[G.R. No. 114398.

October 24, 1997]

CARMEN LIWANAG, petitioner, vs. THE HON. COURT OF APPEALS

and THE PEOPLE OF THE PHILIPPINES, represented by the
Solicitor General,respondents.
DECISION
ROMERO, J.:

Petitioner was charged with the crime of estafa before the Regional Trial
Court (RTC), Branch 93, Quezon City, in an information which reads as follows:
That on or between the month of May 19, 1988 and August, 1988 in Quezon City,
Philippines and within the jurisdiction of this Honorable Court, the said accused, with
intent of gain, with unfaithfulness, and abuse of confidence, did then and there,
willfully, unlawfully and feloniously defraud one ISIDORA ROSALES, in the
following manner, to wit: on the date and in the place aforementioned, said
accusedreceived in trust from the offended party cash money amounting
to P536,650.00, Philippine Currency, with the express obligation involving the duty to
act as complainants agent in purchasing local cigarettes (Philip Morris and Marlboro
cigarettes), to resell them to several stores, to give her commission corresponding to
40% of the profits; and to return the aforesaid amount of offended party, but said
accused, far from complying her aforesaid obligation, and once in possession thereof,
misapplied, misappropriated and converted the same to her personal use and benefit,
despite repeated demands made upon her, accused failed and refused and still fails and
refuses to deliver and/or return the same to the damage and prejudice of the said
ISIDORA ROSALES, in the aforementioned amount and in such other amount as
may be awarded under the provision of the Civil Code.
CONTRARY TO LAW.
The antecedent facts are as follows:
Petitioner Carmen Liwanag (Liwanag) and a certain Thelma Tabligan went
to the house of complainant Isidora Rosales (Rosales) and asked her to join
them in the business of buying and selling cigarettes. Convinced of the
feasibility of the venture, Rosales readily agreed. Under their agreement,
Rosales would give the money needed to buy the cigarettes while Liwanag and

Tabligan would act as her agents, with a corresponding 40% commission to her
if the goods are sold; otherwise the money would be returned to
Rosales. Consequently, Rosales gave several cash advances to Liwanag and
Tabligan amounting to P633,650.00.
During the first two months, Liwanag and Tabligan made periodic visits to
Rosales to report on the progress of the transactions. The visits, however,
suddenly stopped, and all efforts by Rosales to obtain information regarding
their business proved futile.
Alarmed by this development and believing that the amounts she advanced
were being misappropriated, Rosales filed a case of estafa against Liwanag.
After trial on the merits, the trial court rendered a decision dated January 9,
1991, finding Liwanag guilty as charged. The dispositive portion of the decision
reads thus:
WHEREFORE, the Court holds, that the prosecution has established the guilt of the
accused, beyond reasonable doubt, and therefore, imposes upon the accused, Carmen
Liwanag, an Indeterminate Penalty of SIX (6) YEARS, EIGHT (8) MONTHS AND
TWENTY ONE (21) DAYS OF PRISION CORRECCIONAL TO FOURTEEN (14)
YEARS AND EIGHT (8) MONTHS OF PRISION MAYOR AS MAXIMUM, AND
TO PAY THE COSTS.
The accused is likewise ordered to reimburse the private complainant the sum
of P526,650.00, without subsidiary imprisonment, in case of insolvency.
SO ORDERED.
Said decision was affirmed with modification by the Court of Appeals in a
decision dated November 29, 1993, the decretal portion of which reads:
WHEREFORE, in view of the foregoing, the judgment appealed from is hereby
affirmed with the correction of the nomenclature of the penalty which should be: SIX
(6) YEARS, EIGHT (8) MONTHS and TWENTY ONE (21) DAYS of prision mayor,
as minimum, to FOURTEEN (14) YEARS and EIGHT (8) MONTHS of reclusion
temporal, as maximum. In all other respects, the decision is AFFIRMED.
SO ORDERED.
Her motion for reconsideration having been denied in the resolution of
March 16, 1994, Liwanag filed the instant petition, submitting the following
assignment of errors:

1. RESPONDENT APPELLATE COURT GRAVELY ERRED IN AFFIRMING

THE CONVICTION OF THE ACCUSED-PETITIONER FOR THE CRIME OF
ESTAFA, WHEN CLEARLY THE CONTRACT THAT EXIST (sic) BETWEEN
THE ACCUSED-PETITIONER AND COMPLAINANT IS EITHER THAT OF A
SIMPLE LOAN OR THAT OF A PARTNERSHIP OR JOINT VENTURE HENCE
THE NON RETURN OF THE MONEY OF THE COMPLAINANT IS PURELY
CIVIL IN NATURE AND NOT CRIMINAL.
2. RESPONDENT APPELLATE COURT GRAVELY ERRED IN NOT
ACQUITTING THE ACCUSED-PETITIONER ON GROUNDS OF REASONABLE
DOUBT BY APPLYING THE EQUIPOISE RULE.
Liwanag advances the theory that the intention of the parties was to enter
into a contract of partnership, wherein Rosales would contribute the funds while
she would buy and sell the cigarettes, and later divide the profits between
them.[1] She also argues that the transaction can also be interpreted as a simple
loan, with Rosales lending to her the amount stated on an installment basis.[2]
The Court of Appeals correctly rejected these pretenses.
While factual findings of the Court of Appeals are conclusive on the parties
and not reviewable by the Supreme Court, and carry more weight when these
affirm the factual findings of the trial court,[3] we deem it more expedient to
resolve the instant petition on its merits.
Estafa is a crime committed by a person who defrauds another causing him
to suffer damages, by means of unfaithfulness or abuse of confidence, or of
false pretenses of fraudulent acts.[4]
From the foregoing, the elements of estafa are present, as follows: (1) that
the accused defrauded another by abuse of confidence or deceit; and (2) that
damage or prejudice capable of pecuniary estimation is caused to the offended
party or third party,[5] and it is essential that there be a fiduciary relation between
them either in the form of a trust, commission or administration.[6]
The receipt signed by Liwanag states thus:
May 19, 1988 Quezon City
Received from Mrs. Isidora P. Rosales the sum of FIVE HUNDRED TWENTY SIX
THOUSAND AND SIX HUNDRED FIFTY PESOS (P526,650.00) Philippine
Currency, to purchase cigarrets (sic) (Philip & Marlboro) to be sold to customers. In
the event the said cigarrets (sic) are not sold, the proceeds of the sale or the said

products (shall) be returned to said Mrs. Isidora P. Rosales the said amount
ofP526,650.00 or the said items on or before August 30, 1988.
(SGD & Thumbedmarked) (sic)
CARMEN LIWANAG
26 H. Kaliraya St.
Quezon City
Signed in the presence of:
(Sgd) Illegible (Sgd) Doming Z. Baligad
The language of the receipt could not be any clearer. It indicates that the
money delivered to Liwanag was for a specific purpose, that is, for the purchase
of cigarettes, and in the event the cigarettes cannot be sold, the money must
be returned to Rosales.
Thus, even assuming that a contract of partnership was indeed entered into
by and between the parties, we have ruled that when money or property have
been received by a partner for a specific purpose (such as that obtaining in the
instant case) and he later misappropriated it, such partner is guilty of estafa.[7]
Neither can the transaction be considered a loan, since in a contract of loan
once the money is received by the debtor, ownership over the same is
transferred.[8] Being the owner, the borrower can dispose of it for whatever
purpose he may deem proper.
In the instant petition, however, it is evident that Liwanag could not dispose
of the money as she pleased because it was only delivered to her for a single
purpose, namely, for the purchase of cigarettes, and if this was not possible
then to return the money to Rosales. Since in this case there was no transfer of
ownership of the money delivered, Liwanag is liable for conversion under Art.
315, par. 1(b) of the Revised Penal Code.
WHEREFORE, in view of the foregoing, the appealed decision of the Court
of Appeals dated November 29, 1993, is AFFIRMED. Costs against petitioner.
SO ORDERED.
Melo, Francisco, and Panganiban, JJ., concur.
Narvasa, C.J., (Chairman), on leave.

G.R. No. 127246 April 21, 1999

SPOUSES LUIS M. ERMITAO and MANUELITA C. ERMITAO, petitioners,

vs.
THE COURT OF APPEALS AND BPI EXPRESS CARD CORP., respondents.

QUISUMBING, J
This petition for review under Rule 45, of the Rules of Court, seeks to set aside the decision of the
Court of Appeals in C.A.-G.R. CV No. 47888 reversing the trial court's 1 judgment in Civil Case No.
61357, as well as the resolution of the Court of Appeals denying petitioners' motion for reconsideration.

In dispute is the validity of the stipulation embodied in the standard application form for credit cards
furnished by private respondent. The stipulation makes the cardholder liable for purchases made
through his lost or stolen credit card until (a) notice of such loss or theft has been given to private
respondent and (b) the latter has communicated such loss or theft to its member-establishments.
The facts, as found by the trial court, are not disputed.
Petitioner Luis Ermitao applied for a credit card from private respondent BPI Express Card Corp.
(BECC) on October 8, 1986 with his wife, Manuelita, as extension cardholder. The spouses were
given credit cards with a credit limit of P10,000.00. They often exceeded this credit limit without
protest from BECC.
On August 29, 1989, Manuelita's bag was snatched from her as she was shopping at the Greenbelt
Mall in Makati, Metro Manila. Among the items inside the bag was her BECC credit card. That same
night she informed, by telephone, BECC of the loss. The call was received by BECC offices through
a certain Gina Banzon. This was followed by a letter dated August 30, 1989. She also surrendered
Luis' credit card and requested for replacement cards. In her letter, Manuelita stated that she "shall
not be responsible for any and all charges incurred [through the use of the lost card] after August 29,
1989. 2
However, when Luis received his monthly billing statement from BECC dated September 20, 1989,
the charges included amounts for purchases made on August 30, 1989 through Manuelita's lost
card. Two purchases were made, one amounting to P2,350.05 and the other, P607.50. Manuelita
received a billing statement dated October 20, 1989 which required her to immediately pay the total
amount of P3,197.70 covering the same (unauthorized) purchases. Manuelita again wrote BECC
disclaiming responsibility for those charges, which were made after she had served BECC with
notice of the loss of her card.
Despite the spouses' refusal to pay and the fact that they repeatedly exceeded their monthly credit
limit, BECC sent them a notice dated December 29, 1989 stating that their cards had been renewed
until March 1991. Notwithstanding this, however, BECC continued to include in the spouses' billing
statements those purchases made through Manuelita's lost card. Luis protested this billing in his
letter dated June 20, 1990.
However, BECC, in a letter dated July 13, 1990, pointed out to Luis the following stipulation in their
contract:
In the event the card is lost or stolen, the cardholder agrees to immediately report its
loss or theft in writing to BECC . . . purchases made/incurred arising from the use of

the lost/stolen card shall be for the exclusive account of the cardholder and the
cardholder continues to be liable for the purchases made through the use of the
lost/stolen BPI Express Card until after such notice has been given to BECC and the
latter has communicated such loss/theft to its member establishments. 3
Pursuant to this stipulation, BECC held Luis liable for the amount of P3,197.70 incurred through the
use of his wife's lost card, exclusive of interest and penalty charges.
In his reply dated July 18, 1990, Luis stressed that the contract BECC was referring to was a
contract of adhesion and warned that if BECC insisted on charging him and his wife for the
unauthorized purchases, they will sue BECC for damages. This warning notwithstanding, BECC
continued to bill the spouses for said purchases. 4
On April 10, 1991, Luis used his credit card to purchase gasoline at a Caltex station. The latter,
however, dishonored his card. In reply to Luis' demand for an explanation, BECC wrote that it
transferred the balance of his old credit card to his new one, including the unauthorized charges.
Consequently, his outstanding balance exceeded his credit limit of P10,00000. He was informed that
his credit card had not been cancelled but, since he exceeded his credit limit, he could not avail of
his credit privileges.
Once more, Luis pointed out that notice of the lost card was given to BECC before the purchases
were made.
Subsequently, BECC cancelled the spouses' credit cards and advised them to settle the account
immediately or risk being sued for collection of said account.
Constrained, petitioners sued BECC for damages. The trial court ruled in their favor, stating that
there was a waiver on the part of BECC in enforcing the spouses' liability, as indicated by the
following circumstances:
(1) Its failure to inform the spouses that the unauthorized charges on the lost card
would be carried over to their replacement cards; and
(2) Its act of unqualifiedly replacing the lost card and Luis' card which were both
surrendered by the spouses, even after the spouses unequivocally denied liability for
the unauthorized purchases.
The trial court further noted that the suspension of the spouses' credit cards was based upon the
"lame excuse" that the credit limit had been exceeded, despite the fact that BECC allowed the
spouses previously to exceed their credit limit, even for almost two years after the loss of Manuelita's
card. Moreover, the credit limit was exceeded only after BECC added the unauthorized purchases to
the liability of the spouses. BECC continued to send the spouses separate billing statements that
included the unauthorized purchases, with interest and penalty charges.
The trial court opined that the only purpose for the suspension of the spouses' credit privileges was
to compel them to pay for the unauthorized purchases. The trial court ruled that the latter portion of
the condition in the parties' contract, which states that liability for purchases made after a card is lost
or stolen shall be for the account of the cardholder until after notice of the loss or theft has been
given to BECC and after the latter has informed its member establishments, is void for being
contrary to public policy and for being dependent upon the sole will of the debtor. 5

Moreover, the trial court observed that the contract between BECC and the Ermitaos was a
contract of adhesion, whose terms must be construed strictly against BECC, the party that prepared
it.
The dispositive portion of the trial court's decision reads:
WHEREFORE, and IN VIEW OF THE ALL THE FOREGOING CONSIDERATIONS,
judgment is hereby rendered in favor of the plaintiffs, Spouses Luis M. Ermitao and
Manuelita C. Ermitao and against defendant BPI Express Card Corporation:
1. Ordering the said defendant to pay the plaintiffs the sum of P100,000.00 as moral
damages.
2. Ordering said defendant to pay the plaintiffs the sum of P50,000.00 as exemplary
damages.
3. Ordering said defencant to pay the plaintiffs the sum equivalent to twenty per cent
(20%) of the amounts abovementioned as and for attorney's fees and expenses of
litigation, and
4. Ordering the said defendant to pay the costs of suit.
SO ORDERED
But, on appeal this decision was reversed. The Court of Appeals stated that the spouses should be
bound by the contract, even though it was one of adhesion. It also said that Luis, being a lawyer, had
"all the tools to drive a hard bargain had he wanted to. 6 It cited the case of Serra v. Court of
Appeals 7 wherein this Court ruled that contracts of adhesion are as binding as ordinary contracts. The
petitioner in Serra was a CPA-lawyer, "a highly educated man
. . . who should have been more cautious in (his) transactions. . . 8 The Court of Appeals therefore
disposed of the appeal as follows:

THE FOREGOING CONSIDERED, the contested decision is REVERSED.

Plaintiffs/appellees are hereby directed to pay the defendant/appellant the amount of
P3,197.70 with 3% interest per month and an additional 3% penalty equivalent to the
amount due every month until full payment. Without cost.
SO ORDERED. 9
Hence, this recourse by petitioners, in which they claim that the Court of Appeals gravely erred in:
(i) Ruling that petitioners should be bound by the stipulations contained in the credit
card application a document wholly prepared by private respondent itself taking
into consideration the professional credentials of petitioner Luis M. Ermitao;
(ii) Relying on the case of Serra v. Court of Appeals, 229 SCRA 60, because unlike
that case, petitioners have no chance at all to contest the stipulations appearing in
the credit card application that was drafted entirely by private respondent, thus, a
clear contract of adhesion;

(iii) Ruling that private respondent is not estopped by its subsequent acts after having
been notified of the loss/theft of the credit card issued to petitioners, and
(iv) Holding that the onerous and unconscionable condition in the credit card
application that the cardholder continues to be liable for purchases made on lost
or stolen credit cards not only after such notice has been given to appellant but also
after the latter has communicated such loss/theft to its member establishments
without any specific time or period is valid. 10
At the outset, we note that the contract between the parties in this case is indeed a contract of
adhesion, so-called because its terms are prepared by only one party while the other party merely
affixes his signature signifying his adhesion thereto. 11 Such contracts are not void in
themselves. 12 They are as binding as ordinary contracts. Parties who enter into such contracts are free to
reject the stipulations entirely. This Court, however, will not hesitate to rule out blind adherence to such
contracts if they prove to be too one-sided under the attendant facts and circumstances. 13

The resolution of this petition, in our view, hinges on the validity and fairness of the stipulation on
notice required by private respondent in case of loss or theft of a BECC-issued credit card. Because
of the peculiar nature of contracts of adhesion, the validity thereof must be determined in light of the
circumstances under which the stipulation is intended to apply. 14
The stipulation in question reads:
In the event the card is lost or stolen, the cardholder agrees to immediately report its
loss or theft in citing to BECC . . . purchases made/incurred arising from the use of
the lost/stolen card shall be for the exclusive account of the cardholder and the
cardholder continues to be liable for the purchases made through the use of the
lost/stolen BPI Express Card until after such notice has been given to BECC and the
latter has communicated such loss/theft to its member establishments.
For the cardholder to be absolved from liability for unauthorized purchases made through his lost or
stolen card, two steps must be followed: (1) the cardholder must give written notice to BECC, and (2)
BECC must notify its member establishments of such loss or theft, which, naturally, it may only do
upon receipt of a notice from the cardholder. Both the cardholder and BECC, then, have a
responsibility to perform, in order to free the cardholder from any liability arising from the use of a
lost or stolen card.
In this case, the cardholder, Manuelita, has complied with what was required of her under the
contract with BECC. She immediately notified BECC of the loss of her card on the same day it was
lost and, the following day, she sent a written notice of the loss to BECC. That she gave such
notices to BECC is admitted by BECC in the letter sent to Luis by Roberto L. Maniquiz, head of
BECC's Collection Department. 15
Having thus performed her part of the notification procedure, it was reasonable for Manuelita and
Luis, for that matter to expect that BECC would perform its part of the procedure, which is to
forthwith notify its member-establishments. It is not unreasonable to assume that BECC would do
this immediately, precisely to avoid any unauthorized charges.
Clearly, what happened in this case was that BECC failed to notify promptly the establishment in
which the unauthorized purchases were made with the use of Manuelita's lost card. Thus, Manuelita
was being liable for those purchases, even if there is no showing that Manuelita herself had signed
for said purchases, and after notice by her concerning her card's loss was already given to BECC.

BECC asserts that the period that elapsed from the time of the loss of the card to the time of its
unauthorized use was too short such that "it would be next to impossible for respondent to notify all
its member-establishments regarding the fact of the loss. 16 Nothing, however, prevents said memberestablishments from observing verification procedures including ascertaining the genuine signature and
proper identification of the purported purchaser using the credit card.

BECC states that, "between two persons who are negligent, the one who made the wrong possible
should bear the loss." We take this to be an admission that negligence had occurred. In effect,
BECC is saying that the company, and the member-establishments or the petitioners could be
negligent. However, according to BECC, petitioners should be the ones to bear the loss since it was
they who made possible the commission of a wrong. This conclusion, however, is self-serving and
obviously untenable.
From one perspective, it was not petitioners who made possible the commission of the wrong. It
could be BECC for its failure to immediately notify its members-establishments, who appear lacking
in care or instruction by BECC in proper procedures, regarding signatures and the identification of
card users at the point of actual purchase of goods or services. For how else could an unauthorized
person succeed to use Manuelita's lost card?
The cardholder was no longer in control of the procedure after it has notified BECC of the card's loss
or theft. It was already BECC's responsibility to inform its member-establishments of the loss or theft
of the card at the soonest possible time. We note that BECC is not a neophyte financial institution,
unaware of the intricacies and risks of providing credit privileges to a large number of people. It
should have anticipated an occurrence such as the one in this case and devised effective ways and
means to prevent it, or otherwise insure itself against such risk.
Prompt notice by the cardholder to the credit card company of the loss or theft of his card should be
enough to relieve the former of any liability occasioned by the unauthorized use of his lost or stolen
card. The questioned stipulation in this case, which still requires the cardholder to wait until the credit
card company has notified all its member-establishments, puts the cardholder at the mercy of the
credit card company which may delay indefinitely the notification of its members to minimize if not to
eliminate the possibility of incurring any loss from unauthorized purchases. Or, as in this case, the
credit card company may for some reason fail to promptly notify its members through absolutely no
fault of the cardholder. To require the cardholder to still pay for unauthorized purchases after he has
given prompt notice of the loss or theft of his card to the credit card company would simply be unfair
and unjust. The Court cannot give its assent to such a stipulation which could clearly run against
public policy. 17
On the matter of the damages petitioners are seeking, we must delete the award of exemplary
damages, absent any clear showing that BECC acted in a wanton, fraudulent, reckless, oppressive,
or malevolent manner, as required by Article 2232 of the Civil Code. We likewise reduce the amount
of moral damages to P50,000.00, considering the circumstances of the parties to the case.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 47888 is hereby
REVERSED and the decision of the Regional Trial Court, Branch 157, Pasig City in Civil Case No.
61375 is REINSTATED, with the MODIFICATION that the award of exemplary damages in the
amount of P50,000.00 is hereby deleted; and the amount of moral damages is reduced to
P50,000.00; but private respondent is further ordered to pay P25,000 as attorney's fees and litigation
expenses.
Costs against private respondents

G.R. No. L-41764 December 19, 1980

NEW PACIFIC TIMBER & SUPPLY COMPANY, INC., petitioner,
vs.
HON. ALBERTO V. SENERIS, RICARDO A. TONG and EX-OFFICIO SHERIFF HAKIM S.
ABDULWAHID,respondents.

CONCEPCION JR., J.:

A petition for certiorari with preliminary injunction to annul and/or modify the order of the Court of
First Instance of Zamboanga City (Branch ii) dated August 28, 1975 denying petitioner's ExParte Motion for Issuance of Certificate Of Satisfaction Of Judgment.
Herein petitioner is the defendant in a complaint for collection of a sum of money filed by the private
respondent. 1On July 19, 1974, a compromise judgment was rendered by the respondent Judge in
accordance with an amicable settlement entered into by the parties the terms and conditions of which, are
as follows:

(1) That defendant will pay to the plaintiff the amount of Fifty Four Thousand Five
Hundred Pesos (P54,500.00) at 6% interest per annum to be reckoned from August
25, 1972;
(2) That defendant will pay to the plaintiff the amount of Six Thousand Pesos
(P6,000.00) as attorney's fees for which P5,000.00 had been acknowledged received
by the plaintiff under Consolidated Bank and Trust Corporation Check No. 16-135022
amounting to P5,000.00 leaving a balance of One Thousand Pesos (P1,000.00);
(3) That the entire amount of P54,500.00 plus interest, plus the balance of P1,000.00
for attorney's fees will be paid by defendant to the plaintiff within five months from
today, July 19, 1974; and
(4) Failure one the part of the defendant to comply with any of the above-conditions,
a writ of execution may be issued by this Court for the satisfaction of the obligation. 2
For failure of the petitioner to comply with his judgment obligation, the respondent Judge, upon
motion of the private respondent, issued an order for the issuance of a writ of execution on
December 21, 1974. Accordingly, writ of execution was issued for the amount of P63,130.00
pursuant to which, the Ex-Officio Sheriff levied upon the following personal properties of the
petitioner, to wit:
(1) Unit American Lathe 24
(1) Unit American Lathe 18 Cracker Wheeler
(1) Unit Rockford Shaper 24
and set the auction sale thereof on January 15, 1975. However, prior to January 15, 1975, petitioner
deposited with the Clerk of Court, Court of First Instance, Zamboanga City, in his capacity as Ex-

Officio Sheriff of Zamboanga City, the sum of P63,130.00 for the payment of the judgment
obligation, consisting of the following:
1. P50.000.00 in Cashier's Check No. S-314361 dated January 3, 1975 of the
Equitable Banking Corporation; and
2. P13,130.00 incash. 3
In a letter dated January 14, 1975, to the Ex-Officio Sheriff, 4 private respondent through counsel,
refused to accept the check as well as the cash deposit. In the 'same letter, private respondent requested
the scheduled auction sale on January 15, 1975 to proceed if the petitioner cannot produce the cash.
However, the scheduled auction sale at 10:00 a.m. on January 15, 1975 was postponed to 3:00 o'clock
p.m. of the same day due to further attempts to settle the case. Again, the scheduled auction sale that
afternoon did not push through because of a last ditch attempt to convince the private respondent to
accept the check. The auction sale was then postponed on the following day, January 16, 1975 at 10:00
o'clock a.m. 5 At about 9:15 a.m., on January 16, 1975, a certain Mr. Taedo representing the petitioner
appeared in the office of the Ex-Officio Sheriff and the latter reminded Mr. Taedo that the auction sale
would proceed at 10:00 o'clock. At 10:00 a.m., Mr. Taedo and Mr. Librado, both representing the
petitioner requested the Ex-Officio Sheriff to give them fifteen minutes within which to contract their lawyer
which request was granted. After Mr. Taedo and Mr. Librado failed to return, counsel for private
respondent insisted that the sale must proceed and the Ex-Officio Sheriff proceeded with the auction
sale. 6 In the course of the proceedings, Deputy Sheriff Castro sold the levied properties item by item to
the private respondent as the highest bidder in the amount of P50,000.00. As a result thereof, the ExOfficio Sheriff declared a deficiency of P13,130.00. 7 Thereafter, on January 16, 1975, the ExOfficio Sheriff issued a "Sheriff's Certificate of Sale" in favor of the private respondent, Ricardo Tong,
married to Pascuala Tong for the total amount of P50,000.00 only. 8Subsequently, on January 17, 1975,
petitioner filed an ex-parte motion for issuance of certificate of satisfaction of judgment. This motion was
denied by the respondent Judge in his order dated August 28, 1975. In view thereof, petitioner now
questions said order by way of the present petition alleging in the main that said respondent Judge
capriciously and whimsically abused his discretion in not granting the motion for issuance of certificate of
satisfaction of judgment for the following reasons: (1) that there was already a full satisfaction of the
judgment before the auction sale was conducted with the deposit made to the Ex-Officio Sheriff in the
amount of P63,000.00 consisting of P50,000.00 in Cashier's Check and P13,130.00 in cash; and (2) that
the auction sale was invalid for lack of proper notice to the petitioner and its counsel when the ExOfficio Sheriff postponed the sale from June 15, 1975 to January 16, 1976 contrary to Section 24, Rule 39
of the Rules of Court. On November 10, 1975, the Court issued a temporary restraining order enjoining
the respondent Ex-OfficioSheriff from delivering the personal properties subject of the petition to Ricardo
A. Tong in view of the issuance of the "Sheriff Certificate of Sale."

We find the petition to be impressed with merit.

The main issue to be resolved in this instance is as to whether or not the private respondent can
validly refuse acceptance of the payment of the judgment obligation made by the petitioner
consisting of P50,000.00 in Cashier's Check and P13,130.00 in cash which it deposited with the ExOfficio Sheriff before the date of the scheduled auction sale. In upholding private respondent's claim
that he has the right to refuse payment by means of a check, the respondent Judge cited the
following:
Section 63 of the Central Bank Act:
Sec. 63. Legal Character. Checks representing deposit money do not have legal
tender power and their acceptance in payment of debts, both public and private, is at
the option of the creditor, Provided, however, that a check which has been cleared

and credited to the account of the creditor shall be equivalent to a delivery to the
creditor in cash in an amount equal to the amount credited to his account.
Article 1249 of the New Civil Code:
Art. 1249. The payment of debts in money shall be made in the currency
stipulated, and if it is not possible to deliver such currency, then in the currency which
is legal tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other
mercantile documents shall produce the effect of payment only when they have been
cashed, or when through the fault of the creditor they have been impaired.
In the meantime, the action derived from the original obligation shall be held in
abeyance.
Likewise, the respondent Judge sustained the contention of the private respondent that he has the
right to refuse payment of the amount of P13,130.00 in cash because the said amount is less than
the judgment obligation, citing the following Article of the New Civil Code:
Art. 1248. Unless there is an express stipulation to that effect, the creditor cannot be
compelled partially to receive the presentations in which the obligation consists.
Neither may the debtor be required to make partial payment.
However, when the debt is in part liquidated and in part unliquidated, the creditor
may demand and the debtor may effect the payment of the former without waiting for
the liquidation of the latter.
It is to be emphasized in this connection that the check deposited by the petitioner in the amount of
P50,000.00 is not an ordinary check but a Cashier's Check of the Equitable Banking Corporation, a
bank of good standing and reputation. As testified to by the Ex-Officio Sheriff with whom it has been
deposited, it is a certified crossed check.9 It is a well-known and accepted practice in the business
sector that a Cashier's Check is deemed as cash. Moreover, since the said check had been certified by
the drawee bank, by the certification, the funds represented by the check are transferred from the credit
of the maker to that of the payee or holder, and for all intents and purposes, the latter becomes the
depositor of the drawee bank, with rights and duties of one in such situation. 10 Where a check is certified
by the bank on which it is drawn, the certification is equivalent to acceptance. 11 Said certification "implies
that the check is drawn upon sufficient funds in the hands of the drawee, that they have been set apart for
its satisfaction, and that they shall be so applied whenever the check is presented for payment. It is an
understanding that the check is good then, and shall continue good, and this agreement is as binding on
the bank as its notes in circulation, a certificate of deposit payable to the order of the depositor, or any
other obligation it can assume. The object of certifying a check, as regards both parties, is to enable the
holder to use it as money." 12 When the holder procures the check to be certified, "the check operates as
an assignment of a part of the funds to the creditors." 13 Hence, the exception to the rule enunciated
under Section 63 of the Central Bank Act to the effect "that a check which has been cleared and credited
to the account of the creditor shall be equivalent to a delivery to the creditor in cash in an amount equal to
the amount credited to his account" shall apply in this case. Considering that the whole amount deposited
by the petitioner consisting of Cashier's Check of P50,000.00 and P13,130.00 in cash covers the
judgment obligation of P63,000.00 as mentioned in the writ of execution, then, We see no valid reason for
the private respondent to have refused acceptance of the payment of the obligation in his favor. The
auction sale, therefore, was uncalled for. Furthermore, it appears that on January 17, 1975, the Cashier's
Check was even withdrawn by the petitioner and replaced with cash in the corresponding amount of
P50,000.00 on January 27, 1975 pursuant to an agreement entered into by the parties at the instance of

the respondent Judge. However, the private respondent still refused to receive the same. Obviously, the
private respondent is more interested in the levied properties than in the mere satisfaction of the
judgment obligation. Thus, petitioner's motion for the issuance of a certificate of satisfaction of judgment
is clearly meritorious and the respondent Judge gravely abused his discretion in not granting the same
under the circumstances.

In view of the conclusion reached in this instance, We find no more need to discuss the ground
relied in the petition.
It is also contended by the private respondent that Appeal and not a special civil action for certiorari
is the proper remedy in this case, and that since the period to appeal from the decision of the
respondent Judge has already expired, then, the present petition has been filed out of time. The
contention is untenable. The decision of the respondent Judge in Civil Case No. 250 (166) has long
become final and executory and so, the same is not being questioned herein. The subject of the
petition at bar as having been issued in grave abuse of discretion is the order dated August 28, 1975
of the respondent Judge which was merely issued in execution of the said decision. Thus, even
granting that appeal is open to the petitioner, the same is not an adequate and speedy remedy for
the respondent Judge had already issued a writ of execution. 14
WHEREFORE, in view of all the foregoing, judgment is hereby rendered:
1. Declaring as null and void the order of the respondent Judge dated August 28, 1975;
2. Declaring as null and void the auction sale conducted on January 16, 1975 and the certificate of
sale issued pursuant thereto;
3. Ordering the private respondent to accept the sum of P63,130.00 under deposit as payment of the
judgment obligation in his favor;
4. Ordering the respondent Judge and respondent Ex-Officio Sheriff to release the levied properties
to the herein petitioner.
The temporary restraining order issued is hereby made permanent.
Costs against the private respondent.
SO ORDERED.
____________________________________________________

G.R. No. L-57552 October 10, 1986

LUISA F. MCLAUGHLIN, petitioner,
vs.
THE COURT OF APPEALS AND RAMON FLORES, respondents.
R.C. Domingo Jr. & Associates for private respondent.

FERIA, Actg. C.J.

This is an appeal by certiorari from the decision of the Court of Appeals, the dispositive part of which
reads as follows:
IN VIEW OF THE FOREGOING PREMISES, the petition for certiorari and
mandamus is hereby GRANTED and the Orders of respondent court dated
November 21 and 27 both 1980 are hereby nullified and set aside and respondent
Judge is ordered to order private respondent to accept petitioner's Pacific Banking
Corporation certified manager's Check No. MC-A-000311 dated November 17, 1980
in the amount of P76,059.71 in full settlement of petitioner's obligation, or another
check of equivalent kind and value, the earlier check having become stale.
On February 28, 1977, petitioner Luisa F. McLaughlin and private respondent Ramon Flores entered
into a contract of conditional sale of real property. Paragraph one of the deed of conditional sale
fixed the total purchase price of P140,000.00 payable as follows: a) P26,550.00 upon the execution
of the deed; and b) the balance of P113,450.00 to be paid not later than May 31, 1977. The parties
also agreed that the balance shall bear interest at the rate of 1% per month to commence from
December 1, 1976, until the full purchase price was paid.
On June 19, 1979, petitioner filed a complaint in the then Court of First Instance of Rizal (Civil Case
No. 33573) for the rescission of the deed of conditional sale due to the failure of private respondent
to pay the balance due on May 31, 1977.
On December 27, 1979, the parties submitted a Compromise Agreement on the basis of which the
court rendered a decision on January 22, 1980. In said compromise agreement, private respondent
acknowledged his indebtedness to petitioner under the deed of conditional sale in the amount of
P119,050.71, and the parties agreed that said amount would be payable as follows: a) P50,000.00
upon signing of the agreement; and b) the balance of P69,059.71 in two equal installments on June
30, 1980 and December 31, 1980.
As agreed upon, private respondent paid P50,000.00 upon the signing of the agreement and in
addition he also paid an "escalation cost" of P25,000.00.
Under paragraph 3 of the Compromise Agreement, private respondent agreed to pay one thousand
(P l,000.00) pesos monthly rental beginning December 5, 1979 until the obligation is duly paid, for
the use of the property subject matter of the deed of conditional sale.
Paragraphs 6 and 7 of the Compromise Agreement further state:
That the parties are agreed that in the event the defendant (private respondent) fails
to comply with his obligations herein provided, the plaintiff (petitioner) will be entitled
to the issuance of a writ of execution rescinding the Deed of Conditional Sale of Real
Property. In such eventuality, defendant (private respondent) hereby waives his right
to appeal to (from) the Order of Rescission and the Writ of Execution which the Court
shall render in accordance with the stipulations herein provided for.
That in the event of execution all payments made by defendant (private respondent)
will be forfeited in favor of the plaintiff (petitioner) as liquidated damages.

On October 15, 1980, petitioner wrote to private respondent demanding that the latter pay the
balance of P69,059.71 on or before October 31, 1980. This demand included not only the installment
due on June 30, 1980 but also the installment due on December 31, 1980.
On October 30, 1980, private respondent sent a letter to petitioner signifying his willingness and
intention to pay the full balance of P69,059.71, and at the same time demanding to see the
certificate of title of the property and the tax payment receipts.
Private respondent states on page 14 of his brief that on November 3, 1980, the first working day of
said month, he tendered payment to petitioner but this was refused acceptance by petitioner.
However, this does not appear in the decision of the Court of Appeals.
On November 7, 1980, petitioner filed a Motion for Writ of Execution alleging that private respondent
failed to pay the installment due on June 1980 and that since June 1980 he had failed to pay the
monthly rental of P l,000.00. Petitioner prayed that a) the deed of conditional sale of real property be
declared rescinded with forfeiture of all payments as liquidated damages; and b) the court order the
payment of Pl,000.00 back rentals since June 1980 and the eviction of private respondent.
On November 14, 1980, the trial court granted the motion for writ of execution.
On November 17, 1980, private respondent filed a motion for reconsideration tendering at the same
time a Pacific Banking Corporation certified manager's check in the amount of P76,059.71, payable
to the order of petitioner and covering the entire obligation including the installment due on
December 31, 1980. However, the trial court denied the motion for reconsideration in an order dated
November 21, 1980 and issued the writ of execution on November 25, 1980.
In an order dated November 27, 1980, the trial court granted petitioner's ex-parte motion for
clarification of the order of execution rescinding the deed of conditional sale of real property.
On November 28, 1980, private respondent filed with the Court of Appeals a petition for certiorari
and prohibition assailing the orders dated November 21 and 27, 1980.
As initially stated above, the appellate court nullified and set aside the disputed orders of the lower
court. In its decision, the appellate court ruled in part as follows:
The issue here is whether respondent court committed a grave abuse of discretion in
issuing the orders dated November 21, 1980 and November 27,1980.
The general rule is that rescission will not be permitted for a slight or casual breach
of the contract, but only for such breaches as are substantial and fundamental as to
defeat the object of the parties in making the agreement. (Song Fo & Co. vs.
Hawaiian-Philippine Co., 47 Phil. 821)
In aforesaid case, it was held that a delay in payment for a small quantity of
molasses, for some twenty days is not such a violation of an essential condition of
the contract as warrants rescission for non-performance.
In Universal Food Corp. vs. Court of Appeals, 33 SCRA 1, the Song Fo ruling was
reaffirmed.

In the case at bar, McLaughlin wrote Flores on October 15, 1980 demanding that
Flores pay the balance of P69,059.71 on or before October 31, 1980. Thus it is
undeniable that despite Flores' failure to make the payment which was due on June
1980, McLaughlin waived whatever right she had under the compromise agreement
as incorporated in the decision of respondent court, to demand rescission.
xxx xxx xxx
It is significant to note that on November 17, 1980, or just seventeen (17) days after
October 31, 1980, the deadline set by McLaughlin, Flores tendered the certified
manager's check. We hold that the Song Fo ruling is applicable herein considering
that in the latter case, there was a 20-day delay in the payment of the obligation as
compared to a 17-day delay in the instant case.
Furthermore, as held in the recent case of New Pacific Timber & Supply Co., Inc. vs.
Hon. Alberto Seneris, L-41764, December 19, 1980, it is the accepted practice in
business to consider a cashier's or manager's check as cash and that upon
certification of a check, it is equivalent to its acceptance (Section 187, Negotiable
Instrument Law) and the funds are thereby transferred to the credit of the creditor
(Araneta v. Tuason, 49 O.G. p. 59).
In the New Pacific Timber & Supply Co., Inc. case, the Supreme Court further held
that the object of certifying a check is to enable the holder thereof to use it as money,
citing the ruling in PNB vs. National City Bank of New York, 63 Phil. 711.
In the New Pacific Timber case, it was also ruled that the exception in Section 63 of
the Central Bank Act that the clearing of a check and the subsequent crediting of the
amount thereof to the account of the creditor is equivalent to delivery of cash, is
applicable to a payment through a certified check.
Considering that Flores had already paid P101,550.00 under the contract to sell,
excluding the monthly rentals paid, certainly it would be the height of inequity to have
this amount forfeited in favor McLaughlin. Under the questioned orders, McLaughlin
would get back the property and still keep P101,550.00.
Petitioner contends that the appellate court erred in not observing the provisions of Article No. 1306
of the Civil Code of the Philippines and in having arbitrarily abused its judicial discretion by
disregarding the penal clause stipulated by the parties in the compromise agreement which was the
basis of the decision of the lower court.
We agree with the appellate court that it would be inequitable to cancel the contract of conditional
sale and to have the amount of P101,550.00 (P l48,126.97 according to private respondent in his
brief) already paid by him under said contract, excluding the monthly rentals paid, forfeited in favor of
petitioner, particularly after private respondent had tendered the amount of P76,059.71 in full
payment of his obligation.
In the analogous case of De Guzman vs. Court of Appeals, this Court sustained the order of the
respondent judge denying the petitioners' motion for execution on the ground that the private
respondent had substantially complied with the terms and conditions of the compromise agreement,
and directing the petitioners to immediately execute the necessary documents transferring to the
private respondent the title to the properties (July 23, 1985, 137 SCRA 730). In the case at bar, there
was also substantial compliance with the compromise agreement.

Petitioner invokes the ruling of the Court in its Resolution of November 16, 1978 in the case of Luzon
Brokerage Co., Inc. vs. Maritime Building Co., Inc., to the effect that Republic Act 6552 (the Maceda
Law) "recognizes and reaffirms the vendor's right to cancel the contract to sell upon breach and nonpayment of the stipulated installments but requires a grace period after at least two years of regular
installment payments ... . " (86 SCRA 305, 329)
On the other hand, private respondent also invokes said law as an expression of public policy to
protect buyers of real estate on installments against onerous and oppressive conditions (Section 2 of
Republic Act No. 6552).
Section 4 of Republic Act No. 6552 which took effect on September 14, 1972 provides as follows:
In case where less than two years of installments were paid, the seller shall give the
buyer a grace period of not less than sixty days from the date the installment became
due. If the buyer fails to pay the installments due at the expiration of the grace
period, the seller may cancel the contract after thirty days from receipt by the buyer
of the notice of the cancellation or the demand for rescission of the contract by a
notarial act.
Section 7 of said law provides as follows:
Any stipulation in any contract hereafter entered into contrary to the provisions of
Sections 3, 4, 5 and 6, shall be null and void.
The spirit of these provisions further supports the decision of the appellate court. The record does
not contain the complete text of the compromise agreement dated December 20, 1979 and the
decision approving it. However, assuming that under the terms of said agreement the December 31,
1980 installment was due and payable when on October 15, 1980, petitioner demanded payment of
the balance of P69,059.71 on or before October 31, 1980, petitioner could cancel the contract after
thirty days from receipt by private respondent of the notice of cancellation. Considering petitioner's
motion for execution filed on November 7, 1980 as a notice of cancellation, petitioner could cancel
the contract of conditional sale after thirty days from receipt by private respondent of said motion.
Private respondent's tender of payment of the amount of P76,059.71 together with his motion for
reconsideration on November 17, 1980 was, therefore, well within the thirty-day period grants by
law..
The tender made by private respondent of a certified bank manager's check payable to petitioner
was a valid tender of payment. The certified check covered not only the balance of the purchase
price in the amount of P69,059.71, but also the arrears in the rental payments from June to
December, 1980 in the amount of P7,000.00, or a total of P76,059.71. On this point the appellate
court correctly applied the ruling in the case of New Pacific Timber & Supply Co., Inc. vs. Seneris
(101 SCRA 686, 692-694) to the case at bar.
Moreover, Section 49, Rule 130 of the Revised Rules of Court provides that:
An offer in writing to pay a particular sum of money or to deliver a written instrument
or specific property is, if rejected, equivalent to the actual production and tender of
the money, instrument, or property.
However, although private respondent had made a valid tender of payment which preserved his
rights as a vendee in the contract of conditional sale of real property, he did not follow it with a
consignation or deposit of the sum due with the court. As this Court has held:

The rule regarding payment of redemption prices is invoked. True that consignation
of the redemption price is not necessary in order that the vendor may compel the
vendee to allow the repurchase within the time provided by law or by contract.
(Rosales vs. Reyes and Ordoveza, 25 Phil. 495.) We have held that in such cases a
mere tender of payment is enough, if made on time, as a basis for action against the
vendee to compel him to resell. But that tender does not in itself relieve the vendor
from his obligation to pay the price when redemption is allowed by the court. In other
words, tender of payment is sufficient to compel redemption but is not in itself a
payment that relieves the vendor from his liability to pay the redemption price. "
(Paez vs. Magno, 83 Phil. 403, 405)
On September 1, 1986, the Court issued the following resolution
Considering the allegation in petitioner's reply brief that the Manager's Check
tendered by private respondent on November 17, 1980 was subsequently cancelled
and converted into cash, the Court RESOLVED to REQUIRE the parties within ten
(10) days from notice to inform the Court whether or not the amount thereof was
deposited in court and whether or not private respondent continued paying the
monthly rental of P1,000.00 stipulated in the Compromise Agreement.
In compliance with this resolution, both parties submitted their respective manifestations which
confirm that the Manager's Check in question was subsequently withdrawn and replaced by cash,
but the cash was not deposited with the court.
According to Article 1256 of the Civil Code of the Philippines, if the creditor to whom tender of
payment has been made refuses without just cause to accept it, the debtor shall be released from
responsibility by the consignation of the thing or sum due, and that consignation alone shall produce
the same effect in the five cases enumerated therein; Article 1257 provides that in order that the
consignation of the thing (or sum) due may release the obligor, it must first be announced to the
persons interested in the fulfillment of the obligation; and Article 1258 provides that consignation
shall be made by depositing the thing (or sum) due at the disposal of the judicial authority and that
the interested parties shall also be notified thereof.
As the Court held in the case of Soco vs. Militante, promulgated on June 28, 1983, after examining
the above-cited provisions of the law and the jurisprudence on the matter:
Tender of payment must be distinguished from consignation. Tender is the
antecedent of consignation, that is, an act preparatory to the consignation, which is
the principal, and from which are derived the immediate consequences which the
debtor desires or seeks to obtain. Tender of payment may be extrajudicial, while
consignation is necessarily judicial, and the priority of the first is the attempt to make
a private settlement before proceeding to the solemnities of consignation. (8
Manresa 325). (123 SCRA 160,173)
In the above-cited case of De Guzman vs. Court of Appeals (137 SCRA 730), the vendee was
released from responsibility because he had deposited with the court the balance of the purchase
price. Similarly, in the above-cited case of New Pacific Timber & Supply Co., Inc. vs. Seneris (101
SCRA 686), the judgment debtor was released from responsibility by depositing with the court the
amount of the judgment obligation.
In the case at bar, although as above stated private respondent had preserved his rights as a
vendee in the contract of conditional sale of real property by a timely valid tender of payment of the

balance of his obligation which was not accepted by petitioner, he remains liable for the payment of
his obligation because of his failure to deposit the amount due with the court.
In his manifestation dated September 19, 1986, private respondent states that on September 16,
1980, he purchased a Metrobank Cashier's Check No. CC 004233 in favor of petitioner Luisa F.
McLaughlin in the amount of P76,059.71, a photocopy of which was enclosed and marked as Annex
"A- 1;" but that he did not continue paying the monthly rental of Pl,000.00 because, pursuant to the
decision of the appellate court, petitioner herein was ordered to accept the aforesaid amount in full
payment of herein respondent's obligation under the contract subject matter thereof.
However, inasmuch as petitioner did not accept the aforesaid amount, it was incumbent on private
respondent to deposit the same with the court in order to be released from responsibility. Since
private respondent did not deposit said amount with the court, his obligation was not paid and he is
liable in addition for the payment of the monthly rental of Pl,000.00 from January 1, 1981 until said
obligation is duly paid, in accordance with paragraph 3 of the Compromise Agreement. Upon full
payment of the amount of P76,059.71 and the rentals in arrears, private respondent shall be entitled
to a deed of absolute sale in his favor of the real property in question.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the following modifications:
(a) Petitioner is ordered to accept from private respondent the Metrobank Cashier's Check No. CC
004233 in her favor in the amount of P76,059.71 or another certified check of a reputable bank
drawn in her favor in the same amount;
(b) Private respondent is ordered to pay petitioner, within sixty (60) days from the finality of this
decision, the rentals in arrears of P l,000.00 a month from January 1, 1981 until full payment thereof;
and
(c) Petitioner is ordered to execute a deed of absolute sale in favor of private respondent over the
real property in question upon full payment of the amounts as provided in paragraphs (a) and (b)
above. No costs.
SO ORDERED.
.

1wphi1.nt

___________________---