2.

Octavio Kalalo vs Alfredo Luz

34 SCRA 337 Mercantile Law Negotiable Instruments Law Negotiable Instruments in General Sum Certain in Money Currency To Be Used

Octavio Kalalo is an engineer whose services were contracted by Alfredo Luz, an architect in 1961. Luz contracted Kalalo to work on ten projects across the
country, one of which was an in the International Rice Research Institute (IRRI) Research Center in Los Baos, Laguna. Luz was to be paid $140,000.00 for
the entire project. For Kalalos work, Luz agreed to pay him 20% of what IRRI is going to pay or equivalent to $28,000.00.

ISSUE: Whether or not Kalalo should be paid in US currency.

HELD: No. The agreement was forged in 1961, years before the passage of Republic Act 529 in 1950. The said law requires that payment in a particular kind
of coin or currency other than the Philippine currency shall be discharged in Philippine currency measured at the prevailing rate of exchange at the time the
obligation was incurred. Nothing in the law however provides which rate of exchange shall be used hence it is but logical to use the rate of exchange at the
time of payment.

3. PACULDO VS. REGALADO

345 SCRA 134

FACTS: On December 27, 1990, petitioner NereoPaculdo and respondent Bonifacio Regalado entered into a contract of lease over a parcel of land with a
wet market building, located at Fairview Park, Quezon City. The contract was for twenty five (25) years, commencing on January 1, 1991 and ending on
December 27, 2015. For the first five (5) years of the contract beginning December 27, 1990, Nereo would pay a monthly rental of P450,000, payable within
the first five (5) days of each month with a 2% penalty for every month of late payment.

Aside from the above lease, petitioner leased eleven (11) other property from the respondent, ten (10) of which were located within the Fairview compound,
while the eleventh was located along Quirino Highway Quezon City. Petitioner also purchased from respondent eight (8) units of heavy equipment and
vehicles in the aggregate amount of Php 1, 020,000.

On account of petitioners failure to pay P361, 895.55 in rental for the month of May, 1992, and the monthly rental of P450, 000.00 for the months of June
and July 1992, the respondent sent two demand letters to petitioner demanding payment of the back rentals, and if no payment was made within fifteen (15)
days from the receipt of the letter, it would cause the cancellation of the lease contract.

Without the knowledge of petitioner, on August 3, 1992, respondent mortgaged the land subject of the lease contract, including the improvements which
petitioner introduced into the land amounting to P35, 000,000.00, to Monte de Piedad Savings Bank, as a security for a loan.

On August 12, 1992, and the subsequent dates thereafter, respondent refused to accept petitioners daily rental payments.

Subsequently, petitioner filed an action for injunction and damages seeking to enjoin respondents from disturbing his possession of the property subject of the
lease contract. On the same day, respondent also filed a complaint for ejectment against petitioner.

The lower court rendered a decision in favor of the respondent, which was affirmed in toto by the Court of Appeals.

ISSUE: Whether or not the petitioner was truly in arrears in the payment of rentals on the subject property at the time of the filing of the complaint for
ejectment.

RULING: NO, the petitioner was not in arrears in the payment of rentals on the subject property at the time of the filing of the complaint for ejectment.
As found by the lower court there was a letter sent by respondent to herein petitioner, dated November 19, 1991, which states that petitioners security
deposit for the Quirino lot, be applied as partial payment for his account under the subject lot as well as to the real estate taxes on the Quirino lot. Petitioner
interposed no objection, as evidenced by his signature signifying his conformity thereto.

Meanwhile, in an earlier letter, dated July 15, 1991, respondent informed petitioner that the payment was to be applied not only to petitioners accounts under
the subject land and the Quirino lot but also to heavy equipment bought by the latter from respondent. Unlike in the November letter, the July letter did not
contain the signature of petitioner.

Petitioner submits that his silence is not consent but is in fact a rejection.

As provided in Article 1252 of the Civil Code, the right to specify which among his various obligations to the same creditor is to be satisfied first rest with
the debtor.

In the case at bar, at the time petitioner made the payment, he made it clear to respondent that they were to be applied to his rental obligations on the Fairview
wet market property. Though he entered into various contracts and obligations with respondent, all the payments made, about P11,000,000.00 were to be
applied to rental and security deposit on the Fairview wet market property. However, respondent applied a big portion of the amount paid by petitioner to the
satisfaction of an obligation which was not yet due and demandable- the payment of the eight heavy equipments.

Under the law, if the debtor did not declare at the time he made the payment to which of his debts with the creditor the payment is to be applied, the law
provided the guideline; i.e. no payment is to be applied to a debt which is not yet due and the payment has to be applied first to the debt which is most
onerous to the debtor.

The lease over the Fairview wet market is the most onerous to the petitioner in the case at bar.

Consequently, the petition is granted.

PACULDO VS. REGALADO 345 SCRA 134

FACTS:

On December 27, 1990, petitioner NereoPaculdo and respondent Bonifacio Regalado entered into a contract of lease over a parcel of land with a
wet market building at Fairview Park, Quezon City. The contract was for twenty five (25) years. Petitioner also leased other properties from the respondent,
ten (10) of which were located within the Fairview compound, while the other one was along Quirino Highway. Petitioner also purchased from respondent
heavy equipment and vehicles. On account of petitioners failure to pay P361, 895.55 in rental for the month of May, 1992, and the monthly rental of P450,
000.00 for the months of June and July 1992, the respondent sent two demand letters to petitioner demanding for payment of the back rentals, which would
cause the cancellation of the lease contract if payment will not be made within fifteen (15) days. Without the knowledge of petitioner, on August 3, 1992,
respondent mortgaged the land subject of the lease contract, including the improvements which petitioner introduced into the land amounting to P35,
000,000.00, to Monte de Piedad Savings a bank, as a security for a loan. On August 12, 1992, and the subsequent dates thereafter, respondent refused to
accept petitioners daily rental payments. Subsequently, petitioner filed an action for injunction and damages seeking to enjoin respondents from disturbing
his possession of the property subject of the lease contract. On the same day, respondent also filed a complaint for ejectment against petitioner. The lower
court rendered a decision in favor of the respondent, which was affirmed in toto by the Court of Appeals.

ISSUE:

Whether or not the petitioner was truly in arrears in the payment of rentals on the subject property at the time of the filing of the complaint for
ejectment.

RULING:

NO. As found by the lower court there was a letter sent by respondent to petitioner, on November 19, 1991, which statesthat petitioners security
deposit for the Quirino lot, be applied as partial payment for his account under the subject lot as well as to the real estate taxes on the Quirino lot. In an earlier
letter, dated July 15, 1991, respondent informed petitioner that the payment was to be applied not only to petitioners accounts under the subject land and the
Quirino lot but also to the heavy equipment.In Article 1252 of the Civil Code, the right to specify which among his various obligations to the same creditor is
to be satisfied first rest with the debtor. In the case at bar, at the time petitioner made the payment, he made it clear to respondent that they were to be applied
to his rental obligations on the Fairview wet market property. Though he entered into various contracts and obligations with respondent, all the payments
made, about P11,000,000.00 were to be applied to rental and security deposit on the Fairview wet market property. However, respondent applied a big portion
of the amount paid by petitioner to the satisfaction of an obligation which was not yet due and demandable- the payment of the eight heavy equipment.
According to law, if the debtor did not declare at the time he made the payment to which of his debts with the creditor the payment is to be applied; the
payment has to be applied first to the debt which is most onerous to the debtor. The lease over the Fairview wet market is the most onerous to the petitioner in
the case at bar. Consequently, the petition is granted.

.R. No. 111890 May 7, 1997

CKH INDUSTRIAL AND DEVELOPMENT CORPORATION and RUBI SAW v. CA, THE REGISTER OF DEEDS OF METRO MANILA
DISTRICT III (VALENZUELA), CENTURY-WELL PHIL. CORPORATION, LOURDES CHONG, CHONG TAK KEI and UY CHI KIM

Facts: Debt of Century-Well to CKH comprising of the purchase price of land sold by the latter to them cannot be compensated by the debt of CKH to Choi
and Kei who happen to be the stockholders of Century-Well because such debt of CKH was not proven to be contracted from the two as stockholders of the
corporation. Hence, interest was personal to them and distinct from the corporation. There can be no compensation where there is no mutuality in parties as
both creditors and debtors of each other.

> Three promissory notes (April 15, 1978, July 17, 1978, November 24, 1981) issued by CKH Industrial and Development Corporation (represented by
owner Cheng Kim Heng) in favour of Chengs sons, Chong Tak Choi and Chong Tak Kei worth P700k (P400k, P100k, P200k) > May 8, 1988: Deed of
Absolute Sale between CKH (represented by Rubi Saw, 2nd wife of Cheng) and Century-Well Phil. Corporation (represented by Lourdes Chong, 1 st wife of
Cheng; owned by Chengs sons, Kei and Choi and Chois wife) covering two parcels of land worth P800k > TCT handed to Century-Well > Alleged non-
payment by Century-Well > Complaint for Rescission of the Deed of Absolute Sale

> Contention of Century-Well: payment by way of compensation, exchanging the purchase price with the P700k debt from earlier promissory notes + P100k
cash > Compensation is admitted by vendor CKH in deed of sale ~ in consideration of the sum of P800k, Ph Currency, paid by VENDEE to VENDOR,
receipt of which is hereby acknowledged by the letter to its entire satisfaction, said VENDOR, by these presents, has SOLD, CEDED, TRANSFERRED, and
CONVEYED by way of absolute sale unto said VENDEE, its successors and assigns, the two parcels of land
> COMPENSATION INVALID > Parties not mutually bound as debtors and creditors of each other > Sale: CKH (represented by Rubi) and Century-Well
(by Lourdes) while Promissory Notes: CKH (by Cheng) and Choi and Kei > Promissory notes without indication that the debt was contracted from Choi and
Kei as stockholders of Century-Well > Sale does not include Choi and Kei as parties distinct from corporation > HENCE, Choi and Keis personal interest in
the promissory notes cannot be off-set against the obligations between CKH and Century-Well arising out of the deed of absolute sale > Stockholders Choi
and Keis interests are not considerable interest as to merit a declaration of unity of their civil personalities ~ corporations have personalities separate and
distinct from their stockholders

>> Parol evidence rule > forbids any addition to or contradiction of the terms of a written instrument by testimony or other evidence purporting to show that,
at or before the execution of the parties written agreement, other or different terms were agreed upon by the parties, varying the purport of the written
contract > when agreement reduced to writing, parties cannot be permitted to adduce evidence to prove alleged practices which to all purposes would alter
the terms of the written agreement > Whatever is not found in the writing is understood to have been waived and abandoned > EXCEPT: (a) An intrinsic
ambiguity, mistake or imperfection in the written agreement; (b) The failure of the written agreement to express the true intent and agreement of the parties
thereto; (c) The validity of the written agreement; or (d) The existence of other terms agreed to by the parties or their successors in interest after the execution
of the written agreement

>> Compensation > (1) LEGAL ~ take place by operation of law when two persons, in their own right, are creditors and debtors of each other ~
Requirements (1279): (1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; (2) That both
debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3)
That the two debts be due; (4) That they be liquidated and demandable; (5) That over neither of them there be any retention or controversy, commenced by
third persons and communicated in due time to the debtor > (2) VOLUNTARY / CONVENTIONAL ~ when the parties, who are mutually creditors and
debtors agree to compensate their respective obligations, even though not all the requisites for legal compensation are present ~ Requirements: (1) that each
of the parties can dispose of the credit he seeks to compensate, and (2) that they agree to the mutual extinguishment of their credits

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

OCTAVIO A. KALALO v. ALFREDO J. LUZ

Facts: Kalalos service for IRRI to be paid in Philippine currency because RA 529 prohibits payment in dollars, to be converted at the rate of exchange
during execution of judgement for payment.

> Agreement (November 17, 1959) > Octavio A. Kalalo (licensed civil engineer; owner of O.A. Kalalo and Associates) with Alfredo J. Luz (licensed
architect; owner of A.J. Luz and Associates) > Former to render engineering design services; Latter to pay > Clarification to Letter-Proposal ~ that the
schedule of engineering fees in the agreement does not cover D. Foundation soil exploration, testing and evaluation; E. Projects that are principally
engineering works such as industrial plants and that O. A. Kalalo and Associates reserve the right to increase fees on projects, which cost less than P100k >
Projects accomplished > Itemized Statement of Accounts (December 11, 1961) ~ total of P116,565 minus previous payments worth P57k; balance of P59,565
> Resume of Fees (May 18, 1962) ~ Luz to Kalalo that the balance was P10,861.08 instead of P59,565 > (June 14, 1962) Luz sent a check worth P10,861.08
but Kalalo refused to accept > Complaint (August 10, 1962) by Kalalo ~ services rendered worth $28k and P100,204.46, excluding interests, of which sums
only P69,323.21 had been paid > Payment for the (1) balance of $28k and the balance of P30,881.25; (2) P17k for consequential and moral damages; (3)
P55; for moral damages, attorney's fees and expenses of litigation; (4) P25k as actual damages, and also for attorney's fees and expenses of litigation

> Contention of Luz: that Kalalos services were not in accordance with the agreement; that the claims were not justified by the services actually rendered;
that the aggregate amount actually due was only P80,336.29, of which P69,475.21 had already been paid, thus leaving a balance of only P10,861.08 >
Submission of the issues to a Commissioner > Report that the amount due was $28k as Kalalos fee in the International Research Institute Project which was
20% of the $140 that was paid to Kalalo, and P51,539.91 for the other projects, less the sum of P69,475.46 which was already paid by Luz > Facts not
questioned by parties but questioned legality of the fee due in dollars ~ if not, what rate of exchange it should be paid in pesos > RTC in favour of Kalalo
(February 10, 1967) ~ P51,539.91 and $28k to be converted into the Ph currency, current rate of exchange at the time of the payment of judgment, as certified
to by the Central Bank of the Philippines

> Payment in Ph Currency > balance should be paid on the basis of the rate of exchange at the time of execution of the judgment, and not at the time of the
constitution of the obligation > Payment in dollars is prohibited by Republic Act (RA) No. 529 which provides that if the obligation was incurred prior to the
enactment of the Act and require payment in a particular kind of coin or currency other than the Philippine currency the same shall be discharged in
Philippine currency measured at the prevailing rate of exchange at the time the obligation was incurred. RA No. 529 was enacted on June 16, 1950.
Obligation of appellant to pay appellee the 20% of $140,000.00, or the sum of $28,000.00, accrued on August 25, 1961, or after the enactment of RA No.
529. It follows that the provision of RA No. 529 which requires payment at the prevailing rate of exchange when the obligation was incurred cannot be
applied. RA No. 529 does not provide for the rate of exchange for the payment of obligation incurred after the enactment of said Act. The logical conclusion,
therefore, is that the rate of exchange should be that prevailing at the time of payment (Engel vs. Velasco & Co.)

> Estoppel > if an act, conduct or misrepresentation of the party sought to be estopped is due to ignorance founded on innocent mistake, estoppel will not
arise > Statements which are not estoppels nor judicial admissions have no quality of conclusiveness > Statement of accounts only prima facie evidence > An
account stated or settled is a mere admission that the account is correct. It is not an estoppel. The account is still open to impeachment for mistakes or errors.
Its effect is to establish, prima facie, the accuracy of the items without other proof; and the party seeking to impeach it is bound to show affirmatively the
mistake or error alleged. The force of the admission and the strength of the evidence necessary to overcome it will depend upon the circumstances of the case
> if one of the parties carelessly makes a wrong interpretation of the words of his contract, or performs more than the contract requires (as reasonably
interpreted independently of his performance), as happened in the instant case, he should be entitled to a restitutionary remedy, instead of being bound to
continue to his erroneous interpretation or his erroneous performance and "the other party should not be permitted to profit by such mistake unless he can
establish an estoppel by proving a material change of position made in good faith > that Exhibit 1-A was written through mistake by appellee and that the
latter is not estopped by it