CACAYORIN VS AFP

FACTS:

Oscar Cacayorin is a member of Armed Forces and Police Mutual Benefit Association Inc.(AFPMBA). In 1994, Oscar and his
wife, Thelma applied to purchase a piece of property owned by AFPMBA located in Puerto Princesa through a loan
facility. To gain financing, the petitioners entered a Loan and Mortgage Agreement with Rural Bank of San Teodoro
under the auspices of PAG-IBIG.

The Rural Bank thereafter issued a letter of guaranty informing AFPMBAI that the proceeds of petitioners’ approved loan
in the amount of P77,418.00 shall be released to AFPMBAI after title to the property is transferred in petitioners’ name and
after the registration and annotation of the parties’ mortgage agreement. In respone to such letter of guaranty, AFPBMBAI
executed in petitiones favor a Deed of Absolute Sale, and a new title was also issued in petitioner’s name, with the
corresponding annotation of their mortgage agreement with the Rural Bank.

Unfortunately, the arrangement between PAG-IBIG and the Rural bank did not push through; theRural bank
was closed and was placed under receivership by the Philippine Deposit Insurance Corporation (PDIC). Despite the closure
though, AFPMBAI somehow was able to take
possession of petitioners’ loan documents.

It so happened also that after AFPMBAI made a demand for payment; petitioners were unable to pay the
loan/consideration for the property.

In July 2003, petitioners filed a Civil Case with the RTC about a Complaint for consignation of
loan payment, recovery of title and cancellation of mortgage annotation against AFPMBAI, PDIC
and theRegister of Deeds of Puerto Princesa City.

Petitioners alleged their complaint that as a result of the Rural Bank’s closure and PDIC’s claim
that their loan papers could not be located, they were left in a quandary as to where they should
tenderfull payment of the loan and how to secure cancellation of the mortgage annotation. In response
to this AFPMBAI filed a Motion to Dismiss, claiming that petitioners Complaint falls within the
jurisdictionof the Housing and Land Use Regulatory Board (HLURB) and not the Puerto Princesa RTC, as it
was filed by petitioners in their capacity as buyers of a subdivision lot and it prays specific performance of
contractual and legal obligations decreed under PD 957.

Puerto Princesa RTC decided in favor of the Cacayorins, declaring that since the tile has been transferred
in the name of the petitioners and the action involves consignation of loan payments, it possessed
jurisdiction to continue with the case. It further held that the only remaining unsettled transaction is
between petitioners and PDIC as the appointed receiver of the Rural Bank. AFPMABAI filed a motion for
reconsideration which was later denied by the RTC.

The CA on the other hand held an opposite decision. It declared that the RTC has no jurisdiction to hear
the case and that such jurisdiction is exclusive to the HLURB

Issue:
 WON there is valid consignation albeit prior tender of payment
 WON the courtv can exercise authority over the issue of consignation with regards to contractual
and legal obligations of parties ina sale of subdivision lots
Held: Yes.
Held:

Under Article 1256 of the Civil Code, the debtor shall be released from the responsibility by the
consignation of the things or sum due, without need of prior tender of payment, when the creditor is
absent or unknown, or when he is incapacitated to receive the payment at the time that it was due or
when two or more persons claim the same right to collect, or when the title to the obligation has been
lost.

Applying 1256, the petitioner’s case with regard to their allegations in their complaints, the court finds
that a case for consignation has arisen, as it now appears that that there are two entities which

Applying Article 1256 to the petitioners’ case as shaped by the allegations in their Complaint, the Court
finds that a case for consignation has been made out, as it now appears that there are two entities which
petitioners must deal with in order to fully secure their title to the property: 1) the Rural Bank (through
PDIC), which is the apparent creditor under the July 4, 1994 Loan and Mortgage Agreement; and 2)
AFPMBAI, which is currently in possession of the loan documents and the certificate of title, and the one
making demands upon petitioners to pay. Clearly, the allegations in the Complaint present a situation
where the creditor is unknown, or that two or more entities appear to possess the same right to collect
from petitioners. Whatever transpired between the Rural Bank or PDIC and AFPMBAI in respect of
petitioners’ loan account, if any, such that AFPMBAI came into possession of the loan documents and TCT
No. 37017, it appears that petitioners were not informed thereof, nor made privy thereto.

Indeed, the instant case presents a unique situation where the buyer, through no fault of his own, was
able to obtain title to real property in his name even before he could pay the purchase price in full. There
appears to be no vitiated consent, nor is there any other impediment to the consummation of their
agreement, just as it appears that it would be to the best interests of all parties to the sale that it be once
and for all completed and terminated. For this reason, Civil Case No. 3812 should at this juncture be
allowed to proceed.

Finally, the lack of prior tender of payment by the petitioners is not fatal to their consignation case. They
filed the case for the exact reason that they were at a loss as to which between the two – the Rural Bank
or AFPMBAI – was entitled to such a tender of payment. Besides, as earlier stated, Article 1256 authorizes
consignation alone, without need of prior tender of payment, where the ground for consignation is that
the creditor is unknown, or does not appear at the place of payment; or is incapacitated to receive the
payment at the time it is due; or when, without just cause, he refuses to give a receipt; or when two or
more persons claim the same right to collect; or when the title of the obligation has been lost.

Consignation is necessarily judicial; hence, jurisdiction lies with the RTC, not with the HLURB.

On the question of jurisdiction, petitioners’ case should be tried in the Puerto Princesa RTC, and not the
HLURB. Consignation is necessarily judicial,26 as the Civil Code itself provides that consignation shall be
made by depositing the thing or things due at the disposal of judicial authority, thus:
Art. 1258. Consignation shall be made by depositing the things due at the disposal of judicial authority,
before whom the tender of payment shall be proved, in a proper case, and the announcement of the
consignation in other cases.