PEOPLE vs.NATIVIDAD FRANKLIN, G.R. No. L-21507 June 7, 1971
Appeal taken by the Asian Surety & Insurance Company, Inc. from the decision of the Court of First Instance of Pampanga dated April 17, 1963, forfeiting the bail bond posted by it for the provisional release of Natividad Franklin, the accused in Criminal Case No. 4300 of said court, as well as from the latter's orders denying the surety company's motion for a reductions of bail, and its motion for reconsideration thereof.
It appears that an information filed with the Justice of the Peace Court of Angeles, Pampanga, docketed as Criminal Case No. 5536, Natividad Franklin was charged with estafa. Upon a bail bond posted by the Asian Surety & Insurance Company, Inc. in the amount of P2,000.00, she was released from custody.
After the preliminary investigation of the case, the Justice of the Peace Court elevated it to the Court of First Instance of Pampanga where the Provincial Fiscal filed the corresponding information against the accused. The Court of First Instance then set her arraignment on July 14, 1962, on which date she failed to appear, but the court postponed the arraignment to July 28 of the same year upon motion of counsel for the surety company. The accused failed to appear again, for which reason the court ordered her arrest and required the surety company to show cause why the bail bond posted by it should not be forfeited.
On September 25, 1962, the court granted the surety company a period of thirty days within which to produce and surrender the accused, with the warning that upon its failure to do so the bail bond posted by it would be forfeited. On October 25, 1962 the surety company filed a motion praying for an extension of thirty days within which to produce the body of the accused and to show cause why its bail bond should not be forfeited. As not withstanding the extension granted the surety company failed to produce the accused again, the court had no other alternative but to render the judgment of forfeiture.
Subsequently, the surety company filed a motion for a reduction of bail alleging that the reason for its inability to produce and surrender the accused to the court was the fact that the Philippine Government had allowed her to leave the country and proceed to the United States on February 27, 1962. The reason thus given not being to the satisfaction of the court, the motion for reduction of bail was denied. The surety company's motion for reconsideration was also denied by the lower court on May 27, 1963, although it stated in its order that it would consider the matter of reducing the bail bond "upon production of the accused." The surety company never complied with this condition.
Appellant now contends that the lower court should have released it from all liability under the bail bond posted by it because its failure to produce and surrender the accused was due to the negligence of the Philippine Government itself in issuing a passport to said accused, thereby enabling her to leave the country. In support of this contention the provisions of Article 1266 of the New Civil Code are invoked.
Appellant's contention is untenable. The abovementioned legal provision does not apply to its case, because the same speaks of the relation between a debtor and a creditor, which does not exist in the case of a surety upon a bail bond, on the one hand, and the State, on the other.
In U.S. vs. Bonoan, et al., 22 Phil., p. 1, We held that: The rights and liabilities of sureties on a recognizance or bail bond are, in many respects, different from those of sureties on ordinary bonds or commercial contracts. The former can discharge themselves from liability by surrendering their principal; the latter, as a general rule, can only be released by payment of the debt or performance of the act stipulated.
In the more recent case of Uy Tuising, 61 Phil. 404, We also held that:By the mere fact that a person binds himself as surety for the accused, he takes charge of, and absolutely becomes responsible for the latter's custody, and under such circumstances it is incumbent upon him, or rather, it is his inevitable obligation not merely a right, to keep the accused at all times under his surveillance, inasmuch as the authority emanating from his character as surety is no more nor less than the Government's authority to hold the said accused under preventive imprisonment. In allowing the accused Eugenio Uy Tuising to leave the jurisdiction of the Philippines, the appellee necessarily ran the risk of violating and in fact it clearly violated the terms of its bail bonds because it failed to produce the said accused when on January 15, 1932, it was required to do so. Undoubtedly, the result of the obligation assumed by the appellee to hold the accused at all times to the orders and processes of the lower court was to prohibit said accused from leaving the jurisdiction of the Philippines because, otherwise, said orders and processes would be nugatory and inasmuch as the jurisdiction of the court from which they issued does not extend beyond that of the Philippines, they would have no binding force outside of said jurisdiction.
It is clear, therefore, that in the eyes of the law a surety becomes the legal custodian and jailer of the accused, thereby assuming the obligation to keep the latter at all times under his surveillance, and to produce and surrender him to the court upon the latter's demand.
That the accused in this case was able to secure a Philippine passport which enabled her to go to the United States was, in fact, due to the surety company's fault because it was its duty to do everything and take all steps necessary to prevent that departure. This could have been accomplished by seasonably informing the Department of Foreign Affairs and other agencies of the government of the fact that the accused for whose provisional liberty it had posted a bail bond was facing a criminal charge in a particular court of the country. Had the surety company done this, there can be no doubt that no Philippine passport would have been issued to Natividad Franklin.
UPON ALL THE FOREGOING, the decision appealed from is affirmed in all its parts, with costs.
OCCENA v JABSON (digest)
October 29, 1976
ropical Homes Inc. agreed to develop a subdivision on the land owned by Jesus and Efigenia Occeña, wherein Tropical Homes would be paid only 40% of the sale of the subdivision lots. Tropical Homes seeks revision of the contract on the Basis of Art 1267 of the Civil Code (CC). They are asking for modification of the terms and conditions of the subdivision contract, due to increase in costs. Art. 1267 CC: When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part.
Held: The CC authorizes the release of an obligor when the service has become so difficult as to be manifestly beyond the contemplation of the parties but does not authorize the Courts to modify or revise the subdivision contract between the parties or to fix a different sharing ratio from that contractually stipulated with the force of law.Tropical Homes complaint for modification of the contract has no basis in law and must be dismissed.
JESUS V. OCCENA and EFIGENIA C. OCCENA vs.HON. RAMON V. JABSON, G.R. L-44349 Oct.29, 1976
The Court reverses the CA appealed resolution. The Civil Code authorizes the release of an obligor when the service has become so difficult as to be manifestly beyond the contemplation of the parties but does not authorize the courts to modify or revise the subdivision contract between the parties or fix a different sharing ratio from that contractually stipulated with the force of law between the parties. Private respondent's complaint for modification of the contract manifestly has no basis in law and must therefore be dismissed for failure to state a cause of action. On February 25, 1975 private respondent Tropical Homes, Inc. filed a complaint for modification of the terms and conditions of its subdivision contract with petitioners (landowners of a 55,330 square meter parcel of land in Davao City), making the allegations:"That due to the increase in price of oil .. and not within the remotest contemplation of the parties at the time said agreement was entered into and to such a degree that the conditions and factors which formed the original basis of said contract, have been totally changed; 'That further performance by the plaintiff under the contract will result in situation where defendants would be unustly enriched at the expense of the plaintiff;
Under the subdivision contract, respondent "guaranteed (petitioners as landowners) as the latter's fixed and sole share and participation an amount equivalent to forty (40%) percent of all cash receipts from the sale of the subdivision lots"
The petition must be granted.
While respondent court correctly cited in its decision the Code Commission's report giving the rationale for Article 1267 of the Civil Code, to wit;The general rule is that impossibility of performance releases the obligor. However, it is submitted that when the service has become so difficult as to be manifestly beyond the contemplation of the parties, the court should be authorized to release the obligor in whole or in part. The intention of the parties should govern and if it appears that the service turns out to be so difficult as have been beyond their contemplation, it would be doing violence to that intention to hold the obligor still responsible. ... 2
It misapplied the same to respondent's complaint.
If respondent's complaint were to be released from having to comply with the subdivision contract, assuming it could show at the trial that the service undertaken contractually by it had "become so difficult as to be manifestly beyond the contemplation of the parties", then respondent court's upholding of respondet's complaint and dismissal of the petition would be justifiable under the cited codal article. Without said article, respondent would remain bound by its contract under the theretofore prevailing doctrine that performance therewith is ot excused "by the fact that the contract turns out to be hard and improvident, unprofitable, or unespectedly burdensome", 3 since in case a party desires to be excuse from performance in the event of such contingencies arising, it is his duty to provide threfor in the contract.
But respondent's complaint seeks not release from the subdivision contract but that the court "render judgment I modifying the terms and Conditions of the Contract by fixing the proper shares that should pertain to the herein parties out of the gross proceed., from the sales of subdivided lots of subject subdivision". The cited article does not grant the courts this authority to remake, modify or revise the contract or to fix the division of shares between the parties as contractually stipulated with the force of law between the parties, so as to substitute its own terms for those covenanted by the partiesthemselves. Respondent's complaint for modification of contract manifestly has no basis in law and therefore states no cause of action. Under the particular allegations of respondent's complaint and the circumstances therein averred, the courts cannot even in equity grant the relief sought.
A final procedural note. Respondent cites the general rule that an erroneous order denying a motion to dismiss is interlocutory and should not be corrected by certiorari but by appeal in due course. This case however manifestly falls within the recognized exception that certiorari will lie when appeal would not prove to be a speedy and adequate remedy.' Where the remedy of appeal would not, as in this case, promptly relieve petitioners from the injurious effects of the patently erroneous order maintaining respondent's baseless action and compelling petitioners needlessly to go through a protracted trial and clogging the court dockets by one more futile case, certiorari will issue as the plain, speedy and adequate remedy of an aggrieved party.
ACCORDINGLY, the resolution of respondent appellate court is reversed and the petition for certiorari is granted and private respondent's complaint in the lower court is ordered dismissed for failure to state a sufficient cause of action. With costs in all instances against private respondent.
GAN TION vs. CA, G.R. No. L-22490 May 21, 1969
The sole issue here is whether or not there has been legal compensation between petitioner Gan Tion and respondent Ong Wan Sieng.
Ong Wan Sieng was a tenant in certain premises owned by Gan Tion. In 1961 the latter filed an ejectment case against the former, alleging non-payment of rents for August and September of that year, at P180 a month, or P360 altogether. The defendant denied the allegation and said that the agreed monthly rental was only P160, which he had offered to but was refused by the plaintiff. The plaintiff obtained a favorable judgment in the municipal court (of Manila), but upon appeal the Court of First Instance, on July 2, 1962, reversed the judgment and dismissed the complaint, and ordered the plaintiff to pay the defendant the sum of P500 as attorney's fees. That judgment became final.
On October 10, 1963 Gan Tion served notice on Ong Wan Sieng that he was increasing the rent to P180 a month, effective November 1st, and at the same time demanded the rents in arrears at the old rate in the aggregate amount of P4,320.00, corresponding to a period from August 1961 to October 1963.lâwphi1.ñet
In the meantime, over Gan Tion's opposition, Ong Wan Sieng was able to obtain a writ of execution of the judgment for attorney's fees in his favor. Gan Tion went on certiorari to the Court of Appeals, where he pleaded legal compensation, claiming that Ong Wan Sieng was indebted to him in the sum of P4,320 for unpaid rents. The appellate court accepted the petition but eventually decided for the respondent, holding that although "respondent Ong is indebted to the petitioner for unpaid rentals in an amount of more than P4,000.00," the sum of P500 could not be the subject of legal compensation, it being a "trust fund for the benefit of the lawyer, which would have to be turned over by the client to his counsel." In the opinion of said court, the requisites of legal compensation, namely, that the parties must be creditors and debtors of each other in their own right (Art. 1278, Civil Code) and that each one of them must be bound principally and at the same time be a principal creditor of the other (Art. 1279), are not present in the instant case, since the real creditor with respect to the sum of P500 was the defendant's counsel.
This is not an accurate statement of the nature of an award for attorney's fee's. The award is made in favor of the litigant, not of his counsel, and is justified by way of indemnity for damages recoverable by the former in the cases enumerated in Article 2208 of the Civil Code.1 It is the litigant, not his counsel, who is the judgment creditor and who may enforce the judgment by execution. Such credit, therefore, may properly be the subject of legal compensation. Quite obviously it would be unjust to compel petitioner to pay his debt for P500 when admittedly his creditor is indebted to him for more than P4,000.
WHEREFORE, the judgment of the Court of Appeals is reversed, and the writ of execution issued by the Court of First Instance of Manila in its Civil Case No. 49535 is set aside. Costs against respondent.
JUAN L. PEREZ vs. CA, G.R. No. 107737 October 1, 1999
This is a petition for review on certiorari of the Decision of the CA affirming the decision of the RTC :
a) directing defendant JUAN PEREZ to allow plaintiff LUIS CRISOSTOMO to occupy and operate the "Papaya Fishpond" for a period of 5 1/2 years at the rental rates of P150,000.00 for the first six months and P175,000.00 for the remaining five years (the same rates provided for in Exh. 4);
b) ordering defendants LUIS KEH, CHARLIE LEE, JUAN PEREZ and Atty. ROSENDO TANSINSIN, JR. to pay unto the plaintiff the amounts of P150,000.00 as actual damages; P20,000.00 as moral damages; P20,000.00 as exemplary damages; and P10,000.00 as attorney's fees, plus the costs of the suit;
c) directing the release, delivery or payment directly to plaintiff LUIS CRISOSTOMO of the amounts of P128,572.00 and P123,993.85, including the interests which may have already accrued thereon, deposited with the Paluwagan ng Bayan Savings Bank (Paombong, Bulacan Branch) in the name of the Clerk of Court and/or Deputy Clerk of Court Rodrigo C. Libunao under this Court's Order dated February 14, 1980; however, the plaintiff is required to pay defendant Perez the corresponding rental on the fishpond for the period June 1979-January 1980 based on the rate of P150,000.00 per annum, deducting therefrom the amount of P21,428.00 already paid to and received by then co-usufructuary Maria Perez (Exh. E);
d) dismissing the defendants' separate counter-claims for damages, for lack of merit; and
e) dismissing the Pleading in Intervention Pro Interesse Suo filed by VICENTE ASUNCION on the ground of lis pendens.
The facts upon which the Court of Appeals based its Decision are the following:
Along with Maria Perez, Fructuosa Perez, Victoria Perez, Apolonio Lorenzo and Vicente Asuncion, petitioner Juan Perez is a usufructuary of a parcel of land popularly called the "Papaya Fishpond." Covered by Transfer Certificate of Title No. 8498 of the Registry of Deeds for the Province of Bulacan, the fishpond is located in Sto. Rosario, Hagonoy, Bulacan and has an area of around 110 hectares. On June 5, 1975, the usufructuaries entered into a contract leasing the fishpond to Luis Keh for a period of five (5) years and renewable for another five (5) years by agreement of the parties, under the condition that for the first five-year period the annual rental would be P150,000.00 and for the next five years, P175,000.00. Paragraph 5 of the lease contract states that the lessee "cannot sublease" the fishpond "nor assign his rights to anyone." 3
Private respondent Luis Crisostomo, who reached only the 5th grade, is a businessman engaged in the operation of fishponds. On September 20, 1977, while he was at his fishpond in Almazar, Hermosa, Bataan, his bosom friend named Ming Cosim arrived with petitioner Charlie Lee. The two persuaded private respondent to take over the operation of "Papaya Fishpond" as petitioner Lee and his partner, petitioner Luis Keh, were allegedly losing money in its operation. Private respondent having acceded to the proposal, sometime in December of that year, he and petitioners Lee and Keh executed a written agreement denominated as "pakiao buwis" whereby private respondent would take possession of the "Papaya Fishpond" from January 6, 1978 to June 6, 1978 in consideration of the amount of P128,000.00 broken down as follows: P75,000.00 as rental, P50,000.00 for the value of milkfish in the fishpond and P3,000 for labor expenses. Private respondent paid the P75,000.00 to petitioner Keh at the house of petitioner Lee in Sta. Cruz, Hagonoy, Bulacan in the presence of Lee's wife, brother-in-law and other persons. He paid the balance to petitioner Lee sometime in February or March 1978 because he was uncertain as to the right of petitioners Keh and Lee to transfer possession over the fishpond to him. Private respondent made that payment only after he had received a copy of a written agreement dated January 9, 1978 4 whereby petitioner Keh ceded, conveyed and transferred all his "rights and interests" over the fishpond to petitioner Lee, "up to June 1985." From private respondent's point of view, that document assured him of continuous possession of the property for as long as he paid the agreed rentals of P150,000.00 until 1980 and P.175,000.00 until 1985.1âwphi1.nêt
For the operation of the fishpond from June 1978 to May 1979, private respondent, accompanied by Ming Cosim and Ambrocio Cruz, paid the amount of P150,000.00 at the Malabon, Metro Manila office of petitioner Keh. Receipt was issued to him.
Handwritten below that receipt but above the signature of petitioner Charlie Lee, are the following: "Rec'd from Luis Crisostomo sum of one hundred fifty-four thousand P154,000.00 for above payment. 5
Private respondent incurred expenses for repairs in and improvement of the fishpond in the total amount of P486,562.65. 6 However, sometime in June 1979, petitioners Tansinsin and Juan Perez, in the company of men bearing armalites, went to the fishpond and presented private respondent with a letter dated June 7, 1979 showing that petitioner Luis Keh had surrendered possession of the fishpond to the usufructuaries.
Because of the threat to deprive him of earnings of around P700,000.00 that the 700,000 milkfish in the fishpond would yield, and the refusal of petitioners Keh, Juan Perez and Lee to accept the rental for June 5, 1979 to June 6, 1980, private respondent filed on June 14, 1979 with the then Court of First Instance of Bulacan an action for injunction and damages. He prayed for the issuance of a restraining order enjoining therein defendants Keh, Perez and Lee from entering the premises and taking possession of the fishpond. He also prayed for actual damages of P50,000.00, moral damages of P20,000.00, exemplary damages in an amount that the court might award, and attorney's fees of P10,000.00. 7
That same day, June 14, 1979, the lower court granted the prayer for a restraining order. On November 13, 1979, Crisostomo paid one of the usufructuaries, Maria Perez (who died in 1984), the amount of P21,428.00 as her 1/7 share of the annual rental of the fishpond for 1979-80. Maria Perez issued a notarized receipt for that amount. 8
On January 11, 1980, the court lifted the restraining order thereby effectively depriving private respondent of possession over the fishpond. On February 14, 1980, the parties submitted a partial compromise agreement.
HELD: For res judicata to apply, the following requisites must concur: (a) the former judgment must be final; (b) the court which rendered it had jurisdiction over the subject matter and the parties; (c) the judgment must be on the merits, and (d) there must be between the first and second actions identity of parties, subject matter and causes of action. 16 The Decision in CA-G.R. No. 10415 having resolved only an interlocutory matter, the principle of res judicata cannot be applied in this case. There can be no res judicata where the previous order in question was not an order or judgment determinative of an issue of fact pending before the court but was only an interlocutory order because it required the parties to perform certain acts for final adjudication. 17 In this case, the lifting of the restraining order paved the way for the possession of the fishpond on the part of petitioners and/or their representatives pending the resolution of the main action for injunction. In other words, the main issue of whether or not private respondent may be considered a sublessee or a transferee of the lease entitled to possess the fishpond under the circumstances of the case had yet to be resolved when the restraining order was lifted.
Art. 1168 of the Civil Code provides that when an obligation "consists in not doing and the obligor does what has been forbidden him, it shall also be undone at his expense." The lease contract prohibited petitioner Luis Keh, as lessee, from subleasing the fishpond. In entering into the agreement for pakiao-buwis with private respondent, not to mention the apparent artifice that was his written agreement with petitioner Lee on January 9, 1978, petitioner Keh did exactly what was prohibited of him under the contract — to sublease the fishpond to a third party. That the agreement for pakiao-buwis was actually a sublease is borne out by the fact that private respondent paid petitioners Luis Keh and Juan Perez, through petitioner Tansinsin the amount of annual rental agreed upon in the lease contract between the usufructuaries and petitioner Keh. Petitioner Keh led private respondent to unwittingly incur expenses to improve the operation of the fishpond. By operation of law, therefore, petitioner Keh shall be liable to private respondent for the value of the improvements he had made in the fishpond or for P486,562.65 with interest of six percent (6%) per annum from the rendition of the decision of the trial court on September 6, 1989. 35
The law supports the awards of moral and exemplary damages in favor of private respondent and against the petitioners. Their conspiratorial scheme to utilize private respondent's expertise in the operation of fishponds to bail themselves out of financial losses has been satisfactorily established to warrant a ruling that they violated Article 21 of the Civil Code and therefore private respondent should be entitled to an award of moral damages. Article 21 states that "(a)ny person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage." Exemplary damages shall likewise be awarded pursuant to Article 2229 of the Civil Code. 36 Because private respondent was compelled to litigate to protect his interest, attorney's fees shall also be awarded. 37
WHEREFORE, in light of the foregoing premises, the decision of the Court of Appeals is AFFIRMED insofar as it (a) directs the release to private respondent of the amounts of P128,572.00 and P123,993.85 deposited with the Paluwagan ng Bayan Savings Bank in Paombong, Bulacan and (b) requires private respondent Crisostomo to pay petitioner Juan Perez the rental for the period June 1979 to January 1980 at the rate of P150,000.00 per annum less the amount of P21,428.00 already paid to usufructuary Maria Perez. It should, however, be subject to the MODIFICATIONS that:
1. Petitioner Luis Keh shall pay private respondent Luis Crisostomo in the amount of P486,562.25 with legal interest from the rendition of the judgment in Civil Case No. 5610-M or on September 6, 1989, and
2. Petitioners be made liable jointly and severally liable for moral damages of P50,000.00, exemplary damages of P20,000 and attorney's fees of P10,000.00.
LORETO J. SOLINAP vs.HON. AMELIA K. DEL ROSARIO, G.R. No. L-50638 July 25, 1983
Posed for resolution in this petition is the issue of whether or not the obligation of petitioners to private respondents may be compensated or set- off against the amount sought to be recovered in an action for a sum of money filed by the former against the latter.
The facts are not disputed. On June 2, 1970, the spouses Tiburcio Lutero and Asuncion Magalona, owners of the Hacienda Tambal, leased the said hacienda to petitioner Loreto Solinap for a period of ten [10] years for the stipulated rental of P50,000.00 a year. It was further agreed in the lease contract that out of the aforesaid annual rental, the sum of P25,000.00 should be paid by Solinap to the Philippine National Bank to amortize the indebtedness of the spouses Lutero with the said bank.
Tiburcio Lutero died on January 21, 1971. Soon after, his heirs instituted the testate estate proceedings of the deceased, docketed as Sp. Proc. No. 1870 of the Court of First Instance of Iloilo, presided by respondent Judge Amelia K. del Rosario. In the course of the proceedings, the respondent judge, upon being apprized of the mounting interest on the unpaid account of the estate, issued an order, stating, among others, "that in order to protect the estate, the administrator, Judge Nicolas Lutero, is hereby authorized to scout among the testamentary heirs who is financially in a position to pay all the unpaid obligations of the estate, including interest, with the right of subrogation in accordance with existing laws."
On the basis of this order, respondents Juanito Lutero [grandson and heir of the late Tiburcio] and his wife Hardivi R. Lutero paid the Philippine National Bank the sum of P25,000.00 as partial settlement of the deceased's obligations. Whereupon the respondents Lutero filed a motion in the testate court for reimbursement from the petitioner of the amount thus paid. They argued that the said amount should have been paid by petitioner to the PNB, as stipulated in the lease contract he had entered into with the deceased Tiburcio Lutero; and that such reimbursement to them was proper, they being subrogees of the PNB.
Before the motion could be resolved by the court, petitioner on April 28, 1978 filed in the Court of First Instance of Iloilo a separate action against the spouses Juanito Lutero and Hardivi R. Lutero for collection of the total amount of P71,000.00, docketed as Civil Case No. 12397. Petitioner alleged in the complaint that on April 25, 1974 the defendants Lutero borrowed from him the sum of P45,000.00 for which they executed a deed of real estate mortgage; that on July 2, 1974, defendants obtained an additional loan of P3,000.00, evidenced by a receipt issued by them; that defendants are further liable to him for the sum of P23,000.00, representing the value of certain dishonored checks issued by them to the plaintiff; and that defendants refused and failed to settle said accounts despite demands.
In their answer, the respondents Lutero traversed the material averments of the complaint and set up legal and factual defenses. They further pleaded a counterclaim against petitioners for the total sum of P 125,000.00 representing unpaid rentals on Hacienda Tambal. Basis of the counterclaim is the allegation that they had purchased one-half [1/2] of Hacienda Tambal, which their predecessors, the spouses Tiburcio Lutero and Asuncion Magalona, leased to the plaintiff for a rental of P50,000.00 a year; and that plaintiffs had failed to pay said rentals despite demands.
At the pre-trial, the parties defined the issues in that case as follows:
(1) Whether or not the defendants [Luteros] are indebted to the plaintiff and, if so, the amount thereof;
(2) Whether or not the defendants are the owners of one-half [1/2] of that parcel of land known as 'Hacienda Tambal' presently leased to the plaintiff and, therefore, entitled to collect from the latter one-half [1/2] of its lease rentals; and in the affirmative, the amount representing the unpaid rental by plaintiff in favor of the defendant. 1
On June 14, 1978, the respondent judge issued an order in Sp. Proc. No. 1870, granting the respondent Lutero's motion for reimbursement from petitioner of the sum of P25,000.00 plus interest, as follows:
WHEREFORE, Mr. Loreto Solinap is hereby directed to pay spouses Juanito Lutero and Hardivi R. Lutero the sum of P25,000.00 with interest at 12% per annum from June 17, 1975 until the same shall have been duly paid.
Petitioner filed a petition for certiorari before this Court, docketed as G.R. No. L-48776, assailing the above order. This Court, however, in a resolution dated January 4, 1979 dismissed the petition thus:
L-48776 [Loreto Solinap vs. CFI etc., et al.]- Acting on the petition in this case as well as the comment thereon of respondents and the reply of petitioner to said comment, the Court Resolved to DISMISS the petition for lack of merit, anyway, the P25,000.00 to be paid by the petitioner to the private respondent Luteros may well be taken up in the final liquidation of the account between petitioner as and the subject estate as lessor.
Thereafter the respondent Luteros filed with the respondent court a "Motion to Reiterate Motion for Execution of the Order dated June 14, 1978." Petitioner filed a rejoinder to said motion, raising for the first time the thesis that the amount payable to private respondents should be compensated against the latter's indebtedness to him amounting to P71,000.00. Petitioner attached to his rejoinder copies of the pleadings filed in Civil Case No. 12397, then pending before Branch V of the Court of First Instance of Iloilo. This motion was denied by respondent judge on the ground that "the claim of Loreto Solinap against Juanito Lutero in Civil Case No. 12397 is yet to be liquidated and determined in the said case, such that the requirement in Article 1279 of the New Civil Code that both debts are liquidated for compensation to take place has not been established by the oppositor Loreto Solinap."
Petition filed a motion for reconsideration of this order, but the same was denied.
Hence, this petition.
The petition is devoid of merit. Petitioner contends that respondent judge gravely abused her discretion in not declaring the mutual obligations of the parties extinguished to the extent of their respective amounts. He relies on Article 1278 of the Civil Code to the effect that compensation shall take place when two persons, in their own right, are creditors and debtors of each other. The argument fails to consider Article 1279 of the Civil Code which provides that compensation can take place only if both obligations are liquidated. In the case at bar, the petitioner's claim against the respondent Luteros in Civil Case No. 12379 is still pending determination by the court. While it is not for Us to pass upon the merits of the plaintiffs' cause of action in that case, it appears that the claim asserted therein is disputed by the Luteros on both factual and legal grounds. More, the counterclaim interposed by them, if ultimately found to be meritorious, can defeat petitioner's demand. Upon this premise, his claim in that case cannot be categorized as liquidated credit which may properly be set-off against his obligation. As this Court ruled in Mialhe vs. Halili, 2 " compensation cannot take place where one's claim against the other is still the subject of court litigation. It is a requirement, for compensation to take place, that the amount involved be certain and liquidated."
WHEREFORE, the petition is dismissed, with costs against petitioner.
IN RE: PETITION FOR VOLUNTARY INSOLVENCY OF UY TONG vs. MARIO R. SILVA, assignee, EDUARDO LOPEZ , G.R. No. L-28377 October 1, 1984
Direct appeal on a pure question of law from the orders of the then Court of First Instance of Manila, Branch XXI, sitting as an insolvency court in Special Proceedings No. 29835, entitled "In Re: Petition for Voluntary Insolvency of Uy Tong alias Teodoro Uy," declaring as duly proved the indebtedness of insolvent Uy Tong in favor of herein appellants, claimants Eduardo Lopez, et al., in the amount of P100,575.00 with legal interest from August 10, 1954; but denying the set-off of such amount against the indebtedness of said claimants to insolvent Uy Tong amounting to P55,000.00 with legal interest from February 24, 1954, until the preferred claims shall have been fully satisfied.
Unquestionably, the principle of compensation or set-off as recognized both in Article 1279 of the Civil Code 1 and Section 58 of the Insolvency Law 2 is applicable to the case at bar. However, the amount which claimants Eduardo Lopez, et al., may set off against their indebtedness in favor of insolvent Uy Tong is limited only to the rentals of the Benavides Building due from the latter for the period from February 28, 1955 up to May 25, 1955, the date when the petition for voluntary in solvency was filed, and not the whole amount representing rentals from February 28, 1955 to June 16, 1961. It is a settled principle that "a debt of the bankrupt arising prior to the bankruptcy cannot be set off against installments of rent falling due after bankruptcy, although the installments are payable under a written lease in effect before the bankruptcy." 3 Upon this premise, the conclusion is easily reached that the debt of claimants which arose prior to bankruptcy cannot be set-off against the installments of rent falling due from the insolvent after bankruptcy. The reason therefor is quite evident: with respect to the difference between the debt of claimants Eduardo Lopez, et al., in the amount of P55,000.00 plus interest, and the rentals corresponding to the period from February 28 to May 25, 1955, retention or controversy had been effectively commenced by third persons upon their filing of claims in the insolvency proceedings of which claimants Lopez, et al., had due notice. For compensation to take place, it is necessary, among other legal requisites, "that over neither of them (the two debts) there be any retention or controversy, commenced by third persons and communicated in due time to the debtor." 4 This essential element of compensation being absent, the same cannot take place.
Besides, to allow compensation to the concurrent amount of the mutual debts and credits would in effect give claimants Lopez, et al., undue preference over other creditors, as such set-off will totally deplete the estate of the insolvent, a situation entirely contrary to the purpose of insolvency proceedings, which is to effect an equitable distribution of the insolvent's estate among his creditors.
WHEREFORE, the orders appealed from are hereby modified in the sense that claimants Eduardo Lopez, et al., are allowed to set off from their indebtedness of P55,000.00 plus interest, whatever amount was due from insolvent Uy Tong as rentals of the Benavidez Building from February 28 to May 25, 1955. The difference shall be paid pro rata with other unpreferred claims, but only after the preferred claims, if any, shall have been satisfied. Let the records of this case be remanded to the court a quo for further proceedings. No costs.
Appeal taken by the Asian Surety & Insurance Company, Inc. from the decision of the Court of First Instance of Pampanga dated April 17, 1963, forfeiting the bail bond posted by it for the provisional release of Natividad Franklin, the accused in Criminal Case No. 4300 of said court, as well as from the latter's orders denying the surety company's motion for a reductions of bail, and its motion for reconsideration thereof.
It appears that an information filed with the Justice of the Peace Court of Angeles, Pampanga, docketed as Criminal Case No. 5536, Natividad Franklin was charged with estafa. Upon a bail bond posted by the Asian Surety & Insurance Company, Inc. in the amount of P2,000.00, she was released from custody.
After the preliminary investigation of the case, the Justice of the Peace Court elevated it to the Court of First Instance of Pampanga where the Provincial Fiscal filed the corresponding information against the accused. The Court of First Instance then set her arraignment on July 14, 1962, on which date she failed to appear, but the court postponed the arraignment to July 28 of the same year upon motion of counsel for the surety company. The accused failed to appear again, for which reason the court ordered her arrest and required the surety company to show cause why the bail bond posted by it should not be forfeited.
On September 25, 1962, the court granted the surety company a period of thirty days within which to produce and surrender the accused, with the warning that upon its failure to do so the bail bond posted by it would be forfeited. On October 25, 1962 the surety company filed a motion praying for an extension of thirty days within which to produce the body of the accused and to show cause why its bail bond should not be forfeited. As not withstanding the extension granted the surety company failed to produce the accused again, the court had no other alternative but to render the judgment of forfeiture.
Subsequently, the surety company filed a motion for a reduction of bail alleging that the reason for its inability to produce and surrender the accused to the court was the fact that the Philippine Government had allowed her to leave the country and proceed to the United States on February 27, 1962. The reason thus given not being to the satisfaction of the court, the motion for reduction of bail was denied. The surety company's motion for reconsideration was also denied by the lower court on May 27, 1963, although it stated in its order that it would consider the matter of reducing the bail bond "upon production of the accused." The surety company never complied with this condition.
Appellant now contends that the lower court should have released it from all liability under the bail bond posted by it because its failure to produce and surrender the accused was due to the negligence of the Philippine Government itself in issuing a passport to said accused, thereby enabling her to leave the country. In support of this contention the provisions of Article 1266 of the New Civil Code are invoked.
Appellant's contention is untenable. The abovementioned legal provision does not apply to its case, because the same speaks of the relation between a debtor and a creditor, which does not exist in the case of a surety upon a bail bond, on the one hand, and the State, on the other.
In U.S. vs. Bonoan, et al., 22 Phil., p. 1, We held that: The rights and liabilities of sureties on a recognizance or bail bond are, in many respects, different from those of sureties on ordinary bonds or commercial contracts. The former can discharge themselves from liability by surrendering their principal; the latter, as a general rule, can only be released by payment of the debt or performance of the act stipulated.
In the more recent case of Uy Tuising, 61 Phil. 404, We also held that:By the mere fact that a person binds himself as surety for the accused, he takes charge of, and absolutely becomes responsible for the latter's custody, and under such circumstances it is incumbent upon him, or rather, it is his inevitable obligation not merely a right, to keep the accused at all times under his surveillance, inasmuch as the authority emanating from his character as surety is no more nor less than the Government's authority to hold the said accused under preventive imprisonment. In allowing the accused Eugenio Uy Tuising to leave the jurisdiction of the Philippines, the appellee necessarily ran the risk of violating and in fact it clearly violated the terms of its bail bonds because it failed to produce the said accused when on January 15, 1932, it was required to do so. Undoubtedly, the result of the obligation assumed by the appellee to hold the accused at all times to the orders and processes of the lower court was to prohibit said accused from leaving the jurisdiction of the Philippines because, otherwise, said orders and processes would be nugatory and inasmuch as the jurisdiction of the court from which they issued does not extend beyond that of the Philippines, they would have no binding force outside of said jurisdiction.
It is clear, therefore, that in the eyes of the law a surety becomes the legal custodian and jailer of the accused, thereby assuming the obligation to keep the latter at all times under his surveillance, and to produce and surrender him to the court upon the latter's demand.
That the accused in this case was able to secure a Philippine passport which enabled her to go to the United States was, in fact, due to the surety company's fault because it was its duty to do everything and take all steps necessary to prevent that departure. This could have been accomplished by seasonably informing the Department of Foreign Affairs and other agencies of the government of the fact that the accused for whose provisional liberty it had posted a bail bond was facing a criminal charge in a particular court of the country. Had the surety company done this, there can be no doubt that no Philippine passport would have been issued to Natividad Franklin.
UPON ALL THE FOREGOING, the decision appealed from is affirmed in all its parts, with costs.
OCCENA v JABSON (digest)
October 29, 1976
ropical Homes Inc. agreed to develop a subdivision on the land owned by Jesus and Efigenia Occeña, wherein Tropical Homes would be paid only 40% of the sale of the subdivision lots. Tropical Homes seeks revision of the contract on the Basis of Art 1267 of the Civil Code (CC). They are asking for modification of the terms and conditions of the subdivision contract, due to increase in costs. Art. 1267 CC: When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part.
Held: The CC authorizes the release of an obligor when the service has become so difficult as to be manifestly beyond the contemplation of the parties but does not authorize the Courts to modify or revise the subdivision contract between the parties or to fix a different sharing ratio from that contractually stipulated with the force of law.Tropical Homes complaint for modification of the contract has no basis in law and must be dismissed.
JESUS V. OCCENA and EFIGENIA C. OCCENA vs.HON. RAMON V. JABSON, G.R. L-44349 Oct.29, 1976
The Court reverses the CA appealed resolution. The Civil Code authorizes the release of an obligor when the service has become so difficult as to be manifestly beyond the contemplation of the parties but does not authorize the courts to modify or revise the subdivision contract between the parties or fix a different sharing ratio from that contractually stipulated with the force of law between the parties. Private respondent's complaint for modification of the contract manifestly has no basis in law and must therefore be dismissed for failure to state a cause of action. On February 25, 1975 private respondent Tropical Homes, Inc. filed a complaint for modification of the terms and conditions of its subdivision contract with petitioners (landowners of a 55,330 square meter parcel of land in Davao City), making the allegations:"That due to the increase in price of oil .. and not within the remotest contemplation of the parties at the time said agreement was entered into and to such a degree that the conditions and factors which formed the original basis of said contract, have been totally changed; 'That further performance by the plaintiff under the contract will result in situation where defendants would be unustly enriched at the expense of the plaintiff;
Under the subdivision contract, respondent "guaranteed (petitioners as landowners) as the latter's fixed and sole share and participation an amount equivalent to forty (40%) percent of all cash receipts from the sale of the subdivision lots"
The petition must be granted.
While respondent court correctly cited in its decision the Code Commission's report giving the rationale for Article 1267 of the Civil Code, to wit;The general rule is that impossibility of performance releases the obligor. However, it is submitted that when the service has become so difficult as to be manifestly beyond the contemplation of the parties, the court should be authorized to release the obligor in whole or in part. The intention of the parties should govern and if it appears that the service turns out to be so difficult as have been beyond their contemplation, it would be doing violence to that intention to hold the obligor still responsible. ... 2
It misapplied the same to respondent's complaint.
If respondent's complaint were to be released from having to comply with the subdivision contract, assuming it could show at the trial that the service undertaken contractually by it had "become so difficult as to be manifestly beyond the contemplation of the parties", then respondent court's upholding of respondet's complaint and dismissal of the petition would be justifiable under the cited codal article. Without said article, respondent would remain bound by its contract under the theretofore prevailing doctrine that performance therewith is ot excused "by the fact that the contract turns out to be hard and improvident, unprofitable, or unespectedly burdensome", 3 since in case a party desires to be excuse from performance in the event of such contingencies arising, it is his duty to provide threfor in the contract.
But respondent's complaint seeks not release from the subdivision contract but that the court "render judgment I modifying the terms and Conditions of the Contract by fixing the proper shares that should pertain to the herein parties out of the gross proceed., from the sales of subdivided lots of subject subdivision". The cited article does not grant the courts this authority to remake, modify or revise the contract or to fix the division of shares between the parties as contractually stipulated with the force of law between the parties, so as to substitute its own terms for those covenanted by the partiesthemselves. Respondent's complaint for modification of contract manifestly has no basis in law and therefore states no cause of action. Under the particular allegations of respondent's complaint and the circumstances therein averred, the courts cannot even in equity grant the relief sought.
A final procedural note. Respondent cites the general rule that an erroneous order denying a motion to dismiss is interlocutory and should not be corrected by certiorari but by appeal in due course. This case however manifestly falls within the recognized exception that certiorari will lie when appeal would not prove to be a speedy and adequate remedy.' Where the remedy of appeal would not, as in this case, promptly relieve petitioners from the injurious effects of the patently erroneous order maintaining respondent's baseless action and compelling petitioners needlessly to go through a protracted trial and clogging the court dockets by one more futile case, certiorari will issue as the plain, speedy and adequate remedy of an aggrieved party.
ACCORDINGLY, the resolution of respondent appellate court is reversed and the petition for certiorari is granted and private respondent's complaint in the lower court is ordered dismissed for failure to state a sufficient cause of action. With costs in all instances against private respondent.
GAN TION vs. CA, G.R. No. L-22490 May 21, 1969
The sole issue here is whether or not there has been legal compensation between petitioner Gan Tion and respondent Ong Wan Sieng.
Ong Wan Sieng was a tenant in certain premises owned by Gan Tion. In 1961 the latter filed an ejectment case against the former, alleging non-payment of rents for August and September of that year, at P180 a month, or P360 altogether. The defendant denied the allegation and said that the agreed monthly rental was only P160, which he had offered to but was refused by the plaintiff. The plaintiff obtained a favorable judgment in the municipal court (of Manila), but upon appeal the Court of First Instance, on July 2, 1962, reversed the judgment and dismissed the complaint, and ordered the plaintiff to pay the defendant the sum of P500 as attorney's fees. That judgment became final.
On October 10, 1963 Gan Tion served notice on Ong Wan Sieng that he was increasing the rent to P180 a month, effective November 1st, and at the same time demanded the rents in arrears at the old rate in the aggregate amount of P4,320.00, corresponding to a period from August 1961 to October 1963.lâwphi1.ñet
In the meantime, over Gan Tion's opposition, Ong Wan Sieng was able to obtain a writ of execution of the judgment for attorney's fees in his favor. Gan Tion went on certiorari to the Court of Appeals, where he pleaded legal compensation, claiming that Ong Wan Sieng was indebted to him in the sum of P4,320 for unpaid rents. The appellate court accepted the petition but eventually decided for the respondent, holding that although "respondent Ong is indebted to the petitioner for unpaid rentals in an amount of more than P4,000.00," the sum of P500 could not be the subject of legal compensation, it being a "trust fund for the benefit of the lawyer, which would have to be turned over by the client to his counsel." In the opinion of said court, the requisites of legal compensation, namely, that the parties must be creditors and debtors of each other in their own right (Art. 1278, Civil Code) and that each one of them must be bound principally and at the same time be a principal creditor of the other (Art. 1279), are not present in the instant case, since the real creditor with respect to the sum of P500 was the defendant's counsel.
This is not an accurate statement of the nature of an award for attorney's fee's. The award is made in favor of the litigant, not of his counsel, and is justified by way of indemnity for damages recoverable by the former in the cases enumerated in Article 2208 of the Civil Code.1 It is the litigant, not his counsel, who is the judgment creditor and who may enforce the judgment by execution. Such credit, therefore, may properly be the subject of legal compensation. Quite obviously it would be unjust to compel petitioner to pay his debt for P500 when admittedly his creditor is indebted to him for more than P4,000.
WHEREFORE, the judgment of the Court of Appeals is reversed, and the writ of execution issued by the Court of First Instance of Manila in its Civil Case No. 49535 is set aside. Costs against respondent.
JUAN L. PEREZ vs. CA, G.R. No. 107737 October 1, 1999
This is a petition for review on certiorari of the Decision of the CA affirming the decision of the RTC :
a) directing defendant JUAN PEREZ to allow plaintiff LUIS CRISOSTOMO to occupy and operate the "Papaya Fishpond" for a period of 5 1/2 years at the rental rates of P150,000.00 for the first six months and P175,000.00 for the remaining five years (the same rates provided for in Exh. 4);
b) ordering defendants LUIS KEH, CHARLIE LEE, JUAN PEREZ and Atty. ROSENDO TANSINSIN, JR. to pay unto the plaintiff the amounts of P150,000.00 as actual damages; P20,000.00 as moral damages; P20,000.00 as exemplary damages; and P10,000.00 as attorney's fees, plus the costs of the suit;
c) directing the release, delivery or payment directly to plaintiff LUIS CRISOSTOMO of the amounts of P128,572.00 and P123,993.85, including the interests which may have already accrued thereon, deposited with the Paluwagan ng Bayan Savings Bank (Paombong, Bulacan Branch) in the name of the Clerk of Court and/or Deputy Clerk of Court Rodrigo C. Libunao under this Court's Order dated February 14, 1980; however, the plaintiff is required to pay defendant Perez the corresponding rental on the fishpond for the period June 1979-January 1980 based on the rate of P150,000.00 per annum, deducting therefrom the amount of P21,428.00 already paid to and received by then co-usufructuary Maria Perez (Exh. E);
d) dismissing the defendants' separate counter-claims for damages, for lack of merit; and
e) dismissing the Pleading in Intervention Pro Interesse Suo filed by VICENTE ASUNCION on the ground of lis pendens.
The facts upon which the Court of Appeals based its Decision are the following:
Along with Maria Perez, Fructuosa Perez, Victoria Perez, Apolonio Lorenzo and Vicente Asuncion, petitioner Juan Perez is a usufructuary of a parcel of land popularly called the "Papaya Fishpond." Covered by Transfer Certificate of Title No. 8498 of the Registry of Deeds for the Province of Bulacan, the fishpond is located in Sto. Rosario, Hagonoy, Bulacan and has an area of around 110 hectares. On June 5, 1975, the usufructuaries entered into a contract leasing the fishpond to Luis Keh for a period of five (5) years and renewable for another five (5) years by agreement of the parties, under the condition that for the first five-year period the annual rental would be P150,000.00 and for the next five years, P175,000.00. Paragraph 5 of the lease contract states that the lessee "cannot sublease" the fishpond "nor assign his rights to anyone." 3
Private respondent Luis Crisostomo, who reached only the 5th grade, is a businessman engaged in the operation of fishponds. On September 20, 1977, while he was at his fishpond in Almazar, Hermosa, Bataan, his bosom friend named Ming Cosim arrived with petitioner Charlie Lee. The two persuaded private respondent to take over the operation of "Papaya Fishpond" as petitioner Lee and his partner, petitioner Luis Keh, were allegedly losing money in its operation. Private respondent having acceded to the proposal, sometime in December of that year, he and petitioners Lee and Keh executed a written agreement denominated as "pakiao buwis" whereby private respondent would take possession of the "Papaya Fishpond" from January 6, 1978 to June 6, 1978 in consideration of the amount of P128,000.00 broken down as follows: P75,000.00 as rental, P50,000.00 for the value of milkfish in the fishpond and P3,000 for labor expenses. Private respondent paid the P75,000.00 to petitioner Keh at the house of petitioner Lee in Sta. Cruz, Hagonoy, Bulacan in the presence of Lee's wife, brother-in-law and other persons. He paid the balance to petitioner Lee sometime in February or March 1978 because he was uncertain as to the right of petitioners Keh and Lee to transfer possession over the fishpond to him. Private respondent made that payment only after he had received a copy of a written agreement dated January 9, 1978 4 whereby petitioner Keh ceded, conveyed and transferred all his "rights and interests" over the fishpond to petitioner Lee, "up to June 1985." From private respondent's point of view, that document assured him of continuous possession of the property for as long as he paid the agreed rentals of P150,000.00 until 1980 and P.175,000.00 until 1985.1âwphi1.nêt
For the operation of the fishpond from June 1978 to May 1979, private respondent, accompanied by Ming Cosim and Ambrocio Cruz, paid the amount of P150,000.00 at the Malabon, Metro Manila office of petitioner Keh. Receipt was issued to him.
Handwritten below that receipt but above the signature of petitioner Charlie Lee, are the following: "Rec'd from Luis Crisostomo sum of one hundred fifty-four thousand P154,000.00 for above payment. 5
Private respondent incurred expenses for repairs in and improvement of the fishpond in the total amount of P486,562.65. 6 However, sometime in June 1979, petitioners Tansinsin and Juan Perez, in the company of men bearing armalites, went to the fishpond and presented private respondent with a letter dated June 7, 1979 showing that petitioner Luis Keh had surrendered possession of the fishpond to the usufructuaries.
Because of the threat to deprive him of earnings of around P700,000.00 that the 700,000 milkfish in the fishpond would yield, and the refusal of petitioners Keh, Juan Perez and Lee to accept the rental for June 5, 1979 to June 6, 1980, private respondent filed on June 14, 1979 with the then Court of First Instance of Bulacan an action for injunction and damages. He prayed for the issuance of a restraining order enjoining therein defendants Keh, Perez and Lee from entering the premises and taking possession of the fishpond. He also prayed for actual damages of P50,000.00, moral damages of P20,000.00, exemplary damages in an amount that the court might award, and attorney's fees of P10,000.00. 7
That same day, June 14, 1979, the lower court granted the prayer for a restraining order. On November 13, 1979, Crisostomo paid one of the usufructuaries, Maria Perez (who died in 1984), the amount of P21,428.00 as her 1/7 share of the annual rental of the fishpond for 1979-80. Maria Perez issued a notarized receipt for that amount. 8
On January 11, 1980, the court lifted the restraining order thereby effectively depriving private respondent of possession over the fishpond. On February 14, 1980, the parties submitted a partial compromise agreement.
HELD: For res judicata to apply, the following requisites must concur: (a) the former judgment must be final; (b) the court which rendered it had jurisdiction over the subject matter and the parties; (c) the judgment must be on the merits, and (d) there must be between the first and second actions identity of parties, subject matter and causes of action. 16 The Decision in CA-G.R. No. 10415 having resolved only an interlocutory matter, the principle of res judicata cannot be applied in this case. There can be no res judicata where the previous order in question was not an order or judgment determinative of an issue of fact pending before the court but was only an interlocutory order because it required the parties to perform certain acts for final adjudication. 17 In this case, the lifting of the restraining order paved the way for the possession of the fishpond on the part of petitioners and/or their representatives pending the resolution of the main action for injunction. In other words, the main issue of whether or not private respondent may be considered a sublessee or a transferee of the lease entitled to possess the fishpond under the circumstances of the case had yet to be resolved when the restraining order was lifted.
Art. 1168 of the Civil Code provides that when an obligation "consists in not doing and the obligor does what has been forbidden him, it shall also be undone at his expense." The lease contract prohibited petitioner Luis Keh, as lessee, from subleasing the fishpond. In entering into the agreement for pakiao-buwis with private respondent, not to mention the apparent artifice that was his written agreement with petitioner Lee on January 9, 1978, petitioner Keh did exactly what was prohibited of him under the contract — to sublease the fishpond to a third party. That the agreement for pakiao-buwis was actually a sublease is borne out by the fact that private respondent paid petitioners Luis Keh and Juan Perez, through petitioner Tansinsin the amount of annual rental agreed upon in the lease contract between the usufructuaries and petitioner Keh. Petitioner Keh led private respondent to unwittingly incur expenses to improve the operation of the fishpond. By operation of law, therefore, petitioner Keh shall be liable to private respondent for the value of the improvements he had made in the fishpond or for P486,562.65 with interest of six percent (6%) per annum from the rendition of the decision of the trial court on September 6, 1989. 35
The law supports the awards of moral and exemplary damages in favor of private respondent and against the petitioners. Their conspiratorial scheme to utilize private respondent's expertise in the operation of fishponds to bail themselves out of financial losses has been satisfactorily established to warrant a ruling that they violated Article 21 of the Civil Code and therefore private respondent should be entitled to an award of moral damages. Article 21 states that "(a)ny person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage." Exemplary damages shall likewise be awarded pursuant to Article 2229 of the Civil Code. 36 Because private respondent was compelled to litigate to protect his interest, attorney's fees shall also be awarded. 37
WHEREFORE, in light of the foregoing premises, the decision of the Court of Appeals is AFFIRMED insofar as it (a) directs the release to private respondent of the amounts of P128,572.00 and P123,993.85 deposited with the Paluwagan ng Bayan Savings Bank in Paombong, Bulacan and (b) requires private respondent Crisostomo to pay petitioner Juan Perez the rental for the period June 1979 to January 1980 at the rate of P150,000.00 per annum less the amount of P21,428.00 already paid to usufructuary Maria Perez. It should, however, be subject to the MODIFICATIONS that:
1. Petitioner Luis Keh shall pay private respondent Luis Crisostomo in the amount of P486,562.25 with legal interest from the rendition of the judgment in Civil Case No. 5610-M or on September 6, 1989, and
2. Petitioners be made liable jointly and severally liable for moral damages of P50,000.00, exemplary damages of P20,000 and attorney's fees of P10,000.00.
LORETO J. SOLINAP vs.HON. AMELIA K. DEL ROSARIO, G.R. No. L-50638 July 25, 1983
Posed for resolution in this petition is the issue of whether or not the obligation of petitioners to private respondents may be compensated or set- off against the amount sought to be recovered in an action for a sum of money filed by the former against the latter.
The facts are not disputed. On June 2, 1970, the spouses Tiburcio Lutero and Asuncion Magalona, owners of the Hacienda Tambal, leased the said hacienda to petitioner Loreto Solinap for a period of ten [10] years for the stipulated rental of P50,000.00 a year. It was further agreed in the lease contract that out of the aforesaid annual rental, the sum of P25,000.00 should be paid by Solinap to the Philippine National Bank to amortize the indebtedness of the spouses Lutero with the said bank.
Tiburcio Lutero died on January 21, 1971. Soon after, his heirs instituted the testate estate proceedings of the deceased, docketed as Sp. Proc. No. 1870 of the Court of First Instance of Iloilo, presided by respondent Judge Amelia K. del Rosario. In the course of the proceedings, the respondent judge, upon being apprized of the mounting interest on the unpaid account of the estate, issued an order, stating, among others, "that in order to protect the estate, the administrator, Judge Nicolas Lutero, is hereby authorized to scout among the testamentary heirs who is financially in a position to pay all the unpaid obligations of the estate, including interest, with the right of subrogation in accordance with existing laws."
On the basis of this order, respondents Juanito Lutero [grandson and heir of the late Tiburcio] and his wife Hardivi R. Lutero paid the Philippine National Bank the sum of P25,000.00 as partial settlement of the deceased's obligations. Whereupon the respondents Lutero filed a motion in the testate court for reimbursement from the petitioner of the amount thus paid. They argued that the said amount should have been paid by petitioner to the PNB, as stipulated in the lease contract he had entered into with the deceased Tiburcio Lutero; and that such reimbursement to them was proper, they being subrogees of the PNB.
Before the motion could be resolved by the court, petitioner on April 28, 1978 filed in the Court of First Instance of Iloilo a separate action against the spouses Juanito Lutero and Hardivi R. Lutero for collection of the total amount of P71,000.00, docketed as Civil Case No. 12397. Petitioner alleged in the complaint that on April 25, 1974 the defendants Lutero borrowed from him the sum of P45,000.00 for which they executed a deed of real estate mortgage; that on July 2, 1974, defendants obtained an additional loan of P3,000.00, evidenced by a receipt issued by them; that defendants are further liable to him for the sum of P23,000.00, representing the value of certain dishonored checks issued by them to the plaintiff; and that defendants refused and failed to settle said accounts despite demands.
In their answer, the respondents Lutero traversed the material averments of the complaint and set up legal and factual defenses. They further pleaded a counterclaim against petitioners for the total sum of P 125,000.00 representing unpaid rentals on Hacienda Tambal. Basis of the counterclaim is the allegation that they had purchased one-half [1/2] of Hacienda Tambal, which their predecessors, the spouses Tiburcio Lutero and Asuncion Magalona, leased to the plaintiff for a rental of P50,000.00 a year; and that plaintiffs had failed to pay said rentals despite demands.
At the pre-trial, the parties defined the issues in that case as follows:
(1) Whether or not the defendants [Luteros] are indebted to the plaintiff and, if so, the amount thereof;
(2) Whether or not the defendants are the owners of one-half [1/2] of that parcel of land known as 'Hacienda Tambal' presently leased to the plaintiff and, therefore, entitled to collect from the latter one-half [1/2] of its lease rentals; and in the affirmative, the amount representing the unpaid rental by plaintiff in favor of the defendant. 1
On June 14, 1978, the respondent judge issued an order in Sp. Proc. No. 1870, granting the respondent Lutero's motion for reimbursement from petitioner of the sum of P25,000.00 plus interest, as follows:
WHEREFORE, Mr. Loreto Solinap is hereby directed to pay spouses Juanito Lutero and Hardivi R. Lutero the sum of P25,000.00 with interest at 12% per annum from June 17, 1975 until the same shall have been duly paid.
Petitioner filed a petition for certiorari before this Court, docketed as G.R. No. L-48776, assailing the above order. This Court, however, in a resolution dated January 4, 1979 dismissed the petition thus:
L-48776 [Loreto Solinap vs. CFI etc., et al.]- Acting on the petition in this case as well as the comment thereon of respondents and the reply of petitioner to said comment, the Court Resolved to DISMISS the petition for lack of merit, anyway, the P25,000.00 to be paid by the petitioner to the private respondent Luteros may well be taken up in the final liquidation of the account between petitioner as and the subject estate as lessor.
Thereafter the respondent Luteros filed with the respondent court a "Motion to Reiterate Motion for Execution of the Order dated June 14, 1978." Petitioner filed a rejoinder to said motion, raising for the first time the thesis that the amount payable to private respondents should be compensated against the latter's indebtedness to him amounting to P71,000.00. Petitioner attached to his rejoinder copies of the pleadings filed in Civil Case No. 12397, then pending before Branch V of the Court of First Instance of Iloilo. This motion was denied by respondent judge on the ground that "the claim of Loreto Solinap against Juanito Lutero in Civil Case No. 12397 is yet to be liquidated and determined in the said case, such that the requirement in Article 1279 of the New Civil Code that both debts are liquidated for compensation to take place has not been established by the oppositor Loreto Solinap."
Petition filed a motion for reconsideration of this order, but the same was denied.
Hence, this petition.
The petition is devoid of merit. Petitioner contends that respondent judge gravely abused her discretion in not declaring the mutual obligations of the parties extinguished to the extent of their respective amounts. He relies on Article 1278 of the Civil Code to the effect that compensation shall take place when two persons, in their own right, are creditors and debtors of each other. The argument fails to consider Article 1279 of the Civil Code which provides that compensation can take place only if both obligations are liquidated. In the case at bar, the petitioner's claim against the respondent Luteros in Civil Case No. 12379 is still pending determination by the court. While it is not for Us to pass upon the merits of the plaintiffs' cause of action in that case, it appears that the claim asserted therein is disputed by the Luteros on both factual and legal grounds. More, the counterclaim interposed by them, if ultimately found to be meritorious, can defeat petitioner's demand. Upon this premise, his claim in that case cannot be categorized as liquidated credit which may properly be set-off against his obligation. As this Court ruled in Mialhe vs. Halili, 2 " compensation cannot take place where one's claim against the other is still the subject of court litigation. It is a requirement, for compensation to take place, that the amount involved be certain and liquidated."
WHEREFORE, the petition is dismissed, with costs against petitioner.
IN RE: PETITION FOR VOLUNTARY INSOLVENCY OF UY TONG vs. MARIO R. SILVA, assignee, EDUARDO LOPEZ , G.R. No. L-28377 October 1, 1984
Direct appeal on a pure question of law from the orders of the then Court of First Instance of Manila, Branch XXI, sitting as an insolvency court in Special Proceedings No. 29835, entitled "In Re: Petition for Voluntary Insolvency of Uy Tong alias Teodoro Uy," declaring as duly proved the indebtedness of insolvent Uy Tong in favor of herein appellants, claimants Eduardo Lopez, et al., in the amount of P100,575.00 with legal interest from August 10, 1954; but denying the set-off of such amount against the indebtedness of said claimants to insolvent Uy Tong amounting to P55,000.00 with legal interest from February 24, 1954, until the preferred claims shall have been fully satisfied.
Unquestionably, the principle of compensation or set-off as recognized both in Article 1279 of the Civil Code 1 and Section 58 of the Insolvency Law 2 is applicable to the case at bar. However, the amount which claimants Eduardo Lopez, et al., may set off against their indebtedness in favor of insolvent Uy Tong is limited only to the rentals of the Benavides Building due from the latter for the period from February 28, 1955 up to May 25, 1955, the date when the petition for voluntary in solvency was filed, and not the whole amount representing rentals from February 28, 1955 to June 16, 1961. It is a settled principle that "a debt of the bankrupt arising prior to the bankruptcy cannot be set off against installments of rent falling due after bankruptcy, although the installments are payable under a written lease in effect before the bankruptcy." 3 Upon this premise, the conclusion is easily reached that the debt of claimants which arose prior to bankruptcy cannot be set-off against the installments of rent falling due from the insolvent after bankruptcy. The reason therefor is quite evident: with respect to the difference between the debt of claimants Eduardo Lopez, et al., in the amount of P55,000.00 plus interest, and the rentals corresponding to the period from February 28 to May 25, 1955, retention or controversy had been effectively commenced by third persons upon their filing of claims in the insolvency proceedings of which claimants Lopez, et al., had due notice. For compensation to take place, it is necessary, among other legal requisites, "that over neither of them (the two debts) there be any retention or controversy, commenced by third persons and communicated in due time to the debtor." 4 This essential element of compensation being absent, the same cannot take place.
Besides, to allow compensation to the concurrent amount of the mutual debts and credits would in effect give claimants Lopez, et al., undue preference over other creditors, as such set-off will totally deplete the estate of the insolvent, a situation entirely contrary to the purpose of insolvency proceedings, which is to effect an equitable distribution of the insolvent's estate among his creditors.
WHEREFORE, the orders appealed from are hereby modified in the sense that claimants Eduardo Lopez, et al., are allowed to set off from their indebtedness of P55,000.00 plus interest, whatever amount was due from insolvent Uy Tong as rentals of the Benavidez Building from February 28 to May 25, 1955. The difference shall be paid pro rata with other unpreferred claims, but only after the preferred claims, if any, shall have been satisfied. Let the records of this case be remanded to the court a quo for further proceedings. No costs.
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