G.R. No. 151903 ; October 9, 2009
MANUEL GO CINCO and ARACELI S. GO CINCO, Petitioners, vs. COURT OF APPEALS, ESTER SERVACIO and MAASIN TRADERS LENDING CORPORATION, Respondents.

FACTS

Petitioners, spouses Manuel and Araceli Go Cinco, obtained a loan from respondent Maasin Traders Lending Corporation (MTLC), secured by a real estate mortgage. To pay this loan, they secured a new loan from the Philippine National Bank (PNB), offering the same properties as collateral. PNB approved the loan but required the cancellation of the MTLC mortgage first. Manuel executed a Special Power of Attorney (SPA) authorizing MTLC’s President, Ester Servacio, to collect the PNB loan proceeds to settle the MTLC obligation. When Servacio went to PNB, the bank required her to sign a deed of release of the MTLC mortgage before releasing the funds. Servacio refused, outraged that the same properties were used as collateral for the new loan. MTLC subsequently initiated foreclosure proceedings.
The spouses Go Cinco filed an action for specific performance and damages, arguing that the assignment of the PNB loan proceeds constituted a valid tender of payment that extinguished their obligation, making the foreclosure unjustified. The Regional Trial Court ruled in their favor, but the Court of Appeals reversed the decision, holding that no payment had actually been made since Servacio did not collect the funds, and the SPA only authorized collection, not an agreement to apply the proceeds to the debt.

ISSUE

Whether the act of the petitioners in obtaining a new loan from PNB and authorizing the creditor to collect its proceeds constitutes a valid tender of payment that extinguishes their obligation to MTLC, thereby rendering the foreclosure improper.

RULING

No. The Supreme Court denied the petition and affirmed the Court of Appeals. Payment requires the delivery of money or the performance of an obligation. The mere authorization to collect funds from a third party (PNB), which were never actually received by the creditor, does not constitute payment. The SPA executed by Manuel Go Cinco only empowered Servacio to withdraw the loan proceeds; it did not embody an agreement that such collection would automatically extinguish the MTLC debt. Since the creditor, Servacio, was not bound to accept a different arrangement—specifically, to cancel her mortgage before actually receiving the cash—her refusal was justified. The obligation to MTLC remained unpaid. Consequently, MTLC had the right to foreclose on the mortgage. The Court emphasized that a debtor cannot compel a creditor to accept a payment through a specific mode or from a third party without the creditor’s consent, and the debtor’s good faith in securing a new loan does not, by itself, amount to payment of the old debt.