Application of Payments - Loss Digests

Reparations Commission v. Universal Deep Sea Fishing|1978|Concepcion|Application of

Payments
Debtor Universal Deep Sea Fishing

Creditor Reparations Commission

Object / Obligation 536,428 ; 687,777 ;

Term / Condition 10 year installments; 3% per annum

Facts:
- The Reparations Commission awarded 6 trawl boats to the Universal Deep-Sea Fishing
Corporation which were delivered two at a time, each delivery being covered by a Contract of
Conditional Purchase and Sale providing for identical schedules of payments the first
installment representing 10% of total cost to be paid in 10 equal installments, which, in the
schedule were numbered as 1,2,3, etc. The first of which was due one year after the first
installment
- Reparations Commission sued Universal and Manila Surety & Fidelity Co, Inc (surety) to recover
various amounts of money due under the contracts
- Other party claimed that the amounts were not yet due and demandable. Universal alleged that
there was an obscurity in the terms of the contracts in question which was caused b the plaintiff
as to the amounts and due dates of the first installments which should have been fixed before RC
can demand its payment, specifically referring to the schedule of payments which allegedly
indicated 2 due dates for the payment of the first installment
Issue: WoN judgment, first installments under judgment, 3 contracts of conditional purchase and
sale were already due and demandable when judgment, complaint was filed YES
Held:
- The terms of the contracts are clear and left no doubt as to intent of the contracting parties
- First installment due 24months after delivery was different from the first ten equal yearly
installment of the balance of the purchase price (which are not designated as first, second, third
installments

Paculdo v. Regalado|2000||Application of Payments

Debtor Paculdo

Creditor Regalado

Object / Obligation Lease of Land, 450K a month

Term / Condition 25 yearsFirst 5 years, 450K/month, 2% interest if delayed for a month

Facts:
- Paculdo and Regalado entered into a contract of lease over a parcel of land with a wet market
building, located at Fairview Park, QC. Contract was for 25 years starting Jan 1, 1991 - Dec 27,
 2015. For the first 5 years of the contract, Paculdo would pay a monthly rental of 450K, payab;e
within the first 5 days of each month with a 2% penalty for every month of late payment
- Paculdo leased 11 other properties, 10 of which are located within Fairview compound, element
located along Quirino Highway QC. Paculdo also purchased 8 units of heavy equipment and
vehicles in the aggregate amount of 1,020,000
- Security deposit of 11M to be applied to Wet Market rent, November letter, July letter (1991)
- Paculdo failed to pay 361,895.55 for month of May 1992, and monthly rental of 450K for months
of June and July 1992. Regalado sent two demand letters, if no payment made within 15 days,
cancellation of the lease contract
- Without Paculdos knowledge, Regalado mortgaged land including improvements which
Paculdo made amounting to 35M, to Monte de Piedad Savings Bank as security for a loan
- On Aug and subsequent dates thereafter, Regalado refused to accept rental payments
- Paculdo filed for action for injunction and damages seeking to enjoin Regalado from disturbing
his possession of property. Regalado filed a complaint for ejectment
- LC - in favor of Regalado; CA affirmed
Issue: WoN Paculdo was truly in arrears in the lament of rentals on the subject property at the time
of the filling of the complaint for ejectment NO
Held:
- Paculdo was not in arrears in the payment of rentals at the time of filing of complaint for
ejectment. As found by LC, there was a letter sent by Regalado dated Nov 1991 which states that
Paculdos security deposit for the Quirino lot be applied as partial payment for his account
under the subject lot as well as to the real estate taxes on Quirino lot. Paculdo did not object, as
evidenced by his signature signifying his conformity thereto
- In an earlier letter dated July 1991, Regalado informed Paculdo that payment was to be applied
not only to Paculdos accounts under subject land and Quirino lot but also to heavy equipment.
The July letter did not contain the signature of Paculdo
- Paculdo submits that his silence is not consent but is in fact a rejection
- Art 1252 - right to specify which among his various obligations to the same creditor is to be
satisfied first rests with the debtor
- At the time Paculdo made the payment, he made it clear to Regalado that they are to be applied
to his rental obligations on the Fairview wet market property. Though he entered into various
cotracts, all the payments made, about 11M, were to be applied to rental and security deposit on
the Fairview wet market property. However, Regalado applied a big portion of the amount to
the satisfaction of an obligation which was not yet due and demandable (heavy equipment)
- If the debtor did not declare at the time he made the payment to which of his debts with the
creditor the payment is to be applied, the law provided the guideline i.e. no payment is to be
applied to a debt which is not yet due and the payment has to be applied first to the debt which
is most onerous to the debtor
- Lease over Fairview market is most onerous to Paculdo. Petition granted.

DBP v. CA|1998|Davide|Dation in Payment

Debtor Cuba

Creditor Development Bank of the Philippines

Object / Obligation 109K, 109K, 98.7K

Term / Condition terms on 3 promissory notes

Facts:
- Lydia Cuba is a grantee of a Fishpond Lease Agreement from the government
- Cuba obtained loans from DBP (109K, 109K, and 98.7K) stated under promissory notes dated
Sept. 1974, Aug 1975, and April 1977, executing 2 deeds of assignment of her Leasehold Rights
as security
- Upon failure to pay, without foreclosure proceedings, DBP appropriated the leasehold Rights
over the fishpond in question
- DPB executed a Deed of Conditional Sale of the Leasehold Rights in favor of Cuba over the same
pishpond. In the negotiation for repurchase, Cuba addressed 2 letters to manager DBP, Dagupan
City. DBP accepted the offer to repurchase . After execution of deed, a new Fishpond Lease
Agreement was issued by the Ministry of Agriculture and Food in favor of Cuba, excluding her
husband. Cuba failed to pay the amortization as stated in Deed of conditional Sale
- DBP sent Notice of Recission thru Notarial Act which was received by Cuba
- DBP too possession of the Leasehold Righs and advertised in the Sunday Punch the public
bidding to dispose of the property
- DPB executed Deed of Conditional sale in favor of defendant Caperal
- Caperal was awarded Fishpond Lease Agreement by the Ministry of Agriculture and Food
- Cuba: 230K pieces of bangus lost
- RTC ruled in favor of Cuba, it being a pactum commissorium, return leasehold rihts, 1M
damages, 100K moral, 50K exemplary, 100K atty.s fees. CA leasehold rights to Caperal as valid
but same damages
Issue: WoN act of DBP in appropriating to itself Cubas leasehold rights without foreclosure
proceedings was valid
Held:
- An assignment to guarantee an obligation is virtually a mortgage. Simultaneous with the
execution of the notes was the execution Assignments of Leasehold Rights where Cuba
assigned her leasehold rights and interest on a 44-hectara fispond, together with 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 a mortgage contract
- Under Condition 22 of deed 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
- Condition 33 foreclosure is actually accomplished, the usual 10% attys fees and 10% liquidated
damages of total obligation shall be imposed
- No shred of doubt that a mortgage was intended
- Peoples Bank & Trust Co. v. Odom Assignment to guarantee an obligation is in effect a
mortgage.
- Not novation, not cession, not nation in payment
- Award of actual damages to Cuba should be struck down for lack of sufficient basis

Filinvest Credit Corp v. Phil. Acetylene|1982||Effects of Dation in Payment

Debtor Phil Acetylene

Creditor Filinvest Credit Corp

Object / Obligation 55,247.80 (20K already paid as down)

Term / Condition 34 monthly installments + chattel mortgage

Facts:
- Philippine Acetylene Co., Inc. purchased from Alexander Lim, as evidenced by a Deed of Sale, a
Chevrolet 1969 model with serial no. so and so for 55,247.80 with a down payment of 20K and
the balance payable under terms and conditions of promissory note 34 monthly installments.
- As security for the payment, Philippine Acetylene Co. executed a chattel mortgage over the same
vehicle in favor of Lim
- Lim assigned to Filinvest Finance Corporation all his rights, title, and interests in the promissory
note and chattel mortgage by virtue of a Deed of Assignment
- Filinvest Finance Corp assigned to new corp Filinvest Credit Corp. all its rights, title, and
interests on aforesaid promissory note and chattel mortgage
- Upon failing to pay, Filinvest Credit Corp sent a demand letter instructing mortgager to rerun
mortgaged property, which shall be in full satisfaction of its indebtedness pursuant to Art 1484
- Lim returned vehicle
Issue: WoN return of vehicle bars the foreclosure of the chattel mortgage NO
Held:
- Filinvest did not consent, nor did it intend, that the mere delivery to and acceptance by him,
shall be construed as actual payment. This is not a case of nation in payment or dacion en pago
- Delivery of mortgaged vehicle does not necessarily mean transfer of ownership
- Express or implied intention to constitute delivery of vehicle as nation in payment is absent
- Dacion en pago is the transmission of the ownership of a thing by the debtor to the creditor as
an accepted equivalent of the performance of obligation
- In the absence of clear consent of Phil Acetylene Co to the proferred special mode of payment,
there can be no transfer of ownership. Transer of possession merely for security of possession to
forestall loss, destruction, fraudulent transfer of vehicle to third persons, or its being rendered
valueless if left in the hands of Phil Acetylene

De Guzman v. CA|1985|Concepcion|Consignation
Debtor Singh
Creditor De Guzman and Sps. Gutevo

Object / Obligation 240K or 250K for two parcels of land in Pasay

Term / Condition Dec 18, 1977 - 240K ; Failure to do so, Jan 27 - 250K

Facts:
- On Feb 17, 1971, De Guzman and Sps. Getuvo executed a contract to sell with Singh covering
two parcels of land in Pasay. It was stipulated that Singh should pay the 133,640 balance on or
before Feb 17, 1975
- Two days before due date, Singh asked petitioners to proide statement of account of balance due,
copies of certificates of land titles, and power of atty executed by Gestuvo in favor od De
Guzman. Petitioners refused. Singh filed complaint alleging that by refusing to furnish docs,
petitioners deliberately intended not to comply with their obligations under the contract too sell
breach of contract, should be liable for damages
- Petitioners: we have no obligation to furnish documents No cause of action because balance due
already predetermined in contract
- Parties executed a compromise agreement which the Court approved: Singh would pay 240K nt
later than Dec 18,1977. In case of failure to do so, 250K till Jan 27,1978 ; upon reeipt, De guzman
to execute legal docs to transfer lands ; De Guzman would temporarily desist from enforcing
their right to the properties until Jan 27 ; Should Singh fail to pay, contract to sell rescinded;
Payment shall take place before Hon. Bautista in courtroom of CFI Rizal at 10am unless payment
was earlier made
- Pets filed motion for issuance of writ of execution, claiming that Singh failed to abide by terms of
compromise agreement. Denied. Directed pets to execute necessary docs for transfer and
ordered Clerk of Court to release 250K deposited by Sign
- Pets. appealed. Singh filed motion to dismiss appeal on grounds that 1) orders unappeasable 2)
record on appeal is defective. TC dismissed appeal. CA sustained decision
Issue: WoN Singh had substantially complied with terms and conditions of compromise
agreement YES
Held:
- Failure to deliver pets full amount on January 27 was not her fault. He went to sala of Judge
Bautista but pets were not there. Only pets counsel was there without authority to receive
payment. He invited Singh to house of pets but pets were not there either. They were informed
that de Guzman would arrive late. Singh waited for the call which did not come and unwittingly
let the period lapse. The next day, Singh went to office of Clerk of CFI Pasay to deposet balance.
But it being a Saturday, cashier was not there to receive it
- Next working day, Monday - Jan 30, Singh deposited 30K with cashier of the office of Clerk of
CFI Pasay to complete payment of purchase price of 250K
- There was substantial compliance with terms and conditions of compromise agreement. Refusal
of creditor to accept consignment not valid
Meat Packing Corp. v. Sandiganbayan|2001||Consignation
Debtor Philippine Integrated Meat Corporation (PIMECO)

Creditor Meat Packing Corporation of the Philippines (MPCP)

Object / Obligation 94M, annual rate 3M

Term / Condition Payable over 28 years; Recission clause

Facts:
- Meat Packing Corporation of the Philippines (MPCP) is a corporation wholly owned by GSIS. It
owns 3 parcels of land in Pasig as well as the meat processing and packing plant thereon
- MCPC and Philippine Integrated Meat Corporation (PIMECO) entered into a lease agreement.
Annual rate of 1.4M Payable over 28 years. Total consideration of 39M. Recission clause: If
PIMECO should fail to pay rentals equivalent to sum of 3 annual installments, agreement shall
be deemed automatically cancelled and forfeited without need of judicial intervention
- MPCP and PIMECO entered into a supplementary and loan agreement. In consideration of the
additional expenditure incurred by MPCP for plant rehabilitiation, total contract price increased
to 94M, annual rate 3M
- PCGG sequestered all assets, poperties, and records of PIMECO
- MPCP wrote letter to PIMECO, giving notice of recession on ground of non-payment of rentals
of more than 2M
- GSIS asked PCGG to exclude the meat packing plant from the sequestered assets because it is
owned by MPCP. CGG denied. MPCP sought turnover on round that lease-purchase agreement
had already been rescinded
- PCGG ordered transfer under condition that PCGG management might continue operations to
complete outstanding orders
- Sandiganbayan found PCGG committed grave abuse of authority in unilaterally terminating
lease agreement and turning over management
- PIMECO alleged that from 1981 to 1985, pIMECO has been regularly paying annual rentals. Pr
- However, after sequestration, PCGG Mgmt Team took over plant became erratic and irregular in
its payment. Hence, PIMECO prayed that rescission clause be cancelled
- In the meantime, PCGG tendered to MCPC 5M, representing partial payment. MPCP refused on
the theory that lease-purchase agreement has been rescinded
- Sandiganbayan approved the consignation by PCGG f 5M
- Unpaid rentals have reached 7.5M. PCGG tender of payment and consignation of 5M averted the
accumulation of unpaid rentals to 3 annual installments
Issue: WoN lease-purchase agreement has been rescinded NO
Held:
- Extrajudicial tender made, judicial consignation validly made. Refusal of MPCP unjustified This
then produces the effect of payment and extinguishes obligation
- Art 1256 - If creditor to whom tender of payment has been made refuses without just cause to
accept it, debtor shall be released from responsibility by the consignation of the thing or sum
due
- To resciend, it must be shown that PIMEO failed to pay aggregate amount of at least 10M.
Assuing in the extreme, as alleged by MCP, that arrears at time of tender amounted to 12.5M,
tender and consignation of 5M, which had effect of payment, reduced back rentals to only7.5M,
an amount less than equivalent of 3 annual installments

Pabugais v. Sahijwani|2004|Ynares-Santiago|Consignation
Debtor Sahijwani

Creditor Pabugais

Object / Obligation 15.5M for a parcel of land

Term / Condition 60days, failure to pay of debtor - forfeiture; failure to provide

docs of creditor - return of 600K plus 18% per annum
Facts:
- Pabugais sold lot to Sahijwani located at North Forbes Park, Makati for 15.5M. Sahjiwani paid
Pabugais 600K as option/reservation fee and the balance to be paid within 60 days from the
execution of contract, simultaneous with delivery of owners duplicate Transfer Certificate of
Title in Sahijwanis name the Deed of Absolute Sale
- Par. 5 of agreement: In case Sahijwani fails to pay baance within stipulated date, 600K shall be
forfeited. Should Pabugais fail to deliver within stipulated period documents, 600K shall be
returned with interest of 18% per annum
- Pabugais failed to deliver required documents. He returned to Sahijwani 600K by way of Far
East Bank & Trust Company which was dishonored
- According to Pabugais, he twice tendered to Sahijwani, through is counsel, 672,900 in the form
of a check but said counsel refused to accept the same. He wrote letter saying that he was
consigning amount tendered with RTC Makati
- According to Sahjiwani, his office received letter but claimed that no check was appended
thereto. No valid tender of payment because no check was tendered and computation of amount
to be tendered was insufficient because Pabugais verbally promised to pay 3% monthly interest
and 25% atty.s fees as penalty for default in addition to 18% interest
- TC held that consignation invalid for failure to prove tender of payment and Sahjiwani refused
to receive it. Assuming refusal, it is justified because manager s check was not legal tender
- Pabugais appealed to CA. He filed ex part motion to withdraw consigned money. Denied by CA.
TC decision affirmed
- On MR, CA declared that consignation was valid. It held that the validity of consignation had
effect of extinguishing Pabugais obligation. Hence, Pabugais can no longer withdraw
- Pabugais: I have a right to withdraw because at the time I moved for withdrawal, no decision
from CA yet and Sahjiwani had not yet accepted the same
Issue: WoN there is a valid consignation YES
Held:
- As testified by counsel for Sahjiwani, reasons why payment was not accepted were check was
not attached to letter and amount tendered insufficient. It is obvious that reason was the alleged
insufficiency and not because the check was not tendered. It is true that in general, manager;s
check is not legal tender an creditor has option for refusing. Payment in check by debtor may be
acceptable as vaid, if no prompt object to said payment is made. Pabugais tender of payment in
for of check is then valid
- Check sufficient
- Pabugais can no longer withdraw amount consigned. Sahjiwanis prayer in his answer that the
amount consigned be awarded t hi is equivalent to an acceptance of the consignation which has
the effete of extinguishing Pabugais obligation.

Occena v. CA|1976|Teehankee|Loss or Impossibility

Debtor Reciprocal obligation

Creditor

Object / Obligation Tropical Homes to conduct development plans while Occena

spouses to provide land for development

Term / Condition

Facts:
- Tropical Homes, Inc. had a subdivision contract with Occena spouses who are the owners of the
land subject of subdivision development by Tropical Homes.
- The contract stipulated that Occenas fixed and sole share and participation is the land which is
equivalent to 40% of all cash receipts from sale of subdivision
- Development costs increased to such level not anticipated during the signing of the contract
which threatened the financial viability of project as assessed by Tropical Homes
- Tropical Homes filed complaint for modification of terms and conditions of contract by fixing
proper shares out of gross proceeds from sales of subdivision lots
- Occena spouses moved for dismissal for lack of cause of action. CFI Rizal (Presiding Judge
Jobson) denied motion for dismissal CA upheld CFIs decision based on 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
- Occena insisted that worldwide increase in prices cited by Tropical Homes does not constitute a
sufficient cause of action for modification of terms and conditions of contract
Issue: WoN Tropical Homes may demand modification of terms of the contract on ground that the
pre station has manifestly come beyond the contemplation of parties NO
Held:
- Above cited provision does not grant the court the power to remake, modify, or revise the
contract or to fix the division of the shares between the parties as contractually stilted with the
force of law between the parties
- If prayer was to be released from its contractual obligation on account that the pre station has
become beyond the contemplation of the parties, then Tropical Homes can rely on said provision

So v. Food Fest Land|2011|Carpio Morales|Loss or Impossibility

Debtor Food Fest Land, Inc.

Creditor Daniel T. So

Object / Obligation payment for lease

Term / Condition Failure to acquire permits and licenses needed within 15days
terminates contract
Facts:
- Food Fest entered into a Contract of Lease with So over a commercial space in Makati City for a
period of 3 years o which Food Fest intended to operate a KFC carry out branch
- Preliminary agreement: Lease shall not become binding upon us unless and unit the
government agencies concerned shall authorize, permit, or license us to open and maintain our
business. We shall also notify you if any of the required permits, licenses, authorities shall not
be given or granted within 15 days from your conform hereto. In such case, the agreement may
be cancelled and all rights and obligations shall cease
- Food Fest was able to secure necessary license and permits for first year (1999) but failed to
commence business operations. Next year, application for renewal of barangay business
clearance was held in abeyance.
- Food Fest communicated its intent to terminate lease to So. So did not accede and instead offered
to help Food Fest secure authorization. Food Fest informed So of its intent to terminate lease for
the second time (August 2000) as it demurred to Sos offer. So demanded payment of rentals
from Foodfest from September 2000 - March 2001 amounting to 123,200
- Food Fest denied any liability and started to remove its fixtures and equipment fro premises. So
sent Food Fest final notice of termination with demand to pay and to vacate
- April 2001, So filed complaint for ejectment and damages against Food Fest before MeTC of
Makati. MeTC ruled in favor of So. RTC reversed MeTCs decision. CA declared that Food Fests
obligation to pay rent was not extinguished upon its failure to secure permits
- Food Fest invoked principle of rebus sic stantibus (Latin for things thus standing -> allowing
contracts to become inapplicable because of fundamental change of circumstances) failure to secure
necessary business permits and licenses rendered impossibility of its purpose in interring into
the contract of lease
Issue: WoN acquisition of subsequent business permits is a suspensive condition to the lease
contract making obligation not binding on parties upon failure to acquire documents NO
Held:
- The cause or essential purpose in a contract of lease is the use or enjoyment of a thing. A party s
motive or particular purpose in entering into a contract does not affect the validity or existence
 of the contract; an exception is when the realization of such motive or particular purple has been
made a condition upon which the contract is made to depend. Exception does not apply here
- It is clear that the condition set forth in the preliminary agreement pertains to the initial
application of Food Fest for the permits, licenses, and authority to operate. It should not be
construed to apply to Food Fests subsequent applications (hello nakasulat 15days so initial lang
talaga)
- Contracts, once perfected are binding between parties. Obligations arising therefrom have the
force of law and should be complied with in good faith. Food Fest cannot renege from the
obligations it has freely assumed when it signed the lease contract