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Republic of the Philippines

SUPREME COURTManila

FIRST DIVISION

G.R. No. 104612 May 10, 1994

BANK OF THE PHILIPPINE ISLANDS (successor-in- interest ofCOMMERCIAL AND TRUST CO.), petitioner,vs.

HON. COURT OF APPEALS, EASTERN PLYWOOD CORP. and BENIGNOD. LIM, respondents.

Leonen, Ramirez & Associates for petitioner.

Constante A. Ancheta for private respondents.

DAVIDE, JR.,J.:

The petitioner urges us to review and set aside the amended

Decision1

of 6 March 1992 of respondent Court of Appeals in CA- G.R.

CV No. 25739 which modified the Decision of 15 November 1990 of

Branch 19 of the Regional Trial Court (RTC) of Manila in Civil Case No.

87-42967, entitled Bank of the Philippine Islands (successor-in-interest

of Commercial Bank and Trust Company)versus Eastern Plywood

Corporation and Benigno D. Lim. The Court of Appeals had affirmed the

dismissal of the complaint but had granted the defendants'

counterclaim for P331,261.44 which represents the outstanding

balance of their account with the plaintiff.

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As culled from the records and the pleadings of the parties, the

following facts were duly established:

Private respondents Eastern Plywood Corporation (Eastern) and

Benigno D. Lim (Lim), an officer and stockholder of Eastern, held atleast one joint bank account ("and/or" account) with the Commercial

Bank and Trust Co. (CBTC), the predecessor-in-interest of petitioner

Bank of the Philippine Islands (BPI). Sometime in March 1975, a joint

checking account ("and" account) with Lim in the amount of

P120,000.00 was opened by Mariano Velasco with funds withdrawn

from the account of Eastern and/or Lim. Various amounts were later

deposited or withdrawn from the joint account of Velasco and Lim. The

money therein was placed in the money market.

Velasco died on 7 April 1977. At the time of his death, the outstanding

balance of the account stood at P662,522.87. On 5 May 1977, by virtue

of an Indemnity Undertaking executed by Lim for himself and as

President and General Manager of Eastern,2one-half of this amount

was provisionally released and transferred to one of the bank accounts

of Eastern with CBTC.3

Thereafter, on 18 August 1978, Eastern obtained a loan of P73,000.00

from CBTC as "Additional Working Capital," evidenced by the

"Disclosure Statement on Loan/Credit Transaction" (Disclosure

Statement) signed by CBTC through its branch manager, Ceferino

Jimenez, and Eastern, through Lim, as its President and General

Manager.4The loan was payable on demand with interest at 14%per

annum.

For this loan, Eastern issued on the same day a negotiable promissory

note for P73,000.00 payable on demand to the order of CBTC with

interest at 14%per annum.5The note was signed by Lim both in his

own capacity and as President and General Manager of Eastern. No

reference to any security for the loan appears on the note. In the

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Disclosure Statement, the box with the printed word "UNSECURED"

was marked with "X" meaning unsecured, while the line with the

words "this loan is wholly/partly secured by" is followed by the

typewritten words "Hold-Out on a 1:1 on C/A No. 2310-001-42," which

refers to the joint account of Velasco and Lim with a balance of

P331,261.44.

In addition, Eastern and Lim, and CBTC signed another document

entitled "Holdout Agreement," also dated 18 August 1978,6wherein it

was stated that "as security for the Loan [Lim and Eastern] have offered

[CBTC] and the latter accepts a holdout on said [Current Account No.

2310-011-42 in the joint names of Lim and Velasco] to the full extent of

their alleged interests therein as these may appear as a result of finaland definitive judicial action or a settlement between and among the

contesting parties thereto."7Paragraph 02 of the Agreement provides

as follows:

Eastply [Eastern] and Mr. Lim hereby confer upon Comtrust

[CBTC], when and if their alleged interests in the Account

Balance shall have been established with finality, ample and

sufficient power as shall be necessary to retain said AccountBalance and enable Comtrust to apply the Account Balance

for the purpose of liquidating the Loan in respect of principal

and/or accrued interest.

And paragraph 05 thereof reads:

The acceptance of this holdout shall not impair the right of

Comtrust to declare the loan payable on demand at anytime, nor shall the existence hereof and the non-resolution

of the dispute between the contending parties in respect of

entitlement to the Account Balance, preclude Comtrust from

instituting an action for recovery against Eastply and/or Mr.

Lim in the event the Loan is declared due and payable and

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the "said claim cannot be awarded without disturbing the resolution" of

the intestate court.12

Both parties appealed from the said decision to the Court of Appeals.

Their appeal was docketed as CA-G.R. CV No. 25739.

On 23 January 1991, the Court of Appeals rendered a decision affirming

the decision of the trial court. It, however, failed to rule on the

defendants' (private respondents') partial appeal from the trial court's

denial of their counterclaim. Upon their motion for reconsideration, the

Court of Appeals promulgated on 6 March 1992 an Amended

Decision13wherein it ruled that the settlement of Velasco's estate had

nothing to do with the claim of the defendants for the return of thebalance of their account with CBTC/BPI as they were not privy to that

case, and that the defendants, as depositors of CBTC/BPI, are the

latter's creditors; hence, CBTC/BPI should have protected the

defendants' interest in Sp. Proc. No. 8959 when the said account was

claimed by Velasco's estate. It then ordered BPI "to pay defendants the

amount of P331,261.44 representing the outstanding balance in the

bank account of defendants."14

On 22 April 1992, BPI filed the instant petition alleging therein that the

Holdout Agreement in question was subject to a suspensive condition

stated therein, viz., that the "P331,261.44 shall become a security for

respondent Lim's promissory note only if respondents' Lim and Eastern

Plywood Corporation's interests to that amount are established as a

result of a final and definitive judicial action or a settlement between

and among the contesting parties thereto."15Hence, BPI asserts, the

Court of Appeals erred in affirming the trial court's decision dismissingthe complaint on the ground that it was the duty of CBTC to debit the

account of the defendants to set off the amount of P73,000.00 covered

by the promissory note.

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Private respondents Eastern and Lim dispute the "suspensive

condition" argument of the petitioner. They interpret the findings of

both the trial and appellate courts that the money deposited in the

joint account of Velasco and Lim came from Eastern and Lim's own

account as a finding that the money deposited in the joint account of

Lim and Velasco "rightfully belong[ed] to Eastern Plywood Corporation

and/or Benigno Lim." And because the latter are the rightful owners of

the money in question, the suspensive condition does not find any

application in this case and the bank had the duty to set off this deposit

with the loan. They add that the ruling of the lower court that they own

the disputed amount is the final and definitive judicial action required

by the Holdout Agreement; hence, the petitioner can only hold the

amount of P73,000.00 representing the security required for the note

and must return the rest.16

The petitioner filed a Reply to the aforesaid Comment. The private

respondents filed a Rejoinder thereto.

We gave due course to the petition and required the parties to submit

simultaneously their memoranda.

The key issues in this case are whether BPI can demand payment of the

loan of P73,000.00 despite the existence of the Holdout Agreement and

whether BPI is still liable to the private respondents on the account

subject of the Holdout Agreement after its withdrawal by the heirs of

Velasco.

The collection suit of BPI is based on the promissory note for

P73,000.00. On its face, the note is an unconditional promise to pay thesaid amount, and as stated by the respondent Court of Appeals,

"[t]here is no question that the promissory note is a negotiable

instrument."17It further correctly ruled that BPI was not a holder in

due course because the note was not indorsed to BPI by the payee,

CBTC. Only a negotiation by indorsement could have operated as a valid

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transfer to make BPI a holder in due course. It acquired the note from

CBTC by the contract of merger or sale between the two banks. BPI,

therefore, took the note subject to the Holdout Agreement.

We disagree, however, with the Court of Appeals in its interpretation ofthe Holdout Agreement. It is clear from paragraph 02 thereof that

CBTC, or BPI as its successor-in-interest, had every right to demand that

Eastern and Lim settle their liability under the promissory note. It

cannot be compelled to retain and apply the deposit in Lim and

Velasco's joint account to the payment of the note. What the

agreement conferred on CBTC was apower, not a duty. Generally, a

bank is under no duty or obligation to make the application.18To apply

the deposit to the payment of a loan is a privilege, a right of set-offwhich the bank has the option to exercise.

19

Also, paragraph 05 of the Holdout Agreement itself states that

notwithstanding the agreement, CBTC was not in any way precluded

from demanding payment from Eastern and from instituting an action

to recover payment of the loan. What it provides is an alternative, not

an exclusive, method of enforcing its claim on the note. When it

demanded payment of the debt directly from Eastern and Lim, BPI hadopted not to exercise its right to apply part of the deposit subject of the

Holdout Agreement to the payment of the promissory note for

P73,000.00. Its suit for the enforcement of the note was then in order

and it was error for the trial court to dismiss it on the theory that it was

set off by an equivalent portion in C/A No. 2310-001-42 which BPI

should have debited. The Court of Appeals also erred in affirming such

dismissal.

The "suspensive condition" theory of the petitioner is, therefore,

untenable.

The Court of Appeals correctly decided on the counterclaim. The

counterclaim of Eastern and Lim for the return of the

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P331,261.4420was equivalent to a demand that they be allowed to

withdraw their deposit with the bank. Article 1980 of the Civil Code

expressly provides that "[f]ixed, savings, and current deposits of money

in banks and similar institutions shall be governed by the provisions

concerning simple loan." In Serrano vs. Central Bank of the

Philippines,21we held that bank deposits are in the nature of irregular

deposits; they are really loans because they earn interest. The

relationship then between a depositor and a bank is one of creditor and

debtor. The deposit under the questioned account was an ordinary

bank deposit; hence, it was payable on demand of the depositor.22

The account was proved and established to belong to Eastern even if it

was deposited in the names of Lim and Velasco. As the real creditor ofthe bank, Eastern has the right to withdraw it or to demand payment

thereof. BPI cannot be relieved of its duty to pay Eastern simply

because it already allowed the heirs of Velasco to withdraw the whole

balance of the account. The petitioner should not have allowed such

withdrawal because it had admitted in the Holdout Agreement the

questioned ownership of the money deposited in the account. As early

as 12 May 1979, CBTC was notified by the Corporate Secretary of

Eastern that the deposit in the joint account of Velasco and Lim was

being claimed by them and that one-half was being claimed by the heirs

of Velasco.23

Moreover, the order of the court in Sp. Proc. No. 8959 merely

authorized the heirs of Velasco to withdraw the account. BPI was not

specifically ordered to release the account to the said heirs; hence, it

was under no judicial compulsion to do so. The authorization given to

the heirs of Velasco cannot be construed as a final determination or

adjudication that the account belonged to Velasco. We have ruled that

when the ownership of a particular property is disputed, the

determination by a probate court of whether that property is included

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in the estate of a deceased is merely provisional in character and

cannot be the subject of execution.24

Because the ownership of the deposit remained undetermined, BPI, as

the debtor with respect thereto, had no right to pay to persons otherthan those in whose favor the obligation was constituted or whose

right or authority to receive payment is indisputable. The payment of

the money deposited with BPI that will extinguish its obligation to the

creditor-depositor is payment to the person of the creditor or to one

authorized by him or by the law to receive it.25Payment made by the

debtor to the wrong party does not extinguish the obligation as to the

creditor who is without fault or negligence, even if the debtor acted in

utmost good faith and by mistake as to the person of the creditor, orthrough error induced by fraud of a third person.

26The payment thenby BPI to the heirs of Velasco, even if done in good faith, did not

extinguish its obligation to the true depositor, Eastern.

In the light of the above findings, the dismissal of the petitioner's

complaint is reversed and set aside. The award on the counterclaim is

sustained subject to a modification of the interest.

WHEREFORE, the instant petition is partly GRANTED. The challenged

amended decision in CA-G.R. CV No. 25735 is hereby MODIFIED. As

modified:

(1) Private respondents are ordered to pay the petitioner

the promissory note for P73,000.00 with interest at:

(a) 14%per annum on the principal, computed

from

18 August 1978 until payment;

(b) 12%per annum on the interest which had

accrued up to the date of the filing of the

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complaint, computed from that date until

payment pursuant to Article 2212 of the Civil

Code.

(2) The award of P331,264.44 in favor of the privaterespondents shall bear interest at the rate of 12%per

annum computed from the filing of the counterclaim.

No pronouncement as to costs.

SO ORDERED.

Cruz, Bellosillo, Quiason and Kapunan, JJ., concur

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SECOND DIVISION

[G.R. No. 125862. April 15, 2004]

FRANCISCO CULABA and DEMETRIA CULABA, doing business underthe name and style Culaba Store,petitioners, vs. COURT OFAPPEALS and SAN MIGUEL CORPORATION, respondents.

D E C I S I O N

CALLEJO, SR.,J.:

This is a petition for review under Rule 45 of the Revised Rules of

Civil Procedure of the Decision[1]

of the Court of Appeals in CA-G.R. CV

No. 19836 affirming in toto the Decision[2]

of the Regional Trial Court of

Makati, Branch 138, in Civil Case No. 1033 for collection of sum of

money, and the Resolution[3]

denying the motion for reconsideration of

the said decision.

The Undisputed Facts

The spouses Francisco and Demetria Culaba were the owners and

proprietors of the Culaba Store and were engaged in the sale and

distribution of San Miguel Corporations (SMC) beer products. SMC

sold beer products on credit to the Culaba spouses in the amount of

P28,650.00, as evidenced by Temporary Credit Invoice No.

42943.[4]

Thereafter, the Culaba spouses made a partial payment ofP3,740.00, leaving an unpaid balance of P24,910.00. As they failed to

pay despite repeated demands, SMC filed an action for collection of a

sum of money against them before the RTC of Makati, Branch 138.

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The defendant-spouses denied any liability, claiming that they had

already paid the plaintiff in full on four separate occasions. To

substantiate this claim, the defendants presented four (4) Temporary

Charge Sales (TCS) Liquidation Receipts, as follows:

April 19, 1983 Receipt No. 27331 for P8,000[5]

April 22, 1983 Receipt No. 27318 for P9,000[6]

April 27, 1983 Receipt No. 27339 for P4,500[7]

April 30, 1983 Receipt No. 27346 for P3,410[8]

Defendant Francisco Culaba testified that he made the foregoing

payments to an SMC supervisor who came in an SMC van. He was then

showed a list of customers accountabilities which included his account.The defendant, in good faith, then paid to the said supervisor, and he

was, in turn, issued genuine SMC liquidation receipts.

For its part, SMC submitted a publishers affidavit[9]

to prove that

the entire booklet of TCSL Receipts bearing Nos. 27301-27350 were

reported lost by it, and that it caused the publication of the notice of

loss in the July 9, 1983 issue of the Daily Express, as follows:

NOTICE OF LOSS

OUR CUSTOMERS ARE HEREBY INFORMED THAT TEMPORARY CHARGE

SALES LIQUIDATION RECEIPTS WITH SERIAL NOS. 27301-27350 HAVE

BEEN LOST.

ANY TRANSACTION, THEREFORE, ENTERED INTO WITH THE USE OF THE

ABOVE RECEIPTS WILL NOT BE HONORED.

SAN MIGUEL CORPORATIONBEER DIVISION

Makati Beer Region[10]

The Trial Courts Ruling

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After trial on the merits, the trial court rendered judgment in favor

of SMC, and held the Culaba spouses liable on the balance of its

obligation, thus:

Wherefore, judgment is hereby rendered in favor of the plaintiff, asfollows:

1. Ordering defendants to pay the amount of P24,910.00 plus legal

interest of 6% per annum from April 12, 1983 until the whole amount is

fully paid;

2. Ordering defendants to pay 20% of the amount due to plaintiff as

and for attorneys fees plus costs.

SO ORDERED.[11]

According to the trial court, it was unusual that defendant Francisco

Culaba forgot the name of the collector to whom he made the

payments and that he did not require the said collector to print his

name on the receipts. The court also noted that although they were

part of a single booklet, the TCS Liquidation Receipts submitted by the

defendants did not appear to have been issued in their natural

sequence. Furthermore, they were part of the lost booklet receipts,

which the public was duly warned of through the Notice of Loss the

plaintiff caused to be published in a daily newspaper. This confirmed

the plaintiffs claim that the receipts presented by the defendants were

spurious ones.

The Case on Appeal

On appeal, the appellants interposed the following assignment of

errors:

I

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THE TRIAL COURT ERRED IN FINDING THAT THE RECEIPTS PRESENTED

BY DEFENDANTS EVIDENCING HIS PAYMENTS TO PLAINTIFF SAN

MIGUEL CORPORATION, ARE SPURIOUS.

II

THE TRIAL COURT ERRED IN CONCLUDING THAT PLAINTIFF-APPELLEE

HAS SUFFICIENTLY PROVED ITS CAUSE OF ACTION AGAINST THE

DEFENDANTS.

III

THE TRIAL COURT ERRED IN ORDERING DEFENDANTS TO PAY 20% OF

THE AMOUNT DUE TO PLAINTIFF AS ATTORNEYS FEES.[12]

The appellants asserted that while the trial courts observations

were true, it was the usual business practice in previous transactions

between them and SMC. The SMC previously honored receipts not

bearing the salesmans name. According to appellant Francisco Culaba,

he even lost some of the receipts, but did not encounter any problems.

According to appellant Francisco, he could not be faulted for payingthe SMC collector who came in a van and was in uniform, and that any

regular customer would, without any apprehension, transact with such

an SMC employee. Furthermore, the respective receipts issued to him

at the time he paid on the four occasions mentioned had not yet then

been declared lost. Thus, the subsequent publication in a daily

newspaper declaring the booklets lost did not affect the validity and

legality of the payments made. Accordingly, by its actuations, the SMC

was estopped from questioning the legality of the payments and had nocause of action against the appellants.

Anent the issue of attorneys fees, the order of the trial court for

payment thereof is without basis. According to the appellant, the

provision for attorneys fees is a contingent fee, already provided for in

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the SMCs contract with the law firm. To further order them to pay 20%

of the amount due as attorneys fees is double payment, tantamount to

undue enrichment and therefore improper.[13]

The appellee, for its part, contended that the primary issue in thecase at bar revolved around the basic and fundamental principles of

agency.[14]

It was incumbent upon the defendants-appellants to

exercise ordinary prudence and reasonable diligence to verify and

identify the extent of the alleged agents authority. It was their burden

to establish the true identity of the assumed agent, and this could not

be established by mere representation, rumor or general reputation. As

they utterly failed in this regard, the appellants must suffer the

consequences.The Court of Appeals affirmed the decision of the trial court, thus:

In the face of the somewhat tenuous evidence presented by the

appellants, we cannot fault the lower court for giving more weight to

appellees testimonial and documentary evidence, all of which establish

with some degree of preponderance the existence of the account sued

upon.

ALL CONSIDERED, we cannot find any justification to reject the factualfindings of the lower court to which we must accord respect, for which

reason, the judgment appealed from is hereby AFFIRMEDin allrespects.

SO ORDERED.[15]

Hence, the instant petition.

The petitioners pose the following issues for the Courts resolution:

I. WHETHER OR NOT THE RESPONDENT HAD PROVEN BY

PREPONDERANT EVIDENCE THAT IT HAD PROPERLY AND TIMELY

NOTIFIED PETITIONER OF LOST BOOKLET OF RECEIPTS

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II. WHETHER OR NOT RESPONDENT HAD PROVEN BY PREPONDERANT

EVIDENCE THAT PETITIONER WAS REMISS IN THE PAYMENT OF HIS

ACCOUNTS TO ITS AGENT.[16]

According to the petitioners, receiving receipts from the privaterespondents agents instead of its salesmen was a usual occurrence, as

they had been operating the store since 1979. Thus, on four occasions

in April 1983, when an agent of the respondent came to the store

wearing an SMC uniform and driving an SMC van, petitioner Francisco

Culaba, without question, paid his accounts. He received the receipts

without fear, as they were similar to what he used to receive before.

Furthermore, the petitioners assert that, common experience will

attest that unless the attention of the customers is called for, theywould not take note of the serial number of the receipts.

The petitioners contend that the private respondent advertised its

warning to the public only after the damage was done, or on July 9,

1993. Its belated notice showed its glaring lack of interest or concern

for its customers welfare, and, in sum, its negligence.

Anent the second issue, petitioner Francisco Culaba avers that the

agent to whom the accounts were paid had all the physical andmaterial attributes or indications of a representative of the private

respondent, leaving no doubt that he was duly authorized by the

latter. Petitioner Francisco Culabas testimony that he does not

necessarily check the contents of the receipts issued to him except for

the amount indicated if [the] same accurately reflects his actual

payment is a common attitude of customers. He could, thus, not be

faulted for paying the private respondents agent on four

occasions. Petitioner Francisco Culaba asserts that he made the

payment in good faith, to an agent who issued SMC receipts which

appeared to be genuine. Thus, according to the petitioners, they had

duly paid their obligation in accordance with Articles 1240 and 1242 of

the New Civil Code.

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The private respondent, for its part, avers that the burden of

proving payment is with the debtor, in consonance with the express

provision of Article 1233 of the New Civil Code. The petitioners

miserably failed to prove the self-serving allegation that they already

paid their liability to the private respondent. Furthermore, under

normal circumstances, an obligor would not just pay a substantial

amount to someone whom he saw for the first time, without even

asking for the latters name.

The Ruling of the Court

The petition is dismissed.

The petitioners question the findings of the Court of Appeals as to

whether the payment of the petitioners obligation to the private

respondent was properly made, thus, extinguishing the same. This is

clearly a factual issue, and beyond the purview of the Court to delve

into. This is in consonance with the well-settled rule that findings of fact

of the trial court, especially when affirmed by the Court of Appeals, are

accorded the highest degree of respect, and generally will not bedisturbed on appeal. Such findings are binding and conclusive on the

Court.[17]

Furthermore, it is not the Courts function under Rule 45 of

the Rules of Court, as amended, to review, examine and evaluate or

weigh the probative value of the evidence presented.[18]

To reiterate, the issue being raised by the petitioners does not

involve a question of law, but a question of fact, not cognizable by this

Court in a petition for review under Rule 45. The jurisdiction of the

Court in such a case is limited to reviewing only errors of law, unless thefactual findings being assailed are not supported by evidence on record

or the impugned judgment is based on a misapprehension of facts.[19]

A careful study of the records of the case reveal that the appellate

court affirmed the trial courts factual findings as follows:

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First. Receipts Nos. 27331, 27318, 27339 and 27346 were included

in the private respondents lost booklet, which loss was duly advertised

in a newspaper of general circulation; thus, the private respondent

could not have officially issued them to the petitioners to cover the

alleged payments on the dates appearing thereon.

Second. There was something amiss in the way the receipts were

issued to the petitioners, as one receipt bearing a higher serial number

was issued ahead of another receipt bearing a lower serial number,

supposedly covering a later payment. The petitioners failed to explain

the apparent mix-up in these receipts, and no attempt was made in this

regard.

Third. The fact that the salesmans name was invariably left blank in

the four receipts and that the petitioners could not even remember the

name of the supposed impostor who received the said payments

strongly argue against the veracity of the petitioners claim.

We find no cogent reason to reverse the said findings.

The dismissal of the petition is inevitable even upon close perusal of

the merits of the case.

Payment is a mode of extinguishing an obligation.[20]

Article 1240 of

the Civil Code provides that payment shall be made to the person in

whose favor the obligation has been constituted, or his successor-in-

interest, or any person authorized to receive it.[21]

In this case, the

payments were purportedly made to a supervisor of the private

respondent, who was clad in an SMC uniform and drove an SMC van.

He appeared to be authorized to accept payments as he showed a list

of customers accountabilities and even issued SMC liquidation receiptswhich looked genuine. Unfortunately for petitioner Francisco Culaba,

he did not ascertain the identity and authority of the said supervisor,

nor did he ask to be shown any identification to prove that the latter

was, indeed, an SMC supervisor. The petitioners relied solely on the

mans representation that he was collecting payments for SMC. Thus,

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the payments the petitioners claimed they made were not the

payments that discharged their obligation to the private respondent.

The basis of agency is representation.[22]

A person dealing with an

agent is put upon inquiry and must discover upon his peril the authorityof the agent.

[23]In the instant case, the petitioners loss could have

been avoided if they had simply exercised due diligence in ascertaining

the identity of the person to whom they allegedly made the payments.

The fact that they were parting with valuable consideration should have

made them more circumspect in handling their business transactions.

Persons dealing with an assumed agent are bound at their peril to

ascertain not only the fact of agency but also the nature and extent of

authority, and in case either is controverted, the burden of proof isupon them to establish it.

[24]The petitioners in this case failed to

discharge this burden, considering that the private respondent

vehemently denied that the payments were accepted by it and were

made to its authorized representative.

Negligence is the omission to do something which a reasonable

man, guided by those considerations which ordinarily regulate the

conduct of human affairs, would do, or the doing of something, which a

prudent and reasonable man would not do.[25]In the case at bar, the

most prudent thing the petitioners should have done was to ascertain

the identity and authority of the person who collected their payments.

Failing this, the petitioners cannot claim that they acted in good faith

when they made such payments. Their claim therefor is negated by

their negligence, and they are bound by its consequences. Being

negligent in this regard, the petitioners cannot seek relief on the basis

of a supposed agency.

[26]

WHEREFORE, the instant petition is hereby DENIED. The assailed

Decision dated April 16, 1996, and the Resolution dated July 19, 1996 of

the Court of Appeals are AFFIRMED. Costs against the petitioners.

SO ORDERED.

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Republic of the Philippines

SUPREME COURTManila

THIRD DIVISION

G.R. No. 172825 October 11, 2012

SPOUSES MINIANO B. DELA CRUZ and LETA L. DELA CRUZ,Petitioners,vs.

ANA MARIE CONCEPCION,Respondent.

D E C I S I O N

PERALTA,J.:

Assailed in this petition for review on certiorari under Rule 45 of the

Rules of Court filed by petitioners spouses Miniano B. Dela Cruz and

Leta L. Dela Cruz against respondent Ana Marie Concepcion are the

Court of Appeals (CA) Decision1dated March 31, 2005 and

Resolution2dated May 24, 2006 in CA-G.R. CV No. 83030.

The facts of the case are as follows:

On March 25, 1996, petitioners (as vendors) entered into a Contract to

Sell3with respondent (as vendee) involving a house and lot in Cypress

St., Phase I, Town and Country Executive Village, Antipolo City for a

consideration of P2,000,000.00 subject to the following terms and

conditions:

a) That an earnest money of P100,000.00 shall be paid

immediately;

b) That a full down payment of Four Hundred Thousand Pesos

(P400,000.00) shall be paid on February 29, 1996;

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c) That Five Hundred Thousand Pesos (P500,000.00) shall be paid

on or before May 5, 1996; and

d) That the balance of One Million Pesos (P1,000,000.00) shall be

paid on installment with interest of Eighteen Percent (18%) perannum or One and a half percent (1-1/2 %) interest per month,

based on the diminishing balance, compounded monthly,

effective May 6, 1996. The interest shall continue to run until the

whole obligation shall have been fully paid. The whole One Million

Pesos shall be paid within three years from May 6, 1996;

e) That the agreed monthly amortization of Fifty Thousand Pesos

(P50,000.00), principal and interest included, must be paid to theVendors, without need of prior demand, on or before May 6,

1996, and every month thereafter. Failure to pay the monthly

amortization on time, a penalty equal to Five Percent (5%) of the

amount due shall be imposed, until the account is updated. In

addition, a penalty of One Hundred Pesos per day shall be

imposed until the account is updated;

f) That after receipt of the full payment, the Vendors shall executethe necessary Absolute Deed of Sale covering the house and lot

mentioned above x x x4

Respondent made the following payments, to wit: (1) P500,000.00 by

way of downpayment; (2) P500,000.00 on May 30, 1996; (3)

P500,000.00 paid on January 22, 1997; and (4) P500,000.00 bounced

check dated June 30, 1997 which was subsequently replaced by

another check of the same amount, dated July 7, 1997. Respondentwas, therefore, able to pay a total of P2,000,000.00.

5

Before respondent issued the P500,000.00 replacement check, she told

petitioners that based on the computation of her accountant as of July

6, 1997, her unpaid obligation which includes interests and penalties

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b) P100,000 plus P2,000 per court appearance as attorneys fees.

SO ORDERED.15

The RTC noted that the evidence formally offered by petitioners havenot actually been marked as none of the markings were recorded. Thus,

it found no basis to grant their claims, especially since the amount

claimed in the complaint is different from that testified to. The court,

on the other hand, granted respondents counterclaim.16

On appeal, the CA affirmed the decision with modification by deleting

the award of moral damages and attorneys fees in favor of

respondent.

17

It agreed with the RTC that the evidence presented bypetitioners cannot be given credence in determining the correct liability

of respondent.18

Considering that the purchase price had been fully

paid by respondent ahead of the scheduled date agreed upon by the

parties, petitioners were not awarded the excessive penalties and

interests.19

The CA thus maintained that respondents liability is limited

to P200,000.00 as claimed by respondent and originally admitted by

petitioners.20

This amount, however, had already been paid by

respondent and received by petitioners representative.21

Finally, theCA pointed out that the RTC did not explain in its decision why moral

damages and attorneys fees were awarded. Considering also that bad

faith cannot be attributed to petitioners when they instituted the

collection suit, the CA deleted the grant of their counterclaims.22

Aggrieved, petitioners come before the Court in this petition for review

on certiorari under Rule 45 of the Rules of Court raising the following

errors:

I.

"THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT ON

THE GROUND THAT PLAINTIFF FAILED TO FORMALLY OFFER THEIR

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EVIDENCE AS DEFENDANT JUDICIALLY ADMITTED IN HER ANSWER

WITH COMPULS[O]RY COUNTERCLAIM HER OUTSTANDING

OBLIGATION STILL DUE TO PLAINTIFFS AND NEED NO PROOF.

II.

THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT FOR

ALLEGED FAILURE OF PLAINTIFFS TO PRESENT COMPUTATION OF

THE AMOUNT BEING CLAIMED AS DEFENDANT JUDICIALLY

ADMITTED HAVING RECEIVED THE DEMAND LETTER DATED

OCTOBER 22, 1997 WITH COMPUTATION OF THE BALANCE DUE.

III.

THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT ON THE

GROUND THAT THE DEFENDANT FULLY PAID THE CLAIMS OF

PLAINTIFFS BASED ON THE ALLEGED RECEIPT OF PAYMENT BY

ADORACION LOSLOSO FROM ANA MARIE CONCEPCION

MAGLASANG WHICH HAS NOTHING TO DO WITH THE JUDICIALLY

ADMITTED OBLIGATION OF APPELLEE."23

Invoking the rule on judicial admission, petitioners insist that

respondent admitted in her Answer with Compulsory Counterclaim that

she had paid only a total amount of P2 million and that her unpaid

obligation amounts to P200,000.00.24

They thus maintain that the RTC

and the CA erred in concluding that said amount had already been paid

by respondent. Petitioners add that respondents total liability as

shown in the latters statement of account was erroneously computed

for failure to compound the monthly interest agreed

upon.25Petitioners also claim that the RTC and the CA erred in giving

credence to the receipt presented by respondent to show that her

unpaid obligation had already been paid having been allegedly given to

a person who was not armed with authority to receive payment.26

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The petition is without merit.

It is undisputed that the parties entered into a contract to sell a house

and lot for a total consideration of P2 million. Considering that the

property was payable in installment, they likewise agreed on thepayment of interest as well as penalty in case of default. It is likewise

settled that respondent was able to pay the total purchase price of P2

million ahead of the agreed term. Afterwhich, they agreed on the

remaining balance by way of interest and penalties which is

P200,000.00. Considering that the term of payment was not strictly

followed and the purchase price had already been fully paid by

respondent, the latter presented to petitioners her computation of her

liabilities for interests and penalties which was agreed to by petitioners.Petitioners also manifested their conformity to the statement of

account prepared by respondent.

In paragraph (9) of petitioners Complaint, they stated that:

9) That the Plaintiffs answered the Defendant as follows: "if P200,000 is

the correct balance, it is okay with us." x x x.27

But in paragraph (17) thereof, petitioners claimed that defendants

outstanding liability as of November 6, 1997 was

P487,384.15.28

Different amounts, however, were claimed in their

demand letter and in their testimony in court.

With the foregoing factual antecedents, petitioners cannot be

permitted to assert a different computation of the correct amount of

respondents liability.

It is noteworthy that in answer to petitioners claim of her purported

unpaid obligation, respondent admitted in her Answer with Compulsory

Counterclaim that she paid a total amount of P2 million representing

the purchase price of the subject house and lot. She then manifested to

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petitioners and conformed to by respondent that her only balance was

P200,000.00. Nowhere in her Answer did she allege the defense of

payment. However, during the presentation of her evidence,

respondent submitted a receipt to prove that she had already paid the

remaining balance. Both the RTC and the CA concluded that respondent

had already paid the remaining balance of P200,000.00. Petitioners

now assail this, insisting that the court should have maintained the

judicial admissions of respondent in her Answer with Compulsory

Counterclaim, especially as to their agreed stipulations on interests and

penalties as well as the existence of outstanding obligations.

It is, thus, necessary to discuss the effect of failure of respondent to

plead payment of its obligations.

Section 1, Rule 9 of the Rules of Court states that "defenses and

objections not pleaded either in a motion to dismiss or in the answer

are deemed waived." Hence, respondent should have been barred from

raising the defense of payment of the unpaid P200,000.00. However,

Section 5, Rule 10 of the Rules of Court allows the amendment to

conform to or authorize presentation of evidence, to wit:

Section 5. Amendment to conform to or authorize presentation of

evidence.When issues not raised by the pleadings are tried with the

express or implied consent of the parties, they shall be treated in all

respects as if they had been raised in the pleadings. Such amendment

of the pleadings as may be necessary to cause them to conform to the

evidence and to raise these issues may be made upon motion of any

party at any time, even after judgment; but failure to amend does not

affect the result of the trial of these issues. If evidence is objected to atthe trial on the ground that it is not within the issues made by the

pleadings, the court may allow the pleadings to be amended and shall

do so with liberality if the presentation of the merits of the action and

the ends of substantial justice will be subserved thereby. The court may

grant a continuance to enable the amendment to be made.

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The foregoing provision envisions two scenarios, namely, when

evidence is introduced in an issue not alleged in the pleadings and no

objection was interjected; and when evidence is offered on an issue not

alleged in the pleadings but this time an objection was raised.29

When

the issue is tried without the objection of the parties, it should be

treated in all respects as if it had been raised in the pleadings.30

On the

other hand, when there is an objection, the evidence may be admitted

where its admission will not prejudice him.31

Thus, while respondent judicially admitted in her Answer that she only

paid P2 million and that she still owed petitioners P200,000.00,

respondent claimed later and, in fact, submitted an evidence to show

that she already paid the whole amount of her unpaid obligation. It isnoteworthy that when respondent presented the evidence of payment,

petitioners did not object thereto. When the receipt was formally

offered as evidence, petitioners did not manifest their objection to the

admissibility of said document on the ground that payment was not an

issue. Apparently, petitioners only denied receipt of said payment and

assailed the authority of Losloso to receive payment. Since there was

an implied consent on the part of petitioners to try the issue of

payment, even if no motion was filed and no amendment of the

pleading has been ordered,32

the RTC cannot be faulted for admitting

respondents testimonial and documentary evidence to prove

payment.33

As stressed by the Court in Royal Cargo Corporation v. DFS Sports

Unlimited, Inc.,34

The failure of a party to amend a pleading to conform to the evidenceadduced during trial does not preclude adjudication by the court on the

basis of such evidence which may embody new issues not raised in the

pleadings. x x x Although, the pleading may not have been amended to

conform to the evidence submitted during trial, judgment may

nonetheless be rendered, not simply on the basis of the issues alleged

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but also on the issues discussed and the assertions of fact proved in the

course of the trial. The court may treat the pleading as if it had been

amended to conform to the evidence, although it had not been actually

amended. x x x Clearly, a court may rule and render judgment on the

basis of the evidence before it even though the relevant pleading had

not been previously amended, so long as no surprise or prejudice is

thereby caused to the adverse party. Put a little differently, so long as

the basic requirements of fair play had been met, as where the litigants

were given full opportunity to support their respective contentions and

to object to or refute each other's evidence, the court may validly treat

the pleadings as if they had been amended to conform to the evidence

and proceed to adjudicate on the basis of all the evidence before it.

(Emphasis supplied)35

To be sure, petitioners were given ample opportunity to refute the fact

of and present evidence to prove payment.

With the evidence presented by the contending parties, the more

important question to resolve is whether or not respondents obligation

had already been extinguished by payment.

We rule in the affirmative as aptly held by the RTC and the CA.

Respondents obligation consists of payment of a sum of money. In

order to extinguish said obligation, payment should be made to the

proper person as set forth in Article 1240 of the Civil Code, to wit:

Article 1240. Payment shall be made to the person in whose favor the

obligation has been constituted, or his successor in interest, or any

person authorized to receive it. (Emphasis supplied)

The Court explained in Cambroon v. City of Butuan,36

cited in Republic

v. De Guzman,37

to whom payment should be made in order to

extinguish an obligation:

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Payment made by the debtor to the person of the creditor or to one

authorized by him or by the law to receive it extinguishes the

obligation. When payment is made to the wrong party, however, the

obligation is not extinguished as to the creditor who is without fault or

negligence even if the debtor acted in utmost good faith and by mistake

as to the person of the creditor or through error induced by fraud of a

third person.

In general, a payment in order to be effective to discharge an

obligation, must be made to the proper person. Thus, payment must be

made to the obligee himself or to an agent having authority, express or

implied, to receive the particular payment. Payment made to one

having apparent authority to receive the money will, as a rule, betreated as though actual authority had been given for its receipt.

Likewise, if payment is made to one who by law is authorized to act for

the creditor, it will work a discharge. The receipt of money due on a

judgment by an officer authorized by law to accept it will, therefore,

satisfy the debt.38

Admittedly, payment of the remaining balance of P200,000.00 was not

made to the creditors themselves. Rather, it was allegedly made to acertain Losloso. Respondent claims that Losloso was the authorized

agent of petitioners, but the latter dispute it.

Loslosos authority to receive payment was embodied in petitioners

Letter39

addressed to respondent, dated August 7, 1997, where they

informed respondent of the amounts they advanced for the payment of

the 1997 real estate taxes. In said letter, petitioners reminded

respondent of her remaining balance, together with the amount oftaxes paid. Taking into consideration the busy schedule of respondent,

petitioners advised the latter to leave the payment to a certain "Dori"

who admittedly is Losloso, or to her trusted helper. This is an express

authority given to Losloso to receive payment.

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Moreover, as correctly held by the CA:

Furthermore, that Adoracion Losloso was indeed an agent of the

appellant spouses is borne out by the following admissions of plaintiff-

appellant Atty. Miniano dela Cruz, to wit:

Q: You would agree with me that you have authorized this Doiry

Losloso to receive payment of whatever balance is due you coming

from Ana Marie Concepcion, that is correct?

A: In one or two times but not total authority, sir.

Q: Yes, but you have authorized her to receive payment?

A: One or two times, yes x x x. (TSN, June 28, 1999, pp. 16-17)40

Thus, as shown in the receipt signed by petitioners agent and pursuant

to the authority granted by petitioners to Losloso, payment made to

the latter is deemed payment to petitioners. We find no reason to

depart from the RTC and the CA conclusion that payment had already

been made and that it extinguished respondent's obligations.

WHEREFORE, premises considered, the petition is DENIED for lack of

merit. The Court of Appeals Decision dated March 31, 2005 and

Resolution dated May 24, 2006 in CA-G.R. CV No. 83030, are AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTAAssociate Justice

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Republic of the Philippines

SUPREME COURTManila

THIRD DIVISION

G.R. No. 72703 November 13, 1992

CALTEX (PHILIPPINES), INC., petitioner,vs.

THE INTERMEDIATE APPELLATE COURT and ASIA PACIFIC AIRWAYS,INC., respondents.

BIDIN,J.:

This is a petition for certiorari seeking the annulment of the decision

dated August 27,1985 of the then Intermediate Appellate Court in CA-

G.R. No. 02684, which reversed the judgment of the trial court andordered petitioner to return the amount of P510, 550.63 to private

respondent plus interest at the legal rate of 14%per annum.

The facts of the case are as follows:

On January 12, 1978, private respondent Asia Pacific Airways Inc.,

entered into an agreement with petitioner Caltex (Philippines) Inc.,

whereby petitioner agreed to supply private respondent's aviation fuel

requirements for two (2) years, covering the period from January 1,

1978 until December 31, 1979. Pursuant thereto, petitioner supplied

private respondent's fuel supply requirements. As of June 30, 1980,

private respondents had an outstanding obligation to petitioner in the

total amount of P4,072,682.13, representing the unpaid price of the

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fuel supplied. To settle this outstanding obligation, private respondent

executed a Deed of Assignment dated July 31, 1980, wherein it

assigned to petitioner its receivables or refunds of Special Fund Import

Payments from National Treasury of the Philippines to be applied as

payment of the amount of P4,072,682.13 which private respondent

owed to petitioner. On February 12, 1981, pursuant to the Deed of

Assignment, Treasury Warrant No. B04708613 in the amount of

P5,475,294.00 representing the refund to respondent of Special Fund

Import Payment on its fuel purchases was issued by the National

Treasury in favor of the petitioner. Four days later, on February 16,

1981, private respondent, having learned that the amount remitted to

petitioner exceeded the amount covered by the Deed of Assignment,

wrote a letter to petitioner, requesting a refund in the amount of

P900,000.00 plus in favor of private respondent. The latter, believing

that it was entitled to a larger amount by way of refund, wrote a

petitioner anew, demanding the refund of the remaining amount. In

response thereto, petitioner informed private respondent that the

amount not returned (P510,550.63) represented interest and service

charges at the rate of 18%per annum on the unpaid and overdue

account of respondent from June 1, 1980 to July 31, 1981.

Thus, on September 13, 1982, private respondent filed a complaint

against petitioner in the Regional Trial Court of Manila, to collect the

sum of P510,550.63.00.

Petitioner (defendant in the trial court) filed its answer, reiterating that

the amount not returned represented interest and service charges on

the unpaid and overdue account at the rate of 18%per annum. It was

further alleged that the collection of said interest and service charges is

sanctioned by law, and is in accordance with the terms and conditions

of the sale of petroleum products to respondent, which was made with

the conformity of said private respondent who had accepted the

validity of said interest and service charges.

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On November 7, 1983, the trial court rendered its decision dismissing

the complaint, as well as the counterclaim filed by defendant therein.

Private respondent (plaintiff) appealed to the Intermediate Appellate

Court (IAC). On August 27, 1985, a decision was rendered by the saidappellate court reversing the decision of the trial court, and ordering

petitioner to return the amount of P510,550.63 to private respondent.

Counsel for petitioner received a copy of the appellate court's decision

on September 6, 1985. On September 20, 1985 or 14 days after receipt

of the aforesaid decision, an Urgent Motion for extension of five days

within which to file a motion for reconsideration was filed by

petitioner. On September 26, 1985, the Motion for Reconsiderationwas filed. The following day, petitioner filed a motion to set the motion

for reconsideration for hearing.

In a Resolution dated October 24, 1985, the appellate court denied the

aforesaid three motions. The first motion praying for an extension of

five days within which to file a motion for reconsideration was denied

by the appellate courtciting the new ruling of the Supreme Court in

Habaluyas Enterprises Inc. vs. Japzon (138 SCRA 46 [1985]) as authority.The appellate court, following said ruling, held that the 15-day period

for filing a motion for reconsideration cannot be extended. Thus, the

motion for reconsideration filed on September 26, 1985 was stricken

from the record, having been filed beyond the non-extensible 15-day

reglementary period. The third motion was likewise denied for being

moot and academic.

On November 4, 1985, the prevailing party (respondent herein) filedUrgent Motion for Entry of Judgment. Two days latter, or on November

6, 1985, the petitioner filed a Motion for Reconsideration of the

Resolution dated October 24, 1985.

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The appellate court in a Resolution dated November 12, 1985 granted

the motion for entry of judgment filed by private respondent. It

directed the entry of judgment and ordered the remand of the records

of the case to the court of origin for execution.

On November 14, 1985, petitioner, without waiting for the resolution

of the appellate court in the urgent motion for reconsideration it filed

on November 6, 1985, filed the instant petition to annul and set aside

the resolution of the appellate court dated October 24, 1985 which

denied the Motion for Reconsideration of its decision dated August 27,

1985.

In a motion dated November 21, 1985, petitioner prayed of theissuance of temporary restraining order to enjoin the appellate court

from remanding the records of the case for execution of the judgment.

The petitioner also filed a Supplement to Petition for Certiorari, dated

November 21, 1985.

In a Resolution dated November 27, 1985, this Court, acting on the

petition, required private respondent to file its Comment; granted the

prayer of the petitioner in his urgent motion, and a temporaryrestraining order was issued enjoining the appellate court from

remanding the records of the case for execution of judgment.

Private respondent filed its COMMENT dated December 14, 1985.

In a Resolution dated January 27, 1986, the Court resolved to give due

course to the petition, and required the parties to submit their

memoranda. In compliance with the said Resolution, the parties filed

their respective memoranda.

On August 15, 1986, petitioner filed a Motion to Remand Records to

the Court of Appeals in view of the resolution of this Court dated May

30, 1986 in the Habaluyas case which considered and set aside its

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decision dated August 5, 1985 by giving it prospective application

beginning one month after the promulgation of the said resolution. This

motion was opposed by private respondent. On September 22, 1986,

petitioner filed its Reply to Opposition to which private respondent

filed its rejoinder. In a Resolution dated December 3, 1986, the motion

to remand records was denied.

Petitioner's Brief raised six (6) assignment of errors, to wit:

I.

THE IAC ERRED IN APPLYING THE NEW POLICY OF NOT

GRANTING ANY EXTENSION OF TIME TO FILE MOTION FORRECONSIDERATION.

II.

THE IAC ERRED IN RULING THAT THE OBLIGATION OF

RESPONDENT WAS LIMITED TO P4,072,682.13

NOTWITHSTANDING THAT FACT THAT THE DEED OF

ASSIGNMENT (THE CONTRACT SUED UPON) ITSELF

EXPRESSLY AND REPEATEDLY SPEAKS OF RESPONDENT'S

OBLIGATION AS "THE AMOUNT OF P4,072,682.13 AS JUNE

30, 1980 PLUS APPLICABLE INTEREST CHARGES ON

OVERDUE ACCOUNT AND OTHER AVTURBO FUEL LIFTING

AND DELIVERIES THAT ASSIGNOR MAY FROM TIME TO TIME

RECEIVE FROM ASSIGNEE."

III.

THE IAC ERRED IN RULING THAT THE DEED OF ASSIGNMENT

SATISFIES THE REQUISITES OF DATION IN PAYMENT (WHICH

HAS THE EFFECT OF IMMEDIATE EXTINGUISHMENT OF THE

OBLIGATION) DESPITE THE FACT THAT SAID DEED OF

ASSIGNMENT (1) COVERS FUTURE OBLIGATION FOR

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"APPLICABLE INTEREST CHARGES ON OVER DUE ACCOUNT

AND OTHER AVTURBO FUEL LIFTING THE DELIVERIES THAT

ASSIGNOR MAY FROM TIME TO TIME RECEIVE FROM

ASSIGNEES" AND (2) INCLUDES AN EXPRESS RESERVATION

BY ASSIGNEE TO DEMAND FULL PAYMENT OF THE

OBLIGATIONS OF THE ASSIGNOR "IN CASE OF

UNREASONABLE DELAY OR NON-RECEIPT OF ASSIGNEE OF

THE AFOREMENTIONED FUNDS AND/OR REFUND OF

SPECIAL FUND IMPORT PAYMENT FROM THE GOVERNMENT

DUE TO ANY CAUSE OR REASON WHATSOEVER.

IV.

THE IAC ERRED IN FAILING TO TAKE INTO ACCOUNT THE

CONTEMPORANEOUS AND SUBSEQUENT ACTS OF THE

PARTIES WHICH ALSO CLEARLY SHOW THAT THEY DID NOT

INTEND THE DEED OF ASSIGNMENT TO HAVE EFFECT OF

DATION IN PAYMENT.

V.

IF THE DEED OF ASSIGNMENT HAD THE EFFECT OF A DATION

IN PAYMENT, THEN THE IAC ERRED IN NOT RULING THAT

PETITIONER HAS A RIGHT TO RETAIN THE ENTIRE CREDIT

ASSIGNED TO IT IN LIEU OF PAYMENT OF RESPONDENT'S

OBLIGATION INSTEAD OF BEING REQUIRED TO RETURN

PORTION OF THE CREDIT WHICH IS CLAIMED TO BE IN

EXCESS OF RESPONDENT'S OBLIGATION.

VI.

ASSUMING THAT PETITIONER IS LIABLE TO MAKE A RETURN

OF A PORTION OF THE CREDIT ASSIGNED, THE IAC ERRED IN

AWARDING "INTEREST AT THE LEGAL RATE OF 14%PER

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ANNUMFROM THE FILING OF THE LEGAL OF THE

COMPLAINT."

We find merit in the instant petition.

The two vital issues presented to the Court for resolution are, as

follows:

1. Whether or not the Urgent Motion for Extension of Time to File a

Motion for Reconsideration filed by petitioner on September 20, 1985,

as well as the Motion for Reconsideration filed on September 26, 1985

(within the period of extension prayed for), may be validly granted; and

2. Whether or not the Deed of Assignment entered into by the parties

herein on July 31, 1980 constituted dacion en pago, as ruled by the

appellate court, such that the obligation is totally extinguished, hence

after said date, no interest and service charges could anymore be

imposed on private respondent, so that petitioner was not legally

authorized to deduct the amount of P510,550.63 as interest and service

charges on the unpaid and overdue accounts of private respondent.

Anent the first issue, we rule in the affirmative.

We held in the case of Habaluyas Enterprises, Inc., et. al. vs. Japson et.

al. (138 SCRA 46 [1985], promulgated August 5, 1985), that the "15-day

period for appealing or for filing a motion for reconsideration cannot be

extended". Subsequently, the Court, acting on respondent's motion for

reconsideration in the same entitled case (142 SCRA 208 [1986]),

restated and clarified the rule on this point for the guidance of the

Bench and Bar by giving the rule prospective application in itsresolution dated May 30, 1986;

After considering the able arguments of counsels for

petitioners and respondents, the Court resolved that the

interest of justice would be better served if the ruling in the

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original decision were applied prospectively from the time

herein stated. The reason is that it would be unfair to

deprive parties of the right to appeal simply because they

availed themselves of a procedure which was not expressly

prohibited or allowed by the law or the Rules. On the

otherhand, a motion for new trial or reconsideration is not a

pre-requisite to an appeal, a petition for review or a petition

for review oncertiorari,and since the purpose of the

amendments above referred to is to expedite the final

disposition of cases, a strict but prospective application of

the said ruling is in order. Hence, for the guidance of the

Bench and Bar, the Court restates and clarifies the rules on

this point, as follows.

1.) Beginning one month after the promulgation of this

Resolution, the rule shall be strictly enforced that no motion

for extension of time to file a motion for new trial or

reconsideration may be filed with the Metropolitan or

Municipal Trial Courts, the Regional Trial Courts, and the

Intermediate Appellate Court. Such a motion may be filed

only in cases pending with the Supreme Court as the court

of last resort, which may in its sound discretion either grant

or deny the extension requested.

In Singh vs. IAC, (148 SCRA 277 [1987]), this Court applying the

aforesaid ruling in the Habaluyas case, held.

In other words, there is one month grace period from the

promulgation on May 30, 1986, of the Court's Resolution inthe clarificatory Habaluyas case, or up to June 30, 1986,

within which the rule barring extensions of time to file

motions for reconsideration is, as yet, not strictly

enforceable (Bayaca vs. IAC, G.R. No. 78424, September 15,

1986).

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From the above, it is clear that a dation in payment does not

necessarily mean total extinguishment of the obligation. The obligation

is totally extinguished only when the parties, by agreement, express or

implied, or by their silence, consider the thing as equivalent to the

obligation.

In the instant case, the then Intermediate Appellate Court failed to take

into account the following express recitals of the Deed of Assignment

That Whereas,ASSIGNOR has an outstanding obligation with

ASSIGNEE in the amount of P4,072,682.13 as of June 30,

1980, plus any applicable interest on overdue account.(p. 2,Deed of Assignment)

Now therefore in consideration of the foregoing premises,

ASSIGNOR by virtue of these presents, does hereby

irrevocably assign and transfer unto ASSIGNEE any and all

funds and/or Refund of Special Fund Payments, including all

its rights and benefits accruing out of the same, that

ASSIGNOR might be entitled to, by virtue of and pursuant tothe decision in BOE Case No. 80-123, in payment of

ASSIGNOR's outstanding obligation plus any applicable

interest charges on overdue account and other avturbo fuel

lifting and deliveries that ASSIGNOR may from time to time

receive from the ASSIGNEE, and ASSIGNEE does hereby

accepts such assignment in its favor.(p. 2, Deed of

Assignment) (Emphasis supplied)

Hence, it could easily be seen that the Deed of Assignment speaks of

three (3) obligations (1) the outstanding obligation of P4,072,682.13

as of June 30, 1980; (2) the applicable interest charges on overdue

accounts; and (3) the other avturbo fuel lifting and deliveries that

assignor (private respondent) may from time to time receive from

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assignee (Petitioner). As aptly argued by petitioner, if it were the

intention of the parties to limit or fix respondent's obligation to

P4,072.682.13; they should have so stated and there would have been

no need for them to qualify the statement of said amount with the

clause "as of June 30, 1980 plus any applicable interest charges on

overdue account" and the clause "and other avturbo fuel lifting and

deliveries that ASSIGNOR may from time to time receive from the

ASSIGNEE". The terms of the Deed of Assignment being clear, the literal

meaning of its stipulations should control (Art. 1370, Civil Code). In the

construction of an instrument where there are several provisions or

particulars, such a construction is, if possible, to be adopted as will give

effect to all (Rule 130, Sec. 9, Rules of Court).

Likewise, the then Intermediate Appellate Court failed to take into

consideration the subsequent acts of the parties which clearly show

that they did not intend the Deed of Assignment to totally extinguish

the obligation (1) After the execution of the Deed of Assignment on

July 31, 1980, petitioner continued to charge respondent with interest

on its overdue account up to January 31, 1981 (Annexes "H", "I", "J"

and "K" of the Partial Stipulation of Facts). This was pursuant to the

Deed of Assignment which provides for respondent's obligation for

"applicable interest charges on overdue account." The charges for

interest were made every month and not once did respondent question

or take exception to the interest; and (2) In its letter of February 16,

1981 (Annex "J", Partial Stipulation of Facts), respondent addressed the

following request to petitioner;

Moreover, we would also like to request for a consideration

in the following

1. Interest charges be limited up to December 31, 1980 only;

and

2. Reduction of 2% of 18% interest rate p.a.

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Republic of the Philippines

SUPREME COURTManila

THIRD DIVISION

G.R. No. L-46658 May 13, 1991

PHILIPPINE NATIONAL BANK, petitioner,vs.

HON. GREGORIO G. PINEDA, in his capacity as Presiding Judge of theCourt of First Instance of Rizal, Branch XXI and TAYABAS CEMENTCOMPANY, INC., respondents.

The Chief Legal Counsel for petitioner.

Ortille Law Office for private respondent.

FERNAN, C.J.:p

In this petition for certiorari, petitioner Philippine National Bank (PNB)

seeks to annul and set aside the orders dated March 4, 1977 and May

31, 1977 rendered in Civil Case No. 244221of the Court of First

Instance of Rizal, Branch XXI, respectively granting private respondent

Tayabas Cement Company, Inc.'s application for a writ of preliminary

injunction to enjoin the foreclosure sale of certain properties in Quezon

City and Negros Occidental and denying petitioner's motion for

reconsideration thereof.

In 1963, Ignacio Arroyo, married to Lourdes Tuason Arroyo (the Arroyo

Spouses), obtained a loan of P580,000.00 from petitioner bank to

purchase 60% of the subscribed capital stock, and thereby acquire the

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controlling interest of private respondent Tayabas Cement Company,

Inc. (TCC).2As security for said loan, the spouses Arroyo executed a

real estate mortgage over a parcel of land covered by Transfer

Certificate of Title No. 55323 of the Register of Deeds of Quezon City

known as the La Vista property.

Thereafter, TCC filed with petitioner bank an application and

agreement for the establishment of an eight (8) year deferred letter of

credit (L/C) for $7,000,000.00 in favor of Toyo Menka Kaisha, Ltd. of

Tokyo, Japan, to cover the importation of a cement plant machinery

and equipment.

Upon approval of said application and opening of an L/C by PNB in favorof Toyo Menka Kaisha, Ltd. for the account of TCC, the Arroyo spouses

executed the following documents to secure this loan accommodation:

Surety Agreement dated August 5, 19643and Covenant dated August

6, 1964.4

The imported cement plant machinery and equipment arrived from

Japan and were released to TCC under a trust receipt agreement.

Subsequently, Toyo Menka Kaisha, Ltd. made the correspondingdrawings against the L/C as scheduled. TCC, however, failed to remit

and/or pay the corresponding amount covered by the drawings. Thus,

on May 19, 1968, pursuant to the trust receipt agreement, PNB notified

TCC of its intention to repossess, as it later did, the imported machinery

and equipment for failure of TCC to settle its obligations under the

L/C.5

In the meantime, the personal accounts of the spouses Arroyo, whichincluded another loan of P160,000.00 secured by a real estate

mortgage over parcels of agricultural land known as Hacienda Bacon

located in Isabela, Negros Occ