G.R. No. 118367 - January 5, 1998.

DEVELOPMENT BANK OF THE PHILIPPINES,

petitioner, v. COURT OF APPEALS and LYDIA CUBA,

respondents.

DAVIDE, JR., J.:

FACTS

Plaintiff is a grantee of a Fishpond Lease Agreement and it obtained from

DBP three separate loans. Plaintiff failed to pay her loan on the scheduled
dates. Without foreclosure proceedings, defendant DBP appropriated the
leasehold Rights of over the fishpond then executed a Deed of Conditional Sale
of the Leasehold Rights in favor of plaintiff over the same fishpond. In the
negotiation for repurchase, plaintiff addressed two letters to the Manager DBP.
After the Deed of Conditional Sale was executed in favor of plaintiff, a new
Fishpond Lease Agreement was issued by the Ministry of Agriculture and Food
but the plaintiff failed to pay the amortizations. Defendant DBP thereafter sent
a Notice of Rescission thru Notarial. Defendant took possession of the
Leasehold Rights, advertised the public bidding to dispose of the property and
thereafter executed a Deed of Conditional Sale in favor of defendant Agripina
Caperal. Plaintiff filed complaint against DBP and Caperal. The trial court
ruled in favor of the plaintiff while the appellate court ordered DBP to turn over
possession of the property to Caperal as lawful holder of the leasehold rights
and to pay the plaintiff the amounts of P1,067,500 as actual damages; P50,000
as moral damages; and P50,000 as attorney's fees.

ISSUE

Whether the assignment of leasehold rights was a mortgage contract, not

amounting to novation, cession under Art. 1255 of Civil Code, nor a Dation
under Art. 1254

HELD

YES, the assignment of leasehold rights was a mortgage contract. We find

no merit in DBPs contention that there is novation since the obligation to pay a
sum of money remained, and the assignment merely served as security for the
loans covered by the promissory notes. Likewise, there is no cession considering
that article 1255 contemplates the existence of two or more creditors and
involves the assignment of all the debtor's property, but in the case only DBP is
the creditor. Furtheremore, the assignment, being in its essence a mortgage,
was but a security and not a satisfaction of indebtedness so there is no Dation
as defined in Article 1254.

G.R. No. 154127. December 8, 2003.

ROMEO C. GARCIA, petitioner, vs. DIONISIO V.
LLAMAS, respondent.

PANGANIBAN, J.:

FACTS

This case started out as a complaint for sum of money and damages by
Dionisio Llamas against Romeo Garcia and Eduardo de Jesus. Petitioner
borrowed P400,000.00 from respondent; that, on the same day, they executed a
promissory note wherein they bound themselves jointly and severally to pay the
loan; that the loan has long been overdue and, despite repeated demands, they
have failed and refused to pay it. Resisting the complaint, Petitioner Garcia
averred that he assumed no liability under the promissory note because he
signed it merely as an accommodation party for De Jesus; and, alternatively,
that he is relieved from any liability arising from the note inasmuch as the loan
had been paid by de Jesus by means of a check and the issuance of such and
the respondents acceptance thereof novated or superseded the note.

ISSUES

Whether there was novation in the obligation

HELD

NO novation took place. For novation to take place, the following

requisites must concur: there must be a previous valid obligation; the parties
concerned must agree to a new contract; the old contract must be
extinguished; and there must be a valid new contract. Applying the foregoing to
the instant case, the Court held that no novation took place. The parties did
not unequivocally declare that the old obligation had been extinguished.
Moreover, it must be noted that for novation to be valid and legal, the law
requires that the creditor expressly consent to the substitution of a new debtor.
Having made himself jointly and severally liable with De Jesus, petitioner is
therefore liable for the entire obligation.
G.R. No. 128448. February 1, 2001.
SPOUSES ALEJANDRO MIRASOL and LILIA E.
MIRASOL, petitioners, vs. THE COURT OF APPEALS,
PHILIPPINE NATIONAL BANK, and PHILIPPINE
EXCHANGE CO., INC., respondents.

QUISUMBING, J.:

FACTS

The Mirasols are sugarland owners and planters. Private respondent

Philippine National Bank financed the Mirasols' sugar production venture.
Under said scheme, the Mirasols signed Credit Agreements, a Chattel Mortgage
on Standing Crops, and a Real Estate Mortgage in favor of PNB. The Chattel
Mortgage empowered PNB as the petitioners' attorney-in-fact to negotiate and
to sell the latter's sugar in both domestic and export markets and to apply the
proceeds to the payment of their obligations to it. PNB continued to finance the
sugar production of the Mirasols. These crop loans and similar obligations were
secured by real estate mortgages and chattel mortgages. Believing that the
proceeds of their sugar sales to PNB were more than enough to pay their
obligations, petitioners asked PNB for an accounting. PNB ignored the request.
PNB then asked petitioners to settle their due and demandable accounts. As a
result, petitioners on August 4, 1977, conveyed to PNB real properties by way of
dacion en pago. On August 10, 1982, the balance of outstanding sugar crop
and other loans owed by petitioners stood at P15,964,252.93. Despite
demands, the Mirasols failed to settle said due and demandable accounts. PNB
then proceeded to extrajudicially foreclose the mortgaged properties but still
had a deficiency claim of P12,551,252.93.

ISSUES
 Whether the Honorable Court of Appeals committed manifest error in
upholding the validity of the foreclosure on petitioners property and in
upholding the validity of the dacion en pago in this case.

HELD

The Court finds petitioners' arguments unpersuasive. Both the lower

court and the appellate court found that the Mirasols admitted that they were
indebted to PNB in the sum stated in the latter's counterclaim. 26 Petitioners
nonetheless insist that the same can be offset by the unliquidated amounts
owed them by PNB for crop years 1973-74 and 1974-75. Petitioners' argument
has no basis in law. For legal compensation to take place, the requirements set
forth in Articles 1278 and 1279 of the Civil Code must be present. In the
present case, set-off or compensation cannot take place between the parties
because: first, neither of the parties are mutually creditors and debtors of each
other; second, compensation cannot take place where one claim, as in the
instant case, is still the subject of litigation, as the same cannot be deemed
liquidated.

G.R. No. 156846. February 23, 2004.

TEDDY G. PABUGAIS, petitioner, vs. DAVE P.

SAHIJWANI, respondent.

YNARES-SANTIAGO, J.:

FACTS

Petitioner Pabugais, in consideration of the amount of P15,487,500.00,

agreed to sell to respondent Sahijwani a lot containing 1,239 square meters.
Respondent paid petitioner the amount of P600,000.00 as option/reservation
fee and the balance to be paid within 60 days from the execution of the
contract, simultaneous with delivery of the owner's duplicate Transfer
Certificate of Title, Deed of Absolute Sale; the Certificate of Non-Tax
Delinquency on real estate taxes and Clearance on Payment of Association
Dues. The parties further agreed that failure on the part of respondent to pay
the balance of the purchase price entitles petitioner to forfeit the P600,000.00
option/reservation fee; while non-delivery by the latter of the necessary
documents obliges him to return to respondent the said option/reservation fee
with interest at 18% per annum. Petitioner failed to deliver the required
documents. In compliance with their agreement, he returned to respondent the
latter's P600,000.00 option/reservation fee by way of Far East Bank & Trust
Company which was, however, dishonored. Petitioner avers that he wrote a
letter saying saying that he is consigning the amount tendered with the RTC
Makati City. On the other hand, respondent admitted that his office received
petitioner's letter but claimed that there was no valid tender of payment
because no check was tendered.

ISSUES

1 Whether there was a valid consignation

2. Whether the petitioner can withdraw the amount consigned as a matter of

right

HELD

1. YES. 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. In this case,there
is a valid consignation as there is a valid tender of payment in an amount
sufficient to extinguish the obligation.

2. NO. Withdrawal of the money consigned would enrich petitioner and

unjustly prejudice respondent. Article 1260 is not applicable here. It provides
that Once the consignation has been duly made, the debtor may ask the judge
to order the cancellation of the obligation. The instant petition for review is
DENIED and the petitioner's obligation to respondent under paragraph 5 of the
"Agreement And Undertaking" as having been extinguished, is AFFIRMED.

G.R. No. 123855. November 20, 2000.*

NEREO J. PACULDO, petitioner, vs. BONIFACIO C.
REGALADO, respondent.

PARDO, J:

FACTS

Petitioner and respondent entered into a lease contract over a 16,478

square meter property. Petitioner also leased from respondent eleven other
properties and purchased from the same respondent eight units of heavy
equipment and vehicles. Petitioner failed to pay rentals for the wet market
property for May, June, and July 1992. Respondent demanded for the payment
of the due rent with advise that if payment is not received within fifteen days
the lease contract will be cancelled. Petitioner tried to pay on a daily basis
respondent refused to accept the same. Petitioner then filed an action for
injunction and damages seeking to enjoin respondent from disturbing his
possession of the leased property. Respondent, on the other hand, filed an
ejectment case against the petitioner. MTC ruled in favor of the respondent and
ordered the petitioner to vacate the prmeises. RTC which subsequently
affirmed the MTC decision en toto.

ISSUE

Whether the petitioner was truly in arrears in the payment of the rentals
on the subject property at the time of the filing of the complaint for ejectment

HELD

NO. There was no clear assent from the petitioner to the change in the
manner of application of payment. The silence of the petitioner with regard the
request of the respondent with regard the application of the rental did not
mean that he consented thereto. Assuming further that petitioner did not
choose the obligation to be first satisfied, giving the respondent the right to
apply the payments to the other obligations of the petitioner, Article 1252 of the
Civil Code provides that no payment shall be made to a debt not yet due and
that payment must be first applied to the debt most onerous to the debtor
under Article 1254. The decision of the Court of Appeals was based on a
misapprehension of the facts and the law on the application of payment.
Hence, the ejectment case subject of the instant petition must be dismissed,
without prejudice to the determination and settlement of the money claims of
the parties inter se.

G.R. No. 100290. June 4, 1993.

NORBERTO TIBAJIA, JR. and CARMEN TIBAJIA,
petitioners, vs. THE HONORABLE COURT OF APPEALS
and EDEN TAN, respondents.

PADILLA, J.:

FACTS

Case No. 54863 was a suit for collection of a sum of money filed by Eden
Tan against the Tibajia spouses. A writ of attachment was issued by the trial
court and the Deputy Sheriff filed a return stating that a deposit made by the
Tibajia Spouses had been garnished by him. On 10 March 1988, RTC Branch
151 of Pasig rendered its decision ordering the Tibajia spouses to pay her an
amount in excess of P300,000.00. On appeal, the Court of Appeals modified
the decision by reducing the award of moral and exemplary damages. The
decision having become final, Eden Tan filed the corresponding motion for
execution. On 14 December 1990, the Tibajia spouses delivered to Deputy
Sheriff Eduardo Bolima the total money judgment. Private respondent refused
to accept the payment made by the Tibajia spouses and instead insisted that
the garnished funds deposited with the cashier of the RTC Manila be
withdrawn to satisfy the judgment obligation. Petitioners filed a motion to lift
the writ of execution on the ground that the judgment debt had already been
paid. However, the motion was denied by the trial court on the ground that
payment in cashiers check is not payment in legal tender and that payment
was made by a third party other than the defendant.

ISSUE

Whether payment by means of check is considered payment in legal

tender as required by the Civil Code, Republic Act No. 529, and the Central
Bank Act.

HELD

NO. In the recent cases of Philippine Airlines, Inc. vs. Court of Appeals and
Roman Catholic Bishop of Malolos, Inc. vs. Intermediate Appellate Court, this
Court held that a check, whether a managers check or ordinary check, is not
legal tender, and an offer of a check in payment of a debt is not a valid tender
of payment and may be refused receipt by the obligee or
creditor. The ruling in these two (2) cases merely applies the statutory
provisions which lay down the rule that a check is not legal tender and that a
creditor may validly refuse payment by check, whether it be a managers,
cashiers or personal check. WHEREFORE, the petition is DENIED.

G.R. No. 104726. February 11, 1999.

VICTOR YAM & YEK SUN LENT, doing business under
the name and style of Philippine Printing Works,
petitioners, vs. THE COURT OF APPEALS and MANPHIL
INVESTMENT CORPORATION, respondents.

MENDOZA, J.:

The parties in this case entered into a Loan Agreement with Assumption
of Solidary Liability whereby petitioners were given a loan of P500,000.00 by
private respondent. The contract provided for the payment of 12% annual
interest, 2% monthly penalty, 1 1/2% monthly service charge, and 10%
attorneys fees. The loan was secured by a chattel mortgage on the printing
machinery in petitioners establishment. Petitioners subsequently obtained a
second loan evidenced by two promissory notes. The deed of chattel mortgage
was amended correspondingly. Private respondent was placed under
receivership by the Central Bank and Ricardo Lirio and Cristina Destajo were
appointed as receiver and in-house examiner, respectively. Petitioners made a
partial payment of P50,000.00 on the second loan. They later wrote private
respondent a letter proposing to settle their obligation. Private respondent
replied that it would reduce the penalty charges up to P140,000.00, provided
petitioners can pay their obligation on or before July 30,1986. The private
respondent sent two demand letters to petitioners seeking payment of the
balance of P266,146.88. As petitioners did not respond, private respondent
filed for the foreclosure of the mortgaged machineries. Petitioners claimed that
they had fully paid their obligation to private respondent. Petitioners added
that this fact of full payment is reflected in the voucher accompanying the
Pilipinas Bank check they issued, which bore the notation full payment of
IGLF loan.

ISSUE

Whether petitioners are liable for the payment of the penalties and
service charges on their loan.

HELD

YES. The answer is in the affirmative. Art. 1270, par. 2 of the Civil Code
provides that express condonation must comply with the forms of donation.
Art. 748, par. 3 provides that the donation and acceptance of a movable, the
value of which exceeds P5,000.00, must be made in writing, otherwise the
same shall be void. In this connection, under Art. 417, par. 1, obligations,
actually referring to credits, are considered movable property. In the case at
bar, it is undisputed that the alleged agreement to condone P266,146.88 of the
second IGLF loan was not reduced in writing. Wherefore, the decision of the
Court of Appeals is AFFIRMED.

G.R. No. L-15645. January 31, 1964.

PAZ P. ARRIETA and VITALIADO ARRIETA, plaintiffsappellees,
vs. NATIONAL RICE AND CORN
CORPORATION, defendant-appellant, MANILA
UNDERWRITERS INSURANCE CO., INC., defendantappellee.

REGALA, J.:

FACTS

Paz Arrieta, a rice dealer/importer, participated in a public bidding held

by the National Rice and Corn Corporation (NARIC). Arrieta was the lowest
bidder hence she won the bidding. So a contract was made whereby Arrieta is
to deliver the rice supply and NARIC is to pay for the imported rice by means
of an irrevocable, confirmed and assignable letter of credit in U.S. currency in
favor of the Arrieta and/or supplier in Burma, immediately. Arrieta then
proceeded to contact her supplier in Burma to arranged the sale of the 20k
metric ton of Burmese Rice. Arrieta promised Setkya that he will be paid by
NARIC on August 4, 1952. Arrieta also made a P200,000.00 as advance
payment to Setkya. Meanwhile, NARIC tried to open a letter of credit ion the
amount of $3,614,000.00 with the Philippine National Bank. PNB agreed to
open the letter of credit but only on the condition that NARIC deposits 50% of
the said amount. NARIC failed to do this and the letter of credit was not opened
when the obligation to pay Setkya became due. Because of this, Arrieta lost the
opportunity to profit from the sale as the agreement was eventually forfeited.
Her 5% deposit was likewise forfeited pursuant to Burma laws.

ISSUE

Whether or not Arrieta is entitled to damages.

HELD

Yes. It is clear upon the records that the sole and principal reason for the
cancellation of the allocation contracted by Arrieta in Rangoon, Burma, was
the failure of the letter of credit to be opened with the contemplated period. In
the premises, however, a minor modification must be effected in the dispositio
portion of the decision appealed from insofar as it expresses the amount of
damages in U.S. currency and not in Philippine Peso. Republic Act 529
specifically requires the discharge of obligations only "in any coin or currency
which at the time of payment is legal tender for public and private debts." In
view of that law, therefore, the award should be converted into and expressed in
Philippine Peso. UPON ALL THE FOREGOING, the decision appealed from is
hereby affirmed, with the sole modification that the award should be converted
into the Philippine peso at the rate of exchange prevailing at the time the
obligation was incurred or on July 1, 1952 when the contract was executed.