Philippine Airlines, Inc. vs Court of Appeals, 181 SCRA 557, GR No.

49188, January 30, 1990, digested

Posted by Pius Morados on November 30, 2011

(Civil Procedure – Alias Writ of Execution; Civil Law – Payment; Commercial Law – Check)

THE FACTS:

Amelia Tan commenced a complaint for damages before the Court of First Instance against Philippine
Airlines, Inc. (PAL). The Court rendered a judgment in favor of the former and against the latter.

PAL filed its appeal with the Court of Appeals (CA), and the appellate court affirmed the judgment of the
lower court with the modification that PAL is condemned to pay the latter the sum of P25, 000.00 as
damages and P5, 000.00 as attorney’s fee.

Judgment became final and executory and was correspondingly entered in the case, which was
remanded to the trial court for execution. The trial court upon the motion of Amelia Tan issued an order
of execution with the corresponding writ in favor of the respondent. Said writ was duly referred to
Deputy Sheriff Reyes for enforcement.

Four months later, Amelia Tan moved for the issuance of an alias writ of execution, stating that the
judgment rendered by the lower court, and affirmed with modification by the CA, remained unsatisfied.
PAL opposed the motion, stating that it had already fully paid its obligation to plaintiff through the
issuance of checks payable to the deputy sheriff who later did not appear with his return and instead
absconded.

The CA denied the issuance of the alias writ for being premature. After two months the CA granted her
an alias writ of execution for the full satisfaction of the judgment rendered, when she filed another
motion. Deputy Sheriff del Rosario is appointed special sheriff for enforcement thereof.

PAL filed an urgent motion to quash the alias writ of execution stating that no return of the writ had as
yet been made by Deputy Sheriff Reyes and that judgment debt had already been fully satisfied by the
former as evidenced by the cash vouchers signed and received by the executing sheriff.

Deputy Sheriff del Rosario served a notice of garnishment on the depository bank of PAL, through its
manager and garnished the latter’s deposit. Hence, PAL brought the case to the Supreme Court and filed
a petition for certiorari.

THE ISSUES:

WON payment made in checks to the sheriff and under his name is a valid payment to extinguish
judgment of debt.

THE RULING:

Negative. Article 1249 of the Civil Code provides:

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

Unless authorized to do so by law or by consent of the obligee, a public officer has no authority to
accept anything other than money in payment of an obligation under a judgment being executed.
Strictly speaking, the acceptance by the sheriff of the petitioner’s checks does not, per se, operate as a
discharge of the judgment of debt.

A check, whether manager’s check or ordinary check, is not legal tender, and an offer of a check in
payment of a debt is not a valid tender or payment and may be refused receipt by the oblige or creditor.
Hence, the obligation is not extinguished.

THE TWIST: Payment in cash is logical, but it was not proper.

Payment in cash to the implementing officer may be deemed absolute payment of judgment debt but
the Court has never, in the least bit, suggested that judgment debtors should settle their obligations by
turning over huge amounts of cash or legal tender to the executing officers. Payment in cash would
result in damage or endless litigations each time a sheriff with huge amounts of cash in his hands
decides to abscond.

As a protective measure, the courts encourage the practice of payment of check provided adequate
controls are instituted to prevent wrongful payment and illegal withdrawal or disbursement of funds.

However, in the case at bar, it is out of the ordinary that checks intended for a particular payee are
made out in the name of another. The issuance of the checks in the name of the sheriff clearly made
possible the misappropriation of the funds that were withdrawn.

The Court of Appeals explained:

“Knowing as it does that the intended payment was for the respondent Amelia Tan, the petitioner
corporation, utilizing the services of its personnel who are or should be knowledgeable about the
accepted procedure and resulting consequences of the checks drawn, nevertheless, in this instance,
without prudence, departed from what is generally observed and done, and placed as payee in the
checks the name of the errant Sheriff and not the name of the rightful payee. Petitioner thereby created
a situation which permitted the said Sheriff to personally encash said checks and misappropriate the
proceeds thereof to his exclusive benefit. For the prejudice that resulted, the petitioner himself must
bear the fault…”

Having failed to employ the proper safeguards to protect itself, the judgment debtor whose act made
possible the loss had but itself to blame.

Payment must be made to the obligee himself or to an agent having authority, express or implied, to
receive the particular payment

The receipt of money due on ajudgment by an officer authorized by law to accept it will, therefore,
satisfy the debt
 Since a negotiable instrument is only a substitute for money and not money, the delivery of such an
instrument does not, by itself, operate as payment

The payment made by the PAL to the absconding sheriff was not in cash or legal tender but in checks

Roman Catholic of Malolos v IAC

Facts:

The property subject matter of the contract consists of a parcel of land in the Province of Bulacan,
issued and registered in the name of the petitioner which it sold to the private respondent.

On July 7, 1971, the subject contract over the land in question was executed between the petitioner as
vendor and the private respondent through its then president, Mr. Carlos F. Robes, as vendee,
stipulating for a downpayment of P23,930.00 and the balance of P100,000.00 plus 12% interest per
annum to be paid within four (4) years from execution of the contract. The contract likewise provides for
cancellation, forfeiture of previous payments, and reconveyance of the land in question in case the
private respondent would fail to complete payment within the said period.

After the expiration of the stipulated period for payment, Atty. Adalia Francisco (president of the
company who bought land) wrote the petitioner a formal request that her company be allowed to pay
the principal amount of P100,000.00 in three (3) equal installments of six (6) months each with the first
installment and the accrued interest of P24,000.00 to be paid immediately upon approval of the said
request.

The petitioner formally denied the said request of the private respondent, but granted the latter a grace
period of five (5) days from the receipt of the denial to pay the total balance of P124,000.00. The private
respondent wrote the petitioner requesting an extension of 30 days from said date to fully settle its
account but this was still denied.

Consequently, Atty. Francisco wrote a letter directly addressed to the petitioner, protesting the alleged
refusal of the latter to accept tender of payment made by the former on the last day of the grace period.
But the private respondent demanded the execution of a deed of absolute sale over the land in question

Atty. Fernandez, wrote a reply to the private respondent stating the refusal of his client to execute the
deed of absolute sale so the petitioner cancelled the contract and considered all previous payments
forfeited and the land as ipso facto reconveyed.

From a perusal of the foregoing facts, we find that both the contending parties have conflicting versions
on the main question of tender of payment.
According to the trial court:
. . . What made Atty. Francisco suddenly decide to pay plaintiff’s obligation on tender her payment,
when her request to extend the grace period has not yet been acted upon? Atty. Francisco’s claim that
she made a tender of payment is not worthy of credence.

The trial court considered as fatal the failure of Atty. Francisco to present in court the certified personal
check allegedly tendered as payment or, at least, its xerox copy, or even bank records thereof.

Not satisfied with the said decision, the private respondent appealed to the IAC. The IAC reversed the
decision of the trial court. The IAC, in finding that the private respondent had sufficient available funds,
ipso facto concluded that the latter had tendered payment.

ISSUE:

1. Whether or not the finding of the IAC that Atty. Francisco had sufficient available funds did
tender payment for the said obligation.
2. Whether or not an offer of a check is a valid tender of payment of an obligation under a contract
which stipulates that the consideration of the sale is in Philippine Currency.

HELD:
1. No. Tender of payment involves a positive and unconditional act by the obligor of offering legal
tender currency as payment to the obligee for the former’s obligation and demanding that the latter
accept the same. Thus, tender of payment cannot be presumed by a mere inference from surrounding
circumstances. At most, sufficiency of available funds is only affirmative of the capacity or ability of the
obligor to fulfill his part of the bargain. The respondent court was therefore in error.

2. No. In the case of Philippine Airlines v. Court of Appeals:

Since a 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
check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment
and may be refused receipt by the obligee or creditor. The tender of payment by the private respondent
was not valid for failure to comply with the requisite payment in legal tender or currency stipulated
within the grace period

the DECISION of the IAC is hereby SET ASIDE and ANNULLED and the DECISION of the trial court is
REINSTATED.

NEW PACIFIC TIMBER & SUPPLY CO. INC. VS. SENERIS

10 SCRA 686

FACTS: Petitioner, New Pacific Timber & Supply Co. Inc. was the defendant in a complaint for collection
of money filed by private respondent, Ricardo A. Tong. In this complaint, respondent Judge rendered a
compromise judgment based on the amicable settlement entered by the parties wherein petitioner will
pay to private respondent P54,500.00 at 6% interest per annum and P6,000.00 as attorney’s fee of
which P5,000.00 has been paid. Upon failure of the petitioner to pay the judgment obligation, a writ of
execution worth P63,130.00 was issued levied on the personal properties of the petitioner. Before the
date of the auction sale, petitioner deposited with the Clerk of Court in his capacity as the Ex-Officio
Sheriff P50,000.00 in Cashier’s Check of the Equitable Banking Corporation and P13,130.00 in cash for a
total of
P63,130.00. Private respondent refused to accept the check and the cash and requested for the auction
sale to proceed. The properties were sold for P50,000.00 to the highest bidder with a deficiency of
P13,130.00. Petitioner subsequently filed an ex-parte motion for issuance of certificate of satisfaction of
judgment which was denied by the respondent Judge. Hence this present petition, alleging that the
respondent Judge capriciously and whimsically abused his discretion in not granting the requested
motion for the reason that the judgment obligation was fully satisfied before the auction sale with the
deposit made by the petitioner to the Ex-Officio Sheriff. In upholding the refusal of the private
respondent
to accept the check, the respondent Judge cited Article 1249 of the New Civil Code which provides that
payments of debts shall be made in the currency which is the legal tender of the Philippines and Section
63 of the Central Bank Act which provides that checks representing deposit money do not have legal
tender power. In sustaining the contention of the private respondent to refuse the acceptance of the
cash, the respondent Judge cited Article 1248 of the New Civil Code which provides that creditor cannot
be compelled to accept partial payment unless there is an express stipulation to the contrary.

ISSUE: Can the check be considered a valid payment of the judgment obligation?

RULING: Yes. It is to be emphasized that it is a well-known and accepted practice in the business sector
that a Cashier’s Check is deemed cash. Moreover, since the check has been certified by the drawee
bank, this certification implies that the check is sufficiently funded in the drawee bank and the funds will
be applied whenever the check is presented for payment. The object of certifying a check is to enable
the holder to use it as money. When the holder procures the check to be certified, it operates as an
assignment of a part of the funds to the creditors. Hence, the exception provided in Section 63 of the
Central Bank Act which states that checks which have been cleared and credited to the account of the
creditor shall be equivalent to a delivery to the creditor in cash the amount equal to that which is
credited to his account. The Cashier’s Check and the cash are valid payment of the obligation of the
petitioner. The private respondent has no valid reason to refuse the acceptance of the check and cash as
full payment of the obligation

HELD:
It is to be emphasized in this connection that the check deposited by the petitioner in the amount of
P50.000.00 is not an ordinary check but a Cashier's Check of the Equitable Banking Corporation, a bank
of good standing and reputation. Where a check is certified by the bank on which it is drawn, the
certification is equivalent to acceptance. The object of certifying a check, as regards both parties, is to
enable the holder to use it as money. When the holder procures the check to be certified, "the check
operates as an assignment of a part of the funds to the creditors". The exception to the rule enunciated
under Section 63 of the Central Bank Act to the effect "that a check which has been cleared and credited
to the account of the creditor shall be equivalent to a delivery to the creditor in cash in an amount equal
to the amount credited to his account" shall apply in this case. Petition was granted ordering the private
respondent to accept the sum of P63,130.00 under deposit as payment of the judgment obligation in h
is favor. “Considering
that the whole amount deposited by the petitioner consisting of Cashier's Check of P60;000.00 and
P13,130.00 in cash covers the judgment obligation of P63,000.00 as mentioned in the writ of execution,
then. We see no valid reason for the private respondent to have refused acceptance of the payment of
the obligation in his favor”.

Negotiable Instruments Case Digest: Philippine Bank of Commerce v. Jose M. Aruego (1961)

G.R. Nos. L-25836-37 January 31, 1981

Lessons Applicable: Liabilities of the Parties (Negotiable Instruments Law)
FACTS:

 December 1, 1959: Philippine Bank of Commerce (PBC) instituted against Jose M. Aruego for the
recovery of the total sum of about P 35K with interest from November 17, 1959 and commission
of 3/8% for every thirty 30 days plus attorney's fees of 10% of the total amount due and costs
o represents the cost of the printing the periodical published by the Aruego "World
Current Events"
o To facilitate the payment of the printing, Aruego obtained a credit accommodation from
the PBC
o the printer, Encal Press and Photo Engraving, collected the cost of every printing by
drawing a draft against the PBC, which PBC later accepts
 As an added security for the payment of the amounts advanced to Encal Press
and Photo-Engraving, PBC required Aruego to execute a trust receipt (PBC hold
in trust for Aruego the periodicals and to sell the same with the promise to turn
over to the Aruego the proceeds for the payment of all obligations arising from
the draft)
 trial court: Aruego to pay to the PBC
o Aruego:
 signed the supposed bills of exchange as an agent of the Philippine Education
Foundation Company where he is president
 Section 20 of the Negotiable Instruments Law

"Where the instrument contains or a person adds to his signature words indicating that he signs for or
on behalf of a principal or in a representative capacity, he is not liable on the instrument if he was duly
authorized; but the mere addition of words describing him as an agent or as filing a representative
character, without disclosing his principal, does not exempt him from personal liability."

 signed the drafts only as an accommodation party and as such, should be made
liable only after a showing that the drawer is incapable of paying
 not really bills of exchange but mere pieces of evidence of indebtedness
because payments were made before acceptance

ISSUE: W/N Aruego should be personally liable

HELD: YES. CFI AFFIRMED.

 nowhere has he disclosed that he was signing as a representative of the Philippine Education
Foundation Company
o For failure to disclose his principal, Aruego is personally liable for the drafts he accepted
 An accommodation party is one who has signed the instrument as maker, drawer, indorser,
without receiving value therefor and for the purpose of lending his name to some other person.
Such person is liable on the instrument to a holder for value, notwithstanding such holder, at
the time of the taking of the instrument knew him to be only an accommodation party
o he signed as a drawee/acceptor
 Under the Negotiable Instrument Law, a drawee is primarily liable
 As long as a commercial paper conforms with the definition of a bill of exchange, that paper is
considered a bill of exchange
o The nature of acceptance is important only in the determination of the kind of liabilities
of the parties involved, but not in the determination of whether a commercial paper is a
bill of exchange or not