G.R. No. 76902 ; January 30, 1990
LAND BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS, SPS. RAFAEL SUAREZ and AFRICA G. SUAREZ, respondents.

FACTS

Private respondents, former landowners, received three Land Bank Interim Bond Certificates as partial payment for their agricultural lands under Operation Land Transfer. These registered bonds bore 6% annual interest, payable semi-annually. On March 17, 1975, the spouses requested the conversion of their registered bonds into bearer bonds to facilitate transfer to third parties. They filled out LBP Form No. 64 for this purpose and, on their own initiative, caused a clerk to type a unilateral notation stating: “NOTE: It is understood that the interest from November 21, 1974 to March 17, 1975 shall accrue to the transferor.” The forms were processed and signed by the bank’s manager, and new bearer bonds were issued. The old registered bonds were retired.
On the next interest payment date, May 20, 1975, the spouses demanded payment of the interest accrued from November 21, 1974, to March 17, 1975, amounting to P11,877.24. The Land Bank refused, citing its internal guidelines requiring the physical presentation of the bond certificates for interest payment. Since the spouses no longer held the bearer bonds (presumably already transferred), they could not comply. The spouses then filed a complaint to compel payment.

ISSUE

Whether the Land Bank of the Philippines is liable to pay the accrued interest to the respondent spouses based on the unilateral notation they inserted in the conversion forms.

RULING

The Supreme Court ruled in favor of the Land Bank, reversing the Court of Appeals. The unilateral notation inserted by the spouses into LBP Form No. 64 did not create a binding obligation on the bank to pay them the interest directly. Legally, the notation was merely a private allocation instruction between the transferor (spouses) and their unknown transferees concerning how the interest for the full semi-annual period (Nov. 21, 1974, to May 20, 1975) should be split. It was not an undertaking by the bank to alter the fundamental terms of the bonds.
The bank’s approval and signing of the form pertained to the administrative act of conversion, not to an acceptance of the substantive condition in the notation. The terms of the bearer bonds, which governed payment, required interest to be paid to the holder or bearer. The spouses, having parted with the bonds through conversion and implied transfer, ceased to be the holders entitled to demand payment. The bank’s internal guideline requiring presentation of the certificate was a valid procedural safeguard consistent with the nature of bearer instruments. No novation of the bond agreement occurred, as the notation was not incorporated into the new bond certificates and did not meet the legal requisites for novation. Therefore, the bank correctly refused payment absent presentation of the bonds.