056. Papa v. Valencia (p.

840)
Myron C. Papa, administrator of the testate estate of Angela M. Butte v. A.U. Valencia and Co., Inc., Felix
Penarroyo, Sps. Arsenio B. Reyes and Amanda Santos, and Delfin Jao
Jan. 23, 1998
Kapunan, J.
Recit-Ready Version:
Papa sold a parcel of land to Penarroyo through Valencia. The latter paid 40k out of the 45k purchase price
through a check, which Papa never encashed. Papa thus claimed that the sale was never consummated, as
checks only produce the effect of payment when encashed.
However, the SC said that by failing to encash the check for more than 10 years, Papa was negligent, and by
such negligence impaired the instrument. Thus, the payment was effective and the sale was consummated.
Facts:
A.U Valencia and Co. and Felix Penarroyo field a complaint for specific performance against Myron Papa, in
his capacity as administrator of the testate estate of Angela M. Butte.
The complaint alleged that Papa, as attorney-in-fact of Butte, sold a parcel of land through Valencia
to Penarroyo. Prior to the sale, the said land had been mortgaged by Butte to Associated Banking
Corporation. After the sale, but before the title had been released, Butte passed away. Despite representations
by Valencia to release the title to the property to Penarroyo, the bank refused to release it until all the
mortgaged properties of Butter were also redeemed. In order to protect his rights and interests over the
property, Penarroyo had the adverse title annotated on the title.
Only upon the release of the title in 1977 did Valencia and Penarroyo discover that the mortgage
rights of the bank had been assigned to Tomas L. Parpana as special administrator of the Estate of Ramon
Papa, Jr. Since then, Myron papa had been collecting monthly rentals of P800 from the tenants of the
property, despite knowing that the land had already been sold to Penarroyo, or so the latter claimed.
Penarroyo and Valencia filed a complaint for specific performance, praying that Papa be ordered to
deliver the property and the accrued rentals to Penarroyo. Papas answer was that the complaint did not state
a cause of action, as the real party-in-interest was the Testate Estate of Angela Butter, which should have
been joined as a party defendant.
Delfin Jao interevened, making common cause with Valencia and Penarroyo, as he claimed that the
property was eventually sold to him by Penarroyo. Thus, he wanted the court to adjudge in Penarroyos
favour, then to order the latter to turn the rentals over to him.
On his part, Papa filed a 3
rd
party complaint against the sps. Reyes, who bought the land at public
auction. They answered that the right to redeem had prescribed.
RTC ruled in favour of, essentially, Jao, allowing Papa to redeem from the Reyes, but ordering him
to execute a deed of sale in favour of Penarroyo, who was in turn ordered to deliver to Jao a deed of absolute
sale over the land.
******************HERE BE NEGO**********************
On appeal to the CA, Papa claimed, among others that the sale was never consummated because he did not
encash the check in the amount of P40,000 given to him by Valencia and Penarroyo in payment of the full
purchase price of the lot. All that he claimed to have received was the amount of P5,000 in cash as earnest
money.
CA affirmed, but modified the RTCs decision by ordering Papa to deliver the owners duplicate of
the TCT to Penarroyo and the peaceful possession and enjoyment of the lot. The CA held that there was no
evidence that the Papa did not encash the check. Rather, what was testified to in court was that Papa had
received P45,000 and issued receipts therefor. The presumption, according to the CA, is that the check was
encashed, especially since the payment by check was not denied by Papa, who merely alleged that he could no
longer recall the transaction.
********************end**************
Other grounds raised by Papa were that the estate of Angela M. Butter should have been joined as
the real party in interest and that he could not be held personally liable, as he was only acting as attorney-in-
fact of the owner, Angela M. Butte.
. MR denied. Hence this petition for review on certiorari.
Pertinent Issue:
WON the sale had been consummated, the check covering the payment not having been encashed. (Yes)
Ratio:
Papa bases his claim that the sale had not been consummated on A1249 of the CC, which states 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. Never having encashed the check, Papa claims, its delivery never
produced the effect of payment.
The SC disagreed. It was undisputed that Valencia and Penarroyo had given Papa P5k in cash and
P40k as covered by the check. Papa admitted having received and having issued receipts for both the cash
and the checks. His assertion that he has not encashed the check conflicts with his defense that he does not
remember the transaction that occurred 10 years ago.
After 10 years from the payment in part by cash and in part by check, the presumption is that the
check had been encashed. Papas failure to encash the check for more than 10 years resulted in the
impairment of the check through his unreasonable and unexplained delay.
The general rule that checks do not effect payment until encashed is subject to the proviso that the
creditor does not impair the check. By the unreasonable delay in presentment, Papa did just that. The
acceptance of a check implies an undertaking to exercise due diligence in presenting it for payment, and if he
wfrom whom it is received by want of such diligence, it will be held to operate as actual payment of the debt
or obligation for which it was given. If no presentment is made at all, the drawer cannot be held liable
irrespective of loss or injury unless presentment is otherwise excused.
As Valencia and Penarroyo had fulfilled their part of the contract of sale by delivering the payment of
the purchase price, they had the right to compel Papa to delvier to them the owners copy of the TCT and the
peaceful possession and enjoyment of the lot.
Other issues:
-It is not clear how the mortgage rights were assigned.
-the estate was not an indispensable party.
Petition denied. CA affirmed.
Gabe.