#14 PACULDO v CA
27, 1990,
GR NO. 123855
NOV. 20, 2000
By: GUZMAN
Topic: EXTINGUISHMENT OF OBLIGATIONS; APPLICATION OF PAYMENT
Petitioners: NEREO J PACULDO
Respondents: COURT OF APPEALS AND BONIFACIO C. REGALADO
Ponente: PARDO, J
RECIT-READY/SUMMARY: After judgment was rendered ordering the petitioner
to vacate the leased wet market building and to pay back rentals, he paid the
amount of P11,478,121.85 for security deposit and rentals but the respondent,
without petitioner's consent, applied portions of the payment to his other
obligations with the respondent. The petitioner filed a petition for review with
the CA but the CA dismissed the petition finding that petitioner impliedly
consented to respondent's application of payment to heavy equipment brought
by petitioner from respondent. Petitioner submits that his silence is not consent
but is in fact a rejection. Ruling in petitioner's favor, the Supreme Court held:
that at the time petitioner made the payments, he made it clear to respondent
that they were to be applied to his rental obligation on the wet market property;
that there was no clear assent by petitioner to the change in the manner of
application of payment; and that even if petitioner did not declare to which of
his debts the payment is to be applied, the application made by respondent to
pay the purchase price of equipment that was not yet due and demandable is
contrary to the provisions of the law.
DOCTRINE: The right to specify which among his various obligations to the same
creditor is to be satisfied first rests with the debtor, as provided by law. 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
—no payment is to be made to a debt that is not yet due and the payment has to be
applied first to the debt most onerous to the debtor.
FACTS
 The case is a petition for certiorari, seeking to set aside the decision of
the CA, which affirmed the RTC ordering the ejectment of petitioner from
the property.
 On Dec. 27, 1990, petitioner and respondent entered into a contract to
lease over a 16,478 sqm parcel of land with a we market building.
o Contract was for 25 yrs, commencing on Jan. 1, 1991 and
ending on Dec. 31, 2015.
o For the first 5 yrs of the contract beginning Dec.
petitioner would pay monthly rental of P450k payable within
the first 5 days of each month at respondent’s office, with a 2%
penalty for every month of late payment.
 Petitioner also leased 11 other properties from respondent and
purchased 8 units of heavy equipment and vehicles in the amount of
P1.02m.
 Upon petitioner’s failure to pay P361,895.5 in rental for the month of May
1992, and the monthly rental of P450k for the months of June and July
1992.
o On July 6, 1992, respondent sent a demand letter to petitioner
demanding payment of the back rentals and if no payment was
made within 15 days from receipt of the letter, it will cancel the
lease contract. Then another demand letter on July 17, 1992.
 Without the knowledge of the petitioner, respondent mortgaged the land
subject of the lease contract, including the improvements.
 MTC: rendered a decision in favor of respondent.
o (1) Ordering the petitioner to vacate the leased land.
o (2) to pay the sum of P527,119.28 for the unpaid monthly
rentals.
o (3) To pay the sum of P450k a month plus 2%.
o (4) To pay the Atty’s fee, sum of P5m.
o (5) To pay the costs of suit.
 RTC: Affirmed the decision of MTC.
o Issued a writ of execution, ordering the petitioner to vacate
the subject premises voluntarily.
 CA: Dismissed the petition for lack of merit. Paculdo impliedly
consented to Regalado’s application of payment to his other obligations.
o Petitioner alleged that he paid P11,478,121.85 as security
deposit & rentals on the wet market building.
o Portions of the amount paid was applied by Regalado w/o his
consent, to his other obligations. Vouchers & receipts indicated
that the
ISSUE
 WON Paculdo was truly in arrears in the payment of rentals on the
subject property at the time of the filing of the complaint for ejectment.
HELD/RATIO
 NO. PETITION GRANTED. CA DECISION REVERSED AND SET ASIDE.
o Based on MTC & RTC findings, Paculdo paid a total of
P10,949,447.18 to Regalado as of July 2, 1992. And if this will be
applied solely to the rentals on the Fairview wet market, there
would even be an excess payment of P1,049,447.18. (see p.139
for computation)
o Paculdo goes back to the July 15, 1991 letter. He emphasized
that applying the payment to the purchased equipment was
crucial because it was equivalent to 2 mos rental & was the
basis for the ejectment case. He further claims that his
silence/lack of protest did not mean consent; rather, it was a
rejection.
o CC Art. 1252 & 1254: Debtor has the rt to specify w/c among his
various obligations to the same creditor is to be satisfied at the
time of making the payment. If the debtor did not exercise this
rt, law provides that no payment is to be made to a debt that is
not yet due (CC Art. 1252) and payment has to be applied first
to the debt most onerous to the debtor (CC Art. 1254).
 Paculdo made it clear that payments were to be
applied to his rental obligations on the wet market
property.
 Regalado claims that Paculdo assented to the
application as inferred from his silence.
 A big chunk of the amount paid went into the
satisfaction of an obligation w/c was not yet due &
demandable (payment of heavy equipment).
Application was contrary to law.
 Paculdo’s silence was not tantamount to consent.
Consent must be clear & definite. There was no
meeting of the minds. Though there was an offer by
Regalado, there was no acceptance by Paculdo. Even
if Paculdo did not exercise his rt to choose the
obligation to be satisfied first & such rt was
transferred to Regalado, latter’s choice is still subject
to former’s consent.
 Lease over the Fairview property is the most onerous
among all the obligations of petitioner to respondent.
It’s a going-concern (?) and investments on the
improvements were made amounting to P35M.
Paculdo was bound to lose more if lease would be
rescinded than if the contract of sale of heavy
equipment would not proceed.