G.R. No. L-48914; August 11, 1943
ROSARIO LIMKAKO and JOSE LIMKAKO, plaintiffs-appellants, vs. NARCISA F. DE TEODORO and her husband JOSE TEODORO, JR., defendants-appellees.

FACTS

Plaintiffs Rosario and Jose Limkako were co-owners (pro indiviso) with Margarita David of properties on Soler St., Manila, owning two-thirds and one-third shares, respectively. The plaintiffs mortgaged their two-thirds share to Margarita David for P10,500 plus interest. Before her death, Margarita David donated the mortgage credit to her two adopted daughters, defendants-appellee Narcisa F. de Teodoro and Priscila F. de Sison, each receiving P5,200. After Margarita David’s death, her one-third ownership of the properties was allotted to Narcisa F. de Teodoro via an extrajudicial partition between the two heiresses.
On August 23, 1941, the plaintiffs sold the mortgaged properties to Carlos M. Sison (husband of Priscila F. de Sison) for P5,600. The conditions of the sale were: (a) the plaintiffs would pay off Narcisa F. de Teodoro’s half of the mortgage credit, and (b) they would execute a deed of mortgage for P11,500 in favor of Carlos M. Sison on the properties. The purchase price of P5,600 was paid by Carlos M. Sison to the plaintiffs via a certified check.
After the sale, the plaintiffs informed defendant Narcisa F. de Teodoro of their desire to pay off her share in the mortgage credit. Upon her refusal to accept, the plaintiffs indorsed the certified check to her and consigned it with the clerk of court on September 1, 1941 (the mortgage due date). The clerk deposited the check in the Insular Treasury as fiduciary funds. Narcisa F. de Teodoro refused the payment, claiming that as a co-owner of the mortgaged property (owning a one-third share), she had a preferential right to purchase the plaintiffs’ interest instead of Carlos M. Sison.
The plaintiffs filed this action to compel the defendants to accept the check in payment. The defendants, in their answer, insisted on their prior right to purchase the property for P5,600. Later, in August 1942, the defendants manifested a willingness to accept the payment due to financial need but discovered the consigned check could not be withdrawn from the National Treasury for lack of appropriation. They then prayed for the court to order the plaintiffs to deliver P5,703.90 in cash instead, claiming additional interest.
The trial court dismissed the complaint, holding the defendants could not be compelled to accept a “valueless check,” and reserved the defendants’ rights to foreclose the mortgage and to pursue annulment of the sale.

ISSUE

Whether the consignation of payment made by the plaintiffs was valid, thereby relieving them of liability for the mortgage debt owed to the defendant Narcisa F. de Teodoro.

RULING

The Supreme Court REVERSED the trial court’s decision. The consignation of payment was valid.
1. Tender and Refusal: The first requisite for valid consignation under Article 1176 of the Civil Code was met. The plaintiffs made a tender of payment to the defendant, who refused it. The defendant’s reason for refusal—that she, as a co-owner, had a preferential right to purchase the property—was not valid. The plaintiffs had the right to sell their interest to a third party (Article 399, Civil Code), subject only to the defendant’s legal right of redemption (Articles 1521, 1522, 1524, Civil Code), not a right to prevent the sale. Therefore, the refusal was without legal reason.
2. Notice of Consignation: The second requisite (previous notice to interested persons under Article 1177) was not explicitly shown in the record but was not attacked by the defendants. The defendants’ challenge was based solely on the plaintiffs’ alleged lack of right to pay, which the Court found untenable.
3. Notification After Consignation: The third requisite (notification after consignation under Article 1178) was fulfilled by the service of summons and a copy of the complaint upon the defendants.
4. Sufficiency of Amount: The defendants’ subsequent claim that the consigned amount (P5,600) was insufficient (alleging P5,703.90 was due) did not invalidate the consignation. Their initial refusal was not based on insufficiency but on an invalid claim of a preferential right to purchase. The Court preserved the defendants’ right to claim any proven deficiency in interest.
5. Right to Consign: The plaintiffs, as mortgagors and debtors, retained the right to pay the debt and seek release from liability even after the conditional sale to Carlos M. Sison. The consignation operated as payment of P5,600 to the defendant.
The case was remanded to the trial court to receive evidence on the defendants’ reserved claim for an additional P103.90 in interest. The trial court was instructed to order the defendants to cancel their share of the mortgage and return the corresponding certificate of title to the plaintiffs upon payment of any proven additional interest. No costs were awarded.