G.R. No. 104819 July 20, 1998
Chonney Lim, petitioner, vs. Court of Appeals, Lea Castro Whelan and Keith Lawrence Whelan, respondents.

FACTS

On March 24, 1984, petitioner Chonney Lim and respondent Lea Whelan executed a conditional deed of sale for a parcel of land for P600,000.00 or US$30,000.00. Whelan paid an earnest money of US$9,000.00 and occupied the premises. Subsequently, Whelan allegedly gave Lim US$8,000.00 in cash, a bank draft for P141,000.00, and a PCI Bank check for P17,800.00. A deed of absolute sale was signed on June 21, 1984. Lim later sent a telegram demanding Whelan to vacate and filed an ejectment complaint, claiming the US$8,000.00 was not paid, the bank draft was dishonored, and the check bounced. Whelan countered that she had fully paid and, upon discovering Lim had not paid the mortgage loan with BPI (P210,297.70) and the capital gains tax (P14,994.00) as promised in the deed, she paid these obligations herself without Lim’s knowledge and stopped payment on her draft and check. She also incurred renovation and repair expenses. Lim filed an action for rescission of contract (Civil Case No. 423-R), while Whelan filed an action for specific performance (Civil Case No. 496-R). The cases were consolidated.

ISSUE

The basic issue is whether Chonney Lim has been fully paid for the property, which hinges on the validity of Lea Whelan’s payments, including her payment of Lim’s mortgage loan and capital gains tax without his knowledge.

RULING

The Supreme Court affirmed the decision of the Court of Appeals, which upheld the Regional Trial Court’s ruling in favor of Lea Whelan. The Court held that Whelan had indeed fully paid Lim for the property. The trial court found credible Whelan’s claim of payment, noting that Lim, as a businessman, would not have signed the deed of absolute sale binding himself to deliver the title free of encumbrances and tax liabilities unless he had been fully paid. The Court rejected Lim’s argument that the dishonored bank draft and check constituted non-payment, as Whelan rightfully stopped payment after paying Lim’s larger mortgage debt to protect her interest. The Court applied Article 1236 of the Civil Code, stating that payment by another without the debtor’s knowledge is recoverable insofar as it has been beneficial to the debtor. Whelan’s payment of the mortgage and capital gains tax benefited Lim by relieving him of these obligations. Therefore, Lim was not entitled to rescission, and Whelan was entitled to specific performance, including the delivery of the title.