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G.R. No. 16454 September 29, 1921

GEORGE A. KAUFFMAN, plaintiff-appellee,vs.THE PHILIPPINE NATIONAL BANK, defendant-appellant.

Roman J. Lacson for appellant.

Ross and Lawrence for appellee.

STREET,J.:

At the time of the transaction which gave rise to this litigation the plaintiff, George A.Kauffman, was the president of a domestic corporation engaged chiefly in the exportationof hemp from the Philippine Islands and known as the Philippine Fiber and ProduceCompany, of which company the plaintiff apparently held in his own right nearly the entireissue of capital stock. On February 5, 1918, the board of directors of said company,

declared a dividend of P100,000 from its surplus earnings for the year 1917, of which theplaintiff was entitled to the sum of P98,000. This amount was accordingly placed to hiscredit on the books of the company, and so remained until in October of the same yearwhen an unsuccessful effort was made to transmit the whole, or a greater part thereof, tothe plaintiff in New York City.

In this connection it appears that on October 9, 1918, George B. Wicks, treasurer of thePhilippine Fiber and Produce Company, presented himself in the exchange department ofthe Philippine National Bank in Manila and requested that a telegraphic transfer of $45,000should be made to the plaintiff in New York City, upon account of the Philippine Fiber andProduce Company. He was informed that the total cost of said transfer, including exchange

and cost of message, would be P90,355.50. Accordingly, Wicks, as treasurer of thePhilippine Fiber and Produce Company, thereupon drew and delivered a check for thatamount on the Philippine National Bank; and the same was accepted by the officer sellingthe exchange in payment of the transfer in question. As evidence of this transaction adocument was made out and delivered to Wicks, which is referred to by the bank'sassistant cashier as its official receipt. This memorandum receipt is in the followinglanguage:

October 9th, 1918.

CABLE TRANSFER BOUGHT FROMPHILIPPINE NATIONAL BANK,Manila, P.I. Stamp P18

Foreign Amount Rate$45,000. 3/8 % P90,337.50

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Payable through Philippine National Bank, New York. To G. A. Kauffman, New York.Total P90,355.50. Account of Philippine Fiber and Produce Company. Sold to Messrs.Philippine Fiber and Produce Company, Manila.

(Sgd.) Y LERMA,

Manager, Foreign Department.

On the same day the Philippine National Bank dispatched to its New York agency acablegram to the following effect:

Pay George A. Kauffman, New York, account Philippine Fiber Produce Co., $45,000.(Sgd.) PHILIPPINE NATIONAL BANK, Manila.

Upon receiving this telegraphic message, the bank's representative in New York sent acable message in reply suggesting the advisability of withholding this money from

Kauffman, in view of his reluctance to accept certain bills of the Philippine Fiber andProduce Company. The Philippine National Bank acquiesced in this and on October 11dispatched to its New York agency another message to withhold the Kauffman payment assuggested.

Meanwhile Wicks, the treasurer of the Philippine Fiber and Produce Company, cabled toKauffman in New York, advising him that $45,000 had been placed to his credit in the NewYork agency of the Philippine National Bank; and in response to this advice Kauffmanpresented himself at the office of the Philippine National Bank in New York City on October15, 1918, and demanded the money. By this time, however, the message from thePhilippine National Bank of October 11, directing the withholding of payment had been

received in New York, and payment was therefore refused.

In view of these facts, the plaintiff Kauffman instituted the present action in the Court ofFirst Instance of the city of Manila to recover said sum, with interest and costs; andjudgment having been there entered favorably to the plaintiff, the defendant appealed.

Among additional facts pertinent to the case we note the circumstance that at the time ofthe transaction above-mentioned, the Philippines Fiber and Produce Company did not haveon deposit in the Philippine National Bank money adequate to pay the check forP90,355.50, which was delivered in payment of the telegraphic order; but the company didhave credit to that extent, or more, for overdraft in current account, and the check in

question was charged as an overdraft against the Philippine Fiber and Produce Companyand has remained on the books of the bank as an interest-bearing item in the account ofsaid company.

It is furthermore noteworthy that no evidence has been introduced tending to show failureof consideration with respect to the amount paid for said telegraphic order. It is true that inthe defendant's answer it is suggested that the failure of the bank to pay over the amount ofthis remittance to the plaintiff in New York City, pursuant to its agreement, was due to a

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desire to protect the bank in its relations with the Philippine Fiber and Produce Company,whose credit was secured at the bank by warehouse receipts on Philippine products; and itis alleged that after the exchange in question was sold the bank found that it did not havesufficient to warrant payment of the remittance. In view, however, of the failure of the bankto substantiate these allegations, or to offer any other proof showing failure of

consideration, it must be assumed that the obligation of the bank was supported byadequate consideration.

In this court the defense is mainly, if not exclusively, based upon the proposition that,inasmuch as the plaintiff Kauffman was not a party to the contract with the bank for thetransmission of this credit, no right of action can be vested in him for the breach thereof."In this situation,"we here quote the words of the appellant's brief, "if there exists acause of action against the defendant, it would not be in favor of the plaintiff who had takenno part at all in the transaction nor had entered into any contract with the plaintiff, but infavor of the Philippine Fiber and Produce Company, the party which contracted in its ownname with the defendant."

The question thus placed before us is one purely of law; and at the very threshold of thediscussion it can be stated that the provisions of the Negotiable Instruments Law can comeinto operation there must be a document in existence of the character described in section1 of the Law; and no rights properly speaking arise in respect to said instrument until it isdelivered. In the case before us there was an order, it is true, transmitted by the defendantbank to its New York branch, for the payment of a specified sum of money to George A.Kauffman. But this order was not made payable "to order or "to bearer," as required insubsection (d) of that Act; and inasmuch as it never left the possession of the bank, or itsrepresentative in New York City, there was no delivery in the sense intended in section 16of the same Law. In this connection it is unnecessary to point out that the official receipt

delivered by the bank to the purchaser of the telegraphic order, and already set out above,cannot itself be viewed in the light of a negotiable instrument, although it affords completeproof of the obligation actually assumed by the bank.

Stated in bare simplicity the admitted facts show that the defendant bank for a valuableconsideration paid by the Philippine Fiber and Produce Company agreed on October 9,1918, to cause a sum of money to be paid to the plaintiff in New York City; and the questionis whether the plaintiff can maintain an action against the bank for the nonperformance ofsaid undertaking. In other words, is the lack of privity with the contract on the part of theplaintiff fatal to the maintenance of an action by him?

The only express provision of law that has been cited as bearing directly on this question isthe second paragraph of article 1257 of the Civil Code; and unless the present action can bemaintained under the provision, the plaintiff admittedly has no case. This provision statesan exception to the more general rule expressed in the first paragraph of the same article tothe effect that contracts are productive of effects only between the parties who executethem; and in harmony with this general rule are numerous decisions of this court(Wolfson vs. Estate of Martinez, 20 Phil., 340; Ibaez de Aldecoa vs. Hongkong and Shanghai

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Banking Corporation, 22 Phil., 572, 584; Manila Railroad Co. vs. Compaia Trasatlantica andAtlantic, Gulf and Pacific Co., 38 Phil., 873, 894.)

The paragraph introducing the exception which we are now to consider is in these words:

Should the contract contain any stipulation in favor of a third person, he maydemand its fulfillment, provided he has given notice of his acceptance to the personbound before the stipulation has been revoked. (Art. 1257, par. 2, Civ. Code.)

In the case of Uy Tam and Uy Yetvs. Leonard (30 Phil., 471), is found an elaboratedissertation upon the history and interpretation of the paragraph above quoted and socomplete is the discussion contained in that opinion that it would be idle for us here to goover the same matter. Suffice it to say that Justice Trent, speaking for the court in that case,sums up its conclusions upon the conditions governing the right of the person for whosebenefit a contract is made to maintain an action for the breach thereof in the followingwords:

So, we believe the fairest test, in this jurisdiction at least, whereby to determinewhether the interest of a third person in a contract is a stipulation pour autrui, ormerely an incidental interest, is to rely upon the intention of the parties as disclosedby their contract.

If a third person claims an enforcible interest in the contract, the question must besettled by determining whether the contracting parties desired to tender him suchan interest. Did they deliberately insert terms in their agreement with the avowedpurpose of conferring a favor upon such third person? In resolving this question, ofcourse, the ordinary rules of construction and interpretation of writings must be

observed. (Uy Tam and Uy Yetvs. Leonard, supra.)

Further on in the same opinion he adds: "In applying this test to a stipulation pour autrui, itmatters not whether the stipulation is in the nature of a gift or whether there is anobligation owing from the promise to the third person. That no such obligation exists mayin some degree assist in determining whether the parties intended to benefit a thirdperson, whether they stipulated for him." (Uy Tam and Uy Yetvs. Leonard, supra.)

In the light of the conclusion thus stated, the right of the plaintiff to maintain the presentaction is clear enough; for it is undeniable that the bank's promise to cause a definite sumof money to be paid to the plaintiff in New York City is a stipulation in his favor within the

meaning of the paragraph above quoted; and the circumstances under which that promisewas given disclose an evident intention on the part of the contracting parties that theplaintiff should have the money upon demand in New York City. The recognition of thisunqualified right in the plaintiff to receive the money implies in our opinion the right inhim to maintain an action to recover it; and indeed if the provision in question were notapplicable to the facts now before us, it would be difficult to conceive of a case arisingunder it.

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It will be noted that under the paragraph cited a third person seeking to enforcecompliance with a stipulation in his favor must signify his acceptance before it has beenrevoked. In this case the plaintiff clearly signified his acceptance to the bank by demandingpayment; and although the Philippine National Bank had already directed its New Yorkagency to withhold payment when this demand was made, the rights of the plaintiff cannot

be considered to as there used, must be understood to imply revocation by the mutualconsent of the contracting parties, or at least by direction of the party purchasing heexchange.

In the course of the argument attention was directed to the case of Legniti vs. Mechanics,etc. Bank (130 N.E. Rep., 597), decided by the Court of Appeals of the State of New York onMarch 1, 1921, wherein it is held that, by selling a cable transfer of funds on a foreigncountry in ordinary course, a bank incurs a simple contractual obligation, and cannot beconsidered as holding the money which was paid for the transfer in the character of aspecific trust. Thus, it was said, "Cable transfers, therefore, mean a method of transmittingmoney by cable wherein the seller engages that he has the balance at the point on which

the payment is ordered and that on receipt of the cable directing the transfer hiscorrespondent at such point will make payment to the beneficiary described in the cable.All these transaction are matters of purchase and sale create no trust relationship."

As we view it there is nothing in the decision referred to decisive of the question nowbefore us, wish is merely that of the right of the beneficiary to maintain an action againstthe bank selling the transfer.

Upon the considerations already stated, we are of the opinion that the right of action exists,and the judgment must be affirmed. It is so ordered, with costs against the appellant.Interest will be computed as prescribed in section 510 of the Code of Civil Procedure.

Johnson, Araullo, Avancea and Villamor, JJ., concur.

G.R. No. L-40824 February 23, 1989

GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,vs.COURT OF APPEALS and MR. & MRS. ISABELO R. RACHO, respondents.

The Government Corporate Counsel for petitioner.

Lorenzo A. Sales for private respondents.

REGALADO , J.:

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Private respondents, Mr. and Mrs. Isabelo R. Racho, together with the spouses Mr. and MrsFlaviano Lagasca, executed a deed of mortgage, dated November 13, 1957, in favor ofpetitioner Government Service Insurance System (hereinafter referred to as GSIS) andsubsequently, another deed of mortgage, dated April 14, 1958, in connection with twoloans granted by the latter in the sums of P 11,500.00 and P 3,000.00, respectively. 1A

parcel of land covered by Transfer Certificate of Title No. 38989 of the Register of Deed ofQuezon City, co-owned by said mortgagor spouses, was given as security under theaforesaid two deeds. 2 They also executed a 'promissory note" which states in part:

... for value received, we the undersigned ... JOINTLY, SEVERALLY andSOLIDARILY, promise to pay the GOVERNMENT SERVICE INSURANCESYSTEM the sum of . . . (P 11,500.00) Philippine Currency, with interest at therate of six (6%) per centum compounded monthly payable in . . . (120)equalmonthly installments of . . . (P 127.65) each. 3

On July 11, 1961, the Lagasca spouses executed an instrument denominated "Assumption

of Mortgage" under which they obligated themselves to assume the aforesaid obligation tothe GSIS and to secure the release of the mortgage covering that portion of the landbelonging to herein private respondents and which was mortgaged to the GSIS. 4 Thisundertaking was not fulfilled. 5

Upon failure of the mortgagors to comply with the conditions of the mortgage, particularlythe payment of the amortizations due, GSIS extrajudicially foreclosed the mortgage andcaused the mortgaged property to be sold at public auction on December 3, 1962. 6

More than two years thereafter, or on August 23, 1965, herein private respondents filed acomplaint against the petitioner and the Lagasca spouses in the former Court of

First Instance of Quezon City, 7 praying that the extrajudicial foreclosure "made on, theirproperty and all other documents executed in relation thereto in favor of the GovernmentService Insurance System" be declared null and void. It was further prayed that they beallowed to recover said property, and/or the GSIS be ordered to pay them the valuethereof, and/or they be allowed to repurchase the land. Additionally, they asked for actualand moral damages and attorney's fees.

In their aforesaid complaint, private respondents alleged that they signed the mortgagecontracts not as sureties or guarantors for the Lagasca spouses but they merely gave theircommon property to the said co-owners who were solely benefited by the loans from the

GSIS.

The trial court rendered judgment on February 25, 1968 dismissing the complaint forfailure to establish a cause of action. 8

Said decision was reversed by the respondent Court of Appeals 9 which held that:

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... although formally they are co-mortgagors, they are so only foraccomodation (sic) in that the GSIS required their consent to the mortgage ofthe entire parcel of land which was covered with only one certificate of title,with full knowledge that the loans secured thereby were solely for thebenefit of the appellant (sic) spouses who alone applied for the loan.

x x x x

'It is, therefore, clear that as against the GSIS, appellants have a valid causefor having foreclosed the mortgage without having given sufficient notice tothem as required either as to their delinquency in the payment ofamortization or as to the subsequent foreclosure of the mortgage by reasonof any default in such payment. The notice published in the newspaper, 'DailyRecord (Exh. 12) and posted pursuant to Sec 3 of Act 3135 is not the notice towhich the mortgagor is entitled upon the application being made for anextrajudicial foreclosure. ... 10

On the foregoing findings, the respondent court consequently decreed that-

In view of all the foregoing, the judgment appealed from is hereby reversed,and another one entered (1) declaring the foreclosure of the mortgage voidinsofar as it affects the share of the appellants; (2) directing the GSIS toreconvey to appellants their share of the mortgaged property, or the valuethereof if already sold to third party, in the sum of P 35,000.00, and (3)ordering the appellees Flaviano Lagasca and Esther Lagasca to pay theappellants the sum of P 10,00.00 as moral damages, P 5,000.00 as attorney'sfees, and costs. 11

The case is now before us in this petition for review.

In submitting their case to this Court, both parties relied on the provisions of Section 29 ofAct No. 2031, otherwise known as the Negotiable Instruments Law, which provide that anaccommodation party is one who has signed an instrument as maker, drawer, acceptor ofindorser without receiving value therefor, but is held liable on the instrument to a holderfor value although the latter knew him to be only an accommodation party.

This approach of both parties appears to be misdirected and their reliance misplaced. Thepromissory note hereinbefore quoted, as well as the mortgage deeds subject of this case,

are clearly not negotiable instruments. These documents do not comply with the fourthrequisite to be considered as such under Section 1 of Act No. 2031 because they are neitherpayable to order nor to bearer. The note is payable to a specified party, the GSIS. Absent theaforesaid requisite, the provisions of Act No. 2031 would not apply; governance shall beafforded, instead, by the provisions of the Civil Code and special laws on mortgages.

As earlier indicated, the factual findings of respondent court are that private respondentssigned the documents "only to give their consent to the mortgage as required by GSIS",

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with the latter having full knowledge that the loans secured thereby were solely for thebenefit of the Lagasca spouses. 12 This appears to be duly supported by sufficient evidenceon record. Indeed, it would be unusual for the GSIS to arrange for and deduct the monthlyamortizations on the loans from the salary as an army officer of Flaviano Lagasca withoutlikewise affecting deductions from the salary of Isabelo Racho who was also an army

sergeant. Then there is also the undisputed fact, as already stated, that the Lagasca spousesexecuted a so-called "Assumption of Mortgage" promising to exclude private respondentsand their share of the mortgaged property from liability to the mortgagee. There is nointimation that the former executed such instrument for a consideration, thus confirmingthat they did so pursuant to their original agreement.

The parol evidence rule 13cannot be used by petitioner as a shield in this case for it is clearthat there was no objection in the court below regarding the admissibility of the testimonyand documents that were presented to prove that the private respondents signed themortgage papers just to accommodate their co-owners, the Lagasca spouses. Besides, theintroduction of such evidence falls under the exception to said rule, there being allegations

in the complaint of private respondents in the court below regarding the failure of themortgage contracts to express the true agreement of the parties. 14

However, contrary to the holding of the respondent court, it cannot be said that privaterespondents are without liability under the aforesaid mortgage contracts. The factualcontext of this case is precisely what is contemplated in the last paragraph of Article 2085of the Civil Code to the effect that third persons who are not parties to the principalobligation may secure the latter by pledging or mortgaging their own property

So long as valid consent was given, the fact that the loans were solely for the benefit of theLagasca spouses would not invalidate the mortgage with respect to private respondents'

share in the property. In consenting thereto, even assuming that private respondents maynot be assuming personal liability for the debt, their share in the property shallnevertheless secure and respond for the performance of the principal obligation. Theparties to the mortgage could not have intended that the same would apply only to thealiquot portion of the Lagasca spouses in the property, otherwise the consent of the privaterespondents would not have been required.

The supposed requirement of prior demand on the private respondents would not be inpoint here since the mortgage contracts created obligations with specific terms for thecompliance thereof. The facts further show that the private respondents expressly boundthemselves as solidary debtors in the promissory note hereinbefore quoted.

Coming now to the extrajudicial foreclosure effected by GSIS, We cannot agree with theruling of respondent court that lack of notice to the private respondents of the extrajudicialforeclosure sale impairs the validity thereof. InBonnevie, et al. vs. Court of appeals, etal., 15 the Court ruled that Act No. 3135, as amended, does not require personal notice onthe mortgagor, quoting the requirement on notice in such cases as follows:

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Section 3. Notice shall be given by posting notices of sale for not less thantwenty days in at least three public places of the municipality where theproperty is situated, and if such property is worth more than four hundredpesos, such notice shall also be published once a week for at least threeconsecutive weeks in a newspaper of general circulation in the municipality

or city.

There is no showing that the foregoing requirement on notice was not complied with in theforeclosure sale complained of .

The respondent court, therefore, erred in annulling the mortgage insofar as it affected theshare of private respondents or in directing reconveyance of their property or the paymentof the value thereof Indubitably, whether or not private respondents herein benefited fromthe loan, the mortgage and the extrajudicial foreclosure proceedings were valid.

WHEREFORE, judgment is hereby rendered REVERSING the decision of the respondent

Court of Appeals and REINSTATING the decision of the courta quo in Civil Case No. Q-9418thereof.

SO ORDERED.

Melencio-Herrera (Chairperson), Paras, Padilla and Sarmiento, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 100290 June 4, 1993

NORBERTO TIBAJIA, JR. and CARMEN TIBAJIA, petitioners,vs.THE HONORABLE COURT OF APPEALS and EDEN TAN, respondents.

PADILLA,J.:

Petitioners, spouses Norberto Tibajia, Jr. and Carmen Tibajia, are before this Court assailingthe decision * of respondent appellate court dated 24 April 1991 in CA-G.R. SP No. 24164denying their petition for certiorariprohibition, and injunction which sought to annul the

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order of Judge Eutropio Migrio of the Regional Trial Court, Branch 151, Pasig, MetroManila in Civil Case No. 54863 entitled "Eden Tan vs. Sps. Norberto and Carmen Tibajia."

Stated briefly, the relevant facts are as follows:

Case No. 54863 was a suit for collection of a sum of money filed by Eden Tan against theTibajia spouses. A writ of attachment was issued by the trial court on 17 August 1987 andon 17 September 1987, the Deputy Sheriff filed a return stating that a deposit made by theTibajia spouses in the Regional Trial Court of Kalookan City in the amount of Four HundredForty Two Thousand Seven Hundred and Fifty Pesos (P442,750.00) in another case, hadbeen garnished by him. On 10 March 1988, the Regional Trial Court, Branch 151 of Pasig,Metro Manila rendered its decision in Civil Case No. 54863 in favor of the plaintiff EdenTan, ordering the Tibajia spouses to pay her an amount in excess of Three HundredThousand Pesos (P300,000.00). On appeal, the Court of Appeals modified the decision byreducing the award of moral and exemplary damages. The decision having become final,Eden Tan filed the corresponding motion for execution and thereafter, the garnished funds

which by then were on deposit with the cashier of the Regional Trial Court of Pasig, MetroManila, were levied upon.

On 14 December 1990, the Tibajia spouses delivered to Deputy Sheriff Eduardo Bolima thetotal money judgment in the following form:

Cashier's Check P262,750.00Cash 135,733.70Total P398,483.70

Private respondent, Eden Tan, refused to accept the payment made by the Tibajia spousesand instead insisted that the garnished funds deposited with the cashier of the RegionalTrial Court of Pasig, Metro Manila be withdrawn to satisfy the judgment obligation. On 15January 1991, defendant spouses (petitioners) filed a motion to lift the writ of execution onthe ground that the judgment debt had already been paid. On 29 January 1991, the motionwas denied by the trial court on the ground that payment in cashier's check is not paymentin legal tender and that payment was made by a third party other than the defendant. Amotion for reconsideration was denied on 8 February 1991. Thereafter, the spouses Tibajiafiled a petition for certiorari, prohibition and injunction in the Court of Appeals. Theappellate court dismissed the petition on 24 April 1991 holding that payment by cashier'scheck is not payment in legal tender as required by Republic Act No. 529. The motion for

reconsideration was denied on 27 May 1991.

In this petition for review, the Tibajia spouses raise the following issues:

I WHETHER OR NOT THE BPI CASHIER'S CHECK NO. 014021 IN THEAMOUNT OF P262,750.00 TENDERED BY PETITIONERS FOR PAYMENT OFTHE JUDGMENT DEBT, IS "LEGAL TENDER".

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II WHETHER OR NOT THE PRIVATE RESPONDENT MAY VALIDLY REFUSETHE TENDER OF PAYMENT PARTLY IN CHECK AND PARTLY IN CASH MADEBY PETITIONERS, THRU AURORA VITO AND COUNSEL, FOR THESATISFACTION OF THE MONETARY OBLIGATION OF PETITIONERS-SPOUSES. 1

The only issue to be resolved in this case is whether or not payment by means of check(even by cashier's check) is considered payment in legal tender as required by the CivilCode, Republic Act No. 529, and the Central Bank Act.

It is contended by the petitioners that the check, which was a cashier's check of the Bank ofthe Philippine Islands, undoubtedly a bank of good standing and reputation, and which wasa crossed check marked "For Payee's Account Only" and payable to private respondentEden Tan, is considered legal tender, payment with which operates to discharge theirmonetary obligation. 2Petitioners, to support their contention, cite the case ofNew PacificTimber and Supply Co., Inc. v. Seeris 3where this Court held through Mr. Justice

Hermogenes Concepcion, Jr. that "It is a well-known and accepted practice in the businesssector that a cashier's check is deemed as cash".

The provisions of law applicable to the case at bar are the following:

a. Article 1249 of the Civil Code which provides:

Art. 1249. The payment of debts in money shall be made in the currencystipulated, and if it is not possible to deliver such currency, then in thecurrency which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange orother mercantile documents shall produce the effect of payment only whenthey have been cashed, or when through the fault of the creditor they havebeen impaired.

In the meantime, the action derived from the original obligation shall be heldin abeyance.;

b. Section 1 of Republic Act No. 529, as amended, which provides:

Sec. 1. Every provision contained in, or made with respect to, any obligation

which purports to give the obligee the right to require payment in gold or inany particular kind of coin or currency other than Philippine currency or inan amount of money of the Philippines measured thereby, shall be as it ishereby declared against public policy null and void, and of no effect, and nosuch provision shall be contained in, or made with respect to, any obligationthereafter incurred. Every obligation heretofore and hereafter incurred,whether or not any such provision as to payment is contained therein ormade with respect thereto, shall be discharged upon payment in any coin or

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currency which at the time of payment is legal tender for public and privatedebts.

c. Section 63 of Republic Act No. 265, as amended (Central Bank Act) which provides:

Sec. 63. Legal character

Checks representing deposit money do not havelegal tender power and their acceptance in the payment of debts, both publicand private, is at the option of the creditor: Provided, however, that a checkwhich has been cleared and credited to the account of the creditor shall beequivalent to a delivery to the creditor of cash in an amount equal to theamount credited to his account.

From the aforequoted provisions of law, it is clear that this petition must fail.

In the recent cases ofPhilippine Airlines, Inc. vs. Court of Appeals 4and Roman CatholicBishop of Malolos, Inc. vs. Intermediate Appellate Court, 5this Court held that

A check, whether a manager's check or ordinary check, is not legal tender,and an offer of a check in payment of a debt is not a valid tender of paymentand may be refused receipt by the obligee or creditor.

The ruling in these two (2) cases merely applies the statutory provisions which lay downthe rule that a check is not legal tender and that a creditor may validly refuse payment bycheck, whether it be a manager's, cashier's or personal check.

Petitioners erroneously rely on one of the dissenting opinions in the PhilippineAirlines case 6to support their cause. The dissenting opinion however does not in any way

support the contention that a check is legal tender but, on the contrary, states that "If thePAL checks in question had not been encashed by Sheriff Reyes, there would be nopayment by PAL and, consequently, no discharge or satisfaction of its judgmentobligation." 7Moreover, the circumstances in the Philippine Airlines case are quite differentfrom those in the case at bar for in that case the checks issued by the judgment debtor weremade payable to the sheriff, Emilio Z. Reyes, who encashed the checks but failed to deliverthe proceeds of said encashment to the judgment creditor.

In the more recent case ofFortunado vs. Court of Appeals, 8this Court stressed that, "We arenot, by this decision, sanctioning the use of a check for the payment of obligations over theobjection of the creditor."

WHEREFORE, the petition is DENIED. The appealed decision is hereby AFFIRMED, withcosts against the petitioners.

SO ORDERED.

Narvasa, C.J., Regalado and Nocon, JJ., concur.

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G.R. No. L-49188 January 30, 1990

PHILIPPINE AIRLINES, INC., petitioner,

vs.HON. COURT OF APPEALS, HON. JUDGE RICARDO D. GALANO, Court of First Instanceof Manila, Branch XIII, JAIME K. DEL ROSARIO, Deputy Sheriff, Court of First Instance,Manila, and AMELIA TAN,respondents.

GUTIERREZ, JR., J.:

Behind the simple issue of validity of an alias writ of execution in this case is a morefundamental question. Should the Court allow a too literal interpretation of the Rules with

an open invitation to knavery to prevail over a more discerning and just approach? Shouldwe not apply the ancient rule of statutory construction that laws are to be interpreted bythe spirit which vivifies and not by the letter which killeth?

This is a petition to review on certiorari the decision of the Court of Appeals in CA-G.R. No.07695 entitled "Philippine Airlines, Inc. v. Hon. Judge Ricardo D. Galano, et al.", dismissingthe petition for certiorari against the order of the Court of First Instance of Manila whichissued an alias writ of execution against the petitioner.

The petition involving the alias writ of execution had its beginnings on November 8, 1967,when respondent Amelia Tan, under the name and style of Able Printing Press commenced

a complaint for damages before the Court of First Instance of Manila. The case wasdocketed as Civil Case No. 71307, entitledAmelia Tan, et al. v. Philippine Airlines, Inc.

After trial, the Court of First Instance of Manila, Branch 13, then presided over by the lateJudge Jesus P. Morfe rendered judgment on June 29, 1972, in favor of private respondentAmelia Tan and against petitioner Philippine Airlines, Inc. (PAL) as follows:

WHEREFORE, judgment is hereby rendered, ordering the defendantPhilippine Air Lines:

1. On the first cause of action, to pay to the plaintiff the amount of P75,000.00

as actual damages, with legal interest thereon from plaintiffs extra-judicialdemand made by the letter of July 20, 1967;

2. On the third cause of action, to pay to the plaintiff the amount ofP18,200.00, representing the unrealized profit of 10% included in thecontract price of P200,000.00 plus legal interest thereon from July 20,1967;

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3. On the fourth cause of action, to pay to the plaintiff the amount ofP20,000.00 as and for moral damages, with legal interest thereon from July20, 1 967;

4. On the sixth cause of action, to pay to the plaintiff the amount of P5,000.00

damages as and for attorney's fee.

Plaintiffs second and fifth causes of action, and defendant's counterclaim, aredismissed.

With costs against the defendant. (CA Rollo, p. 18)

On July 28, 1972, the petitioner filed its appeal with the Court of Appeals. The case wasdocketed as CA-G.R. No. 51079-R.

On February 3, 1977, the appellate court rendered its decision, the dispositive portion of

which reads:

IN VIEW WHEREOF, with the modification that PAL is condemned to payplaintiff the sum of P25,000.00 as damages and P5,000.00 as attorney's fee,judgment is affirmed, with costs. (CA Rollo, p. 29)

Notice of judgment was sent by the Court of Appeals to the trial court and on datessubsequent thereto, a motion for reconsideration was filed by respondent Amelia Tan, dulyopposed by petitioner PAL.

On May 23,1977, the Court of Appeals rendered its resolution denying the respondent's

motion for reconsideration for lack of merit.

No further appeal having been taken by the parties, the judgment became final andexecutory and on May 31, 1977, judgment was correspondingly entered in the case.

The case was remanded to the trial court for execution and on September 2,1977,respondent Amelia Tan filed a motion praying for the issuance of a writ of execution of thejudgment rendered by the Court of Appeals. On October 11, 1977, the trial court, presidedover by Judge Galano, issued its order of execution with the corresponding writ in favor ofthe respondent. The writ was duly referred to Deputy Sheriff Emilio Z. Reyes of Branch 13of the Court of First Instance of Manila for enforcement.

Four months later, on February 11, 1978, respondent Amelia Tan moved for the issuance ofan alias writ of execution stating that the judgment rendered by the lower court, andaffirmed with modification by the Court of Appeals, remained unsatisfied.

On March 1, 1978, the petitioner filed an opposition to the motion for the issuance of analias writ of execution stating that it had already fully paid its obligation to plaintiff through

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the deputy sheriff of the respondent court, Emilio Z. Reyes, as evidenced by cash vouchersproperly signed and receipted by said Emilio Z. Reyes.

On March 3,1978, the Court of Appeals denied the issuance of the alias writ for beingpremature, ordering the executing sheriff Emilio Z. Reyes to appear with his return and

explain the reason for his failure to surrender the amounts paid to him by petitioner PAL.However, the order could not be served upon Deputy Sheriff Reyes who had absconded ordisappeared.

On March 28, 1978, motion for the issuance of a partial alias writ of execution was filed byrespondent Amelia Tan.

On April 19, 1978, respondent Amelia Tan filed a motion to withdraw "Motion for PartialAlias Writ of Execution" with Substitute Motion for Alias Writ of Execution. On May 1, 1978,the respondent Judge issued an order which reads:

As prayed for by counsel for the plaintiff, the Motion to Withdraw 'Motion forPartial Alias Writ of Execution with Substitute Motion for Alias Writ ofExecution is hereby granted, and the motion for partial alias writ ofexecution is considered withdrawn.

Let an Alias Writ of Execution issue against the defendant for the fallsatisfaction of the judgment rendered. Deputy Sheriff Jaime K. del Rosario ishereby appointed Special Sheriff for the enforcement thereof. (CA Rollo, p.34)

On May 18, 1978, the petitioner received a copy of the first alias writ of execution issued on

the same day directing Special Sheriff Jaime K. del Rosario to levy on execution in the sumof P25,000.00 with legal interest thereon from July 20,1967 when respondent Amelia Tanmade an extra-judicial demand through a letter. Levy was also ordered for the further sumof P5,000.00 awarded as attorney's fees.

On May 23, 1978, the petitioner filed an urgent motion to quash the alias writ of executionstating that no return of the writ had as yet been made by Deputy Sheriff Emilio Z. Reyesand that the judgment debt had already been fully satisfied by the petitioner as evidencedby the cash vouchers signed and receipted by the server of the writ of execution, DeputySheriff Emilio Z. Reyes.

On May 26,1978, the respondent Jaime K. del Rosario served a notice of garnishment on thedepository bank of petitioner, Far East Bank and Trust Company, Rosario Branch, Binondo,Manila, through its manager and garnished the petitioner's deposit in the said bank in thetotal amount of P64,408.00 as of May 16, 1978. Hence, this petition for certiorari filed bythe Philippine Airlines, Inc., on the grounds that:

I

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AN ALIAS WRIT OF EXECUTION CANNOT BE ISSUED WITHOUT PRIORRETURN OF THE ORIGINAL WRIT BY THE IMPLEMENTING OFFICER.

II

PAYMENT OF JUDGMENT TO THE IMPLEMENTING OFFICER AS DIRECTEDIN THE WRIT OF EXECUTION CONSTITUTES SATISFACTION OF JUDGMENT.

III

INTEREST IS NOT PAYABLE WHEN THE DECISION IS SILENT AS TO THEPAYMENT THEREOF.

IV

SECTION 5, RULE 39, PARTICULARLY REFERS TO LEVY OF PROPERTY OF

JUDGMENT DEBTOR AND DISPOSAL OR SALE THEREOF TO SATISFYJUDGMENT.

Can an alias writ of execution be issued without a prior return of the original writ by theimplementing officer?

We rule in the affirmative and we quote the respondent court's decision with approval:

The issuance of the questioned alias writ of execution under thecircumstances here obtaining is justified because even with the absence of aSheriffs return on the original writ, the unalterable fact remains that such a

return is incapable of being obtained (sic) because the officer who is to makethe said return has absconded and cannot be brought to the Court despite theearlier order of the court for him to appear for this purpose. (Order of Feb.21, 1978, Annex C, Petition). Obviously, taking cognizance of thiscircumstance, the order of May 11, 1978 directing the issuance of an aliaswrit was therefore issued. (Annex D. Petition). The need for such a return asa condition precedent for the issuance of an alias writ was justifiablydispensed with by the court below and its action in this regard meets withour concurrence. A contrary view will produce an abhorent situationwhereby the mischief of an erring officer of the court could be utilized toimpede indefinitely the undisputed and awarded rights which a prevailing

party rightfully deserves to obtain and with dispatch. The final judgment inthis case should not indeed be permitted to become illusory or incapable ofexecution for an indefinite and over extended period, as had alreadytranspired. (Rollo, pp. 35-36)

Judicium non debet esse illusorium; suum effectum habere debet(A judgment ought not to beillusory it ought to have its proper effect).

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Indeed, technicality cannot be countenanced to defeat the execution of a judgment forexecution is the fruit and end of the suit and is very aptly called the life of the law(Ipekdjian Merchandising Co. v. Court of Tax Appeals, 8 SCRA 59 [1963]; Commissioner ofInternal Revenue v. Visayan Electric Co., 19 SCRA 697, 698 [1967]). A judgment cannot berendered nugatory by the unreasonable application of a strict rule of procedure. Vested

rights were never intended to rest on the requirement of a return, the office of which ismerely to inform the court and the parties, of any and all actions taken under the writ ofexecution. Where such information can be established in some other manner, the absenceof an executing officer's return will not preclude a judgment from being treated asdischarged or being executed through an alias writ of execution as the case may be. Moreso, as in the case at bar. Where the return cannot be expected to be forthcoming, to requirethe same would be to compel the enforcement of rights under a judgment to rest on animpossibility, thereby allowing the total avoidance of judgment debts. So long as ajudgment is not satisfied, a plaintiff is entitled to other writs of execution (Government ofthe Philippines v. Echaus and Gonzales, 71 Phil. 318). It is a well known legal maxim that hewho cannot prosecute his judgment with effect, sues his case vainly.

More important in the determination of the propriety of the trial court's issuance of an aliaswrit of execution is the issue of satisfaction of judgment.

Under the peculiar circumstances surrounding this case, did the payment made to theabsconding sheriff by check in his name operate to satisfy the judgment debt? The Courtrules that the plaintiff who has won her case should not be adjudged as having sued in vain.To decide otherwise would not only give her an empty but a pyrrhic victory.

It should be emphasized that under the initial judgment, Amelia Tan was found to havebeen wronged by PAL.

She filed her complaint in 1967.

After ten (10) years of protracted litigation in the Court of First Instance and the Court ofAppeals, Ms. Tan won her case.

It is now 1990.

Almost twenty-two (22) years later, Ms. Tan has not seen a centavo of what the courts havesolemnly declared as rightfully hers. Through absolutely no fault of her own, Ms. Tan hasbeen deprived of what, technically, she should have been paid from the start, before 1967,

without need of her going to court to enforce her rights. And all because PAL did not issuethe checks intended for her, in her name.

Under the peculiar circumstances of this case, the payment to the absconding sheriff bycheck in his name did not operate as a satisfaction of the judgment debt.

In general, a payment, in order to be effective to discharge an obligation, must be made tothe proper person. Article 1240 of the Civil Code provides:

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Payment shall be made to the person in whose favor the obligation has beenconstituted, or his successor in interest, or any person authorized to receiveit. (Emphasis supplied)

Thus, payment must be made to the obligee himself or to an agent having authority,

express or implied, to receive the particular payment (Ulen v. Knecttle 50 Wyo 94, 58 [2d]446, 111 ALR 65). Payment made to one having apparent authority to receive the moneywill, as a rule, be treated as though actual authority had been given for its receipt. Likewise,if payment is made to one who by law is authorized to act for the creditor, it will work adischarge (Hendry v. Benlisa 37 Fla. 609, 20 SO 800,34 LRA 283). The receipt of money dueon ajudgment by an officer authorized by law to accept it will, therefore, satisfy the debt(See 40 Am Jm 729, 25; Hendry v. Benlisa supra; Seattle v. Stirrat 55 Wash. 104 p. 834,24LRA [NS] 1275).

The theory is where payment is made to a person authorized and recognized by thecreditor, the payment to such a person so authorized is deemed payment to the creditor.

Under ordinary circumstances, payment by the judgment debtor in the case at bar, to thesheriff should be valid payment to extinguish the judgment debt.

There are circumstances in this case, however, which compel a different conclusion.

The payment made by the petitioner to the absconding sheriff was not in cash or legaltender but in checks. The checks were not payable to Amelia Tan or Able Printing Press butto the absconding sheriff.

Did such payments extinguish the judgment debt?

Article 1249 of the Civil Code provides:

The payment of debts in money shall be made in the currency stipulated, andif it is not possible to deliver such currency, then in the currency which islegal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange orother mercantile documents shall produce the effect of payment only whenthey have been cashed, or when through the fault of the creditor they havebeen impaired.

In the meantime, the action derived from the original obligation shall be heldin abeyance.

In the absence of an agreement, either express or implied, payment means the discharge ofa debt or obligation in money (US v. Robertson, 5 Pet. [US] 641, 8 L. ed. 257) and unless theparties so agree, a debtor has no rights, except at his own peril, to substitute something inlieu of cash as medium of payment of his debt (Anderson v. Gill, 79 Md.. 312, 29 A 527, 25LRA 200,47 Am. St. Rep. 402). Consequently, unless authorized to do so by law or by

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consent of the obligee a public officer has no authority to accept anything other than moneyin payment of an obligation under a judgment being executed. Strictly speaking, theacceptance by the sheriff of the petitioner's checks, in the case at bar, does not,per se,operate as a discharge of the judgment debt.

Since a negotiable instrument is only a substitute for money and not money, the delivery ofsuch an instrument does not, by itself, operate as payment (See. 189, Act 2031 on Negs.Insts.; Art. 1249, Civil Code; Bryan Landon Co. v. American Bank, 7 Phil. 255; Tan Sunco v.Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A check, whether a manager's check or ordinary cheek,is not legal tender, and an offer of a check in payment of a debt is not a valid tender ofpayment and may be refused receipt by the obligee or creditor. Mere delivery of checksdoes not discharge the obligation under a judgment. The obligation is not extinguished andremains suspended until the payment by commercial document is actually realized (Art.1249, Civil Code, par. 3).

If bouncing checks had been issued in the name of Amelia Tan and not the Sheriff's, there

would have been no payment. After dishonor of the checks, Ms. Tan could have run afterother properties of PAL. The theory is that she has received no value for what had beenawarded her. Because the checks were drawn in the name of Emilio Z. Reyes, neither hasshe received anything. The same rule should apply.

It is argued that if PAL had paid in cash to Sheriff Reyes, there would have been payment infull legal contemplation. The reasoning is logical but is it valid and proper? Logic has itslimits in decision making. We should not follow rulings to their logical extremes if in doingso we arrive at unjust or absurd results.

In the first place, PAL did not pay in cash. It paid in cheeks.

And second, payment in cash always carries with it certain cautions. Nobody hands overbig amounts of cash in a careless and inane manner. Mature thought is given to thepossibility of the cash being lost, of the bearer being waylaid or running off with what he iscarrying for another. Payment in checks is precisely intended to avoid the possibility of themoney going to the wrong party. The situation is entirely different where a Sheriff seizes acar, a tractor, or a piece of land. Logic often has to give way to experience and to reality.Having paid with checks, PAL should have done so properly.

Payment in money or cash to the implementing officer may be deemed absolute payment ofthe judgment debt but the Court has never, in the least bit, suggested that judgment

debtors should settle their obligations by turning over huge amounts of cash or legal tenderto sheriffs and other executing officers. Payment in cash would result in damage orinterminable litigations each time a sheriff with huge amounts of cash in his hands decidesto abscond.

As a protective measure, therefore, the courts encourage the practice of payments by cheekprovided adequate controls are instituted to prevent wrongful payment and illegalwithdrawal or disbursement of funds. If particularly big amounts are involved, escrow

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arrangements with a bank and carefully supervised by the court would be the saferprocedure. Actual transfer of funds takes place within the safety of bank premises. Thesepractices are perfectly legal. The object is always the safe and incorrupt execution of thejudgment.

It is, indeed, out of the ordinary that checks intended for a particular payee are made out inthe name of another. Making the checks payable to the judgment creditor would haveprevented the encashment or the taking of undue advantage by the sheriff, or any personinto whose hands the checks may have fallen, whether wrongfully or in behalf of thecreditor. The issuance of the checks in the name of the sheriff clearly made possible themisappropriation of the funds that were withdrawn.

As explained and held by the respondent court:

... [K]nowing as it does that the intended payment was for the private partyrespondent Amelia Tan, the petitioner corporation, utilizing the services of

its personnel who are or should be knowledgeable about the acceptedprocedures and resulting consequences of the checks drawn, nevertheless, inthis instance, without prudence, departed from what is generally observedand done, and placed as payee in the checks the name of the errant Sheriffand not the name of the rightful payee. Petitioner thereby created a situationwhich permitted the said Sheriff to personally encash said checks andmisappropriate the proceeds thereof to his exclusive personal benefit. Forthe prejudice that resulted, the petitioner himself must bear the fault. Thejudicial guideline which we take note of states as follows:

As between two innocent persons, one of whom must suffer the consequence

of a breach of trust, the one who made it possible by his act of confidencemust bear the loss. (Blondeau, et al. v. Nano, et al., L-41377, July 26, 1935, 61Phil. 625)

Having failed to employ the proper safeguards to protect itself, the judgment debtor whoseact made possible the loss had but itself to blame.

The attention of this Court has been called to the bad practice of a number of executingofficers, of requiring checks in satisfaction of judgment debts to be made out in their ownnames. If a sheriff directs a judgment debtor to issue the checks in the sheriff's name,claiming he must get his commission or fees, the debtor must report the sheriff

immediately to the court which ordered the execution or to the Supreme Court forappropriate disciplinary action. Fees, commissions, and salaries are paid through regularchannels. This improper procedure also allows such officers, who have sixty (60) dayswithin which to make a return, to treat the moneys as their personal finds and to depositthe same in their private accounts to earn sixty (60) days interest, before said finds areturned over to the court or judgment creditor (See Balgos v. Velasco, 108 SCRA 525[1981]). Quite as easily, such officers could put up the defense that said checks had beenissued to them in their private or personal capacity. Without a receipt evidencing payment

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of the judgment debt, the misappropriation of finds by such officers becomes clean andcomplete. The practice is ingenious but evil as it unjustly enriches court personnel at theexpense of litigants and the proper administration of justice. The temptation could be fargreater, as proved to be in this case of the absconding sheriff. The correct and prudentthing for the petitioner was to have issued the checks in the intended payee's name.

The pernicious effects of issuing checks in the name of a person other than the intendedpayee, without the latter's agreement or consent, are as many as the ways that an artfulmind could concoct to get around the safeguards provided by the law on negotiableinstruments. An angry litigant who loses a case, as a rule, would not want the winning partyto get what he won in the judgment. He would think of ways to delay the winning party'sgetting what has been adjudged in his favor. We cannot condone that practice especially incases where the courts and their officers are involved. We rule against the petitioner.

Anent the applicability of Section 15, Rule 39, as follows:

Section 15. Execution of money judgments.

The officer must enforce anexecution of a money judgment by levying on all the property, real andpersonal of every name and nature whatsoever, and which may be disposedof for value, of the judgment debtor not exempt from execution, or on asufficient amount of such property, if they be sufficient, and selling thesame, and paying to the judgment creditor, or his attorney, so much of theproceeds as will satisfy the judgment. ...

the respondent court held:

We are obliged to rule that the judgment debt cannot be considered satisfied

and therefore the orders of the respondent judge granting the alias writ ofexecution may not be pronounced as a nullity.

xxx xxx xxx

It is clear and manifest that after levy or garnishment, for a judgment to beexecuted there is the requisite of payment by the officer to the judgmentcreditor, or his attorney, so much of the proceeds as will satisfy the judgmentand none such payment had been concededly made yet by the abscondingSheriff to the private respondent Amelia Tan. The ultimate and essential stepto complete the execution of the judgment not having been performed by the

City Sheriff, the judgment debt legally and factually remains unsatisfied.

Strictly speaking execution cannot be equated with satisfaction of a judgment. Underunusual circumstances as those obtaining in this petition, the distinction comes out clearly.

Execution is the process which carries into effect a decree or judgment (Painter v.Berglund, 31 Cal. App. 2d. 63, 87 P 2d 360, 363; Miller v. London, 294 Mass 300, 1 NE 2d198, 200; Black's Law Dictionary), whereas the satisfaction of a judgment is the payment of

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the amount of the writ, or a lawful tender thereof, or the conversion by sale of the debtor'sproperty into an amount equal to that due, and, it may be done otherwise than upon anexecution (Section 47, Rule 39). Levy and delivery by an execution officer are notprerequisites to the satisfaction of a judgment when the same has already been realized infact (Section 47, Rule 39). Execution is for the sheriff to accomplish while satisfaction of the

judgment is for the creditor to achieve. Section 15, Rule 39 merely provides the sheriff withhis duties as executing officer including delivery of the proceeds of his levy on the debtor'sproperty to satisfy the judgment debt. It is but to stress that the implementing officer's dutyshould not stop at his receipt of payments but must continue until payment is delivered tothe obligor or creditor.

Finally, we find no error in the respondent court's pronouncement on the inclusion ofinterests to be recovered under the alias writ of execution. This logically follows from ourruling that PAL is liable for both the lost checks and interest. The respondent court'sdecision in CA-G.R. No. 51079-R does not totally supersede the trial court's judgment inCivil Case No. 71307. It merely modified the same as to the principal amount awarded as

actual damages.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED. Thejudgment of the respondent Court of Appeals is AFFIRMED and the trial court's issuance ofthe alias writ of execution against the petitioner is upheld without prejudice to any action itshould take against the errant sheriff Emilio Z. Reyes. The Court Administrator is orderedto follow up the actions taken against Emilio Z. Reyes.

SO ORDERED.

Fernan, C.J., Cruz, Paras, Bidin, Grio-Aquino, Medialdea and Regalado, JJ., concur.

Separate Opinions

NARVASA,J., dissenting:

The execution of final judgments and orders is a function of the sheriff, an officer of thecourt whose authority is by and large statutorily determined to meet the particularexigencies arising from or connected with the performance of the multifarious duties of theoffice. It is the acknowledgment of the many dimensions of this authority, defined bystatute and chiselled by practice, which compels me to disagree with the decision reachedby the majority.

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A consideration of the wide latitude of discretion allowed the sheriff as the officer of thecourt most directly involved with the implementation and execution of final judgments andorders persuades me that PAL's payment to the sheriff of its judgment debt to Amelia Tan,though made by check issued in said officer's name, lawfully satisfied said obligation andforeclosed further recourse therefor against PAL, notwithstanding the sheriffs failure to

deliver to Tan the proceeds of the check.

It is a matter of history that the judiciary .. is an inherit or of the Anglo-American tradition. While the common law as such .. "is not in force" in thisjurisdiction, "to breathe the breath of life into many of the institutions,introduced [here] under American sovereignty, recourse must be had to therules, principles and doctrines of the common law under whose protectingaegis the prototypes of these institutions had their birth" A sheriff is "anofficer of great antiquity," and was also called the shire reeve. A shire inEnglish law is a Saxon word signifying a division later called a county. Areeve is an ancient English officer of justice inferior in rank to an alderman ..

appointed to process, keep the King's peace, and put the laws in execution.From a very remote period in English constitutional history .. the shire hadanother officer, namely the shire reeve or as we say, the sheriff. .. The Sheriffwas the special representative of the legal or central authority, and as suchusually nominated by the King. .. Since the earliest times, both in England andthe United States, a sheriff has continued his status as an adjunct of the court.. . As it was there, so it has been in the Philippines from the time of theorganization of the judiciary .. . (J. Fernando's concurring opinion inBagatsing v. Herrera, 65 SCRA 434)

One of a sheriff s principal functions is to execute final judgments and orders. The Rules of

Court require the writs of execution to issue to him, directing him to enforce suchjudgments and orders in the manner therein provided (Rule 39). The mode of enforcementvaries according to the nature of the judgment to be carried out: whether it be againstproperty of the judgment debtor in his hands or in the hands of a third person i e. moneyjudgment), or for the sale of property, real or personal (i.e. foreclosure of mortgage) or thedelivery thereof, etc. (sec. 8, Rule 39).

Under sec. 15 of the same Rule, the sheriff is empowered to levy on so much of thejudgment debtor's property as may be sufficient to enforce the money judgment and sellthese properties at public auction after due notice to satisfy the adjudged amount. It is thesheriff who, after the auction sale, conveys to the purchaser the property thus sold (secs.

25, 26, 27, Rule 39), and pays the judgment creditor so much of the proceeds as will satisfythe judgment. When the property sold by him on execution is an immovable whichconsequently gives rise to a light of redemption on the part of the judgment debtor andothers (secs. 29, 30, Rule 39), it is to him (or to the purchaser or redemptioner that thepayments may be made by those declared by law as entitled to redeem (sec. 31, Rule 39);and in this situation, it becomes his duty to accept payment and execute the certificate ofredemption (Enage v. Vda. y Hijos de Escano, 38 Phil. 657, cited in Moran, Comments on theRules of Court, 1979 ed., vol. 2, pp. 326-327). It is also to the sheriff that "written notice of

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any redemption must be given and a duplicate filed with the registrar of deeds of theprovince, and if any assessments or taxes are paid by the redemptioner or if he has oracquires any lien other than that upon which the redemption was made, notice thereofmust in like manner be given to the officer and filed with the registrar of deeds," the effectof failure to file such notice being that redemption may be made without paying such

assessments, taxes, or liens (sec. 30, Rule 39).

The sheriff may likewise be appointed a receiver of the property of the judgment debtorwhere the appointment of the receiver is deemed necessary for the execution of thejudgment (sec. 32, Rule 39).

At any time before the sale of property on execution, the judgment debtor may prevent thesale by paying the sheriff the amount required by the execution and the costs that havebeen incurred therein (sec. 20, Rule 39).

The sheriff is also authorized to receive payments on account of the judgment debt

tendered by "a person indebted to the judgment debtor," and his "receipt shall be asufficient discharge for the amount so paid or directed to be credited by the judgmentcreditor on the execution" (sec. 41, Rule 39).

Now, obviously, the sheriff s sale extinguishes the liability of the judgment debtor either infun, if the price paid by the highest bidder is equal to, or more than the amount of thejudgment orpro tanto if the price fetched at the sale be less. Such extinction is not in anyway dependent upon the judgment creditor's receiving the amount realized, so that theconversion or embezzlement of the proceeds of the sale by the sheriff does not revive thejudgment debt or render the judgment creditor liable anew therefor.

So, also, the taking by the sheriff of, say, personal property from the judgment debtor fordelivery to the judgment creditor, in fulfillment of the verdict against him, extinguishes thedebtor's liability; and the conversion of said property by the sheriff, does not make saiddebtor responsible for replacing the property or paying the value thereof.

In the instances where the Rules allow or direct payments to be made to the sheriff, thepayments may be made by check, but it goes without saying that if the sheriff so desires, hemay require payment to be made in lawful money. If he accepts the check, he places himselfin a position where he would be liable to the judgment creditor if any damages are sufferedby the latter as a result of the medium in which payment was made (Javellana v. Mirasol, etal., 40 Phil. 761). The validity of the payment made by the judgment debtor, however, is in

no wise affected and the latter is discharged from his obligation to the judgment creditor asof the moment the check issued to the sheriff is encashed and the proceeds are received byId. office. The issuance of the check to a person authorized to receive it (Art. 1240, CivilCode; See. 46 of the Code of Civil Procedure; Enage v. Vda y Hijos de Escano, 38 Phil. 657,cited in Javellana v. Mirasol, 40 Phil. 761) operates to release the judgment debtor from anyfurther obligations on the judgment.

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The sheriff is an adjunct of the court; a court functionary whose competence involves bothdiscretion and personal liability (concurring opinion of J. Fernando, citing Uy Piaoco v.Osmena, 9 Phil. 299, in Bagatsing v. Herrera, 65 SCRA 434). Being an officer of the court andacting within the scope of his authorized functions, the sheriff s receipt of the checks inpayment of the judgment execution, may be deemed, in legal contemplation, as received by

the court itself (Lara v. Bayona, 10 May 1955, No. L- 10919).

That the sheriff functions as a conduit of the court is further underscored by the fact thatone of the requisites for appointment to the office is the execution of a bond, "conditioned(upon) the faithful performance of his (the appointee's) duties .. for the delivery orpayment to Government, or the person entitled thereto, of all properties or sums of moneythat shall officially come into his hands" (sec. 330, Revised Administrative Code).

There is no question that the checks came into the sheriffs possession in his officialcapacity. The court may require of the judgment debtor, in complying with the judgment,no further burden than his vigilance in ensuring that the person he is paying money or

delivering property to is a person authorized by the court to receive it. Beyond this, furtherexpectations become unreasonable. To my mind, a proposal that would make the judgmentdebtor unqualifiedly the insurer of the judgment creditor's entitlement to the judgmentamount which is really what this case is all about begs the question.

That the checks were made out in the sheriffs name (a practice, by the way, of long andcommon acceptance) is of little consequence if juxtaposed with the extent of the authorityexplicitly granted him by law as the officer entrusted with the power to execute andimplement court judgments. The sheriffs requirement that the checks in payment of thejudgment debt be issued in his name was simply an assertion of that authority; and PAL'scompliance cannot in the premises be faulted merely because of the sheriffs subsequent

malfeasance in absconding with the payment instead of turning it over to the judgmentcreditor.

If payment had been in cash, no question about its validity or of the authority and duty ofthe sheriff to accept it in settlement of PAL's judgment obligation would even have arisen.Simply because it was made by checks issued in the sheriff s name does not warrantreaching any different conclusion.

As payment to the court discharges the judgment debtor from his responsibility on thejudgment, so too must payment to the person designated by such court and authorized toact in its behalf, operate to produce the same effect.

It is unfortunate and deserving of commiseration that Amelia Tan was deprived of whatwas adjudged to her when the sheriff misappropriated the payment made to him by PAL indereliction of his sworn duties. But I submit that her remedy lies, not here and in revivingliability under a judgment already lawfully satisfied, but elsewhere.

ACCORDINGLY, I vote to grant the petition.

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Melencio-Herrera, Gancayco, J., concurs.

FELICIANO,J., dissenting:

I concur in the able dissenting opinions of Narvasa and Padilla, JJ. and would merely wish toadd a few footnotes to their lucid opinions.

1. Narvasa, J. has demonstrated in detail that a sheriff is authorizedby theRules of Court and our case law to receive either legal tender or checks fromthe judgment debtor in satisfaction of the judgment debt. In addition, Padilla,J. has underscored the obligation of the sheriff, imposed upon him by thenature of his office and the law, to turn over such legal tender, checks andproceeds of execution sales to the judgment creditor. The failure of a sheriffto effect such turnover and his conversion of the funds (or goods) held by

him to his own uses, do not have the effect of frustrating payment by andconsequent discharge of the judgment debtor.

To hold otherwise would be to throw the risk of the sheriff faithfullyperforming his duty as a public officer upon those members of the generalpublic who are compelled to deal with him. It seems to me that a judgmentdebtor who turns over funds or property to the sheriff can not reasonably bemade an insurer of the honesty and integrity of the sheriff and that the risk ofthe sheriff carrying out his duties honestly and faithfully is properly lodgedin the State itself The sheriff, like all other officers of the court, is appointedand paid and controlled and disciplined by the Government, more specifically

by this Court. The public surely has a duty to report possible wrongdoing bya sheriff or similar officer to the proper authorities and, if necessary, totestify in the appropriate judicial and administrative disciplinaryproceedings. But to make the individual members of the general communityinsurers of the honest performance of duty of a sheriff, or other officer of thecourt, over whom they have no control, is not only deeply unfair to theformer. It is also a confession of comprehensive failure and comes too closeto an abdication of duty on the part of the Court itself. This Court should haveno part in that.

2. I also feel compelled to comment on the majority opinion written by

Gutierrez, J. with all his customary and special way with words. My learnedand eloquent brother in the Court apparently accepts the proposition thatpayment by a judgment debtor of cash to a sheriff produces the legal effectsof payment, the sheriff being authorized to accept such payment. Thus, inpage 10 of hisponencia, Gutierrez, J. writes:

The receipt of money due on a judgment by an officer authorized by law toaccept it will satisfy the debt. (Citations omitted)

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The theory is where payment is made to a person authorized and recognizedby the creditor, the payment to such a person so authorized is deemedpayment to the creditor. Under ordinary circumstances, payment by thejudgment debtor in the case at bar, to the sheriff would be valid payment toextinguish the judgment debt.

Shortly thereafter, however, Gutierrez, J. backs off from the above positionand strongly implies that payment in cash to the sheriff is sheer imprudenceon the part of the judgment debtor and that therefore, should the sheriffabscond with the cash, the judgment debtor has not validly discharged thejudgment debt:

It is argued that if PAL had paid in cash to Sheriff Reyes, there would havebeen payment in full legal contemplation. The reasoning is logical but is itvalid and proper?

In the first place, PAL did not pay in cash. It paid in checks.

And second, payment in cash always carries with it certain cautions. Nobodyhands over big amounts of cash in a careless and inane manner. Maturethought is given to the possibility of the cash being lost, of the bearer beingwaylaid or running off with what he is carrying for another. Payment inchecks is precisely intended to avoid the possibility of the money going to thewrong party....

Payment in money or cash to the implementing officer may be deemedabsolute payment of the judgment debt but the court has never, in the least

bit, suggested that judgment debtors should settle their obligations byturning over huge amounts of cash or legal tender to sheriffs and otherexecuting officers. ... (Emphasis in the original) (Majority opinion, pp. 12-13)

There is no dispute with the suggestion apparently made that maximum safety is securedwhere the judgment debtor delivers to the sheriff not cash but a checkmade out, not in thename of the sheriff, butin the judgment creditor's name. The fundamental point that mustbe made, however, is that under our law only cash is legal tender and that the sheriff can becompelled to acceptonly cash and not checks, even if made out to the name of the judgmentcreditor.1 The sheriff could have quite lawfully required PAL to deliver to him only cash,i.e., Philippine currency. If the sheriff had done so, and if PAL had complied with such a

requirement, as it would have had to, one would have to agree that legal payment must bedeemed to have been effected. It requires no particularly acute mind to note that adishonest sheriff could easily convert the money and abscond. The fact that the sheriff inthe instant case required, not cash to be delivered to him, but rather a check made out inhis name, does notchange the legal situation. PAL did notthereby become negligent; itdid notmake the loss anymore possible or probable than if it had instead delivered plaincash to the sheriffs.

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It seems to me that the majority opinion's real premise is the unspoken one that thejudgment debtor should bear the risk of the fragility of the sheriff s virtue until the moneyor property parted with by the judgment debtor actually reaches the hands of the judgmentcreditor. This brings me back to my earlier point that risk is most appropriately borne notby the judgment debtor, nor indeed by the judgment creditor, but by the State itself. The

Court requires all sheriffs to post good and adequate fidelity bonds before entering uponthe performance of their duties and, presumably, to maintain such bonds in force and effectthroughout their stay in office. 2 The judgment creditor, in circumstances like those of theinstant case, could be allowed to execute upon the absconding sheriff s bond. 3

I believe the Petition should be granted and I vote accordingly.

PADILLA,J., Dissenting Opinion

From the facts that appear to be undisputed, I reach a conclusion different from that of themajority. Sheriff Emilio Z. Reyes, the trial court's authorized sheriff, armed with a writ ofexecution to enforce a final money judgment against the petitioner Philippine Airlines(PAL) in favor of private respondent Amelia Tan, proceeded to petitioner PAL's office toimplement the writ.

There is no question that Sheriff Reyes, in enforcing the writ of execution, was acting withfull authority as an officer of the law and not in his personal capacity. Stated differently,PAL had every right to assume that, as an officer of the law, Sheriff Reyes would performhis duties as enjoined by law. It would be grossly unfair to now charge PAL with advancedor constructive notice that Mr. Reyes would abscond and not deliver to the judgment

creditor the proceeds of the writ of execution. If a judgment debtor cannot rely on and trustan officer of the law, as the Sheriff, whom else can he trust?

Pursued to its logical extreme, if PAL had delivered to Sheriff Reyes the amount of thejudgment in CASH, i.e. Philippine currency, with the corresponding receipt signed by SheriffReyes, this would have been payment by PAL in full legal contemplation, because underArticle 1240 of the Civil Code, "payment shall be made to the person in whose favor theobligation has been constituted or his successor in interestor any person authorized toreceive it." And said payment if made by PAL in cash, i.e., Philippine currency, to SheriffReyes would have satisfied PAL's judgment obligation, as payment is a legally recognizedmode for extinguishing one's obligation. (Article 1231, Civil Code).

Under Sec. 15, Rule 39, Rules of Court which provides that-

Sec. 15. Execution of money judgments. The officer must enforce anexecution of a money judgment by levying on all the property, real andpersonal of every name and nature whatsoever, and which may be disposedof for value, of the judgment debtor not exempt from execution, or on asufficient amount of such property, if there be sufficient, and selling the

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same, andpaying to the judgment creditor, or his attorney, so much of theproceeds as will satisfy the judgment. ... .(emphasis supplied)

it would be the duty of Sheriff Reyes to pay to the judgment creditor the proceeds of theexecution i.e., the cash received from PAL (under the above assumption). But, the duty of

the sheriff to pay the cash to the judgment creditor would be a matter separate the distinctfrom the fact that PAL would have satisfied its judgment obligation to Amelia Tan, thejudgment creditor, by delivering the cash amount due under the judgment to Sheriff Reyes.

Did the situation change by PAL's delivery of its two (2) checks totalling P30,000.00 drawnagainst its bank account, payable to Sheriff Reyes, for account of the judgment renderedagainst PAL? I do not think so, because when Sheriff Reyes encashed the checks, theencashment was in fact a payment by PAL to Amelia Tan through Sheriff Reyes, an officer ofthe law authorized to receive payment, and such payment discharged PAL'S obligationunder the executed judgment.

If the PAL cheeks in question had not been encashed by Sheriff Reyes, there would be nopayment by PAL and, consequently no discharge or satisfaction of its judgment obligation.But the checks had been encashed by Sheriff Reyes giving rise to a situation as if PAL hadpaid Sheriff Reyes in cash, i.e., Philippine currency. This, we repeat, is payment, in legalcontemplation, on the part of PAL and this payment legally discharged PAL from itsjudgment obligation to the judgment creditor. To be sure, the same encashment by SheriffReyes of PAL's checks delivered to him in his official capacity as Sheriff, imposed anobligation on Sheriff Reyes to pay and deliver the proceeds of the encashment to AmeliaTan who is deemed to have acquired a cause of action against Sheriff Reyes for his failure todeliver to her the proceeds of the encashment. As held:

Payment of a judgment, to operate as a release or satisfaction, evenprotanto must be made to the plaintiff or to some person authorized by him, orby law, to receive it. The payment of money to the sheriff having an executionsatisfies it, and, if the plaintiff fails to receive it, his only remedy is against theofficer (Henderson v. Planters' and Merchants Bank, 59 SO 493, 178 Ala.420).

Payment of an execution satisfies it without regard to whether the officerpays it over to the creditor or misapplies it (340, 33 C.J.S. 644, citing Elliot v.Higgins, 83 N.C. 459). If defendant consents to the Sheriff s misapplication ofthe money, however, defendant is estopped to claim that the debt is satisfied

(340, 33 C.J.S. 644, citing Heptinstall v. Medlin 83 N.C. 16).

The above rulings find even more cogent application in the case at bar because, ascontended by petitioner PAL (not denied by private respondent), when Sheriff Reyesserved the writ of execution on PAL, he (Reyes) was accompanied by private respondent'scounsel. Prudence dictated that when PAL delivered to Sheriff Reyes the two (2)questioned checks (payable to Sheriff Reyes), private respondent's counsel should have

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insisted on their immediate encashment by the Sheriff with the drawee bank in order topromptly get hold of the amount belonging to his client, the judgment creditor.

ACCORDINGLY, I vote to grant the petition and to quash the courta quo's alias writ ofexecution.

Melencio-Herrera, Gancayco, Sarmiento, Cortes, JJ., concurs.

Separate Opinions

NARVASA,J., dissenting:

The execution of final judgments and orders is a function of the sheriff, an officer of thecourt whose authority is by and large statutorily determined to meet the particularexigencies arising from or connected with the performance of the multifarious duties of theoffice. It is the acknowledgment of the many dimensions of this authority, defined bystatute and chiselled by practice, which compels me to disagree with the decision reachedby the majority.

A consideration of the wide latitude of discretion allowed the sheriff as the officer of thecourt most directly involved with the implementation and execution of final judgments and

orders persuades me that PAL's payment to the sheriff of its judgment debt to Amelia Tan,though made by check issued in said officer's name, lawfully satisfied said obligation andforeclosed further recourse therefor against PAL, notwithstanding the sheriffs failure todeliver to Tan the proceeds of the check.

It is a matter of history that the judiciary .. is an inherit or of the Anglo-American tradition. While the common law as such .. "is not in force" in thisjurisdiction, "to breathe the breath of life into many of the institutions,introduced [here] under American sovereignty, recourse must be had to therules, principles and doctrines of the common law under whose protectingaegis the prototypes of these institutions had their birth" A sheriff is "an

officer of great antiquity," and was also called the shire reeve. A shire inEnglish law is a Saxon word signifying a division later called a county. Areeve is an ancient English officer of justice inferior in rank to an alderman ..appointed to process, keep the King's peace, and put the laws in execution.From a very remote period in English constitutional history .. the shire hadanother officer, namely the shire reeve or as we say, the sheriff. .. The Sheriffwas the special representative of the legal or central authority, and as suchusually nominated by the King. .. Since the earliest times, both in England and

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the United States, a sheriff has continued his status as an adjunct of the court.. . As it was there, so it has been in the Philippines from the time of theorganization of the judiciary .. . (J. Fernando's concurring opinion inBagatsing v. Herrera, 65 SCRA 434)

One of a sheriff s principal functions is to execute final judgments and orders. The Rules ofCourt require the writs of execution to issue to him, directing him to enforce suchjudgments and orders in the manner therein provided (Rule 39). The mode of enforcementvaries according to the nature of the judgment to be carried out: whether it be againstproperty of the judgment debtor in his hands or in the hands of a third person i e. moneyjudgment), or for the sale of property, real or personal (i.e. foreclosure of mortgage) or thedelivery thereof, etc. (sec. 8, Rule 39).

Under sec. 15 of the same Rule, the sheriff is empowered to levy on so much of thejudgment debtor's property as may be sufficient to enforce the money judgment and sellthese properties at public auction after due notice to satisfy the adjudged amount. It is the

sheriff who, after the auction sale, conveys to the purchaser the property thus sold (secs.25, 26, 27, Rule 39), and pays the judgment creditor so much of the proceeds as will satisfythe judgment. When the property sold by him on execution is an immovable whichconsequently gives rise to a light of redemption on the part of the judgment debtor andothers (secs. 29, 30, Rule 39), it is to him (or to the purchaser or redemptioner that thepayments may be made by those declared by law as entitled to redeem (sec. 31, Rule 39);and in this situation, it becomes his duty to accept payment and execute the certificate ofredemption (Enage v. Vda. y Hijos de Escano, 38 Phil. 657, cited in Moran, Comments on theRules of Court, 1979 ed., vol. 2, pp. 326-327). It is also to the sheriff that "written notice ofany redemption must be given and a duplicate filed with the registrar of deeds of theprovince, and if any assessments or taxes are paid by the redemptioner or if he has or

acquires any lien other than that upon which the redemption was made, notice thereofmust in like manner be given to the officer and filed with the registrar of deeds," the effectof failure to file such notice being that redemption may be made without paying suchassessments, taxes, or liens (sec. 30, Rule 39).

The sheriff may likewise be appointed a receiver of the property of the judgment debtorwhere the appointment of the receiver is deemed necessary for the execution of thejudgment (sec. 32, Rule 39).

At any time before the sale of property on execution, the judgment debtor may prevent thesale by paying the sheriff the amount required by the execution and the costs that have

been incurred therein (sec. 20, Rule 39).

The sheriff is also authorized to receive payments on account of the judgment debttendered by "a person indebted to the judgment debtor," and his "receipt shall be asufficient discharge for the amount so paid or directed to be credited by the judgmentcreditor on the execution" (sec. 41, Rule 39).

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Now, obviously, the sheriff s sale extinguishes the liability of the judgment debtor either infun, if the price paid by the highest bidder is equal to, or more than the amount of thejudgment orpro tanto if the price fetched at the sale be less. Such extinction is not in anyway dependent upon the judgment creditor's receiving the amount realized, so that theconversion or embezzlement of the proceeds of the sale by the sheriff does not revive the

judgment debt or render the judgment creditor liable anew therefor.

So, also, the taking by the sheriff of, say, personal property from the judgment debtor fordelivery to the judgment creditor, in fulfillment of the verdict against him, extinguishes thedebtor's liability; and the conversion of said property by the sheriff, does not make saiddebtor responsible for replacing the property or paying the value thereof.

In the instances where the Rules allow or direct payments to be made to the sheriff, thepayments may be made by check, but it goes without saying that if the sheriff so desires, hemay require payment to be made in lawful money. If he accepts the check, he places himselfin a position where he would be liable to the judgment creditor if any damages are suffered

by the latter as a result of the medium in which payment was made (Javellana v. Mirasol, etal., 40 Phil. 761). The validity of the payment made by the judgment debtor, however, is inno wise affected and the latter is discharged from his obligation to the judgment creditor asof the moment the check issued to the sheriff is encashed and the proceeds are received byId. office. The issuance of the check to a person authorized to receive it (Art. 1240, CivilCode; See. 46 of the Code of Civil Procedure; Enage v. Vda y Hijos de Escano, 38 Phil. 657,cited in Javellana v. Mirasol, 40 Phil. 761) operates to release the judgment debtor from anyfurther obligations on the judgment.

The sheriff is an adjunct of the court; a court functionary whose competence involves bothdiscretion and personal liability (concurring opinion of J. Fernando, citing Uy Piaoco v.

Osmena