AZCONA vs JAMANDRE

Doctrine:

It is noted that the receipt was meticulously worded, suggesting that the parties were taking
great pains, indeed, to provide against any possible misunderstanding, as if they were even
then already apprehensive of future litigation. Such a reservation-if there was one-would have
been easily incorporated in the receipt, as befitted the legal document it was intended to be.

In any event, the relative insignificance of the alleged balance seems to us a paltry justification
for annulling the contract for its supposed violation. If the petitioner is fussy enough to invoke it
now, it stands to reason that he would have fussed over it too in the receipt he willingly signed
after accepting, without reservation and apparently without protest, only P7,000.00.

The applicable provision is Article 1235 of the Civil Code, declaring that:

Art. 1235. When the obligee accepts the performance, knowing its incompleteness or
irregularity, and without expressing any protest or objection, the obligation is deemed fully
complied with.

The petitioner says that he could not demand payment of the balance of P200.00 on October
26, 1960, date of the receipt because the rental for the crop year 1961-62 was due on or before
January 30, 1961. 18 But this would not have prevented him from reserving in the receipt his
right to collect the balance when it fell due. Moreover, there is no evidence in the record that
when the due date arrived, he made any demand, written or verbal, for the payment of that
amount.

Facts:

Guillermo Azcona leased 80 hectares out of his 150 hectare share in Hacienda Sta. Fe in
Negros Occidental to Cirilo Jamandre. The agreed yearly rental was P7,200.00
and the term was for 3 agricultural years beginning 1965.

On March 30, 1960, when the first annual rent was

due, petitioner was not able to deliver possession of the leased property thus he “waived”
payment of that rental. Respondent only entered the premises on October 26, 1960 after paying
P7,000, which was acknowledged by the petitioner in the receipt. On April
6,1961,the petitioner notified respondent that the contract of lease was
deemed cancelled for violation of the conditions of the contract. Earlier, in fact, the respondent
had been ousted from the possession of the 60 hectares of the leased premises and let with
only 20 hectares of the original area.

Issue:

Whether or not the obligation is extinguished by the acceptance of payment though incomplete

Held:
Yes.

At any rate, that issue and the omission of the parcelary plan became immaterial when the
parties agreed on the lease for the succeeding agricultural year 1961-62, the respondent paying
and the petitioner receiving therefrom the sum of P7,000.00, as acknowledged in Exhibit "B,"
which is reproduced in full as follows:

Bacolod City

October 26, 1960

RECEIPT

RECEIVED from Mr. Cirilo Jamandre at the City of Bacolod, Philippines, this 26th day of
October, 1960, Philippine National Bank Check No. 180646-A (Manager's Check Binalbagan
Branch) for the amount of SEVEN THOUSAND PESOS (P7,000.00), Philippine Currency as
payment for the rental corresponding to crop year 1961-62, by virtue of the contract of lease I
have executed in his favor dated November 23, 1959, and ratified under Notary Public Mr.
Enrique F. Marino as Doc. No. 119, Page No. 25, Book No. XII, Series of 1959. It is hereby
understood, that this payment corresponds to the rentals due on or before January 30, 1961, as
per contract. It is further understood that I hereby waive payment for the rentals corresponding
to crop year 1960-61 and which was due on March 30, 1960, as possession of the property
lease in favor of Mr. Cirilo Jamandre was not actually delivered to him, but the same to be
delivered only after receipt of the amount as stated in this receipt. That Mr. Cirilo Jamandre is
hereby authorized to take immediate possession of the property under lease effective today,
October 26, 1960.

WITNESS my hand at the City of Bacolod, Philippines, this 26th day of October, 1960.

(SGD.) GUILLERMO AZCONA

SIGNED IN THE PRESENCE OF:

(SGD.) JOSE T. JAMANDRE

Citing the stipulation in the lease contract for an annual rental of P7,200.00, the petitioner now
submits that there was default in the payment thereof by the respondent because he was
P200.00 short of such rental. That deficiency never having been repaired, the petitioner
concludes, the contract should be deemed cancelled in accordance with its paragraph 8. 16

For his part, the respondent argues that the receipt represented an express reduction of the
stipulated rental in consideration of his allowing the use of 16 hectares of the leased area by the
petitioner as grazing land for his cattle. Having unqualifiedly accepted the amount of P7,000.00
as rental for the agricultural year 1961-62, the petitioner should not now be heard to argue that
the payment was incomplete. 17
After a study of the receipt as signed by the petitioner and witnessed for the respondent, this
Court has come to the conclusion, and so holds, that the amount of P7,000.00 paid to by the
respondent and received by the petitioner represented payment in full of the rental for the
agricultural year 1961-62.

The language is clear enough: "The amount of SEVEN THOUSAND PESOS (P7,000.00),
Philippine Currency, as payment for the rental corresponding to crop year 1961-62 ... to the
rental due on or before January 30, 1961, as per contract." The conclusion should be equally
clear.

The words "as per contract" are especially significant as they suggest that the parties were
aware of the provisions of the agreement, which was described in detail elsewhere in the
receipt. The rental stipulated therein was P7,200.00. The payment being acknowledged in the
receipt was P7,000.00 only. Yet no mention was made in the receipt of the discrepancy and, on
the contrary, the payment was acknowledged "as per contract." We read this as meaning that
the provisions of the contract were being maintained and respected except only for the
reduction of the agreed rental.

The respondent court held that the amount of P200.00 had been condoned, but we do not think
so. The petitioner is correct in arguing that the requisites of condonation under Article 1270 of
the Civil Code are not present. What we see here instead is a mere reduction of the stipulated
rental in consideration of the withdrawal from the leased premises of the 16 hectares where the
petitioner intended to graze his cattle. The signing of Exhibit "B " by the petitioner and its
acceptance by the respondent manifested their agreement on the reduction, which modified the
lease contract as to the agreed consideration while leaving the other stipulations intact.

The petitioner says that having admittedly been drafted by lawyer Jose Jamandre, the
respondent's son, the receipt would have described the amount of P7,000.00 as "payment in
full" of the rental if that were really the case.

It seems to us that this meaning was adequately conveyed in the acknowledgment made by the
petitioner that this was "payment for the rental corresponding to crop year 1961-62" and
"corresponds to the rentals due on or before January 30, 1961, as per contract." On the other
hand, if this was not the intention, the petitioner does not explain why he did not specify in the
receipt that there was still a balance of P200.00 and, to be complete, the date when it was to be
paid by the respondent.

It is noted that the receipt was meticulously worded, suggesting that the parties were taking
great pains, indeed, to provide against any possible misunderstanding, as if they were even
then already apprehensive of future litigation. Such a reservation-if there was one-would have
been easily incorporated in the receipt, as befitted the legal document it was intended to be.

In any event, the relative insignificance of the alleged balance seems to us a paltry justification
for annulling the contract for its supposed violation. If the petitioner is fussy enough to invoke it
now, it stands to reason that he would have fussed over it too in the receipt he willingly signed
after accepting, without reservation and apparently without protest, only P7,000.00.
The applicable provision is Article 1235 of the Civil Code, declaring that:

Art. 1235. When the obligee accepts the performance, knowing its incompleteness or
irregularity, and without expressing any protest or objection, the obligation is deemed fully
complied with.

The petitioner says that he could not demand payment of the balance of P200.00 on October
26, 1960, date of the receipt because the rental for the crop year 1961-62 was due on or before
January 30, 1961. 18 But this would not have prevented him from reserving in the receipt his
right to collect the balance when it fell due. Moreover, there is no evidence in the record that
when the due date arrived, he made any demand, written or verbal, for the payment of that
amount.
[G.R. No. L-52807. February 29, 1984.]

JOSE ARAÑAS and LUISA QUIJENCIO ARAÑAS, Petitioners, v. HON. EDUARDO C. TUTAAN, as
Judge of the Court of First Instance of Quezon City, and UNIVERSAL TEXTILE MILLS,
INC.,Respondents.

Jose R. Francisco, for Petitioners.

Doctrine:

It is elementary that payment made by a judgment debtor to a wrong party cannot extinguish the
obligation of such debtor to its creditor. It was clear in the motion for clarification that all dividends
accruing to the said shares after the rendition of judgement belonged to the Aranas. When UTEX paid the
wrong parties, despite its knowledge and understanding of the final judgment, it is still liable to pay
Aranas as the lawful declared owners of the said shares. The burden to recover the wrong payment is on
UTEX and cannot be passed on to the Aranas as the innocent parties.

Facts:

The stocks of Universal Textile Mills (UTEX) were issued to co-defendants Manuel and Castaneda.
Subsequently, in 1971, the lower court declared that Luisa Aranas is the rightful owner of the 400 shares
of stocks at Universal Textile Mills (UTEX. Further, it ordered that dividends in cash or stocks pertaining to
the same be delivered to Aranas. UTEX then filed a motion to clarify the phrase in said decision which
states “to deliver to her all dividends appertaining to the same, whether in cash or in stocks” meant
dividends properly pertaining to the plaintiffs after the court’s declaration of her ownership. The said
motion was granted, where the court ordered UTEX to pay the plaintiff the cash dividends which accrued
to the stocks in question after the current decision was rendered but the cash dividends already paid to
the co-defendants before the court decision may not be claimed by the plaintiffs.

The co-defendants filed for a new trial and the decision was the same as the the 1971 ruling. Upon
appeal to the CA, the said ruling was affirmed. The lower court issued a writ of execution in 1979 directed
to UTEX to 1) cancel the certificate of stocks of the co-defendants and issue new ones in the name of the
petitioners, and 2) Pay the cash dividends accrued from 1972 to 1979 (period from the new trial to the
issuance of writ of execution). UTEX alleged that the cash dividends had already been paid.

ISSUE: Was the contention of UTEX, alleging that the cash dividends of stock had already been paid and
thereby absolving it from any further payment, valid?

Ruling:

No.

The final and executory judgment against UTEX in favor of petitioners, declared petitioners as the owners
of the questioned UTEX shares of stock as againsts its co-defendants Castañeda and Manuel. It was
further made clear upon UTEX’ own motion for clarification that all dividends accruing to the said shares
of stock after the rendition of the decision of August 7, 1971 which for the period from 1972 to 1979
amounted to P100,701.45 were to be paid by UTEX to petitioners, and UTEX, per the trial court’s order of
clarification of June 16, 1971 above quoted had expressly maintained "it would rightfully abide by
whatever decision may be rendered by this Honorable Court since such would be the logical
consequence after the declaration or ruling in respect to the rightful ownership of the said shares of
stock." chanrobles.com.ph : virtual law library

Consequently, there is no legal nor equitable basis for respondent judge’s position "that it would indeed
be most unjust and inequitable to require the defendant Universal Textile Mills, Inc. to pay twice cash
dividends on particular shares of stocks." 1 If UTEX nevertheless chose to pay the wrong parties,
notwithstanding its full knowledge and understanding of the final judgment, that it was liable to pay all
dividends after the trial court’s judgment in 1971 to petitioners as the lawfully declared owners of the
questioned shares of stock (but which could not be enforced against it pending the outcome of the appeal
filed by the co-defendants Castañeda and Manuel in the Court of Appeals), it only had itself to blame
therefor.

The burden of recovering the supposed payment of the cash dividends made by UTEX to the wrong
parties Castañeda and Manuel squarely falls upon itself by its own action and cannot be passed by it to
petitioners as innocent parties. It is elementary that payment made by a judgment debtor to a wrong party
cannot extinguish the judgment obligation of such debtor to its creditor. It is equally elementary that once
a judgment becomes final and executory, the court which rendered it cannot change or modify the same
in any material aspect such as what respondent judge has without authority attempted to do with his
questioned order, which would relieve the judgment debtor UTEX of its acknowledged judgment
obligation to pay to petitioners as the lawful owners of the questioned shares of stock, the cash dividends
that accrued after the rendition of the judgment recognizing them as the lawful owners. (Miranda v.
Tiangco, 96 Phil. 626 [1955]). Execution of a final and executory judgment according to its terms is a
matter of right for the prevailing party and becomes the ministerial duty of the court (De los Angeles v.
Victoriano, 109 Phil. 12).chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

ACCORDINGLY, judgment is rendered setting aside the questioned order of January 4, 1980 of
respondent judge and a writ of mandamus is hereby issued commanding said respondent judge to order
the execution of his judgment against respondent Universal Textile Mills, Inc., pursuant to his first order of
June 16, 1971 ordering it to pay the sum of P100,701.45, representing the cash dividends that accrued to
petitioners’ UTEX shares of stock from 1972 to 1979, with interest thereon at the rate of 12% per annum
from the date of service of the writ of execution on October 3, 1979 until fully paid, as well as to pay
petitioners any subsequent cash dividends that may have been issued by it thereafter, with interest from
due date of payment until actual payment, and directing the sheriff to satisfy such judgment out of the
properties of respondent UTEX. With costs against respondent UTEX. This judgment is immediately
executory.
G.R. No. L-27782 July 31, 1970

OCTAVIO A. KALALO, plaintiff-appellee,

vs.
ALFREDO J. LUZ, defendant-appellant.

Doctrine:

Obligation requiring payment in foreign currency must be discharged in Philippine currency as provided
by Rep. Act no. 529; Exception ----. Under Republic Act 529, if the obligation was incurred prior to the
enactment of the Act and requires 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. Republic Act 529 does not provide for the rate of
exchange for the payment of obligation incurred after the enactment of said Act.

Facts:

Kalalo, a licensed civil engineer doing business under the firm name of O. A. Kalalo and Associates,
entered into an agreement with defendant-appellant Alfredo J . Luz , a licensed architect, doing business
under firm name of A. J. Luz and Associates, whereby the former was to render engineering design
services to the latter for fees, as stipulated in the agreement. The services included design computation
and sketches, contract drawing and technical specifications of all engineering phases of the project
designed by O. A. Kalalo and Associates bill of quantities and cost estimate, and consultation and advice
during construction relative to the work. The fees agreed upon were percentages of appellant’s fee. One
of the projects they worked on was for the International Rice Research Institute where appellee stood to
receive $28,000, or 20% of the $140,000 that was paid to appellant.

ISSUE(S):
Whether or not appellant may be compelled to pay in US dollars.

RULING:
NO.

2. In support of the second assignment of error, that the lower court erred in holding that the balance from
appellant on the IRRI project should be paid on the basis of the rate of exchange of the U.S. dollar to the
Philippine peso at the time of payment of the judgment, appellant contends: first, that the official rate at
the time appellant received his architect's fees for the IRRI project, and correspondingly his obligation to
appellee's fee on August 25, 1961, was P2.00 to $1.00, and cites in support thereof Section 1612 of the
Revised Administrative Code, Section 48 of Republic Act 265 and Section 6 of Commonwealth Act No.
699; second, that the lower court's conclusion that the rate of exchange to be applied in the conversion of
the $28,000.00 is the current rate of exchange at the time the judgment shall be satisfied was based
solely on a mere presumption of the trial court that the defendant did not convert, there being no showing
to that effect, the dollars into Philippine currency at the official rate, when the legal presumption should be
that the dollars were converted at the official rate of $1.00 to P2.00 because on August 25, 1961, when
the IRRI project became due and payable, foreign exchange controls were in full force and effect,
and partial decontrol was effected only afterwards, during the Macapagal administration; third, that the
other ground advanced by the lower court for its ruling, to wit, that appellant committed a breach of his
obligation to turn over to the appellee the engineering fees received in U.S. dollars for the IRRI project,
cannot be upheld, because there was no such breach, as proven by the fact that appellee never claimed
in Exhibit 1-A that he should be paid in dollars; and there was no provision in the basic contract (Exh. "A")
that he should be paid in dollars; and, finally, even if there were such provision, it would have no binding
effect under the provision of Republic Act 529; that, moreover, it cannot really be said that no payment
was made on that account for appellant had already paid P57,000.00 to appellee, and under Article 125
of the Civil Code, said payment could be said to have been applied to the fees due from the IRRI project,
this project being the biggest and this debt being the most onerous.

In refutation of appellant's argument in support of the second assignment of error, appellee argues that
notwithstanding Republic Act 529, appellant can be compelled to pay the appellee in dollars in view of the
fact that appellant received his fees in dollars, and appellee's fee is 20% of appellant's fees; and that if
said amount is be converted into Philippine Currency, the rate of exchange should be that at the time of
the execution of the judgment. 2 0

We have taken note of the fact that on August 25, 1961, the date when appellant said his obligation to
pay appellee's fees became due, there was two rates of exchange, to wit: the preferred rate of P2.00 to
$1.00, and the free market rate. It was so provided in Circular No. 121 of the Central Bank of the
Philippines, dated March 2, 1961. amending an earlier Circular No. 117, and in force until January 21,
1962 when it was amended by Circular No. 133, thus:

1. All foreign exchange receipts shall be surrendered to the Central Bank of those authorized to deal in
foreign exchange as follows:

Percentage of Total to be surrendered at

Preferred: Free Market Rate: Rate:

(a) Export Proceeds, U.S. Government Expenditures invisibles other than those specifically mentioned
below. ................................................ 25 75

(b) Foreign Investments, Gold Proceeds, Tourists and Inward Remittances of Veterans and Filipino
Citizens; and Personal Expenses of Diplomatic Per personnel ................................. 100"2 1

The amount of $140,000.00 received by appellant foil the International Rice Research Institute project is
not within the scope of sub-paragraph (a) of paragraph No. 1 of Circular No. 121. Appellant has not
shown that 25% of said amount had to be surrendered to the Central Bank at the preferred rate because
it was either export proceeds, or U.S. Government expenditures, or invisibles not included in sub-
paragraph (b). Hence, it cannot be said that the trial court erred in presuming that appellant converted
said amount at the free market rate. It is hard to believe that a person possessing dollars would exchange
his dollars at the preferred rate of P2.00 to $1.00, when he is not obligated to do so, rather than at the
free market rate which is much higher. A person is presumed to take ordinary care of his concerns, and
that the ordinary course of business has been
followed. 2 2

Under the agreement, Exhibit A, appellee was entitled to 20% of $140,000.00, or the amount of
$28,000.00. Appellee, however, cannot oblige the appellant to pay him in dollars, even if appellant himself
had received his fee for the IRRI project in dollars. This payment in dollars is prohibited by Republic Act
529 which was enacted on June 16, 1950. Said act provides as follows:
SECTION 1. Every provision contained in, or made with respect to, any obligation which provision
purports to give the obligee the right to require payment in gold or in a particular kind of coin or currency
other than Philippine currency or in an amount of money of the Philippines measured thereby, be as it is
hereby declared against public policy, and null, void and of no effect, and no such provision shall be
contained in, or made with respect to, any obligation hereafter incurred. Every obligation heretofore or
here after incurred, whether or not any such provision as to payment is contained therein or made with
respect thereto, shall be discharged upon payment in any coin or currency which at the time of payment
is legal tender for public and private debts: Provided, That, ( a) if the obligation was incurred prior to the
enactment of this Act and required payment in a particular kind of coin or currency other than Philippine
currency, it shall be discharged in Philippine currency measured at the prevailing rate of exchange at the
time the obligation was incurred, (b) except in case of a loan made in a foreign currency stipulated to be
payable in the same currency in which case the rate of exchange prevailing at the time of the stipulated
date of payment shall prevail. All coin and currency, including Central Bank notes, heretofore or hereafter
issued and declared by the Government of the Philippines shall be legal tender for all debts, public and
private.

Under the above-quoted provision of Republic Act 529, 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. As We have adverted to, Republic Act 529 was enacted on June
16, 1950. In the case now before Us the 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 Republic Act 529. It
follows that the provision of Republic Act 529 which requires payment at the prevailing rate of exchange
when the obligation was incurred cannot be applied. Republic Act 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. This view finds
support in the ruling of this Court in the case of Engel vs. Velasco & Co. 2 3 where this Court held that
even if the obligation assumed by the defendant was to pay the plaintiff a sum of money expressed in
American currency, the indemnity to be allowed should be expressed in Philippine currency at the rate of
exchange at the time of judgment rather than at the rate of exchange prevailing on the date of defendant's
breach. This is also the ruling of American court as follows:

The value in domestic money of a payment made in foreign money is fixed with respect to the rate of
exchange at the time of payment. (70 CJS p. 228)

According to the weight of authority the amount of recovery depends upon the current rate of exchange,
and not the par value of the particular money involved. (48 C.J. 605-606)

The value in domestic money of a payment made in foreign money is fixed in reference to the rate of
exchange at the time of such payment. (48 C.J. 605)

It is Our considered view, therefore, that appellant should pay the appellee the equivalent in pesos of the
$28,000.00 at the free market rate of exchange at the time of payment. And so the trial court did not err
when it held that herein appellant should pay appellee $28,000.00 "to be converted into the Philippine
currency on the basis of the current rate of exchange at the time of payment of this judgment, as certified
to by the Central Bank of the Philippines, ...." 2 4

Appellant also contends that the P57,000.00 that he had paid to appellee should have been applied to the
due to the latter on the IRRI project because such debt was the most onerous to appellant. This
contention is untenable. The Commissioner who was authorized by the trial court to receive evidence in
this case, however, reports that the appellee had not been paid for the account of the $28,000.00 which
represents the fees of appellee equivalent to 20% of the $140,000.00 that the appellant received as fee
for the IRRI project. This is a finding of fact by the Commissioner which was adopted by the trial court.
The parties in this case have agreed that they do not question the finding of fact of the Commissioner.
Thus, in the decision appealed from the lower court says:

At the hearing on the Report of the Commissioner on February 15, 1966, the counsels for both parties
manifested to the court that they have no objection to the findings of facts of the Commissioner in his
report; and agreed that the said report only poses two (2)legal issues, namely: (1) whether under the facts
stated in the Report, the doctrine of estoppel will apply; and (2) whether the recommendation in the
Report that the payment of amount due to the plaintiff in dollars is permissible under the law, and, if not,
at what rate of exchange should it be paid in pesos (Philippine currency) .... 2 5

In the Commissioner's report, it is spetifically recommended that the appellant be ordered to pay the
plaintiff the sum of "$28,000. 00 or its equivalent as the fee of the plaintiff under Exhibit A on the IRRI
project." It is clear from this report of the Commissioner that no payment for the account of this
$28,000.00 had been made. Indeed, it is not shown in the record that the peso equivalent of the
$28,000.00 had been fixed or agreed upon by the parties at the different times when the appellant had
made partial payments to the appellee.