OBLICON 11 | 2018Feb13 Consoli
TOPIC: Payment of Performance | To whom payment can be made
CASE TITLE: SPS. MINIANO B. DELA CRUZ & LETA L. DELA CRUZ, vs ANA
MARIE CONCEPCION | G.R. No. 172825 | October 11, 2012
FACTS:
 On March 25, 1996, petitioners (as vendors) entered into a Contract to Sell with
respondent (as vendee) for a house and lot in Cypress St., Phase I, Town and Country
Executive Village, Antipolo City for P 2Million; with the following terms and conditions:
 An earnest money of P100,000.00 shall be paid immediately;
 That a full down payment of P400,000.00 shall be paid on February 29, 1996;
 That P500,000.00 shall be paid on or before May 5, 1996; and
 That the balance of One Million Pesos shall be paid:
o on installment
o With interest of Eighteen Percent (18%) per annum or One and a half
percent (1-1/2 %) interest per month, based on the diminishing balance,
compounded monthly, effective May 6, 1996.
o The interest shall continue to run until the whole obligation shall have
been fully paid.
o The whole One Million Pesos shall be paid within three years from May 6,
1996;
o That the agreed monthly amortization of P50,000.00, principal and
interest included, must be paid to the Vendors, without need of prior
demand, on or before May 6, 1996, and every month thereafter.
o Failure to pay the monthly amortization on time, a penalty equal to Five
Percent (5%) of the amount due shall be imposed, until the account is
updated.
o That after receipt of the full payment, the Vendors shall execute the
necessary Absolute Deed of Sale covering the house and lot mentioned
above x x x4
 Respondent made the following payments:
o P500,000.00 DP;
o P500,000.00 on May 30, 1996;
o P500,000.00 paid on January 22, 1997; and
o P500,000.00 bounced check dated June 30, 1997 which was subsequently
replaced by another check of the same amount, dated July 7, 1997.
 Respondent was, therefore, able to pay a total of P2,000,000.00.
 Before respondent issued the P500,000.00 replacement check, she told petitioners that
based on the computation of her accountant as of July 6, 1997, her unpaid obligation
which includes interests and penalties was only P200,000.00.
 Petitioners agreed with respondent and said "if P200,000.00 is the correct balance, it
is okay with us."7
 The title to the property was transferred to respondent.
 Petitioners later reminded respondent to pay P209,000.00 within three months. They
claimed that the said amount remained unpaid, despite the transfer of the title to the
property to respondent.
 Despite repeated demands, petitioners failed to collect the amounts they claimed from
respondent. Hence, the Complaint for Sum of Money With Damages before the RTC
Antipolo, Rizal.
 During the presentation of the parties’ evidence, in addition to documents showing the
statement of her paid obligations, respondent presented a receipt purportedly indicating
payment of the remaining balance of P200,000.00 to Adoracion Losloso (Losloso)
who allegedly received the same on behalf of petitioners.13
 The RTC DISMISSED the case.
 CA affirmed RTC’s decision favor of respondent.
ISSUE: WON respondent’s obligation had already been extinguished by payment.
HELD:
 Yes. SC ruled in the affirmative as aptly held by the RTC and the CA.
 Respondent’s obligation consists of payment of a sum of money. In order to extinguish
said obligation, payment should be made to the proper person as set forth in Article 1240
of the Civil Code, to wit:
Article 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.
(Emphasis supplied)
 The Court explained in Cambroon v. City of Butuan, 36 cited in Republic v. De
Guzman,37 to whom payment should be made in order to extinguish an obligation:
Payment made by the debtor to the person of the creditor or to one authorized by
him or by the law to receive it extinguishes the obligation. When payment is made to
the wrong party, however, the obligation is not extinguished as to the creditor who is
without fault or negligence even if the debtor acted in utmost good faith and by
mistake as to the person of the creditor or through error induced by fraud of a third
person.
 In general, a payment in order to be effective to discharge an obligation, must be made to
the proper person. Thus, payment must be made to the obligee himself or to an agent
having authority, express or implied, to receive the particular payment.
 Payment made to one having apparent authority to receive the money will, as a
rule, be treated as though actual authority had been given for its receipt. Likewise,
if payment is made to one who by law is authorized to act for the creditor, it will work a
discharge. The receipt of money due on a judgment by an officer authorized by law
to accept it will, therefore, satisfy the debt.
 Admittedly, payment of the remaining balance of P200,000.00 was not made to the
creditors themselves. Rather, it was allegedly made to a certain Losloso. Respondent
claims that Losloso was the authorized agent of petitioners, but the latter dispute it.
 Losloso’s authority to receive payment was embodied in petitioners’ Letter addressed to
respondent, dated August 7, 1997, where they informed respondent of the amounts they
advanced for the payment of the 1997 real estate taxes.
o In said letter, petitioners reminded respondent of her remaining balance,
together with the amount of taxes paid.
o Taking into consideration the busy schedule of respondent, petitioners
advised the latter to leave the payment to a certain "Dori" who
admittedly is Losloso, or to her trusted helper. This is an express
authority given to Losloso to receive payment.
 As correctly held by the CA, Adoracion Losloso was indeed an agent of the appellant
spouses is borne out by the following admissions of plaintiff-appellant Atty. Miniano dela
Cruz during the hearing.
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 Thus, as shown in the receipt signed by petitioners’ agent and pursuant to the authority
granted by petitioners to Losloso, payment made to the latter is deemed payment to
petitioners.
 We find no reason to depart from the RTC and the CA conclusion that payment had
already been made and that it extinguished respondent's obligations.
TOPIC: EXTINGUISHMENT OF OBLIGATIONS | PAYMENT OR
PERFORMANCE | WHAT IS TO BE PAID (IDENTITY)
TITLE: G.R. No. L-27796 March 25, 1976
ST. PAUL FIRE & MARINE INSURANCE CO,
vs. MACONDRAY & CO., INC., BARBER STEAMSHIP LINES, INC., WILHELM
WILHELMSEN MANILA PORT SERVICE and/or MANILA RAILROAD
COMPANY
June 29, 1960, Winthrop Products, Inc., (New York, U.S.A)., shipped aboard the SS "Tai Ping"
(owned and operated by Wilhelm Wilhelmsen)
 218 cartons and drums of drugs and medicine (with the freight prepaid) which
were consigned to Winthrop-Stearns Inc., Manila, Philippines
 Barber Steamship Lines, Inc., (agent of Wilhelm Wilhelmsen) issued Bill of
Lading No. 34, in the name of Winthrop Products, Inc. as shipper, with arrival
notice in Manila to consignee Winthrop-Stearns, Inc., Manila, Philippines
 The shipment was insured by the shipper against loss and/or damage with the
St. Paul Fire & Marine Insurance Company
August 7, 1960, SS "Tai Ping" arrived at the Port of Manila and discharged its shipment into the
custody of Manila Port Service
 shipment was discharged complete and in good order with the exception of one
(1) drum and several cartons which were in bad order condition
 consignee failed to receive the whole shipment and as several cartons of
medicine were received in bad order condition→ the consignee filed the
corresponding claim in the amount of Fl,109.67 (representing the C.I.F. value of
the damaged drum and cartons of medicine with the carrier, herein
defendants- appellees and the Manila Port Service
 However, both refused to pay such claim
 the consignee filed its claim with the insurer, St. Paul Fire & Marine insurance
Co. → and the insurance company, on the basis of such claim, paid to the
consignee the insured value of the lost and damaged goods, including other
expenses in connection therewith, in the total amount of $1,134.46 U.S.
currency
 August 5, 1961, as subrogee of the rights of the shipper and/or consignee, the
insurer, St. Paul Fire & Marine Insurance Co., filed action against the defendants
for the recovery of said amount
 August 23, 1961, defendants Manila Port Service and Manila Railroad
Company contend:
-- that the whole cargo was delivered to the consignee in the same
condition in which it was received from the carrying vessel;
-- that their rights, duties and obligations as arrastre contractor at the
Port of Manila are governed by and subject to the terms, conditions and
limitations contained in the Management Contract between the Bureau of
Customs and Manila Port Service
-- and their liability is limited to the invoice value of the goods, but in no
case more than P500.00 per package, pursuant to paragraph 15 of the
said Management Contract;
-- and that they are not the agents of the carrying vessel in the receipt and
delivery of cargoes in the Port of Manila.
September 7, 1961, defendants (Macondray & Co., Inc., Barber Steamship Lines, Inc. and
Wilhelm Wilhelmsen) also argue:
 that the carrier's liability for the shipment ceased upon discharge
thereof from the ship's tackle;
 that they and their co-defendant Manila Port Service are not the
agents of the vessel;
 that the said 218 packages were discharged from the vessel SS "Tai
Ping" into the custody of defendant Manila Port Service as operator
of the arrastre service for the Port of Manila;
 that if any damage was sustained by the shipment while it was under
the control of the vessel, such damage was caused by insufficiency of
packing, force majeure and/or perils of the sea; and that they, in
good faith and for the purpose only of avoiding litigation without
admitting liability to the consignee, offered to settle the latter's claim
in full (by paying the C.I.F. value of 27 lbs. caramel 4.13 kilos methyl
salicylate and 12 pieces pharmaceutical vials of the shipment) but
their offer was declined by the consignee and/or the plaintiff.
RTC: ordering defendants Macondray & Co., Inc., Barber Steamship Lines, Inc. and Wilhelm
Wilhelmsen to pay plaintiff, jointly and severally, the sum of P300.00, with legal interest
thereon from the filing of the complaint until fully paid,
and defendants Manila Railroad Company and Manila Port Service to pay to plaintiff,
jointly and severally, the sum of P809.67, with legal interest thereon from the filing
of the complaint until fully paid, the costs to be borne by all the said defendants.
ISSUES:
1. WON in case of loss or damage, the liability of the carrier to the consignee
is limited to the C.I.F. value of the goods which were lost or damaged → YES.
OBLICON 11 | 2018Feb13 Consoli
2. WON the insurer who has paid the claim in dollars to the consignee
should be reimbursed in its peso equivalent on the date of discharge of the
cargo or on the date of the decision → YES (peso--date of discharge)
*** April 12, 1965, plaintiff contends: it should recover the amount of $1,134.46, or its
equivalent in pesos at the rate of P3.90, instead of P2.00, for every US$1.00
 that, as subrogee of the consignee, it should be entitled to recover
from the defendants-appellees the amount of $1,134.46 which it
actually paid to the consignee and which represents the value of the
lost and damaged shipment (as well as other legitimate expenses
such as the duties and cost of survey of said shipment)
 and that the exchange rate on the date of the judgment, which
was P3.90 for every US$1.00, should have been applied by the
lower court
Defendants contend: that their liability is limited to the C.I.F. value of the goods, pursuant to
contract of sea carriage embodied in the bill of lading that the consignee's (Winthrop-Stearns
Inc.) claim against the carrier (Macondray & Co., Inc., Barber Steamship Lines, Inc., Wilhelm
Wilhelmsen and the arrastre operators (Manila Port Service and Manila Railroad Company)
was only for the sum of Pl,109.67 (representing the C.I.F. value of the loss and damage
sustained by the shipment which was the amount awarded by the lower court to the plaintiff)
 defendants are not insurers of the goods and as such they should not be made
to pay the insured value therefor;
 the obligation of the defendants was established as of the date of
discharge, hence the rate of exchange should be based on the rate existing
on that date, i.e., August 7, 1960, and not the value of the currency at the time
5
the lower court rendered its decision on March 10, 1965.
The appeal is without merit.
RULING: RTC correct in adopting the aforesaid rate of exchange.
The purpose of the bill of lading is to provide for the rights and liabilities of
the parties in reference to the contract to carry.
 The stipulation in the bill of lading limiting the
common carrier's liability to the value of the goods
appearing in the bill, unless the shipper or owner
declares a greater value, is valid and binding.
 This limitation of the carrier's liability is sanctioned by the freedom
of the contracting parties to establish such stipulations, clauses,
terms, or conditions as they may deem convenient, provided they
are not contrary to law, morals, good customs and public policy.
 A stipulation fixing or limiting the sum that may be recovered from
the carrier on the loss or deterioration of the goods is valid,
provided it is (a) reasonable and just under the circumstances, and
9
(b) has been fairly and freely agreed upon. 10
*** 1. → YES. In the case at bar, the liabilities of the defendants with
respect to the lost or damaged shipments are expressly limited to the
C.I.F. value of the goods as per contract of sea carriage embodied in the
bill of lading, which reads:
Whenever the value of the goods is less than $500 per package or other
freight unit, their value in the calculation and adjustment of claims for
which the Carrier may be liable shall for the purpose of avoiding
uncertainties and difficulties in fixing value be deemed to be the
invoice value, plus frieght and insurance if paid, irrespective of whether
any other value is greater or less.
The limitation of liability and other provisions herein shall inure not only to
the benefit of the carrier, its agents, servants and employees, but also to the
benefit of any independent contractor performing services including
stevedoring in connection with the goods covered hereunder. (Paragraph
17, emphasis supplied.)
→ The shipper and consignee are, therefore, bound by such stipulations since it is
expressly stated in the bill of lading that in "accepting this Bill of Lading, the shipper,
owner and consignee of the goods, and the holder of the Bill of Lading agree to be bound
by all its stipulations, exceptions and conditions, whether written, stamped or printed,
as fully as if they were all signed by such shipper, owner, consignee or holder.
-- It is obviously for this reason that the consignee filed its claim against the
defendants on the basis of the C.I.F. value of the lost or damaged goods in the
aggregate amount of Pl,109.67
→ The plaintiff (as insurer), after paying the claim of the insured for damages under the
insurance, is subrogated merely to the rights of the assured.
-- As subrogee, it can recover only the amount that is recoverable by the latter.
Since the right of the assured, in case of loss or damage to the goods, is limited
or restricted by the provisions in the bill of lading, a suit by the insurer as
subrogee necessarily is subject to like limitations and restrictions.
-- The insurer after paying the claim of the insured for damages under the insurance
is subrogated merely to the rights of the insured and therefore can
necessarily recover only that to what was recoverable by the insured. 12
*Upon payment for a total loss of goods insured, the insurance is only
subrogated to such rights of action as the assured has against 3rd persons
who caused or are responsible for the loss.
The right of action against another person, the equitable interest in which
passes to the insurer, being only that which the assured has, it follows that
8
if the assured has no such right of action, none passes to the insurer,
and if the assured's right of action is limited or restricted by lawful contract
between him and the person sought to be made responsible for the loss, a
OBLICON 11 | 2018Feb13 Consoli
suit by the insurer, in the Tight of the assured, is subject to like limitations
or restrictions.13
*** 2. → ON the contention of the plaintiff: that because of extraordinary
inflation, it should be reimbursed for its dollar payments at the rate of —
exchange on the date of the judgment (and not on the date of the loss or
damage).
→ The obligation of the carrier to pay for the damage
commenced on the date it failed to deliver the shipment in
good condition to the consignee.
Decision affirmed.
NOTE: Article 1249 (par.1) of the Civil Code provides:
Art. 1249. The payment of debts in money shall be made in the currency
stipulated, and if it is not possible to deliver such currency, then in the
currency which is legal tender in the Philippines.
 Although the Civil Code took effect on August 30, 1950,
jurisprudence had upheld the continued effectivity of Republic Act
No. 529, which took effect earlier on June 16, 1950.
 Pursuant to Section 1 of Republic Act No. 529, any agreement to
[58]
pay an obligation in a currency other than the Philippine currency is
void; the most that could be demanded is to pay said obligation in
Philippine currency to be measured in the prevailing rate of
exchange at the time the obligation was incurred. [59]
 On June 19, 1964, Republic Act No. 4100 took effect, modifying
Republic Act No. 529 by providing for several exceptions to the
nullity of agreements to pay in foreign currency. [60]
 On April 13, 1993, Central Bank Circular No. 1389 was issued, [61]
lifting foreign exchange restrictions and liberalizing trade in foreign
currency.
In cases of foreign borrowings and foreign currency loans, however,
prior Bangko Sentral approval was required.
On July 5, 1996, Republic Act No. 8183 took effect, expressly [62]
repealing Republic Act No. 529 in Section 2 thereof.
[63]
The same statute also explicitly provided that parties may agree
that the obligation or transaction shall be settled in a currency
other than Philippine currency at the time of payment.
TITLE: PAPA vs A.U. Valencia
[G.R. No. 105188. January 23, 1998]
TOPIC: Payment or performance | What is to be paid (Identity)
COMMENT: The facts involve two other parties but we focus on the transaction
between Myron Papa and Pearroyo. It is just simple. There was a payment thru
check; issue is when does a check constitute a payment.
FACTS:
 15 June 1973, petitioner Myron C. Papa, acting as attorney-in-fact of
Angela M. Butte, sold to respondent Pearroyo, through respondent
Valencia, a parcel of land
 prior to the alleged sale, the said property, had been mortgaged by
Butte to the Associated Banking Corporation (now Associated Citizens
Bank)
 after the alleged sale, but before the title to the subject property had
been released, Angela M. Butte passed away;
 that despite representations made by herein Pearroyo/Valencia to the
bank to release the title to the property sold to respondent Pearroyo,
the bank refused to release it unless and until all the mortgaged
properties of the late Angela M. Butte were also redeemed
 that in order to protect his rights and interests over the property,
respondent Pearroyo caused the annotation on the title
 Title of the property had been released eventually in 1977
 respondents Valencia and Pearroyo discovered that the mortgage
rights of the bank had been assigned to one Tomas L. Parpana (now
deceased), as special administrator of the Estate of Ramon Papa, Jr
 that since then, herein petitioner had been collecting monthly rentals
in the amount of P800.00 from the tenants of the property, knowing
that said property had already been sold to private respondents
 despite repeated demands from said Pearroyo/Valencia, Papa refused
and failed to deliver the title to the property
 respondents Valencia and Pearroyo filed a complaint for specific
performance
ANOTHER PERSON’S INVOLVEMENT
[64]
 A certain Delfin Jao was allowed to intervene in the case.
 Jao alleges that the lot sold to Pearroyo was subsequently sold to him
in 1973
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 Hence, Jao’s involvement
YET ANOTHER PERSONS’ INVOLVEMENT
 Papa now files a third party complaint against Spouses Reyes.
 that due to non-payment of real estate tax said property was sold at
public auction by the City Treasurer of Quezon City to the respondent
Reyes spouses in 1980
 Reyeses paid 14K only
 The property was estimated to be worth 155k
 Reyeses admitted that the 14K was not enough and agreed to pay 55K
upon delivery of property
 Since the sale was inequitable, Papa is willing to reimburse the Reyeses
14K since the property is still under Angela Butte’s name.
IN SUM (follow the arrows):
 Sold to Reyeses from auction due to non-payment of property tax ←
Property owned by Angela Butte → Atty-in-fact Papa → sold to
Pearroyo → sold to Jao
 All of these happened while the title remains in the name of Butte
PAPA’s CONTENTION:
 Sale was never consummated as he did not encash the check (in the
amount of P40,000.00) given by respondents Valencia and Pearroyo in
payment of the full purchase price of the subject lot.
 He maintained that what said respondents had actually paid was only
the amount of P5,000.00 (in cash) as earnest money.
 Invokes Art. 1249 of the Civil Code, which provides, in part, that
o payment by checks shall produce the effect of payment only
when they have been cashed or when through the fault of
the creditor they have been impaired.
 Petitioner, while admitting that he had issued receipts for the
payments, asserts that said receipts, in the amount of P40,000.00,
these not prove payment.
 He avers that there must be a showing that said check had been
encashed.
PEARROYO:
ISSUE:
WON the non-encashment of the check means the payment was not made,
therefore the sale was not consummated, therefore there is no ground for
specific performance filed by Pearroyo.
HELD:
 Granting that petitioner (the creditor) had never encashed the check,
his failure to do so for more than ten (10) years undoubtedly resulted
in the impairment of the check through his unreasonable and
unexplained delay.
 While it is true that the delivery of a check produces the effect of
payment only when it is cashed, pursuant to Art. 1249 of the Civil
Code, the rule is otherwise if the debtor is prejudiced by the creditors
unreasonable delay in presentment.
 The acceptance of a check implies an undertaking of due diligence in
presenting it for payment, and if he from whom it is received sustains
loss by want of such diligence, it will be held to operate as actual
payment of the debt or obligation for which it was given.
 likewise, been held that if no presentment is made at all, the drawer
(debtor) cannot be held liable irrespective of loss or injury unless
presentment is otherwise excused.
 Considering that respondents Valencia and Pearroyo had fulfilled their
part of the contract of sale by delivering the payment of the purchase
price, said respondents, therefore, had the right to compel petitioner
to deliver to them the owners duplicate of TCT No. 28993 of Angela M.
Butte and the peaceful possession and enjoyment of the lot in
question.
Topic: Extinguishment of Obligations │What is to be paid
Title: PHIL. AIRLINES v. CA
(G.R. No. L-49188; Jan. 30, 1990)
FACTS:
 Amelia Tan [TAN] (under the business name Able Printing Press) filed
for Damages against PAL in CFI Manila.
 CFI decided for TAN and ordered PAL to pay her:
 75,000 - actual damages (w/ legal interest fr. TAN’s
extra-judicial demand on July 20, 1967);
OBLICON 11 | 2018Feb13 Consoli
 P18,200 - unrealized profit of 10% included in the contract
price of P200,000+legal interest thereon from July 20,1967;
 20,000 - moral damages w/ legal interest fr. July 20, 1 967;
 P5,000.00 damages as & for attorney's fee.
 CA affirmed the CFI’s decision modifying the award of damages to
25,000 & attorney’s fee of 5,000.
 PAL filed its MR; Decision became final and executor.
 Writ of Execution issued by the CFI on Oct. 11, 1977 - referred to the
court Sheriff Reyes.
 4 mos. after, TAN filed a motion praying for the issuance of an Alias
Writ of Execution claiming that the CA decision remained unsatisfied – PAL
opposed, contending that it already paid the obligation per cash voucher
duly received & receipted by Sheriff Reyes.
 CA denied the motion (premature) but ordered the sheriff to appear
w/ his return and explain the reason for his failure to surrender the
amounts paid to him by PAL - sheriff absconded/disappeared.
 CFI subsequently issued an Alias Writ to levy the 25,000 damages &
5,000 atty’s fee (w/ legal interest) → PAL moved for the quashal of the writ
claiming payment to the previous sheriff (Reyes).
 Sheriff Del Rosario (new sheriff) caused the garnishment of 64,408 (as
of May 16, 1978) to PAL’s bank account (Far East Bank & Trust Co.)
ISSUE: Was the garnished amount correct? → YES
*The CA affirmed the CFI’s judgment modifying only the damages from 5,000 to
25,000 (principal amount awarded as actual damages).
SC:
 PAL’s claim of its payment in cash is incorrect. It actually paid in check,
which is actually encouraged:
“As a protective measure, therefore, the courts encourage the practice of
payments by check provided adequate controls are instituted to prevent
wrongful payment and illegal withdrawal or disbursement of funds. If
particularly big amounts are involved, escrow arrangements with a bank
and carefully supervised by the court would be the safer procedure. Actual
transfer of funds takes place within the safety of bank premises. These
practices are perfectly legal. The object is always the safe and incorrupt
execution of the judgment.”
 BUT, what is wrong with PAL is that it issued the check in the name of
the sheriff and not in favor TAN:
“It is, indeed, out of the ordinary that checks intended for a particular
payee are made out in the name of another. Making the checks payable
to the judgment creditor would have prevented the encashment or the
taking of undue advantage by the sheriff, or any person into whose hands
the checks may have fallen, whether wrongfully or in behalf of the creditor.
The issuance of the checks in the name of the sheriff clearly made possible
the misappropriation of the funds that were withdrawn.”
 Having failed to employ the proper safeguards to protect itself, the
judgment debtor [PAL] whose act made possible the loss had but itself
to blame.
 The pernicious effects of issuing checks in the name of a person other
than the intended payee, without the latter's agreement or consent,
are as many as the ways that an artful mind could concoct to get
around the safeguards provided by the law on negotiable instruments.
An angry litigant who loses a case, as a rule, would not want the
winning party to get what he won in the judgment. He would think of
ways to delay the winning party's getting what has been adjudged in
his favor. We cannot condone that practice especially in cases where
the courts and their officers are involved.
HELD:
PAL’s petition dismissed.
Possible questions:
Is the payment made to Sheriff Reyes for TAN valid?
Answer:
No. Section 15, Rule 39 provides:
Execution of money judgments. — The officer must enforce an execution of a
money judgment by levying on all the property, real and personal of every name
and nature whatsoever, and which may be disposed of for value, of the
judgment debtor not exempt from execution, or on a sufficient amount of such
property, if they be sufficient, and selling the same, and paying to the judgment
creditor, or his attorney, so much of the proceeds as will satisfy the
judgment. ...”
What is the difference between Execution & Satisfaction of judgment?
Execution Satisfaction of Judgment
OBLICON 11 | 2018Feb13 Consoli
 Execution is the process  Is the payment of the amount Chua obtained another loan from DBP in the amount of
which carries into effect a of the writ, or a lawful tender ₱960,000.00 (Diamond L Ranch Account).
decree or judgment (Painter v. thereof, or the conversion by sale  They also executed a Promissory Note, promising to pay the loan
Berglund, 31 Cal. App. 2d. 63, 87 of the debtor's property into an annually from August 22, 1973 until August 22, 1982 with an
P 2d 360, 363; Miller v. London, amount equal to that due, and, it
interest rate of 12% per annum and a penalty charge of 1/3% per
294 Mass 300, 1 NE 2d 198, 200; may be done otherwise than
Black's Law Dictionary. upon an execution (Section 47,
month on the overdue amortization.
Rule 39)  To secure the loans, petitioners executed a Mortgage in favor of
DBP over real properties covered by titles registered in the
 Execution is for the sheriff to  Is for the creditor to achieve.
Registry of Deeds for the Province of South Cotabato.
accomplish.  Levy and delivery by an  Due to violent confrontations between government troops and
execution officer are not Muslim rebels in Mindanao from 1972 to 1977, petitioners were
prerequisites to the satisfaction forced to abandon their cattle ranch. As a result, their business
of a judgment when the same
collapsed and they failed to pay the loan amortizations.
has already been realized in fact
(Section 47, Rule 39)
ISSUE:
WON the restructuring agreement reached and perfected between the
Section 15, Rule 39 merely provides the sheriff with his duties as executing
petitioners and the respondent novated and extinguished petitioners’ loan
officer including delivery of the proceeds of his levy on the debtor's property
obligations to respondent under the Promissory Notes sued upon.
to satisfy the judgment debt. It is but to stress that the implementing officer's
duty should not stop at his receipt of payments but must continue until RULING:
payment is delivered to the obligor or creditor. The CA erred in finding the foreclosure sale valid.
TOPIC: WHAT IS TO BE PAID – PAYMENT OF INTEREST Penalties and interest rates should
CASE: LIM, ET AL. v. DBP, G.R. No. 177050, JULY 1, 2013 be expressly stipulated in writing.

FACTS: As to the imposition of additional interest and penalties not stipulated in

Article 1956. No interest shall be due unless it has been expressly
stipulated in writing. (1755a) [Topic for the discussion]
 On November 24, 1969, petitioners Carlos, Consolacion, and
Carlito, all surnamed Lim, obtained a loan of ₱40,000.00 (Lim
Account) from respondent Development Bank of the Philippines
(DBP) to finance their cattle raising business.
 On the same day, they executed a Promissory Note undertaking
to pay the annual amortization with an interest rate of 9% per
annum and penalty charge of 11% per annum.
 On December 30, 1970, petitioners Carlos, Consolacion, Carlito,
and Edmundo, all surnamed Lim; Shirley Leodadia Dizon,
Arleen Lim Fernandez, Juan S. Chua, and Trinidad D.
the Promissory Notes, this should not be allowed. Article 1956 of the
Civil Code specifically states that "no interest shall be due unless it has
been expressly stipulated in writing." Thus, the payment of interest and
penalties in loans is allowed only if the parties agreed to it and reduced
their agreement in writing.
In this case, petitioners never agreed to pay additional interest and
penalties. Hence, we agree with the RTC that these are illegal, and thus,
void. Quoted below are the findings of the RTC on the matter, to wit:
Moreover, in its various statements of account, [respondent] Bank
charged [petitioners] for additional interests and penalties which were not
stipulated in the promissory notes.
OBLICON 11 | 2018Feb13 Consoli
In the Promissory Note, Exhibit "A," for the principal amount of
₱960,000.00, only the following interest and penalty charges were
stipulated:
(1) interest at the rate of twelve percent (12%) per annum;
(2) penalty charge of one-third percent (1/3%) per month on
overdue amortization;
(3) attorney’s fees equivalent to ten percent (10%) of the total
indebtedness then unpaid; and
(4) advances and interest thereon at one percent (1%) per month.
[Respondent] bank, however, charged [petitioners] the following items as
shown in its Statement of Account for the period as of 31 January 1989,
Exhibit "D:"
(1) regular interest in the amount of ₱561,037.14;
(2) advances in the amount of ₱34,589.45;
(3) additional interest in the amount of ₱2,590,786.26; and
(4) penalty charges in the amount of ₱1,068,147.19.
The Court finds no basis under the Promissory Note, Exhibit "A," for
charging the additional interest in the amount of ₱2,590,786.26.
Moreover, it is incomprehensible how the penalty charge of 1/3% per
month on the overdue amortization could amount to ₱1,086,147.19 while
the regular interest, which was stipulated at the higher rate of 12% per
annum, amounted to only ₱561,037.14 or about half of the amount
allegedly due as penalties.
There was nothing in the Promissory Note, Exhibit "C," which
authorized the imposition of additional interest. Again, this Court notes
that the additional interest in the amount of ₱92,113.56 is even larger
than the regular interest in the amount of ₱5,046.97. Moreover, based on
the Promissory Note, Exhibit "C," if the 11% interest on unpaid
amortization is considered an "additional interest," then there is no basis
for [respondent] bank to add penalty charges as there is no other
provision providing for this charge. If, on the other hand, the 11%
interest on unpaid amortization is considered the penalty charge, then
there is no basis to separately charge plaintiffs additional interest. The
same provision cannot be used to charge plaintiffs both interest and
penalties.
TOPIC: Payment of Performance | When Payment is to be made
CASE TITLE: SOLAR HARVEST, INC., vs. DAVAO CORRUGATED CARTON
CORPORATION | G.R. No. 176868 July 26, 2010
FACTS:
 Solar Harvest, Inc., entered into an agreement with respondent, Davao Corrugated
Carton Corporation, for the purchase of corrugated carton boxes:
o specifically designed for petitioner’s business of exporting fresh bananas, at
US$1.10 each.
o The agreement was not reduced into writing.
o To get the production underway, petitioner deposited, on March 31, 1998,
US$40,150.00 in respondent’s US Dollar Savings Account with Westmont Bank,
as full payment for the ordered boxes.
 Despite such payment, petitioner did not receive any boxes from respondent.
 On January 3, 2001, petitioner wrote a demand letter for reimbursement of the amount
paid.3
o Respondent replied that the boxes had been completed as early as April 3, 1998
and that petitioner failed to pick them up from the former’s warehouse 30 days
from completion, as agreed upon.
o Respondent then demanded petitioner to remove the boxes from the factory
and to pay the balance of US$15,400.00 for the additional boxes and
₱132,000.00 as storage fee.
 Petitioner filed a Complaint for sum of money and damages against respondent.
 Respondent insisted that, as early as April 3, 1998, it had already completed production of
the 36,500 boxes, contrary to petitioner’s allegation.
o Petitioner, in fact, made an additional order of 24,000 boxes, out of which,
14,000 had been completed without waiting for petitioner’s payment.
o Petitioner was to pick up the boxes at the factory as agreed upon, but
petitioner failed to do so.
o Averred that petitioner’s representative, Bobby Que (Que), went to the factory
and saw that the boxes were ready for pick up.
 Que visited the factory again and supposedly advised respondent to
sell the boxes as rejects to recoup the cost of the unpaid 14,000
boxes, because petitioner’s transaction to ship bananas to China did
not materialize.
o Claimed that the boxes were occupying warehouse space and that petitioner
should be made to pay storage fee at ₱60.00 per square meter for every month
from April 1998.
RTC:
 Ruled that respondent did not commit any breach of faith that would justify rescission of
the contract and the consequent reimbursement of the amount paid by petitioner.
 The RTC said that respondent was able to produce the ordered boxes but
petitioner failed to obtain possession thereof because its ship did not arrive.
CA:
 Denied the appeal for lack of merit.
 Held that petitioner failed to discharge its burden of proving what it claimed to be the
parties’ agreement with respect to the delivery of the boxes.
 It was unthinkable that, over a period of more than two years, petitioner did not even
demand for the delivery of the boxes.
 Added that even assuming that the agreement was for respondent to deliver the boxes,
respondent would not be liable for breach of contract as petitioner had not yet demanded
from it the delivery of the boxes.
ISSUE: WON the respondent did not completely manufacture the boxes and that it was
respondent which was obliged to deliver the boxes to TADECO.
OBLICON 11 | 2018Feb13 Consoli
 The agreement between the parties was for petitioner to pick up the boxes from
HELD: SC finds no reversible error in the assailed Decision that would justify the grant of this respondent’s warehouse, contrary to petitioner’s allegation. Thus, it was due to
petition. petitioner’s fault that the boxes were not delivered to TADECO.
 Petitioner’s claim for reimbursement is actually one for rescission (or resolution) of  In sum, the Court finds that petitioner failed to establish a cause of action for rescission,
contract under Article 1191 of the Civil Code, which reads: the evidence having shown that respondent did not commit any breach of its contractual
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one obligation.
of the obligors should not comply with what is incumbent upon him. o As previously stated, the subject boxes are still within respondent’s premises.
The injured party may choose between the fulfillment and the rescission of the o To put a rest to this dispute, we therefore relieve respondent from the burden
obligation, with the payment of damages in either case. He may also seek rescission, of having to keep the boxes within its premises and, consequently, give it the
even after he has chosen fulfillment, if the latter should become impossible. right to dispose of them, after petitioner is given a period of time within which
to remove them from the premises.
The court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law.
 The right to rescind a contract arises once the other party defaults in the performance of
his obligation. In determining when default occurs, Art. 1191 should be taken in
conjunction with Art. 1169 of the same law, which provides:
Art. 1169. 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.
However, the demand by the creditor shall not be necessary in order that delay may
exist:
(1) When the obligation or the law expressly so declares; or
(2) When from the nature and the circumstances of the obligation it
appears that the designation of the time when the thing is to be delivered
or the service is to be rendered was a controlling motive for the
establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it
beyond his power to perform.
 In reciprocal obligations, neither party incurs in delay if the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him. From the
moment one of the parties fulfills his obligation, delay by the other begins.
 In reciprocal obligations, as in a contract of sale, the general rule is that the fulfillment of
the parties’ respective obligations should be simultaneous. Hence, no demand is
generally necessary because, once a party fulfills his obligation and the other party does
not fulfill his, the latter automatically incurs in delay.
 Without a previous demand for the fulfillment of the obligation, petitioner would not
have a cause of action for rescission against respondent as the latter would not yet be
considered in breach of its contractual obligation.
 Even assuming that a demand had been previously made before filing the present case,
petitioner’s claim for reimbursement would still fail, as the circumstances would show
that respondent was not guilty of breach of contract.
 As correctly observed by the CA, aside from the pictures of the finished boxes and the
production report thereof, there is ample showing that the boxes had already been
manufactured by respondent.
 There is the testimony of Estanislao who accompanied Que to the factory, attesting that,
during their first visit to the company, they saw the pile of petitioner’s boxes and Que
took samples thereof. Que, petitioner’s witness, himself confirmed this incident. He
testified that Tan pointed the boxes to him and that he got a sample and saw that it was
blank. Que’s absolute assertion that the boxes were not manufactured is, therefore,
implausible and suspicious.