 3 Cir., 1959. 258 F. 2d 31. See also United Artists Corp. v.
Masterpiece Productions, Inc. 2 Cir., 1955, 221 F. 2d 213, 216. The phrase
"logical relationship" is given meaning by the purpose of the rule which it was
designed to implement. Thus, a counterclaim is logically related to the
opposing party's claim where separate trials of each of their respective
claims would involve a substantial duplication of effort and time by the
parties and the courts. Where multiple claims involve many of the same
factual issues, or the same factual and legal issues, or where they are off-
shoots of the same basic controversy between the parties, fairness and
considerations of convenience and of economy require that the
counterclaimant be permitted to maintain his cause of action. ...
Obligations and contracts; Payment by delivery of commercial paper;
Impairment clause in article 1249 applies only to instruments executed by
third persons and delivered by the debtor to the creditor
.—–The delivery of promissory notes payable to order, or bills of exchange or
drafts or othermercantile documents shall produce the effect of payment
only whenrealized, or when by the fault of the creditor, the privileges
inherent in theirnegotiable character have been impaired (Article 1249, New
Civil Code).The clause of article 1249 relative to the impairment of the
negotiablecharacter of the commercial paper by the fault of the creditor is
applicableonly to instruments executed by third persons and delivered by the
debtor tothe creditor, and does not apply to instruments executed by the
debtorhimself and delivered to the creditor.
From internet also
PAL v. CA
G.R. No. L-49188 January 30, 1990
Lessons Applicable: Promissory notes and checks (Negotiable Instruments
Law)
FACTS:
 November 8, 1967: Amelia Tan, under the name and style of Able
Printing Press commenced a complaint for damages before the CFI
 CFI: favored Amelia Tan against Philippine Airlines Inc. (PAL)
 CA affirmed with mod
 May 18, 1978: PAL received a copy of the first alias writ of execution
issued on the same day directing Special Sheriff Jaime K. del Rosario to
levy on execution in the sum of P25,000.00 with legal interest thereon
from July 20,1967 when respondent Amelia Tan made an extra-judicial
demand through a letter
 May 23, 1978: PAL filed an urgent motion to quash the alias writ of
execution stating that no return of the writ had as yet been made and
that the judgment debt had already been fully satisfied as evidenced by
the cash vouchers signed and received by Deputy Sheriff Reyes who
absconded
 May 26,1978: served a notice of garnishment on the depository bank of
PAL
ISSUE: W/N payment made to the absconding sheriff by check in his name
operate to satisfy the judgment debt
HELD: NO. CA affirmed.
 payment must be made to the obligee himself or to an agent having
authority, express or implied, to receive the particular payment
 The receipt of money due on ajudgment by an officer authorized by law
to accept it will, therefore, satisfy the debt
 Since a negotiable instrument is only a substitute for money and not
money, the delivery of such an instrument does not, by itself, operate
as payment
 The payment made by the PAL to the absconding sheriff was not in
cash or legal tender but in checks
Article 1249 of the Civil Code provides:
The payment of debts in money shall be made in the currency stipulated, and
if it is not possible to deliver such currency, then in the currency which is
legal tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or
other mercantile documents shall produce the effect of payment only when
they have been cashed, or when through the fault of the creditor they have
been impaired.
 As between two innocent persons, one of whom must suffer the
consequence of a breach of trust, the one who made it possible by his
act of confidence must bear the loss.
 PAL without prudence, departed from what is generally observed and
done, and placed as payee in the checks the name of the errant Sheriff
and not the name of the rightful payee
EQUITABLE PCI BANK, YU and APAS v. NG SHEUNG NGOR
G.R.NO. 171545, December 19, 2007
FACTS: On October 7, 2001, respondents Ngor and Go filed an action for
amendment and/or reformation of documents and contracts against Equitable
and its employees. They claimed that they were induced by the bank to avail
of its peso and dollar credit facilities by offering low interests so they accepted
and signed Equitable’s proposal. They alleged that they were unaware that the
documents contained escalation clauses granting Equitable authority to
increase interest without their consent. These were rebutted by the bank. RTC
ordered the use of the 1996 dollar exchange rate in computing respondent’s
dollar-denominated loans. CA granted the Bank’s application for injunction but
the properties were sold to public auction.
ISSUE: Whether or not there was an extraordinary deflation
RULING: Extraordinary inflation exists when there is an unusual decrease in
the purchasing power of currency and such decrease could not be reasonably
foreseen or was beyond the contemplation of the parties at the time of the
obligation. Deflation is an inverse situation.
Despite the devaluation of the peso, BSP never declared a situation of
extraordinary inflation. Respondents should pay their dollar denominated
loans at the exchange rate fixed by the BSP on the date of maturity.
Decision of lower courts are reversed and set aside.
PCIB v Franco
G.R. No. 180069, March 5, 2014
J.Peralta/ Resurreccion
Topic: Payment and performance - As to time and place of performance
Doctrine: One who pleads payment has the burden of proving it. Even where
the plaintiff must allege non-payment, the general rule is that the burden rests
on the defendant to prove payment, rather than on the plaintiff to prove non-
payment. When the creditor is in possession of the document of credit, he
need not prove non-payment for it is presumed. The creditor's possession of
the evidence of debt is proof that the debt has not been discharged by
payment.
Facts:
1. Franco secured four (4) Trust Indenture Certificates from PCIB
(Basically, it was an investment of Franco to PCIB which will earn
interests when maturity date comes);
2. According to Franco, in making the trust investment, he was
actually providing for his future since the money invested was going
to be managed and administered by PCIB and will be commingled,
pooled and automatically rolled- over for better investment;
3. One day, he ran out of money because his child got leukemia. With
this, he went to PCIB and requested withdrawal of his investment;
4. However, the PCIB denied the request and told him that due to the
conversion of all outstanding PCIBank trust indenture accounts into
common trust certificates, all trust indenture certificates have been
rendered "null and void.";
5. Furious, Franco filed a complaint for recovery of sum of money and
damages against PCIB;
6. PCIB answered that it already paid the TICs;
7. During Pretrial, Franco presented the original TICs. PCIB witnesses
were also presented. After trial, the RTC ruled in favour Franco. On
appeal, the CA affirmed the RTC;
Hence, this case.
Issue: WON the TICs had already been paid. NO
Ruling:
8. No. Franco’s possession of the original copies of the TICs strongly
supports his claim that PCIB obligation to return the principal plus
interest of the money placement has not been extinguished;
9. One who pleads payment has the burden of proving it. Even where
the plaintiff must allege non-payment, the general rule is that the
burden rests on the defendant to prove payment, rather than on
the plaintiff to prove non-payment. When the creditor is in
possession of the document of credit, he need not prove non-
payment for it is presumed. The creditor's possession of the
evidence of debt is proof that the debt has not been discharged by
payment;
10. The TICs in the hands of Franco is a proof of indebtedness and a
prima facie evidence that they have not been paid. PCIB could have
easily presented documentary evidence to dispute the claim, but it
did not. In its omission, it may be reasonably deduced that no
evidence to that effect really exist. Worse, the testimonies of PCIB's
own witnesses, reinforce, rather than belie, Franco's allegations of
non-payment.
11. Franco won.
# 49 PNB v. DEE
G.R. No. 182128 |February 19, 2014 | J.Reyes | Mendoza
Dacion en Pago
Doctrine: Dacion en pago or dation in payment is the delivery and
transmission of ownership of a thing by the debtor to the creditor as an
accepted equivalent of the performance of the obligation. It is a mode of
extinguishing an existing obligation and partakes the nature of sale as the
creditor is really buying the thing or property of the debtor, the payment for
which is to be charged against the debtor’s debt. Dation in payment
extinguishes the obligation to the extent of the value of the thing delivered,
either as agreed upon by the parties or as may be proved, unless the parties
by agreement – express or implied, or by their silence – consider the thing as
equivalent to the obligation, in which case the obligation is totally extinguished
Facts:
1. In July 1994, respondent (Dee) bought from respondent Prime East
Properties Inc. (PEPI) on an installment basis a residential lot
located in Rizal. Subsequently, PEPI assigned its rights over a
property on August 1996 to respondent Armed Forces of the
Philippines–Retirement and Separation Benefits System, Inc. (AFP–
RSBS), which included the property purchased by Dee.
Thereafter, PEPI obtained a loan from PNB (petitioner), secured by
a mortgage over several properties, including Dee’s property.
2.
After Dee’s full payment of the purchase price, a deed of sale was
executed by respondents PEPI and AFP–RSBS on July 1998 in Dee’s
favor. Consequently, Dee sought from the petitioner the delivery of
the owner’s duplicate title over the property, to no avail.
3.
4. Thus, she filed with the HLURB a complaint for specific
performance to compel delivery of TCT No. 619608 by the
petitioner, PEPI and AFP–RSBS, among others.
5. HLURB favored Dee. Affirmed by Board, OP, CA.
6. The petitioner claims that it has a valid mortgage over Dee’s
property, which was part of the property mortgaged by PEPI to it
to secure its loan obligation, and that Dee and PEPI are bound by
such mortgage. The petitioner also argues that it is not privy to the
transactions between the subdivision project buyers and PEPI, and
has no obligation to perform any of their respective undertakings
under their contract.
7. PNB also contends that it petitioner can be compelled to release or
cancel the mortgage only after the provisions of P.D. No. 957 on
redemption of the mortgage by the owner/developer (Section 25)
are complied with. The petitioner also objects to the denomination
by the CA of the provisions in the Affidavit of Undertaking as
stipulations pour autrui,17 arguing that the release of the title was
conditioned on Dee’s direct payment to it.18
8. Respondent PEPI, on the other hand, claims that the title over the
subject property is one of the properties due for release by the
petitioner as it has already been the subject of a Memorandum of
Agreement and dacion en pago entered into between them.
9. The agreement was reached after PEPI filed a petition for
rehabilitation, and contained the stipulation that the petitioner
agreed to release the mortgage lien on fully paid mortgaged
properties upon the issuance of the certificates of title over
the dacioned properties.
Issue: WON PEPI’s OBLIG to PNB was extinguished by Dacion en Pago- YES
WON PNB should release the lien on the property- YES
Held: Petition DENIED
Ruling:
PEPI brought to the attention of the Court the subsequent execution of a
Memorandum of Agreement dated November 22, 2006 by PEPI and the
petitioner pursuant to the RTC order in a Corporate Rehab filed by PEPI.
The RTC order approved PEPI’s modified Rehabilitation Plan, which included
the settlement of the latter’s unpaid obligations to its creditors by way
of dacion of real properties. In said order, the RTC also incorporated certain
measures that were not included in PEPI’s plan, one of which is that “[t]itles to
the lots which have been fully paid shall be released to the purchasers within
90 days after the dacion to the secured creditors has been completed.”
Consequently, the agreement stipulated that as partial settlement of PEPI’s
obligation with the petitioner, the former absolutely and irrevocably conveys
by way of “dacion en pago” the properties listed therein, which included the
lot purchased by Dee. The petitioner also committed to –
[R]elease its mortgage lien on fully paid Mortgaged Properties upon issuance
of the certificates of title over the Dacioned Properties in the name of the
[petitioner]. The request for release of a Mortgaged Property shall be
accompanied with: (i) proof of full payment by the buyer, together with a
certificate of full payment issued by the Borrower x x x. The [petitioner]
hereby undertakes to cause the transfer of the certificates of title over the
Dacioned Properties and the release of the Mortgaged Properties with
reasonable dispatch.
There is nothing on record showing that the Memorandum of Agreement has
been nullified or is the subject of pending litigation; hence, it carries with it the
presumption of validity.
Consequently, the execution of the dation in payment effectively extinguished
respondent PEPI’s loan obligation to the petitioner insofar as it covers the
value of the property purchased by Dee. This negates the petitioner’s claim
that PEPI must first redeem the property before it can cancel or release the
mortgage.
As it now stands, the petitioner already stepped into the shoes of PEPI and
there is no more reason for the petitioner to refuse the cancellation or release
of the mortgage, for, as stated by the Court in Luzon Development Bank, in
accepting the assigned properties as payment of the obligation, “[the bank]
has assumed the risk that some of the assigned properties are covered by
contracts to sell which must be honored under PD 957.”45 Whatever claims the
petitioner has against PEPI and AFP–RSBS, monetary or otherwise, should not
prejudice the rights and interests of Dee over the property, which she has
already fully paid for.
On Relativity of contracts( Just In Case)
The petitioner is correct in arguing that it is not obliged to perform any of the
undertaking of respondent PEPI and AFP–RSBS in its transactions with Dee
because it is not a privy thereto. The basic principle of relativity of contracts is
that contracts can only bind the parties who entered into it, and cannot favor
or prejudice a third person, even if he is aware of such contract and has acted
with knowledge thereof. “Where there is no privity of contract, there is
likewise no obligation or liability to speak about.”
57 FILINVEST v. PHILIPPINE ACETYLENE
GR No. L-50449|January 30, 1982|De Castro, J. |Reyes
TOPIC: Dacion en pago
DOCTRINE: Dacion en pago is the transmission of the ownership of a thing by
the debtor to the creditor as an accepted equivalent of the performance of an
obligation. 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.
1. Philippine Acetylene (PACI) purchased from Lim a Chevrolet on an
installment basis.
2. As security, PACI executed a chatter mortgage over the car in favor of
Lim which was later assigned to Filinvest.
3. PACI defaulted. Filinvest sent a demand letter.
a. Demand Letter: Pay the amount OR return the car.
4. PACI returned the mortgaged property to Filinvest.
5. Filinvest later informed PACI that the car cannot be sold because there
were unpaid taxes on the car. Filinvest requested that PACI updates its
accounts by paying the installments in arrears and accruing interest.
6. Filinvest offered to deliver back the car but PACI refused.
7. Filinvest then filed an action for collection of sum of money.
8. PACI: No more obligation because it was extinguished when it returned
the car. The return and acceptance being a a mode of payment or a
dacion en pago.
ISSUE: Whether the return of the car totally extinguished/cancelled the
obligation. NO.

 The mere return of the mortgaged motor vehicle by PACI to Filinvest
does not constitute dacion en pago in the absence, express or implied of
the true intention of the parties.
 Dacion en pago is the transmission of the ownership of a thing by the
debtor to the creditor as an accepted equivalent of the performance of
an obligation.
 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
novation, to have the effect of totally extinguishing the debt or
obligation.
 The evidence fails to show that Filinvest, consented, 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 PACI to Filinvest.
 In the absence of clear consent of Filinvest 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 Filinvest, 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 PACI.
59 REPARATIONS COMMISSION v UNIVERSAL DEEP SEA and MANILA SURETY
AM 21901-96 | 27 June 1978 | J. Concepcion, Jr. | SULLANO
TOPIC: Application of payments
DOCTRINE: SC held that Arts. 1252 to 1254 apply to persons owing several
debts to one creditor, not to sureties whose obligation 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.
1. The Reparations Commission (RC) awarded 6 trawl boats to Universal
which were delivered two at a time, each delivery being covered by a
Contract of Conditional Purchase and Sale providing for identical
schedules of payments.
2. The first installment representing 10% of the total cost was to be paid 24
months after delivery and the balance of the total cost to be paid in 10
equal installments, the first of which was due one year after the first
installment.
a. To guarantee faithful compliance with the said contract, a
performance bond of P53,643, with Universal as principal and
Manila Surety as surety, was executed in favor of RC.
3. On 10 August 1962, RC sued Universal and its Manila Surety to recover
various amounts of money due under the contracts.
a. Universal claimed that the amounts were not yet due and
demandable. The surety company also contended that the
action is premature.
4. RTC rendered judgment against Universal. Hence, this appeal.
a. Universal contends that there were obscurities in the terms
of the contracts as to the amounts and due dates of the first
installments which should have been first fixed before a
creditor can demand payment from the debtor.
b. Universal points to the Schedule of Payment of the M/S
UNIFISH 1 and M/S UNIFISH 2, which states that the amount
of first installment is P53,642 and the due date of its payment
is 8 May 1961. However, the amount of the first of the
succeeding itemized installments is P56,597 and the due date
is 8 May 8 1962. In the case of the M/S UNIFISH 3 and M/S
UNIFISH 4, the first installment is P68,777 and due on July
1961 and P72,565 and due on July 1962, respectively. In the
contract for the purchase and sale of the M/S UNIFISH 5 and
M/S UNIFISH 6, the amounts indicated as first installments
are P54,500 and P57,501, and the due dates of payment are
17 October 1961 and 17 October 1962, respectively.
ISSUES:
1. WoN the first installments under the 3 contracts of conditional purchase
and sale of reparations goods were already due and demandable when
the complaint was filed- YES
2. WON the P10k down payment made by Universal to RC for M/S UNIFISH
1 and 2 can be applied to the first installment guaranteed by the surety-
NO
1. The terms of the contracts for the purchase and sale of the reparations
vessels are very clear and leave no doubt as to the intent of the
contracting parties.
 In the contract concerning M/S UNIFISH 1 and M/S UNIFISH
2, the parties expressly agreed that the first installment
representing 10% of the purchase price or P53,642 shall be
paid within 24 months from the date of complete delivery of
the vessels or on 8 May 1961, and the balance to be paid in
10 equal yearly installments. The amount of P56,597 due on
8 May 1962, which is also claimed to be a "first installment,"
is but the first of the 10 equal yearly installments of the
balance of the purchase price.
2. Manila Surety contends that the down payment of P10k made by
Universal can be applied to the first installment for M/S UNIFISH 1 and 2
(an indebtedness guaranteed by Manila Surety), thus reducing its liability
from P53,643 to P43,642, because Art. 1254 stipulates that where the
creditor or debtor does not specify to which liability a payment shall be
applied, it shall be deemed to apply to the most onerous debt (in this
case, the most immediate, which is the first installment for M/S UNIFISH
1 and 2).
 SC held that Arts. 1252 to 1254 apply to persons owing several
debts to one creditor, not to sureties whose obligation 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 standing obligation of Universal is not just the first
installment, but also the 10 equal yearly installments. Thus,
given that both the first installment and the first of the 10
installments have both accrued, the P10k down payment
cannot be applied to just one of them.
o SC found the terms of the contracts clear and
left no doubt as to the intent of the contracting
parties that the first installment due 24 months
after delivery was different from the first of the
10 equal yearly installments of the balance of
the purchase price.
87 PACULDO v. REGALADO
G.R. No. 123855; 20 December 2000
Topic: Application of Payment | Ponente: J. Pardo | Author: Tiglao
Doctrine: 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.
Facts:
 Nereo Paculdo (Nereo) and Bonifacio Regalado (Bonifacio) entered
into a contract of lease over a parcel of land with a wet market
building.
 Contract was for 25 years (January 1, 1991-December
31,2015)
 Aside from the lease, Nereo leased 11 other properties from
respondent.
 10 properties – Fairview Compound
  1 property – Quirino Highway, QC
 Nereo also purchased from Bonifacio 8 units of heavy equipment
and vehicles
 On account of Nereo’s failure to pay P361,895.55 in rental for the
month of May 1992 and monthly rental of P450K for the months of
June and July 1992, Bonifacio sent a demand letter (if no payment
within 15 days it would cause the cancellation of lease contract)
 Without knowledge of Nereo, Bonifacio mortgaged the land
subject of the lease contract to Monte Piedad Savings Bank as
security for a loan.
 Bonifacio refused to accept Nero’s daily rental payments
 Nereo filed with RTC an action for injunction and damages seeking
to enjoin Bonifacio from disturbing his possession of the property
subject of the lease contract
 Same day, Bonifacio filed a complaint for ejectment against Nereo.
Facts na nasa Ruling:
 July 15, 1991 – In a letter respondent informed petitioner that the
payment was to be applied not only to petitioner’s accounts under
both the subject land and the Quirino lot but also to heavy
equipment bought by the latter from respondent.
 November 19, 1991 – In another letter respondent proposed that
petitioner’s security deposit for the Quirino lot, in the amount of
P643,276.48, be applied as partial payment for his account under
the subject lot as well as to real estate taxes on the Quirino lot.
 Petitioner interposed no objection, as evidenced by his
signature signifying his conformity thereto.
Issue/s: WON Nereo’s failure to object to the letter of July 15, 1991 and its
proposed application of payments amount to consent to such application?
Held:
 Petitioner submits that his silence is not consent but is in fact a
rejection.
 The right to specify which among his various obligations to the
same creditor is to be satisfied first rests with the debtor as
provided by law.
 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.
 Respondent Regalado argues that assuming that petitioner
expressed at the time of payment which among his obligations
were to be satisfied first, petitioner is estopped by his assent to the
application made by the respondent. This assent is inferred from
the silence of petitioner on the July 15, 1991 letter containing a
statement of the application of payments, which was different
from the application made by petitioner.
 A big chunk of the amount paid by petitioner went into the
satisfaction of an obligation which was not yet due and
demandable--the payment of the eight (8) heavy equipment
amounting to about P1,020,000.00.
 The statement of account prepared by respondent was not the
receipt contemplated under the law. The receipt is the evidence of
payment executed at the time of payment, and not the statement
of account executed several days thereafter.
 There was no clear assent by petitioner to the change in the
manner of application of payment. 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.
Petitioners 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.[28] 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.
61 SPS. SINAMBAN V. CHINA BANKING CO.
G.R. No. 193890|March 11, 2015| Reyes|TING
TOPIC: Application of payments
DOCTINE: Article 1216 of the Civil Code provides that "[t]he creditor may
proceed against any one of the solidary debtors or some or all of them
simultaneously. The demand made against one of them shall not be an
obstacle to those which may subsequently be directed against the others, so
long as the debt has not been fully collected."
1. Sps. Manalastas executed REM in favor of Chinabank over 2 properties.
To secure 700k loan as capital for rice milling business. They executed
several amendements, increasing their credit. Limit was increased to
P2.450M. Sps. executed several pns. In two of the pns, Sps Snamban
signed as co-makers (they are relatives)
2. Chinabank filed a complaint for sum of money against both set of sps.
3. Chinbank instituted EJF against the mortgaged security. FC sale was held,
but by then, amount had already increased due to the interest. There
was a deficiency of P1.7M
4. A complaint before RTC was filed. Praying that Sps. settle the deficiency
5. RTC: Sps. Sinamban must, solidarily with the spouses Manalastas,
proportionately answer for the loan deficiency pertaining to the two PNs
they co-signed, since the mortgage security provided by Sps. Manalastas
secured all three PNs and thus also benefited them as co-makers
 CA: Chinabank, in the exercise of the aforesaid option, chose to apply the
net proceeds of the EJF sale first to the PN solely signed by the Sps.
Manalastas. Thus, the net proceeds were applied to the 1st pn in the
principal amount of P1.8M instead of pro rata to all three pns due.
Issue: Whether the application of payment made, as assumed by CA, should
be followed. NO.
Ratio:
 Article 1216 of the Civil Code provides that "[t]he creditor may proceed
against any one of the solidary debtors or some or all of them
simultaneously. The demand made against one of them shall not be an
obstacle to those which may subsequently be directed against the
others, so long as the debt has not been fully collected."
 While the CA correctly noted that the choice is given to the solidary
creditor to determine against whom he wishes to enforce payment, the
CA stated that Chinabank, in the exercise of the aforesaid option, chose
to apply the net proceeds of the EJF sale first to the PN solely signed by
the Sps. Manalastas. Thus, the net proceeds were applied to the 1st pn in
the principal amount of P1.8M instead of pro rata to all three pns due.
 The Court finds this factual conclusion of the CA not supported by any
evidence or any previous arrangement. To the contrary, as clearly shown
in its Statement of Account, Chinabank opted to apply the entire auction
proceeds to the aggregate amount of the 3 PNs due.
 By deducting the auction proceeds from the aggregate amount of the
three loans due, Chinabank in effect opted to apply the entire proceeds
of the auction simultaneously to all the three loans. This implies that
each PN will assume a pro rata portion of the resulting deficiency on the
total indebtedness as bears upon each PN’s outstanding balance
 Contrary to the Sps. Sinamban’s insistence, none of the 3 PNs is more
onerous than the others to justify applying the proceeds according to
 Article 1254 of the Civil Code, in relation to Articles 1252 and 1253. Since
each loan, represented by each PN, was obtained under a single credit
line. No PN enjoys any priority or preference in payment over the others,
with the only difference being that the Sps. Sinamban are solidarily liable
for the deficiency on two of them.
SOLEDAD SOCO vs. HON. FRANCIS MILITANTE, Incumbent Presiding Judge of
the Court of First Instance of Cebu, Branch XII, Cebu City and REGINO
FRANCISCO, JR.
G.R. No. L-58961 June 28, 1983
Facts:
On January 17, 1973, Soledad Soco entered into a contract of lease
with Regino Francisco, Jr., 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.
However, during the leasing period, both parties were disputing
certain terms indicated in the Contract of Lease, which made Soco decide to
annul the Contract and filed a civil suit for annulment against Francisco. While
the case was pending, Soco alleged that Francisco was not able to pay his
monthly rentals for the months May, June, July and August, 1977. She also
found out that Francisco was subleasing a portion of the property to NACIDA
at a monthly rate of PhP 3,000 that was higher than what Francisco was paying
to Soco under the Contract of Lease. She felt that she was on losing end and
tried to find means to terminate the Contract. Thus, the alleged non-payment
of the rental beginning May 1977, prompted her to serve notice to Francisco
to vacate the premises. When Francisco refused to leave and informed her
that all payments rental due to her were in fact paid by Commercial Bank and
Trust Company (Comtrust) through the Clerk of Court of the City Court of Cebu,
she decided to file another petition which is Illegal Detainer on January 8,
1978. Soco alleged that she had personally demanded the payment but
Francisco did not pay for the reason that he had no funds available at that
time. She also admitted that she received the check payments issued by
Comtrust only from June, 1975 to April, 1977.
According to Francisco, sometime before the first civil suit was
filed, he noticed that Soco was not sending her collector for the payment of
the rentals and when there were paid, no receipt was issued. Because of this,
Francisco wrote Soco a letter dated February 7, 1975 informing her that his
rental payments will be paid in checks which will be issued by the Commercial
Bank and Trust Company (Comtrust). He denied the allegation of Soco for the
non-payment. He claims that he instructed Comtrust to issue the check
payment for the monthly rentals, which was delivered through messengerial
services of the FAR Corporation. However, Soco refused to accept the payment
beginning May 1977 that is why Franciso instructed Comtrust to make
consignation by depositing these checks with the Clerk of Court of the City
Court of Cebu. Evidence were presented through the Debit Memorandum and
Certification issued by the bank.
The City Court of Cebu ruled that there was proper substantial
compliance of the requisites of consignation; hence Francisco’s payments
were valid and effective. However, the Court of First Instance reversed the
judgment and ruled in favour of Soco.
Issue:
WON consignation of rental payments were valid to discharge effectively
Francisco’s obligation
Held: No.
The Court ruled that Francisco failed to comply with the requisites
for consignation based on the evidence presented.
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.
According to Article 1256 of the 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.
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.
Without the notice first announced to the persons interested in the
fulfillment of the obligation, the consignation as a payment is void. In order to
be valid, the tender of payment must be made in lawful currency. While
payment in check by the debtor may be acceptable as valid, if no prompt
objection to said payment is made the fact that in previous years payment in
check was accepted does not place its creditor in estoppel from requiring the
debtor to pay his obligation in cash.
In the instant case, Francisco failed to give proof of tender payment
of the monthly rentals to the lessor except indicated in the June 9,1977 letter
(Exhibit 10). He also failed to prove the first notice to the lessor prior to
consignation, except the payment referred to in Exhibit 10. The notice is
needed to give the creditor an opportunity to reconsider his unjustified refusal
and to accept payment thereby avoiding consignation and the subsequent
litigation. This previous notice is essential to the validity of the consignation
and its lack invalidates the same. He also failed to send someone to get the
cashier's check from the bank which is his duty based on the arrangement
agreed upon by Francisco and Comtrust. Moreover, Francsco failed to provide
evidence of 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. Likewise, the bank was
not given instruction by Francisco to serve the first and second notice for
consignation. The reason for the notification to the persons interested in the
fulfillment of the obligation after consignation had been made, which is
separate and distinct from the notification, which is made prior to the
consignation, is to enable the creditor to withdraw the goods or money
deposited. Indeed, it would be unjust to make him suffer the risk for any
deterioration, depreciation or loss of such goods or money by reason of lack
of knowledge of the consignation.
For the fourth requisite, no official receipt issued by the Clerk of
Court was presented to prove actual deposit of the monthly rentals except the
two cashier's checks referred to in Exhibit 12. When the official receipt of Clerk
of Court was check (Annexes B1-B40), no receipt was found for the payment
to month of May and June 1977 and on the month of July and August 1977,
the rentals were only deposited on November 1979 (more than 2 years later).
The Debit Memorandum provided by Comtrust was not considered by the
Court as binding upon a third person such as the lessor because it is merely
internal bank procedures. It cannot prove payment of the monthly rentals.
What is important was to prove that lessee had the checks picked up which
was the arrangement. On this, he failed to prove that he complied with the
arrangement.
In sum, the Court 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 that the evidence is clear, competent and convincing
showing that the lessee has violated the terms of the lease contract and he
may, therefore, be judicially ejected.
63 MEAT PACKING CORP v SANDIGANBAYAN
G.R. No. 103068 | 22 June 2001| J. Ynares-Santiago| Valera
TOPIC: Tender of Payment and Consignation
DOCTRINE: If the creditor to whom tender of payment has been made refused
without just cause to accept it, the debtor shall be released from responsibility
by the consignation of the thing or sum due.
ER: MPCP’s meat plant and parcels of land were sequestered by the PCGG,
which at the time were in the hands of PIMECO pursuant to their lease
purchase agreement. It was eventually managed by the PCGG team. To
prevent the rescission of the agreement between MPCP and PIMECO, PCGG
tendered payment of 5 million; however, MPCP refused to accept it saying that
it has rescinded the agreement due to the failure of PIMECO to pay 3 annual
installments. However, Sandiganbayan approved the consignation. Hence, the
agreement is not deemed rescinded because the 5 million effectively reduced
the payables due to PIMECO.
FACTS:
1. MPCP, a corporation wholly owned by GSIS, owned 3 parcels of
land as well as a meat packing plant.
2. MPCP and PIMECO entered into a lease-purchase agreement
wherein MPCP leased to PIMECO the abovementioned property,
payable over 28 years. (Annual Rate = Around 1.3 million; Total =
Around 38.5 million)
3. The agreement contained a rescission clause, which states that if
PIMECO fail or default in the payment of rentals equivalent to 3
annual installments, the agreement shall be automatically
rescinded.
4. MPCP and PIMECO entered into a Supplementary Loan Agreement
which increased the contract price to around 93.6 million, with an
annual rate of around 3.3 million.
AT THS JUNCTURE, REMIND YOURSELF THAT IF MPCP DECIDES TO
UNILATERALLY RESCIND THE AGREEMENT, PIMECO’S TOTAL AMOUNT OF
DEFAULTED RENTALS SHOULD AMOUNT TO THREE (3) ANNUAL
INSTALLMENTS.
5. PCGG sequestered all the assets, properties and records of
PIMECO, including the subject properties and agreement.
6. MPCP wrote a letter to PIMECO, notifying them that the agreement
has been rescinded on the ground of non payment of rentals.
7. GSIS asked PCGG to excluded the meat packing plant from the
sequestered assets. PCGG denied the request. MPCP sought the
turnover on the ground that the agreement has been rescinded.
8. PCGG ordered the transfer of the plant to GSIS, under the condition
that the PCGG management team continue its operations to
complete outstanding orders.
9. In fear that PCGG would not pay the rentals due to MPCP, PIMECO
filed a petition praying that it be declared to be no longer bound by
the lease purchase agreement.
10. Meanwhile, PCGG tendered to MPCP amounting to 5 million,
representing partial payment of accrued rentals on the meat
packing plant, which MPCP refused to accept on the theory that the
agreement has been rescinded.
11. Sandiganbayan approved the consignation by PCGG after MPCP
refused the tender.
ISSUE/S:
W/N there was valid consignation – YES
HELD/RULING:
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. It should be distinguished
from tender of payment. 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. Tender and
consignation, where validly made, produces the effect of payment and
extinguishes the obligation.
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.
In the case at bar, there was prior tender by PCGG of the amount of
P5,000,000.00 for payment of the rentals in arrears. MPCPs refusal to accept
the same, on the ground merely that its lease-purchase agreement with
PIMECO had been rescinded, was unjustified. As found by the Sandiganbayan,
from January 29, 1986 to January 30, 1990, PIMECO paid, and GSIS/MPCP
received, several amounts due under the lease-purchase agreement, such as
annual amortizations or rentals, advances, insurance, and taxes, in total sum
of P15,921,205.83. Surely, the acceptance by MPCP and GSIS of such payments
for rentals and amortizations negates any rescission of the lease-purchase
agreement.
Under the terms of the lease-purchase agreement, the amount of arrears in
rentals or amortizations must be equivalent to the cumulative sum of three
annual installments, in order to warrant the rescission of the contract.
Therefore, it must be shown that PIMECO failed to pay the aggregate amount
of at least P10,038,809.10 before the lease-purchase agreement can be
deemed automatically cancelled. Assuming in the extreme that, as alleged by
MPCP, the arrears at the time of tender on January 30, 1991 amounted to
P12,578,171.00,40 the tender and consignation of the sum of P5,000,000.00,
which had the effect of payment, reduced the back rentals to only
P7,578,171.00, an amount less than the equivalent of three annual
installments.
Thus, with the Sandiganbayan’s approval of the consignation and directive for
MPCP to accept the tendered payment, the lease-purchase agreement could
not be said to have been rescinded.
65 SPS. NAMEAL and LOURDES BONROSTRO v. SPS. JUAN and CONSTANCIA
LUNA
G.R. No. 172346|July 24, 2013|Del Castillo, J.|YUMUL
TOPIC: Tender of Payment and Consignation
DOCTRINE: Tender of payment is the manifestation by the debtor of a desire
to comply with or pay an obligation. If refused without just cause, the tender
of payment will discharge the debtor of the obligation to pay but only after a
valid consignation of the sum due shall have been made with the proper court.
Tender of payment, without more, produces no effect. To have the effect of
payment and the consequent extinguishment of the obligation to pay, the law
requires the companion acts of tender of payment and consignation.
1. Constancia (buyer) entered into a Contract to Sell with Bliss
Development involving a house and lot.
2. 1 year later, Constancia Luna (as seller), entered into another Contract
to Sell with Lourdes for the same property.
3. Sps. Bonrostro took possession of the property. However, Lourdes failed
to pay the subsequent amortization.
4. Sps. Luna filed a Complaint for Rescission of Contract.
5. Sps. Bonrostro: They were willing to pay the balance after they sought
an extension. However, during the time that they were ready to pay,
Constancia and lawyer did not show up at their meeting.
 a. Lourdes then sent a letter expressing her desire to pay but
received no response.
b. Claiming that they are still willing to pay, they prayed that the
Court fix the period within which they can pay Sps. Luna.
c. They also denied that they were not paying amortizations to
New Capitol because they paid Bliss, which was the developer
of New Capitol.
6. RTC: Ruled in favor of Sps. Bonrostro. CA affirmed but imposed interest
only for certain amortizations, no interest on the payments made to
Bliss.
7. Sps. Bonrostro: Sending the letter constitutes a valid tender of payment
on their part. Thus, they should not be assessed interest after sending
the letter.
ISSUE: Whether there was a valid tender of payment.
 Tender of payment is the manifestation by the debtor of a desire to
comply with or pay an obligation. If refused without just cause, the
tender of payment will discharge the debtor of the obligation to pay but
only after a valid consignation of the sum due shall have been made with
the proper court.
 Consignation is the deposit of the [proper amount with a judicial
authority in accordance with rules prescribed by law, after the tender of
payment has been refused or because of circumstances which render
direct payment to the creditor impossible or inadvisable.
 Tender of payment, without more, produces no effect. To have the effect
of payment and the consequent extinguishment of the obligation to pay,
the law requires the companion acts of tender of payment and
consignation.
 If the debtor did not take any immediate step to make a consignation,
then interest is not suspended from the time of such tender.
 Here, the subject letter merely states Lourdes’ willingness and readiness
to pay but it was not accompanied by payment.
o She claimed that she made numerous telephone calls to
Constancia’s lawyer reminding the latter to collect her
payment, but, neither said lawyer nor Constancia came to
collect the payment.
o After that, the spouses Bonrostro took no further steps to
effect payment.
o They did not resort to consignation of the payment with the
proper court despite knowledge that under the contract, non-
payment of the installments on the agreed date would make
them liable for interest thereon.
 The spouses Bonrostro erroneously assumed that their notice to pay
would excuse them from paying interest.
 Their claimed tender of payment did not produce any effect whatsoever
because it was not accompanied by actual payment or followed by
consignation.
o Hence, it did not suspend the running of interest.
o The spouses Bonrostro are therefore liable for interest on the
subject installments from the date of default until full
payment.
66 DEL CARMEN v. SPOUSES SABORDO
G.R. No. 181723 | 11 August 2014
Topic: Tender of Payment and Consignation | Ponente: Peralta | Author:
Acido (edited Castro’s digest)
Doctrine:
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. It should be distinguished
from tender of payment which is the manifestation by the debtor to the
creditor of his desire to comply with his obligation, with the offer of immediate
performance.
Facts:
 The properties (Lots A, B, C, and D) of Suico spouses were foreclosed
after they failed to pay their loan obligation to the Dev’t Bank of the
Philippines (DBP). After DBP consolidated its ownership, they were
nonetheless allowed to repurchase the lots by way of a conditional
sale.
 Threatened with the cancellation of the conditional sale for paying
only the down payment and first monthly amortization, Suico spouses
sold their rights over the properties to spouses Sabordo, subject to the
condition that the latter shall pay the balance of the sale price.
 They executed a supplemental agreement to affirm that what was
actually sold to spouses Sabordo were Lots B and C, while Lots A and D
were given to them as usufructuaries. DBP approved the sale of rights
and spouses Sabordo were able to repurchase the foreclosed
properties.
 Sabordo filed with an original action for declaratory relief with
damages and prayer for a writ of preliminary injunction raising the
issue of whether or not the Suico spouses have the right to recover
from them Lots A and D.
 RTC: Spouses Suico may redeem the properties. CA: Extended the
period within which spouses Suico may redeem the lots in the amount
of P127,500.00.
 Del Carmen (legal heir of Suico) discovered that spouses Sabordo
mortgaged the properties with Republic Planters Bank (RPB) as
security for a loan which became delinquent.
 Claiming that they are ready with the payment but alleging that they
cannot determine as to whom such payment shall be made, Del
Carmen and her coheirs filed a Complaint seeking to compel Spouses
Sabordo and RPB to interplead and litigate between themselves their
respective interests on the P127,000.00. Upon the complaint’s filing,
they deposited the amount with the RTC.
Issue: Whether there was a valid consignation
Held: No. Failure to comply with the requisites, one of which is a valid prior
tender of payment, will render the consignation void.
Ruling:
 Consignation 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. It should be distinguished from tender of payment
which is the manifestation by the debtor to the creditor of his
desire to comply with his obligation, with the offer of immediate
performance. 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. Tender and
consignation, where validly made, produces the effect of
payment and extinguishes the obligation.
 In the instant case, petitioner and her coheirs, upon making the
deposit with the RTC, did not ask the trial court that respondents
be notified to receive the amount that they have deposited. In fact,
there was no tender of payment. Instead, what petitioner and her
coheirs prayed for is that respondents and RPB be directed to
interplead with one another to determine their alleged respective
rights over the consigned amount.
 In Del Rosario v. Sandico and Salvante v. Cruz, this Court held that
for a consignation or deposit with the court of an amount due on a
judgment to be considered as payment, there must be prior tender
to the judgment creditor who refuses to accept it. As stated above,
tender of payment involves a positive and unconditional act by the
obligor of offering legal tender currency as payment to the obligee
for the former’s obligation and demanding that the latter accept
the same. In the instant case, the Court finds no cogent reason to
depart from the findings of the CA and the RTC that petitioner and
her coheirs failed to make a prior valid tender of payment to
respondents.
It is settled that compliance with the requisites of a valid consignation is
mandatory. Failure to comply strictly with any of the requisites will render the
consignation void. One of these requisites is a valid prior tender of payment.
Under Article 1256, the only instances where prior tender of payment is
excused are: (1) when the creditor is absent or unknown, or does not appear
at the place of payment; (2) when the creditor is incapacitated to receive the
payment at the time it is due; (3) when, without just cause, the creditor refuses
to give a receipt; (4) when two or more persons claim the same right to collect;
and (5) when the title of the obligation has been lost. None of these instances
are present in the instant case. Hence, the fact that the subject lots are in
danger of being foreclosed does not excuse petitioner and her co-heirs from
tendering payment to respondents, as directed by the court.