Cuaycong v. Rius
REITERATIONFacts
1. The Antecedents: This case concerns a dispute over the payment of a mortgage debt arising from the sale of the hacienda "Tibidabo." On February 18, 1937, Ramon S. Rius sold the hacienda to Jose G. Cuaycong and Vicente F. Gustilo for P350,000. A portion was paid upfront, with the balance of P250,000 to be paid in installments with 7% annual interest. The purchasers mortgaged the property back to the vendor as security, with a stipulation that failure to meet payment conditions would allow the vendor to rescind the sale, forfeiting all payments made. The purchasers were current on payments until December 1941, but failed to pay the interest due on February 18, 1942, and the final balance on February 18, 1943. The vendor, Rius, chose not to rescind the contract, waiving his right to forfeit the payments made due to potential war-related financial difficulties of the purchasers. 2. Procedural History: On January 24, 1944, the purchasers offered to pay the outstanding balance in Japanese military notes, an offer reiterated on February 17, 1944, with a threat of legal action and court deposit if not accepted. The vendor refused this offer due to the low value of the currency and the potential for profitable investment of the funds if paid when due. Consequently, on February 22, 1944, the purchasers filed an action to compel acceptance of payment and cancellation of the mortgage, depositing P181,000 via a manager's check with the clerk of court. The defendant Rius opposed this, raising defenses including the invalidity of the consignation. Later, Caridad Jison and her husband intervened, alleging a prior promise of sale of the property, and filed a motion for summary judgment. This motion was granted by the trial court, ordering the defendant to accept the deposited payment, release the mortgage, and pay costs, despite the defendant's opposition. This decision led to the present appeal. 3. The Petition: The appellant, Ramon S. Rius, contests the validity of the consignation made in court. The core of his argument, and the Supreme Court's focus, is that the deposit of a manager's check, rather than legal tender, does not constitute a valid payment or consignation under Articles 1127 and 1170 of the Civil Code. The Court noted that a check is not legal tender and its acceptance requires the creditor's consent, which was not given here. Furthermore, the Civil Code provision regarding commercial papers producing the effect of payment only when collected or when lost in value due to the creditor's fault was not met, as there was no proof of collection or loss. The Court rejected the appellant's attempt to establish collection through a chain of presumptions, emphasizing that such presumptions cannot rest upon other presumptions. Therefore, the Court found the consignation invalid, reversed the lower court's judgment, and ordered the plaintiffs to pay the P181,000 plus interest within a specified period, failing which the defendant would have the right to rescind the contract.
Issue(s)
Whether the consignation of a manager's check in court, despite objection from the creditor, constitutes a valid payment under Philippine law. Whether the purchasers are exempt from paying their obligation due to previous tenders of payment.
Ruling
The Supreme Court reversed the judgment of the lower court. It held that the consignation made by means of a manager's check was not valid because it was objected to by the defendant-appellant and a manager's check is not legal tender. The Court ordered the plaintiffs-appellees to pay the defendant-appellant the sum of P181,000 plus 7% annual interest from February 18, 1945, within thirty (30) days from the entry of judgment. The defendant-appellant was given fifteen (15) days from payment to execute a deed of cancellation of the mortgage debt. Failure to pay within the given period would give the defendant the right to rescind the contract, with the payments made being forfeited without reimbursement. Plaintiffs were ordered to pay costs.
Ratio Decidendi
On the validity of the consignation: The Court held that consignation must be made strictly in accordance with the provisions governing payment. Under Article 1170 of the Civil Code, payment of debts of money must be made in the specie stipulated, or in legal tender if not possible. A manager's check, like an ordinary check, is not legal tender in the Philippines. The Court cited previous rulings (Belisario vs. Natividad, Villanueva vs. Santos) establishing that a consignation by check is not binding upon the creditor unless accepted by him, and even a certified check is not good legal tender against an objection. Furthermore, Article 1170, paragraph 2, states that commercial papers produce the effect of payment only when collected or when they lose value due to the creditor's fault. There was no proof of collection or loss of value in this case. The argument that the clerk of court's duty to deposit the check with the National Treasurer and the presumption of compliance, coupled with the presumption of presentment for collection, was found defective because a presumption cannot rest upon another presumption. The Court emphasized that for a consignation to be valid, the collection of the check must be proven and appear on the record, not merely presumed. On exemption from paying the obligation: Since the consignation was found to be invalid due to the objection and the nature of the manager's check, the previous tenders of payment made by the plaintiffs did not exempt them from their obligation. The Court concluded that there was no valid consignation, and thus the purchasers remained liable for the debt. The reversal of the judgment meant that the purchasers had a specific period to make the payment in legal tender, failing which the contract could be rescinded.
Main Doctrine
A consignation made by means of a manager's check is not valid if objected to by the creditor, as a manager's check is not legal tender and its validity as payment depends on its collection, which must be proven and not presumed.