Philippine National Bank Vs Lilibeth Chan

CASE:
Philippine National
Bank vs. Lilibeth Chan
G.R. No. 206037. March 13, 2017
FACTS
Respondent Lilibeth S. Chan owns a three-story
commercial building which she leased to petitioner
Philippine National Bank (PNB) for a period of five
years from December 15, 1999, to December 14,
2004. When the lease expired, PNB continued to
occupy the property on a month-to-month basis.
PNB vacated the premises on March 23, 2006.
FACTS
On January 22, 2002, respondent obtained a
P1,500,000.00 loan from PNB which was secured by a
Real Estate Mortgage constituted over the leased
property
In addition, respondent executed a Deed of

Assignment over the rental payments in favor of PNB.
The amount of the respondent’s loan was
subsequently increased to P7,500,000.00.
FACTS
Later, respondent filed a Complaint for Unlawful Detainer
before the Metropolitan Trial Court (MeTC) alleging that
the latter failed to pay its monthly rentals from October
2004 until August 2005.
In its defense, PNB claimed that it applied the rental

proceeds from October 2004 to January 15, 2005 as
payment for respondent’s outstanding loan which became
due and demandable in October 2004.
FACTS
PNB explained that it received a demand letter from a
certain Lamberto Chua (Chua) who claimed to be the
new owner of the leased property and requested that
the rentals be paid directly to him.
PNB thus deposited the rentals in a separate non-drawing
savings account for the benefit of the rightful party. PNB
consigned the amount of P1,348,643.92, representing
the rentals due from January 16, 2005 to February 2006,
with the court on May 31, 2006.
ISSUE
ISSUE:
Whether or not there was

proper consignment done
by PNB to make it not
liable to pay interest due
to delay?
RULING
No.
PNB’s deposit of the subject monthly rentals in a
non-drawing savings account is not the
consignation contemplated by law, precisely
because it does not place the same at the disposal
of the court. Consignation is necessarily judicial; it
is not allowed in venues other than the courts.
RULING
No.
PNB’s deposit of the subject monthly rentals in a
non-drawing savings account is not the
consignation contemplated by law, precisely
because it does not place the same at the disposal
of the court. Consignation is necessarily judicial; it
is not allowed in venues other than the courts.
RULING
PNB’s obligation to pay rent for the period of January 16, 2005 up
to March 23, 2006 remained subsisting, as the deposit of the
rentals cannot be considered to have the effect of payment. It is
important to point out that PNB’s obligation to pay the subject
monthly rentals had already fallen due and demandable before PNB
consigned the rental proceeds with the MeTC on May 31, 2006.
Although it is true that consignment has a retroactive effect, such
payment is deemed to have been made only at the time of the
deposit of the thing in court or when it was placed at the disposal
of the judicial authority.
RULING
Given its belated consignment of the rental proceeds in

court, PNB clearly defaulted in the payment of monthly
rentals to the respondent for the period January 16,
2005 up to March 23, 2006, when it finally vacated the
leased property. As such, it is liable to pay interest in
accordance with Article 2209 of the Civil Code.
What is consignation of
payment?
Consignation of payment is a legal remedy

provided for under Philippine law. It occurs when
a debtor attempts to pay a creditor, but the
creditor refuses to accept payment. In such cases,
the debtor may make a deposit of the amount
owed with a court or authorized depositary.
What is consignation of
payment?
Under Article 1256 of the Civil Code of the

Philippines, consignation shall be made by
depositing the thing or sum 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.
Requirements
1.There must be a debt: Consignation can only be used when there is an
existing debt that is due and payable;
2. There must be a valid tender of payment: The debtor must have offered to
pay the debt to the creditor in a valid manner, such as by offering cash or a
check;
3. The creditor must refuse payment: The creditor must have refused to
accept payment, or if the creditor is absent or unknown, the debtor must
have attempted to locate the creditor and failed to do so;
Requirements
4. The debtor must deposit the payment with the proper court or entity: The
debtor must deposit the payment with the proper court or entity, and follow the
proper procedures for consignation.
5. Notice of consignation must be given to the creditor: The debtor must give
notice of the consignation to the creditor or attempt to do so if the creditor is
unknown or cannot be found.
If the consignation is made in accordance with these requirements, it will release

the debtor from his obligation to pay and the creditor will be deemed to have
been paid.

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CASE:

In addition, respondent executed a Deed of

In its defense, PNB claimed that it applied the rental

Whether or not there was

Given its belated consignment of the rental proceeds in

Consignation of payment is a legal remedy

Under Article 1256 of the Civil Code of the

If the consignation is made in accordance with these requirements, it will release

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