Union Bank v Spouses Tiu

G.R. Nos. 173090-91 September 7, 2011
Art. 1249 – Payment of debts in money shall be made in currency. 

Facts:

·          Petitioner Union Bank of the Philippines (Union Bank) and respondent spouses Rodolfo T. Tiu and Victoria N. Tiu (the spouses Tiu) entered into a Credit Line Agreement (CLA), whereby Union Bank agreed to make available to the spouses Tiu credit facilities in such amounts as may be approved.

·          Within 6 months, the spouses Tiu took out various loans pursuant to this CLA in total of US$3,632,000.00 received in equivalent Philippine pesos at the prevailing exchange rate of US$1=₱26.

·          Union Bank advised the spouses Tiu that, in view of the existing currency risks, the loans shall be redenominated to their equivalent Philippine peso.

·          Union Bank and the spouses Tiu entered into a Restructuring Agreement to redenominate the loans at the rate of US$1=₱41.40 with interest of 19% for one year, with an additional loan of 5M which was applied as interest payments.

·          Under said agreement, the parties declared that the loan obligation to be restructured and executed Deeds of Dation in Payment over Labangon properties and Mandaue property.

·          The spouses Tiu executed also a Real Estate Mortgage in favor of Union Bank over their residential property inclusive of lot and improvements.

·          Asserting that the spouses Tiu failed to comply with the payment schemes set up in the Restructuring Agreement, Union Bank initiated extrajudicial foreclosure proceedings on their residential property.

·          The CA rendered the assailed Joint Decision: 1. dismissed the Petition for Prohibition; and 2. ruled in favor of the spouses Tiu, invalidating the RA on account of its being a failed novation of the original loan agreements, and 5M charge of interest therein, and enjoining Union Bank from foreclosing the mortgaged properties.

Issue:

WoN receiving the peso equivalent of dollar loan proves the intention of the parties that such loans should be paid in pesos.

Held:

            No, the Court disagrees with the CA ruling and holds that the parties intended the amount of the loans in US dollars and not in any other currency as stipulated in the promissory notes.

            Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.

            In the instant case, the promissory notes indicated that the spouses Tiu borrowed amounts in US dollars although they received peso equivalents. Hence, they were bound to pay Union Bank in dollars and not in any other currency.

            Thus, the Petition is PARTIALLY GRANTED.

Tibajia v CA

G.R. No. 100290 June 4, 1993
Art. 1249 – Payment of debts in money shall be made in currency.

Facts:

·          Eden Tan filed a suit for collection of a sum of money against the Tibajia spouses.

·          The trial court issued a writ of attachment, and thereafter the Deputy Sheriff filed a return stating that he had garnished a deposit made by the Tibajia spouses.

·          Following the final judgment, Tan filed the corresponding motion for execution and thereafter, the garnished funds were levied upon her.

·          The Tibajia spouses delivered to Deputy Sheriff the total money judgment though check.

·          Tan refused to accept the payment made by the Tibajia spouses and instead insisted that the garnished funds deposited with the cashier of the RTC Pasig be withdrawn to satisfy the judgment obligation.  

·          Petitioners filed a motion to lift the writ of execution on the ground that the judgment debt had already been paid.

·          The trial court denied the motion because payment in cashier's check is not payment in legal tender and that payment was made by a third party other than the defendant.

Issue:

WoN payment by means of cashier's check is considered payment in legal tender as required by law.

Held:

            No, the Court rules that a check is not legal tender and that a creditor may validly refuse payment by check, whether it be a manager's, cashier's or personal check.

            Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.

            In the case at bar, the petitioner issued a cashier’s check which is not a legal tender as required by law. The Court does not sanction the use of a check for the payment of obligations over the objection of the creditor.

            Thus, the petition is DENIED.

Papa v Valencia

G.R. No. 105188 January 23, 1998
Art. 1249 – Payment of debts in money shall be made in currency.

Facts:

·          The respondents filed with the RTC Pasig a complaint for specific performance against petitioner to deliver the title and turn over the accrued rentals.

·          The petitioner, acting as attorney-in-fact of Angela M. Butte, sold to Peñarroyo through Valencia, a parcel of land, which was mortgaged to the Associated Banking Corporation, together with several other parcels of land.

·          The bank refused to release it unless and until all the mortgaged properties were also redeemed.

·          Respondents discovered that petitioner had been collecting monthly rentals from the tenants of the property, knowing that said property had already been sold to Peñarroyo.

·          On appeal, the petitioner argued that alleged sale of the subject property had not been consummated because he did not encashed the check (in the amount of P40,000.00), which did not produce the effect of payment as in Art. 1249 of the Civil Code.

Issue:

WoN the delivery of a check produces the effect of payment only when it is cashed.

Held:

            No, the Court holds that while it is true that the delivery of a check produces the effect of payment only when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if the debtor is prejudiced by the creditor's unreasonable delay in presentment.

            Art. 1249 of the Civil Code provides, in part, that payment by checks shall produce the effect of payment only when they have been cashed or when through the fault of the creditor they have been impaired.

            In the instant case, the acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if he from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment of the debt or obligation for which it was given. It has, likewise, been held that if no presentment is made at all, the drawer cannot be held liable irrespective of loss or injury¹² unless presentment is otherwise excused. Granting that petitioner had never encashed the check, his failure to do so for more than ten (10) years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay.

            Thus, the petition for review is DENIED.

Tolentino v CA

G.R. Nos. L-50405-06 August 5, 1981
Art. 1249 – Payment of debts in money shall be made in currency

Facts:

·          The De la Cruzes executed a deed of sale with the spouses Tolentino to sell the homestead land.

·          The Tolentinos constituted a first mortgage over the homestead land, together with two other parcels of land, in favor of the Bank of the Philippine Islands in Davao City.

·          Another mortgage was constituted over the said properties in favor of Philippine Banking Corporation.

·          The Tolentinos failed to pay their mortgage indebtedness to the BPI upon maturity, which judicial foreclosure sale followed in favor of the BPI.

·          Meanwhile, prior to the said foreclosure sale, the De la Cruzes filed an action with CFI Davao against the Tolentinos (including the BPI and BPC as mortgagees) for the repurchase of the homestead land under Section 119 of the Public Land Act (CA 141).

·          Accordingly, the possession of the homestead land was delivered to the De la Cruzes.

·          On separate action, the Tolentinos filed a redemption case against BPI simultaneously with the consignation of the crossed check with the City Sheriff of Davao.

Issue:

WoN in the Redemption Case consignation by crossed check satisfies the requirements set forth in Article 1249 of the New Civil Code.

Held:

            No, the Court holds that a check, even if good when offered, does not satisfy the requirements of a legal tender.

            Art. 1249 provides ‘'payment shall be made in the Currency stipulate and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.'’

            In the case at bar, there is no quarrel that the Tolentinos had 12 months within which to redeem the properties sold at the Sheriff's sale, but the problem lies in the manner of the tender of payment made by them, granting they made one, since consignation by crossed check does not satisfy the requirements of a legal tender, and for that very reason, BPI was not legally bound to accept such tender of payment.

            Thus, the judgement appealed is affirmed with modifications.

Towne & City Dev’t. Corp v CA

G.R. No. 135043 July 14, 2004

Art. 1249 – Payment of debts in money shall be made in currency

Facts:

·          Guillermo and petitioner Towne were both engaged in the construction business.

·          They entered into a contract for the (a) construction of several housing units belonging to or reserved for different individuals; (b) repair of several existing housing units belonging to different individuals; and (c) repair of facilities, all located at the Virginia Valley Subdivision, owned and developed by the petitioner.

·          The parties agreed that Guillermo should be paid in full by petitioner the agreed contract cost upon completion of the project.

·          But pending its completion, Guillermo was allowed by petitioner to occupy, free of charge, one of its houses.

·          Following completion of the construction and repair works subject of the contract, Guillermo demanded payment for his services.

·          When petitioner failed to satisfy his claim in full, Guillermo filed a Complaint for collection against petitioner.

·          On appeal, petitioner averred that it had already paid Guillermo the full amount, submitting the vouchers as proof of payment.

Issue:

WoN a voucher suffices as evidence of payment to extinguish the petitioner’s obligation.

Held:

            No, the Court holds that the vouchers presented by the petitioner do not vest them with the character of receipts in accordance with Art. 1249 of the Civil Code.

            Under the law, payment of debts in money has to be made in legal tender and the delivery of mercantile documents, including checks, shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

            Of the two exceptions to the rule that payment by check does not extinguish the obligation, neither exception is present in this case. It should be noted that a voucher is not necessarily an evidence of payment. It is merely a way or method of recording or keeping track of payments made.

            Thus, the Petition is DENIED.

Fortunado v CA

G.R. No. 78556. April 25, 1991
Art. 1249 – Payment of debts in money shall be made in currency.

Facts:

·          RTC Quezon City awarded the petitioner Fortunado damages in Civil Case against Angel Bautista.

·          Pursuant to the said judgment, Bautista levied upon two parcels of land registered in her name.

·          But the second lot had already been purchased by National Steel Corporation although not yet registered in its name.

·          After due notice, these lots were sold at public auction to the petitioners, and registered in his name.

·          NSC filed with the trial court an urgent motion to redeem both lots, which was opposed by the petitioner.

·          As the motion remained unresolved and the period of redemption would expire, NSC issued to the sheriff PNB Check as the redemption price for the lot.

·          The sheriff acknowledged receipt of the check as redemption money for the two parcels of land and issued a certificate of redemption in favor of NSC and Bautista.

·          The petitioner rejected the redemption by check because it was not legal tender and was not intended for payment but merely for deposit.

Issue:

WoN Article 1249 of the New Civil Code does not apply to the payment of the redemption price of property sold at public auction.

Held:

            Yes, the Court holds that Art. 1249 is inapplicable as it "deals with a mode of extinction of debts" while the "right to redeem is not an obligation, nor is it intended to discharge a pre-existing debt."

            In Javellana v. Mirasol, the Court declares that "a redemption of property sold under execution is not rendered invalid by reason of the fact that the payment to the sheriff for the purpose of redemption is effected by means of a check for the amount due."

            Such ruling is applicable to the present controversy, stressing the liberality of the courts in redemption cases. When a right of redemption is exercised, it is the policy of the law to aid rather than to defeat the right of redemption. Hence, a payment by check which is not legal tender is effective when the officer accepted such payment.

            Thus, the petition is denied.

PAL v CA

G.R. No. L-49188 January 30, 1990

Art. 1240 – Payment shall be made to person in whose favor obligation has been constituted.

Art. 1249 – Payment of debts in money shall be made in currency.

Facts:

·          The petition involved the alias writ of execution when respondent Amelia Tan commenced a complaint for damages against PAL, which CDI Manila rendered a decision in her favor.

·          The CA affirmed the decision with modification that PAL shall pay Tan P25,000.00 as damages and P5,000.00 as attorney's fee, with costs.

·          The case was remanded to the trial court for execution and Tan filed a motion praying for the issuance of a writ of execution of the judgment rendered by the CA.

·          Four months later, Tan moved for the issuance of an alias writ of execution stating that the judgment rendered by the lower court, and affirmed with modification by the Court of Appeals, remained unsatisfied.

·          In opposition, PAL countered that it already fully paid its obligation to Tan through the deputy sheriff of the respondent court, Emilio Z. Reyes, as evidenced by cash vouchers properly signed and receipted by said sheriff who had absconded.

Issues:

(1) WoN the payment made to the absconding sheriff by check in his name did operate to satisfy the judgment debt.

(2) WoN such payments extinguish the judgment debt.

Held:

            (1) No, the Court disagrees that the payment made to the absconding sheriff by check in his name operates to satisfy the judgment debt. In general, a payment, in order to be effective to discharge an obligation, must be made to the proper person.

Article 1240 of the Civil Code provides that “Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it.”

In the instant case, because PAL did not issue the checks intended for her, in her name, but to the absconding sheriff, such payment did not extinguish the judgment debt.

(2) No, the Court rules that the acceptance by the sheriff of the petitioner's checks, in the case at bar, does not, per se, operate as a discharge of the judgment debt.

Article 1249 of the Civil Code provides:

The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in abeyance.

           Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. A check, whether a manager's check or ordinary cheek, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized.            
           Thus, the petition is hereby DISMISSED.