Philippine Lawin Bus v. Court of Appeals

Summary

This case involved a loan dispute between Advance Capital Corporation and Philippine Lawin Bus Company regarding P16.4 million in unpaid promissory notes secured by chattel mortgage on buses. The central legal issue was whether dacion en pago (payment in kind) occurred when the buses were transferred to the creditor. The trial court found the obligation extinguished through valid arrangement, but the Court of Appeals reversed, finding no dacion en pago. The Supreme Court affirmed, ruling that dacion en pago requires meeting of minds between parties for absolute transfer of ownership. The receipts showed buses were delivered for custody and sale purposes only, not ownership transfer. The case establishes important precedent on the requirements for valid dacion en pago under Article 1245 of the Civil Code, emphasizing that common consent for absolute ownership transfer is essential.