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