TITLE:

MANUEL GO CINCO and ARACELI S. GO CINCO, petitioners vs. COURT OF

APPEALS, ESTER SERVACIO and MAASIN TRADERS LENDING CORPORATION,
respondents.
FACTS:

Manuel Cinco, petitioner obtained a commercial loan in the amount 700,000.00 from
Maasin Traders Lending Corporation (MTLC), respondent. The loan was evidenced by
the promissory note, and secured by a real estate mortgage over the spouses Cinco’s
land and 4-storey building. To pay the loan in favor of MTLC, the spouses Cinco applied
for a loan with the Philippine National Bank (PNB), and offered the same properties they
previously mortgage to MTLC.

The PNB approved the P1.3M loan with a condition that it would be released on the
cancellation of the mortgage in favor of MTLC. Ester, the MTLC’S president, upon
knowing that the same properties mortgaged to MTLC was used as collateral for the PNB
loan refused to sign the deed of release/cancellation and did not collect the P1.3 M loan
proceeds. Outraged, Ester refused the deed and did not collect the 1.3 Million. Ester
instituted foreclosure proceeding. To prevent the foreclosure, the spouses Cinco filed an
action for specific performance, damages, and preliminary injunction. RTC ruled in favor
of the spouses Go Cinco. It held that creditors cannot unreasonably prevent payment or
performance of obligation to the damage and prejudice of debtors who may stand liable
for payment of higher interest rates. CA reversed the RTCs decision, hence this petition.
ISSUE:
Whether the loan due the MTLC had been extinguished?
HELD:

No. Under Article 1256, if the creditor to whom tender of payment has been made refuses
without just cause to accept it, the debtor shall be released from responsibility by the
consignation of the thing or sum due. So, while Ester’s refusal was unjustified and
unreasonable, we cannot agree with Manuel’s position that this refusal had the effect of
payment that extinguished his obligation to MTLC. Simply speaking, a refusal without just
cause is not equivalent to payment; to have the effect of payment and the consequent
extinguishment of the obligation to pay, the law requires the companion acts of tender of
payment and consignation.

Nonetheless, the SPA stood as an authority to collect the proceeds of the already-
approved PNB loan that, upon receipt by Ester, would have constituted as payment of the
MTLC loan. The Court agrees with Manuel that Ester’s refusal of the payment was without
basis. Under these circumstances, we hold that while no completed tender of payment
and consignation took place sufficient to constitute payment, the spouses Go Cinco duly
established that they have legitimately secured a means of paying off their loan with
MTLC; they were only prevented from doing so by the unjust refusal of Ester to accept
the proceeds of the PNB loan through her refusal to execute the release of the mortgage
on the properties mortgaged to MTLC. Since payment was available and was unjustifiably
refused, justice and equity demand that the spouses Go Cinco be freed from the
obligation to pay interest on the outstanding amount from the time the unjust refusal took
place, they would not have been liable for any interest from the time tender of payment
was made if the payment had only been accepted.