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Jose Baritua and Edgar Bitancor vs.

Court of Appeals, Nicolas Nacario and Victoria Ronda Nacario Facts: On November 7, 1979, the tricycle driven by Bienvenido Nacario along the national highway at Camarines Sur met an accident with a bus driven by petitioner Edgar Bitancor and owned and operated by petitioner Jose Baritua. Bienvenido and his passenger died due to the accident and the tricycle was damaged. On March 27, 1980, extra-judicial settlement were negotiated by the petitioners and the bus insurer with Bienvenido Nacarios widow, Alicia Nacario where she received P18,500. After the settlement, Alicia executed on March 27, 1980 a Release of Claim in favour of petitioners and the bus insurer, releasing and forever discharging them from all actions, claims, and demands arising from the accident. About one year and ten months from the date of accident, Bienvenidos parent, private respondents herein, filed a complaint for damages against petitioners. Private respondents alleged that during the vigil for their deceased son, petitioners through their representatives promised them that as extrajudicial settlement, they shall be indemnified for the death of their son, for funeral expenses incurred, and for the damage to the tricycle which they only loaned to the victim. Petitioners, however, reneged on their promise and instead negotiated and settled their obligations with the long estranged wife of private respondents late son. The trial court dismissed the complaint. However, on appeal, the decision was reversed by the Court of Appeals. Hence, this petition.


Whether or not petitioners are still liable to pay the damages to private respondents despite the agreement of extrajudicial settlement between petitioners and the victims wife. Held: No, petitioners are no longer liable to private respondents. Article 1231 of the Civil Code provides that Obligations are extinguished: 1) by payment or performance; 2) by the loss of the thing due; 3) by condonation or remission of the debt; 4) by the confusion or merger of the rights of creditor and debtor; 5) by compensation; 6) by novation. It is undeniable the petitioners had already paid their obligation to the victims wife arising from the accident that occurred on November 7, 1979. Article 1240 the states that Payment shall be made to the person in whose favour the obligation has been constituted, or his successor in interest, or any person authorized to receive it. And as stated in Article 887 of the Civil Code, Alicia and her son with the deceased are certainly the successors in interest referred to in Article 1240. Therefore, the obligation of petitioners had already been extinguished by the time they paid their obligation to Alicia, the victims wife and after extrajudicial settlement had been agreed. Petition granted.

Pilar Pagsibigan vs. Court of Appeals and Planters Development Bank Facts: On August 4, 1974, petitioner, through her daughter as attorney-in-fact, obtained a loan from the Planters Development Bank in the sum of P4,500 secure by a mortgage over a parcel of land. This loan was later fully paid. On November 3, 1977, another loan was obtained by petitioner from the bank secured by the same parcel of land. The first payment was to be made in May 3, 1977 and every six months thereafter at P1,018.14 with 19% interest for unpaid amortizations, as stipulated in the Promissory Note which also contained an acceleration clause. Initial payment was made on July 6, 1978 followed by several payments in the total amount of P11,900. However, only four of these payments were applied to the loan, while the rest were temporarily lodged to accounts payable since the account was already past due. The parcel of land securing the loan was then extrajudicially foreclosed by the bank for failure of petitioner to pay an outstanding balance of P29,554.81. The property was sold to the bank for P8,163. Petitioner then filed an action for annulment of sale with damages and writ of preliminary injunction in which the lower court sustained the theory of overpayment.

Issue: Whether or not the foreclosure and auction sale of the property is valid and justified under the circumstances. Held: No, the foreclosure and auction sale of the property is not valid and justified. Article 1234 of the Civil Code provides that If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfilment, less damages suffered by the oblige. On the payments received by respondent bank from petitioner on June 6, 1978 and August 26, 1978, the Court noticed that the bank waived its right under Article 1253 of the Civil Code on Application of Payments when it applied the payment to the principal instead of the interest. Thus, on that date the outstanding balance of petitioner was reduced after she had paid a total of P2,200 over a period of nine months from the time the loan was obtained. And for more than four years the payments of petitioner amounted to P8,650. This constitutes substantial performance of petitioner to her obligation to the bank. Furthermore, Article 1235 of the Civil Code states that When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with. Thus, when the bank accepted the initial payment of petitioner on July 6, 1977, which had been 2 months and 3 day delayed and the succeeding payments for a period of more than six years without any protest or objection, the bank waived its right under the acceleration clause and, therefore, estopped from enforcing its right to foreclosure of the mortgaged parcel of land. Petition granted.

Chonney Lim vs. Court of Appeals, Lea Whelan and Keith Lawrence Whelan Facts: On March 24, 1984, a conditional deed of sale was executed between Lim and Lea Whelan whereby Lea would buy from Lim a parcel of land with an area of 1,000 sq. m. for the sum of P600,000 or $30,000 in $100 denomination. The property, however, was still mortgaged to the BPI. An earnest money of $14,000 was then paid by Lea. Subsequently, Lea allegedly paid Lim an additional $8,000 in cash, a bank draft in the sum of P141,000 and a check for P17,800 drawn against PCI Bank as full payment for the property. After these payments, a deed of absolute sale was signed by Lim and Lea. On August 23, 1984, Lim sent Lea a telegram demanding her to vacate the subject property. Lea refused to do so and on the next day, Lim file a complaint for ejectment against Lea. The trial court and the Court of Appeals ruled in favour of Lea. Hence, this petition. Lim alleged that he was not paid fully for the bank draft and the check Lea gave him was not honoured. Lea, however, answered that due to the failure of Lim to pay his indebtedness to BPI and the penalty charges and the capital gains tax to the BIR, she paid them albeit without knowledge of Lim. She contends that she in fact overpaid Lim.

Issue: Whether or not Chonney Lim has been fully paid for the property in question thus, making the deed of absolute sale enforceable. Held: Yes, Chonney Lim has been fully paid. Article 1236 of the Civil Code partly provides that Whoever pays for another may demand from the debtor what he has paid, except that if he had paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor. In the case at bar, the payment of Lea to the indebtedness of Lim to BPI and BIR undoubtedly benefited Lim to be free from his loan obligation. Furthermore, it is the obligation of Lim to see that the property was free from all encumbrances and tax liabilities, which he failed to do so. Thus, the payment of Lea of the mortgage loan and the capital gains tax as her full payment for the property is but a fair disposition. Therefore, Lim has already been fully paid and he is obliged to deliver the title of the property to Lea. Petition dismissed.

Dominion Insurance Corporation vs. Court of Appeals, Rodolfo Guevarra and Fernando Austria Facts: On January 25, 1991, respondent Rodolfo Guevarra instituted a case against petitioner Dominion Insurance Corporations for sum of money amounting to P156,473.90 which he claimed to have advanced in his capacity as manager of petitioner to satisfy certain claims filed by petitioners clients. Petitioner denied any liability to respondent Geuvarra and filed third party complaint against respondent Fernando Austria, who, at the time relevant to the case, was its Regional Manager for Central Luzon area. The trial court rendered a decision in favour of respondent Guevarra, ordering petitioner to pay P156,473.90. The Court of Appeals affirmed the said decision. Hence, this petition.


Whether or not respondent Guevarra is entitled to reimbursement of amounts he paid out of his personal money in settling the claims of several insured. Held: Yes, respondent Guevarra is entitled to the reimbursement. Article 1236, second paragraph, of the Civil Code provides that Whoever pays for another may demand from the debtor what he has paid, except that if he had paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor. In this case, the obligation of petitioner that arose when the risk insured occurred was extinguished by the time respondent Guevarra paid the claims of those who were insured. Thus, to the extent that the obligation of petitioner has been extinguished or to which petitioner benefited, respondent Guevarra may demand reimbursement from petitioner. To rule otherwise would result in unjust enrichment of petitioner. However, as proven, petitioner only benefited from the extinguishment of its obligation P112,672.11. Therefore, respondent Guevarra can only claim P112,672.11, not P156,473.90. Decision of Court of Appeals affirmed with modification.