G.R. No. L-4689; August 31, 1953
JOSE T. VALENZUELA, ETC., plaintiff-appellant, vs. JOSE I. BAKANI, defendant-appellee; FLORENCIO H. ARAULLO, intervenor-appellant.

FACTS

On May 8, 1938, Jose T. Valenzuela sold eight parcels of land in Pampanga to Jose I. Bakani for P13,490.00 under a pacto de retro, reserving the right to repurchase within seven years and remaining as lessee at an annual rental of P1,100. On May 22, 1943, the parties extended the repurchase period to ten years from May 16, 1943, and reduced the annual rental to P867. On February 16, 1944, Valenzuela transferred his rights to Florencio H. Araullo. On March 3, 1944, Valenzuela, through counsel, sent a letter to Bakani offering the repurchase price of P13,490 and warning that failure to respond within ten days would result in legal action. A follow-up letter was sent on March 21, 1944. Bakani rejected the offer on March 24, 1944. On March 31, 1944, Valenzuela filed an action in the Court of First Instance of Pampanga to compel reconveyance and deposited with the clerk of court P15,372.50, covering the repurchase price, unpaid rentals, and expenses. Araullo intervened as Valenzuela’s assignee. The trial court, in its decision dated May 10, 1950, held that there was no valid consignation because Valenzuela failed to give previous notice of the judicial consignation as required by Article 1177 of the old Civil Code. It nevertheless ordered Bakani to execute a deed of resale in favor of Araullo upon payment of P13,490 in actual currency, plus unpaid rentals. Valenzuela and Araullo appealed.

ISSUE

Whether the consignation of the repurchase price by Valenzuela was valid, thereby releasing him from his obligation and entitling him (or his assignee) to a reconveyance of the properties.

RULING

The Supreme Court reversed the trial court’s decision, holding that the consignation was valid. The Court ruled that the service of the summons and a copy of the complaint upon Bakani constituted sufficient notice of the consignation, as established in Andres vs. Court of Appeals and Duñgao vs. Roque. The Court also held that Japanese military notes were legal tender in the Philippines during the occupation, making the tendered amount valid. The agreement of May 22, 1943, did not convert the sale into an absolute deed but merely extended the repurchase period. Since the consignation was valid and covered the repurchase price, rentals, and expenses, Valenzuela was released from his obligation. The Court ordered Jose I. Bakani to execute a deed of reconveyance in favor of Florencio H. Araullo within ninety days from the finality of the decision.
Separate Opinions:
Justice Pablo dissented, arguing that the consignation was invalid because it was made in Japanese military notes, not in Philippine currency as originally stipulated, and that no novation as to the quality of the currency occurred.
Justice Padilla dissented, reiterating his view from a prior case that Japanese war notes were not legal tender and that the consignation was invalid.