G.R. No. L-5942; May 14, 1954
REHABILITATION FINANCE CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS, ESTELITO MADRID and JESUS ANDUIZA, respondents.

FACTS

On October 31, 1941, Quintana Cano and Jesus de Anduiza executed a promissory note in favor of the Agricultural and Industrial Bank (predecessor of the Rehabilitation Finance Corporation or RFC) for P13,800.00, payable on or before October 31, 1951, in ten annual installments. They failed to pay the amortizations due in 1942 and 1943. During the Japanese occupation, Estelito Madrid, who learned of this default, went to the Bank’s Manila office in October 1944 and paid a total of P16,425.17 (P10,000 on October 23 and P6,425.17 on October 30) to settle the obligation. Madrid later demanded reimbursement from Anduiza, who refused. The Bank also refused to cancel the mortgage, alleging the payment was made without Anduiza’s authority and was accepted only as a deposit pending submission of such authority, and that Anduiza had later repudiated it and made a partial payment of P2,000 in 1948. Madrid filed an action seeking a declaration that the indebtedness was paid, an order for the Bank to cancel the mortgage, and a judgment against Anduiza for the amount paid. The trial court initially ruled for Madrid but later dismissed his complaint. The Court of Appeals reversed the trial court, ordering the RFC to cancel the mortgage and Anduiza to pay Madrid. The RFC appealed to the Supreme Court.

ISSUE

Whether the payment made by Estelito Madrid to the Bank, without the knowledge and consent of the debtor Jesus de Anduiza and allegedly against his will, extinguished the mortgage obligation and obligated Anduiza to reimburse Madrid.

RULING

Yes. The Supreme Court affirmed the decision of the Court of Appeals. Applying Article 1158 of the Spanish Civil Code (then in force), the Court held that payment may be made by any person, whether the debtor knows and approves of it or not, and even if the debtor opposes it. Such payment extinguishes the obligation as to the creditor. The Bank’s acceptance of the payment, despite any conditions it attached, effectively discharged the debt. The fact that the obligation was payable in installments and not fully due until 1951 did not preclude full payment earlier, as the note allowed payment “on or before” the maturity date. The debtor’s (Anduiza’s) opposition, if any, must be shown before or at the time of payment, not afterward; his subsequent repudiation did not invalidate the payment. The question of whether the payment was beneficial to the debtor and the limitation on the payor’s right to recover (i.e., only to the extent of benefit) is a defense available only to the debtor, not to the Bank. The Court found the payment was in fact beneficial to Anduiza as it extinguished his debt. Therefore, the mortgage must be cancelled, and Anduiza must reimburse Madrid for the amount paid.