Roman Catholic Bishop of Malolos, Inc. vs. Intermediate Appellate Court

Mere proof that an obligor had sufficient available funds to satisfy an obligation does not constitute proof of tender of payment, which requires a positive and unconditional act by the obligor of offering legal tender currency as payment and demanding that the obligee accept the same; and a certified check, not being legal tender, cannot constitute valid tender of payment where the contract stipulates payment in Philippine currency.

Roman Catholic Bishop of Malolos, Inc. (petitioner) was the registered owner of a parcel of land in San Jose del Monte, Bulacan, covered by Original Certificate of Title No. 575 of the Province of Bulacan. Robes-Francisco Realty and Development Corporation (private respondent) was a corporate vendee that contracted to purchase a 20,655 sq.m. portion of that land for ₱123,930.00. The contract, executed on July 7, 1971, stipulated a downpayment of ₱23,930.00 and a balance of ₱100,000.00 plus 12% interest per annum payable within four years, with provisions for cancellation, forfeiture of previous payments, and reconveyance in case of non-completion of payment within the stipulated period.

On July 7, 1971, a contract over a 20,655 sq.m. portion of land in San Jose del Monte, Bulacan, covered by OCT No. 575, was executed between the petitioner, Roman Catholic Bishop of Malolos, Inc., as vendor, and the private respondent, Robes-Francisco Realty and Development Corporation, through its then president, Mr. Carlos F. Robes, as vendee. The contract stipulated a downpayment of ₱23,930.00 and a balance of ₱100,000.00 plus 12% interest per annum to be paid within four years from execution, that is, on or before July 7, 1975. The contract likewise provided for cancellation, forfeiture of previous payments, and reconveyance of the land in case the private respondent failed to complete payment within the stipulated period.

On March 12, 1973, the private respondent, through its new president, Atty. Adalia Francisco, wrote to Father Vasquez, parish priest of San Jose del Monte, Bulacan, requesting a copy of the subject contract and supporting documents. On July 17, 1975, after the expiration of the stipulated period for payment, Atty. Francisco wrote the petitioner a formal request that her company be allowed to pay the principal of ₱100,000.00 in three equal installments of six months each, with the first installment and accrued interest of ₱24,000.00 to be paid immediately upon approval. On July 29, 1975, the petitioner, through counsel, Atty. Carmelo Fernandez, formally denied the request but granted a grace period of five days from receipt of the denial to pay the total balance of ₱124,000.00, otherwise the provisions on cancellation, forfeiture, and reconveyance would be implemented.

On August 4, 1975, the private respondent wrote to the petitioner's counsel requesting an extension of 30 days from that date to fully settle its account. The counsel received the letter on the same day and, upon consultation with the petitioner in Malolos, wrote the private respondent on August 7, 1975 denying the request for extension. Thereafter, on August 22, 1975, Atty. Francisco wrote directly to the petitioner, protesting the alleged refusal of the latter to accept a tender of payment purportedly made on August 5, 1975, the last day of the grace period. In the same letter, received by the petitioner on August 23, 1975, the private respondent demanded the execution of a deed of absolute sale over the land, after which it would pay its account in full, threatening judicial action otherwise.

On August 27, 1975, the petitioner's counsel replied, refusing to execute the deed of absolute sale due to the private respondent's failure to pay its full obligation, and denying that any tender of payment had been made within the grace period. The petitioner cancelled the contract, declared all previous payments forfeited, and considered the land ipso facto reconveyed.

The trial court found for the petitioner, declining to credit the evidence of tender of payment presented by the private respondent. The trial court found it implausible that Atty. Francisco would tender payment on August 5, 1975, when her request for a 30-day extension dated August 4, 1975 had not yet been acted upon until August 7, 1975. The trial court likewise noted inconsistencies in the testimony of Atty. Francisco regarding who accompanied her on August 5, 1975, the failure to present the certified personal check allegedly tendered as payment or even a photocopy or bank records thereof, and the insufficiency of available funds, as Atty. Francisco had only ₱64,840.00 in savings and a money-market placement of ₱300,000.00 that would mature only after the expiration of the grace period. The Court of Appeals reversed, finding that the money-market placement could be withdrawn at any time, thus proving financial capability, and concluding from such sufficiency of funds that tender of payment had been made.

• Sufficiency of Funds Does Not Prove Tender of Payment: Petitioner argued that a finding that the private respondent had sufficient available funds on or before the grace period does not constitute proof that it actually tendered payment within that period, as tender of payment requires a positive and unconditional act of offering legal tender currency, not a mere inference from surrounding circumstances.
• Conditional Obligation to Execute Deed of Sale: Petitioner maintained that under the express terms of the contract, the vendor's obligation to execute the deed of absolute sale arises only upon complete payment by the vendee, and the private respondent was in estoppel to claim otherwise, as its own president admitted in cross-examination that she wanted the deed executed before she would pay.
• Check Is Not Valid Tender of Payment: Petitioner contended that an offer of a certified personal check does not constitute valid tender of payment under a contract stipulating payment in Philippine currency, since a check is not legal tender.

• Sufficiency of Funds and Financial Capability: Respondent argued, through the Court of Appeals' adoption of its position, that it had sufficient available funds totaling ₱364,840.00 on or before August 4, 1975, as the money-market placement of ₱300,000.00 could be withdrawn at any time, thus proving its financial capability to meet the entire obligation and the truth of its tender of payment.
• Reversible Error of Trial Court: Respondent assigned as reversible error the trial court's findings that its available funds were insufficient and that it did not effect a valid tender of payment and consignation.

• Tender of Payment: Whether a finding that the private respondent had sufficient available funds on or before the grace period constitutes proof that it tendered payment for its obligation within that period.
• Conditional Obligation to Execute Deed of Sale: Whether it is the legal obligation of the petitioner, as vendor, to execute a deed of absolute sale in favor of the private respondent, as vendee, before the latter has actually paid the complete consideration, where the contract stipulates that upon complete payment the vendor shall cause the execution of the deed.
• Validity of Check as Tender of Payment: Whether an offer of a check constitutes a valid tender of payment of an obligation under a contract stipulating that the consideration is in Philippine currency.

• Tender of Payment: No. A finding of sufficient available funds does not constitute proof of tender of payment, which requires a positive and unconditional act by the obligor of offering legal tender currency as payment and demanding acceptance; sufficiency of funds proves only capacity, not performance.
• Conditional Obligation to Execute Deed of Sale: No. The subject contract expressly conditioned the vendor's obligation to execute the deed of absolute sale upon complete payment by the vendee, and the private respondent was in estoppel to claim otherwise, its own president having so admitted in cross-examination.
• Validity of Check as Tender of Payment: No. A certified personal check is not legal tender nor the currency stipulated, and therefore cannot constitute valid tender of payment under Article 1249 of the Civil Code; the delivery of a negotiable instrument does not by itself operate as payment.

• Tender of Payment: 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. It cannot be presumed by mere inference from surrounding circumstances. Sufficiency of available funds is affirmative only of the capacity or ability of the obligor to fulfill his part of the bargain, but whether the obligor actually availed himself of such funds to settle his account must be proven by independent and credible evidence. The maxim ab posse ad actu non vale illatio applies: a proof that an act could have been done is no proof that it was actually done. The Court of Appeals committed a non sequitur in concluding from sheer proof of sufficient available funds that tender of payment was made. Moreover, the Court of Appeals overlooked the trial court's factual findings — entitled to great weight on appeal — regarding the implausibility of the alleged tender, the inconsistent testimony on who accompanied Atty. Francisco, the failure to present the certified check or any evidence thereof, and the timing of the money-market placement's maturity. Where the findings of the Court of Appeals are at variance with those of the trial court, or when the inference of the Court of Appeals is manifestly mistaken, the Supreme Court must review the evidence to arrive at the correct findings.

• Conditional Obligation to Execute Deed of Sale: The subject contract clearly and expressly provides that "upon complete payment of the agreed consideration by the herein VENDEE, the VENDOR shall cause the execution of a Deed of Absolute Sale in favor of the VENDEE." Full payment is an a priori condition for the execution of the deed. The private respondent was in estoppel to claim otherwise, as its president, Atty. Francisco, admitted in cross-examination that she wanted the deed of sale executed before she would give the certified check in payment. Article 1159 of the Civil Code provides that obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. The private respondent should have paid within the grace period, obtained a receipt, and then demanded execution of the deed; if refused, it could have resorted to judicial action. Its failure to follow this course rendered it alone liable for the consequences.

• Validity of Check as Tender of Payment: Granting arguendo a favorable ruling on the first two issues, the private respondent's case still fails because it used a certified personal check, which is not legal tender nor the currency stipulated. Article 1249 of the Civil Code provides that payment of debts in money shall be made in the currency stipulated, and if not possible, in the currency which is legal tender in the Philippines. Citing Philippine Airlines vs. Court of Appeals, the Court reiterated that a negotiable instrument is only a substitute for money and not money; the delivery of such an instrument does not by itself operate as payment. A check, whether a manager's check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused by the obligee. Because the tender was invalid for failure to comply with the requisite payment in legal tender or stipulated currency within the grace period, and was validly refused by the petitioner, the subsequent consignation did not discharge the private respondent from its obligation. The petitioner therefore validly cancelled the contract, forfeited previous payments, and ordered reconveyance of the land.

• Tender of Payment — Tender of payment requires a positive and unconditional act by the obligor of offering legal tender currency as payment to the obligee and demanding acceptance. It cannot be presumed by mere inference from surrounding circumstances. Sufficiency of available funds proves only the capacity or ability to pay, not the actual act of tendering payment. The maxim ab posse ad actu non vale illatio — "a proof that an act could have been done is no proof that it was actually done" — applies. The Court applied this doctrine to reject the Court of Appeals' conclusion that proof of sufficient funds ipso facto established tender of payment.

• Negotiable Instrument as Substitute for Money, Not Money Itself — A negotiable instrument is only a substitute for money and not money; the delivery of such an instrument does not by itself operate as payment. A check, whether a manager's check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused by the obligee. The Court relied on this principle, as articulated in Philippine Airlines vs. Court of Appeals, to hold that the private respondent's offer of a certified personal check did not constitute valid tender of payment under a contract stipulating payment in Philippine currency.

• Binding Force of Contracts — Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith (Article 1159, Civil Code). Stipulations not contrary to law, morals, good customs, public order, or public policy are binding as between the parties. The Court applied this to enforce the contract's express condition that the deed of absolute sale would be executed only upon complete payment by the vendee.

• "Tender of payment involves a positive and unconditional act by the obligor of offering legal tender currency as payment to the obligee for the former's obligation and demanding that the latter accept the same. Thus, tender of payment cannot be presumed by a mere inference from surrounding circumstances." — This passage defines the essential nature of tender of payment and articulates the ratio decidendi for the first issue: that sufficiency of funds alone cannot substitute for the actual act of tender.

• "A check, whether a manager's check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor." — Quoted from Philippine Airlines vs. Court of Appeals, this is the canonical formulation of the rule that a check does not constitute valid tender of payment, directly controlling the third issue.

• "Ab posse ad actu non vale illatio. 'A proof that an act could have been done is no proof that it was actually done.'" — The Latin maxim encapsulates the logical fallacy in the Court of Appeals' reasoning, distilling the principle that capacity to perform does not establish performance.

• Philippine Airlines vs. Court of Appeals, G.R. No. L-49188 (January 30, 1990) — Controlling precedent cited for the proposition that a negotiable instrument is only a substitute for money and not money, and that a check is not legal tender; an offer of a check is not valid tender of payment and may be refused by the obligee. The Court applied this ruling directly to the third issue.

• Natividad del Rosario Vda. de Alberto vs. Court of Appeals, G.R. No. 29759 (May 18, 1989) — Cited for the principle that findings of fact of the trial court are entitled to great weight on appeal and should not be disturbed absent strong and cogent reasons.

• Matabuena vs. Court of Appeals, G.R. No. 76542 (May 5, 1989) — Cited alongside Natividad del Rosario Vda. de Alberto for the same proposition regarding deference to trial court factual findings.

• Robleza vs. Court of Appeals, G.R. No. 80364 (June 28, 1989) — Cited for the exception allowing Supreme Court review of factual findings when the findings of the Court of Appeals are at variance with those of the trial court.

• Reynolds Philippine Corporation vs. Court of Appeals, G.R. No. 38187 (January 17, 1987) — Cited for the exception allowing review when the inference of the Court of Appeals from its findings of fact is manifestly mistaken.

• Article 1159, Civil Code of the Philippines — Provides that obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Applied to enforce the contract's express stipulation that the deed of absolute sale would be executed only upon complete payment by the vendee.

• Article 1249, Civil Code of the Philippines — Provides that payment of debts in money shall be made in the currency stipulated, and if not possible, in the currency which is legal tender in the Philippines. Applied to hold that a certified personal check is neither the currency stipulated (Philippine currency) nor legal tender, and therefore cannot constitute valid tender of payment.

• Article 1409, Civil Code of the Philippines (par. 1) — Cited in connection with the principle that stipulations in a contract, unless contrary to law, morals, good customs, public order, or public policy, are binding as between the parties.

Melencio-Herrera (Chairman), Paras, Padilla, and Regalado, JJ., concurred.