Adamson University

College of Law

Obligations and Contracts

Dation in Payment
Filinvest Credit Corporation vs Philippine Acetylene,111SCRA421
FACTS
Philippine Acetylene Co. purchased from Alexander Lim a motor vehicle for P55K to be paid in
installments. As security for the payment of said promissory note, the appellant executed a chattel
mortgage over the same motor vehicle in favor of said Alexander Lim. Then, 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.

Phil Acetylene defaulted in the payment of nine successive installments. When Filinvest sent a demand
letter, Phil Acetylene wrote back of its desire to return the mortgaged property, which return shall be in full
satisfaction of its indebtedness. Thus, the vehicle was returned to the Filinvest. However, they failed to
sell the motor vehicle, as there were unpaid taxes on the said vehicle. Filinvest requested the appellant to
update its account by paying the installments in arrears and accruing interest. They also 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.

Accordng to Phil Acetylene, the delivery of the motor vehicle to Filinvest extinguished its money
obligation as it amounted to a dation in payment. Assuming arguendo that the return did not extinguish, it
was justified in refusing payment since the appellee is not entitled to recover the same due to the breach
of warranty committed by the original vendor-assignor Alexander Lim.

ISSUE
Whether or not there was dation in payment that extinguished Phil Acetylene’s obligation?

RULING
No. The mere return of the mortgaged motor vehicle by the mortgagor does not constitute dation in
payment in the absence, express or implied of the true intention of the parties. 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 dacion, 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 this case, the evidence on the record fails to show that the Filinvest consented to the mortgaged motor
vehicle be construed as actual payment, more specifically dation in payment or dacion en pago. The fact
that the mortgaged motor vehicle was delivered to him does not necessarily mean that ownership thereof,
as juridically contemplated by dacion en pago, was transferred from appellant to appellee. In the absence
of clear consent of appellee to the preferred special mode of payment, there can be no transfer of
ownership of the mortgaged motor vehicle from appellant to appellee. If at all, only transfer of possession
of the mortgaged motor vehicle took place, for it is quite possible that appellee, as mortgagee, merely
wanted to secure possession to forestall the loss, destruction, fraudulent transfer of the vehicle to third
persons, or its being rendered valueless if left in the hands of the appellant.

An examination of the language of the document executed by appellant captioned "Voluntary Surrender
with Special Power of Attorney To Sell" reveals that the possession of the mortgaged motor vehicle was
voluntarily surrendered by the appellant to the appellee authorizing the latter to look for a buyer and sell
the vehicle in behalf of the appellant who retains ownership thereof, and to apply the proceeds of the sale
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Obligations and Contracts
Course Outline
to the mortgage indebtedness, with the undertaking of the appellant to pay the difference, if any, between
the selling price and the mortgage obligation. With the stipulated conditions as stated, the appellee, in
essence was constituted as a mere agent to sell the motor vehicle which was delivered to the appellee,
not as its property, for if it were, he would have full power of disposition of the property, not only to sell it
as is the limited authority given him in the special power of attorney.

Expenses of Consignation
De Guzman vs Court of Appeals, 137 SCRA 730
FACTS:

On February 1971, the petitioners, as SELLER, and the private respondent, as BUYER, executed a
Contract to Sell covering two (2) parcels of land owned by the petitioners located in Pasay City. It was
stipulated therein that the private respondent should pay the balance of the purchase price of
P133,640.00 on or before February 17, 1975. Two days before the said date, the private respondent
asked the petitioners to furnish her with a statement of account of the balance due; copies of the
certificates of title covering the two parcels of land subject of the sale; and a copy of the power of attorney
executed by Rolando Gestuvo in favor of Pilar de Guzman. But, the petitioners denied the request. As a
result, the private respondent filed a complaint for specific performance with damages against the
petitioners with the CFI Rizal. The trial rendered a decision and approved a compromise agreement
between the parties where the respondents will pay 240K (due date Jan 27,1978) and petitioners to
execute the transfer of the title. The petitioners filed a motion contending that the respondents failed to
abide with the terms of the compromise agreement where it was held that respondents deposited the
amount with the court only on January 30, 1978.

ISSUE:
Whether or not the private respondents substantially complied with the terms and conditions of the
compromise agreement

RULING:

Yes. 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 record shows that the private respondent went to the sala of Judge
Bautista on the appointed day to make payment, as agreed upon in their compromise agreement. But, the
petitioners were not there to receive it. Only the petitioners' counsel appeared later, but, he informed the
private respondent that he had no authority to receive and accept payment. Instead, he invited the private
respondent and her companions to the house of the petitioners to effect payment. But, the petitioners
were not there either. They were informed that the petitioner Pilar de Guzman would arrive late in the
afternoon, possibly at around 4:00 o'clock. The private respondent was assured, however, that she would
be informed as soon as the petitioners arrived. The private respondent, in her eagerness to settle her
obligation, consented and waited for the call which did not come and unwittingly let the period lapse. The
next day, January 28, 1978, the private respondent went to the office of the Clerk of the Court of First
Instance of Rizal, Pasay City Branch, to deposit the balance of the purchase price. But, it being a
Saturday, the cashier was not there to receive it. So, on the next working day, Monday, January 30, 1978,
the private respondent deposited the amount of P30,000.00 with the cashier of the Office of the Clerk of
the Court of First Instance of Rizal, Pasay City Branch, to complete the payment of the purchase price of
P250,000.00. Since 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 .
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Obligations and Contracts
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TLG International Continental Enterprising, Inc. vs Flores, 47 SCRA 437

FACTS:

In a case for an action for declaratory relief involving the rights of Bearcon Trading Co, Inc. as lesseeof
the premises of Juan Fabella, Judge Flores granted TLG’s Motion to Intervene.TLG intervened as sub-
lessee of Bearcon over the property to protect its rights as sub-lessee and to enable it, during pendency
of the case, to make a consignation of the monthly rentals as it was at a loss as to who is lawfully and
rightfully entitled to receive payments of the monthly rentals. TLG deposited with the Clerk of Court of the
CFI P3, 750.00.

Upon Juan Fabella’s prayer, Judge Flores issued an Omnibus Order dismissing the complaint and the
complaint in intervention on ground that the subject matter could be better ventilated in the ejectment
case against Bearcon. Petitioner filed its Motion to withdraw the P3, 750.00 it deposited because
the Order dismissed the case and complaint in intervention without a resolution having been made as
to the right of Fabella/Bearcon to the rentals deposited by TLG. This left TLG without any recourse but to
apply for authority to withdraw the amount and turn it over to Fabella.

Judge Flores denied it and the motion for reconsideration as well.

ISSUE:

Whether or not the CFI could authorize the withdrawal of the deposits considering that the Court "has not
ordered the intervenor to make any deposit in connection" with the case

RULING:

YES. There is no question that in cases of consignation the debtor is entitled as a matter of right to
withdraw the deposit made with the court, before the consignation is accepted by the creditor or prior to
the judicial approval of such consignation. This is explicit from the second paragraph of Article 1260 of the
new Civil Code which states 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".

In this case, the case was dismissed before the amount deposited was either accepted by the creditor or
a declaration made by the Court approving such consignation. Such dismissal rendered the consignation
ineffectual. Under such circumstances it was incumbent upon Respondent to have allowed the withdrawal
by petitioner of the sums of money deposited by it with the Court.

Respondent nevertheless insists that the Court had no authority to authorize its withdrawal since it "has
not ordered intervenor to make" the deposit. This contention ignores the fact that the deposit was made
by petitioner as a consequence of the admission by the Court of its "Complaint In Intervention". It must be
noted that the aforesaid deposit was made with and officially receipted by the Clerk of Court.