G.R. No. L-333; April 21, 1950
JOSE G. CUAYCONG, ET AL., plaintiffs-appellees, vs. RAMON S. RIUS, defendant-appellant.

FACTS

Plaintiffs purchased a hacienda from defendant, with a balance secured by a mortgage. They defaulted on interest and principal payments due in 1942 and 1943. Defendant waived his right to rescind. In 1944, plaintiffs offered to pay the entire balance in Japanese military notes, which defendant refused due to their depreciated value. Plaintiffs then filed an action to compel acceptance, depositing a manager’s check for P181,000 with the court. Defendant objected, arguing the consignation was invalid. Intervenors (to whom plaintiffs had promised to sell the property) later filed a motion for summary judgment, which was granted by the lower court, ordering defendant to accept the payment and release the mortgage.

ISSUE

Was the consignation of a manager’s check valid to extinguish the mortgage debt over the defendant’s objection?

RULING

No. The consignation was invalid. Under Article 1170 of the Civil Code, payment of money debts must be made in the stipulated specie or legal tender. A manager’s check is not legal tender. The delivery of commercial papers (including checks) only produces the effect of payment when collected or when they lose value through the creditor’s fault. Here, the check was not accepted by the creditor, and there was no proof it had been collected or had lost value due to his fault. Presumptions cannot be stacked to establish collection. The judgment was reversed. Plaintiffs were given 30 days to pay the sum in legal tender, with failure allowing defendant to rescind the contract.

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