Del Carmen vs. Sabordo

A judicial deposit of a sum due under a final judgment does not constitute valid consignation that extinguishes an obligation where the debtor failed to make a prior tender of payment to the creditor and did not request the court to notify the creditor to receive such tender, notwithstanding that the deposit was made in compliance with a judgment granting the debtor the right to repurchase property upon payment of a specific sum.

In 1961, the spouses Toribio and Eufrocina Suico, together with business partners, established a rice and corn mill in Mandaue City, Cebu, obtaining a loan from the Development Bank of the Philippines (DBP) secured by mortgage over four parcels of land. Following default and foreclosure, the Suico spouses and their successors were allowed to repurchase the properties via conditional sale. When they again defaulted, they sold their rights to respondents Restituto and Mima Sabordo, who subsequently repurchased the properties from DBP. A dispute arose regarding the Suico spouses' rights to two of the lots (Lots 506 and 514), which culminated in a 1990 Court of Appeals decision granting the Suico spouses until October 31, 1990 (later extended by 90 days) to repurchase the lots by paying ₱127,500.00 to respondents. Toribio Suico died during the pendency of these proceedings, leaving petitioner Elizabeth Del Carmen and other heirs.

• The Original Transaction and Foreclosure: In 1961, spouses Toribio and Eufrocina Suico and their business partners obtained a loan from the Development Bank of the Philippines (DBP) to establish a rice and corn mill, securing the loan with a mortgage over four lots (Lots 506, 512, 513, and 514) owned by the Suico spouses and another lot owned by their partner Juliana Del Rosario. Upon default, DBP foreclosed the mortgage and consolidated ownership. The Suico spouses and the Flores spouses (substitutes for Del Rosario) were later allowed to repurchase the properties through a conditional sale for ₱240,571.00.
• The Sale to Respondents: After paying only the downpayment and first monthly amortization, the Suico and Flores spouses faced cancellation of the conditional sale. To avoid this, they sold their rights to respondents Restituto and Mima Sabordo, subject to the condition that respondents would pay the balance of the sale price. By supplemental agreement dated September 3, 1974, the parties affirmed that Lots 512 and 513 were sold to respondents, while Lots 506 and 514 were given to the Suico and Flores spouses as usufructuaries. DBP approved this sale of rights, and respondents subsequently repurchased the foreclosed properties.
• The Prior Litigation: On September 13, 1976, Restituto Sabordo initiated an action for declaratory relief to determine whether the Suico spouses had the right to recover Lots 506 and 514. The RTC initially ruled in favor of the Suico spouses, granting them until August 31, 1987 to redeem the lots. The Court of Appeals modified this in its April 24, 1990 decision in CA-G.R. CV No. 13785, granting the Suico spouses until October 31, 1990 to exercise their option to purchase by paying ₱127,500.00, and further extended this by 90 days in a February 13, 1991 resolution.
• The Attempted Payment and Interpleader: Toribio Suico died, leaving petitioner Elizabeth Del Carmen and other heirs. The heirs discovered that respondents had mortgaged Lots 506 and 514 with Republic Planters Bank (RPB) and that the loan had become delinquent. Claiming readiness to pay the ₱127,500.00 but alleging inability to determine the proper payee, petitioner and her co-heirs filed a complaint for interpleader with the RTC of San Carlos City, depositing the amount with the court clerk. They prayed that respondents and RPB be compelled to interplead to determine their respective interests; that respondents be directed to substitute other properties as collateral for their RPB loan; and that RPB be ordered to accept the substitute collateral and release the mortgage on the subject lots.
• Proceedings Below: Respondents filed an Answer with Counterclaim, arguing that interpleader was improper because RPB made no claim on the sum; the redemption period had expired; there was no valid consignation; and the action was barred by litis pendencia or res judicata. RPB filed a Motion to Dismiss on the ground that petitioner had no cause of action against it. On December 5, 2001, the RTC dismissed the complaint for lack of merit, also dismissing respondents' counterclaim. The Court of Appeals affirmed this dismissal.

• Nature of the Deposit: Petitioner contended that the consignation made with the RTC was a judicial deposit based on a final judgment, and as such, did not require compliance with the requisites of Articles 1256 and 1257 of the Civil Code regarding prior tender of payment.
• Reliance on Arzaga: Petitioner cited Arzaga v. Rumbaoa to support the proposition that a deposit made with the court by a plaintiff-appellee is considered valid payment of the amount adjudged even without prior tender to the defendants-appellants, provided the plaintiff expressly petitions the court that the defendants be notified to receive the tender.
• Effect of Payment: Petitioner maintained that the judicial deposit produced the effect of payment and extinguished the obligation to pay the purchase price, thereby preserving their right to repurchase the subject lots.

• Impropriety of Interpleader: Respondents countered that the action for interpleader was improper because RPB was not laying any claim on the sum of ₱127,500.00, eliminating the existence of conflicting claims necessary for an interpleader suit.
• Expiration of Redemption Period: Respondents argued that the period within which the complainants were allowed to purchase Lots 506 and 514 had already expired.
• Invalid Consignation: Respondents maintained that there was no valid consignation because petitioner failed to comply with the mandatory requisites under the Civil Code, particularly the requirement of prior tender of payment.
• Bar by Prior Judgment: Respondents asserted that the case was barred by litis pendencia or res judicata.

• Validity of Consignation: Whether the judicial deposit of ₱127,500.00 made by the Suicos with the Clerk of Court of the RTC, San Carlos City, in compliance with the final and executory decision of the Court of Appeals in CA-G.R. CV-13785 was valid and sufficient to effect payment.

• Validity of Consignation: The deposit did not constitute valid consignation. Strict compliance with the requisites for consignation under Articles 1256 and 1257 of the Civil Code is mandatory, and failure to comply with any requisite renders the consignation void. A prior tender of payment is generally required, and none of the exceptions under Article 1256—such as the creditor being absent, unknown, incapacitated, or when two or more persons claim the same right—were present. While Arzaga v. Rumbaoa recognized an exception where prior tender is excused when the debtor expressly petitions the court to notify the creditor to receive payment, petitioner herein did not make such a request. Instead, the prayer was limited to compelling respondents and RPB to interplead and for substitution of collateral. The danger of foreclosure did not excuse the failure to tender payment. The Court found no cogent reason to disturb the concurrent findings of the Court of Appeals and the Regional Trial Court that no prior valid tender was made.

• Consignation and Tender of Payment Distinguished — Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment, and generally requires a prior tender of payment. Tender of payment is the manifestation by the debtor to the creditor of his desire to comply with his obligation, with the offer of immediate performance. Tender is the antecedent of consignation, preparatory to it, while consignation is the principal act from which the debtor seeks to derive the consequences of payment. Tender may be extrajudicial, while consignation is necessarily judicial. Both, when validly made, produce the effect of payment and extinguish the obligation.
• Mandatory Requisites of Consignation — Compliance with the requisites of a valid consignation is mandatory. Failure to comply strictly with any of the requisites will render the consignation void. One essential requisite is a valid prior tender of payment, except in the specific instances enumerated in Article 1256 of the Civil Code: (1) when the creditor is absent or unknown, or does not appear at the place of payment; (2) when the creditor is incapacitated to receive the payment at the time it is due; (3) when, without just cause, the creditor refuses to give a receipt; (4) when two or more persons claim the same right to collect; and (5) when the title of the obligation has been lost.
• Judicial Deposit as Payment — For a consignation or deposit with the court of an amount due on a judgment to be considered as payment, there must be prior tender to the judgment creditor who refuses to accept it. Alternatively, the debtor must expressly petition the court that the creditor be notified to receive the tender of payment; absent such prayer, the deposit alone is insufficient to constitute payment.

• "Consignation [is] the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment, and it generally requires a prior tender of payment. It should be distinguished from tender of payment which is the manifestation by the debtor to the creditor of his desire to comply with his obligation, with the offer of immediate performance. Tender is the antecedent of consignation, that is, an act preparatory to the consignation, which is the principal, and from which are derived the immediate consequences which the debtor desires or seeks to obtain. Tender of payment may be extrajudicial, while consignation is necessarily judicial, and the priority of the first is the attempt to make a private settlement before proceeding to the solemnities of consignation. Tender and consignation, where validly made, produces the effect of payment and extinguishes the obligation."
• "It is settled that compliance with the requisites of a valid consignation is mandatory. Failure to comply strictly with any of the requisites will render the consignation void. One of these requisites is a valid prior tender of payment."
• "Under Article 1256, the only instances where prior tender of payment is excused are: (1) when the creditor is absent or unknown, or does not appear at the place of payment; (2) when the creditor is incapacitated to receive the payment at the time it is due; (3) when, without just cause, the creditor refuses to give a receipt; (4) when two or more persons claim the same right to collect; and (5) when the title of the obligation has been lost."

• Arzaga v. Rumbaoa, 91 Phil. 499 (1952) — Cited by petitioner as authority that a deposit with the court can constitute valid payment even without prior tender if the plaintiff expressly petitions the court to notify the defendant to receive payment. The Court distinguished this case because the petitioner herein did not request such notification.
• Del Rosario v. Sandico, 85 Phil. 170 (1949) — Applied to establish that for a consignation of an amount due on a judgment to be considered payment, there must be prior tender to the judgment creditor who refuses to accept it.
• Salvante v. Cruz, 88 Phil. 236 (1951) — Reiterated the principle that prior tender to the judgment creditor is required for a judicial deposit to constitute payment.
• Pabugais v. Sahijwani, G.R. No. 156846, February 23, 2004, 423 SCRA 596 — Cited for the same principle regarding the necessity of prior tender.
• Roman Catholic Bishop of Malolos, Inc. v. IAC, G.R. No. 72110, November 16, 1990, 191 SCRA 411 — Cited for the definition that tender of payment involves a positive and unconditional act by the obligor of offering legal tender currency as payment to the obligee and demanding that the latter accept the same.

• Article 1256, Civil Code — Provides that if the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due. Also enumerates the five instances where prior tender of payment is excused.
• Article 1257, Civil Code — Provides that in order for consignation to release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation, and that consignation shall be ineffectual if not made strictly in consonance with the provisions regulating payment.

• Presbitero J. Velasco, Jr. (Chairperson)
• Martin S. Villarama, Jr. (Acting Member, per Special Order No. 1691 dated May 22, 2014)
• Jose Catral Mendoza
• Marvic Mario Victor F. Leonen