GR L 2429; (July, 1950) (Digest)
G.R. No. L-2429. July 27, 1950.
GONZALO G. PADUA, plaintiff-appellee, vs. RIZAL SURETY & INSURANCE CO., defendant-appellant.
FACTS
In 1940, defendant Rizal Surety & Insurance Co. insured plaintiff Gonzalo G. Padua’s merchandise for P14,000. After a fire destroyed the insured property, the defendant refused to pay the claim. The plaintiff filed a suit, and the Court of First Instance of Manila ordered the defendant to pay P7,033.79 with legal interest. The Court of Appeals affirmed the decision and added P2,160 as rents, for a total of P10,833.82. After the case was remanded, the defendant, unable to locate the plaintiff (who was a guerrilla captain moving frequently), sought and obtained court permission to deposit the judgment amount. In early September 1944, the defendant deposited P10,000 in Japanese military notes with the clerk of court. The plaintiff had no knowledge of this deposit. After the war, the plaintiff moved for execution of the judgment. The defendant opposed, claiming payment through the 1944 deposit. The trial court ruled the deposit was ineffective and did not release the defendant from its obligation. The defendant appealed directly to the Supreme Court.
ISSUE
Whether the consignation (deposit) of the judgment amount in Japanese military notes, made with court permission but without subsequent judicial approval, extinguished the defendant’s obligation under Article 1180 of the Civil Code.
RULING
No. The Supreme Court affirmed the trial court’s decision, holding that the consignation did not extinguish the obligation. Under Article 1180 of the Civil Code, for a consignation to discharge an obligation, there must be a judicial declaration that it was properly made. Mere permission to deposit and the act of depositing are insufficient. Until the creditor accepts the consignation or the court declares it valid, the debtor may withdraw the deposit and the obligation remains. Here, there was no such judicial approval. Furthermore, the amount deposited (P10,000 in Japanese military notes) was insufficient to cover the total judgment debt of P10,833.82. Therefore, the defendant’s obligation under the Court of Appeals’ judgment remained subsisting. Costs were awarded against the defendant-appellant.
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