FAR EAST BANK v. DIAZ REALTY INC., GR No. 138588, 2001-08-23

FAR EAST BANK v. DIAZ REALTY INC., GR No.
138588, 2001-08-23
Facts:
Sometime in August 1973, Diaz and Company got a loan from the former PaBC [Pacific
Banking Corporation] in the amount of P720,000.00, with interest at 12% per annum, later
increased to 14%, 16%, 18% and 20%. The loan was secured by a real estate mortgage
over... two parcels of land owned by the plaintiff Diaz Realty, both located in Davao City.
In 1981, Allied Banking Corporation rented an office space in the building constructed on
the properties covered by the mortgage contract, with the conformity of mortgagee PaBC,
whereby the... parties agreed that the monthly rentals shall be paid directly to the
mortgagee for the lessor's account, either to partly or fully pay off the aforesaid mortgage
indebtedness.
Allied Bank paid the monthly rentals to PaBC instead of to the... plaintiffs.
On July 5, 1985, the Central Bank closed PaBC, placed it under receivership
Sometime in December 1986, appellant FEBTC purchased the credit of Diaz & Company in
favor of PaBC, but it was not until March 23,... 1988 that Diaz was informed about it.
According to the plaintiff... on March 23, 1988... that Cashier Ramon Lim told him that as of
such date, his loan was P1,447,142.03... that
(Diaz) asked the defendant to make an accounting of the monthly rental payments made by
Allied Bank; that on December 14, 1988,[6] Diaz tendered to FEBTC the amount of
P1,450,000.00 through an Interbank check, in order to prevent the imposition of additional
interests, penalties and surcharges on its loan; that FEBTC did not accept it as payment;
that instead, Diaz was asked to deposit the amount with the defendant's Davao City Branch
Office... that in the meantime, Diaz wrote the defendant, asking that the interest rate be
reduced from 20% to 12% per annum, but no reply was ever made; that subsequently... the
defendant told him to change the
P1,450,000.00 deposit into a money market placement, which he did; that the money
market placement expired on April 14, 1989; that when there was still no news from the
defendant whether or not it [would] accept his tender of payment, he filed this case at the
Regional Trial
Court of Davao City.
the defendant set up the following special/affirmative defenses: that sometime in December
1986, FEBTC purchased from the PaBC the account of the plaintiffs for a total consideration
of P1,828,875.00; that despite such purchase, PaBC Davao
Branch continued to collect interests and penalty charges on the loan from January 6, 1987
to July 8, 1988
CA sustained the trial court's finding that there was a valid tender of payment in the sum of
P1,450,000, made by Diaz Realty Inc. in favor of Far East Bank and Trust Company.
The appellate court reasoned that petitioner failed to effectively rebut respondent's...
evidence that it so tendered the check to liquidate its indebtedness, and that petitioner had
unilaterally treated the same as a deposit instead.
Issues:
Issues
Whether or not the Court of Appeals correctly ruled that the validity of the tender of payment
was not properly raised in the trial court and could not thus be raised in the appeal.
Ruling:
The Petition[9] is not meritorious.
First Issue:
Tender of Payment
Petitioner resolutely argues that the CA erred in upholding the validity of the tender of
payment made by respondent. What the latter had tendered to settle its outstanding
obligation, it points out, was a check which could not be considered legal tender.
We disagree. The records show that petitioner bank purchased respondent's account from
PaBC in December 1986, and that the latter was notified of the transaction only on March
23, 1988. Thereafter, Antonio Diaz, president of respondent corporation, inquired from...
petitioner on the status and the amount of its obligation. He was informed that the
obligation summed up to P1,447,142.03. On November 14, 1988, petitioner received from
respondent Interbank Check No. 81399841 dated November 13, 1988, bearing the amount
of
P1,450,000, with the notation "Re: Full Payment of Pacific Bank Account now turn[ed] over
to Far East Bank."[10] The check was subsequently cleared and honored by Interbank, as
shown by the Certification it issued on January 20, 1992.[11]
True, jurisprudence holds that, in general, a check does not constitute legal tender, and that
a creditor may validly refuse it.[12] It must be emphasized, however, that this dictum does
not prevent a creditor from accepting a check as payment. In... other words, the creditor
has the option and the discretion of refusing or accepting it.
In the present case, petitioner bank did not refuse respondent's check. On the contrary, it
accepted the check which, it insisted, was a deposit. As earlier stated, the check proved to
be fully funded and was in fact honored by the drawee bank.
Moreover, petitioner was in possession of the money for several months.
In other words, tender of payment is the definitive act of offering the creditor what is due him
or her, together with the demand that the creditor accept the same.
Finally, petitioner points out that, in any case, tender of payment extinguishes the obligation
only after proper consignation, which respondent did not do.
The argument does not persuade. For a consignation to be necessary, the creditor must
have refused, without just cause, to accept the debtor's payment.[15] However, as pointed
out earlier, petitioner accepted respondent's check.
by... accepting the tendered check and converting it into money, petitioner is presumed to
have accepted it as payment. To hold otherwise would be inequitable and unfair to the
obligor

FAR EAST BANK v. DIAZ REALTY INC., GR No. 138588, 2001-08-23

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