Pabugais v. Sahijwani
REITERATIONFacts
The Antecedents: Petitioner Teddy G. Pabugais and respondent Dave P. Sahijwani entered into an "Agreement And Undertaking" where Pabugais agreed to sell a lot for P15,487,500.00, with Sahijwani paying P600,000.00 as an option/reservation fee. The agreement stipulated forfeiture of the fee if Sahijwani failed to pay the balance, or return of the P600,000.00 with 18% interest per annum if Pabugais failed to deliver required documents, including the owner's duplicate TCT, Deed of Absolute Sale, Certificate of Non-Tax Delinquency, and Clearance on Payment of Association Dues. Pabugais failed to deliver these documents and attempted to return the P600,000.00 with 18% interest (P672,900.00) to Sahijwani's counsel via manager's check on two occasions, which the counsel allegedly refused. Consequently, Pabugais filed a complaint for consignation. Sahijwani's counsel admitted receiving a letter but denied receiving the check, claiming the tendered amount was insufficient, and also mentioned verbal promises of 3% monthly interest and 25% attorney's fees as penalties. Procedural History: The Regional Trial Court (RTC) declared the consignation invalid, citing failure to prove a valid tender of payment and refusal of acceptance, and also ruled that a manager's check is not legal tender. The RTC ordered Pabugais to pay Sahijwani P600,000.00 with 18% interest, plus moral damages and attorney's fees. Pabugais appealed to the Court of Appeals (CA). During the appeal, Pabugais's counsel died and was substituted. Pabugais then executed a "Deed of Assignment" assigning part of the consigned amount to his new counsel as attorney's fees and filed a motion to withdraw the consigned money. The CA initially affirmed the RTC decision with modifications but, upon motion for reconsideration, issued an Amended Decision reversing the RTC, declaring the consignation valid, thereby extinguishing Pabugais's obligation, and stating that he could no longer withdraw the consigned amount. The Petition: Pabugais filed a petition for review on certiorari with the Supreme Court, arguing that he should be allowed to withdraw the consigned amount as a matter of right because the CA had not yet ruled on the consignation's validity and Sahijwani had not accepted it.
Issue(s)
Whether there was a valid consignation. Whether the petitioner can withdraw the amount consigned as a matter of right.
Ruling
The Supreme Court denied the petition and affirmed the Amended Decision of the Court of Appeals, declaring the consignation valid and the petitioner's obligation extinguished. The Court held that the petitioner could not withdraw the consigned amount.
Ratio Decidendi
On the validity of consignation: The Court found that there was a valid tender of payment. The respondent's counsel's reasons for non-acceptance, namely the alleged absence of the check in the letter and the insufficiency of the amount, were addressed. The Court clarified that while a manager's check is not legal tender, a creditor may accept it, and prompt objection is necessary to invalidate payment by check. The Court found that the amount tendered, P672,900.00 (P600,000.00 plus 18% interest), was sufficient to cover the obligation as per the "Agreement And Undertaking." Therefore, the consignation was deemed valid. On the petitioner's right to withdraw the consigned amount: The Court ruled that the petitioner could not withdraw the amount consigned. Relying on Article 1260 of the Civil Code, the Court explained that while a debtor may withdraw the consigned amount before acceptance by the creditor or judicial confirmation, the respondent's prayer in his answer for the consigned amount to be awarded to him constituted an acceptance. This acceptance extinguished the petitioner's obligation. Furthermore, the Court noted that withdrawal would unjustly enrich the petitioner and prejudice the respondent, especially since the petitioner had not manifested an intention to comply with the "Agreement And Undertaking" by delivering the documents and the lot. The Court also found the Deed of Assignment of the consigned amount to the petitioner's counsel to be void, as it violated Article 1491 of the Civil Code and Rule 10 of the Canons of Professional Ethics, which prohibit lawyers from acquiring interests in the subject of litigation. Granting the withdrawal would sanction a void contract.
Main Doctrine
A consignation is valid if there is a valid tender of payment and the amount due is placed at the disposal of the court. Once a consignation is validly made and the creditor accepts it, or it is judicially confirmed, the debtor's obligation is extinguished, and the debtor can no longer withdraw the consigned amount. Furthermore, a Deed of Assignment of consigned money to an attorney as attorney's fees during the pendency of the case is void for violating prohibitions against lawyers acquiring interests in the subject of litigation.