G.R. No. L-16109 - Taylor vs. Uy Tieng Piao

Case Summary (G.R. No. L-16109)

Factual Background: The Sale, Mortgage, and Unpaid Balance

The corporation owned the two land parcels formerly registered in the names of Lydia L. Lizares and Ofelia L. Lizares, later covered by certificate of title No. 1776 in the corporation’s name. Under a document dated May 10, 1944, the corporation sold the two parcels to Mary Hayden Arcache, assisted by her husband Joseph Arcache, for P621,500. The corporation acknowledged receipt of P150,000 as initial payment on March 10, 1944. The balance of P471,500 was stipulated to be paid in two tranches: P200,000 within ninety days from April 3, 1944, and P271,500 within twelve months from April 3, 1944, to be secured by two promissory notes to be executed by the purchaser. The sale was also coupled with a mortgage of the two parcels in favour of the corporation to secure payment of the purchase price.

There was no dispute that the parties had complied with payments made prior to January 8, 1945, and that the only unpaid portion at issue was P271,500. The payments on account of the purchase price had been made directly to Nicolas Lizares, the corporation’s president. On January 8, 1945, Nicolas Lizares was in Baguio, prompting the purchaser’s husband, Joseph Arcache, to deposit the unpaid balance of P271,500 with the Philippine National Bank, with the deposit appearing in the name of Nicolas Lizares.

Commencement of the Action and the Claims

On February 6, 1950, Mary Hayden Arcache, assisted by Joseph Arcache, filed a complaint in the Court of First Instance of Rizal against Nicolas Lizares & Co., Inc., Lydia L. Lizares, Ofelia L. Lizares, and Manuel C. Monsod as Register of Deeds of Rizal City. The complaint was amended on March 3, 1950. The plaintiffs sought an order directing the surrender of the certificate of title covering the two parcels, directing the Register of Deeds to register the deed of sale in favour of the plaintiffs, cancelling transfer certificate of title No. 72435, and issuing a new transfer certificate of title in the name of the plaintiff spouses free from all liens and encumbrances. They also prayed for damages of P150,000.

In an order dated April 17, 1950, the trial court dismissed the complaint as to Lydia L. Lizares and Ofelia L. Lizares, denied the motion to dismiss as to the corporation, and allowed the case to proceed against Nicolas Lizares & Co., Inc.

The Corporation’s Position and the Trial Court’s Ruling

The corporation answered, in substance alleging that P271,500 had never been paid to it. It asserted that, on that account, it had already rescinded the contract of sale, and it sought the return of the two parcels and damages in the amount of P18,000 from the plaintiffs.

After trial, the Court of First Instance of Rizal rendered a decision ordering the plaintiffs to pay the corporation P2,262.50. It further ordered that, upon payment, the corporation would execute in favour of the plaintiffs a deed of sale of the two lots free from all liens and encumbrances, plus costs. The trial court awarded no damages to either side.

Only the corporation appealed, and the Supreme Court framed the decisive question as revolving around the effect of the P271,500 deposit made with the Philippine National Bank by Joseph Arcache in the name and to the credit of Nicolas Lizares, the corporation’s president.

The Parties’ Contentions on the Effect of the Bank Deposit

The purchasers relied on the deposit made on January 8, 1945 as excusing or satisfying their obligation under the contract. Joseph Arcache testified that Nicolas Lizares—before leaving Manila for Baguio—had instructed him that payment could be made to the corporation by depositing the amount with the Philippine National Bank. The corporation denied this alleged instruction.

The trial court ruled Joseph Arcache’s testimony inadmissible because Nicolas Lizares had already died. Yet the trial court considered the deposit itself, which was uncontroverted, as made in good faith and as having at least allowed the plaintiffs to pay the balance of P271,500. Accordingly, the trial court did not treat the plaintiffs as in default in a manner that would justify rescission.

On appeal, the corporation argued that payment must be made to the person in whose favour the obligation was constituted, or to another authorised to receive it in his name (Art. 1162, old Civil Code), and thus the deposit could not bind the corporation.

Legal Reasoning of the Supreme Court

The Supreme Court agreed with the trial court. It noted that there was no dispute that Nicolas Lizares was in Baguio, and that, for the relevant period in January 1945, the conditions were such as to preclude—even with reasonable diligence—the purchasers from actually contacting Nicolas Lizares. On that premise, the Court held that, when the purchasers deposited P271,500 with the Philippine National Bank in the name and to the credit of Nicolas Lizares on January 8, 1945, they could be deemed to have acted in good faith, at least to the extent of allowing the contract of sale to subsist.

The Court acknowledged the corporation’s correct statement that payment must follow the rule in Art. 1162, old Civil Code. However, it emphasised that the trial court’s disposition did not rest on treating the deposit as fully valid payment. Rather, the trial court treated the deposit as a sufficient excuse such that the purchasers could not be deemed in default that would entitle the corporation to rescind. The Court explained that the result would have been different if the deposit had been made when Nicolas Lizares was accessible in Manila near the date of deposit. It further treated the timing of payment as an equitable factor: the purchasers had until April 3, 1945 to pay the balance of P271,500, and because a debt moratorium had been declared as early as November 18, 1944, the corporation could not have demanded payment earlier as of the critical date.

The Court considered it unnecessary to dwell on whether the execution by the purchasers of a separate promissory note covering the P271,500 balance simultaneously with the contract consummated the sale and foreclosed rescission, since the controlling equities and the effect of the deposit already supported the trial court’s conclusion.

The Court then addressed the monetary conversion issue. It found that the amount ordered by the trial court, P2,262.50, represented the equivalent in actual Philippine currency under the Ballantyne Scale of P271,500 as of January 1945, when the rate was 120 war notes to P1.00 Philippine currency. Yet the Supreme Court held that, considering all circumstances and equities, the proper payment rate for the purchasers should be that as of May 1944, when the purchasers executed the promissory note for the unpaid balance. Under the Ballantyne Scale, the equivalent of the P271,500 amount as of May 1944 was P22,625. It further reasoned that the promissory note executed on May 10, 1944 contemplated payment in Japanese war notes within twelve months from April 3, 1944, because the note did not specify any particular currency and did not stipulate payment after liberation.

The Court rejected reliance on Rono vs. Gomez, 83 Phil., 890, and Gomez vs. Tabia, 84 Phil., 269, cited by the appellant, because the circumstances did not call for the same treatment.

Having found the balance due, the Court agreed with the trial court that neither party was entitled to recover damages. It ordered the purchasers to pay P22,625 to the corporation within thirty days from the date the decision would become final, thereby affirming the appealed judgment, while leaving the Register of Deeds acts and the execution of the deed of sale to follow from payment.

Ruling and Disposition

The Supreme Court affirmed the decision of the Court of First Instance of Rizal with modification only as to the amount to be paid. It held that the correct amount the plaintiffs-appellees must pay to the defendant corporation was P22,625, within thirty days from the decision’s finality, and it denied both sides’ claims for damages. The Court ordered the case disposition without costs.

Separate Opinion (Dissent) of Justice Pablo M. (PABLO)

Justice Pablo M. dissented. He opined that the deposit of P271,500, made on January 8, 1945 by Joseph Arcache in the name

Case Syllabus (G.R. No. L-16109)

The case involved a contract of sale of two parcels of land and the legal effect of a deposit of the unpaid balance of the purchase price made by the buyer’s husband in the name and credit of the corporation’s president.
The controversy arose from the corporation’s claim that the third installment of P271,500 had not been paid and that it had therefore rescinded the contract of sale.
The Court resolved the “only important question” as to whether the deposit with the Philippine National Bank by Joseph Arcache, in the name and to the credit of Nicolas Lizares, produced legal effects sufficient to prevent the buyer from being treated as in default.

Parties and Procedural Posture

Mary Hayden Arcache, assisted by her husband Joseph Arcache (plaintiffs and appellees), sued for relief against Nicolas Lizares & Co., Inc. and other defendants including Lydia L. Lizares, Ofelia L. Lizares, and Manuel C. Monsod as Register of Deeds of Rizal City.
The defendant corporation, Nicolas Lizares & Co., Inc., moved to dismiss and later answered by asserting that it rescinded for nonpayment and by seeking return of the lots and damages.
The Court of First Instance of Rizal dismissed the complaint as against Lydia L. Lizares and Ofelia L. Lizares while denying the motion to dismiss as against the corporation.
After trial, the Court of First Instance of Rizal ordered the plaintiffs to pay P2,262.50, and upon payment the corporation had to execute a deed of sale free from liens and encumbrances.
The corporation appealed, contesting the effect of the P271,500 deposit made in January 1945 and the consequences for rescission and damages.
The dissenting opinion was authored by Pablo, M., J., who argued for rescission based on failure to comply with payment terms.

Key Contractual Transaction

The corporation owned two parcels of land covered by certificate of title No. 1776.
On May 10, 1944, the corporation sold the two parcels to Mary Hayden Arcache, assisted by her husband Joseph Arcache, for P621,500.
The corporation acknowledged receipt of P150,000 on March 10, 1944 as initial payment.
The contract required payment of the balance of P471,500 with P200,000 within ninety days from April 3, 1944 and P271,500 within twelve months from April 3, 1944, with the purchaser to execute two promissory notes.
The sale was coupled with a mortgage of the two parcels in favor of the corporation to secure the payment of the stipulated purchase price.

Undisputed Payment History

The decision stated that there was no dispute as to payments made before January 8, 1945.
The only unpaid portion of the purchase price as of the relevant period was P271,500.
The payments made toward the purchase price before the dispute were said to have been made directly to Nicolas Lizares, the corporation’s president.

Deposit Made in January 1945

On January 8, 1945, Nicolas Lizares was in Baguio, which led to the deposit arrangement.
Joseph Arcache testified that Nicolas Lizares had instructed him that the unpaid balance could be deposited with the Philippine National Bank to the credit of Nicolas Lizares.
The corporation denied the instruction, and the trial court ruled Joseph’s testimony inadmissible because Nicolas Lizares had already died.
Even with the inadmissibility ruling, the trial court treated the deposit itself as uncontroverted, and it found the deposit to have been made in good faith.
The record reflected that Joseph deposited the unpaid balance of P271,500 with the Philippine National Bank on January 8, 1945, in the name and to the credit of Nicolas Lizares.
The dissent treated the deposit as not fulfilling the contract terms and emphasized that the buyer should not be excused by the location of the seller’s president.

Trial Court Claims and Rulings

The amended complaint, filed on March 3, 1950, sought surrender of the certificate of title, registration of the deed of sale, cancellation of an existing transfer certificate of title, issuance of a new one in the spouses’ names, relief “free from all liens and encumbrances,” and damages of P150,000.
The corporation’s answer in substance alleged that P271,500 had never been paid to the corporation and that it had already rescinded the contract.
The corporation sought return of the properties and damages of P18,000.
The Court of First Instance of Rizal ord