SCRA January 5, 1998.

Arrieta 764
NARIC,(1978) 10.Filinvest Credit Corporation vs. Philippine
supra 7.Pacul Acetylene, GR L-50449, Jan 1982
Kalalo do11.De Guzman v. CA, 137 SCRA 730 (1985)
Luz, 34Regalad 12. TLG International
SCRA 377o, 345
Continental Enterprising, Inc. v.
(1970) SCRA Flores, 47 SCRA 437
St. Paul134 (1972)
Fire and(2000)
Marine 8 14.McLaughlin v.
. CA, 144 SCRA
Insurance
D 693
v. B (1986)
Macondray,
P 15.Soco
70 v.
S1. v Militant
v. . e, 123
supra C SCRA
2.KalaloA 160
Luz, 34, (1983)
SCRA 377G 16.Sotto
(1970) . v.
R
3.St. Paul Mijares,
Fire and. 28 SCRA
Marine N 17
o
Insurance (1969)
v. . 17.Chan vs. CA (March 3, 1994,
1
Macondray 230 SCRA)
, 1 18. Meat Packing
122 8 Corp vs. Sandiganbayan
3 (June 22, 2001, 359 SCRA)
4.Papa
4 19.Pabugais v.
Valencia,
2 Sahijwani, G.R. No.
284 SCRA
, 156846, February
643
J 23, 2004
78.
a 20.Spouses Cinco v. CA,
5.PAL
n G.R. No. 103068, June 22,
CA 181
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SCRA 557
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 1. Arrieta v. NARIC, G.R. No. L-15645, January 31, 1964

Facts:

Mrs. Paz Arrieta participated in public bidding called by NARIC on May 19, 1952 for the supply of
20,000 metric tons of Burmese rice. Her bid was $ 203.00 per metric ton, it was the lowest that’s why
the contract was awarded to her. On July 1,1952, Arrieta and NARIC entered into contract. Arrieta was
obligated to deliver 20,000 metric ton of Burmese rice at $203.00 per metric ton to NARIC. In return,
NARIC committed itself to pay for the imported rice “ by means of an irrevocable, confirmed and
assignable letter of credit in US currency in favor of Arrieta and/or supplier in Burma (THIRI SETKYA),
immediately.”

NARIC took the first step to open the letter of credit on July 30, 1952 by forwarding to the PNB
its application for commercial letter of credit. Arrieta with the help of a counsel, advised NARIC of the
necessity for the opening of the letter because she tender her supplier in Ragoon, Burma of 5% of the
price of 20,000 tons at $180.70 and if she didn’t comply the 5% will be confiscated if the required letter
of credit is not received by them before August 4, 1952. PNB informed NARIC that their application of
credit letter amounting to $3,614,000.00 was approved with the condition of 50% marginal cash be paid.
NARIC does not meet the condition. The allocation of Arrieta’s supplier in Ragoon was cancelled and the
5% deposit was forfeited.

When the futility of restoring the cancelled Burmese rice allocation became clear, Arrieta
offered to provide the NARIC with Thai rice instead. They rejected the offer and later contended that it
amounted to a waiver of rights with regard to the breach of contract. Arrieta sent a letter to NRIC
demanding compensation for the damages caused her in the sum of $286, 000.00, representing
unrealized profit. The demand having been rejected, she instituted the case.

NARIC filed a counterclaim, asserting that it has suffered likewise by way of unrealized profit,
damages of $406,000 from the failure of the projected contract to materialize. It also sued the Manila
Underwriters Insurance Company as a third party defendant to hold it liable on the performance bond it
executed in favor of Arrieta.

Issue:

Whether or not NARIC’s failure to open immediately the letter of credit amounted to a breach of
the contract for which it may be held liable in damages.

Held:

Yes, because the reason of the cancellation of the contract by Arrieta in Ragoon, Burma was the
failure of NARIC to open the letter of credit within a specific period of time. One who assumes
contractual obligation and fails to perform in which he knew and was aware when he entered in the
contract, should be liable for his failure to do what is required by a law. Under the Art. 1170 of the Civil
Code, not only the debtors guilty of fraud, negligence or default but also a debtor of every, in general,
who fails in the performance of his obligation is bound to indemnify for the losses and damages caused
thereby.

3.
4. Papa v Valencia
G.R. No. 105188 January 23, 1998
Art. 1249 – Payment of debts in money shall be made in currency.

Facts:
          The respondents filed with the RTC Pasig a complaint for specific performance
against petitioner to deliver the title and turn over the accrued rentals.
          The petitioner, acting as attorney-in-fact of Angela M. Butte, sold to Peñarroyo through
Valencia, a parcel of land, which was mortgaged to the Associated Banking Corporation,
together with several other parcels of land.
          The bank refused to release it unless and until all the mortgaged properties were also
redeemed.
          Respondents discovered that petitioner had been collecting monthly rentals from the
tenants of the property, knowing that said property had already been sold to Peñarroyo.
          On appeal, the petitioner argued that alleged sale of the subject property had not been
consummated because he did not encashed the check (in the amount of P40,000.00), which did
not produce the effect of payment as in Art. 1249 of the Civil Code.
Issue:
WoN the delivery of a check produces the effect of payment only when it is cashed.
Held:
            No, the Court holds that 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 creditor's unreasonable delay in presentment.
            Art. 1249 of the Civil Code provides, in part, that 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.
            In the instant case, 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. It has, likewise, been held that if no presentment is made at all, the drawer cannot be
held liable irrespective of loss or injury12 unless presentment is otherwise excused. Granting that
petitioner 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.
            Thus, the petition for review is DENIED.

Papa v. Valencia
G.R. No. 105188 January 23, 1998

Banking; Checks

Facts:
1. The case arose from a sale of a parcel of land allegedly made to private respondent Penarroyo by
petitioner acting as attorney-in-fact of Anne Butte. The purchaser, through Valencia, made a check
payment in the amount of P40,000 and in cash, P5,000. Both were accepted by petitioner as evidenced
by various receipts. It appeared that the said property has already been mortgaged to the bank previously
together with other properties of Butte.

2. When Butte passed away, the private respondent Penarroyo now demanded that the title to the
property be conveyed to him, however the bank refused. Hence, the filing of a suit for specific
performance by private respondents against the petitioner. The lower court ruled in favor of the private
respondents and ordered herein petitioner the conveyance or the property or if not, its payment. The
petitioner appealed the lower court's decision alleging that the sale was not consummated as he never
encashed the check given as part of the purchase price. 

3. The Court of Appeals affirmed with modifications the lower court's decision. It held that there was a
consummated sale of the subject property despite.

Issue: Whether or not the check is a valid tender of payment/Whether or not there was a valid sale
of the subject property

RULING: Yes. While it is true that the delivery of check produces payment only when encashed (pursuant
to Art. 1249, Civil Code), the rule is otherwise if the debtor is prejudiced by the delay in presentment.
(Here in this case, the petitioner now alleges that he did not present the check, ten years after the same
was paid to him as part of the purchase price of the property.)

Check acceptance implied an undertaking of due diligence in presenting it for payment. If the person who
receives it sustains loss by want of this diligence, this will operated as actual payment of the debt or
obligation for which the check was given. The debtor cannot now be held liable if non-presentment of the
check was through the fault of the creditor.

5. PAL. vs. C.A.

Philippine Air Lines vs. Court of Appeals
GR 120262, 17 July 1997)

FACTS:

On 23 October 1988, Leovigildo A. Pantejo, then City Fiscal of Surigao City, boarded a PAL plane in Manila and disembarked in Cebu City
where he was supposed to take his connecting flight to Surigao City. However, due to typhoon Osang, the connecting flight to Surigao City
was cancelled. To accommodate the needs of its stranded passengers, PAL initially gave out cash assistance of P 100.00 and, the next day,
P200.00, for their expected stay of 2 days in Cebu. Pantejo requested instead that he be billeted in a hotel at the PAL’s expense because he
did not have cash with him at that time, but PAL refused. Thus, Pantejo was forced to seek and accept the generosity of a co-passenger, an
engineer named Andoni Dumlao, and he shared a room with the latter at Sky View Hotel with the promise to pay his share of the expenses
upon reaching Surigao. On 25 October 1988 when the flight for Surigao was resumed, Pantejo came to know that the hotel expenses of his
co-passengers, one Superintendent Ernesto Gonzales and a certain Mrs. Gloria Rocha, an Auditor of the Philippine National Bank, were
reimbursed by PAL. At this point, Pantejo informed Oscar Jereza, PAL’s Manager for Departure Services at Mactan Airport and who was in
charge of cancelled flights, that he was going to sue the airline for discriminating against him. It was only then that Jereza offered to pay
Pantejo P300.00 which, due to the ordeal and anguish he had undergone, the latter declined.

Pantejo filed a suit for damages against PAL with the RTC of Surigao City which, after trial, rendered judgment, ordering PAL to pay Pantejo
P300.00 for actual damages, P150,000.00 as moral damages, P100,000.00 as exemplary damages, P15,000.00 as attorney’s fees, and 6%
interest from the time of the filing of the complaint until said amounts shall have been fully paid, plus costs of suit.

On appeal, the appellate court affirmed the decision of the court a quo, but with the exclusion of the award of attorney’s fees and litigation
expenses.

The Supreme Court affirmed the challenged judgment of Court of Appeals, subject to the modification regarding the computation of the 6%
legal rate of interest on the monetary awards granted therein to Pantejo.

ISSUE:

Whether petitioner airlines acted in bad faith when it failed and refused to provide hotel accommodations for respondent Pantejo or to
reimburse him for hotel expenses incurred by reason of the cancellation of its connecting flight to Surigao City due to force majeur.

HELD:
A contract to transport passengers is quite different in kind and degree from any other contractual relation, and this is because of the relation
which an air carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and
advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or malfeasance of the
carrier’s employees naturally could give ground for an action for damages.

The discriminatory act of PAL against Pantejo ineludibly makes the former liable for moral damages under Article 21 in relation to Article
2219 (10) of the Civil Code. As held in Alitalia Airways vs. CA, et al., such inattention to and lack of care by the airline for the interest of its
passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the
passenger to the award of moral damages.

Moral damages are emphatically not intended to enrich a plaintiff at the expense of the defendant. They are awarded only to allow the former
to obtain means, diversion, or amusements that will serve to alleviate the moral suffering he has undergone due to the defendant’s culpable
action and must, perforce, be proportional to the suffering inflicted. However, substantial damages do not translate into excessive damages.
Herein, except for attorney’s fees and costs of suit, it will be noted that the Courts of Appeals affirmed point by point the factual findings of
the lower court upon which the award of damages had been based.

The interest of 6% imposed by the court should be computed from the date of rendition of judgment and not from the filing of the complaint.

The rule has been laid down in Eastern Shipping Lines, Inc. vs. Court of Appeals, et. al. that “when an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate
of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run
from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which
time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged.” This is because at the time of the filling of the complaint, the amount of the
damages to which Pantejo may be entitled remains unliquidated and not known, until it is definitely ascertained, assessed and determined by
the court, and only after the presentation of proof thereon.

6. Reparations
Commission v. Universal Deep Sea Fishing
A.M. No. 21901-96, 27 June 1978
FACTS:
Universal Deep Sea Fishing acquired 6 trawl boats by the Reparations Commission to be delivered two at
a time and a Contract Purchase and Sale of Reparations Goods between the parties. The Manila Surety
& Fidelity Co. Inc. was the surety of UNIVERSAL to indemnify the Reparations in case of damage or loss.
Now after the Reparations have given all the boats they were now filing a suit against UNIVERSAL and
the Manila Surety to pay the amount of the boats. The surety company now contends that the action is
premature, but set up a cross-claim against UNIVERSAL for reimbursement of whatever amount of
money it may have to pay judgment, plaintiff by reason of judgment, complaint, including interest, and for
judgment, collection of accumulated and unpaid premiums on judgment, bonds with interest thereon.
ISSUE:
Whether or not the paying of the down payment by UNIVERSAL to Reparations Commission guaranteed
indebtedness.
RULING:
Surety company, under Article 1254 of judgment, Civil Code, where there is no imputation of payment
made by either judgment, debtor or creditor, The debt which is the most onerous to the debtor shall be
deemed to have been satisfied, so that the amount of P10,000.00 paid by UNIVERSAL as down payment
on the purchase of the, M/S UNIFISH 1 and M/S UNIFISH 2 should be applied to the guaranteed portion
of the debt, this releasing part of the liability hence the obligation of the surety company shall be only
P43,643.00, instead of P53,643.00.
The rules contained in Articles 1252 to 1254 of judgment, Civil Code apply to a person owing several
debts of judgment, same kind to a single creditor. They cannot be made applicable to a person whose
obligation as a mere surety is both contingent and singular, which in this case is the full and faithful
compliance with the terms of the contract of conditional purchase and sale of reparations goods. The
obligation included the payment, not only of the first installment but also of the ten (10) equal yearly
installments. The amount of P10,000.00 was, indeed, deducted from judgment, amount of P53,643.00,
but then judgment, first of judgment, ten (10) equal yearly installments had also accrued, hence, no error
was committed to holding judgment, surety company to judgment, the full extent of its undertaking.

7.Paculdo v. Regalado
G.R. No. 123855, 20 November 2000
FACTS:
Petitioner Nereo Paculdo and respondent Bonifacio Regalado entered into a contract of lease over a
parcel of land. Aside from the lease, petitioner leased eleven (11) other property from the respondent, ten
(10) of which was located within the Fairview compound, while the eleventh was located along Quirino
Highway Quezon City. Petitioner also purchased from respondent eight (8) units of heavy equipment and
vehicles.
On account of petitioner’s failure to pay rent for the month of May and the monthly rental for the months of
June and July the respondent sent two demand letters to petitioner demanding payment of the back
rentals, and if no payment was made within fifteen (15) days from the receipt of the letter, it would cause
the cancellation of the lease contract.  Without the knowledge of petitioner, respondent mortgaged the
land subject of the lease contract, including the improvements which petitioner introduced into the land
amounting to Monte de Piedad Savings Bank, as a security for a loan. Respondent refused to accept
petitioner’s daily rental payments.
ISSUE:
Whether or not the petitioner was truly in arrears in the payment of rentals on the subject property at the
time of the filing of the complaint about ejectment.
RULING:
NO, the petitioner was not in arrears in the payment of rentals on the subject property at the time of the
filing of the complaint about ejectment.
As provided in Article 1252 of the Civil Code, the right to specify which among his various obligations to
the same creditor is to be satisfied first rest with the debtor.
In the case at bar, at the time petitioner made the payment, he made it clear to the respondent that they
were to be applied to his rental obligations on the Fairview wet market property. Though he entered into
various contracts and obligations with respondent, all the payments made, were to be applied to rental
and security deposit on the Fairview wet market property. However, respondent applied a big portion of
the amount paid by petitioner to the satisfaction of an obligation which was not yet due and demandable
which is the payment of heavy equipment.
Under the law, 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.

8. G.R.No. 118367  January 5, 1998

Lessons Applicable: Certainty (Torts and Damages)
Laws Applicable: Article 1245, Article 1255, Article 2087, Art. 2088 of the Civil
Code

FACTS:

 Lydia P. Cuba is a grantee of a Fishpond Lease Agreement from the

Government
 Cuba obtained loans from DBP stated under promissory notes dated
September 6, 1974; August 11, 1975; and April 4, 1977 executing 2
Deeds of Assignment of her Leasehold Rights as security
 Upon failure to pay, without foreclosure proceedings it was
appropriated and DBP executed in turn a Deed of Conditional Sale of the
Leasehold Rights in her favor 
 Her offer to repurchase was accepted and a new Fishpond Lease
Agreement was issued by the Ministry of Agriculture and Food in her
favor alone excluding her husband
 Failing to pay her amortizations, she entered into a temporary
agreement with DBP 
 Soon, she was sent a Notice of Rescission and DBP took possession of
the Leasehold Rights of the fishpond
 After the public bidding, DBP executed a Deed of Conditional Sale in
favor of defendant Agripina Caperal 
 Cuba filed against DBP since no foreclosure proceedings was done
thus, contrary to Article 2088 of the Civil Code
 RTC: favored Cuba, it being a pactum commissorium  
 return leasehold rights to Cuba
 entitling P1,067,500 actual damages, P100,000 moral
and P50,000 exemplary damages and P100,000 attorney’s fees
 CA:  leasehold rights to Caperal as valid but same damages 
ISSUE: W/N Cuba should be awarded with actual and compensatory damages

HELD: NO. CA reversed except the P50,000 as moral damages. REMANDED to

the trial court for the reception of the income statement of DBP, as well as
the statement of the account of Lydia P. Cuba, and for the determination of
each party’s financial obligation to one another

 assignment of leasehold rights was a mortgage contract (Article 2087) 

 not novated, cession (Article 1255 of the Civil Code), dation in
payment (Article 1245 of the civil Code), pactum commissorium
 condition no. 12 did not provide that CUBA’s default would operate to
vest in DBP ownership of the said rights
 The fact that CUBA offered and agreed to repurchase her leasehold
rights from DBP did not estop her from questioning DBP’s act of
appropriation. 
 estoppel cannot give validity to an act that is prohibited by law
or against public policy
 alleged loss of personal belongings and equipment was not proved by
clear evidence. Other than the testimony of CUBA and her caretaker,
there was no proof as to the existence of those items before DBP took
over the fishpond in question. Neither was a single receipt or record of acquisition
presented.
 dated 17 May 1985, CUBA included “losses of property” as
among the damages resulting from DBP’s take-over of the fishpond.  Yet,
it was only in September 1985 when her son and a caretaker went to the
fishpond and the adjoining house that she came to know of the alleged
loss of several articles
 bangus which died also not duly proved nor was it expressed in her
later 7 months after DBP took over
 The award of actual damages should, therefore, be struck down for
lack of sufficient basis
 Exemplary or corrective damages in the amount of P25,000 should
likewise be awarded by way of example or correction for the public
good. There being an award of exemplary damages, attorney’s fees are
also recoverable

10. FILINVEST CREDIT CORPORATION vs. PHILIPPINE ACETYLENE, CO., INC.

G.R. No. L-50449 January 30, 1982 Dacion en Pago, Contract of Sale
MARCH 16, 2019

FACTS:

Philippine Acetylene Co., Inc., defendant-appellant, purchased from one Alexander Lim, a
motor vehicle the full payment thereof was under the terms and conditions of a promissory
note.

As security for the payment, the appellant executed a chattel mortgage over the same
motor vehicle in favor of Lim. Subsequently, Lim assigned to the Filinvest all his rights,
title, and interests in the promissory note and chattel mortgage by virtue of a Deed of
Assignment

Filinvest, as a consequence of its merger with the Credit and Development Corp., assigned
to the new corporation, (herein plaintiff-appellee Filinvest Credit Corporation) all its
rights, title, and interests on the aforesaid promissory note and chattel mortgage.

In effect, the payment of the unpaid balance owed by defendant-appellant to Lim was
financed by plaintiff-appellee such that Lim became fully paid.

Appellant defaulted in the payment of nine successive installments. Appellee then sent a
demand letter to pay the amount in full with interest and charges or to return the
mortgaged property.

Appellant advised appellee of its decision to “return the mortgaged property, which return
shall be in full satisfaction of its indebtedness pursuant to Article 1484 of the New Civil
Code.”

Appellee offered to deliver back the motor vehicle to the appellant but the latter refused to
accept it, so appellee instituted an action for collection of a sum of money with damages.

In its answer, appellant, while admitting the material allegations of the appellee’s
complaint, avers that appellee has no cause of action against it since its obligation towards
the appellee was extinguished when in compliance with the appellee’s demand letter, it
returned the mortgaged property to the appellee.

ISSUE:

Whether or not the return of the mortgaged motor vehicle to the appellee by virtue of its
voluntary surrender by the appellant totally extinguished and/or cancelled its obligation to
the appellee.

RULING:

The mere return of the mortgaged motor vehicle by the mortgagor, the herein appellant, to the
mortgagee, the herein appellee, does not constitute dation in payment or dacion en pago in the
absence, express or implied of the true intention of the parties.

Dacion en pago, according to Manresa, 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 dacion en
pago, as a special mode of payment, the debtor offers another thing to the creditor who accepts it
as equivalent of payment of an outstanding debt. The undertaking really partakes in one sense of
the nature of sale, that is, the creditor is really buying the thing or property of the debtor,
payment for which is to be charged against the debtor’s debt.

As such, the essential elements of a contract of sale, namely, consent, object certain, and cause or
consideration must be present. In its modern concept, what actually takes place in dacion en
pago is an objective novation of the obligation where the thing offered as an accepted equivalent
of the performance of an obligation is considered as the object of the contract of sale, while the
debt is considered as the purchase price. In any case, common consent is an essential
prerequisite, be it sale or innovation to have the effect of totally extinguishing the debt or
obligation.

11. De Guzman v. Court of Appeals

G.R. No. L-52733, 23 July 1985

FACTS:

On November 29, 1977, the trial court rendered a decision approving a compromise between Pilar de Guzman, Rolando Gestuvo,
and Minerva Gestuvo, as sellers, and Leonida P. Singh, the buyer. Singh agreed to pay de Guzman and the Gestuvos, now
petitioners, P250,000 for two lots located at Cementina Street, Pasay City at ten o’clock in the morning of January 27, 1978, in the
courtroom of Judge Bautista of Pasay City. In case no payment was made, then the petitioners would be immediately entitled to a
writ of execution for the possession of the said lots.

Ben Restrivera, in behalf of Singh, on January 24, 1978, deposited P220,000 with the clerk of court. Restrivera on January 27,
1978, tried to deliver to Antonio G. Barredo, petitioners’ counsel, P5,000 cash and P25,000 in postdated checks, or P30,000 to
complete the price of P250,000. Barredo refused to accept that payment. On January 30, 1978 (3 days after the deadline) Singh
deposited with the clerk of court cash of P30,000.
On that same day, January 30, the petitioners filed a motion for execution. It was opposed by Singh. Judge Bautista in his order of
March 27, 1978, denied the motion and ordered the petitioners to execute the corresponding deed of sale. He ordered the clerk of
court to release the P250,000 to them.

ISSUE:

Whether or not private respondent substantially complied with the terms of the compromise agreement.

RULING:

The private respondent had substantially complied with the terms and conditions of the compromise agreement. Her failure to
deliver to the petitioners the full amount on January 27, 1978, was not her fault. The blame lies with the petitioners.  The deposit of
the balance of the purchase price was made in good faith and that the failure of the private respondent to deposit the purchase price
on the date specified was due to the petitioners who also make no claim that they had sustained damages because of the two days
delay, there was substantial compliance with the terms and conditions of the compromise agreement. 

12.
 13. McLaughlin v. Court of Appeals

G.R. No. L-57552, 10 October 1986

FACTS:
Petitioner and private respondent, Flores, entered into a contract of conditional sale of real property.
When the private responded failed to pay the balance on the date stipulated, he filed a petition to rescind
the contract. They entered into a Compromise Agreement. Thereafter, the petitioner made a demand. In
response, the Flores sent a letter to the former signifying his willingness and intention to pay the balance.
Flores alleged that he tendered payment to petitioner but the petitioner refused to accept it. Petitioner filed
a motion for writ of execution, to rescind and liquidate damages, alleging that Flores had failed to pay the
installment due, as stipulated in their compromise agreement. Flores filed a motion for reconsideration
and tendered a certified manager’s check covering the entire obligation, within seventeen days after it
was due. The trial court dismissed the motion for reconsideration. The CA nullified and set aside the
decision of the trial court. It contended that rescission will not be permitted in cases of a slight or casual
breach. The delay in payment of Flores is merely a slight breach.
ISSUE:
WON the tender of payment restored the defendant’s right as vendee.
RULING:
Yes. The tender made by private respondent of a certified bank manager’s check payable to petitioner
was a valid tender of payment. The certified check covered not only the balance of the purchase price in
the amount of P69,059.71, but also the arrears in the rental payments from June to December 1980 in the
amount of P7,000.00, or a total of P76,059.71. But he is not released from the responsibility to pay the
vendor. The vendee must first consign the amount to the court. According to Article 1256 of the Civil Code
of the Philippines, if the creditor to whom tender of payment has been made refuses without just cause to
accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due, and
that consignation alone shall produce the same effect in the five cases enumerated therein; Article 1257
provides that in order that the consignation of the thing (or sum) due may release the obligor, it must first
be announced to the persons interested in the fulfillment of the obligation; and Article 1258 provides that
consignation shall be made by depositing the thing (or sum) due at the disposal of the judicial authority
and that the interested parties shall also be notified thereof.

14. Soco v. Militante

G.R. No. L-58961, 28 June 1983

FACTS:
Soco and Francisco entered into a contract of lease whereby Soco leased her commercial building and lot
to Francisco for a monthly rental of P 800.00 for a period of 10 years renewable for another 10 years at
the option of the lessee.
Francisco noticed that Soco did not anymore send her collector for the payment of rentals and at times
there were payments made but no receipts were issued. This situation prompted Francisco to write Soco
a letter which the latter received. After writing this letter, Francisco sent his payment for rentals by checks
issued by the Commercial Bank and Trust Company.
Soon after Soco learned that Francisco sub-leased a portion of the building to NACIDA at a monthly
rental of more than P3,000.00 which is definitely very much higher than what Francisco was paying to
Soco under the Contract of Lease, the latter felt that she was on the losing end of the lease agreement so
she tried to look for ways and means to terminate the contract.
In view of the alleged non-payment of rental of the leased premises, Soco, through her lawyer, sent to
Francisco serving notice to the latter ‘to vacate the premises leased.’ In answer to this letter, Francisco,
through his lawyer, informed Soco and her lawyer that all payments of rental due her were in fact paid by
Commercial Bank and Trust Company through the Clerk of Court. Despite this explanation, Soco filed a
case of Illegal Detainer.
ISSUE:
Whether or not there was a valid consignation of payment of the rentals.
RULING:
No valid consignation. In order that consignation may be effective, the debtor must first comply with
certain requirements prescribed by law. The debtor must show:
(1) that there was a debt due;
(2) that the consignation of the obligation had been made because the creditor to whom tender of
payment was made refused to accept it, or because he was absent or incapacitated, or because several
persons claimed to be entitled to receive the amount due (Art. 1176, Civil Code);
(3) that previous notice of the consignation had been given to the person interested in the performance of
the obligation (Art. 1177, Civil Code);
(4) that the amount due was placed at the disposal of the court (Art. 1178, Civil Code); and
(5) that after the consignation had been made the person interested was notified thereof (Art. 1178, Civil
Code).
Failure in any of these requirements is enough ground to render a consignation ineffective.
The Court held that the respondent lessee has utterly failed to prove the following requisites of a valid
consignation.
First, failed to prove tender of payment of the monthly rentals to the lessor.
Second, respondent lessee also failed to prove the first notice to the lessor prior to consignation.
Evidently, from this arrangement, it was the lessee’s duty to send someone to get the cashier’s check
from the bank and logically, the lessee has the obligation to make and tender the check to the lessor. This
the lessee failed to do, which is fatal to his defense.
Third, respondent lessee likewise failed to prove the second notice, that is, after consignation has been
made, to the lessor.
And, lastly, respondent lessee failed to prove the actual deposit or consignation of the monthly rentals.

15. Sotto v. Mijares

G.R. No. L-23563, 8 May 1969

FACTS:

 Sotto filed a Motion for Deposit in the Court of First Instance of Negros Occidental dated March 20, 1963, in its Civil Case No. 6796
which requires them to deposit with the Clerk of Court the amount of P5,106.00 within ten (10) days from receipt of said order.

“Defendants, in their “Opposition” dated November 23, 1962, signified their willingness to deposit the requested amount provided
that the complaint is dismissed and that they be absolved of all other liabilities, expenses, and costs.

CFI issued the following order “hereby ordered to deposit said amount to the Clerk of Court pending the final termination of this
case. Plaintiff — this time represented by new counsel — filed a motion for partial judgment on the pleadings with respect to the
amount of P5,106.00, modifying their previous request for the judicial deposit, which had already been granted.

Defendants moved to reconsider the order of November 26, explaining that through oversight they failed to allege in their
“Opposition” that the sum of P5,106.00 was actually secured by a real estate mortgage. They would thus premise their willingness to
deposit said amount upon the condition “… that the plaintiff will cancel the mortgage above mentioned and that the plaintiff be
ordered to return to the defendants Transfer Certificate of Title No. 29326 covering Lot No. 327 of Pontevedra and Transfer
Certificate of Title No. 29327 covering Lot No. 882 of Hinigaran Cadastre, Negros Occidental.”

The CFI denied both motions. Thus this appeal. 

ISSUE:

 Did the court act with authority and in the judicious exercise of its discretion in ordering the defendants to make the deposit but
without the condition they had stated?

RULING:

 Whether or not to deposit at all the amount of an admitted indebtedness, or to do so under certain conditions, is a right which
belongs to the debtor exclusively. If he refuses he may not be compelled to do so, and the creditor must fall back on the proper
coercive processes provided by law to secure or satisfy his credit, as by attachment, judgment, and execution. From the viewpoint of
the debtor, a deposit such as the one involved here is in the nature of consignation, and consignation is a facultative remedy which
he may or may not avail himself of. If made by the debtor, the creditor merely accepts it, if he wishes; or the court declares that it
has been properly made, in either of which events the obligation is ordered canceled. Indeed, the law says that “before the creditor
has accepted the consignation or before a judicial declaration that the consignation has been properly made, the debtor may
withdraw the thing or the sum deposited, allowing the obligation to remain in force.”  2 If the debtor has such right of withdrawal, he
surely has the right to refuse to make the deposit in the first place. For the court to compel him to do so was a grave abuse of
discretion amounting to excess of jurisdiction.

16. Chan vs. Court of Appeals

G.R. No. 109020, 3 March 1994

FACTS:
 On February 1, 1983, Petitioner Felisa Chan entered into a contract of lease with Grace Cu, private respondent, wherein the latter
as the lessee and the former as the lessor. Petitioner rented two rooms for residential purposes. However, after several renewals of
the contract it was agreed that the premises shall be used by the petitioner as a learning center. Despite of the absence of a written
contract on the subsequent agreement, Grace has continuously occupied the premises as learning center. Sometime of November
1989, Felisa padlock the way to the other room which is in the roof top on the grounds that it poses danger to the students and that
only one room was leased which is not the roof top. Felisa terminated the lease giving Grace until January 1, 1990 to vacate the
premises.Felisa refuses to receive rents from the room in the roof top that causes Grace to consign the amounts as payment. In the
ejectment case filed by  Felisa, the Municipal Trial Court rendered a decision declaring the room in the roof top as included in the
Contract of Lease, fixes the term as to when Grace will vacate and declaring the consignation as valid. Both Parties appealed to the
RTC which affirmed the decision of the MTC. Grace appealed to the Court of Appeals.

The CA then reversed and set aside the decisions of the MTC and the RTC and dismissed the complaint for consignation for lack of
merit. However, the CA goes beyond the issues being raised in the petition.

ISSUE:

Whether or not the CA erred in giving due course to Grace’s petition for review and in deciding upon issues which she never raised
in her petition.

RULING:

 Yes. After deliberating on the allegations, issues, and arguments raised by the parties in their pleadings, we find merit in the
petition. It must be stressed that the validity of the consignation and the propriety of the counterclaim for ejectment were not raised
before the Court of Appeals. As to the first, both the MTC and the RTC ruled that the consignation was valid.

Felisa filed no petition for the review of the RTC decision and had, therefore, accepted the said ruling. Grace did not, for obvious
reasons, raise the issue on consignation in her petition for review. Since the validity of the consignation was not raised before it, the
Court of Appeals seriously erred when it dismissed the complaint for consignation on the ground that it has no merit.

We also hold that the MTC had the authority to extend the period of the lease. The law grants the court the authority to fix the term
of the lease depending on how the rentals are paid and on the length of the lessee’s occupancy of the leased premises. Article 1687
of the Civil Code provides that: “If the period for the lease has not been fixed, it is understood to be from year to year, if the rent
agreed upon is annual; from month to month, if it is monthly; from week to week, if the rent is weekly; and from day to day, if the rent
is to be paid daily. However, even though a monthly rent is paid, and no period for the lease has been set, the courts may fix a
longer term for the lease after the lessee has occupied the premises for over one year. If the rent is weekly, the courts may likewise
determine a longer period after the lessee has been in possession for over six months. In case of daily rent, the courts may also fix
a longer period after the lessee has stayed in the place for over one month.” In the light of the special circumstances of this case, we
find the extended term fixed by the MTC to be reasonable.

WHEREFORE, the instant petition is GRANTED and the challenged Decision Court of Appeals is hereby SET ASIDE, and the
Decisions of the MTC and RTC are REINSTATED.

17. Meat Packing Corp vs. Sandiganbayan

G.R. No. 103068, June 22, 2001

FACTS:

 Meat Packing Corporation of the Philippines (MPCP) is a corporation wholly owned by GSIS. It is the owner of 3 parcels of land in
Pasig as well as the meat processing and packing plant thereon. MPCP and Philippine Integrated Meat Corporation (PIMECO)
entered into an Agreement: MPCP leased to PIMECO, under a lease-purchase arrangement, its aforesaid property at an annual
rental rate of P1,375,563.92. It is payable over 28 years commencing on the date of execution of the Agreement, or for a total
consideration of P38,515,789.87. The Agreement’s rescission clause: If the lessee-vendee (PIMECO) should fail or default in the
payment of rentals equivalent to the cumulative sum total of 3 annual installments, the Agreement shall be deemed automatically
canceled and forfeited without the need of judicial intervention. MPCP and PIMECO entered into a Supplementary and Loan
Agreement. In consideration of the additional expenditures incurred by MPCP for plant rehabilitation, the total contract price of the
lease-purchase agreement was increased to P93,695,552.59, payable over a period of 28 years, at the annual rental rate of
P3,346,269.70. PCGG sequestered all the assets, properties, and records of PIMECO, including the meat packing plant and the
lease-purchase agreement. MPCP wrote a letter to PIMECO, giving notice of the rescission of the lease-purchase agreement on the
ground, among others, of non-payment of rentals of more than P2M. GSIS asked the PCGG to exclude the meat packing plant from
the sequestered assets of PIMECO because it is owned by MPCP. However, PCGG denied the request. Likewise, MPCP sought
the turnover to it of the meat packaging plant on the ground that the lease-purchase agreement had already been rescinded. PCGG
ordered the transfer of the plant to GSIS, under the condition that the PCGG management team might continue its operations to
complete outstanding orders.
Sandiganbayan found that PCGG committed grave abuse of authority, power, and discretion in unilaterally terminating the lease-
purchase agreement of PIMECO and MPCP, and in turning over its management, control, and operation to the latter.

ISSUE:

 Whether or not the lease-purchase agreement has been rescinded.

 RULING:

 No. Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or
refuses to accept payment, and it generally requires a prior tender of payment. Tender is the antecedent of consignation. Tender of
payment may be extrajudicial, while consignation is necessarily judicial, and the priority of the first is the attempt to make a private
settlement before proceeding to the solemnities of consignation. Tender and consignation, where validly made, produces the effect
of payment and extinguishes the obligation.

Article 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be
released from responsibility by the consignation of the thing or sum due.

There was prior tender by PCGG for payment of the rentals in arrears. MPCP’s refusal to accept the same on the ground merely
that its lease-purchase agreement with PIMECO had been rescinded was unjustified. PIMECO paid, and GSIS/MPCP received
several amounts due under the lease-purchase agreement. Certainly, the acceptance by MPCP and GSIS of such payments
negates any rescission of the lease-purchase agreement. Under the terms of the lease-purchase agreement, the amount of arrears
in rentals or amortizations must be equivalent to the cumulative sum of three annual installments, in order to warrant the rescission
of the contract.

Therefore, it must be shown that PIMECO failed to pay the aggregate amount of at least P10,038,809.10 before the lease-purchase
agreement can be deemed automatically canceled. Assuming in the extreme that, as alleged by MPCP, the arrears at the time of
tender amounted to P12,578,171.00, the tender and consignation of the sum of P5,000,000.00, which had the effect of payment,
reduced the back rentals to only P7,578,171.00, an amount less than the equivalent of three annual installments. Thus, with the
Sandiganbayan’s approval of the consignation and directive for MPCP to accept the tendered payment, the lease-purchase
agreement could not be said to have been rescinded.

18. Pabugais v. Sahijwani

G.R. No. 156846, 23 February 2004

FACTS:

Pursuant to an Agreement and Undertaking, petitioner Teddy G. Pabugais agreed to sell to respondent Dave P. Sahijwani a lot.
Respondent paid petitioner an option/reservation fee and the balance to be paid within 60 days from the execution of the contract.
The parties further agreed that failure on the part of respondent to pay the balance of the purchase price entitles petitioner to forfeit
the option/reservation fee; while non-delivery by the latter of the necessary documents obliges him to return to respondent the said
option/reservation fee with interest at 18% per annum.

Petitioner failed to deliver the required documents. In compliance with their agreement, he returned to respondent the latter’s
option/reservation fee by way of manager’s check which was, however, dishonored.

Petitioner claimed that he twice tendered to respondent, through his counsel, in the form of Far East Bank & Trust Company
Managers Check but said counsel refused to accept the same. He wrote a letter to respondent saying that he is consigning the
amount tendered, thus petitioner filed a complaint for consignation.

ISSUE:

1. WHETHER OR NOT there was a valid consignation.

2. WHETHER OR NOT petitioner can withdraw the amount consigned as a matter of right.

RULING:

1. Yes. As testified by the counsel for respondent, the reasons why his client did not accept petitioners tender of payment
were (1) the check mentioned in the August 5, 1994 letter of petitioner manifesting that he is settling the obligation was
not attached to the said letter; and (2) the amount tendered was insufficient to cover the obligation. It is obvious that the
reason for respondents non-acceptance of the tender of payment was the alleged insufficiency thereof and not because
 the said check was not tendered to respondent, or because it was in the form of managers check. While it is true that in
general, a manager’s check is not legal tender, the creditor has the option of refusing or accepting it. Payment in check by
the debtor may be acceptable as valid, if no prompt objection to said payment is made.

2. No. The amount consigned with the trial court can no longer be withdrawn by petitioner because respondent’s prayer in
his answer that the amount consigned be awarded to him is equivalent to an acceptance of the consignation, which has
the effect of extinguishing petitioner’s obligation. Petitioner failed to manifest his intention to comply with the Agreement
and Undertaking by delivering the necessary documents and the lot subject of the sale to respondent in exchange for the
amount deposited. Withdrawal of the money consigned would enrich petitioner and unjustly prejudice respondent.