Case Digest: Gonzaga and Hernandez vs Rehabilitation Finance Corporation, G.R. No. L-8947

Gonzaga and Hernandez vs Rehabilitation Finance Corporation, GR No. L-8947, February 20, 1957

Subject: Obligations and Contracts

FACTS

On May 30, 1940, Gonzaga and Hernaez executed in Philippine National Bank in Bacolod a mortgage on their properties to secure the payment of the Php37,000.00 loan granted to them by the now defunct Agricultural and Industrial Bank (AIB). Immediately after the operation of the AIB by virtue of Commonwealth Act No. 459, the PNB- Bacolod was made the agent thereof in Bacolod while in the island of Panay comprising the provinces of Iloilo, Capiz, and Antique, the PNB- Iloilo Branch.

On August 19, 1940, the Iloilo Branch of AIB was established therein which branch was authorized to manage and carry on the business of the AIB within the territory of Iloilo, Negros Occidental, Capiz and Antique as well as in Iloilo City and Bacolod. Inasmuch as upon the opening of the Iloilo Branch of the AIB, certain business transactions being handled by PNB Bacolod in behalf of AIB in the process of completion, PNB was allowed to carry on such transactions until such time as the release of the loans being applied for had been effected. Plaintiffs signed a promissory note for Php37,000.00 in PNB Bacolod and received the proceeds of the loan on February 4, 1941. The promissory not provided that the spouses Gonzaga and Hernaez bound themselves to pay the loan and interests due at the office of the AIB in the City of Manila.

During the war, the spouses paid in PNB Iloilo. After liberation, plaintiffs went to Manila and asked for the cancellation of the mortgage on the ground that the indebtedness of Php37,000.00 had already been paid. The creditor refused.

ISSUE

Whether or not the payment made by the spouses in PNB Iloilo is valid.

RULING

No, the payment was void.

Under the law (Art 1251, NCC), payment shall be made in the place designated in the obligation. There being no express stipulation and if the undertaking is to deliver a determinate thing, the payment shall be made wherever the thing might be at the moment the obligation was constituted. In any other case, the place or payment shall be the domicile of the debtor.

In this case, the only relation between the Iloilo branch of the Philippine National Bank and the defunct Agricultural and Industrial Bank is that the former was merely the depository of the funds of the latter, for which a free account was opened and a ledger was kept showing the status of said account. The existence and operation of this free account cannot mean that the Iloilo Branch of the Philippine National Bank was an agent of the Agricultural Bank, in so far as the business of this Bank was concerned, nor that it could receive directly from a customer any amount in payment of his obligation to the Agricultural Bank without the previous approval of the latter. The payment to the Iloilo Branch of the Philippine National Bank by the plaintiff spouses in the present case of their pre-war obligation cannot have the effect of obliging the Agricultural Bank to liberate the mortgage and assignment deeds executed by them in favor of the latter bank.