G.R. No. L-47461; April 8, 1941
TIRSO GARCIA, as receiver of the Merchantile Bank of China, plaintiff-appellee, vs. ARSENIA ENRIQUEZ, defendant-appellant.

FACTS

On December 4, 1934, the Mercantile Bank of China filed a complaint for the foreclosure of a mortgage executed by defendant Arsenia Enriquez. The mortgage secured general credit facilities not exceeding P60,000. The trial court initially dismissed the complaint for failure to prove a breach. The Supreme Court reversed and remanded the case for a new trial to determine: (a) the total indebtedness secured by the mortgage, and (b) whether the amount of P19,866.14, covered by 36 checks issued by the defendant, was chargeable to a separate account with the bank. After the new trial, the lower court rendered a judgment ordering the defendant to pay an aggregate sum of P113,586.08 (comprising amounts from her overdraft account, acceptance account, an additional account, and attorney’s fees) with interest, and decreed the foreclosure and sale of the mortgaged property if payment was not made within three months. The defendant appealed.

ISSUE

1. Whether the amount of P19,866.14 covered by the 36 checks should be applied to the defendant’s overdraft account or her acceptance account.
2. Whether the balance of the acceptance account (P3,976.76) is covered by the deed of mortgage and can be recovered in the foreclosure suit.

RULING

1. On the application of the P19,866.14 payment: The Supreme Court ruled that the amount was properly applied to the defendant’s acceptance account. The evidence showed the bank charged this amount to her acceptance account (which consisted of drafts drawn against her by foreign companies and paid by the bank), sent her monthly statements specifying this application, and the defendant signed these statements approving the status of her account. Under Article 1172, second paragraph, of the Civil Code, a debtor who accepts a receipt from the creditor stating the application of a payment cannot contest it, barring grounds to void the contract. The defendant’s argument, citing Article 1174 of the Civil Code (that payment should be applied to the more burdensome debt—her overdraft account), was rejected because Article 1174 applies only when payment cannot be applied under preceding rules, such as Article 1172.
2. On the recovery of the acceptance account balance: The Court held there was sufficient ground to consider the acceptance account as included in the “general credit facilities” covered by the mortgage. Even assuming it was not included, the claim for this separate account was properly joined in the foreclosure suit. Any surplus from the sale of the mortgaged property could be applied to this debt, as there were no junior encumbrances.
The judgment of the lower court was affirmed, with costs against the appellant.