(11) DALTON v FGR REALTY AND DEVELOPMENT CORPORATION

G.R. No. 172577               January 19, 2011

The Case

This is a petition1 for review on certiorari under Rule 45 of the Rules of Court. The
petition challenges the 9 November 2005 Decision 2 and 10 April 2006 Resolution 3 of the
Court of Appeals in CA-G.R. CV No. 76536. The Court of Appeals affirmed the 26
February 2002 Decision4 of the Regional Trial Court (RTC), Judicial Region 7, Branch
13, Cebu City, in Civil Case No. CEB 4218.

The Facts

Flora R. Dayrit (Dayrit) owned a 1,811-square meter parcel of land located at the
corner of Rama Avenue and Velez Street in Cebu City. Petitioner Soledad Dalton
(Dalton), Clemente Sasam, Romulo Villalonga, Miguela Villarente, Aniceta Fuentes,
Perla Pormento, Bonifacio Cabajar, Carmencita Yuson, Angel Ponce, Pedro Regudo,
Pedro Quebedo, Mary Cabanlit, Marciana Encabo and Dolores Lim (Sasam, et al.)
leased portions of the property.

In June 1985, Dayrit sold the property to respondent FGR Realty and
Development Corporation (FGR). In August 1985, Dayrit and FGR stopped accepting
rental payments because they wanted to terminate the lease agreements with Dalton
and Sasam, et al.

In a complaint5 dated 11 September 1985, Dalton and Sasam, et al. consigned

the rental payments with the RTC. They failed to notify Dayrit and FGR about the
consignation. In motions dated 27 March 1987, 6 10 November 1987,78 July 1988,8 and
28 November 1994,9 Dayrit and FGR withdrew the rental payments. In their motions,
Dayrit and FGR reserved the right to question the validity of the consignation.

Dayrit, FGR and Sasam, et al. entered into compromise agreements dated 25
March 199710 and 20 June 1997.11 In the compromise agreements, they agreed to
abandon all claims against each other. Dalton did not enter into a compromise
agreement with Dayrit and FGR.

The RTC’s Ruling

In its 26 February 2002 Decision, the RTC dismissed the 11 September 1985
complaint and ordered Dalton to vacate the property. The RTC held that:
 Soledad Dalton built a house which she initially used as a dwelling and store
space. She vacated the premises when her children got married. She transferred her
residence near F. Ramos Public Market, Cebu City.

She constructed the 20 feet by 20 feet floor area house sometime in 1973. The
last monthly rental was ₱69.00. When defendants refused to accept rental and
demanded vacation of the premises, she consignated [sic] her monthly rentals in court.

xxxx

It is very clear from the facts that there was no valid consignation made.

The requisites of consignation are as follows:

1. The existence of a valid debt.

2. Valid prior tender, unless tender is excuse [sic];

3. Prior notice of consignation (before deposit)

4. Actual consignation (deposit);

5. Subsequent notice of consignation;

Requisite Nos. 3 and 5 are absent or were not complied with. It is very clear that
there were no prior notices of consignation (before deposit) and subsequent notices of
consignation (after deposit)

Besides, the last deposit was made on December 21, 1988. At the time Dalton
testified on December 22, 1999, she did not present evidence of payment in 1999. She
had not, therefore, religiously paid her monthly obligation.

By clear preponderance of evidence, defendants have established that plaintiff

was no longer residing at Eskina Banawa at the time she testified in court. She vacated
her house and converted it into a store or business establishment. This is buttressed by
the testimony of Rogelio Capacio, the court’s appointed commissioner, who submitted a
report, the full text of which reads as follows:

REPORT AND/OR OBSERVATION

"The store and/or dwelling subject to ocular inspection is stuated [sic] on the left
portion of the road which is about fifty-five (55) meters from the corner of Banawa-
Guadalupe Streets, when turning right heading towards the direction of Guadalupe
Church, if travelling from the Capitol Building.
 I observed that when we arrived at the ocular inspection site, Mrs. Soledad
Dalton with the use of a key opened the lock of a closed door. She claimed that it was a
part of the dwelling which she occupies and was utilized as a store. There were few
saleable items inside said space."

Soledad Dalton did not take exception to the said report.

Two witnesses who were former sub-lessees testified and clearly established
that Mrs. Dalton use the house for business purposes and not for dwelling. 12

Dalton appealed to the Court of Appeals.

The Court of Appeals’ Ruling

In its 9 November 2005 Decision, the Court of Appeals affirmed the RTC’s 26
February 2002 Decision. The Court of Appeals held that:

After a careful review of the facts and evidence in this case, we find no basis for
overturning the decision of the lower court dismissing plaintiffs-appellants’ complaint, as
we find that no valid consignation was made by the plaintiff-appellant.

Consignation is the act of depositing the thing due with the court or judicial
authorities whenever the creditor cannot accept or refuses to accept payment and
generally requires a prior tender of payment. 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 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 has 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 thereof. Failure in any of these requirements is enough
ground to render a consignation ineffective.

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. All interested parties are to be notified of the consignation. It had been
consistently held that compliance with these requisites is mandatory.

No error, therefore, can be attributed to the lower court when it held that the
consignation made by the plaintiff-appellant was invalid for failure to meet requisites 3
and 5 of a valid consignation (i.e., previous notice of the consignation given to the
person interested in the performance of the obligation and, after the consignation had
been made, the person interested was notified thereof).
 Plaintiff-appellant failed to notify defendants-appellees of her intention to consign
the amount due to them as rentals. She, however, justifies such failure by claiming that
there had been substantial compliance with the said requirement of notice upon the
service of the complaint on the defendants-appellees together with the summons.

We do not agree with such contention.

The prevailing rule is that substantial compliance with the requisites of a valid
consignation is not enough. In Licuanan vs. Diaz, reiterating the ruling in Soco vs.
Militante, the Supreme Court had the occasion to rule thus:

"In addition, it must be stated that in the case of Soco v. Militante (123 SCRA
160, 166-167 [1983]), this Court ruled that the codal provisions of the Civil Code dealing
with consignation (Articles 1252-1261) should be accorded mandatory construction —

We do not agree with the questioned decision. We hold that the essential
requisites of a valid consignation must be complied with fully and strictly in accordance
with the law. Articles 1256-1261, New Civil Code. That these Articles must be accorded
a mandatory construction is clearly evident and plain from the very language of the
codal provisions themselves which require absolute compliance with the essential
requisites therein provided. Substantial compliance is not enough for that would render
only directory construction of the law. The use of the words "shall" and "must [sic] which
are imperative, operating to impose a duty which may be enforced, positively indicated
that all the essential requisites of a valid consignation must be complied with. The Civil
Code Articles expressly and explicitly direct what must be essentially done in order that
consignation shall be valid and effectual..."

Clearly then, no valid consignation was made by the plaintiff-appellant for she did
not give notice to the defendants-appellees of her intention to so consign her rental
payments. Without any announcement of the intention to resort to consignation first
having been made to persons interested in the fulfillment of the obligation, the
consignation as a means of payment is void.

As to the other issues raised by the plaintiff-appellant in her second and third
assigned errors, we hold that the ruling of the lower court on such issues is supported
by the evidence adduced in this case.

That plaintiff-appellant is not residing at the leased premises in Eskina Banawa

and that she is using the same for business purposes, not as dwelling place, is amply
supported by the testimony of two of plaintiff-appellant’s sub-lessees. The
Commissioner’s Report submitted by Rogelio Capacio, who was commissioned by the
lower court to conduct an ocular inspection of the leased premises, further lends
support to the lower court’s findings. On the other hand, plaintiff-appellant only has her
self-serving claims that she is residing at the leased premises in Eskina Banawa to
prove her continued use of the leased premises as dwelling place.
 There is thus no merit to plaintiff-appellant’s fourth assigned error. The lower
court acted within its authority in ordering the plaintiff-appellant to vacate the leased
premises. The evidence shows that plaintiff-appellant had failed to continuously pay the
rentals due to the defendants-appellees. It was therefore within the powers of the lower
court to grant such other relief and remedies equitable under the circumstances.

In sum, there having been no valid consignation and with the plaintiff-appellant
having failed to pay the rentals due to the defendants-appellees, no error can be
attributed to the lower court in rendering its assailed decision. 13

Hence, the present petition. Dalton raises as issues that the Court of Appeals
erred in ruling that (1) the consignation was void, and (2) Dalton failed to pay rent.

The Court’s Ruling

The petition is unmeritorious.

Dalton claims that, "the issue as to whether the consignation made by the petitioner is
valid or not for lack of notice has already been rendered moot and academic with the
withdrawal by the private respondents of the amounts consigned and deposited by the
petitioner as rental of the subject premises." 14

The Court is not impressed. First, in withdrawing the amounts consigned, Dayrit and
FGR expressly reserved the right to question the validity of the consignation.
In Riesenbeck v. Court of Appeals,15 the Court held that:

A sensu contrario, when the creditor’s acceptance of the money consigned is

conditional and with reservations, he is not deemed to have waived the claims he
reserved against his debtor. Thus, when the amount consigned does not cover the
entire obligation, the creditor may accept it, reserving his right to the balance (Tolentino,
Civil Code of the Phil., Vol. IV, 1973 Ed., p. 317, citing 3 Llerena 263). The same factual
milieu obtains here because the respondent creditor accepted with reservation the
amount consigned in court by the petitioner-debtor. Therefore, the creditor is not
barred from raising his other claims, as he did in his answer with special defenses
and counterclaim against petitioner-debtor.

As respondent-creditor’s acceptance of the amount consigned was with reservations, it

did not completely extinguish the entire indebtedness of the petitioner-debtor. It is
apposite to note here that consignation is completed at the time the creditor
accepts the same without objections, or, if he objects, at the time the court
declares that it has been validly made in accordance with law.16 (Emphasis
supplied)

Second, compliance with the requisites of a valid consignation is mandatory. Failure to

comply strictly with any of the requisites will render the consignation void. Substantial
compliance is not enough.
In Insular Life Assurance Company, Ltd. v. Toyota Bel-Air, Inc.,17 the Court enumerated
the requisites of a valid consignation: (1) a debt due; (2) the creditor to whom tender of
payment was made refused without just cause to accept the payment, or the creditor
was absent, unknown or incapacitated, or several persons claimed the same right to
collect, or the title of the obligation was lost; (3) the person interested in the
performance of the obligation was given notice before consignation was made;
(4) the amount was placed at the disposal of the court; and (5) the person interested
in the performance of the obligation was given notice after the consignation was
made.

Articles 1257 and 1258 of the Civil Code state, respectively:

Art. 1257. In order that the consignation of the thing due may release the obligor,
it must first be announced to the persons interested in the fulfillment of the
obligation.

The consignation shall be ineffectual if it is not made strictly in consonance with

the provisions which regulate payment.

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 supplied)

The giving of notice to the persons interested in the performance of the obligation is
mandatory. Failure to notify the persons interested in the performance of the obligation
will render the consignation void. In Ramos v. Sarao,18 the Court held that, "All
interested parties are to be notified of the consignation. Compliance with [this
requisite] is mandatory."19 In Valdellon v. Tengco,20 the Court held that:

Under Art. 1257 of our Civil Code, in order that consignation of the thing due may
release the obligor, it must first be announced to the persons interested in the
fulfillment of the obligation. The consignation shall be ineffectual if it is not made
strictly in consonance with the provisions which regulate payment. In said Article
1258, it is further stated that the consignation having been made, the interested
party shall also be notified thereof.21 (Emphasis supplied)

In Soco v. Militante, et al.,22 the Court held that:

We hold that the essential requisites of a valid consignation must be complied

with fully and strictly in accordance with the law, Articles 1256 to 1261, New Civil
Code. That these Articles must be accorded a mandatory construction is clearly evident
and plain from the very language of the codal provisions themselves which require
absolute compliance with the essential requisites therein provided. Substantial
compliance is not enough for that would render only a directory construction to
the law. The use of the words "shall" and "must" which are imperative, operating to
impose a duty which may be enforced, positively indicate that all the essential requisites
of a valid consignation must be complied with. The Civil Code Articles expressly and
explicitly direct what must be essentially done in order that consignation shall be
valid and effectual.23 (Emphasis supplied)

Dalton claims that the Court of Appeals erred in ruling that she failed to pay rent. The
Court is not impressed. Section 1, Rule 45 of the Rules of Court states that petitions for
review on certiorari "shall raise only questions of law which must be distinctly set forth."
In Pagsibigan v. People,24 the Court held that:

A petition for review under Rule 45 of the Rules of Court should cover only questions of
law. Questions of fact are not reviewable. A question of law exists when the doubt
centers on what the law is on a certain set of facts. A question of fact exists when the
doubt centers on the truth or falsity of the alleged facts.1avvphi1

There is a question of law if the issue raised is capable of being resolved without need
of reviewing the probative value of the evidence. The issue to be resolved must be
limited to determining what the law is on a certain set of facts. Once the issue invites a
review of the evidence, the question posed is one of fact. 25

Whether Dalton failed to pay rent is a question of fact. It is not reviewable.

The factual findings of the lower courts are binding on the Court. The exceptions to this
rule are (1) when there is grave abuse of discretion; (2) when the findings are grounded
on speculation; (3) when the inference made is manifestly mistaken; (4) when the
judgment of the Court of Appeals is based on a misapprehension of facts; (5) when the
factual findings are conflicting; (6) when the Court of Appeals went beyond the issues of
the case and its findings are contrary to the admissions of the parties; (7) when the
Court of Appeals overlooked undisputed facts which, if properly considered, would
justify a different conclusion; (8) when the facts set forth by the petitioner are not
disputed by the respondent; and (9) when the findings of the Court of Appeals are
premised on the absence of evidence and are contradicted by the evidence on
record.26 Dalton did not show that any of these circumstances is present.

WHEREFORE, the Court DENIES the petition. The Court AFFIRMS the 9 November

2005 Decision and 10 April 2006 Resolution of the Court of Appeals in CA-G.R. CV No.
76536.