Case Summary (G.R. No. 156846)
Agreement and Default Clause
On December 3, 1993, Pabugais agreed to sell the Makati lot to Sahijwani for P15,487,500.00. Sahijwani paid a P600,000.00 option/reservation fee with the balance due within 60 days upon delivery of title documents, certificate of non-delinquency, and association-dues clearance. The contract provided that:
- If Sahijwani failed to pay the balance, the P600,000.00 fee would be forfeited.
- If Pabugais failed to deliver the documents, he would return the P600,000.00 with 18% annual interest.
Failure to Deliver and Tender of Payment
Pabugais did not deliver the required documents and returned a check for P600,000.00, which was dishonored. He then allegedly tendered P672,900.00 (the P600,000.00 plus 18% interest up to August 3, 1994) by manager’s check on August 3 and August 8, 1994, and notified Sahijwani on August 11 that he would consign the amount with the court. On August 15, 1994, Pabugais filed a complaint for consignation.
Trial Court’s Ruling
On November 29, 1996, the Makati RTC declared the consignation invalid for failure to prove a valid tender or refusal by Sahijwani, ruled that a manager’s check is not legal tender, and ordered Pabugais to pay P600,000.00 plus 18% interest from December 3, 1993, moral damages, and attorney’s fees.
Court of Appeals Proceedings
Pabugais appealed. His original counsel died and was replaced by Atty. Salvador P. De Guzman, Jr. In December 2001, Pabugais executed a Deed of Assignment assigning part of the consigned P672,900.00 to De Guzman as attorney’s fees. He then moved to withdraw the consigned funds. The Court of Appeals initially denied withdrawal and affirmed the RTC decision with modifications, but on January 16, 2003, it reversed and set aside the RTC decision, declaring the consignation valid and Pabugais’s obligation extinguished.
Issues on Review
- Was there a valid consignation?
- Could Pabugais withdraw the consigned amount as a matter of right?
Requisites for Valid Consignation
Under Articles 1256–1258, consignation requires:
- A debt due;
- Tender and creditor’s refusal (or alternative grounds);
- Prior notice to the creditor;
- Deposit of the amount with the court;
- Notification to the creditor after deposit.
Validity of Tender
The sole ground for refusal was alleged insufficiency of the amount tendered, not the form of payment. Although manager’s checks are not legal tender, a creditor may accept or refuse them; absence of prompt objection renders the tender valid. The P672,900.00 manager’s check matched the contract’s 18% interest on P600,000.00 and was sufficient to extinguish the obligation.
Effect of Consignation on Obligation
A valid consignation extinguishes the debtor’s obligation. Article 1260 allows withdrawal before creditor’s acceptance or judicial confirmation, but once the creditor has accepted—as by praying in its answer that the con
...continue readingCase Syllabus (G.R. No. 156846)
Factual Background
- On December 3, 1993, petitioner and respondent executed an “Agreement And Undertaking” for the sale of a 1,239 sqm lot in North Forbes Park, Makati, for ₱15,487,500.00.
- Respondent paid ₱600,000.00 as option/reservation fee; the balance of ₱14,887,500.00 was to be paid within 60 days upon delivery of:
- Owner’s duplicate Transfer Certificate of Title in respondent’s name
- Deed of Absolute Sale
- Certificate of Non-Tax Delinquency on real estate taxes
- Clearance on Payment of Association Dues
- Default clause:
- If respondent fails to pay the balance on time, petitioner may forfeit the ₱600,000.00 fee.
- If petitioner fails to deliver the documents, he must return the ₱600,000.00 with 18% per annum interest.
Procedural History
- Petitioner failed to deliver the required documents and attempted to return the ₱600,000.00 by Far East Bank & Trust Company Check No. 25AO54252P, which was dishonored.
- Petitioner claimed two tenders of ₱672,900.00 (₱600,000.00 plus 18% p.a. interest from Dec 3, 1993 to Aug 3, 1994) by manager’s check on August 3 and August 8, 1994.
- On August 11, 1994, petitioner notified respondent of consignation with the RTC of Makati; on August 15, 1994, he filed a complaint for consignation.
- Respondent’s counsel admitted receipt of petitioner’s letter but denied any check was attached and contested both tender and amount.
- RTC Branch 64, Makati (Nov 29, 1996) held consignation invalid for lack of proof of valid tender, ordered petitioner to pay ₱600,000.00 + 18% p.a. interest + moral damages + attorney’s fees.
- On appeal to the CA, petitioner’s counsel died and was replaced by Atty. Salvador P. De Guzman, Jr.
- December 20, 2001: Petitioner executed a Deed of Assignment of part of the consigned ₱672,900.00 to Atty. De Guzman, Jr. as partial attorney’s fees.
- January 7, 2002: Petitioner file