Understanding tender of payment and consignation

Article 1256 of the Civil Code discusses the concept of tender of payment and consignation, to wit:

ART. 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.

Consignation alone shall produce the same effect in the following cases: 

(1) When the creditor is absent or unknown, or does not appear at the place of payment;

(2) When he is incapacitated to receive the payment at the time it is due;

(3) When, without just cause, he refuses to give a receipt;

(4) When two or more persons claim the same right to collect;

(5) When the title of the obligation has been lost. (1176a)

In Far East Bank v. Diaz Realty,[1] the Supreme Court held that tender of payment is a definitive act of offering the creditor what is due him or her, together with the demand that the creditor accept the same. More important, there must be a fusion of intent, ability and capability to make good such offer, which must be absolute and must cover the amount due. Mere manifestation by debtor of his desire to comply with the obligation is not sufficient in the absence of an offer of immediate performance.[2] In other words, tender of payment is a manifestation made by the debtor to the creditor of his desire to comply with his obligation, with offer of immediate performance.[3] Tender of payment must be made in the lawful currency. The tender of a check to pay for an obligation is not a valid tender of payment thereof.[4]

On the other hand, consignation  is the act of depositing the thing or amount due with the proper court when the creditor does not desire, or refuses to accept payment, or cannot receive it, after complying with the formalities required by law. It is always judicial and it generally requires a prior tender of payment which is by its very nature extra judicial.[5][6] 

For a valid consignation to happen, the requisites must concur:

1) there is a debt due;[7]

2) consignation is made because of some legal cause;

    a. There was tender of payment and creditor refuses without just cause to accept it 

    b. Instances when consignation alone would suffice as provided under Art. 1256

3) previous notice of consignation to persons interested in the fulfillment of the obligation (first notice);[8]

4) amount or thing due was placed at the disposal of the court; and

5) after the consignation has been made, the persons interested were notified thereof (second notice).

The second paragraph of Article 1256 mentions the five (5) cases where tender of payment is not necessary before debtor can consign the thing due to the court, thus:

a) creditor is absent or unknown, or does not appear at the place of payment;

b) creditor is incapacitated to receive the thing due at the time of payment;

c) without just cause, creditor refuses to give receipt;

d) two or more persons claim the same right to collect; and

e) title of the obligation has been lost.

Furthermore, in Llobrera v. Fernandez,[9] the Supreme Court held that unless there is an unjust refusal by a creditor to accept payment from a debtor, Article 1256 cannot apply.

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[1] Far East Bank and  Trust Company v. Diaz Realty, Inc., 363 SCRA 659 (2001).

[2] Rabuya. (2019). Obligations and Contracts. 

[3] Del Carmen v. Sps. Sabordo, G.R. No. 181723 (2014).

[4] Soco v. Militante, G.R. No. L-58961, (1983).

[5] Article 1256, Civil Code.

[6] De Leon. (2014). Obligations and Contracts.

[7] Paragraph 1, Article 1256, Civil Code.

[8] Paragraph 1, Article 1257, Civil Code.

[9] G.R. No. 142882 (2006).