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Domingo Bautista vs Court of Appeals
Obligations and Contract – Extinguished Obligation Via Payment Cannot Be Revived
From 1951 to 1952, Philippine Ready-Mixed Concrete Co., Inc. (PRMCCI) undertook to build roads for the government. PRMCCI is to get its payment from the Bureau of Public Works. On the other hand, Domingo Bautista is a contractor which provides construction materials. Bautista was contracted by PRMCCI to be its provider of construction materials.
From September 1951 to January 1952, Bautista provided materials for the construction of the roads, one of the roads being built was Highway 54. At the end of January 1952, he sued PRMCCI for the latter’s failure to pay. PRMCCI acknowledged its indebtedness and it entered into a compromise agreement with Bautista which provides that it is authorizing Bautista to receive checks from the Bureau of Public Works as payment. The total amount of the checks would equal to P140,000.00 – the total amount of the indebtedness. The compromise agreement was approved by the judge and Bautista did receive his checks as agreed.
From February 1952 to March 1952, Bautista continued supplying materials worth P37k for the construction of the roads. But he was again unpaid so in April 1952, he again sued PRMCCI. He then received a letter from the Bureau of Public Works that he can go after the P313k bond posted by PRMCCI to ensure the construction of the roads of Highway 54 among others.
He then filed a new case against PRMCCI, this time impleading the surety company which posted the bond, and it amended its claim from P37k to P48k. The P48k, according to Bautista, represents unpaid debt worth P40k from January 1952 and the remaining P8k is for the unpaid debt from February to March 1952.
ISSUE: Whether or not Bautista’s claim is valid.
HELD: No. To allow Bautista’s claim would be a violation of the compromise agreement which settled PRMCCI’s indebtedness from September 1951 to January 1952. The debt from said period is already settled by operation of the compromise agreement. What Bautista did is to apply payments intended to debt incurred from September 1951 to January 1952 to debt incurred after the compromise agreement i.e. February to March 1952. As can deduced from the facts, Bautista initially applied the check payments to debts incurred from September 1951 to January 1952. But when he received the letter from the Bureau of Public Works, he re-appropriated the check payments to debts incurred after January 1952 which made it appear that PRMCCI’ debt from September 1951 to January 1952 is not fully paid. Bautista did this to take advantage of the security of the bond. Bautista, however, cannot, by the simple expedient of changing the application of payments, revive an obligation that had been legally extinguished by payment.
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