G.R. No. 81805 - Var-Orient Shipping Co., Inc. vs. Achacoso

On August 20, 1999, Central Surety & Insurance Co. (Central Surety) obtained an industrial loan of ₱6,000,000.00 from Premiere Development Bank (Premiere Bank) under Promissory Note (PN) No. 714-Y, payable August 14, 2000, with 17% per annum interest and 24% penalty interest. The loan was secured by a Deed of Assignment with Pledge covering Central Surety’s Wack Wack Golf & Country Club membership certificate (Certificate No. 217). Constancio T. Castañeda, Jr. and Engracio T. Castañeda, officers of Central Surety, bound themselves as sureties.
Central Surety also maintained a separate commercial loan of ₱40,898,000.00 (PN No. 376-X) maturing October 10, 2001, secured by a real estate mortgage over Condominium Certificate of Title No. 8804.

On August 22, 2000, Premiere Bank demanded payment of the ₱6,000,000.00 loan or assignment of the pledged shares. Central Surety sought extension to late September.
On September 20, 2000, Central Surety issued Bank of Commerce Check No. 08114 for ₱6,000,000.00, which Premiere Bank returned. On September 28, 2000, Premiere Bank demanded payment of both the ₱6,000,000.00 and the ₱40,898,000.00 loans, threatening foreclosure. Central Surety re-tendered Check No. 08114 on September 29, 2000, and also tendered Check No. 08115 (₱2,600,000.00) for a separate personal loan.
On October 13, 2000, Premiere Bank accepted the two checks (total ₱8,600,000.00) but applied payments to four accounts:

Central Surety objected, claiming full payment of PN No. 714-Y and demanding release of the Wack Wack membership pledge.

Central Surety filed a complaint in RTC, Branch 132, Makati City, praying (a) declaration of full payment of PN No. 714-Y; (b) release of the pledged certificate; (c) damages and attorney’s fees.
On July 12, 2005, the RTC dismissed the complaint, holding the PN stipulation granting Premiere Bank sole discretion in applying payments valid, except as to payments applied to unrelated entities; it ordered Central Surety to pay ₱100,000.00 attorney’s fees.
On July 31, 2006, the Court of Appeals (CA) reversed, ruling Premiere Bank waived its application right by demanding only the ₱6,000,000.00 loan and was estopped from applying payments otherwise; it declared PN No. 714-Y fully paid and ordered release of the pledged membership.
Premiere Bank filed this petition for review on certiorari before the Supreme Court.

Whether Premiere Bank waived its contractual and statutory right to apply payments to Central Surety’s debts.
Whether the ₱6,000,000.00 loan under PN No. 714-Y was extinguished by the encashment of Check No. 08114.
Whether the Wack Wack Golf membership pledge should be released.