DAVID, ANGELICA A.

, 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. L-15645, January 31, 1964]

PAZ P. ARRIETA and VITALIADO ARRIETA, plaintiffs-
appellees, vs. NATIONAL RICE AND CORN CORPORATION,
defendant-appellant, MANILA UNDERWRITERS INSURANCE CO.,
INC., defendant-appellee.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
The National Rice and Corn Corporation and Arrieta
signed a contract on July 1, 1952, wherein the former
committed to supply the latter with 20,000 metric tons of
Burmese rice for $203.00 per metric ton, and the latter agreed
to pay for the imports "immediately employing an irrevocable,
confirmed, and assignable letter of credit in US currency in
favor of Arrieta and/or supplier in Burma."
Ultimately, the agreement was forfeited, and the 5%
deposit was also forfeited under Burmese laws, so Arrieta lost
out on the chance to profit from the sale; NARIC attempted to
open a $3,614,000 letter of credit with the Philippine National
Bank; however, the defendant failed to do so, and the letter of
credit was delayed when the obligation to pay the supplier
became due. Following the demand's denial, she filed an
appeal in this case.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
NARIC counterclaimed in its defense, stating that
unrealized profit damages of $406,000 had been sustained due
to the projected contract's failure to materialize. In addition, it
brought a third-party lawsuit against Manila Underwriters
Insurance Company, claiming it was responsible for Arrieta's
performance bond.

3. Decisions of the lower courts (e.g. RTC, CA)

This is an appeal by defendant-appellant NARIC from the
trial court's February 20, 1958 decision, which dismissed the
defendant-appellant NARIC's counterclaim and third-party
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

complaint and awarded $286,000.00 in damages to the

plaintiffs-appellees for breach of contract.

ISSUE:
4. Issue/s (one sentence)
Whether or not NARIC is liable for the damages.

HELD:
5. Disposition of the case (one sentence)
This decision upholds the decision that was appealed,
with the only change being that the award shall be converted
into Philippine pesos at the exchange rate in effect on July 1,
1952, the date the contract was executed, or at the time the
obligation was incurred; in light of this ruling, the appellee
insurance company is released from any obligation arising from
this lawsuit; no cost announcement was made.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
The delay in opening the Letter of Credit and the
subsequent cancellation of the allocation in Burma were caused
by NARIC's inability to meet the requirements set forth by the
Philippine National Bank for the issuance of the Letter of Credit.
However, the defendant-appellant's incapacity resulted from
more than just not fulfilling PNB's requirements. Its acceptance
of contractual obligations despite its financial inability to finish
the presentation—which it acknowledged to PNB in its
application—makes it culpable.
As per the provisions of Article 1170 of the Civil Code,
debtors who are found guilty of fraud, negligence, or default,
and those who default on their obligations generally, are
required to provide indemnity for any losses or damages
incurred.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. L-27782 July 31, 1970.]

OCTAVIO A. KALALO, Petitioner, vs. ALFREDO J. LUZ,
Respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
Alfredo Luz agreed to pay Octavio Kalalo, a licensed civil
engineer who operates under the business name "O.A. Kalalo
and Associates," for engineering design services; on May 18,
1962, the defendant sent the plaintiff a resume of fees due to
the latter along with a check for P10,861.08, but Kalalo refused
to accept the check as full payment of the remaining balance of
the fees due him. On December 11, 1961, Kalalo sent Luz a
statement of account indicating that the balance due for
services rendered was P59,508.
With regard to the International Research Institute project,
Kalalo filed a complaint citing four causes of action: (1) P28,000
as 20% of the pain Luz suffered; (2) P17,000 as consequential
and moral damages; (3) P55,000 as moral damages, attorney's
fees, and litigation expenses; and (4) P25,000 as actual
damages, attorney's fees, and litigation expenses.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
Luz claimed that only P10,861.08 remained in fees
despite some of Kalalo's services not being provided as agreed;
in addition to asserting special defenses, he denied liability for
any damages claimed by Kalalo. He said that the latter had no
cause of action and was in estoppel due to the statement of
accounts and that his claim regarding one of the projects was
premature because Luz had not yet received payment for that
particular project. Moreover, Kalalo's services were insufficient,
lacking, or in violation of the terms of the contract.

3. Decisions of the lower courts (e.g. RTC, CA)

The trial court decided in favor of Kalalo and ordered the
defendant to pay P51,539.91 and $28,000 to the plaintiff, along
with the legal interest rate from the time the complaint was filed
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

until the matter was settled. Furthermore, there will be an extra

P8,000 in legal fees. In accordance with the Central Bank of the
Philippines' approved rate of exchange between the US dollar
and the Philippine Peso, the $28,000 was to be converted into
pesos at the time of judgment payment. Luz brought up legal
concerns by directly appealing to the Supreme Court.

ISSUE:
4. Issue/s (one sentence)
Whether or not the dollar-peso exchange rate was the
same when the research institute project became due and
demandable, or when the judgment payment was made.

HELD:
5. Disposition of the case (one sentence)
Costs are assessed against the defendant-appellant, and
the trial court's ruling is upheld.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
According to the terms of the agreement, Kalalo was
entitled to $28,000, which started to accrue on August 25, 1961,
or after Republic Act 529 (June 16, 1950) was passed. Thus,
the clause in the statute that stipulates that payment must be
made at the exchange rate that was in effect at the time the
obligation was incurred is not applicable. The R.A. Since 529
prohibited payments made in dollars for expenses incurred after
the Act's enactment, the exchange rate used for payments must
be the one in effect at the time of payment.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. L-27796 March 25, 1976.]

ST. PAUL FIRE & MARINE INSURANCE CO., Petitioner, vs.
MACONDRAY & CO., INC., BARBER STEAMSHIP LINES, INC.,
WILHELM WILHELMSEN MANILA PORT SERVICE and/or
MANILA RAILROAD COMPANY, Respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
Barber Steamship Lines, Inc., Wilhelm Wilhelmsen's
agent, issued Bill of Landing No. 34 to Winthrop Products, Inc.
as the shipper, along with an arrival notice to the consignee in
Manila. Before the SS Tai Ping arrived at the Port of Manila and
unloaded its aforementioned shipment into Manila Port
Service's custody, the shipper insured it against loss or damage
with St. Paul Fire& Marine Insurance Company: 1 drum and
several cartons of medicine were in poor condition. St. Paul
Fire & Marine Insurance Company sued the defendants in the
Manila Court of First Instance, requesting $1,134.46 in
damages in addition to costs.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
The carrier and Manila Port Service both rejected the
consignee's claim for the value of the damaged drum and
medicine cartons. The consignee then filed a claim with St.
Paul Fire & Marine Insurance Company, which paid the
consignee $1,134.46 for the insured value of the lost and
damaged goods along with other related expenses; on August
23, 1961, Manila Port Service and Manila Railroad Company
submitted a counterclaim to the insurer. Each defendant argued
that they merely delivered the shipment in the same condition
that it was received and that they were not the carrying vessel's
agents.

3. Decisions of the lower courts (e.g. RTC, CA)

The lower court's decision was rendered on March 10,
1965, and it directed Wilhelm Wilhelmsen, Macondray & Co.,
and Barber Steamship Lines, Inc. to pay ₱300 to Winthrop
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

Steams Inc. jointly and severally. Until the money was paid in
full, legal interest would be accrued from the complaint's filing.
On the other hand, the consignee is entitled to receive
payment of ₱809.67 from Manila Railroad Company and Manila
Port Service jointly and severally, plus legal interest from the
date of complaint filing until the full amount is paid.
In a move for reconsideration, Winthrop Steams Inc.
claimed that it was also entitled to damages totaling $1,134.46,
but the lower court rejected the move. It appealed, saying that
instead of paying ₱2.00, the aforementioned parties should
have paid $1,134.46 in pesos at a rate of ₱3.90 for every US
dollar.

ISSUE:
4. Issue/s (one sentence)
1. Whether or not the CIF value of the lost or damaged
goods will be the carrier's maximum liability in the event of loss
or damage.
2. Whether St. Paul Fire & Marine Insurance Company,
which paid Winthrop-Steams Inc. in dollars to settle a claim,
ought to receive payment in pesos on the day of discharge or
the ruling.

HELD:
5. Disposition of the case (one sentence)
Thus, the decision that was appealed is upheld, and the
plaintiff-appellant is responsible for paying the costs.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
A clause that establishes or caps the amount that can be
recovered from the carrier in the event that the goods are lost
or deteriorated is only considered valid if it is both (1)
reasonable and just given the circumstances, and (2) freely and
fairly agreed upon. St. Paul becomes subrogated to the rights
of the assured after paying the insured's claim for damages
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

under the insurance; as a result, it can only recover the amount

that the assured is entitled to recover as a subrogee.
The plaintiff-appellant's untenable claim is that it should
be compensated for its dollar payments at the exchange rate on
the judgment date instead of the date of loss or damage
because of extraordinary inflation. When the carrier failed to
deliver the shipment to the consignee in good condition, it
became liable for the damage.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. 105188. January 23, 1998.]

MYRON C. PAPA, Administrator of the Testate Estate of Angela
M. Butte, Petitioner, vs. A.U. VALENCIA and CO. INC., FELIX
PEÑARROYO, SPS. ARSENIO B. REYES & AMANDA SANTOS,
and DELFIN JAO, Respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
The petitioner's attorney-in-fact, Anne Butte, is charged
with selling several other land parcels as well as a tract of land
to private respondent Penarroyo, which was mortgaged to the
Associated Banking Corporation. The petitioner acknowledged
the buyer's payment of $5,000 in cash and a $40,000 check
through Valencia, as shown by a number of receipts. On appeal,
the petitioner contended that since he failed to cash the check,
which had no bearing on payment, the stated sale of the
subject property was not completed.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
Even though it was known that the property had already
been sold to Pearroyo, the bank appeared to have previously
mortgaged the aforementioned property as well as other
properties in Butte. Tenants were paying rent to the petitioner
on a monthly basis; the bank denied Penarroyo's request, a
private respondent, to take ownership of the property following
Butte's passing. For this reason, the respondents requested
that the petitioner deliver the title and pay the accumulated
rentals in a specific performance case that they filed in the
Pasig Regional Trial Court.

3. Decisions of the lower courts (e.g. RTC, CA)

The petitioner was ordered to sell or pay for the property
by the lower court, which found in favor of the private
respondents. Consequently, in accordance with Rule 45 of the
Rules of Court, the petitioner filed a petition for review on
certiorari. With some changes, the CA maintained the ruling of
the subordinate court.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

ISSUE:
4. Issue/s (one sentence)
Whether or not the check represents a legitimate tender
of payment.

HELD:
5. Disposition of the case (one sentence)
The Supreme Court's decision upholds the appellate
court's January 27, 1992 decision and denies the petition for
review.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
According to Article 1249 of the Civil Code, payment by
check only affects payment once it has been cashed or when it
has been compromised by an error on the part of the creditor.
Article 1249 of the Civil Code states that a check is only
considered paid when it is cashed; however, this rule does not
apply if the debtor suffers harm as a result of a delay in
presenting information to a court.
Accepting a check implied that you would treat it carefully
and present it as payment. The check will be regarded as
actual payment of the debt or obligation for which it was written
if the recipient incurs losses as a result of their failure to
exercise due diligence. The debtor is no longer liable if the
check was not presented due to a mistake on the part of the
creditor.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[A.M. No. 21901-96. June 27, 1978]

REPARATIONS COMMISSION, plaintiff-appellants, vs.
UNIVERSAL DEEP-SEA FISHING CORPORATION and MANILA
SURETY AND FIDELITY CO., INC., defendant-appellants.
MANILA SURETY & FIDELITY CO., INC., third-party plaintiff-
appellee, vs. PABLO S. SARMIENTO, third-party defendant-
appellant.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
According to the surety company, the trial court erred in
failing to apply P10,000.00, which UNIVERSAL had paid as a
down payment to the Reparations Commission in order to
guarantee indebtedness. According to the surety company, in
accordance with Article 1254 of the Civil Code, in cases where
neither the debtor nor the creditor imputes payment, the debt
that is most burdensome to the debtor is considered to have
been satisfied. Consequently, the P10,000.00 that Universal
paid as a down payment for the acquisition of M/S UNIFISH 1
and M/S UNIFISH 2 should be applied to the guaranteed
portion of the debt, releasing a portion of the liability and
resulting in the surety company's obligation being P43,643.00
rather than P53,643.00.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
Pablo S. Sarmiento, the third-party defendant, argues that
he is not personally accountable because he only signed
indemnity contracts while serving as Universal Deep-Sea
Fishing Corporation's acting general manager.

3. Decisions of the lower courts (e.g. RTC, CA)

The Court of First Instance of Manila has rendered the
following judgment: (1) Defendant Universal Deep-Sea Fishing
Corporation is hereby sentenced to pay the plaintiff
P100,242.04 in the first cause of action, P141,343.45 in the
second cause of action, and P54,500.00 in the third cause of
action; (2) Defendant Manila Surety & Fidelity Co., Inc. is
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

hereby sentenced to pay the plaintiff P53,643.00 in the first

cause of action, P68,777.77 in the second cause of action, and
P54,508.00 in the third cause of action; (3) Defendant Universal
Deep-Sea Fishing Corporation and Pablo Sarmiento are hereby
sentenced to pay the Manila Surety & Fidelity Co., Inc. the
sums of P53,643.00 and P68,777.77 with interest thereon at
the rate of 12% per annum from August 10, 1962 until fully paid
plus P2,000.00 as attorney's fees; (4) Defendant Universal
Deep-Sea Fishing Corporation is hereby sentenced to pay the
Manila Surety & Fidelity Co., Inc. the sum of P54,508.00 with
interest thereon at the rate of 12% per annum from August 10,
1962, until fully paid; (5) Defendant Universal Deep-Sea Fishing
Corporation shall pay the costs.

ISSUE:
4. Issue/s (one sentence)
Whether or not the P10,000 down payment made by
UNIVERSAL can be applied to the first installment that the surety
guarantees.

HELD:
5. Disposition of the case (one sentence)
The judgment that was appealed is hereby upheld with
the modification that the appellants must pay corresponding
costs and that UNIVERSAL Deep-Sea Fishing Corporation
must additionally pay Manila Surety & Fidelity Co., Inc.
P7,251.42 for documentary stamps and premiums on
performance bonds.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
NO. A person who owes multiple judgment debts of the
same kind to a single creditor is subject to the provisions
outlined in Articles 1252 to 1254 of the Civil Code. They cannot
be applied to someone whose duty as a mere surety is singular
and contingent, as in this instance, full and faithful adherence to
the conditions of the conditional purchase and sale of
reparations goods contract. The initial installment of P53,643.00
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

as well as the ten (10) equal annual installments totaling

P56,597.20 were included in Universal Deep-Sea Fishing
Corp.'s standing obligation. Universal cannot decide that the
P10,000 payment should only be applied to the first installment
because the first installment and the first ten annual
installments have both accrued.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. 123855, November 20, 2000]

NEREO J. PACULDO, petitioner, vs. BONIFACIO C. REGALADO,
respondent.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
A twenty-five (25) year lease was signed by Nereo
Paculdo and Bonifacio Regalado for a plot of land in Fairview
Park, Quezon City, that included a wet market building. Along
with leasing additional properties from the respondent—ten (10)
within the Fairview compound and one along Quirino
Highway—the former also bought heavy machinery and
automobiles from the latter. Petitioner Paculdo asked
respondents not to impede his possession of the property
assigned to him under the terms of the lease in a motion for
injunction and damages.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
The respondent sent two demand letters requesting
payment of the back rentals, threatening to terminate the lease
contract if payment was not made within fifteen (15) days,
because the petitioner had failed to pay 361, 895.55 in rent for
May 1992 and 450, 000 in monthly rental for June and July.

3. Decisions of the lower courts (e.g. RTC, CA)

The decision in the Metropolitan Trial Court ordered the
petitioner to leave the property and pay 527,119.27 in unpaid
rent as of June 30, 1992, plus 2% interest. Paculdo was also
ordered to pay 5,000,000 in litigation fees while the Regional
Trial Court upheld the MTC decision. Paculdo voluntarily
vacated the property, and on July 12, 1994, the MTC decision
was upheld and a writ of execution was issued.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

ISSUE:
4. Issue/s (one sentence)
Whether or not the petitioner actually owed money for the
rental use of the subject property at the time the ejectment
complaint was submitted.

HELD:
5. Disposition of the case (one sentence)
In addition to the complaint being dismissed from the
Metropolitan Trial Court in Quezon City, the petition is granted
and the Court of Appeals' ruling is reversed and set aside.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
The debtor has the authority to designate which of his
multiple obligations to the same creditor should be satisfied first,
as stated in Article 1252 of the Civil Code.
In this instance, the petitioner explicitly informed the
respondent that the payment would be applied to his rental
obligations for the Fairview wet market property. Conversely,
the respondent utilized a significant amount of the money paid
by the petitioner to fulfill the payment of eight heavy pieces of
equipment, which was an obligation that was not yet due and
demandable.
According to the law, the payment must be applied to the
debt that is the most burdensome to the debtor first if the debtor
failed to specify which of his debts with the creditor it was to be
applied to at the time of payment. In the present case, the
petitioner's most burdensome lease is related to the Fairview
wet market.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. 118342, January 5, 1998.]

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs.
COURT OF APPEALS and LYDIA CUBA, respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
Due to Cuba's nonpayment of loans, the Development
Bank of the Philippines assumed control of Cuba's leasehold
over the fishpond without initiating foreclosure procedures. As a
result, DBP signed a Deed of Conditional Sale of the Leasehold
Rights in Cuba's favor. However, when Cuba neglected to
make the amortizations required by the Deed of Conditional
Sale, DBP issued a Notice of Rescission and seized the
Leasehold Rights over the aforementioned fishpond. The
assignment of the rights over the loans replaced the promissory
notes' requirement to pay a certain amount of money for the
loans, according to DBP's argument in its petition opposing the
damages award.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
In the Pangasinan Regional Trial Court, Cuba filed a
complaint against DBP and Caperal, requesting the following:
(1) the declaration of nullity of DBP's appropriation of Cuba's
rights, title, and interests over the fishpond for violating Article
2088 of the Civil Code; (2) the annulment of the Deed of
Conditional Sale executed in her favor by DBP; (3) the
annulment of DBP's sale of the subject fishpond to Caperal; (4)
the restoration of her rights, title, and interests over the
fishpond; (5) the recovery of damages, attorney's fees, and
litigation expenses.

3. Decisions of the lower courts (e.g. RTC, CA)

Cuba won the case at the Pangasinan Regional Trial
Court, which found that DBP had violated the pactum
commissorium provision of the Civil Code by taking ownership
and possession of property without first obtaining a foreclosure.
Additionally, it concluded that the Assignment of Leasehold
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

Rights' condition number 12 constituted an obvious case of

pactum commissorium, which is specifically forbidden and
deemed void by Article 2088 of the Civil Code. Additionally, it
concluded that since DBP never obtained legal ownership of
Cuba's leasehold rights, all acts of ownership and possession
by the bank are void, as is the Conditional Sale deed in favor of
Caperal. Appeal petitions to the Court of Appeals were
intervened in by Cuba and the Philippines Development Bank.
The appellate court found that Caperal could lawfully obtain the
leasehold rights and that condition 12 of the deed of
assignment was an explicit permit from Cuba for DBP to sell
any rights she may have had over the fishpond. The appellate
court also found that the RTC erred in declaring the deed of
assignment null and void.

ISSUE:
4. Issue/s (one sentence)
1. Whether or not the assignment constitutes dation in
payment.
2. Whether or not condition no. 12 of the deed of
assignment constituted pactum commissorium.

HELD:
5. Disposition of the case (one sentence)
The Court of Appeals' ruling is overturned, and the trial
court's judgment is changed—apart from the moral damages;
the Development Bank of the Philippines is also mandated to
provide an accounting for the money received from the
fishpond's operation.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
A sale of property to a creditor as payment for a monetary
debt is known as a "dation in payment," and it falls under the
purview of the Civil Code's Article 1245 laws. In this instance,
the parties acknowledged in their stipulation of facts that the
assignment of leasehold rights was made as security for loan
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

payment and not as a discharge of debt. This made the

assignment of leasehold rights part of a mortgage agreement;
the components of a pactum commissorium, on the other hand,
are as follows: (1) a property mortgaged as security for the
fulfillment of the basic obligation, and (2) a clause requiring the
creditor to automatically appropriate the item mortgaged if the
principal obligation is not paid within the allotted time. Condition
No. 12 did not state that DBP would automatically become the
owner of the leasehold rights if Cuba did not make timely loan
payments. To pay the principal obligation, the mortgagee may
foreclose and alienate the mortgaged property, under Civil
Code Article 2087 and a standard condition.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. L-50449. January 30, 1982]

FILINVEST CREDIT CORPORATION, Plaintiff-appellee, vs.
PHILIPPINE ACETYLENE, CO., INC., (CASURECO II), Defendant-
appellant.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
According to a Deed of Sale designated as Exhibit G,
Philippine Acetylene Co., Inc. paid P35,247.80 in installments
under the terms and conditions of a promissory note, and paid
P20,000 down payment for a 1969 Chevrolet model with serial
no. 136699Z303652 from a person named Alexander Lim. PAC
executed a chattel mortgage in Alexander Lim's favor over the
same motor vehicle as security for the promissory note
payment. Through a Deed of Assignment, Alexander Lim gave
the Filinvest Finance Corporation all of his rights, titles, and
interests in the chattel mortgage and promissory note.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
The terms of the chattel mortgage and promissory note
were not followed by Philippine Acetylene Co. In compliance
with Article 1484 of the New Civil Code, the defendant notified
Filinvest Credit that it was returning the mortgaged property as
full payment for its debt. "Voluntary Surrender with Special
Power of Attorney to Sell" was the document that was returned
with it to Filinvest.

3. Decisions of the lower courts (e.g. RTC, CA)

This appeal concerns the decision rendered by the Court
of First Instance of Manila, Branch XII on February 25, 1974,
subsequent to the submission of the case for determination.
Two questions can be summarized as the central concerns of
the appellant's five error assignments. First, the question of
whether the appellant's voluntary surrender of the mortgaged
motor vehicle to the appellee fully terminated and/or canceled
the appellant's obligation to the appellee; and second, the
question of whether the warranty for the unpaid taxes on the
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

mortgaged motor vehicle can be appropriately raised and

imputed to that party.

ISSUE:
4. Issue/s (one sentence)
Whether or not Philippine Acetylene's voluntary surrender
of the mortgaged car to Filinvest resulted in the elimination or
cancellation of its obligation to Filinvest.

HELD:
5. Disposition of the case (one sentence)
The entire decision that was the subject of the appeal is upheld,
and the defendant-appellant will be charged with costs.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
In the absence of the parties' true intention, the simple
return of the mortgaged vehicle by the mortgagor, Phil.
Acetylene, to the mortgagee, Filinvest, does not amount to a
dacion en pago or dation in payment. The documentation in the
file does not prove that the mortgagee approved or even
intended for the mortgaged car to be delivered to him and that
his acceptance of it be taken as actual payment, more precisely
dation in payment or dacion en pago; Manresa defines dacion
en pago as the transfer of ownership of a thing from the debtor
to the creditor as an accepted substitute for the fulfillment of an
obligation. Even though he received the mortgaged car, it does
not follow that Phil Acetylene and Filinvest now own the car as
per the terms of the dacion en pago. Without Filinvest's express
approval, the appellant and appellee cannot exchange
ownership of the mortgaged vehicle. If the car was left in Phil
Acetylene's hands, Filinvest would likely have only desired
control to prevent it from being misplaced, destroyed,
fraudulently transferred to other parties, or rendered worthless.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. L-51767 June 20, 1982.]

LETICIA CO, assisted by her husband MUI YUK KONG, in
substitution of CITADEL INSURANCE & SURETY CO., INC.,
Petitioner, vs. PHILIPPINE NATIONAL BANK, Respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
Using its real properties in Baguio City and Makati, Rizal
as collateral, Standard Parts Manufacturing Corporation
obtained multiple loans totaling ₱4,296,103.36 from the
Philippine National Bank. Additionally, the company secured a
chattel mortgage over its personal properties. When the
appellant bank failed to fulfill its obligations, it bought the
mortgaged properties as the highest bidder and conducted
extrajudicial foreclosure, leaving a ₱1,434,321.07 deficiency
claim.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
PNB acquired the properties on July 19, 1974, in Baguio,
and August 8, 1974, in Makati, after Standard failed to redeem
them within the redemption period. PNB then consolidated titles
to the Baguio properties; the Makati property was transferred to
PNB on May 14, 1976, after the title was granted on May 5,
1976. In the meantime, Citadel claimed to be the assignee of
Standard's right of redemption and wrote to PNB on March 5,
1976, expressing its desire to redeem the Makati property;
Citadel's entire claim of P3,366,546.42 was insufficient, so PNB
rejected it.

3. Decisions of the lower courts (e.g. RTC, CA)

Based on the date specified as the redemption date, the
Court determines that the redemption was completed on
schedule. The sale receipt has been turned in. P.D. It is stated
in 694, also referred to as the new PNB Charter, that
redemption is necessary. Payment in full of all PNB claims on
the loan cannot be used to acquire PNB seized assets
retroactively to loan contracts entered into before its effective
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

date of May 8, 1975, due to P.D.'s non-impairment. Since 694

has stricter requirements for the borrower, the contractual
clause will be broken. Stated differently, because of a particular
clause found in the mortgage agreement.

ISSUE:
4. Issue/s (one sentence)
Whether or not Citadel leveraged its redemption right
during that window of time.

HELD:
5. Disposition of the case (one sentence)
The trial court's judgment against the Philippine National
Bank in this appeal is hereby modified, and a new one is
hereby rendered in favor of the aforementioned defendant-
appellant bank using the formula mentioned above;
consequently, PNB is ordered to transfer title to Leticia Co.
upon Leticia Co.'s payment of the amount owed it based on the
aforementioned computation; this payment must be made
within ten (10) days of the judgment becoming final.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
Act. 3133 and Sections 29–32 of Rule 39 of the Rules of
Court are the applicable legal precepts to Citadel's right of
redemption, but it cannot be blamed for not including it in its
repurchase agreement. Citadel made its tender of redemption
in a timely manner in a letter dated March 3, 1976, addressed
to the Philippine National Bank, and accompanied by a
manager’s check covering the redemption price. For equity and
substantial justice reasons, the appellant bank should be paid
P3,366,346.32 in full, interest-free, as of March 11, 1976, when
it rejected the legally and validly tendered redemption. It also
shouldn't have to reimburse Citadel and/or Leticia Co. for the
rentals it had earned since taking possession of the property.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. 149756, February 11, 2005.]

MYRNA RAMOS, petitioner, vs. SUSANA S. SARAO and JONAS
RAMOS, respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
The "Deed of Sale Under Pacto de Retro," which gave the
Ramos spouses the option to repurchase the property within six
months of February 21, 1991, for P1,310,430 plus 4.5%
monthly interest, was signed by spouses Jonas and Myrna
Ramos in favor of Susana S. Sarao. Additionally, it was decided
that the transfer would be deemed an absolute sale if the
couples failed to exercise their right to repurchase within the
predetermined time frame or pay the monthly interest.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
On December 21, 1991, Sarao filed a petition against the
Ramos spouses seeking consolidation of ownership in a pacto
de retro sale. The case was docketed as Civil Case No. 91-
3434 and was raffled to Branch 61 of the Makati City RTC.

3. Decisions of the lower courts (e.g. RTC, CA)

The appeal court affirmed the RTC's ruling that the
disputed agreement was a legitimate pacto de retro sale rather
than a mortgage to secure a loan. Given that the two manager's
checks were deemed unlawful to consign, it was concluded that
Myrna Ramos had failed to utilize her right of repurchase. She
is charged with neglecting to: (1) deposit the appropriate
purchase price; and (2) provide the necessary consignment
notice.

ISSUE:
4. Issue/s (one sentence)
Whether or not the honorable appellate court erred in
upholding the court a quo's decision that there was neither a
legitimate consignment nor a legitimate tender of payment for
the redemption price in the particular case.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

HELD:
5. Disposition of the case (one sentence)
The assailed decision is overturned and the petition is
partially granted, leading to the following rulings: (1) recognizing
(a) the disputed contract as an equitable mortgage, (b)
recognizing the amount of the petitioner's loan to Respondent
Sarao as $1,633,034.19 as of July 30, 1991, and (c)
recognizing the property's mortgage, secured by TCT No.
151784 in the Ramos spouses' names and issued by the
Makati City Register of Deeds, as discharged; (2) directing the
RTC to release the consigned amount to Sarao; (3) ordering
the respondent to return to the petitioner the owner's copy of
TCT No. 151784, which was issued by the Makati City Register
of Deeds in the names of the Ramos spouses; (4) ordering the
Makati City Register of Deeds to cancel Entry No. 24057, the
annotation that appears on TCT No. 151784; and (5) ordering
the petitioner to reimburse Sarao for real property taxes while
making no pronouncement regarding costs.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
No. A tender of payment is an expression by debtors of
their wish to fulfill or pay their obligations; if the creditor declines
the payment tender without good reason, the debtors are
released from their obligation by consigning the amount owed.
A consignment is made when the appropriate sum is deposited
with the appropriate court, where the payment is tendered and
the consignment announcement is validated. All relevant
parties must be informed of the consignment, and compliance
with these requirements is required.
This conclusion is incorrect because the petitioner failed
to give Sarao enough notice of the consignment and the correct
amount, as determined by the trial and appellate courts, which
held that there was no valid consignment. To support their
decision that the petitioner had neglected to inform Respondent
Sarao of the consignment, the two lower courts referenced
Article 1257 of the Civil Code; according to this legal clause, the
debtor may be released as long as the consignment is first
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

made known to the parties interested in the satisfaction of the

duty.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. L-47822 December 22, 1988.]

PEDRO DE GUZMAN, Petitioner, vs. COURT OF APPEALS and
ERNESTO CENDENA, Respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
De Guzman received only 150 crates of milk that had
been filled with Liberty; the truck carrying the remaining 600
boxes was ambushed by armed individuals somewhere along
the MacArthur Highway in Paniqui, Tarlac, and the cargo was
taken. As a result, the petitioner never received the remaining
600 boxes. The petitioner filed a lawsuit at the Pangasinan
Court of First Instance on January 6, 1971, seeking P22,150,
the purported value of the lost item, in addition to damages and
legal fees.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
Ernesto Cendaa, the respondent, is a junk dealer from
Pangasinan who bought used bottles and scrap metal intending
to transport enough to Manila for resale once he accumulated
enough. He brought the materials to Manila using two (2) six-
wheeler vehicles he owned; the respondent would load his
vehicles with goods that different merchants needed to be
delivered to different locations in Pangasinan while traveling
back to that province. He would then charge freight fees for that
service, which were typically less than standard commercial
rates.

3. Decisions of the lower courts (e.g. RTC, CA)

The trial court found on December 10, 1975, that the
private respondent was a common carrier and assessed liability
against him for the amount of $22,150 that was not delivered, in
addition to $2,000 in legal fees and $4,000 in damages.
However, the Court of Appeals overturned the trial court's
decision, concluding that the respondent was not acting as a
common carrier but rather was transporting return loads of
freight as a side gig for his scrap iron company.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

ISSUE:
4. Issue/s (one sentence)
Whether or not the private respondent is regarded as a
common carrier and if the respondent's truck was hijacked due
to force majeure.

HELD:
5. Disposition of the case (one sentence)
The Supreme Court affirmed the Court of Appeals' August
3, 1977 decision, without citing any costs, and agreed with the
Court of Appeal's conclusion that private respondent Cendana
is not liable for the value of the undelivered item that was lost
as a result of an uncontrollable event; the Petition for Review
on Certiorari was denied.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
According to Article 1732, common carriers are "persons,
companies, partnerships, or groups engaged in the business of
carrying or transporting passengers or products, or both, by
land, water, or air for a fee and providing their services to the
general public.". The aforementioned article does not
distinguish between individuals whose primary economic
activity is the transportation of people or products, or both, and
those who do it on the side. Neither the regular nor the planned
provider of transportation nor the sporadic, episodic, or
unplanned provider of transportation are distinguished in Article
1732.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. L-3538, October 31, 1972.]

TLG INTERNATIONAL CONTINENTAL ENTERPRISING, INC.,
petitioner, vs. HON. DELFIN B. FLORES, Presiding Judge, Court
of First Instance of Rizal, Branch XI, respondent.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
TLG, being Bearcon's sub-lessee over the property,
stepped in to protect its rights as such and to allow it to consign
the monthly rentals while the lawsuit was pending, as it was
unclear who was legally and legitimately entitled to receive the
payments. The petitioner placed a ₱3,750 deposit with the CFI
Clerk of Court. But since the Order dismissed the case and
complaint in intervention without ruling on Fabella's or
Bearcon's rights to the rentals deposited by TLG, the latter was
left with no option but to move to withdraw the ₱3,750 it had
deposited and ask for permission to take the money out and
give it to Fabella.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
As lessee of Juan Fabella's property, Bearcon Trading
Co., Inc.'s rights were impacted by a declaratory relief action,
and Judge Flores granted TLG's motion to intervene. When
Juan Fabella asked for the subject to be discussed in the
ejectment proceedings against Bearcon, he responded by
issuing an Omnibus Order dismissing both the complaint and
the complaint in intervention.

3. Decisions of the lower courts (e.g. RTC, CA)

In the present instance, the lawsuit was dropped before
the court declared the consignment authorized or the creditor
took receipt of the deposit. This dismissal led to the
determination that the consignment was ineffective. It was the
respondent's responsibility in these circumstances to grant the
petitioner access to the money it had deposited with the court.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

ISSUE:
4. Issue/s (one sentence)
Whether or not the respondent might let the deposits be
withdrawn, considering that the respondent claims the Court
"has not required the intervenor to make any deposit in
connection" with the issue.

HELD:
5. Disposition of the case (one sentence)
The respondent is directed to permit the deposit
withdrawal per the aforementioned, and the orders dated June
23, 1972, and July 15, 1972, which are the basis of the
certiorari petition, are hereby set aside; no expenses have been
disclosed.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
Without a doubt, in consignment situations, the debtor
has the right to withdraw the deposit made with the court prior
to the consignment being authorized by the court or accepted
by the creditor. The second paragraph of Article 1260 of the
new Civil Code states, "The debtor may withdraw the thing or
the sum deposited, enabling the obligation to continue in force,
before the creditor has accepted the consignment, or before a
judicial declaration that the consignment has been lawfully
made."
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. L-57552 October 10, 1986.]

LUISA F. MCLAUGHLIN, Petitioner, vs. THE COURT OF
APPEALS AND RAMON FLORES, Respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
Ramon Flores and Luisa McLaughlin signed a contract for
the conditional sale of real estate. McLaughlin filed a petition to
cancel the contract when the private respondent agreed to a
settlement but failed to pay the remaining amount by the
deadline. Additionally, the petitioner claimed that Flores had
neglected to make the payment required by their compromise
agreement and filed a writ of execution motion to retract and
liquidate damages.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
Writing to the former, Flores emphasized that he would be
happy to pay the remaining amount. He claimed that despite his
offer of money, the petitioner turned him down. Within
seventeen days after the deadline, the private respondent filed
a move for reconsideration and the full sum with a certified
manager's check.

3. Decisions of the lower courts (e.g. RTC, CA)

The Court of Appeals declared the trial court's decision to
be invalid even though it had denied the move for
reconsideration. It contended that retraction would not be
allowed in case of a small or inadvertent infringement. Flores'
payment delay is a small setback.

ISSUE:
4. Issue/s (one sentence)
Whether or not the payment was made in a way that
reinstated the defendant's rights as a vendee.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

HELD:
5. Disposition of the case (one sentence)
Thus, the judgment rendered by the Court of Appeals is
upheld with changes.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
The petitioner received a certified bank manager's check
payable to the private respondent, which was a legitimate
means of payment. The certified check settled P7,000 in unpaid
rental arrears from June to December 1980 in addition to the
outstanding balance of the P69,059.71 purchase price, for a
total of P76,059.71. However, he still has to pay the vendor,
and the cash needs to be lodged with the court first.
According to Article 1256 of the Civil Code of the
Philippines, if the creditor to whom tender of payment has been
made refuses without just cause to accept it, the debtor shall be
released from responsibility by the consignation of the thing or
sum due, and that consignation alone shall produce the same
effect in the five cases enumerated therein; Article 1257
provides that in order that the consignation of the thing (or sum)
due may release the obligor, it must first be announced to the
persons interested in the fulfillment of the obligation; and Article
1258 provides that consignation shall be made by depositing
the thing (or sum) due at the disposal of the judicial authority
and that the interested parties shall also be notified thereof.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

(14) [G.R. No. L-58961. June 28, 1983]

SOLEDAD SOCO, Plaintiff-appellee, vs. HON. FRANCIS
MILITANTE, Incumbent Presiding Judge of the Court of First
Instance of Cebu, Branch XII, Cebu City and REGINO
FRANCISCO, JR., Defendant-appellant.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
Soco entered into a lease agreement with Francisco,
leasing her commercial property to him for $800 per month for
ten years, with a further ten-year extension option. However,
upon discovering that Francisco sublet a section of the
premises to NACIDA for over $3,000 monthly, far surpassing
what he paid her, Soco believed the lease unfairly favored
Francisco. Consequently, she sought means to terminate the
contract.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
Francisco observed that Soco had ceased sending her
agent to collect rent and sometimes accepted payments without
providing receipts. Consequently, he chose to communicate his
concerns through a letter, which the petitioner received.
Subsequently, the respondent began paying rent using checks
from the Commercial Bank and Trust Company.

3. Decisions of the lower courts (e.g. RTC, CA)

As per the City Court's factual determinations, Francisco,
the defendant, consistently fulfilled his obligation of paying
Soco, the plaintiff, the agreed-upon rentals outlined in the
Lease Contract while utilizing the leased premises. However, a
discrepancy arose when Soco requested payment for the rental
dues starting in May 1977. The court also established that there
was no substantiated proof indicating that a letter purportedly
handed to Soco in May 1977 by Filomeno Soon, a messenger
of the FAR Corporation, contained any form of monetary value
such as cash, a check, money order, or any other financial
instrument. Consequently, there was no valid tender of
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

payment, and even if there was, Soco declined it without any

evident justification, rendering the supposed tender ineffective.

ISSUE:
4. Issue/s (one sentence)
Whether or not there was a valid consignation of payment
of the rentals.

HELD:
5. Disposition of the case (one sentence)
The Court of First Instance of Cebu, 14th Judicial District,
Branch XII's decision is overturned and replaced with the
reinstatement of the order from the City Court of Cebu, Branch
II, with costs awarded to the petitioner.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
Failure to meet certain standards renders the
consignment ineffective, as per the Court's ruling regarding the
respondent lessee's case. The lessee's defense suffered
greatly due to their inability to fulfill key requirements of a
legitimate consignment. Firstly, they neglected to notify the
lessor about the payment of monthly rentals. Secondly, they
couldn't establish that the initial notification to the lessor
preceded the consignment. Additionally, they failed to
demonstrate the second notice to the lessor after the
consignment's delivery and the deposit or cosigning of monthly
rentals. These lapses in meeting the necessary conditions
severely weakened the lessee's argument.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

(15) [G.R. No. L-23563. May 8, 1969.]

CRISTINA SOTTO, plaintiff-appellee, vs. HERNANI MIJARES, ET
AL, defendants-appellants.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
Sotto submitted a request for deposit in her case before
the CFI of Negros Occidental, stating that the defendants had
acknowledged the amount in question, and to streamline the
proceedings, it was appropriate for the sum of P5,106.00 to be
deposited with the Office of the Clerk of Court or handed over
to the plaintiff or her legal representative.
Later, Sotto, now represented by new legal counsel, filed
a motion for partial judgment on the pleadings specifically
concerning the aforementioned amount, altering their previous
plea for judicial deposit, which had already been approved.

The plaintiff, through new legal representation, sought a

partial judgment on the pleadings regarding the sum of
P5,106.00, revising their earlier request for the amount to be
deposited judicially, as already granted.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
The defendants expressed their readiness to deposit the
requested sum if the complaint was dismissed and they were
relieved of all other obligations and costs. In their request for
reconsideration, the defendants clarified that the sum was
secured by a real estate mortgage, and they proposed
depositing it on the condition that the plaintiff cancels the
mentioned mortgage and returns certain titled properties to
them.

3. Decisions of the lower courts (e.g. RTC, CA)

The motions were rejected by the Court of First Instance,
leading to this appeal. Initially taken to the Court of Appeals, the
case was referred to the Supreme Court solely on a legal
matter.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

ISSUE:
4. Issue/s (one sentence)
Whether or not to make a deposit for the full amount of
acknowledged debt, or to impose conditions on such deposit, is
a privilege solely held by the debtor.

HELD:
5. Disposition of the case (one sentence)
The motion for partial judgment on the pleadings dated
November 28, 1962, is refused, instead, the defendants are
directed to deposit P5,106.00 with the Clerk of Court within ten
days from receipt of this order, pending further decision
following trial; the appealed order is overturned, with no cost
pronouncement.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
Yes, According to the debtor's perspective, a deposit like
the one under discussion resembles consignation, a
discretionary remedy he may choose to employ or not. If the
debtor initiates it, the creditor may either accept it voluntarily or
the court can validate its proper execution, leading to the
cancellation of the obligation. The law stipulates that before the
creditor's acceptance or a judicial declaration of proper
consignation, the debtor retains the option to retrieve the
deposited item or sum, thereby maintaining the obligation's
validity. Granting the debtor this right to withdraw also implies
the right to decline to make the initial deposit. Thus, compelling
the debtor to deposit was a significant misuse of authority,
constituting an overreach of jurisdiction.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

(16) [G.R. No. L-44349. October 29, 1976.]

JESUS V. OCCENA and EFIGENIA C. OCCENA, Petitioner, vs.
HON. RAMON V. JABSON, Presiding Judge of the Court of First
Instance of Rizal, Branch XXVI; COURT OF APPEALS and
TROPICAL HOMES, INC., Respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
Petitioners received a complaint from Tropical Homes,
Inc. on February 25, 1975, requesting modifications to their
subdivision contract concerning a 55,330-square-meter land
parcel in Davao City, citing uncontrollable factors like rising oil
prices and global fee increases. The complaint was initially
rejected by petitioners for lack of cause of action, leading to a
motion granted by the lower court, which then prompted an
appeal to the Court of Appeals via certiorari by the petitioners.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
The court, in its June 28, 1976 resolution, reversed its
earlier decision to issue a preliminary injunction and dismissed
the petition. This was based on Article 1267, which allows the
obligor to be released from their obligations if the service has
significantly deviated from what the parties originally intended.

3. Decisions of the lower courts (e.g. RTC, CA)

The lower courts' decisions were dismissed by the
appellate court based on Article 1267, which states that
typically, if fulfilling an obligation becomes impossible, the
obligor is no longer bound. Nonetheless, there's a proposal to
grant the court authority to release the obligor partially or
entirely when fulfilling the obligation has become so unfeasible
that it exceeds what the parties had in mind. The primary
consideration should be the intention of the parties, and if the
fulfillment of the obligation becomes excessively burdensome
beyond what they envisioned, holding the obligor accountable
would contradict their intentions.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

ISSUE:
4. Issue/s (one sentence)
Whether or not the worldwide increase of prices claimed
by the plaintiff insufficient cause for modification of the
subdivision contract.

HELD:
5. Disposition of the case (one sentence)
The Civil Code permits the discharge of an obligor if the
service has become unreasonably complex, but it prohibits
courts from altering the terms of a contractual agreement or
establishing a different sharing ratio than what was originally
agreed upon by the parties.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
The private respondent aimed to modify the distribution of
proceeds from the sale of subdivision lots owed to the
petitioners, citing global inflation in commodities. However, the
Supreme Court sided with the petitioners, finding that the lower
court had misinterpreted Clause 1267 of the Civil Code. This
clause does not authorize altering contractual terms and
conditions, as the respondents sought to do. Therefore, the
court could not accommodate their request for adjustment
under this provision.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. 107112. February 24, 1994]

NAGA TELEPHONE CO., (NATELCO) and LUCIANO M. MAGGAY,
Petitioner vs. THE COURT OF APPEALS and CAMARINES SUR II
ELECTRIC COOPERATIVE INC., (CASURECO II), Respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
On November 1, 1977, Naga Telephone Co., Inc.
(NATELCO) and Camarines Sur Il Electric Cooperative, Inc.
(CASURECO II) entered into an agreement where NATELCO
would utilize CASURECO II's electric light poles in Naga City
for their telephone service, with a commitment to provide ten
(10) free telephone connections for CASURECO II's use.
CASURECO II filed a complaint with the Regional Trial Court,
seeking contract reformation and damages, arguing that the
agreement heavily favored NATELCO, violated National
Electrification Administration (NEA) norms, and led to damages
to the poles and cables over the course of more than a decade
of NATELCO's use. CASURECO II contends that justice and
fairness necessitate modifying the contract to rectify these
imbalances.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
The second allegation asserts that the petitioners have
utilized 319 posts beyond Naga City without a formal
agreement dating back to 1981. The third claim demands that
the petitioners compensate $10 per post. The petitioners
allegedly declined to remunerate the private respondent a
cumulative sum of $267,960 spanning from 1981 until the
initiation of legal proceedings despite repeated requests, while
the private respondent additionally lamented about subpar
service provided by the petitioners throughout the litigation
process.

3. Decisions of the lower courts (e.g. RTC, CA)

The Court of Appeals affirmed the ruling of the trial court
for various reasons, such as (1) the application of Article 1267
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

of the New Civil Code, and (2) the determination that the
contract was contingent upon a condition that was ultimately
deemed invalid.

ISSUE:
4. Issue/s (one sentence)
Whether or not Article 1267 of the New Civil Code of the
Philippines is applicable.

HELD:
5. Disposition of the case (one sentence)
The petition is rejected, and the rulings of the Court of
Appeals issued on May 28, 1992, and September 10, 1992, are
upheld.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
A potestative condition refers to a situation where
fulfillment depends entirely on the debtor's will. Consequently,
the assertions made by the petitioners should be supported.
NATELCO argues that this condition does not apply in their
contract since it does not involve providing a service or
personal obligation, and there's no anticipation of future
unusual changes. Additionally, CASURECO hasn't raised any
objections regarding this article.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. 104726. February 11, 1999.]

VICTOR YAM & YEK SUN LENT, doing business under the name
and style of Philippine Printing Works, petitioners, vs. THE
COURT OF APPEALS and MANPHIL INVESTMENT
CORPORATION, respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
Victor Yam and Yek Sun received a Php 300,000 IGLF
loan from Manphil Invest Corporation, secured by a chattel
mortgage. They made a payment on July 31, 1986,
acknowledged by the Central Bank with a note indicating full
repayment of the loan.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
The respondent initiated legal action against the petitioner
for non-payment of the outstanding balance. According to the
petitioner, there was an alleged agreement with the
respondent's president, Carlos Sobrepeñas, to forgive penalties
and service charges, supported by a voucher indicating full
payment.

3. Decisions of the lower courts (e.g. RTC, CA)

The trial court rendered a decision in favor of the
respondents which was sustained by the Court of Appeals.

ISSUE:
4. Issue/s (one sentence)
Whether or not petitioners are liable for the payment of
the penalties and service charges on their loan.

HELD:
5. Disposition of the case (one sentence)
The decision of the Court of Appeals is AFFIRMED.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
Yes, Art. 1270, par. 2 of the Civil Code provides that
forgiveness of debt must follow the formalities of a donation.
Art. 748, par. 3 specifies that if the value of a movable property
exceeds P5,000,00, the donation, and its acceptance must be
documented in writing, otherwise it will be invalid. Additionally,
Art. 417, par. 1 considers obligations, particularly credits, as
movable property. In the present case, it is acknowledged that
the alleged agreement to waive P266,196.88 of the second
IGLF loan was not documented in writing. Therefore, it does not
meet the legal requirements for condonation.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. L-22490 May 21, 1969]

GAN TION, petitioner, [Link]. COURT OF APPEALS, HON.
JUDGE AGUSTIN P. MONTESA, as Judge of the Court of First
Instance of Manila, ONG WAN SIENG and THE SHERIFF OF
MANILA, respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
Ong Wan Sieng, a tenant of Gan Tion, faced an eviction
lawsuit in 1961. Gan Tion claimed that Ong Wan Sieng had not
paid the monthly rent of ₱180 for August and September,
totaling ₱360.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
The defendant disputes the allegation, asserting that the
agreed monthly rent was only ₱160, which he proposed but the
plaintiff refused.

3. Decisions of the lower courts (e.g. RTC, CA)

The plaintiff initially obtained a favorable judgment at the
municipal court in Manila. However, the Court of First Instance
later overturned this decision, dismissing the complaint on July
2, 1962, and instructing the plaintiff to pay the defendant ₱500
for attorney's fees. Subsequently, the decision of the Court of
Appeals was reversed, and the enforcement order from the
Court of First Instance in Manila was revoked. Although the
appellate court accepted the petition, it ultimately ruled in favor
of the respondent. The court determined that although
"respondent Ong owed the petitioner over ₱4,000 in unpaid
rentals," the amount of ₱500 couldn't be legally offset.
According to the court's interpretation, the conditions necessary
for legal compensation, namely, that both parties must be
creditors and debtors of each other independently (as per
Article 1278 of the Civil Code) and that each party must be
primarily indebted to the other simultaneously (as per Article
1279), were not met in this case.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

ISSUE:
4. Issue/s (one sentence)
Whether or not there was legal compensation between
the petitioner and the private respondent.

HELD:
5. Disposition of the case (one sentence)
The ruling favors the litigant directly, awarding
compensation in line with Article 2208 of the Civil Code, and
deems it unjust to require the petitioner to pay a debt of ₱500
when the creditor owes them over ₱4,000.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
The Court of Appeals argued that attorney's fees function
as a fund held in trust for the lawyer's benefit, suggesting that
clients must relinquish these funds to their attorneys, making
them exempt from legal compensation. However, the Supreme
Court countered this view, asserting that such awards belong to
the litigant, not the attorney. In this context, the judgment
creditor, typically the plaintiff, possesses the authority to
enforce legal compensation judgments via execution.
Nevertheless, in the specific case at hand, enforcing this
judgment was deemed impractical due to the respondent's debt
to the petitioner exceeding ₱4,000, resulting in the dismissal of
the writ of execution.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. 116792 March 29, 1996.]

BANK OF THE PHILIPPINES ISLAND, GRACE ROMERO,
Petitioner, vs. COURT OF APPEALS, EDVIN F. REYES,
Respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
The petitioners filed counterclaims seeking moral and
exemplary damages in retaliation to the initial complaint. They
argued that the respondent explicitly authorized them verbally
to withdraw the disputed amount, presenting this as a Special
and Affirmative Defense. Additionally, they asserted that the
disclosed information was treated confidentially.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
Edvin F. Reyes asserts that he established Savings
Account No. 3 185-0172-56 at the Bank of the Philippine
Islands (BPI) Cubao, Shopping Center Branch in September
1985, consistently depositing U.S. Treasury Warrants intended
for Emerteria M. Fernandez's pension until her demise on
December 28, 1989, unbeknownst to the United States
Treasury Department. Following Fernandez's passing, Reyes
claims that on January 4, 1990, he made a deposit of P10,556
into the account, subsequently closing it in March 1990 and
transferring the remaining funds totaling P13,112.91.

3. Decisions of the lower courts (e.g. RTC, CA)

On January 20, 1993, the trial court ruled to dismiss the
private respondent's complaint due to insufficient grounds for
legal action.

ISSUE:
4. Issue/s (one sentence)
Whether or not BPI possesses the legal entitlement to
utilize the deposit towards the unsettled obligation according to
the legal doctrine of compensation.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

HELD:
5. Disposition of the case (one sentence)
The Supreme Court mandated that rightful compensation
be utilized, stipulating that when two parties hold debtor and
creditor roles simultaneously, compensation must be provided.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
Article 1290 of the Civil Code states that compensation
occurs automatically when all conditions outlined in Article 1279
are met, canceling out obligations to the same extent, even if
the parties involved are unaware of it. In this case, the bank
petitioning is owed by the private respondent due to the
improper transfer of a U.S. Treasury Warrant to their joint
account. Denying legal compensation based on the argument
that all parties are not mutually obligated would unjustly enrich
the private respondent and their spouse. Therefore, the
application of legal compensation is essential to prevent such
unjust enrichment.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. 108052 July 24, 1996.]

PHILIPPINE NATIONAL BANK, Petitioner, vs. THE COURT OF
APPEALS AND RAMON FLORES, doing business under the
name and style SAPPHIRE SHIPPING, Respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
The petitioner Philippine National Bank argued that it had
rightfully retained $2,627.11 to offset the private respondent's
debt, citing Article 1279 of the Civil Code as legal justification.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
The respondent Court of Appeals dismissed the
argument, affirming that PNB remains liable as a correspondent
bank until it fulfills its obligations according to the nature of its
banking operations and the responsibilities it carries. The court
emphasized that PNB's role as a correspondent bank is vital for
the functioning of industries, trade, and commerce across
various nations and communities. Therefore, PNB's liability
persists until it completely fulfills its duties in accordance with its
banking activities.

3. Decisions of the lower courts (e.g. RTC, CA)

The regional trial court determined that the petitioner must
pay the private respondent a sum of US$2,627.11 or its
equivalent in Philippine pesos, along with interest at the legal
rate. The Court of Appeals upheld the trial court's decision in
full.

ISSUE:
4. Issue/s (one sentence)
Whether or not the petitioner was within legal rights to
offset the remittances made to the private respondent to
reclaim funds mistakenly credited in 1980 and 1981, adhering
to the principle of solutio indebiti.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

HELD:
5. Disposition of the case (one sentence)
The petition is rejected due to its lack of merit, and the
court upholds the decision entirely because it finds that the
parties involved are not mutually bound or principal creditors of
each other regarding the mentioned amount, thus preventing
compensation or setoff according to Article 1279 of the Civil
Code.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
Article 1279 of the Civil Code stipulates the conditions for
compensation to be valid:
1. Each obligor must be primarily obligated and
simultaneously a principal creditor of the other party.
2. The debts must involve monetary sums or, if they
concern consumable items, they must be of the same type and
quality if specified.
3. Both debts must be due.
4. They must be clearly defined and ready for payment.
5. Neither debt should be subject to any dispute or
retention initiated by third parties and communicated to the
debtor in due time.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. 167434. February 19, 2007]

SPOUSES RAMON M. NISCE and A. NATIVIDAD PARAS-NISCE,
Petitioners, vs. EQUITABLE PCI BANK, INC., Respondent.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
Plaintiffs, Spouses Ramon M. Nisce and Natividad Paras-
Nisce initiated legal proceedings in the RTC of Makati City on
January 28, 2003, seeking to invalidate a suretyship
agreement, claim damages, and obtain legal compensation,
along with requesting injunctive relief against the Bank and the
Ex-Officio Sheriff. Their primary contentions included: offsetting
their obligation against their US dollar account with PCI Capital
Asia Limited (Hong Kong), a Bank subsidiary; complying with
the Bank's request by disclosing their account balances, which
included a substantial US dollar deposit belonging to Natividad;
and their dismay upon receiving a demand for loan repayment
and subsequent foreclosure petition from the Bank, prompting
the filing of a supplemental complaint with a request for a
temporary restraining order to halt the public auction.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
Equitable PCI Bank Inc. submitted a revised request to
the Office of the Executive Judge seeking extrajudicial
foreclosure of the Real Estate Mortgage, aiming to settle the
spouses' outstanding loan balance of ₱30,533,552.24, without
factoring in interests, penalties, and additional fees. This action
also addresses the amounts of ₱16,665,439.77 and
$57,306.59, which were covered by Natividad Nisce's
suretyship agreement. The Bank countered the spouses'
complaint by asserting that PCI Capital is a distinct entity,
suggesting that any potential setoff could only involve the
spouses' $500 deposit account units at the Paseo de Roxas
branch.

3. Decisions of the lower courts (e.g. RTC, CA)

DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

The Regional Trial Court held hearings regarding the

plaintiffs' request for a temporary restraining order. During
these hearings, both parties presented testimonial and
documentary evidence to support their respective arguments.
Subsequently, the RTC issued an Order granting the spouses
Nisce's request for a preliminary injunction, requiring a bond of
₱10,000,000. Additionally, the RTC expressed the belief that
justice would be best served by issuing a preliminary injunction
to maintain the status quo. However, the court had not yet
resolved the issue of set-off, as only Natividad had engaged
with the Bank concerning her dollar account. The Nisce
spouses posted the required bond, which was approved by the
RTC.

ISSUE:
4. Issue/s (one sentence)
Whether or not legal compensation may operate to
extinguish the petitioners ’obligation.

HELD:
5. Disposition of the case (one sentence)
After reviewing all preceding factors, the petition is
rejected due to insufficient merit, and the Court of Appeals'
ruling is upheld, with no expenses imposed on the petitioners.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
Article 1278 of the New Civil Code dictates that
compensation occurs when two individuals are both creditors
and debtors to each other. This legal process is triggered
automatically, as outlined in Article 1279, extinguishing both
debts concurrently, irrespective of the parties' awareness. Legal
compensation operates independently of the parties' consent,
taking effect immediately when all conditions are met. To
qualify for compensation, two parties must owe each other
equally demandable and clear debts without any disputes or
retentions. Whether arising from different contracts or
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

transactions, compensation necessitates the mutual debtor and

creditor roles in the involved individuals.

[G.R. No. L-29981. April 30, 1971.]

EUSEBIO S. MILLAR, petitioners, vs. THE HON. COURT OF
APPEALS and [Link], respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
Eusebio S. Millar secured a favorable ruling from the
Court of First Instance of Manila in civil case 27116, which
ordered Antonio P. Gabriel to pay him P1,746.98 plus interest.
Millar then requested the court to issue a writ of execution
without involving the opposing party to enforce the judgment.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
The respondent urged the petitioner to allow the release
of the jeep by proposing a plan where the respondent would
mortgage the vehicle to ensure payment of the debt. Both
parties consented to this plan, leading them to execute a chattel
mortgage on February 22, 1957. However, on November 10,
1961, the respondent filed a pressing motion to halt the
execution sale, citing fulfillment of the judgment debt.

3. Decisions of the lower courts (e.g. RTC, CA)

The Court of First Instance of Manila ruled that Antonio P.
Gabriel must pay a total of ₱1,746.98 plus 12% interest
annually from the date of the complaint filing, ₱400 for
attorney's fees, and the lawsuit expenses. An order issued on
January 25, 1962, reiterated the execution for ₱1,700.00 plus
execution costs.
The Court of Appeals rejected the respondent's appeal
against the Court of First Instance's judgment. In a decision
made on October 17, 1968, it overturned the execution order,
stating that a subsequent agreement between the parties
effectively replaced the obligations stated in civil case 27116.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

The petitioner's request for reconsideration of the appellate

court's decision was denied in a resolution dated December 7,
1968.

ISSUE:
4. Issue/s (one sentence)
Whether or not there existed a significant disparity
between the judgment and the execution of the chattel
mortgage that could justify an implied replacement of the
original obligation.

HELD:
5. Disposition of the case (one sentence)
The ruling made by the Court of Appeals on October 17,
1968, is overturned, and the decision of the Court of First
Instance of Manila dated January 25, 1962, is upheld, with
respondent Antonio Gabriel bearing the expenses.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
Implied or express novation was not present, hence the
obligation remains unextinguished. When a new obligation
merely reaffirms the old one without significant alterations to its
essence, an implied novation cannot be established. Implied
novation occurs only when essential changes to the old
obligation are introduced by the new one, altering its essence.
There is no prescribed form for implied novation; rather, it
hinges on whether the two obligations are compatible. In cases
of non-compliance with reciprocal obligations, Article 1191 of
the Civil Code applies, while Article 1385 addresses the
consequences of rescission.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. L-25897 August 21, 1976]

AGUSTIN DORMITORIO and LEONCIA D. DORMITORIO,
petitioner, vs. HONORABLE JOSE FERNANDEZ, Judge of the
Court of First Instance of Negros Occidental, Branch Bacolod
City, and SERAFIN LAZALITA, respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
The Dormitorios initiated legal proceedings to execute the
Court's prior ruling, compelling Lazalita to adhere to the
directive to pay $20 monthly rent and leave the premises.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
Judge Fernandez nullified the execution order, citing
fraudulent means, misrepresentation, and concealment of case
facts. The order, obtained under false pretenses, was revealed
to have stemmed from a Court decision on September 5, 1961.

3. Decisions of the lower courts (e.g. RTC, CA)

The Court of First Instance (CFI) ruled in favor of the
Dormitorios, instructing Lazalita to leave the property and pay a
monthly rent of ₱20 to them. Subsequently, Lazalita and the
Dormitorios jointly filed a lawsuit against the Municipality of
Victorias, which expressed readiness to resolve the matter.
After reaching an agreement, the parties presented a document
called "Agreed Stipulation of Facts" to the court. Consequently,
a judgment was issued based on this agreement.

ISSUE:
4. Issue/s (one sentence)
Whether or not the judgment of the lower court has been
novated.

HELD:
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

5. Disposition of the case (one sentence)

The petition for certiorari is dismissed with costs against
petitioners.
6. Dictum (no more than five sentences addressing the issue
relevant to the topic under discussion)
The newly established agreement between the involved
parties naturally replaced the prior judgment, setting forth fresh
rights and responsibilities. To ensure the effectiveness of
novation, the parties must show animus novandi, signifying
their intention to substitute an existing obligation or party with a
new one. The decision resulting from a compromise carries the
weight of res judicata, thereby obligating the parties to adhere
to it.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. L-184111. December 17, 1966.]

MAGDALENA ESTATES, INC., Petitioner, vs. ANTONIO A.
RODRIGUEZ and HERMINIA C. RODRIGUEZ, Respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
The Luzon Surety Co., Inc. gave the appellee $5,000
when the obligation of the appellants was due on June 20,
1958. Consequently, the appellee demanded that the
appellants should pay $655.89, representing the alleged total
interest on the $5,000 principal. However, the appellants
declined to pay, prompting the appellee to initiate a collection
lawsuit in the Manila Municipal Court.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
The appellants bought a piece of land in Quezon City
from the appellee, known as Lot 7-K-2-G, Psd-26193, with a
remaining unpaid balance of $5,000. They argued that the legal
documents failed to demonstrate that the appellee had
demanded payment for the accrued interest. Additionally, they
claimed that the appellee impliedly waived the interest owed by
accepting a payment of $5,000 from Luzon Surety Co., Inc.,
which equated to the principal sum, without utilizing part of it to
settle the alleged interest, despite being aware of this right.

3. Decisions of the lower courts (e.g. RTC, CA)

The Municipal Court of Manila issued a verdict in favor of
the appellee, directing the appellants to collectively and
individually pay them $655.89, along with interest at the legal
rate starting from November 10, 1958, when the complaint was
filed, until the entire amount is settled. The initial decision was
made by the Court of First Instance, which also instructed the
defendants-appellants to compensate the plaintiff-appellee with
$655.89, alongside legal interest from the date of judicial
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

demand, along with an additional $100 for attorney's fees and

expenses.

ISSUE:
4. Issue/s (one sentence)
Whether or not there was a novation of the obligation.

HELD:
5. Disposition of the case (one sentence)
The duty remains unchanged; therefore, the decision
being contested should be upheld, with expenses to be borne
by the appellants, due to this circumstance.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
For novation to be valid, it must be demonstrated that the
old and new contracts are completely incompatible, or that the
parties explicitly consent to the novation through significant
actions. Novation by presumption has historically been
disfavored. Merely changing payment terms or adding new
responsibilities to an existing contract, without rendering the old
contract entirely obsolete, does not constitute novation. If a
third party guarantees payments but doesn't agree to release
the original debtor from liability, there is no novation. Article
1253 is cited, but Articles 1252 to 1254 govern when one
person owes multiple similar obligations to a single creditor.
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

[G.R. No. 120817. November 4, 1996.]

ELSA B. REYES, Petitioner, vs. COURT OF APPEALS,
SECRETARY OF JUSTICE, AFP-MUTUAL BENEFIT
ASSOCIATION, INC., and GRACIELA ELEAZAR, Respondents.
FACTS:
1. Petitioner's/Plaintiff's claim/s (no more than 3 sentences)
Reyes, as petitioner, faces charges of BP 22 and Estafa
due to Eleazar's failure to honor bounced checks. She contends
that her criminal liability is void as the contract between her and
AFP-MBAI underwent novation by substituting the debtor.
Reyes asserts that Eleazar, instead of fulfilling loan repayment
obligations to her, assumed the responsibility to pay AFP-MBAI
directly under the sale contract, prompting her plea to the
Secretary of Justice to reassess the resolution on the grounds
that novation did not transpire.

2. Respondent's/Defendant's claim/s (no more than 3

sentences)
AFP-MBAI obtained funds from Bermic, sourced from
payments made to Eurotrust for assets by Elsa Reyes.
Eurotrust decided that Bermic would directly settle its debts with
AFP-MBAI and DECS-IMC, who are the rightful beneficiaries of
the funds. Bermic requested Eurotrust to hold the money in
trust for the rightful owners, but Reyes persisted in gathering
the funds, prompting Eleazar to halt the payment upon her
lawyer's advice, leading to the rejection of her cheques issued
on behalf of Eurotrust.

3. Decisions of the lower courts (e.g. RTC, CA)

The Office of the Provincial Prosecutor of Rizal dismissed
Elsa Reyes' accusations against Graciela Eleazar, citing that
Eleazar's acceptance of Reyes' commitment to AFP-MBAI
amounted to novation. This act nullified any potential criminal
liability on Eleazar's part. The Secretary of Justice denied the
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

petition, affirming that the novation of the loan agreement

precluded the emergence of any criminal liability, as it
effectively invalidated the checks and nullified any subsequent
dishonor of those checks.

ISSUE:
4. Issue/s (one sentence)
Whether or not the respondent Eleazar should handle her
company's (BERMIC) loan repayments directly with AFP-MBAI
and DECS-IMC instead of Reyes was the decision made.

HELD:
5. Disposition of the case (one sentence)
In this instance, there was no replacement of a party to
the contract discussed in court. Consequently, as no significant
mistake was identified in the decision made on May 12, 1995,
there is no basis for reversing it. Therefore, the decision stands
affirmed in its entirety.

6. Dictum (no more than five sentences addressing the issue

relevant to the topic under discussion)
Novation, the process of substituting an existing debtor
with a new one, can occur with or without the consent of the
former debtor, but always requires the creditor's agreement
(stipulated in Civil Code, Article 1293). The new debtor acquires
the rights outlined in Articles 1236 and 1237 upon making
payments. However, the creditor's approval for novation by
debtor substitution is as crucial as consent for novation by
traditional subrogation for it to be legally binding. Merely
receiving payments from Eleazar, who agreed to assume the
petitioner's obligations under a securities sales contract, does
not establish novation but rather creates a legal relationship of
co-debtorship or suretyship between Eleazar and the
petitioner's contractual obligation to AFP-MBAI, allowing the
latter to still enforce the obligation. The requirement for
novation to be legally recognized is deeply rooted in Roman
Law jurisprudence, where the intention (animus) to substitute
DAVID, ANGELICA A., 2023-237

ASSIGNMENT NO. 4: EXTINGUISHMENT OF OBLIGATIONS

the old obligation with the new one (debitum for debito) must
always be present.