IDENTITY OF THE PRESTATION nice for them as hosts to travel in First Class and their guests, in the Business

r them as hosts to travel in First Class and their guests, in the Business Class; and
moreover, they were going to discuss business matters during the flight. He also told Ms. Chiu
G.R. No. 150843 March 14, 2003 that she could have other passengers instead transferred to the First Class Section. Taken
CATHAY PACIFIC AIRWAYS, LTD. V. SPOUSES DANIEL VAZQUEZ AND MARIA LUISA aback by the refusal for upgrading, Ms. Chiu consulted her supervisor, who told her to handle
MADRIGAL VAZQUEZ the situation and convince the Vazquezes to accept the upgrading. Ms. Chiu informed the
latter that the Business Class was fully booked, and that since they were Marco Polo Club
FACTS:
members they had the priority to be upgraded to the First Class. Dr. Vazquez continued to
refuse, so Ms. Chiu told them that if they would not avail themselves of the privilege, they
CathayPacfic Airways, Ltd. is a common carrier engaged in the business of transporting
would not be allowed to take the flight. Eventually, after talking to his two friends, Dr. Vazquez
passengers and goods by air. Among the many routes it services is the Manila-Hongkong-
gave in. He and Mrs. Vazquez then proceeded to the First Class Cabin.
Manila course. As part of its marketing strategy, Cathay accords its frequent flyers
membership in its Marco Polo Club. The members enjoy several privileges, such as priority
Upon their return to Manila, the Vazquezes, in a letter of 2 October 1996 addressed to
for upgrading of booking without any extra charge whenever an opportunity arises. Thus, a
Cathay's Country Manager, demanded that they be indemnified in the amount of P1million for
frequent flyer booked in the Business Class has priority for upgrading to First Class if the
the "humiliation and embarrassment" caused by its employees. They also demanded "a
Business Class Section is fully booked.
written apology from the management of Cathay, preferably a responsible person with a rank
of no less than the Country Manager, as well as the apology from Ms. Chiu" within fifteen
Respondents-spouses Dr. Daniel Earnshaw Vazquez and Maria Luisa Madrigal Vazquez are
days from receipt of the letter.
frequent flyers of Cathay and are Gold Card members of its Marco Polo Club. On 24
September 1996, the Vazquezes, together with their maid and two friends Pacita Cruz and
After Cathay's failure to give them any feedback within its self- imposed deadline, the
Josefina Vergel de Dios, went to Hongkong for pleasure and business.
Vazquezes instituted before the Regional Trial Court of Makati City an action for damages
against Cathay, praying for the payment to each of them the amounts of P250,000 as
For their return flight to Manila on 28 September 1996, they were booked on Cathay's Flight
temperate damages; P500,000 as moral damages; P500,000 as exemplary or corrective
CX-905, with departure time at 9:20 p.m. Two hours before their time of departure, the
damages; and P250,000 as attorney's fees.
Vazquezes and their companions checked in their luggage at Cathay's check-in counter at
Kai Tak Airport and were given their respective boarding passes, to wit, Business Class
Petitioners’ Contention: Vazquezes alleged that when they informed Ms. Chiu that they
boarding passes for the Vazquezes and their two friends, and Economy Class for their maid.
preferred to stay in Business Class, Ms. Chiu "obstinately, uncompromisingly and in a loud,
They then proceeded to the Business Class passenger lounge.
discourteous and harsh voice threatened" that they could not board and leave with the flight
unless they go to First Class, since the Business Class was overbooked. Ms. Chiu's loud and
When boarding time was announced, the Vazquezes and their two friends went to Departure
stringent shouting annoyed, embarrassed, and humiliated them because the incident was
Gate No. 28, which was designated for Business Class passengers. Dr. Vazquez presented
witnessed by all the other passengers waiting for boarding. They also claimed that they were
his boarding pass to the ground stewardess, who in turn inserted it into an electronic machine
unjustifiably delayed to board the plane, and when they were finally permitted to get into the
reader or computer at the gate. The ground stewardess was assisted by a ground attendant
aircraft, the forward storage compartment was already full. A flight stewardess instructed Dr.
by the name of Clara Lai Han Chiu. When Ms. Chiu glanced at the computer monitor, she saw
Vazquez to put his roll-on luggage in the overhead storage compartment. Because he was
a message that there was a "seat change" from Business Class to First Class for the
not assisted by any of the crew in putting up his luggage, his bilateral carpal tunnel syndrome
Vazquezes.
was aggravated, causing him extreme pain on his arm and wrist. The Vazquezes also averred
that they "belong to the uppermost and absolutely top elite of both Philippine Society and the
Ms. Chiu approached Dr. Vazquez and told him that the Vazquezes' accommodations were
upgraded to First Class. Dr. Vazquez refused the upgrade, reasoning that it would not look
1
Philippine financial community, [and that] they were among the wealthiest persons in the
Philippine[s]."
Respondent’s Contention: Cathay alleged that it is a practice among commercial airlines to
upgrade passengers to the next better class of accommodation, whenever an opportunity
arises, such as when a certain section is fully booked. Priority in upgrading is given to its
frequent flyers, who are considered favored passengers like the Vazquezes. Cathay also
asserted that its employees at the Hong Kong airport acted in good faith in dealing with the
Vazquezes; none of them shouted, humiliated, embarrassed, or committed any act of
disrespect against them (the Vazquezes). More so, they also conducted an investigation
regarding the matter.
The Trial Court ruled in favor of Petitioners which was affirmed by the Court of Appeals.
ISSUE: WON there was a BREACH OF CONTRACT due to the upgrading of the seat
accommodation of the Vazquezes
HELD:
YES. A contract is a meeting of minds between two persons whereby one agrees to give
something or render some service to another for a consideration. There is no contract unless
the following requisites concur: (1) consent of the contracting parties; (2) an object certain
which is the subject of the contract; and (3) the cause of the obligation which is established.
Undoubtedly, a contract of carriage existed between Cathay and the Vazquezes. They
voluntarily and freely gave their consent to an agreement whose object was the transportation
of the Vazquezes from Manila to Hong Kong and back to Manila, with seats in the Business
Class Section of the aircraft, and whose cause or consideration was the fare paid by the
Vazquezes to Cathay. Breach of contract is defined as the "failure without legal reason to
comply with the terms of a contract." It is also defined as the "[f]ailure, without legal excuse, to
perform any promise which forms the whole or part of the contract."
The contract between the parties was for Cathay to transport the Vazquezes to Manila
on a Business Class accommodation in Flight CX-905. After checking-in their luggage at
the Kai Tak Airport in Hong Kong, the Vazquezes were given boarding cards indicating their
seat assignments in the Business Class Section. However, during the boarding time, when
the Vazquezes presented their boarding passes, they were informed that they had a seat
change from Business Class to First Class. It turned out that the Business Class was
overbooked in that there were more passengers than the number of seats. Thus, the seat
2
assignments of the Vazquezes were given to waitlisted passengers, and the Vazquezes,
being members of the Marco Polo Club, were upgraded from Business Class to First Class.
But, just like other privileges, such priority could be waived. The Vazquezes should have
been consulted first whether they wanted to avail themselves of the privilege or would
consent to a change of seat accommodation before their seat assignments were given
to other passengers. Normally, one would appreciate and accept an upgrading, for it would
mean a better accommodation. But, whatever their reason was and however odd it might be,
the Vazquezes had every right to decline the upgrade and insist on the Business Class
accommodation they had booked for and which was designated in their boarding passes.
They clearly waived their priority or preference when they asked that other passengers be
given the upgrade. It should not have been imposed on them over their vehement objection.
By insisting on the upgrade, Cathay breached its contract of carriage with the Vazquezes.
CASE NO. 2 G.R. No. 158086
ASJ CORPORATION and
ANTONIO SAN JUAN, Petitioners,
- versus –
SPS. EFREN & MAURA
EVANGELISTA, Respondents.
FACTS:
Respondents, under the name and style of R.M. Sy Chicks, are engaged in the large-scale
business of buying broiler eggs, hatching them, and selling their hatchlings (chicks) and egg
by-products[4] in Bulacan and Nueva Ecija. For the incubation and hatching of these eggs,
respondents availed of the hatchery services of ASJ Corp., a corporation duly registered in
the name of San Juan and his family.
Sometime in 1991, respondents delivered to petitioners various quantities of eggs at an
agreed service fee of 80 centavos per egg, whether successfully hatched or not. Each
delivery was reflected in a Setting Report indicating the following: the number of eggs
delivered; the date of setting or the date the eggs were delivered and laid out in the
incubators; the date of candling or the date the eggs, through lighting system, were inspected
and determined if viable or capable of being hatched into chicks; and the date of hatching,
which is also the date respondents would pick-up the chicks and by-products. Initially, the
service fees were paid upon release of the eggs and by-products to respondents. But as their
business went along, respondents delays on their payments were tolerated by San Juan, who
just carried over the balance, as there may be, into the next delivery, out of keeping goodwill
with respondents.
On February 3, 1993, respondent Efren went to the hatchery to pick up the chicks and by-
products, but San Juan refused to release the same due to respondents failure to settle
accrued service fees on several setting reports. Nevertheless, San Juan accepted from Efren
10,245 eggs and P15,000.00[8] in cash as partial payment for the accrued service fees.
On February 10, 1993, Efren returned to the hatchery to pick up the chicks and by-products,
but San Juan again refused to release the same unless respondents fully settle their
accounts. In the afternoon of the same day, respondent Maura, with her son Anselmo,
tendered P15,000.00[9] to San Juan, and tried to claim the chicks and by-products. She
explained that she was unable to pay their balance because she was hospitalized for an
undisclosed ailment. San Juan accepted the P15,000.00, but insisted on the full settlement of
respondents accounts before releasing the chicks and by-products. Believing firmly that the
total value of the eggs delivered was more than sufficient to cover the outstanding balance,
Maura promised to settle their accounts only upon proper accounting by San Juan. San
Juan disliked the idea and threatened to impound their vehicle and detain them at the
hatchery compound if they should come back unprepared to fully settle their accounts with
him.
On February 11, 1993, respondents directed their errand boy, Allan Blanco, to pick up the
chicks and by-products and also to ascertain if San Juan was still willing to settle amicably
their differences. Unfortunately, San Juan was firm in his refusal and reiterated his threats on
respondents. Fearing San Juans threats, respondents never went back to the hatchery.
The parties tried to settle amicably their differences before police authorities, but to no
avail. Thus, respondents filed with the RTC an action for damages based on petitioners
retention of the chicks and by- On July 8, 1996, the RTC ruled in favor of
respondents.[12] The RTC disregarded the corporate fiction of ASJ Corp.,[13] and held it and
3
San Juan solidarily liable to respondents actual damages, moral damages, and
attorney’s fees, plus interests and costs of suit.
Both parties appealed to the Court of Appeals. Respondents prayed for an additional
award of actual damages for the cost of other unreturned by-products
and P1,727,687.52 as unrealized profits, while petitioners prayed for the reversal
of the trial courts entire decision.
The Court of Appeals denied both appeals for lack of merit and affirmed the trial courts
decision, with the slight modification of including an award of exemplary damages
of P10,000.00 in favor of respondents. The Court of Appeals, applying the doctrine of
piercing the veil of corporate fiction, considered ASJ Corp. and San Juan as one entity,
after finding that there was no bona fide intention to treat the corporation as separate and
distinct from San Juan and his wife Iluminada.
ISSUE:
Whether or not the detention of chicks was proper and whether the petitioners are
jointly and severally liable to pay respondents
HELD:
1.YES!!
The petitioners contend that the retention was justified and did not constitute an abuse
of rights since it was respondents who failed to comply with their
obligation. Respondents, for their part, aver that all the elements on abuse of rights
were present. They further state that despite their offer to partially satisfy the accrued
service fees, and the fact that the value of the chicks and by-products was more than
sufficient to cover their unpaid obligations, petitioners still chose to withhold the delivery.
The crux of the controversy, in our considered view, is simple enough. Was
petitioners retention of the chicks and by-products on account of respondents failure to pay
the corresponding service fees unjustified? While the trial and appellate courts had the same
decisions on the matter, suffice it to say that a modification is proper. Worth stressing,
petitioners act of withholding the chicks and by-products is entirely different from petitioners
unjustifiable acts of threatening respondents. The retention had legal basis; the threats had
none. To begin with, petitioners obligation to deliver the chicks and by-products corresponds
to three dates: the date of hatching, the delivery/pick-up date and the date of respondents
payment. On several setting reports, respondents made delays on their payments, but
petitioners tolerated such delay. When respondents accounts accumulated because of their
successive failure to pay on several setting reports, petitioners opted to demand the full
settlement of respondents accounts as a condition precedent to the delivery. However,
respondents were unable to fully settle their accounts.
Respondents offer to partially satisfy their accounts is not enough to extinguish their
obligation.
LAW:
Under Article 1248of the Civil Code, the creditor cannot be compelled to accept partial
payments from the debtor, unless there is an express stipulation to that effect. More
so, respondents cannot substitute or apply as their payment the value of the chicks
and by-products they expect to derive because it is necessary that all the debts be for
the same kind, generally of a monetary character. Needless to say, there was no valid
application of payment in this case.
2. NO!! There was violation to their reciprocal obligation.
Furthermore, it was respondents who violated the very essence of reciprocity in
contracts, consequently giving rise to petitioners right of retention. This case is clearly one
among the species of non-performance of a reciprocal obligation. Reciprocal obligations are
those which arise from the same cause, wherein each party is a debtor and a creditor of the
other, such that the performance of one is conditioned upon the simultaneous fulfillment of the
other.From the moment one of the parties fulfills his obligation, delay by the other party
begins.
Topic: Identity of prestation( payment or performance)
G.R. No. 149420 October 8, 2003
SONNY LO, petitioner,
vs.
KJS ECO-FORMWORK SYSTEM PHIL., INC., respondent.
Facts: Respondent KJS ECO-FORMWORK System Phil., Inc. is a corporation engaged in the
sale of steel scaffoldings, while petitioner Sonny L. Lo, doing business under the name and
style San’s Enterprises, is a building contractor. On February 22, 1990, petitioner ordered
4
scaffolding equipments from respondent worth P540,425.80.He paid a downpayment in the
amount of P150,000.00. The balance was made payable in ten monthly installments.
Respondent delivered the scaffoldings to petitioner. Petitioner was able to pay the first two
monthly installments.1a\^/phi1.net His business, however, encountered financial difficulties
and he was unable to settle his obligation to respondent despite oral and written demands
made against him.
On October 11, 1990, petitioner and respondent executed a Deed of Assignment, whereby
petitioner assigned to respondent his receivables in the amount of P335,462.14 from Jomero
Realty Corporation.
However, when respondent tried to collect the said credit from Jomero Realty Corporation, the
latter refused to honor the Deed of Assignment because it claimed that petitioner was also
indebted to it. On November 26, 1990, respondent sent a letter to petitioner demanding
payment of his obligation, but petitioner refused to pay claiming that his obligation had been
extinguished when they executed the Deed of Assignment.
Consequently, on January 10, 1991, respondent filed an action for recovery of a sum of
money against the petitioner before the Regional Trial Court of Makati, Branch 147, which
was docketed as Civil Case No. 91-074.
During the trial, petitioner argued that his obligation was extinguished with the execution of
the Deed of Assignment of credit. Respondent, for its part, presented the testimony of its
employee, AlmedaBañaga, who testified that Jomero Realty refused to honor the assignment
of credit because it claimed that petitioner had an outstanding indebtedness to it.
On August 25, 1994, the trial court rendered a decision dismissing the complaint on the
ground that the assignment of credit extinguished the obligation.
Respondent appealed the decision to the Court of Appeals. On April 19, 2001, the appellate
court rendered a decision,the dispositive portion of which reads:
WHEREFORE, finding merit in this appeal, the court REVERSES the appealed Decision and
enters judgment ordering defendant-appellee Sonny Lo to pay the plaintiff-appellant KJS
ECO-FORMWORK SYSTEM PHILIPPINES, INC.
Issue: W/N the Deed of Assignment extinguished Lo’s obligation.
Held: No, An assignment of credit is an agreement by virtue of which the owner of a credit,
known as the assignor, by a legal cause, such as sale, dacion en pago, exchange or
donation, and without the consent of the debtor, transfers his credit and accessory rights to
another, known as the assignee, who acquires the power to enforce it to the same extent as
the assignor could enforce it against the debtor.
Corollary thereto, in dacion en pago, as a special mode of payment, the debtor offers another
thing to the creditor who accepts it as equivalent of payment of an outstanding debt. In order
that there be a valid dation in payment, the following are the requisites: (1) There must be the
performance of the prestation in lieu of payment (animosolvendi) which may consist in the
delivery of a corporeal thing or a real right or a credit against the third person; (2) There must
be some difference between the prestation due and that which is given in substitution (aliud
pro alio); (3) There must be an agreement between the creditor and debtor that the obligation
is immediately extinguished by reason of the performance of a prestation different from that
due. The undertaking really partakes in one sense of the nature of sale, that is, the creditor is
really buying the thing or property of the debtor, payment for which is to be charged against
the debtor’s debt. As such, the vendor in good faith shall be responsible, for the existence and
legality of the credit at the time of the sale but not for the solvency of the debtor, in specified
circumstances.
Hence, it may well be that the assignment of credit, which is in the nature of a sale of personal
property, produced the effects of a dation in payment which may extinguish the
obligation. However, as in any other contract of sale, the vendor or assignor is bound by
certain warranties. More specifically, the first paragraph of Article 1628 of the Civil Code
provides:
The vendor in good faith shall be responsible for the existence and legality of the credit at the
time of the sale, unless it should have been sold as doubtful; but not for the solvency of the
debtor, unless it has been so expressly stipulated or unless the insolvency was prior to the
sale and of common knowledge.
From the above provision, petitioner, as vendor or assignor, is bound to warrant the existence
and legality of the credit at the time of the sale or assignment. When Jomero claimed that it
was no longer indebted to petitioner since the latter also had an unpaid obligation to it, it
essentially meant that its obligation to petitioner has been extinguished by compensation. In
other words, respondent alleged the non-existence of the credit and asserted its claim to
petitioner’s warranty under the assignment. Therefore, it behooved on petitioner to make
good its warranty and paid the obligation
Furthermore, we find that petitioner breached his obligation under the Deed of Assignment, to
wit:
And the ASSIGNOR further agrees and stipulates as aforesaid that the said ASSIGNOR, his
heirs, executors, administrators, or assigns, shall and will at times hereafter, at the request of
said ASSIGNEE, its successors or assigns, at his cost and expense, execute and do all such
further acts and deeds as shall be reasonably necessary to effectually enable said
ASSIGNEE to recover whatever collectibles said ASSIGNOR has in accordance with the true
intent and meaning of these presents.(underscoring ours)
Indeed, by warranting the existence of the credit, petitioner should be deemed to have
ensured the performance thereof in case the same is later found to be inexistent. He should
be held liable to pay to respondent the amount of his indebtedness.
#4. Payment or Performance (Payment by Cession/ Dation in Payment)
GR No. 118342, January 5, 1998 DBP v Court of Appeals and Lydia Cuba
GR No 118367, January 5, 1998 Lydia Cuba v Court of Appeals, Development Bank of
the Philippines and AgripinaCaperal
FACTS:
These two consolidated cases stemmed from a complaint[1] filed against DBP and Caperal
filed Lydia Cuba.
5
Plaintiff Lydia P. Cuba is a grantee of a Fishpond Lease Agreement No. 2083 (new) dated
May 13, 1974 from the Government. She obtained loans from the DBP in the amounts of
P109,000.00; P109,000.00; and P98,700.00 under the terms stated in the Promissory Notes
dated September 6, 1974; August 11, 1975; and April 4, 1977. As security for said loans,
plaintiff Lydia P. Cuba executed two Deeds of Assignment of her Leasehold Rights. However,
she failed to pay her loan on the scheduled dates in accordance with the terms of the
Promissory Notes. DBP thereafter appropriated the Leasehold rights of Cuba over the
fishpond in question without foreclosure proceedings, either judicial or extrajudicial. After
which, the DBP executed a Deed of Conditional Sale of the Leasehold Rights in favor of
Cuba. In the negotiation for repurchase, plaintiff Lydia Cuba addressed two letters to the
Manager DBP, Dagupan City dated November 6, 1979 and December 20, 1979. DBP
thereafter accepted the offer to repurchase in a letter addressed to plaintiff. Thereafter, a
Fishpond Lease Agreement was issued by the Ministry of Agriculture and Food for plaintiff
Cuba only, excluding her husband.
When Lydia Cuba later on failed to pay her amortizations stipulated in the Deed of Conditional
Sale, she entered with the DBP a temporary arrangement whereby in consideration for the
deferment of the Notarial Rescission of Deed of Conditional Sale, plaintiff Lydia Cuba
promised to make certain payments as stated in temporary Arrangement dated February 23,
1982. Defendant DBP thereafter sent a Notice of Rescission thru Notarial Act and which was
received by plaintiff Lydia Cuba. DBP then took possession of the Leasehold Rights over the
fishpond, and then advertised in the SUNDAY PUNCH the public bidding to dispose the
property. DBP thereafter executed a Deed of Conditional Sale in favor of defendant
AgripinaCaperal on August 16, 1984. Caperal was later on awarded the Fishpond Lease
Agreement by the Ministry of Agriculture and Food.
Cuba then challenged the act of DBP in appropriating to itself Cuba’s leasehold rights over
the fishpond without foreclosure proceedings, contending that the same was contrary to Art
2088 of the Civil Code, therefore invalid. DBP on the otherhand stressed that it merely
exercised its contractual right under the Assignments of Leasehold Rights, which was not a
contract of mortgage. Defendant Caperal sided with DBP.
Furthermore, Cuba insists that the assignment was a mortgage contract while DBP insists
that it had the effect of Novation.
ISSUE:
WON the leasehold rights was a mortgage contract.
WON the assignment amounts to cession of payment.
WON there is dation in payment.
WON condition No 12 constitutes pactumcommissorium.
WON the DBP may appropriate to itself the leasehold rights over the fishpond without
any foreclosure proceedings.
RULING:
YES, mortgage contract.
We agree with CUBA that the assignment of leasehold rights was a mortgage contract. It is
undisputed that CUBA obtained from DBP three separate loans totalling P335,000, each of
which was covered by a promissory note. In all of these notes, there was a provision that: In
the event of foreclosure of the mortgage securing this notes, I/We further bind
myself/ourselves, jointly and severally, to pay the deficiency, if any. [7]
Simultaneous with the execution of the notes was the execution of Assignments of Leasehold
Rights [8] where CUBA assigned her leasehold rights and interest on a 44-hectare fishpond,
together with the improvements thereon. The deeds of assignment constantly referred to the
assignor (CUBA) as borrower; the assigned rights, as mortgaged properties; and the
instrument itself, as mortgage contract. Moreover, under condition no. 22 of the deed, it was
provided that failure to comply with the terms and condition of any of the loans shall cause all
other loans to become due and demandable and all mortgages shall be foreclosed. And,
condition no. 33 provided that if foreclosure is actually accomplished, the usual 10% attorneys
fees and 10% liquidated damages of the total obligation shall be imposed. There is, therefore,
no shred of doubt that a mortgage was intended.
Besides, in their stipulation of facts the parties admitted that the assignment was by way of
security for the payment of the loans.
We find no merit in DBPs contention that the assignment novated the promissory notes in that
the obligation to pay a sum of money the loans (under the promissory notes) was substituted
by the assignment of the rights over the fishpond (under the deed of assignment). As correctly
pointed out by CUBA, the said assignment merely complemented or supplemented the notes;
both could stand together. The former was only an accessory to the latter. Contrary to DBPs
submission, the obligation to pay a sum of money remained, and the assignment merely
served as security for the loans covered by the promissory notes.
No, there was no cession.
Neither did the assignment amount to payment by cession under Article 1255 of the Civil
Code for the plain and simple reasonthat there was only one creditor, the DBP. Article 1255
contemplates the existence of two or more creditors and involves the assignment of all the
debtors property.
No, it was not a dation in payment.
Nor did the assignment constitute dation in payment under Article 1245 of the civil Code,
which reads: Dation in payment, whereby property is alienated to the creditor in satisfaction of
a debt in money, shall be governed by the law on sales. It bears stressing that the
assignment, being in its essence a mortgage, was but a security and not a satisfaction of
indebtedness.[10]
NO, it was not in the nature of pactumcommissorium.
6
12. That effective upon the breach of any condition of this assignment, the
Assignor hereby appoints the Assignee his Attorney-in-fact with full power and
authority to take actual possession of the property above-described, together with
all improvements thereon, subject to the approval of the Secretary of Agriculture
and Natural Resources, to lease the same or any portion thereof and collect
rentals, to make repairs or improvements thereon and pay the same, to sell or
otherwise dispose of whatever rights the Assignor has or might have over said
property and/or its improvements and perform any other act which the Assignee
may deem convenient to protect its interest. All expenses advanced by the
Assignee in connection with purpose above indicated which shall bear the same
rate of interest aforementioned are also guaranteed by this Assignment. Any
amount received from rents, administration, sale or disposal of said property may
be supplied by the Assignee to the payment of repairs, improvements, taxes,
assessments and other incidental expenses and obligations and the balance, if
any, to the payment of interest and then on the capital of the indebtedness
secured hereby. If after disposal or sale of said property and upon application of
total amounts received there shall remain a deficiency, said Assignor hereby binds
himself to pay the same to the Assignee upon demand, together with all interest
thereon until fully paid. The power herein granted shall not be revoked as long as
the Assignor is indebted to the Assignee and all acts that may be executed by the
Assignee by virtue of said power are hereby ratified.
We do not, however, buy CUBAs argument that condition no. 12 of the deed of assignment
constituted pactumcommissorium. The elements of pactumcommissorium are as follows: (1)
there should be a property mortgaged by way of security for the payment of the principal
obligation, and (2) there should be a stipulation for automatic appropriation by the creditor of
the thing mortgaged in case of non-payment of the principal obligation within the stipulated
period.[11]It did not provide that the ownership over the leasehold rights would automatically
pass to DBP upon CUBAs failure to pay the loan on time. It merely provided for the
appointment of DBP as attorney-in-fact with authority, among other things, to sell or otherwise
dispose of the said real rights, in case of default by CUBA, and to apply the proceeds to the
payment of the loan. This provision is a standard condition in mortgage contracts and is in
conformity with Article 2087 of the Civil Code, which authorizes the mortgagee to foreclose
the mortgage and alienate the mortgaged property for the payment of the principal obligation.
No. DBP may not appropriate the leasehold rights without foreclosure proceedings.
DBP, however, exceeded the authority vested by condition no. 12 of the deed of
assignment. As admitted by it during the pre-trial, it had [w]ithout foreclosure proceedings,
whether judicial or extrajudicial, appropriated the [l]easehold [r]ights of plaintiff Lydia Cuba
over the fishpond in question. Its contention that it limited itself to mere administration by
posting caretakers is further belied by the deed of conditional sale it executed in favor of
CUBA. The deed stated:
WHEREAS, the Vendor [DBP] by virtue of a deed of assignment executed in its favor by the
herein vendees [Cuba spouses] the former acquired all the rights and interest of the latter
over the above-described property. The title to the real estate property [sic] and all
improvements thereon shall remain in the name of the Vendor until after the purchase price,
advances and interest shall have been fully paid.(Emphasis supplied).
It is obvious from the above-quoted paragraphs that DBP had appropriated and taken
ownership of CUBAs leasehold rights merely on the strength of the deed of assignment. DBP
cannot take refuge in condition no. 12 of the deed of assignment to justify its act of
appropriating the leasehold rights. As stated earlier, condition no. 12 did not provide that
CUBAs default would operate to vest in DBP ownership of the said rights. Besides, an
assignment to guarantee an obligation, as in the present case, is virtually a mortgage and not
an absolute conveyance of title which confers ownership on the assignee. [12] At any rate,
DBPs act of appropriating CUBAs leasehold rights was violative of Article 2088 of the Civil
Code, which forbids a creditor from appropriating, or disposing of, the thing given as security
for the payment of a debt. The fact that CUBA offered and agreed to repurchase her
leasehold rights from DBP did not estop her from questioning DBPs act of
appropriation. Estoppel is unavailing in this case.Estoppel cannot give validity to an act that is
prohibited by law or against public policy. Hence, the appropriation of the leasehold rights,
being contrary to Article 2088 of the Civil Code and to public policy, cannot be deemed
validated by estoppel.
***SINAMA KO NA LAHAT NG ISSUES KASI OBLI NAMAN LAHAT WAG NA TAYO
TAMARIN 2 PAGES LANG YAN MG BESSY BASAHIN NYO NA LAHAT HAHAHAH***
TOPIC: Payment or performance; Proper payee
G.R. No. 125862. April 15, 2004
FRANCISCO CULABA and DEMETRIA CULABA, doing business under the name and
style Culaba Store, petitioners, vs. COURT OF APPEALS and SAN MIGUEL
CORPORATION, respondents.
FACTS: The spouses Francisco and DemetriaCulaba were the owners and proprietors of the
Culaba Store and were engaged in the sale and distribution of San Miguel Corporations
(SMC) beer products.
SMC sold beer products on credit to the Culaba spouses in the amount of P28,650.00, as
evidenced by Temporary Credit Invoice No. 42943. Thereafter, the Culaba spouses made a
partial payment of P3,740.00, leaving an unpaid balance of P24,910.00. As they failed to
pay despite repeated demands, SMC filed an action for collection of a sum of money
against them before the RTC of Makati, Branch 138.
7
The defendant-spouses denied any liability, claiming that they had already paid the plaintiff
in full on four separate occasions. To substantiate this claim, the defendants presented four
(4) Temporary Charge Sales (TCS) Liquidation Receipts.
Defendant Francisco Culaba testified that he made the foregoing payments to an SMC
supervisor who came in an SMC van. He was then showed a list of customers accountabilities
which included his account. The defendant, in good faith, then paid to the said
supervisor, and he was, in turn, issued genuine SMC liquidation receipts.
For its part, SMC submitted a publishers affidavit to prove that the entire booklet of TCSL
Receipts bearing Nos. 27301-27350 were reported lost by it, and that it caused the
publication of the notice of loss [which stated that any transaction entered into with the
use of aforementioned receipts will not be honoured] in the July 9, 1983 issue of the Daily
Express.
RTC RULING
After trial on the merits, the trial court rendered judgment in favor of SMC, and held the
Culaba spouses liable on the balance of its obligation. According to the trial court, it was
unusual that defendant Francisco Culaba forgot the name of the collector to whom he made
the payments and that he did not require the said collector to print his name on the receipts.
The court also noted that although they were part of a single booklet, the TCS Liquidation
Receipts submitted by the defendants did not appear to have been issued in their natural
sequence. Furthermore, they were part of the lost booklet receipts, which the public was duly
warned of through the Notice of Loss the plaintiff caused to be published in a daily
newspaper. This confirmed the plaintiffs claim that the receipts presented by the defendants
were spurious ones.
The appellants asserted that while the trial courts observations were true, it was the usual
business practice in previous transactions between them and SMC. The SMC previously
honored receipts not bearing the salesmans name. According to appellant Francisco Culaba,
he even lost some of the receipts, but did not encounter any problems.
According to appellant Francisco, he could not be faulted for paying the SMC collector who
came in a van and was in uniform, and that any regular customer would, without any
apprehension, transact with such an SMC employee. Furthermore, the respective receipts
issued to him at the time he paid on the four occasions mentioned had not yet then been
declared lost. Thus, the subsequent publication in a daily newspaper declaring the booklets
lost did not affect the validity and legality of the payments made. Accordingly, by its
actuations, the SMC was estopped from questioning the legality of the payments and had no
cause of action against the appellants.
The appellee, for its part, contended that the primary issue in the case at bar revolved around
the basic and fundamental principles of agency. It was incumbent upon the defendants-
appellants to exercise ordinary prudence and reasonable diligence to verify and identify the
extent of the alleged agents authority. It was their burden to establish the true identity of the
assumed agent, and this could not be established by mere representation, rumor or general
reputation. As they utterly failed in this regard, the appellants must suffer the consequences.
CA AFFIRMED RTC.
According to the petitioners, receiving receipts from the private respondents agents
instead of its salesmen was a usual occurrence, as they had been operating the store
since 1979. Thus, on four occasions in April 1983, when an agent of the respondent came to
the store wearing an SMC uniform and driving an SMC van, petitioner Francisco Culaba,
without question, paid his accounts. He received the receipts without fear, as they were
similar to what he used to receive before. Furthermore, the petitioners assert that, common
experience will attest that unless the attention of the customers is called for, they would not
take note of the serial number of the receipts.
Petitioner Francisco Culaba avers that the agent to whom the accounts were paid had all the
physical and material attributes or indications of a representative of the private respondent,
leaving no doubt that he was duly authorized by the latter. Petitioner Francisco Culabas
testimony that he does not necessarily check the contents of the receipts issued to him except
for the amount indicated if [the] same accurately reflects his actual payment is a common
attitude of customers. He could, thus, not be faulted for paying the private respondents agent
on four occasions. Petitioner Francisco Culaba asserts that he made the payment in good
faith, to an agent who issued SMC receipts which appeared to be genuine. Thus, according to
the petitioners, they had duly paid their obligation in accordance with Articles 1240 and 1242
of the New Civil Code.
The private respondent, for its part, avers that the burden of proving payment is with the
debtor, in consonance with the express provision of Article 1233 of the New Civil Code. The
petitioners miserably failed to prove the self-serving allegation that they already paid their
liability to the private respondent. Furthermore, under normal circumstances, an obligor would
not just pay a substantial amount to someone whom he saw for the first time, without even
asking for the latter’s name.
ISSUE: Whether the payment of the petitioners’ obligation to the private respondent
was properly made, thus, extinguishing the same
HELD: NO
First. Receipts Nos. 27331, 27318, 27339 and 27346 were included in the private
respondents lost booklet, which loss was duly advertised in a newspaper of general
8
circulation; thus, the private respondent could not have officially issued them to the petitioners
to cover the alleged payments on the dates appearing thereon.
Second. There was something amiss in the way the receipts were issued to the petitioners, as
one receipt bearing a higher serial number was issued ahead of another receipt bearing a
lower serial number, supposedly covering a later payment. The petitioners failed to explain
the apparent mix-up in these receipts, and no attempt was made in this regard.
Third. The fact that the salesman’s name was invariably left blank in the four receipts and that
the petitioners could not even remember the name of the supposed impostor who received
the said payments strongly argue against the veracity of the petitioners claim.
We find no cogent reason to reverse the said findings.
Payment is a mode of extinguishing an obligation. Article 1240 of the Civil Code
provides that payment shall be made to the person in whose favor the obligation has
been constituted, or his successor-in-interest, or any person authorized to receive it. In
this case, the payments were purportedly made to a supervisor of the private respondent, who
was clad in an SMC uniform and drove an SMC van. He appeared to be authorized to accept
payments as he showed a list of customers accountabilities and even issued SMC liquidation
receipts which looked genuine. Unfortunately for petitioner Francisco Culaba, he did not
ascertain the identity and authority of the said supervisor, nor did he ask to be shown
any identification to prove that the latter was, indeed, an SMC supervisor. The petitioners
relied solely on the man’s representation that he was collecting payments for SMC. Thus, the
payments the petitioners claimed they made were not the payments that discharged
their obligation to the private respondent.
The basis of agency is representation. A person dealing with an agent is put upon inquiry
and must discover upon his peril the authority of the agent. In the instant case, the
petitioner’s loss could have been avoided if they had simply exercised due diligence in
ascertaining the identity of the person to whom they allegedly made the payments. The
fact that they were parting with valuable consideration should have made them more
circumspect in handling their business transactions. Persons dealing with an assumed
agent are bound at their peril to ascertain not only the fact of agency but also the
nature and extent of authority, and in case either is controverted, the burden of proof is
upon them to establish it. The petitioners in this case failed to discharge this burden,
considering that the private respondent vehemently denied that the payments were accepted
by it and were made to its authorized representative.
Negligence is the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing
of something, which a prudent and reasonable man would not do. In the case at bar, the most
prudent thing the petitioners should have done was to ascertain the identity and authority of
the person who collected their payments. Failing this, the petitioners cannot claim that
they acted in good faith when they made such payments. Their claim therefor is
negated by their negligence, and they are bound by its consequences. Being negligent
in this regard, the petitioners cannot seek relief on the basis of a supposed agency.
WHEREFORE, the instant petition is hereby DENIED. The assailed Decision dated April 16,
1996, and the Resolution dated July 19, 1996 of the Court of Appeals are AFFIRMED. Costs
against the petitioners.
TOPIC: Proper Payee
G.R. No. 121989 --- January 31, 2006
PHILIPPINE COMMERCIAL INTERNATIONAL BANK,Petitioner,
-versus-
COURT OF APPEALS, ATLAS CONSOLIDATED MINING & DEVELOP-
MENT CORPORATION,Respondents.
FACTS: PCIB and, Manila Banking Corporation (MBC) were joint bidders in a
foreclosure sale held on 20 December 1975 of assorted mining machinery and equipment
previously mortgaged to them by the Philippine Iron Mines, Inc. (PIM).
Four (4) years later, Atlas agreed to purchase some of these properties owned jointly at that
time by PCIB and MBC. The sale was evidenced by a Deed of Sale dated 8 February 1979,
with the parties agreeing therein to an initial down payment of P12,000,000.00 and the
balance of P18,000,000.00 payable in six (6) monthly installments. It was also stipulated that
the total purchase price would be finally adjusted to exclude items to be retained by the
Bureau of Mines. The contract contained provisions expressly warranting the following: (1) full
and sufficient title to the properties, (2) freeing the properties from all liens and
encumbrances, (3) freeing Atlas from all claims and incidental actions of the National
Mines and Allied Workers Union (NAMAWU), and (4) full rights and capacity of the seller to
convey title to and effect peaceful delivery of the properties to Atlas.
The NAMAWU claim stemmed from a labor dispute docketed as RB-VI-3322-75 of the
National Labor Relations Commission (NLRC), where it obtained a favorable judgment
against PIM in the amount of P4,298,307.77. This award was affirmed by the Court.[5] After
the judgment became final and executory, a writ of execution was duly issued.
In compliance with the contract, on 12 February 1979, Atlas issued Hongkong and
Shanghai Bank Check No. 003842 in the amount of P12,000,000.00 as downpayment,
payable to both PCIB and MBC.
In a letter-agreement[6] dated 7 March 1979 between PCIB and MBC bearing the conformity of
Atlas that was made a supplement to the Deed of Sale, the final purchase price was adjusted
to P29,630,000.00.
9
On the following day, PCIB and MBC wrote Atlas requesting that subsequent
installment payments of the balance be made in the following proportions: PCIB 63.1579%
and MBC - 36.8421%. The request was expressed through a letter[7] signed by Ruben G.
Asedillo and Porfirio Q. Cabalu, Vice Presidents respectively of MBC and PCIB.
On 18 April 1979, Atlas paid to NAMAWU the amount of P4,298,307.77. This payment was
made in compliance with the writ of garnishment issued on the same date against Atlas to
satisfy the final judgment in favor of NAMAWU and against PIM.
PCIB and MBC filed on 23 April 1979 a petition for certiorari with this Court, seeking to annul
and set aside the order of garnishment and to enjoin Atlas from complying with it. The Court,
in G.R. No. L-50402, dismissed the petition and sustained Atlas rights.
In the meantime, Atlas had made six (6) monthly payments in 1979
totaling P13,696,692.22, of which P8,650,543.18 or 63.1579% was received by PCIB.
According to Atlas, apart from the downpayment of P12,000,000.00 and installment
payments of P13,696,692.22, it should be credited with its payment of P4,298,307.77 to
NAMAWU as a consequence of the garnishment with which the latter had secured together
with corresponding P5,000.00 sheriffs fee. Thus, Atlas claims to have paid a total
of P30,000,000.00, of which P370,000.00 was an overpayment. Following the payment
allocations between PCIB and MBI, Atlas claimed that PCIB should reimburse it to the tune
of P233,684.23.When PCIB refused to pay, Atlas sued PCIB to obtain reimbursement of
the alleged overpayment.
On the other hand, PCIB contended that Atlas still owed it a total of P908,398.75.
It also alleged that even before the writ of garnishment was served on Atlas, the judgment in
favor of NAMAWU had already been partially satisfied in the amount of P601,260.00. On
account of this earlier payment, PCIB argued that the total payments NAMAWU had
received exceeded what it was entitled to by reason of the final judgment and,
therefore, Atlas could not credit the full amount received by NAMAWU in satisfaction of
the Atlas obligation to PCIB.
Trial Court: Upheld PCIBs position and ordered Atlas to pay P908,398.75, plus interest at
the legal rate from the time of demand until payment of said amount.[10]
Court of Appeals: Reversedthelowercourt by ordering PCIB to pay Atlas the sum
of P233,654.23, plus interest at the legal rate from the date of the first demand on 3
September 1984, until fully paid, as well as the sum of P20,000.00 as attorneys fees and
costs of suit.
PCIB moved for a reconsideration of the decision but the same was denied by the Court
of Appeals.

PCIB is now before us. The instant petition is anchored on two grounds, namely: (1)
the Court of Appeals erred in reversing the trial court by disturbing the latters factual findings
and conclusions despite the absence of strong and cogent reasons: and (2) the Court of
Appeals erred in finding that Atlas had complied with its obligation to PCIB.[12]
Prefatorily, findings of facts of the Court of Appeals are final and conclusive and
cannot be reviewed on appeal to this Court. A deviation from this rule, however, is justified
where the findings of fact of the Court of Appeals contradict those of the trial court.[14] In the
case at bar, the contradictory findings of the courts below necessitate our review of the
factual issues.
ISSUES: The controversy boils down into whether Atlas overpaid or underpaid
PCIB. To resolve the conflicting claims, we must dispose of two issues: whether PCIB
should settle for only P6,819,766.10 which it received out of the P12,000,000.00
downpaymentor it is entitled to more than that, specifically 63.1579% of the downpayment;
and whether Atlas should be fully credited for the amount of P4,298,307.77 it had paid
to NAMAWU.
There is no dispute that the total purchase price of the properties bought by Atlas
was P29,630,000.00. Of this amount, PCIB claims that it is entitled to receive from Atlas the
total of P18,713,685.77 or 63.1579% of the purchase price, pursuant to the letter dated 7
March 1979 of the P12,000,000.00 down payment made by Atlas to PCIB and MBC, and
PCIB acknowledged that it had received P6,819,766.10. PCIB also admitted having
received P8,650,543.18 as its share from the subsequent installment payments made by
Atlas.
1st ISSUE:Court of Appeals rejected PCIBs claim that it should received 63.1579% of
the downpayment. It ruled in essence that PCIB cannot demand from Atlas more than what it
got from MBC out of the downpayment remitted by Atlas to both PCIB and MBC.
1st HELD: We uphold the appellate court on this issue.
This case concerns a joint obligation,which is defined as an obligation where
there is a concurrence of several creditors, or of several debtors, or of several debtors,
or of several creditors and debtors, by virtue of which each of the creditors has a right
to demand, and each of the debtors is bound to render, compliance with his
proportionate part of the prestation which constitutes the object of the obligation.
Article 1208 of the Civil Code mandates the equal sharing of creditors in the payment of debt
in the absence of any law or stipulation to the contrary.
It is beyond dispute that Atlas issued Hongkong Shanghai Bank Check No. 003842 in
the sum of P12,000,000.00 with PCIB and MBC as joint payees as downpayment of the
purchase price on 12 February 1979. The check was received by PorfirioCabalu, Jr., a PCIB
10
Vice-President. As admitted by the parties during trial, the check was afterwards deposited in
the account of MBC.[18] Therefore, it is reasonable to conclude that the amount received
by PCIB, as evidenced by the receipt, was given to it by MBC.
Undeniably, there was yet no agreement as of that date concerning the corresponding
share of each creditor. It was only on 8 March 1979 when PCIB communicated to Atlas the
percentage of payments to be remitted to PCIB and MBC. Before said date, Atlas could be
secure in the thought that the matter of sharing was best left to the creditors to decide.
Thus, we agree with the appellate courts conclusion that whatever deficiency PCIB
is entitled from the P12,000,000.00 down payment had become an internal matter between it
and MBC.The obligation was deemed fulfilled to the extent of P12,000,000.00 on the part
of Atlas when the check was received by a representative of PCIB and eventually deposited in
the account of MBC.
2nd HELD: PCIB posits that Atlas cannot be credited with the payment of the full
amount of P4,298,307.77 because the remaining outstanding balance with respect to the
NAMAWU judgment claim at the time of the service of the writ of garnishment on Atlas was
only P3,697,047.77. Atlas, on the other hand, insists that the creditable payment to NAMAWU
was P4,298,307.77, as upheld by the Supreme Court in NAMAWU v. PCIB. Accordingly, it is
this amount which should be the basis in extracting the 63.1579% share of PCIB, which
amounts to P2,714,720.92 and not P2,334,977.74 as erroneously asserted by PCIB.[20]
The appellate court upheld the position of Atlas on the second issue. We reverse the
appellate court.
While the original amount sought to be garnished was P4,298,307.77, the partial
payment of P601,260.00 naturally reduced it to P3,697,047.77. Clearly, Atlas overpaid
NAMAWU. It will be recalled that upon receipt of the writ of garnishment, Atlas immediately
paid NAMAWU, without making any investigation or consultation with PCIB.
Article 1236 of the Civil Code applies in this instance. It provides that whoever pays
for another may demand from the debtor what he has paid, except that if he paid without the
knowledge or against the will of the debtor, he can recover only insofar as the payment has
been beneficial to the debtor.
PCIB is the debtor in this case, it having purchased along with MBC legally garnished
properties, while Atlas is the third person who paid the obligation of the debtor without the
latters knowledge and consent. Since Atlas readily paid NAMAWU without the knowledge
and consent of PCIB, Atlas may only recover from PCIB or, more precisely charge to
PCIB, only the amount of payment which has benefited the latter.
Generally, the third person who paid anothers debt is entitled to recover the full
amount he had paid. The law, however, limits his recovery to the amount by which the debtor
has been benefited, if the debtor has no knowledge of, or has expressed his opposition to
such payment. Where the defenses that could have been set up by the debtor against the
creditor were existing and perfected, a payment by a third person without the knowledge of
the debtor cannot obligate the debtor to such third person to an amount more than what he
could have been compelled by the creditor to pay. Thus, if the debt has been remitted, paid,
compensated or prescribed, a payment by a third person would constitute a payment of
what is not due; his remedy would be against the person who received the payment
under such conditions, and not against the debtor who did not benefit from the
payment.
The trial court correctly ruled that the overpayment amounting to P601,260.00
should be recovered from NAMAWU. The remedy of Atlas in this case would be to proceed,
not against PCIB, but against NAMAWU who was paid in excess, applying the principle that
no person can unjustly enrich himself at the expense of another.[22]
Having established that there has been partial satisfaction of the judgment in the
amount of P601,260.00, the remaining obligation of PCIB in the judgment account stood
at P2,334,977.74. Consequently, this is the only amount which must be credited to Atlas.
As it stands, the total payments by Atlas amounted to only P29,398,739.99. Therefore,
Atlas must settle P231,260.00, the balance of the purchase price, of which PCIB is entitled to
receive P146,058.96 as its proportionate share.
WHEREFORE, based on the foregoing, the petition is GRANTED in PART. The
Decision of the Court of Appeals is REVERSED and SET ASIDE and in lieu thereof Atlas is
ORDERED to pay PCIB the sum of P146,058.96, with legal interest commencing from the
time of first demand on 22 August 1985.
TOPIC: Proper payee
G.R. No. 82233 March 22, 1990
JOSE BARITUA and EDGAR BITANCOR, petitioners,
vs.
HONORABLE COURT OF APPEALS, NICOLAS NACARIO and VICTORIA RONDA
NACARIO, respondents.
FACTS:
In the evening of November 7, 1979, the tricycle then being driven by BienvenidoNacario
along the national highway at Barangay San Cayetano, in Baao, Camarines Sur, figured in an
accident with JB Bus No. 80 driven by petitioner Edgar Bitancor and owned and operated by
petitioner Jose Baritua. 3As a result of that accident Bienvenido and his passenger died 4 and
the tricycle was damaged. 5No criminal case arising from the incident was ever instituted. 6
Subsequently, on March 27, 1980, as a consequence of the extra-judicial settlement of the
matter negotiated by the petitioners and the bus insurer — Philippine First Insurance
Company, Incorporated (PFICI for brevity) — BienvenidoNacario's widow, Alicia
BaracenaVda. deNacario, received P18,500.00. In consideration of the amount she received,
Alicia executed on March 27, 1980 a "Release of Claim" in favor of the petitioners and PFICI,
releasing and forever discharging them from all actions, claims, and demands arising from the
accident which resulted in her husband's death and the damage to the tricycle which the
11
deceased was then driving. Alicia likewise executed an affidavit of desistance in which she
formally manifested her lack of interest in instituting any case, either civil or criminal, against
the petitioners. 7
On September 2, 1981, or about one year and ten months from the date of the accident on
November 7, 1979, the private respondents, who are the parents of BienvenidoNacario, filed
a complaint for damages against the petitioners with the then Court of First Instance of
Camarines Sur. 8 In their complaint, the private respondents alleged that during the vigil for
their deceased son, the petitioners through their representatives promised them (the private
respondents) that as extra-judicial settlement, they shall be indemnified for the death of their
son, for the funeral expenses incurred by reason thereof, and for the damage for the tricycle
the purchase price of which they (the private respondents) only loaned to the victim. The
petitioners, however, reneged on their promise and instead negotiated and settled their
obligations with the long-estranged wife of their late son. The Nacario spouses prayed that
the defendants, petitioners herein, be ordered to indemnify them in the amount of P25,000.00
for the death of their son Bienvenido, P10,000.00 for the damaged tricycle, P25,000.00 for
compensatory and exemplary damages, P5,000.00 for attorney's fees, and for moral
damages. 9
After trial, the court a quo dismissed the complaint, holding that the payment by the
defendants (herein petitioners) to the widow and her child, who are the preferred heirs and
successors-in-interest of the deceased Bienvenido to the exclusion of his parents, the
plaintiffs (herein private respondents), extinguished any claim against the defendants
(petitioners). 10
The parents appealed to the Court of Appeals which reversed the judgment of the trial
court. The appellate court ruled that the release executed by Alicia BaracenaVda. de Nacario
did not discharge the liability of the petitioners because the case was instituted by the private
respondents in their own capacity and not as "heirs, representatives, successors, and
assigns" of Alicia; and Alicia could not have validly waived the damages being prayed for (by
the private respondents) since she was not the one who suffered these damages arising from
the death of their son. Furthermore, the appellate court said that the petitioners "failed to rebut
the testimony of the appellants (private respondents) that they were the ones who bought the
tricycle that was damaged in the incident. Appellants had the burden of proof of such fact, and
they did establish such fact in their testimony . . . 11 Anent the funeral expenses, "(T)he
expenses for the funeral were likewise shouldered by the appellants (the private
respondents). This was never contradicted by the appellees (petitioners). . . . Payment (for
these) were made by the appellants, therefore, the reimbursement must accrue in their favor.
12
Consequently, the respondent appellate court ordered the petitioners to pay the private
respondents P10,000.00 for the damage of the tricycle, P5,000.00 for "complete" funeral
services, P450.00 for cemetery lot, P55.00 for oracionadulto, and P5,000.00 for attorney's
fees. 13 The petitioners moved for a reconsideration of the appellate court's decision 14but
their motion was denied. 15 Hence, this petition.
ISSUE:
The issuehere is whether or not the respondent appellate court erred in holding that the
petitioners are still liable to pay the private respondents the aggregate amount of
P20,505.00 despite the agreement of extrajudicial settlement between the petitioners
and the victim's compulsory heirs.
HELD:
The petition is meritorious.
Obligations are extinguished by various modes among them being by payment. Article 1231
of the Civil Code of the Philippines provides:
Art. 1231. Obligations are extinguished:
(1) By payment or performance;
There is no denying that the petitioners had paid their obligation petition arising from the
accident that occurred on November 7, 1979. The only question now is whether or not Alicia,
the spouse and the one who received the petitioners' payment, is entitled to it.
Article 1240 of the Civil Code of the Philippines enumerates the persons to whom payment to
extinguish an obligation should be made.
Art 1240. Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it.
Certainly there can be no question that Alicia and her son with the deceased are the
successors in interest referred to in law as the persons authorized to receive payment. The
Civil Code states:
Article 887. The following are compulsory heirs:
1. Legitimate children and descendants, with respect to their legitimate parents and
ascendants;
2. In default of the foregoing, legitimate parents and ascendants with respect to their
legitimate children and decendants;
3. The widow or widower;
4. Acknowledged natural children and natural children by legal fiction;
5. Other illegitimate children referred to in Article 287.
Compulsory heirs mentioned in Nos. 3, 4 and 5 are not excluded by those in Nos. 1 and 2.
Neither do they exclude one another. (Emphasis ours.)
Article 985.In default of legitimate children and descendants of the deceased, his parents and
ascendants shall inherit from him, to the exclusion of collateral relatives.
(Emphasis ours.)
It is patently clear that the parents of the deceased succeed only when the latter dies without
a legitimate descendant. On the other hand, the surviving spouse concurs with all classes of
heirs. As it has been established that Bienvenido was married to Alicia and that they
begot a child, the private respondents are not successors-in-interest of Bienvenido;
they are not compulsory heirs. The petitioners therefore acted correctly in settling their
obligation with Alicia as the widow of Bienvenido and as the natural guardian of their lone
child. This is so even if Alicia had been estranged from Bienvenido. Mere estrangement is not
a legal ground for the disqualification of a surviving spouse as an heir of the deceased
spouse.
Neither could the private respondents, as alleged creditors of Bienvenido, seek relief and
compensation from the petitioners. While it may be true that the private respondents loaned to
Bienvenido the purchase price of the damaged tricycle and shouldered the expenses for his
funeral, the said purchase price and expenses are but money claims against the estate of
their deceased son. 16 These money claims are not the liabilities of the petitioners who, as we
have said, had been released by the agreement of the extra-judicial settlement they
12
concluded with Alicia BaracenaVda. deNacario, the victim's widow and heir, as well as the
natural guardian of their child, her co-heir. As a matter of fact, she executed a "Release Of
Claim" in favor of the petitioners.
TOPIC: Payment – Proper Party
[G.R. No. 138018. July 26, 2002]
RIDO MONTECILLO, petitioner, vs. IGNACIA REYNES and SPOUSES REDEMPTOR and
ELISA ABUCAY, respondents.
FACTS: Respondents IgnaciaReynes (Reynes for brevity) and Spouses Abucay (Abucay
Spouses for brevity) filed on June 20, 1984 a complaint for Declaration of Nullity and Quieting
of Title against petitioner RidoMontecillo (Montecillo for brevity). Reynes asserted that she is
the owner of a lot situated in Mabolo, Cebu City, covered by Transfer Certificate of Title No.
74196 and containing an area of 448 square meters (Mabolo Lot for brevity). In 1981, Reynes
sold 185 square meters of the Mabolo Lot to the Abucay Spouses who built a residential
house on the lot they bought.
Reynes alleged further that on March 1, 1984 she signed a Deed of Sale of the Mabolo Lot in
favor of Montecillo (Montecillos Deed of Sale for brevity). Reynes, being illiterate,[6] signed by
affixing her thumb-mark[7] on the document. Montecillo promised to pay the
agreed P47,000.00 purchase price within one month from the signing of the Deed of
Sale. Montecillos Deed of Sale states as follows:
That I, IGNACIA T. REYNES, of legal age, Filipino, widow, with residence and postal address
at Mabolo, Cebu City, Philippines, for and in consideration of FORTY SEVEN THOUSAND
(P47,000.00) PESOS, Philippine Currency, to me in hand paid by RIDO MONTECILLO, of
legal age, Filipino, married, with residence and postal address at Mabolo, Cebu City,
Philippines, the receipt hereof is hereby acknowledged, have sold, transferred, and
conveyed, unto RIDO MONTECILLO, his heirs, executors, administrators, and assigns,
forever, a parcel of land together with the improvements thereon, situated at Mabolo, Cebu
City, Philippines, free from all liens and encumbrances, and more particularly described as
follows:
A parcel of land (Lot 203-B-2-B of the subdivision plan Psd-07-01-00 2370, being a portion of
Lot 203-B-2, described on plan (LRC) Psd-76821, L.R.C. (GLRO) Record No. 5988), situated
in the Barrio of Mabolo, City of Cebu. Bounded on the SE., along line 1-2 by Lot 206; on the
SW., along line 2-3, by Lot 202, both of Banilad Estate; on the NW., along line 4-5, by Lot
203-B-2-A of the subdivision of Four Hundred Forty Eight (448) square meters, more or less.
of which I am the absolute owner in accordance with the provisions of the Land Registration
Act, my title being evidenced by Transfer Certificate of Title No. 74196 of the Registry of
Deeds of the City of Cebu, Philippines. That This Land Is Not Tenanted and Does Not Fall
Under the Purview of P.D. 27.[8] (Emphasis supplied)
Reynes further alleged that Montecillo failed to pay the purchase price after the lapse of
the one-month period, prompting Reynes to demand from Montecillo the return of the Deed of
Sale. Since Montecillo refused to return the Deed of Sale,[9] Reynes executed a document
unilaterally revoking the sale and gave a copy of the document to Montecillo.
Subsequently, on May 23, 1984 Reynes signed a Deed of Sale transferring to the
Abucay Spouses the entire Mabolo Lot, at the same time confirming the previous sale in 1981
of a 185-square meter portion of the lot. This Deed of Sale states:
I, IGNACIA T. REYNES, of legal age, Filipino, widow and resident of Mabolo, Cebu City, do
hereby confirm the sale of a portion of Lot No. 74196 to an extent of 185 square meters to
Spouses RedemptorAbucay and Elisa Abucay covered by Deed per Doc. No. 47, Page No. 9,
Book No. V, Series of 1981 of notarial register of BenedictoAlo, of which spouses is now in
occupation;
That for and in consideration of the total sum of FIFTY THOUSAND (P50,000) PESOS,
Philippine Currency, received in full and receipt whereof is herein acknowledged from
SPOUSES REDEMPTOR ABUCAY and ELISA ABUCAY, do hereby in these presents, SELL,
TRANSFER and CONVEY absolutely unto said Spouses RedemptorAbucay and Elisa
Abucay, their heirs, assigns and successors-in-interest the whole parcel of land together with
improvements thereon
Reynes and the Abucay Spouses alleged that on June 18, 1984 they received
information that the Register of Deeds of Cebu City issued Certificate of Title No. 90805 in the
name of Montecillo for the Mabolo Lot.
Reynes and the Abucay Spouses argued that for lack of consideration there (was) no
meeting of the minds[11] between Reynes and Montecillo. Thus, the trial court should declare
null and void ab initio Montecillos Deed of Sale, and order the cancellation of Certificate of
Title No. 90805 in the name of Montecillo.
In his Answer, Montecillo, a bank executive with a B.S. Commerce degree, [12] claimed he
was a buyer in good faith and had actually paid the P47,000.00 consideration stated in his
Deed of Sale.Montecillo, however, admitted he still owed Reynes a balance
of P10,000.00. He also alleged that he paid P50,000.00 for the release of the chattel
mortgage which he argued constituted a lien on the Mabolo Lot. He further alleged that he
paid for the real property tax as well as the capital gains tax on the sale of the Mabolo Lot.
In their Reply, Reynes and the Abucay Spouses contended that Montecillo did not have
authority to discharge the chattel mortgage, especially after Reynes revoked Montecillos
Deed of Sale and gave the mortgagee a copy of the document of revocation. Reynes and the
Abucay Spouses claimed that Montecillo secured the release of the chattel mortgage through
13
machination. They further asserted that Montecillo took advantage of the real property taxes
paid by the Abucay Spouses and surreptitiously caused the transfer of the title to the Mabolo
Lot in his name.
During pre-trial, Montecillo claimed that the consideration for the sale of the Mabolo Lot
was the amount he paid to Cebu Ice and Cold Storage Corporation (Cebu Ice Storage for
brevity) for the mortgage debt of BienvenidoJayag (Jayag for brevity). Montecillo argued that
the release of the mortgage was necessary since the mortgage constituted a lien on the
Mabolo Lot.
Reynes, however, stated that she had nothing to do with Jayags mortgage debt except that
the house mortgaged by Jayag stood on a portion of the Mabolo Lot. Reynes further stated
that the payment by Montecillo to release the mortgage on Jayags house is a matter between
Montecillo and Jayag. The mortgage on the house, being a chattel mortgage, could not be
interpreted in any way as an encumbrance on the Mabolo Lot. Reynes further claimed that the
mortgage debt had long prescribed since the P47,000.00 mortgage debt was due for payment
on January 30, 1967.
ISSUE: Was there an agreement between Reynes and Montecillo that the stated
consideration of P47,000.00 in the Deed of Sale be paid to Cebu Ice and Cold Storage to
secure the release of the Transfer Certificate of Title?
HELD: NO.Montecillos Deed of Sale does not state that the P47,000.00 purchase price
should be paid by Montecillo to Cebu Ice Storage. Montecillo failed to adduce any evidence
before the trial court showing that Reynes had agreed, verbally or in writing, that
the P47,000.00 purchase price should be paid to Cebu Ice Storage. Absent any evidence
showing that Reynes had agreed to the payment of the purchase price to any other party, the
payment to be effective must be made to Reynes, the vendor in the sale. Article 1240 of the
Civil Code provides as follows:
Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it.
Thus, Montecillos payment to Cebu Ice Storage is not the payment that would
extinguish[16] Montecillos obligation to Reynes under the Deed of Sale.
It militates against common sense for Reynes to sell her Mabolo Lot for P47,000.00 if
this entire amount would only go to Cebu Ice Storage, leaving not a single centavo to her for
giving up ownership of a valuable property. This incredible allegation of Montecillo becomes
even more absurd when one considers that Reynes did not benefit, directly or indirectly, from
the payment of the P47,000.00 to Cebu Ice Storage.
The trial court found that Reynes had nothing to do with Jayags mortgage debt with
Cebu Ice Storage. The trial court made the following findings of fact:
 x xx. Plaintiff IgnaciaReynes was not a party to nor privy of the obligation in favor of the
Cebu Ice and Cold Storage Corporation, the obligation being exclusively of
BienvenidoJayag and wife who mortgaged their residential house constructed on the
land subject matter of the complaint. The payment by the defendant to release the
residential house from the mortgage is a matter between him and Jayag and cannot by
implication or deception be made to appear as an encumbrance upon the land. [17]
Thus, Montecillos payment to Jayags creditor could not possibly redound to the
benefit[18] of Reynes. We find no reason to disturb the factual findings of the trial court. In
petitions for review on certiorari as a mode of appeal under Rule 45, as in the instant case, a
petitioner can raise only questions of law.[19] This Court is not the proper venue to consider a
factual issue as it is not a trier of facts.
PROPER PAYER
G.R. No. 151060
JN DEVELOPMENT CORPORATION and SPS. RODRIGO AND LEONAR STA. ANA V.
PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE CORPORATION
G.R. No. 151311
NARCISO V. CRUZ V. PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE
CORPORATION
FACTS:
On 13 December 1979, petitioner JN Development Corporation ("JN") and Traders Royal
Bank (TRB) entered into an agreement whereby TRB would extend to JN an Export Packing
Credit Line for Two Million Pesos (P2,000,000.00). The loan was covered by several
securities, including a real estate mortgage and a letter of guarantee from respondent
Philippine Export and Foreign Loan Guarantee Corporation ("PhilGuarantee"), now Trade and
Investment Development Corporation of the Philippines, covering seventy percent (70%) of
the credit line. With PhilGuarantee issuing a guarantee in favor of TRB, JN, petitioner
spouses Rodrigo and Leonor Sta. Ana 5 and petitioner Narciso Cruz 6 executed a Deed of
Undertaking (Undertaking) to assure repayment to PhilGuarantee.
It appears that JN failed to pay the loan to TRB upon its maturity; thus, on 8 October 1980
TRB requested PhilGuarantee to make good its guarantee. 8 PhilGuarantee informed JN
about the call made by TRB, and inquired about the action of JN to settle the loan. 9 Having
received no response from JN, on 10 March 1981 PhilGuarantee paid TRB Nine Hundred
14
Thirty Four Thousand Eight Hundred Twenty Four Pesos and Thirty Four Centavos
(P934,824.34). 10 Subsequently, PhilGuarantee made several demands on JN, but the latter
failed to pay. On 30 May 1983, JN, through Rodrigo Sta. Ana, proposed to settle the
obligation "by way of development and sale" of the mortgaged property. PhilGuarantee,
however, rejected the proposal. PhilGuarantee thus filed a Complaint for collection of money
and damages against herein petitioners.
RTC RULING: It ruled that petitioners are not liable to reimburse PhilGuarantee what it had
paid to TRB. Crucial to this holding was the court's finding that TRB was able to foreclose the
real estate mortgage executed by JN, thus extinguishing petitioners' obligation. In addition,
the RTC held that since PhilGuarantee's guarantee was good for only one year from 17
December 1979, or until 17 December 1980, and since it was not renewed after the expiry of
said period, PhilGuarantee had no more legal duty to pay TRB on 10 March 1981.
CA RULING: The appellate court reversed the RTC and ordered petitioners to pay
PhilGuarantee Nine Hundred Thirty Four Thousand Six Hundred Twenty Four Pesos and
Thirty Four Centavos (P934,624.34), plus service charge and interest. It ruled that JN's
obligation had become due and demandable within the one- year period of effectivity of the
guarantee; thus, PhilGuarantee's payment to TRB conformed with its guarantee, although the
payment itself was effected one year after the maturity date of the loan.
Petitioner’s Contention:A erred when it held that petitioners are liable to PhilGuarantee
despite its payment after the expiration of its contract of guarantee and the lack of
PhilGuarantee's consent to the extensions granted by TRB to JN.
Respondent’s Contention: PhilGuarantee maintains that the date of default, not the actual
date of payment, determines the liability of the guarantor and that having paid TRB when the
loan became due, it should be indemnified by petitioners. 30 It argues that, contrary to
petitioners' claim, there could be no waiver of its right to excussion more explicit than its act of
payment to TRB very directly. Besides, the right to excussion is for the benefit of the
guarantor and is not a defense for the debtor to raise and use to evade liability. 32 Finally,
PhilGuarantee maintains that there is no sufficient evidence proving the alleged forgery of
Cruz's signature on the Undertaking, which is a notarized document and as such must be
accorded the presumption of regularity.
ISSUE: WON JN Development Corporation is liable to pay reimbursements to
PhilGuarantee

HELD:
YES. Under a contract of guarantee, the guarantor binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter should fail to do so.The guarantor who
pays for a debtor, in turn, must be indemnified by the latter. However, the guarantor
cannot be compelled to pay the creditor unless the latter has exhausted all the property of the
debtor and resorted to all the legal remedies against the debtor. This is what is otherwise
known as the benefit of excussion. It is clear that excussionmay only be invoked after legal
remedies against the principal debtor have been expanded. Thus, it was held that the creditor
must first obtain a judgment against the principal debtor before assuming to run after the
alleged guarantor, "for obviously the 'exhaustion of the principal's property' cannot even begin
to take place before judgment has been obtained." The law imposes conditions precedent for
the invocation of the defense. Thus, in order that the guarantor may make use of the benefit
of excussion, he must set it up against the creditor upon the latter's demand for payment and
point out to the creditor available property of the debtor within the Philippines sufficient to
cover the amount of the debt.
While a guarantor enjoys the benefit of excussion, nothing prevents him from paying the
obligation once demand is made on him. Excussion, after all, is a right granted to him by law
and as such he may opt to make use of it or waive it. PhilGuarantee's waiver of the right of
excussion cannot prevent it from demanding reimbursement from petitioners. The law clearly
requires the debtor to indemnify the guarantor what the latter has paid.
The guarantee was only up to 17 December 1980. JN's obligation with TRB fell due on 30
June 1980, and demand on PhilGuarantee was made by TRB on 08 October 1980. That
payment was actually made only on 10 March 1981 does not take it out of the terms of the
guarantee. What is controlling is that default and demand on PhilGuarantee had taken
place while the guarantee was still in force. There is likewise no merit in petitioners' claim
that PhilGuarantee's failure to give its express consent to the alleged extensions granted by
TRB to JN had extinguished the guarantee. The requirement that the guarantor should
consent to any extension granted by the creditor to the debtor under Art. 2079 is for the
benefit of the guarantor. As such, it is likewise waivable by the guarantor. Thus, even
assuming that extensions were indeed granted by TRB to JN, PhilGuarantee could have
opted to waive the need for consent to such extensions. Indeed, a guarantor is not precluded
from waiving his right to be notified of or to give his consent to extensions obtained by the
debtor. Such waiver is not contrary to public policy as it is purely personal and does not affect
15
public interest. 41 In the instant case, PhilGuarantee's waiver can be inferred from its actual
payment to TRB after the latter's demand, despite JN's failure to pay the renewal/guarantee
fee as indicated in the guarantee.
For the above reasons, there is no basis for petitioner's claim that PhilGuarantee was a mere
volunteer payor and had no legal obligation to pay TRB. The law does not prohibit the
payment by a guarantor on his own volition, heedless of the benefit of excussion. In fact, it
recognizes the right of a guarantor to recover what it has paid, even if payment was made
before the debt becomes due, 43 or if made without notice to the debtor, 44 subject of course
to some conditions.
The benefit of excussion, as well as the requirement of consent to extensions of payment, is a
protective device pertaining to and conferred on the guarantor. These may be invoked by the
guarantor against the creditor as defenses to bar the unwarranted enforcement of the
guarantee. However, PhilGuarantee did not avail of these defenses when it paid its obligation
according to the tenor of the guarantee once demand was made on it. What is peculiar in the
instant case is that petitioners, the principal debtors themselves, are muddling the issues and
raising the same defenses against the guarantor, which only the guarantor may invoke
against the creditor, to avoid payment of their own obligation to the guarantor. The Court
cannot countenance their self-seeking desire to be exonerated from the duty to reimburse
PhilGuarantee after it had paid TRB on their behalf and to unjustly enrich themselves at the
expense of PhilGuarantee.
PhilGuarantee was well within its rights to demand reimbursement for such payment
made, regardless of whether the creditor, TRB, was subsequently able to obtain
payment from JN. If double payment was indeed made, then it is JN which should go after
TRB, and not PhilGuarantee. Petitioners have no one to blame but themselves, having
allowed the foreclosure of the property for the full value of the loan despite knowledge of
PhilGuarantee's payment to TRB. Having been aware of such payment, they should have
opposed the foreclosure, or at the very least, filed a supplemental pleading with the trial court
informing the same of the foreclosure sale.
CASE NO. 10
G.R. No. 112214
SECURITY BANK & TRUST COMPANY, petitioner, vs. COURT OF APPEALS, CRISPULO
IKE ARBOLEDA, and AMADOR LIBONGCO, respondents.
FACTS:
Petitioner filed an action against private respondents for the recovery of a sum of money
with damages and preliminary attachment. It alleged that sometime in 1983, A.T. Diaz Realty,
through Anita Diaz, bought from Ricardo Lorenzo his undivided share in a parcel of land
which he owned in common with Servando Solomon. In connection with this transaction, Diaz
issued a check for P60,000.00 in the name of Ricardo Lorenzos agent, private respondent
CrispuloArboleda. The check, dated November 7, 1983, was to be drawn against the current
account of A.T. Diaz Realty in the Marikina branch of the Security Bank and Trust Co.
(SBTC). According to Diaz, the money was part of the purchase price of the land. It was to be
used to pay the capital gains tax on the transaction and to reimburse Solomon for payments
he had made for delinquent real estate taxes on the land. In return, Solomon would deliver to
Diaz the title to the land.
On November 8, 1983, Solomon informed Diaz that, as he had not yet been reimbursed
by private respondent, he could not deliver to Diaz the title to the land. Diaz decided to
reimburse Solomon and to pay the capital gains tax herself. Consequently, she issued two
more checks, one for P20,000.00, in the name of Solomon for the reimbursement, and
another one for P40,000.00, payable to bearer, for the payment of the tax. Thereafter, on the
same date, she ordered petitioner to stop payment on the check. Diaz allegedly advised
private respondent of the order and requested the return of the check to her.
Instead of returning the check to Diaz, however, private respondent encashed it. For their
part, employees of petitioner bank failed to notice that the check was the subject of a stop
payment order and allowed private respondent to encash
The error was discovered only the next day. Petitioner recredited the amount
(P60,000.00) of the check to A.T. Diaz Realtys account.
Bank officials went to see respondent Arboleda to ask for the return of the amount
of P60,000.00. But they were told the money had been turned over to Amador
Libongco. When asked by bank officials, Libongco did not deny receipt of the money, but said
he would return it provided Diaz showed him the receipt for payment of the capital gains tax.
As Diaz failed to show receipts, Arboleda and Libongco refused to return the
money. Petitioner, therefore, filed the instant suit.
In their answer, Arboleda and Libongco denied any obligation to return the money,
alleging that it was due them. Arboleda also denied having been notified of the stop payment
order, while Libongco denied having received the money.[2]Libongco died on January 19,
1989[3] and, accordingly, the case against him was dismissed.[4]
On May 21, 1990, the trial court rendered its decision, dismissing petitioners complaint. It
ruled that private respondent and Libongco had no obligation to return the P60,000.00 to
Diaz.. Consequently, it was held, petitioner should not have recredited A.T. Diaz Realty with
the P60,000.00.
16
The trial court ruled that petitioner incurred no liability even if it encashed the check
despite a stop payment order.
Petitioner appealed to the Court of Appeals which, as earlier stated, affirmed the decision
of the trial court.
The petition must fail.
Petitioner contends that whatever claim respondent has against Anita Diaz is immaterial
to this case. It is argued that private respondent has an obligation to return the money he
received based on Art. 2154 of the Civil Code, which provides:
If something is received when there is no right to demand it, and it was unduly delivered
through mistake, the obligation to return it arises.
This contention has no merit. There was no contractual relation created between
petitioner and private respondent as a result of the payment by the former of the amount of
the check. Petitioner simply paid the check for and in behalf of Anita Diaz. Therefore, the
question
ISSUE:
Whether private respondent CrispuloArboleda has a right to keep the proceeds of the
check
HELD:
YES!!
What appears to have happened in this case is that there was an agreement that if Anita
Diaz, the drawer of the check, paid the capital gains tax, she would be reimbursed the amount
she had paid to Arboleda. Claiming that she had paid the capital gains tax, Diaz issued a stop
payment order to petitioner and asked for the return of the check she had issued to
Arboleda.As she could not show any receipt for payment, however, Arboleda refused to return
the check. Arboleda instead cashed the check and refused to pay its proceeds.
Petitioner contends that defenses against Anita Diaz should not be considered in this
case because she has not been impleaded as a party. It appears, however, that petitioner
was ordered by the trial court to implead Diaz but it did not do so on the ground that it was
going to present her as a witness.
Indeed, even if petitioner is considered to have paid Anita Diaz in behalf of Arboleda, its
right to recover from Arboleda would be only to the extent that the payment benefitted
Arboleda, because the payment (recrediting) was made without the consent of
Arboleda. Since Arboleda denies owing any obligation to Diaz, petitioner cannot ask for
reimbursement.
LAW:
Art. 1236 of the Civil Code states:
The creditor is not bound to accept payment or performance by a third person who has
no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has paid, except that if
he paid without the knowledge or against the will of the debtor, he can recover only
insofar as the payment has been beneficial to the debtor.
Topic: Time of performance (Payment or performance)
G.R. No. 145483 November 19, 2004
LORENZO SHIPPING CORP., petitioner,
vs.
BJ MARTHEL INTERNATIONAL, INC., respondent.
Facts: Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged in
coastwise shipping. It used to own the cargo vessel M/V Dadiangas Express.
Upon the other hand, respondent BJ Marthel International, Inc. is a business entity engaged
in trading, marketing, and selling of various industrial commodities. It is also an importer and
distributor of different brands of engines and spare parts.
From 1987 up to the institution of this case, respondent supplied petitioner with spare parts for
the latter's marine engines. Sometime in 1989, petitioner asked respondent for a quotation for
various machine parts. Acceding to this request, respondent furnished petitioner with a formal
quotation.
Petitioner thereafter issued to respondent Purchase Order No. 13839,3 dated 02 November
1989, for the procurement of one set of cylinder liner, valued at P477,000, to be used for M/V
Dadiangas Express. The purchase order was co-signed by Jose Go, Jr., petitioner's vice-
president, and Henry Pajarillo.
Instead of paying the 25% down payment for the first cylinder liner, petitioner issued in favor
of respondent ten postdated checks4 to be drawn against the former's account with Allied
Banking Corporation. The checks were supposed to represent the full payment of the
aforementioned cylinder liner.
17
Subsequently, petitioner issued Purchase Order No. 14011,5 dated 15 January 1990, for yet
another unit of cylinder liner. This purchase order stated the term of payment to be "25% upon
delivery, balance payable in 5 bi-monthly equal installment[s]."6 Like the purchase order of 02
November 1989, the second purchase order did not state the date of the cylinder liner's
delivery.
On 26 January 1990, respondent deposited petitioner's check that was postdated 18 January
1990, however, the same was dishonored by the drawee bank due to insufficiency of funds.
The remaining nine postdated checks were eventually returned by respondent to petitioner.
The parties presented disparate accounts of what happened to the check which was
previously dishonored. Petitioner claimed that it replaced said check with a good one, the
proceeds of which were applied to its other obligation to respondent. For its part, respondent
insisted that it returned said postdated check to petitioner.
Respondent thereafter placed the order for the two cylinder liners with its principal in Japan,
Daiei Sangyo Co. Ltd., by opening a letter of credit on 23 February 1990 under its own name
with the First Interstate Bank of Tokyo.
On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's warehouse in North
Harbor, Manila. The sales invoices7 evidencing the delivery of the cylinder liners both contain
the notation "subject to verification" under which the signature of Eric Go, petitioner's
warehouseman, appeared.
Respondent thereafter sent a Statement of Account dated 15 November 19908 to petitioner.
While the other items listed in said statement of account were fully paid by petitioner, the two
cylinder liners delivered to petitioner on 20 April 1990 remained unsettled. Consequently, Mr.
Alejandro Kanaan, Jr., respondent's vice-president, sent a demand letter dated 02 January
19919 to petitioner requiring the latter to pay the value of the cylinder liners subjects of this
case. Instead of heeding the demand of respondent for the full payment of the value of the
cylinder liners, petitioner sent the former a letter dated 12 March 1991 offering to pay only
P150,000 for the cylinder liners. In said letter, petitioner claimed that as the cylinder liners
were delivered late and due to the scrapping of the M/V Dadiangas Express, it (petitioner)
would have to sell the cylinder liners in Singapore and pay the balance from the proceeds of
said sale.
Due to the failure of the parties to settle the matter, respondent filed an action for sum of
money and damages before the Regional Trial Court (RTC) of Makati City. In its
complaint respondent (plaintiff below) alleged that despite its repeated oral and written
demands, petitioner obstinately refused to settle its obligations. Respondent prayed that
petitioner be ordered to pay for the value of the cylinder liners plus accrued interest of
P111,300 as of May 1991 and additional interest of 14% per annum to be reckoned from June
1991 until the full payment of the principal; attorney's fees; costs of suits; exemplary
damages; actual damages; and compensatory damages.
On even date, the trial court issued an Order16lifting the levy on petitioner's properties and the
garnishment of its bank accounts.
Petitioner afterwards filed its Answer alleging therein that time was of the essence in
the delivery of the cylinder liners and that the delivery on 20 April 1990 of said items
was late as respondent committed to deliver said items "within two (2) months after
receipt of firm order"18 from petitioner.
The trial court held respondent bound to the quotation it submitted to petitioner particularly
with respect to the terms of payment and delivery of the cylinder liners. It also declared that
respondent had agreed to the cancellation of the contract of sale when it returned the
postdated checks issued by petitioner. Respondent's counterclaims for moral, exemplary, and
compensatory damages were dismissed for insufficiency of evidence.
Respondent moved for the reconsideration of the trial court's Decision but the motion was
denied for lack of merit.
Aggrieved by the findings of the trial court, respondent filed an appeal with the Court of
Appeals which reversed and set aside the Decision of the court a quo. The appellate court
brushed aside petitioner's claim that time was of the essence in the contract of sale between
the parties herein considering the fact that a significant period of time had lapsed between
respondent's offer and the issuance by petitioner of its purchase orders.
The Court of Appeals also held that respondent could not have incurred delay in the delivery
of cylinder liners as no demand, judicial or extrajudicial, was made by respondent upon
petitioner in contravention of the express provision of Article 1169 of the Civil Code which
provides:
Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.
Likewise, the appellate court concluded that there was no evidence of the alleged cancellation
of orders by petitioner and that the delivery of the cylinder liners on 20 April 1990 was
reasonable under the circumstances.
Issue:
Whether or not respondent incurred delay in performing its obligation under the contract of
sale
Held: No, In determining whether time is of the essence in a contract, the ultimate criterion is
the actual or apparent intention of the parties and before time may be so regarded by a court,
18
there must be a sufficient manifestation, either in the contract itself or the surrounding
circumstances of that intention. Petitioner insists that although its purchase orders did not
specify the dates when the cylinder liners were supposed to be delivered, nevertheless,
respondent should abide by the term of delivery appearing on the quotation it submitted to
petitioner. Petitioner theorizes that the quotation embodied the offer from respondent while
the purchase order represented its (petitioner's) acceptance of the proposed terms of the
contract of sale. Thus, petitioner is of the view that these two documents "cannot be taken
separately as if there were two distinct contracts." We do not agree. While this Court
recognizes the principle that contracts are respected as the law between the contracting
parties, this principle is tempered by the rule that the intention of the parties is primordial and
"once the intention of the parties has been ascertained, that element is deemed as an integral
part of the contract as though it has been originally expressed in unequivocal terms. "In the
present case, we cannot subscribe to the position of petitioner that the documents, by
themselves, embody the terms of the sale of the cylinder liners. One can easily glean the
significant
differences in the terms as stated in the formal quotation and Purchase Order No. 13839 with
regard to the due date of the down payment for the first cylinder liner and the date of its
delivery as well as Purchase Order No. 14011 with respect to the date of delivery of the
second cylinder liner. While the quotation provided by respondent evidently stated that the
cylinder liners were supposed to be delivered within two months from receipt of the firm order
of petitioner and that the 25% down payment was due upon the cylinder liners' delivery, the
purchase orders prepared by petitioner clearly omitted these significant items. The petitioner's
Purchase Order No. 13839 made no mention at all of the due dates of delivery of the first
cylinder liner and of the payment of 25% down payment. Its Purchase Order No. 14011
likewise did not indicate the due date of delivery of the second cylinder liner. In the instant
case, the formal quotation provided by respondent represented the negotiation phase of the
subject contract of sale between the parties. As of that time, the parties had not yet reached
an agreement as regards the terms and conditions of the contract of sale of the cylinder
liners. Petitioner could very well have ignored the offer or tendered a counter-offer to
respondent while the latter could have, withdrawn or modified the same. The parties were at
liberty to discuss the provisions of the contract of sale prior to its perfection. In this
connection, we turn to the testimonies of Pajarillo and Kanaan, Jr., that the terms of the offer
were, indeed, renegotiated prior to the issuance of Purchase Order No. 13839The law
implies, however, that if no time is fixed, delivery shall be made within a reasonable time, in
the absence of anything to show that an immediate delivery intended. We also find significant
the fact that while petitioner alleges that the cylinder liners were to be used for dry dock repair
and maintenance of its M/V Dadiangas Express between the later part of December 1989 to
early January 1990, the record is bereft of any indication that respondent was aware of such
fact. The failure of petitioner to notify respondent of said date is fatal to its claim that time was
of the essence in the subject contracts of sale. Finally, the ten postdated checks issued in
November 1989 by petitioner and received by the respondent as full payment of the purchase
price of the first cylinder liner supposed to be delivered on 02January 1990 fail to impress. It is
not an indication of failure to honor a commitment on the part of the respondent. The earliest
maturity date of the checks was 18 January 1990. As delivery of said checks could produce
the effect of payment only when they have been cashed, respondent's obligation to deliver the
first cylinder liner could not have arisen as early as 02 January 1990 as claimed by petitioner
since by that time, petitioner had yet to fulfill its undertaking to fully pay for the value of the
first cylinder liner. As explained by respondent, it proceeded with the placement of the order
for the cylinder liners with its principal in Japan solely on the basis of its previously
harmonious business relationship with petitioner.in the subject contracts, time was not of the
essence. The delivery of the cylinder liners on 20 April1990 was made within a reasonable
period of time considering that respondent had to place the order for the cylinder liners with its
principal in Japan and that the latter was, at that time, beset by heavy volume of work. There
having been no failure on the part of the respondent to perform its obligation, the power to
rescind the contract is unavailing to the petitioner.
TOPIC: Burden of Proving Payment
G.R. No. 156132 February 6, 2007
CITIBANK, N.A. (Formerly First National City Bank) and INVESTORS’ FINANCE
CORPORATION, doing business under the name and style of FNCB
Finance, Petitioners,
vs.
MODESTA R. SABENIANO, Respondent.
FACTS: 16 October 2006 DECISION: IN VIEW OF THE FOREGOING, the instant Petition
is PARTLY GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. No. 51930,
dated 26 March 2002, as already modified by its Resolution, dated 20 November 2002, is
hereby AFFIRMED WITH MODIFICATION.
Subsequent thereto, respondent Modesta R. Sabeniano filed an Urgent Motion to Clarify
and/or Confirm Decision with Notice of Judgment on 20 October 2006; while, petitioners
Citibank, N.A. and FNCB Finance2 filed their Motion for Partial Reconsideration of the
foregoing Decision on 6 November 2006.
Respondent was a client of petitioners. She had several deposits and market placements
with petitioners, among which were her savings account with the local branch of petitioner
Citibank (Citibank-Manila3 ); money market placements with petitioner FNCB Finance; and
dollar accounts with the Geneva branch of petitioner Citibank (Citibank-Geneva). At the same
time, respondent had outstanding loans with petitioner Citibank, incurred at Citibank-Manila,
the principal amounts aggregating to P1,920,000.00, all of which had become due and
demandable by May 1979. Despite repeated demands by petitioner Citibank, respondent
failed to pay her outstanding loans. Thus, petitioner Citibank used respondent’s deposits and
money market placements to off-set and liquidate her outstanding obligations.
19
Respondent, however, denied having any outstanding loans with petitioner Citibank. She
likewise denied that she was duly informed of the off-setting or compensation thereof
made by petitioner Citibank using her deposits and money market placements with
petitioners. Hence, respondent sought to recover her deposits and money market placements.
RTC DECISION:
(1) Declaring as illegal, null and void the setoff effected by the defendant Bank
[petitioner Citibank] of plaintiff’s [respondent Sabeniano] dollar deposit with Citibank,
Switzerland, in the amount of US$149,632.99, and ordering the said defendant
[petitioner Citibank] to refund the said amount to the plaintiff with legal interest at the
rate of twelve percent (12%) per annum, compounded yearly, from 31 October 1979
until fully paid, or its peso equivalent at the time of payment;
(2) Declaring the plaintiff [respondent Sabeniano] indebted to the defendant Bank
[petitioner Citibank] in the amount of P1,069,847.40 as of 5 September 1979 and
ordering the plaintiff [respondent Sabeniano] to pay said amount, however, there shall
be no interest and penalty charges from the time the illegal setoff was effected on 31
October 1979;
(3) Dismissing all other claims and counterclaims interposed by the parties against
each other.
Costs against the defendant Bank.
Court of Appeals: Promulgated its Decision,5 ruling entirely in favor of respondent, to wit –
Wherefore, premises considered, the assailed 24 August 1995 Decision of the court a quo is
hereby AFFIRMED with MODIFICATION
Court of Appeals (petitioners’ Motion for Partial Reconsideration):
WHEREFORE, premises considered, the instant Motion for Reconsideration is PARTIALLY
GRANTED as Sub-paragraph (V) paragraph 3 of the assailed Decision’s dispositive portion is
hereby ordered DELETED. The challenged 26 March 2002 Decision of the Court
is AFFIRMED with MODIFICATION.
SC: As to the off-setting or compensation of respondent’s outstanding loan balance with her
dollar deposits in Citibank-Geneva:
Without the Declaration of Pledge, petitioner Citibank had no authority to demand the
remittance of respondent’s dollar accounts with Citibank-Geneva and to apply them to her
outstanding loans.It cannot effect legal compensation under Article 1278 of the Civil
Code since, petitioner Citibank itself admitted that Citibank-Geneva is a distinct and
separate entity. As for the dollar accounts, respondent was the creditor and Citibank-Geneva
is the debtor; and as for the outstanding loans, petitioner Citibank was the creditor and
respondent was the debtor.The parties in these transactions were evidently not the
principal creditor of each other.
Petitioners maintain that respondent’s Declaration of Pledge, by virtue of which she
supposedly assigned her dollar accounts with Citibank-Geneva as security for her loans with
petitioner Citibank, is authentic and, thus, valid and binding upon respondent. Alternatively,
petitioners aver that even without said Declaration of Pledge, the off-setting or compensation
made by petitioner Citibank using respondent’s dollar accounts with Citibank-Geneva to
liquidate the balance of her outstanding loans with Citibank-Manila was expressly authorized
by respondent herself in the promissory notes (PNs) she signed for her loans, as well as
sanctioned by Articles 1278 to 1290 of the Civil Code. This alternative argument is anchored
on the premise that all branches of petitioner Citibank in the Philippines and abroad are part
of a single worldwide corporate entity and share the same juridical personality. In connection
therewith, petitioners deny that they ever admitted that Citibank-Manila and Citibank-
Geneva are distinct and separate entities.
Petitioners call the attention of this Court to the following provision found in all of the
PNs7 executed by respondent for her loans –
At or after the maturity of this note, or when same becomes due under any of the provisions
hereof, any money, stocks, bonds, or other property of any kind whatsoever, on deposit or
otherwise, to the credit of the undersigned on the books of CITIBANK, N.A. in transit or in
their possession, may without notice be applied at the discretion of the said bank to the
full or partial payment of this note.
It is the petitioners’ contention that the term "Citibank, N.A." used therein should be
deemed to refer to all branches of petitioner Citibank in the Philippines and abroad;
thus, giving petitioner Citibank the authority to apply as payment for the PNs even
respondent’s dollar accounts with Citibank-Geneva. Still proceeding from the premise that all
branches of petitioner Citibank should be considered as a single entity, then it should not
matter that the respondent obtained the loans from Citibank-Manila and her deposits were
with Citibank-Geneva. Respondent should be considered the debtor (for the loans) and
creditor (for her deposits) of the same entity, petitioner Citibank. Since petitioner Citibank and
respondent were principal creditors of each other, in compliance with the requirements under
Article 1279 of the Civil Code,8 then the former could have very well used off-setting or
compensation to extinguish the parties’ obligations to one another. And even without the PNs,
off-setting or compensation was still authorized because according to Article 1286 of the Civil
Code, "Compensation takes place by operation of law, even though the debts may be payable
at different places, but there shall be an indemnity for expenses of exchange or transportation
to the place of payment."
20
Pertinent provisions of Republic Act No. 8791, otherwise known as the General Banking
Law of 2000, governing bank branches are reproduced below –
SEC. 20. Bank Branches. – Universal or commercial banks may open branches or other
offices within or outside the Philippines upon prior approval of the BangkoSentral.
Branching by all other banks shall be governed by pertinent laws.
A bank may, subject to prior approval of the Monetary Board, use any or all of its branches as
outlets for the presentation and/or sale of the financial products of its allied undertaking or its
investment house units.
A bank authorized to establish branches or other offices shall be responsible for all business
conducted in such branches and offices to the same extent and in the same manner as
though such business had all been conducted in the head office. A bank and its branches and
offices shall be treated as one unit.
SEC. 72. Transacting Business in the Philippines.SEC. 74. Local Branches of Foreign
Banks. SEC. 75. Head Office Guarantee.
Republic Act No. 7721, otherwise known as the Foreign Banks Liberalization Law.
Relevant provisions of the said statute: Sec. 2. Modes of Entry. Sec. 5. Head Office
Guarantee.
It is true that the afore-quoted Section 20 of the General Banking Law of 2000 expressly
states that the bank and its branches shall be treated as one unit. It should be pointed out,
however, that the said provision applies to a universal9 or commercial bank,10 duly
established and organized as a Philippine corporation in accordance with Section 8 of
the same statute,11 and authorized to establish branches within or outside the
Philippines.
The General Banking Law of 2000, however, does not make the same categorical
statement as regards to foreign banks and their branches in the Philippines. What
Section 74 of the said law provides is that in case of a foreign bank with several branches in
the country, all such branches shall be treated as one unit. As to the relations between the
local branches of a foreign bank and its head office, Section 75 of the General Banking Law
of 2000 and Section 5 of the Foreign Banks Liberalization Law provide for a "Home Office
Guarantee," in which the head office of the foreign bank shall guarantee prompt payment of
all liabilities of its Philippine branches. While the Home Office Guarantee is in accord with
the principle that these local branches, together with its head office, constitute but one
legal entity, it does not necessarily support the view that said principle is true and
applicable in all circumstances.
ISSUE: Now the question that remains to be answered is whether the foreign bank can use
the principle for a reverse purpose, in order to extend the liability of a client to the
foreign bank’s Philippine branch to its head office, as well as to its branches in other
countries. Thus, if a client obtains a loan from the foreign bank’s Philippine branch, does it
absolutely and automatically make the client a debtor, not just of the Philippine branch, but
also of the head office and all other branches of the foreign bank around the world?
HELD: This Court rules in the negative. There being a dearth of Philippine authorities and
jurisprudence on the matter, this Court, just as what petitioners have done, turns to American
authorities and jurisprudence. American authorities and jurisprudence are significant herein
considering that the head office of petitioner Citibank is located in New York, United States of
America (U.S.A.).
Unlike Philippine statutes, the American legislation explicitly defines the relations among
foreign branches of an American bank. Section 25 of the United States Federal Reserve
Act13 states that –
Every national banking association operating foreign branches shall conduct the accounts of
each foreign branch independently of the accounts of other foreign branches established by it
and of its home office, and shall at the end of each fiscal period transfer to its general ledger
the profit or loss accrued at each branch as a separate item.
Contrary to petitioners’ assertion that the accounts of Citibank-Manila and Citibank-
Geneva should be deemed as a single account under its head office, the foregoing
provision mandates that the accounts of foreign branches of an American bank shall
be conducted independently of each other. Since the head office of petitioner Citibank is in
the U.S.A., then it is bound to treat its foreign branches in accordance with the said provision.
It is only at the end of its fiscal period that the bank is required to transfer to its general ledger
the profit or loss accrued at each branch, but still reporting it as a separate item. It is by virtue
of this provision that the Circuit Court of Appeals of New York declared in Pan-American Bank
and Trust Co. v. National City Bank of New York14 that a branch is not merely a teller’s
window; it is a separate business entity.
The structure of international banking houses such as Chartered bank defies one rigorous
description. Suffice it to say for present analysis, branches or agencies of an international
bank have been held to be independent entities for a variety of purposes Thus in law
there is nothing innately unitary about the organization of international banking
institutions.
The Sokoloff case, aside from its violently different fact situation, is centered on the legal
problem of default of payment and consequent breach of contract by a branch bank. It does
not stand for the principle that in every instance an international bank with branches is
but one legal entity for all purposes.
21
Going back to the instant Petition, although this Court concedes that all the Philippine
branches of petitioner Citibank should be treated as one unit with its head office, it cannot be
persuaded to declare that these Philippine branches are likewise a single unit with the
Geneva branch. It would be stretching the principle way beyond its intended purpose.
Therefore, this Court maintains its original position in the Decision that the off-setting
or compensation of respondent’s loans with Citibank-Manila using her dollar accounts
with Citibank-Geneva cannot be effected. The parties cannot be considered principal
creditor of the other. As for the dollar accounts, respondent was the creditor and Citibank-
Geneva was the debtor; and as for the outstanding loans, petitioner Citibank, particularly
Citibank-Manila, was the creditor and respondent was the debtor. Since legal compensation
was not possible, petitioner Citibank could only use respondent’s dollar accounts with
Citibank-Geneva to liquidate her loans if she had expressly authorized it to do so by
contract.
Respondent cannot be deemed to have authorized the use of her dollar deposits with
Citibank-Geneva to liquidate her loans with petitioner Citibank when she signed the PNs16 for
her loans.
As has been established in the preceding discussion, "Citibank, N.A." can only refer to the
local branches of petitioner Citibank together with its head office. Unless there is any showing
that respondent understood and expressly agreed to a more far-reaching interpretation, the
reference to Citibank, N.A. cannot be extended to all other branches of petitioner Citibank all
over the world.
Moreover, the PNs can be considered a contract of adhesion, the PNs being in standard
printed form prepared by petitioner Citibank. Generally, stipulations in a contract come about
after deliberate drafting by the parties thereto, there are certain contracts almost all the
provisions of which have been drafted only by one party, usually a corporation. Such
contracts are called contracts of adhesion, because the only participation of the party is the
affixing of his signature or his "adhesion" thereto. This being the case, the terms of such
contract are to be construed strictly against the party which prepared it.17
As for the supposed Declaration of Pledge of respondent’s dollar accounts with
Citibank-Geneva as security for the loans, this Court stands firm on its ruling that the
non-production thereof is fatal to petitioners’ cause in light of respondent’s claim that
her signature on such document was a forgery. It bears to note that the original of the
Declaration of Pledge is with Citibank-Geneva, a branch of petitioner Citibank. As between
respondent and petitioner Citibank, the latter has better access to the document. The
constant excuse forwarded by petitioner Citibank that Citibank-Geneva refused to return
possession of the original Declaration of Pledge to Citibank-Manila only supports this Court’s
finding in the preceding paragraphs that the two branches are actually operating separately
and independently of each other.
Lastly, this Court’s ruling striking down the Declaration of Pledge is not entirely based on
respondent’s allegation of forgery. In its Decision, this Court already extensively discussed
why it found the said Declaration of Pledge highly suspicious and irregular.
First of all, it escapes this Court why petitioner Citibank took care to have the Deeds of
Assignment of the PNs notarized, yet left the Declaration of Pledge unnotarized. This Court
would think that petitioner Citibank would take greater cautionary measures with the
preparation and execution of the Declaration of Pledge because it involved
respondent’s "all present and future fiduciary placements" with a Citibank branch in
another country, specifically, in Geneva, Switzerland. While there is no express legal
requirement that the Declaration of Pledge had to be notarized to be effective, even so, it
could not enjoy the same prima facie presumption of due execution that is extended to
notarized documents, and petitioner Citibank must discharge the burden of proving due
execution and authenticity of the Declaration of Pledge.
Second, petitioner Citibank was unable to establish the date when the Declaration of Pledge
was actually executed. Respondent, on the other hand, was able to secure a copy of the
Declaration of Pledge, certified by an officer of Citibank-Geneva, which bore the date 24
September 1979.
Third, the Declaration of Pledge was irregularly filled-out. The pledge was in a standard
printed form.
The pledge, therefore, made no sense, the pledgor and pledgee being the same entity.
Was a mistake made by whoever filled-out the form? Yes, it could be a possibility.
Nonetheless, considering the value of such a document, the mistake as to a significant detail
in the pledge could only be committed with gross carelessness on the part of petitioner
Citibank, and raised serious doubts as to the authenticity and due execution of the same.
(imposibledawnawalangnakapansin nun eh damingdinaananna officers)
Lastly, respondent denied that it was her signature on the Declaration of Pledge. She claimed
that the signature was a forgery. When a document is assailed on the basis of forgery, the
best evidence rule applies.
As to the value of the dollar deposits in Citibank-Geneva ordered refunded to respondent
It is well-settled that Article 1250 of the Civil Code becomes applicable only when there is
extraordinary inflation or deflation of the currency. Inflation has been defined as the sharp
increase of money or credit or both without a corresponding increase in business transaction.
Furthermore, it is incontrovertible that Article 1250 of the Civil Code is based on equitable
considerations. Among the maxims of equity are (1) he who seeks equity must do equity, and
22
(2) he who comes into equity must come with clean hands. (Madumidawkamayni Citibank
dahilsa delay haha)
The damage caused to respondent of the deprivation of her dollar accounts for more
than two decades is unquestionably relatively more extensive and devastating, as
compared to whatever damage petitioner Citibank, an international banking
corporation with undoubtedly substantial capital, may have suffered for respondent’s
non-payment of her loans. It must also be remembered that petitioner Citibank had already
considered respondent’s loans paid or liquidated by 26 October 1979 after it had fully effected
compensation thereof using respondents deposits and money market placements. All this
time, respondent’s dollar accounts are unlawfully in the possession of and are being used by
petitioner Citibank for its business transactions. In the meantime, respondent’s businesses
failed and her properties were foreclosed because she was denied access to her funds when
she needed them most. Taking these into consideration, respondent’s dollar accounts with
Citibank-Geneva must be deemed to be subsisting and continuously deposited with petitioner
Citibank all this while, and will only be presently withdrawn by respondent. Therefore,
petitioner Citibank should refund to respondent the U.S. $149,632.99 taken from her Citibank-
Geneva accounts, or its equivalent in Philippine currency using the exchange rate at the time
of payment, plus the stipulated interest for each of the fiduciary placements and current
accounts involved, beginning 26 October 1979.
IN VIEW OF THE FOREGOING, petitioners’ Motion for Partial Reconsideration of this Court’s
Decision, dated 16 October 2006, and respondent’s Motion for this Court to declare the same
Decision already final and executory, are both DENIED for lack of merit.
SO ORDERED.
TOPIC: Burden of proving paymentG.R. No. 162308, November 22, 2006
G & M PHILIPPINES, INC., petitioner, vs. ROMIL V. CUAMBOT, respondent
FACTS: On November 7, 1994, respondent Romil V. Cuambotapplied for deployment to
Saudi Arabia as a car body builder with petitioner G & MPhilippines, Inc., a duly licensed
placement and recruitment agency. Respondent’s application was duly processed and he
later signed a two-year employment contract to work at the Al Waha Workshop in Unaizah
City, Gassim, Kingdom of Saudi Arabia. He left the country on January 5, 1995. However,
respondent did not finish his contract and returned to the Philippines barely six
months later, on July 24, 1995 and he filed before the National Labor Relations
Commission (NLRC) a complaint for unpaid wages, withheld salaries, refund of plane ticket
and repatriation bond, later amended to include illegal dismissal, claim for the unexpired
portion of his employment contract, damages, and attorney’s fees.
Respondent narrated that at the Al Waha Workshop where he worked, he was subjected to
inhumane and unbearable working conditions. Except for a meal allowance of 100 Riyals a
month, he was not paid his monthly salary of 1,200 Riyals. And he was required to render six
(6) hours of overtime work daily, except Friday, without overtime pay; he was also seriously
insulted by his employer every time he demanded for his salary, and some of the letters sent
to him by his family were withheld by his employer.
When respondent asked Motairi for his salary, he was told that since a huge sum had been
paid to the agency for his recruitment and deployment, he would only be paid after the said
amount had already been recovered. He was also told that his salary was only 800 Saudi
Riyals (SAR) per month, in contrast to the SAR1200 that was promised him under the
contract. Motairi warned that he would be sent home the next time he demanded for his
salary. However, respondent mustered the courage to again demand for his salaries and
Motairi ordered him to pack up and leave. He was able to purchase his plane ticket only
through the contributions of his fellow Filipinos.
Respondent further claimed that his employer’s actuations violated Articles 83 and 103 of the
Labor Code. While he was entitled to terminate his employment in accordance with Article
285 (b) due to the treatment he received, he did not exercise this right. He was nevertheless
illegally dismissed by his employer when he tried to collect the salaries due him. Respondent
further claimed that the reduction of his monthly salary from SAR1,200 to SAR800 and
petitioners failure to furnish him a copy of the employment contract before his departure
amounted to prohibited practices under Article 34 (i) and (k) of the Labor Code.
PETITIONER insisted that respondent was religiously paid his salaries as they fell due.
After working for a little over seven months, respondent pleaded with his employer to be
allowed to return home since there were family problems he had to settle personally.
Respondent even submitted a resignation letter dated July 23, 1995. To support its claim
that respondent had been paid his salaries as they fell due, petitioner submitted in evidence
copies of seven payslips authenticated by the Philippine Labor Attach in Riyadh, Saudi
Arabia.
Respondent countered that his signatures in the purported payslips were forged. He
denied having received his salaries for the said period, except only for the SAR100 as
monthly allowance. He pointed out that the authentication of the alleged pay slips and
resignation letter before the labor attach in Riyadh is immaterial, since the documents
themselves were falsified.
To counter the allegation of forgery, petitioner claimed that there was a great possibility
that respondent had changed his signature while abroad so that he could file a complaint for
illegal dismissal upon his return. The argument that the stroke and handwriting on the payslip
was written by one and the same person is mere conjecture, as respondent could have
requested someone, i.e., the cashier, to prepare the resignation letter for him. While it is the
employer who fills up the pay slip, respondent could have asked another employee to prepare
the resignation letter, particularly if he (respondent) did not know how to phrase it himself.
Petitioner further pointed out that respondent has different signatures, not only in the
pleadings submitted before the Labor Arbiter, but also in respondents personal documents.
23
On January 30, 1997, Labor Arbiter Jose De Vera ruled in favor of respondent stating that
what convinced this Arbitration Branch about the unreliability of the complainants’ signature in
the payslip is the close semblance of the handwritings in the payslips and the handwritings in
the purported handwritten resignation of the complainant. It unmistakably appears to this
Arbitration Branch that the payslips as well as the handwritten letter-resignation were
prepared by one and the same person. Under the circumstances, the only logical conclusion
is that both the payslips and the handwritten letter-resignation were prepared and signed by
one and the same person definitely not the complainant.
Petitioner appealed the Decision of the Labor Arbiter to the NLRC, alleging that the Labor
Arbiter, not being a handwriting expert, committed grave abuse of discretion amounting to
lack of jurisdiction in finding for respondent. NLRC upheld this contention and remanded the
case to the Arbitration Branch of origin for referral to the government agency concerned for
calligraphy examination of the questioned documents.
This time, the complaint was dismissed for lack of merit.According to Labor Arbiter Portillo,
aside from respondent’s bare allegations, he failed to substantiate his claim of poor working
conditions and long hours of employment. The fact that he executed a handwritten resignation
letter is enough evidence of the fact that he voluntarily resigned from work. The Labor Arbiter
concluded that as between the oral allegations of workers that they were not paid monetary
benefits and the documentary evidence presented by employer, the latter should prevail.
Respondent appealed the decision before the NLRC, alleging that the Labor Arbiter failed to
consider the genuineness of the signature which appears in the purported resignation
letter, as well as those that appear in the seven pay slips. He insisted that these documents
should have been endorsed to the NBI Questioned Documents Division or the PNP Crime
Laboratory for calligraphy examination.
The NLRC dismissed the appeal for lack of merit in a Resolution. It held that the questioned
documents could not be endorsed to the agency concerned since mere photocopies had
been submitted in evidence. The records also revealed that petitioner had communicated to
the foreign employer abroad, who sent the original copies, but there was no response from
respondent. If respondent had wanted to have the documents endorsed to the NBI or the
PNP, he should have insisted that the documents be examined by a handwriting expert of the
government. Thus, respondent was estopped from assailing the Labor Arbiters ruling.
Unsatisfied, respondent elevated the matter to the CA which reversed the ruling of the NLRC.
According to the appellate court, a visual examination of the questioned signatures would
instantly reveal significant differences in the handwriting movement, stroke, and structure, as
well as the quality of lines of the signatures; petitioner filed a motion for reconsideration, which
the CA denied.
Petitioner points out that most of the signatures which Labor Arbiter De Vera used as
standards for comparison with the signatures appearing on the questioned documents were
those in the pleadings filed by the respondent long after the questioned documents had been
supposedly signed by him. It claims that respondent affixed his signatures on the pleadings in
question and intentionally made them different from his true signature so that he could later
on conveniently impugn their authenticity. Thus, the CA clearly committed a palpable error of
law.
ISSUE: Whether or not the employee was illegally dismissed
HELD: Yes.We find that petitioner’s failure to submit the original copies of the pay slips and
the resignation letter raises doubts as to the veracity of its claim that they were actually
signed/penned by respondent. Petitioner did not even present in evidence the original copy of
the employment contract, much less a machine copy, giving credence to respondents claim
that he was not at all given a copy of the employment contract after he signed it. What
petitioner presented was a mere photocopy of the OCW Info Sheet issued by the Philippine
Overseas Employment Administration as well as the Personal Data Sheet which respondent
filled up. It bears stressing that the original copies of all these documents, including the
employment contract, were in the possession of petitioner, or, at the very least, petitioner’s
principal.
Moreover, as correctly noted by the CA, the opinions of handwriting experts are not binding
upon the courts. As such, resort to these experts is not mandatory or indispensable to the
examination or the comparison of handwriting. A finding of forgery does not depend entirely
on the testimonies of handwriting experts, because the judge must conduct an independent
examination of the questioned signature in order to arrive at a reasonable conclusion as to its
authenticity. The opinion of a handwriting expert on the genuineness of a questioned
signature is certainly much less compelling upon a judge than an opinion rendered by a
specialist on a highly technical issue.
Even a cursory perusal of the resignation letter and the handwritten pay slips will readily show
that they were written by only one person. A mere layman will immediately notice that the
strokes and letters in the documents are very similar, if not identical, to one another. It is also
quite apparent from a comparison of the signatures in the pay slips that they are inconsistent,
irregular, with uneven and faltering strokes.
We also find it unbelievable that after having waited for so long to be deployed to Saudi
Arabia and with the hopes of opportunity to earn a better living within his reach, respondent
would just suddenly decide to abandon his work and go home due to family problems.
At the very least, respondent could have at least specified the reason or elaborated on the
details of such an urgent matter so as not to jeopardize future employment opportunities. That
respondent also filed the complaint immediately gives more credence to his claim that he was
illegally dismissed. He arrived in the Philippines on July 24, 1995, and immediately filed his
complaint for illegal dismissal two days later, on July 26, 1995.
24
We are not impervious of petitioners claim that respondent could have asked another person
to execute the resignation letter for him. However, petitioner failed to present even an affidavit
from a representative of its foreign principal in order to support this allegation.
Indeed, the rule is that all doubts in the implementation and the interpretation of the
Labor Code shall be resolved in favor of labor, in order to give effect to the policy of the
State to afford protection to labor, promote full employment, ensure equal work opportunities
regardless of sex, race or creed, and regulate the relations between workers and employers,
and to assure the rights of workers to self-organization, collective bargaining, security of
tenure, and just and humane conditions of work. We reiterate the following pronouncement in
Nicario v. National Labor Relations Commission:
It is a well-settled doctrine, that if doubts exist between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the latter. It
is a time-honored rule that in controversies between a laborer and his master, doubts
reasonably arising from the evidence, or in the interpretation of agreements and
writing should be resolved in the formers favor. The policy is to extend the doctrine to
a greater number of employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and protection of
labor.
Moreover, one who pleads payment has the burden of proving it. The reason for the rule
is that the pertinent personnel files, payrolls, records, remittances and other similar
documents which will show that overtime, differentials, service incentive leave, and other
claims of workers have been paid are not in the possession of the worker but in the custody
and absolute control of the employer. Thus, the burden of showing with legal certainty
that the obligation has been discharged with payment falls on the debtor, in
accordance with the rule that one who pleads payment has the burden of proving it.
Only when the debtor introduces evidence that the obligation has been extinguished does the
burden shift to the creditor, who is then under a duty of producing evidence to show why
payment does not extinguish the obligation. In this case, petitioner was unable to present
ample evidence to prove its claim that respondent had received all his salaries and benefits in
full.
TOPIC: Burden of proving payment
G.R. No.154286 February 28, 2006
MAGDALENA CORUA, JORGE CORUA, ESTATE OF ALBERTO CORUA, ROSITA
CORUA, ESTATE OF BENJAMIN CORUA, JUANITA ELIZALDE, FLORA ACOSTA,
LORETO CORUA, and ESTATE OF JOSE CORUA,
Petitioners,
- versus-
SATURNINO CINAMIN, ANDRES ACANA, ROSITALAUREANO, ROGELIOENGAG,
DOMINADORGABIOTA, JR., FEDERICOGABIOTA, RAULVANGUARDIA,
ROMEOLOCSIN, GUALBERTOGUALDRAPA, CARLITOGOROY,
GERVACIOSONQUIAWON, LEOPOLDO BELO, and NORMA LOCSIN,
Respondents.
FACTS:
Julieta Vasquez Corua was the owner of Lot No. 1176-A located in Himaya, Hinigaran,
Negros Occidental, with an area of 119.3830 hectares and Lot No. 350-B situated in Payao,
Binalbagan, Negros Occidental, composed of 25.2513 hectares. When Julieta died intestate
on 30 September 1972, these properties passed on to petitioners who were her children,
namely: Magdalena, Jorge, Rosita, Loreto, Rosendo, Jose, Benjamin, all surnamed Corua,
Juanita Elizalde, and Flora Acosta. Rosendo died leaving behind as compulsory heirs
MarivicTogle, Diana, Cesar, and Anna Corua. When Jose passed away, he left, as his
compulsory heirs Priscilla, Patricia, Ma. Fe, and Jose Ma., all surnamed Corua, while
Benjamin died without issues.
Lot No. 1176-A was tenanted by respondents SaturninoCinamin, Andres Acana, Rosita
Laureano, Rogelio Egang, DominadorGabiota, and Federico Gabiota. On the other hand, Lot
No. 350-B was tenanted by respondents Raul Vanguardia, Romeo Locsin, Gilberto
Gualdrapa, CarlitoGoroy, GervacioSonquiawon, Leopoldo Belo, and Norma Locsin.[8]
On 28 June 1994, petitioners filed before the (PARAD) two separate complaints for
cancellation and/or nullification of emancipation patents and/or certificates of land transfers
issued in favor of respondents.[9] The first complaint, docketed as PARAD Case No. VI-71-
NO-94, was instituted against respondents Cinamin, Acana, Laureano, Engag, Gabiota, Jr.,
and Gabiota.[10]
In said complaint, petitioners alleged that Lot No. 1176-A was primarily devoted to sugar
production and only a small portion thereof or about 9.92 hectares were devoted to rice and
corn production. As the entire property was still under the regime of co-ownership, each
petitioner was the pro-indiviso owner of only 9,920 square meters which was way below the
seven-hectare retention limit mandated by Presidential Decree No. 27.[11] Despite this and
the fact that neither respondents Cinamin, Acana, Laureano, Engag, Gabiota, Jr., and
Gabiota nor their predecessors-in-interest were petitioners tenants, emancipation patents
were issued in favor of said respondents.Moreover, petitioners claimed that respondents
failed to pay the rentals and amortizations for the lands awarded to them.
In their answer with motion to dismiss,[12] respondents Cinamin, Acana, Laureano, Engag,
Gabiota, Jr., and Gabiota insisted that they were tenants of Lot No. 1176-A as they and their
predecessors-in-interest were duly paying the landowners shares on the lands they were
farming such that when Pres. Decree No. 27 took effect, the Department of Agrarian Reform
(DAR) immediately recognized them as farmer-beneficiaries. They likewise alleged that they
were paying their amortizations for the lands granted to them through the Land Bank of the
Philippines (LBP) and that aside from this, they had been paying the real property taxes due
on the subject lands.
The second case was instituted by petitioners against respondents Vanguardia, Locsin,
Gualdrapa, Goroy, Sonquiawon, Belo, and Locsin and this was docketed as PARAD Case
No. VI-72-NO-94.[13] In this complaint, petitioners alleged that Lot No. 350-B was primarily
devoted to sugar production and only 8.10 hectares thereof, more or less, were used for rice
and corn production. Petitioners stated that as Lot 350-B was still owned in common, each
petitioners share in the 8.10 hectares which was supposed to be covered by Pres. Decree No.
27 would be less than the retention limit stated in said statute. Petitioners, therefore, assailed
the issuance of emancipation patents to respondents Vanguardia, Locsin, Gualdrapa, Goroy,
Sonquiawon, Belo, and Locsin for being violative of the retention limit imposed by Pres.
25
Decree No. 27. The issuance of emancipation patents in this PARAD case was likewise
questioned on the grounds that respondents Vanguardia, Locsin, Gualdrapa, Goroy,
Sonquiawon, Belo, and Locsin or their predecessors-in-interest were not tenants of Lot 350-B
and that they failed to pay for the value of the lands awarded to them prior to the issuance of
emancipation patents.
Respondents Vanguardia, Locsin, Gualdrapa, Goroy, Sonquiawon, Belo, and Locsin
countered in their answer with motion to dismiss[14] that like the respondents in the other
case, they and their predecessors-in-interest, as tenants of Lot 350-B, paid to petitioners the
latters share in their tenancy relationship. They also alleged that when Pres. Decree No. 27
was implemented, they were recognized by no less than the DAR as farmer-beneficiaries. As
regards their alleged failure to pay for the value of the portions of Lot 350-B awarded to them,
respondents Vanguardia, Locsin, Gualdrapa, Goroy, Sonquiawon, Belo, and Locsin claimed
that they had been paying their amortizations through the LBP and that they were the ones
paying the real property taxes for the lands awarded to them.
In a decision dated 22 December 1994, the PARAD disposed of the complaints in the
following manner:
WHEREFORE, premises considered, decision is hereby rendered dismissing the complaints
for utter lack of merit.
For lack of evidence, the counterclaim is denied.[15]
On 14 February 1995, petitioners filed a motion for reconsideration[20] but this was denied
by the PARAD.
Petitioners thereafter filed a notice of appeal dated 29 June 1995[21] before the DARAB
which, however, affirmed in toto the decision of the PARAD.[22]
Still undaunted, petitioners then sought relief before the Court of Appeals where their case
once again failed to prosper for in its decision dated 14 December 2001, the Court of
Appeals denied petitioners petition for review. Petitionersmotion for reconsideration
failed to persuade the Court of Appeals and so it was denied through the Court of Appeals
resolution dated 23 May 2002.
Hence, the present petition where petitioners pray that we reverse and set aside the assailed
decision of the Court of Appeals and in lieu thereof a new judgment be rendered declaring as
null and void the emancipation patents and/or certificates of land transfer issued by the DAR
in favor of respondents.[23]
Petitioners contend that under both law and jurisprudence, emancipation patents may only be
issued to farmer-beneficiaries after they had fully complied with the requirements of Pres.
Decree No. 27 including the full payment of amortization. In support of this contention, they
cite the first paragraph of Section 2, Pres. Decree No. 266.
And under Pres. Decree No. 266 which specifies the procedure for the registration of title to
lands acquired under Pres. Decree No. 27, full compliance by the grantee with the above-
mentioned undertakings is required for a grant of title under the Tenant Emancipation Decree
and the subsequent issuance of an emancipation patent in favor of the farmer/grantee
[Section 2, Pres. Decree No. 266]. x x x.[28]
For their part, respondents claim that they have complied with what is required of them under
the law. For one, petitioners maintain that they have been paying to the LBP the monthly
amortization due on the lands awarded to them and that in fact, some of them had paid the
LBP the full amount of their obligations.[32] They also assert that even prior to this, they
religiously paid the landowners share in the portions of the land that they respectively
tilled.[33] Respondents likewise point to the initiatory steps taken by the DAR in the
implementation of Operation Land Transfer program of Pres. Decree No. 27 particularly the
determination of the average gross production data per hectare conducted by the Barangay
Committee on Land Production (BCLP).[34] As the BLCP had already done its duty of
determining the value of the subject lands, respondents were then authorized to pay for the
lands awarded to them to the LBP.[35]
Petitioner, however, claims that she was not paid just compensation and, thus, prays for the
cancellation of the Emancipation Patents issued to respondents under PD 27. She contends
that it is illegal for the DAR to take property without full payment of just compensation[;] until
full payment is done the title and ownership remain with the landholder.
ISSUE: WON the emancipation patents may be cancelled.
HELD: YES.
Petitioners contention has merit. Section 2 of PD 266 states:
After the tenant-farmer shall have fully complied with the requirements for a grant of title
under Presidential Decree No. 27, an Emancipation Patent and/or Grant shall be issued by
the Department of Agrarian Reform on the basis of a duly approved survey plan.
On the other hand, paragraphs 8 and 9 of PD 27 reads as follows:
For the purpose of determining the cost of the land to be transferred to the tenant-farmer
pursuant to this Decree, the value of the land shall be equivalent to two and one-half (2 )
times the average harvest of three normal crop years immediately preceding the promulgation
of this Decree;
The total cost of the land, including interest at the rate of six (6) per centum per annum, shall
be paid by the tenant in fifteen (15) years of fifteen (15) equal annual amortizations[.]
Although, under the law, tenant farmers are already deemed owners of the land they till, they
are still required to pay the cost of the land, including interest, within fifteen years before the
title is transferred to them. Thus, the Court held in Association of Small Landowners in the
Philippines v. Secretary of Agrarian Reform:[40]
It is true that PD 27 expressly ordered the emancipation of tenant-farmers as of October 21,
1972 and declared that he shall be deemed the owner of a portion of land consisting of a
family-sized farm except that no title to the land owned by him was to be actually issued to
him unless and until he had become a full-fledged member of a duly recognized farmers
cooperative. It was understood, however, that full payment of the just compensation also had
to be made first, conformably to the constitutional requirement.
x xxx
Presidential Decree 27 and subsequently Executive Order (EO) 228, which recognized the
rights acquired by tenant-farmers under PD 27, provide in detail the computation to be used in
arriving at the exact total cost of the parcels of land. Evidently, therefore, the law recognizes
that their exact value, or the just compensation to be given to the landowner, cannot just be
assumed; it must be determined with certainty before the land titles are transferred.
Although EO 228 provides that the total lease rentals paid for the lands from October 21,
1972 shall be considered as advance payment, it does not sanction the assumption that such
rentals are automatically considered as equivalent to just compensation for the land. The
provision significantly designates the lease rentals as advance, not full payment. The
26
determination of the exact value of the lands cannot simply be brushed aside, as it is
fundamental to the determination of whether full payment has been made.
In the case at bar, respondents submitted as evidence the accomplished forms of Land
Valuation Summary & Farmers Undertaking of the LBP[41] and the average gross production
prepared by the BCLPs in Barangays Hinigaran and Payao, Binalbagan, Negros
Occidental.[42] To our mind, however, these documentary evidence, pertaining merely to
the valuation of the subject lands, do not meet the requirement of Pres. Decree No. 27
and Pres. Decree No. 266 with respect to the issuance of emancipation patents to
respondents. Valuation of the land is only one aspect of the whole process of agrarian
reform; full compensation for the value of land is another. As discussed above, the laws
mandate the full compensation for the lands acquired under Pres. Decree No. 27 prior to the
issuance of emancipation patents. This is understandable particularly since the emancipation
patent presupposes that the grantee thereof has already complied with all the requirements
prescribed by Pres. Decree No. 27.[43] The issuance of emancipation patent, therefore,
conclusively vests upon the farmer/grantee the rights of absolute ownership over the land
awarded to him.[44]
While this Court commiserates with respondents in their plight, we are constrained by the
explicit requirements of the laws and jurisprudence on the matter to annul the emancipation
patents issued to respondents in the absence of any proof that they or the LBP has already
fully paid the value of the lands put under the coverage of Pres. Decree No. 27. The
requirement is unequivocal in that the values of the lands awarded to respondents must, prior
to the issuance of emancipation patents, be paid in full.
Under the rules of evidence, respondents, as debtors, bear the onus of showing with legal
certainty that the obligation to petitioners with respect to the value of the lands awarded to
them has been discharged by payment.[45] Sadly for respondents, they failed to dispose of
this burden as the records of this case is bereft of any evidence, such as certifications from
the proper government authorities, which would satisfactorily establish that the requisite full
payment to petitioners has been complied with. The cancellation of the emancipation patents
subject of this case, perforce, follows. Dura lexsedlex.
Despite the cancellation of emancipation patents in this case, respondents, however, should
remain in possession of the disputed lands. Section 22 of Republic Act No. 6657,[46] which
we have ruled to apply to lands rice and corn lands under Pres. Decree No. 27,[47] clearly
provides that actual tenant-tillers in the landholding shall not be ejected or removed
therefrom.[48] Thus, while actual titles remain with petitioners, respondents are entitled to
maintain possession of the lands granted to them.