Lopez vs. Alvendia

A check does not constitute payment of an obligation unless and until it is cashed, pursuant to Article 1249 of the Civil Code; a dishonored check therefore does not satisfy a judgment obligation, and the debtor remains liable for the stipulated consequences of non-payment. Certiorari does not lie to correct mere errors of fact or law that are remediable by appeal.

Petitioners Eusebio M. Lopez, Eusebio Lopez, Jr., Deogracias P. Lirio, Soledad Lirio-Dolor, and Renato C. Dolor (as judicial administrator of the estate of Faustino Dolor) were the sellers of a parcel of residential land forming part of St. Ignacius Village Subdivision. Private respondents David and Adelaida Minsberg were the buyers. The title to the entire subdivision was mortgaged with the GSIS to secure a loan of ₱1,600,000.00 — a fact not disclosed to the Minsbergs at the time of sale. Respondent Hon. Carmelino G. Alvendia was the presiding judge of Branch XVI, CFI Manila, before whom the civil case was pending.

Sometime in March 1957, David and Adelaida Minsberg bought a parcel of residential land from the petitioners. The first payment of ₱900.00 was made on March 25, 1957, and on April 1, 1957, the amount of ₱1,100.00 was paid to complete the down payment. On the latter date, a written contract was executed wherein it was covenanted that upon completion of the full payment of ₱7,560.00, the certificate of title on the lot would be issued to the Minsbergs. In July 1958, the Minsbergs received from the petitioners a written notice stating that if they failed to pay the balance of ₱5,560.00 within two weeks, the down payment of ₱2,000.00 would be forfeited and they would lose all rights over the lot. On July 31, 1958, the Minsbergs paid the balance and demanded the title. The petitioners, however, failed to deliver the title despite full payment, telling the respondents to wait a few days as the necessary papers were being prepared. The title could not be delivered because the title to the entire subdivision was mortgaged with the GSIS to secure a loan of ₱1,600,000.00 — a fact the petitioners had not communicated to the Minsbergs.

In 1960, the Minsbergs began constructing their house on the lot. When their estimates proved insufficient to complete the house, they again sought issuance of the title to enable them to mortgage the property and obtain funds. Instead of delivering the title, the petitioners issued a mere certification stating that the Minsbergs had paid in full the purchase price. The certification was not accepted by banks as sufficient security for a loan application.

Claiming damages from the petitioners' failure to issue the title, the Minsbergs filed Civil Case No. 49628 with the CFI of Manila, praying for delivery of the certificate of title, ₱45,000.00 in damages, ₱4,500.00 in attorney's fees, and costs. After the Minsbergs rested their case, the parties, through the intervention of the court, reached a compromise agreement embodied in the decision dated August 24, 1962. The decision required the petitioners to deliver a Torrens title covering the lot to the Minsbergs and to pay ₱3,500.00 as damages, both no later than September 21, 1962. Should the petitioners fail to deliver the title and/or the ₱3,500.00, the damages would automatically be raised to ₱10,000.00 and a writ of execution would immediately issue.

The title was delivered within the prescribed period, but one of the checks issued to cover the ₱3,500.00 — Republic Bank Check No. 152597 in the amount of ₱3,277.38 drawn by Eusebio Lopez, Jr. — was dishonored by the drawee bank on September 26, 1962 with the notation "no arrangement." On September 28, 1962, the Minsbergs filed a motion for execution for ₱10,000.00. The petitioners opposed, contending that the dishonor was due to a mere "oversight" by the bank cashier, and simultaneously deposited ₱3,277.38 in cash with the trial court to demonstrate good faith. The bank cashier issued a certification dated October 4, 1962 stating that the check was good and valid and that the dishonor was "a pure case of oversight." The respondent judge, however, found that the petitioners had failed to comply with the requirement to pay ₱3,500.00 by September 21, 1962, and on December 4, 1962, ordered the issuance of a writ of execution for ₱10,000.00. Petitioners' motion for reconsideration was denied on December 15, 1962, the trial court applying Article 1249 of the Civil Code and holding that a check is not legal tender and that a creditor cannot be compelled to accept it in payment.

• Substantial Compliance: Petitioners contended that they had substantially complied with the judgment, having delivered the title and issued a check for the damages within the prescribed period, and that the non-cashing of the check was due to a mere "oversight" on the part of the cashier of the drawee bank.
• Excusable Negligence / Honest Mistake: Petitioners argued that there was a prior arrangement with the Republic Bank, through Atty. Eusebio Lopez, Jr., and that the dishonor was due to an oversight or honest mistake; they prayed that they be allowed to present evidence to prove this oversight or excusable negligence.
• Grave Abuse of Discretion: Petitioners claimed that the respondent judge acted with grave abuse of discretion and oppressive exercise of authority in issuing the orders directing execution for ₱10,000.00, denying the motion for reconsideration, denying the motion to suspend proceedings, and refusing to allow them to introduce evidence on the bank's oversight — all without any plain, speedy, and adequate remedy in the ordinary course of law.
• Improper Levy: Petitioners asserted that with the death of Faustino Dolor, his ownership over Dolor's Pharmacy had ceased, and the properties of said pharmacy could not be reached by the writ of execution.

• No Grave Abuse of Discretion: Respondents contended that there was no grave abuse of discretion committed by the respondent judge, as the decision was based on a compromise agreement entered into by the parties after the respondents had rested their case.
• Automatic Escalation Clause: Respondents pointed out that they had originally claimed ₱49,500.00 as damages and attorney's fees, and that the sum of ₱10,000.00 was provided in the decision as the consequence of the petitioners' failure to comply with the conditions of the compromise agreement and the judgment.

• Propriety of Certiorari: Whether the respondent judge committed grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the orders directing execution for ₱10,000.00, denying reconsideration, and refusing to admit evidence on the alleged bank oversight.
• Payment by Check: Whether the issuance and delivery of a check that was subsequently dishonored constitutes payment of the judgment obligation within the meaning of Article 1249 of the Civil Code.
• Substantial Compliance: Whether the petitioners' deposit of cash with the trial court after the dishonor of the check constituted substantial compliance with the judgment.

• Propriety of Certiorari: No. Any error committed by the respondent judge was a mere error of fact or law correctable by appeal, not by certiorari, which is not a substitute for appeal.
• Payment by Check: No. A check is not legal tender and does not produce the effect of payment unless cashed, pursuant to Article 1249 of the Civil Code; the dishonor of the check meant the obligation remained unsatisfied.
• Substantial Compliance: No. The petitioners failed to pay the ₱3,500.00 by the deadline of September 21, 1962; the subsequent cash deposit after the dishonor did not cure the default, as time was of the essence in the compromise judgment.

• Propriety of Certiorari: The jurisdiction of the trial court was conceded, and petitioners admitted their failure to comply with the terms of the judgment rendered pursuant to a compromise agreement where time was of the essence. Even assuming the respondent court erred in refusing to admit evidence or in its factual findings, such errors were merely mistakes of fact or errors of judgment and/or of law, not within the reach of a writ of certiorari, much less mandamus. Petitioners could have appealed the orders complained of; certiorari is not a substitute for appeal. The Court found no abuse of discretion, much less a grave one, in the issuance of the assailed orders.

• Payment by Check: Under Article 1249 of the Civil Code, the delivery of promissory notes payable to order, bills of exchange, or other mercantile documents produces the effect of payment only when they have been cashed or when, through the fault of the creditor, they have been impaired. A check is not currency and is not legal tender; a creditor cannot be compelled to accept it in payment of his credit. Applied to the facts, it was immaterial whether the petitioners had sufficient funds with the drawee bank to cover the check; because the check was dishonored when presented, it did not produce the effect of payment. The obligation to pay ₱3,500.00 by September 21, 1962 was therefore not satisfied, triggering the automatic escalation to ₱10,000.00.

• Substantial Compliance: The Court found the petitioners' claim of a prior arrangement with the bank untenable. One month had transpired between the rendition of the decision and the date of compliance, during which the petitioners could have ascertained that the alleged arrangement was known to the bank's cashier — who did not state in his certification that any such prior arrangement existed. The respondent court did not credit the claim of an arrangement, and this disbelief was strengthened by the facts and circumstances of record. Furthermore, the bank, having accepted the alleged arrangement, had constituted itself as the agent of the petitioners; the principal is responsible for the acts of the agent done within the scope of its authority and should bear the damages caused upon third parties. If the fault lay with the bank, the petitioners were free to sue the bank for damages, but could not shift the consequences of non-payment to the Minsbergs.

• Payment by Check (Article 1249, Civil Code) — The delivery of promissory notes payable to order, bills of exchange, or other mercantile documents produces the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired. A check is not legal tender and a creditor cannot be compelled to accept it in payment. In this case, the dishonor of the check meant that payment was never effected, and the judgment obligation remained unsatisfied, triggering the automatic escalation clause in the compromise judgment.

• Certiorari Not a Substitute for Appeal — Certiorari lies only when the lower court acts without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction. Mere errors of fact or law, even if committed by the trial court, are not correctable by certiorari but by appeal. The petitioners had an adequate remedy by appeal from the orders complained of and therefore could not resort to certiorari.

• Agency — Principal's Liability for Agent's Acts — The principal is responsible for the acts of the agent done within the scope of its authority and should bear the damages caused upon third parties. The drawee bank, having accepted the alleged arrangement with the petitioners, constituted itself as the petitioners' agent; consequently, the bank's oversight in dishonoring the check was attributable to the petitioners, who bore the resulting consequences and could separately sue the bank for damages.

• "The check not being currency is not a legal tender and a creditor could not be compelled to accept it in payment of his credit." — This passage, drawn from the respondent judge's order affirmed by the Supreme Court, articulates the fundamental principle that a check does not constitute legal tender and cannot be forced upon a creditor as payment.

• "The delivery of the promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired." — This verbatim quotation of Article 1249 of the Civil Code is the controlling legal provision applied to hold that the dishonored check did not satisfy the judgment obligation.

• "Certiorari is not a substitute for appeal." — This canonical formulation underscores the limited scope of the extraordinary remedy of certiorari and explains why the petition was dismissed despite the petitioners' allegations of error by the trial court.

• Article 1249, Civil Code of the Philippines — Provides that the delivery of promissory notes payable to order, bills of exchange, or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired. Applied to hold that the dishonored check did not constitute payment of the ₱3,500.00 damages, thereby triggering the automatic escalation to ₱10,000.00 under the compromise judgment.

Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera, Dizon, Regala, Bengzon, J.P., and Zaldivar, JJ., concurred.