MEAT PACKING CORPORATION OF THE PHILIPPINES, vs.

THE HONORABLE SANDIGANBAYAN, THE PRESIDENTIAL COMMISSION

ON GOOD GOVERNMENT and PHILIPPINE INTEGRATED MEAT CORPORATION.
G.R. No. 103068; June 22, 2001.
YNARES-SANTIAGO, J.

Doctrine: Tender is the antecedent of consignation, that is, an act preparatory to the consignation, which is the principal, and from which are
derived the immediate consequences which the debtor desires or seeks to obtain. Tender of payment may be extrajudicial, while consignation
is necessarily judicial, and the priority of the first is the attempt to make a private settlement before proceeding to the solemnities of
consignation. Tender and consignation, where validly made, produces the effect of payment and extinguishes the obligation.

Facts: The PCGG sequestered the properties of PIMECO, including a meat packaging plant subject of a lease-purchase agreement with
MPCP, a corporation owned by the Government Service Insurance System (GSIS). The contract was rescinded for failure to pay three (3)
annual installments. The PCGG then issued a resolution ordering the transfer of the subject property to the MPCP. The resolution provides that
the subject transfer is subject to the execution of a memorandum of agreement approved by the Sandiganbayan. Despite the non-compliance
of this requirement, the PCGG ordered the turn over of the meat packaging complex to MPCP. This turnover was challenged in Civil Case No.
0024, an action for reconveyance, reversion, accounting, restitution and damages filed by PCGG against Peter Sabido, et al., wherein the
SANDIGANBAYAN issued a temporary restraining order commanding the PCGG from enforcing the turnover of PIMECO's management,
control and possession to MPCP and that the transfer of the meat packaging complex without the Sandiganbayan's approval cannot be legally
enforced. Meanwhile, Civil Case No. 0108 for declaratory relief was filed by PIMECO against MPCP. In the meantime, the PCGG tendered to
MPCP 2 checks in the amount of P5,000,000 representing back rentals. When MPCP refused acceptance, PCGG consigned the amount. The
Sandiganbayan issued a resolution ordering MPCP to receive the amount consigned. Contesting the same, MPCP, by special appearance,
alleged that Sandiganbayan had no jurisdiction over it since it was not a party thereto and that the lease-purchase agreement had been
rescinded. The Sandiganbayan ruled that tender of payment and consignation which were validly made, reduced the back rentals to an amount
less than the equivalent of 3 annual installments. Thus, the contract could not have been rescinded. MPCP, still under a special appearance,
moved for reconsideration. The same was denied. Meanwhile, Civil Case No. 0108 was dismissed, with the ruling that the tender of payment
and consignation of the tendered amount (upheld in Civil Case No. 0024) averted the accumulation of the unpaid rentals, rendering the petition
moot and academic. Hence, the present recourse, MPCP claiming that not being a party to Civil Case No. 0024 it cannot be directed to accept
the consigned amount.

Issue: Whether or not the lease-purchase agreement has been rescinded.

Ruling: No. Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or
refuses to accept payment, and it generally requires a prior tender of payment. Tender is the antecedent of consignation. Tender of payment
may be extrajudicial, while consignation is necessarily judicial, and the priority of the first is the attempt to make a private settlement before
proceeding to the solemnities of consignation. Tender and consignation, where validly made, produces the effect of payment and extinguishes
the obligation.

Article 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from
responsibility by the consignation of the thing or sum due.

There was prior tender by PCGG for payment of the rentals in arrears. MPCP’s refusal to accept the same on the ground merely that its lease-
purchase agreement with PIMECO had been rescinded was unjustified. PIMECO paid, and GSIS/MPCP received several amounts due under
the lease-purchase agreement. Certainly, the acceptance by MPCP and GSIS of such payments negates any rescission of the lease-purchase
agreement. Under the terms of the lease-purchase agreement, the amount of arrears in rentals or amortizations must be equivalent to the
cumulative sum of three annual installments, in order to warrant the rescission of the contract.

Therefore, it must be shown that PIMECO failed to pay the aggregate amount of at least P10,038,809.10 before the lease-purchase agreement
can be deemed automatically canceled. Assuming in the extreme that, as alleged by MPCP, the arrears at the time of tender amounted to
P12,578,171.00, the tender and consignation of the sum of P5,000,000.00, which had the effect of payment, reduced the back rentals to only
P7,578,171.00, an amount less than the equivalent of three annual installments. Thus, with the Sandiganbayan’s approval of the consignation
and directive for MPCP to accept the tendered payment, the lease-purchase agreement could not be said to have been rescinded.