Nereo J. PACULDO, petitioner, vs. Bonifacio C. REGALADO, respondent 2.
2. Portions of the amount paid was applied by Regalado w/o his consent,
[2000]
 Dec. 27, 1990: Contract of Lease between Paculdo (lessee) & Regalado
(lessor) over a 16,478 sq meter parcel of land w/a wet market bldg located
along Don Mariano Marcos Ave., Fairview Park, QC. Contract was for 5 yrs
from this date w/monthly rental of P450k payable w/in first 5 days of each
month at Regalado’s office + 2% penalty for every month of late payment.
 Paculdo leased 11 other properties from Regalado, 10 of w/c were located
in Fairview while the 11th was located along Quirino Highway, QC.
 Paculdo also purchased 8 units of heavy equipment & vehicles from
Regalado amounting to P1,020,000.00
 July 15, 1991: Regalado informed Paculdo that his payment was to be
applied to the following: monthly rentals for the wet market, Quirino lot, and
the heavy equipment purchased. This letter had no conformity portion.
Paculdo did not act on the letter.
 Nov. 19, 1991: Regalado proposed that Paculdo’s security deposit for the
Quirino lot (P643,276.48) be applied as partial payment for his account
under the subj lot as well as to the real estate taxes on the Quirino lot.
Paculdo did not object and he signed the conformity portion.
 Regalado claims that Paculdo failed to pay P361,895.55 in rental for the
month of May, 1992 and monthly rental of P450k for the months of June &
July, 1992. Thus he sent 2 demand letters (both in July, 1992) asking for
payment and later on asked Paculdo to vacate the property.
 Aug. 3, 1992: Regalado mortgaged the land under the contract to Monte de
Piedad Savings Bank. It included the improvements introduced by Paculdo
amounting to P35M. Mortgage was used as security for a loan amounting to
P20M.
 Aug. 12, 1992 onwards: Regalado refused to accept Paculdo’s daily rental
payments.
 Aug. 20, 1992: Paculdo filed an action for injunction & damages to enjoin
Regalado from disturbing his possession of property under the contract.
Regalado on the other hand, filed a complaint for ejectment against
Paculdo. Later on withdrawn and then re-filed w/claim of P3,924,000.00.
 MTC: Ordered Paculdo to vacate the premises & pay P527,119.27 of
unpaid monthly rentals as of June 30, 1992 w/2% interest + P450k/month
w/2% interest from July 1992 onwards until place has been vacated &
turned over to Regalado + P5M for atty’s fees + costs.
 Feb. 19, 1994: Regalado w/50 armed security guards forcibly entered the
property & took possession of the wet market.
 RTC affirmed MTC decision. Issued a writ of execution thus Paculdo
vacated the property voluntarily & there was complete turn over by July 12,
1994.
 Paculdo appealed to the CA claiming that:
1. He paid P11,478,121.85 as security deposit & rentals on the wet
market building.
to his other obligations. Vouchers & receipts indicated that the
payments were made for rentals, proof of Paculdo’s declaration as to
w/c obligation the payment must be applied.
 CA: Dismissed the petition for lack of merit. Paculdo impliedly consented to
Regalado’s application of payment to his other obligations.
Issue: WON Paculdo was truly in arrears in the payment of rentals on the
subject property at the time of the filing of the complaint for ejectment. –
NO.
Ratio:
1. Based on MTC & RTC findings, Paculdo paid a total of P10,949,447.18 to
Regalado as of July 2, 1992. And if this will be applied solely to the rentals
on the Fairview wet market, there would even be an excess payment of
P1,049,447.18. (see p.139 for computation)
2. Paculdo goes back to the July 15, 1991 letter. He emphasized that applying
the payment to the purchased equipment was crucial because it was
equivalent to 2 mos rental & was the basis for the ejectment case. He
further claims that his silence/lack of protest did not mean consent; rather, it
was a rejection.
3. CC Art. 1252 & 1254: Debtor has the rt to specify w/c among his various
obligations to the same creditor is to be satisfied at the time of making the
payment. If the debtor did not exercise this rt, law provides that no payment
is to be made to a debt that is not yet due (CC Art. 1252) and payment has
to be applied first to the debt most onerous to the debtor (CC Art. 1254).
a. Paculdo made it clear that payments were to be applied to his rental
obligations on the wet market property.
b. Regalado claims that Paculdo assented to the application as inferred
from his silence.
c. A big chunk of the amount paid went into the satisfaction of an
obligation w/c was not yet due & demandable (payment of heavy
equipment). Application was contrary to law.
d. Paculdo’s silence was not tantamount to consent. Consent must be
clear & definite. There was no meeting of the minds. Though there was
an offer by Regalado, there was no acceptance by Paculdo. Even if
Paculdo did not exercise his rt to choose the obligation to be satisfied
first & such rt was transferred to Regalado, latter’s choice is still subject
to former’s consent.
e. Lease over the Fairview property is the most onerous among all the
obligations of petitioner to respondent. It’s a going-concern (?) and
investments on the improvements were made amounting to P35M.
Paculdo was bound to lose more if lease would be rescinded than if the
contract of sale of heavy equipment would not proceed.
Holding: Petition granted. CA decision reversed & set aside.