BPI V Spouses Royeca

BPI v Spouses Royeca
FACTS:
On August 23, 1993, spouses Reynaldo and Victoria Royecaexecuted and delivered to Toyota Shaw a
Promissory Note for 577,008.00, payable in 48 equal monthly installments of 12,021.00, with a
maturity date of August 18, 1997 and with penalty of 3% for every month or fraction of a month
that an installment remains unpaid.
Toyota, with notice to respondents, executed a Deed if Assignment transferring all its rights, title, and
interest in Chattel Mortgage to Far East Bankand Trust Company (FEBTC)The respondents allegedly
failed to pay four (4) monthly amortizations from May 1997 to August 18, 1997 which prompted
FEBTC to send a formal demand to respondents on March 14, 2000 asking for the payment thereof plus
penalty. Respondents refused to pay contending that they already paid their obligation to FEBTC.
On April 19, 2000, FEBTC filed a complaint for Replevin and Damages praying for the delivery of the
vehicle, with an alternative prayer for the payment of 48,084.00 plus interest and/or late payments
charges at the rate of 36% per annum from May 18, 1997 until fully paid. The complaint was later
amended to substitute BPI as plaintiff when it merged and absorbed FEBTC.
In their Answer, respondents alleged that on May 20, 1997, they delivered to Auto Financing
Department of FEBTC eight (8) postdated checks in different amounts totaling 97,281.78, with an
Acknowledgement Receipt from the latter.
The respondents further averred that they did not receive any notice from drawee banks or from
FEBTC that said checks were dishonored. They explained that, considering this and the fact that the
checks were issued three years ago, they believed in good faith that their obligation had already been
fully paid.
During the trial, an Account Analyst from BPI admitted that they received eight checks from
respondents, two of which weredishonored and the remaining two were not deposited anymore due
to the previous dishonored checks.
After deducting the payments, the total outstanding balance of the obligation was 48,084, which
represented the last four monthly installments.
RTC set aside the decision of MeTC and ordered respondents to pay the amount claimed by
petitioner. CA decided in favor of respondents. Hence, this petition for review
ISSUES:
1. Whether tender of checks constitutes payment.
HELD:
No. Settled is the rule that payment must be made in legal tender. A check is not legal tender
and, therefore, cannot constitute a valid tender of payment. Since a negotiable instrument is only
a substitute for money and not money, the delivery of such an instrument does not, by itself, operate
as payment. Mere delivery of checks does not discharge the obligation under a judgment. The
obligation is not extinguished and remains suspended until the payment by commercial document is
actually realized.
Because of failure of the respondents to present sufficient proof of payment, it was no longer necessary
for the petitioner to prove non-payment, particularly proof that the checks were dishonored.
A notice of dishonor is required only to preserve the right of the payee to recover on the checks. It
should be noted that petitioner, as payee, did not have legal obligation to inform the respondents of
the dishonor of the checks. It preserves liability of the drawer and the indorsers on the check,
otherwise, if the payee fails to give notice to them, they are discharged from their liability
thereon, and the payee is precluded from enforcing payment on the check. The respondents, therefore,
cannot fault the petitioner for not notifying them of the non-payment of the checks because
whatever rights were transgressed by such omission belonged only to the petitioner.
A promissory note in the hands of the creditor is a proof of indebtedness rather than proof of payment.
The petitioner’s possession of the documents pertaining to the obligation strongly buttresses its claim
that the obligation has not been extinguished. The creditor’s possession of the evidence of debt is proof
that the debt has not been discharged.

BPI V Spouses Royeca

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BPI v Spouses Royeca

1. Whether tender of checks constitutes payment.

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