Anama v CA

G.R. No. 128609  January 29, 2004

Art. 1253 – Payment shall be applied to interest first

Facts:

·          petitioner Douglas Anama and private respondent Philippine Savings Bank (PSBank) entered into an agreement denominated as a Contract to Buy.

·          The property was previously owned by Anama’s parents, who mortgaged it to respondent Bank. Upon their failure to pay the loan extended to them by PSBank, the latter foreclosed on the property

·          CTB salient provisions:

1.     The BUYER shall purchase the property

2.     The BUYER shall pay to the SELLER payable as follows:

(a) P5,000.00 upon signing of this Agreement;

(b) P5,000.00 on or before April 12, 1973; and

(c) P20,000.00 on or before April 30, 1973

3.   The BUYER shall apply from the SELLER a real estate mortgage loan (105k) exclusively to pay the balance of the purchase price

·          Petitioner was able to pay the first and second installments, except third installment.

·          The assigned savings account of Anama’s father took by PSB as payments covered "penalty/interest charges" for the delay in the payment of the third installment.

·          the Bank executed an Affidavit of Cancellation rescinding the contract and forfeited the payments made by petitioner, which were applied as rentals for the use of the property.

·          PSBank sold the property to spouses Tomas Co and Saturnina Baria.

·          Anama opposed the rescission of the Contract to Buy and the sale of the mortgaged property, insisting that that the amounts reflected in the official receipts as payments covering the third installment and not the "penalty/interest charges".

  

Issue:

WoN respondent Bank first applied the payments represented by the subject receipts to the interest due.

Held:

            Yes, the Court holds that under the circumstances it is safe to assume that respondent Bank first applied the payments represented by the subject receipts to the interest due.

            Under Article 1253 of the New Civil Code, if the debt produces interest, payment of the principal shall not be deemed to have been made until the interests have been covered.

            In the instant case, The amounts covered by the subject receipts cannot be considered payments for the third installment. The contract states that where the Bank exercises the right to demand full payment of the agreed total purchase price, the balance of the purchase price shall bear interest from May 1, 1973 at the rate of one percent (1%) per month until fully paid. As petitioner failed to pay the third installment, petitioner was liable to pay respondent Bank such interest. The accumulated interest from 1 May 1973 to 22 February 1975 amounted to P26,250.00 or much more than what petitioner paid on the latter date.

           Thus, the petition is DENIED.