Dear Atty. Gab

Subject: Musta Atty! Urgent question about my condo final payment.

I hope you can shed some light on a very stressful situation I’m in. I entered into a Contract to Sell for a condominium unit in Azure North, San Fernando, Pampanga, with XYZ Developers Inc. I diligently paid the total principal amount of Php 3,500,000.00 over three years. After the principal was settled, there was a bit of a back-and-forth regarding the computation of interest and some minor penalties due to a couple of amortization payments that were a few days late before the principal was fully paid.

My accountant helped me compute this, and we arrived at Php 180,000.00. I discussed this with Mr. De Leon, the project manager, who, after reviewing my records, verbally agreed that Php 180,000.00 seemed to be the correct remaining balance. He even said, “Okay, that sounds about right, let’s settle that.” A few weeks later, I received a statement from XYZ Developers claiming I owed Php 420,000.00! I was shocked. I tried to contact Mr. De Leon but was told he was on extended leave. However, during our last meeting, he had introduced me to a Ms. Reyes, saying she was handling the final account settlements for our phase of the project and I could coordinate payments with her. Trusting this, I paid the Php 180,000.00 to Ms. Reyes at their site office and got an official-looking receipt from her with the XYZ logo.

Now, XYZ Developers has sent me a demand letter for Php 420,000.00, completely ignoring my payment to Ms. Reyes and denying she was authorized to receive such a large final payment. They’re threatening legal action if I don’t pay up. I’m so confused and worried. Was my payment to Ms. Reyes valid? What happens if they sue me? I didn’t specifically mention the payment in my initial quick email reply to their first informal query as I was still gathering my thoughts; I just reiterated Mr. De Leon’s agreement on the P180,000. Please help me understand my rights.

Sincerely,
Beatrice Palad

Dear Beatrice,

Thank you for reaching out. I understand this situation with XYZ Developers is causing you significant concern, especially after you believed the matter of your final balance was settled. It’s indeed a tricky position when a payment made in good faith is questioned.

The core issues here revolve around whether your payment to Ms. Reyes can be considered a valid extinguishment of your obligation to XYZ Developers, and how the fact of this payment can be established, particularly if it wasn’t initially formally raised as a defense. Generally, Philippine law holds that payment made to a person authorized by the creditor to receive it is valid and extinguishes the debt. This authorization doesn’t always have to be in writing; it can be implied or arise from circumstances creating what’s known as “apparent authority.” Furthermore, even if a defense like payment isn’t initially pleaded in court documents, our procedural rules allow for issues to be considered if they are tried with the express or implied consent of both parties. This means if evidence of your payment to Ms. Reyes is presented in court and XYZ Developers doesn’t object to the issue of payment itself being discussed (even if they dispute its validity), the court can take it into account.

When Payment to an Agent Becomes a Point of Contention

Your situation highlights a common yet complex issue in contractual dealings: the validity of payment made not directly to the creditor, but to someone perceived as their agent. The primary concern is whether this payment legally discharges your obligation. Philippine law is quite clear on to whom payment should be made to be effective.

The Civil Code of the Philippines provides a foundational principle regarding the proper recipient of payment. Specifically, Article 1240 states:

Article 1240. Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it. (Article 1240 of the Civil Code)

This means that for your payment of Php 180,000.00 to be valid and to extinguish that portion of your debt, Ms. Reyes must have been an “authorized person” by XYZ Developers. Authorization can take several forms. It can be express, such as through a formal letter of appointment or a specific instruction from XYZ Developers naming Ms. Reyes as a collector. It can also be implied from the conduct or acts of XYZ Developers or its representatives, like Mr. De Leon. If Mr. De Leon, acting within his capacity as project manager, introduced Ms. Reyes as the person handling final settlements and directed you to coordinate payments with her, this could form the basis for implied authority.

Moreover, the concept of apparent authority is relevant. This arises when a principal (XYZ Developers) knowingly permits an agent (Ms. Reyes) to act as if she has authority, or holds her out as possessing such authority, leading a third person (you) to deal with her in good faith. If XYZ Developers, through Mr. De Leon’s actions and Ms. Reyes operating from their site office and issuing receipts with their logo, created a situation where it was reasonable for you to believe Ms. Reyes was authorized, your payment to her might be deemed valid. As jurisprudence clarifies:

In general, a payment in order to be effective to discharge an obligation, must be made to the proper person. Thus, payment must be made to the obligee himself or to an agent having authority, express or implied, to receive the particular payment. Payment made to one having apparent authority to receive the money will, as a rule, be treated as though actual authority had been given for its receipt. (Philippine Civil Code and Jurisprudence on Obligations and Contracts)

Now, regarding the procedural aspect, you mentioned not specifically stating the payment to Ms. Reyes as a defense in your initial informal reply. If this matter proceeds to court, and you file a formal Answer to a complaint, the defense of payment should ideally be alleged. However, the Rules of Court offer some flexibility. Section 5, Rule 10 provides for the amendment of pleadings to conform to evidence:

Section 5. Amendment to conform to or authorize presentation of evidence. – When issues not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure to amend does not affect the result of the trial of these issues. (Section 5, Rule 10 of the Rules of Court)

This rule means that if, during trial, you present evidence of your payment to Ms. Reyes (like the receipt and your testimony about Mr. De Leon’s instructions), and XYZ Developers does not object to the introduction of this evidence on the ground that payment was not pleaded, the issue of payment can be treated as if it had been raised in your formal court pleadings. The court can then rule on it. The critical element is the implied consent of the opposing party to try the unpleaded issue. Philippine jurisprudence further supports this:

The failure of a party to amend a pleading to conform to the evidence adduced during trial does not preclude adjudication by the court on the basis of such evidence which may embody new issues not raised in the pleadings. … The court may treat the pleading as if it had been amended to conform to the evidence, although it had not been actually amended … so long as no surprise or prejudice is thereby caused to the adverse party. (Jurisprudence on Section 5, Rule 10 of the Rules of Court)

Therefore, your ability to prove Ms. Reyes’s authority (express, implied, or apparent) and the fact of payment, coupled with the procedural allowance for unpleaded issues tried by consent, will be crucial in defending against XYZ Developers’ claim.

Practical Advice for Your Situation

• Gather All Evidence: Meticulously collect and organize all documents. This includes your Contract to Sell, proof of all payments for the principal amount, your accountant’s computation for the Php 180,000, any written communication with Mr. De Leon or XYZ Developers about this agreed amount, and crucially, the official-looking receipt issued by Ms. Reyes.
• Document Mr. De Leon’s Actions: Write down a detailed account of your interactions with Mr. De Leon, especially the meeting where he agreed to the Php 180,000 balance and introduced Ms. Reyes as authorized to receive payments. If anyone else was present or aware of Ms. Reyes’s role in collections at the site office, their potential testimony could be helpful.
• Formal Written Response: Consider sending a formal, registered letter to XYZ Developers. In this letter, clearly state your position: reiterate the agreement with Mr. De Leon on the Php 180,000 balance, detail the circumstances of your payment to Ms. Reyes (mentioning Mr. De Leon’s introduction and her operating from their site office), and attach copies (not originals) of your proof of payment and any other supporting documents. This creates a formal record of your assertions.
• Consult a Lawyer: If XYZ Developers persists with their demand or files a lawsuit, you should immediately engage the services of a lawyer. Provide them with all your evidence and a full account of the events. Your lawyer can then properly plead the defense of payment and argue the validity of the payment to Ms. Reyes based on her actual, implied, or apparent authority.
• Argue Apparent Authority: Even if XYZ Developers denies Ms. Reyes had express authority, your lawyer can argue that her actions (being introduced by the project manager, working at the site office, issuing receipts with the company logo) created an appearance of authority upon which you reasonably relied.
• Prepare for Negotiation or Litigation: Be prepared that this might lead to further negotiation with XYZ Developers, or ultimately, litigation. Having all your evidence well-organized will be essential in either scenario.
• Highlight Implied Consent if in Court: Should this proceed to court, and evidence of payment is presented, your lawyer will be mindful of the rules regarding issues tried by implied consent, ensuring that your defense of payment is properly considered by the court even if it was not exhaustively detailed in initial informal communications.

It’s important to assert your position clearly and be prepared to substantiate your claims with evidence. The initial verbal agreement with Mr. De Leon on the Php 180,000, coupled with the payment to a person he introduced for that purpose, forms a strong basis for your defense.

Hope this helps!

Sincerely,
Atty. Gabriel Ablola

For more specific legal assistance related to your situation, please contact me through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This correspondence is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please schedule a formal consultation.