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77. Paculdo v.

Regalado
G.R. No. 123855 | 20 November 2000 | Pardo, J.
Aggy | TOPIC: C. Application of Payments: Article 1252

Doctrine:
The debtor has the right to specify which among his various obligations to the same creditor is to be satisfied
first. The creditor may exercise this right when the debtor fails to choose an obligation, but such exercise by
the creditor is subject to the debtor’s consent. Such consent must be clear and definite. Mere silence is not
consent. Further, application of payment cannot extend to obligations that are not yet due at the time of
payment.

Facts:
Creditor – Regalado
Debtor – Paculdo
Property in question: Fairview Property with Wet Market Building

1. Nerio Paculdo (petitioner) and Bonifacio Regalado (respondent) entered into a lease contract over
a parcel of land with a wet market building located at Fairview Park, QC.
a. Contract was for 25 years (from January 1, 1991 to December 31, 2015)
b. For the first 5 years (beginning December 27, 1990), Paculdo was to pay a monthly rent of
P450,000 payable within the first 5 days of each month.
c. 2% penalty for every month of late payment
2. Paculdo bound himself once again with various obligations to Regalado
a. He leased 11 other properties (10 are located within the Fairview compound, 1 is located
along Quirino Highway)
b. He also purchased 8 units of equipment and vehicles (aggregate amount of P1,020,000)
3. Paculdo failed to pay P361,894.55 monthly rent (for the additional obligations) for May 1992 and the
monthly rent of P450,000 (for the Fairview wet market property) for the months of June to July 1992.
a. Regalado sent 2 demand letters demanding payment with a condition that should Paculdo fail
to pay he will cause the cancellation of the contract.
4. Without the knowledge of Paculdo, Regalado mortgaged the Fairview wet market property, including
the improvements introduced by Paculdo to Monte de Piedad Savings Bank as security for a loan.
a. Likewise, Regalado refused to accept Paculdo’s daily rental payments.
5. November 19, 1991 letter – Regalado informed Paculdo that the latter’s security deposit will be
applied as partial payment for the Fairview Property, as well as to real estate taxes on the Quirino
property. Paculdo didn’t object as evidenced by his signature.
6. July 15, 1991 letter – Regalado informed Paculdo that the payment was to be applied not only to the
Fairview and Quirino properties, but also to the 8 units of equipment. There was no signature of
Paculdo as to this letter.
7. Paculdo filed with RTC an action for injunction and damages.
8. Regalado filed with MTC an ejectment complaint. (He filed it twice because he withdrew his first
complaint because according to him it had to be recomputed).
a. MTC ruled in favor of Regalado and ordered Paculdo to vacate the Fairview property and to
pay the amount due to Regalado.
b. Regalado with support of 50 armed security guards forcibly entered the Fairview property and
took possession of the wet market building.
c. RTC affirmed. It likewise issued a writ of execution. Paculdo vacated the premises voluntarily.
d. CA also affirmed and held that Paculdo impliedly consented to Regalado’s application of the
payment because he didn’t object.
9. The issue of the application of the payment is important because if it were shown that the payments
made were applied only to the Fairview property (and not to the purchased equipment), there would
even be an excess payment by Paculdo, thus, the ejectment of Paculdo from the Fairview property
would not be proper.

Issues/Holding:
W/N petitioner’s failure to object to the letter of July 15, 1991 amount to consent to such application of
payment – No.
• When the debtor has various obligations to the same creditor, he has the right to choose which
obligation the payment made would be applied to. If the debtor failed to choose an obligation,
the creditor may exercise the right to choose, but it must be subject to the consent of the
debtor. Such consent must be clear and definite. Mere silence or failure to object cannot
amount to a consent.
• Further, the law provides for guidelines in situations where the debtor failed to choose an
obligation:
o The application of the payment cannot be made to a debt that is not yet due.
o The payment is to be applied first to the debt most onerous to the debtor.

• In the case at bar, Paculdo’s mere silence to the letter of Regalado regarding the
application of the payment to the 8 units of equipment does not amount to a consent. It
should have been a clear and definite. Anything less will not warrant a consent.
• Further, the price of the 8 units of equipment was not yet due at the time of the payment.
There was no date fixed as to its payment and Regalado has not yet demanded for it, thus, it
was not yet due and demandable. The payment made by Paculdo cannot be applied to it.
• It is clear that the Fairview property is the most onerous among all the obligations of
Paculdo. He invested about P35M to it. He stands to lose more if the lease for said property
was rescinded, than if the contract of sale for the equipment would not proceed.

Ruling:
Petition is granted. CA decision is reversed and set aside.

Relevant Provisions: