Dela Cruz
Culaba v. San Miguel Corp.
GR No. 125862, April 15, 2004
Second Division, J. Callejo, Sr.
Payment shall be made to the person in whose favor the obligation has been constitued, or
his successor, or any person authorized to receve it.
Facts:
The spouses, Francisco and Demetria Culaba, were the owners and proprietors of the
Culaba Store and were engaged in the sale and distribution of San Miguel Corporation’s
(SMC) beer products. They owed SMC P28,650.00 but only made a partial payment of
P3,740,000, 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. The defendant
spouses denied any liability, claiming that they had already paid the plaintiff in full on four
separate occasions to an SMC supervisor who came in an SMC van. For its part, SMC
submitted a publisher’s affidavit to prove that the entire booklet was reported lost.
Francisco Culaba argued that he shouldn't be blamed for paying the SMC collector in a van,
as it was common for regular customers. He also stated that the receipts weren't declared
lost when he paid, so his payments were valid. The trial court ruled in favor of SMC, finding
the Culaba spouses liable for the unpaid balance. The court noted that it was unusual that
Francisco didn't remember the collector's name or ask for it on the receipts.
Issue/s:
I. Whether the payment of the petitioners' obligation to the private respondent was
duly made to extinguish it.
Ruling:
No. Petitioners’ obligation was not duly made to extinguish it.
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 clad in an SMC
uniform and drove an SMC van. Persons dealing with an assumed agent are bound at their
peril to ascertain not only the fact of 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.
The most prudent thing the petitioners should have done was to ascertain the identity and
authority of the person who collected their payments. Failing this, the petitioners cannot
claim that they acted in good faith when they made such payments. Their claim therefore
is negated by their negligence, and they are bound by its consequences. Being negligent in
this regard, the petitioners cannot seek relief based on a supposed agency. Hence, the
instant petition is hereby DENIED.
Dela Cruz
Sps Miniano v. Concepcion
GR No. 172825, October 11, 2012
Third Division, J. Peralta
Respondent’s obligation consists of payment of a sum of money. In order to extinguish said
obligation, payment should be made to the proper person.
Facts:
In 1996, the petitioners and respondent entered into a contract to sell a house and lot in
Antipolo City for P2,000,000. The respondent paid this amount with an agreement that her
remaining obligation was P200,000, including interests and penalties, and the petitioners
agreed to this amount. The property title was transferred to the respondent. However, the
petitioners later demanded an additional P209,000, stating it was the correct amount owed.
Despite repeated demands and changes in the claimed amount by the petitioners, they
were unable to collect the asserted amounts from the respondent.Consequently, the
petitioners filed a complaint for a sum of money with damages. In her response, the
respondent asserted that her outstanding obligation was only P200,000, as confirmed by
the petitioners, and not the P487,384.15 claimed in the complaint. She requested the
dismissal of the complaint. During the presentation of the parties’ evidence, in addition to
documents showing the statement of her paid obligations, the respondent presented a
receipt purportedly indicating payment of the remaining balance of P200,000.00 to
Adoracion Losloso (Losloso), who allegedly received the same on behalf of the petitioners.
The Regional Trial Court ruled in favor of the respondent on March 8, 2004.
Issue/s:
Whether or not respondent’s obligation had already been extinguished by payment.
Ruling:
Yes. Respondent’s obligation consists of payment of a sum of money. To extinguish said
obligation, payment should be made to the proper person as set forth in Article 1240 of the
Civil Code.
The Court explained to whom payment should be made to extinguish an obligation:
Payment made by the debtor to the person of the creditor or to one authorized by him or by
the law to receive it extinguishes the obligation. When payment is made to the wrong party,
however, the obligation is not extinguished as to the creditor who is without fault or
negligence even if the debtor acted in utmost good faith and by mistake as to the person of
the creditor or through error induced by fraud of a third person.
In general, a payment to be effective to discharge an obligation, must be made to the proper
person. Thus, payment must be made to the obligee himself or to an agent having authority,
express or implied, to receive the payment. Payment made to one having apparent authority
to receive the money will, as a rule, be treated as though actual authority had been given for
its receipt. Likewise, if payment is made to one who by law is authorized to act for the
creditor, it will work a discharge. The receipt of money due on a judgment by an officer
authorized by law to accept it will, therefore, satisfy the debt.
Losloso’s authority to receive payment was embodied in petitioners’ Letter addressed to
respondent, dated August 7, 1997, 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. Thus, as
shown in the receipt signed by petitioners’ agent and pursuant to the authority granted by
petitioners to Losloso, payment made to the latter is deemed payment to petitioners. We
find no reason to depart from the RTC and the CA conclusion that payment had already
been made and that it extinguished respondent's obligations.
Dela Cruz
NAPOCOR v. Lucman Ibrahim, et al.
GR No. 168732, June 29, 2007
First Division, J. Azcuna
“Payment made in good faith to any person in possession of the credit shall release the debtor.”
Facts:
On November 23, 1994, respondent Lucman G. Ibrahim, in his personal capacity and on
behalf of his co-heirs, filed an action against National Power Corporation (NAPOCOR) for
recovery of land and damages. They claimed they were owners of 70,000 square meters of
land and that NAPOCOR took possession of their subterrain area without their knowledge
or consent. On September 19, 1992, respondent Omar G. Maruhom requested the Marawi
Water District construct or install a motorized deep well, but his request was turned down.
They demanded damages and vacated the land, but NAPOCOR refused to vacate and pay
damages. The Regional Trial Court issued a decision that rejected the heirs' plea to
dismantle the underground tunnels. Instead, the court ordered NAPOCOR to compensate
them for the fair market value of the property, a reasonable monthly rental, as well as moral
damages, attorney's fees, and legal costs. Subsequently, the respondents submitted a
Petition for Relief from Judgment, which was granted, resulting in a modified judgment
that reduced the fair market value award. This prompted both Ibrahim and NAPOCOR to
file appeals with the Court of Appeals. The Court of Appeals overturned the modified
judgment and reinstated the original decision, except for removing the award for moral
damages and reducing the amounts allocated for rentals and attorney's fees.
Issue/s
Whether or not the petitioner is solidarily liable to the Ibrahims and Maruhoms?
Ruling:
Without the existence of bad faith, the ruling of the RTC and of the Court of Appeals
apropos petitioner’s remaining liability to the Ibrahims and Maruhoms becomes devoid of
legal basis. In fact, petitioner’s previous payment to Mangondato of the rental fees and
expropriation indemnity due the subject land pursuant to the final judgment in Civil Case
No. 605-92 and Civil Case No. 610-92. This would be a simple case of an obligation being
extinguished through payment by the debtor to its creditor. Under this scenario, the
Ibrahims and Maruhoms would not even be entitled to receive anything from anyone for
the subject land. Hence, petitioner cannot be held liable to the Ibrahims and Maruhoms.
Second. We, however, can reach the same conclusion even if the Ibrahims and Maruhoms
turn out to be the real owners of the subject land.
Should the Ibrahims and Maruhoms turn out to be the real owners of the subject land,
petitioner’s previous payment to Mangondato pursuant to Civil Case No. 605-92 and Civil
Case No. 610-92—given the absence of bad faith on petitioner’s part as previously
discussed— may nonetheless be considered as akin to a payment made in “good faith” to a
person in “possession of credit” per Article 1242 of the Civil Code that, just the same,
extinguishes its obligation to pay for the rental fees and expropriation indemnity due for
the subject land. Article 1242 of the Civil Code reads:
"Payment made in good faith to any person in possession of the credit shall release the
debtor." Article 1242 of the Civil Code is an exception to the rule that a valid payment of an
obligation can only be made to the person to whom such obligation is rightfully owed.64
It contemplates a situation where a debtor pays a "possessor of credit" i.e., someone who is
not the real creditor but appears, under the circumstances, to be the real creditor.65 In such
scenario, the law considers the payment to the "possessor of credit" as valid even as against
the real creditor taking into account the good faith of the debtor.
Borrowing the principles behind Article 1242 of the Civil Code, we find that Mangondato—
being the judgment creditor in Civil Case No. 605-92 and Civil Case No. 610-92 as well as
the registered owner of the subject land at the time66 —may be considered as a "possessor
of credit" with respect to the rental fees and expropriation indemnity adjudged due for the
subject land in the two cases, if the Ibrahims and Maruhoms turn out to be the real owners
of the subject land. Hence, petitioner’s payment to Mangondato of the fees and indemnity
due for the subject land as a consequence of the execution of Civil Case No. 605-92 and
Civil Case No. 610-92 could still validly extinguish its obligation to pay for the same even as
against the Ibrahims and Maruhoms.
Dela Cruz
PNB v. Pineda
GR No. L-46658, May 13, 1991
Third Division, C.J. Fernan
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.
Facts:
In 1963, Ignacio Arroyo, married to Lourdes Tuason Arroyo (Spouses Arroyo), obtained a
loan from the petitioner bank to purchase 60% of the subscribed capital stock and thereby
acquire the controlling interest of private respondent Tayabas Cement Company, Inc.
(TCC). To secure this loan, the spouse, Arroyo, executed a real estate mortgage on a piece
of land known as the La Vista Property. To cover the imports of machinery and equipment
for cement plants, TCC submitted a request for an eight-year deferred letter of credit. The
Arroyo spouses executed legal papers that secured the loan. The Japanese-made cement
plant's imported machinery and equipment then arrived and were delivered to TCC in
accordance with a trust receipt agreement. Toyo Menka Kaisha, Ltd. made withdrawals
against the Letter of Credit (L/C) in accordance with the predetermined schedule.
Unfortunately, TCC did not make the payments due under the terms of the trust receipt
agreement. Due to TCC's inability to fulfill its obligations under the L/C, the petitioner
bank decided to take the action of reclaiming the imported machinery and equipment,
which it later did. The personal accounts of the Arroyo spouses had also come due. These
accounts included a P160,000.00 loan supported by a real estate mortgage over agricultural
land parcels known as Hacienda Bacon in Isabela, Negros Occidental. However, as the
Arroyo spouses struggled to pay their debts to PNB, the bank made the decision to start
the foreclosure process for the real estate mortgages that the Arroyo spouses had
authorized in the bank's favor.
Issue/s:
Whether or not TCC's liability has been extinguished by the repossession of PNB of the
imported cement plant machinery and equipment?
Ruling:
No. TCC’s liability was not extinguished by the possession of PNB.
It must be remembered that PNB took possession of the imported cement plant machinery
and equipment pursuant to the trust receipt agreement executed by and between PNB and
TCC giving the former the unqualified right to the possession and disposal of all property
shipped under the Letter of Credit until such time as all the liabilities and obligations under
said letter had been discharged.
PNB's possession of the subject machinery and equipment being precisely as a form of
security for the advances given to TCC under the Letter of Credit, said possession by itself
cannot be considered payment of the loan secured thereby. Payment would legally result
only after PNB had foreclosed on said securities, sold the same and applied the proceeds
thereof to TCC's loan obligation. Mere possession does not amount to foreclosure for
foreclosure denotes the procedure adopted by the mortgagee to terminate the rights of the
mortgagor on the property and includes the sale itself.
Neither can say repossession amount to dacion en pago. Dation in payment takes place when
property is alienated to the creditor in satisfaction of a debt in money and the same is
governed by sales. 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. As aforesaid, the repossession of the machinery and equipment in question was
merely to secure the payment of TCC's loan obligation and not for the purpose of
transferring ownership thereof to PNB in satisfaction of said loan. Thus, no dacion en pago
was ever accomplished.
Proceeding from this finding, PNB has the right to foreclose the mortgages executed by the
spouses Arroyo as sureties of TCC. A surety is considered in law as being the same party as
the debtor in relation to whatever is adjudged touching the obligation of the latter, and their
liabilities are interwoven as to be inseparable.
Dela Cruz
CALTEX v. IAC
GR No. 72703|November 13, 1992
Third Division, J. Bidin
The obligation is totally extinguished only when the parties, by agreement, express or implied,
or by their silence, consider the thing as equivalent to the obligation.
Facts:
In 1978, Asia Pacific Airways and Caltex (Philippines) signed a fuel supply agreement. By
June 1980, Asia Pacific Airways owed Caltex P4,072,682.13 for fuel. To settle, Asia Pacific
assigned National Treasury receivables to Caltex, resulting in a P5,475,294.00 refund to
Caltex. Asia Pacific Airways believed this exceeded the assigned amount and sought a
P900,000.00 refund. Caltex claimed it was interest and charges. In 1982, Asia Pacific
Airways filed a P510,550.63 lawsuit. The trial court rejected the case, but the appellate court
reversed it in 1985. Caltex got the decision on September 6, 1985, and filed a motion for
reconsideration within 14 days, which was denied. The Appellate Court allowed Asia Pacific
Airways' entry of a judgment motion. On November 14, 1985, Caltex petitioned to annul the
Appellate Court's October 24, 1985, resolution denying reconsideration. A temporary
restraining order was issued. The Supreme Court accepted the petition and requested
memoranda. In 1986, Caltex sought remand to the Court of Appeals, citing the Habaluyas
case, but this was denied in December 1986.
Issue/s:
Whether or not, as established by the appellate court, the Deed of Assignment executed by
the parties on July 31, 1980, constituted dacion en pago such that the obligation was entirely
extinguished.
Ruling:
No. With respect to the issue, The Court rule that the Deed of Assignment executed by the
parties on July 31, 1980, is not a dation in payment and did not totally extinguish
respondent's obligation as stated therein.
A dation in payment does not necessarily mean total extinguishment of the obligation. The
obligation is totally extinguished only when the parties, by agreement, express or implied,
or by their silence, consider the thing as equivalent to the obligation.
Hence, it could easily be seen that the Deed of Assignment speaks of three (3) obligations
— (1) the outstanding obligation of P4,072,682.13 as of June 30, 1980; (2) the applicable
interest charges on overdue accounts; and (3) the other avturbo fuel lifting and deliveries
that assignor (private respondent) may from time to time receive from assignee
(Petitioner). As aptly argued by petitioner, if it were the intention of the parties to limit or
fix respondent's obligation to P4,072.682.13; they should have so stated and there would
have been no need for them to qualify the statement of said amount.
Likewise, the then Intermediate Appellate Court failed to take into consideration the
subsequent acts of the parties which clearly show that they did not intend the Deed of
Assignment to totally extinguish the obligation. To judge the intention of the contracting
parties, their contemporaneous and subsequent acts shall be principally considered (Art.
1253, Civil Code). The foregoing subsequent acts of the parties clearly show that they did
not intend the Deed of Assignment to have the effect of totally extinguishing the
obligations of private respondent without payment of the applicable interest charges on
the overdue account.
Dela Cruz
Netlink Computer v. Delmo
GR No. 160827, June 18, 2014
First Division, J. Bersamin
In the absence of a written agreement between the employer and the employee that sales
commissions shall be paid in a foreign currency, the latter has the right to be paid in such
foreign currency once the same has become an established practice of the former. The rate of
exchange at the time of payment, not the rate of exchange at the time of the sales, controls
Facts:
On November 3, 1991, Netlink Computer, Inc. Products and Services (Netlink) hired Eric S.
Delmo (Delmo) as its account manager, tasked with canvassing and sourcing clients and
convincing them to purchase the products and services of Netlink. He was able to generate
sales worth ₱35,000,000.00, from which he earned commissions amounting to ₱993,558.89
and US$7,588.30. He then requested payment of his commissions, but Netlink refused and
only gave him partial cash advances chargeable to his commissions. In 1996, Delmo was
denied entry to Netlink's premises and subsequently filed a complaint for illegal dismissal.
Netlink argued that there were guidelines for working hours and time recording. The Labor
Arbiter (LA) ruled in favor of Delmo and against Netlink. On appeal, the National Labor
Relations Commission (NLRC) upheld the LA's decision. The Court of Appeals (CA) also
affirmed the NLRC's ruling and found that Netlink had failed to provide evidence to dispute
Delmo's entitlement to commissions in US dollars. Netlink argues that Delmo's
commissions should be based on sales generated using the US dollar-to-Philippine peso
conversion rate at the time of the sale. In contrast, Delmo argues that since he earned in
US dollars, it would be equitable for his commissions to be paid in US dollars.
Issue/s:
I. Whether or not the payment of the commissions should be in US dollars
II. Whether or not the award of attorney’s fees was warranted.
Ruling:
I.Yes. The appeal lacks merit. As a general rule, all obligations shall be paid in Philippine
currency. However, the contracting parties may stipulate that foreign currencies may be used
for settling obligations. This is pursuant to Republic Act No. 8183, which provides as follows:
Section 1. All monetary obligations shall be settled in the Philippine currency which is legal
tender in the Philippines. However, the parties may agree that the obligation or transaction
shall be settled in any other currency at the time of payment.
There was no written contract between Netlink and Delmo stipulating that the latter’s
commissions would be paid in US dollars. The absence of the contractual stipulation
notwithstanding, Netlink was still liable to pay Delmo in US dollars because the practice of
paying its sales agents in US dollars for their US dollar-denominated sales had become a
company policy.
With the payment of US dollar commissions having ripened into a company practice, there
is no way that the commissions due to Delma were to be paid in US dollars or their
equivalent in Philippine currency determined at the time of the sales. To rule
otherwise would be to cause an unjust diminution of the commissions due and owing to
Delma.
II. Yes. The award of attorney's fees must, likewise, be upheld in line of (sic) the decision of
the Supreme Court in the case of Consolidated Rural Bank (Cagayan Valley), Inc. vs.
National Labor Relations Commission, 301 SCRA 223, 235, where it was held that "in actions
for recovery of wages or where an employee was forced to litigate and thus incur expenses
to protect her rights and interests, even if not so claimed, an award of attorney's fees
equivalent to ten percent (10%) of the total award is legally and morally justifiable. There
is no doubt that in the present case, the private respondent has incurred expenses for the
protection and enforcement of his right to his commissions.
Dela Cruz
Papa v. Valencia & Co.
GR No. 105188, January 23, 1998
First Division, J. Kapunan
The payee of a check would be a creditor under this provision and if its no-payment is caused
by his negligence, payment will be deemed effected and the obligation for which the check was
given as conditional payment will be discharged.
Facts:
In 1982, A.U. Valencia and Co., Inc., and Felix Peñarroyo filed a complaint for specific
performance against Myron C. Papa, administrator of Angela M. Butte's Testate Estate. Papa
sold a piece of land to Peñarroyo, but the title was not released until all mortgaged properties
were redeemed. Valencia, representing Penarroyo, made a payment of P40,000 by check and
P5,000 in cash, both of which were accepted by Papa and documented with receipts. It was
later revealed that the property had been previously mortgaged to a bank along with Butte's
other assets. The trial court ruled in favor of Valencia and Peñarroyo, allowing Papa to
redeem the property and execute a deed of sale.
Issue/s
Whether or not the payment made by respondents Valencia and Peñarroyo was sufficient to
consummate the sale of the property.
Ruling:
No. While it is true that the delivery of a check produces the effect of payment only when
it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if the debtor is
prejudiced by the creditor's unreasonable delay in presentment. The acceptance of a check
implies an undertaking of due diligence in presenting it for payment, and if he from whom
it is received sustains loss by want of such diligence, it will be held to operate as actual
payment of the debt or obligation for which it was given. It has, likewise, been held that if
no presentment is made at all, the drawer cannot be held liable irrespective of loss or
injury unless presentment is otherwise excused.
This is in harmony with Article 1249 of the Civil Code under which payment by way of check
or another negotiable instrument is conditioned on its being cashed, except when through
the fault of the creditor, the instrument is impaired. The payee of a check would be a creditor
under this provision and if its no-payment is caused by his negligence, payment will be
deemed effected and the obligation for which the check was given as conditional payment
will be discharged.
Considering that respondents Valencia and Peñarroyo had fulfilled their part of the
contract of sale by delivering the payment of the purchase price, said respondents,
therefore, had the right to compel petitioner to deliver to them the owner's duplicate of
TCT No. 28993 of Angela M. Butte and the peaceful possession and enjoyment of the lot in
question.
Dela Cruz
Del Carmen v. Sps. Sabordo
GR No. 181723, August 11, 2014
Third Division, J. Peralta
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.
Fact:
In 1961, the spouses Suico and their business partners established a rice and corn mill in
Mandaue City, Cebu, securing a loan from the Development Bank of the Philippines (DBP)
by mortgaging several parcels of land, including Lots 506, 512, 513, and 514. When they
defaulted on the loan, DBP foreclosed on the mortgage and eventually took ownership of
the properties. Del Carmen, one of the legal heirs of the Suico spouses, continued the case
as a substitute after one of the spouses passed away. The main issue in this case revolves
around Lots 512 and 513, which were redeemed from DBP by the spouses Sabordo through
a conditional sale. The Sabordos acquired the rights to these lots from the petitioners (Del
Carmen) for the purpose of redeeming them from DBP, which they successfully did. A
dispute arose over whether the Suico spouses and their heirs could repurchase a property
from the Sabordos. During this dispute, the Sabordos mortgaged certain lots to Republic
Planters Bank (RPB), and the loan became overdue. The petitioners found out about this
and wanted to pay P127,500.00, but were unsure who to pay it to. They filed a complaint
with the Regional Trial Court (RTC) to have the respondents and RPB clarify their claims
to the money. The heirs of Toribio Del Carmen deposited the amount with the RTC in good
faith. However, the RTC dismissed the complaint. The petitioners appealed to the Court of
Appeals (CA), arguing that the deposit was valid payment for the lots, but the CA upheld
the RTC's decision. A subsequent motion for reconsideration (MR) was also denied.
Issue:
Whether or not the consignation made by the petitioners can be considered as a valid means
to extinguish their obligations.
Ruling:
No. The petition lacks merit. At the outset, the Court quotes with approval the discussion
of the CA regarding the definition and nature of consignation, to wit:
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. 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.
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.
