EN BANC

[G.R. No. L-8155. October 23, 1956.]

VIOLET MCGUIRE SUMACAD, ET AL., Plaintiffs-Appellees, vs. THE PROVINCE OF SAMAR, ET AL.,
Defendants; THE PHILIPPINE NATIONAL BANK, Defendant-Appellant.

DECISION

PARAS, J.:

In May, 1942, while the province of Samar was still occupied by Japanese military forces, a check was
issued by said province to Paulino M. Santos (then the postmaster of Borongan) for the sum of P25,000,
drawn against the Philippine National Bank Cebu Branch. The payee negotiated the check with James
McGuire, an American citizen and resident of the municipality of Borongan. After the liberation in 1946,
James McGuire presented the check to the municipal treasurer of Borongan for payment, but the latter
(who merely noted it) was not able or did not choose to pay the same. James McGuire wrote letters to
the Bureau of Posts dated May 28 and August 5, 1948, and March 30, 1950 seeking payment of the
check, which were in turn referred by the Director of the Bureau of Posts to the Philippine National Bank
on April 21, 1950. On April 25, 1950, the Philippine National Bank requested the Bureau of Posts to
furnish it with photostatic copies of the check which were duly received by the bank on May 12, 1950. As
of this date the province of Samar still had a deposit of P84,287.47 in the Philippine National Bank. On
May 14, 1950, the latter requested James McGuire to present the check to the provincial treasurer and
the provincial auditor for certification in accordance with the circular issued by the Secretary of Finance
of July 3, 1947. On August 22, 1950, James McGuire again requested the Bureau of Posts to expedite
compliance with the requirement of the Philippine National Bank so as to permit the encashment of the
check. Before the check could be certified by the authorities concerned as being in order and entitled to
priority of payment, the province of Samar, on September 4, 1951, withdraw the amount of P83,504.07,
leaving a balance of only P743.43. In the meantime, James McGuire transferred his rights to the check to
the herein Plaintiffs who, unable to cash it, filed in the Court of First Instance of Samar on July 27, 1953,
the present complaint against the province of Samar and the Philippine National Bank. After trial the
court rendered a decision sentencing the Defendants to pay jointly and severally to the Plaintiffs the sum
of P25,000, plus legal interest from May 1950, P1,000 as attorney’s fees, and the costs. Only the
Philippine National Bank has appealed.

The position of the Appellant bank is that it did not issue the check and was merely called upon to pay
the same upon being presented for encashment if and when funds for the purpose were available; chan
roblesvirtualawlibrarythat it could not have paid said check because it was never presented to it with the
required certification under the circular of the Secretary of Finance of July 3, 1947; chan
roblesvirtualawlibrarythat the relation between the Appellant bank and the province of Samar was that
of debtor and creditor, the debtor being without power to inquire into the obligation of his creditor
unless it had an interest in the same; chan roblesvirtualawlibrarythat there is nothing in the records to
show that the holder of the check ever requested the Appellant bank to withhold the amount of the
check or ever filed, before the exhaustion of the deposit of the province of Samar, any order from the
courts or proper authorities to withhold the amount covered by the check; chan
roblesvirtualawlibrarythat in any event, the Appellant bank cannot be held solidarily liable, the province
of Samar being the drawee of the check and therefore primarily liable to pay the same.

Appellant’s contentions are in the main correct. But in view of the fact that as early as May 12, 1950,
upon its own request, it was furnished with photostatic copies of the check in question; chan
roblesvirtualawlibraryand on May 14, 1950, it went to the trouble of requiring James McGuire to present
the check to the provincial treasurer and provincial auditor for necessary certification, it voluntarily
assumed the obligation of holding so much of the deposit of the province of Samar as would be
sufficient to cover the amount of the check, or before allowing the withdrawal that exhausted said
deposit, of making the necessary inquiry on the matter. In our opinion, an implied acceptance of the
check by the Appellant bank was thereby created. The request by the Appellant bank from the Bureau of
Posts for photostatic copies of the check and the subsequent requirement by it for its presentation by
James McGuire to the provincial treasurer and the provincial auditor for certification, would be an empty
gesture if the Appellant did not thereby mean to assume the obligation of paying the check and holding
sufficient deposit of the drawer for the purpose. Even so, Appellant’s resulting obligation is merely
subsidiary, the province of Samar being primarily liable to pay the check.

It being understood that the obligation of the Appellant is merely subsidiary, the appealed decision is
hereby affirmed, without costs in this instance. SO ORDERED.

Bautista Angelo, Labrador, Reyes, J. B. L., Endencia and Felix, JJ., concur.
Separate Opinions

PADILLA, J., dissenting:chanroblesvirtuallawlibrary

Under the facts of the case I do not believe the Appellant bank is even subsidiarily liable. To hold the
bank liable the original check must have been presented to it for payment and the bank should have
refused to honor or cash it. The fact that it requested the Bureau of Posts to furnish it with photostatic
copies of the check shows that the original check had not been presented to the drawee (the bank) for
payment. The request by the bank for photostatic copies of the check did not, at the time of the request,
create any obligation on its part to pay the amount of the check. The suggestion by the bank to James
McGuire to secure a certification of the check by the provincial treasurer and auditor, in accordance with
a circular of the Department of Finance dated 3 July 1947, also did not create an obligation on its part to
pay the amount of the check. The subsequent withdrawal by the Province of Samar of its deposit,
thereby leaving a small balance insufficient to pay the check referred to if and when duly presented for
payment, could not be prevented by the bank and if it had refused to allow the withdrawal the bank
might be held responsible for damages for refusing to allow it. The only party liable for the payment of
the check is the Province of Samar, the drawer. The Philippine National Bank, the drawee, should be held
free from any liability, primarily or subsidiarily. The judgment appealed from should be modified by
absolving the Appellant from any liability.
DIVISION

[ GR No. L-41764, Dec 19, 1980 ]

NEW PACIFIC TIMBER v. ALBERTO V. SENERIS +

DECISION

189 Phil. 516

CONCEPCION, JR., J.:

A petition for certiorari with preliminary injunction to annul and/or modify the order of the Court of First
Instance of Zamboanga City (Branch II) dated August 28, 1975 denying petitioner's Ex-Parte Motion for
Issuance Of Certificate Of Satisfaction Of Judgment.

Herein petitioner is the defendant in a complaint for collection of a sum of money filed by the private
respondent.[1] On July 19, 1974, a compromise judgment was rendered by the respondent Judge in
accordance with an amicable settlement entered into by the parties the terms and conditions of which,
are as follows:

"(1)

That defendant will pay to the plaintiff the amount of Fifty Four Thousand Five Hundred Pesos
(P54,500.00) at 6% interest per annum to be reckoned from August 25, 1972;

"(2)

That defendant will pay to the plaintiff the amount of Six Thousand Pesos (P6,000.00) as attorney's fees
for which P5,000.00 had been acknowledged received by the plaintiff under Consolidated Bank and Trust
Corporation Check No. 16-135022 amounting to P5,000.00 leaving a balance of One Thousand Pesos
(P1,000.00);

"(3)
That the entire amount of P54,500.00 plus interest, plus the balance of P1,000.00 for attorney's fees will
be paid by defendant to the plaintiff within five months from today, July 19, 1974; and

"(4)

Failure on the part of the defendant to comply with any of the above-conditions, a writ of execution may
be issued by this Court for the satisfaction of the obligation."[2]

For failure of the petitioner to comply with his judgment obligation, the respondent Judge, upon motion
of the private respondent, issued an order for the issuance of a writ of execution on December 21, 1974.
Accordingly, a writ of execution was issued for the amount of P63,130.00 pursuant to which, the Ex-
Officio Sheriff levied upon the following personal properties of the petitioner, to wit:

(1) Unit American Lathe 24"

(1) Unit American Lathe 18" Cracker Wheeler

(1) Unit Rockford Shaper 24"

and set the auction sale thereof on January 15, 1975. However, prior to January 15, 1975, petitioner
deposited with the Clerk of Court, Court of First Instance, Zamboanga City, in his capacity as Ex-Officio
Sheriff of Zamboanga City, the sum of P63,130.00 for the payment of the judgment obligation, consisting
of the following:

P50,000.00 in Cashier's Check No. S-314361 dated January 3, 1975 of the Equitable Banking Corporation;
and

P13,130.00 in cash.[3]

In a letter dated January 14, 1975, to the Ex-Officio Sheriff,[4] private respondent through counsel,
refused to accept the check as well as the cash deposit. In the same letter, private respondent requested
the scheduled auction sale on January 15, 1975 to proceed if the petitioner cannot produce the cash.
However, the scheduled auction sale at 10:00 a.m. on January 15, 1975 was postponed to 3:00 o'clock
p.m. of the same day due to further attempts to settle the case. Again, the scheduled auction sale that
afternoon did not push through because of a last ditch attempt to convince the private respondent to
accept the check. The auction sale was then postponed on the following day, January 16, 1975 at 10:00
o'clock a.m.[5]At about 9:15 a.m., on January 16, 1975, a certain Mr. Tañedo representing the petitioner
appeared in the office of the Ex-Officio Sheriff and the latter reminded Mr. Tañedo that the auction sale
would proceed at 10:00 o'clock. At 10:00 a.m., Mr. Tañedo and Mr. Librado, both representing the
petitioner requested the Ex-Officio Sheriff to give them fifteen minutes within which to contact their
lawyer which request was granted. After Mr. Tañedo and Mr. Librado failed to return, counsel for private
respondent insisted that the sale must proceed and the Ex-Officio Sheriff proceeded with the auction
sale.[6] In the course of the proceedings, Deputy Sheriff Castro sold the levied properties item by item to
the private respondent as the highest bidder in the amount of P50,000.00. As a result thereof, the Ex-
Officio Sheriff declared a deficiency of P13,130.00.[7] Thereafter, on January 16, 1975, the Ex-Officio
Sheriff issued a "Sheriff's Certificate of Sale" in favor of the private respondent, Ricardo Tong, married to
Pascuala Tong for the total amount of P50,000.00 only.[8] Subsequently, on January 17, 1975, petitioner
filed an ex-parte motion for issuance of certificate of satisfaction of judgment. This motion was denied
by the respondent Judge in his order dated August 28, 1975. In view thereof, petitioner now questions
said order by way of the present petition alleging in the main that said respondent Judge capriciously
and whimsically abused his discretion in not granting the motion for issuance of certificate of satisfaction
of judgment for the following reasons: (1) that there was already a full satisfaction of the judgment
before the auction sale was conducted with the deposit made to the Ex-Officio Sheriff in the amount of
P63,000.00 consisting of P50,000.00 in Cashier's Check and P13,130.00 in cash; and (2) that the auction
sale was invalid for lack of proper notice to the petitioner and its counsel when the Ex-Officio Sheriff
postponed the sale from June 15, 1975 to January 16, 1976 contrary to Section 24, Rule 39 of the Rules
of Court. On November 10, 1975, the Court issued a temporary restraining order enjoining the
respondent Ex-Officio Sheriff from delivering the personal properties subject of the petition to Ricardo A.
Tong in view of the issuance of the "Sheriff Certificate of Sale."

We find the petition to be impressed with merit.

The main issue to be resolved in this instance is as to whether or not the private respondent can validly
refuse acceptance of the payment of the judgment obligation made by the petitioner consisting of
P50,000.00 in Cashier's Check and P13,130.00 in cash which it deposited with the Ex-Officio Sheriff
before the date of the scheduled auction sale. In upholding private respondent's claim that he has the
right to refuse payment by means of a check, the respondent Judge cited the following:

Section 63 of the Central Bank Act:

"Sec. 63. Legal Character. - Checks representing deposit money do not have legal tender power and their
acceptance in payment of debts, both public and private, is at the option of the creditor, Provided,
however, that a check which has been cleared and credited to the account of the creditor shall be
equivalent to a delivery to the creditor in cash in an amount equal to the amount credited to his
account."

Article 1249 of the New Civil Code:

"Art. 1249. - The payment of debts in money shall be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the currency which is legal tender in the Philippines.

"The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents
shall produce the effect of payment only when they have been cashed, or when through the fault of the
creditor they have been impaired.

"In the meantime, the action derived from the original obligation shall be held in abeyance."

Likewise, the respondent Judge sustained the contention of the private respondent that he has the right
to refuse payment of the amount of P13,130.00 in cash because the said amount is less than the
judgment obligation, citing the following Article of the New Civil Code:

"Art. 1248. Unless there is an express stipulation to that effect, the creditor cannot be compelled
partially to receive the presentations in which the obligation consists. Neither may the debtor be
required to make partial payment.

"However, when the debt is in part liquidated and in part unliquidated, the creditor may demand and
the debtor may effect the payment of the former without waiting for the liquidation of the latter."

It is to be emphasized in this connection that the check deposited by the petitioner in the amount of
P50,000.00 is not an ordinary check but a Cashier's Check of the Equitable Banking Corporation, a bank
of good standing and reputation. As testified to by the Ex-Officio Sheriff with whom it has been
deposited, it is a certified crossed check.[9] It is a well-known and accepted practice in the business
sector that a Cashier's Check is deemed as cash. Moreover, since the said check had been certified by
the drawee bank, by the certification, the funds represented by the check are transferred from the credit
of the maker to that of the payee or holder, and for all intents and purposes, the latter becomes the
depositor of the drawee bank, with rights and duties of one in such situation.[10] Where a check is
certified by the bank on which it is drawn, the certification is equivalent to acceptance.[11] Said
certification "implies that the check is drawn upon sufficient funds in the hands of the drawee, that they
have been set apart for its satisfaction, and that they shall be so applied whenever the check is
presented for payment. It is an understanding that the check is good then, and shall continue good, and
this agreement is as binding on the bank as its notes in circulation, a certificate of deposit payable to the
order of the depositor, or any other obligation it can assume. The object of certifying a check, as regards
both parties, is to enable the holder to use it as money."[12] When the holder procures the check to be
certified, "the check operates as an assignment of a part of the funds to the creditors".[13] Hence, the
exception to the rule enunciated under Section 63 of the Central Bank Act to the effect "that a check
which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to
the creditor in cash in an amount equal to the amount credited to his account" shall apply in this case.
Considering that the whole amount deposited by the petitioner consisting of Cashier's Check of
P50,000.00 and P13,130.00 in cash covers the judgment obligation of P63,000.00 as mentioned in the
writ of execution, then, We see no valid reason for the private respondent to have refused acceptance of
the payment of the obligation in his favor. The auction sale, therefore, was uncalled for. Furthermore, it
appears that on January 17, 1975, the Cashier's Check was even withdrawn by the petitioner and
replaced with cash in the corresponding amount of P50,000.00 on January 27, 1975 pursuant to an
agreement entered into by the parties at the instance of the respondent Judge. However, the private
respondent still refused to receive the same. Obviously, the private respondent is more interested in the
levied properties than in the mere satisfaction of the judgment obligation. Thus, petitioner's motion for
the issuance of a certificate of satisfaction of judgment is clearly meritorious and the respondent Judge
gravely abused his discretion in not granting the same under the circumstances.

In view of the conclusion reached in this instance, We find no more need to discuss the other ground
relied upon in the petition.

It is also contended by the private respondent that appeal and not a special civil action for certiorari is
the proper remedy in this case, and that since the period to appeal from the decision of the respondent
Judge has already expired, then, the present petition has been filed out of time. The contention is
untenable. The decision of the respondent Judge in Civil Case No. 250 (166) has long become final and
executory and so, the same is not being questioned herein. The subject of the petition at bar as having
been issued in grave abuse of discretion is the order dated August 28, 1975 of the respondent Judge
which was merely issued in execution of the said decision. Thus, even granting that appeal is open to
the petitioner, the same is not an adequate and speedy remedy for the respondent Judge had already
issued a writ of execution.[14]

WHEREFORE, in view of all the foregoing, judgment is hereby rendered:

Declaring as null and void the order of the respondent Judge dated August 28, 1975;

Declaring as null and void the auction sale conducted on January 16, 1975 and the certificate of sale
issued pursuant thereto;

Ordering the private respondent to accept the sum of P63,130.00 under deposit as payment of the
judgment obligation in his favor;
Ordering the respondent Judge and respondent Ex-Officio Sheriff to release the levied properties to the
herein petitioner.

The temporary restraining order issued is hereby made permanent.

Costs against the private respondent.

SO ORDERED.

Barredo, (Chairman), Aquino, Abad Santos, and De Castro, JJ., concur.

epublic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. L-2886 August 22, 1952

GREGORIO ARANETA, INC., plaintiff-appellant,

vs.

PAZ TUASON DE PATERNO and JOSE VIDAL, defendants-appellants.

Araneta and Araneta for appellant.

Ramirez and Ortigas for defendants-appellants.

Perkins, Ponce Enrile and Contreras And La O and Feria for appellee.

TUASON, J.:

This is a three-cornered contest between the purchasers, the seller, and the mortgagee of certain
portions (approximately 40,703 square meters) of a big block of residential land in the district of Santa
Mesa, Manila. The plaintiff, which is the purchaser, and the mortgagee elevated this appeal. Though not
an appellant, the seller and mortgagor has made assignments of error in her brief, some to strengthen
the judgment and others for the purpose of new trial.

The case is extremely complicated and multiple issues were raised.

The salient facts in so far as they are not controverted are these. Paz Tuason de Paterno is the registered
owner of the aforesaid land, which was subdivided into city lots. Most of these lots were occupied by
lessees who had contracts of lease which were to expire on December 31,1952, and carried a stipulation
to the effect that in the event the owner and lessor should decide to sell the property the lessees were
to be given priority over other buyers if they should desire to buy their leaseholds, all things being equal.
Smaller lots were occupied by tenants without formal contract.

In 1940 and 1941 Paz Tuason obtained from Jose Vidal several loans totalling P90,098 and constituted a
first mortgage on the aforesaid property to secure the debt. In January and April, 1943, she obtained
additional loans of P30,000 and P20,000 upon the same security. On each of the last-mentioned
occasions the previous contract of mortgage was renewed and the amounts received were consolidated.
In the first novated contract the time of payment was fixed at two years and in the second and last at
four years. New conditions not relevant here were also incorporated into the new contracts.

There was, besides, a separate written agreement entitled "Penalidad del Documento de Novacion de
Esta Fecha" which, unlike the principal contracts, was not registered. The tenor of this separate
agreement, all copies, of which were alleged to have been destroyed or lost, was in dispute and became
the subject of conflicting evidence. The lower court did not make categorical findings on this point,
however, and it will be our task to do so at the appropriate place in this decision.

In 1943 Paz Tuason decided to sell the entire property for the net amount of P400,000 and entered into
negotiations with Gregorio Araneta, Inc. for this purpose. The result of the negotiations was the
execution on October 19, 1943, of a contract called "Promesa de Compra y Venta" and identified as
Exhibit "1." This contract provided that subject to the preferred right of the lessees and that of Jose Vidal
as mortgagee, Paz Tuason would sell to Gregorio Araneta, Inc. and the latter would buy for the said
amount of P400,000 the entire estate under these terms.

El precio sera pagado como sigue: un 40 por ciento juntamente con la carta de aceptacion del
arrendatario, un 20 por ciento delprecio al otorgarse la escritura de compromiso de venta, y el
remanente 40 por ciento al otorgarse la escritura de venta definitiva, la cual sera otorgada despues de
que se habiese canceladola hipoteca a favor de Jose Vidal que pesa sobre dichos lotes. Lacomision del 5
por ciento que corresponde a Jose Araneta serapagada al otorgarse la escritura de compromiso de venta.

Paz Tuason se obliga a entregar mediante un propio las cartasque dirigira a este efecto a los
arrendatarios, de conformidad con el formulario adjunto, que se marca como Apendice A.

Expirado el plazo arriba mencionado, Paz Tuason otorgara las escrituras correspondientes de venta a los
arrendatarios que hayan decidido comprar sus respectivos lotes.

9. Los alquieres correspondientes a este año se prorratearan entre la vendedora y el comprador,

correspondiendo al comprador los alquileres correspondientes a Noviembre y Diciembre de este año y
asimismo sera por cuenta del comprador el amillaramiento correspondiente a dichos meses.

10. Paz Tuason, reconoce haver recibido en este acto de Gregorio Araneta, Inc., la suma de Ciento
Noventa Mil Pesos (P190,000)como adelanto del precio de venta que Gregorio Araneta, Inc., tuviere que
pagar a Paz Tuason.

La cantidad que Paz Tuason recibe en este acto sera aplicadapor ella a saldar su deuda con Jose Vidal, los
amillaramientos, sobre el utilizado por Paz Tuason para otros fines.

11. Una vez determinados los lotes que Paz Tuason podra vendera Gregorio Araneta, Inc., Paz Tuason
otorgara una escritura deventa definitiva sobre dichos lotes a favor de Gregorio Araneta, Inc.

Gregorio Araneta, Inc., pagara el precio de venta como sigue: 90 por ciento del mismo al otorgarse la
escritura de venta definitiva descontandose de la cantidad que entonces se tenga que pagar de adelanto
de P190,000 que se entrega en virtud de esta escritura. El 10 por ciento remanente se pagara a Paz
Tuazon, una vez se haya cancelado la hipoteca que pesa actualmente sobre el terreno.

No obstante la dispuesto en el parrafo 8, cualquier arrendatario que decida comprar el lote que occupa
con contrato de arrendamiento podra optar por pedir el otorgamiento inmediato a su favor el acto de la
escritura de venta definitiva pagando en el acto el 50 por ciento del precio (ademas del 40 por ciento
que debio incluir en su carta de aceptacion) y el remanente de 10 por ciento inmediatemente despues
de cancelarse la hipoteca que pesa sobre el terreno.

12. Si la mencionada cantidad de P190,000 excediere del 90 por ciento de la cantidad que Gregorio
Araneta, Inc., tuviere que vender a dicho comprador, el saldo sera pagado inmediatamente por Paz
Tuazon, tomandolo de las cantidades que reciba de los arrendatarios como precio de venta.

In furtherance of this promise to buy and sell, letters were sent the lessees giving them until August 31,
1943, an option to buy the lots they occupied at the price and terms stated in said letters. Most of the
tenants who held contracts of lease took advantage of the opportunity thus extended and after making
the stipulated payments were giving their deeds of conveyance. These sales, as far as the record would
show, have been respected by the seller.

With the elimination of the lots sold or be sold to the tenants there remained unencumbered, except for
the mortgage to Jose Vidal, Lots 1, 8-16 and 18 which have an aggregate area of 14,810.20 square
meters; and on December 2, 1943, Paz Tuason and Gregorio Araneta, Inc. executed with regard to these
lots an absolute deed of sale, the terms of which, except in two respects, were similar to those of the
sale to the lessees. This deed, copy of which is attached to the plaintiff's complaint as Exhibit A,
provided, among other things, as follows:

The aforesaid lots are being sold by he Vendor to the Vendee separately at the prices mentioned in
paragraph (6) of the aforesaid contract entitled "Promesa de Compra y Venta," making a total sum of
One Hundred Thirty-Nine Thousand Eighty-three pesos and Thirty-two centavos (P139,083.32), ninety
(90%) per cent of which amount, i.e., the sum of One Hundred Twenty-five Thousand One Hundred
Seventy-four Pesos and Ninety-nine centavos (P125,174.99), the Vendor acknowledges to have received
by virtue of the advance of One Hundred Ninety Thousand (P190,000) Pesos made by the Vendee to the
Vendor upon the execution of the aforesaid contract entitled "Promesa de Compra y Venta". The balance
of Sixty-Four Thousand Eight Hundred Twenty-five Pesos and One centavo (P64,825.01) between the
sum of P125,174.99, has been returned by the Vendor to the Vendee, which amount the Vendee
acknowledges to have received by these presents;

The aforesaid sum of P190,000 was delivered by the Vendee to the Vendor by virtue of four checks
issued by the Vendee against the Bank of the Philippine Islands, as follows:

No. C-286445 in favor of Paz Tuason de Paterno

P13,476.62
No. C-286444 in favor of the City Treasurer, Manila

3,373.38

No. C-286443 in favor of Jose Vidal

30,000.00

No. C-286442 in favor of Jose Vidal

143,150.00

Total

P190,000.00

The return of the sum of P64,825.01 was made by the Vendor to the Vendee in a liquidation which reads
as follows:

Hemos recibido de Da. Paz Tuason de Paterno la cantidad de Sesenta y Cuatro mil Ochocientos
Veinticinco Pesos y un centimo (P64,825.01) enconcepto de devolucion que nos hace del excesode lo
pagadoa ella de

P190,000.00

Menos el 90% de P139,083.32, importe de los lotes que vamos a comprar

125,174.99

Exceso

64,825.01

Cheque BIF No. D-442988 de Simplicio del Rosario

21,984.20

Cheque PNB No. 177863-K de L.E. Dumas

21,688.60

Cheque PNB No. 267682-K de Alfonso Sycip

20,000.00

Cheque PNB No. 83940 de Josefina de Pabalan

4,847.96

Billetes recibidos de Alfonso Sycip

42.96
P68,563.21

Menos las comisiones de 5 % recibidas de Josefina de Pabalan

P538.60

L.E. Dumas

1,084.43

Angela S. Tuason

1,621.94

3,244.97

P65,318.24

Menos cheque BIF No. C-288642 a favor de Da. Paz Tuason de Paterno que le entregamos como exceso

493.23

P64,825.01
Manila, Noviembre 2, 1943

GREGORIO ARANETA, INCORPORATED

Por;

(Fdo.) "JOSE ARANETA

Presidente

Recibido cheque No. C-288642 BIF-P493.23

Por:

(Fdo.) "M.J. GONZALEZ

In view of the foregoing liquidation, the vendor acknowledges fully and unconditionally, having received
the sum of P125,174.99 of the present legal currency and hereby expressly declares that she will not
hold the Vendee responsible for any loss that she might suffer due to the fact that two of the checks paid
to her by the Vendee were issued in favor of Jose Vidal and the latter has, up to the present time, not yet
collected the same.

The ten (10%) per cent balance of the purchase price not yet paid in the total sum of P13,908.33 will be
paid by the Vendee to the Vendor when the existing mortgage over the property sold by the Vendor to
the Vendee is duly cancelled in the office of the Register of Deeds, or sooner at the option of the
Vendee.

This Deed of Sale is executed by the Vendor free from all liens and encumbrances, with the only
exception of the existing lease contracts on parcels Nos. 1, 10, 11, and 16, which lease contracts will
expire on December 31, 1953, with the understanding, however, that this sale is being executed free
from any option or right on the part of the lessees to purchase the lots respectively leased by them.

It is therefore clearly understood that the Vendor will pay the existing mortgage on her property in favor
of Jose Vidal.

The liquidation of the amounts respectively due between the Vendor and the Vendee in connection with
the rents and real estate taxes as stipulated in paragraph (9) of the contract entitled "Promesa de
Compara y Venta" will be adjusted between the parties in a separate document.

Should any of the aforesaid lessees of lots Nos. 2, 3, 4, 5, 6, 7, 9 and 17 fail to carry out their respective
obligations under the option to purchase exercised by them so that the rights of the lessee to purchase
the respective property leased by him is cancelled, the Vendor shall be bound to sell the same to the
herein Vendee, Gregorio Araneta, Incorporated, in conformity with the terms and conditions provided in
the aforesaid contract of "Promesa de Compra y Venta";

The documentary stamps to be affixed to this deed will be for the account of the Vendor while the
expenses for the registration of this document will be for the account of the Vendee.

The remaining area of the property of the Vendor subject to Transfer Certificates of Title Nos. 60471 and
60472, are lots Nos. 2, 3, 4, 5, 6, 7, 9, and 17, all of the Consolidation of lots Nos. 20 and 117 of plan II-
4755, G.L.R.O. Record No. 7680.

Before the execution of the above deed, that is, on October 20, 1943, the day immediately following the
signing of the agreement to buy and sell, Paz Tuason had offered to Vidal the check for P143,150
mentioned in Exhibit A, in full settlement of her mortgage obligation, but the mortgagee had refused to
receive that check or to cancel the mortgage, contending that by the separate agreement before
mentioned payment of the mortgage was not to be effected totally or partially before the end of four
years from April, 1943.

Because of this refusal of Vidal's Paz Tuason, through Atty. Alfonso Ponce Enrile, commenced an action
against the mortgagee in October or the early paret of November 1943. the record of that case was
destroyed and no copy of the complaint was presented in evidence. Attached to the complaint or
deposited with the clerk of court by Attorney Ponce Enrile simultaneously with the docketing of the suit
were the check for P143,150 previously turned down by Vidal, another certified check for P12,932.61,
also drawn by Gregorio Araneta, Inc., in favor of Vidal, and one ordinary check for P30,000 issued by Paz
Tuazon. These three checks were supposed to cover the whole indebtedness to Vidal including the
principal and interest up to that time and the penalty provided in the separate agreement.

But the action against Vidal never came on for trial and the record and the checks were destroyed during
the war operations in January or February, 1945; and neither was the case reconstituted afterward. This
failure of the suit for the cancellation of Vidal's mortgage, coupled with the destruction of the checks
tendered to the mortgagee, the nullification of the bank deposit on which those checks had been drawn,
and the tremendous rise of real estate value following the termination of the war, gave occasion to the
breaking off the schemes outlined in Exhibits 1 and A; Paz Tuason after liberation repudiated them for
the reasons to be hereafter set forth. The instant action was the offshoot, begun by Gregorio Araneta,
Inc. to compel Paz Tuason to deliver to the plaintiff a clear title to the lots described in Exhibit A free
from all liens and encumbrances, and a deed of cancellation of the mortgage to Vidal. Vidal came into
the case in virtue of a summon issued by order of the court, and filed a cross-claim against Paz Tuazon to
foreclose his mortgage.

It should be stated that the outset that all the parties are in agreement that Vidal's loans are still
outstanding. Paz Tuason's counsel concede that the tender of payment to Vidal was legally defective and
did not operate to discharge the mortgage, while the plaintiff is apparently uninterested in this feature of
the case considering the matter one largely between the mortgagor and the mortgagee, although to a
certain degree this notion is incorrect. At any rate, the points of discord between Paz Tuason and Vidal
concern only the accrual of interest on the loans, Vidal's claim to attorney's fees, and the application of
the debt moratorium law which the debtor now invokes. These matters will be taken up in the discussion
of the controversy between Paz Tuason and Jose Vidal.

The principal bone of contention between Gregorio Araneta, Inc., and Paz Tuason was the validity of the
deed of sale of Exhibit A on which the suit was predicated. The lower court's judgment was that this
contract was invalid and was so declared, "sin per juicio de que la demandada Paz Tuason de Paterno
pague a la entidad demandante todas las cantidades que habia estado recibiendo de lareferida entidad
demandante, en concepto de pago de losterrenos, en moneda corriente, segun el cambio que debiaregir
al tiempo de otorgarse la escritura segun la escalade "Ballentine", descontando, sin embargo, de dichas
cantidades cualesquiera que la demandante haya estadorecibiendo como alquileres de los terrenos
supuestamentevendidos a ella." The court based its opinion that Exhibit 1. His Honor, Judge Sotero
Rodas, agreedwith the defendant that under paragraph 8 of Exhibit 1 there was to be no absolute sale to
Gregorio Araneta, Inc., unless Vidal's mortgage was cancelled.

In our opinion the trial court was in error in its interpretation of Exhibit 1. The contemplated execution of
an absolute deed of sale was not contingent on the cancellation of Vidal's mortgage. What Exhibit 1 did
provide (eleventh paragraph) was that such deed of absolute sale should be executed "una vez
determinado los lotes que Paz Tuason podra vender a Gregorio Araneta, Inc." The lots which could be
sold to Gregorio Araneta, Inc. were definitely known by October 31, 1943, which was the expiry of the
tenants' option to buy, and the lots included in the absolute of which the occupants' option to buy
lapsed unconditionally. Such deed as Exhibit A was then in a condition to be made.

Vidal's mortgage was not an obstacle to the sale. An amount had been set aside to take care of it, and
the parties, it would appear, were confident that the suit against the mortgagee would succeed. The only
doubt in their minds was in the amount to which Vidal was entitled. The failure of the court to try and
decide that the case was not foreseen either.

This refutes, were think, the charge that there was undue rush on the part of the plaintiff to push across
the sale. The fact that simultaneously with Exhibit A similar deeds were given the lessees who had
elected to buy their leaseholds, which comprise an area about twice as big as the lots described in
Exhibit A, and the further fact that the sale to the lessees have never been questioned and the proceeds
thereof have been received by the defendant, should add to dispel any suspicion of bad faith on the part
of the plaintiff. If anyone was in a hurry it could have been the defendant. The clear preponderance of
the evidence that Paz Tuason was pressed for cash and that the payment of the mortgage was only an
incident, or a necessary means to effectuate the sale. Otherwise she could have settled her mortgage
obligation merely by selling a portion of her estate, say, some of the lots leased to tenants who, except
two who were in concentration camps, were only too anxious to buy and own the lots on which their
houses were built.

Whatever the terms of Exhibit 1, the plaintiff and the defendant were at perfect liberty to make a new
agreement different from or even contrary to the provisions of that document. The validity of the
subsequent sale must of necessity depend on what it said and not on the provisions of the promise to
buy and sell.
It is as possible proof or fraud that the discrepancies between the two documents bear some attention.
It was alleged that Attorneys Salvador Araneta and J. Antonio Araneta who the defendant said had been
her attorneys and had drawn Exhibit A, and not informed or had misinformed her about its contents;
that being English, she had not read the deed of sale; that if she had not trusted the said attorneys she
would not have been so foolish as to affix her signature to a contract so one-sided.

The evidence does not support the defendant. Except in two particulars, Exhibit A was a substantial
compliance with Exhibit 1 in furtherance of which Exhibit A was made. One departure was the proviso
that 10 per cent of the purchase price should be paid only after Vidal's mortgage should have been
cancelled. This provisional deduction was not onerous or unusual. It was not onerous or unusual that the
vendee should withhold a relatively small portion of the purchase price before all the impediments to
the final consummation of the sale had been removed. The tenants who had bought their lots had been
granted the privilege to deduct as much as 40 per cent of the stipulated price pending discharge of the
mortgage, although his percentage was later reduced to 10 as in the case of Gregorio Araneta, Inc. It has
also been that the validity of the sales to the tenants has not been contested; that these sales embraced
in the aggregate 24,245.40 square meters for P260,916.68 as compared to 14,811.20 square meters sold
to Gregorio Araneta, Inc. for P139,083.32; that the seller has already received from the tenant
purchasers 90 per cent of the purchase money.

There is good reason to believe that had Gregorio Araneta, Inc. not insisted on charging to the defendant
the loss of the checks deposited with the court, the sale in question would have gone the smooth way of
the sales to the tenants. Thus Dindo Gonzales, defendant's son, declared:

P. Despues de haberse presentado esta demanda, recuerda usted haber tenido conversacion con
Salvador Araneta acerca de este asunto?

R. Si Señor.

P. Usted fue quien se acerco al señor Salvador Araneta?

R. Si, señor.

P. Quiero usted decir al Honorable Juzgado que era lo que usted dijo al señor Salvador Araneta?

R. No creo que es propio que yo diga, por tratarse de mi madre.

P. En otras palabras, usted quiere decir que no quiere usted que se vuelva decir o repetir ante este
Honorable Juzgado lo que usted dijo al señor Salvador Araneta, pues, se trata de su madre?

R. No, señor.

P. Puede usted decirnos que quiso usted decir cuando que no quisiera decir?

R. Voy a decir lo que Salvador Araneta, yo me acerque a Don Salvador Araneta, y yo le dije que es una
verguenza de que nosotros, en la familia tengamos que ir a la Corte por este, y tambien dije que mi
madre de por si quiere vender el terreno a ellos, porque mi madre quiere pagar al señor Vidal, y que es
una verguenza, siendo entre parientes, tener que venir por este; era lo que yo dije al señor Salvador
Araneta.

xxx xxx xxx

P. No recuerda usted tambien dijo al señor Salvador Araneta que usted no comulgaba con ella (su madre)
en este asunto?

R. Si, Señor; porque yo creia que mi madre solamente queria anular esta venta, pero cuando me dijo el
señor La O y sus abogados que, encima de quitar la propiedad, todavia tendria ella que pagar al señor
Vidal, este no veso claro.

xxx xxx xxx

P. Ahora bien; de tal suerte que, tal como nosotros desperendemos de su testimonio, tanto, usted como,
su madre, esteban muy conformes en la venta, es asi?

R. Si, señor.

The other stipulation embodied in Exhibit A which had no counterpart in Exhibit 1 was that by which
Gregorio Araneta Inc. would hold Paz Tuason liable for the lost checks and which, as stated, appeared to
be at the root of the whole trouble between the plaintiff and the defendant.

The stipulation reads:

In view of the foregoing liquidation, the Vendor acknowledges fully and unconditionally, having received
the sum of P125,174.99 of the present legal currency and hereby expressly declares that she will not
hold the Vendee responsible for any loss that she might suffer due to the fact that two of the checks paid
to her by the Vendee were used in favor of Jose Vidal and the latter has, up to the present time, not yet
collected the same.

It was argued that no person in his or her right senses would knowingly have agreed to a covenant so
iniquitous and unreasonable.

In the light of all the circumstances, it is difficult to believe that the defendant was deceived into signing
Exhibit A, in spite of the provision of which she and her son complaint. Intelligent and well educated who
had been managing her affairs, she had an able attorney who was assisting her in the suit against Vidal, a
case which was instituted precisely to carry into effect Exhibit A or Exhibit 1, and a son who is leading
citizen and a business-man and knew the English language very well if she did not. Dindo Gonzalez took
active part in, if he was not the initiator of the negotiations that led to the execution of Exhibit 1, of
which he was an attesting witness besides. If the defendant signed Exhibit A without being apprised of
its import, it can hardly be conceived that she did not have her attorney or her son read it to her
afterward. The transaction involved the alienation of property then already worth a fortune and now
assessed by the defendant at several times higher. Doubts in defendant's veracity are enhanced by the
fact that she denied or at least pretended in her answer to be ignorant of the existence of Exhibit A, and
that only after she was confronted with the signed copy of the document on the witness did she spring
up the defense of fraud. It would look as if she gambled on the chance that no signed copy of the deed
had been saved from the war. She could not have forgotten having signed so important a document even
if she had not understood some of its provisions.

From the unreasonableness and inequity of the aforequoted Exhibit A it is not to be presumed that the
defendant did not understand it. It was highly possible that she did not attach much importance to it,
convinced that Vidal could be forced to accept the checks and not foreseeing the fate that lay in store for
the case against the mortgagee.

Technical objections are made against the deed of sale.

First of these is that Jose Araneta, since deceased, was defendant's agent and at the same time the
president of Gregorio Araneta, Inc.

The trial court found that Jose Araneta was not Paz Tuason's agent or broker. This finding is contrary to
the clear weight of the evidence, although the point would be irrelevant, if the court were right in its
holding that Exhibit A was void on another ground, i.e., it was inconsistent with Exhibit 1.

Without taking into account defendant's Exhibit 7 and 8, which the court rejected and which, in our
opinion, should have been admitted, Exhibit 1 is decisive of the defendant's assertion. In paragraph 8 of
Exhibit 1 Jose Araneta was referred to as defendant's agent or broker "who acts in this transaction" and
who as such was to receive a commission of 5 per cent, although the commission was to be charged to
the purchasers, while in paragraph 13 the defendant promised, in consideration of Jose Araneta's
services rendered to her, to assign to him all her right, title and interest to and in certain lots not
embraced in the sales to Gregorio Araneta, Inc. or the tenants.

However, the trial court hypothetically admitting the existence of the relation of principal and agent
between Paz Tuason and Jose Araneta, pointed out that not Jose Araneta but Gregorio Araneta, Inc. was
the purchaser, and cited the well-known distinction between the corporation and its stockholders. In
other words, the court opined that the sale to Gregorio Araneta, Inc. was not a sale to Jose Araneta the
agent or broker.

The defendant would have the court ignore this distinction and apply to this case the other well-known
principle which is thus stated in 18 C.J.S. 380: "The courts, at law and in equity, will disregard the fiction
of corporate entity apart from the members of the corporation when it is attempted to be used as a
means of accomplishing a fraud or an illegal act.".

It will at once be noted that this principle does not fit in with the facts of the case at bar. Gregorio
Araneta, Inc. had long been organized and engaged in real estate business. The corporate entity was not
used to circumvent the law or perpetrate deception. There is no denying that Gregorio Araneta, Inc.
entered into the contract for itself and for its benefit as a corporation. The contract and the roles of the
parties who participated therein were exactly as they purported to be and were fully revealed to the
seller. There is no pretense, nor is there reason to suppose, that if Paz Tuason had known Jose Araneta to
Gregorio Araneta, Inc's president, which she knew, she would not have gone ahead with the deal. From
her point of view and from the point of view of public interest, it would have made no difference, except
for the brokerage fee, whether Gregorio Araneta, Inc. or Jose Araneta was the purchaser. Under these
circumstances the result of the suggested disregard of a technicality would be, not to stop the
commission of deceit by the purchaser but to pave the way for the evasion of a legitimate and binding
commitment buy the seller. The principle invoked by the defendant is resorted to by the courts as a
measure or protection against deceit and not to open the door to deceit. "The courts," it has been said,
"will not ignore the corporate entity in order to further the perpetration of a fraud." (18 C.J.S. 381.)

The corporate theory aside, and granting for the nonce that Jose Araneta and Gregorio Araneta, Inc.
were identical and that the acts of one where the acts of the other, the relation between the defendant
and Jose Araneta did not fall within the purview of article 1459 of the Spanish Civil Code.1

Agency is defined in article 1709 in broad term, and we have not come across any commentary or
decision dealing directly with the precise meaning of agency as employed in article 1459. But in the
opinion of Manresa(10 Manresa 4th ed. 100), agent in the sense there used is one who accepts
another's representation to perform in his name certain acts of more or less transcendency, while
Scaevola (Vol. 23, p. 403) says that the agent's in capacity to buy his principal's property rests in the fact
that the agent and the principal form one juridicial person. In this connection Scaevola observes that the
fear that greed might get the better of the sentiments of loyalty and disinterestedness which should
animate an administrator or agent, is the reason underlying various classes of incapacity enumerated in
article 1459. And as American courts commenting on similar prohibition at common law put it, the law
does not trust human nature to resist the temptations likely to arise of antogonism between the interest
of the seller and the buyer.

So the ban of paragraph 2 of article 1459 connotes the idea of trust and confidence; and so where the
relationship does not involve considerations of good faith and integrity the prohibition should not and
does not apply. To come under the prohibition, the agent must be in a fiduciary with his principal.

Tested by this standard, Jose Araneta was not an agent within the meaning of article 1459. By Exhibits 7
and 8 he was to be nothing more than a go-between or middleman between the defendant and the
purchaser, bringing them together to make the contract themselves. There was no confidence to be
betrayed. Jose Araneta was not authorize to make a binding contract for the defendant. He was not to
sell and he did not sell the defendant's property. He was to look for a buyer and the owner herself was to
make, and did make, the sale. He was not to fix the price of the sale because the price had been already
fixed in his commission. He was not to make the terms of payment because these, too, were clearly
specified in his commission. In fine, Jose Araneta was left no power or discretion whatsoever, which he
could abuse to his advantage and to the owner's prejudice.

Defendant's other ground for repudiating Exhibit A is that the law firm of Araneta & Araneta who
handled the preparation of that deed and represented by Gregorio Araneta, Inc. were her attorneys also.
On this point the trial court's opinion is likewise against the defendant.
Since attorney Ponce Enrile was the defendant's lawyer in the suit against Vidal, it was not likely that she
employed Atty. Salvador Araneta and J. Antonio Araneta as her attorneys in her dealings with Gregorio
Araneta, Inc., knowing, as she did, their identity with the buyer. If she had needed legal counsels, in this
transaction it seems certain that she would have availed herself of the services of Mr. Ponce Enrile who
was allegedly representing her in another case to pave the way for the sale.

The fact that Attys. Salvador and Araneta and J. Antonio Araneta drew Exhibits 1 and A, undertook to
write the letters to the tenants and the deeds of sale to the latter, and charged the defendant the
corresponding fees for all this work, did not themselves prove that they were the seller's attorneys.
These letters and documents were wrapped up with the contemplated sale in which Gregorio Araneta,
Inc. was interested, and could very well have been written by Attorneys Araneta and Araneta in
furtherance of Gregorio Araneta's own interest. In collecting the fees from the defendant they did what
any other buyer could have appropriately done since all such expenses normally were to be defrayed by
the seller.

Granting that Attorney Araneta and Araneta were attorneys for the defendant, yet they were not
forbidden to buy the property in question. Attorneys are only prohibited from buying their client's
property which is the subject of litigation. (Art. 1459, No. 5, Spanish Civil Code.) The questioned sale was
effected before the subject thereof became involved in the present action. There was already at the time
of the sale a litigation over this property between the defendant and Vidal, but Attys. Salvador Araneta
and J. Antonio Araneta were not her attorneys in that case.

From the pronouncement that Exhibit A is valid, however, it does not follow that the defendant should
be held liable for the loss of the certified checks attached to the complaint against Vidal or deposited
with the court, or of the funds against which they had been issued. The matter of who should bear this
loss does not depend upon the validity of the sale but on the extent and scope of the clause
hereinbefore quoted as applied to the facts of the present case.

The law and the evidence on this branch of the case revealed these facts, of some of which passing
mention has already been made.

The aforesaid checks, one for P143,150 and one for P12,932.61, were issued by Gregorio Araneta, Inc.
and payable to Vidal, and were drawn against the Bank of the Philippines with which Gregorio Araneta,
Inc. had a deposit in the certification stated that they were to be "void if not presented for payment date
of acceptance" office (Bank) within 90 days from date of acceptance."

Under banking laws and practice, by the clarification" the funds represented by the check were
transferred from the credit of the maker to that of the payee or holder, and, for all intents and purposes,
the latter became the depositor of the drawee bank, with rights and duties of one such relation." But the
transfer of the corresponding funds from the credit of the depositor to that of that of the payee had to
be co-extensive with the life of the checks, which in the case was 90 days. If the checks were not
presented for payment within that period they became invalid and the funds were automatically
restored to the credit of the drawer though not as a current deposit but as special deposit. This is the
consensus of the evidence for both parties which does not materially differ on this proposition.
The checks were never collected and the account against which they were drawn was not used or
claimed by Gregorio Araneta, Inc.; and since that account "was opened during the Japanese occupation
and in Japanese currency," the checks "became obsolete as the account subject thereto is considered
null and void in accordance with Executive Order No. 49 of the President of the Philippines", according to
the Bank.

Whether the Bank of the Philippines could lawfully limit the negotiability of certified checks to a period
less than the period provided by the Statute of Limitations does not seem material. The limitation
imposed by the Bank as to time would adversely affect the payee, Jose Vidal, who is not trying to recover
on the instruments but on the contrary rejected them from the outset, insisting that the payment was
premature. As far as Vidal was concerned, it was of no importance whether the certification was or was
not restricted. On the other hand, neither the plaintiff nor the defendant now insists that Vidal should
present, or should have presented, the checks for collection. They in fact agree that the offer of those
checks to Vidal did not, for technical reason, work to wipe out the mortgage.

But as to Gregorio Araneta and Paz Tuason, the conditions specified in the certification and the prevailing
regulations of the Bank were the law of the case. Not only this, but they were aware of and abided by
those regulations and practice, as instanced by the fact that the parties presented testimony to prove
those regulations and practice. And that Gregorio Araneta, Inc. knew that Vidal had not cashed the
checks within 90 days is not, and could not successfully be denied.

In these circumstances, the stipulation in Exhibit A that the defendant or seller "shall not hold the
vendee responsible for any loss of these checks" was unconscionable, void and unenforceable in so far as
the said stipulation would stretch the defendant's liability for this checks beyond 90 days. It was not in
accord with law, equity or good conscience to hold a party responsible for something he or she had no
access to and could not make use of but which was under the absolute control and disposition of the
other party. To make Paz Tuason responsible for those checks after they expired and when they were
absolutely useless would be like holding an obligor to answer for the loss or destruction of something
which the obligee kept in its safe with no power given the obligor to protect it or interfere with the
obligee's possession.

To the extent that the contract Exhibit A would hold the vendor responsible for those checks after they
had lapsed, the said contract was without consideration. The checks having become obsolete, the
benefit in exchange for which the defendant had consented to be responsible for them had vanished.
The sole motivation on her part for the stipulation was the fact that by the checks the mortgage might or
was to be released. After 90 days the defendant stood to gain absolutely nothing by them, which had
become veritable scraps of paper, while the ownership of the deposit had reverted to the plaintiff which
alone could withdraw and make use of it.

What the plaintiff could and should have done if the disputed stipulation was to be kept alive was to
keep the funds accessible for the purpose of paying the mortgage, by writing new checks either to Vidal
or to the defendant, as was done with the check for P30,000, or placing the deposit at the defendant's
disposal. The check for P30,000 intended for the penalty previously had been issued in the name of Vidal
and certified, too, but by mutual agreement it was changed to an ordinary check payable to Paz Tuason.
Although that check was also deposited with the court and lost, its loss undoubtedly was imputable to
the defendant's account, and she did not seem to disown her liability for it.

Let it be remembered that the idea of certifying the lost checks was all the plaintiff's. The plaintiff would
not trust the defendant and studiously so arranged matters that she could not by any possibility put a
finger on the money. For all the practical intents and purposes the plaintiff dealt directly with the
mortgagee and excluded the defendant from meddling in the manner of payment to Vidal. And let it also
be kept in mind that Gregorio Araneta, Inc. was not a mere accommodator in writing these checks. It was
as much interested in the cancellation of the mortgage as Paz Tuason.

Coming down to Vidal's cross-claim Judge Rodas rendered no judgment other than declaring that the
mortgage remained intact and subsisting. The amount to be paid Vidal was not named and the question
whether interest and attorney's fees were due was not passed upon. The motion for reconsideration of
the decision by Vidal's attorney's praying that Paz Tuason be sentenced to pay the creditor P244,917.90
plus interest at the rate of 1 percent monthly from September 10, 1948 and that the mortgaged property
be ordered sold in case of default within 90 days, and another motion by the defendant seeking
specification of the amount she had to pay the mortgagee were summarily denied by Judge Potenciano
Pecson, to whom the motions were submitted, Judge Rodas by that time having been appointed to the
Court of Appeals.

All the facts and evidence on this subject are on the record, however, and we may just as well determine
from these facts and evidence the amount to which the mortgagee is entitled, instead of remanding the
case for new trial, if only to avoid further delay if the disposition of this case.

It is obvious that Vidal had a right to judgment for his credit and to foreclose the mortgage if the credit
was not paid.

There is no dispute as to the amount of the principal and there is agreement that the loans made in
1943, in Japanese war notes, should be computed under the Ballantyne conversion table. As has been
said, where the parties do not see eye-to-eye was in regard to the mortgagee's claim to attorney's fees
and interest from October, 1943, which was reached a considerable amount. It was contended that,
having offered to pay Vidal her debt in that month, the defendant was relieved thereafter from paying
such interest.

It is to be recalled that Paz Tuason deposited with the court three checks which were intended to cover
the principal and interest up to October, 1943, plus the penalty provided in the instrument "Penalidad
del Documento de Novacion de Esta Fecha." The mortgagor maintains that although these checks may
not have constituted a valid payment for the purpose of discharging the debt, yet they did for the
purpose of stopping the running of interest. The defendant draws attention to the following citations:

An offer in writing to pay a particular sum of money or to deliver a written instrument or specific
personal property is, if rejected, equivalent to the actual production and tender of the money,
instrument or property. (Sec. 24, Rule 123.)
It is not accord with either the letter or the spirit of the law to impose upon the person affecting a
redemption of property, in addition to 12 per cent interest per annum up to the time of the offer to
redeem, a further payment of 6 per cent per annum from the date of the officer to redeem. (Fabros vs.
Villa Agustin, 18 Phil., 336.)

A tender by the debtor of the amount of this debt, if made in the proper manner, will suspend the
running of interest on the debt for the time of such tender. (30 Am. Jur., 42.)

In the case of Fabrosa vs. Villa Agustin, supra, a parcel of land had been sold on execution to one Tabliga.
Within the period of redemption Fabros, to whom the land had been mortgaged by the execution
debtor, had offered to redeem the land from the execution creditor and purchaser at public auction. The
trial court ruled that the redemptioner was not obliged to pay the stipulated interest of 12 per cent after
he offered to redeem the property; nevertheless he was sentenced to pay 6 per cent interest from the
date of the offer.

This court on appeal held that "there is no reason for this other (6 per cent) interest, which appears to
be a penalty for delinquency while there was no delinquency." The court cited an earlier decision,
Martinez vs. Campbell, 10 Phil., 626, where this doctrine was laid down: "When the right of redemption
is exercised within the term fixed by section 465 of the Code of Civil Procedure, and an offer is made of
the amount due for the repurchase of the property to which said right refers, it is neither reasonable nor
just that the repurchaser should pay interest on the redemption money after the time when he offered
to repurchase and tendered the money therefor."

In the light of these decisions and law, the next query is; Did the mortgagor have the right under the
contract to pay the mortgage on October 20, 1943? The answer to this question requires an inquiry into
the provision of the "Penalidad del Documento de Novacion de Esta Fecha."

Vidal introduced oral evidence to the effect that he reserved unto himself in that agreement the right "to
accept or refuse the total payment of the loan outstanding . . ., if at the time of such offer of payment he
considered it advantageous to his interest." This was gist of Vidal's testimony and that of Lucio M.
Tiangco, one of Vidal's former attorneys who, as notary public, had authenticated the document. Vidal's
above testimony was ordered stricken out as hearsay, for Vidal was blind and, according to him, only had
his other lawyer read the document to him.

We are of the opinion that the court erred in excluding Vidal's statement. There is no reason to suspect
that Vidal's attorney did not correctly read the paper to him. The reading was a contemporaneous
incident of the writing and the circumstances under which the document was read precluded every
possibility of design, premeditation, or fabrication.

Nevertheless, Vidal's testimony, like the testimony of Lucio M. Tiangco's, was based on recollection
which, with the lapse of time, was for from infallible. By contrast, the testimony of Attorneys Ponce
Enrile, Salvador Araneta, and J. Antonio Araneta does not suffer from such weakness and is entitled to
full faith and credit. The document was the subject of a close and concerted study on their part with the
object of finding the rights and obligations of the mortgagee and the mortgagor in the premises and
mapping out the course to be pursued. And the results of their study and deliberation were translated
into concrete action and embodied in a letter which has been preserved. In line with the results of their
study, action was instituted in court to compel acceptance by Vidal of the checks consigned with the
complaint, and before the suit was commenced, and with the document before him, Atty. Ponce Enrile,
in behalf of his client, wrote Vidal demanding that he accept the payment and execute a deed of
cancellation of the mortgage. In his letter Atty. Ponce Enrile reminded Vidal that the recital in the
"Penalidad del Documento de Novacion de Esta Fecha" was "to the effect that should the debtor wish to
pay the debt before the expiration of the period the reinstated (two years) such debtor would have to
pay, in addition to interest due, the penalty of P30,000 — this is in addition to the penalty clause of 10
per cent of the total amount due inserted in the document of mortgage of January 20, 1943."

Atty. Ponce Enrile's concept of the agreement, formed after mature and careful reading of it, jibes with
the only possible reason for the insertion of the penalty provision. There was no reason for the penalty
unless it was for defendant's paying her debt before the end of the agreed period. It was to Vidal's
interest that the mortgage be not settled in the near future, first, because his money was earning good
interest and was guaranteed by a solid security, and second, which was more important, he, in all
probability, shared the common belief that Japanese war notes were headed for a crash and that four
years thence, judging by the trends of the war, the hostilities would be over.

To say, as Vidal says, that the debtor could not pay the mortgage within four years and, at the same time,
that there would be penalty if she paid after that period, would be a contradiction. Moreover, adequate
remedy was provided for failure to pay or after the expiration of the mortgage: increased rate or interest,
foreclosure of the mortgage, and attorney's fees.

It is therefore to be concluded that the defendant's offer to pay Vidal in October, 1943, was in
accordance with the parties' contract and terminated the debtor's obligation to pay interest. The
technical defects of the consignation had to do with the discharge of the mortgage, which is conceded
on all sides to be still in force because of the defects. But the matter of the suspension of the running of
interest on the loan stands of a different footing and is governed by different principles. These principles
regard reality rather than technicality, substance rather than form. Good faith of the offer or and ability
to make good the offer should in simple justice excuse the debtor from paying interest after the offer
was rejected. A debtor can not be considered delinquent who offered checks backed by sufficient
deposit or ready to pay cash if the creditor chose that means of payment. Technical defects of the offer
cannot be adduced to destroy its effects when the objection to accept the payment was based on
entirely different grounds. If the creditor had told the debtor that he wanted cash or an ordinary check,
which Vidal now seems to think Paz Tuason should have tendered, certainly Vidal's wishes would have
been fulfilled, gladly.

The plain truth was that the mortgagee bent all his efforts to put off the payment, and thanks to the
defects which he now, with obvious inconsistency, points out, the mortgage has not perished with the
checks.
Falling within the reasons for the stoppage of interest are attorney's fees. In fact there is less merit in the
claim for attorney's fees than in the claim for interest; for the creditor it was who by his refusal brought
upon himself this litigation, refusal which, as just shown, resulted greatly to his benefit.

Vidal, however, is entitled to the penalty, a point which the debtor seems to a grant. The suspension of
the running of the interest is premised on the thesis that the debt was considered paid as of the date the
offer to pay the principal was made. It is precisely the mortgagor's contention that he was to pay said
penalty if and when she paid the mortgage before the expiration of the four-year period provided in the
mortgage contract. This penalty was designed to take the place of the interest which the creditor would
be entitled to collect if the duration of the mortgage had not been cut short and from which interest the
debtor has been relieved. "In obligations with a penalty clause the penalty shall substitute indemnity for
damages and the payment of interest. . ." (Art. 1152, Civil Code of Spain.).

To summarize, the following are our findings and decision:

The contract of sale Exhibit A was valid and enforceable, but the loss of the checks for P143,150 and
P12,932.61 and invalidation of the corresponding deposit is to be borne by the buyer. Gregorio Araneta,
Inc. the value of these checks as well as the several payments made by Paz Tuason to Gregorio Araneta,
Inc. shall be deducted from the sum of P190,000 which the buyer advanced to the seller on the
execution of Exhibit 1.

The buyer shall be entitled to the rents on the land which was the subject of the sale, rents which may
have been collected by Paz Tuason after the date of the sale.

Paz Tuason shall pay Jose Vidal the amount of the mortgage and the stipulated interest up to October
20,1943, plus the penalty of P30,000, provided that the loans obtained during the Japanese occupation
shall be reduced according to the Ballantyne scale of payment, and provided that the date basis of the
computation as to the penalty is the date of the filing of the suit against Vidal.

Paz Tuason shall pay the amount that shall have been found due under the contracts of mortgage within
90 days from the time the court's judgment upon the liquidation shall have become final, otherwise the
property mortgaged shall be ordered sold provided by law.

Vidal's mortgage is superior to the purchaser's right under Exhibit A, which is hereby declared subject to
said mortgage. Should Gregorio Araneta, Inc. be forced to pay the mortgage, it will be subrogated to the
right of the mortgagee.

This case will be remanded to the court of origin with instruction to hold a rehearing for the purpose of
liquidation as herein provided. The court also shall hear and decide all other controversies relative to the
liquidation which may have been overlooked at this decision, in a manner not inconsistent with the
above findings and judgment.

The mortgagor is not entitled to suspension of payment under the debt moratorium law or orders.
Among other reasons: the bulk of the debt was a pre-war obligation and the moratorium as to such
obligations has been abrogated unless the debtor has suffered war damages and has filed claim for
them; there is no allegation or proof that she has. In the second place, the debtor herself caused her
creditor to be brought into the case which resulted in the filing of the cross-claim to foreclose the
mortgage. In the third place, prompt settlement of the mortgage is necessary to the settlement of the
dispute and liquidation between Gregorio Araneta, Inc. and Paz Tuason. If for no other reason, Paz
Tuason would do well to forego the benefits of the moratorium law.

There shall be no special judgments as to costs of either instance.

Paras, C.J., Pablo, Bengzon, Padilla, Bautista Angelo and Labrador, JJ., concur.

RESOLUTION

December 22, 1952

TUASON, J.:

The motion for reconsideration of the plaintiff, Gregorio Araneta, Inc., and the defendant, Paz Tuason de
Paterno, are in large part devoted to the question, extensively discussed in the decision, of the validity of
the contract of sale Exhibit A. The arguments are not new and at least were given due consideration in
the deliberation and study of the case. We find no reason for disturbing our decision on this phase of the
case.

The plaintiff-appellant's alternative proposition — to wit: "Should this Honorable Court declare that the
purchase price was not paid and that plaintiff has to bear the loss due to the invalidation of the
occupation currency, its loss should be limited to: (a) the purchase price of P139,083.32 less P47,825.70
which plaintiff paid and the defendant actually collected during the occupation, or the sum of
P92,233.32, or at most, (b) the purchase price of the lot in the sum of P139,083.32," — as well as the
alleged over-payment by the defendant-appellee, may be taken up in the liquidation under the
reservation in the judgment that "the court (below) shall hold a rehearing for the purpose of liquidation
as herein provided" and "shall also hear and decide all other controversies relative to the liquidation
which may have been overlooked in this decision, in the manner not inconsistent with the above findings
and judgment."

These payments and disbursement are matters of accounting which, not having been put directly in issue
or given due attention at the trial and in the appealed decision, can better be treshed out in the
proposed rehearing where each party will have an opportunity to put forward his views and reasons,
with supporting evidence if necessary, on how the various items in question should be regarded and
credited, in the light of our decision.
As to Jose Vidal's motion: There is nothing to add to or detract from what has been said in the decision
relative to the interest on the loans and attorney's fees. There are no substantial features of the case
that have not been weighed carefully in arriving at our conclusions. It is our considered opinion that the
decision is in accord with law, reason and equity.

The vehement protest that this court should not modify the conclusion of the lower court on interest
and attorney's fees is actually and entirely contrary to the cross-claimant's own suggestion in his brief.
From page 20 of his brief, we copy these passages:

We submit that this Honorable Court is in a position now to render judgment in the foreclosure of
mortgage suit as no further issue of fact need be acted upon by the trial court. Defendant Paz Tuason
has admitted the amount of capital due. That is a fact. She only requests that interest be granted up to
October 20,1943, and that the moratorium law be applied. Whether this is possible or not is a legal
question, which can be decided by this court. Unnecessary loss of time and expenses to the parties
herein will be avoided by this Honorable Court by rendering judgment in the foreclosure of mortgage
suit as follows:

xxx xxx xxx

In reality, the judgment did not adjudicate the foreclosure of the mortgage nor did it fix the amount due
on the mortgage. The pronouncement that the mortgage was in full force and effect was a conclusion
which the mortgagor did not and does not now question. There was therefore virtually no decision that
could be executed.

Vidal himself moved in the Court of First Instance for amendment of the decision alleging, correctly, that
"the court failed to act on the cross-claim of Jose Vidal dated April 22, 1947, where he demanded
foreclosure of the mortgage . . . ." That motion like Paz Tuason's motion to complete the judgment, was
summarily denied.

In strict accordance with the procedure, the case should have been remanded to the court of origin for
further proceedings in the form stated by Paz Tuason's counsel. Both the mortgagor and the mortgagee
agree on this. We did not follow the above course believing it best, in the interest of the parties
themselves and following Vidal's attorney's own suggestion, to decide the controversies between Vidal
and Paz Tuason upon the records and the briefs already submitted.

The three motions for reconsideration are denied.

Paras, C.J., Pablo, Bengzon, Padilla, Montemayor, Jugo, Bautista Angelo and Labrador, JJ., concur.

RESOLUTION

January 26, 1953

TUASON, J.:

In the second motion for reconsideration by defendant-appellee it is urged that the sale be resolved for
failure of plaintiff-appellant to pay the entire purchase price of the property sold.

Rescission of the contract, it is true, was alternative prayer in the cross-complaint, but the trial court
declared the sale void in accordance with the main contention of the defendant, and passed no
judgment on the matter of rescission. For this reason, and because rescission was not pressed on appeal,
we deemed unnecessary, if not uncalled for, any pronouncement touching this point.

In the second place, the nonpayment of a portion, albeit big portion, of the price was not, in our opinion,
such failure as would justify recission under Articles 1124 and 1505 et seq. of the Civil Code of Spain,
which was still in force when this case was tried. "The general rule is that recission will not be permitted
for a slight or casual breach of the contract, but only for such breaches as are so substantial and
fundamental as to defeat the object of the parties." (Song Fo & Co. vs. Hawaiian-Philippine Co., 47 Phil.,
821, 827.)

In the present case, the vendee did not fail or refuse to pay by plan or design, granting there was failure
or refusal to pay. As a matter of fact, the portion of the purchase price which is said not to have been
satisfied until now was actually received by checks by the vendor and deposited by her with the court in
the suit against Vidal, in accordance with the understanding if not express agreement between vendor
and vendee. The question of who should bear the loss of this amount, the checks having been destroyed
and the funds against which they were drawn having become of no value, was one of the most bitterly
debated issues, and in adjudging the vendee to be the party to shoulder the said loss and ordering the
said vendee to pay the amount to the vendor, this Court's judgment was not, and was not intended to
be, in the nature of an extension of time of payment. In contemplation of the Civil Code there was no
default, except possibly in connection with the alleged overcharges by the vendee arising from honest
mistakes of accounting, mistakes which, by our decision, are to be corrected in a new trial thereby
ordered.

The second motion for reconsideration is, therefore, denied.

Paras, C.J., Pablo, Bengzon, Padilla, Montemayor, Reyes, Jugo, Bautista Angelo and Labrador, JJ., concur.
Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. L-16510 January 9, 1922

PHILIPPINE NATIONAL BANK, plaintiff-appellant,

vs.

PRODUCERS' WAREHOUSE ASSOCIATION, defendant-appellee.

Roman Lacson for appellant.

Ross & Lawrence and Ewald E. Selph for appellee.

JOHNS, J.:

The plaintiff is a corporation organized under the banking laws of the Philippine Islands with its principal
office in the city of Manila. The defendant is a domestic corporation doing a general warehouse business
and domiciled at Manila, and the Philippine Fiber and Produce Company, to which we will hereafter refer
as the Produce Company, is another domestic corporation with its principal office also at Manila. In May,
1916, the defendant, as party of the first part, entered into a written contract with the Produce
Company, as party of the second part, in and by which "the above-named party of the second part is
hereby named, constituted, and appointed as the general manager of the business of the party of the
first part, in all of the branches thereof, with the duties, powers, authority and compensation hereinafter
provided." "The said party of the second part shall exercise a general and complete supervision over and
management of the business of the party of the first part," and "shall direct, manage, promote and
advance the said business, subject only to the control and instructions of the board of directors of the
party of the first part." That said party of the second part, as general manager, shall have all powers and
authorities necessary, proper or usual for the due transaction of the business of the party of the first
part, including the power to sign the company's name, save and except such power or authority as shall
have been expressly reserved to itself, by the board of directors of the party of the first part, provided
"that such reservations by the board of directors shall not be employed to unreasonably hamper or
interfere with the due management of said business and shall, at no time, reduce the powers and
authorities of said general manager below the usual and ordinary standard in business of like kind." It is
then agreed that the Produce Company shall have an annual salary of P7,500 for its services as general
manager, and that the defendant will also pay the local agents of the Produce Company P300 per month
for their services. The agreement also provides that it shall remain in force and effect ten years from
date, with the right of the Produce Company to renew it for a further period of one to ten years at its
option. In the months of November and December, 1918, and while the contract was in force and effect,
the defendant duly issued to the Produce Company its negotiable quedans Nos. 1255, 1266, 1273, 1275,
1277, 1279, and 1283 for 15,699.34 piculs of copra in and by which, subject to the terms and conditions
therein stated, it agreed to deliver that amount of copra to the Produce Company or its order.

Section 4 of the conditions printed on the back provides:

This Association will deliver the package, noted hereon, on surrender to the Association of this warrant
endorsed by the party who shall be for the time registered in the books of the Association as the owner
of the packages described hereon; and the production by the Association of this warrant shall at all times
be conclusive proof that the packages hereon noted have been properly delivered by the Association and
shall exempt the Association from all responsibility in connection with the said packages or goods.

Section 5 provides:

No transfer of interest and/or ownership will be recognized by the Association unless registered in the
books of the Association, and/or all charges for storage and/or insurance due to the Association paid.
Such storage and/or insurance shall constitute a lien against the packages herein noted until paid and aid
package shall remain undelivered until such lien or lien is/are satisfied.

Each quedan gave the number of sack, piculs, warehouse number, gross weight in kilos and its declared
value, and recited thereon that the copra was insured for the full amount of its declared value, and
across the face of the quedan were the words "Negotiable Warrant" in red ink. They were all of the
printed form entitled "Producers' Warehouse Association." Each recited in red ink "This warrant is of no
value unless signed by an officer of the Association," and were signed "Producers' Warehouse
Association by George B. Wicks, Treasurer, and Producers' Warehouse Association by R. Torres,
Warehouseman." Each receipt was also numbered, and stated the number of the warehouse and where
situated, and recited that storage charges were at the rate of P0.04 per picul per month, and that the
insurance rate was 1/3 per cent per month on the declared value.

The Produce Company arranged for an overdraft with the plaintiff of P1,000,000. To secure such
overdraft, and as collateral from and after the dates of their issuance, the quedans in question were
endorsed in blank by the Produce Company, and delivered to the plaintiff, which became and is now the
owner and holder thereof. Without making a tender of any charges, on March 21, 1919, the plaintiff
requested the delivery of the copra described in the respective quedans, and, for its failure to do so,
commenced this action on April 23, 1919, to recover its value alleged to be P240,689, with interest from
March 21, 1919, at the rate of 6 per cent per annum. July 10, 1919, an amended complaint was filed, and
on August 9, 1919, a second amended complaint was filed, in which it is alleged that, in good faith, the
plaintiff purchased these quedans, and that it is the owner, and recites all of the conditions printed on
the back, and made a part of the quedans. It is then alleged that on July 30, 1919, the plaintiff requested
the defendant to register the quedans in the name of the plaintiff, and to deliver to it the 14,587.19
piculs of copra, and, upon that date, that it had offered to satisfy any lien that defendant might have, to
surrender the receipts with such indorsement that it might require, and the receipt therefor, when the
goods were delivered, if such signature is requested by the defendant. "That the defendant refused to
comply with the demands of the plaintiff, stating that it could not deliver the goods mentioned in the
receipts as said goods are not in the warehouse, said defendant still refusing to make such delivery."
That on July 30, 1919, copra was of the value of P21 per picul. That by reason of such refusal, plaintiff
has been damaged in the amount of P306,330.99. It is also alleged that in January, 1919, with the
consent of the plaintiff, the Produce Company removed from the warehouse of the defendant 1,112.15
piculs of copra described in receipt No. 1255, of the declared value of P18,350.

For amended answer, the defendant admits that the Produce Company deposited copra in defendant's
warehouse, and that warehouse receipts were issued therefor to the Produce Company, "signed by one
George B. Wicks and one R. Torres, but denies that either of the said George B. Wicks or the said R.
Torres had any authority to issue such receipts in the name of the defendant," or that the receipts set
out in plaintiff's complaint are complete and correct copies of those issued, and, as a further answer and
defense, pleads that at the time alleged, the Produce Company was the manager of the defendant's
warehouse; that all the copra deposited by the Produce Company "in the defendant's warehouse" was,
by and with the consent and knowledge of plaintiff, sold and delivered to the Laguna Cocoanut Oil
Company, and all the proceeds thereof deposited to the account of the said Philippine Fiber and Produce
Company with plaintiff, before the filing of the said second amended complaint; that by and with the
consent of plaintiff, said delivery was made by the Philippine Fiber and Produce Company, the manager
of the defendant's warehouse, without the surrender of the receipts referred to in the complaint; that
said receipts were issued without defendant's authority, as hereinbefore set out; that said receipts were
never transferred to plaintiff on the books of defendant, as provided in the terms thereof; and that they
were issued without the copra described therein being deposited in the defendant's warehouse.
Testimony was taken on such issues during which the plaintiff offered in evidence the described quedans
as Exhibits C to I, inclusive, and the defendant admitted that the signature appearing on the lower left-
hand corner of each exhibit is the signature of George B. Wicks, and that at the time he signed the
quedans "he was the duly elected, qualified and appointed treasurer of defendant," that the signature
on the lower right-hand corner of each quedan was signed by R. Torres; and that he was a
warehouseman of the defendant at the time, and in the employ of the Produce Company. After the
taking of testimony, the lower court rendered judgment for the defendant, from which the plaintiff
appeals, claiming in substance that the court erred in not giving plaintiff judgment for the full amount
prayed for in its complaint.

On March 21, 1919, the plaintiff notified the defendant that the Produce Company had endorsed to
plaintiff the above described quedans, and asked that it should be informed "as to when we can take
possession of the goods represented by the above quedans." This was answered by a letter from the
secretary and attorney for the defendant, known in the record as Exhibit B, and which the trial court
refused to receive in evidence. But it does appear from the record that in response to that letter, the
then secretary and attorney for the defendant went to the bank, and that the only matter which was
then and there discussed between the parties was the amount which the defendant should pay the
plaintiff for the copra that it could not deliver. That nothing was ever said about the lien or the surrender
of the quedans, or that the receipts should be signed for the copra when delivered. It also appears that
on the 30th of July, after the court sustained the demurrer to the complaint, the attorney for the bank
went direct to the defendant and then offered to pay any lien or charges that it might have on the
quedans, and offered it all the quedans indorsed in blank by the Produce Company, and "to place on
them any indorsement that would make them negotiable," and to sign for the bank the receipts for the
copra when delivered. That Mr. Wicks, who was then acting for the defendant, refused to take up the
quedans, stating that the copra which they represented was not in the warehouse, and that "we cannot
give you the copra because it is not there." The bank's attorney then had the quedans with him and
exhibited them to Mr. Wicks. It further appears that on July 29, 1919, and in answer to its letter of the
28th, the Produce Company wrote the defendant as follows:

We regret to state that we are unable to return to you the warrant referred to in your letter for the
reason that, in December, 1918, we deposited these warrants with the Philippine National Bank as
security for loans and said bank refuses to return same to us. As all the copra, less shrinkage and other
losses, has been delivered by you, we hereby authorize you to cancel such warrants and hereby agree to
hold you free and harmless for so doing.

The attorney further testified: "I have seen the overdraft agreement and, if I remember right, it was for a
million pesos." The Produce Company "signed one of the printed forms of the bank for overdraft
agreement." When plaintiff rested, the defendant moved for judgment against the plaintiff for want of
sufficient evidence. The motion was denied and exception duly taken. The defendant then called J.
Mclaughlin, who, as a public accountant, audited the books of the Produce Company for the period of six
months ending December 31, 1918. A copy of his report made from the books of the Produce Company
was offered in evidence, from which it appears that on December 31, 1918, it owed the plaintiff
P887,856.66. George E. Kauffman testified that he was president of both the defendant and the Produce
Company and held that position in October, 1916, at the time the contract was made between the two
companies. That it was voluntarily surrendered and cancelled in April, 1919, also that the contract was
duly ratified by the director of both corporations, and after its ratification, the Produce Company
assumed the active management of defendant's business, under the terms and provisions of the
contract. He also testified that Mr. Lacson presented quedans for a certain amount of copra to Mr. Wicks,
and asked for the delivery of the copra. Mr. Wicks told Mr. Lacson "the copra did not exist because the
copra has been delivered — by the Philippine Fiber and Produce Company." Mr. Kauffman further
testified that he owned 98 per cent of the capital stock of the Produce Company, and that Mr. Wicks had
only one share.

Q. What was the balance show by your books? — A. I reserve the right, in answering these questions, —
because I am not prepared to answer in amounts. They run into large amounts of money.

A. I can say what caused the controversy, and that is that the bank showed an overdraft of some five
hundred and some odd thousand pesos as to the Philippine Fiber and Produce Company, while my books
show an overdraft of some hundred and thirty-nine thousand pesos, — caused by the fact that I have
charged the Philippine National Bank with the entire expenditure for the purchase of hemp made for
their account and risk during the year of 1918. I have so notified the bank, but they haven't seen fit to
reply to my letter.

He further testified that Mr. Wicks was treasurer of the defendant at the time the quedans were issued,
and that the printed forms used are like those held by the bank.

Q. And they have been from the very beginning, haven't they? — A. Yes, sir.

Mr. Wicks testified that he was vice-president of the Produce Company from October, 1916, until
February, 1919, and that he was treasurer of the company "from July 1, 1917, up until this year." He
further testified that R. Torres was actually in charge of the warehouse itself, and that the Produce
Company was managing the warehouse. That it was selling copra between December 1, 1918, and
February 1, 1919, and that the proceeds were deposited in the Philippine National Bank; that during that
period the warehouse receipts were hypothecated with the plaintiff; that under the practice at the end
of each week, the warehouse would notify him of the amount of copra delivered; and that "I would then
withdraw from the Philippine National Bank the corresponding number of warrant for cancellation.
Sometimes I would go personally and withdraw them; and at other times I would send the cashier down
with a note to the Philippine National Bank, asking them to release these warrants for cancellation." The
warehouse receipts were delivered to me regularly "until about the end of January or early in February."
This procedure was a matter of convenience to both parties.

Q. What reason did you give to Philippine National Bank for not delivering the copra to Mr. Lacson, or
any other representative of the bank? — A. The reason was that the copra was not in the warehouse;
having been delivered to its owners.

Q. While you were treasurer of the Producers' Warehouse Association, all the quedans issued by the
warehouse were signed by you as treasurer, were they not? — A. Yes, sir.

Q. Even by Mr. Kauffman — now haven't they? — A. So far as I know, they have.

The record shows that Mr. Kauffman was absent from about March 15, 1918, until May, 1919.

Q. And during that period you had full authority to act for the Philippine Fiber and Produce Company? —
A. Yes.

Q. Was that authority ever questioned by anyone; by Mr. Kauffman or anyone? — A. Not to my
knowledge.

The testimony is conclusive that the quedans in question were duly executed by Wicks, as treasurer, and
Torres, as warehouseman, for and on behalf of the defendant, and as its act and deed. That it appears
from its own books that on December 31, 1918, the Produce Company was indebted to the plaintiff in
the sum of P887,856.66, and Mr. Kauffman, president of the defendant, testified that the Produce
Company had an indebtedness; "they run into large amounts of money." The testimony is also conclusive
that amounts money." The testimony is also conclusive that after the quedans described in the
complaint were issued to the Produce Company, they were endorsed in blank, and physical possession
delivered to the plaintiff as collateral security for the overdraft of the Produce Company, and that each of
them is in form negotiable.

That on March 21, 1919, plaintiff notified the defendant of such facts and requested the delivered of the
copra. At that time no claim was made on account of conditions, liens or charges, and the plaintiff did
not offer to pay the charges or comply with the conditions, and the only question discussed was the
amount of copra to which plaintiff was entitled. In July, 1919, and after the sustaining of the defendant's
demurrer to the complaint, plaintiff, for the first time, made a formal tender of all such conditions, and
then filed its second amended complaint in which tenders were alleged. In its answer, the defendant
denies that Wicks and Torres had any authority to issue the quedans for, or in the name of, the
defendant, and, as further and separate defense, alleges that the Produce Company was the manager of
the defendant's warehouse, and that all copra deposited in it by the Produce Company was, with the
knowledge and consent of plaintiff, sold to the Laguna Cocoanut Oil Company, and the proceeds of the
sale were duly deposited with the plaintiff to the account of the Produce Company, before the filing of
the second amended complaint; that with the consent of the plaintiff, delivery was made by the Produce
Company, as manager of the defendant's warehouse, without the surrender of the quedans described in
the complaint; that such receipts were issued without authority and they were never transferred to the
plaintiff on the books of the defendant corporation; and that they "were issued without the copra
described therein being deposited in defendant's warehouse." The defendant, having alleged that the
quedans were invalid and wrongfully issued, and that the copra therein described was not in defendant's
warehouse, is now estopped do claim or assert that the plaintiff did not comply with any conditions
precedent. In this kind of an action, a person has no legal right to deny the existence of the instruments
on which it is based, and then claim that plaintiff has not complied with the provisions of the
instruments. This question is squarely decided in Wyatt vs. Henderson (31 Ore., 48; 48 Pac., 790), where
the court says:

. . . The only possible object defendants could have had in seeking to show that storage was due on this
grain was to insist upon the maintenance of a statutory lien thereon, under which they expected to hold
the oats until their charges had been paid, and thus defeat the action for the recovery of possession; but,
by denying the plaintiff's ownership, the lien given by statute was waived, and the title to and the
quantity of the grain being the only issues for trial, the amount due for storage was immaterial. . . .

This case was again followed and approved in Anderson vs. Portland Flouring-Mills Co. (60 Pac., 839).
The same rule is also laid down in Cyc., vol. 38, p. 135, where it is said:

. . . Similarly a tender is waived where the tenderee makes any declaration which amounts to a
repudiation of the contract, or takes any position which would render a tender, so long as the position
taken by him is maintained, a vain and idle ceremony. . . .

Ruling Case Law, vol. 26. p. 624, says:

Since the law does not require any one to do vain or useless things, a formal tender is never required
where it appears that if it had been made, the money would not have been received, as where a creditor
states that an actual tender will be useless because he will not accept it, or where one party to a
contract states that he will not comply with its terms.

. . . Where a contract calls for the performance by the parties of concomitant acts, neither party being
obliged to perform unless the other is ready to perform the correlative act, a tender is not necessary by
the one if the other is not willing to perform his part. . . . (Citing numerous authorities.)

Again, in the inception of this dispute nothing was ever said about any condition precedent, or about any
claim on account of liens or charges, and it is very apparent that at that time the defendant did not
contemplate any such a defense. When the point was first raised, the formal tender or offer was
promptly made, and the defendant then, for the first time, denied the authenticity of the quedans, and
claimed that they were wrongfully and illegally issued. If the copra evidence by the quedans was in the
bodegas, defendant's contention would be tenable, but upon the facts shown, the defendant has no
legal right to make that defense.

Complaint is made that the quedans were not transferred on the books of the company in accord with
their provisions. Here again, it is shown that the plaintiff produced them and requested their transfer to
the bank, which the defendant requested their transfer to the bank, which the defendant refused to
make. It is not now in a position to urge that point as a defense.

The stubborn fact remains that, under the written contract between them, the Produce Company was
the general manager of the defendant's warehouse business, and that it had authority to issue quedans
in its name, and as its corporate act and deed. That the quedans in question are duly authenticated, and
were duly issued by the defendant to, and in the name of, the Produce Company, and when issued were
duly endorsed, and delivered to the plaintiff for value. For aught that appears in the record, the bank was
acting in good faith, and the quedans were duly issued, endorsed and delivered to it as collateral in the
ordinary course of business. Although there may have been fraud, there is no allegation or proof that the
bank was a party to it, or had any knowledge of it, and this court has no right to assume that the bank
was a party to a fraud. Giving to the quedans their legal force and effect, it must follow that at the time
the demand was made, the bank was the owner and entitled to the possession of the copra therein
described. The receipts call for 15,699.34 piculs of copra, but plaintiff admits that, with its consent,
1,112.15 piculs of copra, of the declared value of P18,350, were delivered to the Produce Company from
and out of receipt No. 1255. This would leave 14,587.19 piculs of copra evidenced by the quedans.

As in the case of the Philippine Trust Company vs. Philippine National Bank,1 recently decided, there is
no direct evidence of the market value of the copra. But each quedan specified the amount of its
declared value. That being specified in the quedans, in the absence of other proof, and upon the fact
shown, the declared value will be deemed and treated as the market value. Deducting the 1,112.15
piculs, which were surrendered by the plaintiff out of quedan No. 1255, the declared value of the copra
remaining was P240,689.

The decision of the lower court is reversed, and judgment will be entered here in favor of the plaintiff
and against the defendant for P240,689, with interest thereon from March 21, 1919, at the rate of 6 per
cent per annum, and costs in this and the lower court. So ordered.
Araullo, C.J., Johnson, Street, Malcolm, Avanceña, Villamor and Romualdez, JJ., concur.
Republic of the Philippines

SUPREME COURT

Manila

EN BANC

G.R. No. L-17825 June 26, 1922

In the matter of the Involuntary insolvency of U. DE POLI.

FELISA ROMAN, claimant-appellee,

vs.

ASIA BANKING CORPORATION, claimant-appellant.

Wolfson, Wolfson and Schwarzkopf and Gibbs, McDonough & Johnson for appellant.

Antonio V. Herrero for appellee.

OSTRAND, J.:

This is an appeal from an order entered by the Court of First Instance of Manila in civil No. 19240, the
insolvency of Umberto de Poli, and declaring the lien claimed by the appellee Felisa Roman upon a lot of
leaf tobacco, consisting of 576 bales, and found in the possession of said insolvent, superior to that
claimed by the appellant, the Asia Banking Corporation.

The order appealed from is based upon the following stipulation of facts:

It is hereby stipulated and agreed by and between Felisa Roman and Asia Banking Corporation, and on
their behalf by their undersigned attorneys, that their respective rights, in relation to the 576 bultos of
tobacco mentioned in the order of this court dated April 25, 1921, be, and hereby are, submitted to the
court for decision upon the following:

I. Felisa Roman claims the 576 bultos of tobacco under and by virtue of the instrument, a copy of which
is hereto attached and made a part hereof and marked Exhibit A.

II. That on November 25, 1920, said Felisa Roman notified the said Asia Banking Corporation of her
contention, a copy of which notification is hereto attached and made a part hereof and marked Exhibit B.
III. That on November 29, 1920, said Asia Banking Corporation replied as per copy hereto attached and
marked Exhibit C.

IV. That at the time the above entitled insolvency proceedings were filed the 576 bultos of tobacco were
in possession of U. de Poli and now are in possession of the assignee.

V. That on November 18, 1920, U. de Poli, for value received, issued a quedan, covering aforesaid 576
bultos of tobacco, to the Asia Banking Corporation as per copy of quedan attached and marked Exhibit D.

VI. That aforesaid 576 bultos of tobacco are part and parcel of the 2,777 bultos purchased by U. de Poli
from Felisa Roman.

VII. The parties further stipulate and agree that any further evidence that either of the parties desire to
submit shall be taken into consideration together with this stipulation.

Manila, P. I., April 28, 1921.

(Sgd.) ANTONIO V. HERRERO

Attorney for Felisa Roman

(Sgd.) WOLFSON, WOLFSON & SCHWARZKOPF

Attorney for Asia Banking Corp.

Exhibit A referred to in the foregoing stipulation reads:

1.º Que la primera parte es dueña de unos dos mil quinientos a tres mil quintales de tacabo de distintas
clases, producidos en los municipios de San Isidro, Kabiaw y Gapan adquiridos por compra con dinero
perteneciente a sus bienes parafernales, de los cuales es ella administradora.

2.º Que ha convenido la venta de dichos dos mil quinientos a tres mil quintales de tabaco mencionada
con la Segunda Parte, cuya compraventa se regira por las condiciones siguientes:

(a) La Primera Parte remitira a la Segunda debidamente enfardado el tabaco de que ella es propietaria en
bultos no menores de cincuenta kilos, siendo de cuenta de dicha Primera Parte todos los gastos que
origine dicha mercancja hasta la estacion de ferrocarril de Tutuban, en cuyo lugar se hara cargo la
Segunda y desde cuyo instante seran de cuenta de esta los riesgos de la mercancia.

(b) El precio en que la Primera Parte vende a la Segunda el tabaco mencionada es el de veintiseis pesos
(P26), moneda filipina, por quintal, pagaderos en la forma que despues se establece.

(c) La Segunda Parte sera la consignataria del tabaco en esta Ciudad de Manila quien se hara cargo de el
cuando reciba la factura de embarque y la guia de Rentas Internas, trasladandolo a su bodega quedando
en la misma en calidad de deposito hasta la fecha en que dicha Segunda Parte pague el precio del
mismo, siendo de cuenta de dicha Segunda Parte el pago de almacenaje y seguro.
(d) LLegada la ultima expedicion del tabaco, se procedera a pesar el mismo con intervencion de la
Primera Parte o de un agente de ella, y conocido el numero total de quintales remitidos, se hara
liquidacion del precio a cuenta del cual se pagaran quince mil pesos (P15,000), y el resto se dividira en
cuatro pagares vencederos cada uno de ellos treinta dias despues del anterior pago; esto es, el primer
pagare vencera a los treinta dias de la fecha en que se hayan pagado los quince mil pesos, el segundo a
igual tiempo del anterior pago, y asi sucesivamente; conviniendose que el capital debido como precio del
tabaco devengara un interes del diez por ciento anual.

Los plazos concedidos al comprador para el pago del precio quedan sujetos a la condicion resolutoria de
que si antes del vencimiento de cualquier plazo, el comprador vendiese parte del tabaco en proporcion
al importe de cualquiera de los pagares que restasen por vencer, o caso de que vendiese, pues se
conviene para este caso que desde el momento en que la Segunda Parte venda el tabaco, el deposito del
mismo, como garantia del pago del precio, queda cancelado y simultaneamente es exigible el importe de
la parte por pagar.

Leido este documento por los otorgantes y encontrandolo conforme con lo por ellos convenido, lo
firman la Primera Parte en el lugar de su residencia, San Isidro de Nueva Ecija, y la Segunda en esta
Ciudad de Manila, en las fechas que respectivamente al pie de este documento aparecen.

(Fdos.) FELISA ROMAN VDA. DE MORENO

U. DE POLI

Firmado en presencia de:

(Fdos.) ANTONIO V. HERRERO

T. BARRETTO

("Acknowledged before Notary")

Exhibit D is a warehouse receipt issued by the warehouse of U. de Poli for 576 bales of tobacco. The first
paragraph of the receipt reads as follows:

Quedan depositados en estos almacenes por orden del Sr. U. de Poli la cantidad de quinientos setenta y
seis fardos de tabaco en rama segun marcas detalladas al margen, y con arreglo a las condiciones
siguientes:

In the left margin of the face of the receipts, U. de Poli certifies that he is the sole owner of the
merchandise therein described. The receipt is endorced in blank "Umberto de Poli;" it is not marked
"non-negotiable" or "not negotiable."

Exhibit B and C referred to in the stipulation are not material to the issues and do not appear in the
printed record.
Though Exhibit A in its paragraph (c) states that the tobacco should remain in the warehouse of U. de
Poli as a deposit until the price was paid, it appears clearly from the language of the exhibit as a whole
that it evidences a contract of sale and the recitals in order of the Court of First Instance, dated January
18, 1921, which form part of the printed record, show that De Poli received from Felisa Roman, under
this contract, 2,777 bales of tobacco of the total value of P78,815.69, of which he paid P15,000 in cash
and executed four notes of P15,953.92 each for the balance. The sale having been thus consummated,
the only lien upon the tobacco which Felisa Roman can claim is a vendor's lien.

The order appealed from is based upon the theory that the tobacco was transferred to the Asia Banking
Corporation as security for a loan and that as the transfer neither fulfilled the requirements of the Civil
Code for a pledge nor constituted a chattel mortgage under Act No. 1508, the vendor's lien of Felisa
Roman should be accorded preference over it.

It is quite evident that the court below failed to take into consideration the provisions of section 49 of
Act No. 2137 which reads:

Where a negotiable receipts has been issued for goods, no seller's lien or right of stoppage in transitu
shall defeat the rights of any purchaser for value in good faith to whom such receipt has been
negotiated, whether such negotiation be prior or subsequent to the notification to the warehouseman
who issued such receipt of the seller's claim to a lien or right of stoppage in transitu. Nor shall the
warehouseman be obliged to deliver or justified in delivering the goods to an unpaid seller unless the
receipt is first surrendered for cancellation.

The term "purchaser" as used in the section quoted, includes mortgagee and pledgee. (See section 58 (a)
of the same Act.)

In view of the foregoing provisions, there can be no doubt whatever that if the warehouse receipt in
question is negotiable, the vendor's lien of Felisa Roman cannot prevail against the rights of the Asia
Banking Corporation as the indorse of the receipt. The only question of importance to be determined in
this case is, therefore, whether the receipt before us is negotiable.

The matter is not entirely free from doubt. The receipt is not perfect: It recites that the merchandise is
deposited in the warehouse "por orden" instead of "a la orden" or "sujeto a la orden" of the depositor
and it contain no other direct statement showing whether the goods received are to be delivered to the
bearer, to a specified person, or to a specified person or his order.

We think, however, that it must be considered a negotiable receipt. A warehouse receipt, like any other
document, must be interpreted according to its evident intent (Civil Code, arts. 1281 et seq.) and it is
quite obvious that the deposit evidenced by the receipt in this case was intended to be made subject to
the order of the depositor and therefore negotiable. That the words "por orden" are used instead of "a
la orden" is very evidently merely a clerical or grammatical error. If any intelligent meaning is to be
attacked to the phrase "Quedan depositados en estos almacenes por orden del Sr. U. de Poli" it must be
held to mean "Quedan depositados en estos almacenes a la orden del Sr. U. de Poli." The phrase must be
construed to mean that U. de Poli was the person authorized to endorse and deliver the receipts; any
other interpretation would mean that no one had such power and the clause, as well as the entire
receipts, would be rendered nugatory.

Moreover, the endorsement in blank of the receipt in controversy together with its delivery by U. de Poli
to the appellant bank took place on the very of the issuance of the warehouse receipt, thereby
immediately demonstrating the intention of U. de Poli and of the appellant bank, by the employment of
the phrase "por orden del Sr. U. de Poli" to make the receipt negotiable and subject to the very transfer
which he then and there made by such endorsement in blank and delivery of the receipt to the blank.

As hereinbefore stated, the receipt was not marked "non-negotiable." Under modern statutes the
negotiability of warehouse receipts has been enlarged, the statutes having the effect of making such
receipts negotiable unless marked "non-negotiable." (27 R. C. L., 967 and cases cited.)

Section 7 of the Uniform Warehouse Receipts Act, says:

A non-negotiable receipt shall have plainly placed upon its face by the warehouseman issuing it 'non-
negotiable,' or 'not negotiable.' In case of the warehouseman's failure so to do, a holder of the receipt
who purchased it for value supposing it to be negotiable may, at his option, treat such receipt as
imposing upon the warehouseman the same liabilities he would have incurred had the receipt been
negotiable.

This section shall not apply, however, to letters, memoranda, or written acknowledgments of an informal
character.

This section appears to give any warehouse receipt not marked "non-negotiable" or "not negotiable"
practically the same effect as a receipt which, by its terms, is negotiable provided the holder of such
unmarked receipt acquired it for value supposing it to be negotiable, circumstances which admittedly
exist in the present case.

We therefore hold that the warehouse receipts in controversy was negotiable and that the rights of the
endorsee thereof, the appellant, are superior to the vendor's lien of the appellee and should be given
preference over the latter.

The order appealed from is therefore reversed without costs. So ordered.

Araullo, C.J., Malcolm, Avanceña, Villamor, Johns and Romualdez, JJ., concur.