Arcache v. Nicolas Lizares & Co., Inc.
REITERATIONFacts
The Antecedents: Nicolas Lizares & Co., Inc. sold two parcels of land to Mary Hayden Arcache for P621,500. An initial payment of P150,000 was made, with the balance of P471,500 payable in installments. A mortgage was constituted on the parcels to secure the purchase price. By January 8, 1945, the only unpaid portion was P271,500. Due to the absence of Nicolas Lizares, the president of the corporation, in Baguio, Joseph Arcache, husband of Mary Hayden Arcache, deposited the unpaid balance of P271,500 with the Philippine National Bank to the credit of Nicolas Lizares. Procedural History: Mary Hayden Arcache filed a complaint against the corporation and others, seeking the surrender of the title, registration of the sale, and damages. The corporation moved to dismiss, alleging the P271,500 was never paid and that it had rescinded the contract. The trial court dismissed the complaint against Lydia and Ofelia Lizares but denied the motion against the corporation. The trial court ordered the plaintiffs to pay P2,262.50 to the corporation and, upon payment, for the corporation to execute a deed of sale. The corporation appealed. The Petition: The corporation appealed the decision of the Court of First Instance of Rizal, primarily questioning the effect of the deposit of P271,500 with the Philippine National Bank.
Issue(s)
Whether the deposit of P271,500 with the Philippine National Bank to the credit of Nicolas Lizares constitutes a valid payment or a valid excuse for non-default. Whether the corporation is entitled to rescind the contract of sale. The proper currency and rate for the payment of the outstanding balance.
Ruling
The Supreme Court affirmed the appealed decision with modification. It ordered the plaintiffs-appellees to pay the sum of P22,625 to the defendant corporation within thirty days from the date the decision becomes final. The Court held that the deposit, while not strictly a valid payment, served as a valid excuse for not holding the appellees in default, thus preventing rescission of the contract. The Court also modified the amount to be paid by the appellees to P22,625, representing the equivalent of P271,500 in Japanese war notes at the rate of May 1944.
Ratio Decidendi
On the effect of the deposit and rescission of the contract: The Court agreed with the trial court that the deposit of P271,500 with the Philippine National Bank to the credit of Nicolas Lizares, while not strictly a valid payment, served as a valid excuse for not holding the appellees in default. This was because Nicolas Lizares was in Baguio, and the conditions in January 1945 precluded appellees from contacting him with reasonable diligence. The Court reiterated the principle that payment must be made to the person in whose favor the obligation was constituted or to an authorized representative, as per Article 1162 of the old Civil Code. However, the trial court's ruling did not consider the balance as paid but merely excused the appellees from default, thus preventing the corporation from exercising its right to rescind the contract. The Court also noted that the debt moratorium declared on November 18, 1944, meant that the corporation could not have demanded payment, further supporting the conclusion that the appellees should not be held in default. On the proper currency and rate for payment: The Court found it necessary to determine the proper rate for the payment of the outstanding balance. While the trial court ordered payment equivalent to P271,500 in actual Philippine currency under the Ballantyne Scale (P2,262.50), the Supreme Court held that the rate should be that of May 1944, when the promissory note for the unpaid balance was executed. This was because the promissory note contemplated payment in Japanese war notes, as there was no stipulation for payment in any specific currency or after liberation. Applying the Ballantyne Scale, the equivalent of P271,500 in actual Philippine currency was determined to be P22,625. The Court distinguished this from the cited cases of Rono vs. Gomez and Gomez vs. Tabia, which were deemed not applicable to the present circumstances. On damages: In view of the resolution of the main issues, the Court agreed with the trial court that neither party was entitled to recover the damages claimed in the complaint or the answer. The primary dispute revolved around the payment of the purchase price and the validity of the contract, not on actionable damages arising from breach.
Main Doctrine
A deposit made in good faith with a bank to the credit of a creditor who is absent, under circumstances precluding actual contact, may serve as a valid excuse for non-default, even if not strictly a valid payment, thereby preventing the creditor from rescinding the contract of sale.