CENON ALBEA, PETITIONER, VS. CARLOS INQUIMBOY AND THE COURT OF APPEALS, RESPONDENTS.

Certiorari to review and reverse a decision of the Court of Appeals, which made the following findings, of fact:

“On 13 October 1941, the plaintiff Carlos Inquimboy
executed a deed of absolute sale of the lands covered by Transfer
Certificate of Title Nos. 15599 and 15600 of the Register of Deeds of
Nueva Ecija, for the sum of P4,000 (Exhibit A). On the same date, the
defendant, Cenon Albea, executed the document, Exhibit B, in favor of
Carlos Inquimboy, in which he recognized that he was indebted to
Inquimboy in the sum of P3,000, Philippine currency, and bound himself
to pay said sum in the following installments: P2,500.00 on 15 November
1941 and P500 in May, 1942, on the condition that if he should fail to
pay the first installment on 15 November 1941, the deed of sale
(Exhibit A) of the same date would ipso facto be deemed cancelled and
rescinded, and he would execute and deliver to the plaintiff the
corresponding deed of cancellation and rescission. He stated in said
document that he had filed an application for a loan from the
Agricultural and Industrial Bank, Nueva Ecija Branch, for the sum of
P10,000, secured by the mortgage of the parcels of land covered by
Transfer Certificate of Title No. 17741, 4359, and 3818 of the Register
of Deeds of Nueva Ecija, and as additional guaranty, of the parcels of
land which were sold to him by Carlos Inquimboy by virtue of Exhibit A.
He authorized the cashier of the branch of the Agricultural and
Industrial Bank in Nueva Ecija to deduct from the sura to be given to
him the amount of P2,500, and deliver it to Inquimboy as partial
payment. In case he should fail to comply with his obligation under
Exhibit B and if it should be necessary for Inquimboy to resort to the
courts, he would pay the sum of P500 as liquidated damages and for
attorney’s fees, besides the costs. These conditions were accepted by
Inquimboy who also signed Exhibit B.

“On 23 February 1944,
Carlos Inquimboy filed-in the Court of First Instance of Nueva Ecija, a
complaint alleging, among other things, that the defendant Cenon Albea
had failed to pay him on 15 November 1941, the sum of P2,500 and the
other installment of P500 called for by the contract, Exhibit B, in
spite of repeated demands. He prayed that the contract of sale, Exhibit
A, be rescinded and cancelled and be declared.of no further force and
effect; that the defendant be ordered to pay the sum of P500 as damages
and attorney’s fees, and to return to him the Transfer Certificate of
Title No. 15599 and 15600 above mentioned, with costs against the
defendant.

“The defendant in his answer alleged, among other
things; that on 19 July 1939, he sold said parcels of land to the
plaintiff for the sum of P4,000 and on the same date the plaintiff
executed another document giving the defendant the right to repurchase
said parcels of land for the same amount of P4,000 at any time after
the expiration of four (4) years from 19 July 1939; that on 13 October
1941, the plaintiff executed a deed of absolute sale in favor of the
defendant and on the same date the latter executed the deed, Exhibit B,
above mentioned; and that he tendered payment in December 1943 and two
times in February 1944.

“The defendant failed to pay the
first installment of P2,500 on 15 November 1941 in spite of the demands
made by the plaintiff upon him.

“In December, 1943, the
defendant made a tender of payment to the plaintiff of the amount
mentioned in Exhibit B, which the plaintiff refused to accept as it was
too late. Another tender of payment was made in the early part of
February, 1944, and on February 13 of the same year. This sum was
consigned with the Court.

“There is a question as to whether
the defendant has paid the sum of P1,000 upon the execution of the
document marked Annex A (pp. 11-17), Record on Appeal, on 19 July 1939
or on a later date. The following words appear at the end of said Annex
A:

‘(Note) Me comprometo ceder las dos parcelas por tres mil (P3,000) pesos solamente.’

“The plaintiff testified that it was a reduction made by him in favor
of the defendant whereas the defendant stated that it was due to the
fact that he had paid P1,000. This question of fact, however, is not
important for the resolution of this case.

“The defendant
failed to obtain a loan from the Agricultural and Industrial Bank, one
of the reasons for the failure being that he pointed to the bank
inspector a piece of land different from that which he offered as
security (bottom of report of agent N. Y. Togore, marked as Exhibit
C-1). Furthermore, the payment of the obligation of the defendant to
the plaintiff cannot be made dependent upon his ability to obtain a
loan from the bank. The insertion of the c!kise referring to the bank
loan was only an indication of where he was going to get the money, but
it was not a condition sine qua non for the payment.”

To complete the statement of facts it is only necessary to add that
the consignment or deposit in court of the sum of P3,000 was made by
the defendant (now petitioner) Cenon Albea on March 1£, 1944, when he
filed his answer to plaintiff’s complaint as appears on page 14 of the
record on appeal, wherein he alleged:

“8. That to show the willingness of the
cross-plaintiff to pay the whole obligation to the cross-defendant,
/he/ now tenders and deposits the sum of P3,000 to this Honorable
Court.”

Upon those facts the Court of Appeals declared the deed of sale
Exhibit A “resolved and of no force and effect” and ordered the
defendant Albea to deliver to the plaintiff Inquimboy Transfer
Certificates of Title Nos. 15599 and 15600, and to pay to the plaintiff
the sum of P500, with costs.

The Court of Appeals applied the ease of Caridad Estates, Inc. vs. Pablo Santero, 71 Phil., 114.

The petitioner-appellant, on the other hand, contends that the case
applicable is not that relied upon by the Court of Appeals, but that of
Villaruel vs. Tan King, (43 Phil. 251).

It is necessary to examine the facts of the two cases to determine which of them is applicable to the case at bar.

In the Caridad Estates case the plaintiff sold certain lots to the
defendant for P30,000, payable as follows: P1,500 on the execution of
the agreement; P4,000 in or before December, 1935, P4,500 in or before
March 1936, and the remaining balance of P20,000 in ten years, each
annual installment to be paid on or before the end of August of each
year beginning 1937, with the stipulation that should the vendee fail
to make the payments agreed upon within 60 days of the date they fell
due, the total balance shall become due and payable and recoverable by
an action at law, or the vendor may, at its option, recover possession
of the property sold, in which case any and all sums paid by the vendee
under the provisions of the contract shall be considered as rental for
the use and occupancy of the property. After paying various auras
aggregating P7,590, the vendee defaulted in the payment of the
subsequent installments, and the vendor rescinded the contract of sale
by so notifying the vendee and by selling the property to another
party, thereafter instituting an action of unlawful detainer against
the vendee to eject him from the property. This Court sustained the
action of the vendor. Notwithstanding that the vendee tendered payment
to the vendor of the installment in arrears and deposited it in court
before the vendor made a demand either judicially or by a notarial act,
this Court refused to apply Article 1504 of the Civil Code, on the
ground that it was not applicable because the contract involved was “a
sale in installment in which the parties have laid down the procedure
to be followed in the event the vendee failed to fulfill his
obligation. There is, consequently, no occasion for the application of
the requirements of Article 1504.”

In the case of Villaruel vs. Tan King, supra, the
plaintiff sold to the defendant two lots for the sum of P2,700, P1,700
of which was paid upon the signing of the deed of sale and the balance
of Pl,000 was promised to be paid within one year, as security for
which the vendee constituted a mortgage on the same property in favor
of the vendor. In other words, the contract was one of absolute sale
with mortgage. Upon failure of the defendant to pay the sura of P1,000,
the plaintiff brought an action praying that the sale be resolved after
returning to the defendant the amount of P1,700 which he had paid as
part of the purchase price. This Court said “that since the subject
matter of the sale in question is real property, it does not come
strictly within the provisions of Article 1124 of the Civil Code, but
is rather subjected to the stipulations agreed upon by the contracting
parties and to the provisions of Article 1504 of the Civil Code, which
reads as follows:

“Art. 1504. In the sale of real property, even
though it may have been stipulated that in default of the payment of
the price within the time agreed upon, the resolution of the contract
shall take place ipso jure, the purchaser may pay even after
the expiration of the period, at any time before demand has been made
upon him either by suit or by notarial act. After such demand has been
made the judge cannot grant him further time.”

This Court, quoting with approval Manresa’s opinion, held that the
demand mentioned in Article 1504 does not refer to a demand for
payment, but “to a demand that the vendor makes upon the vendee for the
latter to agree to the resolution of the obligation and to create no
obstacles to this contractual mode of extinguishing obligations.”
Inasmuch as the vendee in that case had deposited in court the amount
due before the action was commenced, this Court absolved him from the
complaint.

The contract Exhibit A involved in the present case, was one of
absolute sale whereby the vendor Inquimboy transferred and conveyed his
title to the land in question to the vendee Albea to enable the latter
to mortgage it together with his other properties to the Agricultural
and Industrial Bank and thereby secure the necessary amount with which
to pay the purchase price to the vendor. In a separate document
(Exhibit B) he agreed to pay that price as follows: P2,500 on or about
November 15, 1941, and P500 in May, 1942, with the proviso that should
he fail to pay the said sum of P2,500 on or before November 15, 1941,
the deed of absolute sale Exhibit A “shall ipso facto be deemed
cancelled and rescinded and that I shall execute and give the
corresponding deed of cancellation and rescission.” In other words, the
vendee agreed to retransfer or reconvey the property to the vendor
should the former fail to pay the first sum of P2,500 on the date
stipulated.

That contract is different from the one involved in the Garidad
Estates case, in that the latter was not an absolute deed of sale but a
mere contract to sell whereby the vendee agreed to pay the purchase
price in various installments with the stipulation that, upon failure
to pay any installment within 60 days after due date, the vendor may,
at its option, recover possession of the property and consider any and
all amounts already paid as rental for the use and occupancy of the
property. In that case there was no need for the vendee to execute any
deed of reconveyance to the vendor because by the said contract to sell
the title had not passed to him.

The contract involved in the present case is similar to that involved in Villaruel vs.
Tan King, in that both contracts were absolute sales which passed title
to the vendee, although the purchase price was not fully paid. As in
the Villaruel case, Article 1504 of the Civil Code is applicable to the
present case. Inasmuch as Cenon Albea, the vendee, offered to pay the
purchase price to the vendor before the latter made a demand upon him
for the resolution of the contract either by suit or by notarial act,
the court is empowered under said article to grant him further time.

We find, however, that the deposit made by Cenon Albea of P3,000 on
March 18, 1944, after the present action had been commenced, did not
relieve him of liability to pay the purchase price, for the following
reasons:

Article 1176 of the Civil Code provides that “if a creditor to whom
tender of payment has been made should refuse without reason to accept
it, the debtor may relieve himself of liability by the deposit of the
thing due.” Article 1177 further provides: “In order that the deposit
of the thing due may release the obligor, previous notice thereof must be given
to the persons interested in the performance of the obligation.”
Article 1178 requires that the deposit be “accompanied by proof of
tender, when required, and of notice of the deposit in other cases.” It
does not appear that Albea gave previous notice of the deposit to
Inquimboy, and the deposit was not accompanied by proof of such notice
nor by any proof of tender. He tendered the payment to Inquiraboy in
December, 1943, and again on February 18, 1944. Inquimboy refused to
accept it on the ground that it was too late and also because it was in
Japanese fiat money. But instead of depositing the amount then and
there with previous notice to Inquimboy, Albea reported Inquimboy’s
refusal to accept the Japanese war notes to the Military Police on
February 18, 1944, as alleged in paragraph 6 of his cross-complaint,
and only deposited said amount in court together with his answer to the
complaint “to show his willingness * * * to pay the whole obligation to
the cross-defendant.” The consignation of payment, not having been made
in accordance with law, was not valid and binding against the creditor.

The judgment of the Court of Appeals is modified as follows: The
petitioner Cenon Albea is hereby adjudged and ordered to reconvey and
deliver to the respondent Carlos Inquimboy the property described in
Transfer Certificates of Title Nos. 15959 and 15600 of the Land Records
of Nueva Ecija, together with said Certificates, free and clear of any
encumbrance, unless within 30 days after entry of final judgment
herein, he should pay to the respondent Carlos Inquimboy the purchase
price of P3,000, Philippine currency, plus the sum of P500 as
liquidated damages and attorney’s fees. The petitioner Albea shall pay
the costs in the three instances.

Pablo, Bengzon, Tuason, and Reyes, JJ., concur.

Montemayor, J., I concur in the result.

OZAETA, J.:

The Chief Justice and Justices Paras and Padilla concur in this
opinion, but being absent on leave on the date of the promulgation
hereof, their signatures do not appear above.