Topic: Application of Payments; Art.

1252 o Unsatisfied, Liggett then appealed, but judgment was

just affirmed and thus ruled that the proceeds of the
LIGGETT & MYERS v. ASSOCIATED INSURANCE sale of the cigarettes should first be applied to the
internal revenue taxes, payment of which was
Facts: guaranteed by a bond

o Petitioner Liggett and Myers entered into an Issue:

agreement with P.C. Ailmal that the former would WON it was correctly upheld that the proceeds of the sale of
advance to the latter 66 cases of Chesterfield cigarettes which constitute as partial payment should first
cigarettes (taxes pre-paid) on the condition that be applied to the internal revenue taxes
Ailmal would return an equal quantity of fresh
Chesterfield cigarettes, tax-free, upon arrival of his Which debt should the amount be applied
own order from Liggetts office in New York
o To guarantee the payment of IR taxes, Ailmal and Held:
respondent Associated Insurance and Surety Co. The issue of when of two obligations, the secured or the
executed a bond in favor of Liggett. (P14,520) unsecured, is more onerous to the debtor, would only be
o When the shipment arrived, Ailmal failed to pay the decisive where payment can not be applied in accordance
corresponding exchange tax on his letter of credit so with the rules immediately preceding Art. 1254;
Liggett was compelled to remit the sum thereof to 1252, the exercise of the exclusive right of the debtor to
avoid delay in the processing of documents make application of the payment, if the same has not been
o The latter now is demanding for reimbursement done, or to modify what has been stated, provided that he
o Ailmal asked for a 60-day extension, although after it obtains in every cases the acceptance of the debtor
had lapsed, the latter still failed to settle the expressly or tacitly
obligation
o Liggett instituted an action demanding Ailmal to (1) Here, the debtor has the right of choice on where to apply
deliver 66 cases of Chesterfield cigarettes in good the payment, initially, the proceeds were intended for partial
condition, (2) to pay the taxes thereon, (3) and all payment of the 66 cases of cigarettes, contrary to what the
other fees incidental thereon respondents were contending that the bond should be paid
o To minimize damages that might result from the since it has the nature of a lien, therefore more onerous;
prolonged storage of cigarettes, plaintiff paid the BULLSHIT
required taxes, withdrew the merchandise to the
warehouse and sold it
o That the proceeds of the sale be applied as partial
payment of Ailmals obligation to deliver to plaintiff
66 cases of fresh Chesterfield cigarettes;
o 15,664 was collected from the sale since 61 cases
were the only ones who were in good condition plus
the fact that they were sold in a much lower price,
which fell short of the obligation
o Lower court ruled that Ailmal was not liable to pay
the indemnity bond so he was of a 10,000-difference
only
Topic: Art. 1253

MAGDALENA ESTATES v. RODRIGUEZ
Facts:
The appellants bought from the appellee a parcel of
land in QC.
In view of an unpaid balance of P5,000, the
appellants executed a promissory note.
The appellants and the Luzon Surety Co, Inc.
executed a bond in favor of the appellee.
When the obligation of the appellants became due
and demandable, Luzon Surety Co. paid to appellee
P5,000.
Subsequently the appellee demanded from the
appellants the payment of P655.89 corresponding to
the alleged accumulated interests on the principal of
P5,000.00.
Appellants refused to pay interest.
Appellee filed a suit in the Municipal Court of Manila
to enforce the collection.
The Municipal Court rendered judgment in favor of
the appellee and ordered the appellants to pay
appellee P655.89 with interest at legal rate from
November 10, 1958 (date of the filing of complaint)
Appellants appealed to CFI - Manila, which affirmed
the decision of the Municipal Court.
Appellants defenses:
o The pleadings do not show that there was
demand made by the appellee for the
payment of accrued interest.
o By demanding payment from the surety,
appellee accepted unqualifiedly the amount of
P5,000.00 as performance by the obligor
and/or obligors of the obligation in its favor.
o The unqualified acceptance of payment made
by the Luzon Surety Co., Inc. of P5,000.00 or
only the amount of the principal obligation,
without exercising its right to apply a portion
of P655.89 to the payment of the alleged
interest due despite its presumed knowledge
of its right to do so, the appellee showed that
it waived or condoned the interests due.
Issue: WoN the appellee waived or condoned the interests
due
NO
The appellee did not protest when it accepted the
payment of P5,000.00 because it knew that that was
the complete amount undertaken by the surety as
appearing in the contract. The liability of a surety is
not extended, by implication, beyond the terms of his
contract.
(On application of payments) Appellants are relying
on Article 1253 of the Civil Code, but the rules
contained in Articles 1252 to 1254 of the Civil Code
apply to a person owing several debts of the same
kind of a single creditor. They cannot be made
applicable to a person whose obligation as a mere
surety is both contingent and singular.
(On novation) The mere fact that the creditor
receives a guaranty or accepts payments from a third
person who has agreed to assume the obligation,
when there is no agreement that the first debtor shall
be released from responsibility does not constitute a
novation, and the creditor can still enforce the
obligation against the original debtor.
The surety bod is not a new and separate contract
but an accessory of the promissory note.