REHABILITATION FINANCE CORPORATION v.

THE HONORABLE COURT OF APPEALS,

ESTELITO MADRID, AND JESUS ANDUIZA

DECIDED BY: Justice Conception

PETITIONER: Rehabilitation Finance Corporation (formerly Agricultural and Industrial Bank)

RESPONDENTS: Court of Appeals, Estelito Madrid, and Jesus Anduiza

FACTS OF THE CASE:

o Jesus de Anduiza & Quinatana Cano borrowed money from the Agricultural and Industrial Bank
(now RFC), as evidenced by a promissory note dated October 31, 1941. In said note, they
promised to pay the AIB, or order, on or before October 31, 1951, the sum of P13,800.00, with
interest at the rate of 6% p.a.. Said note also recited that payments were to be made in ten equal
annual installments in accordance with the given schedule of amortizations.
o Mortgagors Anduiza and Cano failed to pay the yearly amortizations that fell due on October 31,
1942 and 1943. Learning of this, Estelito Madrid (who temporarily lived in the house of Anduiza)
offered to pay and actually paid on October 30, 1944 the full amount of said indebtedness to
AIB/RFC.
o July 30, 1948: Madrid instituted the present action asking the court to (a) declare as paid the
P16,425.17 Anduiza owed the AIB/RFC; (b) order AIB/RFC to cancel the mortgage and release
the properties; (c) condemn Anduiza to pay Madrid the P16,425.17 with legal interest, etc.
o In answer, AIB/RFC prayed that the complaint be dismissed. The bank argued that in as much as
Madrid’s payment was unauthorized by Anduiza, Madrid’s deposit in the sum of P16,425.17 was
null and void in accordance with EO No. 49, series of 1945. Anduiza, on the other hand, alleged
that when Madrid paid his debt, the same was not yet due and demandable; hence, he may not be
compelled to pay the latter.
o RTC dismissed the complaint. On appeal, the CA reversed and directed AIB/RFC to cancel the
mortgage and Anduiza to pay Madrid the P16,425.17
o AIB/RFC’s Arguments: that payments by Madrid were made against the express will of Anduiza
and over the objection of the Bank, hence not valid; that the obligation in question was not fully
due and demandable at the time of the payments

ISSUES:

1. Whether the debtors were entitled to pay the obligation prior to Oct. 31, 1951
2. Whether the payment by third person was valid

RULING:

1. Whether the debtors were entitled to pay the obligation prior to Oct. 31, 1951
YES. It should be noted that the makers of the promissory note quoted above promised to
pay the obligation evidenced thereby "on or before October 31, 1951." Although the full amount
 of said obligation was not demandable prior to October 31, 1951, in view of the provision of the
note relative to the payment in ten (10) annual installments, it is clear, therefore, that the makers
or debtors were entitled to make a complete settlement of the obligation at any time before said
date.

3. Whether the payment by third person was valid

YES. Article 1158 of the Civil Code of Spain, which was in force in the Philippines at the
time of the payments under consideration and of the institution of the present case provides:
"Payment may be made by any person, whether he has an interest in the performance of the
obligation or not, and whether the payment is known and approved by the debtor or whether he is
unaware of it. One who makes a payment for the account of another may recover from the debtor
the amount of the payment, unless it was made against his express will. In the latter case he can
recover from the debtor only in so far as the payment has been beneficial to him."
Madrid was entitled to pay the obligation of Anduiza irrespective of the latter's will or
that of the Bank, and even over the objection of either or both. Nevertheless, payments in
question were not made against the objection either of Anduiza or of the Bank. Anduiza
impliedly, but clearly, agreed in the validity of the payment when he joined Madrid in appealing
the decision.