View full case

REPUBLIC v. THI THU THUY T. DE GUZMAN

FACTS:

The Republic of the Philippines, represented by the Chief of the Philippine National Police (PNP), filed a Petition for Review on Certiorari against Montaguz General Merchandise (MGM) in relation to a contract for the supply of office and construction materials and services. The PNP released a Requisition and Issue Voucher for the acquisition of building materials for the construction of a condominium building. MGM and the PNP, through its chief, executed a Contract of Agreement for the procurement and delivery of the construction materials. MGM proceeded with the delivery of the materials, and the PNP conducted an inspection before issuing two Disbursement Vouchers. MGM then demanded payment from the PNP. The PNP claimed that payment had already been made through a Land Bank of the Philippines (LBP) check, but MGM denied receiving the check and claimed that the Receipt No. 001 presented by the PNP belonged to a different company. MGM filed a Complaint for Sum of Money against the PNP, and the PNP filed a Motion to Dismiss, claiming that the claim had already been paid. The trial court denied the motion, and the parties proceeded to trial.

The case involves a dispute over the payment of construction materials or supplies between the petitioner, Land Bank Corporation, and the respondent, MGM Construction and Supply. The respondent claimed that she went to the PNP Finance Center to claim a check due to her company, Montaguz Builders, but was informed that the check was still with Land Bank Corporation (LBP) and could not yet be released. She then went to the Engineering Services Office, leaving her belongings, including her receipt booklet, at a bench in Captain Rama's office. The next day, she discovered that the receipt she left, which was meant for the check, was missing. She informed the releaser of the missing receipt and issued a new one in its place. Later on, she learned that the check had been received by a person named Cruz, whom she denied authorizing to receive or claim the check. The petitioner presented witnesses to prove that the respondent received the check and gave it to Cruz, as well as to establish that the payment rightfully belonged to Highland Enterprises.

Montaguz Builders and Developers Corporation (Montaguz Builders) entered into a construction contract with the Philippine National Police (PNP) for the renovation of the PNP Finance Center Building in Camp Crame. A dispute arose between Montaguz Builders and Metropolitan Grains Management Corporation (MGM), a supplier of construction materials, regarding the payment for the materials delivered. MGM claimed that it was not paid the full amount due, while Montaguz Builders contended that it already paid the said amount.

During the trial, Edgardo Cruz, the supervisor of Montaguz Builders, testified that the respondent, MGM, was aware that the payment check from Land Bank of the Philippines (LBP) was meant for Highland Enterprises. Cruz claimed that the respondent handed him the already signed receipt, which he filled up, and that the respondent had already been paid a commission for the use of her business name in the transaction.

The Regional Trial Court (RTC) ruled in favor of the respondent, holding that Montaguz Builders admitted in its pleadings and in open court that it received construction materials from MGM. The RTC also found that the LBP check was never received by the respondent, and the petitioner's evidence, including Cruz's testimony, was contradictory and not credit-worthy. The RTC ordered the petitioner to pay the respondent the principal sum plus interest, attorney's fees, and costs of suit.

The petitioner appealed the decision to the Court of Appeals, which affirmed the RTC's ruling with modification. The Court of Appeals held that the petitioner's admissions and declarations were express admissions that cannot be overcome by allegations of the respondent's implied admissions. The Court of Appeals also found that the petitioner should have directed its payment to MGM, as the contract was with MGM and not with Highland Enterprises. The Court of Appeals reduced the interest rate but deleted the award of attorney's fees and costs of suit.

Now, the petitioner brings the case before the Supreme Court, seeking the reversal of the lower courts' decisions on the ground of alleged error in law committed by the Court of Appeals.

ISSUES:

  1. Whether the petitioner’s obligation to the respondent under the contract was extinguished by payment.

RULING:

  1. Obligation Not Extinguished - Both the RTC and the Court of Appeals found that the petitioner’s obligation was not extinguished because the payment was not made to the proper party, the respondent, or her authorized personnel, as required by law. The petitioner’s own records showed that the check was claimed and signed for by Edgardo Cruz, who was not authorized by the respondent to receive payment on her behalf. Therefore, the payment was ineffective in extinguishing the petitioner’s obligation.

  2. Interest Rate Modification - The Supreme Court modified the interest rate imposed by the Court of Appeals. The legal interest rate of six percent per annum is to be imposed from November 16, 1997 (the date of the last demand) and twelve percent per annum interest in lieu of six percent shall be imposed upon finality of the decision until fully paid.

PRINCIPLES:

  • Judicial Admissions (§4, Rule 129, Rules of Court): Admissions made in the course of the proceedings do not require proof and are conclusive as to the party making the admission unless shown to have been made through palpable mistake.

  • Payment to Proper Person (Article 1240, Civil Code): Payment must be made to the person in whose favor the obligation is constituted, his successor in interest, or any person authorized to receive it. Payment to the wrong party does not discharge an obligation to the innocent creditor, even if done in good faith.

  • Preponderance of Evidence (§1, Rule 133, Revised Rules of Court): The burden of proof in civil cases is on the party that must establish their case by a preponderance of evidence, meaning the evidence that is more convincing and credible.

  • Interest on Sum of Money (Article 2209 and Eastern Shipping Lines doctrine): Legal interest on a sum of money in obligations not constituting a loan is six percent per annum, and twelve percent per annum upon finality of the judgment until full payment.

  • Rule 45: Only questions of law may be raised in a petition for review on certiorari, except in specific situations warranting a review of factual findings.