DBP v CA

G.R. No. 118342 January 5, 1998

Art. 1245 – Dation in Payment

Facts:

·          Cuba is a grantee of a Fishpond Lease Agreement from the Government.

·          Cuba obtained loans from the DBP through Deeds of Assignment of her Leasehold Rights.

·          Cuba failed to pay her loan on the scheduled dates thereof in accordance with the terms of the Promissory Notes.

·          Without foreclosure proceedings, whether judicial or extra-judicial, DBP appropriated the Leasehold Rights of Cuba over the fishpond in question.

·          DBP, in turn, executed a Deed of Conditional Sale of the Leasehold Rights in favor of Cuba over the same fishpond in question.

·          But Cuba failed to pay the amortizations stipulated in the Deed of Conditional Sale.

·          DBP sent Notice of Rescission and took possession of the Leasehold Rights over said fishpond.

·          DBP thereafter executed a Deed of Conditional Sale in favor of defendant Agripina Caperal to award Fishpond Lease Agreement.

·          The RTC Pangasinan resolved the issue in favor of CUBA, but the CA ruled otherwise except for the damages awarded to Cuba.

·          On appeal against the award of damages, DBP contended that the assignment novated the promissory notes in that the obligation to pay a sum of money the loans was substituted by the assignment of the rights over the fishpond.

  

Issue:

WoN the assignment constitute dation in payment.

Held:

            No, the Court holds that the Deeds of Assignment of Cuba’s Leasehold Rights is not dation in payment under Article 1245 of the civil Code.

            Under the law, Dation in payment, whereby property is alienated to the creditor in satisfaction of a debt in money, shall be governed by the law on sales.

            In the instant case, the assignment of leasehold rights was a mortgage contract. In their stipulation of facts the parties admitted that the assignment was by way of security for the payment of the loans, and therefore not a satisfaction of indebtedness.

            Thus, the CA decision is reversed except as to the moral damages, and the trial court’s decision is modified.