G.R. No. L-22254; August 8, 1967
QUIRICO DEL MAR, petitioner-appellant, vs. REHABILITATION FINANCE CORPORATION, now the DEVELOPMENT BANK OF THE PHILIPPINES, respondent-appellee.

FACTS

The Rehabilitation Finance Corporation (RFC), now the Development Bank of the Philippines, granted a loan to Quirico del Mar. As of March 26, 1957, his outstanding obligation was P4,423.04. Del Mar offered to pay this debt using a backpay acknowledgment certificate under Republic Act 897. RFC refused to accept the certificate. Del Mar filed a suit (Civil Case No. R-5324) to compel acceptance, and the court ordered RFC to accept the certificate as payment, a decision which became final. Del Mar’s backpay certificate had a face value of about P20,000. In accepting it for the P4,423.04 debt, RFC applied a discount at the rate of 2% per annum based on the certificate’s remaining maturity period of 315 months, resulting in a total assignment of P9,311.66 from the certificate to cover the loan. Del Mar, contesting RFC’s authority to impose this discount, filed another suit (Civil Case No. R-6455) to compel acceptance without discount. The Court of First Instance of Cebu dismissed his petition, ruling that Republic Act 897 authorized the discount. Del Mar appealed to the Supreme Court.

ISSUE

Whether the Rehabilitation Finance Corporation (now DBP) is legally authorized to charge a discount on a backpay acknowledgment certificate when it is endorsed to pay an obligation before its maturity date.

RULING

Yes. The Supreme Court affirmed the lower court’s decision. Republic Act 897, which amended Republic Act 304, explicitly provides that a backpay certificate “shall not be transferred or ceded by indorsement more than once, nor at a discount rate exceeding two per centum per annum.” The law therefore permits a discount not exceeding 2% per annum when such a non-negotiable certificate is endorsed before maturity to settle an obligation. The reason for the discount is that the certificate is not yet due and payable; it matures thirty years from issuance, so until that time, it is not worth its full face value. The transaction in question involves an endorsement before maturity, not a redemption at maturity. The Court rejected Del Mar’s contention that the rule on omnibus motion barred RFC from raising the discount issue, as the right to charge a discount was not in issue in the first suit. The Court also held that compensation under the Civil Code is inapplicable because it requires both debts to be due, whereas the government’s liability to redeem the backpay certificate was not yet due while Del Mar’s debt to RFC was due.