G.R. No. 172577 - Dalton vs. FGR Realty and Development Corp.

Case Summary (G.R. No. 172577)

Relevant Dates and Procedural Posture

Complaint and consignation: complaint dated 11 September 1985 in the Regional Trial Court (RTC). Subsequent motions by Dayrit and FGR to withdraw consigned amounts: 27 March 1987, 10 November 1987, 8 July 1988, 28 November 1994. Compromise agreements between Dayrit, FGR and certain lessees (but not Dalton): 25 March 1997 and 20 June 1997. RTC decision dismissing complaint and ordering Dalton to vacate: 26 February 2002. Court of Appeals affirmed: 9 November 2005 (resolution 10 April 2006). Supreme Court denial of petition for review under Rule 45: G.R. No. 172577, decision rendered January 19, 2011 (reported 655 Phil. 93; 107 OG No. 49, 6247, December 5, 2011).

Facts

Flora Dayrit owned the subject lot and had several lessees, including Dalton and a group collectively referred to as Sasam, et al. Dayrit sold the property to FGR in June 1985. Dayrit and FGR thereafter refused to accept rental payments and sought to terminate leases. Dalton and Sasam, et al. attempted to consign rental payments to the RTC via the 11 September 1985 complaint, but they did not notify Dayrit and FGR of the intended consignation before or after deposit. Dayrit and FGR later withdrew the deposited amounts in multiple motions and explicitly reserved the right to contest the consignation’s validity. Compromise agreements between Dayrit/FGR and Sasam, et al. resulted in mutual abandonment of claims, but Dalton did not participate in those compromises. Evidence at trial included an ocular inspection report by the court commissioner and testimony that Dalton had ceased residing in the leased premises and used the premises for business; there were also gaps in rental payment records.

Issues Presented to the Supreme Court

Whether Dalton’s consignation of rental payments to the RTC was valid despite lack of pre- and post-deposit notices to the creditor. 2. Whether Dalton failed to pay rent owed, and if that factual finding is reviewable by the Supreme Court under a Rule 45 petition.

RTC Ruling and Findings of Fact

The RTC dismissed Dalton’s complaint and ordered her to vacate. The trial court found no valid consignation because the mandatory requisites (in particular, prior notice of consignation and subsequent notice after deposit) were absent. The RTC also found as factual matter that Dalton had ceased to reside at the leased premises, converted part of it to a business, and had not continuously paid monthly rentals, with the last recorded deposit in December 1988. The court relied on the commissioner’s ocular inspection report and testimony from former sub-lessees.

Court of Appeals’ Ruling and Reasoning

The Court of Appeals affirmed the RTC. It reiterated the strict, mandatory nature of consignation requisites: (1) a debt due; (2) consignation because of creditor’s refusal/absence/other grounds; (3) prior notice to interested persons before consignation; (4) placing the amount at the disposal of the court; and (5) post-consignation notification to interested persons. The CA rejected Dalton’s contention that service of the complaint and summons sufficed as notice, holding that substantial compliance is insufficient: the statutory prerequisites must be strictly observed. The CA also found the RTC’s factual determinations—nonresidence and nonpayment—amply supported and not overcome by Dalton’s self-serving testimony.

Supreme Court’s Analysis — Validity of Consignation

The Supreme Court affirmed the lower courts on the consignation issue. It emphasized the mandatory character of the Civil Code’s consignation provisions (Arts. 1257–1258 as cited) and controlling jurisprudence that requires strict compliance with prior and subsequent notice requirements. The Court noted that consignation is effective to discharge the obligor only if announced to interested persons before deposit and if interested persons are notified after deposit; failure on either front renders consignation ineffectual. The Court also addressed the argument that withdrawal/acceptance of consigned funds by the creditors mooted the notice defect: it held that where acceptance is conditional or reserved, the creditor does not waive objections and acceptance with reservation does not extinguish the debtor’s other obligations. Thus the conditional withdrawal by Dayrit and FGR did not validate the consignation nor bar them from asserting invalidity.

Supreme Court’s Analysis — Payment of Rent (Question of Fact)

On Dalton’s contention that the Court of Appeals erred in finding she failed to pay rent, the Supreme Court declined to re-examine the factual determinations. Citing Section 1, Rule 45 of the Rules of Court and settled Rule 45 jurisprudence, the Court reiterated that petitions for review under Rule 45 must raise only questions of law; questions of fact are not reviewable except in narrowly defined circumstances (e.g., grave abuse of discretion, findings grounded on speculation, manifestly mistaken inferences, misapprehension of facts, conflicting fi

Case Syllabus (G.R. No. 172577)

The Case

Petition for review on certiorari under Rule 45 of the Rules of Court.
The petition challenges the 9 November 2005 Decision and 10 April 2006 Resolution of the Court of Appeals in CA-G.R. CV No. 76536.
The Court of Appeals affirmed the 26 February 2002 Decision of the Regional Trial Court (RTC), Judicial Region 7, Branch 13, Cebu City, in Civil Case No. CEB 4218.
The petition was resolved by the Supreme Court in a resolution authored by Justice Carpio, with Justices Nachura, Peralta, Abad, and Mendoza concurring.

Parties and Subject Property

Petitioner: Soledad Dalton.
Respondents: FGR Realty and Development Corporation (FGR), Felix Ng, Nenita Ng, and Flora R. Dayrit (also referred to as Flora Regner).
Other parties/lessees referred to collectively as "Sasam, et al.": Clemente Sasam, Romulo Villalonga, Miguela Villarente, Aniceta Fuentes, Perla Pormento, Bonifacio Cabajar, Carmencita Yuson, Angel Ponce, Pedro Regudo, Pedro Quebedo, Mary Cabanlit, Marciana Encabo, and Dolores Lim.
Subject property: a 1,811-square meter parcel of land located at the corner of Rama Avenue and Velez Street in Cebu City, formerly owned by Flora R. Dayrit.

Factual Background — Ownership, Leasing and Sale

Flora R. Dayrit owned the 1,811-square meter parcel; portions were leased to Dalton and Sasam, et al.
In June 1985, Dayrit sold the property to respondent FGR Realty and Development Corporation.
In August 1985, Dayrit and FGR stopped accepting rental payments because they wanted to terminate the lease agreements with Dalton and Sasam, et al.
On 11 September 1985, Dalton and Sasam, et al. filed a complaint and consigned rental payments with the RTC; they did not notify Dayrit and FGR about the consignation.
Dayrit and FGR, in motions dated 27 March 1987, 10 November 1987, 8 July 1988, and 28 November 1994, withdrew the rental payments deposited in court; in those motions they expressly reserved the right to question the validity of the consignation.
Dayrit, FGR and Sasam, et al. entered into compromise agreements dated 25 March 1997 and 20 June 1997, agreeing to abandon all claims against each other.
Dalton did not enter into a compromise agreement with Dayrit and FGR.

Factual Background — Use of the Leased Premises and Payments

The RTC found that Dalton built a house of approximately 20 feet by 20 feet sometime in 1973.
The RTC found the last monthly rental to have been P69.00.
The RTC found that Dalton initially used the house as a dwelling and store space, but that she vacated the premises when her children got married, transferred her residence near F. Ramos Public Market, Cebu City, and used the subject space as a store/business establishment.
Dalton consignated monthly rentals in court when defendants refused to accept rental and demanded vacation of the premises.
The RTC noted the last deposit was made on December 21, 1988, and observed that at the time Dalton testified on December 22, 1999, she did not present evidence of payment in 1999.

Commissioner’s Ocular Inspection Report (as found by the RTC)

The RTC-appointed commissioner, Rogelio Capacio, submitted a Report and/or Observation, the full text of which was reproduced in the RTC decision:
- "The store and/or dwelling subject to ocular inspection is stuated [sic] on the left portion of the road which is about fifty-five (55) meters from the corner of Banawa-Guadalupe Streets, when turning right heading towards the direction of Guadalupe Church, if travelling from the Capitol Building. I observed that when we arrived at the ocular inspection site, Mrs. Soledad Dalton with the use of a key opened the lock of a closed door. She claimed that it was a part of the dwelling which she occupies and was utilized as a store. There were few saleable items inside said space."
Dalton did not take exception to the commissioner’s report.
Two former sub-lessees testified and the RTC found their testimony established that Dalton used the house for business purposes and not as a dwelling.

RTC Ruling (26 February 2002)

The RTC dismissed the 11 September 1985 complaint and ordered Dalton to vacate the property.
The RTC held that there was no valid consignation because the requisites for consignation, specifically prior notice of consignation (before deposit) and subsequent notice of consignation (after deposit), were not complied with.
The RTC emphasized that requisites 3 (previous notice of consignation) and 5 (after-consignation notice) were absent.
The RTC relied on the factual findings that Dalton had not continuously paid rentals up to her testimony date and that she had converted the premises to business use, supported by witness testimony and the commissioner’s report.

Court of Appeals Ruling (9 November 2005)

The Court of Appeals affirmed the RTC’s dismissal and the order to vacate.
The Court of Appeals reviewed the requisites for consignation and articulated the following five elements required for effective consignation:
1. There was a debt due;
2. The consignation had been made because the creditor refused to accept payment, or was absent/incapacitated, or several persons claimed entitlement, or title to the obligation