NEREO J. PACULDO, vs. COURT OF APPEALS and BONIFACIO C. REGALADO.

G.R. No. 123855; November 20, 2000.

PARDO. J.

Doctrine: The right to specify which among his various obligations to the same creditor is to be satisfied first rests
with the debtor, as provided by Article 1252 of the Civil Code.

Facts: Petitioner Nereo Paculdo and respondent Bonifacio Regalado entered into a contract of lease over a parcel of
land. Aside from the lease, petitioner leased eleven (11) other property from the respondent, ten (10) of which was
located within the Fairview compound, while the eleventh was located along Quirino Highway Quezon City. Petitioner
also purchased from respondent eight (8) units of heavy equipment and vehicles.

On account of petitioner’s failure to pay rent for the month of May and the monthly rental for the months of June and
July the respondent sent two demand letters to petitioner 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 petitioner, respondent mortgaged the land subject of the lease contract, including the
improvements which petitioner introduced into the land amounting to Monte de Piedad Savings Bank, as a security
for a loan. Respondent refused to accept petitioner’s daily rental payments.

Issue: Whether or not the petitioner was truly in arrears in the payment of rentals on the subject property at the time
of the filing of the complaint about ejectment.

Ruling: No, the petitioner was not in arrears in the payment of rentals on the subject property at the time of the filing
of the complaint about ejectment.

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 petitioner made the payment, he made it clear to the respondent that they were to be
applied to his rental obligations on the Fairview wet market property. Though he entered into various contracts and
obligations with respondent, all the payments made, were to be applied to rental and security deposit on the Fairview
wet market property. However, respondent applied a big portion of the amount paid by petitioner to the satisfaction of
an obligation which was not yet due and demandable which is the payment of heavy equipment.

Under the law, if the debtor did not declare at the time he made the payment to which of his debts with the creditor
the payment is to be applied, the law provided the guideline; i.e. no payment is to be applied to a debt which is not
yet due and the payment has to be applied first to the debt which is most onerous to the debtor. The Supreme Court
held that at the time petitioner made the payments, he made it clear to respondent that they were to be applied to his
rental obligation on the wet market property; that there was no clear assent by petitioner to the change in the manner
of application of payment; and that even if petitioner did not declare to which of his debts the payment is to be
applied, the application made by respondent to pay the purchase price of equipment that was not yet due and
demandable is contrary to the provisions of the law.