SPOUSES DEO AGNER and MARICON AGNER, Petitioners, vs. BPI FAMILY
SAVINGS BANK, INC., Respondent.
FACTS:On February 15, 2001, the petitioners executed a
Promissory Note with Chattel Mortgage in favor of Citimotors, Inc.
The contract provides, among others, that: for receiving the amount
of Php834, 768.00, petitioners shall pay Php 17,391.00 every 15th
day of each succeeding month until fully paid; the loan is secured
by a 2001 Mitsubishi Adventure Super Sport; and an interest of 6%
per month shall be imposed for failure to pay each installment on
or before the stated due date.
On the same day, Citimotors, Inc. assigned all its rights, title
and interests in the Promissory Note with Chattel Mortgage to ABN
AMRO Savings Bank, Inc., which, on May 31, 2002, likewise assigned
the same to respondent BPI Family Savings Bank, Inc.
Spouses Agner failed to pay four successive installments from
May 15, 2002 to August 15, 2002, respondent, through counsel, sent
to petitioners a demand letter dated August 29, 2002, declaring the
entire obligation as due and demandable and requiring to pay
Php576,664.04, or surrender the mortgaged vehicle immediately upon
receiving the letter. Getting no response, respondent filed on
October 4, 2002 an action for Replevin and Damages before the
Manila Regional Trial Court.
A writ of replevin was issued. But still, the subject vehicle
was not seized. Trial on the merits succeeded. August 11, 2005, the
Manila RTC Br. 33 ruled in favor of BPI Family Savings Bank, Inc.
and ordered Spouses Agner to jointly and severally pay the amount
of Php576,664.04 plus interest at the rate of 72% per annum from
August 20, 2002 until fully paid, and the costs of suit.
Petitioners appealed the decision to the Court of Appeals, but
the CA affirmed the lower courts decision and, subsequently, denied
the motion for reconsideration.
ISSUE/S: Whether or Not petitioners can be considered to have
defaulted in payment for lack of competent proof that they received
the demand letter.
RULING:The SC held that even if there is no demand letter sent
by respondent, there is really no need for it because petitioners
legally waived the necessity of notice or demand in the Promissory
Note with Chattel Mortgage, which they voluntarily and knowingly
signed in favor of respondents predecessor-in-interest. The Civil
Code in Article 1169 provides that one incurs in delay or is in
default from the time the obligor demands the fulfilment of the
obligation from the obligee. However, the law expressly provides
that demand is not necessary under certain circumstances, and one
of these circumstances is when the parties expressly waive demand.
Hence, since the co-signors expressly waived demand in the
promissory notes, demand was unnecessary for them to be in
default.
STRONGHOLD INSURANCE v REPUBLIC ASAHI492 SCRA 179FACTSRepublic
Asahi Glass (RAG) contracts with Jose D. Santos Jr. Construction
(JDS) for the contruction of roadways and drainage systems in RAG's
compound. JDS does so and files the required compliance bond with
Stronghold Insurance Inc (SHI) acting as surety. The contract is
5.3M the bond is 795k. JDS falls woefully behind schedule,
prompting RAG to rescind the contract and demand the compliance
bond. The owner of JDS dies and JDS Construction disappears. SHI
refuses to pay the bond claiming that the death of JDS owner
extinguishes the obligation. Is SHI right?
ISSUEWhether or not the death of Jose D. Santos Jr. , as the
proprietor of JDS Construction, extinguish the obligation of JDS
and SHI in its obligation to Republic Asahi Glass?
HELDNo. As a general rule, the death of either the creditor or
the debtor does not extinguish the obligation. Obligations are
transmissible to theheirs, except when the transmission is
prevented by the law, the stipulations of the parties, or the
nature of the obligation. Only obligations that are personal or are
identified with the persons themselves are extinguished by
death.
In the present case, whatever monetary liabilities or
obligations Santos had under his contracts with respondent were not
intransmissible by their nature, by stipulation, or by provision of
law. Hence, his death did not result in the extinguishment of those
obligations or liabilities, which merely passed on to his
estate.
Furthermore, The liability of petitioner is contractual in
nature, because it executed a performance bond, As a surety,
petitioner is solidarilyliable with Santos in accordance with the
Civil Code.
ARTICLE 1240 TO WHOM PAYMENT SHALL BE MADEPNB VS CA AND TAN
Facts:Private respondent Loreto Tan is the owner of a parcel of
land abutting the national highway in Mandalangan, Bacolod City.
Expropriation proceedings were instituted by the government against
private respondent Tan and other property owners before the CFI of
Negros Occidental.
Tan then filed a motion requesting the issuance of an order for
the release to him of the expropriation price of P32,480.00.
On May 22, 1978, petitioner PNB was required by the trial court
to release to Tan the said amount.
On May 24, 1978, petitioner, through its Assistant Branch
Manager Juan Tagamolilia, issued a managers check for P32,480.00
and delivered the same to one Sonia Gonzaga without Tans knowledge,
consent or authority. Sonia Gonzaga deposited it in her account
with Far East Bank and Trust Co. (FEBTC) and later on withdrew the
said amount. Private respondent Tan subsequently demanded payment
of the amount from petitioner, but the same was refused on the
ground that petitioner had already paid and delivered the amount to
Sonia Gonzaga on the strength of a Special Power of Attorney (SPA)
allegedly executed in her favor by Tan.
Tan then executed an affidavit stating that he had never
executed an SPA in favor of Sonia Gonzaga and he had never
authorized her to receive the sum from petitioner. After failing to
recover the amount from PNB, private respondent filed a motion with
the court to require PNB to pay the same to him.
Held:There is no question that no payment had ever been made to
private respondent as the check was never delivered to him. When
the court ordered petitioner to pay private respondent the amount
of P32,480.00, it had the obligation to deliver the same to him.
Under Art. 1233 of the Civil Code, a debt shall not be understood
to have been paid unless the thing or service in which the
obligation consists has been completely delivered or rendered, as
the case may be.
The burden of proof of such payment lies with the debtor. In the
instant case, neither the SPA nor the check issued by petitioner
was ever presented in court.
The testimonies of petitioners own witnesses regarding the check
were conflicting. Tagamolila testified that the check was issued to
the order of Sonia Gonzaga as attorney-in-fact of Loreto Tan, while
Elvira Tibon, assistant cashier of PNB (Bacolod Branch), stated
that the check was issued to the order of Loreto Tan.
Furthermore, contrary to petitioners contention that all that is
needed to be proved is the existence of the SPA, it is also
necessary for evidence to be presented regarding the nature and
extent of the alleged powers and authority granted to Sonia
Gonzaga; more specifically, to determine whether the document
indeed authorized her to receive payment intended for private
respondent. However, no such evidence was ever presented.
CULABA VS CAFacts:The spouses Francisco and Demetria Culaba were
engaged in the sale and distribution of San Miguel Corporations
(SMC) beer products. SMC sold beer products on credit to the Culaba
spouses in the amount of P28,650.00. thereafter, the Culaba spouses
made a partial payment of P3,740.00, leaving an unpaid balance of
P24,910.00. As they failed to pay despite repeated demands, SMC
filed an action for collection of a sum of money against them
before the RTC.
The defendant-spouses denied any liability, claiming that they
had already paid the plaintiff in full on four separate occasions.
To substantiate this claim, the defendants presented 4 Temporary
Charge Sales (TCS) Liquidation Receipts: 27331, 27318, 27339,
27346. Defendant Francisco Culaba testified that he made payments
to an SMC supervisor who came in an SMC van. The defendant, in good
faith, then paid to the said supervisor, and he was, in turn,
issued genuine SMC liquidation receipts.
SMC, for its part, submitted a publishers affidavit to prove
that the entire booklet of TCSL Receipts bearing Nos. 27301-27350
were reported lost by it, and that it caused the publication of the
notice of loss.
Issue:W/N petitioners obligation is extinguished. No
Held:Payment is a mode of extinguishing an obligation. Article
1240 of the Civil Code provides that payment shall be made to the
person in whose favor the obligation has been constituted, or his
successor-in-interest, or any person authorized to receive it. In
this case, the payments were purportedly made to a supervisor of
the private respondent, who was clan in an SMC uniform and drove an
SMC van. He appeared to be authorized to accept payment as he
showed a list of customers accountabilities and issued SMC
liquidation receipts which looked genuine. Unfortunately for
petitioner Francisco Culaba, he did not ascertain the identity and
authority of the said supervisor, nor did he ask to be shown any
identification to prove that the latter was, indeed, an SMC
supervisor. The petitioners relied solely on the mans
representation that he was collecting payments for SMC. Thus, the
payments the petitioners claimed they made were not the payments
that discharged their obligation to private respondents.
The basis of agency is representation. A person dealing with an
agent is put upon an inquiry and must discover upon his peril the
authority of the agent. In the instant case, the petitioners loss
could have been avoided if they had simply exercised due diligence
in ascertaining the identity of the person to whom they allegedly
made the payments. The fact that they were parting with valuable
consideration should have made them more circumspect in handling
their business transactions. Persons dealing with an assumed agent
are bound at their peril to ascertain not only the fact agency but
also the nature and extent of authority, and in case either is
controverted, the burden of proof is upon them to establish it. the
petitioners in this case failed to discharge this burden,
considering that the private respondent vehemently denied that the
payments were accepted by it, and were made to its authorized
representative.
ALLIED BANKING CORPORATION VS LIM SIO WAN
Facts: On November 14, 1983, respondent Lim Sio Wan deposited
with petitioner Allied Banking Corporation (Allied) a money market
placement of PhP 1,152,597.35 for a term of 31 days to mature on
December 15, 1983, as evidenced by Provisional Receipt No. 1356
dated November 14, 1983.
On December 5, 1983, a person claiming to be Lim Sio Wan called
up Cristina So, an officer of Allied, and instructed the latter to
pre-terminate Lim Sio Wan's money market placement, to issue a
manager's check representing the proceeds of the placement, and to
give the check to one Deborah Dee Santos who would pick up the
check. Lim Sio Wan described the appearance of Santos so that So
could easily identify her.
Later, Santos arrived at the bank and signed the application
form for a manager's check to be issued. The bank issued Manager's
Check No. 035669 for PhP 1,158,648.49, representing the proceeds of
Lim Sio Wan's money market placement in the name of Lim Sio Wan, as
payee. The check was cross-checked "For Payee's Account Only" and
given to Santos.
Thereafter, the manager's check was deposited in the account of
Filipinas Cement Corporation (FCC) at respondent Metropolitan Bank
and Trust Co. (Metrobank), with the forged signature of Lim Sio Wan
as indorser.
Earlier, on September 21, 1983, FCC had deposited a money market
placement for PhP 2 million with respondent Producers Bank. Santos
was the money market trader assigned to handle FCC's account. Such
deposit is evidenced by Official Receipt No. 317568 and a Letter
dated September 21, 1983 of Santos addressed to Angie Lazo of FCC,
acknowledging receipt of the placement. The placement matured on
October 25, 1983 and was rolled-over until December 5, 1983 as
evidenced by a Letter dated October 25, 1983. When the placement
matured, FCC demanded the payment of the proceeds of the placement.
On December 5, 1983, the same date that So received the phone call
instructing her to pre-terminate Lim Sio Wan's placement, the
manager's check in the name of Lim Sio Wan was deposited in the
account of FCC, purportedly representing the proceeds of FCC's
money market placement with Producers Bank. In other words, the
Allied check was deposited with Metrobank in the account of FCC as
Producers Bank's payment of its obligation. The check was sent to
Allied through the PCHC. Upon the presentment of the check, Allied
funded the check even without checking the authenticity of Lim Sio
Wan's purported indorsement. Thus, the amount on the face of the
check was credited to the account of FCC.
On December 14, 1983, upon the maturity date of the first money
market placement, Lim Sio Wan went to Allied to withdraw it. She
was then informed that the placement had been pre-terminated upon
her instructions. She denied giving any instructions and receiving
the proceeds thereof.Consequently, Lim Sio Wan filed with the RTC a
Complaint against Allied to recover the proceeds of her first money
market placement.
On May 15, 1984, or more than six (6) months after funding the
check, Allied informed Metrobank that the signature on the check
was forged. Thus, Metrobank withheld the amount represented by the
check from FCC. Later on, Metrobank agreed to release the amount to
FCC after the latter executed an Undertaking, promising to
indemnify Metrobank in case it was made to reimburse the
amount.After trial, the RTC issued its Decision holding Allied
solely liable to Lim Sio Wan.
Allied appealed to the CA which ruled that Allied shall be
liable for the 60% of the amount of the money and 40% shall be
borne by Metrobank. Hence, Allied filed the instant petition.Issue:
Whether or not there was a valid payment to Lim Sio Wan
Held:NO. Lim Sio Wan, as creditor of the bank for her money
market placement, is entitled to payment upon her request, or upon
maturity of the placement, or until the bank is released from its
obligation as debtor. Until any such event, the obligation of
Allied to Lim Sio Wan remains unextinguished.Since there was no
effective payment of Lim Sio Wan's money market placement, the bank
still has an obligation to pay her at six percent (6%) interest
from March 16, 1984 until the payment thereof. To reiterate, had
Allied exercised the diligence due from a financial institution,
the check would not have been issued and no loss of funds would
have resulted. In fact, there would have been no issuance of
indorsement had there been no check in the first place.
Given the relative participation of Allied and Metrobank to the
instant case, both banks cannot be adjudged as equally liable.
Hence, the 60:40 ratio of the liabilities of Allied and Metrobank,
as ruled by the CA, must be upheld.
DELA CRUZ v CONCEPCION
Obligations; payment; extinguishment of obligation.Respondents
obligation consists of payment of a sum of money. In order to
extinguish said obligation, payment should be made to the proper
person as set forth in Article 1240 of the Civil Code. Admittedly,
payment of the remaining balance of P200,000 was not made to the
creditors themselves. Respondent claims that Losloso was the
authorized agent of petitioners, but the latter dispute it.
Loslosos authority to receive payment was embodied in petitioners
letter addressed to respondent where they informed respondent of
the amounts they advanced for the payment of the 1997 real estate
taxes. In said letter, petitioners reminded respondent of her
remaining balance, together with the amount of taxes paid. Taking
into consideration the busy schedule of respondent, petitioners
advised the latter to leave the payment to a certain Dori who
admittedly is Losloso, or to her trusted helper. This is an express
authority given to Losloso to receive payment.Spouses Miniano B.
Dela Cruz and Leta L. Dela Cruz vs. Ana Marie ConcepcionG.R. No.
172825. October 11, 2012
ARTICLE 1245 DATION IN PAYMENTESTANISLAO VS EAST WEST BANK
Facts:On July 24, 1987, petitioners obtained a loan from the
respondent in the amount of P3,925,000.00 evidenced by a promissory
note and secured by 2 deeds of chattel mortgage: one covering 2
dump trucks and a bulldozer to secure the loan amount of
P2,375,000.00, and another covering bulldozer and a wheel loader to
secure the loan amount of P1,550,000.00. Petitioners defaulted in
the amortizations and the entire obligation became due and
demandable.
On April 10, 2000, respondent bank filed a suit for replevin
with damages praying that the equipment covered by the first deed
of chattel mortgage be seized and delivered to it.
After the trial court suspended the proceedings, on a moved by
the respondent, a deed of assignment date August 16, 2000 was
drafted by the respondent which provides in part:ASSIGNOR does
hereby ASSIGN, TRANSFER and CONVEY unto the ASIGNEE those motor
vehicles, with all their tools and accessories.
That the ASSIGNEE hereby accepts the assignment in full payment
of the above-mentioned debt.
Petitioners affixed their signatures on the deed of assignment.
However, for some unknown reason, respondent banks duly authorized
representative failed to sign the deed.
On October 6, 2000 and March 8, 2001, petitioner completed the
delivery of the heavy equipment mentioned in the deed of assignment
to respondent, which accepted the same without protest or
objection.
However, on June 20, 2001, respondent filed a manifestation and
motion to admit an amended complaint for the seizure and delivery
of two more heavy equipment which are covered under the 2nd deed of
chattel mortgage. Respondent claimed that its representative
inadvertently failed to include the 2nd deed of chattel mortgage
among the documents forwarded to its counsel when the original
complaint was being drafted.
Petitioners sought to dismiss the amended complaint. They
alleged that their previous payment on loan amortizations, the
execution of the deed of assignment on August 16, 200, and
respondents acceptance of the 3 units of heavy equipment, had the
effect of full payment or satisfaction of their total outstanding
obligation which is a bar on respondent bank from recovering any
more amounts from them.
Issue:W/N the deed of assignment which expressly provides that
the transfer and conveyance to respondent of the 3 units of heavy
equipment, and its acceptance thereof, shall be in full payment of
the petitioners total outstanding obligation to the latter operate
to extinguish petitioners debt to respondent such that the replevin
suit could no longer prosper. Yes.
Held:The deed of assignment was a perfected agreement which
extinguished petitioners total outstanding obligation to the
respondent. The deed explicitly provides that the assignor
(petitioners), in full payment of its obligation shall deliver the
3 units of heavy equipment to the assignee (respondent), which
accepts the assignment in full payment of the above-mentioned debt.
This could only mean that should petitioners complete the delivery
of the 3 units of heavy equipment covered by the deed, respondents
credit would have been satisfied in full, and petitioners aggregate
indebtedness would then be considered to have been paid in full as
well.
The nature of the assignment was a dation in payment, whereby
property is alienated to the creditor in satisfaction of a debt in
money. Such transaction is governed by the law on sales. Even if we
were to consider the agreement as a compromise agreement, there was
no need for respondents signature on the same, because with the
delivery of the heavy equipment which the latter accepted, the
agreement was consummated. Respondents approval may be inferred
from its unqualified acceptance of the heavy equipment.
With years of banking experience, resources and manpower,
respondent bank is presumed to be familiar with the implications of
entering into the deed of assignment, whose terms are categorical
and left nothing for interpretation. The alleged non-inclusion in
the deed of certain units of heavy equipment due to inadvertence,
plain oversight or mistake, is tantamount to inexcusable manifest
negligence, which should not invalidate the juridical tie that was
created.
Since the agreement was consummated by the delivery on March 8,
2001 of the last unit of heavy equipment under the deed,
petitioners are deemed to have been released from all their
obligations to respondent.
Since there is no more credit to collect, no principal
obligation to speak of, then there is no more 2nd deed of chattel
mortgage that may susbsist. A chattel mortgage cannot exist as an
independent contract since its consideration is the same as that of
the principal contract. Being a mere accessory contract, its
validity would depend on the validity of the loan secured by it.
this being so, the amended complaint for replevin should be
dismissed, because the chattel mortgage agreement upon which it is
based had been rendered ineffectual.
ONG VS ROBAN LENDINGFacts:On different dates from July 14, 1999
to March 20, 2000, petitioner-spouses Ong obtained several loans
from Roban Lending Corporation (respondent). These loans were
secured by a real estate mortgage on petitioners parcels of
land.
On February 12, 2001, petitioners and respondent executed an
Amendment to Amended Real Estate Mortgage consolidating their
loans. On even date, the parties executed a Dacion in Payment
Agreement wherein petitioners assigned their properties to
respondent in settlement of their total obligation and a Memorandum
of Agreement reading:
With a promise to pay the FIRST PARTY in full within one year
from the date of the consolidation and restructuring, otherwise the
SECOND PARTY agree to have their DACION IN PAYMENT agreement, which
they have executed and signed today in favor of the FIRST PARTY be
enforced.
In April 2002, petitioners filed a complaint alleging that the
Memorandum of Agreement and the Dacion in Payment executed are void
for being pactum commissorium.
Respondent maintained its legality alleging that if the
voluntary execution of the Memorandum of Agreement and Dacion in
Payment Agreement novated the Real Estate Mortgage then the
allegation of Pactum Commissorium has no more legal leg to stand
on.
Issue:W/N the Memorandum of Agreement and the Dacion in Pago
constitutes pactum commissorium. Yes.
Held:The Court finds that the Memorandum of Agreement and Dacion
in Payment constitute pactum commissorium, which is prohibited
under Article 2088 of the Civil Code which provides:
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.
The elements of pactum commissorium which enables the mortgagee
to acquire ownership of the mortgaged property without the need of
any foreclosure proceedings, are: (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.
In the case at bar, the Memorandum of Agreement and the Dacion
in Payment contain no provisions for foreclosure proceedings nor
redemption. Under the Memorandum of Agreement, the failure by the
petitioners to pay their debt within the one-year period gives
respondent the right to enforce the Dacion in Payment transferring
to it ownership of the properties. Respondent, in effect,
automatically acquires ownership of the properties upon petitioners
failure to pay their debt within the stipulated period.
Respondent argues that the law recognizes dacion en pago as a
special form of payment whereby the debtor alienates property to
the creditor in satisfaction of a monetary obligation. This does
not persuade. In a true dacion en pago, the assignment of the
property extinguishes the monetary debt. In the case at bar, the
alienation of the properties was by way of security, and not by way
of satisfying the debt. The Dacion in Payment did not extinguish
petitioners obligation to respondent. On the contrary, under the
Memorandum of Agreement executed on the same day as Dacion in
Payment, petitioners had to execute a promissory note, which they
were to pay within one year.
TYPINCO V. LIMFACTS:Respondents-spouses Lina Wong Lim (Lina) and
Johnson Sychingho (Johnson) borrowed from petitioner Joseph
Typingco (Typingco) the sum of US$600,000 which was later
restructured, payable on or before December 31, 1997, under a
promissory note executed by the spouses and co-signed by their
children-co-respondents Jerry Sychingho (Jerry) and Jackson
Sychingho (Jackson) as sureties.Following their default in payment,
Lina, Jerry, and Jackson conveyed to Typingco via dacion en pago
their house and lot in Greenhills in the name of Lina and her sons,
after first paying respondent Far East Bank and Trust Company
(FEBTC) the balance of a promissory note to clear the title of a
Real Estate Mortgage annotated thereon in favor of FEBTC.
Typingcos repeated demands for the delivery of the owners
duplicate copy of the title remained unheeded thus he filed a
complaint for specific performance and recovery of the title
against respondents Sychinghos and FEBTC before the Quezon City
Regional Trial Court (RTC).
Respondents Sychinghos averred in the main that it was FEBTC
that was unlawfully withholding delivery of the owners duplicate
copy of the title despite full payment of the mortgage loan with
it.
FEBTC contended that spouses Lina and Johnson had unsettled
obligations as sureties for 2 corporations under Comprehensive
Surety Agreements which they had executed authorizing FEBTC to
retain and proceed against their properties in its possession; that
the Real Estate Mortgage annotated on the title was a continuing
security for their present and future obligations; and that
Typingco was not a buyer in good faith, he having failed to conduct
further inquiry on the status of the subject property given that
the mortgage in its favor was annotated on the title.
RTC dismissed the complaint, holding that Typingco was bound by
the Real Estate Mortgage in favor of FEBTC not only because the
same was duly annotated on the title, but also because he failed to
verify the status of the subject property despite his awareness of
the said mortgage.
ISSUE: whether respondent Sychinghos had the right to sell or
convey title to the subject property at the time of the dacion en
pago
HELD: The Court finds in the affirmative.Dacion en pago is the
delivery and transmission of ownership of another thing by the
debtor to the creditor as an accepted equivalent of performance of
an obligation. It partakes of the nature of a contract of sale,
where the thing offered by the debtor is the object of the
contract, while the debt is the consideration or purchase
price.
There having been no previous foreclosure of the Real Estate
Mortgage on the subject property, respondent Sychinghos ownership
thereof remained intact. Indeed, a mortgage does not affect the
ownership of the property as it is nothing more than a lien thereon
serving as security for a debt. The mortgagee does not acquire
title to the mortgaged real estate unless he purchases it at a
public auction, and it is not redeemed within the period provided
for by the Rules of Court. This applies a fortiori to the present
case where only 1/3, not the whole, of the subject property was
actually encumbered to FEBTC.
With respect to whatever amount Lina and her sons may still owe
BPI (then FEBTC), the Court finds that this is not a concern of
petitioner as he is not a party to the loan documents covering it.
Since petitioner agreed to the full extinguishment of respondents
spouses then outstanding obligation in view of the unconditional
conveyance to him of the subject property, there is a perfected and
enforceable dacion en pago. He should thus enjoy full entitlement
to the subject property.
The question of whether the subject property stands as a
continuing security for any outstanding obligations of Lina and her
sons to BPI (then FEBTC) should not detain the Court any further.
Surrender of the certificate of title will not impair any existing
mortgage on the subject property. It is an elementary principle in
civil law that a real estate mortgage subsists notwithstanding
changes in ownership, and all subsequent purchasers of the property
must respect the mortgage..
TAN SHUY V MAULAWINFacts:Tan Shuy (petitioner) a business man
engaged in buyibf and selling copra extended to Guillermo Maulawin
(respondent) a loan on July 10, 1997 in the amount of P420,000.
The loan is evidenced by a contract see below.
No2567 Lopez, Quezon July 10, 1997Tinanggap ko kay G. TAN SHUY
ang halagang. (P420,000.00) salaping Filipino. Inaako ko naisusulit
sa kanya ang aking LUCAD at babayaran ko ang nasabing halaga. Kung
hindi akomakasulit ng LUCAD o makabayad bago sumapit ang ., 19
maaari niyaakong ibigay sa may kapangyarihan. Kung ang
pagsisingilan ay makakarating sa Juzgadoay sinasagutan ko ang lahat
ng kaniyang gugol.P................ [Sgd. by respondent] .
Lagda
Trouble started when petitioner complained and alleged that
respondent despite repeated demand failed to pay his loan and only
remitted a total of P28,000, Outstanding balance still amouts to
P391,500.Guillermo replied that he already paid in full by
continuously delivering copra to Tan Shuy from April 1998 to April
1999 pursuant to the verbal arrangement he had with the petitioner
that the net proceeds thereof of the delivered copra shall be
applied as installment payments for the loan. His total deliveries
amounted to P420,537.68, this was evidenced by pesadas as a form of
receipt from Tan Shuy or his associates which were admitted by the
RTC and CA as valid evidence and sufficient proof. Every time
respondent delivers copra petitioner issues a pesada.
Issue:Whether the delivery of copra by respondent to the
petitioner amounted to installment payments for the loan obtained
by respondents from petitioner.YES.
Ruling:The delivery of copras by the respondent to the
petitioner were installment payments for the loan abtained by the
respondent to the petitioner in the form of Dacion en Pago.Article
1245 of the Civil Code provides for a special mode of payment
called dation in payment (dacin en pago). There is dation in
payment when property is alienated to the creditor in satisfaction
of a debt in money. Here, the debtor delivers and transmits to the
creditor the formers ownership over a thing as an accepted
equivalent of the payment or performance of an outstanding debt. In
such cases, Article 1245 provides that the law on sales shall
apply, since 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, the payment for which is to be charged
against the debtors obligation. 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 extinguishedIn this case, the contract
expressly provides that the copra will be in lieu for the payment
of the loan. The subsequent arrangement between Tan Shuy and
Guillermo can thus be considered as one in the nature of dation in
payment. There was partial payment every time Guillermo delivered
copra to petitioner, chose not to collect the net proceeds of his
copra deliveries, and instead applied the collectible as
installment payments for his loan from Tan Shuy.Thus, the loan of
respondent from petitioner was partially extinguished from the
amount of copra delivered by the respondent and received by the
petitioner.
EXTRAORDINARY INFLATION/DEFLATIONEquitable PCI vs Ng Sheung
Ngor
Respondent Ng Sheung Ngor, Ken Appliance and Benjamin E. Go
filed an action for annulment and / or reformation of documents and
contracts against Equitable PCI Bank and its employees.
They claimed that Equitable induced them to avail of its peso
and dollar credit facilities by offering low interest rates,
accepted Equitables proposal and signed the banks pre printed
promissory notes on various dates beginning 1996They were unaware
that the documents contained identical escalation clauses granting
Equitables authority to increase interest rates without their
consent.
quitable asserted that respondent knowingly accepted all the
terms and conditions contained in the promissory note continuously
availed of and benefited from Equitables credit facilities for 5
years.
RTC: upheld the validity of the promissory notes, invalidated
the escalation clause contained because it violated the principle
of mutuality of contracts ordered the use of 1996 dollar exchange
rate in computing respondents dollar denominated loans.
ISSUE:Whether or not there was extraordinary deflation. No
HELD: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 manifestly beyond the
contemplation of the parties at the time of the obligation.
Extraordinary deflation involves an inverse situation.
Article 1250: in case an extraordinary inflation or deflation of
currency stipulated should intervene, the value of the currency at
the time of establishment of the obligation shall be the basis of
payment, unless there is an agreement to the contrary.
For extraordinary inflation (or deflation) to affect an
obligation, the following requisites must be proven:That there was
an official declaration of extraordinary inflation/deflation from
the BSP;That the obligation was contractual in nature; andThat the
parties expressly agreed to consider the effects of the
extraordinary inflation or deflationDespite the devaluation of the
peso, the BSP never declared a situation of extraordinary
inflationAlthough the obligation arose out of a contract, the
parties did not agree to recognize the effects of extraordinary
inflation or deflation.Respondent should pay their dollar
denominated loans at the exchange rate fixed by BSP on the maturity
date
ALMEDA VS BATHALA MARKETING
Facts: Sometime in May 1997, respondent Bathala Marketing
Industries, Inc., as lessee, represented by its president Ramon H.
Garcia, renewed its Contract of Lease with Ponciano L. Almeda
(Ponciano), as lessor, husband of petitioner Eufemia and father of
petitioner Romel Almeda. Under the said contract, Ponciano agreed
to lease a portion of the Almeda Compound for a monthly rental of
P1,107,348.69, for a term of four (4) years from May 1, 1997.The
contract of lease contained the following pertinent provisions
which gave rise to the instant case:SIXTH It is expressly
understood by the parties hereto that the rental rate stipulated is
based on the present rate of assessment on the property, and that
in case the assessment should hereafter be increased or any new tax
when the rental herein provided becomes due, the additional rental
or charge corresponding to the portion hereby leased.SEVENTH In
case an extraordinary inflation or devaluation of Philippine
Currency should supervene, the value of Philippine peso at the time
of the establishment of the obligation shall be the basis of
payment.
During the effectivity of the contract, Ponciano died.
Thereafter, respondent dealt with petitioners. In a letter
petitioners advised respondent that the former shall assess and
collect Value Added Tax (VAT) on its monthly rentals. In response,
respondent contended that VAT may not be imposed as the rentals
fixed in the contract of lease were supposed to include the VAT
therein, considering that their contract was executed on May 1,
1997 when the VAT law had long been in effect.
On January 26, 1998, respondent received another letter from
petitioners informing the former that its monthly rental should be
increased by 73% pursuant to condition No. 7 of the contract and
Article 1250 of the Civil Code. Respondent opposed petitioners
demand and insisted that there was no extraordinary inflation to
warrant the application of Article 1250. Respondent refused to pay
the VAT and adjusted rentals as demanded by petitioners but
continued to pay the stipulated amount set forth in their
contract.
Respondent instituted an action for declaratory relief for
purposes of determining the correct interpretation of condition
Nos. 6 and 7 of the lease contract to prevent damage and prejudice.
Petitioners in turn filed an action for ejectment, rescission and
damages against respondent for failure of the latter to vacate the
premises after the demand made by the former.
RTC ruled in favor of respondent and against petitioners.
Petitioners elevated the aforesaid case to the Court of Appeals
which affirmed with modification the RTC decision.
ISSUE: Whether the amount of rentals due the petitioners should
be adjusted by reason of extraordinary inflation or
devaluation.
RULING: No. The Court affirmed the decision of the lower
courts.Petitioners reliance on the sixth condition of the contract
is unavailing. This provision clearly states that respondent can
only be held liable for new taxes imposed after the effectivity of
the contract of lease, that is, after May 1997, and only if they
pertain to the lot and the building where the leased premises are
located. Considering that RA 7716 took effect in 1994, the VAT
cannot be considered as a new tax in May 1997, as to fall within
the coverage of the sixth stipulation. Neither can petitioners
legitimately demand rental adjustment because of extraordinary
inflation or devaluation.Petitioners contend that Article 1250 of
the Civil Code does not apply to this case because the contract
stipulation speaks of extraordinary inflation or devaluation while
the Code speaks of extraordinary inflation or deflation. They
insist that the doctrine pronounced in Del Rosario v. The Shell
Company, Phils. Limited should apply.
While, indeed, condition No. 7 of the contract speaks of
extraordinary inflation or devaluation as compared to Article 1250s
extraordinary inflation or deflation, we find that when the parties
used the term devaluation, they really did not intend to depart
from Article 1250 of the Civil Code. Condition No. 7 of the
contract should, thus, be read in harmony with the Civil Code
provision.
That this is the intention of the parties is evident from
petitioners letter where, in demanding rental adjustment ostensibly
based on condition No. 7, petitioners made explicit reference to
Article 1250 of the Civil Code, even quoting the law verbatim.
Thus, the application of Del Rosario is not warranted. Rather,
jurisprudential rules on the application of Article 1250 should be
considered.
Inflation has been defined as the sharp increase of money or
credit, or both, without a corresponding increase in business
transaction. There is inflation when there is an increase in the
volume of money and credit relative to available goods, resulting
in a substantial and continuing rise in the general price level In
a number of cases, this Court had provided a discourse on what
constitutes extraordinary inflation, thus:[E]xtraordinary inflation
exists when there is a decrease or increase in the purchasing power
of the Philippine currency which is unusual or beyond the common
fluctuation in the value of said currency, and such increase or
decrease could not have been reasonably foreseen or was manifestly
beyond the contemplation of the parties at the time of the
establishment of the obligationThe factual circumstances obtaining
in the present case do not make out a case of extraordinary
inflation or devaluation as would justify the application of
Article 1250 of the Civil Code.
APPLICATION OF PAYMENTS
PREMIERE DEVELOPMENT BANK VS CENTRAL SURETYG.R. NO. 176246
FEBRUARY 13, 2009Facts:August 20, 1999, Central Surety obtained an
industrial loan of P6,000,000.00 from Premiere Development Bank
(Premiere Bank) with a maturity date of August 14, 2000.This
P6,000,000.00 loan, evidenced by Promissory Note, stipulates
payment of 17% interest per annum payable monthly in arrears and
the principal payable on due date.
In addition, the note provides for a penalty charge of 24%
interest per annum based on the unpaid amortization/installment or
the entire unpaid balance of the loan. In all, should Central
Surety fail to pay, it would be liable to Premiere Bank for: (1)
unpaid interest up to maturity date; (2) unpaid penalties up to
maturity date; and (3) unpaid balance of the principal.
To secure payment, Central Surety executed in favor of Premiere
Bank a Deed of Assignment with Pledge covering Central Suretys
Membership Fee Certificate No. 17 representing its proprietary
share in Wack Wack Golf and Country Club.
Central Surety also had other loans outstanding with Premiere
Bank including an amount of 40M maturing on October 10,
2001.Central Surety however defaulted in their payment of their
obligations. This resulted to Premiere to write a collection
letter.
Accordingly, Central Surety tendered a Check in the amount of
P6M payable to Premiere Bank. However, for undisclosed reasons,
Premiere Bank returned the Check to Central Surety and demanded
from the latter not just the payment of the P6M loan but also the
P40M loan.
Central Surety wrote a letter to Premiere Bank and re-tendered
the check with the amount of 6M and was later accepted by Premiere
Bank.
The amount of the check was however not applied to the 6M loan
of the Central Surety but to the other obligations of the latter to
Premiere Bank.
The said application of payment by Premiere Bank was then
questioned by Central Surety. Thus CS filed a complaint for damages
and release of security collateral praying among others that their
obligation of 6M be declared fully paid.
Issue: W/N the application of payment made by Premiere Bank was
valid (W/N Premiere Bank waived its right of application of
payments on the loans of Central Surety)
Held:The debtors right to apply payment is not mandatory.Article
1252 of the Civil Code provides: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
ofpayment 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.
The debtors right to apply payment is not mandatory. This is
clear from the use of the word "may" rather than the word "shall"
in the provision which reads: "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 the same must be applied."
Article 1252 gives the right to the debtor to choose to which of
several obligations to apply a particular payment that he tenders
to the creditor. But likewise granted in the same provision is the
right of the creditor to apply such payment in case the debtor
fails to direct its application. It is the directory nature of this
right and the subsidiary right of the creditor to apply payments
when the debtor does not elect to do so that make this right, like
any other right, waivable.
In the case at bench, the records show that Premiere Bank and
Central Surety entered into several contracts of loan, securities
by way of pledges, and suretyship agreements. In at least two (2)
promissory notes between the parties, , Central Surety expressly
agreed to grant Premiere Bank the authority to apply any and all of
Central Suretys payments, thus:
In case I/We have several obligations with [Premiere Bank], I/We
hereby empower [Premiere Bank] to apply without notice and in any
manner it sees fit, any or all of my/our deposits and payments to
any of my/our obligations whether due or not. Any such application
of deposits or payments shall be conclusive and binding upon
us.
This proviso is representative of all the other Promissory Notes
involved in this case. It is in the exercise of this express
authority under the Promissory Notes, and following Bangko Sentral
ng Pilipinas Regulations, that Premiere Bank applied payments made
by Central Surety, as it deemed fit, to the several debts of the
latter.
All debts were due; There was no waiver on the application of
payment on the part of Premiere BankAt the time of the conflict
between the parties in this case, the obligation of P6M secured by
the pledge of the Wack Wack membership, was past the due and demand
stage. Premiere Bank was then entitled to declare the obligation
due and payable without need of any demand. The subsequent demand
made by Premiere Bank was merely a superfluity, which cannot be
equated with a waiver of the right to demand payment of all the
matured obligations of Central Surety to Premiere Bank.
Neither can it be said that Premiere Bank waived its right to
apply payments when it specifically demanded payment of the P6M
loan.
It is an elementary rule that the existence of a waiver must be
positively demonstrated since a waiver by implication is not
normally countenanced. The norm is that a waiver must not only
be voluntary, but must have been made knowingly, intelligently,
and with sufficient awareness of the relevant circumstances and
likely consequences. There must be persuasive evidence to show an
actual intention to relinquish the right. Mere silence on the part
of the holder of the right should not be construed as a surrender
thereof; the courts must indulge every reasonable presumption
against the existence and validity of such waiver
ESPINA VS CA
Facts: Mario S. Espina is the registered owner of Condominium
Unit No. 403, Victoria Valley Condominium, Valley Golf Subdivision,
Antipolo, Rizal. Such ownership is evidenced by a Condominium
Certificate of Title. On November 29, 1991, Espina and Rene Diaz
executed a Provisional Deed of Sale, whereby the former sold to the
latter the aforesaid condominium unit for Php 1.5M, with the term
that P100,000.00 will be paid upon the execution of the contract
and the remaining balance will be paid through six PCI Bank
postdated checks.
Subsequently, in a letter dated January 22, 1992, petitioner
informed private respondent that his checking account with PCI Bank
has been closed and a new checking account with the same drawee
bank is opened for practical purposes. The letter further stated
that the postdated checks issued will be replaced with new ones in
the same drawee bank.
On January 25, 1992, respondent through his wife, paid Espina
P200, 000.00, acknowledged by him as partial payment for the
subject condominium unit. In July of the same year, private
respondent sent petitioner a "Notice of Cancellation" of the
Provisional Deed of Sale. However, despite said notice, Espina
accepted payment from Diaz through a Metrobank Check dated and
encashed on October 28, 1992 in the amount of P100,000.00. On
February 24, 1993, Espina filed a complaint for Unlawful Detainer
against petitioner before the Municipal Trial Court of Antipolo,
Branch 1.
The trial court in its decision ordered the defendant and all
persons claiming rights under him to vacate unit 403 of the
Victoria Golf Valley Condominium, Valley Golf Subdivision,
Antipolo, Rizal; to pay the total arrears of P126,000.00, covering
the period July 1991 up to the filing (sic) complaint, and to pay
P7,000.00 every month thereafter as rentals unit (sic) he vacates
the premises; he was also ordered to pay attorney's fees, and costs
of suit. However, the court noted that the plaintiff may refund to
the defendant the balance from (sic) P400,000.00 after deducting
all the total obligations of the defendant as specified in the
decision from receipt of said decision.Petitioner appealed to the
RTC, which affirmed in all respects the decision of the trial
court. Petitioner then filed with the Court of Appeals a petition
for review.The CA reversed the appealed decision and dismissed the
complaint for unlawful detainer with costs against petitioner
Espina. The Court of Appeals denied the motion for reconsideration
filed by the petitioner on August 19, 1994, hence the case was
brought before the supreme court.
ISSUE: WON payment made on October 28, 1992 in the amount of Php
100,000.00 be applied as payment for purchase of the condominium
unit
RULING: NO. Petitioner terminated the provisional deed of sale
by a notarial notice of cancellation on July 26, 1992. Nonetheless,
respondent Diaz continued to occupy the premises, as lessee, but
failed to pay the rentals due. When respondent made a payment of
P100,000.00 on October 28, 1992, the payment made may be applied
either to the back rentals or for the purchase of the condominium
unit.
The Supreme Court held that unless the application of payment is
expressly indicated, the payment shall be applied to the obligation
most onerous to the debtor. In this case, the unpaid rentals
constituted the more onerous obligation of the respondent to
petitioner. As the payment did not fully settle the unpaid rentals,
petitioner's cause of action for ejectment survives. Thus, the
Court of Appeals erred in ruling that the payment was "additional
payment" for the purchase of the property.
TENDER OF PAYMENTS
PABUGAIS v SAHIJWANI
Facts: Pabugais sells a 15m property to Sahijwani. 600K is to be
paid as dp, while the balance will be delivered after the documents
are handed over to the buyer. Also, an agreement was included
whereby if the seller fails to deliver the documents, the buyer
will have the right to reclaim the dp plus 18% interest per annum.
Pabugais fails to deliver the documents. Sahijwani demands the
return of his dp plus the interest. Pabugais pays with a check but
the check is subsequently dishonored. Pabugais issues a second
check and mails it to Sj's counsel who alleges that she did not
receive the thing. Pabugais consigns the check with the RTC.
Consignation deemed invalid. Subsequently, Pabugais new counsel
(who assumed the role by virtue of the death of the old one)tries
to withdraw the consigned money but is prevented from doing so by
the CA. New counsel invokes article 1260, claiming that they still
have the right to withdraw the consigned money as the same had not
yet been accepted by the creditor or deemed as valid by the judge.
Is this contention correct? Was there not in fact a valid
consignation? Was there a valid tender?
Held: There was a valid tender of payment. Although the general
rule is that paying a manager's check is not tender of payment (coz
manager' checks are not legal tender), payment in check by the
debtor may be valid if no prompt objection to the same is made. In
the case at bar, none was made. What was merely made was a denial
of the actual receipt of the check, a claim which was contradicted
by petitioners own claims. There was also a valid consignation as
the requisites for a valid consignation were present in the case.
There was a debt owing, the debtor refused to accept the payment
unjustly, previous notice had been given, the amount was consigned
with the judicial authorities and there was notice given after the
consignation....also, the prayer of SJ in his reply to be awarded
the sum of money consigned signified an acceptance of the
consignation on the part of the creditor, thus Dr. may no longer
withdraw.
LLOBRERA VS FERNANDEZFacts:Respondent Josefina V. Fernandez, who
is one of the registered co-owners of a parcel of land, served a
written demand letter upon petitioners Spouses Llobrera, et al., to
vacate the premises within fifteen (15) days from notice.
Notwithstanding the receipt of the demand letter, petitioners
refused to vacate, which led to the filing by the respondent of a
formal complaint against them before the Barangay Captain. Upon
failure of the parties to reach any settlement, the Barangay
Captain issued the necessary certification to file action.
Respondent then filed a complaint for ejectment and damages the
petitioners before the MTCC of Dagupan City.
Petitioners alleged in their answer that they had been occupying
the property in question beginning the year 1945 onwards, when
their predecessors-in-interest, with the permission of Gualberto de
Venecia, one of the other co- owners of said land, developed and
occupied the same on the condition that they will pay their monthly
rental of P20.00 each.
From then on, they have continuously paid their monthly rentals
to de Venecia or their representatives, such payments being duly
acknowledged by receipts.
But sometime in June 1996, the representatives of de Venecia
refused to accept their rentals, prompting them to consign the same
to Banco San Juan, which bank deposit they continued to maintain
and update with their monthly rental payments.
MTCC rendered judgment in favor of the respondent. The court
ordered each of the defendants to vacate the portion of the land in
question.
RTC of Dagupan and the CA both affirmed the MTCC decision. Hence
the petition.
Issue:Whether the alleged P20.00 monthly rental deposited to a
bank account constitutes a valid consignation. NO.
Held:In the present case, the possession of the property by the
petitioners being by mere tolerance as they failed to establish
through competent evidence the existence of any contractual
relations between them and the respondent, the latter has no
obligation to receive any payment from them. Since respondent is
not a creditor to petitioners as far as the alleged P20.00 monthly
rental payment is concerned, respondent cannot be compelled to
receive such payment even through consignation under Article 1256.
The bank deposit made by the petitioners intended as consignation
has no legal effect insofar as the respondent is
concerned.Consignation based on Article 1256 of the Civil Code
indispensably requires a creditor-debtor relationship between the
parties, in the absence of which, the legal effects thereof cannot
be availed of.
BENOS vs LAWILAO, GR. NO. 172259
FACTS: on February 1999, the parties executed a Pacto de Retro
sale, where the Benoses sold their lot & the building erected
thereon for 300,000. According to their agreement, the Lawilaos
would pay 150,000 cash to the Benoses, while the other 150,000
shall be paid to the bank to pas off the loan of the Benos spouses.
The contract also stipulated that the Benoses can redeem the
property within 18 months from the date of execution by returning
the contract price. Otherwise, the sale would become irrevocable
w/o necessity of a final deed to consolidate ownership over the
property in the name of the Lawilao spouses.
However, after paying the first 150,000, Lawilaos restructured
the bank loan, until it became due & demandable.
On August 2000, the son of the Benos spouses paid the bank loan
of 159,000. Lawilao offered to pay the same amount to the bank, but
the latter refused it. Lawilao's subsequent petition for
consignation against the bank was dismissed for lack of cause of
action.
Subsequently, the Lawilao spouses filed. With the MCTC a
complaint for consolidation of ownership. The Benos spouses moved
to dismiss, but the trial ensued. The MCTC however, dismissed the
case.
The lawilao's appeal to the RTC bore a judgement in their favor.
The subsequent appeals to RTC & the CA affirmed the previous
decision, hence, petitioners filed this instant petition.
Petitioner argue that consolidation is not proper since the
Lawilao spouses violated the terms of the contract by not paying
the bank loan. Such consisted of a breach of contract & as such
the Lawilao spouses cannot insist on the performance of the Benos
spouses.
On the other hand, the Lawilao spouses contend that hey have
complied w/ their obligation when they offered to pay the loan to
the bank & filed a petition for consignation. They also assert.
That the failure of the Benos spouses to redeem the property
immediately vested in the Lawilaos the title and ownership of the
property.
ISSUE: W/N THE RRESPONDENTS MADE A VALID TENDER OF PAYMENT &
CONSIGNATION.
RULING: NO. The court found that the evidence shows that the
Lawilao spouses did not make a valid tender of payment and
consignation of the balance of the contract price.The court
enumerated the requisites of a valid tender of payment &
consignation, where requisites were not observed by the
Lawilaos.
First, although the Lawilao spouses repeatedly alleged that the
159,000 was still w/ the trial court the Benoses can withdraw
anytime, they never made any step to withdraw the amount &
consign it.
Second, the respondents failed to notify the petitioners of
their petition for consignation against the bank. In fact, the
Lawilao spouses never notified the Benos spouses of their offer to
pay.
Thus, as far as the Benos are concerned, there was no complete
& full payment of the contract price, which gives them the
right to rescind the contract pursuant to Art. 1191, & in
relation to art. 1592.
According to the court, although the Benos spouses did not
rescind the Pacto de Retro Sale through a notarial act, they
nevertheless rescind the same in their answer with counter
claim.
B.E. SAN DIEGO, INC vs ROSARIO ALZULFacts:Rosario T. Alzul
purchased from B.E. San Diego, Inc. four (4) subdivision lots for a
total purchase price of P237,660.00. Respondent took immediate
possession of the subject property. Alzul signed a Conditional Deed
of Assignment and Transfer of Rights which assigned to a certain
Wilson P. Yu her rights under the Contract to Sell. Petitioner was
notified of the execution of such deed. Later on, the Contract to
Sell in Alzuls name was cancelled, and petitioner issued a new one
in favor of Yu.
Respondent informed petitioner about Yus failure and refusal to
pay the amounts due under the conditional deed. She also manifested
that she would be the one to pay the installments due to respondent
on account of Yus default.Alzul commenced an action for rescission
of the conditional deed of assignment against Yu before the
Regional Trial Court. Subsequently caused the annotation of notices
of lis pendens on the titles covering the subject lots.
B.E. San Diego informed Alzul that the Contract to Sell was was
declared rescinded and cancelled. The subject lots were sold to
spouses Carlos and Sandra Ventura who were allegedly surprised to
find the annotation of lis pendens in their owners duplicate
title.
Alzul filed a Manifestation informing the Supreme Court that
petitioner, on three (3) occasions, refused to accept her payment
of the balance in the amount of P187,380.00.
Thinking that an action for consignation alone would not be
sufficient to allow for the execution of a final judgment in her
favor, respondent decided to file an action for consignation and
specific performance against petitioner before the Housing and Land
Use Regulatory Board. The complaint prayed that Alzul be considered
to have fully paid the total purchase price of the subject
properties.
A decision was rendered by the HLURB in favor of B.E. San Diego.
It contended that even if the complainant had actually made the
consignation of the amount, such consignation is still ineffective
and void for having been done long after the expiration of the
non-extendible period set forth in the Supreme Court Resolution.
Alzul then filed an appeal to the Office of the President. This
was, however, dismissed.
Respondent Alzul brought before the CA a petition for
certiorari. The CA agreed with the HLURB that no valid consignation
was made by respondent but found that justice would be better
served by allowing respondent Alzul to effect the consignation,
albeit belatedly. It cited the respondents right over the disputed
lots which, if taken away on account of the delay in completing the
payment, would amount to a grave injustice.
ISSUE: Whether respondent Alzul is still entitled to
consignation despite the lapse of the period provided by the
Court
RULING:No consignation within the 30-day period or at a
reasonable time thereafter.
It is clear as day that respondent did not attempt nor pursue
consignation within the 30-day period given to her in accordance
with the prescribed legal procedure. She received a copy of the
entry of judgment on August 21, 1996 and had 30 days or until
September 20, 1996 to pay the balance of the purchase price to
petitioner. She made a tender of payment on August 29, 1996, August
30, 1996, and September 28, 1996, all of which were refused by
petitioner.
It must be borne in mind however that a mere tender of payment
is not enough to extinguish an obligation. In Meat Packing
Corporation of the Philippines v. Sandiganbayan, we distinguished
consignation from tender of payment and reiterated the rule that
both must be validly done in order to effect the extinguishment of
the obligation, thus:
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.
There is no dispute that a valid tender of payment had been made
by respondent. Absent however a valid consignation, mere tender
will not suffice to extinguish her obligation and consummate the
acquisition of the subject properties.
The records also reveal that respondent failed to effect
consignation within a reasonable time after the 30-day period which
expired on September 20, 1996. Instead of consigning the amount
with the court of origin, respondent filed her November 11, 1996
Manifestation informing this Court of petitioners unjust refusal of
the tender of payment.
Respondent still failed to take the cue by her inaction to
consign the amount with the court of origin. Undoubtedly, pursuing
the action for consignation on March 12, 1998or over a year after
the Court issued its January 28, 1997 Resolution is way beyond a
reasonable time thereafter. Indeed, we have accorded respondent,
through said Resolution, all the opportunity to pursue consignation
with the court of origin and yet, respondent failed to make a valid
consignation. This is already inexcusable neglect on the part of
respondent.
No valid consignation madeWe agree with petitioners assertion
that even granting arguendo that the instant case for consignation
was instituted within the 30-day period or within a reasonable time
thereafter, it would still not accord respondent relief as no valid
consignation was made. Certainly, the records show that there was
no valid consignation made by respondent before the HLURB
as she did not deposit the amount with the quasi-judicial body
as required by law and the rules.
Pertinently, the first paragraph of Article 1258 of the Civil
Code provides that [c]onsignation 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, and the
announcement of the consignation in other cases.
It is true enough that respondent tendered payment to petitioner
three times . It is true likewise that petitioner refused to accept
it but not without good reasons. Petitioner was not impleaded as a
party by the Ventura spouses in the Malabon City RTC case for
quieting of title against Wilson Yu. Petitioner is of the view that
there was no jurisdiction acquired over its person and hence, it is
not bound by the final judgment. Secondly, petitioner believed that
respondent Alzul has lost her rights over the subject lot by the
rescission of the sale in her favor due to the latters failure to
pay the installments and also as a result of her transferees
failure to pay the agreed amortizations. And even in the face of
the refusal by petitioner to accept tender of payment, respondent
is not left without a remedy. It is basic that consignation is an
available remedy, and respondent, with the aid of her counsel,
could have easily availed of such course of action sanctioned under
the Civil Code.
CACAYORIN v. AFPMBAI
Facts: Oscar Cacayorin filed an application with AFPMBAI to
purchase a property which the latter owned through a loan facility.
Oscar and his wife, Thelma, and the Rural Bank of San Teodoro
executed a Loan and Mortgage Agreementwith the former as borrowers
and the Rural Bank as lender, under the auspices of PAG-IBIG. On
the basis of the Rural Bank's letter of guaranty, AFPMBAI executed
in petitioners' favor a Deed of Absolute Sale,and a new title was
issued in their name. Then, the PAG-IBIG loan facility did not push
through and the Rural Bank closed. Meanwhile, AFPMBAI somehow was
able to take possession of petitioners' loan documents and the TCT,
while petitioners were unable to pay the loan for the property.
AFPMBAI made written demands for petitioners to pay the loan for
the property. Then, petitioners filed with the RTC a complaint for
consignation of loan payment, recovery of title and cancellation of
mortgage annotation against AFPMBAI, PDIC and the Register of Deeds
of Puerto Princesa City. AFPMBAI filed a motion to dismiss claiming
that petitioners' Complaint falls within the jurisdiction of the
Housing and Land Use Regulatory Board (HLURB), as it was filed by
petitioners in their capacity as buyers of a subdivision lot and it
prays for specific performance of contractual and legal obligations
decreed under Presidential Decree No. 957(PD 957). It added that
since no prior valid tender of payment was made by petitioners, the
consignation case was fatally defective and susceptible to
dismissal.
Issue:Whether or not the case falls within the exclusive
jurisdiction of the HLURB.
Ruling: No.Unlike tender of payment which is
extrajudicial,consignation is necessarily judicial; hence,
jurisdiction lies with the RTC, not with the HLURB.Under Article
1256 of the Civil Code, the debtor shall be released from
responsibility by the consignation of the thing or sum due, without
need of prior tender of payment, when the creditor is absent or
unknown, or when he is incapacitated to receive the payment at the
time it is due, or when two or more persons claim the same right to
collect, or when the title to the obligation has been lost. The
said provision clearly precludes consignation in venues other than
the courts.
1267- Doctrine of Unforeseen EventsPHILIPPINE NATIONAL
CONSTRUCTION CORPORATION vs. CAFacts:Petitioner and private
respondents executed a lease contract on November 18, 1895 with the
following stipulations:1. TERM OF LEASE - This lease shall be for a
period of 5 years, commencing on the date of issuance of the
industrial clearance by the Ministry of Human Settlements ...2.
RATE OF RENT - monthly rate of P20,000.00. This rate shall be
increased yearly by Five Percent (5%) based on the agreed monthly
rate of P20,000.003. TERMS OF PAYMENT - The rent shall be paid
yearly in advance by the LESSEE. The first annual rent in the
amount of P240,000.00 shall be due and payable upon the execution
of this Agreement and the succeeding annual rents shall be payable
every 12 months thereafter...4. USE OF LEASED PROPERTY - Property
shall be used by the LESSEE as the site, grounds and premises of a
rock crushing plant and field office.... . .11. TERMINATION OF
LEASE - This Agreement may be terminated by mutual agreement of the
parties. Upon the termination or expiration of the period of lease
without the same being renewed, the LESSEE shall vacate the Leased
Property at its expense.
Petitioner obtained from the Ministry of Human Settlements a
Temporary Use Permit for the proposed rock crushing project which
was valid for 2 years. Subsequently, private respondents wrote
petitioner requesting payment of the first annual rental in the
amount of P240,000 which was due and payable upon the execution of
the contract.
In its reply-letter, petitioner argued that under paragraph 1 of
the lease contract, payment of rental would commence on the date of
the issuance of an industrial clearance by the Ministry of Human
Settlements, and not from the date of signing of the contract. It
then expressed its intention to terminate the contract due to
financial and technical difficulties. However, private respondents
insisted on the performance of petitioner's obligation and demanded
for the payment of the first annual rental.
Petitioner argued that it was only obligated to pay the amount
of P20,000.00 as rental payments for the one-month period of lease,
counted from the issuance of the Industrial Permit up to the Notice
of Termination. Private respondents then instituted with the RTC an
action against petitioner for Specific Performance with Damages.
RTC rendered a decision ordering petitioner to pay the private
respondents the amount of P492,000 which represented the rentals
for two years. CA affirmed RTC's decision.
Invoking Article 1266 and the principle of rebus sic stantibus,
petitioner asserts that it should be released from the obligatory
force of the contract of lease because the purpose of the contract
did not materialize due to unforeseen events and causes beyond its
control, which is due to abrupt change in political climate after
the EDSA Revolution and financial difficulties.
Issue: Whether or not petitioner should be released from the
obligatory force of the contract of lease because the purpose of
the contract did not materialize due to unforeseen events.
Held:No. It is a fundamental rule that contracts, once
perfected, bind both contracting parties, and should be complied
with in good faith. But the law recognizes exceptions to the
principle of the obligatory force of contracts. One exception is
laid down in Article 1266 of the Civil Code, which reads: "The
debtor in obligations to do shall also be released when the
prestation becomes legally or physically impossible without the
fault of the obligor."
Petitioner cannot take refuge in the said article, since it is
applicable only to obligations "to do", and not to obligations "to
give". An obligation "to do" includes all kinds of work or service;
while an obligation "to give" is a prestation which consists in the
delivery of a movable or an immovable thing in order to create a
real right, or for the use of the recipient, or for its simple
possession, or in order to return it to its owner.
The obligation to pay rentals or deliver the thing in a contract
of lease falls within the prestation to give; hence, it is not
covered within the scope of Article 1266. At any rate, the
unforeseen event and causes mentioned by petitioner are not the
legal or physical impossibilities contemplated in said article.
Petitioner failed to state specifically the circumstances brought
about by the abrupt change in the political climate in the country
except the alleged prevailing uncertainties in government policies
on infrastructure projects.
The principle of rebus sic stantibus neither fits in with the
facts of the case. Under this theory, the parties stipulate in the
light of certain prevailing conditions, and once these conditions
cease to exist the contract also ceases to exist. This theory is
said to be the basis of Article 1267 of the Civil Code, which
provides: When the service has become so difficult as to be
manifestly beyond the contemplation of the parties, the obligor may
also be released therefrom, in whole or in part.
The parties to the contract must be presumed to have assumed the
risks of unfavorable developments. It is therefore only in
absolutely exceptional changes of circumstances that equity demands
assistance for the debtor. In this case, petitioner wants this
Court to believe that the abrupt change in the political climate of
the country after the EDSA Revolution and its poor financial
condition rendered the performance of the lease contract
impractical and inimical to the corporate survival of the
petitioner. It is a matter of record that petitioner PNCC entered
into a contract with private respondents on November 18, 1985.P
rior thereto, the country has already experienced political
upheavals, turmoils, almost daily mass demonstrations,
unprecedented, inflation, peace and order deterioration, the Aquino
trial and many other things that brought about the hatred of people
even against crony corporations. Notwithstanding the above,
petitioner PNCC entered into the contract of lease with private
respondents with open eyes of the deteriorating conditions of the
country.
Anent petitioners alleged poor financial condition, the same
will neither release petitioner from the binding effect of the
contract of lease. As held in Central Bank v. Court of Appeals,
mere pecuniary inability to fulfill an engagement does not
discharge a contractual obligation, nor does it constitute a
defense to an action for specific performance.
With regard to the non-materialization of petitioners particular
purpose in entering into the contract of lease, i.e., to use the
leased premises as a site of a rock crushing plant, the same will
not invalidate the contract. The cause or essential purpose in a
contract of lease is the use or enjoyment of a thing. As a general
principle, the motive or particular purpose of a party in entering
into a contract does not affect the validity or existence of the
contract; an exception is when the realization of such motive or
particular purpose has been made a condition upon which the
contract is made to depend.
MAGAT JR. v CA
Article 1267. When the service has become so difficult asto be
manifestly beyond the contemplation of the parties, theobligor may
also be released therefrom, in whole or in part.Facts:Guerrero is
the President and Chairman of the Guerrero Transport Services
(GTS), a single proprietorship. IN 1972, the GTS won a bidding to
operate a fleet of taxicabs in Subic. As the highest bidder,
Guerrero was required to have four door, four wheel, radio
controlled, meter controlled and sedans taxi services.Guerrero and
Magat, General Manager of the Spectrum Electronic Laboratories,
executed a letter-contract for the purchase of transceivers at
$77,620.59 FOB, Yokohoma. Magat was to deliver within the 60-90
days after receiving from the Guerrero the assigned frequency.Magat
then contacted his Japanese supplier (Koide & Co., Ltd.) and
placed an order for the transceivers.On Sept. 22, 1972, in the
event of the Martial Law, the then President Marcos issued the
Letter of Instructions (LOI) no. 1 which stated:SEIZURE AND CONTROL
OF ALL PRIVATELY OWNED NEWSPAPERS, MAGAZINES, RADIO AND TELEVISION
FACILITIES AND ALL OTHER MEDIA OF COMMUNICATION., said LOI was for
the prevention of Propaganda actions against the government.On
Sept. 25, 1972. Pursuant to the LOI, the Radio Control Office
issued Administrative Circular no. 4, which stated:SUSPENDING THE
ACCEPTANCE AND PROCESSING OF APPLICATIONS FOR RADIO STATION
CONSTRUCTION PERMITS AND FOR PERMITS TO OWN AND/OR POSSESS RADIO
TRANSMITTERS OR TRANSCEIVERS.said circular suspended the sale and
purchase of radio transmitters or transceivers.The permit to import
the transceivers was denied because of the Martial LawGuerrero was
not able to obtain the necessary letter of credit. He then did not
continue with the contract.
Issue: W/ON there is a breach of contract
Held: No. The law provides thatwhen the service has become so
difficult as to be manifestly beyond the contemplation of the
parties, the obligor may also be released therefrom, in whole or in
part. Here in the case, the denial of permit to import resulted the
non compliance of the obligation and the inability to secure the
letter of credit.
Compensation
BANK OF THE PHILIPPINE ISLANDS and GRACE ROMERO, petitioners,
vs. COURT OF APPEALS and EDVIN F. REYES, respondents.Facts:Edvin F.
Reyes opened a Joint Savings Account of him and his wife with
BPI.
He also had a joint with his grandmother, Emeteria M. Fernandez
at the same BPI branch, where he regularly deposited in this
account the U.S. Treasury Warrants payable to the order of Emeteria
M. Fernandez as her monthly pension.
Emeteria died on December 28, 1989 without the knowledge of the
U.S. Treasury Department. She was still sent U.S. Treasury Warrant
dated January 1, 1990 in the amount of U.S. $377.003 or
P10,556.00.
Reyes deposited the U.S. treasury check the Joint Savings
Account (Reyes and Fernandezs account). The check was conditionally
cleared and was then sent to the United States for further
clearing.Thereafter Reyes closed Savings Account (Reyes and
Fernandezs account) and transferred its funds amounting to
P13,112.91 to the joint account with his wife.
The U.S. Treasury Warrant was dishonored as it was discovered
that Fernandez died three (3) days prior to its issuance. The U.S.
Department of Treasury requested BPI for a refund. For the first
time BPI came to know of the death of Fernandez.
BPI requested Reyes to contact the officers of BPI. When he
called up the bank, he was informed that the treasury check was the
subject of a claim by Citibank NA, correspondent of BPI. Reyes
assured BPI that he would drop by the bank to look into the matter.
He also verbally authorized them to debit from his other joint
account the amount stated in the dishonored U.S. Treasury Warrant.
On the same day, BPI debited the amount of P10,556.00 from Spouses
ReyesJoint Savings Account.
Reyes, with his lawyer Humphrey Tumaneng, visited the BPI and
the refund documents were shown to them. Surprisingly, Reyes
demanded from BPI restitution of the debited amount.Reyes then
filed a suit for Damages against BPI.
BPI avers that Reyes gave them his express verbal authorization
to debit the questioned amount.
RTC dismissed the complaint for lack of cause of action.CA did
not apply legal compensation and ordered BPI to credit to Reyes
account P10,556.00 plus interest.
Issue: Whether legal compensation is proper
Ruling: AffirmativeThe CA erred when it failed to rule that
legal compensation is proper. Compensation shall take place when
two persons, in their own right, are creditors and debtors of each
other. Article 1290 of the Civil Code provides that when all the
requisites mentioned in Article 1279 are present, compensation
takes effect by operation of law, and extinguishes both debts to
the concurrent amount, even though the creditors and debtors are
not aware of the compensation.
Legal compensation operates even against the will of the
interested parties and even without the consent of them. Since this
compensation takes place ipso jure, its effects arise on the very
day on which all its requisites concur. When used as a defense, it
retroacts to the date when its requisites are fulfilled.
Article 1279 states that in order that compensation may be
proper, it is necessary:
(1) That each one of the obligors be bound principally, and that
he be at the same time a principal creditor of the other;(2) That
both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality
if the latter has been stated;(3) That the two debts be due;(4)
That they be liquidated and demandable;(5) That over neither of
them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.The elements of
legal compensation are all present in the case at bar. The obligors
bound principally are at the same time creditors of each other. BPI
stands as a debtor of the Reyes, a depositor. At the same time,
said bank is the creditor of the Reyes with respect to the
dishonored U.S. Treasury Warrant which the latter illegally
transferred to his joint account. The debts involved consist of a
sum of money. They are due, liquidated, and demandable. They are
not claimed by a third person.It is true that the joint account of
Reyes and his wife was debited in the case at bar. We hold that the
presence of Reyess wife does not negate the element of mutuality of
parties, i.e., that they must be creditors and debtors of each
other in their own right. The wife of Reyes is not a party in the
case at bar. She never asserted any right to the debited U.S.
Treasury Warrant. Indeed, the right of the BPI to make the debit is
clear and cannot be doubted. To frustrate the application of legal
compensation on the ground that the parties are not all mutually
obligated would result in unjust enrichment on the part of the
Reyes and his wife who herself out of honesty has not objected to
the debit.
PNB vs CA & SAPPHIRE SHIPPINGFACTS:-PNB appropriated the
amount $2,627 and P34,340 from remittances of Sapphires principals
abroad.-These were admitted by PNB, subject to the affirmative
defenses of compensation for what is owing to it on the principle
of solution indebti.-Sapphire Shippings account with petitioner
bank was doubly credited for the amount of $5,679 and $5,885 in
1980 and 1981.-Money was telexed from Jeddah and Libya to be
credited to respondents account at Citibank through PNB.-PNB
intercepts the telexed money and deducts the value of $2,627
without the knowledge of respondent.-Respondent sues PNB for the
amount owed.-PNB claims legal compensation.
ISSUES:1. W/N there can be legal compensation
PROVISION:Article 1278.Compensation shall take place when two
persons, in their own right are creditors and debtors of each
other.Article 1473.When property is conveyed to a person in
reliance upon his declared intention to hold it for, or transfer it
to another or the grantor, there is an implied trust in favor of
the person whose benefit is contemplated.RULING :No. Because PNB is
not a creditor of Sapphire Shipping.- The contractual relationship
was between the bank in Jeddah and the private respondent.- Between
PNB and the plaintiff as beneficiary, there is created an implied
trust pursuant to Art. 1453 of the Civil Code- Hence, they are not
creditor and debtor of each other.Petition denied
EGV REALTY VS CAFacts:Petitioner EGV is the owner of a 7-storey
condominium known as Cristina Condominium. Cristina Condominium
Corporation holds title to all common areas of Cristina Condominium
and is in charge of managing and providing for the buildings
security.
Respondent Unisphere is the owner of Unit 301 of said
condominium.
On several occasions, respondent was allegedly robbed bringing
the total value of items lost at P12,295.00.
Respondent then demanded compensation and reimbursement from
petitioner for the losses incurred as a result of the robbery.
Petitioner denied any liability for the losses stating that the
goods lost belonged to Amtrade, a third party.As a consequence of
the denial, respondent withheld payment of its monthly dues.
Respondent then received a letter from petitioner demanding
payment of past dues.
Petitioner then executed a Deed of Absolute Sale over Unit 301
in favor of respondent. Thereafter, a condominium certificate was
issued in respondents name bearing the annotation of a lien in
favor of petitioner for the unpaid condominium dues in the amount
of P13,142.67.
Petitioners then filed a petition with SEC for the collection of
unpaid monthly dues against respondents.
In its answer, respondent alleged that it could not be deemed in
default of said unpaid dues because its tardiness was occasioned by
petitioners failure to comply with what is incumbent upon them.
On appeal to the CA, it declared that the amount of P13,142.67,
the unpaid monthly dues of respondent should be offset by the
losses it suffered in the amount of P12,295.00.Petitioner now
asserts that the ruling of the CA to offset the alleged losses in
unfounded because respondent is not the owner of the goods lost,
but a third party, Amtrade.
Issue:W/N compensation is proper. No.
Held:Compensation or offset under the New Civil Code takes place
only when two persons or entities in their own rights, are
creditors and debtors of each other.
A distinction must be made between a debt and a mere claim. A
debt is an amount actually ascertained. It is a claim which has
been formally passed upon by the courts or quasi-judicial bodies to
which it can in law be submitted and has been declared to be a
debt. A claim, on the other hand, is a debt in embryo. It is mere
evidence of debt and must pass thru the process prescribed by law
before it develops into what is properly called a debt. Absent,
however, any such categorical admission by an obligor or final
adjudication, no compensation or off-set can take place. Unless
admitted by the a debtor himself, the conclusion that he is in
truth indebted to another cannot be definitely and finally
pronounce, no matter how convinced he may be from the examination
of the pertinent records of the validity of that conclusion the
indebtedness must be one that is admitted by the alleged debtor or
pronounced by final judgment of a competent court or in this case
by the Commission.
It appears quite clear that the offsetting of debts does not
extend to unliquidated, disputed claims arising from tort or breach
of contract.
While respondent Unisphere does not deny any liability for its
unpaid dues to petitioners, the latter do not admit any
responsibility for the loss suffered by the former occasioned by
the burglary. At best, what respondent Unisphere has against
petitioners is just a claim, not a debt. Such being the case, it is
not enforceable in court. It is only the debts that are enforceable
in court, there being no apparent defenses inherent in them.
Respondent Unispheres claim for its losses has not been passed upon
by any legal authority so as to elevate it to the level of a
debt.
METROBANK v TONDA
Any compromise relating to the civil liability arising from PD
115does not automatically terminate the criminal proceeding against
or extinguish the criminal liability of the malefactor.
Facts: Spouses Joaquin G. Tonda and Ma. Cristina U. Tonda,
hereinafter referred to as the TONDA, applied for and were granted
commercial letters of credit by petitioner Metropolitan Bank and
Trust Company, hereinafter referred to as METROBANK for a period of
eight (8) months beginning June 14, 1990 to February 1, 1991 in
connection with the importation of raw textile materials to be used
in the manufacturing of garments. The TONDA acting both in their
capacity as officers of Honey Tree Apparel Corporation (HTAC) and
in their personal capacities, executed eleven (11) trust receipts
to secure the release of the raw materials to HTAC. The imported
fabrics with a principal value of P2,803,000.00 were withdrawn by
HTAC under the 11 trust receipts executed by the TONDA. Due to
their failure to settle their obligations under the trust receipts
upon maturity, METROBANK through counsel, sent a letter dated
August 10, 1992, making its final demand upon the TONDA to settle
their past due TR/LC accounts on or before August 15, 1992. They
were informed that by said date, the obligations would amount to
P4,870,499.13. Despite repeated demands therefor, the TONDA failed
to comply with their obligations stated in the trust receipts
agreements, i.e. the TONDA failed to account to METROBANK the goods
and/or proceeds of sale of the merchandise, subject of the trust
receipts. The RTC convicted the spouses. However, the Court of
Appeals citing the case of Tan Tiong Tick vs. American Apothecaries
implied that in making the deposit, the TONDA are entitled to set
off, by way of compensation, their obligations to METROBANK on
their trust receipt l