Paculdo v Regalado

345 SCRA 134 (2000)

DOCTRINE: Application of payments, NCC 1252-1254; The right to specify

which among his various obligations to the same creditor is to be satisfied
first rests with the debtor. Under the law, if the debtor did not declare at the
time he made the payment which of his debts with the creditor the payment
is to be applied, the law provided the guideline—no payment is to be made
to a debt that is not yet due and the payment has to be applied first to the
debt most onerous to the debtor.

FACTS: Petitioner Nereo Paculdo (Paculdo) and respondent Bonifacio

Regalado (Regalado) entered into a contract of lease over a parcel of land
with a wet market building, located at Fairview Park, Quezon City. The
contract was for twenty five (25) years. For the first five (5) years of the
contract beginning December 27, 1990, Paculdo would pay a monthly rental
of P450,000, payable within the first five (5) days of each month with a 2%
penalty for every month of late payment.

Aside from the above lease, Paculdo leased eleven (11) other properties
from Regalado, ten (10) of which were located within the Fairview
compound, while the eleventh was located along Quirino Highway Quezon
City. Paculdo also purchased from respondent eight (8) units of heavy
equipment and vehicles.

On account of Paculdo’s failure to pay the corresponding monthly rentals,

Regalado sent two demand letters to Paculdo demanding payment of the
back rentals, and if no payment was made within fifteen (15) days from the
receipt of the letter, it would cause the cancellation of the lease contract.

Without the knowledge of Paculdo, Regalado mortgaged the land subject of

the lease contract, including the improvements which Paculdo introduced
into the land. Subsequent dates thereafter, Regalado refused to accept
Paculdo’s daily rental payments.

Consequently, Paculdo filed an action for injunction and damages seeking to

enjoin respondents from disturbing his possession of the property subject of
the lease contract. On the same day, Regalado also filed a complaint for
ejectment against Paculdo.

The lower court rendered a decision in favor of the Regalado, which was
affirmed in toto by the Court of Appeals. Hence, this petition.

ISSUE: Whether or not the Paculdo was truly in arrears in the payment of
rentals on the subject property at the time of the filing of the complaint for
ejectment.
RULING: NO, the Paculdo was not in arrears in the payment of rentals on
the subject property at the time of the filing of the complaint for ejectment.

As found by the lower court there was a letter sent by Regalado to Paculdo,
which states that Paculdo’s security deposit for the Quirino lot, be applied
as partial payment for his account under the subject lot as well as to the
real estate taxes on the Quirino lot. However later on, Regalado also
informed Paculdo that the payment was to be applied not only to Paculdo’s
accounts under the subject land and the Quirino lot but also to heavy
equipment bought by the latter from Regalado. Paculdo submits that his
silence is not consent but is in fact a rejection.

As provided in Article 1252 of the Civil Code, the right to specify which
among his various obligations to the same creditor is to be satisfied first
rest with the debtor.

In the case at bar, at the time Paculdo made the payment, he made it clear
to Regalado that they were to be applied to his rental obligations on the
Fairview wet market property. However, Regalado applied a big portion of
the amount paid by Paculdo to the satisfaction of an obligation which was
not yet due and demandable- the payment of the eight heavy equipment.

The lease over the Fairview wet market is the most onerous to the petitioner
in the case at bar.

Consequently, the petition is granted.