FIRST DIVISION

[G.R. No. 156846. February 23, 2004.]

TEDDY G. PABUGAIS , petitioner, vs . DAVE P. SAHIJWANI , respondent.

DECISION

YNARES-SANTIAGO , J : p

Assailed in this petition for review on certiorari is the January 16, 2003 Amended
Decision 1 of the Court of Appeals 2 in CA-G.R. CV No. 55740 which set aside the
November 29, 1996 Decision 3 of the Regional Trial Court of Makati, Branch 64, in Civil
Case No. 94-2363.
Pursuant to an "Agreement And Undertaking" 4 dated December 3, 1993, petitioner
Teddy G. Pabugais, in consideration of the amount of Fifteen Million Four Hundred Eighty
Seven Thousand Five Hundred Pesos (P15,487,500.00), agreed to sell to respondent Dave
P. Sahijwani a lot containing 1,239 square meters located at Jacaranda Street, North
Forbes Park, Makati, Metro Manila. Respondent paid petitioner the amount of P600,000.00
as option/reservation fee and the balance of P14,887,500.00 to be paid within 60 days
from the execution of the contract, simultaneous with delivery of the owner's duplicate
Transfer Certificate of Title in respondent's name the Deed of Absolute Sale; the Certificate
of Non-Tax Delinquency on real estate taxes and Clearance on Payment of Association
Dues. The parties further agreed that failure on the part of respondent to pay the balance
of the purchase price entitles petitioner to forfeit the P600,000.00 option/reservation fee;
while non-delivery by the latter of the necessary documents obliges him to return to
respondent the said option/reservation fee with interest at 18% per annum, thus —
5. DEFAULT — In case the FIRST PARTY [herein respondent] fails to
pay the balance of the purchase price within the stipulated due date, the sum of
P600,000.00 shall be deemed forfeited, on the other hand, should the SECOND
PARTY [herein petitioner] fail to deliver within the stipulated period the documents
hereby undertaken, the SECOND PARTY shall return the sum of P600,000.00 with
interest at 18% per annum. 5

Petitioner failed to deliver the required documents. In compliance with their

agreement, he returned to respondent the latter's P600,000.00 option/reservation fee by
way of Far East Bank & Trust Company Check No. 25AO54252P, which was, however,
dishonored.
What transpired thereafter is disputed by both parties. Petitioner claimed that he
twice tendered to respondent, through his counsel, the amount of P672,900.00
(representing the P600,000.00 option/reservation fee plus 18% interest per annum
computed from December 3, 1993 to August 3, 1994) in the form of Far East Bank & Trust
Company Manager's Check No. 088498, dated August 3, 1994, but said counsel refused to
accept the same. His rst attempt to tender payment was allegedly made on August 3,
1994 through his messenger; 6 while the second one was on August 8, 1994, 7 when he
sent via DHL Worldwide Services, the manager's check attached to a letter dated August 5,
1994. 8 On August 11, 1994, petitioner wrote a letter to respondent saying that he is
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 consigning the amount tendered with the Regional Trial Court of Makati City. 9 On August
15, 1994, petitioner filed a complaint for consignation. 10
Respondent's counsel, on the other hand, admitted that his o ce received
petitioner's letter dated August 5, 1994, but claimed that no check was appended thereto.
11 He averred that there was no valid tender of payment because no check was tendered
and the computation of the amount to be tendered was insu cient, 12 because petitioner
verbally promised to pay 3% monthly interest and 25% attorney's fees as penalty for
default, in addition to the interest of 18% per annum on the P600,000.00
option/reservation fee. 1 3
On November 29, 1996, the trial court rendered a decision declaring the
consignation invalid for failure to prove that petitioner tendered payment to respondent
and that the latter refused to receive the same. It further held that even assuming that
respondent refused the tender, the same is justi ed because the manager's check
allegedly offered by petitioner was not legal tender, hence, there was no valid tender of
payment. The trial court ordered petitioner to pay respondent the amount of P600,000.00
with interest of 18% per annum from December 3, 1993 until fully paid, plus moral
damages and attorney's fees. 14
Petitioner appealed the decision to the Court of Appeals. Meanwhile, his counsel,
Atty. Wilhelmina V. Joven, died and she was substituted by Atty. Salvador P. De Guzman, Jr.
15 On December 20, 2001, petitioner executed a "Deed of Assignments" 16 assigning in
favor of Atty. De Guzman, Jr., part of the P672,900.00 consigned with the trial court as
partial payment of the latter's attorney's fees. 1 7 Thereafter, on January 7, 2002, petitioner
led an Ex Parte Motion to Withdraw Consigned Money. 18 This was followed by a "Motion
to Intervene" led by Atty. De Guzman, Jr., praying that the amount consigned be released
to him by virtue of the Deed of Assignment. 19
Petitioner's motion to withdraw the amount consigned was denied by the Court of
Appeals and the decision of the trial court was a rmed with modi cation as to the
amount of moral damages and attorney's fees. 20
On a motion for reconsideration, the Court of Appeals declared the consignation as
valid in an Amended Decision dated January 16, 2003. It held that the validity of the
consignation had the effect of extinguishing petitioner's obligation to return the
option/reservation fee to respondent. Hence, petitioner can no longer withdraw the same.
The decretal portion of the Amended Decision states: cEaSHC

WHEREFORE, premises considered, our decision dated April 26, 2002 is

RECONSIDERED. The trial court's decision is hereby REVERSED and SET ASIDE,
and a new one is entered (1) DECLARING as valid the consignation by the
plaintiff-appellant in favor of defendant-appellee of the amount of P672,900.00
with the Makati City RTC Clerk of Court and deposited under O cial Receipt No.
379061 dated 15 August 1994 and (2) DECLARING as extinguished appellant's
obligation in favor of appellee under paragraph 5 of the parties' "AGREEMENT
AND UNDERTAKING". Neither party shall recover costs from the other.

SO ORDERED. 21

Unfazed, petitioner led the instant petition for review contending, inter alia, that he
can withdraw the amount deposited with the trial court as a matter of right because at the
time he moved for the withdrawal thereof, the Court of Appeals has yet to rule on the
consignation's validity and the respondent had not yet accepted the same.
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 The resolution of the case at bar hinges on the following issues: (1) Was there a
valid consignation? and (2) Can petitioner withdraw the amount consigned as a matter of
right?
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. 22 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 noti ed thereof. Failure in any of these requirements is enough ground to
render a consignation ineffective. 23
The issues to be resolved in the instant case concerns one of the important
requisites of consignation, i.e., the existence of a valid tender of payment. As testi ed by
the counsel for respondent, the reasons why his client did not accept petitioner's tender of
payment were — (1) the check mentioned in the August 5, 1994 letter of petitioner
manifesting that he is settling the obligation was not attached to the said letter; and (2)
the amount tendered was insu cient to cover the obligation. It is obvious that the reason
for respondent's non-acceptance of the tender of payment was the alleged insu ciency
thereof — and not because the said check was not tendered to respondent, or because it
was in the form of manager's check. While it is true that in general, a manager's check is
not legal tender, the creditor has the option of refusing or accepting it. 2 4 Payment in
check by the debtor may be acceptable as valid, if no prompt objection to said payment is
made. 25 Consequently, petitioner's tender of payment in the form of manager's check is
valid.
Anent the su ciency of the amount tendered, it appears that only the interest of
18% per annum on the P600,000.00 option/reservation fee stated in the default clause of
the "Agreement And Undertaking" was agreed upon by the parties, thus —
5. DEFAULT — In case the FIRST PARTY [herein respondent] fails to
pay the balance of the purchase price within the stipulated due date, the sum of
P600,000.00 shall be deemed forfeited, on the other hand, should the SECOND
PARTY [herein petitioner] fail to deliver within the stipulated period the documents
hereby undertaken, the SECOND PARTY shall return the sum of P600,000.00 with
interest at 18% per annum. 26

The manager's check in the amount of P672,900.00 (representing the P600,000.00

option/reservation fee plus 18% interest per annum computed from December 3, 1993 to
August 3, 1994) which was tendered but refused by respondent, and thereafter consigned
with the court, was enough to satisfy the obligation.
There being a valid tender of payment in an amount su cient to extinguish the
obligation, the consignation is valid.
As regards petitioner's right to withdraw the amount consigned, reliance on Article
1260 of the Civil Code is misplaced. The said Article provides —
Art. 1260. Once the consignation has been duly made, the debtor may
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 ask the judge to order the cancellation of the obligation.

Before the creditor has accepted the consignation, or before a judicial

con rmation that the consignation has been properly made, the debtor may
withdraw the thing or the sum deposited, allowing the obligation to remain in
force.

The amount consigned with the trial court can no longer be withdrawn by petitioner
because respondent's prayer in his answer that the amount consigned be awarded to him
is equivalent to an acceptance of the consignation, which has the effect of extinguishing
petitioner's obligation.
Moreover, petitioner failed to manifest his intention to comply with the "Agreement
And Undertaking" by delivering the necessary documents and the lot subject of the sale to
respondent in exchange for the amount deposited. Withdrawal of the money consigned
would enrich petitioner and unjustly prejudice respondent.
The withdrawal of the amount deposited in order to pay attorney's fees to
petitioner's counsel, Atty. De Guzman, Jr., violates Article 1491 of the Civil Code which
forbids lawyers from acquiring by assignment, property and rights which are the object of
any litigation in which they may take part by virtue of their profession. 2 7 Furthermore, Rule
10 of the Canons of Professional Ethics provides that "the lawyer should not purchase any
interest in the subject matter of the litigation which he is conducting." The assailed
transaction falls within the prohibition because the Deed assigning the amount of
P672,900.00 to Atty. De Guzman, Jr., as part of his attorney's fees was executed during the
pendency of this case with the Court of Appeals. In his Motion to Intervene, Atty. De
Guzman, Jr., not only asserted ownership over said amount, but likewise prayed that the
same be released to him. That petitioner knowingly and voluntarily assigned the subject
amount to his counsel did not remove their agreement within the ambit of the prohibitory
provisions. 28 To grant the withdrawal would be to sanction a void contract. 2 9
WHEREFORE, in view of all the foregoing, the instant petition for review is DENIED.
The January 16, 2003 Amended Decision of the Court of Appeals in CA-G.R. CV No. 55740,
which declared the consignation by the petitioner in favor of respondent of the amount of
P672,900.00 with the Clerk of Court of the Regional Trial Court of Makati City valid, and
which declared petitioner's obligation to respondent under paragraph 5 of the "Agreement
And Undertaking" as having been extinguished, is AFFIRMED. No costs.
SO ORDERED.
Davide, Jr., C.J., Panganiban and Azcuna, JJ., concur.
Carpio, J., took no part. Former counsel of a party.

Footnotes
1. Rollo, p. 18.
2. Penned by Associate Justice Eliezer R. De Los Santos and concurred in by Associate
Justices Cancio C. Garcia and Marina L. Buzon.

3. Records, p. 157.
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 4. Id., p. 85.
5. Id., p. 86.
6. TSN, 24 July 1995, pp. 9-10.

7. DHL Delivery Receipt, Records, p. 16.

8. TSN, 24 July 1995, pp. 11-14.

9. Records, p. 94.
10. Id., p. 1.
11. TSN, 14 February 1996, p. 37.
12. Id., p. 39.
13. TSN, 27 March 1996, pp. 9-10; 22-23; 29-30.

14. Records, p. 160.

15. His "Entry of Appearance" for petitioner which was received by the Court of Appeals on
July 4, 2000, was noted in the October 30, 2000 Resolution of said court (CA Rollo, p.
114).

16. Rollo, p. 116.

17. Pertinent portion thereof, reads:
WHEREAS, in order that he may pay the estate of the late Atty. Wilhelmina Joven and
at the same time give partial payment to herein ASSIGNEE of the latter's attorney's fees,
the ASSIGNOR has decided to assign the consigned money to herein ASSIGNEE;

NOW, THEREFORE, for and in consideration of the foregoing premises, and of the
terms and conditions hereinafter stated, the ASSIGNOR, by these presents, irrevocably
ASSIGNS to the herein ASSIGNEE the P672,900.00 now on deposit with the Clerk of
Court of the Regional Trial Court of Makati City under Official Receipt No. 3790631
dated August 15, 1994 in Civil Case No. 94-2363 entitled "Teddy G. Pabugais, petitioner
v. Dave Sahijwani, respondent", provided that at least 40% of said amount is paid to the
Estate of the late Atty. Wilhelmina Joven.

xxx xxx xxx

TEDDY G. PABUGAIS SALVADOR P. DE GUZMAN, JR.

Assignor Assignee
18. CA Rollo, p. 117.

19. Id., p. 158.

20. Id., p. 123.
21. Rollo, p. 29.
22. Legaspi v. Court of Appeals, 226 Phil. 24, 29 (1986); citing Limkako v. Teodoro, 74 Phil.
313 (1943).

23. Soco v. Militante, 208 Phil. 151, 160 (1983); citing Jose Ponce de Leon v. Santiago
Syjuco, Inc., 90 Phil. 311 (1951); Civil Code, Articles 1256-1258.
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 24. Far East Bank & Trust Company v. Diaz Realty, Inc., G.R. No. 138588, 23 August 2001,
363 SCRA 659, 667; citing Tibajia, Jr. v. Court of Appeals, G.R. No. 100290, 4 June 1993,
223 SCRA 163; Roman Catholic Bishop of Malolos, Inc. v. Intermediate Appellate Court,
G.R. No. 72110, 16 November 1990, 191 SCRA 411.

25. Soco v. Militante, supra.

26. Records, p. 86.

27. Article 1491. The following persons cannot acquire by purchase, even at a public or
judicial auction, either in person or through the mediation of another:

xxx xxx xxx

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts,
and other officers and employees connected with the administration of justice, the
property and rights in litigation or levied upon an execution before the court within
whose jurisdiction or territory they exercise their respective functions; this prohibition
includes the act of acquiring by assignment and shall apply to lawyers, with respect to
the property and rights which may be the object of any litigation in which they may take
part by virtue of their profession.
28. Ordinio v. Palongan Eduarte, A.M. No. 3216, 16 March 1992, 207 SCRA 229, 231-232;
citing In re: Atty. Melchor E. Ruste, 70 Phil. 243 (1940).
29. Rubias v. Batiller, 151-A Phil. 584, 600 (1973); Fornilda v. Branch 164, RTC IVth Judicial
Region, Pasig, G.R. No. L-72306, 5 October 1988, 166 SCRA 281, 288-289.

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