G.R. No.

149756 February 11, 2005

MYRNA RAMOS, petitioner,

vs.
SUSANA S. SARAO and JONAS RAMOS, respondents.

DECISION

PANGANIBAN, J.:

Although the parties in the instant case denominated their contract as a "DEED OF SALE UNDER PACTO DE
RETRO," the "sellers" have continued to possess and to reside at the subject house and lot up to the present.
This evident factual circumstance was plainly overlooked by the trial and the appellate courts, thereby justifying
a review of this case. This overlooked fact clearly shows that the petitioner intended merely to secure a loan, not
to sell the property. Thus, the contract should be deemed an equitable mortgage.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the August 31, 2001
Decision2 of the Court of Appeals (CA) in CA-GR CV No. 50095, which disposed as follows:

"WHEREFORE, the instant appeal is DISMISSED for lack of merit. The decision dated January 19, 1995 of
the Regional Trial Court, Branch 145, Makati City is AFFIRMEDin toto."3

The Facts

On February 21, 1991, Spouses Jonas Ramos and Myrna Ramos executed a contract over their conjugal house
and lot in favor of Susana S. Sarao for and in consideration of ₱1,310,430.4 Entitled "DEED OF SALE UNDER
PACTO DE RETRO," the contract, inter alia, granted the Ramos spouses the option to repurchase the property
within six months from February 21, 1991, for ₱1,310,430 plus an interest of 4.5 percent a month.5 It was
further agreed that should the spouses fail to pay the monthly interest or to exercise the right to repurchase
within the stipulated period, the conveyance would be deemed an absolute sale.6

On July 30, 1991, Myrna Ramos tendered to Sarao the amount of ₱1,633,034.20 in the form of two manager’s
checks, which the latter refused to accept for being allegedly insufficient.7 On August 8, 1991, Myrna filed a
Complaint for the redemption of the property and moral damages plus attorney’s fees.8 The suit was docketed as
Civil Case No. 91-2188 and raffled to Branch 145 of the Regional Trial Court (RTC) of Makati City. On
August 13, 1991, she deposited with the RTC two checks that Sarao refused to accept.9

On December 21, 1991, Sarao filed against the Ramos spouses a Petition "for consolidation of ownership
in pacto de retro sale" docketed as Civil Case No. 91-3434 and raffled to Branch 61 of the RTC of Makati
City.10 Civil Case Nos. 91-2188 and 91-3434 were later consolidated and jointly tried before Branch 145 of the
said Makati RTC.11

The two lower courts narrated the trial in this manner:

"x x x Myrna [Ramos] testified as follows: On February 21, 1991, she and her husband borrowed from Sarao
the amount of ₱1,234,000.00, payable within six (6) months, with an interest thereon at 4.5% compounded
monthly from said date until August 21, 1991, in order for them to pay [the] mortgage on their house. For and in
consideration of the said amount, they executed a deed of sale under a [pacto de retro] in favor of Sarao over
their conjugal house and lot registered under TCT No. 151784 of the Registry of Deeds of Makati (Exhibit A).
She further claimed that Sarao will keep the torrens title until the lapse of the 6-month period, in which case she
will redeem [the] subject property and the torrens title covering it. When asked why it was the amount of
₱1,310,430 instead of the aforestated amount which appeared in the deed, she explained that upon signing of the
deed in question, the sum of ₱20,000.00 representing attorney’s fees was added, and its total amount was
multiplied with 4.5% interest rate, so that they could pay in advance the compounded interest. She also stated
that although the market value of the subject property as of February 1991 [was] calculated to [be] more or less
₱10 million, it was offered [for] only ₱1,310,430.00 for the reason that they intended nothing but to redeem the
same. In May 1991, she wrote a letter to Atty. Mario Aguinaldo requesting him to give a computation of the
loan obligation, and [expressed] her intention to redeem the subject property, but she received no reply to her
letter. Instead, she, through her husband, secured directly from Sarao a handwritten computation of their loan
obligation, the total of which amount[ed] to ₱1,562,712.14. Later, she sent several letters to Sarao, [furnishing]
Atty. Aguinaldo with copies, asking them for the updated computation of their loan obligation as of July 1991,
but [no reply was again received]. During the hearing of February 17, 1992, she admitted receiving a letter
dated July 23, 1991 from Atty. Aguinaldo which show[ed] the computation of their loan obligation [totaling] to
₱2,911,579.22 (Exhs. 6, 6-A). On July 30, 1991, she claimed that she offered the redemption price in the form
of two (2) manager’s checks amounting to ₱1,633,034.20 (Exhs. H-1 & H-2) to Atty. Aguinaldo, but the latter
refused to accept them because they [were] not enough to pay the loan obligation. Having refused acceptance of
the said checks covering the redemption price, on August 13, 1991 she came to Court to consign the checks
(Exhs. L-4 and L-5). Subsequently, she proceeded to the Register of Deeds to cause the annotation of lis
pendens on TCT No. 151784 (Exh. B-1-A). Hence, she filed the x x x civil case against Sarao.

"On the other hand, Sarao testified as follows: On February 21, 1991, spouses Ramos together with a certain
Linda Tolentino and her husband, Nestor Tolentino approached her and offered transaction involv[ing a] sale of
property[. S]he consulted her lawyer, Atty. Aguinaldo, and on the same date a corresponding deed of sale
under pacto de retro was executed and signed (Exh. 1 ). Later on, she sent, through her lawyer, a demand letter
dated June 10, 1991 (Exh. 6) in view of Myrna’s failure to pay the monthly interest of 4.5% as agreed upon
under the deed[. O]n June 14, 1991 Jonas replied to said demand letter (Exh. 8); in the reply Jonas admitted that
he no longer ha[d] the capacity to redeem the property and to pay the interest. In view of the said reply of Jonas,
[Sarao] filed the corresponding consolidation proceedings. She [further claimed] that before filing said action
she incurred expenses including payment of real estate taxes in arrears, x x x transfer tax and capital [gains] tax,
and [expenses] for [the] consolidated proceedings, for which these expenses were accordingly receipted (Exhs.
6, 6-1 to 6-0). She also presented a modified computation of the expenses she had incurred in connection with
the execution of the subject deed (Exh. 9). She also testified that Myrna did not tender payment of the correct
and sufficient price for said real property within the 6-month period as stipulated in the contract, despite her
having been shown the computation of the loan obligation, inclusive of capital gains tax, real estate tax, transfer
tax and other expenses. She admitted though that Myrna has tendered payment amounting to ₱1,633,034.20 in
the form of two manager’s checks, but these were refused acceptance for being insufficient. She also claimed
that several letters (Exhs. 2, 4 and 5) were sent to Myrna and her lawyer, informing them of the computation of
the loan obligation inclusive of said expenses. Finally, she denied the allegations made in the complaint that she
allied herself with Jonas, and claimed that she ha[d] no knowledge about said allegation."12

After trial, the RTC dismissed the Complaint and granted the prayer of Sarao to consolidate the title of the
property in her favor.13 Aggrieved, Myrna elevated the case to the CA.

Ruling of the Court of Appeals

The appellate court sustained the RTC’s finding that the disputed contract was a bonafide pacto de retro sale,
not a mortgage to secure a loan.14 It ruled that Myrna Ramos had failed to exercise the right of repurchase, as the
consignation of the two manager’s checks was deemed invalid. She allegedly failed (1) to deposit the correct
repurchase price and (2) to comply with the required notice of consignation.15

Hence, this Petition.16

The Issues

Petitioner raises the following issues for our consideration:

"1. Whether or not the honorable appellate court erred in ruling the subject Deed of Sale under Pacto de Retro
was, and is in reality and under the law an equitable mortgage;

"2. Whether or not the honorable appellate court erred in affirming the ruling of the court a quo that there was
no valid tender of payment of the redemption price neither [sic] a valid consignation in the instant case; and

"3. Whether or not [the] honorable appellate court erred in affirming the ruling of the court a quo denying the
claim of petitioner for damages and attorney’s fees."17

The Court’s Ruling

The Petition is meritorious in regard to Issues 1 and 2.

First Issue:

A Pacto de Retro Sale

or an Equitable Mortgage?

Respondent Sarao avers that the herein Petition should have been dismissed outright, because petitioner (1)
failed to show proof that she had served a copy of it to the Court of Appeals and (2) raised questions of fact that
were not proper issues in a petition under Rule 45 of the Rules of Court.18 This Court, however, disregarded the
first ground; otherwise, substantial injustice would have been inflicted on petitioner. Since the Court of Appeals
is not a party here, failure to serve it a copy of the Petition would not violate any right of respondent. Service to
the CA is indeed mentioned in the Rules, but only to inform it of the pendency of the appeal before this Court.

As regards Item 2, there are exceptions to the general rule barring a review of questions of fact.19 The Court
reviewed the factual findings in the present case, because the CA had manifestly overlooked certain relevant
and undisputed facts which, after being considered, justified a different conclusion.20

Pacto de Retro Sale Distinguished

from Equitable Mortgage

The pivotal issue in the instant case is whether the parties intended the contract to be a bona fide pacto de
retro sale or an equitable mortgage.

In a pacto de retro, ownership of the property sold is immediately transferred to the vendee a retro, subject only
to the repurchase by the vendor a retro within the stipulated period.21 The vendor a retro’s failure to exercise the
right of repurchase within the agreed time vests upon the vendee a retro, by operation of law, absolute title to
the property.22 Such title is not impaired even if the vendee a retro fails to consolidate title under Article 1607 of
the Civil Code.23

On the other hand, an equitable mortgage is a contract that -- although lacking the formality, the form or words,
or other requisites demanded by a statute -- nevertheless reveals the intention of the parties to burden a piece or
pieces of real property as security for a debt.24 The essential requisites of such a contract are as follows: (1) the
parties enter into what appears to be a contract of sale, but (2) their intention is to secure an existing debt by
way of a mortgage.25 The nonpayment of the debt when due gives the mortgagee the right to foreclose the
mortgage, sell the property, and apply the proceeds of the sale to the satisfaction of the loan obligation.26

This Court has consistently decreed that the nomenclature used by the contracting parties to describe a contract
does not determine its nature.27 The decisive factor is their intention -- as shown by their conduct, words, actions
and deeds -- prior to, during, and after executing the agreement.28 This juristic principle is supported by the
following provision of law:

Article 1371. In order to judge the intention of the contracting parties, their contemporaneous and subsequent
acts shall be principally considered.29

Even if a contract is denominated as a pacto de retro, the owner of the property may still disprove it by means
of parol evidence,30 provided that the nature of the agreement is placed in issue by the pleadings filed with the
trial court.31

There is no single conclusive test to determine whether a deed absolute on its face is really a simple loan
accommodation secured by a mortgage.32 However, the law enumerates several instances that show when a
contract is presumed to be an equitable mortgage, as follows:

Article 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument extending the period of
redemption or granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction
shall secure the payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall be subject to the usury laws.33

Furthermore, a contract purporting to be a pacto de retro is construed as an equitable mortgage when the terms
of the document and the surrounding circumstances so require.34 The law discourages the use of a pacto de
retro, because this scheme is frequently used to circumvent a contract known as a pactum commissorium. The
Court has frequently noted that a pacto de retro is used to conceal a contract of loan secured by a
mortgage.35 Such construction is consistent with the doctrine that the law favors the least transmission of
rights.36

Equitable Mortgage Presumed

to be Favored by Law

Jurisprudence has consistently declared that the presence of even just one of the circumstances set forth in the
forgoing Civil Code provision suffices to convert a contract to an equitable mortgage.37 Article 1602 specifically
states that the equitable presumption applies to any of the cases therein enumerated.

In the present factual milieu, the vendor retained possession of the property allegedly sold.38 Petitioner and her
children continued to use it as their residence, even after Jonas Ramos had abandoned them.39 In fact, it
remained as her address for the service of court orders and copies of Respondent Sarao’s pleadings.40

The presumption of equitable mortgage imposes a burden on Sarao to present clear evidence to rebut it.
Corollary to this principle, the favored party need not introduce proof to establish such presumption; the party
challenging it must overthrow it, lest it persist.41 To overturn that prima facie fact that operated against her,
Sarao needed to adduce substantial and credible evidence to prove that the contract was a bona fide pacto de
retro. This evidentiary burden she miserably failed to discharge.

Contrary to Sarao’s bare assertions, a meticulous review of the evidence reveals that the alleged contract was
executed merely as security for a loan.

The July 23, 1991 letter of Respondent Sarao’s lawyer had required petitioner to pay a computed amount --
under the heading "House and Lot Loan"42 -- to enable the latter to repurchase the property. In effect, respondent
would resell the property to petitioner, once the latter’s loan obligation would have been paid. This explicit
requirement was a clear indication that the property was to be used as security for a loan.

The loan obligation was clear from Sarao’s evidence as found by the trial court, which we quote:

"x x x [Sarao] also testified that Myrna did not tender payment of the correct and sufficient price for said real
property within the 6-month period as stipulated in the contract, despite her having been shown the computation
of the loan obligation, inclusive of capital gains tax, real estate tax, transfer tax and other expenses. She
admitted though that Myrna has tendered payment amounting to ₱1,633,034.20 in the form of two manager’s
checks, but these were refused acceptance for being insufficient. She also claimed that several letters (Exhs. 2, 4
and 5) were sent to Myrna and her lawyer, informing them of the computation of the loan obligation inclusive
of said expenses. x x x."43

Respondent herself stressed that the pacto de retro had been entered into on the very same day that the property
was to be foreclosed by a commercial bank.44 Such circumstance proves that the spouses direly needed funds to
avert a foreclosure sale. Had they intended to sell the property just to realize some profit, as Sarao
suggests,45 they would not have retained possession of the house and continued to live there. Clearly, the
spouses had entered into the alleged pacto de retro sale to secure a loan obligation, not to transfer ownership of
the property.

Sarao contends that Jonas Ramos admitted in his June 14, 1991 letter to her lawyer that the contract was a pacto
de retro.46 That letter, however, cannot override the finding that the pacto de retro was executed merely as
security for a loan obligation. Moreover, on May 17, 1991, prior to the transmittal of the letter, petitioner had
already sent a letter to Sarao’s lawyer expressing the former’s desire to settle the mortgage on the
property.47 Considering that she had already denominated the transaction with Sarao as a mortgage, petitioner
cannot be prejudiced by her husband’s alleged admission, especially at a time when they were already
estranged.48

Inasmuch as the contract between the parties was an equitable mortgage, Respondent Sarao’s remedy was to
recover the loan amount from petitioner by filing an action for the amount due or by foreclosing the property.49

Second Issue:

Propriety of Tender of

Payment and Consignation

Tender of payment is the manifestation by debtors of their desire to comply with or to pay their obligation.50 If
the creditor refuses the tender of payment without just cause, the debtors are discharged from the obligation by
the consignation of the sum due.51 Consignation is made by depositing the proper amount to the judicial
authority, before whom the tender of payment and the announcement of the consignation shall be proved.52 All
interested parties are to be notified of the consignation.53 Compliance with these requisites is mandatory.54

The trial and the appellate courts held that there was no valid consignation, because petitioner had failed to offer
the correct amount and to provide ample consignation notice to Sarao.55 This conclusion is incorrect.

Note that the principal loan was ₱1,310,430 plus 4.5 per cent monthly interest compounded for six months.
Expressing her desire to pay in the fifth month, petitioner averred that the total amount due was ₱1,633,034.19,
based on the computation of Sarao herself.56 The amount of ₱2,911,579.22 that the latter demanded from her to
settle the loan obligation was plainly exorbitant, since this sum included other items not covered by the
agreement. The property had been used solely as secure ty for the ₱1,310,430 loan; it was therefore improper to
include in that amount payments for gasoline and miscellaneous expenses, taxes, attorney’s fees, and other
alleged loans. When Sarao unjustly refused the tender of payment in the amount of ₱1,633,034.20, petitioner
correctly filed suit and consigned the amount in order to be released from the latter’s obligation.

The two lower courts cited Article 1257 of the Civil Code to justify their ruling that petitioner had failed to
notify Respondent Sarao of the consignation. This provision of law states that the obligor may be released,
provided the consignation is first announced to the parties interested in the fulfillment of the obligation.

The facts show that the notice requirement was complied with. In her August 1, 1991 letter, petitioner said that
should the respondent fail to accept payment, the former would consign the amount.57 This statement was an
unequivocal announcement of consignation. Concededly, sending to the creditor a tender of payment and notice
of consignation -- which was precisely what petitioner did -- may be done in the same act.58

Because petitioners’ consignation of the amount of ₱1,633,034.20 was valid, it produced the effect of
payment.59 "The consignation, however, has a retroactive effect, and the payment is deemed to have been made
at the time of the deposit of the thing in court or when it was placed at the disposal of the judicial
authority."60 "The rationale for consignation is to avoid making the performance of an obligation more onerous
to the debtor by reason of causes not imputable to him."61

Third Issue:

Moral Damages and Attorney’s Fees

Petitioner seeks moral damages in the amount of ₱500,000 for alleged sleepless nights and anxiety over being
homeless.62 Her bare assertions are insufficient to prove the legal basis for granting any award under Article
2219 of the Civil Code.63 Verily, an award of moral damages is uncalled for, considering that it was Respondent
Sarao’s accommodation that settled the earlier obligation of the spouses with the commercial bank and allowed
them to retain ownership of the property.

Neither have attorney’s fees been shown to be proper.64 As a general rule, in the absence of a contractual or
statutory liability therefor, sound public policy frowns on penalizing the right to litigate.65 This policy applies
especially to the present case, because there is a need to determine whether the disputed contract was a pacto de
retro sale or an equitable mortgage.

Other Matters
In a belated Manifestation filed on October 19, 2004, Sarao declared that she was the "owner of the one-half
share of Jonas Ramos in the conjugal property," because of his alleged failure to file a timely appeal with the
CA.66 Such declaration of ownership has no basis in law, considering that the present suit being pursued by
petitioner pertains to a mortgage covering the whole property.

Besides, it is basic that defenses and issues not raised below cannot be considered on appeal.67

The Court, however, observes that Respondent Sarao paid real property taxes amounting to ₱67,567.10 to halt
the auction sale scheduled for October 8, 2004, by the City of Muntinlupa.68 Her payment was made in good
faith and benefited petitioner. Accordingly, Sarao should be reimbursed; otherwise, petitioner would be unjustly
enriched,69 under Article 2175 of the Civil Code which provides:

Art. 2175. Any person who is constrained to pay the taxes of another shall be entitled to reimbursement from
the latter.

WHEREFORE, the Petition is partly GRANTED and the assailed Decision SET ASIDE. Judgment is hereby
rendered:

(1) DECLARING (a) the disputed contract as an equitable mortgage, (b) petitioner’s loan to Respondent Sarao
to be in the amount of ₱1,633,034.19 as of July 30, 1991; and (c) the mortgage on the property -- covered by
TCT No. 151784 in the name of the Ramos spouses and issued by the Register of Deeds of Makati City --as
discharged

(2) ORDERING the RTC to release to Sarao the consigned amount of ₱1,633,034.19

(3) COMMANDING Respondent Sarao to return to petitioner the owner’s copy of TCT No. 151784 in the
name of the Ramos spouses and issued by the Register of Deeds of Makati City

(4) DIRECTING the Register of Deeds of Makati City to cancel Entry No. 24057, the annotation appearing on
TCT No. 151784

(5) ORDERING petitioner to pay Sarao in the amount of ₱67,567.10 as reimbursement for real property taxes

No pronouncement as to costs.

SO ORDERED.

Sandoval-Gutierrez, Corona, Carpio-Morales and Garcia, JJ., concur.

G.R. No. 156474. August 16, 2005

PESANE ANIMAS MONGAO, joined by her husband BENHUR MONGAO, Petitioners,

vs.
PRYCE PROPERTIES CORPORATION, Respondent.

DECISION

TINGA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure assailing
the Decision1 of the Court of Appeals in CA-G.R. CV No. 52753, which reversed the trial court’s judgment on
the pleadings and remanded the case thereto for trial on the merits, and the Resolution2 denying petitioners’
motion for reconsideration.

The instant petition originated from a complaint for rescission and damages filed on February 14, 1995 by
petitioners, Spouses Pesane Animas Mongao (hereafter referred to as petitioner Mongao) and Benhur Mongao,
against respondent Pryce Properties Corporation before the Regional Trial Court (RTC) in General Santos
City.3 The complaint alleged that petitioner Mongao and respondent corporation executed a Memorandum of
Agreement4 on December 20, 1993, wherein the former agreed to sell to the latter for the total price of Five
Million Twenty-Eight Thousand Eight Hundred Pesos (₱5,028,800.00) a parcel of land in Polomolok, South
Cotabato covered by Transfer Certificate of Title (TCT) No. T-221865 registered in the name of petitioner
Mongao only. In accordance with the terms and conditions of the Memorandum of Agreement, respondent
corporation allegedly paid petitioners the sum of Five Hundred Fifty Thousand Pesos (₱550,000.00) as earnest
money considered as part of the purchase price. The complaint further alleged that after considerable delay,
respondent corporation offered to pay the balance of the purchase price by issuing a check payable to petitioner
Mongao and her mother, Nellie Animas, which the former rejected. Allegedly, respondent corporation
continuously refused to heed petitioners’ written and oral demands to pay the balance solely to petitioner
Mongao.

The complaint also denied that petitioner Mongao executed a Deed of Absolute Sale dated November 15, 1994
in favor of respondent corporation, the registration of which caused the cancellation of TCT No. T-22186 in the
name of petitioner Mongao and the issuance of TCT No. T-62944. In addition to petitioners’ prayer for the
rescission of the Memorandum of Agreement and the Deed of Absolute Sale and the forfeiture of the earnest
money paid by respondent corporation, the complaint also asked for the award of moral and exemplary damages
and attorney’s fees.

Respondent corporation filed an answer and refuted petitioners’ allegations with a narration of the factual
antecedents leading to the perfection of the contract of sale.6 It claimed that sometime in 1993, a certain Pedro
Animas IV approached Sonito N. Mole, an officer of respondent corporation, and negotiated the sale of
properties belonging to the Animas family which were on the verge of being foreclosed by the bank.
Respondent corporation further claimed that the subject property was one of the two parcels of land it selected
for purchase. Said property covered by TCT No. T-22186 allegedly belonged to petitioner Mongao’s parents
but was registered in petitioner Mongao’s name as a trustee thereof.

Respondent corporation averred that the true agreement between respondent corporation and the Animas family
was for the former to purchase the two parcels of land belonging to the late Pedro Animas, father of petitioner
Mongao. It admitted the execution of the Memorandum of Agreement but qualified that respondent corporation
did not pay the earnest money directly and solely to petitioner Mongao. Said earnest money was allegedly part
of the amount directly paid by respondent corporation to the Development Bank of the Philippines in order to
redeem certain properties of the Animas family which were foreclosed and sold at a public auction.

Respondent corporation averred that petitioner Mongao and Pedro Animas, Jr., the registered owners of the
subject properties, executed simultaneously the corresponding Deed of Sale and Memorandum of
Agreement after respondent corporation’s representative delivered the checks to the bank as payment for
redemption of the properties. Controversy arose after respondent corporation had allegedly manifested its intent
to complete payments but petitioner Mongao demanded that payment be made to her alone to the exclusion of
the rest of the Animas family. Respondent corporation admitted issuing a check in the amount of Three Million
Three Hundred Fifty-Seven Pesos and Eighty-Seven Centavos (₱3,353,357.84) payable to the order of
petitioner Mongao and her mother, Nellie Animas, which was however refused by petitioner Mongao.
The answer also admitted that due to the demands of both petitioner Mongao and the Animas family,
respondent corporation was constrained to deposit the payment with the Clerk of Court of the RTC of Davao
City. By way of a compulsory counterclaim, respondent corporation prayed that petitioners be adjudged liable
for attorney’s fees for their hasty and unjustified institution of the case.

Petitioners moved for judgment on the pleadings on the ground that the answer admitted the material allegations
of the complaint and, therefore, failed to tender an issue.7 In particular, the answer allegedly admitted the
existence of the contract of sale and respondent corporation’s refusal to satisfy the unpaid balance of the
purchase price despite demand. Petitioners contended that respondent corporation cannot avoid rescission by
raising the defense that it contracted with the Animas family and not solely with petitioner Mongao. Petitioners
belied respondent corporation’s claim for consignation by attaching a letter from the Office of the Clerk of
Court of the RTC of Davao City to the effect that the court could not act on petitioners’ motion to deny
consignation because the deposit was transmitted through a mere letter, hence, the case was not raffled to a
particular branch of the court.8

Respondent corporation opposed petitioners’ motion for judgment on the pleadings, arguing that two material
allegations in the complaint, namely: that petitioner Mongao did not execute the Deed of Sale and that petitioner
Mongao was the owner of the subject property, were disputed in the answer.9

The trial court granted petitioners’ motion for judgment on the pleadings and considered the case submitted for
decision. The trial court rendered a Decision10 on November 13, 1995. The dispositive portion thereof reads:

WHEREFORE, premises considered, the Memorandum of Agreement dated 20 December 1993, as well as the
Deed of Absolute Sale entered into between plaintiff Pesane Animas Mongao and defendant Pryce Properties
Corporation dated November 15, 1994, are hereby declared rescinded. As a consequence thereof, Pryce
Properties Corporation is directed to execute a Deed of Reconveyance of the property covered by TCT No. T-
62944 in favor of Pesane Animas and to pay attorney’s fees in the amount of ₱50,000.00 as well as costs of suit,
by way of damages.

On the other hand plaintiff Pesane Animas Mongao is likewise directed to return to the defendant Pryce
Properties Corporation, what she had received by virtue of the contract in the amount of ₱1,675,442.16, a
portion of which may be compensated to the damages herein awarded pursuant to Article 1278 of the New Civil
Code.

SO ORDERED.11

With the adverse decision, respondent corporation elevated the case to the Court of Appeals, which reversed the
trial court’s Decision and remanded the case for trial on the merits through its Decision promulgated on March
22, 2001.12 On the main issue of whether or not judgment on the pleadings was proper, the Court of Appeals
ruled in the negative, finding that there were actual issues raised in the answer requiring the presentation and
assessment of evidence. The appellate court opined that aside from the amount of damages claimed by both
parties, the following were also put in issue: (1) the genuineness of the Deed of Sale purportedly executed by
petitioner Mongao, and (2) the nature of petitioner Mongao’s title to the subject property. The Court of Appeals
also ruled against the trial court’s interference with the consignation case pending before the RTC of Davao
City but did not find petitioners guilty of forum-shopping in filing the action for rescission despite the pendency
of the consignation case with the RTC of Davao City.

Petitioners moved for the reconsideration of the Court of Appeals’ Decision but the same was denied in
a Resolution dated November 25, 2002. Hence, this petition for review, raising the following issues:

A. WHETHER OR NOT THE MERE DEPOSIT OF A CHECK ¾ PAYABLE TO TWO PERSONS, ONE OF
WHOM IS A THIRD PARTY AND/OR A STRANGER TO THE TRANSACTION, AND THE RELEASE OF
WHICH IS SUBJECT TO CERTAIN CONDITIONS¾ CONSTITUTES CONSIGNATION.

B. WHETHER OR NOT JUDGMENT ON THE PLEADINGS IS PROPER IN THIS CASE.13

The main issue for this Court’s resolution is the propriety of the trial court’s judgment on the pleadings on the
ground that respondent corporation’s allegation did not tender an issue.

Judgment on the pleadings is governed by Section 1, Rule 34 of the 1997 Rules of Civil Procedure, essentially a
restatement of Section 1, Rule 19 of the 1964 Rules of Court then applicable to the proceedings before the trial
court. Section 1, Rule 19 of the Rules of Court provides that where an answer "fails to tender an issue, or
otherwise admits the material allegations of the adverse party's pleading, the court may, on motion of that party,
direct judgment on such pleading." The answer would fail to tender an issue, of course, if it does not comply
with the requirements for a specific denial set out in Section 1014 (or Section 8)15 of Rule 8; and it would admit
the material allegations of the adverse party's pleadings not only where it expressly confesses the truthfulness
thereof but also if it omits to deal with them at all.16

Now, if an answer does in fact specifically deny the material averments of the complaint in the manner
indicated by said Section 10 of Rule 8, and/or asserts affirmative defenses (allegations of new matter which,
while admitting the material allegations of the complaint expressly or impliedly, would nevertheless prevent or
bar recovery by the plaintiff) in accordance with Sections 417 and 518 of Rule 6, a judgment on the pleadings
would naturally not be proper.19

Thus, there is joinder of issues when the answer makes a specific denial of the material allegations in the
complaint or asserts affirmative defenses which would bar recovery by the plaintiff. Where there is proper
joinder of issues, the trial court is barred from rendering judgment based only on the pleadings filed by the
parties and must conduct proceedings for the reception of evidence. On the other hand, an answer fails to tender
an issue where the allegations admit the allegations in support of the plaintiff’s cause of action or fail to address
them at all. In either case, there is no genuine issue and judgment on the pleadings is proper.

Petitioners’ action for rescission is mainly based on the alleged breach by respondent corporation of its
contractual obligation under the Memorandum of Agreement when respondent refused to effect payment of the
purchase price solely to petitioner Mongao. The complaint pertinently alleged the following:

4. Plaintiff Pesane Animas Mongao is the registered owner in fee simple of a parcel of land more particularly
described as: . . . .

5. In a Memorandum of Agreement dated 20 December 1993 and entered in the Notarial Register of Atty.
Rosalio C. Cariño, as Document No. 75, Page No. 15, Book No. II, Series of 1993; plaintiff Pesane Animas
Mongao agreed to sell the aforesaid parcel of land to defendant (copy of the Memorandum of Agreement is
attached as Annex B);

6. As earnest money, defendant paid to plaintiff Pesane Animas Mongao, and in her sole name, the amount of
P550,000.00;

. . . .20

On the other hand, nothing from the allegations in respondent corporation’s answer makes out a proper joinder
of issues. Petitioners’ cause of action for rescission is founded mainly on a perfected contract of sale allegedly
entered into between petitioners and respondent corporation as embodied in the Memorandum of
Agreement attached to the complaint. First, the allegations in respondent corporation’s answer do not make out
a specific denial that a contract of sale was perfected between the parties. Second, respondent corporation does
not contest the due execution and/or genuineness of said Memorandum of Agreement. In fact, paragraph 1 of the
answer categorically admits paragraph 5 of the complaint, thus:

1. Paragraphs 1, 2, 3, and 5 of the Complaint are admitted.21

Paragraph 5 of the complaint referred to above states:

5. In a Memorandum of Agreement dated 20 December 1993 and entered in the Notarial Register of Atty.
Rosalio C. Cariño, as Document No. 75, Page No. 15, Book No. II, Series of 1993; plaintiff Pesane Animas
Mongao agreed to sell the aforesaid parcel of land to defendant (copy of the Memorandum of Agreement is
attached as Annex B);22

As to how respondent corporation allegedly breached its contractual obligation under the Memorandum of
Agreement is illustrated by the following averments in the complaint:

7. Subsequent to the execution of the Memorandum of Agreement, defendant corporation after considerable
delay offered to pay the balance of the purchase price net of still undetermined and undisclosed deductions, this
time in the name of both plaintiff Pesane Animas Mongao and that of her mother;

8. Plaintiff Pesane Animas Mongao justifiably refused to accept payment under the conditions unilaterally
imposed by defendant corporation;
9. Several demands, both written and oral, were conveyed by plaintiffs to defendant corporation to pay the
balance immediately, directly and solely to plaintiff Pesane Animas Mongao, but defendant corporation, in
patent breach of its contractual obligation, refused;23

The answer denied the aforequoted allegations and asserted that there was an earlier understanding between the
parties, the substance of which was not clearly expressed in the following averments:

4. Paragraph 7 of the Complaint is denied, the truth of the matter being those stated in the Special and
Affirmative Defenses in this Answer.

5. Paragraph 8 of the Complaint is denied, the truth of the matter being that plaintiff’s refusal to accept payment
was not justified and was contrary to the earlier understanding and agreement of the parties.

6. Paragraph 9 of the Complaint is admitted, except for the allegation that defendant was in "patent breach of its
contractual obligation, the truth of the matter being that defendant’s refusal was in accordance with its
contractual obligation.24

Respondent corporation offered the affirmative defense that the separate demands of petitioner Mongao and the
Animas family compelled it to issue the check payable to both petitioner Mongao and her mother, to wit:

16. That in so far as Pedro Animas, Jr., was concerned, he did not object to payment being made to his brother
and/or mother, but with respect to plaintiff Pesane Animas Mongao, it was then that the controversy began since
plaintiff now demanded that payment be given to her alone to the exclusion of the rest of the Animas family.

17. That in order to play safe, defendant issued the check in the amount of ₱3,353,357.84, payable to the order
of plaintiff "Pesane Animas Mongao" and the surviving matriarch of the Animas Family in the person of "Nellie
vda. de Animas". Plaintiff resented this arrangement and refused to accept payment unless the check was made
out to her alone.

18. That since defendant was now receiving demands from plaintiff and the rest of the Animas Family (through
Nellie vda. de Animas), defendant became confused on which was the proper party to receive payment and, on
January 18, 1995, the amount of ₱3,353,357.84 was deposited by the defendant by way consignment with the
Clerk of Court of the Regional Court, 11th Judicial Region.25

Effectively, the aforequoted averments imply an admission by respondent corporation that it effected payment
contrary to the express terms of the contract of sale. Nowhere in the terms of the Memorandum of
Agreement does it state that the payment of the purchase price be tendered to any person other than petitioner
Mongao. The averment virtually admits petitioners’ allegation that respondent corporation committed a breach
of its contractual obligation to petitioners and supports their cause of action for rescission. Indeed, the drawing
of the check payable to the order of petitioner Mongao and Nellie Vda. de Animas would deprive petitioner
Mongao of the exclusive benefit of the payment, thereby sharply deviating from the terms of the contract of
sale.

As earlier stated, an answer may allege affirmative defenses which may strike down the plaintiff’s cause of
action. An affirmative defense is one which is not a denial of an essential ingredient in the plaintiff’s cause of
action, but one which, if established, will be a good defense—i.e. an "avoidance" of the claim.26 Affirmative
defenses include fraud, statute of limitations, release payment, illegality, statute of frauds, estoppel, former
recovery, discharge in bankruptcy, and any other matter by way of confession and avoidance. When the answer
asserts affirmative defenses, there is proper joinder of issues which must be ventilated in a full-blown trial on
the merits and cannot be resolved by a mere judgment on the pleadings. Allegations presented in the answer as
affirmative defenses are not automatically characterized as such. Before an allegation qualifies as an affirmative
defense, it must be of such nature as to bar the plaintiff from claiming on his cause of action. For easy reference,
respondent corporation’s affirmative defenses shall be laid out in full:

SPECIAL AND AFFIRMATIVE DEFENSES

9. That, sometime in the latter half of 1993, defendant’s officer, Sonito N. Mole, was approached by a real
estate broker who introduced Pedro Animas IV who disclosed that his family (referring to his mother, brothers
and sisters) was on the verge of permanently losing to the Bank all of their family properties. The Animas
family desperately needed to sell some of the properties so that the rest could be saved. Thus, S.N. Mole, as
representative of the defendant, and Pedro Animas IV, as representative of the Animas Family, discussed and
negotiated on what properties would be purchased and the terms of the purchase.
10. That defendant was shown a sketch plan of what was referred to therein as the "ANIMAS SUBDIVISION"
situated at Matinao, Polomolok, South Cotabato and its corresponding "Development Permit" No. 01835 issued
on January 10, 1985, covering TCT Nos. T-22186 and T-22188, for a residential subdivision in the name of
applicant/owner "PEDRO ANIMAS", the late father of the Complainant Pesane Animas Mongao. Because of
their potential as residential subdivision, these very same two (2) parcels of land at Matinao were the ones
defendant chose to purchase.

11. That, sometime in December, 1993, the defendant, through S.N. Mole went to General Santos City, bringing
with him the two (2) checks necessary to pay the Bank in order to redeem the Animas family lands from the
Bank, the written agreements outlining the terms of the purchase by defendant of the lands, and the deeds of
absolute sale for the lands that defendant intended to purchase.

12. That upon delivery of the checks to the Bank, plaintiff (and her husband), as well as Pedro Animas, Jr. (the
registered owner of the other land purchased by the defendant) signed the necessary memoranda of agreement,
as well as the deeds of conveyances (deeds of absolute sale).

13. That, in the meantime, a Notice of Lis Pendens was annotated in TCT No. T-22186 regarding Civil Case
No. 5195 "FOR: PARTITION" then pending . . . and entitled "PEDRO ANIMAS VI, Plaintiff, versus NELLIE
ANIMAS, BALDOMERO ANIMAS, EDUARDO ANIMAS, PEDRO ANIMAS, JR., PEDRO ANIMAS IV,
PEDRO ANIMAS V, MARIVIC ANIMAS, MARINEL ANIMAS LIM and PESANE ANIMAS, Defendants"
and, on May 23, 1994, judgment was rendered approving the Compromise Agreement, wherein "the defendants
will give plaintiff the amount of ONE HUNDRED THOUSAND (₱100,000.00) PESOS upon the sale of their
Matinao properties in favor of PRYCE INC."

14. That in the middle of November, 1995 the lands subject of the purchase by the defendant were finally issued
clearances for transfer of title in favor and in the name of the defendant.

15. That in early December, 1995, plaintiff Pesane Animas Mongao and the rest of the Animas Family were
advised that defendant was ready to complete payments in accordance with their Memorandum of Agreement.

16. That in so far as Pedro Animas, Jr., was concerned, he did not object to payment being made to his brother
and/or mother, but with respect to plaintiff Pesane Animas Mongao, it was then that the controversy began since
plaintiff now demanded that payment be given to her alone to the exclusion of the rest of the Animas Family.

17. That in order to play safe, defendant issued the check in the amount of ₱3,353,357.84, payable to the order
of plaintiff "Pesane Animas Mongao" and the surviving matriarch of the Animas Family in the person of "Nellie
vda. de Animas". Plaintiff resented this arrangement and refused to accept payment unless the check was made
out to her alone.

18. That since defendant was now receiving demands from plaintiff and the rest of the Animas Family (through
Nellie vda. de Animas), defendant became confused on which was the proper party to receive payment and, on
January 18, 1995, the amount of ₱3,353,357.84 was deposited by the defendant by way consignment with the
Clerk of Court of the Regional Court, 11th Judicial Region.

19. The defendant is still ready and willing to cause the release of said consignment amount (less consignment
fees of the court) to whomsoever that the Court may adjudge to be the proper party entitled to the amount.

20. That since the start of the negotiations for the purchase of the lands, it was made clear to the defendant that
the properties were part of the estate of the deceased Judge Pedro Animas and his surviving wife Nellie vda. de
Animas and that the registered owners (the children) were merely holding the same in trust for the estate and
Nellie vda. de Animas.

21. That no factual nor legal ground exists to support plaintiffs claim for rescission of contract.

22. That the complaint states no cause of action against the defendant.

23. That this suit actually involves conflicting claims among members of the same family.27

In essence, respondent corporation justifies its refusal to tender payment of the purchase price solely to
petitioner Mongao by alleging that the latter was a mere trustee and not the beneficial owner of the property
subject of the sale and therefore not the proper party to receive payment. Such defense cannot prevent
petitioners from seeking the rescission of the contract of sale. The express terms of the Memorandum of
Agreement, the genuineness and due execution of which are not denied, clearly show that the contract of sale
was executed only between petitioner Mongao and respondent corporation. Where there is an apparent
repudiation of the trust by petitioner Mongao, such claim or defense may properly be raised only by the parties
for whose benefit the trust was created. Respondent corporation cannot assert said defense in order to resist
petitioners’ claim for rescission where it has been sufficiently shown by the allegations of the complaint and
answer that respondent corporation has breached its contractual obligation to petitioners. There being no
material allegation in the answer to resist petitioners’ claim, the trial court correctly rendered judgment based on
the pleadings submitted by the parties.

The Court of Appeals enumerated certain factual controversies, which it believed can only be resolved after
presentation of evidence, and these are: (1) whether or not petitioner Mongao executed the Deed of Absolute
Sale in favor of respondent corporation, and (2) whether or not petitioner Mongao is the sole owner of the
subject property.

The Court finds that the determination of these factual questions is immaterial to the resolution of the main
issue of whether or not there is a valid cause for rescission in light of respondent’s implied admissions of certain
allegations and the weakness of the affirmative defenses in the answer. At the risk of being repetitious,
respondent corporation’s answer admitted that there was a perfected contract of sale between respondent and
petitioner Mongao and that respondent corporation refused to tender payment of the purchase price solely to
petitioner Mongao. These admissions clearly make out a case for rescission of contract.

On the peripheral issue of whether or not there was proper consignation of the purchase price with the RTC of
Davao City, the Court adopts the trial court’s finding that respondent corporation did not follow the procedure
required by law, to wit:

On the second issue, the mere consignment or deposit of the check to the Clerk of Court without observing the
mandatory provisions of Articles 1256 to 1257 of the New Civil Code, does not produce the effect of payment
in order that the obligor or the defendant herein shall be released from the obligation, hence, no payment of the
unpaid balance of ₱3,533,357.84 has actually been made. In fact it was noted by the Court that the deposit is
even conditional, i.e. it should not be released without a court order.28

The records reveal that respondent corporation did not file any formal complaint for consignation but merely
deposited the check with the Clerk of Court. A formal complaint must be commenced with the trial court to
provide the proper venue for the determination if there is a valid tender of payment. Strictly speaking, without
the institution of an action for tender of payment and consignation, the trial court cannot rule on whether or not
respondent was justified in not effecting payment solely to petitioner Mongao.

WHEREFORE, the instant petition for review is GRANTED. The Decision of the Court of Appeals in CA-
G.R. CV No. 52753 is REVERSED and SET ASIDE and the Decision of the Regional Trial Court, Branch 35,
General Santos City in Civil Case No. 5545 is hereby REINSATED. Costs against respondent.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

G.R. No. 169501 June 8, 2007

B.E. SAN DIEGO, INC., petitioner,

vs.
ROSARIO T. ALZUL, respondent.

DECISION

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari1 under Rule 45 questions the February 18, 2005 Decision2 of the Court of
Appeals (CA) in CA-G.R. SP No. 81341, which granted respondent Alzul the right to pay the balance of the
purchase price within five (5) days from receipt of the CA Decision despite the lapse of the original period
given to said party through the final Resolution of this Court in an earlier case. The CA ruling reversed the
September 18, 2003 Resolution3 and December 2, 2003 Order4 of the Office of the President (OP) in O.P. Case
No. 01-1-097, which upheld the dismissal of respondent Alzul’s complaint for consignation and specific
performance before the Housing and Land Use Regulatory Board (HLURB) in HLURB Case No. REM-A-
99097-0167. Likewise challenged is the August 31, 2005 CA Resolution5 rejecting petitioner’s Motion for
Reconsideration.

The Facts

The facts culled by the CA are as follows:

On February 10, 1975, [respondent] Rosario T. Alzul purchased from [petitioner] B.E. San Diego, Inc. four (4)
subdivision lots with an aggregate area of 1,275 square meters located at Aurora Subdivision, Maysilo,
Malabon. These lots, which are now subject of this petition, were bought through installment under Contract to
Sell No. 867 at One Hundred Pesos (₧100.00) per square meter, with a downpayment [sic] of Twelve
Thousand Seven Hundred Fifty Pesos (₧12,750.00), and monthly installments of One Thousand Two Hundred
Forty-Nine Pesos (₧1,249.50). The interest agreed upon was 12 percent (12%) per annum until fully paid, thus,
the total purchase price was Two Hundred Thirty Seven Thousand Six Hundred Sixty Pesos (₧237,660.00).

[Respondent] took immediate possession of the subject property, setting up a perimeter fence and constructing a
house thereon.

On July 25, 1977, [respondent] signed a "Conditional Deed of Assignment and Transfer of Rights" which
assigned to a certain Wilson P. Yu her rights under the Contract to Sell. [Petitioner] was notified of the
execution of such deed. Later on, the Contract to Sell in [respondent’s] name was cancelled, and [petitioner]
issued a new one in favor of Yu although it was also denominated as "Contract to Sell No. 867".

On July 4, 1979, [respondent] informed [petitioner] about Yu’s failure and refusal to pay the amounts due under
the conditional deed. She also manifested that she would be the one to pay the installments due to respondent on
account of Yu’s default.

On August 25, 1980, [respondent] commenced an action for rescission of the conditional deed of assignment
against Yu before the Regional Trial Court of Caloocan City. Subsequently, on September 30, 1985,
[respondent] caused the annotation of notices of lis pendens on the titles covering the subject lots.

The trial court ruled in [respondent’s] favor in the rescission case. The decision was even affirmed by this
[appellate] Court. Yu brought his cause before the Supreme Court in a Petition for Review, but this was
likewise denied.

On February 17, 1989, [petitioner] notified [respondent] that Contract to Sell No. 867 was declared rescinded
and cancelled. On April 28, 1989, the subject lots were sold to spouses Carlos and Sandra Ventura who were
allegedly surprised to find the annotation of lis pendens in their owner’s duplicate title.

On May 8, 1990, the Ventura spouses filed an action for Quieting of Title with Prayer for Cancellation of
Annotation and Damages before the Regional Trial Court of Malabon. The trial court ruled in favor of the
Ventura spouses. On appeal before this [appellate] Court, however, the decision was reversed on November 27,
1992, as follows:
"WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE, and the complaint therein is
ordered dismissed. Transfer Certificates of Title Nos. N-1922, N-1923, N-1924, and N-1925, all of the Register
of Deeds of Metro Manila, District III, Malabon Branch, in the names of plaintiffs-appellees Carlos N. Ventura
and Sandra L. Ventura are hereby declared null and void, and the titles of ownership reinstated in the name of
B.E. San Diego, Inc. with the corresponding notices of lis pendens therein annotated in favor of defendant-
appellant until such time that ownership of the subject parcels of land is transferred to herein defendant-
appellant Rosario Alzul. Costs against plaintiff-appellees.

SO ORDERED."

Upon filing of an appeal to the Supreme Court docketed as GR No. 109078, the above decision was affirmed on
December 26, 1995. A motion for reconsideration was filed, but this was denied by the Highest Tribunal on
February 5, 1996.

On June 17, 1996, a resolution was issued by the Supreme Court, ordering, as follows:

"We, however, agree with the observation made by movants that no time limit was set by the respondent Court
of Appeals in its assailed Decision for the private respondent herein, Rosario Alzul, to pay B.E. San Diego, Inc.
the original owner of the properties in litigation. To rectify such oversight, private respondent Rosario T. Alzul
is hereby given a non-extendible period of thirty (30) days from entry of judgment, within which to make full
payment for the properties in question. xxx" (Emphasis supplied.)

On July 12, 1996, an Entry of Judgment was issued. In an attempt to comply with the Supreme Court’s
directive, herein [respondent] tried to serve payment upon [petitioner] on August 29, 1996, August 30, 1996 and
September 28, 1996. On all these dates, however, [petitioner] allegedly refused to accept payment from
[respondent].

On November 11, 1996, [respondent] filed a Manifestation in GR No. 109078 informing the Supreme Court
that [petitioner], on three (3) occasions, refused to accept [her] payment of the balance in the amount of
₧187,380.00. On January 29, 1997, a Resolution was issued by the Supreme Court referring the case to the
court of origin for appropriate action, on account of [respondent’s] manifestation.

On October 21, 1997, [respondent’s] counsel wrote a letter to [petitioner] citing the latter’s refusal to accept her
payment on several occasions. It was also mentioned therein that due to its refusal, [respondent] would just
consign the balance due to [petitioner] before the proper judicial authority.

On January 14, 1998, a reply was sent by [petitioner] through a certain Flora San Diego. [Respondent’s] request
was rejected on account of the following:

1. We have long legally rescinded the sale in her favor in view of her failure to pay the monthly amortization as
per contract.

2. She sold her rights to Mr. Wilson Yu who failed to pay his monthly amortizations, too.

3. We are not and have never been a part of the case you are alluding to hence we cannot be bound by the same.

4. The property in question is now under process to be reconveyed to us as ordered by the court by virtue of a
compromised (sic) agreement entered into in Civil Case No. 2655 MN of the Malabon RTC Branch entitled
Spouses Carlos Ventura and Sandra Ventura vs. B.E. San Diego, Inc. xxx

Thinking that an action for consignation alone would not be sufficient to allow for the execution of a final
judgment in her favor, [respondent] decided to file an action for consignation and specific performance against
[petitioner] before the Housing and Land Use Regulatory Board on March 12, 1998. The complaint, docketed as
REM-031298-10039, prayed that a) [respondent] be considered to have fully paid the total purchase price of the
subject properties; b) TCT Nos. N-155545 to 48 which were declared void in CA GR No. L-109078 be
cancelled; c) new certificates of title over the subject properties be issued in the name of [respondent]; and d)
[petitioner] be ordered to reimburse [respondent] the sum of Fifty Thousand Pesos (₧50,000.00) as attorney’s
fees and litigation expenses.

On July 12, 1999, a decision was rendered by the HLURB through Housing and Land Use Arbiter Dunstan T.
San Vicente. It was held, thus:
"The purported "consignation" in this case is thus of no moment, inasmuch as the amount allegedly due was not
even deposited or placed at the disposal of this Office by the complainant.

In any event, we agree with [petitioner] that even if the complainant had actually made the consignation of the
amount, such consignation is still ineffective and void for having been done long after the expiration of the non-
extendible period set forth in the 17 June 1996 Supreme Court Resolution that expired on 20 September 1996.

WHEREFORE, Premises Considered, a judgment is hereby rendered DISMISSING the complaint. Cost against
complainant.

IT (sic) SO ORDERED."

Aggrieved by the above decision, [respondent] filed a Petition for Review before the HLURB’s First Division.
On March 17, 2000, a decision was rendered dismissing the petition for lack of merit, and affirming the
decision dated July 12, 1999. [Respondent] filed a Motion for Reconsideration, but this was denied on July 31,
2001.

[Respondent] then filed an appeal to the Office of the President. This was, however, dismissed on June 2, 2003
for having been filed out of time. Again, [respondent] moved for its reconsideration. On September 18, 2003,
the Office of the President gave due course to [respondent’s] motion, and resolved the motion according to its
merits. The single question resolved was whether or not [respondent’s] offer of consignation was correctly
denied by the HLURB. Said office ruled in the affirmative, and We quote:

"From the foregoing, it is evident that there was no valid consignation of the balance of the purchase price. The
30-day non-extendible period set forth in the 17 June 1996 resolution had already expired on 20 September
1996. The HLURB is therefore justified in refusing the consignation, otherwise it would be accused of
extending the period beyond that provided by the Supreme Court. A valid consignation is effected when there is
an actual consignation of the amount due within the prescribed period (St. Dominic Corporation vs.
Intermediate Appellate Court, 138 SCRA 242). x x x

WHEREFORE, premises considered, the appeal is hereby DISMISSED for lack of merit. x x x"

[Respondent] filed a Motion for Reconsideration [of] the above Resolution, but this was denied with finality on
December 2, 2003.6

The Ruling of the Court of Appeals

Respondent Alzul brought before the CA a petition for certiorari docketed as CA-G.R. SP No. 67637, ascribing
grave abuse of discretion to the OP in dismissing her appeal in O.P. Case No. 01-1-097 and affirming the March
17, 2000 Decision7 and July 31, 2001 Resolution8 of the HLURB First Division in HLURB Case No. REM-A-
990907-0167.

On February 18, 2005, the CA rendered its assailed Decision reversing the September 18, 2003 Resolution and
December 2, 2003 Order of the OP, the fallo of which reads:

WHEREFORE, in the higher interest of justice, the assailed Decision, Resolution and Order dated March 17,
2000, September 18, 2003 and December 2, 2003, respectively, are hereby REVERSED and SET ASIDE.
Accordingly, [respondent Alzul] is hereby ordered to pay [petitioner B.E. San Diego, Inc.] the balance due for
the sale of the subject four parcels of land within five (5) days from receipt of this decision. [Petitioner B.E. San
Diego, Inc.], on the other hand, is ordered to accept such payment from [respondent Alzul], after which, the
corresponding Deed of Sale must be issued.

SO ORDERED.9

The CA agreed with the HLURB that no valid consignation was made by respondent but found that justice
would be better served by allowing respondent Alzul to effect the consignation, albeit belatedly. It cited the
respondent’s right over the disputed lots as confirmed by this Court in G.R. No. 109078, which, if taken away
on account of the delay in completing the payment, would amount to a grave injustice.

Moreover, the CA pointed out that respondent’s counsel concededly lacked the vigilance and competence in
defending his client’s right when he failed to consign the balance on time; nonetheless, such may be disregarded
in the interest of justice. It considered the failure of respondent’s counsel to avail of the remedy of consignation
as a procedural lapse, citing the principle that where a rigid application of the rules will result in a manifest
failure or miscarriage of justice, technicalities can be ignored.

A copy of the February 18, 2005 CA Decision was received by respondent Alzul through her counsel on
February 24, 2005.

On March 4, 2005, respondent filed a Compliance and Motion for Extension of Time to Comply with the
Decision of the [CA]10 praying that she be given an extension of ten (10) days or from March 2 to 11, 2005 to
comply with the CA Decision. On the other hand, on March 8, 2005, petitioner filed its Motion for
Reconsideration with Opposition to Petitioner’s "Motion for Extension of Time to Comply with the Decision of
the [CA]."11

Through its assailed August 31, 2005 Resolution, the CA denied petitioner’s Motion for Reconsideration, and
finding that respondent duly exerted efforts to comply with its Decision and a valid consignation was made by
respondent, it granted the requested 10-day extension of time to comply with the February 18, 2005 Decision
and her motion for consignation. The fallo of said Resolution reads:

IN VIEW OF THE FOREGOING, the motion for extension to comply with the Decision is hereby GRANTED,
the motion for reconsideration is DENIED and the motion for consignation is GRANTED. [Petitioner] B.E. San
Diego, Inc. is hereby ordered to receive the payment of [respondent] Rosario T. Alzul and to issue, in her favor,
the corresponding Deed of Sale.12

The Issues

Hence, before us is the instant petition with the following issues:

1. Whether or not the Court of Appeals, in issuing the assailed 18 February 2005 Decision and 31 August 2005
Resolution in CA-G.R. SP No. 81341, has decided questions of law in a way not in accord with law and with
the applicable decisions of the Honorable Court;

2. Whether or not the Court of Appeals committed patent grave abuse of discretion and/or acted without or in
excess of jurisdiction in granting respondent Alzul’s subsequent motion for extension of time to comply with
the 18 February 2005 decision and motion for consignation; and

3. Whether or not the 18 February 2005 Decision and 31 August 2005 Resolution of the Court of Appeals in
CA-G.R. SP No. 81341 ought to be annulled and set aside, for being contrary to law and jurisprudence.13

The Court’s Ruling

On the procedural issue, petitioner B.E. San Diego, Inc. assails the sufficiency of respondent Alzul’s CA
petition as the latter, in violation of the rules, allegedly lacked the essential and relevant pleadings filed with the
HLURB and the OP.

Section 6 of Rule 43, 1997 Rules of Civil Procedure pertinently provides:

SEC. 6. Contents of the petition.—The petition for review shall x x x (c) be accompanied by a clearly legible
duplicate original or a certified true copy of the award, judgment, final order or resolution appealed from,
together with certified true copies of such material portions of the record referred to therein and other
supporting papers; x x x (Emphasis supplied.)

The above proviso explicitly requires the following to be appended to a petition: 1) clearly legible duplicate
original or a certified true copy of the award, judgment, final order, or resolution appealed from; 2) certified
true copies of such material portions of the record referred to in the petition; and 3) other supporting papers.

Obviously, the main reason for the prescribed attachments is to facilitate the review and evaluation of the
petition by making readily available to the CA all the orders, resolutions, decisions, pleadings, transcripts,
documents, and pieces of evidence that are material and relevant to the issues presented in the petition without
relying on the case records of the lower court. The rule is the reviewing court can determine the merits of the
petition solely on the basis of the submissions by the parties14 without the use of the records of the court a quo.
It is a fact that it takes several months before the records are elevated to the higher court, thus the resulting
delay in the review of the petition. The attachment of all essential and necessary papers and documents is
mandatory; otherwise, the petition can be rejected outright under Sec. 7 of Rule 43 of the Rules of Court, which
provides:

Effect of failure to comply with requirements.—The failure of the petitioner to comply with any of the
foregoing requirements regarding the payment of the docket and other lawful fees, the deposit for costs, proof
of service of the petition, and the contents of and the documents which should accompany the petition shall be
sufficient ground for the dismissal thereof.

To prevent premature dismissals, the requirements under Sec. 6 on the contents of the petition have to be
elucidated.

First, there can be no question that only the award, judgment, or final order or resolution issued by the lower
court or agency and appealed from has to be certified as true.

The second set of attachments refers to the "certified true copies of such material portions of the record referred
to therein."

Material is defined as "important; more or less necessary; having influence or effect; going to the merits; having
to do with matter, as distinguished from form."15 Thus, material portions of the records are those parts of the
records that are relevant and directly bear on the issues and arguments raised and discussed in the petition. They
may include any of the pleadings that are subject of any issue, documentary evidence, transcripts of testimonial
evidence, and parts of the records pertinent and relevant to the grounds supporting the petition. The attachment
of the material portions is subject to the qualification that these are referred to or cited in the petition. Thus, only
the material parts specified in the petition have to be appended and that would be sufficient compliance with the
rule as to form.

It would be prudent however for the petitioner to attach all parts of the records which are relevant, necessary, or
important in whatever way to be able to reach the resolution of the issues of the petition. The availability of
such documents to the ponente and members of a Division can easily provide the substance and support to the
merits of the grounds put forward by the petitioner. Moreover, the processing time for the review and resolution
of the petition is greatly abbreviated, thereby obviating intolerable delays.

Lastly, it has to be explained whether the material portions of the records have to be certified as true by the
clerk of court or his/her duly authorized representative as provided in Sec. 6 of Rule 43. If strictly required, the
rule to require attachment of certified true copies of the material portions will surely make the preparation of the
petition more tedious, cumbersome, and expensive. It should therefore be construed that merely clear and
legible copies of the material portions will suffice. The rules on the different modes of appeal from the lower
courts or quasi-judicial agencies to the CA reveal that it is only Rule 43 that specifically states that the material
portions to be appended to the petition should be certified true copies. Rule 41 of course does not require
attachment of the pertinent records since the entire records are elevated to the CA. Rule 42 on petition for
review from the trial court in aid of its appellate jurisdiction to the CA speaks of plain copies of the material
portions of the record as would support the allegations of the petition.16 Even Rule 45 on appeal by certiorari
from the CA to this Court simply speaks of material portions of the records without indicating that these should
be certified true copies. Rule 46 on original cases to this Court only requires plain copies of the material
portions of the records. Finally, Rule 65 on special civil actions requires only copies of relevant and pertinent
pleadings and documents.

From the foregoing premises, the inescapable conclusion is that only plain and clear copies of the material
portions of the records are required under Sec. 3 of Rule 43. This finding is buttressed by our ruling in
Cadayona v. CA, where it was held that only judgments or final orders of the lower courts are needed to be
certified true copies or duplicate originals.17 There is no plausible reason why a different treatment or stricter
requirement should be applied to petitions under Rule 43.

The last requirement is the attachment of "other supporting papers." Again, it is only in Rule 43 that we
encounter the requirement of annexing "supporting papers" to the petition. This can be interpreted to mean other
documents, pictures, and pieces of evidence not forming parts of the records of the lower court or agency that
can bolster and shore up the petition. While not so specified in Sec. 3 of Rule 43, it is inarguable that said
papers must also be relevant and material to the petition; otherwise, the attachments would be mere surplusages
and devoid of use and value.

Petitioner claims respondent’s petition in CA-G.R. SP No. 81341 failed to attach material documents of the
records of the HLURB and the OP. They cry foul that none of the pleadings filed with the HLURB and the OP
found their way into the CA petition. It prays that the CA petition should have been dismissed under Sec. 7 of
Rule 43 due to the lack of needed attachments.

Petitioner’s postulation must fail.

Sec. 7 of Rule 43 does not prescribe outright rejection of the petition if it is not accompanied by the required
documents but simply gives the discretion to the CA to determine whether such breach constitutes a "sufficient
ground" for dismissal. Apparently, petitioner was not able to convince the CA that the alleged missing
attachments deprived said court of the full opportunity and facility in examining and resolving the petition. It
has not been satisfactorily shown that the pleadings filed by petitioner with the quasi-judicial agencies have
material bearing or importance to the CA petition. Such pleadings could have been attached to the comment of
respondent and hence, no prejudice would be suffered. Thus, the CA did not exercise its discretion in an
arbitrary or oppressive manner by giving due course to the petition.

In addition, it was noted in Cusi-Hernandez v. Diaz that the CA Revised Internal Rules provide certain
flexibility in the submission of additional documents:

When a petition does not have the complete annexes or the required number of copies, the Chief of the Judicial
Records Division shall require the petitioner to complete the annexes or file the necessary number of copies of
the petition before docketing the case. Pleadings improperly filed in court shall be returned to the sender by the
Chief of the Judicial Records Division.18

In Rosa Yap Paras, et al. v. Judge Ismael O. Baldado, et al., the Court preferred the determination of cases on
the merits over technicality or procedural imperfections so that the ends of justice would be served better, thus:

At the same time, the Rules of Court encourage a reading of the procedural requirements in a manner that will
help secure and not defeat justice. Thus:

Section 6. Construction.—These Rules shall be liberally construed in order to promote their objective of
securing a just, speedy and inexpensive disposition of every action and proceeding.

As expressed in Alberto vs. Court of Appeals, "(w)hat should guide judicial action is the principle that a party-
litigant is to be given the fullest opportunity to establish the merits of his complaint or defense rather than for
him to lose life, liberty, honor or property on technicalities. x x x (T)he rules of procedure should be viewed as
mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result
in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed."19

Now we will address the main issue—whether respondent Alzul is still entitled to consignation despite the lapse
of the period provided by the Court in G.R. No. 109078 entitled Yu v. Court of Appeals.

Petitioner stresses the fact that respondent Alzul did not comply with this Court’s June 17, 1996
Resolution20 which gave a non-extendible period of thirty (30) days from entry of judgment within which to
make full payment for the subject properties. The entry of judgment shows that the December 26, 1995
Resolution21 in G.R. No. 109078 became final and executory on July 2, 1996. Respondent Alzul received
through counsel a copy of the entry of judgment on August 21, 1996. Thus, respondent had until September 20,
1996 within which to make the full payment.

After three (3) unsuccessful tenders of payment, respondent Alzul made no consignation of the amount to the
court of origin. It was only on March 12, 1998 or about a year and a half later that respondent offered to consign
said amount in an action for consignment before the HLURB. Relying on the case of St. Dominic Corporation
v. Intermediate Appellate Court,22 petitioner strongly asserts that upon its refusal to accept the tendered
payment, respondent ought to have consigned it with the court of origin also within the 30-day period or within
a reasonable time thereafter. Respondent failed to do this as she waited for a year and a half before instituting
the instant action for specific performance and consignment before the HLURB.

Moreover, petitioner argues that respondent’s delay of a year and a half to pursue full payment must be
regarded as a waiver on her part to claim whatever residual remedies she might still have for the enforcement of
the June 17, 1996 Resolution in G.R. No. 109078.

Petitioner further contends that even if the action before the HLURB was made on time, that is, within the 30-
day period, still it is fatally defective as respondent did not deposit any amount with the HLURB which violated
the rules for consignment which require actual deposit of the amount allegedly due with the proper judicial
authority.

Premised upon these considerations, petitioner faults the appellate court for its grant of respondent’s petition for
review which nullified the denial by the HLURB Arbiter, HLURB First Division, and the OP of respondent’s
action.

On the other hand, respondent contends that the June 17, 1996 Resolution of this Court should not be construed
against her inability to effect payment due to the obstinate and unjust refusal by petitioner—a supervening
circumstance beyond her control. Respondent underscores that within the 30-day period, she repeatedly
attempted to effect the payment to no avail. Moreover, the much delayed response of petitioner embodied in its
January 14, 1998 letter23 confirming its refusal was based on untenable, baseless, and contrived grounds.

Moreover, she argues that the December 26, 1995 Resolution in G.R. No. 109078 granting her proprietary
rights over the subject lots has long become final and executory.

Anent the issue of laches and estoppel, respondent strongly contends that such do not apply in the instant case
as incontrovertible circumstances show that she has relentlessly pursued the protection and enforcement of her
rights over the disputed lots for over a quarter of a century.

After a careful study of the factual milieu, applicable laws, and jurisprudence, we find the petition meritorious.

Respondent Alzul was accorded legal rights over subject properties

In G.R. No. 109078, finding no reversible error on the part of the CA, we denied Wilson P. Yu’s petition and
affirmed the appellate court’s ruling that as between Wilson P. Yu, the Ventura spouses, petitioner B.E. San
Diego, Inc., and respondent Alzul, respondent has inchoate proprietary rights over the disputed lots. We upheld
the CA ruling declaring as "null and void" the titles issued in the name of the Ventura spouses and reinstating
them in the name of B.E. San Diego, Inc., with the corresponding notices of lis pendens annotated on them in
favor of respondent until such time that ownership of the subject parcels of land is transferred to respondent
Rosario Alzul.

It is thus clear that we accorded respondent Alzul expectant rights over the disputed lots, but such is conditioned
on the payment of the balance of the purchase price. Having been conceded such rights, respondent had the
obligation to pay the remaining balance to vest absolute title and rights of ownership in his name over the
subject properties.

In our June 17, 1996 Resolution, we clearly specified thirty (30) days from entry of judgment for respondent to
promptly effect the full payment of the balance of the purchase price for the subject properties, thus:

We however agree with the observation made by movants that no time limit was set by the respondent Court of
Appeals in its assailed Decision for the private respondent herein, Rosario Alzul, to pay B.E. San Diego, Inc.,
the original owner of the properties in litigation. To rectify such oversight, private respondent Rosario T. Alzul
is hereby given a non-extendible period of thirty (30) days from entry of judgment, within which to make full
payment for the properties in question.24 (Emphasis supplied.)

The non-compliance with our June 17, 1996 Resolution is fatal to respondent Alzul’s action for consignation
and specific performance

Unfortunately, respondent failed to effect such full payment of the balance of the purchase price for the subject
properties.

No consignation within the 30-day period or at a reasonable time thereafter

It is clear as day that respondent did not attempt nor pursue consignation within the 30-day period given to her
in accordance with the prescribed legal procedure. She received a copy of the entry of judgment on August 21,
1996 and had 30 days or until September 20, 1996 to pay the balance of the purchase price to petitioner. She
made a tender of payment on August 29, 1996, August 30, 1996, and September 28, 1996, all of which were
refused by petitioner possibly because the latter is of the view that it is not bound by the November 27, 1992
Decision in CA-G.R. CV No. 33619 nor the December 26, 1995 Resolution in G.R. No. 109078, and the fact
that respondent has forfeited her rights to the lots because of her failure to pay the monthly amortizations.
It must be borne in mind however that a mere tender of payment is not enough to extinguish an obligation. In
Meat Packing Corporation of the Philippines v. Sandiganbayan, we distinguished consignation from tender of
payment and reiterated the rule that both must be validly done in order to effect the extinguishment of the
obligation, thus:

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. 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.25 (Emphasis supplied.)

There is no dispute that a valid tender of payment had been made by respondent. Absent however a valid
consignation, mere tender will not suffice to extinguish her obligation and consummate the acquisition of the
subject properties.

In St. Dominic Corporation involving the payment of the installment balance for the purchase of a lot similar to
the case at bar, where a period has been judicially directed to effect the payment, the Court held that a valid
consignation is made when the amount is consigned with the court within the required period or within a
reasonable time thereafter. We ruled as follows:

First of all, the decision of the then Court of Appeals which was promulgated on October 21, 1981, is quite
clear when it ordered the payment of the balance of the purchase price for the disputed lot within 60 days "from
receipt hereof" meaning from the receipt of the decision by the respondents. It is an admitted fact that the
respondents received a copy of the decision on October 30, 1981. Hence, they had up to December 29, 1981 to
make the payment. Upon refusal by the petitioner to receive such payment, the proper procedure was for the
respondent to consign the same with the court also within the 60-day period or within a reasonable time
thereafter.26 (Emphasis supplied.)

The records also reveal that respondent failed to effect consignation within a reasonable time after the 30-day
period which expired on September 20, 1996. Instead of consigning the amount with the court of origin,
respondent filed her November 11, 1996 Manifestation informing this Court of petitioner’s unjust refusal of the
tender of payment. We acted favorably to it by issuing our January 28, 1997 Resolution which ordered, thus:

Considering the manifestation, dated November 11, 1996, filed by counsel for private respondent Rosario T.
Alzul, stating that private respondent tendered to B.E. San Diego, Inc. the payment of the sum of P187,380.00
representing the balance of the purchase price of the properties which are the subject of this litigation, but B.E.
San Diego, Inc., refused to accept the same, the Court resolved to REFER the case to the court of origin, for
appropriate action.27

Respondent still failed to take the cue by her inaction to consign the amount with the court of origin.
Undoubtedly, pursuing the action for consignation on March 12, 1998 or over a year after the Court issued its
January 28, 1997 Resolution is way beyond a "reasonable time thereafter." Indeed, we have accorded
respondent, through said Resolution, all the opportunity to pursue consignation with the court of origin and yet,
respondent failed to make a valid consignation. This is already inexcusable neglect on the part of respondent.

No valid consignation made

We agree with petitioner’s assertion that even granting arguendo that the instant case for consignation was
instituted within the 30-day period or within a reasonable time thereafter, it would still not accord respondent
relief as no valid consignation was made. Certainly, the records show that there was no valid consignation made
by respondent before the HLURB as she did not deposit the amount with the quasi-judicial body as required by
law and the rules.

Pertinently, the first paragraph of Article 1258 of the Civil Code provides that "[c]onsignation shall be made
by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be
proved, in a proper case, and the announcement of the consignation in other cases (emphasis supplied)."

It is true enough that respondent tendered payment to petitioner three (3) times through a Solidbank Manager’s
Check No. 1146 in the amount of PhP 187,38028 on August 29 and 30, 1996 and September 28, 1996. It is true
likewise that petitioner refused to accept it but not without good reasons. Petitioner was not impleaded as a
party by the Ventura spouses in the Malabon City RTC case for quieting of title against Wilson Yu nor in the
appealed case to the CA nor in G.R. No. 109078.

Petitioner is of the view that there was no jurisdiction acquired over its person and hence, it is not bound by the
final judgment and June 17, 1996 Resolution in G.R. No. 109078. Secondly, petitioner believed that respondent
Alzul has lost her rights over the subject lot by the rescission of the sale in her favor due to the latter’s failure to
pay the installments and also as a result of her transferee’s failure to pay the agreed amortizations. And even in
the face of the refusal by petitioner to accept tender of payment, respondent is not left without a remedy. It is
basic that consignation is an available remedy, and respondent, with the aid of her counsel, could have easily
availed of such course of action sanctioned under the Civil Code.

Considering the tenor of our June 17, 1996 Resolution, respondent ought to have consigned the amount with the
court of origin within the non-extendible period of 30 days that was accorded her or within a reasonable time
thereafter.

As cited earlier, 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.29 It is of no moment if the refusal to accept payment be reasonable or not. Indeed, consignation is the
remedy for an unjust refusal to accept payment. The first paragraph of Art. 1256 of the Civil Code precisely
provides that "[i]f 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 (emphasis
supplied)."

The proper and valid consignation of the amount due with the court of origin, which shall judicially pronounce
the validity of the consignation and declare the debtor to be released from his/her responsibility, shall extinguish
the corresponding obligation.

Moreover, in order that consignation may be effective, the debtor must show that: (1) there was a debt due; (2)
the consignation of the obligation had been made because the creditor to whom tender of payment was made
refused to accept it, or because s/he was absent or incapacitated, or because several persons claimed to be
entitled to receive the amount due or because the title to the obligation had been lost; (3) previous notice of the
consignation had been given to the person interested in the performance of the obligation; (4) the amount due
was placed at the disposal of the court; and (5) after the consignation had been made, the person interested was
notified of the action.30

Respondent did not comply with the provisions of law particularly with the fourth and fifth requirements
specified above for a valid consignation. In her complaint for consignation and specific performance,
respondent only prayed that she be allowed to make the consignation without placing or depositing the amount
due at the disposal of the court of origin. Verily, respondent made no valid consignation.

The rights of petitioner and respondent over the 1,275 square meter lot subject of this petition will be
determined by the significance and effects of the December 26, 1995 Resolution rendered in G.R. No. 109078
entitled Yu v. Court of Appeals.31

The subject matter of G.R. No. 109078 is the November 27, 1992 Decision rendered in CA-G.R. CV No. 33619
entitled Carlos N. Ventura and Sandra L. Ventura v. Rosario T. Alzul, et al., the fallo of which reads:

WHEREFORE, the appealed decision is hereby REVERSED AND SET ASIDE, and the complaint therein is
ordered dismissed. Transfer Certificates of Title Nos. N-1922, N-1923, N-1924, and N-1925, all of the Register
of Deeds of Metro Manila, District III, Malabon Branch, in the names of plaintiffs-appellees Carlos N. Ventura
and Sandra L. Ventura are hereby declared null and void, and the titles of ownership reinstated in the name of
B.E. San Diego, Inc., with the corresponding notices of lis pendens therein annotated in favor of defendant-
appellant until such time that ownership of the subject parcels of land is transferred to herein defendant-
appellant Rosario Alzul. Costs against plaintiff-appellees.

SO ORDERED.32

On December 26, 1995, this Court issued the Resolution in G.R. No. 109078 wherein it found no reversible
error in the actions of the CA in its aforequoted disposition in CA-G.R. CV No. 33619, and resolved to deny the
petition for lack of merit. On February 5, 1996, this Court denied with finality the Motion for Reconsideration
filed by petitioner Wilson Yu.
However, on June 17, 1996, this Court, in resolving the Motion for Reconsideration of private respondents
Spouses Carlos and Sandra Ventura, granted respondent Alzul "a non-extendible period of thirty (30) days from
entry of judgment, within which to make full payment for the properties in question."33

The question is—can the Court, the CA, or the Malabon City RTC order petitioner B.E. San Diego, Inc. to
accept the tender of payment made by respondent Alzul?

Definitely, they cannot. The reason is that petitioner was not impleaded as a party in the Malabon City RTC
civil case, CA-G.R. CV No. 33619, nor in G.R. No. 109078 and hence is not under the jurisdiction of said
courts. What were determined and decided in the CA Decision in CA-G.R. CV No. 33619 were the annulment
of the titles of spouses Carlos and Sandra Ventura, the reinstatement of said titles to the name of petitioner, and
the declaration that the ownership of the lots subject of said titles will be transferred to respondent. There is no
directive to respondent granting her the right to pay the balance of the price to petitioner and, more importantly,
there is no order for petitioner to accept the payment. The dispositive or fallo of the decision is what actually
constitutes the judgment or resolution of the court that can be the subject of execution. Where there is a conflict
between the dispositive portion of the decision and its body, the dispositive portion controls irrespective of what
appears in the body of the decision.34 Such being the case, petitioner is not duty bound to accept any tender of
payment from respondent precisely because such diktat is absent in the fallo of the CA Decision which was
affirmed by this Court in its December 26, 1995 Resolution in G.R. No. 109078.

The lacuna in the CA Decision was sought to be corrected in its June 17, 1996 Resolution in G.R. No. 109078
where respondent was given "a non-extendible period of thirty (30) days from entry of judgment, within which
to make full payment for the properties in question." Pursuant to this Resolution, what was established was the
right of respondent to pay the balance of the purchase price within 30 days. Again, the query is—can this Court,
the CA, or the trial court compel petitioner to accept the tender of payment from respondent?

The answer is no. The reason is obvious as jurisdiction was never acquired over the person of petitioner. The
action for quieting of title is characterized as quasi in rem. In Realty Sales Enterprise, Inc. v. Intermediate
Appellate Court, it was held that:

Suits to quiet title are not technically suits in rem, nor are they, strictly speaking, in personam, but being against
the person in respect of the res, these proceedings are characterized as quasi in rem. (McDaniel v. McElvy, 108
So. 820 [1926].) The judgment in such proceedings is conclusive only between the parties. (Emphasis
supplied.)35

Not being impleaded as a necessary or indispensable party, petitioner is not bound by the dispositions in the CA
Decision in CA-G.R. CV No. 33619 and the Resolutions of this Court in G.R. No. 109078. Moreover, there is
no explicit and clear directive for petitioner to accept the payment of the balance of the price.

It is for this reason that respondent cannot ask for a writ of execution from the trial court where the complaint
was originally instituted as said court has no jurisdiction over the person of petitioner. Even if a writ is issued, it
should conform to the judgment, and the fallo of the CA Decision does not impose the duty or obligation on the
part of petitioner to accept the payment from respondent. It is the settled doctrine that a writ of execution must
conform to the judgment and if it is different from or exceeds the terms of the judgment, then it is a nullity.36

In addition, Sec. 10, Rule 39 provides the procedure for execution of judgments for specific acts, thus:

Sec. 10. Execution of judgments for specific act.—(a) Conveyance, delivery of deeds, or other specific acts;
vesting title.—If a judgment directs a party to execute a conveyance of land or personal property, or to deliver
deeds or other documents, or to perform any other specific act in connection therewith, and the party fails to
comply within the time specified, the court may direct the act to be done at the cost of the disobedient party by
some other person appointed by the court and the act when so done shall have like effect as if done by the party.
If real or personal property is situated within the Philippines, the court in lieu of directing a conveyance thereof
may by an order divest the title of any party and vest it in others, which shall have the force and effect of a
conveyance executed in due form of law.

The rule mentions the directive to a "party." It is therefore essential that the person tasked to perform the
specific act is impleaded as a party to the case. Otherwise, the judgment cannot be executed. In the case at bar,
petitioner should have been impleaded as a party so as to compel it to accept payment and execute the deed of
sale over the disputed lots in favor of respondent. As petitioner was not impleaded as a party, then the CA
Decision in CA-G.R. CV No. 33619 as affirmed in G.R. No. 109078 cannot be enforced against it.
The cause of action available to respondent is to file an action for consignation against petitioner which she did
by registering a complaint for consignation before the HLURB on March 12, 1998. Unfortunately, it was filed
way beyond the 30-day period which lapsed on September 20, 1996 or immediately thereafter. Because of the
failure of respondent to effect payment to petitioner within the 30-day period or soon thereafter, her rights to
buy the disputed lots have been forfeited, lost, and extinguished.

In St. Dominic Corporation, which is substantially similar to the case at bar, we explained the procedure when a
party is directed to pay the balance of the purchase price based on a court decision, thus:

First of all, the decision of the then Court of Appeals which was promulgated on October 21, 1981, is quite
clear when it ordered the payment of the balance of the purchase price for the disputed lot within 60 days "from
receipt hereof," meaning from the receipt of the decision by the respondents. It is an admitted fact that the
respondents received a copy of the decision on October 30, 1981. Hence, they had up to December 29, 1981 to
make the payment. Upon refusal by the petitioner to receive such payment, the proper procedure was for the
respondent to consign the same with the court also within the 60-day period or within a reasonable time
thereafter. The fact that efforts were made by the petitioner to reach an agreement with the respondents after the
promulgation of the decision did not in anyway affect the finality of the judgment. This was clearly emphasized
in the order of the appellate court on May 6, 1982.

Secondly, even if we reckon the 60-day period from the date of the finality of the decision as interpreted by the
appellate court, such finality should be counted from March 5, 1982, which was the date the decision became
final as indicated in the entry of judgment and not from August 26, 1982 which is the date the entry was made.
The date of a finality of a decision is entirely distinct from the date of its entry and the delay in the latter does
not affect the effectivity of the former as such is counted from the expiration of the period to appeal.37 x x x

In the aforecited case, the lot owner was made a party to the case and the judgment of the court was for the
plaintiff to pay to the lot owner the balance of the purchase price within 60 days from receipt of the Decision.
Even assuming arguendo that petitioner B.E. San Diego, Inc., though not a party in the complaint for quieting of
title, can be compelled to receive the purchase price, still, the refusal to receive the money requires respondent
Alzul to follow the procedure in St. Dominic Corporation and consign the money with the court of origin.
Having failed in this respect, respondent’s rights to the property have been forfeited as a result of non-payment
within the prescribed time frame.

The CA relied on justice and equity in granting an additional period of five (5) days from receipt of the
February 18, 2005 Decision in CA-G.R. SP No. 81341 to pay the balance due for the sale of the four
lots.38 While we commiserate with the plight of respondent, the CA ruling will not prevail over the established
axiom that equity is applied only in the absence of and never against statutory law or judicial rules of
procedure.39 For all its conceded merits, equity is available only in the absence of law and not as its
replacement.40 Equity as an exceptional extenuating circumstance does not favor, nor may it be used to reward,
the indolent. This Court will not allow a party, in guise of equity, to benefit from respondent’s own
negligence.41

In the light of the foregoing considerations, we find that the grant of respondent’s petition in CA-G.R. SP No.
81341 and the recognition of the belated consignation of the amount find no support nor basis in law, rule, or
jurisprudence. The CA’s holding that the non-consignation of the amount due is merely a procedural lapse on
the part of respondent’s counsel is misplaced and is contrary to settled jurisprudence. Plainly, respondent’s
rights over the subject property are now lost and forfeited.

Having resolved the core issue on the validity of the consignation, the Court sees no further need to discuss the
remaining issues raised in the petition.

Petitioner to reimburse payments

However, respondent had made payments over the subject properties based on her agreement with petitioner. So
as not to enrich itself at the expense of respondent, petitioner is obliged to reimburse respondent whatever
amount was paid by her in form of monthly amortizations. On the other hand, if respondent is in possession of
the subject properties, she and all persons claiming under her should surrender the possession to petitioner.

WHEREFORE, the petition is GRANTED, the February 18, 2005 Decision and August 31, 2005 Resolution of
the CA are REVERSED and SET ASIDE, and the September 18, 2003 Resolution and December 2, 2003 Order
of the OP are hereby REINSTATED. Petitioner is ORDERED to reimburse respondent whatever amount the
latter has paid for the subject properties per the Contract to Sell No. 867. Petitioner is DECLARED to be the
true and legal owner of Lots Nos. 5, 6, 7, and 8, Block 18, Aurora Subdivision, Maysilo, Malabon City. The
Register of Deeds of Manila, District III, Malabon City Branch is ORDERED to cancel Transfer Certificates of
Title Nos. N-1922, N-1923, N-1924, and N-1925 in the names of spouses Carlos N. Ventura and Sandra L.
Ventura and register the same in the name of petitioner. The lis pendens in favor of respondent annotated on the
Transfer Certificates of Title over the subject properties is hereby LIFTED, and the Register of Deeds for Metro
Manila, District III is DIRECTED to CANCEL said lis pendens. Respondent and all persons claiming under her
are ORDERED to vacate the subject properties and surrender them to petitioner within sixty (60) days from
finality of this judgment. No pronouncement as to costs.

SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

ANTONIO T. CARPIO CONCHITA CARPIO MORALES

Associate Justice Associate Justice

DANTE O. TINGA
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

LEONARDO A. QUISUMBING
Acting Chief Justice
G.R. No. 136409 March 14, 2008

SUBHASH C. PASRICHA and JOSEPHINE A. PASRICHA, Petitioners,

vs.
DON LUIS DISON REALTY, INC., Respondent.

DECISION

NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal of the
Decision1 of the Court of Appeals (CA) dated May 26, 1998 and its Resolution2 dated December 10, 1998 in
CA-G.R. SP No. 37739 dismissing the petition filed by petitioners Josephine and Subhash Pasricha.

The facts of the case, as culled from the records, are as follows:

Respondent Don Luis Dison Realty, Inc. and petitioners executed two Contracts of Lease3 whereby the former,
as lessor, agreed to lease to the latter Units 22, 24, 32, 33, 34, 35, 36, 37 and 38 of the San Luis Building,
located at 1006 M.Y. Orosa cor. T.M. Kalaw Streets, Ermita, Manila. Petitioners, in turn, agreed to pay monthly
rentals, as follows:

For Rooms 32/35:

From March 1, 1991 to August 31, 1991 – ₱5,000.00/₱10,000.00

From September 1, 1991 to February 29, 1992 – ₱5,500.00/₱11,000.00

From March 1, 1992 to February 28, 1993 – ₱6,050.00/₱12,100.00

From March 1, 1993 to February 28, 1994 – ₱6,655.00/₱13,310.00

From March 1, 1994 to February 28, 1995 – ₱7,320.50/₱14,641.00

From March 1, 1995 to February 28, 1996 – ₱8,052.55/₱16,105.10

From March 1, 1996 to February 29, 1997 – ₱8,857.81/₱17,715.61

From March 1, 1997 to February 28, 1998 – ₱9,743.59/₱19,487.17

From March 1, 1998 to February 28, 1999 – ₱10,717.95/₱21,435.89

From March 1, 1999 to February 28, 2000 – ₱11,789.75/₱23,579.484

For Rooms 22 and 24:

Effective July 1, 1992 – ₱10,000.00 with an increment of 10% every two years.5

For Rooms 33 and 34:

Effective April 1, 1992 – ₱5,000.00 with an increment of 10% every two years.6

For Rooms 36, 37 and 38:

Effective when tenants vacate said premises – ₱10,000.00 with an increment of 10% every two years.7

Petitioners were, likewise, required to pay for the cost of electric consumption, water bills and the use of
telephone cables.8

The lease of Rooms 36, 37 and 38 did not materialize leaving only Rooms 22, 24, 32, 33, 34 and 35 as subjects
of the lease contracts.9 While the contracts were in effect, petitioners dealt with Francis Pacheco (Pacheco), then
General Manager of private respondent. Thereafter, Pacheco was replaced by Roswinda Bautista (Ms.
Bautista).10 Petitioners religiously paid the monthly rentals until May 1992.11 After that, however, despite
repeated demands, petitioners continuously refused to pay the stipulated rent. Consequently, respondent was
constrained to refer the matter to its lawyer who, in turn, made a final demand on petitioners for the payment of
the accrued rentals amounting to ₱916,585.58.12 Because petitioners still refused to comply, a complaint for
ejectment was filed by private respondent through its representative, Ms. Bautista, before the Metropolitan Trial
Court (MeTC) of Manila.13 The case was raffled to Branch XIX and was docketed as Civil Case No. 143058-
CV.

Petitioners admitted their failure to pay the stipulated rent for the leased premises starting July until November
1992, but claimed that such refusal was justified because of the internal squabble in respondent company as to
the person authorized to receive payment.14 To further justify their non-payment of rent, petitioners alleged that
they were prevented from using the units (rooms) subject matter of the lease contract, except Room 35.
Petitioners eventually paid their monthly rent for December 1992 in the amount of ₱30,000.00, and claimed that
respondent waived its right to collect the rents for the months of July to November 1992 since petitioners were
prevented from using Rooms 22, 24, 32, 33, and 34.15 However, they again withheld payment of rents starting
January 1993 because of respondent’s refusal to turn over Rooms 36, 37 and 38.16 To show good faith and
willingness to pay the rents, petitioners alleged that they prepared the check vouchers for their monthly rentals
from January 1993 to January 1994.17 Petitioners further averred in their Amended Answer18 that the complaint
for ejectment was prematurely filed, as the controversy was not referred to the barangay for conciliation.

For failure of the parties to reach an amicable settlement, the pre-trial conference was terminated. Thereafter,
they submitted their respective position papers.

On November 24, 1994, the MeTC rendered a Decision dismissing the complaint for ejectment.19 It considered
petitioners’ non-payment of rentals as unjustified. The court held that mere willingness to pay the rent did not
amount to payment of the obligation; petitioners should have deposited their payment in the name of respondent
company. On the matter of possession of the subject premises, the court did not give credence to petitioners’
claim that private respondent failed to turn over possession of the premises. The court, however, dismissed the
complaint because of Ms. Bautista’s alleged lack of authority to sue on behalf of the corporation.

Deciding the case on appeal, the Regional Trial Court (RTC) of Manila, Branch 1, in Civil Case No. 94-72515,
reversed and set aside the MeTC Decision in this wise:

WHEREFORE, the appealed decision is hereby reversed and set aside and another one is rendered ordering
defendants-appellees and all persons claiming rights under them, as follows:

(1) to vacate the leased premised (sic) and restore possession thereof to plaintiff-appellant;

(2) to pay plaintiff-appellant the sum of ₱967,915.80 representing the accrued rents in arrears as of
November 1993, and the rents on the leased premises for the succeeding months in the amounts stated in
paragraph 5 of the complaint until fully paid; and

(3) to pay an additional sum equivalent to 25% of the rent accounts as and for attorney’s fees plus the
costs of this suit.

SO ORDERED.20

The court adopted the MeTC’s finding on petitioners’ unjustified refusal to pay the rent, which is a valid ground
for ejectment. It, however, faulted the MeTC in dismissing the case on the ground of lack of capacity to sue.
Instead, it upheld Ms. Bautista’s authority to represent respondent notwithstanding the absence of a board
resolution to that effect, since her authority was implied from her power as a general manager/treasurer of the
company.21

Aggrieved, petitioners elevated the matter to the Court of Appeals in a petition for review on certiorari.22 On
March 18, 1998, petitioners filed an Omnibus Motion23 to cite Ms. Bautista for contempt; to strike down the
MeTC and RTC Decisions as legal nullities; and to conduct hearings and ocular inspections or delegate the
reception of evidence. Without resolving the aforesaid motion, on May 26, 1998, the CA affirmed24 the RTC
Decision but deleted the award of attorney’s fees.25

Petitioners moved for the reconsideration of the aforesaid decision.26 Thereafter, they filed several motions
asking the Honorable Justice Ruben T. Reyes to inhibit from further proceeding with the case allegedly because
of his close association with Ms. Bautista’s uncle-in-law.27
In a Resolution28 dated December 10, 1998, the CA denied the motions for lack of merit. The appellate court
considered said motions as repetitive of their previous arguments, irrelevant and obviously dilatory.29 As to the
motion for inhibition of the Honorable Justice Reyes, the same was denied, as the appellate court justice
stressed that the decision and the resolution were not affected by extraneous matters.30 Lastly, the appellate
court granted respondent’s motion for execution and directed the RTC to issue a new writ of execution of its
decision, with the exception of the award of attorney’s fees which the CA deleted.31

Petitioners now come before this Court in this petition for review on certiorari raising the following issues:

I.

Whether this ejectment suit should be dismissed and whether petitioners are entitled to damages for the
unauthorized and malicious filing by Rosario (sic) Bautista of this ejectment case, it being clear that
[Roswinda] – whether as general manager or by virtue of her subsequent designation by the Board of
Directors as the corporation’s attorney-in-fact – had no legal capacity to institute the ejectment suit,
independently of whether Director Pacana’s Order setting aside the SEC revocation Order is a mere
scrap of paper.

II.

Whether the RTC’s and the Honorable Court of Appeals’ failure and refusal to resolve the most
fundamental factual issues in the instant ejectment case render said decisions void on their face by
reason of the complete abdication by the RTC and the Honorable Justice Ruben Reyes of their
constitutional duty not only to clearly and distinctly state the facts and the law on which a decision is
based but also to resolve the decisive factual issues in any given case.

III.

Whether the (1) failure and refusal of Honorable Justice Ruben Reyes to inhibit himself, despite his
admission – by reason of his silence – of petitioners’ accusation that the said Justice enjoyed a $7,000.00
scholarship grant courtesy of the uncle-in-law of respondent "corporation’s" purported general manager
and (2), worse, his act of ruling against the petitioners and in favor of the respondent "corporation"
constitute an unconstitutional deprivation of petitioners’ property without due process of law.32

In addition to Ms. Bautista’s lack of capacity to sue, petitioners insist that respondent company has no standing
to sue as a juridical person in view of the suspension and eventual revocation of its certificate of
registration.33 They likewise question the factual findings of the court on the bases of their ejectment from the
subject premises. Specifically, they fault the appellate court for not finding that: 1) their non-payment of rentals
was justified; 2) they were deprived of possession of all the units subject of the lease contract except Room 35;
and 3) respondent violated the terms of the contract by its continued refusal to turn over possession of Rooms
36, 37 and 38. Petitioners further prayed that a Temporary Restraining Order (TRO) be issued enjoining the CA
from enforcing its Resolution directing the issuance of a Writ of Execution. Thus, in a Resolution34 dated
January 18, 1999, this Court directed the parties to maintain the status quo effective immediately until further
orders.

The petition lacks merit.

We uphold the capacity of respondent company to institute the ejectment case. Although the Securities and
Exchange Commission (SEC) suspended and eventually revoked respondent’s certificate of registration on
February 16, 1995, records show that it instituted the action for ejectment on December 15, 1993. Accordingly,
when the case was commenced, its registration was not yet revoked.35 Besides, as correctly held by the appellate
court, the SEC later set aside its earlier orders of suspension and revocation of respondent’s certificate,
rendering the issue moot and academic.36

We likewise affirm Ms. Bautista’s capacity to sue on behalf of the company despite lack of proof of authority to
so represent it. A corporation has no powers except those expressly conferred on it by the Corporation Code and
those that are implied from or are incidental to its existence. In turn, a corporation exercises said powers
through its board of directors and/or its duly authorized officers and agents. Physical acts, like the signing of
documents, can be performed only by natural persons duly authorized for the purpose by corporate by-laws or
by a specific act of the board of directors.37 Thus, any person suing on behalf of the corporation should present
proof of such authority. Although Ms. Bautista initially failed to show that she had the capacity to sign the
verification and institute the ejectment case on behalf of the company, when confronted with such question, she
immediately presented the Secretary’s Certificate38 confirming her authority to represent the company.

There is ample jurisprudence holding that subsequent and substantial compliance may call for the relaxation of
the rules of procedure in the interest of justice.39 In Novelty Phils., Inc. v. Court of Appeals,40 the Court faulted
the appellate court for dismissing a petition solely on petitioner’s failure to timely submit proof of authority to
sue on behalf of the corporation. In Pfizer, Inc. v. Galan,41 we upheld the sufficiency of a petition verified by an
employment specialist despite the total absence of a board resolution authorizing her to act for and on behalf of
the corporation. Lastly, in China Banking Corporation v. Mondragon International Philippines, Inc,42 we relaxed
the rules of procedure because the corporation ratified the manager’s status as an authorized signatory. In all of
the above cases, we brushed aside technicalities in the interest of justice. This is not to say that we disregard the
requirement of prior authority to act in the name of a corporation. The relaxation of the rules applies only to
highly meritorious cases, and when there is substantial compliance. While it is true that rules of procedure are
intended to promote rather than frustrate the ends of justice, and while the swift unclogging of court dockets is a
laudable objective, we should not insist on strict adherence to the rules at the expense of substantial
justice.43 Technical and procedural rules are intended to help secure, not suppress, the cause of justice; and a
deviation from the rigid enforcement of the rules may be allowed to attain that prime objective, for, after all, the
dispensation of justice is the core reason for the existence of courts.44

As to the denial of the motion to inhibit Justice Reyes, we find the same to be in order. First, the motion to
inhibit came after the appellate court rendered the assailed decision, that is, after Justice Reyes had already
rendered his opinion on the merits of the case. It is settled that a motion to inhibit shall be denied if filed after a
member of the court had already given an opinion on the merits of the case, the rationale being that "a litigant
cannot be permitted to speculate on the action of the court x x x (only to) raise an objection of this sort after the
decision has been rendered."45 Second, it is settled that mere suspicion that a judge is partial to one of the parties
is not enough; there should be evidence to substantiate the suspicion. Bias and prejudice cannot be presumed,
especially when weighed against a judge’s sacred pledge under his oath of office to administer justice without
regard for any person and to do right equally to the poor and the rich. There must be a showing of bias and
prejudice stemming from an extrajudicial source, resulting in an opinion on the merits based on something other
than what the judge learned from his participation in the case.46 We would like to reiterate, at this point, the
policy of the Court not to tolerate acts of litigants who, for just about any conceivable reason, seek to disqualify
a judge (or justice) for their own purpose, under a plea of bias, hostility, prejudice or prejudgment.47

We now come to the more substantive issue of whether or not the petitioners may be validly ejected from the
leased premises.

Unlawful detainer cases are summary in nature. In such cases, the elements to be proved and resolved are the
fact of lease and the expiration or violation of its terms.48 Specifically, the essential requisites of unlawful
detainer are: 1) the fact of lease by virtue of a contract, express or implied; 2) the expiration or termination of
the possessor’s right to hold possession; 3) withholding by the lessee of possession of the land or building after
the expiration or termination of the right to possess; 4) letter of demand upon lessee to pay the rental or comply
with the terms of the lease and vacate the premises; and 5) the filing of the action within one year from the date
of the last demand received by the defendant.49

It is undisputed that petitioners and respondent entered into two separate contracts of lease involving nine (9)
rooms of the San Luis Building. Records, likewise, show that respondent repeatedly demanded that petitioners
vacate the premises, but the latter refused to heed the demand; thus, they remained in possession of the
premises. The only contentious issue is whether there was indeed a violation of the terms of the contract: on the
part of petitioners, whether they failed to pay the stipulated rent without justifiable cause; while on the part of
respondent, whether it prevented petitioners from occupying the leased premises except Room 35.

This issue involves questions of fact, the resolution of which requires the evaluation of the evidence presented.
The MeTC, the RTC and the CA all found that petitioners failed to perform their obligation to pay the stipulated
rent. It is settled doctrine that in a civil case, the conclusions of fact of the trial court, especially when affirmed
by the Court of Appeals, are final and conclusive, and cannot be reviewed on appeal by the Supreme
Court.50 Albeit the rule admits of exceptions, not one of them obtains in this case.51

To settle this issue once and for all, we deem it proper to assess the array of factual findings supporting the
court’s conclusion.

The evidence of petitioners’ non-payment of the stipulated rent is overwhelming. Petitioners, however, claim
that such non-payment is justified by the following: 1) the refusal of respondent to allow petitioners to use the
leased properties, except room 35; 2) respondent’s refusal to turn over Rooms 36, 37 and 38; and 3)
respondent’s refusal to accept payment tendered by petitioners.

Petitioners’ justifications are belied by the evidence on record. As correctly held by the CA, petitioners’
communications to respondent prior to the filing of the complaint never mentioned their alleged inability to use
the rooms.52 What they pointed out in their letters is that they did not know to whom payment should be made,
whether to Ms. Bautista or to Pacheco.53 In their July 26 and October 30, 1993 letters, petitioners only
questioned the method of computing their electric billings without, however, raising a complaint about their
failure to use the rooms.54 Although petitioners stated in their December 30, 1993 letter that respondent failed to
fulfill its part of the contract,55 nowhere did they specifically refer to their inability to use the leased rooms.
Besides, at that time, they were already in default on their rentals for more than a year.

If it were true that they were allowed to use only one of the nine (9) rooms subject of the contract of lease, and
considering that the rooms were intended for a business purpose, we cannot understand why they did not
specifically assert their right. If we believe petitioners’ contention that they had been prevented from using the
rooms for more than a year before the complaint for ejectment was filed, they should have demanded specific
performance from the lessor and commenced an action in court. With the execution of the contract, petitioners
were already in a position to exercise their right to the use and enjoyment of the property according to the terms
of the lease contract.56 As borne out by the records, the fact is that respondent turned over to petitioners the keys
to the leased premises and petitioners, in fact, renovated the rooms. Thus, they were placed in possession of the
premises and they had the right to the use and enjoyment of the same. They, likewise, had the right to resist any
act of intrusion into their peaceful possession of the property, even as against the lessor itself. Yet, they did not
lift a finger to protect their right if, indeed, there was a violation of the contract by the lessor.

What was, instead, clearly established by the evidence was petitioners’ non-payment of rentals because
ostensibly they did not know to whom payment should be made. However, this did not justify their failure to
pay, because if such were the case, they were not without any remedy. They should have availed of the
provisions of the Civil Code of the Philippines on the consignation of payment and of the Rules of Court on
interpleader.

Article 1256 of the Civil Code provides:

Article 1256. 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.

Consignation alone shall produce the same effect in the following cases:

xxxx

(4) When two or more persons claim the same right to collect;

x x x x.

Consignation shall be made by depositing the things due at the disposal of a judicial authority, before whom the
tender of payment shall be proved in a proper case, and the announcement of the consignation in other cases.57

In the instant case, consignation alone would have produced the effect of payment of the rentals. The rationale
for consignation is to avoid the performance of an obligation becoming more onerous to the debtor by reason of
causes not imputable to him.58 Petitioners claim that they made a written tender of payment and actually
prepared vouchers for their monthly rentals. But that was insufficient to constitute a valid tender of payment.
Even assuming that it was valid tender, still, it would not constitute payment for want of consignation of the
amount. Well-settled is the rule that tender of payment must be accompanied by consignation in order that the
effects of payment may be produced.59

Moreover, Section 1, Rule 62 of the Rules of Court provides:

Section 1. When interpleader proper. – Whenever conflicting claims upon the same subject matter are or may be
made against a person who claims no interest whatever in the subject matter, or an interest which in whole or in
part is not disputed by the claimants, he may bring an action against the conflicting claimants to compel them to
interplead and litigate their several claims among themselves.
Otherwise stated, an action for interpleader is proper when the lessee does not know to whom payment of
rentals should be made due to conflicting claims on the property (or on the right to collect).60 The remedy is
afforded not to protect a person against double liability but to protect him against double vexation in respect of
one liability.61

Notably, instead of availing of the above remedies, petitioners opted to refrain from making payments.

Neither can petitioners validly invoke the non-delivery of Rooms 36, 37 and 38 as a justification for non-
payment of rentals. Although the two contracts embraced the lease of nine (9) rooms, the terms of the contracts
- with their particular reference to specific rooms and the monthly rental for each - easily raise the inference that
the parties intended the lease of each room separate from that of the others.lavvphil There is nothing in the
contract which would lead to the conclusion that the lease of one or more rooms was to be made dependent
upon the lease of all the nine (9) rooms. Accordingly, the use of each room by the lessee gave rise to the
corresponding obligation to pay the monthly rental for the same. Notably, respondent demanded payment of
rentals only for the rooms actually delivered to, and used by, petitioners.

It may also be mentioned that the contract specifically provides that the lease of Rooms 36, 37 and 38 was to
take effect only when the tenants thereof would vacate the premises. Absent a clear showing that the previous
tenants had vacated the premises, respondent had no obligation to deliver possession of the subject rooms to
petitioners. Thus, petitioners cannot use the non-delivery of Rooms 36, 37 and 38 as an excuse for their failure
to pay the rentals due on the other rooms they occupied.1avvphil

In light of the foregoing disquisition, respondent has every right to exercise his right to eject the erring lessees.
The parties’ contracts of lease contain identical provisions, to wit:

In case of default by the LESSEE in the payment of rental on the fifth (5th) day of each month, the amount
owing shall as penalty bear interest at the rate of FOUR percent (4%) per month, to be paid, without prejudice
to the right of the LESSOR to terminate his contract, enter the premises, and/or eject the LESSEE as hereinafter
set forth;62

Moreover, Article 167363 of the Civil Code gives the lessor the right to judicially eject the lessees in case of
non-payment of the monthly rentals. A contract of lease is a consensual, bilateral, onerous and commutative
contract by which the owner temporarily grants the use of his property to another, who undertakes to pay the
rent therefor.64 For failure to pay the rent, petitioners have no right to remain in the leased premises.

WHEREFORE, premises considered, the petition is DENIED and the Status Quo Order dated January 18, 1999
is hereby LIFTED. The Decision of the Court of Appeals dated May 26, 1998 and its Resolution dated
December 10, 1998 in CA-G.R. SP No. 37739 are AFFIRMED.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

LEONARDO A. QUISUMBING* MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to
the writer of the opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify
that the conclusions in the above Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice
G.R. No. 171298 April 15, 2013

SPOUSES OSCAR and THELMA CACAYORIN, Petitioners,

vs.
ARMED FORCES AND POLICE MUTUAL BENEFIT ASSOCIATION, INC., Respondent.

DECISION

DEL CASTILLO, J.:

Consignation is necessarily judicial. Article 1258 of the Civil Code specifically provides that consignation shall
be made by depositing the thing or things due at the disposal of judicial authority. The said provision clearly
precludes consignation in venues other than the courts.

Assailed in this Petition for Review on Certiorari1 are the September 29, 2005 Decision2 of the Court of Appeals
(CA) which granted the Petition for Certiorari in CA-G.R. SP No. 84446 and its January 12, 2006
Resolution3 denying petitioners' Motion for Reconsideration.4

Factual Antecedents

Petitioner Oscar Cacayorin (Oscar) is a member of respondent Armed Forces and Police Mutual Benefit
Association, Inc. (AFPMBAI), a mutual benefit association duly organized and existing under Philippine laws
and engaged in the business of developing low-cost housing projects for personnel of the Armed Forces of the
Philippines, Philippine National Police, Bureau of Fire Protection, Bureau of Jail Management and Penology,
and Philippine Coast Guard. He filed an application with AFPMBAI to purchase a piece of property which the
latter owned, specifically Lot 5, Block 8, Phase I, Kalikasan Mutual Homes, San Pedro, Puerto Princesa City
(the property), through a loan facility.

On July 4, 1994, Oscar and his wife and co-petitioner herein, Thelma, on one hand, and the Rural Bank of San
Teodoro (the Rural Bank) on the other, executed a Loan and Mortgage Agreement5 with the former as
borrowers and the Rural Bank as lender, under the auspices of Pag-IBIG or Home Development Mutual Fund’s
Home Financing Program.

The Rural Bank issued an August 22, 1994 letter of guaranty6 informing AFPMBAI that the proceeds of
petitioners’ approved loan in the amount of ₱77,418.00 shall be released to AFPMBAI after title to the property
is transferred in petitioners’ name and after the registration and annotation of the parties’ mortgage agreement.

On the basis of the Rural Bank’s letter of guaranty, AFPMBAI executed in petitioners’ favor a Deed of
Absolute Sale,7 and a new title – Transfer Certificate of Title No. 370178 (TCT No. 37017) – was issued in their
name, with the corresponding annotation of their mortgage agreement with the Rural Bank, under Entry No.
3364.9

Unfortunately, the Pag-IBIG loan facility did not push through and the Rural Bank closed and was placed under
receivership by the Philippine Deposit Insurance Corporation (PDIC). Meanwhile, AFPMBAI somehow was
able to take possession of petitioners’ loan documents and TCT No. 37017, while petitioners were unable to pay
the loan/consideration for the property.

AFPMBAI made oral and written demands for petitioners to pay the loan/ consideration for the property.10

In July 2003, petitioners filed a Complaint11 for consignation of loan payment, recovery of title and cancellation
of mortgage annotation against AFPMBAI, PDIC and the Register of Deeds of Puerto Princesa City. The case
was docketed as Civil Case No. 3812 and raffled to Branch 47 of the Regional Trial Court (RTC) of Puerto
Princesa City (Puerto Princesa RTC). Petitioners alleged in their Complaint that as a result of the Rural Bank’s
closure and PDIC’s claim that their loan papers could not be located, they were left in a quandary as to where
they should tender full payment of the loan and how to secure cancellation of the mortgage annotation on TCT
No. 37017. Petitioners prayed, thus:

a. That after the filing of this complaint an order be made allowing the consignation x x x of
Php77,418.00.

b. For the court to compute and declare the amount of interest to be paid by the plaintiffs and thereafter
to allow the consignation of the interest payments in order to give way for the full discharge of the loan.
 c. To order the AFPMBAI to turn over to the custody of the court the loan records and title (T.C.T. No.
37017) of the plaintiffs if the same are in their possession.

d. To declare the full payment of the principal loan and interest and ordering the full discharge from
mortgage of the property covered by T.C.T. No. 37017.

e. To order the Register of Deeds of Puerto Princesa City to cancel the annotation of real estate
mortgage under Entry No. 3364 at the back of T.C.T. No. 37017.

f. Thereafter, to turn over to the plaintiffs their title free from the aforesaid mortgage loan.12

AFPMBAI filed a Motion to Dismiss13 claiming that petitioners’ Complaint falls within the jurisdiction of the
Housing and Land Use Regulatory Board (HLURB) and not the Puerto Princesa RTC, as it was filed by
petitioners in their capacity as buyers of a subdivision lot and it prays for specific performance of contractual
and legal obligations decreed under Presidential Decree No. 95714 (PD 957). It added that since no prior valid
tender of payment was made by petitioners, the consignation case was fatally defective and susceptible to
dismissal.

Ruling of the Regional Trial Court

In an October 16, 2003 Order,15 the trial court denied AFPMBAI’s Motion to Dismiss, declaring that since title
has been transferred in the name of petitioners and the action involves consignation of loan payments, it
possessed jurisdiction to continue with the case. It further held that the only remaining unsettled transaction is
between petitioners and PDIC as the appointed receiver of the Rural Bank.

AFPMBAI filed a Motion for Reconsideration,16 which the trial court denied in its March 19, 2004 Order.17

Ruling of the Court of Appeals

AFPMBAI thus instituted CA-G.R. SP No. 84446, which is a Petition for Certiorari18 raising the issue of
jurisdiction. On September 29, 2005, the CA rendered the assailed Decision decreeing as follows:

WHEREFORE, premises considered, this Petition is GRANTED. The Assailed 16 October 2003 and 19 March
2004 Orders of the public respondent judge are hereby ordered VACATED and SET ASIDE.

SO ORDERED.19

The CA held that Civil Case No. 3812 is a case for specific performance of AFPMBAI’s contractual and
statutory obligations as owner/developer of Kalikasan Mutual Homes, which makes PD 957 applicable and thus
places the case within the jurisdiction of the HLURB. It said that since one of the remedies prayed for is the
delivery to petitioners of TCT No. 37017, the case is cognizable exclusively by the HLURB.

Petitioners moved for reconsideration which was denied by the CA in its January 12, 2006 Resolution.

Hence, the instant Petition.

Issue

The sole issue that must be resolved in this Petition is: Does the Complaint in Civil Case No. 3812 fall within
the exclusive jurisdiction of the HLURB?

Petitioners’ Arguments

Petitioners assert that the elements which make up a valid case for consignation are present in their Complaint.
They add that since a deed of absolute sale has been issued in their favor, and possession of the property has
been surrendered to them, not to mention that title has been placed in their name, the HLURB lost jurisdiction
over their case. And for this same reason, petitioners argue that their case may not be said to be one for specific
performance of contractual and legal obligations under PD 957 as nothing more was left to be done in order to
perfect or consolidate their title.

Petitioners thus pray that the herein assailed Decision and Resolution of the CA be set aside, and that the trial
court be ordered to continue with the proceedings in Civil Case No. 3812.
Respondent's Arguments

Respondent, on the other hand, insists in its Comment20 that jurisdiction over petitioners’ case lies with the
HLURB, as it springs from their contractual relation as seller and buyer, respectively, of a subdivision lot. The
prayer in petitioners’ Complaint involves the surrender or delivery of the title after full payment of the purchase
price, which respondent claims are reciprocal obligations in a sale transaction covered by PD 957. Respondent
adds that in effect, petitioners are exacting specific performance from it, which places their case within the
jurisdiction of the HLURB.

Our Ruling

The Court grants the Petition.

The Complaint makes out a case for consignation.

The settled principle is that "the allegations of the Complaint determine the nature of the action and
consequently the jurisdiction of the courts. This rule applies whether or not the plaintiff is entitled to recover
upon all or some of the claims asserted therein as this is a matter that can be resolved only after and as a result
of the trial."21

Does the Complaint in Civil Case No. 3812 make out a case for consignation? It alleges that:

6.0 – Not long after however, RBST22 closed shop and defendant Philippine Deposit Insurance
Corporation (PDIC) was appointed as its receiver. The plaintiffs, through a representative, made a verbal
inquiry to the PDIC regarding the payment of their loan but were told that it has no information or
record of the said loan. This made [sic] the plaintiffs in quandary as to where or whom they will pay
their loan, which they intend to pay in full, so as to cancel the annotation of mortgage in their title.

7.0 – It was discovered that the loan papers of the plaintiffs, including the duplicate original of their title,
were in the possession of defendant AFPMBAI. It was unclear though why the said documents including
the title were in the possession of AFPMBAI. These papers should have been in RBST’s possession and
given to PDIC after its closure in the latter’s capacity as receiver.

8.0 – Plaintiffs are now intending to pay in full their real estate loan but could not decide where to pay
the same because of RBST [sic] closure and PDIC’s failure to locate the loan records and title. This
court’s intervention is now needed in order to determine to [sic] where or whom the loan should be paid.

9.0 – Plaintiffs hereby respectfully prays [sic] for this court to allow the deposit of the amount of
Php77,418.00 as full payment of their principal loan, excluding interest, pursuant to the Loan and
Mortgage Agreement on 4 July 1994.23

From the above allegations, it appears that the petitioners’ debt is outstanding; that the Rural Bank’s receiver,
PDIC, informed petitioners that it has no record of their loan even as it took over the affairs of the Rural Bank,
which on record is the petitioners’ creditor as per the July 4, 1994 Loan and Mortgage Agreement; that one way
or another, AFPMBAI came into possession of the loan documents as well as TCT No. 37017; that petitioners
are ready to pay the loan in full; however, under the circumstances, they do not know which of the two – the
Rural Bank or AFPMBAI – should receive full payment of the purchase price, or to whom tender of payment
must validly be made.

Under Article 1256 of the Civil Code,24 the debtor shall be released from responsibility by the consignation of
the thing or sum due, without need of prior tender of payment, when the creditor is absent or unknown, or when
he is incapacitated to receive the payment at the time it is due, or when two or more persons claim the same
right to collect, or when the title to the obligation has been lost. Applying Article 1256 to the petitioners’ case as
shaped by the allegations in their Complaint, the Court finds that a case for consignation has been made out, as
it now appears that there are two entities which petitioners must deal with in order to fully secure their title to
the property: 1) the Rural Bank (through PDIC), which is the apparent creditor under the July 4, 1994 Loan and
Mortgage Agreement; and 2) AFPMBAI, which is currently in possession of the loan documents and the
certificate of title, and the one making demands upon petitioners to pay. Clearly, the allegations in the
Complaint present a situation where the creditor is unknown, or that two or more entities appear to possess the
same right to collect from petitioners. Whatever transpired between the Rural Bank or PDIC and AFPMBAI in
respect of petitioners’ loan account, if any, such that AFPMBAI came into possession of the loan documents
and TCT No. 37017, it appears that petitioners were not informed thereof, nor made privy thereto.
Indeed, the instant case presents a unique situation where the buyer, through no fault of his own, was able to
obtain title to real property in his name even before he could pay the purchase price in full. There appears to be
no vitiated consent, nor is there any other impediment to the consummation of their agreement, just as it appears
that it would be to the best interests of all parties to the sale that it be once and for all completed and terminated.
For this reason, Civil Case No. 3812 should at this juncture be allowed to proceed.

Moreover, petitioners’ position is buttressed by AFPMBAI’s own admission in its Comment25 that it made oral
and written demands upon the former, which naturally aggravated their confusion as to who was their rightful
creditor to whom payment should be made – the Rural Bank or AFPMBAI. Its subsequent filing of the Motion
to Dismiss runs counter to its demands to pay. If it wanted to be paid with alacrity, then it should not have
moved to dismiss Civil Case No. 3812, which was brought precisely by the petitioners in order to be able to
finally settle their obligation in full.

Finally, the lack of prior tender of payment by the petitioners is not fatal to their consignation case. They filed
the case for the exact reason that they were at a loss as to which between the two – the Rural Bank or
AFPMBAI – was entitled to such a tender of payment. Besides, as earlier stated, Article 1256 authorizes
consignation alone, without need of prior tender of payment, where the ground for consignation is that the
creditor is unknown, or does not appear at the place of payment; or is incapacitated to receive the payment at
the time it is due; or when, without just cause, he refuses to give a receipt; or when two or more persons claim
the same right to collect; or when the title of the obligation has been lost.

Consignation is necessarily judicial; hence, jurisdiction lies with the RTC, not with the HLURB.

On the question of jurisdiction, petitioners’ case should be tried in the Puerto Princesa RTC, and not the
HLURB. Consignation is necessarily judicial,26 as the Civil Code itself provides that consignation shall be made
by depositing the thing or things due at the disposal of judicial authority, thus:

Art. 1258. Consignation shall be made by depositing the things due at the disposal of judicial authority, before
whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in
other cases.

The consignation having been made, the interested parties shall also be notified thereof. (Emphasis and
underscoring supplied)

The above provision clearly precludes consignation in venues other than the courts.1âwphi1 Elsewhere, what
may be made is a valid tender of payment, but not consignation. The two, however, are to be distinguished.

Tender of payment must be distinguished from consignation. 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. (8 Manresa 325).27

While it may be true that petitioners’ claim relates to the terms and conditions of the sale of AFPMBAI’s
subdivision lot, this is overshadowed by the fact that since the Complaint in Civil Case No. 3812 pleads a case
for consignation, the HLURB is without jurisdiction to try it, as such case may only be tried by the regular
courts.

WHEREFORE, premises considered, the Petition is GRANTED. The September 29, 2005 Decision and January
12, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 84446 are ANNULLED and SET ASIDE. The
October 16, 2003 and March 19, 2004 Orders of the Regional Trial Court of Puerto Princesa City, Branch 47,
are REINSTATED, and the case is REMANDED to the said court for continuation of the proceedings.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:
 ANTONIO T. CARPIO
Associate Justice
Chairperson

DIOSDADO M. PERALTA* JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Court's Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that
the conclusions in the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice