Digested Cases (sabay sabay natin nguyain lahat, mabagal lang para hindi magka-kabag)

(Payment to the third person)

G.R. No. L-49188

January 30, 1990

PHILIPPINE AIRLINES, INC. v. HON. COURT OF APPEALS, HON. JUDGE RICARDO D. GALANO,
Court of First Instance of Manila, Branch XIII, JAIME K. DEL ROSARIO, Deputy Sheriff, Court of First
Instance, Manila, and AMELIA TAN,

Facts: Tan was granted damages against PAL but PAL made payment to Sheriff by issuing a check in Sheriffs
favour instead of aggrieved Tan. Hence, when Sheriff absconded with PALs money, latter is made to bear the loss
because it allowed such possibility of misappropriation to happen when it improperly issued the check to the wrong
person.

> Complaint for Damages (November 8, 1967) by Amelia Tan (of Able Printing Press) against Philippine Airlines,
Inc. > RTC Held (June 29, 1972) in favor of Amelia Tan ~ Payment of P75k as actual damages, P18,200 as
unrealized profit, P20k as moral damages, P5k as damages > CA affirmed (February 3, 1977) > Final and Executory
(May 31, 1977) > Remanded to RTC for execution > Motion for issuance of writ of execution (September 2,1977) >
Issuance of writ of execution (October 11, 1977) > Writ referred to Deputy Sheriff Emilio Z. Reyes for enforcement
> Motion for issuance of an alias writ of execution (February 11, 1978) > Opposition Motion (March 1, 1978) by
PAL alleging that they had already fully paid its obligation through check payment in favour of the deputy sheriff ~
receipts issued by Reyes > CA Order (March 3,1978) denying issuance of alias writ but ordering sheriff Reyes to
surrender amounts paid to him > Order unserved ~ Sheriff Reyes absconded or disappeared > Motion for the
issuance of a partial alias writ of execution (March 28, 1978) then substituted by Motion Substitute Motion for Alias
Writ of Execution (April 19, 1978) > RTC Granted (May 1, 1978) ~ Directed Special Sheriff Jaime K. del Rosario to
levy on execution in the sum of P25k > Urgent motion to quash (May 23, 1978) by PAL alleging that no return of
the writ had as yet been made by Deputy Sheriff Emilio Z. Reyes and that the judgment debt had already been fully
satisfied > Notice of Garnishment (May 26,1978) on PALs deposit in Far East Bank and Trust Company worth
P64,408.00

> Contention: Fulfillment of payment by PAL via Sheriff Reyes

> Issuance of an alias writ of execution without the prior return of the original writ by the implementing officer
(Sheriff Reyes) > due to fact that such a return is incapable of being obtained ~ officer who is to make the said

return has absconded and cannot be brought to the Court despite the earlier order of the court for him to appear for
this purpose > necessity for such a return as a condition precedent for the issuance of an alias writ was justifiably
dispensed with by the court > judgment cannot be rendered nugatory by the unreasonable application of a strict rule
of procedure > where the return cannot be expected to be forthcoming, to require the same would be to compel the
enforcement of rights under a judgment to rest on an impossibility, thereby allowing the total avoidance of judgment
debts > HENCE so long as a judgment is not satisfied, a plaintiff is entitled to other writs of execution ~ Tan has
waited for 22y yet payment has not been made (1967 to 1990); that she has been deprived of what, technically, she
should have been paid from the start, before 1967, without need of her going to court to enforce her rights >
OTHERWISE, requiring such will produce an abhorent situation whereby the mischief of an erring officer of the
court could be utilized to impede indefinitely the undisputed and awarded rights which a prevailing party rightfully
deserves to obtain and with dispatch > merely to inform the court and the parties, of any and all actions taken under
the writ of execution but such information can be established in some other manner > execution is the fruit and end
of the suit and is very aptly called the life of the law

> Payment made to Sheriff Reyes DID NOT SATISFY THE JUDGEMENT DEBT > Payment was made thru a
check addressed to Sheriff Reyes where PAL knew the aggrieved to be Tan and should have issued the check to her
> NORMALLY, Payment must be made to (1) the obligee himself or to (2) an agent having authority, express or
implied, or to (3) one who by law is authorized to act for the creditor, or to (4) one having apparent authority to
receive the particular payment as authorized by law or by consent of the oblige > Payment to Sheriff could have
satisfied the debt BUT NOT IN THIS CASE due to payment thru check issued in his name > (1) Sheriff not
authorized by consent of obligee to accept payment; (2) Check only a substitute for money and its delivery does not
operate as payment ~ cash would have been considered as payment; (3) Check issued in the Sheriffs name ~ PAL
made possible the misappropriation of money, which goes to the wrong party ~ PAL must bear the fault > Payment
in checks is precisely intended to avoid the possibility of the money going to the wrong party

> Payment > the discharge of a debt or obligation in money > unless the parties so agree, a debtor has no rights,
except at his own peril, to substitute something in lieu of cash as medium of payment of his debt > negotiable
instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself,
operate as payment > A check, whether a manager's check or ordinary cheek, is not legal tender, and an offer of a
check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor ~
mere delivery of checks does not discharge the obligation under a judgment ~ obligation is not extinguished and
remains suspended until the payment by commercial document is actually realized

> Execution > process which carries into effect a decree or judgment > for the sheriff to accomplish
> Satisfaction of a judgment > payment of the amount of the writ, or a lawful tender thereof, or the conversion by
sale of the debtor's property into an amount equal to that due, and, it may be done otherwise than upon an execution
> for the creditor to achieve

>> The implementing officer's duty should not stop at his receipt of payments but must continue until payment is
delivered to the obligor or creditor

Giving him cash or check payable to him is making the same risk!
Why payment if in cash and not in check >> Why the distinction? None but they were just insisting

Application of Payments

A.M. No. 21901-96

June 27, 1978

REPARATIONS COMMISSION v. UNIVERSAL DEEP-SEA FISHING CORPORATION

and MANILA SURETY AND FIDELITY CO., INC.

MANILA SURETY & FIDELITY CO., INC. v. PABLO S. SARMIENTO

Facts:
> 3 Sales between Universal Deep-Sea Fishing Corporation and Reparations Commission
over 6 fishing boats (delivered in twos) > (1) Contract of Conditional Purchase with
Schedule of Payments (February 12, 1960) > Total of P536,428.44 where 1st installement or
10% of F.O.B. Cost due on May 8, 1961 and balance in 10 equal yearly instalments > Delivery
of 2 boats (November 20,1958) > Performance Bond worth P53,643 with UNIVERSAL as
principal and the Manila Surety & Fidelity Co., Inc. as surety ~ Indemnity Agreement to
indemnify the surety company for any damage, loss charges, etc., which it may sustain or
incur as a consequence of having become a surety upon the performance bond > (2)
Contract of Conditional Purchase and Sale Reparations Goods (November 25, 1959) > Total
of P687,777.76 where 1st installement or 10% of F.O.B. Cost due on July 1961 and balance
in 10 equal yearly instalments > Delivery of 2 boats (April 20, 1959) > Performance Bond
worth P68,777.77 with UNIVERSAL as principal and the Manila Surety & Fidelity Co., Inc.
as surety > (3) Contract for the Utilization of Reparations Goods (February 12, 1960) >
Total of P54,500 where 1st installement or 10% of F.O.B. Cost due on October 17, 1961 and
balance in 10 equal yearly instalments > Delivery of 2 boats> Performance Bond worth
P54,500 with UNIVERSAL as principal and the Manila

Surety & Fidelity Co., Inc. as surety > Suit for Recovery of Sums of Money (August 10,
1962) by Reparations Commission > Contention of UNIVERSAL: Not yet due and
demandable

> DEBT DUE AND DEMANDABLE > Last instalment of first sale was due on May 8, 1961
and of second sale on July 31, 1961 and of third on October 17, 1961 ~ Suit was filed
August 10, 1962

> Arts. 1252-1254 DO NOT APPLY ~ desire to apply because of choice to which debt the
payment will accrue > APPLY to a person owing several debts of the same kind to a single
creditor > CANNOT APPLY to a person whose obligation as a mere surety is both

contingent and singular ~ full and faithful compliance with the terms of the contract of
conditional purchase and sale of reparations goods

> OBLIGATION OF SURETY > payment of the first installment and the 10 equal yearly
installments of the first sale > P10k deducted from P53,643 paid as first instalment BUT
THEN 10 equal yearly installments had also accrued > surety company to pay still the full
extent of its undertaking > WHY DEDUCT P10k FROM DP OF FIRST SALE ~ where there
is no imputation of payment made by either debtor or creditor, the debt which is the most
onerous to the debtor shall be deemed to have been satisfied

(Dacion en pago)

G.R. No. 118342 January 5, 1998

DEVELOPMENT BANK OF THE PHILIPPINES v. COURT OF APPEALS and LYDIA CUBA

G.R. No. 118367 January 5, 1998

LYDIA P. CUBA v. COURT OF APPEALS, DEVELOPMENT BANK OF THE PHILIPPINES and

AGRIPINA P. CAPERAL

Facts:

> September 6, 1974; August 11, 1975; and April 4, 1977: Loans obtained by Lydia Cuba from Development Bank
of the Philippines worth P109,000.00; P109,000.00; and P98,700.00 > Deed of Assignment of her Leasehold Rights
to a Fishpond as Security > Defaulted > DBP appropriated the leasehold rights without foreclosure proceedings,
whether judicial or extra-judicial > Deed of Conditional Sale of the Leasehold Rights in favor of Lydia Cuba over
after negotiation for repurchase of her leasehold rights > New Fishpond Lease Agreement (March 24, 1980) issued
by the Ministry of Agriculture and Food in favor of Lydia Cuba > Defaulted in amortizations > Notice of Rescission
thru Notarial Act (March 13, 1984) by DBP > Repossession of Leasehold Rights > Public Auction and Deed of
Conditional Sale (August 16, 1984) in favor of Agripina Caperal > Fishpond Lease Agreement (December 28, 1984)
awarded to Caperal

> Property as Security for loan was a MORTGAGE > ASSIGNMENT WAS BY WAY OF SECURITY FOR
PAYMENT OF THE LOANS ~ assignment to guarantee an obligation is in effect a mortgage > provision in
promissory notes 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; provisions in Assignment of Leasehold Rights
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 that if "foreclosure is actually accomplished, the usual 10%
attorney's fees and 10% liquidated damages of the total obligation shall be imposed > No provision that the
ownership over the leasehold rights would automatically pass to DBP upon CUBA's failure to pay the loan on time ~
merely provided for the appointment of DBP as attorney-in-fact with authority to sell or otherwise dispose of the
said real rights, in case of default > Not reassignment of ownership where 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 > assignment being in its essence a mortgage, was but a security and not a
satisfaction of indebtedness ~ obligation to pay a sum of money remained, and the assignment merely served as
security for the loans covered by the promissory notes > DBP never acquired lawful ownership of CUBA's leasehold
rights > Necessity for foreclosure proceedings before DBP could have acquired ownership > Art. 2088 forbids a
credit or from appropriating, or disposing of, the thing given as security for the payment of a debt > VOID! all acts
of ownership and possession by the bank > BAD FAITH! in falsely representing to the Bureau of Fisheries that it
had foreclosed its mortgage on CUBA's leasehold rights that resulted to termination of CUBA's leasehold rights

> Payment by cession > existence of two or more creditors and the assignment of all the debtor's property
> Dation > property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law on
sales

> Pactum commissorium > ELEMENTS: (1) there should be a property mortgaged by way of security for the
payment of the principal obligation; (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 > VOID because
it is a conflict of interest ~ creditor normally takes property that is more valuable than value of debt > creditor still
protected if value of security goes down > VOID ~ if lender appropriates it for himself, debtor is cheated because
excess of the appropriation goes to creditor > LEGAL: foreclosure ~ sale ~ excess is returned to debtor >
contemplates automatic appropriation ~ automatic transfer of title ~ If made into a dation en pago, is it valid if there
is a deed of sale > depends

(Impossibility of obligation)
G.R. No. L-44349

October 29, 1976

JESUS V. OCCENA and EFIGENIA C. OCCENA v. HON. RAMON V. JABSON, Presiding

Judge of the Court Of First Instance of Rizal, Branch XXVI; COURT OF APPEALS and
TROPICAL HOMES, INC.

Facts: Remedy sought by Tropical Homes, Inc., which is for the court to modify its contract
with Occenas allegedly due to unanticipated rise in prices that would leave the former at a
loss, cannot be granted for lack of legal basis. Impossibility of performance which Art. 1267
speaks of is for the release from obligation by the debtor but not the modification of contract
which has the force of law between the parties.
> Subdivision Contract between landowners Jesus and Efigenia Occena and developer
Tropical Homes, Inc. where latter guaranteed former 40% share, fixed and sole, of all cash
receipts from the sale of subdivision lots owned by former > Complaint for Modification of
the Terms and Conditions of the Contract by Tropical (February 25, 1975) > Contentions of
Tropical: That increase in prices of oil and its derivatives and concomitant worldwide
spiralling of prices made the cost of development [rise] to levels which are unanticipated,
unimagined and not within the remotest contemplation of the parties at the time said
agreement was entered into and to such a degree that the conditions and factors which
formed the original basis of said contract have been totally changed WITHOUT SPECIFYING
HOW EXACTLY > Relief prayed for was modification of the terms and conditions of the
contract by fixing the proper shares that should pertain to the parties out of the gross
proceeds from the sales of subdivided lots of subjects subdivision > Invoked ART. 1267 ~
When the service has become so difficult as to be manifestly beyond the contemplation of
the parties, the obligor may also be released therefrom, in whole or in part
> General Rule of Art. 1267 ~ impossibility of performance releases the obligor, or when the
service has become so difficult as to be manifestly beyond the contemplation of the parties,
the court should be authorized to release the obligor in whole or in part > Intention of the
parties should govern ~ that service turns out to be so difficult as have been beyond their

contemplation > it would be doing violence to that intention to hold the obligor still
responsible > that performance will result in situation where other party would be unustly
enriched at the expense of the other > inequitous distribution of proceeds and exposure of
plaintiff to implacable losses, resulting in an unconscionable, unjust and immoral situation
> ART. 1267 CANNOT APPLY > REMEDY HAS NO LEGAL BASIS > Seeks NOT THE RELEASE
from compliance of the obligation as contemplated by Art. 1267 that gives a positive right in
favor of the obligor to be released from the performance of an obligation in full or in part
when its performance has become so difficult as to be manifestly beyond the contemplation
of the parties > Seeks modification of the terms and conditions of the Contract by fixing the
proper shares that should pertain to the parties out of the gross proceed > Art. 1267 does
not grant the courts this authority to remake, modify or revise the contract which has the
force of law between the parties, so as to substitute its own terms for those covenanted by
the parties themselves > no legal basis; no cause of action