1240 PAYMENT

ANK OF THE PHILIPPINE ISLANDSvs.HON. COURT OF APPEALS, EASTERN PLYWOOD CORP. and BENIGNO D. LIMG.R. No. 104612May 10, 1994FACTS: Private respondents Eastern Plywood Corporation (Eastern) and Benigno D. Lim (Lim),an officer and stockholder of Eastern, held at least one joint bank account with theCommercial Bank and Trust Co. (CBTC), the predecessor-in-interest of petitioner Bankof the Philippine Islands (BPI). Sometime in March 1975, a joint checking account withLim in the amount of P120,000.00 was opened by Mariano Velasco with fundswithdrawn from the account of Eastern and/or Lim. Various amounts were laterdeposited or withdrawn from the joint account of Velasco and Lim.Velasco died on 7 April 1977. At the time of his death, the outstanding balance of theaccount stood at P662,522.87. On 5 May 1977, by virtue of an Indemnity Undertakingexecuted by Lim for himself and as President and General Manager of Eastern, one-half of this amount was provisionally released and transferred to one of the bankaccounts of Eastern with CBTC. 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. . The loan was payable on demand with interest at 14% per annum.For this loan, Eastern issued on the same day a negotiable promissory note forP73,000.00 payable on demand to the order of CBTC with interest at 14% per annum.In the Disclosure Statement, the box with the printed word "UNSECURED" wasmarked with "X" meaning unsecured, while the line with the words "this loan iswholly/partly secured by" is followed by the typewritten words "Hold-Out on a 1:1 onC/A No. 2310-001-42," which refers to the joint account of Velasco and Lim with abalance of P331,261.44.Eastern and Lim, and CBTC signed another document entitled "Holdout Agreement,"dated 18 August 1978, wherein it was stated that "as security for the Loan haveoffered [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 allegedinterests therein as these may appear as a result of final and definitive judicial actionor a settlement between and among the contesting parties thereto."Sometime in 1980, CBTC was merged with BPI. On December 2, 1987, BPI filed withthe RTC of Manila a complaint against Lim and Eastern demanding payment of thepromissory note for P73,000.00. Defendants Lim and Eastern, in turn, filed a

counterclaim against BPI for the return of the balance in the disputed account subjectof the Holdout Agreement and the interests thereon after deducting the amount dueon the promissory note.thetrial courtruled that "the promissory note in question is subject to the 'hold-out'agreement," and that based on this agreement, "it was the duty of plaintiff Bank[BPI] to debit the account of the defendants under the promissory note to set off theloan even though the same has no fixed maturity." As to the defendants'counterclaim, the trial court, recognizing the fact that the entire amount in questionhad been withdrawn by Velasco's heirs pursuant to the order of the intestate court indenied it because the "said claim cannot be awarded without disturbing theresolution" of the intestate court.On 23 January 1991, the Court of Appeals rendered a decision affirming the decisionof the trial court. it ruled that the settlement of Velasco's estate had nothing to dowith the claim of the defendants for the return of the balance of their account withCBTC/BPI as they were not privy to that case, and that the defendants, as depositorsof CBTC/BPI, are the latter's creditors; hence, CBTC/BPI should have protected thedefendants'

interest in Sp. Proc. No. 8959 when the said account was claimed byVelasco's estate. It then ordered BPI "to pay defendants the amount of P331,261.44representing the outstanding balance in the bank account of defendants."On 22 April 1992, BPI filed the instant petition alleging therein that the HoldoutAgreement in question was subject to a suspensive condition the "P331,261.44 shallbecome a security for respondent Lim's promissory note only if respondents' Lim andEastern 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 thecontesting parties thereto. Issues: can BPI demand payment of the loan of P73,000.00 despite the existence of theHoldout Agreement andis BPI still liable to the private respondents on the account subject of the HoldoutAgreement after its withdrawal by the heirs of Velasco. Decision: Yes The collection suit of BPI is based on the promissory note for P73,000.00. On itsface, the note is an unconditional promise to pay the said amount, and as stated bythe respondent Court of Appeals, further correctly ruled that BPI was not a holder indue course because the note was not indorsed to BPI by the payee, CBTC. Only anegotiation by indorsement could have operated as a valid transfer to make BPI aholder in due course. It acquired the note from CBTC by the contract of merger or salebetween the two banks. BPI, therefore, took the note subject to the HoldoutAgreement.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 andVelasco's joint account to the payment of the note. What the agreement conferred onCBTC was a power, not a duty. Generally, a bank is under no duty or obligation tomake the application. To apply the deposit to the payment of a loan is a privilege, aright of set-off which the bank has the option to exercise.Also, paragraph 05 of the Holdout Agreement itself states that notwithstanding theagreement, CBTC was not in any way precluded from demanding payment fromEastern and from instituting an action to recover payment of the loan. What itprovides 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 had optednot to exercise its right to apply part of the deposit subject of the Holdout Agreementto the payment of the promissory note for P73,000.00. Yes. The account was proved and established to belong to Eastern even if it wasdeposited in the names of Lim and Velasco. As the real creditor of the bank, Easternhas 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 towithdraw the whole balance of the account.As early as 12 May 1979, CBTC was notified by the Corporate Secretary of Easternthat the deposit in the joint account of Velasco and Lim was being claimed by themand that one-half was being claimed by the heirs of Velasco. 23Moreover, 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 theaccount to the said heirs; hence, it was under no judicial compulsion to do so. Theauthorization given to the heirs of Velasco cannot be construed as a finaldetermination or adjudication that the account belonged to Velasco. We have ruled

Culaba vs CA Facts: Culaba sells SMB. One day, an agent from SMB driving an SMB van drops by to collect Culaba's balance, issuing SMB receipts for thepayment. Susbequently, Culaba receives demand letters from SMB for not paying his balance. The agent turns out to be a spurious agent,and the receipts lost receipts which had been published in the papers as lost after the payment. Culaba invokes articles 1240 and 1242 in hisdefense. SMB's counsel invokes 1233, that the burden of proof of payment is on the debtor and that Culaba failed to exercise due diligencewhen he failed to question the irregular nature of the invoices as well as the authority of the purported agent. Was Culaba excused by hismistaken payment?Held: Culaba failed to observe the due diligence required in parting with such a valuable consideration. He should have verified the identityof the agent and his authority to receive. He did not, thus he was guilty of negligence, the effects of which not even his claims of good faithcan shield him from. Culaba is liable to pay SMB Dela Cruz Obligations; payment; extinguishment of obligation. 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. Admittedly, payment of the remaining balance of P200,000 was not made to the creditors themselves. Respondent claims that Losloso was the authorized agent of petitioners, but the latter dispute it. Loslosos authority to receive payment was embodied in petitioners letter addressed to respondent 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 of taxes 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. Spouses Miniano B. Dela Cruz and Leta L. Dela Cruz vs. Ana Marie Concepcion G.R. No. 172825. October 11, 2012 1245 CALTEX V IAC We rule that the Deed of Assignment executed by the parties on July 31, 1980 is not a dation in payment and did not totally extinguish respondent's obligation as stated therein.

The then Intermediate Appellate Court ruled that the three (3) requisites dacion en pago * are all present in the instant case, and concluded that the Deed of Assignment of July 31, 1980 (Annex "C" of Partial Stipulation of Facts) constitutes a dacion in payment provided for in Article 1245 ** of the Civil Code which has the effect of extinguishing the obligation, thus supporting the claim of private respondent for the return of the amount retained by petitioner.

This Court, speaking of the concept of dation in payment, in the case of Lopez vs. Court of Appeals (114 SCRA 671, 685 [1982]), among others, stated:

The dation in payment extinguishes the obligation to the extent of the value of the thing delivered, either as agreed upon by the parties or as may be proved, unless the parties by agreement, express or implied, or by their silence, consider the thing as equivalent to the obligation, in which case the obligation is totally extinguished. (8 Manresa 324; 3 Valverde 174 fn.)

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 to the 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 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.

We are hoping for your usual kind consideration on this matter.

In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered (Art. 1253, Civil Code). The foregoing subsequent acts of the parties clearly show that they did not intend the Deed of Assignment to have the effect of totally extinguishing the obligations of private respondent without payment of the applicable interest charges on the overdue account.

Finally, the payment of applicable interest charges on overdue account, separate from the principal obligation of P4,072.682.13 was expressly stipulated in the Deed of Assignment. The law provides that "if the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered." (Art. 1253, Civil Code). PNB V. PINEDA PNB vs. Pineda by Maki PHILIPPINE NATIONAL BANK vs. PINEDA G.R. No. L-46658 May 13, 1991

Facts:

The Arroyo Spouses obtained a loan of P580K from PNB to purchase 60% of the subscribed capital stock, and thereby acquire the controlling interest of Tayabas Cement Company, Inc. (TCC). As security for said loan, the spouses executed a real estate mortgage over a parcel of land known as the La Vista property.

TCC filed with petitioner bank an application and agreement for the establishment of an 8 year deferred letter of credit (L/C) for $7M in favor of Toyo Menka Kaisha to cover the importation of a cement plant machinery and equipment. Upon approval of the application and opening of an L/C by PNB in favor of Toyo Menka Kaisha for the account of TCC, the Arroyo spouses executed a surety agreement. The imported cement plant machinery and equipment arrived from Japan and were released to TCC under a trust receipt agreement. Subsequently, Toyo Menka Kaisha made the corresponding drawings against the L/C as scheduled.

TCC, however, failed to remit and/or pay the corresponding amount covered by the drawings. Thus, pursuant to the trust receipt agreement, PNB notified TCC of its intention to repossess the imported machinery and equipment for failure of TCC to settle its obligations under the L/C. PNB foreclosed the real estate mortgages executed by the spouses Arroyo in TCCs favor. PNB contends that the sale of La Vista was made to satisfy not only the amount owed by the spouses on their personal loan but also the amount of expenses owed by said spouses as sureties of TCC. The Arroyos oppose the foreclosure, contending primarily that repossession of the imported machinery and equipment by PNB amounted to dacion en pago that extinguished their obligation as surety to TCC. Issue:

WON the repossession of the machinery was tantamount to a dacion en pago that absolved Arroyo spouses as surety? NO.

Held:

There was no dacion en pago. Dation in payment takes place when property is alienated to the creditor in satisfaction of a debt in money and the same is governed by sales. Dation in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. The repossession of the machinery and equipment in question was merely to secure the payment of TCCs loan obligation and not for the purpose of transferring ownership thereof to PNB in satisfaction of said loan. Thus, no dacion en pago was ever accomplished.

PNB took possession of the imported cement plant machinery and equipment pursuant to the trust receipt agreement executed by and between PNB and TCC giving the former the unqualified right to the possession and disposal of all property shipped under the Letter of Credit until such time as all the liabilities and obligations under said letter had been discharged. PNBs possession of the subject machinery and equipment being precisely as a form of security for the advances given to TCC under the Letter of Credit, said possession by itself cannot be considered payment of the loan secured thereby. Payment would legally result only after PNB had foreclosed on said securities, sold the same and applied the proceeds thereof to TCCs loan obligation. Mere possession does not amount to foreclosure for foreclosure denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself.

The transfer of ownership to extinguish a pre-existing obligation is the essence in dation in payment, therefore it is not a consensual contract, but a real contract and novates the original debt relationship into a consummated sale. 1249 CHECK AS PAYMENT Tibajia v. CA TIBAJIA vs. CA and EDEN TAN G.R. No. 100290 June 4, 1993

FACTS A suit for collection of a sum of money filed by Eden Tan against the Tibajia spouses A writ of attachment was issued by the trial court The Deputy Sheriff filed a return stating that a deposit made by the Tibajia spouses had been garnished by him. Tibajia spouses delivered to Deputy Sheriff Eduardo Bolima the total money judgment in check Private respondent refused to accept the payment made by the Tibajia spouses and instead insisted that the garnished funds deposited be withdrawn to satisfy the judgment obligation. Petitioners filed a motion to lift the writ of execution on the ground that the judgment debt had already been paid Motion was denied by the trial court on the ground that payment in cashier's check is not payment in legal tender and that payment was made by a third party other than the defendant ISSUE WHETHER OR NOT THE BPI CASHIER'S CHECK TENDERED BY PETITIONERS FOR PAYMENT OF THE JUDGMENT DEBT, IS "LEGAL TENDER"

RULING The provisions of law applicable to the case at bar are the following: a. Article 1249 of the Civil Code which provides: Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines. The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents 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 meantime, the action derived from the original obligation shall be held in abeyance.; b. Section 1 of Republic Act No. 529, as amended, which provides: Sec. 1. Every provision contained in, or made with respect to, any obligation which purports to give the obligee the right to require payment in gold or in any particular kind of coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby, shall be as it is hereby declared against public policy null and void, and of no effect, and no such provision shall be contained in, or made with respect to, any obligation thereafter incurred. Every obligation heretofore and hereafter incurred, whether or not any such provision as to payment is contained therein or made with respect thereto, shall be discharged upon payment in any coin or currency which at the time of payment is legal tender for public and private debts Section 63 of Republic Act No. 265, as amended (Central Bank Act) which provides: Sec. 63. Legal character Checks representing deposit money do not have legal tender power and their acceptance in the payment of debts, both public and private, is at the option of the creditor: Provided, however, that a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account. In the recent cases of Philippine Airlines, Inc. vs. Court of Appeals 4 and Roman Catholic Bishop of Malolos, Inc. vs. Intermediate Appellate Court, 5 this Court held that A check, whether a manager's check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. PAPA V. VALENCIA AND CO acts:

Sometime in June 1982, A.U. Valencia and Co., Inc. and Felix Pearroyo, filed with the Regional Trial Court of Pasig, Branch 151, a complaint for specific performance against Myron C. Papa, in his capacity as administrator of the Testate Estate of one Angela M. Butte. The complaint alleged that Papa, acting as attorney-in-fact of Angela M. Butte, sold to Pearroyo, through Valencia, a parcel of land.

Prior to the alleged sale, the said property had been mortgaged by her to the Associated Banking Corporation. After the alleged sale to Valencia and Penarroyo, but before the title to the subject property had been released, Butte passed away. Despite representations made by Valencia to the bank to release the title to the property sold to Pearroyo, the bank refused to release it unless and until all the mortgaged properties of the late Butte were also redeemed.

In order to protect his rights and interests over the property, Pearroyo caused the annotation on the title of an adverse claim.

Sometime in April 1977, that Valencia and Pearroyo discovered that the mortgage rights of the bank had been assigned to Tomas L. Parpana, as special administrator of the Estate of Ramon Papa. Jr. Since then, Papa had been collecting monthly rentals in the amount of P800.00 from the tenants of the property, knowing that said property had already been sold to Valencia and Pearroyo. Despite repeated demands from said respondents, Papa refused and failed to deliver the title to the property.

Valencia and Pearroyo prayed that Papa be ordered to deliver to Pearroyo the title to the subject property

RTC rendered a decision, allowing Papa to redeem from the Reyes spouses, who bought the land at a public auction because of tax delinquency and ordering Papa to execute a Deed of Absolute Sale in favor of Pearroyo.

Papas defense: The sale was never consummated as he did not encash the check (in the amount of P40,000.00) given by Valencia and Pearroyo in payment of the full purchase price of the subject lot. He maintained that what Valencia and Pearroyo had actually paid was only the amount of P5,000.00 (in cash) as earnest money.

Issue: Was there valid payment although Papa failed to encash the check?

Held:

Yes. Valencia and Pearroyo had given Papa the amounts of P5,000.00 in cash on 24 May 1973, and P40,000.00 in check on 15 June 1973, in payment of the purchase price of the subject lot. Papa himself admits having received said amounts, and having issued receipts therefor. Papas assertion that he

never encashed the aforesaid check is not substantiated and is at odds with his statement in his answer that he can no longer recall the transaction which is supposed to have happened 10 years ago.

After more than 10 years from the payment in part by cash and in part by check, the presumption is that the check had been encashed. Granting that Papa had never encashed the check, his failure to do so for more than 10 years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay.

While it is true that the delivery of a check produces the effect of payment only when it is cashed, pursuant to Article 1249 of the Civil Code, the rule is otherwise if the debtor is prejudiced by the creditors unreasonable delay in presentment. 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.

If no presentment is made at all, the drawer cannot be held liable irrespective of loss or injury unless presentment is otherwise excused. This is in harmony with Article 1249 of the Civil Code under which payment by way of check or other negotiable instrument is conditioned on its being cashed, except when through the fault of the creditor, the instrument is impaired. The payee of a check would be a creditor under this provision and if its non-payment is caused by his negligence, payment will be deemed effected and the obligation for which the check was given as conditional payment will be discharged.

Considering that Valencia and Pearroyo had fulfilled their part of the contract of sale by delivering the payment of the purchase price, they, therefore, had the right to compel Papa to deliver to them the owners duplicate of TCT 28993 of Angela M. Butte and the peaceful possession and enjoyment of the lot in question.

Republic act no. 8183 : RA 529 has already been repealed by Republic Act 8183 which provides that every monetary obligation must be paid in Philippine currency which is legal tender in the Philippines. However, the parties may agree that the obligation or transaction shall be settled in any other currency at the time of payment.

HYRDO RESOURCES V. Nia

We now come to the issue of whether or not the provisions of R.A. No. 529, otherwise known as an Act To Assure Uniform Value to Philippine Coin And Currency , is applicable to Hydros claim. The Contract between NIA and Hydro is an internationally tendered contract considering that it was funded by the International Bank for Reconstruction and Development (IBRD). As a contract funded by an

international organization, particularly one recognized by the Philippines, the contract is exempt from the provisions of R.A. No. 529. R.A. No. 4100 amended the provisions of R.A. 529 thus:
[37]

SECTION 1. Section one of Republic Act Numbered Five hundred and twenty-nine, entitled An Act to Assure Uniform Value of Philippine Coin and Currency, is hereby amended to read as follows: Sec. 1. Every provision contained in, or made with respect to, any domestic obligation to wit, any obligation contracted in the Philippines which provisions purports to give the obligee the right to require payment in gold or in a particular kind of coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby, be as it is hereby declared against public policy, and null, void, and of no effect, and no such provision shall be contained in, or made with respect to, any obligation hereafter incurred. The above prohibition shall not apply to (a) transactions where the funds involved are the proceeds of loans or investments made directly or indirectly, through bona fide intermediaries or agents, by foreign governments, their agencies and instrumentalities, and international financial and banking institutions so long as the funds are identifiable, as having emanated from the sources enumerated above; (

Even assuming ex gratia argumenti that R.A. No. 529 is applicable, it is still erroneous for the Court of Appeals to deny Hydros claim because Section 1 of R.A. No. 529 states that only the stipulation requiring payment in foreign currency is void, but not the obligation to make payment. This can be gleaned from the provision that every other domestic obligation heretofore or hereafter incurred shall be discharged upon payment in any coin and currency which at the time is legal tender for public and private debts. In Republic Resources and Development Corporation v. Court of Appeals,[38] it was held:

. . . it is clear from Section 1 of R.A. No. 529 that what is declared null and void is the provision contained in, or made with respect to, any domestic obligation to wit, any obligation contracted in the Philippines which provision purports to give the obligee the right to require payment in gold or in a particular kind of coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby and not the contract or agreement which contains such proscribed provision. (Emphasis supplied)

More succinctly, we held in San Buenaventura v. Court of Appeals[39] that

It is to be noted under the foregoing provision that while an agreement to pay an obligation in a currency other than Philippine currency is null and void as contrary to public policy, what the law specifically prohibits is payment in currency other than legal tender but does not defeat a creditors claim for payment. A contrary rule would allow a person to profit or enrich himself inequitably at anothers expense. (Emphasis supplied)

It is thus erroneous for the Court of Appeals to disallow petitioners claim for foreign currency differential because NIAs obligation should be converted to Philippine Pesos which was legal tender at the time.[40]