Title
Caltex , Inc. vs. Intermediate Appellate Court
Case
G.R. No. 72703
Decision Date
Nov 13, 1992
Debt dispute over unpaid aviation fuel; Deed of Assignment not *dacion en pago*; petitioner entitled to retain interest charges.
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Case Digest (G.R. No. 72703)

Facts:

Contractual Agreement and Obligations:
On January 12, 1978, Asia Pacific Airways Inc. (private respondent) entered into an agreement with Caltex (Philippines) Inc. (petitioner) for the supply of aviation fuel for two years (January 1, 1978, to December 31, 1979). By June 30, 1980, private respondent owed petitioner P4,072,682.13 for unpaid fuel supplies.

Deed of Assignment:
To settle the debt, private respondent executed a Deed of Assignment on July 31, 1980, assigning its receivables or refunds of Special Fund Import Payments from the National Treasury to petitioner. On February 12, 1981, a Treasury Warrant for P5,475,294.00 was issued to petitioner, exceeding the assigned amount.

Dispute Over Excess Payment:
On February 16, 1981, private respondent requested a refund of the excess. Petitioner refunded P900,000.00 but retained P510,550.63, claiming it represented interest and service charges at 18% per annum on the overdue account from June 1, 1980, to July 31, 1981.

Legal Proceedings:
Private respondent filed a complaint on September 13, 1982, to recover P510,550.63. The trial court dismissed the complaint, but the Intermediate Appellate Court (IAC) reversed the decision, ordering petitioner to refund the amount.

Motion for Reconsideration and Procedural Issues:
Petitioner filed an Urgent Motion for Extension to file a Motion for Reconsideration on September 20, 1985, and the Motion for Reconsideration on September 26, 1985. The IAC denied both motions, citing the Supreme Court's ruling in Habaluyas Enterprises Inc. vs. Japzon that the 15-day period for filing a motion for reconsideration is non-extendible.

Issue:

  1. Whether the Urgent Motion for Extension of Time to File a Motion for Reconsideration and the Motion for Reconsideration filed by petitioner were valid.
  2. Whether the Deed of Assignment constituted dacion en pago, extinguishing private respondent's obligation, and whether petitioner was entitled to retain P510,550.63 as interest and service charges.

Ruling:

The Supreme Court ruled in favor of petitioner:

  1. The Motion for Extension and Motion for Reconsideration were valid, as they were filed within the grace period established by the Habaluyas ruling, which was given prospective application.
  2. The Deed of Assignment did not constitute dacion en pago. It did not extinguish private respondent's obligation entirely, as the agreement explicitly included interest charges on overdue accounts and future fuel deliveries. Petitioner was entitled to retain P510,550.63 as interest and service charges.

The decision of the IAC was set aside, and the trial court's decision was reinstated.

Ratio:

  1. Procedural Issue: The Supreme Court clarified that the Habaluyas ruling, which barred extensions for filing motions for reconsideration, applied prospectively. Since petitioner's motions were filed within the grace period (before June 30, 1986), they were valid.

  2. Substantive Issue: The Deed of Assignment did not meet the requisites of dacion en pago. The agreement explicitly included interest charges on overdue accounts and future fuel deliveries, indicating that the obligation was not fully extinguished. The terms of the Deed of Assignment were clear, and the literal meaning of its stipulations controlled. The subsequent acts of the parties, including private respondent's request to limit interest charges, further demonstrated that the obligation was not fully extinguished by the assignment.

The Court emphasized that the payment of principal does not extinguish the obligation if interest remains unpaid, as stipulated in the Civil Code.


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