CALTEX (PHILIPPINES), INC., PETITIONER, VS. THE INTERMEDIATE APPELLATE COURT AND ASIA PACIFIC AIRWAYS, INC., RESPONDENTS.

This is a petition for certiorari seeking the annulment of
the decision dated August 27, 1985 of the then Intermediate Appellate Court in
CA-G.R. No. 02684, which reversed the judgment of the trial court and ordered
petitioner to return the amount of P510,550.63 to private respondent plus interest
at the legal rate of 14% per annum.

The facts of the case are as follows:

On January 12, 1978, private respondent Asia Pacific Airways Inc.
entered into an agreement with petitioner Caltex (Philippines) Inc., whereby
petitioner agreed to supply private respondent’s aviation fuel requirements for
two (2) years, covering the period from January 1, 1978 until December 31,
1979. Pursuant thereto, petitioner
supplied private respondent’s fuel supply requirements. As of June 30, 1980, private respondent had
an outstanding obligation to petitioner in the total amount of P4,072,682.13,
representing the unpaid price of the fuel supplied. To settle this outstanding obligation, private respondent
executed a Deed of Assignment dated July 31, 1980, wherein it assigned to
petitioner its receivables or refunds of Special Fund Import Payments from the
National Treasury of the Philippines to be applied as payment of the amount of
P4,072,683.13 which private respondent owed to petitioner. On February 12, 1981, pursuant to the Deed of Assignment, Treasury Warrant
No. B04708613 in the amount of P5,475,294.00 representing the refund to
respondent of Special Fund Import Payment on its fuel purchases was issued by
the National Treasury in favor of petitioner. Four days later, on February 16, 1981, private respondent, having
learned that the amount remitted to petitioner exceeded the amount covered by
the Deed of Assignment, wrote a letter to petitioner, requesting a refund of
said excess. Petitioner, acting on said
request, made a refund in the amount of P900,000.00 plus in favor of private
respondent. The latter, believing that
it was entitled to a larger amount by way of refund, wrote petitioner anew,
demanding the refund of the remaining amount. In response thereto, petitioner informed private respondent that the
amount not returned (P510,550.63) represented interest and service charges at
the rate of 18% per annum on the unpaid and overdue account of respondent from
June 1, 1980 to July 31, 1981.

Thus, on September 13, 1982, private respondent filed a complaint
against petitioner in the Regional Trial Court of Manila, to collect the sum of
P510,550.63.00.

Petitioner (defendant in the trial court) filed its answer,
reiterating that the amount not returned represented interest and service
charges on the unpaid and overdue account at the rate of 18% per annum. It was further alleged that the collection
of said interest and service charges is sanctioned by law, and is in accordance
with the terms and conditions of the sale of petroleum products to respondent,
which was made with the conformity of said private respondent who had accepted
the validity of said interest and service charges.

On November 7,
1983, the trial court rendered its decision dismissing the complaint, as well
as the counterclaim filed by defendant therein.

Private respondent (plaintiff) appealed to the Intermediate
Appellate Court (IAC). On August 27,
1985, a decision was rendered by the said
appellate court reversing the decision of the trial court, and ordering
petitioner to return the amount of P510,550.63 to private respondent.

Counsel of petitioner received a copy of the appellate court’s
decision on September 6, 1985. On
September 20, 1985, or 14 days after receipt of the aforesaid decision, an Urgent
Motion for extension of five days within which to file a motion for
reconsideration was filed by petitioner. On September 26, 1985, the Motion for Reconsideration was filed. The following day, petitioner filed a motion
to set the motion for reconsideration for
hearing.

In a Resolution dated October 24, 1985, the appellate court
denied the aforesaid three motions. The
first motion praying for an extension of five days within which to file a
motion for reconsideration was denied by the appellate court citing the new
ruling of the Supreme Court in Habaluyas Enterprises Inc. vs. Japzon (138 SCRA
46 [1985]) as authority. The appellate
court, following said ruling, held that the 15-day period for filing a motion for
reconsideration cannot be extended. Thus,
the motion for reconsideration filed on September 26, 1985 was stricken from
the record, having been filed beyond the non-extendible 15-day reglementary
period. The third motion was likewise
denied for being moot and academic.

On November 4, 1985, the prevailing party (respondent herein)
filed an Urgent Motion for Entry of Judgment. Two days later, or on November 6, 1985, the petitioner filed a Motion
for Reconsideration of the Resolution dated October 24, 1985.

The appellate court in a Resolution dated November 12, 1985
granted the motion for entry of judgment filed by private respondent. It directed the entry of judgment and
ordered the remand of the records of the case to the court of origin for
execution.

On November 14, 1985, petitioner, without waiting for the
resolution of the appellate court in the urgent motion for reconsideration it
filed on November 6, 1985, filed the instant petition to annul and set aside
the resolution of the appellate court dated October 24, 1985 which denied the
Motion for Reconsideration of its decision dated August 27, 1985.

In a motion dated November 21, 1985,
petitioner prayed for the issuance
of a temporary restraining order to enjoin
the appellate court from remanding the records of the case for execution of
judgment. The petitioner also filed a
Supplement to Petition for Certiorari, dated November 21, 1985.

In a Resolution
dated November 27, 1985, this Court, acting on the petition, required private respondent to file its Comment; granted the
prayer of the petitioner in his urgent
motion, and a temporary restraining order was issued enjoining the appellate
court from remanding the records of the case for execution of judgment.

Private respondent filed its COMMENT dated December 14, 1985.

In a Resolution dated January 27, 1986, the Court resolved to
give due course to the petition, and required the parties to submit their
memoranda. In compliance with the said
Resolution, the parties filed their respective memoranda.

On August 15, 1986, petitioner filed a Motion to Remand Records
to the Court of Appeals in view of the resolution of this Court dated May 30,
1986 in the Habaluyas case which reconsidered and set aside its decision dated
August 5, 1985 by giving it prospective application beginning one month after
the promulgation of said resolution. This motion was opposed by private respondent. On September 22, 1986, petitioner filed its Reply to Opposition
to which private respondent filed its rejoinder. In a Resolution dated December 3, 1986, the motion to remand records
was denied.

Petitioner’s Brief raised six (6) assignment of errors, to wit:

I.

THE IAC ERRED IN APPLYING THE NEW POLICY OF NOT GRANTING ANY
EXTENSION OF TIME TO FILE MOTION FOR RECONSIDERATION.

II.

THE  IAC ERRED IN RULING THAT
THE OBLIGATION OF RESPONDENT WAS LIMITED TO P4,072,682.13 NOTWITHSTANDING THE
FACT THAT THE DEED OF ASSIGNMENT
(THE CONTRACT SUED UPON) ITSELF EXPRESSLY AND REPEATEDLY SPEAKS OF RESPONDENT’S
OBLIGATIONS AS “THE AMOUNT OF P4,072,682.13 AS OF JUNE 30, 1980 PLUS
APPLICABLE INTEREST CHARGES ON OVERDUE ACCOUNT AND OTHER AVTURBO FUEL LIFTING
AND DELIVERIES THAT ASSIGNOR MAY FROM TIME TO TIME RECEIVE FROM THE
ASSIGNEE”.

III.

THE  IAC ERRED IN RULING THAT
THE DEED OF ASSIGNMENT SATISFIES THE REQUISITES OF DATION IN PAYMENT (WHICH HAS
THE EFFECT OF IMMEDIATE EXTINGUISHMENT OF THE OBLIGATION) DESPITE THE FACT THAT
SAID DEED OF ASSIGNMENT (1) COVERS FUTURE OBLIGATIONS FOR “APPLICABLE
INTEREST CHARGES ON OVER DUE ACCOUNT AND OTHER AVTURBO FUEL LIFTING AND
DELIVERIES THAT ASSIGNOR MAY FROM TIME TO TIME RECEIVE FROM ASSIGNEES” AND
(2) INCLUDES AN EXPRESS RESERVATION BY ASSIGNEE TO DEMAND FULL PAYMENT OF THE
OBLIGATIONS OF THE ASSIGNOR “IN CASE OF UNREASONABLE DELAY OR NON-RECEIPT
OF ASSIGNEE OF THE AFOREMENTIONED FUNDS AND/OR REFUND OF SPECIAL FUND IMPORT
PAYMENT FROM THE GOVERNMENT DUE
TO ANY CAUSE OR REASON WHATSOEVER”.

IV.

THE IAC ERRED IN FAILING TO TAKE INTO ACCOUNT THE CONTEMPORANEOUS AND SUBSEQUENT ACTS OF THE
PARTIES WHICH ALSO CLEARLY SHOW THAT THEY DID NOT INTEND THE DEED OF ASSIGNMENT
TO HAVE EFFECT OF DATION IN PAYMENT.

V.

IF THE DEED OF ASSIGNMENT HAD THE EFFECT OF A DATION IN PAYMENT,
THEN THE IAC ERRED IN NOT RULING THAT PETITIONER HAS A RIGHT TO RETAIN THE
ENTIRE CREDIT ASSIGNED TO IT IN LIEU OF PAYMENT OF RESPONDENT’S OBLIGATIONS
INSTEAD OF BEING REQUIRED TO RETURN PORTION OF THE CREDIT WHICH IS CLAIMED TO
BE IN EXCESS OF RESPONDENT’S OBLIGATION.

VI.

ASSUMING THAT PETITIONER IS LIABLE TO MAKE A RETURN OF A PORTION OF
THE CREDIT ASSIGNED, THE IAC ERRED IN AWARDING “INTEREST AT THE LEGAL RATE OF 14% PER ANNUM FROM THE
FILING OF THE COMPLAINT”.

We find merit in the instant petition.

The two vital issues presented to the Court for resolution are,
as follows:

1.  Whether or not the Urgent
Motion for Extension of Time to File a Motion for Reconsideration filed by petitioner on September 20, 1985, as
well as the Motion for Reconsideration filed on September 26, 1985 (within the
period of extension prayed for), may be validly granted; and

2. Whether or not the Deed of Assignment entered into by the
parties herein on July 31, 1980 constituted dacion en pago, as ruled by
the appellate court, such that the obligation is totally extinguished, hence
after said date, no interest and service charges could anymore be imposed on
private respondent, so that
petitioner was not legally authorized to deduct the amount of P510,550.63 as
interest and service charges on the unpaid and overdue accounts of private
respondent.

Anent the first issue, we rule in the affirmative.

We held in the case of Habaluyas
Enterprises, Inc., et. al. vs. Japson et. al. (138 SCRA 46 [1985], promulgated
August 5, 1985), that the “15-day period for appealing or for filing a
motion for reconsideration cannot be extended”. Subsequently, the Court, acting on respondent’s motion for
reconsideration in the same entitled case (142 SCRA 208 [1986]), restated and
clarified the rule on this point for the guidance of the Bench and Bar by
giving the rule prospective application in
its resolution dated May 30, 1986:

“After considering the able arguments of counsels for
petitioners and respondents, the Court resolved that the interest of justice
would be better served if the ruling in the original decision were applied
prospectively from the time herein stated. The reason is that it would be unfair to deprive parties of the right to
appeal simply because they availed themselves of a procedure which was not
expressly prohibited or allowed by the law or the Rules. On the otherhand, a motion for new trial or
reconsideration is not a
pre-requisite to an appeal, a petition for review or a petition for review on certiorari,
and since the purpose of the amendments above referred to is to expedite the
final disposition of cases, a strict but prospective application of the said
ruling is in order. Hence, for the
guidance of the Bench and Bar, the Court restates and clarifies the rules on
this point, as follows:

1.) Beginning one
month after the promulgation of this Resolution, the rule shall be strictly enforced that no
motion for extension of time to
file a motion for new trial or reconsideration may be filed with the Metropolitan or Municipal Trial
Courts, the Regional Trial Courts, and the Intermediate Appellate Court. Such a motion may be filed only in cases
pending with the Supreme Court as the court of last resort, which may in its
sound discretion either grant or deny the extension requested.”

In Singh vs. IAC, (148 SCRA 277 [1987]), this Court applying the
aforesaid ruling in the Habaluyas case,
held:

“In other words, there is a one month grace period from the
promulgation on May 30, 1986, of this Court’s Resolution in the clarificatory
Habaluyas case, or up to June 30,
1986, within which the rule barring extensions of time to file motions for new
trial or reconsideration is, as yet, not strictly enforceable (Bayaca vs. IAC,
G.R. No.74824, September 15, 1986).

“Since petitioners herein filed their Motion for Extension on
August 6, 1985, it was still within the grace period, which expired on June 30,
1986, and may still be allowed.”

Similarly, when petitioner herein filed its Motion for Extension of time to file motion for reconsideration on September 20, 1985, the said motion
was filed within the one-month grace period, which expired on June
30, 1986, and may still be allowed. Consequently, the Motion for Reconsideration filed by petitioner on September 26, 1985, was also filed on time.

With respect to the second issue, We rule that the Deed of
Assignment executed by the parties on July 31, 1980 is not a dation in payment
and did not totally extinguish respondent’s obligations as stated therein.

The then Intermediate Appellate Court ruled that the three (3)
requisites of dacion en pago* are
all present in the instant case, and concluded that the Deed of Assignment of
July 31, 1980 (Annex “C” of Partial Stipulation of Facts) constitutes
a dacion in payment provided for in Article 1245** of the
Civil Code which has the effect of extinguishing the obligation, thus supporting the claim of private respondent for the return of the amount retained
by petitioner.

This Court, speaking of the concept of dation in payment, in the
case of Lopez vs. Court of Appeals (114 SCRA 671, 685 [1982], among others,
stated:

“‘The dation in payment extinguishes the obligation to the
extent of the value of the thing delivered, either as agreed upon by the
parties or as may be proved, unless the parties by agreement, express or
implied, or by their silence, consider the thing as equivalent to the
obligation, in which case the obligation is totally extinguished.’ (8 Manresa
324; 3 Valverde 174 fn.)”

From the above, it is clear that a dation in payment does not
necessarily mean total extinguishment of the obligation. The obligation is totally extinguished only
when the parties, by agreement, express or implied, or by their silence, consider the thing as equivalent to
the obligation.

In the instant case, the then Intermediate Appellate Court failed to take into account the
following express recitals of the Deed of Assignment –

“That Whereas, ASSIGNOR has an outstanding obligation with
ASSIGNEE in the amount of P4,072,682.13 as of June 30, 1980, plus any
applicable interest on overdue account. (p. 2, Deed of Assignment)

“Now therefore in consideration of the foregoing premises, ASSIGNOR
by virtue of these presents, does hereby irrevocably assign and transfer unto
ASSIGNEE any and all funds and/or Refund of Special Fund Payments, including
all its rights and benefits accruing out of the same, that ASSIGNOR might be
entitled to, by virtue of and pursuant to the decision in BOE Case No. 80-123, in
payment of ASSIGNOR’s outstanding obligation plus any applicable interest
charges on overdue account and other
avturbo fuel lifting and deli­veries that ASSIGNOR may from time to time
receive from the ASSIGNEE, and ASSIGNEE does hereby ac­cepts such assignment in
its favor.” (p. 2, Deed of Assignment) (Underscoring supplied)

Hence, it could easily be seen that the Deed of Assignment speaks
of three (3) obligations – (1) the outstanding obligation of P4,072,682.13 as
of June 30, 1980; (2) the applicable interest charges on overdue accounts; and
(3) the other avturbo fuel lifting and deliveries that assignor (private
respondent) may from time to time receive from assignee (Petitioner). As aptly argued by petitioner, if it were
the intention of the parties to limit or fix respondent’s obligation to
P4,072,682.13, they should have so stated and there would have been no need for
them to qualify the statement of said amount with the clause “as of June
30, 1980 plus any applicable interest charges on overdue account” and the
clause “and other avturbo
fuel lifting and deliveries that ASSIGNOR may from time to time receive from
the ASSIGNEE”. The terms of the
Deed of Assignment being clear, the literal meaning of its stipulations should
control (Art. 1370, Civil Code). In the
construction of an instrument where there are several provisions or
particulars, such a construction is, if possible, to be adopted as will give
effect to all (Rule 130, Sec. 9, Rules of Court).

Likewise, the then Intermediate Appellate Court failed to take
into consideration the subsequent acts of the parties which clearly show that
they did not intend the Deed of Assignment to totally extinguish the obligation
– (1) After the execution of the Deed of Assignment on July 31, 1980,
petitioner continued to charge respondent with interest on its overdue account
up to January 31, 1981 (Annexes “H”, “I”, “J” and
“K” of the Partial Stipulation of Facts). This was pursuant to the Deed of Assign­ment which provides for
respondent’s obligation for “applicable interest charges on overdue
account”. The charges for interest
were made every month and not
once did respondent question or take exception to the interest; and (2) In its
letter of February 16, 1981 (Annex “J”, Partial Stipulation of Facts), respondent addressed the
following request to petitioner:

“Moreover, we would also like to request for a consideration in the following:

1. Interest charges be limited up to December 31, 1980 only; and

2. Reduction of 2% on 18% interest rate p.a.

“We are hoping for your usual kind conside­ration on this
matter.”

In order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered (Art. 1253,
Civil Code). The foregoing subsequent
acts of the parties clearly show that they did not intend the Deed of Assignment to have the effect of
totally extinguishing the obligations of private respondent without payment of
the applicable interest charges on the overdue account.

Finally, the payment of applicable interest charges on overdue
account, separate from the principal obligation of P4,072,682.13 was expressly
stipulated in the Deed of Assignment. The law provides that “if the debt produces interest, payment of
the principal shall not be deemed to have been made until the interests have
been covered.” (Art. 1253, Civil Code).

WHEREFORE, the decision of the then Intermediate Appellate
Court dated August 27, 1985 is hereby SET ASIDE, and the November 7, 1983 decision of the trial court is
REINSTATED.

SO ORDERED.

Gutierrez, Jr., Acting C.J., (Chairman), Davide, Jr., Romero, and Melo, JJ., concur.

* s/s 263. same; requisites. In order that there be a valid dation in
payment, the following are the requisites: (1) There must be the performance of
the prestation in lieu of payment (animo
solvendi) which may consist in the delivery of a corporeal thing or a real right or a
credit against the third person; (2) There must be some difference between the
prestation due and that which is given in substitution (aliud pro alio); (3) There must be an
agreement between the creditor and debtor that the obligation is immediately
extinguished by reason of the performance of a prestation different from that
due.” (3 Castan,
Vol. I, 8th Ed., page 283 cited in IV Caguioa ‘Comments and Cases in Civil
Law’, s/s263, page 325; underscoring supplied)

** Art. 1245. Dation in payment,
whereby property is alienated to the creditor in satisfaction of a debt in
money, shall be governed by the law of sales.