Cacayorin v. Armed Forces and Police 696 S 311

Cacayorin v. Armed Forces and Police (AFPMBAI)
GR 171298
Facts: AFPMBAI is 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 AFP, PNP, Bureau of Fire Protection, Bureau of Jail Management and Penology, and Philippine Coast Guard. Petitioner Cacayorin is a member of AFPMBAI.

                Petitioner applied to purchase a piece of property which the respondent owned through a loan facility. Sps Cacayorin (borrower) and the Rural Bank (lender) executed a Loan and Mortgage Agreement under the auspices of Pag IBIG or HDMF. The Rural Bank granted the loan and in a letter of guaranty informed AFPMBAI to release the proceeds upon the transfer of title in petitioner’s name, and after the registration and annotation of petitioner’s mortgage agreement.

                AFPMBAI executed in petitioner’s favor a DEED OF ABSOLUTE SALE, and a new title was issued in their name, with the corresponding annotation of their mortgage agreement with Rural Bank. 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.

                Petitioners filed a Complaint 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. 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.
Petitioner- jurisdiction in RTC; AFPMBAI- jurisdiction is in HLURB because of the seller-buyer relationship.

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.
ISSUE: Whether or not this is a case of consignation.

Ruling: Under Article 1256 of the Civil Code, 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.

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.

On the question of jurisdiction, petitioners’ case should be tried in the Puerto Princesa RTC, and not the HLURB. Consignation is necessarily judicial, 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. Elsewhere, what may be made is a valid tender of payment, but not consignation.

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