Premiere Devt vs.

Central Surety
FACTS
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August 20, 1999: Central Surety obtained an industrial loan of P6M from
Premiere Bank with a maturity date of August 14, 2000.
o 17% interest per annum payable monthly in arrears and the principal
payable on due date
o Penalty charge of 24% per annum based on unpaid
amortization/installment or unpaid balance of the loan.
o In all, failure to pay by Central Surety means they are liable for
Unpaid interest up to maturity date
Unpaid penalties up to maturity date
Unpaid balance of principal
o To secure payment, Central Surety executed Deed of Assignment with
Pledge in favor of Premiere Bank, covering Central Suretys
membership in Wack-Wack Golf nad Country Club. The president and
vice-president of Central Surety solidarily bound themselves to the
obligation
Central had another loan with Premiere Bank for P40.89M maturing on
October 10, 2001.
Premiere Bank demanded payment from Central Surety on August 22, 2000,
but Central said they would be able to pay by the end of September. And they
issued a check in the amount of P6M by September 20, 2000.
September 28, 2000: The check was returned to Central for undisclosed
reasons, and sent another demand letter, asking for payment of both the P6M
and the P40.89M and threatened foreclosure of the respective securities.
September 29, 2000: Central resent the check. Same date, personal loan of
one of the solidary debtors from Central was also paid, in the amount of
P2.6M
Premiere Bank then applied the payments to different loans of Central Surety.
Central Surety filed complaint for damages asking the court to declare the
P6M loan as fully paid.
o RTC ruled in favor of Premiere Bank
o CA reversed RTC and said the P6M loan was fully paid.
CA said Premiere Bank waived its right to apply payments when
it specifically demanded payment of the P6M loan.

ISSUE: W/N Premiere Bank waived its right of application of payments on

Central Suretys loans -- NO
RATIO
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Debtors right to apply payment is not mandatory, because of the word

may in Art. 1252. It is directory, not mandatory.

1252 gives the right to the debtor to choose to which of several obligations to
apply a particular payment that he tenders to the creditor. But if the debtor
fails to direct its application, creditor may do so.
Premiere Bank and Central Surety entered into several contracts of loan,
securities by way of pledges, and suretyship agreements. In at least 2
promissory notes, Central Surety EXPRESSLY AGREED TO GRANT PREMIERE
BANK the AUTHORITY TO APPLY CENTRAL SURETYs PAYMENTS.
o Pursuant to this, Premiere Bank applied payments made by Central
Surety as it deemed fit.
As regards the waiver of right, there is an express provision in the Promissory
Note:
o No failure on the part of [Premiere Bank] to exercise, and no delay in
exercising any right hereunder, shall operate as a waiver thereof.
o Existence of a waiver must be positively demonstrated, not implied. So
there is no waiver when Premiere Bank demanded payment of the P6M
loan.