G.R. No. L-5942 - Rehabilitation Fice Corp. vs. Court of Appeals

Quintana Cano and Jesus de Anduiza executed a promissory note dated October 31, 1941, payable "on or before October 31, 1951" in the principal sum of P13,800.00 with interest at six percent per annum and provision for ten equal annual installments of P1,874.98.
The obligation was secured by a mortgage in favor of the Agricultural and Industrial Bank (hereinafter the Bank).

Quintana Cano and Jesus de Anduiza failed to pay the annual amortizations due October 31, 1942 and October 31, 1943.
Estelito Madrid learned of Anduiza's defaults and, in October 1944, went to the Bank's central office in Manila and offered to pay Anduiza's indebtedness.
On October 23, 1944, Madrid paid P7,374.83 principal and P2,625.17 interest (total P10,000.00) (Exh. "A"); on October 30, 1944, he paid the balance of P6,425.17 (Exh. "B"), making total payments of P16,425.17.
The Bank issued receipts acknowledging the payments.

On July 3, 1948, Estelito Madrid filed suit in the Court of First Instance of Manila against the Agricultural and Industrial Bank (now Rehabilitation Finance Corporation) and Jesus de Anduiza.
Madrid prayed: (a) declaration that Anduiza's indebtedness of P16,425.17 was paid; (b) ordering the Bank (now R.F.C.) to release and cancel the mortgage; (c) condemning Anduiza to pay Madrid P16,425.17 with legal interest and declaring such obligation a preferred lien; and (d) awarding P2,000.00 damages and costs.

The Bank answered on July 14, 1948, alleging: the loan was not due and demandable; the Bank accepted Madrid's remittance as a deposit pending proof of Anduiza's authority to permit payment; if authority was not proved the deposit would be annulled; Anduiza refused to approve the payments; the deposit was null and void under Executive Order No. 49 (June 6, 1945); and Anduiza paid P2,000.00 on June 4, 1948.
Anduiza answered on August 9, 1948, alleging the payments were made without his knowledge or consent; the Bank treated them as mere deposit; Executive Order No. 49 nullified the deposit; and Anduiza paid P2,000.00 on June 4, 1948; he asserted counterclaims.

The trial court rendered judgment for Madrid on June 20, 1949; that judgment was set aside on June 28, 1949, after counsel for the Bank alleged absence at hearing due to misunderstanding.
After further proceedings, the...(Subscriber-Only)

Whether a third person’s payment of a debtor's obligation extinguishes the obligation vis-à-vis the creditor when the debtor did not authorize or expressly opposed the payment.
Whether payments made by a third person in the name of the debtor, without the debtor's written authorization, can validly extinguish the creditor's mortgage lien.

Whether the Bank validly accepted Madrid's payments only as deposit pending the debtor's written authorization and whether such conditional acceptance prevented extinguishment of the debt.
Whether Executive Order No. 49 (June 6, 1945) rendered Madrid's deposit/payments null and void and thereby defeated Madrid's claim.
Whether Madrid's alleged bad faith...(Subscriber-Only)