Inchausti v Yulo
Teodoro Yulo, died testate properties in Iloilo and Negros Occidental 1. Six of Yulo's children executed the mortgage of August 12, 1909, namely, Gregorio, Pedro, Francisco, Manuel, Carmen, and Concepcion, admitting a debt of P253,445.42 at 10 per cent per annum and mortgaging six-ninths of their hereditary properties (5 installments from June 30th of 1909 to 1914)
2. Due to nonpayment, on March 27, 1911, Inchausti & Company brought an ordinary action in the Court of First Instance of Iloilo, against Gregorio Yulo for the payment of the said balance.
3. Of the six children who executed the first instrument, Francisco, Manuel and Carmen executed the instrument of May 12, 1911, wherein was obtained a reduction of the capital to 225,000 pesos and of the interest to 6 per cent from the 15th of March of the same year of 1911 4. Per first instrument the maturity of the first installment was June 30, 1910. Per second instrument, Francisco, Manuel, and Carmen had in their favor as the maturity of the first installment of their debt, June 30, 1912
5. By sentencing Gregorio Yulo to pay 253,445 pesos and 42 centavos of August 12, 1909, this debtor, if he should pay all this sum, could not recover from his joint debtors Francisco, Manuel, and Carmen their proportional parts of the P253,445.42 which he had paid, inasmuch as the three were not obligated by virtue of the instrument of May 12, 1911, to pay only 225,000 pesos, thus constituting a violation of Gregorio Yulo's right
6. Wherefore we hold that although the contract of May 12, 1911, has not novated that of August 12, 1909, it has affected that contract and the outcome of the suit brought against Gregorio Yulo alone for the sum of P253,445.42; and in consequence thereof, the amount stated in the contract of August 12, 1909, cannot be recovered but only that stated in the contract of May 12, 1911, by virtue of the remission granted to the three of the solidary debtors in this instrument, in conformity with what is provided in article 1143 of the Civil Code, cited by the creditor itself. *OCC 1204 = NCC Art. 1292. In order that an obligation may be extinguished by another which substitute the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other. (1204) *an obligation to pay a sum of money is not novated in a new instrument wherein the old is ratified, by changing only the term of payment and adding other obligations not incompatible with the old one
*OCC 1143 = NCC Art. 1215. Novation, compensation, confusion or remission of the debt, made by any of the solidary creditors or with any of the solidary debtors, shall extinguish the obligation, without prejudice to the provisions of Article 1219.
The creditor who may have executed any of these acts, as well as he who collects the debt, shall be liable to the others for the share in the obligation corresponding to them. (1143)
Inciong v CA ROMERO, J.:
This is a Petition for Review on Certiorari of the Decision of the Court of Appeals affirming that of the Regional Trial Court of Misamis Oriental, Branch 18, which disposed of Civil Case No. 10507 for collection of a sum of money and damages, as follows:
“WHEREFORE, defendant BALDOMERO L. INCIONG, JR. is adjudged solidarily liable and ordered to pay to the plaintiff Philippine Bank of Communications, Cagayan de Oro City, the amount of FIFTY THOUSAND PESOS (P50,000.00), with interest thereon from May 5, 1983 at 16% per annum until fully paid; and 6% per annum on the total amount due, as liquidated damages or penalty from May 5, 1983 until fully paid; plus 10% of the total amount due for expenses of litigation and attorney’s fees; and to pay the costs. The counterclaim, as well as the cross claim, are dismissed for lack of merit.
SO ORDERED.”
Petitioner’s liability resulted from the promissory note in the amount of P50,000.00 which he signed with Rene C. Naybe and Gregorio D. Pantanosas on February 3, 1983, holding themselves jointly and severally liable to private respondent Philippine Bank of
Communications, Cagayan de Oro City branch. The promissory note was due on May 5, 1983. Said due date expired without the promissors having paid their obligation. Consequently, on November 14, 1983 and on June 8, 1984, private respondent sent petitioner telegrams demanding payment thereof. On December 11, 1984 private respondent also sent by registered mail a final letter of demand to Rene C. Naybe. Since both obligors did not respond to the demands made, private respondent filed on January 24, 1986 a complaint for collection of the sum of P50,000.00 against the three obligors.
On November 25, 1986, the complaint was dismissed for failure of the plaintiff to prosecute the case. However, on January 9, 1987, the lower court reconsidered the dismissal order and required the sheriff to serve the summonses. On January 27, 1987, the lower court dismissed the case against defendant Pantanosas as prayed for by the private respondent herein. Meanwhile, only the summons addressed to petitioner was served as the sheriff learned that defendant Naybe had gone to Saudi Arabia. In his answer, petitioner alleged that sometime in January 1983, he was approached by his friend, Rudy Campos, who told him that he was a partner of Pio Tio, the branch manager of private respondent in Cagayan de Oro City, in the falcata logs operation business. Campos also intimated to him that Rene C. Naybe was interested in the business and would contribute a chainsaw to the venture. He added that, although Naybe had no money to buy the equipment, Pio Tio had assured Naybe of the approval of a loan he would make with private respondent. Campos then persuaded petitioner to act as a “comaker” in the said loan. Petitioner allegedly acceded but with the understanding that he would only be a co-maker for the loan of P5,000.00. Petitioner alleged further that five (5) copies of a blank promissory note were brought to him by Campos at his office. He affixed his signature thereto but in one copy, he indicated that he bound himself only for the amount of P5,000.00. Thus, it was by trickery, fraud and misrepresentation that he was made liable for the amount of P50,000.00.
In the aforementioned decision of the lower court, it noted that the typewritten figure “-50,000-” clearly appears directly below the admitted signature of the petitioner in the promissory note. Hence, the latter’s uncorroborated testimony on his limited liability cannot prevail over the
presumed regularity and fairness of the transaction, under Sec. 5 (q) of Rule 131. The lower court added that it was “rather odd” for petitioner to have indicated in a copy and not in the original, of the promissory note, his supposed obligation in the amount of P5,000.00 only. Finally, the lower court held that, even granting that said limited amount had actually been agreed upon, the same would have been merely collateral between him and Naybe and, therefore, not binding upon the private respondent as creditor-bank.
The lower court also noted that petitioner was a holder of a Bachelor of Laws degree and a labor consultant who was supposed to take due care of his concerns, and that, on the witness stand, Pio Tio denied having participated in the alleged business venture although he knew for a fact that the falcata logs operation was encouraged by the bank for its export potential. appealed the said decision to the Court of Appeals which, in its decision of August 31, 1990, affirmed that of the lower court. His motion for reconsideration of the said decision having been denied, he filed the instant petition for review on certiorari. On February 6, 1991, the Court denied the petition for failure of petitioner to comply with the Rules of Court and paragraph 2 of Circular No. 1-88, and to sufficiently show that respondent court had committed any reversible error in its questioned Decision.
His Motion for the Reconsideration of the denial of his Petition was likewise denied with finality in the Resolution of April 24,
1991.Thereafter, petitioner filed a motion for leave to file a second motion for reconsideration which, in the Resolution of May 27, 1991, the Court denied. In the same Resolution, the Court ordered the entry of judgment in this case.
Unfazed, petitioner filed a motion for leave to file a motion for clarification. In the latter motion, he asserted that he had attached Registry Receipt No. 3268 to page 14 of the petition in compliance with Circular No. 1-88. Thus, on August 7, 1991, the Court granted his prayer that his petition be given due course and reinstated the same.
Nonetheless, we fined the petition unmeritorious. Annexed to the petition is a copy of an affidavit executed on May 3, 1988, or after the rendition of the decision of the lower court, by Gregorio Pantanosas, Jr., an MTCC judge and petitioner’s co-maker in the promissory note. It supports petitioner’s allegation that they were induced to sign the promissory note no the belief that it was only for P5,000.00, adding that it was Campos who caused the amount of the loan to be increased to P50,000.00.
The affidavit is clearly intended to buttress petitioner’s contention in the instant petition that the Court of Appeals should have declared the promissory note null and void on the following grounds: (a) the promissory note was signed in the office of Judge Pantanosas, outside the premises of the bank; (b) the loan was incurred for the purpose of buying a second-hand chainsaw which cost only P5,000.00; (c) even a new chainsaw would cost only P27,500.00; (d) the loan was not approved by the board or credit committee which was the practice, at it exceeded P5,000.00; (e) the loan had no collateral; (f) petitioner and Judge Pantanosas were not present at the time the loan was released in contravention of the bank practice, and (g) notices of default are sent simultaneously and separately but no notice was validly sent to him. Finally, petitioner contends that in signing the promissory note, his consent was vitiated by fraud as, contrary to their agreement that the loan was only for the amount of P5,000.00, the promissory note stated the amount of P50,000.00.
The above-stated points are clearly factual. Petitioner is to be reminded of the basic rule that this Court is not a trier of facts. Having lost the chance to fully ventilate his factual claims below, petitioner may no longer be accorded the same opportunity in the abuse of discretion on the part of the court below. Had he presented Judge Pantanosas’ affidavit before the lower court, it would have strengthened his claim that the promissory note did not reflect the correct amount of the loan.
Nor is there merit in petitioner’s assertion that since the promissory note “is not a public deed with the formalities prescribed by law but a mere commercial paper which does not bear the signature of attesting witnesses,” parol evidence may “overcome” the contents of the promissory note.
The first paragraph of the parol evidence rule states:
“When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the content of the written agreement.”
Clearly, the rule does not specify that the written agreement be a public document. What is required is that agreement be in writing as the rule is in fact founded on “long experience that written evidence is so much more certain and accurate than that which rests in fleeting memory only, that it would be unsafe, when parties have expressed the terms of their contract in writing, to admit weaker evidence to control and vary the stronger and to show that the parties intended a different contract from that expressed in the writing signed by them.”
Thus, for the parol evidence rule to apply, a written contract need not by in any particular form, or be signed by both parties. As a general rule, bills, notes and other instruments of a similar nature are not subject to be varied or contradicted by parol or extrinsic evidence.
By alleging fraud in his answer, petitioner was actually in the right direction towards proving that he and his co-makers agreed to a loan of P5,000.00 only considering that, where a parol contemporaneous agreement was the inducing and moving cause of the written contract, it may be shown by parol evidence.
However, fraud must be established by clear and convincing evidence, mere preponderance of evidence, not even being adequate. Petitioner’s attempt to prove fraud must, therefore, fail as it was evidenced only by his own uncorroborated and, expectedly, self-serving testimony. Petitioner also argues that the dismissal of the complaint against Naybe, the principal debtor, and against Pantanosas, his co-maker, constituted a release of his obligation, especially because the dismissal of the case against Pantanosas was upon the motion of private respondent itself. He cites as basis for his argument, Article 2080 of the Civil Code which provides that:
“The guarantors, even though they be solidary, are released from their obligation whenever by come act of the creditor, they cannot be subrogated to the rights, mortgages, and preferences of the latter.” It is to be noted, however, that petitioner signed the promissory note as a solidary co-maker and not as a guarantor. This is patent even from the first sentence of the promissory note which states as follows:
“Ninety one (91) days after date, for value received, I/we, JOINTLY and SEVERALLY promise to pay to the PHILIPPINE BANK OF
COMMUNICATIONS as its office in the City of Cagayan de Oro, Philippines the sum of FIFTY THOUSAND ONLY (P50,000.00) Pesos, Philippine Currency, together with interest at the rate of SIXTEEN (16) per cent per annum until fully paid.”
A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation, and each creditor is entitled to demand the whole obligation.
On the other hand, Article 2047 of the Civil Code states:
“By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall be observed, In such a case the contract is called a suretyship.” (Emphasis supplied.)
While a guarantor may bind himself solidarily with the principal debtor, the liability of a guarantor is different from that of a solidary debtor. Thus, Tolentino explains:
“A guarantor who binds himself in solidum with the principal debtor under the provisions of the second paragraph does not become a solidary co-debtor to all intents and purposes. There is a difference between a solidary co-debtor, and a fiador in solidum (surety). The later, outside of the liability he assumes to pay the debt before the property of the principal debtor has been exhausted, retains all the other rights, actions and benefits which pertain to him by reason of rights than those bestowed upon him in Section 4, Chapter 3, title I, Book IV of the Civil Code.”
Section 4, Chapter 3, Title I, Book IV of the Civil Code states the law on joint and several obligations. Under Art. 1207 thereof, when there are two or more debtors in one and the same obligation, the presumption is that obligation is joint so that each of the debtors is liable only for a proportionate part of the debt. There is a solidarily liability only when he obligation expressly so states, when the law so provides or when the nature of the obligation so requires.
Because the promissory note involved in this case expressly states that the three signatories therein are jointly and severally liable, any one, some or all of them may be proceeded against for the entire obligation. The choice is left to the solidary creditor to determine against whom he will enforce collection.
Consequently, the dismissal of the case against Judge Pontanosas may not be deemed as having discharged petitioner from liability as well. As regards Nayve, suffice it to say that the court never acquired jurisdiction over him. Petitioner, therefore, may only have recourse against his co-makers, as provided by law.
WHEREFORE, the instant Petition for Review on Certiorari is here DENIED and the questioned Decision of the Court of Appeals is AFFIRMED. Costs against petitioner.
G.R. No. 85396 October 27, 1989
RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs.
COURT OF APPEALS, PHILIPPINE BLOOMING MILLS, INC. and ALFREDO CHING, respondents.
MELENCIO-HERRERA, J.:
Will a Securities and Exchange Commission (SEC) Order suspending, during the pendency of a rehabilitation proceeding, payment of all claims against the principal debtor bar or preclude the creditor from recovering from the surety? Respondents Philippine Blooming Mills (PBM) and its Surety, Alfredo Ching, answer in the affirmative; petitioner Bank in the negative.
The facts:
On 4 May 1979, Alfredo Ching signed a 'Comprehensive Surety Agreement' with Rizal Commercial Banking Corporation (RCBC), binding himself to jointly and severally guarantee the prompt payment of all PBM obligations owing RCBC in the aggregate sum of Forty Million (P40,000,000.00) Pesos.
Between 8 September to 30 October 1980, PBM filed several
applications for letters of credit with RCBC. Through said applications, PBM obligated itself, among other things, to pay on demand for all draft(s) drawn under or purporting to be drawn under the credits. Everything being in order, RCBC opened the corresponding letters of credit and imported various goods for PBM's account. In due time the imported goods arrived and were released, in trust, to PBM who acknowledged receipt thereof through various trust receipts. All in all, PBM's obligations stood at P7,982,649.08.
Less than a year later, or on 7 August 1981, RCBC filed a Complaint for collection of said sum against respondents PBM and Alfredo Ching with the then Court of First Instance of Pasig, docketed as CV-42333. Upon filing of a bond satisfactory to the Court, a Writ of Preliminary Attachment was issued against the assets and properties of respondents PBM and Ching on the same day. By way of special and affirmative defenses they alleged that "although the trust receipts stipulate due dates, the true intent and agreement of the parties was that the maturity dates of the trust receipts were to be extended at the end of the stipulated dates, as had been the customary practice of RCBC with PBM."
On 23 September 1981, PBM and Ching moved to discharge the attachment, which RCBC opposed. On 4 December 1981 the Court issued an Order lifting the attachment upon their filing of a satisfactory counter-bond.
Meanwhile, on 1 April 1982, PBM filed a Petition for Suspension of Payments with the Securities and Exchange Commission, docketed as SEC Case No. 2250, seeking at the same time its rehabilitation. In an injunctive Order, dated 6 July 1982, all actions for claims against PBM pending before any Court or tribunal, in whatever stage the same may have been, were ordered suspended by the SEC in order to give the Commission the opportunity to pass upon the feasibility of any rehabilitation plans. And on 26 April 1988, SEC approved the revised rehabilitation plan and ordered its implementation.
On 14 October 1982, RCBC pursued its claims with the Trial Court and filed, unopposed, a Motion for Summary Judgment in CV-42333, a motion for extension to file said opposition having been earlier withdrawn. RCBC contended that respondents PBM and Ching had not
denied their indebtedness to RCBC and, therefore, no genuine issue was raised in the pleadings.
On 25 November 1982, the CFI rendered such summary judgment** in RCBC's favor, declaring:
WHEREFORE, judgment is hereby rendered against the defendants (PBM and Ching) in favor of plaintiff (RCBC) ordering defendants to pay plaintiff jointly and severally the following:
a) P7,982,649.08 inclusive of interest, service charges and penalties as of August 7, 1981 on account of their liability in solidum arising from the trust receipts and comprehensive surety agreements plus such other additional amount by way of interest, service charges and penalties from August 7,1981 until fully paid; and
b) P10,000.00 as attorney's fees. With costs against the defendants.
On appeal, respondent Court of Appeals,*** ruling that it was precipitate and improper for the lower Court to have continued with the proceedings despite the SEC Order of suspension, set aside the lower Court Decision and ordered it to hold in abeyance the determination of the merits invoked in CV-42333 pending the outcome of SEC Case No. 2250. On 6 October 1988, the Appellate Court denied RCBC's Motion for
Reconsideration.
Hence, this Petition for Review, to which we gave due course on 31 May 1989, and required the filing of Memoranda by the parties, the last of which was submitted on 27 July 1989.
RCBC takes the position that the SEC injunctive Order pertains and affects only PBM, the corporation under rehabilitation, and that its right, as creditor, to proceed against respondent Ching, as Surety, is not affected by said Order. In fine, RCBC avers that to hold the injunctive Order applicable to both respondents PBM and Ching is to deprive RCBC of its right to proceed against the Surety based on the latter's separate and independent undertaking.
PBM and Ching counter that the liabilities incurred by PBM were corporate in character and, hence, as a corporate officer, Alfredo Ching cannot be held liable therefor; that the pendency of SEC Case No. 2250 and the rendition of an Order therein on 26 April 1988 implementing respondent PBM's rehabilitation plan must necessarily benefit the Surety, inasmuch as payment of PBM obligations must be made pursuant to that plan; and that the liability of the Surety cannot be more than what would remain after payment of all the obligations of the principal. Moreover, they continue, it is usual for majority stockholders to act as co-signors with their respective corporations where promissory notes, collaterals or guaranty or security agreements are involved. Respondent Ching's action may, it is claimed, be classified as a corporate act.
Under the attendant facts and circumstances, we answer the question earlier posed in the negative.
Where an obligation expressly states a solidary liability, the concurrence of two or more creditors or two or more debtors in one and the same obligation implies that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation (Article 1207, Civil Code). The creditor may proceed against
any one of the solidary debtors or some or all of them simultaneously (Article 1216, Civil Code).
That there exists a Comprehensive Surety Agreement between RCBC and respondent Ching is admitted. There is no escaping the attendant liability that binds respondent Ching, as Surety. He is charged as an original promissor by virtue of his primary obligation under the Suretyship Agreement. That Agreement is bare of words imputing to respondent Ching any liability other than that of a Surety who binds himself to insure a debt in his personal capacity, lacking consideration therefor notwithstanding (p. 94, Original Record). That respondent Ching acted for and on behalf of respondent PBM as part of its usual corporate procedure is not supported by the evidence nor the pleadings on record, nor the Agreement itself .We can not give any additional meaning to the plain language of the subject agreement. It is basic that the parties are bound by the terms of their contract, which is the law between them. As held in Zenith Insurance Corporation vs. Court of
Appeals , the extent of a surety's liability is determined only by the
clause of the contract of suretyship. It cannot be extended by implication, beyond the terms of the contract. Conversely, liability therefor may not be restricted unless expressly so stated.
Neither can respondent Ching seek refuge behind the SEC injunctive Order. Under Section 3 of P.D. 902-A, as amended by P.D. 1758, the Commission is given absolute jurisdiction, supervision and control only over corporations or associations, which are grantees of a primary franchise and/or a license or permit issued by the government to operate in the Philippines. The SEC injunctive Order can not effect a suspension of payment of respondent Surety's due and demandable obligation, it being clear therefrom that the rehabilitation receivers were limited "to tak(ing) custody and control over all the existing assets and property of PBM." Nothing in said Order puts respondent Ching within its scope. To further avoid payment of their obligation, PBM and Ching allege a customary extension given by petitioner in PBM's favor, which, it is averred, must necessarily benefit the Surety. Suffice it to say that the summary judgment made by the lower Court offers an acceptable explanation finding respondents' obligation as matured and demandable. Thus:
The trust receipts from No. 2042 to 2100 in the schedule (pages 2 and 3, complaint) shows that the maturity dates thereof vary from May 12, 1981 at the latest and February 19, 1981 at the earliest. The alleged agreement to extend, granting its existence, obviously would have had a much earlier date than the maturity dates of the trust receipts and considering that the instant case was brought on August 7, 1981, there should have been, to say the least,
representation made prior to the maturity dates or at least on the dates of maturity thereof. But it has not even been alleged by defendants that such representations were made by defendants. It is too far fetched to rule that the Court will grant an extension of time to pay, when no such extension has ever been requested by defendants. The obligation, therefore, is covered by Article 1193 of the Civil Code and hence, demandable when the day comes (pp. 199-200, Original Record).
The lower Court correctly found the case to be without any genuine issue of fact and ripe for summary judgment. Respondents' bare allegation of customary extensions is not corroborated by any documentary evidence but remains plain self-serving assertions.
In fine, the SEC injunctive Order is of no effect as far as the respondent Surety, Alfredo Ching, is concerned. He can be sued separately to
enforce his liability as Surety for PBM (Traders Royal Bank vs. Court of Appeals, et al. G.R. No. 78412, September 26, 1989).
WHEREFORE, the Decision of the Court of Appeals, dated 30 June 1988, and its Resolution denying reconsideration thereof, dated 6 October 1988, are SET ASIDE. The judgment of the lower Court is hereby REINSTATED and made executory as far as respondent, Alfredo Ching, is concerned.
Costs against private respondents, Philippine Blooming Mills and Alfredo Ching.
G.R. No. 155173 November 23, 2004
LAFARGE CEMENT PHILIPPINES, INC., (formerly Lafarge Philippines, Inc.), LUZON CONTINENTAL LAND
CORPORATION, CONTINENTAL OPERATING CORPORATION and PHILIP ROSEBERG, petitioners, vs.
CONTINENTAL CEMENT CORPORATION, GREGORY T. LIM and ANTHONY A. MARIANO, respondents.
PANGANIBAN, J.:
May defendants in civil cases implead in their counterclaims persons who were not parties to the original complaints? This is the main question to be answered in this controversy.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to nullify the May 22, 20022 and the September 3, 2002 Orders3 of the Regional Trial Court (RTC) of Quezon City (Branch 80) in Civil Case No. Q-00-41103. The decretal portion of the first assailed Order reads:
"WHEREFORE, in the light of the foregoing as earlier stated, the plaintiff's motion to dismiss claims is granted. Accordingly, the defendants' claims against Mr. Lim and Mr. Mariano captioned as their counterclaims are dismissed."4
The second challenged Order denied petitioners' Motion for Reconsideration.
The Facts
Briefly, the origins of the present controversy can be traced to the Letter of Intent (LOI) executed by both parties on August 11, 1998, whereby Petitioner Lafarge Cement Philippines, Inc. (Lafarge) -- on behalf of its affiliates and other qualified entities, including Petitioner Luzon Continental Land Corporation (LCLC) -- agreed to purchase the cement business of Respondent Continental Cement Corporation (CCC). On October 21, 1998, both parties entered into a Sale and Purchase Agreement (SPA). At the time of the foregoing transactions, petitioners were well aware that CCC had a case pending with the Supreme Court. The case was docketed as GR No. 119712, entitled Asset Privatization Trust (APT) v. Court of Appeals and Continental Cement Corporation. In anticipation of the liability that the High Tribunal might adjudge against CCC, the parties, under Clause 2 (c) of the SPA, allegedly agreed to retain from the purchase price a portion of the contract price in the amount of P117,020,846.84 -- the equivalent of US$2,799,140. This amount was to be deposited in an interest-bearing account in the First National City Bank of New York (Citibank) for payment to APT, the petitioner in GR No. 119712.
However, petitioners allegedly refused to apply the sum to the payment to APT, despite the subsequent finality of the Decision in GR No. 119712 in favor of the latter and the repeated instructions of Respondent
CCC. Fearful that nonpayment to APT would result in the foreclosure, not just of its properties covered by the SPA with Lafarge but of several other properties as well, CCC filed before the Regional Trial Court of Quezon City on June 20, 2000, a "Complaint with Application for Preliminary Attachment" against petitioners. Docketed as Civil Case No. Q-00-41103, the Complaint prayed, among others, that petitioners be directed to pay the "APT Retained Amount" referred to in Clause 2 (c) of the SPA.
Petitioners moved to dismiss the Complaint on the ground that it violated the prohibition on forum-shopping. Respondent CCC had allegedly made the same claim it was raising in Civil Case No. Q-00-41103 in another action, which involved the same parties and which was filed earlier before the International Chamber of Commerce. After the trial court denied the Motion to Dismiss in its November 14, 2000 Order,
petitioners elevated the matter before the Court of Appeals in CA-GR SP No. 68688.
In the meantime, to avoid being in default and without prejudice to the outcome of their appeal, petitioners filed their Answer and Compulsory Counterclaims ad Cautelam before the trial court in Civil Case No. Q-00-41103. In their Answer, they denied the allegations in the Complaint. They prayed -- by way of compulsory counterclaims against Respondent CCC, its majority stockholder and president Gregory T. Lim, and its corporate secretary Anthony A. Mariano -- for the sums of (a)
P2,700,000 each as actual damages, (b) P100,000,000 each as exemplary damages, (c) P100,000,000 each as moral damages, and (d) P5,000,000 each as attorney's fees plus costs of suit.
Petitioners alleged that CCC, through Lim and Mariano, had filed the "baseless" Complaint in Civil Case No. Q-00-41103 and procured the Writ of Attachment in bad faith. Relying on this Court's pronouncement in Sapugay v. CA,5 petitioners prayed that both Lim and Mariano be held "jointly and solidarily" liable with Respondent CCC.
On behalf of Lim and Mariano who had yet to file any responsive pleading, CCC moved to dismiss petitioners' compulsory counterclaims on grounds that essentially constituted the very issues for resolution in the instant Petition.
Ruling of the Trial Court
On May 22, 2002, the Regional Trial Court of Quezon City (Branch 80) dismissed petitioners' counterclaims for several reasons, among which were the following: a) the counterclaims against Respondents Lim and Mariano were not compulsory; b) the ruling in Sapugay was not applicable; and c) petitioners' Answer with Counterclaims violated procedural rules on the proper joinder of causes of action.6
Acting on the Motion for Reconsideration filed by petitioners, the trial court -- in an Amended Order dated September 3, 20027 -- admitted some errors in its May 22, 2002 Order, particularly in its pronouncement that their counterclaim had been pleaded against Lim and Mariano only. However, the RTC clarified that it was dismissing the counterclaim insofar as it impleaded Respondents Lim and Mariano, even if it included CCC.
Hence this Petition.8
Issues
In their Memorandum, petitioners raise the following issues for our consideration:
"[a] Whether or not the RTC gravely erred in refusing to rule that Respondent CCC has no personality to move to dismiss petitioners' compulsory counterclaims on Respondents Lim and Mariano's behalf.
"[b] Whether or not the RTC gravely erred in ruling that (i) petitioners' counterclaims against Respondents Lim and Mariano are not compulsory; (ii) Sapugay v. Court of Appeals is inapplicable
here; and (iii) petitioners violated the rule on joinder of causes of action."9
For clarity and coherence, the Court will resolve the foregoing in reverse order.
The Court's Ruling The Petition is meritorious.
First Issue:
Counterclaims and Joinder of Causes of Action.
Petitioners' Counterclaims Compulsory
Counterclaims are defined in Section 6 of Rule 6 of the Rules of Civil Procedure as "any claim which a defending party may have against an opposing party." They are generally allowed in order to avoid a multiplicity of suits and to facilitate the disposition of the whole controversy in a single action, such that the defendant's demand may be adjudged by a counterclaim rather than by an independent suit. The only limitations to this principle are (1) that the court should have jurisdiction over the subject matter of the counterclaim, and (2) that it could acquire jurisdiction over third parties whose presence is essential for its adjudication.10
A counterclaim may either be permissive or compulsory. It is permissive "if it does not arise out of or is not necessarily connected with the subject matter of the opposing party's claim."11 A permissive counterclaim is essentially an independent claim that may be filed separately in another case.
A counterclaim is compulsory when its object "arises out of or is necessarily connected with the transaction or occurrence constituting the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction."12
Unlike permissive counterclaims, compulsory counterclaims should be set up in the same action; otherwise, they would be barred forever. NAMARCO v. Federation of United Namarco Distributors13 laid down the following criteria to determine whether a counterclaim is compulsory or permissive: 1) Are issues of fact and law raised by the claim and by the counterclaim largely the same? 2) Would res judicata bar a subsequent suit on defendant's claim, absent the compulsory counterclaim rule? 3) Will substantially the same evidence support or refute plaintiff's claim as well as defendant's counterclaim? 4) Is there any logical relation between the claim and the counterclaim? A positive answer to all four questions would indicate that the counterclaim is compulsory.
Adopted in Quintanilla v. CA14 and reiterated in Alday v. FGU Insurance Corporation,15 the "compelling test of compulsoriness" characterizes a counterclaim as compulsory if there should exist a "logical relationship" between the main claim and the counterclaim. There exists such a relationship when conducting separate trials of the respective claims of the parties would entail substantial duplication of time and effort by the parties and the court; when the multiple claims involve the same factual and legal issues; or when the claims are offshoots of the same basic controversy between the parties.
We shall now examine the nature of petitioners' counterclaims against respondents with the use of the foregoing parameters.
Petitioners base their counterclaim on the following allegations: "Gregory T. Lim and Anthony A. Mariano were the persons responsible for making the bad faith decisions for, and causing plaintiff to file this baseless suit and to procure an unwarranted writ of attachment, notwithstanding their knowledge that plaintiff has no right to bring it or to secure the writ. In taking such bad faith actions, Gregory T. Lim was motivated by his personal interests as
one of the owners of plaintiff while Anthony A. Mariano was motivated by his sense of personal loyalty to Gregory T. Lim, for which reason he disregarded the fact that plaintiff is without any valid cause.
"Consequently, both Gregory T. Lim and Anthony A. Mariano are the plaintiff's co-joint tortfeasors in the commission of the acts complained of in this answer and in the compulsory counterclaims pleaded below. As such they should be held jointly and solidarily liable as plaintiff's co-defendants to those compulsory
counterclaims pursuant to the Supreme Court's decision in Sapugay v. Mobil.
x x x x x x x x x
"The plaintiff's, Gregory T. Lim and Anthony A. Mariano's bad faith filing of this baseless case has compelled the defendants to engage the services of counsel for a fee and to incur costs of litigation, in amounts to be proved at trial, but in no case less than P5 million for each of them and for which plaintiff Gregory T. Lim and Anthony A. Mariano should be held jointly and solidarily liable.
"The plaintiff's, Gregory T. Lim's and Anthony A. Mariano's actions have damaged the reputations of the defendants and they should be held jointly and solidarily liable to them for moral damages of P100 million each.
"In order to serve as an example for the public good and to deter similar baseless, bad faith litigation, the plaintiff, Gregory T. Lim and Anthony A. Mariano should be held jointly and solidarily liable to the defendants for exemplary damages of P100 million each." 16 The above allegations show that petitioners' counterclaims for damages were the result of respondents' (Lim and Mariano) act of filing the Complaint and securing the Writ of Attachment in bad faith. Tiu Po v. Bautista17 involved the issue of whether the counterclaim that sought moral, actual and exemplary damages and attorney's fees against respondents on account of their "malicious and unfounded" complaint was compulsory. In that case, we held as follows:
"Petitioners' counterclaim for damages fulfills the necessary requisites of a compulsory counterclaim. They are damages claimed to have been suffered by petitioners as a consequence of the action filed against them. They have to be pleaded in the same action; otherwise, petitioners would be precluded by the judgment from invoking the same in an independent action. The pronouncement in Papa vs. Banaag (17 SCRA 1081) (1966) is in point:
"Compensatory, moral and exemplary damages, allegedly suffered by the creditor in consequence of the debtor's action, are also compulsory counterclaim barred by the dismissal of the debtor's action. They cannot be claimed in a subsequent action by the creditor against the debtor."
"Aside from the fact that petitioners' counterclaim for damages cannot be the subject of an independent action, it is the same evidence that sustains petitioners' counterclaim that will refute private respondent's own claim for damages. This is an additional factor that characterizes petitioners' counterclaim as compulsory."18 Moreover, using the "compelling test of compulsoriness," we find that, clearly, the recovery of petitioners' counterclaims is contingent upon the case filed by respondents; thus, conducting separate trials thereon will result in a substantial duplication of the time and effort of the court and the parties.
Since the counterclaim for damages is compulsory, it must be set up in the same action; otherwise, it would be barred forever. If it is filed concurrently with the main action but in a different proceeding, it would
be abated on the ground of litis pendentia; if filed subsequently, it would meet the same fate on the ground of res judicata.19
Sapugay v. Court of Appeals Applicable to the Case at Bar Sapugay v. Court of Appeals finds application in the present case. In Sapugay, Respondent Mobil Philippines filed before the trial court of Pasig an action for replevin against Spouses Marino and Lina Joel Sapugay. The Complaint arose from the supposed failure of the couple to keep their end of their Dealership Agreement. In their Answer with Counterclaim, petitioners alleged that after incurring expenses in anticipation of the Dealership Agreement, they requested the plaintiff to allow them to get gas, but that it had refused. It claimed that they still had to post a surety bond which, initially fixed at P200,000, was later raised to P700,000.
The spouses exerted all efforts to secure a bond, but the bonding companies required a copy of the Dealership Agreement, which respondent continued to withhold from them. Later, petitioners discovered that respondent and its manager, Ricardo P. Cardenas, had intended all along to award the dealership to Island Air Product Corporation.
In their Answer, petitioners impleaded in the counterclaim Mobil Philippines and its manager -- Ricardo P. Cardenas -- as defendants. They prayed that judgment be rendered, holding both jointly and severally liable for pre-operation expenses, rental, storage, guarding fees, and unrealized profit including damages. After both Mobil and Cardenas failed to respond to their Answer to the Counterclaim, petitioners filed a "Motion to Declare Plaintiff and its Manager Ricardo P. Cardenas in Default on Defendant's Counterclaim."
Among the issues raised in Sapugay was whether Cardenas, who was not a party to the original action, might nevertheless be impleaded in the counterclaim. We disposed of this issue as follows:
"A counterclaim is defined as any claim for money or other relief which a defending party may have against an opposing party. However, the general rule that a defendant cannot by a counterclaim bring into the action any claim against persons other than the plaintiff admits of an exception under Section 14, Rule 6 which provides that 'when the presence of parties other than those to the original action is required for the granting of complete relief in the determination of a counterclaim or cross-claim, the court shall order them to be brought in as defendants, if jurisdiction over them can be obtained.' The inclusion, therefore, of Cardenas in petitioners' counterclaim is sanctioned by the rules."20
The prerogative of bringing in new parties to the action at any stage before judgment is intended to accord complete relief to all of them in a single action and to avert a duplicity and even a multiplicity of suits thereby.
In insisting on the inapplicability of Sapugay, respondents argue that new parties cannot be included in a counterclaim, except when no complete relief can be had. They add that "[i]n the present case, Messrs. Lim and Mariano are not necessary for petitioners to obtain complete relief from Respondent CCC as plaintiff in the lower court. This is because Respondent CCC as a corporation with a separate [legal personality] has the juridical capacity to indemnify petitioners even without Messrs. Lim and Mariano."21
We disagree. The inclusion of a corporate officer or stockholder -- Cardenas in Sapugay or Lim and Mariano in the instant case -- is not premised on the assumption that the plaintiff corporation does not have the financial ability to answer for damages, such that it has to share its liability with individual defendants. Rather, such inclusion is based on the allegations of fraud and bad faith on the part of the corporate officer or stockholder. These allegations may warrant the piercing of the veil of
corporate fiction, so that the said individual may not seek refuge therein, but may be held individually and personally liable for his or her actions. In Tramat Mercantile v. Court of Appeals,22 the Court held that generally, it should only be the corporation that could properly be held liable. However, circumstances may warrant the inclusion of the personal liability of a corporate director, trustee, or officer, if the said individual is found guilty of bad faith or gross negligence in directing corporate affairs.
Remo Jr. v. IAC23 has stressed that while a corporation is an entity separate and distinct from its stockholders, the corporate fiction may be disregarded if "used to defeat public convenience, justify a wrong, protect fraud, or defend crime." In these instances, "the law will regard the corporation as an association of persons, or in case of two
corporations, will merge them into one." Thus, there is no debate on whether, in alleging bad faith on the part of Lim and Mariano the counterclaims had in effect made them "indispensable parties" thereto; based on the alleged facts, both are clearly parties in interest to the counterclaim.24
Respondents further assert that "Messrs. Lim and Mariano cannot be held personally liable [because their assailed acts] are within the powers granted to them by the proper board resolutions; therefore, it is not a personal decision but rather that of the corporation as represented by its board of directors."25 The foregoing assertion, however, is a matter of defense that should be threshed out during the trial; whether or not "fraud" is extant under the circumstances is an issue that must be established by convincing evidence.26
Suability and liability are two distinct matters. While the Court does rule that the counterclaims against Respondent CCC's president and manager may be properly filed, the determination of whether both can in fact be held jointly and severally liable with respondent corporation is entirely another issue that should be ruled upon by the trial court.
However, while a compulsory counterclaim may implead persons not parties to the original complaint, the general rule -- a defendant in a compulsory counterclaim need not file any responsive pleading, as it is deemed to have adopted the allegations in the complaint as its answer -- does not apply. The filing of a responsive pleading is deemed a voluntary submission to the jurisdiction of the court; a new party impleaded by the plaintiff in a compulsory counterclaim cannot be considered to have automatically and unknowingly submitted to the jurisdiction of the court. A contrary ruling would result in mischievous consequences whereby a party may be indiscriminately impleaded as a defendant in a compulsory counterclaim; and judgment rendered against it without its knowledge, much less participation in the proceedings, in blatant disregard of rudimentary due process requirements.
The correct procedure in instances such as this is for the trial court, per Section 12 of Rule 6 of the Rules of Court, to "order [such impleaded parties] to be brought in as defendants, if jurisdiction over them can be obtained," by directing that summons be served on them. In this manner, they can be properly appraised of and answer the charges against them. Only upon service of summons can the trial court obtain jurisdiction over them.
In Sapugay, Cardenas was furnished a copy of the Answer with Counterclaim, but he did not file any responsive pleading to the counterclaim leveled against him. Nevertheless, the Court gave due consideration to certain factual circumstances, particularly the trial court's treatment of the Complaint as the Answer of Cardenas to the compulsory counterclaim and of his seeming acquiescence thereto, as evidenced by his failure to make any objection despite his active participation in the proceedings. It was held thus:
"It is noteworthy that Cardenas did not file a motion to dismiss the counterclaim against him on the ground of lack of jurisdiction. While it is a settled rule that the issue of jurisdiction may be raised
even for the first time on appeal, this does not obtain in the instant case. Although it was only Mobil which filed an opposition to the motion to declare in default, the fact that the trial court denied said motion, both as to Mobil and Cardenas on the ground that Mobil's complaint should be considered as the answer to petitioners' compulsory counterclaim, leads us to the inescapable conclusion that the trial court treated the opposition as having been filed in behalf of both Mobil and Cardenas and that the latter had adopted as his answer the allegations raised in the complaint of Mobil. Obviously, it was this ratiocination which led the trial court to deny the motion to declare Mobil and Cardenas in default. Furthermore, Cardenas was not unaware of said incidents and the proceedings therein as he testified and was present during trial, not to speak of the fact that as manager of Mobil he would necessarily be interested in the case and could readily have access to the records and the pleadings filed therein.
"By adopting as his answer the allegations in the complaint which seeks affirmative relief, Cardenas is deemed to have recognized the jurisdiction of the trial court over his person and submitted thereto. He may not now be heard to repudiate or question that
jurisdiction."27
Such factual circumstances are unavailing in the instant case. The records do not show that Respondents Lim and Mariano are either aware of the counterclaims filed against them, or that they have actively participated in the proceedings involving them. Further, in dismissing the counterclaims against the individual respondents, the court a quo -- unlike in Sapugay -- cannot be said to have treated Respondent CCC's Motion to Dismiss as having been filed on their behalf.
Rules on Permissive Joinder of Causes of Action or Parties Not Applicable
Respondent CCC contends that petitioners' counterclaims violated the rule on joinder of causes of action. It argues that while the original Complaint was a suit for specific performance based on a contract, the counterclaim for damages was based on the tortuous acts of
respondents.28 In its Motion to Dismiss, CCC cites Section 5 of Rule 2 and Section 6 of Rule 3 of the Rules of Civil Procedure, which we quote:
"Section 5. Joinder of causes of action. – A party may in one pleading assert, in the alternative or otherwise, as many causes of action as he may have against an opposing party, subject to the following conditions:
(a) The party joining the causes of action shall comply with the rules on joinder of parties; x x x"
Section 6. Permissive joinder of parties. – All persons in whom or against whom any right to relief in respect to or arising out of the same transaction or series of transactions is alleged to exist whether jointly, severally, or in the alternative, may, except as otherwise provided in these Rules, join as plaintiffs or be joined as defendants in one complaint, where any question of law or fact common to all such plaintiffs or to all such defendants may arise in the action; but the court may make such orders as may be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection with any proceedings in which he may have no interest." The foregoing procedural rules are founded on practicality and
convenience. They are meant to discourage duplicity and multiplicity of suits. This objective is negated by insisting -- as the court a quo has done -- that the compulsory counterclaim for damages be dismissed, only to have it possibly re-filed in a separate proceeding. More important, as we have stated earlier, Respondents Lim and Mariano are real parties in interest to the compulsory counterclaim; it is imperative that they be joined therein. Section 7 of Rule 3 provides:
"Compulsory joinder of indispensable parties. – Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants."
Moreover, in joining Lim and Mariano in the compulsory counterclaim, petitioners are being consistent with the solidary nature of the liability alleged therein.
Second Issue:
CCC's Personality to Move to Dismiss the Compulsory Counterclaims Characterizing their counterclaim for damages against Respondents CCC, Lim and Mariano as "joint and solidary," petitioners prayed:
"WHEREFORE, it is respectfully prayed that after trial judgment be rendered:
"1. Dismissing the complaint in its entirety;
"2. Ordering the plaintiff, Gregory T. Lim and Anthony A. Mariano jointly and solidarily to pay defendant actual damages in the sum of at least P2,700,000.00;
"3. Ordering the plaintiff, Gregory T. Lim and Anthony A, Mariano jointly and solidarily to pay the defendants LPI, LCLC, COC and Roseberg:
"a. Exemplary damages of P100 million each; "b. Moral damages of P100 million each; and
"c. Attorney's fees and costs of suit of at least P5 million each. Other reliefs just and equitable are likewise prayed for."29 Obligations may be classified as either joint or solidary. "Joint" or "jointly" or "conjoint" means mancum or mancomunada or pro rata obligation; on the other hand, "solidary obligations" may be used interchangeably with "joint and several" or "several." Thus, petitioners' usage of the term "joint and solidary" is confusing and ambiguous. The ambiguity in petitioners' counterclaims notwithstanding,
respondents' liability, if proven, is solidary. This characterization finds basis in Article 1207 of the Civil Code, which provides that obligations are generally considered joint, except when otherwise expressly stated or when the law or the nature of the obligation requires solidarity.
However, obligations arising from tort are, by their nature, always solidary. We have assiduously maintained this legal principle as early as 1912 in Worcester v. Ocampo,30 in which we held:
"x x x The difficulty in the contention of the appellants is that they fail to recognize that the basis of the present action is tort. They fail to recognize the universal doctrine that each joint tort feasor is not only individually liable for the tort in which he participates, but is also jointly liable with his tort feasors. x x x
"It may be stated as a general rule that joint tort feasors are all the persons who command, instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the commission of a tort, or who approve of it after it is done, if done for their benefit. They are each liable as principals, to the same extent and in the same manner as if they had performed the wrongful act themselves. x x x "Joint tort feasors are jointly and severally liable for the tort which they commit. The persons injured may sue all of them or any number less than all. Each is liable for the whole damages caused by all, and all together are jointly liable for the whole damage. It is no defense for one sued alone, that the others who participated in the wrongful act are not joined with him as defendants; nor is it any excuse for him that his participation in the tort was insignificant as compared to that of the others. x x x
"Joint tort feasors are not liable pro rata. The damages can not be apportioned among them, except among themselves. They cannot
insist upon an apportionment, for the purpose of each paying an aliquot part. They are jointly and severally liable for the whole amount. x x x
"A payment in full for the damage done, by one of the joint tort feasors, of course satisfies any claim which might exist against the others. There can be but satisfaction. The release of one of the joint tort feasors by agreement generally operates to discharge all. x x x "Of course the court during trial may find that some of the alleged tort feasors are liable and that others are not liable. The courts may release some for lack of evidence while condemning others of the alleged tort feasors. And this is true even though they are charged jointly and severally."
In a "joint" obligation, each obligor answers only for a part of the whole liability; in a "solidary" or "joint and several" obligation, the relationship between the active and the passive subjects is so close that each of them must comply with or demand the fulfillment of the whole
obligation.31 The fact that the liability sought against the CCC is for specific performance and tort, while that sought against the individual respondents is based solely on tort does not negate the solidary nature of their liability for tortuous acts alleged in the counterclaims. Article 1211 of the Civil Code is explicit on this point:
"Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by the same periods and
conditions."
The solidary character of respondents' alleged liability is precisely why credence cannot be given to petitioners' assertion. According to such assertion, Respondent CCC cannot move to dismiss the counterclaims on grounds that pertain solely to its individual co-debtors.32 In cases filed by the creditor, a solidary debtor may invoke defenses arising from the nature of the obligation, from circumstances personal to it, or even from those personal to its co-debtors. Article 1222 of the Civil Code provides: "A solidary debtor may, in actions filed by the creditor, avail itself of all defenses which are derived from the nature of the obligation and of those which are personal to him, or pertain to his own share. With respect to those which personally belong to the others, he may avail himself thereof only as regards that part of the debt for which the latter are responsible." (Emphasis supplied).
The act of Respondent CCC as a solidary debtor -- that of filing a motion to dismiss the counterclaim on grounds that pertain only to its individual co-debtors -- is therefore allowed.
However, a perusal of its Motion to Dismiss the counterclaims shows that Respondent CCC filed it on behalf of Co-respondents Lim and Mariano; it did not pray that the counterclaim against it be dismissed. Be that as it may, Respondent CCC cannot be declared in default.
Jurisprudence teaches that if the issues raised in the compulsory counterclaim are so intertwined with the allegations in the complaint, such issues are deemed automatically joined.33 Counterclaims that are only for damages and attorney's fees and that arise from the filing of the complaint shall be considered as special defenses and need not be answered.34
CCC's Motion to Dismiss the Counterclaim on Behalf of Respondents Lim and Mariano Not Allowed
While Respondent CCC can move to dismiss the counterclaims against it by raising grounds that pertain to individual defendants Lim and Mariano, it cannot file the same Motion on their behalf for the simple reason that it lacks the requisite authority to do so. A corporation has a legal personality entirely separate and distinct from that of its officers and cannot act for and on their behalf, without being so authorized. Thus, unless expressly adopted by Lim and Mariano, the Motion to Dismiss the compulsory counterclaim filed by Respondent CCC has no force and effect as to them.
In summary, we make the following pronouncements:
1. The counterclaims against Respondents CCC, Gregory T. Lim and Anthony A. Mariano are compulsory.
2. The counterclaims may properly implead Respondents Gregory T. Lim and Anthony A. Mariano, even if both were not parties in the original Complaint.
3. Respondent CCC or any of the three solidary debtors (CCC, Lim or Mariano) may include, in a Motion to Dismiss, defenses available to their co-defendants; nevertheless, the same Motion cannot be deemed to have been filed on behalf of the said co-defendants.
4. Summons must be served on Respondents Lim and Mariano before the trial court can obtain jurisdiction over them. WHEREFORE, the Petition is GRANTED and the assailed Orders REVERSED. The court of origin is hereby ORDERED to take cognizance of the counterclaims pleaded in petitioners' Answer with Compulsory Counterclaims and to cause the service of summons on Respondents Gregory T. Lim and Anthony A. Mariano. No costs. SO ORDERED.
G.R. No. L-11307 October 5, 1918 ROMAN JAUCIAN, plaintiff-appellant, vs.
FRANCISCO QUEROL, administrator of the intestate estate of the deceased Hermenegildo Rogero,defendant-appellee.
STREET, J.:
This appeal by bill of exceptions was brought to reverse a judgment of the Court of First Instance of the Province of Albay whereby said court has refused to allow a claim in favor of the plaintiff, Roman Jaucian, against the state of Hermenegilda Rogero upon the facts hereinbelow stated.
In October, 1908, Lino Dayandante and Hermenegilda Rogero executed a private writing in which they acknowledged themselves to be indebted to Roman Jaucian in the sum of P13,332.33. The terms of this obligation are fully set out at page 38 of the bill of exceptions. Its first clause is in the following words:
We jointly and severally acknowledge our indebtedness in the sum of P13,332.23 Philippine currency (a balance made October 23, 1908) bearing interest at the rate of 10 per cent per annum to Roman Jaucian, of age, a resident of the municipality of Ligao, Province of Albay, Philippine Islands and married to Pilar Tell. Hermenegilda Rogero signed this document in the capacity of surety for Lino Dayandante; but as clearly appears from the instrument itself both debtors bound themselves jointly and severally to the creditor, and there is nothing in the terms of the obligation itself to show that the relation between the two debtors was that of principal and surety. In November, 1909, Hermenegilda Rogero brought an action in the Court of First Instance of Albay against Jaucian, asking that the document in question be canceled as to her upon the ground that her signature was obtained by means of fraud. In his answer to the complaint, Jaucian, by was of cross-complaint, asked for judgment against the plaintiff for the amount due upon the obligation, which appears to have matured at that time. Judgment was rendered in the
Court of First Instance in favor of the plaintiff, from which judgment the defendant appealed to the Supreme Court.
In his appeal to this court, Jaucian did not assign as error the failure of the lower court to give him judgment on his cross-demand, and therefore the decision upon the appeal was limited to the issues
concerning the validity of the document.
While the case was pending in the Supreme Court, Hermenegilda Rogero died and the administrator of her estate was substituted as the party plaintiff and appellee. On November 25, 1913, the Supreme Court rendered in its decision reversing the judgment of the trial court and holding that the disputed claim was valid. 1
During the pendency of the appeal, proceedings were had in the Court of First Instance of Albay for the administration of the estate of
Hermenegilda Rogero; Francisco Querol was named administrator; and a committee was appointed to pass upon claims against the estate. This committee made its report on September 3, 1912. On March 24, 1914, or about a year and half after the filing of the report of the committee on claims against the Rogero estate, Jaucian entered an appearance in the estate proceedings, and filed with the court a petition in which he averred the execution of the document of October, 1908, by the deceased, the failure of her co-obligor Dayandante, to pay any part of the debt, except P100 received from him in March, 1914, and the complete insolvency of Dayandante. Upon these facts Jaucian prayed the court for an order directing the administrator of the Rogero estate to pay him the principal sum of P13,332.33, plus P7,221.66, as interest thereon from October 24, 1908, to March 24, 1914, with interest on the principal sum of
P13,332.33, plus P7,221.66, as interest thereon from October 24, 1908, to March 24, 1914, with interest on the principal sum from March 24, 1914, at 10 per cent per annum, until paid.
A copy of this petition was served upon the administrator of the estate, who, on March 30, 1914, appeared by his attorney and opposed the granting of the petition upon the grounds that the claim had never been presented to the committee on claims for allowance; that more than eighteen months had passed since the filing of the report of the
committee, and that the court was therefore without jurisdiction to entertain the demand of the claimant. A hearing was had upon the petition before the Honorable P.M. Moir, then sitting in the Court of First Instance of Albay. On April 13, 1914, he rendered his decision, in which, after reciting the facts substantially as above set forth, he said:
During the pendency of that action (the cancellation suit) in the Supreme Court Hermenegilda Rogero died, and Francisco Querol was named administrator of the estate, and he was made a party defendant to the action then pending in the Supreme Court. As such he had full knowledge of the claim presented and was given an opportunity to make his defense. It is presumed that defense was made in the Supreme Court.
No contingent claim was filed before the commissioners by Roman Jaucian, who seems to have rested content with the action pending. Section 746 et seq. of the Code of Civil Procedure provides for the presentation of contingent claims, against the estate. This claim is a contingent claim, because, according to the decision of the Supreme Court, Hermenegilda Rogero was a surety of Lino Dayandante. The object of presenting the claim to the commissioners is simply to allow them to pass on the claim and to give the administrator an opportunity to defend the estate against the claim. This having been given by the administrator defending the suit in the Supreme Court, the court considers this a substantial
compliance with the law, and the said defense having been made by the administrator, he cannot now come into court and hide behind a technicality and say that the claim had not been presented to the commissioners and that, the commissioners having long since made report, the claim cannot be referred to the commissioners and therefore the claim of Roman Jaucian is barred. The court considers that paragraph (e) of the opposition is well-taken and that there must be legal action taken against Lino Dayandante to determine whether or not he is insolvent, and that declaration under oath to the effect that he has no property except P100 worth of property, which he has ceded to Roman Jaucian, is not sufficient.
Hermenegilda Rogero having been simply surety for Lino Dayandante, the administrator has a right to require that Roman Jaucian produce a judgment for his claim against Lino Dayandante, in order that the said administrator may be subrogated to the rights of Jaucian against Dayandante. The simple affidavit of the principal debtor that he had no property except P100 worth of property which he has ceded to the creditor is not sufficient for the court to order the surety to pay the debt of the principal. When this action shall have been taken against Lino Dayandante and an execution returned "no effects," then the claim of Jaucian against the estate will be ordered paid or any balance that may be due to him.
Acting upon the suggestions contained in this order Jaucian brought an action against Dayandante and recovered a judgment against him for the full amount of the obligation evidenced by the document of October 24, 1908. Execution was issued upon this judgment, but was returned by the sheriff wholly unsatisfied, no property of the judgment debtor having been found.
On October 28, 1914, counsel for Jaucian filed another petition in the proceedings upon the estate of Hermenegilda Rogero, in which they averred, upon the grounds last stated, that Dayandante was insolvent, and renewed the prayer of the original petition. It was contended that the court, by its order of April 13, 1914, had "admitted the claim."
The petition was again opposed by the administrator of the estate upon the grounds (a) that the claim was not admitted by the order of April 13, 1914, and that "the statement of the court with regard to the admissibility of the claim was mere dictum," and (b) "that the said claim during the life and after the death of Hermenegilda Rogero, which occurred on August 2, 1911, was a mere contingent claim against the property of the said Hermenegilda Rogero, was not reduced to judgment during the lifetime of said Hermenegilda Rogero, and was not presented to the commissioners on claims during the period of six months from which they were appointed in this estate, said commissioner having given due and lawful notice of their sessions and more than one year having expired since the report of the said commissioners; and this credit is outlawed or prescribed, and that this court has no jurisdiction to consider this claim."
On November 24, 1914, the Honorable J. C. Jenkins, then sitting in the Court of First Instance of Albay, after hearing argument, entered an order refusing to grant Jaucian's petition. To this ruling the appellant excepted and moved for a rehearing. On December 11, 1914, the judge a
quo entered an order denying the rehearing and setting forth at length,
the reasons upon which he based his denial of the petition. These grounds were briefly, that as the claim had never been presented to the committee on claims, it was barred; that the court had no jurisdiction to entertain it; that the decision of the Supreme Court in the action brought by the deceased against Jaucian did not decide anything except that the document therein disputed was a valid instrument.
