OBLICON CASE DIGESTS (SEPT 2)

Ca se # 1: AR RI ET A V S. N AT I ON AL RI C E AN D CO R N IS S U E: W as N AR IC l ia bl e fo r dam age s?
CO R PO R ATI ON
GR L - 15 645 Jan ua ry 31 , 1964 RUL IN G: Ye s. On e who as su mes a con trac tua l o bl ig ati on
and fa il s to p er for m the s ame o n ac cou nt of h is ina bi lit y to
meet c erta in ba nk w hic h ina bi li ty he k ne w a nd w as a ware
F ACT S: On May 19, 1 952 , p lai nt iff - a ppe lle e Mr s. Pa z of whe n h e e nter ed int o con tra ct, sh ou ld be hel d lia bl e i n
Arr iet a par ti ci pat ed in a pu bl ic b id di ng cal le d by N A RI C dama ges f or bre ac h of c ontra ct .
for the sup pl y of 2 0,00 0 metr ic t on s of Burm ese r ic e. A s
her b id o f $ 203 , 00 0 per metr ic ton wa s th e l ow est , s he Und er A rt icl e 11 70 of the C ivi l Code , not on ly
wa s a ward ed he con t ract for the sa me. On Jul y 1 , 1 952 , debt ors gu ilt y of fr aud, neg l ige nce or defa ul t bu t a ls o
Arr iet a an d N A RI C e ntere d i nto Co ntra c t of Sal e of R ice debt or o f e ver y, in g enera l, w ho fai ls i n t he p erfo rman ce of
under the ter m of wh ich the form er obl iga ted her se lf t o his ob li gat io ns i s b o und to in dem nif y for the l os se s a nd
del iv er t o t he la tter 20, 000 me tri c ton s of Bur me se r ic e a t dama ges c au sed th ereb y.
$203 , 000 per me tri c to n. I n turn , N A RI C co mmi tte d it se lf
to pa y for th e imp o rted ri ce “b y mea ns of a n irre vo cab le , DO CT RI NE S:
con firm ed and as sig na ble let ter of cred it i n U S curre nc y i n
1 . O B L I G A T I O N S A N D CO NT R A CT S ; L I A B I L I T Y F O R NO N - P E RF O R M A N CE ;
fav or of Ar rie ta an d/or s upp li er in Bu rma, im med ia tel y. ”
F A I L U RE T O P UT UP L E T T E R O F C RE D I T W I T HI N A G RE E D P E R I O D. — O n e
Ho we ver, it was o nly on J ul y 30 , 1952 tha t N A RI C wh o a s s u m e s a c o n t ra c t u a l o b l i g a t i o n a n d f a i l s t o p e rf o rm t h e s a m e o n a c c o u n t
too k t he fir st st ep to ope n a l ett er of cre dit by f orw ard ing to o f h i s i n a b i l i t y t o m e e t c e rt a i n b a n k r e q u i re m e n t s , w h i c h i n a b i l i t y h e k n e w a n d
the PNB i ts a pp li ca tio n for Co m mer ci al Lett er of Cr ed it. wa s a w a r e o f wh e n h e e n t e re d i n t o t h e c o n t ra c t , s h o u l d b e h e l d l i a b l e i n
On th e sa me d ay, Arr iet a, th ru c oun se l, adv ise d N A RI C of damages for breach of contract.
the ex trem e nec es si ty for th e ope nin g of the l ett er of cre di t
2 . O B L I G A T I O NS A ND CO NT R A CT S ; L I A B I L I T Y O F NO N - P E RF O RM A N CE . —
sin ce she h ad b y th en mad e a t end er t o her s upp li er in Un d e r A rt i c l e 1 1 7 0 o f t h e Ci v i l C o d e , n o t o n l y d e b t o rs g u i l t y o f f ra u d , n e g l i g e n c e
Ran goo n, B urma e qui val ent t o 5 % o f t h e F. O. B. pr ic e o f o r d e f a u l t b u t a l s o e v e ry d e b t o r , i n g e n e r a l , wh o f a i l s i n t h e p e rf o r m a n c e o f h i s
20, 00 0 ton s at $180 .70 a nd in co mpl ian ce w it h the obligations is bound to indemnify for the losses and damages caused thereby.
regu lat ion s in Ran goo n, th is 5 % wi ll be con fi sca ted if the
3 . I D . ; I D. ; M E A NI NG O F P H RA S E " I N A NY M A N N E R CO NT RA V E N E T H E
requ ired let ter of cr edi t is no t rec ei ved by t hem b efor e
T E NO R" O F T HE O B L I G A T I O N I N A RT . 1 1 7 0 , CI V I L C O DE . — T h e p h r a s e " i n
Au gus t 4, 1952 . a n y m a n n e r c o n t r a v e n e t h e t e n o r" o f t h e o b l i g a t i o n i n A r t . 1 1 7 0 , Ci v i l Co d e ,
On Au gu st 4, PNB i nfor med N AR IC th at its i n c l u d e s a n y i l l i c i t t a s k wh i c h i m p a i rs t h e s t ri c t a n d f a i t h f u l f u l f i l l m e n t o f t h e
app li cat ion for a le tte r of cr edi t ha s b een appro ve d by the o b l i g a t i o n , o r e v e ry k i n d o f d e f e c t i v e p e rf o rm a n c e .
Bo ard of Dir ect ors wi th t he con di tio n t hat 50 % m arg ina l
4 . I D. ; I D . ; W A I V E R O F B R E A C H O F CO NT RA CT NO T P RE S UM E D . — W a i v e rs
cas h d epo si t be pa id and tha t dr aft s a 5e to b e pa id upo n
a r e n o t p re s u m e d , b u t m u s t b e c l e a rl y a n d c o n v i n c i n g l y s h o w n , e i t h e r b y
pres ent men t. It turn ed out th at NA RI C wa s not in f ina nc ia l express stip11lation or acts admitting of no other reasonable explanation.
pos it ion t o me et th e con dit io n. As a r es ult of the del ay , th e
all oc ati on of Arr ie ta’ s s upp li er in Ra ngo on wa s c anc el le d
and the 5% dep osi t a mou nti ng to 524 k yat s or
appro xi mat el y P2 00, 0 00 wa s for fei ted .

1
quantum meruit – as much as he deserves
OBLICON CASE DIGESTS (SEPT 2)
Ca se # 2 : O CTA V IO A. KAL AL O, v s. A L F R E DO J. LUZ (J . Zal div ar ;
1970)
DO CT RI NE : Un der R epu bl ic Act 5 29, if th e o bl ig ati on wa s in curr ed pr io r
to t he e na ctm ent of the A ct a nd one is req uir ed to pay in a p art icu lar k ind
of co in or curr en cy ot her than t he P hi li ppi ne c urren cy th e sam e sha ll b e
dis ch arge d in Ph il ipp in e c urren cy m ea sure d at t he pre vai li ng ra te of
exc han ge at the t ime th e o bli gat io n was i ncu rred .
F ACT S: 1 1/1 7/1 959 — K al alo (an en gi neer ) e nter ed in to an agr eeme nt w /
Luz ( an ar ch ite ct) und er t heir fir m nam es ( O. A . Ka lal o & As soc ia te s an d
A. J. Lu z & A sso ci ate s, r esp ect iv el y) w here t he f ormer w as t o r end er
eng ine erin g de sig n ser vi c es to th e lat ter fo r f ee s, as sti pu lat ed in t he
agree men t
Pur su ant to th e a gree men t , Kal al o g av e h is ser v ice s for sev era l p roj ec ts.
12/1 1/1 961 — K ala lo se n t a s tat eme nt ac cou nt a s kin g f or P11 6,5 65. 00
eng ine erin g fee s
Al so st ate d: P5 7 K = L uz ’s p rev io us pay men t, t hu s P59 ,56 5.0 0= a ctu al
bal anc e
05/1 8/1 962 — L uz sen t r esum e of fee s to app el la nt, s ai d th ey o nl y o we
P1 0,8 61. 08
06/1 4/1 962 — Lu z se nt a che ck w/ P10 ,86 1.0 8; Kal al o ac cep ted b ut
refu sed to a cce pt it as fu ll pa ymen t f or ser vi ce s re nd ered
08/1 0/1 962 — Ka lal o f il ed a c omp la int ag ain st Lu z
O 4 c au ses of a ct io n: (1) $28 K a nd P3 0,8 81. 25 w as d ue t o hi m for hi s
serv ic es ; (2) P 17, 000 .00 as con seq uen ti al and mora l da mag es; (3 )
P5 5 Kas m ora l dam age s, attor ne y' s fee s and e xp e nse s of l it iga tio n; (4)
P2 5 K as a ct ual dam age s, and a lso for a ttor ne y' s f ees a nd e xp ens es o f
lit ig ati on.
* Not e: $ 28 K fe e i s in dol lar s be cau se it was for th e In tern a t ion a l
Re sear ch In st itu te proj ec t
Luz ’s An sw er: some o f K ala lo ’s ser vi ces were n ot in a cc orda nc e w/ th e
agree men t and Ka la lo ’s cla im s wer e n ot ju st if ied b y t he ser vi ce s act ua ll y
quantum meruit – as much as he deserves
rende red , and th e amo unt the y o we is P10 ,86 1.0 8. K ala lo ha s no c aus e of
act ion a nd i s in e sto ppe l b ec au se of th e st ate m ent of a cc oun ts , a l so
Ka la lo' s c la im r egar di ng o ne of the pro je cts wa s pr emat ure b ec aus e L u z
had no t yet b een p ai d fo r s aid pr oj ec t, an d Ka la l o’s serv ic es were n ot
comp le te or wer e perf o rmed i n v iol at ion of th e agre eme nt an d/o r
other w ise un sa ti sfa ct ory .
TC: aut hor ize d t hat th e c a se b e br oug ht to a C omm i ss ion er s in ce the on ly
que sti on i s o n the as se ss ment of th e pro per f ee s a nd th e ba lan ce d ue t o
Ka la lo aft er d edu ct ing t he admi tte d p ay men ts mad e by Luz
Ba sed o n Com mi ss ion er’ s rep ort, T C r ule s tha t the fe es d ue to Kal al o
are:
o [( $28 K + P5 1,5 39. 91) - su m the y alr ead y pa id ] + th e leg al ra te of
int eres t ther eon fr om the f il ing of th e com pl ain t in th e c ase u nti l fu ll y p ai d
for + P 8 K A tto rne y’ s f ee s
$28 K wa s t o be c onv ert ed int o p es o on th e b as is of the rat e of e xch ang e
of the U. S. do ll ar to th e Ph il ipp in e pes o at th e ti me of p aym ent o f
jud gmen t as Cer ti fie d b y t he Cen tra l Ba nk of the Ph i lip pi nes
[not e: ca se sa ys su m t he y p aye d is P 69, 475 .46 bu t i f y ou add up th eir
prev iou s pa ym ent s men ti o ned in the cas e it ’s jus t P6 7,8 61. 08 … we ird ,
mayb e it s l aw ph il]
Lu z a ppe ale d t o S C.
IS S U E: (1) W het her or n ot Ka la lo s w as in es top pe l ( bec aus e o f s tat eme nt
of a cc oun ts)
H ELD: (1) NO. Sta tem en t o f A cc oun ts d id no t es to p Ka la los bec au se Lu z
did not r el y on it a s t he C ommi ss io ner ’s re por t fo un d. U nder art ic le 1 431
of th e C iv il Cod e, i n ord e r that e st opp el m ay a pp ly the per so n, t o wh om
repre sen tat io ns hav e b een made an d w ho cl aim s t he est opp el in hi s f avor
must ha ve re li ed or ac t ed on su ch r epre se nta tio ns . Sa id ar ti cl e pro vi de s:
Throu gh es top pel a n a dm is sio n or r epre sen tat io n i s re nde red c onc lu si ve
upon t he p ers on ma ki ng i t , a nd c ann ot b e den ie d or d isp rov ed a s ag ain st
the pe rso n rel yi ng t hereo nThr oug h es top pel an adm is si on o r
r epre sen tat io n is r end ere d con cl us iv e upo n the p erso n mak in g it , and
can not be de nie d o r d is pr ove d a s a ga ins t t he per so n re ly ing th ereo n.
2
OBLICON CASE DIGESTS (SEPT 2)
Ca se # 3 : St. Pau l F i re & Ma ri n e In su ran c e Co . vs. M acond ra y & Co. ,
In c
G. R. No. L – 27 796
Ma rch 25, 19 76
Wi nthr op Pr o du ct s, In c. of Ne w Y ork – Sh ip per
S S ‘T a i Pi ng ’ – o wne d a nd oper ate d b y W il hel m Wi lh emse n
Wi nthr op S tear ns , I nc . Ma nil a – C on sig nee
Bar ber S tea msh ip L ine s, I nc. – age nt of W ilh el m Wi l helm se n
St . Pa ul F ire & M ari ne Ins uran ce Co mpa ny – I ns urer
Mani la Port Se r vi ce – arr a stre co ntr act or
Maco ndr ay & C o., In c. – c arrier
F ACT S:
 Wi nthr op P rod uct s, In c. o f N ew Yor k sh ipp ed abo ar d th e S S ‘Ta i
Pi ng ’, 21 8 car ton s and dr ums of d rug s and m edi ci ne wh ic h wer e
con si gne d t o Wi nthr op S te arns , I nc. Ma ni la P hi li ppi n es
 Bar ber Ste am shi p Li ne s, I nc. i s sue d a B il l of L ad in g in th e nam e
of Win thro p Pro duc ts , In c. as s hi pper , w it h arr iva l n oti ce in M ani la
to con si gne e Wi ntrh op S te arns , I nc. Ma ni la
 The sh ipm ent was ins ur ed by th e sh ipp er aga in st lo os an d/o r
dama ge wi th S t. P au l F i re and Mar ine In sur anc e Co mpan y
 S S T ai Pi ng arri ve d a t t he Po rt of Man i la and d is char ged t he
shi pme nt in to the cu st ody of M ani la Port Ser vi ce
 The sh ipm en t wa s di sc har ged c omp let e an d in g ood order wit h th e
exc ept io n of 1 dru m and s erver al c arto ns whi ch wer e i n bad o rder
con dit io n
 The con sig n ee f iled a cla im in the am ount of P1, 109 .47
rep r esent ing th e C.I .F va lu e o f th e d am ag ed d rum and ca rtons
of m edin e with th e ca r ri e r an d M an il a Po rt S e rvi c e
 Bo th th e c arri er an d Ma nil a P ort Ser vi ce r efu se d to pa y su ch
cla im
 The c on sig nee th en f il ed its cl ai m w it h th e i nsur er. On t he b as is
of su ch c la im, th e in su r an ce co m p an y pa id to t he c onsig nee
the in su red va lu e o f th e lo st a n d d am age d go ods, incl udin g
othe r exp en s es in co n n e ctio n th er ew ith in the to tal am ou nt o f
$1,1 34. 46
 As subr oge e of th e r ig ht s o f the shi ppe r and /or cos ig nee , the
ins urer i nst it ute d wi th the CF I a n act io n a ga ins t th e de fe nda nts
for t he rec ov ery of th e a m ount of $1 ,13 4.4 6
 Con ten ti on of def end ant M ani la P ort S erv ic e:
quantum meruit – as much as he deserves
o The who le c argo w as de l iver ed to th e c on sig nee i n th e
same con di ti on i n wh ic h it w as r ece iv ed fr om th e ca rryi n g
ves se l
o Their l ia bi lit y is l im ite d t o the i nv oi ce va lu e o f t he good s,
but i n no c ase m ore t han P50 0 per p ac kag e pur su ant to
the ir M ana gem ent C ontr ac t
 Con ten ti on of d efe nda nts Maco ndr ay & Co ., In c, Bar ber S tea msh ip
Lin es, In c. an d Wi lh elm W i lhe lms en :
o The carr ier ’s l ia bi li ty fo r th e sh ipm ent c ea sed up o n
dis ch arge th ereo f f rom th e sh ip ’s ta ck le
o If a ny da mag e wa s sus ta i ned by th e sh ipme nt w hi le it w as
under the co ntro l of the v ess el , su ch d a ma ge wa s cau sed
by ins uff i cin ec y o f p ac kag ing , fo rce ma jeu re a nd/ or peri ls
of t he se a
 Low er Cou rt Ru li ng:
o Def end ant s M ac ondr ay & Co, Barb er St eam sh ip Lin es Inc
and W il hel Wi lhe lm sen to pa y p la int iff , joi nt ly and
sev era ll y P3 00
o Def end ant Ma ni la P ort S er vi ce to pay p lai nt iff P80 9. 67
o (Tota l P1 109 .67)
 Content ion of St. P aul Fi re & Ma ri ne Insu ran ce C o.:
o As su brog ee o f t he c on s ign ee, it sho ul d be ent it l ed to
reco ver from def en dan ts t he am oun t o f $1 ,13 4.4 6 w hic h i t
act ual ly pa id to the co ns i gnee an d w hi ch repr ese n ts t he
val ue of t he lo st a nd dam aged sh ip men t a s w el l a s oth er
leg it ima te exp en ses
 Content ion of D efend ant s:
o Their l iab il ty is l imi ted to the C. I.F . v alu e o f t he good s,
purs uan t to con trac t of s ea car ria ge e mbo die d in t he bi ll
of lad ing
o That the co ns ign ee ’s c lai m ag ai ns t th e c arri e r and
arras tre ope rat ors w as on l y f or t he sum of P1, 109 .67
IS S U E S:
1. Whe ther or not in ca se of l os s or dam age , t he li a bil it y o f th e c arri er t o
the co ns ign ee i s li mit ed t o t he C. I.F . va lue of t he good s wh ic h wer e lo st
or da mag ed
2. Wh eth er the i nsu rer wh o ha s pa id th e cla im in d o llar s to th e con si gne e
sho uld be rei mbur se d i n i ts p es o eq ui va len t o n th e dat e of di sc har ge o f
the car go or o n t he dat e o f th e d ec is ion
3
OBLICON CASE DIGESTS (SEPT 2)
H EL D:
1. Y E S - The p urpo se of t he b il l of la din g is to pro v ide for th e r igh ts an d
lia bi li tie s o f th e par ti es in re fere nc e to the co ntra ct t o c arry . The
sti pu lat ion i n t he b i ll of la din g l im iti ng the c ommo n carr ier' s li abi li ty to th e
val ue of th e goo ds ap pe arin g in t he b il l, un le ss the sh ip per or ow ner
dec lare s a grea ter val ue , is va li d an d bi nd ing . This li mi tat ion of t he
carr ier' s li ab il ity i s sa nct io ned by th e free dom of t he con trac ti ng par tie s t o
est abl is h su ch s ti pu lat ion s, c lau se s, te rms , or co ndi tio ns a s th ey ma y
deem co nv eni ent , pr ov ide d th ey are not co ntra ry to l aw , m ora ls, go o d
cus tom s and p ubl i c p ol ic y. A s ti pul at ion f ix ing or l imi ti ng the sum th a t
may be re co vere d from t he carr ier on t he lo ss or de teri ora tio n of the
good s i s v al id, pro vid e d it is (a ) rea son a b le and j us t un der t he
cir cum sta nc es, and (b) h as b een fair ly and fre el y agree d up on. In t hi s
cas e, th e li ab il it ies o f the defe nda nt s - ap pe lle es wit h re spe ct t o the l os t or
dama ged sh ipm ent s ar e e xpre ss ly li mi ted to the C. I .F. v al ue o f th e g ood s
as per con tra ct of se a carr iag e em bo die d in the bi ll o f l adi ng.
- T he p la int iff - a ppe ll ant , as in sure r, aft er pa yin g th e c la im of th e in sure d
for d ama ges un der the in sura nce , is sub rog ate d m erel y t o t he r igh ts of
the as sur ed. A s su brog ee, it ca n r eco ver on l y t he am oun t t hat i s
reco ver abl e b y the l att er. S in ce the ri ght of th e as sure d, in ca se of l os s
or d ama ge to t he go ods , is l imi ted or r estr ic te d b y th e pro vi sio ns i n the
bil l of lad ing , a su it b y th e ins urer a s su bro gee n e ces sar il y i s su bje ct t o
li ke li mit at i on s a nd res tri c tio ns.
2. T he co nte nti on o f th e pla int if f - ap pe lla nt t hat be cau se o f e xtra ord inar y
inf lat io n, it s hou ld be re i mbur sed for i ts d ol lar pa ymen ts at t he rat e o f
exc han ge on t he da te of t he ju dgme nt a nd no t on t he dat e of th e lo ss or
dama ge, i s u nt ena ble . T h e ob li gat io n o f t he ca rrie r to p ay for t he dam age
comm en ced on t he dat e i t fai led to de li ver t he sh ip ment in goo d c ond it ion
to t he con si gne e. T he C.I . F . Ma ni la val ue of the goo ds wh ich w ere lo st o r
dama ged , a cc ord ing to th e c la im of the co ns ig n ee dat ed S ept emb er 2 6 ,
1960 is $22 6.3 7 an d $ 32 4.3 or P 456 .14 and P 65 3.53 , re spe ct iv el y, i n
Ph il ipp in e C urre nc y. T h e pes o eq ui val ent wa s b as e d by the con si gne e o n
the e xch ang e rat e of P2. 0 15 to $1 .0 0 wh ic h wa s th e ra te e xi st ing a t tha t
time . The tri al c our t com mitt ed n o error in a dop ti n g the a for esa id ra te o f
exc han ge.
DO CT RI NE S :
COM M ER CI A L L A W; CO M MON C A RR I ER S ; BIL L O F LA DI N G; P UR P O S E.
— T he pur po se of th e b il l o f la din g is t o pro vid e f or the ri ght s an d
quantum meruit – as much as he deserves
lia bi li tie s of t he par tie s of the re fere nc e to th e c o ntra ct t o carr y. The
sti pu lat ion i n t he b i ll of la din g l im iti ng the c ommo n carr ier' s li abi li ty to th e
val ue of the g ood s ap pe arin g in t he b il l un les s t he sh ipp er or o wn er
dec lare s a gr eat er va lue , i s v al id and b ind in g.
2. ID .; I D. ; ID .; V ALI DIT Y OF LIMI TA TIO N OF C AR RI E R' S LI A B ILIT Y . —
The lim it ati on of the c arri er's l iab il it y is sa nct io ned by the fr eed om o f t h e
con trac ti ng part ie s t o e st abl is hed su ch st ip ula ti on s, cl aus es , t erms , or
con dit io ns as th ey ma y de em con ven ie nt, pro vi de th ey are not c ontr ary t o
la w, mor al s, go od c us to ms an d pub li c po li cy . A s tip ul ati on f ix ing or
lim it ing th e sum t hat ma y be re cov ere d fr om th e c arrier o n t he lo ss or
deter ior at ion of t he go od s is va l id pro vi de it i s ( a ) rea so nab le an d ju st
under th e cir cum st anc es , and ( b) has be en f a irl y a n d fre el y a gre ed upo n.
3. ID .; ID .; I D.; I D. ; BI N DI NG EFF ECT . — W her e, as in t he ca se a t b ar the
lia bi li tie s of t he def end ant s - ap pel le es w ith res pe ct t o th e l os s or dam ag e d
shi pme nt are ex pre ss ly l i mite d to the c .i. f. va lu e of t he go ods a s p er
con trac t o f sea car ria ge embo die d o n t he bi ll of lad ing , a nd it is no t
con ten ded t hat the con di ti ons t her ein are u nrea so na ble or wer e no t fre el y
and f air ly agr eed up on, the sh ipp er an d c on sig n ee ar e bo und by th e
sti pu lat ion s.
4. ID .; ID .; C A RR I ER ' S LI A BI L IT Y FO R D A MA G E S, D AT E OF
COM M EN C EM E NT T H E R E OF. — Th e obl ig ati on of the ca rri er to pa y for
the d amag e c omme nc ed on th e dat e it fai le d to d eli ver t he shi pme nt i n
good con dit io n to th e co nsi gne e. Th us, it sh ou ld be r ei mbur se d for it s
dol lar pa yme nts at t he r a t e of e xch ang e e xi st in g a t t hat tim e.
5. I N SU R A NC E; M AR IN E I N S UR A NC E ; R IG HT S OF I N SU R ER A S
S UB R OG E E T O RI GHT S OF A S S UR E D; R E ST R ICT E D B Y BI LL OF
LA DI NG . — The pl ai nti ff - appe ll ant , a s i ns urer, aft er pa yi ng t he cl aim o f
the ins ure d for dam age s u nder the in su ra nc e, is sub rogat ed m ere ly to t h e
righ ts of t he a ss ure d a s s ubrog ee, it ca n re co ver o nly the am oun t th at i s
reco ver abl e b y the l att er. S in ce the ri ght of th e as sure d, in ca se of l os s
or d ama ge to t he go ods , is l imi ted or r estr ic te d b y th e pro vi sio ns i n th e
bil l of l adi ng, a s ui t by th e i ns ured a s su brog ee ne ces sar il y is sub je ct to
li ke li mit at ion s a nd res tri c tio ns.
4
OBLICON CASE DIGESTS (SEPT 2)
Ca se # 4 : M Y RO N C. P A PA , Ad m in i st rato r of t he Te state Estat e of
An g e la M. Butt e, pe titio n er , vs . A . U . VAL E N CI A and C O. I N C., F EL I X
P EA R RO Y O, S P S. A R S EN I O B . R E YE S & AM A ND A S ANT O S, and D ELFI N
JA O, re sponde nts.
G. R. No. 10 518 8 J an u a ry 23, 199 8
F ACT S: T he ca se ar os e f r om a sa le of a p arc el of l and a lle ged ly m ade t o
priv ate res pon den t Pen ar royo by pet it ion er a cti ng as a ttor ne y - in - fa ct o f
An ne B utt e. The pur ch as er, thro ugh Va len ci a, mad e a ch ec k pa ymen t i n
the a mou nt o f P40 ,00 0 and in c as h, P5 ,00 0. Bo th w ere a cc ept ed b y
pet iti oner a s ev id enc ed by var io us re cei pt s. It a ppear ed th at th e sa id
prope r ty ha s a lre ady be en mort gag ed t o t he ban k pr evi ou sl y to get her w ith
other pr oper ti es of B ut te. W hen But te pa sse d aw ay , t he pri va te
resp ond ent Pe narr oyo no w dem and ed t hat t he t it l e t o th e pro pert y be
con ve yed to h im, h ow ev er th e b an k r efu sed . He nc e, th e f il i n g of a su it for
spe ci fi c pe rfor man ce by priv ate re spo nde nts ag ai n st t he pet it ion er. T he
lo wer cou rt r ule d in fav or of the pr iva te r es pon den ts a nd ord ered her ei n
pet iti oner t he c onv ey an c e or t he pro pert y or if not, i ts p aym ent . T he
pet iti oner a ppe al ed th e lo wer co urt 's de ci si on a lle g ing th at th e sa le wa s
not c ons umm ate d as he nev er enc as hed t he ch ec k g i ven a s part o f the
purc has e pri ce.
T he Co urt o f Ap pe al s aff irme d wi th mo di fi cat io ns th e lo wer c ourt 's
dec is ion . It he ld t hat th ere w as a co ns umma te d sal e of the su bje ct
prope rty de sp ite .
IS S U E S: WO N the s ale i n que sti on wa s con su mma te d
H EL D: Y E S . Pet it ion er ar gue s th at re sp ond ent Co u rt of A ppe al s erre d i n
con cl udi ng t hat t he a lle ged s ale of th e su bje ct pr oper ty h ad be e n
con sum mat ed. He co nte nds th at s uch a con c lus i on is b ase d on th e
erron eou s pre su mpt ion th at th e ch ec k (i n the amo u nt of P4 0,0 00. 00) h ad
been ca she d, c it ing Art . 1 249 o f the Ci vi l C ode , wh ich prov id es , in p art,
that p ay men t by c he ck s sha ll pr odu ce t he ef fe ct of pa yme nt on ly whe n
the y ha ve bee n c ash ed or whe n th rou gh t he f au lt o f t he cr ed itor the y h av e
been i mpa ire d. P et iti one r in si st s tha t he ne ver ca she d sai d ch ec k; and ,
suc h b ei ng the ca se , its d eli ver y nev er p rod uce d t he eff ec t o f p aym ent .
- It i s an un di spu ted fa ct th at r es pon den ts Val en ci a a nd P eñarr oy o had
giv en pe tit io ner Myr on C . Pap a the am oun ts of Five Th ou san d Pe so s
(P5 ,00 0.0 0) in c ash o n 24 Ma y 197 3, an d F orty Th ous and Pe so s
(P4 0,0 00. 00) i n che ck on 15 Jun e 197 3, in p aym ent of th e pur cha se pr ice
of th e su bje ct lot . P et iti on er him se lf a dmi ts h av ing r ece iv ed s aid amo unt s ,
quantum meruit – as much as he deserves
and ha vi ng i ssu ed re ce ipt s t her efor . Pe ti ti oner 's a s sert ion t hat h e nev er
enc ash ed the a fore sa id ch eck i s not su bs tan ti ate d a nd is at od ds w ith h i s
sta teme nt i n hi s an sw er that "he can n o lo nger r eca ll t he tr ans ac tio n
wh ich is su ppo sed to h av e hap pen ed 1 0 ye ars ago ." Aft er mo re t han t e n
(10) y ear s fro m th e p aym ent in p art b y cas h an d i n part by ch ec k, t h e
pres ump tio n is t hat t he c hec k had b een e nc as hed . As a lrea dy s tat ed, h e
eve n wai ve d t he pre sen tat ion of ora l ev ide nce .
- Gra nt ing tha t p et it ion er had ne ver enc as hed th e c hec k, hi s f ai lure to do
so f or mo re t han ten (10) year s u ndo ubt edl y r esu lt e d in the im pai rme nt o f
the ch ec k t hrou gh hi s u nre aso nab le and un ex pl ain ed de lay .
- Wh il e i t i s tru e th at th e de li ver y of a c hec k pr odu ces the ef fec t of
paym ent on ly wh en i t i s c ash ed, pur sua nt t o Art. 1 249 o f th e C i vi l C ode ,
the r ule i s ot her wi se if the deb tor is pre jud ic ed b y th e cr ed itor 's
unrea so nab le de la y in pre sen tmen t. The a cc ept an ce of a ch ec k imp li es an
under ta kin g of due d il ig en ce i n pre sen ti ng i t for p a ymen t, a nd i f he fr om
who m it is re ce iv ed su sta i ns lo ss b y wan t of su ch di lig en ce, i t wi ll be h eld
to oper ate a s ac tua l pa y ment o f the d ebt or o bl ig ati on for whi ch i t wa s
giv en. It has , l ik ew is e, b een h el d th at if n o pr ese n tme nt is m ade at al l ,
the dr aw er ca nno t be he ld l iab le irre spe ct iv e of l oss or in jur y un le ss
pres ent men t i s oth erw is e exc us ed. Th is is i n h armo ny wi th Ar ti cl e 1 249 of
the Ci vi l Cod e un der wh ic h pa yme nt b y way of ch e ck o r ot her neg oti ab le
ins trum ent i s c ond it ion ed on its be in g c ash ed , e xc ept wh en t hro ugh the
fau lt of th e cre dit or, th e ins trum ent i s im pa ired . T he pay ee of a c he c k
wou ld be a cre dit or un der thi s pro v is ion and if its n on - pa ym ent is cau se d
by h i s n egl ig enc e, pa yme nt wi ll be dee med ef fe cte d and th e o bl iga ti on f or
wh ich th e c hec k wa s g ive n as co nd iti ona l p ay men t wi ll be di sc harg ed. -
Con si der ing th at r esp ond ent s Va len ci a an d Pe ñarr oyo had fu lf il led th eir
part of the co ntr act of s ale by de li ver ing th e p ay ment of the pur ch as e
pric e, sa id re spo nde nt s, t heref ore , ha d th e ri ght to comp el pet it ion er to
del iv er to t hem t he o wn e r's d upl ic ate of T CT N o. 2899 3 of An gel a M.
Bu tte an d t he pea ce ful po sse ss io n a nd enj oy men t o f the l ot in que st ion .
DO CT RI NE : CI V IL L A W; OB LI G ATIO N S AN D CO NT R ACT S ; P A YM E NT B Y
CH E C K; W H E N CO ND I TIO N ED O N I TS B EI N G CA S H E D E XC E PT
THR O UG H TH E F A ULT OF T H E C R E DITO R TH E IN ST R UM E NT I S
IM PA IR E D; W H ER E NO N - P A YM E NT I S C A U S ED B Y H I S N E GLI G E NC E,
P A YM E NT I S D E EM ED E F FE CT ED . — W hi le it is tru e tha t t he d el iv ery of
a c hee k p rod uce s the ef fe ct of pay men t o nl y wh en i t i s cas he d, purs ua nt
to A rt. 1 249 of t he C iv il Cod e, th e ru le i s ot her wi se i f th e de btor is
prej udi ce d b y th e cre di t or's unre as ona bl e de la y in pr ese ntm ent . Th e
acc ept an ce o f a c he ck imp lie s a n un dert ak ing of du e d i li ge nce in
5
OBLICON CASE DIGESTS (SEPT 2)
pres ent ing it for pay men t, and if h e fro m w hom it is r ece iv ed s us ta ins lo ss
by wan t of su ch di lig en ce, it wi ll be h el d to ope rat e as a ctu al pa yme nt o f
the de bt or o bl iga tio n for wh ich it w as g ive n. It has , li ke wi se, b een h el d
that i f no pre sen t me nt i s mad e at al l, th e dra wer can not be h eld l ia bl e
irre spe ct ive o f los s or in j ury un les s pre sen tme nt i s o ther w ise e xc use d.
T his is in harm on y w ith Art ic le 124 9 of the Ci v il Cod e un der wh ich
paym ent by w ay o f ch ec k or o th er neg ot iab le i nst ru ment is c ond i t ion ed on
its b ein g ca she d, ex cep t wh en thr oug h the fa ul t of th e cred it or, the
ins trum ent i s i mpa ire d. T he p aye e o f a ch ec k wou l d be a cred it or u nder
thi s pr ov is ion an d i f i ts non - pay men t i s cau se d by hi s ne gl ige nc e,
paym ent w il l b e de eme d effe ct ed a nd t he obl ig ati o n for wh ic h th e c he ck
wa s g iv en as co ndi ti ona l p ayme nt w il l b e d is ch arge d.
Ca se # 5 : P HILI P P IN E A I RL I N E S, IN C. , p e tition e r, vs. HO N. C OU RT OF
A PP E AL S, H ON . J UD G E RI CA R DO D. GA L A NO , C ourt of Fi rst Inst ance
o f Man ila , Br anch XII I, J AIM E K . DE L RO S AR IO, Deput y She r iff, Cou rt
o f F i rst Inst anc e, M an i la, an d AM EL I A T A N, r espo ndents.
Ci vi l L aw – P aym ent
F ACT S:
 Am el ia Ta n co mme nce d a comp la int for d ama ge s b efore the Co urt o f
F irs t In sta nc e ag ain st P hil ip pin e Air li nes , In c. ( P AL) . The Co ur t
rende red a j udg men t in f avor o f the fo rmer a nd a gai nst t he la tte r. 
 RUL IN G:
P AL f il ed i ts a ppe al wi th t he Co urt o f A pp eal s (C A) , an d th e ap pel la te
cour t aff irme d the j udg me nt of th e lo wer c ourt wit h th e m od if ica ti on
that P AL i s co nde mne d t o p ay t he la tter t he s um of P 25, 0 00. 00 as
dama ges a nd P5 , 0 00. 00 a s a ttor ney ’ s f ee.
 Jud gmen t be came f ina l an d e xe cut ory an d wa s c orre sp ond ing ly
enter ed in th e ca se , w h ich wa s rem and ed t o th e tria l c ourt for
exe cut io n. T he tri al co urt upo n t he mot ion of Ame lia Tan i ss ued an
order o f ex ecu ti on w ith th e corr es pon di ng wr it i n fav or of t h e
resp ond ent . Sa id wr it wa s du l y re ferre d t o Dep ut y S heri ff Re ye s f or
enfor ce men t.
 F our mon th s lat er, Ame li a T an m ove d for th e is sua n ce of an a li as wr it
of e xe cut io n, st ati ng th at the j udg men t r end ered b y t he lo wer c ourt ,
and a ffir med wi th mo di fi c ati on b y the C A, re mai ne d u ns at isf ie d. P AL
oppo se d the m ot ion , sta ti n g t hat it ha d alr ea dy fu ll y pai d it s ob lig at ion
to pl ai nti ff th rou gh th e i ssu an ce of che ck s pa ya ble t o the dep uty
quantum meruit – as much as he deserves
sher iff w ho l ate r d id n ot ap pea r w ith hi s re t urn a nd i ns tea d
abs con ded .
 The C A d en ied the is sua nce o f th e al ia s wr it f or bein g pre mat ure.
Af ter t wo mo nth s the C A g rante d her an a li as wri t of ex ec ut ion f or the
ful l s at isf ac tio n o f th e j u dgme nt re nd ered , w hen she fi led ano the r
moti on. D ep uty Sher if f d el Ro sar io is ap po int ed spe ci al sh eri ff fo r
enfor ce men t ther eof . 
 P AL f ile d an ur gen t m ot ion t o q ua sh th e al ias
wri t of e xe cut io n st ati ng that no ret urn o f th e wr it h ad a s ye t bee n
made by Dep ut y Sher iff Re yes and tha t j udgm ent debt had alr ead y
been fu ll y sat is fi ed by the form er a s e vi de nce d b y t he c as h v ou cher s
sig ned an d r ece iv ed by th e e x ec ut ing sh eri ff.
 Dep ut y Sher if f d el Ro sar io ser ved a n ot ice of ga rnis hme nt on the
depo si tor y ba nk o f P AL, throu gh its man ager a nd gar ni she d th e
lat ter’ s dep os it. He nc e, P AL bro ugh t th e cas e t o t he Sup rem e C ourt
and fi led a pet it ion f or c er tior ari .
IS S U E S:
1. WO N an al ia s wri t o f e xe cut ion c an be is su ed wi th out pri or re tur n o f
the ori gin al wr it by th e im plem ent in g o ff icer . Y E S
2. WO N pa yme nt of j udg men t t o t he im pl eme nti ng of fi cer as d ire cte d i n
the wr it of exe cu ti on con st itu tes s ati sf act io n o f jud g ment .N O
3. WO N p ay men t ma de in ch eck s t o t he s her iff an d un der h is nam e i s a
val id pa yme nt to ex tin gu is h j udgm en t o f d ebt .N O
1. A ffi rmat iv e. Te chn ic a lit y ca nno t be c oun ten anc ed to d efe at th e
exe cut io n o f a ju dgm ent f or e xec ut ion i s t he fru it a nd e nd of the s uit a nd
is v ery a pt ly c al le d the li fe of t he l aw . A jud gme n t can not be ren der ed
nuga tor y b y unr ea son abl e app li cat ion of a st ri ct ru le of pr oce dure . Ve ste d
righ t we re ne ver int end ed to r es t on t he req uir eme nt of a r etur n. So l ong
as j udg men t i s not sa t i sfi ed, a pl ai nti ff is e nt it led t o ot her wri ts o f
exe cut io n.
2. N eg ati ve . In ge nera l, a pay men t, in o rder to be effe ct iv e to di sc har ge
an ob lig at ion , m us t be m ade to t he pro per pe rso n . Art ic le 12 40 of t he
Ci vi l Cod e pro vid es : 
 “Pa ymen t m ad e t o t he per so n i n who se fa vor th e
obl iga ti on has b een co n sti tut ed, or hi s su cce s so r in in ter est , o r a ny
pers on aut hor ize d t o r ece i ve it. ”
Und er ord inar y ci rcu ms ta nce s, pa yme nt b y t he j u dgme nt de btor i n the
cas e a t bar, to th e sher if f sho uld b e v al id pa yme nt t o e xti ngu is h jud gme nt
of d ebt . 
 H ow ev er, un der the p ecu li ar cir cu mst an ces of t hi s cas e, th e
6
OBLICON CASE DIGESTS (SEPT 2)
paym ent t o the a bs con di n g s her iff b y ch ec k in h is name d id no t oper ate to h is ex clu si ve ben ef it. For th e pre ju di ce t hat re sul ted , th e p eti ti oner
as a s at isf ac tio n of the ju dgme nt deb t. him sel f m us t b ear the fa ul t... ”
3. N ega ti ve. Ar ti cl e 12 49 of th e C iv i l C ode pro vid es: 
 “T he p ay men t of
debt s in m one y sh al l be made i n the curr enc y st ip ula ted , and i f it i s no t Ha vin g fai le d t o emp lo y the pr oper s afe gu ards to p rot ect i ts el f , the
pos si ble to de li ver su ch curre nc y, t hen in th e cur renc y w hi ch i s le ga l jud gmen t deb tor wh ose a c t ma de po ss ibl e t he lo ss h ad b ut it se lf to bla me.
tend er in th e P hi lip pi ne s ”. 
 Un le ss a uth ori zed t o do so b y la w or b y ___
con sen t o f t he ob li gee , a pu bl ic o ff icer has n o a uth ori ty t o ac cep t
any thi ng o the r th an mo ne y in pa ymen t of an o bl ig a tio n un der a jud gme nt
bei ng exe cu ted . Str ic tl y spe ak ing , t he ac cep tan ce by the s her iff of th e
pet iti oner ’ s che ck s doe s no t, per s e, op erat e a s a d is ch arge o f t he
jud gmen t of deb t. 
 A c hec k, w het her m ana ger ’s c he ck or ordi nar y ch ec k ,
is not l ega l t en der, an d a n of fer of a che ck i n p ay ment of a deb t is not a
val id t end er or p ay men t and m ay b e ref use d re c eip t by t he o bl ige or
cred ito r. He nce , t he ob li ga ti o n i s not ex ti ngu is hed .

T H E TW I ST: Pay men t in cas h i s lo gi ca l, bu t it wa s not pro per . 
 P ay men t

in cas h t o th e i mpl eme nt i ng of fi cer ma y be de eme d ab so lut e pa yme nt of
jud gmen t de bt bu t the Co urt ha s ne ver, in th e lea st bi t, s ugg es ted t hat
jud gmen t d eb tors s hou ld se ttl e t he ir o bl iga ti ons by turn ing o ver hug e
amou nts o f cas h or leg al ten der to t he ex ecu ti ng off i cers . Pa ym ent i n
cas h wo ul d res ul t in d ama ge or en dl es s li ti gat ion s e ach t ime a sh erif f w ith
huge am oun ts of ca sh in h is han ds de ci des t o a bs co nd.

As a pr ote ct iv e me asu re, t he c ourt s e nco ura ge t he p ract ic e of pa yme nt o f

che ck pro vid ed a de qua te con tro ls ar e i ns tit ute d to pr eve nt wro ngf ul
paym ent a nd il leg al w ith dr awa l or d is bur sem ent of fu nds .
Ho we ver, in the ca se at b ar, i t i s o ut of t he ordi nar y th at che ck s int end ed
for a p art ic ula r p ay ee are made ou t in th e nam e o f a noth er. The i ss uan ce
of the c hec k s in the n a me o f the s her iff c le arl y m ade p os sib le t he
mis appr opr iat io n o f t he fu nds th at wer e wit hdr aw n.

T he C ourt of App eal s e x pla ine d: 
 “Kn ow in g as it d oes t hat the int end ed
paym ent w as for t he r es p onde nt Am el ia T an, the p eti tio ner cor pora ti on,
uti li zi ng t he ser vi ce s o f i ts pers on nel w ho a re o r s ho uld be kn ow led gea bl e
abou t th e ac ce pte d pro ce dure a nd re su lt ing co nse q uen ces of t he c he ck s
draw n, ne ver the l e ss, in t his i ns tan ce, wi tho ut pru den ce, de par ted fr om
wha t i s g ener al ly ob ser ve d and do ne, and pl ac ed a s pa ye e in th e c hec ks
the n ame of t he e rran t S heri ff a nd n ot t he n ame of th e ri ght fu l pa yee .
Pe tit io ner th ere by cr eat ed a s it uat ion wh ic h perm it t ed the sa id Sher if f to
pers ona ll y en ca sh sai d c hec ks a nd m is appr opr iat e the pr oce ed s th ereo f

7
quantum meruit – as much as he deserves
OBLICON CASE DIGESTS (SEPT 2)
Ca se # 6 : R E PA R AT I ON S C OMM IS S IO N, pla intiff - a ppel lants , vs.
UN I VE R S AL D E E P - S EA F IS HI NG CO R PO R AT I ON a nd M AN ILA S UR ET Y
AN D F ID EL IT Y CO ., IN C. , d efen d an ts - ap p el lant s. 
 be c la ime d th at t here is obs cur it y in the term s o f the con tra ct a s to th e
MA NIL A S U RE TY & F I D E L IT Y CO ., I NC ., th i rd - p a r ty p laint iff - app el lee ,
vs. P A BLO S . S AR MI EN T O, th i rd - p ar ty d efen d ant - appel lant.
S YN O P SI S:
T he Re para ti ons Comm is s ion a ward ed s ix (6) tra w l boat s to th e Un iver sa l
Dee p - Sea F ish in g Cor pora tio n ( Un iv ers al, f or sh ort) wh ich were d el iv ered
two a t a t ime , eac h del iv ery be ing c ov ered b y a C ontra ct of Con di tio na l
Pur ch ase and S ale pro vid ing f or i den ti ca l s che dul e s of p ay men ts — th e
firs t in st al lme nt rep res en tin g 10 % o f the tot al c o st w as t o be p aid 24
mont hs af ter d el ive ry an d th e ba lan ce of t he to ta l cos t to be p ai d in te n
(10) eq ual ins ta llm ent s, w hic h, i n the sc h edu le were nu mber ed a s "1 ", " 2" ,
"3 ", e tc. , th e f irs t of wh ic h wa s d ue o ne year aft er the f ir st i ns tal lm ent .
Wh en the Rep arat io ns C ommi ss io n sue d Un iv ers al and i ts s uret y to
reco ver var io us amo unt s o f mo ney du e u nder th e co nstr act s, th ey cl ai med
that th e a mou nt s were n ot yet du e a nd dem and a ble . Uni ver sa l a ll ege d
that t her e wa s an o bs cur it y in t he ter ms o f the con tr act s in q ue sti on w hi ch
wa s cau se d by t he pl ai nt i ff as t o the a mou nt s and due da te s of th e fir st
ins ta llm ent s wh ic h sh oul d ha ve be en f irst f ix ed be f ore the c red ito r cou ld
dema nd i ts pa ym ent fr om t he deb tor, spe ci fi ca ll y r ef errin g to th e sc he dul e
of pa yme nt s w hi ch a ll ege dly in di cat ed t wo ( 2) du e date s fo r th e pa yme nt
of t he fir st in st al lme nt.
T he Supr eme Co urt fou n d the term s o f th e c ontr act s c lea r an d le ft n o
doub t a s to t he int ent of t he c ontr act in g par ti es t ha t the fir st ins ta llm ent
due 24 m on ths a fte r de li very wa s di ffer ent from t he the fir st te n (10)
equa l year ly i nst al lme nt o f th e b ala nc e o f t he pur c has e pr ic e ( wh ich are
not de sig nat ed as " fi r st ", " sec ond ", " thi rd" , e tc ., in st all men ts) .
1. CO NT R ACT S ; I NT E R P RE T A T IO N; CA S E AT B A R. — Wher e the
sch edu le o f pa yme nts s pec if ica ll y pro v ide s th at he fir st i nst al lme nt
repre sen ti ng 1 0 % of the purc has e pr ic e sh al l be p aid wi th in 2 4 mon th s
from th e dat e of c omp le te de li ver y of th e goo ds pur ch as ed an d the
bal anc e t o be pai d in te n (10) equ al ye arl y in sta ll m ent s o n t he ba lan ce of
the pur ch ase pr ic e is d iff e rent fro m the f irst ins ta llm ent repr es ent ing 1 0 %
of t he p urc ha se p ri ce. Moreo ver , w her e th e sc hedu le o f pay men ts
spe ci fi cal ly de sig nat es a paym ent r epr ese nt ing 1 0 % o f the purc ha se pr ic e
as a "f irs t i nst al lme nt " a nd th e s ub seq uen t pa ym ent s repr es ent in g th e
quantum meruit – as much as he deserves
bal anc e of the pu rch as e p rice ar e n ot de si gna ted a s the "fir st ", " se con d" ,
"th ird ", et c., i ns tal lm ent s but are nu mber ed as " 1" , "2 ", "3 ", et c., i t can not
amou nts a n d ue dat es of t he f irs t in sta llm en t.
4. O BL IG AT IO N S AN D C O NTR A CT S; A P PL IC A BI LIT Y OF A RTI CL E S 125 2
TO 1 254 OF T H E N E W C I V IL C OD E . — T he rul es co nta in ed in Art ic le s
1252 to 1 254 of th e Ci vi l Cod e a pp ly to a per son o wi ng se vera l deb ts of
the s ame ki nd t o a sin gl e cred ito r. Th ey can not be made app li cab le to a
pers on w hos e ob lig at ion a s a m ere s uret y i s b oth co nti nge nt an d si ng u lar,
wh ich i n t hi s cas e is th e f ull an d f ai thf ul co mp lia nc e w ith th e t erms o f t he
con trac t of co nd it ion al p urch ase a nd sa le o f r ep arat ion s goo ds . T he
obl iga ti on in cl ude d t he p ayme nt, n ot onl y of the f irst i ns tal lm ent in th e
amou nt of P53 ,64 3.0 0, bu t a ls o of the t en (10 ) e qu al ye arl y in sta ll men ts
of P5 6,5 97. 20 per ann u m. Th e a mou nt of P1 0, 000. 00 wa s, in dee d,
dedu ct ed fr om th e am oun t of P 53, 643 .0 0, bu t th en t he fi rst of t he t en (1 0)
equa l ye arl y in sta ll men t s h ad al so a ccr ued ; h enc e, no erro r wa s
comm it ted in hol di ng t h e sur et y co mpa ny to t h e fu ll e xt ent of its
under ta kin g.
5. I D.; E XT EN T OF L IA B IL ITY OF PE R S ON SI GN IN G I N D U AL C A PA CI TY .
— An ac tin g g ene ral ma n ager of a c omp an y w ho a ppear s to hav e s ig ned
an i ndem ni ty a gre eme nt tw ice ; f irst , i n hi s c apa c ity as act in g ge nera l
mana ger, an d s ec ond , i n his in di vi dua l cap ac it y, is per son al ly li ab le o n
the co ntr act a s an in dem ni tor, mo re p arti cu lar ly w here t he
ack no wl edg men t st ate s t h at he "f or h im sel f an d o n beha lf " o f th e c omp any
pers ona ll y ap pear ed b efor e t he n otar y an d ac kn ow le dged tha t the amou n t
is hi s o wn fr ee and vo lu nt ary act an d dee d.
____ __
FACT S
- U ni ver sal wa s aw arde d 6 tr aw l boa ts b y the Rep a rati ons Com mi ss ion a s
end- u ser o f rep arat io n go ods . T he se w ere d el iver e d 2 at a t ime. - T he
firs t 2 bo at s were de li ver e d N ov 20 , 1 958 an d t he C ontra ct of
Con di tio na l Pur cha se and Sa le of Re par ati on s G oo ds e xe cut ed F eb 12,
1960 pro vi ded am ong ot h ers, th at "t he fir st in sta ll ment repr es ent in g 1 0 %
of t he am oun t.. . sha ll be pai d wi thi n 24 mon ths fr o m th e dat e o f com ple te
del iv ery ther eof , th e ba la n ce s ha ll b e p aid in the ma nner h ere in sta ted as
sho wn i n t he S ch edu le of P ay men ts ". To guar ant e e th e com pl ian ce w it h
the o bl ig ati on s un der sa id con tra ct, a p erfor man ce bond in the am oun t of
P5 3,6 43. 00, w ith U NI V E R S AL as pr inc ip a l an d t he Mani la
Sur et y & Fi de li ty Co ., I nc. , a s s uret y, wa s exe cut ed in f av or o f t h e
Rep arat io ns Comm i ss ion . A cor res pon di ng i nde m nit y agr eem ent wa s
exe cut ed t o ind emn if y th e s uret y c ompa ny f or an y d amag e, l os s ch arge s,
8
OBLICON CASE DIGESTS (SEPT 2)
etc ., wh ic h i t m ay su st ain or inc u r as a con seq ue nc e of ha vi ng be com e a
sure ty upo n the per form an ce bon d
- T he ne xt 2 b oat s were d eli ver ed A pri l 2 0, 195 9 wi th c on trac t d ate d No v
25, 195 9 pro vid ed for a s i mil ar st ipu lat io n o n the s c hedu le of pa ym ent s. A
perfo rman ce bo nd in the amo unt of P 6 8, 777 .77 , is sue d b y t he M an ila
Sur et y & F id el it y Co ., I nc ., w as a ls o s ubm itt ed t o guara nte e th e fa it hfu l
comp li an ce w ith t he ob li g ati ons s et fo rth i n the c o ntra ct, 6 and i nde mni ty
agree men t wa s ex ec ute d i n f av or of th e sur ety com pan y in c ons id erat io n
of t he sa id bon d.
- T he de li ver y of the la s t 2 boa ts w ere co ver ed by a c on trac t for the
Ut il iza ti on o f R ep arat ion Goo ds exe cu ted by the p arti es on Fe bru ary 12,
1960 w ith a s im ilar s c hedu le of 1 0 eq ua l y e arly in st al lme nts . A
perfo rman ce bon d i n th e amou nt o f P 54 ,50 0.0 0 i ssu ed b y t he Ma ni la
Sur et y & F ide li ty Co ., Inc ., was s ubm itt ed, an d a n ind emn it y a gree men t
wa s e xe cut ed by U NI V E RS AL in fa vor of th e sure ty c ompa ny.
- O n Au gu st 10, 1 962 , the R epar at ion s Co mmi ss io n ins ti tut ed the pr es ent
act ion a gai ns t U NI V ER S A L a nd the sure ty c omp an y t o r ec ove r var iou s
amou nts of mo ney du e u nder the se co ntra ct s. In ans we r, UN I V ER S AL
cla ime d tha t the a mou nt s of mon ey s oug ht to b e co l lec ted ar e not yet d ue
and dem and ab le. The s ur ety co mpa ny al so co nt en ded tha t t he ac ti on is
prema tu re , but set u p a cr os s - c la im ag ai nst U NI V E R S AL for
reim burs eme nt of wha te v er a mou nt of m one y it may ha ve t o pay t he
pla int if f by re as on of t he co mpl ai nt, in clu di ng int eres t, a nd fo r the
col le ct ion of a cc umu lat ed and unp ai d p rem ium s on t he b ond s w ith i nter e s t
there on. W ith l ea ve of co urts f irs t ob tai ned , th e su rety comp an y fi led a
thir d - par ty c omp lai nt ag ai nst P ab lo S . Sarm ie nto , o ne o f t he in dem nit ors
in the ind emn it y agre e ment s. T h e t hir d - p arty de fen dan t P abl o S .
Sar mie nto den ie d per so na l l iab il it y c lai mi n g t hat he sig ned the in demn it y
agree men ts i n q ue sti on i n h is ca pa ci ty as a ct ing gen era l m an ager of
UN I VE R S AL . Af ter appr op riat e pr oc eed ing s and up o n th e pr ec ed ing fa ct s,
the tri al co urt ren dere d t h e j udgm en t s tat ed. H en ce, th is app ea l.
- U NI V E R S AL c la ims t h at ther e is a n ob scur it y in t he te rms o f the
con trac ts in qu es ti on w hi c h wer e ca use d by the p la i nti ff a s to t he am oun ts
and due da tes of th e f irs t in sta ll men ts wh ic h s ho ul d ha ve bee n f irs t f ix ed
befor e a cr ed itor ca n d em and it s p aym en t fr om t he debt or. T he S ch edu l e
of Pa ym ent a tta che d to, an d f orm ing a p art of , th e con tra ct for t he
purc has e and sal e of th e f irst 2 b oat s w hi ch st ate s t hat th e amo unt o f fir st
ins ta llm ent is P 53 ,64 2.8 4 and t he due dat e of i s pa ymen t i s M ay 8, 1 961 .
Ho we ver, the a mou nt o f t he fi rst of t he s uc cee di ng item iz ed ins ta llm ent s
is P 56, 597 .20 a nd the du e dat e is Ma y 8, 196 2. In th e c ase o f t he 3rd an d
4th boa ts , t he fir st in st al l ment s are P 68, 777 .77 an d due i n Jul y, 19 61 and
quantum meruit – as much as he deserves
P7 2,5 65. 68 a nd du e in J uly , 19 62, r esp ec ti vel y. I n the con tr a ct fo r the
purc has e an d sa le o f th e la st 2 bo at s, th e am o unt s in di cat ed a s fir st
ins ta llm ent s are P5 4,5 00 .00 an d P 57, 501 .57 , an d t he du e dat es o f
paym ent ar e O ct ober 17 , 1 961 and O cto ber 17 , 1 962 , res pec ti ve ly .
IS S U E S
1. W ON t he f irs t in sta ll ment s un der th e 3 co n trac ts o f con di tio na l
purc has e a nd sa le were a lrea dy due and de man dab le whe n t he comp la in t
wa s f il ed. Y E S
2. WO N th e T C e rred i n not aw ard ing t he sur ety c ompa ny pre miu ms on
the perf orma nc e b ond s .Y E S 

3. W O N the cou rt err e d in n ot ap pl yi ng t he dow n pa yme nt t o the
guara nte ed ind ebt edn es s app ly ing Art 125 4 ( Wher e there is no i mpu tat io n
of pa yme nt m ade b y e ith er the deb tor or cred it or, the de bt wh ich is the
most on ero us to the de bt o r sh al l b e d eem ed to ha ve been s at i sf ied ). NO
4. W ON Pab lo Sarm ien to is l iab le ha vi ng e xe cut ed the i nde mn ity
agree men ts in h is ca pa cit y a s a ct ing ge ner al man ag er of un iv ers al . Y E S
H ELD
1. Y E S.
The o bl ig ati on of U NI V E RS A L t o pay th e f ir st in sta ll men ts on th e
purc has e pri ce of th e s ix (6) r epa rat ion s ve ss el s wa s a lre ady du e and
dema nda bl e whe n the pr e sen t a ct io n wa s com men c ed on A ugu st 1 0, 19 62.
Al so d ue an d dem and ed f rom U NI V E RS A L wer e th e f irs t of th e ten ( 10)
equa l year ly i nst al lme nt s on t he bal an ce of the pur c has e pr ic e o f t he fir st
2 b oat s as we ll a s the s e con d pair o f boa ts . T he f i rst ac cru ed on M ay 8,
1962 , wh ile th e sec ond f el l d ue on Ju ly 31, 19 62.
In t he co ntra ct c onc ern ing the f irs t 2 bo at s, the par tie s e xpr es sl y a gre e d
that t he fir st in st al lme nt repr es ent ing 1 0 % o f th e p urch as e p ri ce or
P5 3,6 42. 84 s ha ll b e pa id wit hi n 24 mon ths from the d ate of c omp le t e
del iv ery of th e ve sse l or on M ay 8, 1 961 , a nd th e bal anc e to be pa id in
ten (10) e qua l year ly i ns t all men ts . Th e amo unt of P 56,5 97. 20 du e o n M ay
8, 1 962 , whi ch i s a ls o cla i med to be a " fir st in st al lm ent, " is bu t t he fir st of
the te n ( 10) eq ual y ear l y ins ta llm ent s of th e bal anc e o f the p urch as e
pric e. - The 2 4 m ont hs f ixe d by t he la w for t he paym ent o f the 'fir st '
ins ta llm ent ar e t he ver y d ate s s tat ed in th e afor eme nti one d s ch edu le s f or
the pa ymen t o f t he r es pe c tiv e ' 1s t' in sta ll men ts . Wh at i s more , i n vie w of
sai d le ga l pro vi sio n, t he Com mi ss ion h ad n o aut ho rity to agr ee t hat t he
1st in sta ll men t sh al l b e p aid on a ny lat er da te, an d the Bu yer mus t ha ve
been a ware of th i s f act .
9
OBLICON CASE DIGESTS (SEPT 2)
2. Y E S - U ni vers al s hou ld awar d t he prem iu ms to the sur ety c omp any .
T he pa yme nt o f pre miu ms on the bon ds t o th e su re ty c omp any had bee n
expr es sl y un dert ak en b y U NI V E R SA L i n th e i ndem nit y a gree men ts
exe cut ed b y .i t in fa vor of t he s uret y co mpa ny . The p rem ium is th e
con si dera ti on f or fur ni sh in g the bon ds and the ob lig ati on t o pa y th e s ame
sub si st s f or a s lon g a s the li ab il ity of th e sure ty sh al l e xi st.
3. NO - Art 12 54 is no t a pp li cab le.
T he rul es c ont ai ned in A rt ic les 1 252 t o 12 54 of t he Ci vi l Co de ap pl y to a
per s on o wi ng s eve ral d eb ts of t he s ame ki nd to a sin gl e cre dit or. Th ey
can not be m ade a ppl ic ab l e t o a p ers on w hos e ob lig ati on as a me re sur et y
is bot h c ont in gen t an d sin gul ar, wh ic h i n th i s c ase i s th e f ul l a nd f ai thf ul
comp li an ce w ith th e t erm s o f t he co ntra ct of co n dit ion al pur ch ase a nd
sal e o f re par ati on s g ood s.
4. YE S - He is li abl e. He sig ned the ind emn it y ag re emen t t wi ce – t he f ir st
in hi s ca pac it y as a ct ing ge nera l man age r a nd s e con d in hi s in di vi dua l
cap ac ity . Be s ide s ac kno wl edgm ent , sta te d t hat Pa bl o Sar mie nto f or
him sel f and i n beh alf o f Un iver sa l per son al ly ap pe ared be fore t he not ary
and ac kno w led ged th at th e do cu men t i s hi s o wn fr ee a nd vo lu ntar y act
and dee d.
Disp o sit ion WH E R EF O R E, the jud gme nt a ppe a led f rom is h ere by
aff irme d w it h th e mo di fi c a ti on t hat the U NI V E R S AL De ep - Se a Fi sh ing
Corp ora tio n i s furt her ord ered to pay th e M ani la S uret y & F ide li ty Co . ,
Inc ., the a mou nt of P7 ,25 1.42 f or the pr emi um s an d d ocu men tar y sta mp s
on t he perf orm anc e b ond s . App el lan ts sh al l p ay pro port ion ate c ost s.
DO CT RI NE S:
CO NT RA CT S; I NT ER P R E T AT I O N; C A SE AT B AR . — Wher e t he sch edu le
of p aym ent s spe c ifi ca ll y prov ide s tha t h e f irs t ins tal lme nt r epre se nt ing
10 % of th e pur cha se pr ic e sh al l be pa id wit hi n 24 m onth s fro m t he da te of
comp le te del i v ery of th e good s p urc ha sed an d t he bal an ce to be pai d in
ten (10 ) equ al y ear ly i nst all men ts o n the b ala nc e o f t he pur ch as e pri ce i s
dif fere nt f rom the fir st i nst al lme nt re pre sen ti ng 10 % o f th e p urc has e
pric e.
Moreo ver , wh ere t he s c hedu le o f pa yme nt s sp e cif ic al ly d es ign at es a
paym ent r epr ese nt ing 1 0 % o f th e pur cha se p ri ce as a "fir st in sta ll men t"
and the s ub seq uen t p ay m ent s re pre sen ti ng the ba l anc e o f t he pur cha se
quantum meruit – as much as he deserves
pric e are n ot de si gna ted a s t he " fir st ", " se con d" , "t hi rd", e tc ., in st al lme nts
but are nu mb er ed a s "1 ", "2 ", "3 ", et c. , it ca nno t b e c lai med th at th ere i s
obs cur it y i n t he term s of the co ntra ct as to th e am ount s an due da te s o f
the fir st in st al lme nt.
2. AC TIO N S; R E CO V E R Y OF M ON E Y D U E O N CO NTR A CT S NO T
P RE M ATU R E. — An a ct io n t o r eco ver v ari ou s a mo u nts of m one y due o n a
con trac t fi led a fte r the exp irat io n of th e spe c ifi ed due d ate s of s ai d
amou nts i s not an ac ti on fi led pre mat ure ly.
3. S UR ET Y S HI P; I ND EM NI TY A GR E E ME NT ; P A YM E NT OF P R EMI UM S ON
TH E B O ND . — The pr emiu m i s the con si dera tio n for f urni sh in g a
perfo rman ce bon d and the o bl iga tio n to p ay t he s am e sub si st s for as l ong
as the l iab il it y o f t he sur et y e xi st s.
4. O BL IG AT IO N S AN D C O NTR A CT S; A P PL IC A BI LIT Y OF A RTI CL E S 125 2
TO 1 254 OF T H E N E W C IV IL C OD E . — T he rul es co nta in ed in Art ic le s
1252 to 1 254 of th e Ci vi l Cod e a pp ly to a per son o wi ng se vera l deb ts of
the s ame ki nd t o a sin gl e cred ito r. Th ey can not be made app li cab le to a
pers on w hos e ob lig at ion a s a m ere s uret y i s b oth co nti nge nt an d si ngu lar,
wh ich i n t hi s cas e is th e f ull an d f ai thf ul co mp lia nc e w ith th e t erms o f t he
con trac t of co nd it ion al p urch ase a nd sa le o f r ep arat ion s goo ds . T he
obl iga ti on in cl ude d t he p ayme nt, n ot onl y of the f irst i ns tal lm ent in th e
amou nt of P53 ,64 3.0 0, bu t a ls o of the t en (10 ) e qu al ye arl y in sta ll men ts
of P5 6,5 97. 20 p er ann u m. Th e a mou nt of P1 0, 000. 00 wa s, in dee d,
dedu ct ed fr om th e am oun t of P 53, 643 .0 0, bu t th en t he fi rst of t he t en (1 0)
equa l ye arl y in sta ll men t s h ad al so a ccr ued ; h enc e, no erro r wa s
comm it ted in hol di ng t h e sur et y co mpa ny to t h e fu ll e xt ent of its
under ta kin g.
5. I D.; E XT EN T OF L IA B IL ITY OF PE R S ON SI GN IN G I N D U AL C A PA CI TY .
— An ac tin g g ene ral ma n ager of a c omp an y w ho a ppear s to hav e s ig ned
an i ndem ni ty a gre eme nt tw ice ; f irst , i n hi s c apa c ity as act in g ge nera l
mana ger, an d s ec ond , i n his in di vi dua l cap ac it y, is per son al ly li ab le o n
the co ntr act a s an in dem ni tor, mo re p arti cu lar ly w here t he
ack no wl edg men t st ate s t h at he "f or h im sel f an d o n beha lf " o f th e c omp any
pers ona ll y ap pear ed b efor e t he n otar y an d ac kn ow le dged tha t the amou n t
is hi s o wn fr ee and vo lu nt ary act an d dee d.
10
OBLICON CASE DIGESTS (SEPT 2)
Ca se # 7 : [G .R . No. 12 385 5. No ve m b e r 20, 20 00.]
N ER E O J . P AC UL DO, p et i tio n e r, vs . CO U RT OF A P P EAL S and
BO NIF A CIO C . R EG AL AD O, re sp o n d e n ts.
Af ter ju dgm ent w as ren de red o rder in g t he pet it ion e r to va ca te the l eas ed
wet mar ke t b ui ld ing an d to pa y b ac k r ent al s, h e pa id th e a mou nt of
P1 1,4 78, 121 .85 for se cu rity de pos it and r en tal s but t he r es pon den t,
wi tho ut pe ti tio ner 's c on se nt, a ppl ie d port io ns o f th e pa ym ent t o hi s ot her
obl iga ti ons w it h t he r es po nden t.
On Aug us t 20, 199 2, p eti t i oner f il ed wit h th e Re gi on al Tri al Cou rt, Que zon
Ci ty an a ct ion f or in jun ct i on and d ama ges s ee ki ng to enj oi n r es pon den t
from d is tur bin g h is pos s ess io n of the pro pert y sub je ct o f th e l ea se
con trac t. O n the sam e da y, res po nde nt fi le d wi th t he Metr opo li tan T r ia l
Cour t, Que zo n C it y a c om pla int for eje ct men t ag ain st p eti ti oner . Att ac hed
to the c omp la int w ere th e t wo ( 2) dem and l ett ers d ated J ul y 6 and J ul y
17, 199 2.
On Aug ust 25, 1 992 , fi v e ( 5) da ys a fter t he f il i ng of t he e jec tme nt
comp la in t, re spo nde nt m ove d to wit hdr aw t he c o mpla in t on t he gr oun d
that cert ai n det ai ls ha d b een om itt ed i n the com pl ain t and m ust b e r e -
comp ute d.
On Apr il 2 2, 1 993 , re spo nden t re - f il ed t he e je ctm ent c omp la int w ith t h e
Metro po lit an Tr ial Co urt, Que zon Ci ty . Co mpu ted fr om A ugu st 1 9 92 u nt i l
Marc h 3 1, 19 93, th e mon t hly re aso na ble c omp en sat ion th at pe tit io ner wa s
lia bl e f or wa s i n t he tot al sum of P 3,9 24, 000 .00 .
MCT C R UL IN G: Rul ed in f avor of pet it ion er. F oun d out tha t th e p eti ti oner
made a tot al pa yme nt of P 10, 949 ,44 7.1 8, to r es p onde nt as of Ju ly 2,
1992 .
RT C R ULI NG: A ffi rmed MCT C’ s ru lin g. Bu t i ss ue d a wr it of e xe cut ion
wher eup on, p et iti on er va c ated t he s ubj ec t prem is e s vo lun tari l y. B y Ju ly
12, 1 994 , pe tit io ner h ad comp le tel y t urne d o ver pos se ss ion of s ub jec t
prope rty to re s po nde nt.
P ET IT IO N ER ’ S A RG UM E NT : H e a lle ged tha t he h ad pa id t he a mou nt o f
P1 1,4 78, 121 .85 fo r sec u rity d epo si t a nd ren ta ls on th e wet m arke t
quantum meruit – as much as he deserves
bui ld ing , but re sp ond ent , w it hou t hi s con se nt, a p pli ed por ti on s of th e
paym ent t o hi s o the r o bl ig ati ons . T he vo uc he r s a nd rece ipt s in di cat ed th at
the p aym ent s ma de wer e for re nta ls . Thu s, a t the t ime of pa ym ent
pet iti oner ha d de cl are d as t o w hi ch obl ig ati on t he pa ym ent mus t b e
app lie d.
The p et iti on er f il ed a p et it ion for re vie w w ith th e C A.
CA RUL IN G: D ism is se d th e pet it ion f ind in g th at pet it ion er imp li ed ly
con sen ted to re spo nde nt ' s a ppl ic at ion of pa ym ent to hea vy eq ui pme nt
broug ht by pe ti tio ner fro m resp ond ent .
Pe tit io ner su bmi ts th at hi s si le nce i s n ot co ns ent bu t is i n f act a rej ec tio n.
On Mar ch 3, 19 95, p et iti o ner fi led a mo ti on for re c ons ider at ion ; ho wev er,
on Fe bru ary 9, 19 96 the C ourt of A ppe al s d en ied th e mot ion .
Hen ce , t hi s a ppe al.
IS S U E: W het her or n ot th e p et iti one r wa s tru ly i n a rrears in th e pa ymen t
of re nta ls on the s ubj ec t p roper ty at t he tim e o f t he fil in g of th e c omp la int
for e je ctm ent ?
S C R ULI NG : R ul ing in p et iti oner 's fa vor: tha t at the time pet it io ner m ade
the pa yme nts , he mad e i t cle ar to r es pon den t t hat th ey wer e t o be app li e d
to hi s re nta l ob li gat ion o n the wet m ark et pr oper t y; th at t here wa s no
cle ar as se nt b y pet it ion er to t he c han ge i n the ma nner o f app li ca tio n of
paym ent ; a nd t ha t e ven if pet it ion er d id n ot de clar e to whi ch of hi s d ebt s
the p aym en t i s to be a ppl ied , th e ap pl ica ti on m ade by re spo nde nt to p a y
the p urch as e pri ce o f eq u ipm e nt t hat wa s not yet d ue an d dem and abl e i s
con trar y t o t he pro vi sio ns of t he la w.
DO CT RI NE S:
CI VI L L A W ; CI VI L CO D E; OB LI G ATIO N AN D C ONT R A CT S; A P PL IC AT IO N
OF
P A YM E NT; RI G HT T O D E CL AR E WH IC H D E BT I S T O B E S ATI SFI E D
FIR ST RE ST S WIT H T HE D EB TO R; CA S E AT B AR . — The r igh t to s pe cif y
wh ich am ong h is v ari ous o bli gat io ns to th e sam e cre dit or is to be s at isf ie d
firs t r es ts w it h the de bto r, as pr ov id ed by Art ic le 12 52 of th e Ci vi l Co de.
11
OBLICON CASE DIGESTS (SEPT 2)
At th e tim e the p eti ti on er m ade th e pa yme nts , he m ad e it cl ear to wou ld be r es ci nde d, t han if the co ntra ct of sa le o f hea vy equ ip men t
resp ond ent t hat t he y we r e t o be a ppl ie d to h is re nta l obl ig at ion s on t he wou ld no t pr oc eed .
F air vie w w et ma rke t pro p erty . T hou gh h e ent ered i nto v ari ous con tra cts
and ob li gat ion s w ith re sp onde nt, i nc lud in g a l ea se co ntra ct o ver el ev en
(11) pro pert y on Qu ez on Ci ty an d sa le of e igh t ( 8) he av y equ ipm ent , al l
the pa yme nt s m ade , a bou t P11 ,00 0,0 00. 00 w ere to be ap pl ied t o re nta l
and se cur it y d epo si t o n t h e F a irv ie w wet mar ke t pr o pert y.

2. I D.; I D. ; I D.; I D. ; CO N S ENT T O C H A NC E TH E M AN N ER OF

A P PLI C ATI O N OF P A YM E NT M U ST B E C L E AR A N D D EFI NIT E; C A S E AT
B AR . — T her e w as n o c l ear a sse nt b y p eti ti oner to th e ch an ge i n th e
mann er of ap pl ic ati on of p ayme nt. T he pe tit io ner' s s ile nc e as reg ard s the
app li cat ion o f p aym ent b y re sp ond ent c ann ot me an t hat h e con sen ted
there to. T here wa s no m eet ing o f the m in ds. T ho ugh an o ff er may b e
made , the a cc ept an ce of s uch o ffer m ust be un con di tio nal a nd un bo und ed
in orde r t hat c on curre nc e ca n gi ve r i se to a perf e cte d con tra ct. H en ce,
pet iti oner c ou ld not be i n es top pel . A ssu mi ng argu endo th at, a s a ll ege d
by re sp ond ent , p eti ti oner did no t, a t t he t im e th e paym ent s wer e ma de,
cho ose t he ob lig at ion to be sat is fi ed fir st, re sp ond ent ma y e xer ci se th e
righ t to ap pl y t he p aym en t s to t h e ot her ob lig at ion s to p eti ti oner . But th is
is s ub je ct to the con di ti on th at t he pe ti ti oner m ust g iv e h is con sen t .
Pe tit io ner' s si len ce is not tant amo unt to con se nt. The c on sen t mu st b e
cle ar a nd de fin it e.

4. ID. ; I D.; I D. ; I D.; GU ID E LIN E W H ER E D EB TO R D ID N OT D EC L AR E

T O WH IC H OF HI S D E BT S P A YM E NT I S T O B E A P PL IE D; C A S E A T
B AR . — U nde r th e l aw , i f the deb tor di d no t d ec la re at the ti me he
made th e pa ym ent to wh i c h of hi s d eb ts wi th the cr e dit or t he p ay men t
is to be ap pl ied , t he la w p rovi ded t he gui de lin e — n o pa ym ent i s t o b e
made to a d ebt tha t i s no t yet d ue a nd t he pa ym ent has t o be app li ed
firs t to the d ebt mo st on e rous to t he deb tor. I n t he in sta nt ca se , t he
purc has e p ri ce of t he ei g ht (8) he av y e qu ipm ent w as n ot ye t d ue at
the t im e th e pa ym ent wa s made , fo r th ere wa s no date se t for su ch
paym ent . Ne it her w as t h ere a dem and b y th e cre dit or to ma ke th e
obl iga ti on to pa y the pur c has e pri ce d ue a nd d ema ndab le . He nc e, t he
app li cat ion mad e b y re sp onde nt is con trar y to the prov is io n of the
la w. Th e l eas e o ver th e F air vie w wet mar ket pro pert y i s th e mo st
onero us amo ng a ll t he o b lig at ion s of pet it ion er to r esp ond ent . It wa s
est abl is hed th at the w et m arke t i s a g oin g - c on cern a nd t hat pe ti tio ner
has in ves ted abo ut P3 5,0 00,0 00. 00, in the form of impr ove men ts , on
the p ro pert y. Hen ce, p et it ion er wo uld sta nd to l ose mor e if th e lea se
12
quantum meruit – as much as he deserves
OBLICON CASE DIGESTS (SEPT 2)
Ca se # 8 : [G .R . No. 11 834 2. J an u a ry 5, 19 98 .]
D EV EL O PM E NT BA N K OF T H E P HIL I PP IN E S , pet iti oner , v s . C O URT OF
A PP E AL S and L Y DI A C U BA , re sp o n d en t s.
Ca se # 8 : [G .R . No. 11 836 7. J an u a ry 5, 19 98 .]
L Y DI A P. C U BA , pet itio n er , v s . C OU RT OF A P P E AL S, D E V ELO PM E NT
BA N K O F T H E PH ILI P PI N E S an d AG RI PI N A P. C A P E RAL , re spondent s.
F ACT S: L yd ia P. Cu ba (C uba) ob ta ine d f rom th e De vel opm ent Ba nk of t h e
Ph il ipp in es ( D B P) t hree s epara te loa ns , ea ch of wh ich wa s cov ered by a
prom is sor y n ote . As a se curi ty for s ai d loa ns, C ub a e xec ute d tw o Dee d s
of As si gnm ent of he r L eas eho ld Ri ght s ove r h er 4 4 - h ect are fi shp ond .
F or fa ilur e of Cub a to p ay her loa ns , D B P ap pro pria ted h er Le as eho l d
Ri ght s o ver the fi sh pon d wi tho ut f ore cl osur e pr oc e edi ngs . Sub se que nt ly,
Cub a o ffer ed and agr eed to r epur ch ase he r l ea se hol d ri ght s from D B P.
F or fai lur e to p ay t he m onth ly amor ti zat ion s s tip ula ted in th e dee d of
con dit io nal sa le e xe cut ed by D B P in f av or of Cu ba, D BP too k p os se ss ion
of t he le ase ho ld r ig ht and sub seq uen tl y sol d the sa m e to Agr ipi na Ca per a.
Cub a f ile d a com pl ain t wi th th e R eg ion al T r ia l Cou rt se ek ing de cl arat ion
of nu ll it y D B P' s ap prop ria tio n of h er le as eho ld ri gh ts w it hou t fore c los ur e
proc eed in gs wh ic h is co ntr ary to Ar ti cl e 2 088 of th e Ci vi l Cod e.
T RI AL C O URT R ULI NG: R eso lv ed t he i ss ue in f av or of C uba and de clar ed
inv al id th e de ed of a s sig nme nt for bei ng a c lear cas e of p atum
comm is sor ium .
Ca se wa s br oug ht on ap pe al to C A.
CA R ULI N G: Rev ers ed th e de ci si on of the tr ia l c o urt a nd de cla red th at
the d eed of a ss ig nme nt w as a n ex pre ss aut hor ity f rom C uba for D B P to
sel l w hat ever r igh t sh e ha d ov er the f is hpo nd. The a ppe ll ate cour t
li ke wi se he ld th at th e dee d o f as si gnme nt am oun te d t o a nov at ion o f the
prom is sor y n ote .
Hen ce , t hi s p eti ti on.
IS S U E: Whe the r or not th e de ed o f a ss ign men t of l eas eho ld r igh ts wa s a
mortg age c ontr ac t or a ca se of pat um com mi sor ium?
quantum meruit – as much as he deserves
S C R ULI NG: T h e dee d of a ss ign men t of l eas eho ld righ ts was a m ort gag e
con trac t. T he as sig nme nt , be ing in it s e ss en ce a mort gag e, wa s bu t a
sec uri ty and no t a s ati sfa ct ion of in de bte dn ess . D BP 's a ct o f
appro pri at ing Cub a's r igh t s wa s vi ola ti ve of Art ic le 2 088 of t he C iv i l C ode ,
wh ich f orb ids a cr ed itor from ap propr ia tin g, or di spo si ng of, t he th ing
giv en a s se cur it y for the paym ent of d ebt . D B P c an not t ake r efu ge i n th e
deed o f as si gnme nt to jus tif y it s ac t o f app ropr iat in g t he le as eho ld ri ght s
sin ce the s aid de ed did not pro vi de t ha t th e l e ase hol d r igh ts wo uld
auto mat ic al ly pa ss to D B P upo n Cub a' s f ai lure to p a y t he loa ns on ti me.
It mer el y pro vi ded for t h e app oi ntme nt o f D B P a s attor ne y - i n- fa ct wi th
auth ori ty, amon g ot her th i ngs , to se ll or oth erw is e d isp os e of th e sa i d re al
righ ts, in ca se of d efa ul t b y Cu ba, a nd to ap pl y th e p roc eed s to th e
paym ent of t he l oan . The Sup rem e Co urt li ke wi se foun d no m eri t in the
con ten tio n th at th e a ss ig nmen t no vat ed t he pr omi s sory not es in th at t he
obl iga ti on to pa y a su m of mon ey w as s ubs ti tut ed by t he as si gnm ent o f
the r ig hts o ver the f is hpo n d.
The s ai d as si gnm ent mere ly com ple men ted o r sup pl emen ted th e
prom is sor y n ote s. T he ob lig at ion to pa y a s um of mone y r ema ine d, and
the a ss ign men t m ere ly s e rved a s se cur it y for th e l oan s co vere d by t he
prom is sor y n ote s.
DO CT RI NE S:
1. CI VI L L A W; O BL IG AT IO N S A N D CO NTR A CT S; MO RT GA G E; A N
A S SI GN ME NT T O G U AR A NT EE A N O B LI G ATIO N I S VI RTU A LL Y A
MOR TG AG E ; C A S E AT B A R. — We agre e w it h C U B A t hat th e a ss ignm en t
of le as eho ld ri ght s w as a mo rtg age con tra ct. Si mu lt a neo us wit h th e
exe cut io n of the no tes wa s th e e xec ut ion " As si gnme nts of Lea se hol d
Ri ght s" wh ere CU B A a ss i gned her l ea seh ol d rig ht s and i nter es t on a 44 -
hec tare f is hpo nd, t oge the r w it h the i mpro ve men ts th ereon . A s po int ed ou t
by CU B A , t he dee ds of ass ig nm e nt con st ant ly ref erred to th e a ss ign or
(CU B A) a s "borr ow er" ; the as si gne d r igh ts , a s mort gage d p rop ert ies ; a nd
the ins trum ent it se lf, as m ortga ge con tra ct. More ov e r, und er c ond it ion No .
22 o f th e d eed , i t w as pro vid ed tha t " fa ilur e t o c om ply w ith th e te rm s and
con dit io n of an y of the lo ans s hal l ca us e al l oth er loa ns to b eco me du e
and d ema nda ble and al l mortg age s s hal l b e for ec l ose d." A nd, con di tio n
No. 33 pr ov ide d tha t if "f orec lo sure i s ac tua ll y ac c ompl is he d, the u sua l
10 % att orne y' s fee s a nd 10 % li qui da t ed dam age s of t he to tal ob l iga tio n
13
OBLICON CASE DIGESTS (SEPT 2)
sha ll b e i mpo sed ." T here i s, th ere fore , no shre d of doub t th at a m ort gag e
wa s int end ed. I n P eop le 's Ban k & T ru st Co. v s. O d om, th is Cour t had t he
occ as ion t o rul e tha t an a ss ignm en t to gu aran tee a n ob li gat io n is in ef fec t
as m ort gag e.
2. I D. ; I D.; I D.; AS S IG N ME NT OF RI GHT S C OM PL EM E NT E D AN D DI D
NOT
NO V AT E T H E P R OMI S S OR Y N OT E S. — W e f in d no me rit i n D B P' s
con ten tio n th at th e a ss ig nmen t no vat ed t he pr omi s sory not es in th at t he
obl iga ti on t o pa y a su m o f mon ey the lo ans (un der the p rom is sor y no te s)
wa s su bst it ute d by the a s sig nme nt o f the r ig hts ov er the fi shp ond ( und er
the dee d o f as sig nme nt). A s corr ect ly po in ted ou t b y CU B A, th e sa i d
ass ig nme n t m ere ly co mpl emen ted or sup pl eme nte d the no tes ; b oth c oul d
sta nd t oge the r. T he f orm e r wa s o nl y a n a cc es sor y t o th e l att er. Co ntra ry
to D B P' s subm is s ion , t he obl iga ti on to pa y a s um of mon ey rem ai ned , a n d
the a ss ig nme nt me rel y s erve d as se cur it y for the lo a ns were gra nte d .
Al so , the l as t para gra ph of the a ss ig nme nt st ate d: "T he a ss ign or furt her
reit erat es an d st ate s al l t e rms, c ove nan ts , are co nd it ion s st ipu lat ed i n t he
prom is sor y n ote or no te s cov eri ng th e pr oc eed s of thi s loa n, ma ki ng sa i d
prom is sor y n ote or no te s , to a ll i nte nt an d p urpo ses , an in tegr al par t
hereo f" .
3. ID .; I D. ; P A YM E NT B Y C ES S IO N ; D O E S N OT A P PL Y WH E R E TH E R E
IS O NL Y ON E C R ED IT O R. — Ne ith er d id the a ss ignm en t am oun t t o
paym ent b y c es sio n u nder Ar ti cle 12 55 o f t he Ci vi l Cod e f or th e p la i n and
sim ple re as on tha t t her e wa s on ly on e cred it or, t he D B P. Ar ti cl e 1 255
con temp la te s th e e xi ste n ce o f t wo or mor e c red it ors a nd in vol ve s t he
ass ig nme nt of al l t he deb t or's pro per ty.
4. ID .; I D. ; D ATI O N I N P A YM E NT ; DO E S N OT A P PL Y W H ER E
A S SI GN ME NT
W A S A ME R E S E CU RIT Y A N D NOT I N S AT I SF ACT IO N OF
IN D EB TE D N E S S. — N or d id the a ss ign men t con st it ute da tio n in pa yme n t
under Ar ti cle 124 5 of t he C i vi l Co de, wh ic h rea ds: " Da ti on i n pa yme nt,
wher eb y pro pert y is a li en ated to t he cred it or in sa tis fa cti on o f a d ebt in
mone y, sha ll be go vern ed by t he la w on sa le s. " I t be ars stre ss in g th at the
ass ig nme nt, be in g in it s e sse nc e a m ortg age , wa s b ut a sec uri ty an d not a
sat is fac ti on of in deb ted ne ss.
quantum meruit – as much as he deserves
9. C I VIL L A W ; D AM A G E S; A CTU A L O R C OM P E N SA TO R Y D AM A G E S;
MU ST
B E D UL Y P RO V E D. — Ac tua l or com pen sa tory dam age s ca nno t b e
pres ume d, but mu st be prov ed w ith rea so nab le degre e of cer tai nt y. A
cour t c ann ot re ly on spe cul at ion s, con je ctur es , or gue ss wor k a s to the
fac t a nd am oun t of da mag es, bu t mu st de pen d upo n co mpe ten t pro of tha t
the y ha ve b een suf fere d by th e i njur ed p art y an d on th e be st o bta ina bl e
evi den ce of th e a ctu al a moun t th ereo f. I t mu st p oin t out sp ec ifi c f act s
wh ich cou ld a ffor d a ba si s for m ea sur ing wha tev er c ompe nsa tor y or ac tua l
dama ges ' are born e.
10. I D.; I D. ; ID .; I D . ; C A S E AT B A R. — In th e pre se nt ca se, t he tr ia l co urt
awar ded in fa vor o f C U B A P1, 067 ,50 0 as a ctu al d amag es c on si sti ng o f
P5 50, 000 whi ch re pre sen t ed the v al ue of th e al leg e d l os t arti c les o f C UB A
and P51 7,5 00 w hi ch rep rese nte d the v al ue of t h e 2 30, 000 p ie ce s of
bang us a lle ged ly s to cke d in 197 9 whe n D B P f ir st ej ect ed C U BA fr om the
fis hpo nd a nd the ad joi ni n g hou se . Th is aw ard wa s aff irme d by th e C ourt
of App eal s. We fin d th at the a ll ege d lo ss of p er son al b el ong ing s a nd
equ ipme nt w as no t pro ved by c le ar ev ide nce . Oth er than t he te sti mon y o f
CU B A and her care ta ker, there wa s n o pr oof as to t he e xi ste nce of tho s e
item s b efor e D B P t oo k ov er the fi shp ond in q ue sti o n. W it h reg ard t o th e
awar d o f P51 7,0 00 r epre s ent ing the va lu e of th e a l leg ed 2 30, 000 pi ec es
of ban gu s wh ic h die d wh e n D BP t oo k pos se ss io n of the f ish pon d in Ma rch
1979 , th e s ame wa s n ot cal le d for . Su ch los s wa s no t du ly pro ved ;
bes ide s, th e c la im the ref o r wa s del ay ed unre as ona b ly. From 19 79 un ti l
after the f il in g of h er co m pla int in c our t in M ay 1 98 5, C U B A di d no t bri ng
to t he at ten ti on of D B P t he a l leg ed lo ss . Th e aw a rd o f a ct ual d ama ges
sho uld , t her efor e, be str uc k d ow n f or l ac k of suf fi ci e nt b as is .
14
OBLICON CASE DIGESTS (SEPT 2)
Ca se # 9 : Fil inv est C re d it Co rp o r atio n v . Phil i ppine Acet ylen e Co .,
In c.
L - 504 49 Janua r y 3 0, 198 2
F acts: Ph il ip pin e Ace ty len e Co ., In c. , pur cha se d fro m one Al ex and er Li m ,
as e vi den ce d b y a De ed of Sa le m ark ed as E xh ib i t G, a m oto r v ehi cl e
des cri bed as C he vor let , 1 969 mod el w ith S eri al N o . 13 669 9Z30 365 2 f or
P5 5,2 47. 80 w ith a do wn pa yme nt of P 20, 000 .00 and t he ba lan ce of
P3 5,2 47. 80 p aya bl e, u nd er the term s an d c ond it i ons o f th e pro mi ss ory
note t hir ty - four ( 34) mo nt hly in sta llm en ts. A s se cur ity f or th e pa yme nt of
sai d pro mi sso ry n ote , th e appe ll ant exe cu ted a ch at tel m ortg age ove r the
sam e mo tor ve hi cl e i n f av or of Al exa nde r L im.
Su bse que nt ly , o n Nov em ber 2 , 197 1. A le xan der Lim as si gne d t o the
F il inv es t Fi nan ce Corp or ati on a ll h is r ig hts , t itl e, and i nter es ts in th e
prom is sor y n ote an d c hat t el m ort gag e b y vir tue of a Dee d o f As si gnm ent .
T here aft er, th e Fi li nve st F ina nce Cor pora ti on, a s a con se que nce of it s
merger w it h t he Cre dit an d D eve lo pme nt Cor pora ti o n as s ign ed t o t he ne w
corp orat io n, th e here in p l ain tif f - ap pe ll ee F i li nve st Cred it Corp orat io n, a ll
its r igh ts , tit le , and int ere sts o n th e afor esa id pr om i ssor y no te an d ch att el
mortg age .
Upo n fa il ing to pa y, F il i nve st Cred it Corp ora tio n sent a dem and let ter
ins tru cti ng t he mor tga gor th at “re turn t he mor tga ged pro per ty, wh ich
retur n s ha ll be in fu ll sa ti sfa ct ion of it s ind ebt ed ne ss pur sua nt to Ar ti cl e
1484 of th e Ne w Ci vi l Cod e. ” L im su bs equ ent ly ret ur ned the v ehi cl e.
Issu e : Whe ther or no t t he retur n o f t he veh ic le bar s the fore cl os ure of the
cha tte l m ortg age
Held : N o. F il in ve st did no t c ons ent ed, or at le ast i n tend ed, th at the mer e
del iv ery t o, a nd a c cep tan ce b y h im, o f th e mor tga ged m otor ve hi cle b e
quantum meruit – as much as he deserves
con stru ed a s a ctu al p ay ment , mor e sp ec if ica ll y dat ion in p aym ent or
dac ion en pa go. T he fa ct that th e mor tga ge d mo tor veh ic le wa s d el iv ered
to Fi li nve st d oe s no t n ece ss ari ly m ean tha t o wner sh ip t here of, as
juri di ca ll y c ont emp la ted by dac io n en pa go, wa s tra ns ferre d fr o m
appe ll ant to ap pe lle e.
The m ere ret urn of the m ortga ged mo tor ve hi cl e b y t he m ort gag or d oe s
not co nst it ute da ti on in pa ymen t in the a bse nc e, ex p ress or im pl ied o f t he
true int ent io n of t he p art i es. Da ci on e n pa go i s th e tran sm is si on o f th e
own ers hip o f a t hin g by th e d ebt or to the c red itor a s a n ac cep ted
equ iva le nt of the per form a nce of ob li gat ion
Dac ion En P ago
In d ac ion e n pag o , as a sp ec ia l m ode o f pay me nt, th e d eb tor of fers
anot her th ing t o t he cr edi tor wh o a cc ept s it a s e qu iva le nt of pa yme nt of
an ou tst and in g deb t. Th e under ta kin g rea ll y pa rta ke s in o ne s en se of the
natur e of sa le, t hat i s, th e cre di tor i s re al ly b uy ing t he thi ng or pro pert y of
the d ebt or, p aym ent f or w hic h i s t o b e ch arge d ag ai nst t he d ebt or' s deb t.
As su ch , th e e ss ent ia l e l emen ts of a co ntra ct of s ale , na mel y, co nse nt,
obj ect cert ai n, an d ca use or con si dera ti on mu st b e pres ent . In i ts mo dern
con cep t, wha t ac tua ll y t ake s pl ac e in da ci on en pa go i s an ob je ct iv e
nov ati on of th e o bl iga ti on wher e the th ing of f ered as an a cce pte d
equ iva le nt o f t he perf orma nce of an obl ig ati on is c o nsi dere d a s t he ob jec t
of th e c ont rac t o f sa le , wh ile the de bt is con si d ered as the pur cha se
pric e.
In th e a bse nc e of cl ear co nse nt o f ap pe lle e t o th e p referr ed spe ci al m ode
of pay men t, th ere c an be no tran sf er of ow ner sh ip o f t he mor tga ged mo tor
veh ic le fro m app el lan t t o appe ll ee. I f a t al l, on ly tr a nsf er o f po sse ss io n o f
the m ortg age d mo tor ve hic le too k p la ce, for it i s qu ite po ss ib le t hat
appe ll ee, as mort gag ee, mere ly wan ted to sec ure pos se ss ion to f ore sta ll
the l os s, d es tru cti on , fra u dul ent tran sfe r of t he veh ic le t o th ird p ers on s,
or i ts be ing ren der ed va lu ele ss if l eft in th e han ds o f th e a ppe ll ant .
WH E R EF OR E, the jud gme nt ap pea led from is here b y aff irm ed in t oto w it h
cos ts ag ain st de fen dan t - a ppe lla nt.
15
OBLICON CASE DIGESTS (SEPT 2)
DO CT RI NE S:
CI VI L L A W; OB LI G AT I ON S A ND C ONT R AC T S; E XT IN GU I SH ME NT
OF O BL IG AT IO N S; D AC IO N EN P A GO A S S P EC IA L MOD E OF P A YM EN T;
D EF I N ED . — Da ci on en p ago, a cc ord ing t o M anr es a, is t he tra nsm is s ion
of the o wne rsh ip of a th i ng by th e d ebt or to th e c redi tor at an a cc ept ed
equ iva le nt of the per form a nce of an ob li gat io n (8 Ma nres a 3 24, c ite d in 4
T ole nti no Co mme ntar ie s & Jur is prud en ce on t h e C iv il Co de of the
Ph il ipp in es , 282 ( 197 3]). In da c io n en p ago , a s a spe ci al m ode o f
paym ent , th e deb tor of fer s ano ther t hin g to t he cre dit or wh o ac cep ts i t as
equ iva le nt of pa yme nt of an out st and in g d ebt . T he u nde rta ki ng r ea ll y
parta ke s in one sen se o f the na tur e of s al e, th at i s , t he c red ito r is r eal ly
buy ing the thi ng or prop erty of th e de btor , pa ym ent f or w hi ch i s to b e
char ged aga in st t he de bt or's deb t. As su ch, the e sse nt ial el emen ts of a
con trac t of sa le, na me ly, c ons en t, obj ec t cer tai n, and c aus e or
con si dera ti on mu st be pre sen t. In it s mod ern c onc e pt, w hat a ctu al ly ta ke s
pla ce in da cio n e n pa go i s an ob je ct ive no vat io n o f the ob lig at ion w here
the t hin g of fere d a s an acc ept ed e qu iva le nt of t he per form an ce of an
obl iga ti on is co ns ider ed as t he ob jec t o f t he co nt ract of sa le , w hi le the
debt is c on sid er ed as th e pur ch as e pri ce. (4 T ole n tin o Com men tar ie s &
Juri spr ude nc e on th e Ci vi l Cod e of th e P hi lip pi nes , 28 3 [19 73] ; 4 Par as ,
Ci vi l Cod e o f t he P hi li ppi n es An not ate d 288 [9 th ed. , 19 78]) . I n a ny c ase ,
comm on c on sen t i s an e s sen tia l pr ereq ui sit e, b e it sal e or no va tio n, t o
hav e t he eff ect of to ta ll y e xti ngu is hi ng the de bt or o bli gat io n.
2. I D. ; I D. ; I D.; I D.; M E R E R ET U RN OF MO RT G AG E D V E HI CL E DO E S
NOT C ON ST IT UT E AC T U AL PA Y M ENT I N T H E A B S EN C E OF CL E A R
CO N S ENT OF MO RT GA G E E T O T H E S P E CI AL M O D E OF PA Y M ENT . —
T he mer e re turn of t he m ortga ged mot or v eh ic le b y the m ortg ago r to the
mortg age e d oes no t c on sti tute da tio n i n p aym ent or dac ion en pag o in t h e
abs enc e, e xpr es s or i mpl i ed, o f the true int ent io n o f the p art ie s. Th e fa ct
that the mort ga ged m ot or veh ic le wa s de li ver ed t o the m ortg age e d oes
not ne ces sar il y m ea n t hat ow ner shi p t her eof , a s jur idi ca ll y con tem pla ted
by da ci on e n pag o, was tr ans ferre d fro m the mort ga gor to t he m ortg age e.
In th e ab se nce of cl ear co nse nt o f th e mor tga gee to the pr of fere d sp ec ia l
mode o f p ay men t, th ere c an be no tr ans fer of o wn e rshi p of th e m ort gag ed
motor
veh ic le from mor tga gor to mortg age e.
3. I D. ; I D. ; I D. ; I D. ; I D. ; S P EC I AL P O W ER OF A TTO RN E Y E X E C UT ED B Y
quantum meruit – as much as he deserves
MOR TG AG O R I ND IC AT E S TR UE I NT ENT OF P A RTI E S I N T H E CA S E AT
B AR . — An e xam ina ti on of t he la ngu age of th e d ocum ent e xe cut ed b y
appe ll ant cap ti one d " Vo lu ntar y S urren der wi th Spe cia l Po wer of At tor ney
To S el l" re vea ls tha t t he pos se ss ion of the mort ga ged m oto r v ehi cl e was
vol unt ari ly surr end ered b y the a ppe l lan t to th e ap pel lee aut hori z ing t h e
lat ter to loo k for a b uy er and s el l t he veh ic le in b eha lf of the ap pel la nt
who r eta in s o wner sh ip t h ereof , an d to a pp ly t he p roce eds of t he s ale to
the mor tga ge in deb ted nes s, wi th th e u nde rta ki ng of the a ppe ll ant t o p ay
the di ffe ren ce, i f a n y, bet wee n the s el li ng pri c e a nd the m ortg age
obl iga ti on. W it h t he st ip ula ted co nd iti on s a s sta ted, th e a ppe ll ee, i n
ess en ce wa s con st itu ted as a m ere age nt to se ll t h e mo tor ve hi cl e whi ch
wa s de li vere d to the app e lle e, n ot a s i ts pr oper ty , f or if it w ere , he wou ld
hav e fu ll po wer of di spo si tio n of th e pro pert y, not o nly to se ll it as is the
lim ite d aut hori ty g ive n h im in th e s pe cia l po wer of at torne y.
4. ID .; C H ATT EL MO RT G AG E ; F OR E CL O SU R E TH E RE OF, A R EQ UI S IT E
TO E XT IN GU I SH M O RTG AG O R' S O B LIG AT IO N. — U nde r the la w, th e
del iv ery o f po ss es sio n of th e mor tga ged prop ert y to th e mort gag ee c a n
onl y op erat e to ext in gu ish appe ll ant 's li abi li ty if t he appe ll ee h ad a ctu al ly
cau sed t he fo re cl os ure sa le of the m ortg age d p rop e rty wh en it re co vere d
pos se ss ion th ereo f. ( N o r thern Mo tor s, Inc . vs . C asi ano Sap in oso , 3 3
S CR A 356 [1 970 ]; Un iv er sal Mo tor s C orp . v s. D y Hi an T at , et a l., 28
S CR A 161 [19 69] ; Ma ni la Motor s Co. , I nc. vs . Fer nand ez , 99 P hi l. 7 82
[195 6]). It is the fa ct o f fore cl osur e a nd a ct ual sal e of th e mor tga ged
cha tt e l tha t bar t he re c over y by t he v end or of an y ba la nce of th e
purc has er' s ou tst an din g o bli gat io n not sat is fi ed by th e sa le . ( Ne w C iv il
Cod e, pa r. 3, Art ic le 1 484 .) I f th e ven dor d es is ted , on hi s ow n in it iat iv e,
from co ns umma ti ng the auc tio n sa le, s uch d es i sta nc e was a t ime ly
dis av ow al o f the r eme dy of for ec los ure , and the v endor can st il l su e for
spe ci fi c per form anc e. (I n dus tria l Fi na nce Cor p. v s . Tob ias , 78 S CR A 28
[197 7]; Ra di ow ea lth Inc . vs . L av in, 7 SC R A 804 [19 63] ; Pac if ic
Com merc ia l Co . v s. de la R am a, 72 P hi l. 380 [1 941 ] ).
5. I D. ; I D. ; UN P AI D T A X E S ON MO R T G AG E D PR OP E RT Y S HO UL D B E
BO R N E B Y T H E M ORT G A GO R; C A S E AT B A R. — S inc e t he ow ner shi p o f
the mort gag e d prop ert y n e ver lef t t he mort gag or, the burd en of the un pai d
tax es o f P 70, 122 .00 due o n the m or tg age d mo tor v e hic le sho uld be b orne
by h im, who , in any ca se, may n ot be sa id t o be wit h out re med y un der t he
la w, bu t de fi nit el y no t ag ain st a ppe ll ee t o w hom w ere tran sf erre d on l y
righ ts, t it le and i nter es t, as su ch is th e e s sen ce of as si gnm ent of cr ed it.
(Ne w Ci vi l Cod e, Ar ti cl e 1 627.) Th e D ee d o f Sa le b etw een Ale xa nder L im
16
OBLICON CASE DIGESTS (SEPT 2)
and ap pe ll ant a nd t he D e ed of As si gnm ent b et we e n A lex and er Li m an d
appe ll ee are ve ry cl e ar o n th is p oin t. T her e is a s pec i 􀀾 c pr ov is ion i n t he
Dee d of S al e t hat th e se ll er Al ex and er L im w arra nts th e s al e of the mo tor
veh ic le t o the buy er an d that if i t ap pear s s ubs eq uent ly tha t "t here are
suc h c oun ter cla im s, off se ts or def en se s th at m ay be i n ter po sed by the
debt or at th e ti me of t h e a ss ig nme nt, s uc h cou nter cla im s , of fs et s or
defe ns es s hal l no t pre ju dic e the F ILI N V E ST F IN A NC E C O R PO R ATI ON
and I ( Al ex and er L im) fur ther war ran t a nd hol d t he sa id cor pora ti on free
and har ml es s from a ny s uch c la im s, of fse ts , or d efen se s tha t ma y b e
ava il ed of. "
Ca se # 1 0: De Gu zm a n v. CA , 1 37 S C RA 73 0 (1 985)
[G. R. No. L - 5 273 3 . Ju ly 2 3, 1 985 .]
F acts: Pe ti tio ner s Ge st u vo, a s S ELL E R, a nd th e p ri vat e res pon den t
Bru no, a s B U Y ER , exe cu t ed a Con tra ct to Se ll c ove ring t wo (2) pa rce ls o f
lan d o wn ed by th e p eti ti o ners l oca ted at C eme nt in a Stre et, Pa say C it y,
and co ver ed by T CT No s. 11 326 an d 113 27 of th e Reg is ter of Dee ds of
Pa sa y Cit y.
It was st ipu la ted ther ei n that the Br uno sho ul d p ay th e ba la nc e of t he
purc has e pri ce of P 133 ,64 0.00 on or be fore F ebr uar y 1 7, 197 5.
T wo da ys bef ore the s aid date , or on F ebr uar y 1 5, 1 975, Brun o a sk ed the
the G est uv os t o fur ni sh h er wi th a s tat eme nt o f ac cou nt of t he b ala nc e
due; co pi es of t he cert if i cat es of t it le co veri ng th e tw o p arc el s of la nd
sub je ct of t he sa le ; and a c op y of th e po wer of attor ne y ex e cu ted b y
Ro lan do Ge stu vo i n f av or of P ilar d e Guz man . Bu t, t he p et it ion ers de nie d
the r equ es t.
As a re su lt, B run o f ile d a c omp la int for sp ec i fic per form anc e wit h
dama ges aga in st th e pe t iti oner s be for e the Co urt of F irs t In sta nc e of
Ri za l. T he ca se , h ow ev er , w as d ism is se d f or fai lu re t o pr os ecu te. But ,
Bru no s ubs equ en tl y r ef ile d t he c as e. T he cas e w as do ck ete d in cour t as
Ci vi l C as e N o. 524 7 - P. In h er c omp la int , Bru no c harg ed tha t th e
Ges tu vos ’, by ref us ing t o fur ni sh h er wi th c op i es o f th e d oc umen ts
reque st ed, de l iber ate ly i nten ded n ot to co mp ly wi th the ir ob lig at ion s
under t he co ntra ct to s e ll, a s a re su lt of w hi ch the s ai d p et iti one rs
quantum meruit – as much as he deserves
comm it ted a bre ac h of con trac t, a nd h ad a l so act ed u nfa irl y a nd i n
mani fe st bad fa it h f or wh ic h th ey sh ou ld be he ld li abl e for da mag es .
An sw eri ng th e com pl ain t , t he pe tit io ner s Ges tu v os’ c la ime d tha t the
comp la in t fa il ed to sta te a c aus e o f a cti on; th at the ba lan ce due wa s
alre ady pre det erm ine d in the con tra ct; tha t th ey hav e no ob lig at ion t o
furn ish the pri va te re spo nden t w it h co pi es o f th e doc umen ts r equ es ted ;
and tha t th e pr iv ate res pond ent 's fa il ure t o p ay the ba lan ce of t h e
purc has e pr ic e o n t he d a te s pe cif ie d h ad cau sed t he c ont rac t t o e xpi re
and b eco me i nef fe cti ve wi tho ut ne ce ss it y of n ot i ce or o f an y ju di ci al
dec lara ti on to tha t e ffe ct . LL| | |
The tr ia l cour t re nder ed a dec is io n a ppro vi ng the c ompro mi se agre eme nt
subm it ted b y t he part ie s.
Pe tit io ner s G es tuv os ’ f il ed a mo tio n f or t he is sua nce of a wr it o f
exe cut io n, c la im ing tha t t he pr iva te re sp ond ent had fai led to a b id e b y th e
term s of th e co mpr omi se agree men t an d pa y the a moun t sp ec if ied i n th eir
comp rom is e a gree men t wit hin th e p eri od st ipu lat ed.
The pe tit io ner s fi led a mot ion f or th e r ec on sid erat io n of the o rder , b ut th e
tria l cour t d en ied th e sam e.
Hen ce , t hi s p eti ti on.
Issue : Wh eth er the pr i vat e r esp ond ent a bi de by the t erm s o f the
comp rom is e a gree men t?
Held : Yes . In th e i ns ta nt c as e, t he leg al it y or enf orce ab il it y of th e
comp rom is e a gre eme nt o r th e de ci sio n of th e tri a l cour t appr ov in g the
comp rom is e agre eme nt i s no t di sp ute d. Th e par tie s bot h wa nt t he s aid
comp rom is e a gree men t t o be imp lem ent ed.
We agre e w it h th e f ind ing s of the tri al cou rt t hat t he pr iv ate r es pon den t
had su bst ant ia ll y com pl i ed wi th t he ter ms and co ndi ti ons of th e
comp rom is e a gree men t. Her fa il u re to de li ver to t he p et iti one rs the f ul l
amou nt o n Ja nuar y 27 , 1 978 was not her f aul t. Th e bla me l ie s w ith the
17
OBLICON CASE DIGESTS (SEPT 2)
pet iti oner s. The rec ord sh ow s th at the pri va te r esp o nden t wen t to th e s al a
of Jud ge Bau ti sta o n the a ppo int ed da y to ma ke pa y ment , as agr ee d u po n
in th eir com prom is e agr e emen t. But , th e pe ti tio ne rs w ere n ot th ere t o
rece iv e it . O nl y th e pe tit i oner s' cou nse l a ppe ared l ater, but , he in form ed
the pr iv ate re sp ond ent t h at he h ad no a uth ori ty t o r ece iv e an d ac cep t
paym ent . In st ead , he inv it ed th e pri va t e re spo nde nt and he r co mpa nio ns
to t he hou se of th e p et iti o ners to ef fe ct pay men t. B u t, t he pet it ion ers w ere
not ther e e ith er. The y wer e in form ed tha t t he pet it i oner P il ar d e G uzm an
wou ld arr ive l ate in th e aft ernoo n, po ss ib ly at aro und 4:0 0 o 'c lo ck .

T he p ri vat e re sp ond ent w a s a ss ured , h ow ev er, tha t s he wou ld be i nfor med

as s oon as t he p et iti on ers arr iv ed. T he pr i vat e resp ond ent , in her
eager ne ss t o set tl e her obl iga ti on, c on sen ted a n d wa ite d for th e ca ll
wh ich di d no t c ome and unw it tin gl y l et t he p eri od l ap se. The nex t d ay,
Jan uary 2 8, 197 8, the pr iv ate res pon den t we nt to th e of fi ce of th e Cl erk of
the Co urt of F irs t I ns tan ce o f Ri za l, Pa sa y Ci ty Bra nc h, t o d epo si t t h e
bal anc e o f t he p urc ha se pric e. B ut, it be ing a Sa t urda y, the ca sh ier wa s
not t her e to r e c ei ve i t. So , on t he nex t w ork in g da y, Mond ay , Ja nua ry 3 0 ,
1978 , th e pr iv ate r es pon d ent d epo si ted th e amo un t of P30 ,00 0.0 0 w it h th e
cas hi er of t he O ffi ce o f th e Cl erk o f the Co urt of F i rst In st anc e of Ri za l,
Pa sa y Ci ty Bra nch , to c ompl ete t he pa ym ent o f th e pur ch ase p ri ce of
P2 50, 000 .00 .

S in ce th e dep os it of t he bal anc e of th e pur cha se p rice wa s m ad e in go od

fai th and th at the fa il ure o f th e pr i vat e re sp ond ent to dep os it the pu rch as e
pric e on th e da te sp ec if ie d wa s due t o the p eti ti on ers w ho al so m ake n o
cla im th at the y h ad su sta ine d d ama ges be ca use of the t wo da ys de lay ,
there wa s s ub sta nt ial co mpl ian ce wi th t he t erm s and con dit io ns o f t he
comp rom is e a gree men t.

WH E R EF OR E, th e p eti ti o n sh ou ld b e, as it i s her eby DI S MI S S ED . Th e

temp orar y r es trai ni ng ord er h e ret ofo re i ssu ed i s LI FTE D and S ET A S ID E.
Wi th co st s a gai ns t t he pet i tio ners .

18
quantum meruit – as much as he deserves
OBLICON CASE DIGESTS (SEPT 2)
Ca se # 11 : TL G I NT ER NA T IO NAL CO NT I N EN T AL E NT ER P RI SI N G IN C V S
F L OR E S
F ACT S: T he C FI gra nte d T LG In ter nat ion al Con ti ne nta l E nter pri si ng In c. ’s
moti on to i nte rve ne an d admi tte d it s "C omp la int I n I nter ve nti on " in an
act ion f or d ec lara tor y r el i ef inv ol vi ng th e r igh ts of Be arc on Tr ad ing C o.,
Inc . a s le ss ee of t he pr emi ses o f def end ant s Ju an F abe ll a et al . T LG
int erve ned a s su b - l es see of Bear co n ove r t he pr opert y, t o p rot ect i ts
righ ts as suc h s ub les se e and t o en ab le it, dur ing pe nden cy of the ca se, to
make a con si gna ti on of t h e m ont hl y ren tal s as it w a s "at a lo ss a s to w ho
is la wf ul ly and ri ght fu ll y e nti tle d t o r ece iv e [ the m]. ”
As a con se que nce of th e ad mi ss ion o f th e "C omp l ain t In In ter ven tio n ”,
T LG the n d epo si ted a to ta l o f P3 ,75 0 i n m ont hl y r en tal s wi th the c ler k o f
cour t o f t he CFI b y way of con si gna tio n.
Be arc on’ s c omp la int an d T L G ’s com pla in t i n in t erve nti on wer e l ater
dis mi ss ed u pon mot ion by defe nda nt s Ju an F abe ll a et a l., on t he gr oun d
that the su bj ect mat ter c oul d be bet ter ven ti lat ed in t he e je ctm ent ca se
fil ed b y Ju an Fa be lla ag ain st Bea rco n T rad in g C o. In c. t hen p end in g
befor e t he mun ic ip al co urt of Man dal uy ong , Ri za l.
RUL IN G: Ye s. Th e c ase wa s di sm is sed bef ore the amou nt d epo si ted wa s
eit her a cce pte d by t he cred ito r or a de cla rat ion ma de b y the Cour t
appro vi ng s uc h co ns ign at ion . S uch di smi ss al re nd ered t he c ons ig nat ion
ine ffe ctu al ( Br av o v s. Barr era s, 9 2 Ph il. 679 , 681). Un der su ch
cir cum sta nc es, it w as i n cumb ent upo n the CFI t o h av e al lo wed t he
wi thdr aw al b y T LG o f the sum s of mo ney d epo s ite d by it wi th th e cl erk o f
cour t ( Art .12 60, N C C).
Th e CFI n eve rth ele ss in si st s tha t it ha d n o au thor ity t o aut hori ze i ts
wi thdr aw al si n ce it "h as n ot ord ere d in ter ven or t o m ake " th e d epo si t. Th is
con ten tio n ign ore s t he f act th at the d epo si t was mad e b y T LG a s a
con seq uen ce o f th e ad mis si on b y th e CFI of i ts "C omp la int I n
Inter ve nti on ". Th e dep os it w as m ade wi th a nd of fi c ial ly r ece ip ted b y th e
Cl erk of Cou rt. Th e dep os it w as ma de pur su ant t o A rtic le 1 258 o f the n ew
Ci vi l Co de. I t wa s t her efore m one y r ec ei ved b y t he C ler k of C ourt
purs uan t to Se ct ion 6 of the J ud ic iar y A ct . (R ep. Ac t 29 6 as Am end ed) .
From the m ome nt the d e pos it w as ma de by T L G, " the mo ne y r ema ine d
under th e con tro l a nd jur i sdi ct ion of th e cour t a nd the form er cou ld no t
reco ver it w ith out an ex p ress ord er o f re st itu ti on " (Mana jer o v s. B uy son
Lamp a).

T LG fi le d it s Mot io n to wi thdr aw t he s ums it de pos ite d, a s "t he ord er

dis mi ss ing t he … ca se a s we ll a s the com pla in t in i nter ven tio n w ith out a
reso lut io n ha vin g bee n made a s to t he rig ht o f t he p lai nt iff or t h e
defe nda nt s to th e ren tal s depo si ted b y th e in ter ven or, le ft th e in ter ven or
wi tho ut an y re cou rse but to ap pl y for aut hori ty to w ith dra w th e .. a mou n t
..an d tur n ov er the sam e t o th e def end ant s i n acc orda nc e w ith t h e
under st and in g arr iv ed at b etw een th e p a rt ie s h eret o ". T he CFI de ni ed the
moti on.

IS S U E: Wh eth er or not he CF I cou ld aut hor iz e t he wit hdra wa l of t he

depo si ts .

19
quantum meruit – as much as he deserves
OBLICON CASE DIGESTS (SEPT 2)
Ca se # 1 2: M CL A UG HL I N V S CO U RT OF A PP E AL S
L eg al Doct rin e: Ti mel y t ender of pa ym ent , if re fu sed t o be a cc ept ed b y
the cr ed itor won ’t re le ase the de bto r of hi s ob li gat io ns un le ss h e mak es a
val id co ns ign at ion .
F ACT S: P eti ti oner Lu isa F . McL aug hl in a nd pr iv at e res pon den t Ra mon
F lore s e nter ed in to a co ntra ct o f c ond it io nal sa le of re al pro pert y. T h e
deed o f con di tio na l sa le f ixe d th e tot al p urc has e pr ice o f P14 0k p aya bl e
as fo ll ow s: a) P26 k up on t he ex ecu ti on of t he de ed; and b) th e ba lan ce o f
P1 13k to be p aid no t lat er than Ma y 197 7.
 Par ti es a l so a gree d t hat the b al an ce s ha ll bear in tere st a t t h e
rate of 1 % p er mon th to c omme nce fr om D ec embe r 1976 , unt il t h e
ful l p urc ha se pri ce wa s pa id.
 In 197 9, pet it io ner fi le d a comp la in t f or the re sc is si o n o f t he de ed
of co nd iti ona l s al e du e to the f ai lure of pr iv ate r esp ond e nt t o p a y
the ba lan ce due on Ma y 3 1, 1 977 .
 Later , th e par ti es s ubm it ted a Com prom is e Agre e ment on th e
bas is of w hi ch th e cour t r ender ed a de ci sio n. In s ai d c ompr omi se
agree men t, pri vat e re sp on dent ac kn ow led ged hi s ind ebte dne ss to
pet iti oner und er the d ee d of con dit io na l sa le in t h e a mou nt of
P1 19k , and th e p art ies a gr eed tha t sai d amo unt w oul d be pa ya bl e
as fo llo w s: a) P5 0k u pon si gn ing o f t he agr eem en t; a nd b) th e
bal anc e of P 69 k in tw o equa l i ns tal lm ent s on Ju ne 1 980 and
De cemb er 19 80. A s agr e ed up on, pr i vat e r es pon d ent p aid P5 0k
upon th e s ig ni ng o f t he a greem ent an d i n a dd iti on he a ls o p aid
an e sc al ati on co st " o f P2 5 k.
 Und er para grap h 3 o f the C ompr omi se Agre em ent, pr iv ate
resp ond ent agr eed to pay P 1k m ont hl y re nt al b eg inn ing
De cemb er 1 979 unt il the obl iga ti on i s d ul y pa id, f or the us e of
the pr oper ty sub je ct m at ter of the dee d of con dit ion al sa le.
Par agra ph s 6 an d 7 o f t h e C ompr om ise Agre eme nt furt her s tat e,
that the p art ie s agr ee th at in the e ve nt t he de fe ndan t (pr iva t e
quantum meruit – as much as he deserves
resp ond ent) f ai ls t o com p ly w it h hi s obl ig at ion s her ein pro vi ded ,
the pl ain ti ff (pe tit io ner) w il l b e e nt itl ed to th e is sua nce of a wr i t
of ex ec uti on re sc ind in g t he De ed o f Co nd iti ona l Sa le o f Re al
Pro pert y. I n suc h ev ent u ali ty , def end ant ( pri vat e re spo nde nt)
hereb y w ai ves h is r igh t to a ppe al to (fr om) t he Ord er of
Re sc is sio n and th e Wr it of E xe cut io n whi ch th e Co ur t s hal l ren der
in a cc orda nc e wit h t he st ipu lat io ns here in pro vi ded for. Tha t i n
the e ve nt o f e xe cut io n a ll pay men ts mad e b y d efe n dant (pr iva te
resp ond ent) w il l be forf ei ted in f avor of t he pla in ti ff (pe ti tio ner)
as li qui dat ed dam age s.
 In O cto ber 198 0, p eti t ion er wr ote to pr i vat e resp ond ent
dema ndi ng tha t th e l att er pay the ba lan ce o f P69 k. This dem and
inc lu ded no t on ly th e ins t all men t d ue on Jun e 1 980 but al so th e
ins ta llm ent due on Dec em ber 19 80. Pr iv ate r es pon d ent t hen se nt
a l ett er t o p et iti one r s ig nif yi ng hi s wi ll ing ne ss an d i nte nti on to
pay th e fu ll ba la nce o f P 6 9k, an d at th e sam e ti me dema ndi ng to
see the cer tif ic ate of tit l e of t he p rop ert y an d th e ta x p aym ent
rece ipt s.
 Pr iva te r esp ond ent ho ld s that on the fir st wor ki n g da y of sa id
mont h, h e te nder ed p aym ent t o pe tit io ner b ut t hi s was r efu se d
acc ept an ce by pe tit io ner. P eti ti oner f ile d a Mo ti o n for Wri t o f
Ex ec uti on a ll egi ng t hat priv ate r esp ond en t fai le d to p ay t he
ins ta l lm ent d ue on Ju ne 1980 a nd tha t sin ce J une 19 80 he ha d
fai led to pa y the mo nth ly r enta l of P1 k.
 RTC gra nte d t he m ot ion for wri t o f e xe cut ion . I t de nie d t h e
moti on for re con si dera ti on in an or der dat ed No ve m ber 21, 19 80
and i ss ued t he w rit of e x ecu tio n on N ov emb er 25, 19 80. I n an
order dat ed No vem ber 27, 198 0, the tri al cour t gr ant ed
pet iti oner 's e x- p art e m ot ion f or cl ari fi cat io n of t he orde r of
exe cut io n re sc ind in g t h e de ed of con di tio na l sal e o f re al
prope rty .
 C A n ul lif ie d a nd se t a si de dis put ed ord ers of RT C
20
OBLICON CASE DIGESTS (SEPT 2)
IS S U E: W het her or not the te nde r o f p aym ent m ade by Fl ores w hi ch
wa s n ot ac cep ted b y M cL augh li n m ade h im not l iab le for furt her
paym ent o f h is ob li gat ion and the ren ta ls in arr ear?
RUL IN G:
Ac cor di ng t o Ar ti cl e 12 56 of th e C iv il Cod e of the Ph il ipp in es , if
the cr edi tor t o wh om ten d er o f pa yme nt ha s bee n made re fu ses
wi tho ut j ust c au se to ac ce pt it , th e de btor sha ll be r ele ase d fro m
resp ons ib il it y b y th e c on s ign ati on o f t he t hi ng or s um du e, a nd
that con si gna ti on al one s hal l pr odu ce t he s ame e ff ect i n th e fi ve
cas es enu mera te d th ere i n; Art ic le 125 7 pr ov ide s tha t i n or der
that th e con si gna ti on of t he t hi ng ( or sum ) d ue ma y re le ase t he
obl igor , it m ust f irs t be a nnou nc ed to t he per son s int eres ted in
the fu lfi ll men t o f t he o bli gat io n; and Arti cl e 1 258 pro vid es
that c ons ig nat ion s ha ll be mad e b y dep os it ing th e t hin g (or s um )
due at the di sp osa l of the ju di ci al aut hor it y and tha t t he
int eres ted p arti es sh al l al so be not if ied th ereo f.
Tende r o f pay men t m us t be di st in gui sh ed from con si gna tio n.
Tende r is th e ant ece de nt of co ns ign at ion , tha t i s, an a ct
prepa rat ory to t he con si g nat ion , wh ich i s the pr in ci pal , a nd fro m
wh ich are d eri ve d th e im medi ate co ns equ enc es wh ich the deb to r
des ire s or se ek s to obta in . T e nder o f pa ym ent ma y be
extr aju di ci al , wh il e c ons ig nat ion is n ec es sar il y ju di cia l, a nd t h e
prior it y of th e fir st i s the at tem pt to ma ke a pri va t e s ett le men t
befor e p roc eed in g t o t he s olem ni ti es of co ns ign ati on .
In th e ca se a t bar , al tho u gh as abo ve sta ted p ri vat e resp on den t
had pre ser ved h is r igh t s a s a ve nde e in th e co ntra ct o f
con dit io nal sa le of re al prope rty b y a t ime ly v a lid t end er of
paym ent o f t he ba lan ce o f hi s ob lig at ion w hi ch w as not ac ce pte d
by p eti ti oner , h e rem ain s lia bl e for th e p aym ent of his ob lig at ion
bec aus e o f h is fa i lure to d epo sit th e a mou nt due w it h th e cour t.
quantum meruit – as much as he deserves
Ina smu ch as pe ti tio ner d id n ot ac cep t t he afor esa id a mou nt, it
wa s i ncu mbe nt on pr i vat e resp ond ent to de pos it th e sa me wi th
the cour t i n or der to b e rel ea sed from res pon sib il it y. S inc e
priv ate r esp ond ent did n ot de po sit sa id amo un t wi th the c ourt , hi s
obl iga ti on wa s no t p ai d and he i s li ab le in ad d iti on for t he
paym ent o f t he mo nth ly re nta l o f P l,0 00. 00 from J an uary 1, 1 981
unt il sai d ob li gat io n i s du l y pa id, in ac cor dan ce wi th paragr ap h 3
of th e C ompr om ise A gree ment . U pon fu ll p aym en t of th e am oun t
of P7 6,0 59. 71 and the re n tal s i n a rrear s, pri va te r es pond ent s hal l
be ent it led t o a d eed o f abs olu te sa le i n hi s fav o r of t he rea l
prope rty i n q ues ti on.
DO CT RI NE S:
CI VI L L A W; CO NT RA CT S: R E S CI S SI ON ; NOT PR O P ER WH E N TH E R E I S
S UB ST A NTI A L COM P LI A N C E I N T H E AG R E EM E NT. — We agre e wit h t he
appe ll ate cou rt th at it w oul d be i ne qui tab le t o c anc el t he c ontr ac t of
con dit io nal sal e and t o h ave t he amo un t of P 101 , 550. 00 ( P14 8,1 26. 97
acc ord ing t o pr iv ate re sp onde nt in h is br ief) a lre a dy pa id by h im und er
sai d con trac t, ex cl ud ing the mon thl y r ent al s p ai d, forf ei ted in fa vor of
pet iti oner , p art ic ular ly af t er pr iva te r es pon den t h ad ten dere d t he a mou nt
of P76 ,05 9.7 1 in f ul l p ay ment of hi s o bl iga tio n. In the ana log ou s c as e of
De Gu zman v s. Co urt o f Ap pea ls , th i s C ourt su st a ine d th e or der of t he
resp ond ent ju dge den yi n g the pet it ion ers ' mo ti on for e xe cut ion on t he
groun d th at t he pr iv ate r esp ond ent had sub sta nt ia ll y co mpl ie d w ith the
term s and con di tio ns o f the c ompr om ise agre eme nt, a nd d irec ti ng t he
pet iti oner s to i mme di ate ly ex ec ute t he ne ce ss ary d ocum ent s tra ns ferr ing
to the pr iv ate re sp ond ent th e tit le t o the pr oper ti e s ( Ju ly 23 , 198 5, 13 7
S CR A 73 0). In t he ca se a t bar , ther e wa s al so s ubs t ant ial c omp li an ce w ith
the com pro mi se agre eme n t.
2. I D.; O BLI G ATI ON ; EX TIN GU IS HM E NT OF O BL I GA TIO N; T E N D ER OF
P A YM E NT; V AL ID I N C A S E AT B A R. — Pr iva te r esp ond ent 's ten der o f
paym ent of t he a mou nt of P 76, 05 9.7 1 tog eth er wit h h is m oti on f or
reco ns ider at ion on N ove mber 17, 19 80 wa s, th er efore , we ll w ith in th e
thir ty- day p eri od gra nte d by la w. Th e ten der ma de by pri va te res pon de nt
of a cer ti fie d ban k ma na ger' s ch ec k pa yab le to p eti tio ner w as a val id
tend er of pay men t. Th e c erti fie d c hec k c ove red n o t onl y th e ba la nce of
the pur cha se pr ic e in the amo unt o f P6 9,0 59. 71 , b ut al so the arr ear s i n
21
OBLICON CASE DIGESTS (SEPT 2)
the ren tal pa ym ent s fro m J une to D ec embe r, 1 980 in th e a mou nt of juri spr ude nc e on th e mat t er: "T end er of pa ym ent must be di st in gui sh ed
P7 ,00 0.0 0, or a t ota l o f P7 6,0 59. 71. On thi s p oi n t the app el la te c our t from c on si gna tio n. Te nde r is t he a nte ced ent of co nsi gna ti on, tha t is , an
corre ct ly a pp lie d th e r ul in g in th e ca se o f N ew Pa cif ic T imb er & S upp ly act pr epa rat ory t o the con sig nat io n, w hi ch i s th e pr i nci pa l, an d fro m wh ic h
Co. , I nc . v s. are de ri ved the imm ed iat e co nse que nc es wh ic h t he de btor de sir es or
Se ner is ( 101 SC R A 686 , 6 92 - 69 4) to the ca se at bar . see ks to o bta in . Te nd er of pay men t ma y b e ex tra jud ic ia l, wh ile
con si gna tio n i s ne ce ssar i ly j ud ic ial , an d the pri ori ty of the f irs t i s th e
3. I D. ; I D. ; I D. ; I D. ; DO E S NO T I N IT SE LF B EL I EV E TH E V E ND O R F ROM atte mpt to mak e a pri vat e set tle men t be for e pro ce ed ing to t he so lem nit ie s
HI S LI A BIL IT Y T O P A Y T H E R ED EM PT IO N P RI C E. — A lt hou gh pri va te of consignation. (8 Manresa 325)." (123 SCRA 160, 173).
resp ond ent had mad e a val id ten der o f pa yme nt wh ich pre ser ved hi s
righ ts as a ve nd e e i n t he con trac t o f c ond it ion al sa l e of r eal pro pert y, he
did no t f ol lo w it w ith a c ons ign at ion or de pos it of the s um due wit h the
cour t.
As th is C our t h as he ld: "T he ru le reg ard ing pa yme nt of r ede mpt io n pr ic es
is in vo ke d. T rue t hat c ons ign at ion o f t he re d e mpti on pr ice is no t
nec es sar y i n or der tha t t he v end or m ay co mpe l t h e ve nde e t o a ll ow th e
repur cha se w it hin t he tim e pr ov ide d b y la w or by con trac t. (R os ale s vs .
Re yes an d Ordo ve za, 25 Ph il . 4 95.) We hav e h el d tha t in su ch ca se s a
mere te nder o f pa yme nt i s en oug h, i f m ade o n ti me, a s a b as is f or ac tio n
aga ins t t he ven dee to co mpel hi m t o re se ll. B ut th at t end er do es no t i n
its el f re lie ve the ve ndor from hi s ob li gat io n to pay the pri ce wh e n
redem pt ion i s al lo we d b y the co urt . In oth er wo rds , te nder o f pay m en t is
suf fi cie nt t o c omp el re dem pti on b ut i s no t i n it se lf a paym ent tha t re li eve s
the ven dor fro m h is li ab il ity to pa y t he r ede mpt i on pr ic e. " ( Pa ez vs .
Magn o, 83 P hi l. 403 , 4 05).

4. I D.; ID .; I D. ; ID .; RU LE W H EN C RE DI T O R R EF U SE S T O AC C E P T
WIT HO UT J U ST C A U S E. — A cc ord ing t o Arti cl e 12 56 of t he C iv il Co de of
the P hi li ppi ne s, if th e cre dit or t o wh om ten der of p ayme nt ha s bee n m ade
refu ses wi tho ut ju st c aus e to a cc ept i t, th e d ebt or s hal l be rel ea sed fr om
resp ons ib il it y by t he c on sig nat io n of th e th ing or s u m du e, an d th at
con si gna tio n alo ne s hal l pro duc e the s ame ef fe ct in th e fi ve ca se s
enum erat ed t here in ; Art ic le 1 257 prov id es t hat in or der t hat the
con si gna tio n of the th in g (or sum ) d ue may re le as e th e obl ig or, it mu st
firs t b e a nno unc ed to th e per so ns in t ere ste d i n the ful fi ll men t of th e
obl iga ti on; an d Art ic le 12 58 pr ov ide s tha t c on sig na tio n s ha ll be mad e b y
depo si ti ng t he thi ng ( or s um) d ue a t th e d is po sal o f the ju di ci al aut hor ity
and tha t t he in tere st ed par tie s sha ll al so be no ti fie d there of.

5. I D. ; I D. ; ID .; ID .; DI ST IN GU IS H E D F RO M CO N S IG NA TIO N. — As th e
Cour t he ld in t he ca se o f S oco vs . M il ita nte , pro mulg ate d o n Ju ne 2 8 ,
1983 , af ter e xam in ing th e abo ve - ci ted p rov is io ns of the la w an d th e
22
quantum meruit – as much as he deserves
OBLICON CASE DIGESTS (SEPT 2)
Ca se # 1 3: S OC O V MIL I T ANT E
June 28, 19 83
Cas e: P eti ti on to re vie w the de ci si on of th e Co urt of Fir st In st an ce of
Ceb u.
F acts:
 So co an d Fra nc is co en ter ed a c ontr ac t o f lea se o n J anu ary 17 ,
1973 w her eby So co le a sed her c omm erc ial b ui ldi ng and l ot
sit uat ed at M ana li li Str eet , Ceb u Ci ty , to Fran ci sc o for a mon thl y
renta l of Ph p 800 .00 for a p erio d of 1 0 ye ars r ene wab le f or
anot her 10 ye ars at th e o p tio n o f t he le sse e.
 S ome tim e l ate r, F r an ci s co n ot ic ed t hat So co d id not an ymor e
sen d he r c ol lec tor for the pay men t o f re nta ls an d at t ime s t her e
were p aym ent s mad e b ut no r ece ip ts w ere is su ed. This s it uat ion
promp ted Fr anc is co t o wr ite So co, t he le tter d ate d Fe brua ry 7,
1975 w hi ch the l att er re ce i ved .
 On Ma y 13, 19 75, F r anc is co wr ote th e V ic e - Pre si den t of
Com tru st, C ebu Bra nch r eque st ing t he la tter t o is sue c hec ks t o
So co in t he amo unt o f Ph p 8 40. 00 e very 1 0th of the mo nth ,
obv iou sl y for pay men t o f hi s m ont hl y re nta ls . Th is r equ es t o f
Franc is co wa s com pl ied w ith b y C omtr ust in i ts let t er dat ed J une
4, 1 975 .
 Pur su ant t o h is let ter d at ed F ebr uar y 7, 197 5, Fra nci sc o pa id h is
mont hl y r ent al s to S oc o b y i ssu in g che ck s of th e Co mmerc ia l B ank
and T rus t Com pan y wh ere he had a ch ec kin g ac cou n t.
 Thes e pay men ts i n che ck s were re ce iv ed be cau se So co ad mit ted
that pri or t o M ay 197 7 de fend ant F ran ci sc o h ad be en re li gi ous ly
pay ing th e r ent al.
 S oon af ter Soc o lear ned tha t F r an ci sco s ub - lea se d a por ti on o f
the b ui ld ing to N AC ID A , at a m ont hl y re nta l o f m ore t han P hp
3,00 0.0 0 w hi ch is m uc h h i gher t han w hat Fr an ci sco wa s pa yi n g t o
So co, th e l att er f elt th at s he w as on the lo si ng end so she tri ed t o
loo k f or wa ys an d me an s t o ter mi nat e t he con tra ct.
 In v ie w o f the al leg ed non - p aym ent of re nta l of th e le as ed
prem ise s fr om Ma y, 1 977 , So co, thro ugh her l aw yer , sen t a l ett er
date d N ov emb er 23 , 1 978 to F ra nc is co ser vin g n oti c e to the la tter
“t o vac ate t he prem is es le ase d. ”
 In an s wer t o thi s l ett er, F ra nc is co th rou gh h is l a wy er in form ed
So co a nd her la wye r tha t a ll p aym ent s of re nta l d ue her were in
quantum meruit – as much as he deserves
fac t pa id by Com mer cia l Ba nk and T r us t C omp an y thr oug h th e
Cl erk of Cour t of the C it y Cour t of C ebu . D esp it e th i s ex pl ana tio n,
So co fi led t hi s i ns tan t c as e of I lle ga l Det ain er on Ja nuar y 8 , 1 979 .
 S oco al le ged tha t s he p erso nal l y de man ded form Fran ci sco th e
May, Ju ne, Ju ly and A ugu st re nta ls but Fran ci sc o d id n ot p ay fo r
the r ea son th at he had no fund s ava il ab le at tha t t im e.
 Thi s a lle gat io n of So co w as de ni ed b y Fra nc is co b e cau se p er h is
ins tru cti on s, the Comm er cia l B ank a nd Tr us t Co mpan y is sue d
che ck s in fav or of So co re pres ent ing p aym en t s f or m onth ly ren ta ls
for th e mon ths of Ma y, J u ne, J ul y, Aug us t, 19 77 a s sho wn i n D ebi t
Memor and um is sue d b y Com tru st. The se pa yme n ts a re f urt her
bol ster ed by th e cert if ic a tio n i ss ued b y Com tru st date d Oct obe r
29, 197 9.
 So co wa s in form ed of th e de po sit s m ad e t o t he Cl erk of C ourt
throu gh a l ett er of At ty. Pa mpi o A bar ien tos dat ed J une 9 , 197 7
(requ est in g So co to cl ai m th e re nta l p ay men t fr om Fra nc is co ’s
off ice o ther wi se t he la tt er wou ld be c on stra ine d t o m ake a
con si gna tio n) and Ju ly 6, 1977 (i nfor min g So co th at Franc is co ha s
con si gne d ren ta l pa ym ent for M ay and Jun e, 197 7 t o the C ler k of
Cour t of Ci ty Cour t of Ce b u) as we ll a s in the ans we r of Fran ci sc o
in Ci vi l C as e R - 162 61. - Sh e was fur ther not i fie d of the se
paym ent s by co ns ign at ion in th e l ett er o f At ty . Me nch ave z dat e d
No vemb er 2 8, 1 97 8 (an sw er to S oc o’ s l ett er all eg ing non -
paym ent ; t he le tter pr ov ed Fr anc is co ’s pa yme nt for No vem ber,
1978 a s d epo si ted i n t he Cl erk of Co urt) .
 The Cit y Cour t o f C ebu r ule d th at t he con si gn ati on wa s no t v al id
and o rder ed Fr a nc is co to vac ate im med iat el y th e l e ase d pre mi se s,
pay t he re nta ls d ue, pay th e pl ai nti ff ’s a ttor ne y’ s fe e, p ay f or
dama ges a nd in cid ent al l it iga tio n e xp ens es an d p ay the co st s.
 The Co urt of F irs t I ns tan c e re ver se d t hi s ju dgm ent and fo und t he
con si gna tio n t o b e va lid . Hen ce , t hi s a ppe al.
Issue s: 1. W ON th e le ss ee fai le d to pa y the mo nt hly re nta ls b eg inn ing
May, 197 7 up to t he t ime the c omp la int f or ev ic ti on w as f il ed on Jan uar y
8, 1 979 . ( WO N le ss ee ma de a v al id ten der of pa yme nt)
2. W ON th e con si gna ti on of t he r ent al s wa s val id
Ruli ng
1. Y E S ( NO)
23
OBLICON CASE DIGESTS (SEPT 2)
 The Jun e a nd Ju ly , 1 97 7 l ett ers ma y b e pr oof of ten der of
paym ent but onl y fo r the mont hs t he y refe r to. T he y are n ot pr oof
of t end er of pa yme nt of ot her or sub seq ue nt mon thl y re nta ls . T h e
No vemb er, 197 8 l ett er l ik e wi se is not a pro of of t end er of pay men t
for t he s ai d mo nth . It mere ly p rov es r ent al de pos it f or t he
part icu lar mo nth of N ov em ber, 197 8 a nd no ot her.
 Furth ermor e, t her e i s n o f act ual ba si s f or t he lo wer cour t’ s f ind in g
that the les se e ha d ten der ed pa ym e nt o f the mon thl y rent al s, t hr u
his b an k, c it ing t he l es se e’s let ter re que st ing t he ban k to i ss ue
che ck s in f avo r o f S oc o in th e amo unt o f Ph p8 40. 00 ev ery 1 0th o f
eac h mo nth and to d edu ct the f ul l am oun t a nd s erv ic e fee from hi s
curre nt a cc oun t. It m us t b e no ted t hat t he l et ter als o req ues ted
sai d ban k to no tif y th em ever y tim e the c he ck i s r ead y so th e y
may se nd so meb od y t o g et it. Ev ide nt ly, i t wa s t h e l es see ’s d uty
to sen d so meo ne to g et the ca sh ier ’s c he ck fr om th e ban k and
log ic al ly, th e l es see ha s th e obl ig ati on to m ak e a nd t end er th e
che ck to th e l es sor . T h is t he les se e f ai led to do .
 Tende r of pa yme nt m us t be mad e i n l aw ful c u rrenc y. W hi le
paym ent i n c he ck by the debt or m ay be ac cep tab le as va li d, if no
promp t o bj ec tio n t o sa id p ayme nt i s m ade th e f a c t t hat in pre vi ou s
year s pa yme nt i n ch ec k w as a cce pte d do es n ot p la ce i ts cr ed itor
in e st opp el from re quir in g the deb tor to pay h is ob lig ati on in ca sh.
Thus , te nder of a ch ec k to pa y f or an ob lig at ion i s no t a v al id
tend er o f p ay men t t here of.
2. NO
 For a c on si gna ti on t o be val id , i ts es sen tia l r equ i sit es mus t b e
comp li ed wi th ful ly an d str ict ly in ac cor dan ce wi th t he la w,
Art ic le s 12 56 to 1 261 , ne w C iv il C ode . Tha t th es e a rtic le s m ust b e
acc orde d a man da tory c ons truc ti on is cl ear ly ev i dent fro m th e
very la n gu age of t he cod al pr ov is ion s t hem se lve s wh ich r equ ire
abs olu te co mpl ia nce w i th t he es sen ti al r equ i sit es th erei n
prov ide d.
 Co ns ign at ion is th e ac t o f d epo si ti ng th e th ing d ue w it h the cour t
or ju di cia l au tho rit ie s w hene ver the cred it or ca n not a cc ept or
r e fu ses to ac cep t pa yme nt and it g ener al ly r equ ire s a pri or te nde r
of p aym en t.
quantum meruit – as much as he deserves
 In order t hat con si gna tio n ma y be ef fec ti ve, t he de btor mu st f irs t
comp ly wi th c erta in re qu ir emen ts pr es cri bed b y la w s. The d ebt or
must s ho w,
a) That the re wa s a de bt due ;
b) That t he c on si gna tio n of the o bl iga ti on ha d be en made bec au s e
the cr ed itor t o w hom t en der of p aym ent wa s mad e r efu sed t o
acc ept it , or be cau se he wa s ab se nt o r i nca pa ci tat ed, or b eca us e
sev era l per son s cl ai med t o b e ent it led t o r ec ei ve th e a mou nt du e ,
Art ic le 11 76;
c) that pr ev iou s not ic e of th e c on sig nat io n h ad be en gi ve n t o the
pers on int ere ste d i n t he perfo rman ce of the ob li g ati on, Ar ti cl e
1177 ;
d) that t he amo unt du e wa s pl ac ed at the d is po sal of t he co urt ,
Art ic le 11 78;
e) That a fter the con si gna ti o n had b een mad e the per s on in tere st ed
wa s no ti fie d t here of, Ar t ic le 1 178 . - Fa i lure in any of t he s e
requ irem ent s i s en oug h groun d to r end er a con sig nat io n
ine ffe ct ive . Fur ther more , wi tho ut no ti ce f ir st an no unc ed to the
pers ons int ere ste d in t he fu lfi l lmen t of t he o bli gat io n, th e
con si gna tio n a s pa ymen t i s v oi d.
 In th e c ase at bar, r es pond ent F ran ci sc o fa il ed to pro ve the
fol lo wi ng r equ is it es of a v ali d con si gna tio n,
a) tend er of pa yme nt of th e mont hl y r ent al s t o the l es ser ex cep t tha t
ind ic ate d in t he J un e, 1 977 l ett er (te nde r o f p a ymen t al rea dy
dis cu ss ed abo ve) ;
b) Re spo nde nt le sse e f ai le d to pro ve the f irst no ti ce to the l es sor
prior to c ons ig nat ion , ex cep t pa ymen t ref erre d to i n the Jun e,
1977 l ett er. The l es see m ust g ive pr ior no ti ce of co nsi gna ti on fo r
eac h mo nt hl y re nta l;
c) Re sp o nde nt le ss ee l ik ew i se fa il ed to pr ov e the s eco nd no ti ce,
wh ich is a fte r co ns ign ati o n has bee n mad e, t o the les sor e x cep t
the con si gn ati on r efer red to i n t he May an d J une c a shi er’ s che ck .
The l es se e s hou ld gi ve a not ic e of c ons ig nat ion of eac h d epo si t
ever y mon th ly ren ta l. The ba nk d id not sen d not ic e to So co th at
che ck s wi ll be dep os ite d and ha ve act ua ll y b een dep os ite d i n
con si gna tio n wi th th e Cle r k o f Cour t bec au se no in s truc tio ns w ere
giv en by it s dep os itor ;
d) The res pon den t fa ile d to prov e act ua l dep os it or c ons ign at ion o f
the mon thl y r ent al s e xc e pt t he tw o c as hie r’ s c he ck s pr ev iou sl y
ment ion ed . N ot a si ng le c opy of t he o ff ic ial re cei pt s is sue d b y th e
24
OBLICON CASE DIGESTS (SEPT 2)
Cl erk o f Cour t w as pres e nted at t he tria l o f th e c ase to pr ov e
act ual d epo si t o r con si gn ati on. T he o ff ic i al re ce ipt s ar e the be st
proof of a ctu al co ns ign ati on. T he co urt al so fou nd t hat the te nan t
onl y mad e th e dep os it s d ue in cour t t wo y ear s la te r a nd af ter t he
fil in g of th e com pl ain t f or il le ga l det ain er. The d eb i t
memor and ums pre se nte d as e vi den ce doe s n ot p ro ve p aym ent of
renta ls or d epo si ts in cour t. T he se deb it m emor and u ms ar e mer el y
int erna l b ank in g pr act ic es or of fi ce pro ced ures in vo lv ing the ba n k
and it s d epo si tor wh ic h i s not bin di ng upo n a th ird p erso n s uc h a s
the le ss or. Wha t is im por tant i s wh eth e r the c he ck s were p ic ke d
up by the les se e as p er th e arran gem ent , wh ere in t h e le sse e sh al l
pic k u p th e c he ck is sue d by t he ban k to te nder th e sa me t o th e
les sor . The les se e fa ile d t o pro ve t hat he c om pli ed w it h th e
arran geme nt
DO CT RI NE S:
CI VI L LA W ; O BLI G AT I ON S AN D C ONT R A CT S; C O N SIG N ATI O N;
D EF I N ED . — Co ns ign at io n is th e ac t o f de po sit in g the t hi ng d ue wi th t he
cour t or ju di ci al au th orit ies whe ne ver th e cre di t or can not a cc ept or
refu ses to a cc ept pay me nt an d it gen era ll y req ui res a pr ior ten der o f
paym ent (L im kak o vs. T e o doro, 74 Ph il. 31 3).
2. I D.; I D.; ID .; R EQ UI SIT E S. — In o rder tha t con si gna ti on m ay be
effe ct iv e, th e de bto r m ust f ir st c omp ly wi th cert ain r equ ire men ts
pres cri bed by l aw . T he d e btor m ust sho w: ( 1) th at t here was a deb t du e;
(2) t hat t he c on sig nat io n of t he ob li gat io n had b e en mad e bec au se th e
cred ito r to w hom t end er of pa yme nt w as m ade re f use d to a cce pt i t, or
bec aus e h e w as ab sen t or in ca pac it ate d, or be c aus e s ever al per son s
cla ime d to be e nti tl ed t o r ece iv e the amo unt due ( A rt. 11 76, Ci vi l Cod e);
(3) t ha t prev io us n oti ce o f th e co ns ign ati on ha d bee n g iv en to t he per so n
int eres ted in t he per for ma nce o f the obl ig ati on ( Art . 1177 , C iv il Cod e); (4)
that t he amo un t d ue w as pla ced a t the d is pos al o f th e cour t ( Ar t. 11 78,
Ci vi l C ode ); a nd(5 ) th at a f ter t he con si gna tio n h ad b een m ade th e per so n
int eres ted wa s n oti fi ed t h ereof ( Ar t. 1 :78 , C iv il Co de). Fa il ure in a ny o f
the se re qui reme nt s i s en o ugh gr oun d to r end er a co nsi gna ti on i nef fe cti ve
(Jos e Po nc e d e L eon v s. Sa nti ago Sy ju co, In c., 9 0 Ph il . 3 11)
3. I D. ; ID .; ID .; I D.; N OT I C E, IN DI S P E N S AB L E. — Wi tho ut th e n ot ice f irs t
anno un ced to th e p ers on s i nter es ted i n t he fu lfi ll ment of th e o bl iga ti on.
she c ons ig nat ion a s a p ayme nt i s vo id ( Li mka ko vs. Te odor o. 74 Ph il.
quantum meruit – as much as he deserves
313). In th i s co nne ct ion , t he pu r pos e of the n ot ice i s in or der t o gi ve t he
cred ito r an opp ortu ni ty t o reco ns ider hi s u nju st if ied refu sal an d to ac cep t
paym ent t her eby a vo id ing con si gna tio n and t he s ub s eque nt l it iga tio n. Th is
prev iou s not ic e i s e ss ent i al t o t he va lid it y o f t he co nsi gna ti on a nd it s l ac k
inv al ida te s t he sa me (C aban os "s . Ca lo, 1 04 P hi l. 105 8; Li mk ako v s.
Teodo ro. 74 P hi l. 31 3).
4. ID .; I D.; I D. ; ID .; I D.; T EN D E R OF P A YM E NT; M US T B E M A DE I N
LA WF UL C U RR E NC Y . — I n or der to be v al id. th e te nder of pa ym ent mu st
he m ade i n la wfu l curr enc y. Wh il e pay men t in ch ec k by th e d eb tor may b e
acc ept ab le a s val id , i f n o prom pt obj ec ti on t o s aid pa ymen t i s m ade
(De sbar at s vs. Vda . de M orter a, L - 49 15, M ay 25 , 1956) t he fa ct tha t in
prev iou s ye ars pa yme nt in ch ec k wa s a cc ept ed doe s not p la ce i t s c red ito r
in es top pe l from re qu irin g th e deb tor to p ay h is o bl i gat ion i n ca sh ( Sy v s.
Eu fem io, L - 105 72, Se pt. 3 0, 195 8). Thu s, th e ten der of a c hec k to pa y for
an ob lig at ion is no t a va li d t end er of p aym ent t her e of ( De sb arat s v s. Vda .
de M orter a, su pra) . See a nnot at ion , Th e M ech an ic s of
Con si gna ti on by A tt y. S. T abi os, 10 4 S CR A 17 4 - 17 9.
5. ID .; I D.; T E ND E R OF P A YM E NT DIFF E RE NT IA TE D F ROM
CO N SI GN AT IO N. — Te n der of pa yme nt mu st h e d is ti ngu is hed fr om
con si gna tio n. Ten der is t he a nte ce den t o f c on sig n ati on, th at is , a n a ct
prepa rat ory to the co ns ig nat ion , w hi ch is th e pr in cip al , an d fr om wh ic h
are de ri ved the imm ed iat e co nse que nc es wh ic h t he de btor de sir es or
see ks to ob ta in. Ten de r of pa yme nt ma y b e extr a jud ic ia l. wh il e
con si gna tio n i s ne ce ssar i ly j ud ic ial , an d the pri ori ty of the f irs t i s th e
atte mpt to mak e a pri vat e set tle men t be for e pro ce ed ing to t he so lem nit ie s
of con si gna tio n ( 8 M anre s a 32 5).
6. I D.; ID .; C O N SIG N ATI ON ; B E ST E VI D E NC E OF RE NT AL D E PO S IT. —
The b est ev id enc e of th e renta l d epo si ts w ith th e C lerk of Co urt a re t he
off ic ial re cei pt s i ss ued b y th e Cle rk of Cou rt. T hes e th e re sp ond ent
les se e ut ter ly f ai le d to pr ese nt a nd pr odu ce dur ing the t ria l o f th e c ase .
As po int ed out in pet it io n er's Mem ora ndum , n o s in gle off ic ia l re ce ipt w as
pres ent ed i n th e tri al cou rt as n o her e in t he f orm al of fer o f ex hi bit s fo r
les se e Fran ci sc o ca n a sin gl e off ic ia l re cei pt o f any d epo si t ma de he
foun d.
7. I D. ; ID .; ID .; P RI OR A ND AFT ER N OTI C E T O C R ED ITO R. — Th ere
sho uld be no ti ce t o t he cr edi tor p nor an d a fter co n s ig nat io n a s re qui red
by t he Ci vi l C od e. Th e re aso n for th is is ob vio us , name ly , to en abl e th e
25
OBLICON CASE DIGESTS (SEPT 2)
cred ito r to wit hdr aw t he good s or m one y de po sit e d. In dee d, i t wo ul d be
unj ust t o mak e hi m suf fer th e r is k for a ny d eter ior ati on, d epre ci at ion or
los s o f s uc h go od s or m one y b y rea so n o f La ck of k no wl edg e of th e
con si gna tio n ( Ca ban os vs . Ca lo , s upra ).
Ca se # 1 4: S OTTO V M IJ AR E S
May 8, 196 9
MA KAL INT AL;
Cas e
Ap pea l f rom th e or der of t he CF I of Ne gro s Oc cid ent al.
F ACT S
 Cri st ina So tto ( pla in tif f - a p pel lee) and Hern an i Mi jar es al ong wi th
other ind iv id ual s (de fe n dant s - a ppe ll ant s), were part ies to a
con trac t.
 On N ov emb er 13, 196 2, duri ng th e pe nde nc y of Ci vi l C ase No .
6796 , a pr oce ed ing t o fo recl os e a rea l e sta te m o rtgag e ear li er
exe cut ed by d efe nda nt s to p lai n t iff i n con si d erat ion of a
P5 ,00 0.0 0 l oan wh ic h th e form er h ad a ll ege dl y f ail ed t o pa y,
pla int if f f il ed a "Mo tio n f or De po sit " wh ic h sta ted :
1. That t he b al anc e i nde bte d nes s of the def end ant s i n favo r
of t he pl ain ti ff is th e a mou nt o f P5 ,10 6.0 0
2. That def en dan ts, i n t hei r ans wer , a dmi tte d t he sa id cl ai m
of P5, 106 .00 3. t hat in vie w o f th e a dmi ss io n of th e
defe nda nt s o f t he sa me i t i s fit ti ng and pr oper t h at t he
sai d am oun t of P5 ,10 6.0 0 be de po sit ed i n th e O ffi ce of th e
Cl erk of Co urt of t hi s pro vin ce o r t o de li ver t he sa me t o
the pl ain ti ff and /or her co uns el.
 Def end ant s, in th eir "O p pos it ion " s ign if ied the ir wi ll ing ne ss t o
depo si t th e re que st ed a moun t pro vi de d th at t he com pla in t be
dis mi ss ed a nd t ha t th ey be a bso l ved of a l l ot her l ia bi lit ie s,
exp ens es a n d c os ts .
 On Nov emb er 26 , 19 62 t h e lo wer cou rt or dere d th e defe nda nt s to
depo si t sai d a mou nt to the C lerk of C our t
 On Nov emb er 2 8, 1 962 pl ain tif f f ile d a m ot ion for p arti al jud gme nt
on th e p lea din gs wi th r esp ect to t he a mou nt of P5, 106 .00 ,
quantum meruit – as much as he deserves
modi fy in g the ir pre vi ous reque st f or ju di ci al de po sit , wh ic h had
alre ady be en gra nte d
 Def end ant s mo ved to re con si der th e or der of No vemb er 26,
exp la ini ng th at thr oug h o vers ig ht the y fa il ed to al leg e in the i r
"Op po sit io n" t hat th e sum of P5 , 106 .00 was a ct ual ly se cur ed by a
real e sta te mort gag e. The y wou ld th us prem i se the ir w il lin gne s s t o
depo si t s ai d am oun t up o n the co nd it ion tha t t he pla in tif f w i ll
can ce l t he mort gag e a bo v e - men ti one d
 On Mar ch 2 0, 19 63 the lo we r cour t r es ol ved b o th mot ion s, i n
effe ct de ny ing th em an d r ei t erat ing i ts pre vi ou s o rd er. He nce , t hi s
appe al
Issue s:
P roc edu ral
WO N the ord er is un app ea lab le
Subs tanti ve
WO N th e cou rt be lo w ac ted w ith a uth ori ty a nd in th e jud ic io us
exer ci se of i ts d is cre tio n in ord erin g the d efe nda nt s t o mak e the
depo si t b ut w ith o ut th e co ndi tio n t he y h ad sta te d.
Ruli ng:
P roc edu ral
 Pl ai nti ff - app el lan t ma int ai ns t hat t he o rder is int erl ocu tory , s in c e
it do es not d is po se o f the cas e w ith fin al it y bu t le a ves som eth in g
sti ll to be do ne, an d hen ce is un app ea lab le.
 The r eme dy , i t i s p oi nte d ou t, sho ul d ha ve be en by p et iti on fo r
cert ior ari but th is C ourt see s f it to di sre gard te c hni ca lit ie s a nd
treat th is a ppe al as su ch a pet it ion an d con si der it o n th e m eri ts.
Subs tanti ve
 Wh eth er or n ot to dep o sit at a ll t he a mou nt o f an adm it ted
ind ebt edn es s, or to do s o und er c ert ain co nd iti o ns, is a ri ght
wh ich be lo ngs to th e d eb t or e xc lu si vel y
 If he r efu se s he m ay n ot be co mpe ll ed t o do so, a nd th e cre di tor
must fa ll b ac k on the pro per c oer ci ve pr oc es ses pr ovi ded by la w
to sec ur e or sa ti sf y h is cred it, a s b y att ac hme nt, ju dgm ent an d
exe cut io n
26
OBLICON CASE DIGESTS (SEPT 2)
 From the v ie wpo in t o f t he d ebt or a de po sit s uc h a s t he one
inv ol ved her e i s in t he nat ure o f c on sig nat io n, a nd c ons ign at ion is
a fa cu lta ti ve reme dy w hi ch he may or ma y n ot av ai l o f.
 Inde ed, t he l aw say s th at " bef ore t he cr edi tor h as a cce pte d th e
con si gna tio n or bef ore a j udi ci al d ec lar ati on tha t th e co ns ign at ion
has be en pro per ly ma de , t he deb tor ma y w ith dra w th e t hin g or the
sum dep os it ed, al lo wi ng th e ob li gat io n t o re mai n in f orce .
 If th e de btor has su ch ri g ht of wit hdr aw al, he su rel y has the r igh t
to re fu se to mak e t he de p osi t in the fi rst p lac e
 The cour t, in i ssu in g t he orde r c omp la ine d o f, co mmit ted gr ave
abu se of di scr eti on amo un tin g t o e xc es s o f juri sd ic ti on.

Disp o sit ion

 The o rder ap pea le d fr om i s s et as ide

DO CT RI NE :

1.C I VIL L A W; O BLI G AT I ON S A N D CO NT R A CT S ; EX TI NG UI S HM EN T

T H ER E OF;
CO N SI GN AT IO N, D EP O S IT IN IN ST A NT C A S E I N TH E N ATU R E OF
CO N SI GN AT IO N. — I n c o nne cti on wi th a pro ce edi n g to fore cl os e a r eal
est ate m ort gag e ex ec ut ed by def end ant s i n f avor of p la int iff s i n
con si dera ti ons o f a P5 ,00 0 l oan wh ich t he for mer h ad al leg ed ly fa il ed to
pay , de fen dan ts w ere wi ll ing to dep os it the su m of P5 ,10 6 i n c our t,
sub je ct t o t he co ndi ti on t hat the sa id mor tga ge b e can ce l l ed. The tr ial
cour t or dere d t he def end a nts to mak e t he dep os its wi tho ut con dit io n t hey
had sta ted . He ld . The ord er of t he tr ia l c ourt sh oul d be s et a si de. From
the v ie wp oi nt of the deb to r a dep os it suc h a s the o ne in vo lv ed h ere is in
the n atu re o f c ons ig n at ion wh ich i s a f ac ult at ive re medy w hi ch h e ma y or
may no t a va il of . Be fore a cce pta nc e b y the cr edi tor of t he co ns ign at ion or
jud ic ia l de cl arat io n th at t he c ons ig nat ion ha s be e n prop erl y m ade , th e
debt or ma y wi thdr aw the thi ng or the su m de po sit ed. I f th e d ebt or ha s
suc h rig ht o f w ith dra wa l, he sur el y ha s th e rig ht t o r efu se t o ma ke th e
depo si t in the fi rst p lac e.

27
quantum meruit – as much as he deserves
OBLICON CASE DIGESTS (SEPT 2)
Ca se # 1 5: P AB U GA I S V S AH IJ WA NI - ; F eb ru a ry 23, 200 4
F ACT S -
 Pur su ant to a n " Agr eem en t An d Und ert ak ing ", pe ti ti oner Ted dy G .
Pa bug ai s, i n c ons id erat io n of t he am ou nt of F if tee n Mi ll ion F ou r
Hun dred E igh ty S eve n T hou san d Fi ve Hun dred Pe so s
(P1 5,4 87, 500 .00 ), agre ed to sel l to r es pon den t Da v e P. S ahi j wan i
a lot con ta in i ng 1 ,23 9 sq u are me ters lo cat ed a t Ja c arand a Stre et,
Nort h Fo rbe s Par k, Ma kat i, Metr o M ani la . Res pond ent pa id
pet iti oner the amo unt o f P60 0,0 00. 00 a s op ti on/r eser vat io n fe e
and t he b ala nc e of P1 4,8 8 7,50 0.0 0 to be pa id wi th in 60 da ys f rom
the ex ecu ti on of t he co nt ract , s im ult ane ou s wit h d eli ver y o f t h e
own er' s dup li cat e T r an sf er Cert if ic ate of Ti tl e in res pon den t' s
name the D eed of A bso lut e Sal e; the C erti fi cat e of No n - Ta x
De lin que nc y on rea l e sta te ta xes a nd C le aran ce o n Pa yme nt of
As so ci at ion Du es . T h e pa r tie s f urth er a gre ed t hat fai lure on th e
part of re spo nde nt to p ay the ba la nc e o f t he p urch ase pr ic e
ent itl es pe ti ti oner t o f orf eit th e P 600 ,00 0.0 0 opt i on/re ser va tio n
fee; w hi le non - de li ver y b y the la tter of th e n ec es sa ry d ocu men ts
obl ige s hi m to re turn t o re spo nde nt th e sa id op ti on/r eser vat io n fee
wi th int ere st at 18 % per a nnum .
 Pe tit io ner fai le d to de li ver the r equ ire d d ocu men ts . In c omp li an ce
wi th th eir agre eme nt, h e retur ned to re sp ond e nt th e la tter 's
P6 00, 000 .00 o pti on/ res er vat ion f ee by wa y of Far Ea s t B ank &
Trust C omp any w hi ch w as, ho we ver, d ish onor ed . P et it ion er' s
Cl aim s - He t wi ce t end er ed to re spo nde nt, t hrou g h h is cou nse l,
the a mou nt of P 672 ,9 00.0 0 (rep res ent in g th e P60 0, 000 .00
opt ion /res erv at ion fe e p l us 1 8 % int ere st per an num com put ed
from Dec emb er 3, 199 3 to Au gus t 3, 199 4) in the fo rm of a che ck
but sa id cou ns el r efu se d to a cc ept th e s ame (1s t - v ia m es sen ger ;
2nd - via D HL) Be cau se o f thes e ref us al s, h e wr ote a let ter say in g
say in g t hat he i s co ns ign ing th e a mou nt ten der ed wi th the RT C
quantum meruit – as much as he deserves
Maka ti C it y. R esp ond en t 's C lai ms - A dmi tte d t h at h i s o ff ice
rece iv ed p et iti one r' s le tt er bu t c lai med th at n o che ck wa s
appe nde d ther eto . He a v erred th at th ere w as no val id te nd er of
paym ent be cau se n o ch ec k wa s te nde red a nd t he c ompu tat io n o f
the am oun t to b e ten d er ed wa s i nsu ff ic ien t, be ca use p eti ti oner
verb al ly pr omi se d t o pa y 3 % m ont hl y in tere st an d 25 % att orn ey' s
fee s as pen alt y f or de fau l t, in add it ion to t he int ere st of 18 % p er
annu m o n t he P 600 ,00 0.0 0 op ti on/r es erva ti on fee .
IS S U E S
1. WO N ther e wa s a v al id co nsi gna ti on?
2. WO N t he p et iti one r c a n w ith dra w t he a mou nt c ons ign ed as a
matt er o f r igh t H EL D
RUL IN G
1. Y E S - I f th ere i s a val id t end er of pay men t in an a mou nt
suf fi cie nt to e xt ing ui sh th e o bl iga tio n, th e con si gn ati on is v al id .
Rea so nin g a . Th e am oun t ten dere d i s suf fi cie nt si n ce it a ppe ars
that on ly t he int ere st of 18 % per an num on th e P 600 ,00 0.0 0
opt ion /res erv at ion fee s tate d i n th e de fau lt cl aus e of the
"A gre eme nt And Und erta ki ng" was agre ed up on b y t he part ie s. b .
pet iti oner 's t end er o f pay ment i n t he for m o f m ana ger' s che ck i s
val id eve n th oug h i t is no t a le ga l te nder si nc e he did n ot o bj ect
to t he form . - Co ns ign at io n i s t he ac t o f d epo si tin g the th ing du e
wi th the co urt or ju di ci al auth ori tie s wh ene ver th e cred ito r c ann o t
acc ept or ref us es to ac ce pt p ay men t a nd it ge nera ll y re qu ires a
prior ten der of pa ymen t. - R eq ui sit es o f an e ffe ct iv e c on sig nat io n:
(1) the re w as a de bt d ue ; (2) th e c ons ig nat ion of the o bl iga ti on
had be en mad e be cau se t he cre dit or to w hom te nd er o f pay men t
wa s m ade r efu sed t o ac cep t it, or b ec au se he wa s abs ent or
inc apa ci tat ed, or b ec aus e se ver al p erso ns c la ime d to be en tit le d
to re ce iv e th e a mou nt du e or bec au se the ti tle to the obl ig ati on
has b een los t; (3) pr ev io us no ti ce of t he c on sig na tio n had b een
28
OBLICON CASE DIGESTS (SEPT 2)
giv en to th e per son i n tere ste d in th e p erfo rm anc e o f the
obl iga ti on; (4) th e amou nt due was p la ced at t he di spo sa l o f the
cour t; and (5) af ter th e c ons ign at ion ha d b ee n m a de t he per so n
int eres ted w as no ti fie d t he reof.

2. NO . - Wi thdr aw al of t he mon ey con si gne d w o uld e nri ch

pet iti oner a nd unj us tl y p reju di ce r es pon den t. Re a son ing a.
Art ic le 126 0 i s no t a ppl ic a ble here . It pro vi de s th at “Onc e t he
con si gna tio n ha s bee n d uly m ade , th e deb tor ma y as k the
jud ge t o ord er th e c anc el lat ion of t he o bl i gat ion ” b.
Re spo nde nt' s pray er in h i s a ns wer tha t t he amo unt con si gne d
be aw arde d to h im i s e qui va len t to an a cc ept an ce of t he
con si gna tio n, w hi ch ha s th e e ffe ct of e xt ing ui sh ing p eti tio ner ' s
obl iga ti on. c. Pe ti tio ner fa ile d t o m an ife st hi s i nten ti on to
comp ly w ith the " Agr eem ent An d U nder ta ki ng" by del iv eri n g
the n ec es sary do cum ent s and t he l ot sub je ct o f t he sa le to
resp ond ent i n e xc han ge fo r the am oun t d epo si ted .

Disp osit io n T he in sta nt p eti tio n f or r ev ie w i s D EN I E D a nd the

pet iti oner 's ob li gat ion to r esp ond ent und er pa ragr ap h 5 of the
"A gre eme nt An d Und erta ki ng" as ha vi ng bee n e xt ing uis hed , i s
AFFI RM E D.

29
quantum meruit – as much as he deserves
OBLICON CASE DIGESTS (SEPT 2)
Ca se # 16 : T EL EN GT AN BR OT H ER S an d SO N S vs. UN IT ED STAT E S
L IN E S
G. R. No. 132 284
F eb r u a ry 28, 200 6
F ACT S: Pet it ion er is a do mest ic c orpo rat ion w hi le U S L ine s is a fore ig n
corp orat io n en gag ed in o vers ea s s hi ppi ng. It wa s made app li ca bl e th at
con si gne es wh o fai l to ta ke del iv ery of th eir c ont a iner iz ed car go w ith in
the 1 0 - d ay f ree per iod ar e li ab le t o pa y d emurr ag e char ge s. O n J une 22,
1981 , U S L in es f il ed a sui t ag ain st p et it ion er see kin g pa ym ent o f
demurr age ch arg es plu s int ere st a nd dama ge s. Pe ti tio ner in curre d
P9 4,0 00 wh ic h th e lat te r refu se d t o pa y des pi t e rep eat ed dem and s.
Pe tit io ner d is cla im s li ab il ity a ll eg ing t hat i t ha s nev er e nt ered int o a
con trac t n or s ig ned an agree men t t o be bo und by it. RT C ru le d th a t
pet iti oner i s li ab le to r es pond ent an d al l b e com p uted a s o f t he da te of
paym ent in ac cor dan ce w ith Art ic le 125 0 of th e Ci vi l Cod e. C A af fir med
the de ci sio n.
IS S U E: Wh eth er th e re - c o mput ati on o f th e ju dgme nt a war d in a cc ord anc e
wi th Ar ti cle 12 50 of the C i vi l Cod e pr oper
RUL IN G: T he Su prem e Co urt f oun d a s err one ous th e tri al co urt’ s d ec is io n
as af firm ed y t he C ourt o f App eal s. T h e Co urt h old s tha t ther e ha s bee n
an ex trao rdi nar y in fl ati on wi thi n th e mea ni ng of Ar ti cle 125 0 of t he Ci vi l
Cod e. Ther e is n o r eas on for or der ing t he pa yme nt of an o bl iga ti on in a n
amou nt di ffe ren t f rom w hat ha s bee n agre ed u pon be cau se o f the
purpo rte d s upe rve nt ion of an e xtr aord in ary in fl ati on.
T he as sa il ed d ec is ion is aff irme d w ith m od ifi ca tio n t hat t he or der f or re -
comp uta ti on a s of the dat e of p aym ent in a cc ord an ce w it h th e pro vi si on s
of Art ic le 12 50 of Ne w Ci v il Co de is de le ted .
quantum meruit – as much as he deserves
Ca se # 1 7: B E NIT O H. L OP EZ v s. T H E C OU RT O F A P P E AL S AN D TH E
P HILI P PI N E AM E RI CA N GE N E RAL I NS U RA N C E C O., I NC. [G .R . No . L -
3315 7. June 29 , 1 982 .]
FACT S: On Jun e 2, 1 959 , peti ti oner Lop ez o bta in ed a loa n of P2 0,0 00. 00
from Pr ude nt ial Ban k pay abl e i n o ne ye ar wi th an in tere st of 10 % per
annu m, a pr omi ss ory no te wa s a ls o e xe cut ed be cau se o f t hi s. W ant ing to
sec ure hi s fu ll and fa ith fu l per form an ce o f hi s o bl ig ati on, Lop ez p os ted a
sure ty bo nd, w ith th e r esp onde nt P hi li pp i ne A mer ica n In sur an ce Com pan y
(Ph il amg en) as hi s sur et y. In li ne wi th P hi lam gen ’s und erta k ing of th e
sure ty bon d, Lop ez exe c uted on the sa me day an ind emn it y a gree men t
and a d eed o f as si gnm e nt of s har es o f sto c k in fa vor of Phi la mge n,
endor si ng in b lan k a nd de l iver in g t he st oc k c ert if ica t e to th e lat ter.
This as si gnme nt o f sh ar es w as m ade d ue t o a comm itm en t mad e by
deter mi nat e th ird part ie s to th e s uret y t hat in ca se pet iti one r de fau lt s i n
paym ent sa id t hir d par ti es wou ld b uy the sha res fro m the sur ety an d the
proc eed s wi ll be pa id to th e ba nk .
So whe n the o bl ig ati on be ca me du e, an d pet i tio ner fa il ed to pay ,
Ph il amg en pa id th e lo an an d it s ubs equ en tl y su ed the p eti ti oner f or
reim burs eme nt.
RTC R ULI NG: Di sm is sed Ph ila mge n’ s co mp lai nt. Si nc e the tran sf er of
sto ck in th e na me of P hil amg en wa s a bs olu te and had ex ti ngu is hed
pet iti oner 's ob li ga tio n u nd er th e ind emn it y a gree men t.
Re spo nde nts ap pea le d t o the Co urt of A ppe al s.
CA RU LIN G: Rul ed i n fa v or of Phi la mge n. Th e st oc k as si gnme nt m ade in
fav or of the sur et y w as a ple dge , in ten ded as a s ec urit y fo r th e pa yme n t
of t he ob lig at ion of pe ti tio ner t o t he sur et y.
30
OBLICON CASE DIGESTS (SEPT 2)
Pe tit io ner ’s Ar gum ent : T h e tra ns fer of shar es w as a da ci on en pag o; a n d
that th ere w as no va tio n of the i nde mn ity c ont rac t wh en t he su ret y an d th e
deter mi nat e thi rd par ti es agree d th at th e lat ter wo uld b uy th e sh are s of
sto ck from th e fo rmer so that th e ba nk ob lig at ion s of p eti ti oner co ul d be
pai d fr om the pro ce eds .
T hus , t hi s p et iti on to S C.
IS S U E S: 1) Whe ther or no t th e sto ck as si gnm ent i s i n ten ded a s a pl edg e?
2) Whe ther or not t he as si gnme nt of st oc k i s a d ac io n en pa go?
3) Whe ther or not t here i s nov ati on?
H EL D:
1) Y E S. C on sid eri ng th at the in dem ni ty ag reem en t c onn ot es a
con tin ui ng obl ig at ion of pet it ion er t ow ard s t he sure ty w hi l e
th e s toc k as s ignm ent ind ic ate s a c omp let e di s char ge of the
same o bl iga ti on, th e ex i ste nce o f t he i ndem ni ty agr eem ent i s
inc on si ste nt wi th the th eory of an ab so lut e s al e for an d i n
con si dera ti on of the sam e und erta ki ng o f the sur e ty, a nd s tro ng
and co gen t r ea son s ex is t t o con cl ude t hat the sur et y an d
pet iti oner int end ed th e s toc k as si gnm ent a s a pl edge .
2) NO . Th e a ss ign men t o f s t ock i s n ot a d ati on in pa y ment s inc e t he
obl iga ti on of t he pe ti tio ne r to wa rds t he s uret y ha s not ma ture d a t
the tim e t he s a me wa s exe cut ed
3) NO . Th ere wa s no no vat i on o f t he ob li gat ion b y s ubs tit ut ion of
debt or s in ce it wa s n ot est ab li she d nor sh ow n that pet it io ner
wou ld be rel ea sed fro m re spo ns ibi li ty .
DI S PO S ITI V E P ORT IO N: S C AF F I RM E D C A’ s d ec is i on in tot o.
DO CT RI NE :
1. ST OC K A S SI GN ME NT IN C AS E AT B AR IS PL E DG E ;
R EQ UI SIT E S S AT I SF I E D. — T he fa cts a nd cir cu msta nc es le ad ing to
the ex ec uti on of th e st ock a ss ig nme nt, Ex hi bi t C , a nd t he ad mi ss ion o f
Lope z pro ve th at it i s in f a ct a ple dg e. T he ap pe lla te cour t i s c orre ct in
ruli ng t hat the fol lo wi ng requ irem ent s of a co n trac t of ple dge ha ve
quantum meruit – as much as he deserves
been s ati sf ied : ( 1) t hat it be co ns tit ute d to s ecur e t he fu lfi ll men t
of a pr in ci pa l o bl iga ti on; (2) tha t t he ple dg or b e t he a bs olu te ow ner of
the th ing pl edg ed; an d ( 3) tha t t he per son co ns ti tut i ng t he pl edg e h as the
free di sp osa l of the pr op erty , a nd in th e abs en ce the reo f, tha t h e b e
leg al ly aut hor iz ed for the purpo se . ( Art ic le 20 85, N e w Ci vi l Cod e).
2. D ATI ON I N P A YM E NT ; PR E S U P PO S E S A M AT UR E D O BLI G AT I ON . —
Pe tit io ner' s " sal e, as si gn ment an d t ran sfer " unt o t he sure ty of th e shar es
of st oc k, c oup led wi th th eir en dor sem ent in bl an k an d de li ver y, i s no t
dat ion in pa yme nt, be cau se t he deb t or ob lig at ion of t he p et iti one r to hi s
sure ty h as not mat ured whe n p e ti tio ner "a lie nat e d" h is 4,0 00 s har es o f
sto ck to hi s sur ety . Pe ti tio ner' s o bl iga ti on wo ul d ar is e on ly w hen he w ou l d
defa ul t i n t he pa yme nt o f the pr inc ip al ob li gat ion ( the lo an) to the ba nk
and th e su ret y ha d to pay f or it . S uc h fa ct b ein g ad vers e to t he
natur e an d c on cep ts o f dat ion i n pa yme nt, the same cou ld n ot h ave
been c on st itu ted w hen the s to ck a ss ign men t wa s e xe cut ed. M oreo ver ,
there i s n o e xpr es s pr ov i sio n in the ter ms of th e st oc k as si gnm ent
bet wee n the sure ty an d th e pet it ion er tha t th e pr in ci pal o bl iga tio n
(wh ich i s th e lo an) is imme di ate ly ex tin gu ish ed by re as on o f su ch
ass ig nme nt.
3. NO V ATI ON . — Un de r A rti cl e 1 29 1 o f t he Ne w C iv il C ode ,
obl iga ti ons may be m odi fie d b y: (1) cha ng i ng th eir o bj ec t or
prin ci pa l con dit io n; ( 2 ) su bst it uti ng the per so n of th e de bto r; ( 3)
subr oga tin g a t hir d per so n in t he r igh ts o f th e cre dit or. And in or de r
that an o bl iga tio n ma y be ex ti ngu is hed by a not her w hi ch su bs tit ute
the s ame, it i s imp erat iv e th at it b e so d ec lare d in uneq ui vo cal t erm s, or
that the old and the n ew obl iga ti ons be o n ev ery p oin t in com pat ib le wi th
eac h oth er. ( Art ic le 1 292 , N .C .C .) N ov ati on whi ch c ons is ts i n su bs tit ut ing
a ne w de bto r in th e pl ac e of th e or ig ina l o ne , may be ma de e ve n w it hou t
the kn ow le dge or ag ai ns t t he wi ll o f t he l att er, bu t n ot wi tho ut th e con se n t
of t he cr edi tor . Pa yme nt by the n ew de btor g iv es him th e m ent io ned i n
Art ic le s 1 236 an d 1 237 . ( A rtic le 12 93, N .C .C .)
31
OBLICON CASE DIGESTS (SEPT 2)
Ca se # 18: M EA T PA C KI NG CO R P OR AT I ON OF T H E PH ILI P PI N E S vs
T H E H ON OR A BL E S A ND I GA NB A Y AN , T H E PR E S ID E NTI AL C OMM IS S IO N
ON G OO D GO V E RN M E NT a n d P HIL I P P IN E I NT EG RA TE D M EAT
CO R PO R ATI ON I NT EG R A T E D M EAT CO R PO R ATI O N [G. R. No. 1 030 68.
Ju n e 22, 20 01.]
F ACT S: The P CG G h a d se que ste red the pro pert i es of PI M EC O,
spe ci fi cal ly t he me at pa c kag ing p la nt, w hi ch i s th e s ub je ct of a l eas e -
purc has e a gree men t be tw een P CG G a nd M P C P, a corp orat io n o wne d b y
the Go vern men t Ser vi ce I nsur anc e Sy st em ( G SI S). No w, th e c ontr ac t w as
resc in ded f or fai lur e to pa y t hre e ( 3) a nn ual i ns ta ll ment s. Bec au se of th i s
the P C GG the n is sue d a res ol uti on ord eri ng the tran sfer of t he mea t
pac kag in g pl ant to th e M P C P. T h is r eso lu tio n, h ow e ver, p rov id es t hat the
sub je ct tr ans fer is s ub j ect t o th e ex ec uti on o f a memor and um o f
agree men t ap pro ved by the Sa nd iga nba yan . N ot wi ths tan di ng t he n on -
comp li an ce of t hi s r equ ir emen t, th e P CG G ord ere d t he tur n ov er of th e
meat pa ck ag ing co mp lex t o M P CP .
In ano ther cas e, PC GG i nst itu ted wi th th e Sa nd ig anba ya n on Ju ly 2 9,
1987 a c omp la int fo r re co nve ya n ce , r ever s ion , a cc o unt ing , re st it uti on an d
dama ges , do ck ete d a s C i vil Cas e No . 00 24, ent it l ed, "R epu bl ic o f th e
Ph il ipp in es , P la int if f ver s us Pet er S ab ido , et a l. , Def end ant s. ", whi ch
all ege s t hat Pet er Sab id o obta in ed, und er f av ored a nd v ery li ber al term s,
huge loa ns from the G SI S in fa vor of PIM E CO , am o ng ot her c orp orat io ns,
wh ich was b ene fi ci al ly he ld and c on trol le d by de fe ndan ts Pet er S abi do,
Rob erto S . Ben ed ict o an d Lui s D . Yu lo; and tha t PIM E CO wa s gra nte d th e
mono pol y to su ppl y mea t produ ct s in the Gr eat er M ani la Ar ea.
In rep ly , th e S A ND IG A N BA Y A N iss u ed a te m po r ar y r est ra ining o rd e r
comm and in g t he P CG G from en for ci ng the tu rnov er o f PI ME C O' s
mana gem ent , con trol a nd pos se ss ion to M P C P a nd t hat the tr ans fer of th e
quantum meruit – as much as he deserves
meat pa cka gi ng com ple x wi tho ut t he Sa nd iga nba ya n's app rov al ca nno t be
leg al ly enf orc ed.
Mean wh il e, C ivi l Cas e No. 01 08 for d ec lara tor y re l ief w as f il ed by
PI ME C O aga in st M PC P . I n t he mea nt ime , t he PC G G t end ere d t o M PC P,
two c hec ks i n t he amo unt of P 5,0 00, 000 re pre sen ti ng b ac k r ent al s. W hen
MP C P re fus ed a cc ept a nce , P C GG con si gne d the a mou nt. T he
Sa ndi gan ba yan is su ed a r eso lut io n ord eri ng M P C P t o rec ei ve t he a mou n t
con si gne d.
Con te sti ng the s ame , MP C P, by s pec ia l app e aran ce, a lle ged th at
Sa ndi gan ba yan h ad no jur isd ic ti on ov er it sin ce i t w as no t a part y th eret o
and tha t t he le ase - pur ch a se agre eme nt had be en r e sc ind ed.
The Sa ndi ga nba yan ru led that te nder of pa yme nt an d co ns ig nat ion w hi ch
were va li dl y m ade , re du c ed t he b ac k re nta ls to an amou nt le ss tha t t he
equ iva le nt of 3 an nua l in sta llm en ts . Th us , t he co n trac t cou ld no t hav e
been r es ci nde d. M P C P, sti ll und er a spe ci al ap peara nc e, m ove d fo r
reco ns ider at ion . The sa m e wa s d en ied . Me an whi le , Ci vi l C as e N o. 0 108
wa s d is mi sse d, w ith th e ru lin g tha t t he ten d er of p aym ent an d
con si gna tio n o f t he ten d ered amo unt (up he ld in Ci vi l Ca se No . 0 024)
aver ted the ac cu mul at ion of t he u npa id ren tal s, r ender in g th e p eti ti o n
moot an d a ca dem ic.
Hen ce , t he pre sen t re cou r se.
P ETIT IO N ER ’ S A RG UM E N T: M P C P cl aim in g tha t not be in g a part y to Ci vi l
Ca se No . 0 024 it c ann ot b e d irec ted t o a cc ept th e c ons ign ed amo unt .
IS S U E S: 1) W het her or not ther e is a v al id t ender of pa yme nt o r
con si gna tio n?
2) Whe ther or not M P C P’ s co nte nti on is c orre ct?
H ELD:
1) Y E S. Th e ten der of p ay ment a nd c ons ig nat io n if v al idl y ma de,
produ ce d t he eff ec t o f p ay ment an d e xt ing ui she d t he ob lig at ion .
In t he ca se at bar , t here wa s a pr ior te nder b y P CG G o f t he amo unt of
P5 ,00 0,0 00. 00 for the p ay ment o f the r ent al s in arr ears . M PC P 's ref us al
32
OBLICON CASE DIGESTS (SEPT 2)
to a c cep t t he sa me, on the gr oun d m ere ly th a t i ts le as e - pu rch as e
agree men t wit h PI ME C O h ad b een res ci nde d, wa s u nju st ifi ed. As fou nd b y
the San di gan bay an, from Jan uary 29, 1 986 t o Ja nu ary 30 , 19 90, PIM E C O
pai d, a nd G SI S/M P C P re cei ve d, sev era l am oun ts due u nde r th e l ea se -
purc has e agre eme nt, suc h a s ann ua l a mort iz at ion s or ren tal s, a dva nc es,
ins uran ce , a nd tax es , i n to tal s um o f P1 5,9 21 ,205 .83 . Sur el y, the
acc ept an ce by M PC P a nd G S I S o f s uc h p aym ent s fo r re nta ls an d
amort iz at ion s n ega te s a ny res ci ss io n o f t he lea se - pu rcha se agr eem ent .

2) NO . T he j uri sd ict io n ove r th e per son o f th e def e ndan t in c i vi l

cas es i s acq uir ed by h is vo lu ntar y app eara nc e in co urt an d h is
subm is s ion to it s a uth ori t y or by s erv ice of s ummo ns a nd tha t a
part y i s pre cl ude d fr om que sti on ing the jur is di cti on of a c ourt
wher e h e a ct iv el y p art ic ip ated i n i ts pr o ce edi ng s.

DI S PO S ITI V E P ORT IO N: S C a ffi rmed S AN DI G AN B A Y AN ’ s d ec is ion .

DO CT RI NE :

1) C ON SI G NA T IO N, D EF IN E D. — Con si gna tio n is the ac t of

depo si ti ng the th in g d ue w ith th e c our t or j udi c i al aut hor iti es
whe ne ver the cre di tor can not ac cep t p aym ent or r ef use s t o a cc ept
paym ent , and it ge nera l ly requ ire s a pr ior ten der of paym ent .

2) C ON SI G NA T IO N DIF F E RE NT IA T E D F ROM TE ND E R OF
P A YM E NT. — It sh ou ld b e d ist in gu ish ed from t end er o f p aym ent .
Tende r is th e ant ec ede nt of co ns ign at ion , tha t i s, an a ct
prepa rat ory to t he c ons ig nat ion , wh ic h is th e pri nc ipa l, an d from
wh ich are d eri ved th e im me di ate c on seq uen ce s wh ich th e d ebt or
des ire s or s eek s to o bta in. T en der of pa ym ent may be
extr aju di ci al , wh il e co ns i gnat io n is n ec es sar il y ju dic ia l, a nd th e
prior it y of th e fir st i s th e at tem pt to m ake a pri va te se ttl eme nt
befor e pro cee di ng to t he sol emn it i e s of c ons ig nat io n. T en der an d
con si gna tio n, wher e va li dl y mad e, pr odu ce s th e eff e ct of pay men t
and ex tin gu ish es th e o bl ig ati on.

33
quantum meruit – as much as he deserves