Albea v. Inquimboy
REITERATIONFacts
1. The Antecedents: On October 13, 1941, Carlos Inquimboy executed a deed of absolute sale (Exhibit A) for lands covered by transfer certificates of title Nos. 15599 and 15600 to Cenon Albea for P4,000. On the same date, Albea executed a document (Exhibit B) acknowledging a P3,000 debt to Inquimboy, payable in installments: P2,500 on November 15, 1941, and P500 in May 1942. Exhibit B stipulated that failure to pay the first installment would ipso facto cancel the deed of sale, requiring Albea to execute a deed of cancellation. Albea also stated he was applying for a P10,000 loan from the Agricultural and Industrial Bank, secured by these lands and others, and authorized the bank to deduct P2,500 for Inquimboy. Failure to pay would also incur P500 in liquidated damages and attorney's fees. 2. Procedural History: Carlos Inquimboy filed a complaint on February 23, 1944, in the Court of First Instance of Nueva Ecija, alleging Albea's failure to pay the installments as agreed. Inquimboy sought rescission of the sale, P500 in damages, and the return of the transfer certificates of title. Albea, in his answer, claimed the transaction was a sale with a right of repurchase and alleged he tendered payment in December 1943 and twice in February 1944, with the latter payment consigned with the court on March 18, 1944. The Court of First Instance ruled in favor of Inquimboy. The Court of Appeals affirmed this decision, declaring the deed of sale resolved and ordering Albea to deliver the titles and pay P500 in damages. 3. The Petition: Cenon Albea filed a petition for certiorari with the Supreme Court, seeking to reverse the decision of the Court of Appeals. Albea contended that the applicable case law was Villaruel vs. Tan King, which allows payment even after the stipulated period before demand, rather than Caridad Estates, Inc. vs. Santero, as applied by the Court of Appeals. The Supreme Court modified the judgment, holding that while Article 1504 of the Civil Code was applicable, Albea's deposit of P3,000 was invalid because he failed to provide prior notice to Inquimboy as required by Article 1177 of the Civil Code. The Court ordered Albea to reconvey the property unless he paid the P3,000 purchase price plus P500 in damages within 30 days of final judgment.
Issue(s)
Whether the deed of sale, Exhibit A, should be deemed ipso facto cancelled and rescinded due to the failure to pay the installment on November 15, 1941. Whether the consignation of P3,000 made by Albea in court was valid and relieved him of his obligation. Whether the provisions of Article 1504 of the Civil Code are applicable to the case.
Ruling
The Supreme Court modified the judgment of the Court of Appeals. Cenon Albea was ordered to reconvey and deliver the property and titles to Carlos Inquimboy, unless within 30 days after final judgment, Albea pays the P3,000 purchase price plus P500 as liquidated damages and attorney's fees.
Ratio Decidendi
On the applicability of Article 1504 of the Civil Code and the nature of the contract: The Court held that the contract in this case was an absolute sale, passing title to the vendee, Albea, although the price was not fully paid. This situation is governed by Article 1504 of the Civil Code, which states that in the sale of real property, even if stipulated for ipso jure resolution upon default, the purchaser may pay even after the expiration of the period, at any time before demand has been made by suit or by notarial act. The Court distinguished this from Caridad Estates, Inc. vs. Santero, where the contract was a mere contract to sell in installments, not an absolute sale, and the parties had laid down a specific procedure for default. The Court found the present case analogous to Villaruel vs. Tan King, where Article 1504 was applied. On the validity of the consignation and tender of payment: The Court found that Albea's deposit of P3,000 in court was not a valid consignation that relieved him of liability. Article 1176 of the Civil Code allows a debtor to relieve himself of liability by depositing the thing due if the creditor refuses to accept tender of payment without reason. However, Article 1177 requires previous notice to the interested party. Albea failed to give previous notice to Inquimboy before making the deposit. Furthermore, the deposit was made after the commencement of the action, and while Albea had made tenders of payment in December 1943 and February 1944, Inquimboy refused them, partly because they were in Japanese fiat money. Instead of validly consigning the amount with previous notice, Albea reported the refusal to the military police and only deposited the money in court with his answer. The Court reiterated that the consignation, not having been made in accordance with law, was not valid and binding against the creditor. On the ipso facto cancellation and rescission: While Exhibit B stipulated that failure to pay the first installment would cause Exhibit A to be ipso facto cancelled and rescinded, the Court applied Article 1504 of the Civil Code. This article provides a remedy for the purchaser even after the stipulated period has passed, as long as no demand for rescission has been made by suit or notarial act. Therefore, the failure to pay on November 15, 1941, did not automatically and irrevocably rescind the sale without further action by the vendor, especially considering the applicability of Article 1504. The Court's modification of the judgment, allowing Albea to pay within 30 days, underscores that the sale was not irrevocably rescinded by the mere default.
Main Doctrine
In sales of real property, even if stipulated that resolution shall be ipso jure upon default, the purchaser may still pay even after the expiration of the period, provided it is before demand by suit or notarial act. However, a valid consignation requires previous notice to the creditor.