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MYRON C. PAPA v. A. U. VALENCIA

FACTS:

In this case, A.U. Valencia and Co., Inc. and Felix Peñarroyo filed a complaint for specific performance against Myron C. Papa, as the administrator of the Testate Estate of Angela M. Butte. The complaint stated that in 1973, Papa, acting as Butte's attorney-in-fact, sold a piece of land to Peñarroyo through Valencia. However, before the title could be released, Butte passed away. The bank refused to release the title until all the mortgaged properties were redeemed. Peñarroyo placed an adverse claim on the title. Upon the release of the title, it was discovered that the mortgage rights had been assigned to Tomas L. Parpana as special administrator of the Estate of Ramon Papa, Jr. Despite being sold to Peñarroyo, Papa had been collecting monthly rentals from the property. Valencia and Peñarroyo demanded the title, rental payments, and damages from Papa. Delfin Jao later intervened, claiming that he purchased the property from Valencia and Peñarroyo. Papa also filed a third-party complaint against Arsenio B. Reyes and Amanda Santos, alleging they acquired the property through a tax sale. The trial court ruled in favor of Valencia and Peñarroyo, allowing Papa to redeem the property from Reyes, ordering Papa to execute a deed of sale in favor of Peñarroyo, and Peñarroyo to execute a deed of sale to Jao. The court also awarded attorney's fees to the plaintiffs. Papa appealed to the Court of Appeals, which affirmed the trial court's decision with modification.

ISSUES:

  1. Whether or not the sale of the subject property had been consummated

  2. Whether or not the Court of Appeals erred in nullifying the assignment of the subject property in favor of the estate of Ramon Papa, Jr.

  3. Whether or not the estate of Angela M. Butte and the estate of Ramon Papa, Jr. are indispensable parties in the case

  4. Whether the check payment made by respondents Valencia and Peñarroyo was deemed to have been encashed.

  5. Whether the petitioner's failure to encash the check within ten years resulted in the impairment of the check.

  6. Whether or not the change in ownership of the property affects the right of the petitioner.

  7. Whether or not the petitioner is entitled to the property regardless of the change in ownership thereof.

RULING:

  1. The Court of Appeals affirmed the trial court's decision, holding that there was no evidence that the petitioner did not encash the check given as payment for the purchase price of the subject property. The court presumed that the check was encashed, as the payment by check was not denied by the petitioner. Therefore, the court concluded that the sale of the subject property had been consummated.

  2. The Court of Appeals modified the trial court's decision by ordering the petitioner to deliver the owner's duplicate of the title to the respondents or, if it cannot be produced, to authorize the Register of Deeds to cancel it and issue a new title in the name of Felix Peñarroyo. The court held that the assignment of the subject property to the estate of Ramon Papa, Jr. was not clear and that any obligation between the two estates does not bind the respondents.

  3. The Court of Appeals held that the estates of Angela M. Butte and Ramon Papa, Jr. are not indispensable parties in the case. The court stated that contracts only bind parties thereto and since they were not parties to the Deed of Absolute Sale, their estates do not need to be joined in the action.

  4. The Court held that the check payment made by respondents Valencia and Peñarroyo was deemed to have been encashed. Although petitioner claimed that he never encashed the check, his assertion was not substantiated and was contradicted by his own statement that he could no longer recall the transaction. Furthermore, after more than ten years from the payment, the presumption is that the check had been encashed.

  5. The Court ruled that the petitioner's failure to encash the check within ten years resulted in the impairment of the check. While the delivery of a check produces the effect of payment only when it is cashed, it is different if the debtor is prejudiced by the creditor's unreasonable delay in presenting it for payment. The acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if the creditor sustains loss due to the creditor's negligence, payment will be deemed effected and the obligation discharged.

  6. The petition for review is denied and the Decision of the Court of Appeals is affirmed.

PRINCIPLES:

  • Payment by checks shall produce the effect of payment only when they have been cashed or impaired through the fault of the creditor. (Art. 1249 of the Civil Code)

  • Contracts bind only those who are parties thereto.

  • The delivery of a check produces the effect of payment only when it is cashed, unless the debtor is prejudiced by the creditor's unreasonable delay in presenting it for payment.

  • The acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if the creditor sustains loss due to the creditor's negligence, payment will be deemed effected and the obligation discharged.

  • The change in ownership of a property does not affect the rights of a petitioner.

  • The petitioner is entitled to the property regardless of the change in ownership.