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Far East Bank & Trust v. Diaz Realty Inc.

G.R. No. 138588, August 23, 2001

1. Diaz and Co. obtained a loan from Pacific Banking Corp. in 1974 in the amount of
P720,000 at 12% interest p.a. which was increased thereafter. The said loan was secured
with a real estate mortgage over two parcels of land owned by Diaz Realty, herein
respondent. Subsequently, the loan account was purchased by the petitioner Far East Bank
(FEBTC). Two years after, the respondent through its President inquired about its obligation
and upon learning of the outstanding obligation, it tendered payment in the form of an
Interbank check in the amount of P1,450,000 in order to avoid the further imposition of
interests. The payment was with a notation for the full settlement of the obligation.
2. The petitioner accepted the check but it alleged in its defense that it was merely a deposit.
When the petitioner refused to release the mortgage, the respondent filed a suit. The lower
court ruled that there was a valid tender of payment and ordered the petitioner to cancel the
mortgage. Upon appeal, the appellate court affirmed the decision.
Issue: Whether or not there was a valid tender of payment to extinguish the
obligation of the respondent
RULING: Yes. Although jurisprudence tells us that a check is not a legal tender and a
creditor may validly refuse it, this dictum does not prevent a creditor from accepting a check
as payment. Herein, the petitioner accepted the check and the same was cleared.
A tender of payment is the definitive act of of offering the creditor what is due him or her,
together with the demand that he accepts it. More important is that there must be a
concurrence of intent, ability and capability to make good such offer, and must be absolute
and must cover the amount due. The acts of the respondent manifest its intent, ability and
capability. Hence, there was a valid tender of payment.
Meanwhile, the transfer of credit from Pacific Bank to the petitioner did not involve an
effective novation but an assignment of credit. As such, the petitioner has the right to collect
the full value of the credit from the respondent subject to the conditions of the promissory
note previously executed.