JAN

Inchausti vs. Yulo

Inchausti vs. Yulo

GR No. L-7721

FACTS:
1. Suit is for recovery balance of a current account opened Inchausti & Company with Teodoro
Yulo and after his death continued with his widow and children, whose principal representative is
Gregorio Yulo.
2. TEODORO YULO: property owner of Iloilo, for exploitation of haciendas in Occidental
Negros, had been borrowing money from Inchausti & Company under specific conditions.
1. Died and appointed widow and SONS as administrators including GREGORIO
YULO.
                            i.     Held conjugal property in common
                           ii.     At the death of widow, Gregoria Regalado, children preserved the same relations under the name of
HIJOS DE T. YULO
1.   Continued current account with Inchausti & Company until balance amounted to P200,000. In for the
payment of the disbursements of money which until that time it had been making in favor of its
debtors, the Yulos.
2. Children are: Pedro, Francisco, Teodoro, Manuel, Gregorio, Mariano, Carmen,
Concepcion, and Jose Yulo y Regalado.
                            i.     Concepcion and Jose were minors
                           ii.     Teodoro was mentally incompetent.
3. 1908, GREGORIO YULO (representing his brothers Pedro, Manuel and Carme,
executed notarial document whereby all admitted their indebtedness to Inchausti & Company in the
sum of P203,221.27.
th
                            i.     To secure with 10% interest per annum, they mortgaged an undivided 6/9  of their 38 rural
properties, remaining urban properties, lorchas, and family credits which were listed
1.   Obligated themselves to make a formal inventory and to describe all properties, and to cure all
defects which might prevent the inscription of the said contract in the registry of property and to
extend by the necessary formalities the aforesaid mortgage over the remaining 3/9 th of all the
property and rights belonging to their other brothers, the incompetent Teodoro, and the minors
Concepcion and Jose.

4. 1909, GREGPRIO YULO, REPRESENTING HIJOS DE YULO ANSWERED LETTER

OF INCHAUSTI IN THESE TERMS:
                            i.     "With your favor of the 2d inst. we have received an abstract of our current account with your
important firm, closed on the 31st of last December, with which we desire to express our entire
conformity as also with the balance in your favor of P271,863.12.”
                           ii.     INCHAUSTI informed Hijos de T. Yulo of the reduction of balance to P253,445.42.
1.   HIJOS T. YULO expressed its conformity by means of a letter, proving that mortgage credit was
formalized. 
 5. 1909, GREGORIO YULO, FOR HIMSELF AND REPRESENTING MANUEL and
PEDRO, FRANCISCO, CARMEN AND CONCEPCION in their OWN BEHALF (now of legal age)
executed affidavit ratifying their admission on their indebtedness to INCHAUSTI:
                            i.     P253,445.42 with 10% interest per annum
                           ii.     To be paid in 5 installments at the rate of P50,000, except last being P53,445.42
                         iii.     Payment beginning June 30, 1910, continuing successively on the 30th of each June until the last
payment on June 30, 1914.
                         iv.     Among other clauses, they expressly stipulated the following:
1. Default in payment of any of the installments or the noncompliance of any of the other obligations will
result in the maturity of all the said installments
2.   INCHAUSTI may exercise at once all the rights and actions to obtain the immediate and total
payment of debt, in same manner that they would have so done at the maturity of the said
installments.
3.  All the obligations will be understood as having been contradicted  in solidum by all of us, the Yulos,
brothers and sisters.
4.   Agreed that this instrument shall be confirmed and ratified in all its parts, within the present week, by
our brother Don Mariano Yulo y Regalado who resides in Bacolod, otherwise it will not be binding on
INCHAUSTI who can make use of their rights to demand and obtain immediate payment of their
credit without any further extension or delay, in accordance with what we have agreed.
5.   This instrument was neither ratified nor confirmed by Mariano Yulo.

3. YULOS did not pay the first installment of the obligation.

1. INCHAUSTI brought an ordinary action against Gregorio Yulo for the payment of
P253,445.42 with 10% interest per annum on that date aggregating P42,944.76.
4. 1911, FRANCISCO, MANUEL, and CARMEN Yulo executed another affidavit in recognition
of the debt and obligation of payment in the following terms:
1. Debt is reduce for them to P225,000
2. Interest is reduced 6% per annum from March 15, 1911
3. Installments are increase to eight, 1st of P20,000, beginning on June 30, 1911, and
the rest of P30,000 each on the same date of each successive year until the total obligation shall be
finally and satisfactorily paid on June 30, 1919
4. If any of the partial payments specified in the foregoing clause be not paid at its
maturity, the amount of the said partial payment together with its interest shall bear 15% interest per
annum from the date of said maturity, without the necessity of demand until its complete payment
5. If during 2 consecutive years the partial payments agreed upon be not made, they
shall lose the right to make use of the period granted to them for the payment of the debt or the part
thereof which remains unpaid, and INCHAUSTI may consider the total obligation due and
demandable, and proceed to collect the same together with the interest for the delay above
stipulated through all legal means.
6. ADDITION STIPULATION: Inchausti & Co. should include in their suit brought in the
CFI of Iloilo against Gregorio Yulo, his brother and joint co-obligee, Pedro Yulo:
                            i.     FRANCISCO, MANUEL AND CARMEN will procure by all legal means and in the least time possible
a judgment in their favor against the said Don Gregorio and Don Pedro, sentencing the later to pay
the total amount of the obligation acknowledged by them in August 12, 1909 affidavit
                           ii.     If they should deem it convenient for their interests, Don Francisco, Don Manuel, and Doña Carmen
Yulo may appoint an attorney to cooperate with the lawyers of Inchausti & Company in the
proceedings of the said case. 

5. GREGORIO YULO ASNWERED THE COMPLAINT:

1. An accumulation of interest had taken place and that compound interest was asked
for the Philippine currency at par with Mexican
 2. IN August 21, 1909 affidavit, 2 conditions were agreed (one approved by Court of
First Instance) and the other ratified and confirmed by the other brother Mariano Yulo, neither of
which was complied with
3. With regard to the same debt claims were presented before the commissioners in the
special proceedings over the inheritances of Teodoro Yulo and Gregoria Regalado, though later they
were dismissed, pending the present suit
4. August 12, 1909 affidavit, was novated by that of May 12, 1911, executed by Manuel,
Francisco and Carmen Yulo.
6. COURT DECIDED IN FAVOR OF GREGORIO/MARIANO YULO. INCHAUSTI pay with
costs.

ISSUE:
WON INCHAUSTI can sue Gregorio alone, here being other obligors. YES.

WON INCHAUSTI lost its right for agreeing with other obligors in the reduction of debt, proroguing
(discontinuing) the obligation and the extension for time of payment, in accordance with May 12
1911 affidavit. NO.

WON THE CONTRACT with the 3 obligors constitute a novation (substitution) of Aug 12 1909
affidavit, entered into the 6 debtors who assumed the payment of P253,445.42. NO.
      If not, WON it has any effect in the action brought and in this present suit. YES.

HELD:
GREGORIO YULO TO PAY INCHAUSTI P112, 500 WITH INTEREST STIPULATD IN MAY 12 1911
AFFIDAVIT, FROM MARCH 15 1911 AND THE LEGL INTEREST ON THIS INTEREST DUE,
JUDGMENT APPEALED FROM IS REVERSED. NO SPECIAL FINDING AS TO COST.
1. WON INCHAUSTI CAN SUE GREGORIO ALONE? YES.
1. Debtors having obligated themselves in solidum, creditor can bring action to any one
of them.
                            i.     When the obligation is constituted as a conjoint and solidary obligation, each one of debtors is bound
to perform in full the undertaking which is the subject matter of the obligation.

2. WON INCHAUSTI lost its right for agreeing with other obligors? NO.
1. Even though the creditor may have stipulated with some of the solidary debtors
diverse installments and conditions, as in this case, INCHAUSTI did with its debtors Manuel,
Francisco, and Carmen Yulo through the instrument of May 12, 1911, this does not lead to the
conclusion that the solidarity stipulated in the instrument of August 12, 1909 is broken, as we already
know the law provides that "solidarity may exist even though the debtors are not bound in the same
manner and for the same periods and under the same conditions."

3. WON THE CONTRACT with the 3 obligors constitute a novation (substitution) of Aug 12
1909 affidavit? NO.
1. The May 12 1911 contract does not substitute the former one (Aug 1909) because:
                            i.     “In order that an obligation may be extinguished by another which substitutes it, it is necessary that it
should be so expressly declared or that the old and the new be incompatible in all points" (Civil
Code, article 1204)
2. May 12, 1911 instrument, far from expressly declaring that the obligation of the three
who executed it substitutes the former signed by Gregorio Yulo and the other debtors, expressly and
clearly stated that the said obligation of Gregorio Yulo to pay P253,000 sued for exists.
3. The suit must continue its course and, if necessary, these three parties who
executed the contract of May 12, 1911, would cooperate in order that the action against Gregorio
 Yulo might prosper, with other undertakings concerning the execution of the judgment which might
be rendered against Gregorio Yulo in this same suit.
4. "It is always necessary to state that it is the intention of the contracting parties to
extinguish the former obligation by the new one" (Judgment in cassation, July 8, 1909).
5. There exist no incompatibility between the old and the new obligation.

4. If not, WON it has any effect in the action brought and in this present suit. Total amount;
amount due; demandable amount respectively.
1. "What effect could this contract have over the rights and obligations of the defendant
Gregorio Yulo with respect to the plaintiff company?
                            i.     The obligation being solidary, the remission of any part of the debt made by a creditor in favor of one
or more of the solidary debtors necessarily benefits the others, and therefore there can be no doubt
that, in accordance with the provision of article 1143 of the Civil Code, the defendant has the right to
enjoy the benefits of the partial remission of the debt granted by the creditor."
2. May 12, 1911 contract has not novated that of August 12, 1909
                            i.     It has affected that contract and the outcome of the suit brought against Gregorio Yulo alone for the
sum of P253,445.42;
                           ii.     In consequence the amount stated in the contract of August 12, 1909, cannot be recovered but only
that stated in the contract of May 12, 1911
                         iii.     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.

5. If the later contract is recognized over the earlier one, should such efficacy not likewise be
recognized concerning the maturity of the same?
1. If Francisco, Manuel, and Carmen had been included in the suit, they could have
alleged the defense of the non-maturity of the installments since the first installment did not mature
until June 30, 1912, and without the least doubt the defense would have prospered, and the three
would have been absolved from the suit.
2. Cannot this defense of the prematurity of the action, which is implied in the last
special defense set up in the answer of the defendant Gregorio Yulo be made available to him in this
proceeding?
                            i.     Gregorio Yulo cannot allege “prematurity of contract” as defense.
1.   When the suit was brought on March 27, 1911, the first installment of the obligation had already
matured of June 30, 1910, and with the maturity of this installment, the first not having been paid, the
whole debt had become mature, according to the express agreement of the parties, independently of
the resolutory condition which gave the creditor the right to demand the immediate payment of the
whole debt upon the expiration of the stipulated term of one week allowed to secure from Mariano
Yulo the ratification and confirmation of the contract of August 12, 1909.
                           ii.     Cannot invoke exception for the shares of his solidary co-debtors Pedro and Concepcion Yulo, they
being in identical condition as he.
                         iii.     None of Francisco, Manuel, and Carmen Yulo’s obligations have been matured.
                         iv.     The part of the debt for which these three are responsible is three-sixths of P225,000 or P112,500, so
that Gregorio Yulo may claim that, even acknowledging that the debt for which he is liable is
P225,000, nevertheless not all of it can now be demanded of him, for that part of it which pertained
to his co-debtors is not yet due, a state of affairs which not only prevents any action against the
persons who were granted the term which has not yet matured, but also against the other solidary
debtors who being ordered to pay could not now sue for a contribution, and for this reason the action
will be only as to the P112,500.         
                           v.     Against the propriety and legality of a judgment against Gregorio Yulo for this sum, to wit, the three-
sixths part of the debt which forms the subject matter of the suit, we do not think that there was any
reason or argument offered which sustains an opinion that for the present it is not proper to order
him to pay all or part of the debt, the object of the action. 
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1.
JAN

Gaite vs. Fonacier

Gaite vs. Fonacier

 GR. No. L-11827

FACTS:
1. FONACIER: OWNER OF DAWAHAN GROUP (11 iron lode mineral claims)
1. Appointed GAITE (attorney-in-fact) to enter to contract with any
individual/juridical person for development of mining claims in a royalty basis of not less than
P.50/ton.
2. GAITE: executed general assignment conveying development and exploitation of
mining claims into LARAP IRON MINES (single proprietorship owned by him)
1. Paved roads, development and facilities
2. Extracted 24,000 metric tons of iron ore
2. FONACIER: revoked GAITE authority
1. Revocation of Power of Attorney and Contract
2. GAITE assented subject to certain conditions:
                            i.     Consideration of P20,000.00, plus 10% of the royalties that Fonacier would receive from the mining
claims
                           ii.     All his rights and interests on all the roads, improvements, and facilities in or outside said claims,
                         iii.     Right to use the business name "Larap Iron Mines" and its goodwill, and all the records and
documents relative to the mines.
                         iv.     Gaite transferred to Fonacier all his rights and interests over the "24,000 tons of iron ore, more or
less" that the former had already extracted from the mineral claims
1.   In consideration of the sum of P75,000.00, P10,000.00 of which was paid upon the signing of the
agreement
2.   P65,000 will be paid from and out of the first letter of credit covering the first shipment of iron ores
and of the first amount derived from the local sale of iron ore made by the Larap Mines & Smelting
Co. Inc.
3. To secure P65,000, Fonacier promised to execute in favor of Gaite a surety
bond with himself (Fonacier) as principal and the Larap Mines and Smelting Co. and its stockholders
George Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante, and Fernando Ty as
sureties (Exhibit "A-1").
                            i.     GAITE REFUSED TO SIGN REVOCATION unless another bond under written by a bonding
company was put up by defendants to secure the payment of the P65,000 balance.
1.   Hence, a second bond with Far Eastern Surety and Insurance Co. as additional surety
a.    Provided liability of the surety company would attach only when there had been an actual sale of iron
ore by the Larap Mines & Smelting Co. for an amount of not less then P65,000.00
b.   Liability of said surety company would automatically expire on December 8, 1955.
c.    Both bonds were attached to the "Revocation of Power of Attorney and Contract", Exhibit "A", and
made integral parts thereof.
4. On same day Fonacier revoked the power of attorney and entered into a
"Contract of Mining Operation", ceding, transferring, and conveying unto the Larap Mines and
Smelting Co., Inc. the right to develop, exploit, and explore the mining claims, together with "Larap
Iron Mines"
                            i.     Also transferred 24,000 tons of iron ore from Gaite, to the Larap & Smelting Co
4. 2nd BOND EXPIRED, no sale of the approximately 24,000 tons of iron ore had been
made by the Larap Mines & Smelting Co., Inc., nor had the P65,000.00 balance of the price of said
ore been paid to Gaite by Fonacier.
1. GAITE filed the present complaint.
2. DEFENSE: obligation sued upon by Gaite was subject to condition that
P65,000 would be payable out of the first letter of credit covering the first shipment of iron ore and/or
the first amount derived from the local sale of the iron ore by the Larap Mines & Smelting Co., Inc.;
                            i.     No sale of the iron ore had been made
1.   Hence the condition had not yet been fulfilled
2.   Obligation was not yet due and demandable.
                           ii.     FONACIER: only 7,573 of 24,000 tons of iron ore sold to him by Gaite was actually delivered

5. ISSUES WITH LOWER COURT:

1. WON obligation of P65,000 is due and demandable.
                            i.     LOWER COURT HELD obligation was held WITH TERM: It would be paid upon sale of sufficient iron
ore by defendants within one year, obligation became due and demandable under Article 1198 of the
New Civil Code.
2. WON 24,000 metric tons is existing.
3. LOWER COURT SIDED WITH GAITE.

ISSUES:
WON lower court erred in holding that the obligation of appellant Fonacier to pay appellee Gaite the
P65,000.00 IS ONE WITH PERIOD/TERM OR A SUSPENSIVE CONDITION (term expired on
December 8, 1955)
WON lower court erred in not holding that there were only 10,954.5 tons in the stockpiles of iron ore
sold by appellee Gaite to appellant Fonacier.

HELD:
NO ERROR in the decision appealed from, we hereby affirm the same, with costs against
appellants.

1. WON lower court erred in holding that the obligation of appellant Fonacier to pay
appellee Gaite the P65,000.00 IS ONE WITH PERIOD/TERM OR A SUSPENSIVE CONDITION
(term expired on December 8, 1955)—LOWER COURT CORRECT THAT LOCAL SALE OF IRON
IS NOT A SUSPENSIVE CONDITION TO PAYMENT OF P65,000 BUT ONLY A SUSPENSIVE
PERIOD OR TERM.
1. CONDITIONAL OBLIGATION: obligatory force (as distinguished from its
demandability) is subordinated to the happening of a future and uncertain event
                            i.     If the suspensive condition does not take place, the parties would stand as if the conditional
obligation had never existed.
                           ii.     NO UNCERTAINTY THAT PAYMENT WILL BE MADE, ONLY THING UNCERTAIN IS THE EXACT
DATE.
1.   THEREFORE existence of the obligation to pay is recognized; only its maturity or demandabilityis
deferred.
2. CONTRACT OF SALE: commutative and onerous: not only does each one of
the parties assume a correlative obligation (the seller to deliver and transfer ownership of the thing
sold and the buyer to pay the price)
                            i.     But each party anticipates performance by the other from the very start.
                           ii.     While in a sale the obligation of one party can be lawfully subordinated to an uncertain event, so that
the other understands that he assumes the risk of receiving nothing for what he gives (as in the case
of a sale of hopes or expectations, emptio spei)
                         iii.     Not in the usual course of business to do so; h
1.   ence, the contingent character of the obligation must clearly appear.
                         iv.     Nothing is found in t evidence that Gaite desired or assumed to run the risk of losing his right over the
ore without getting paid for it, or that Fonacier understood that Gaite assumed any such risk.
3. To subordinate the obligation to pay tremaining P65,000.00 TO SALE OR
SHIPMENT OF ORE AS A CONDITION PRECENDENT = Leaving the payment at the discretion of
the debtor, for the sale or shipment could not be made unless the appellants took steps to sell the
ore.
4. ONLY RATIONAL VIEW IS SALE OR ORE TO FONACIER WAS A SALE
ON CREDIT AND NOT an aleatory (random) contract where the transferor, Gaite, would assume the
risk of not being paid at all
 2. WON Fonacier and his sureties, still have the right to insist that Gaite should wait for
the sale or shipment of the ore before receiving payment; ARE THEY ENTITLED TO MAKE FULL
ADVANTAGE OF PERIOD GRANTED FOR MAKING PAYMENT?—FORFEITED RIGHT COURT
THE RIGHT TO COMPEL GAITE TO WAIT FOR THE SALE BEFORE RECEIVING PAYMENT,
BECAUSE THEY WERE NOT ABLE TO RENEW BOND WITH FAR EASTERN SURETY
COMPANY
1. ART. 1198:
                            i.      When he does not furnish to the creditor the guaranties or securities which he has promised.
                           ii.     When by his own acts he has impaired said guaranties or securities after their establishment
                         iii.     AND When through fortuitous event they disappear, unless he immediately gives new ones equally
satisfactory.
3. WON there were really 24,000 tons of iron ore in the stockpiles sold by appellee
Gaite to appellant Fonacier and whether, if there had been a short-delivery as claimed by appellants,
they are entitled to the payment of damages.
1. This is case of a sale of a specific mass of fungible goods for a single price or
a lump sum, the quantity of "24,000 tons of iron ore, more or less," stated in the contract being a
mere estimate by the parties of the total tonnage weight of the mass
2. Evidence shows that neither of the parties had actually measured of weighed
the mass, so that they both tried to arrive at the total quantity by making an estimate of the volume
thereof in cubic meters and then multiplying it by the estimated weight per ton of each cubic meter.
3. Subject matter of the sale is, therefore, a determinate object, the mass, and
not the actual number of units or tons contained therein, so that all that was required of the seller
Gaite was to deliver in good faith to his buyer all of the ore found in the mass,
                            i.     Gaite had, therefore, complied with his promise to deliver, and appellants in turn are bound to pay the
lump price.
4. In the face of the conflict of evidence, we take as the most reliable estimate of the
tonnage factor of iron ore in this case to be that made by Leopoldo F. Abad, chief of the Mines and
Metallurgical Division of the Bureau of Mines
1. This witness placed the tonnage factor of every cubic meter of iron ore at
between 3 metric tons as minimum to 5 metric tons as maximum. This estimate, in turn, closely
corresponds to the average tonnage factor of 3.3 adopted in his corrected report (Exhibits "FF" and
FF-1") by engineer Nemesio Gamatero, who was sent by the Bureau of Mines to the mining claims
involved at the request of appellant Krakower, precisely to make an official estimate of the amount of
iron ore in Gaite's stockpiles after the dispute arose. 
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1.
JAN

Gonzales vs. Heirs of Thomas and Paula Cruz

Gonzales vs. Heirs of Thomas and Paula Cruz

GR No. 131784

FACTS:
1. Petition for Review on Certiorari on decision of CA:
 1.  “WHEREFORE, premises considered, this Court hereby renders judgment in
favor of the defendant, Felix Gonzales, and against the plaintiffs, as follows:
                            i.     Ordering the dismissal of the case;
                           ii.     Sentencing the plaintiffs, jointly and severally, the sum of P20,000.00 as moral damages and the
other sum of P10,000.00 as and for attorney’s fees; and
                         iii.     to pay the costs.”
2. CRUZ entered into a Contract of Lease/Purchase with Gonzales (sole proprietor and
manager of Felgon Farms) of a half-portion of a ‘parcel of land containing an area of 12 hectares,
more or less, and an accretion of 2 hectares, more or less, situated in Rodriguez Town, Province of
Rizal’ UNDER TERMS:
1. Term of contract is for a period of one year upon the signing thereof. 
2. After the period, GONZALES shall purchase the property P1,000,000.00, 2
years payable with 12% per annum interest subject to the devalued amount of the Philippine Peso,
according to the following schedule of payment:
                            i.     Upon the execution of deed 50%
                           ii.     25% every 6 months thereafter
1.   Payable within first 10 days of the beginning of each 6 months
3. GONZALES shall pay annual rental equivalent to P2,500.00 per hectare,
upon the signing of this contract
4. LESSORS (CRUZ) shall undertake to obtain a separate certificate over
leased portion to the LESSEE within a reasonable period of time which shall not in any case exceed
four (4) years
                            i.     A new Contract shall be executed by the herein parties which shall be the same in all respects with
this Contract of Lease/Purchase insofar as the terms and conditions are concerned.
3. GONZALES paid the P2,500.00 per hectare or P15,000.00 annual rental on the half-
portion of the property covered by certificate in accordance with the second provision of the Contract
of Lease/Purchase, took possession of the property, installing thereon the defendant Jesus
Sambrano as his caretaker.
1. Did not purchase the property immediately after the expiration of the one-
year lease
2. Remained in possession of the property without paying the purchase price
and without paying any further rentals
2. CRUZ SENT LETTER TO GONZALES INFORMING DECISION TO RESCIND
CONTRACT DUE TO GONZALES BREACH
1. Demanded defendant to vacate the premises within 10 days from receipt of
said letter.
3. GONZALES refused to vacate the property and continued possession, case brought
against GONZALES.
4. LESSOR, PAULA CRUZ DIED.
1. Final demand letter to vacate the premises was sent by the remaining
lessors.
2. Title to the property remains in the name of CRUZ
3. Filed a complaint for recovery of possession of the property - subject of the
contract with damages, both moral and compensatory and attorney’s fees and litigation expenses.
5. SAMBRANO (FOR GONZALES), upon motion, declared in default for failure to file
an answer despite valid service of summons.
6. ISSUES SUBMITTED AT THAT TIME:
1. WON PAR 9 is a condition precedent before the defendant is to pay the
down payment;
                            i.     PAR 9: LESSORS (CRUZ) shall undertake to obtain a separate certificate over leased portion to the
LESSEE within a reasonable period of time which shall not in any case exceed four (4) years
                           ii.     A new Contract shall be executed by the herein parties which shall be the same in all respects with
this Contract of Lease/Purchase insofar as the terms and conditions are concerned.
 2. WON CRUZ can rescind the Contract of Lease/Purchase
3. WON CRUZ can terminate the Contract of Lease.
2. DECISION OF LOWER COURT: COMPLAINT DISMISSED.
1. WON PAR 9 IS A CONDITION PRECEDENT BEFORE DOWNPAYMENT? –
YES.
                            i.     PAR
9 indicates CRUZ to obtain TCT for GONZALES within 4 years.
1.   Thus, before a deed of Sale can be entered into between the plaintiffs and the defendant, the
plaintiffs have to obtain TCT in favor of GONZALES

2. WON CRUZ can rescind the Contract of Lease/Purchase –NO.

                            i.     Failure of the plaintiffs to secure TCT, as provided for in the contract, does not entitle them to rescind
the contract
1.   ART 1191: Power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.  The injured party may choose between the
fulfillment of the obligation, with the payment of damages in either case.  He may seek rescission,
even after he has chosen fulfillment, if the latter should become impossible.’ The power to rescind is
given to the injured party. 
2.   Where the plaintiff is the party who did not perform, he is not entitled to insist upon the performance
of the contract by the defendant or recover damages by reason of his own breach
                           ii.     CRUZ failed to comply with the conditions precedent after 2-1/2 years from the execution of the
contract so as to entitle them to rescind the contract.  Although the contract stated that the same be
done within 4 years from execution, still, the defendant has to be assured that the land subject of the
case will be transferred in his name without any encumbrances
1.   The failure to secure the Transfer Certificate of Title in favor of the defendant entitles not the plaintiffs
but, rather, the defendant to either rescind or to ask for specific performances.

3. WON CRUZ can terminate the Contract of Lease. –NO

                            i.     Article
1670 of the New Civil Code states that:
1.   If at the end of the contract the lessee should continue enjoying the thing leased for fifteen days with
the acquies[c]ence of the lessor and unless a notice to the contrary by either party has previously
been given, it is understood that there is an implied new lease

10. CA REVERSED TRIAL COURT DECISION.

1. Transfer of title to the property cannot be interpreted as a condition
precedent to the payment of the agreed purchase price because such interpretation IS COUNTER-
EXPLICIT and CONTRARY TO NORMAL COURTS OF SALE OF REAL PROPERTIES.
2. Normal course: There must first be payment of the agreed purchase
price before transfer of title to the vendee’s name can be made.
3. Reason for this four (4) year period is [that] title to the property still remains in
the name of the original owners, the predecessors-in-interest of the herein appellants and
[transferring] the title to their names and eventually to the lessee-purchaser, appellee herein, would
take quite some time.
4. GONZALES wanted to have the title to the property transferred in his
name first before he exercises his option to purchase allegedly in accordance with the ninth
provision of the contract.  But the ninth provision does not give him this right: 
                            i.     4-year period asked for by the appellants within which to have title to the property transferred in the
appellee’s name will only start to run when the appellee exercises his option to purchase. 
5. Since the appellee never exercised his option to purchase, then appellee is
not entitled to have the title to the property transferred in his name.”

ISSUES:
WON CA has gravely erred and committed grave abuse of discretion in the interpretation of [the] law
between the parties.
 WON CA committed serious mistakes in the finding of facts which resulted [in] departing from the
usual course of judicial proceedings.
For these issues to be resolved, petitioner asks this Court to answer the following questions:
Is there a conflict between the statement in paragraph 1 of the Lease/Purchase Contract and that [in]
paragraph No. 9 thereof?
Is paragraph 9 of the Lease/Purchase Contract a condition precedent before petitioner could
exercise his option to buy the property?
Can plaintiff rescind or terminate the Contract of Lease after the one-year period?”

HELD:
PETITION GRANTED; appealed decision is REVERSED and SET ASIDE. 
The Decision of the trial court is REINSTATED, but the award of moral damages and attorney’s fees
is DELETED for lack of basis.  No costs.

1. WON CA has gravely erred and committed grave abuse of discretion in the
interpretation of [the] law between the parties. –YES.
1. CA relied on a literal interpretation to the effect that the TCT should be
obtained in the name of the petitioner-vendee. 
                            i.     It reasoned that the title could be transferred to the name of the buyer only after the completion of the
purchase.  Thus, petitioner should first purchase the property before respondents could be obliged to
transfer the TCT to his name.
2. WE DISAGREE. PAR 9 does not say that the TCT should be obtained in the
name of the lessee. 
                            i.     In fact, PAR 9 requires respondents to obtain a “TCT over the herein leased portion to the LESSEE,”
thereby showing that the crucial phrase “to the LESSEE” adverts to “the leased portion” and not to
the name which should appear in the new TCT.
                           ii.     If GONZALES should purchase the property first before the title can be transferred to his name, why
should there be a waiting period of four years before the parties can execute the new contract
evidencing the sale?  Why should the petitioner still be required to pay rentals after it purchases and
pays for the property? 
3. PAR 9 can only mean that the respondents should first obtain a TCT in their
names, after which petitioner is given time to purchase and pay for the property.
4. RECORDS SHOW THAT the land in question respondents’ predecessors-in-
interest. 
                            i.     No showing whether respondents were the only heirs.
                           ii.     They admit that extrajudicial proceedings were still ongoing. 
                         iii.     Hence, when the Contract of Lease/Purchase was executed, there was no assurance that the
respondents were indeed the owners of the specific portion of the lot that petitioner wanted to buy,
and if so, in what concept and to what extent.
                         iv.     Thus, the clear intent of the ninth paragraph was for respondents to obtain a separate and distinct
TCT in their names. 
1.    This was necessary to enable them to show their ownership of the stipulated portion of the land and
their concomitant right to dispose of it. 
2.   Absent any title in their names, they could not have sold the disputed parcel of land.
5. Because the property remained registered in the names of their
predecessors-in-interest, private respondents could validly sell only their undivided interest in the
estate of predecessor, the extent of which was however not shown in the records. 
6. There being no partition of the estate thus far, there was no guarantee as to
how much and which portion would be adjudicated to respondents.
7. They could not deliver ownership or title to a specific portion of the yet
undivided property. 
 8. Parties under PAR 9 wanted the specific portion of the land to be segregated,
identified and specifically titled. 
                            i.     Hence, by the said Contract, the respondents as sellers were given a maximum of four years within
which to acquire a separate TCT in their names, preparatory to the execution of the deed of sale and
the payment of the agreed price in the manner described in PAR 9.
1.   P50,000 advance given by GONZALES is proof of helping them expedite the transfer of the TCT to
their names. 
2.   Ineluctably, intention of the parties was to have the title transferred first to respondents’ names as a
condition for the completion of the purchase.
2. WON CA committed serious mistakes in the finding of facts which resulted [in]
departing from the usual course of judicial proceedings.
1. PAR 9 required respondents to obtain a separate and distinct TCT in their
names and not in the name of petitioner
                            i.     Logically follows that it was condition precedent to the latter’s obligation to purchase and pay for the
land. 
                           ii.     CONDITION: every future and uncertain event upon which an obligation or provision is made to
depend. 
1.   It is a future and uncertain event upon which the acquisition or resolution of rights is made to depend
by those who execute the juridical act.
2. Without it, the sale of the property under the contract cannot be perfected,
and petitioner cannot be obliged to purchase the property. 
3. When obligation assumed by a party to a contract is expressly subjected to a
condition, the obligation cannot be enforced against him unless the condition is complied with.
                            i.     Obligatory force of a conditional obligation is subordinated to the happening of a future and uncertain
event, so that if that event does not take place, the parties would stand as if the conditional
obligation had never existed.
3. Can plaintiff rescind or terminate the Contract of Lease after the one-year period?” –
NO. BECAUSE THEY HAVE NOT CAUSED TRANSFER OF TCT TO THEIR NAMES.
1. There can be no rescission (or more properly, resolution) of an obligation as
yet non-existent, because the suspensive condition has not happened.

Posted 4th January 2013 by Lee Anne

  
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2.
JAN

Antonio Tan vs. Court of Appeals/CCP

Antonio Tan vs. Court of Appeals/CCP

GR No. 116285

FACTS:
1. Petition for review.
2. TAN OBTAINED 2 LOANS, EACH FOR P2,000,000 FROM CCP.
1. Executed a promissory note in amount of P3,411,421.32; payable in 5
installments. 
 2. TAN failed to pay any installment on the said restructured loa.
3. In a letter, TAN requested and proposed to respondent CCP a mode of
paying the restructured loan
                            i.     20% of the principal amount of the loan upon the respondent giving its conformity to his proposal
                           ii.     Balance on the principal obligation payable 36 monthly installments until fully paid. 
4. TAN requested for a moratorium on his loan obligation until the following year
allegedly due to a substantial deduction in the volume of his business and on account of the peso
devaluation. 
                            i.     No favorable response was made to said letters. 
                           ii.     CCP demanded full payment, within ten (10) days from receipt of said letter P6,088,735.03.
3. CCP FILED COMPLAINT collection of a sum of money
1. TAN interposed the defense that he accommodated a friend who asked for
help to obtain a loan from CCP. 
                            i.     Claimed that cannot find the friend.
2. TAN filed a Manifestation wherein he proposed to settle his indebtedness to
CCP by down payment of P140,000.00 and to issue1 2 checks every beginning of the year to cover
installment payments for one year, and every year thereafter until the balance is fully paid. 
                            i.     CCP did not agree to the petitioner’s proposals and so the trial of the case ensued.
4. TRIAL COURT ORDERED TAN TO PAY CCP P7,996,314.67, representing
defendant’s outstanding account as of August 28, 1986, with the corresponding stipulated interest
and charges thereof, until fully paid, plus attorney’s fees in an amount equivalent to 25% of said
outstanding account, plus P50,000.00, as exemplary damages, plus costs.
1. REASONS:
                            i.     Reason of loan for accommodation of friend was not credible.
rd
                           ii.     Assuming, arguendo, that the TAN did not personally benefit from loan, he should have filed a 3 -
party complaint against Wilson Lucmen
                         iii.     3 times the petitioner offered to settle his loan obligation with CCP. 
                         iv.     TAN may not avoid his liability to pay his obligation under the promissory note which he must comply
with in good faith. 
                           v.     TAN is estopped from denying his liability or loan obligation to the private respondent.
5. TAN APPEALED TO CA, asked for the reduction of the penalties and charges on his
loan obligation.
1. Judgment appealed from is hereby AFFIRMED.
1.   No alleged partial or irregular performance.
2.   However, the appellate court modified the decision of the trial court by deleting exemplary damages
because not proportionate to actual damage caused by the non-performance of the contract

ISSUES:
WON there are contractual and legal bases for the imposition of the penalty, interest on the penalty
and attorney’s fees.
TAN imputes error on CA in not fully eliminating attorney fees and in not reducing the penalties
considering that he made partial payments on the loan. 
And if penalty is to be awarded, TAN asking for non-imposition of interest on the surcharges
because compounding of these are not included in promissory note.
No basis in law for the charging of interest on the surcharges for the reason that the New Civil Code
is devoid of any provision allowing the imposition of interest on surcharges.

WON interest may accrue on the penalty or compensatory interest without violating ART
1959: “Without prejudice to the provisions of Article 2212, interest due and unpaid shall not earn
interest.  However, the contracting parties may by stipulation capitalize the interest due and unpaid,
which as added principal, shall earn new interest.”
 TAN- No legal basis for the imposition of interest on the penalty charge for the reason that the law
only allows imposition of interest on monetary interest but not the charging of interest on
penalty. Penalties should not earn interest.

WON TAN can file reduction of penalty due to made partial payments.
Petitioner contends that reduction of the penalty is justifiable under ART 1229: “The judge shall
equitably reduce the penalty when the principal obligation has been partly or irregularly complied
with by the debtor.  Even if there has been no performance, the penalty may also be reduced by the
courts if it is iniquitous or unconscionable.” 

HELD
CA DECISION AFFIRMED with MODIFICATION in that the penalty charge of two percent (2%) per
month on the total amount due, compounded monthly, is hereby reduced to a straight twelve percent
(12%) per annum starting from August 28, 1986.  With costs against the petitioner.

1. WON there are contractual and legal bases for the imposition of the penalty, interest
on the penalty and attorney’s fees. –YES. WITH LEGAL BASES.
1. ART 1226: In obligations with a penal clause, the penalty shall substitute the
indemnity for damages and the payment of interests in case of non-compliance, if there is no
stipulation to the contrary.  Nevertheless, damages shall be paid if the obligor refuses to pay the
penalty or is guilty of fraud in the fulfillment of the obligation.
                            i.     The penalty may be enforced only when it is demandable in accordance with the provisions of this
Code.
2. CASE AT BAR: promissory note expressed the imposition of both interest
and penalties in case of default on the part of the petitioner in the payment of  the  subject 
restructured loan. 
3. PENALTY IN MANY FORMS:
                            i.     If the parties stipulate penalty apart monetary interest, two are different and distinct from each other
and may be demanded separately. 
                           ii.     If stipulation about payment of an additional interest rate partakes of the nature of a penalty clause
which is sanctioned by law:
1.   ART 2209: If the obligation consists in the payment of a sum of money, and the debtor incurs in
delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of
the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent
per annum.
4. CASE AT BAR: Penalty charge of 2% per month began to accrue from the
time of default by the petitioner. 
                            i.     No doubt petitioner is liable for both the stipulated monetary interest and the stipulated penalty
charge. 
1.   PENALTY CHARGE = penalty or compensatory interest. 

2. WON interest may accrue on the penalty or compensatory interest without violating
ART 1959.
1. Penalty clauses can be in the form of penalty or compensatory interest. 
                            i.     Thus,
the compounding of the penalty or compensatory interest is sanctioned by and allowed
pursuant to the above-quoted provision of Article 1959 of the New Civil Code considering that:
1.   There is an express stipulation in the promissory note (Exhibit “A”) permitting the compounding of
interest. 
a.    5th paragraph of the said promissory note provides that:  “Any interest which may be due if not paid
shall be added to the total amount when due and shall become part thereof, the whole amount to
bear interest at the maximum rate allowed by law.”.
 2.    Therefore, any penalty interest not paid, when due, shall earn the legal interest of twelve percent
(12%) per annum, in the absence of express stipulation on the specific rate of interest, as in the case
at bar.
2. ART 2212: “Interest due shall earn legal interest from the time it is judicially
demanded, although the obligation may be silent upon this point.”
3. CASE AT BAR: interest began to run on the penalty interest upon the filing of
the complaint in court by CCP. 
                            i.     Hence, the courts did not err in ruling that the petitioner is bound to pay the interest on the total
amount of the principal, the monetary interest and the penalty interest.

3. WON TAN can file reduction of penalty due to made partial payments. –YES. BUT
NOT 10% REDUCTION AS SUGGESTED BY PETITIONER.
1. REDUCED TO 2% REDUCTION:
                            i.     PARTIAL PAYMENTS showed his good faith despite difficulty in complying with his loan obligation
due to his financial problems. 
1.   However, we are not unmindful of the respondent’s long overdue deprivation of the use of its money
collectible.
4. The petitioner also imputes error on the part of the appellate court for not declaring
the suspension of the running of the interest during period when the CCP allegedly failed to assist
the petitioner in applying for relief from liability
1. Alleges that his obligation to pay the interest and surcharge should have
been suspended because the obligation to pay such interest and surcharge has become conditional
                            i.     Dependent on a future and uncertain event which consists of whether the petitioner’s request for
condonation of interest and surcharge would be recommended by the Commission on Audit. 
1.   Since the condition has not happened due to the private respondent’s reneging on its promise, his
liability to pay the interest and surcharge on the loan has not arisen. 
2. COURT ANSWER:
                            i.     Running of the interest and surcharge was not suspended.
                           ii.     CCP correctly asserted that it was the primary responsibility of petitioner to inform the Commission
on Audit of his application for condonation of interest and surcharge.  
Posted 4th January 2013 by Lee Anne
  
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2.
JAN

Makati Developmental Corp vs. Empire Insurance Corp

Makati Developmental Corp vs. Empire Insurance Corp

GR No. L-21780

FACTS:
1. MAKATI SOLD TO Rodolfo P. Andal a lot
1. SPECIAL CONDITION:
                            i.     VENDEE/S shall commence the construction and complete at least 50% of his/her/their/its residence
on the property within two (2) years from March 31, 1959 to the satisfaction of the VENDOR
                           ii.     Failure to do so, the bond which the VENDEE/S has delivered to the VENDOR in the sum of
P11,123.00 and evidenced by a cash bond receipt dated April 10, 1959 will be forfeited in favor of
the VENDOR by the mere fact of failure of the VENDEE/S to comply with this special condition."
2. ANDAL GAVE A SURETY BOND, he as principal, and the Empire Insurance
Company, as surety, jointly and severally, undertook to pay the Makati Development Corporation the
sum of P12,000 in case Andal failed to comply with his obligation under the deed of sale.
                            i.     Did not build his house; instead he sold the lot to Juan Carlos
                           ii.     Neither built a house on the lot within the stipulated period
                         iii.     MAKATI sent a notice of claim to the Empire Insurance Co. advising it of Andal's failure to comply
with his undertaking.
                         iv.     Demand for the payment of P12,000 was refused
2. MAKATI FILED COMPLAINT against the Empire.
1. EMPIRE filed answer with a third-party complaint against Andal.
                            i.     To order Andal to pay the Empire Insurance Co. whatever amount it maybe ordered to pay the Makati
Development Corporation, plus interest at 12%, from the date of the filing of the complaint until said
amount was fully reimbursed, and attorney's fees.
                           ii.     Andal admitted the execution of the bond but alleged that the "special condition" in the deed of sale
was contrary to law, morals and public policy.
1.   He averred that Juan Carlos had started construction of a house on the lot.
3. LOWER COURT SENTENCED Empire to pay MAKATI P1,500, with interest at the
rate of 12% from the time of the filing of the complaint until the amount was fully paid, and to pay
attorney's fees in the amount of P500, and the proportionate part of the costs.
1. Andal should in turn pay EMPIRE P1,500 with interest at 12% from the time
of the filing of the complaint to the time of payment and to pay attorney's fees in the sum of P500
and proportionate part of the costs.
2. MAKATI APPEALED.
2. COURT REDUSED ANDAL’S LIABILITY BECAUSE THERE WAS ONLY REALLY A
LITTLE DELAY.
1. There was indication of owner's desire to construct his house with the least
possible delay.
2. MAKATI argues that Andal became liable for the full amount of his bond upon
his failure to build a house within the two-year period which expired on March 31, 1961
3. Trial court has no authority to reduce Andal's liability on the basis of Carlos'
construction of a house a month after the stipulated period because there was no contract between
Carlos and the Makati Development Corporation.

ISSUE:
WON court erred in mitigating the obligor’s liability considering obligor failed to commit obligation
within stipulated time.
WON 3rd party’s commencement of stipulated condition can be counted in commitment of the
contract.

HELD:
Accordingly, the decision appealed from is affirmed, at appellant's cost.

1. SPECIAL CONDITION = OBLIGATION

2. MITIGATION OF OBLIGOR’S LIABILITY IS ALLOWED:
1. ART 1229 of the Civil Code states:
                            i.     The judge shall equitably reduce the penalty when the principal obligation has been partly or
irregularly complied with by the debtor. Even if there has been no performance, the penalty may also
be reduced by the courts if it is iniquitous or unconscionable.
3. JUAN CARLOS FINISHED 50% OF HOUSE ONE MONTH AFTER EXPIRATION OF
STIPULATED PERIOD.
 1. The penal clause in this case was inserted not to indemnify for any damage
but rather to compel performance of the so-called "special condition" and encourage home building
among lot owners in the Urdaneta Village.
3. ON CARLOS NO CONTRACTUAL RELATION WITH MAKATI:
1. Indeed the stipulation in this case to commence the construction and
complete at least 50 per cent of the vendee's house within two years cannot be construed as
imposing a strictly personal obligation on Andal –BECAUSE IT WOULD ANDAL’S RIGHT TO
DISPOSE THE LOT.
2. There is nothing in the deed of sale restricting Andal's right to sell the lot at
least within the two-year period.
3. Such limitation should be expressed if ever and not left to mere inference.

Posted 4th January 2013 by Lee Anne

  
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3.
JAN

Lafarge vs. Continental

Lafarge vs. Continental

GR No. L-155173

FACTS:
1. Petition for review.
2. 1998, LETTER OF INTENT EXECUTED BY BOTH PARTIES
1. LAFARGE, in behalf of Luzon Continental Land Corporation (LCLC), agreed
to purchase the cement business of respondent Continental Cement Corporation. 
2. Parties entered into a Sale and Purchase Agreement (SPA).
3. LAFARGE aware of CONTINENTAL pending case with the Supreme Court
(Asset Privatization Trust (APT) v. Court of Appeals and Continental Cement Corporation)
                            i.     In anticipation of the liability SC might adjudge against CONTINENTAL, 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 ofP117,020,846.84 -- 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 Asset Privatization Trust V. CA/Continental.
                           ii.     LAFARGE refused to apply the sum to the payment to APT, despite decision in APT vs
CONTINENTAL, in favor of CONTINENTAL and the repeated instructions of CONTINENTAL. 
1.   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, CONTINENTAL filed “Complaint with
Application for Preliminary Attachment” against LAFARGE.  Docketed as Civil Case No. Q-00-
41103,
a.    For LAFARGE to pay the “APT Retained Amount” referred to in Clause 2 (c) of the SPA.
b.   LAFARGE moved to dismiss the Complaint on the ground that it violated the prohibition on forum-
shopping. 
                           i.     CONTINENTAL 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. 
                          ii.     Trial court denied LAFARGE’s Motion to Dismiss
1.   LAFARGE elevated the matter to CA.
3. LAFARGE to avoid being in default and without prejudice to the outcome of their
appeal, filed Answer and Compulsory Counterclaims ad Cautelam before the trial court in Civil Case
No. Q-00-41103 (issued for them to pay APT Retained Amount).
1. Denied the allegations in the Complaint. 
2. They prayed -- by way of compulsory counterclaims against CONTINENTAL,
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.
3. Prayed that both Lim and Mariano be held “jointly and solidarily” liable with
CONTINENTAL.
4. On behalf of Lim and Mariano, CONTINENTAL moved to dismiss petitioners’
compulsory counterclaims on grounds that essentially constituted the very issues for resolution in
the instant Petition.

4. RTC dismissed LAFARGE counterclaims:

1. Counterclaims against Respondents Lim and Mariano were not compulsory.
2. Ruling in Sapugay was not applicable.
3. LAFARGE’s Answer with Counterclaims violated procedural rules on the
proper joinder of causes of action.
3. LAFARGE Motion for Reconsideration:
1. RTC admitted some errors in Order, particularly in its pronouncement that
their counterclaim had been pleaded against Lim and Mariano only. 
2. However, the RTC clarified that it was dismissing the counterclaim as it
impleaded Respondents Lim and Mariano, even if it included CONTINENTAL.

ISSUE:
WON RTC gravely erred in refusing to rule that CONTINENTAL has no personality to move to
dismiss petitioners’ compulsory counterclaims on Respondents Lim and Mariano’s behalf.

WON 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.”

May defendants in civil cases implead in their counterclaims persons who were not parties to the
original complaints?

HELD:
Petition 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.

1. WON RTC gravely erred in ruling that (i) petitioners’ counterclaims (claim to rebut a
previous claim) against Respondents Lim and Mariano are not compulsory---- YES,
COUNTERCLAIM IS CONSIDERED COMPULSARY:
1. SEC 6 of Rule 6 of the Rules of Civil Procedure: “any claim which a
defending party may have against an opposing party.” 
                            i.     Purpose of this is 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 considered by a
counterclaim rather than by an independent suit. 
                           ii.     LIMITATIONS:
1.   Court should have jurisdiction over the subject matter of the counterclaim
2.   It could acquire jurisdiction over third parties whose presence is essential for its consideration.
2. PERMISSIVE COUNTERCLAIM: an independent claim that may be filed
separately in another case.
                            i.     Does not arise out of or is not necessarily connected with the subject matter of the opposing party’s
claim.
3. COMPULSORY COUNTERCLAIM: does not require for its adjudication
(consideration) the presence of third parties of whom the court cannot acquire jurisdiction.
                            i.     Arises out of or is necessarily connected with the transaction or occurrence constituting the subject
matter of the opposing party’s claim
                           ii.     Should be set up in the same action; otherwise, they would be barred forever.
4. COMPULSORY OR PERMISSIVE?
                            i.     Issues of fact and law raised by the claim and by the counterclaim largely the same?
                           ii.     Would res judicata (judged matter; matter considered by the court and may not be pursued
further) bar a subsequent suit on defendant’s claim, absent the compulsory counterclaim rule?
                         iii.     Will substantially the same evidence support or refute plaintiff’s claim as well as defendant’s
counterclaim?
                         iv.     Is there any logical relation between the claim and the counterclaim?
1.   YES TO ALL four questions = COMPULSORY
5. LIM AND MARIANO were the persons responsible for making the bad faith
decisions:
                            i.     Caused 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. 
                           ii.     LIM AND MARIANO ARE LAFARGE’S TORTFEASOR (commits a tort; tort- infringement of right
leading to legal liability)
1.   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.
                         iii.     Allegations show that LAFARGE’s counterclaims for damages were the result of LIM AND
MARIANO’s act of filing the Complaint and securing the Writ of Attachment in bad faith. 
6. CASE AT HAND: LAFARGE’s counterclaim for damages fulfills the
necessary requisites of a compulsory counterclaim. 
                            i.     Damages as a consequence of the action filed against them. 
                           ii.     Papa vs. Banaag:
1.   “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.”
2.   “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.”
3.   Since the counterclaim for damages is compulsory, it must be set up in the same action; otherwise, it
would be barred forever. 
4.   If it is filed concurrently with the main action but in a different proceeding, it would be abated on the
ground of litis pendentia
5.   If filed subsequently, it would meet the same fate on the ground of res judicata.

2. WON RTC gravely erred in ruling that Sapugay v. Court of Appeals is

inapplicable here—YES. SAPUGAY VS. CA IS APPLICABLE.
1. In Sapugay vs. MOBIL:
                            i.     MOBIL filed before the trial court of Pasig an action for replevin against SAPUGAY. 
                           ii.     Couple failed to keep Dealership Agreement.
1.   In their Answer with Counterclaim, SAPUGAY 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.
2.   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. 
3.   Later, SAPUGAY discovered that MOBIL had intended all along to award the dealership to Island Air
Product Corporation.
                         iii.     SAPUGAY impleaded in the counterclaim Mobil Philippines and its manager -- Ricardo P. Cardenas
-- both jointly and severally liable. 
                         iv.     MOBIL and Cardenas failed to respond to their Answer to the Counterclaim, SAPUGAY filed a
“Motion to Declare Plaintiff and its Manager Ricardo P. Cardenas in Default on Defendant’s
Counterclaim.”
                           v.     ISSUES: WON Cardenas, who was not a party to the original action, might nevertheless be
impleaded in the counterclaim. 
1.   COUNTERCLAIM is defined as any claim for money or other relief which a defending party may have
against an opposing party. 
2.   GENERAL RULE: DEFENDANT CANNOT BRING INTO ACTION ANY CLAIMS AGAINST
PERSONS UNDER THIS EXCEPTION: ‘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.’
a.    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.
2. CASE AT HAND:
                            i.     CONTINENTAL argue that new parties cannot be included in a counterclaim, except when no
complete relief can be had: CONTINENTAL as a corporation with a separate [legal personality] has
the juridical capacity to indemnify petitioners even without Messrs. Lim and Mariano.
1.   COURT DISAGREES.
a.    Inclusion is due to 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.
                           ii.     CONTINENTAL ASSERTS THAT 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.”
1.   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.
3. SUABILITY AND LIABILITY NOT THE SAME. 
                            i.     While the Court does rule that the counterclaims against CONTINENTAL 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.
4. However, GENERAL RULE IN RESPONDING TO COMPULSORY CLAIM:
                            i.     Defendant need not file any responsive pleading, answers, adopting allegations in the complaint,
does not apply.
                           ii.     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. 
                         iii.     Court may consider possibility that new party is unaware of counterclaims filed against it.
 5. RECORDS SHOW THAT LIM AND MARIANO ARE UNAWARE OF
COUNTERCLAIMS FILED AGAINST THEM. THEREFORE, CONTINENTAL’S MOTION TO
DISMISS CANNOT BE TREATED AS BEING FILED IN THEIR BEHALF.

3. WON RTC gravely erred in ruling that petitioners violated the rule on joinder of
causes of action. –NO. LIM AND MARIANO ARE REAL PARTIES IN INTEREST TO
COMPULSARY COUNTERCLAIM. IT IS IMPERATIVE THEY BE JOINED.
1. Section 6.  Permissive joinder of parties. 
                            i.     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.”
2. This is for practicality and convenience; meant to discourage duplicity and
multiplicity of suits. 
3. SEC 7 of Rule 3 provides:
                            i.     “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.”

4. WON RTC gravely erred in refusing to rule that CONTINENTAL has no

personality to move to dismiss petitioners’ compulsory counterclaims on Respondents Lim and
Mariano’s behalf. –YES.
1. COUNTERCLAIM FOR DAMAGES TO LIM AND MARIANO AND
CONTINENTAL ARE JOINT AND SOLIDARY.
2. 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. 
                            i.     JOINT TORTFEASORS (JOINT OBLIGATION) 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. 
1.   The damages can not be apportioned among them, except among themselves. 
2.   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.
3.   Each obligor answers only for a part of the whole liability.
                           ii.     SOLIDARY OR JOINT/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.
3. CASE AT HAND: LIABILITY SOUGHT AGAINST CONTINENTAL IS FOR
SPECIFIC PERFORMANCE/TORT; LIM AND MARIANO’S TORT DOES NOT NEGATE THE
SOLIDARY NATURE FOR THE TORTUOUS ACTS ALLEGED IN COUNTERCLAIMS.
                            i.     Due to SOLIDARY CHARACTER of obligation, LIM and MARIANO may avail themselves as regards
to part of the debt for which they are responsible.
                           ii.     THEREFORE, the act of CONTINENTAL in filing a motion to dismiss the counterclaim on grounds
that pertain only to its individual co-debtors -- is allowed.
                         iii.     HOWEVER, SINCE MOTION TO DISMISS COUNTERCLAIMS SHOW CONTINENTAL FILING IN
BEHALF OF LIM AND MARIANO, CONTINENTAL CANNOT BE DECLARED IN DEFAULT.
1.   If issues raised in the compulsory counterclaim are so intertwined with the allegations in the
complaint, such issues are deemed automatically joined.
                         iv.     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.
5.  CONTINENTAL’S MOTION TO DISMISS IN BEHALF OF LIM AND MARIANO NOT
ALLOWED.
1. It lacks the requisite authority to do so.
2. 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.
3. 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.
4. Summons must be served on Respondents Lim and Mariano before the trial
court can obtain jurisdiction over them.

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4.
JAN

DAILY REMINDER

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5.
JAN

Inchausti vs. Yulo

Inchausti vs. Yulo

GR No. L-7721

FACTS:
1. Suit is for recovery balance of a current account opened Inchausti & Company with
Teodoro Yulo and after his death continued with his widow and children, whose principal
representative is Gregorio Yulo.
2. TEODORO YULO: property owner of Iloilo, for exploitation of haciendas in
Occidental Negros, had been borrowing money from Inchausti & Company under specific conditions.
 1. Died and appointed widow and SONS as administrators including
GREGORIO YULO.
                            i.     Held conjugal property in common
                           ii.     At the death of widow, Gregoria Regalado, children preserved the same relations under the name of
HIJOS DE T. YULO
1.   Continued current account with Inchausti & Company until balance amounted to P200,000. In for the
payment of the disbursements of money which until that time it had been making in favor of its
debtors, the Yulos.
2. Children are: Pedro, Francisco, Teodoro, Manuel, Gregorio, Mariano,
Carmen, Concepcion, and Jose Yulo y Regalado.
                            i.     Concepcion and Jose were minors
                           ii.     Teodoro was mentally incompetent.
3. 1908, GREGORIO YULO (representing his brothers Pedro, Manuel and
Carme, executed notarial document whereby all admitted their indebtedness to Inchausti &
Company in the sum of P203,221.27.
th
                            i.     To secure with 10% interest per annum, they mortgaged an undivided 6/9  of their 38 rural
properties, remaining urban properties, lorchas, and family credits which were listed
1.   Obligated themselves to make a formal inventory and to describe all properties, and to cure all
defects which might prevent the inscription of the said contract in the registry of property and to
extend by the necessary formalities the aforesaid mortgage over the remaining 3/9 th of all the
property and rights belonging to their other brothers, the incompetent Teodoro, and the minors
Concepcion and Jose.

4. 1909, GREGPRIO YULO, REPRESENTING HIJOS DE YULO ANSWERED

LETTER OF INCHAUSTI IN THESE TERMS:
                            i.     "With your favor of the 2d inst. we have received an abstract of our current account with your
important firm, closed on the 31st of last December, with which we desire to express our entire
conformity as also with the balance in your favor of P271,863.12.”
                           ii.     INCHAUSTI informed Hijos de T. Yulo of the reduction of balance to P253,445.42.
1.   HIJOS T. YULO expressed its conformity by means of a letter, proving that mortgage credit was
formalized. 

5. 1909, GREGORIO YULO, FOR HIMSELF AND REPRESENTING MANUEL

and PEDRO, FRANCISCO, CARMEN AND CONCEPCION in their OWN BEHALF (now of legal
age) executed affidavit ratifying their admission on their indebtedness to INCHAUSTI:
                            i.     P253,445.42 with 10% interest per annum
                           ii.     To be paid in 5 installments at the rate of P50,000, except last being P53,445.42
                         iii.     Payment beginning June 30, 1910, continuing successively on the 30th of each June until the last
payment on June 30, 1914.
                         iv.     Among other clauses, they expressly stipulated the following:
1. Default in payment of any of the installments or the noncompliance of any of the other obligations will
result in the maturity of all the said installments
2.   INCHAUSTI may exercise at once all the rights and actions to obtain the immediate and total
payment of debt, in same manner that they would have so done at the maturity of the said
installments.
3.  All the obligations will be understood as having been contradicted  in solidum by all of us, the Yulos,
brothers and sisters.
4.   Agreed that this instrument shall be confirmed and ratified in all its parts, within the present week, by
our brother Don Mariano Yulo y Regalado who resides in Bacolod, otherwise it will not be binding on
INCHAUSTI who can make use of their rights to demand and obtain immediate payment of their
credit without any further extension or delay, in accordance with what we have agreed.
5.   This instrument was neither ratified nor confirmed by Mariano Yulo.
 3. YULOS did not pay the first installment of the obligation.
1. INCHAUSTI brought an ordinary action against Gregorio Yulo for the
payment of P253,445.42 with 10% interest per annum on that date aggregating P42,944.76.
3. 1911, FRANCISCO, MANUEL, and CARMEN Yulo executed another affidavit in
recognition of the debt and obligation of payment in the following terms:
1. Debt is reduce for them to P225,000
2. Interest is reduced 6% per annum from March 15, 1911
3. Installments are increase to eight, 1st of P20,000, beginning on June 30,
1911, and the rest of P30,000 each on the same date of each successive year until the total
obligation shall be finally and satisfactorily paid on June 30, 1919
4. If any of the partial payments specified in the foregoing clause be not paid at
its maturity, the amount of the said partial payment together with its interest shall bear 15% interest
per annum from the date of said maturity, without the necessity of demand until its complete
payment
5. If during 2 consecutive years the partial payments agreed upon be not made,
they shall lose the right to make use of the period granted to them for the payment of the debt or the
part thereof which remains unpaid, and INCHAUSTI may consider the total obligation due and
demandable, and proceed to collect the same together with the interest for the delay above
stipulated through all legal means.
6. ADDITION STIPULATION: Inchausti & Co. should include in their suit
brought in the CFI of Iloilo against Gregorio Yulo, his brother and joint co-obligee, Pedro Yulo:
                            i.     FRANCISCO, MANUEL AND CARMEN will procure by all legal means and in the least time possible
a judgment in their favor against the said Don Gregorio and Don Pedro, sentencing the later to pay
the total amount of the obligation acknowledged by them in August 12, 1909 affidavit
                           ii.     If they should deem it convenient for their interests, Don Francisco, Don Manuel, and Doña Carmen
Yulo may appoint an attorney to cooperate with the lawyers of Inchausti & Company in the
proceedings of the said case. 

5. GREGORIO YULO ASNWERED THE COMPLAINT:

1. An accumulation of interest had taken place and that compound interest was
asked for the Philippine currency at par with Mexican
2. IN August 21, 1909 affidavit, 2 conditions were agreed (one approved by
Court of First Instance) and the other ratified and confirmed by the other brother Mariano Yulo,
neither of which was complied with
3. With regard to the same debt claims were presented before the
commissioners in the special proceedings over the inheritances of Teodoro Yulo and Gregoria
Regalado, though later they were dismissed, pending the present suit
4. August 12, 1909 affidavit, was novated by that of May 12, 1911, executed by
Manuel, Francisco and Carmen Yulo.
4. COURT DECIDED IN FAVOR OF GREGORIO/MARIANO YULO. INCHAUSTI pay
with costs.

ISSUE:
WON INCHAUSTI can sue Gregorio alone, here being other obligors. YES.

WON INCHAUSTI lost its right for agreeing with other obligors in the reduction of debt, proroguing
(discontinuing) the obligation and the extension for time of payment, in accordance with May 12
1911 affidavit. NO.

WON THE CONTRACT with the 3 obligors constitute a novation (substitution) of Aug 12 1909
affidavit, entered into the 6 debtors who assumed the payment of P253,445.42. NO.
      If not, WON it has any effect in the action brought and in this present suit. YES.
 HELD:
GREGORIO YULO TO PAY INCHAUSTI P112, 500 WITH INTEREST STIPULATD IN MAY 12 1911
AFFIDAVIT, FROM MARCH 15 1911 AND THE LEGL INTEREST ON THIS INTEREST DUE,
JUDGMENT APPEALED FROM IS REVERSED. NO SPECIAL FINDING AS TO COST.
1. WON INCHAUSTI CAN SUE GREGORIO ALONE? YES.
1. Debtors having obligated themselves in solidum, creditor can bring action to
any one of them.
                            i.     When the obligation is constituted as a conjoint and solidary obligation, each one of debtors is bound
to perform in full the undertaking which is the subject matter of the obligation.

2. WON INCHAUSTI lost its right for agreeing with other obligors? NO.
1. Even though the creditor may have stipulated with some of the solidary
debtors diverse installments and conditions, as in this case, INCHAUSTI did with its debtors Manuel,
Francisco, and Carmen Yulo through the instrument of May 12, 1911, this does not lead to the
conclusion that the solidarity stipulated in the instrument of August 12, 1909 is broken, as we already
know the law provides that "solidarity may exist even though the debtors are not bound in the same
manner and for the same periods and under the same conditions."

3. WON THE CONTRACT with the 3 obligors constitute a novation (substitution) of Aug
12 1909 affidavit? NO.
1. The May 12 1911 contract does not substitute the former one (Aug 1909)
because:
                            i.     “In order that an obligation may be extinguished by another which substitutes it, it is necessary that it
should be so expressly declared or that the old and the new be incompatible in all points" (Civil
Code, article 1204)
2. May 12, 1911 instrument, far from expressly declaring that the obligation of
the three who executed it substitutes the former signed by Gregorio Yulo and the other debtors,
expressly and clearly stated that the said obligation of Gregorio Yulo to pay P253,000 sued for
exists.
3. The suit must continue its course and, if necessary, these three parties who
executed the contract of May 12, 1911, would cooperate in order that the action against Gregorio
Yulo might prosper, with other undertakings concerning the execution of the judgment which might
be rendered against Gregorio Yulo in this same suit.
4. "It is always necessary to state that it is the intention of the contracting
parties to extinguish the former obligation by the new one" (Judgment in cassation, July 8, 1909).
5. There exist no incompatibility between the old and the new obligation.

4. If not, WON it has any effect in the action brought and in this present suit. Total
amount; amount due; demandable amount respectively.
1. "What effect could this contract have over the rights and obligations of the
defendant Gregorio Yulo with respect to the plaintiff company?
                            i.     The obligation being solidary, the remission of any part of the debt made by a creditor in favor of one
or more of the solidary debtors necessarily benefits the others, and therefore there can be no doubt
that, in accordance with the provision of article 1143 of the Civil Code, the defendant has the right to
enjoy the benefits of the partial remission of the debt granted by the creditor."
2. May 12, 1911 contract has not novated that of August 12, 1909
                            i.     It has affected that contract and the outcome of the suit brought against Gregorio Yulo alone for the
sum of P253,445.42;
                           ii.     In consequence the amount stated in the contract of August 12, 1909, cannot be recovered but only
that stated in the contract of May 12, 1911
                         iii.     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.
 5. If the later contract is recognized over the earlier one, should such efficacy not
likewise be recognized concerning the maturity of the same?
1. If Francisco, Manuel, and Carmen had been included in the suit, they could
have alleged the defense of the non-maturity of the installments since the first installment did not
mature until June 30, 1912, and without the least doubt the defense would have prospered, and the
three would have been absolved from the suit.
2. Cannot this defense of the prematurity of the action, which is implied in the
last special defense set up in the answer of the defendant Gregorio Yulo be made available to him in
this proceeding?
                            i.     Gregorio Yulo cannot allege “prematurity of contract” as defense.
1.   When the suit was brought on March 27, 1911, the first installment of the obligation had already
matured of June 30, 1910, and with the maturity of this installment, the first not having been paid, the
whole debt had become mature, according to the express agreement of the parties, independently of
the resolutory condition which gave the creditor the right to demand the immediate payment of the
whole debt upon the expiration of the stipulated term of one week allowed to secure from Mariano
Yulo the ratification and confirmation of the contract of August 12, 1909.
                           ii.     Cannot invoke exception for the shares of his solidary co-debtors Pedro and Concepcion Yulo, they
being in identical condition as he.
                         iii.     None of Francisco, Manuel, and Carmen Yulo’s obligations have been matured.
                         iv.     The part of the debt for which these three are responsible is three-sixths of P225,000 or P112,500, so
that Gregorio Yulo may claim that, even acknowledging that the debt for which he is liable is
P225,000, nevertheless not all of it can now be demanded of him, for that part of it which pertained
to his co-debtors is not yet due, a state of affairs which not only prevents any action against the
persons who were granted the term which has not yet matured, but also against the other solidary
debtors who being ordered to pay could not now sue for a contribution, and for this reason the action
will be only as to the P112,500.         
                           v.     Against the propriety and legality of a judgment against Gregorio Yulo for this sum, to wit, the three-
sixths part of the debt which forms the subject matter of the suit, we do not think that there was any
reason or argument offered which sustains an opinion that for the present it is not proper to order
him to pay all or part of the debt, the object of the action. 

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6.
JAN

Occena vs. Marquez

Occena vs. Marquez

FACTS:
1. OCCENA seek to nullify order of MARQUEZ:
1. “In the matter of testate estate of William Ogan”, in relation to OCCENA’s
claim for partial payment of attorney fees P30,000 (November 2, 1966), fixing at P20,000 (covering
 March 1963-December 1965) and directing its payment minus P4,000 previously received by
petitioners.
2. Order denying motion for reconsideration and modifying Nov. 2 1966 order
by deleting the phrase:
                            i.     “direct the said court to approve the release to them as attorney’s fees amount P30,000 minus
P4,000 already advanced to them by executrix”
                           ii.     “allow petitioners to submit evidence to establish the total attorney’s fees to which they are entitled, in
case no agreement thereon is reached between them and the instituted heirs”
2. GROSS VALUE OF OGAN ESTATE IS P2,000,000.
1. OCCENA are the lawyers for estate executrix, Mrs. NECITAS OGAN
OCCENA.
                            i.     Have been representing since 1963
                           ii.     Defended the estate against claims and protecting the interests of the estate.
3. EXPEDITE SETTLEMENT OF ESTATE:
1. 7 instituted heirs compromised with claimants, including co-executor
BINAMIRA, lawyers and wife.
                            i.     Partial distributor of corpus and income made to heirs in total of P450,000.
2. Estate and inheritance taxes were settled by executrix (Nov. 6)
                            i.     Requisite tax clearance and discharge from liability was issued by Commissioner of Internal
Revenue.
4. OCCENA FILED MOTION FOR PARTIAL PAYMENT OF ATTORNEY FEES (1965)
to approve payment of P30,000 as counsel since 1963; authorize executrix to withdraw amount from
deposits of estate.
1. 3 heirs moved to defer consideration until total amounts of executrix fees and
attorney fees are agreed upon.
                            i.     In July 1966, 5 of 7 heirs filed manifestation, no objection to release P30,000 as partial payment and
recommending approval of OCCENA petition.
2. First motion (Nov. 18, 1965) still unresolved, filed 2 nd motion for release of
P30,000.
                            i.     Deferred by QUIJANO and ARROYO for remaining 2 heirs until all heirs have agreed in writing on
total attorney fees.
1.   Filed for motion for reconsideration, payment of P30,000 would be chargeable against the fees they
and instituted heirs might agree to be their total fee.
a.    MARQUEZ order fixing total fees from 1963-1965 to P20,000.
                           i.     MARQUEZ denied motion for reconsideration and also modified lawyer fees to P20,000.
5. OCCENA CONTEND THAT MARQUEZ ACTED WITH GRAVE ABUSE OF
DISCRETION/ EXCESS OF JURISDICTION:
1. Motion submitted for resolution was only for partied payment of attorney fees
                            i.     Without prejudice to any agreement that might later be reached between them and instituted heirs on
question of total attorney fees, yet MARQUEZ resolved the question of total attorney fees.
2. Considering only question raised by OCCENA for court’s determination was
of partial attorney fees, they never expected the court to make a ruling on the question of total
attorney fees.
                            i.     Consequently, OCCENA did not have the opportunity to prove to total fees to which they were
entitled.
                           ii.     Hence, they were denied due process of law.
3. 5 of 7 heirs agreed to OCCENA motion for partial payment while remaining 2
did not oppose the motion.
4. MARQUEZ said he based the P20,000 on records of the case but amount of
attorney fees cannot be determined on sole basis of records for there are other circumstances that
should be taken into consideration.
5. Contrary to MARQUEZ opinion, the fact that one of OCCENA is the husband
of executrix does not deny them the right to fees to which they are entitled.
 2. ONLY MARQUEZ IS NAMED RESPONDENT FOR ACCORDING TO
PETITIONERS, “NO PROPER PARTY IS INTERESTED IN SUSTAINING THE QUESTIONED
PROCEEDINGS IN LOWER COURT”.
3. MARQUEZ COUNTER-ARGUMENT:
1. OCCENA proper remedy is appeal and not special civil action, considering
there is already a final order on motion for payment of fees.
2. One of OCCENA is the husband of executrix.
                            i.     Hence, pecuniary interest goes against pecuniary interest of 4 heirs he is representing in special
proceeding.
c.    There are miscellaneous payments appearing in the compromised agreement and in the executrix’s
accounting which cover expenses incurred by OCCENA for the estate- reason why MARQUEZ
deleted 1963-1965 from November 2 order.
d.   Co-executor BINAMIRA should be included as party respondent to comply with SEC 5, RULE 65 of
Revised Rules of Court.
e.    Duty of MARQUEZ not to be very liberal to the attorney representing the executrix, who is the wife of
said counsel and is herself an heir to a sizable portion of the estate, for it is his duty to see to it that
the estate is administered “frugally” as economically as possible.
1.   And to avoid a considerable portion of estate is absorbed in the process of such division in order that
there may be a worthy residue for the heirs.
f.     As special defenses, MARQUEZ alleged that 7 instituted heirs are indispensable parties in this case;
mandamus cannot control the actuations of the trial court because they involved matters of
discretion; no abuse of discretion can be imputed to respondent Judge for trying his best to
administer the estate frugally.
8.   Since SAMUEL OCCENA AND JESUS OCCENA are husband and father-in-law of executrix,
NECITAS OGAN OCCENA, JESUS OCCENA cannot oppose claim for attorney fees, thus leaving
co-executor (BINAMIRA) as the lone party to represent and defend the interests of estate.
a.    BINAMIRA filed for motion for leave to intervene, granted in 1967.
                            i.     OCCENA filed motion for reconsideration of AUG 9 1967 resolution and opposition to BINAMIRA’s
motion for leave to intervene:
1.   BINAMIRA ceased to be co-executor upon his resignation in 1965.
9.   Intervenor (BINAMIRA) filed Reply to Executrix’s Opposition and Opposition to Executrix’s Motion for
Reconsideration; filed Intervenor’s Comments on Petitioner’s Motion for Reconsideration of
Resolution (AUG 9 1967).
a.    OCCENA filed against BINAMIRA, Petition for Contempt asking to hold BINAMIRA in contempt of
court.
                            i.     Court required BINAMIRA to comment.
b.   OCCENA filed Supplemental Petition for Contempt.
                            i.     BINAMIRA responded, asking court to dismiss OCCENA’s motion for indirect contempt and hold
them guilty of indirect contempt for gross breach of legal ethics.
1.   Action deferred until case is considered on merits.
                           ii.     Exchange of petitions for contempt between BINAMIRA and OCCENA.
1.   Charge of false averments against BINAMIRA.

ISSUE:
WON the Court made a grace abuse of discretion upon modifying attorney fees?
Is there a conflict on interest on the testate proceedings considering one of petitioners is husband of
executrix?

HELD:
PETITION FOR CERTIORARI GRANTED. COURT A QUO IS DIRECTED TO HOLD A HEARNG
TO DETERMINE HOW MUCH TOTAL ATTORNEY FEES PETITIONERS ARE ENTITLED TO.
 BINAMIRA, WHO APPEARED AS INTERVENOR, IS DECLARED GUILTY OF CONTEMPT AND
SENTENCED TO PAY COURT P500.
1. On BASIS PETITION OF ATTORNEY FEES:
1. GENERAL RULE: When lawyer rendered legal services to
executor/administrator to assist in execution of his trust, attorney fees may be allowed as expenses
of administration.
                            i.     Estate not directly liable for his fees.
                           ii.     Liability of payment rests on executor.
                         iii.     If executor/administrator pays, he may reimburse from the estate.
                         iv.     In case of failure to pay:
1.   File an action against him in his personal capacity and not as administrator
2.   File a petition in testate or intestate proceedings asking court to direct payment of fees as expenses
of administration
                           v.     *Whichever action chosen, heirs will have to right to inquire into the value, of the services of the
lawyer and on necessity of his employment.
2. NO AUTHORIZATION IN THE COURT to fix amount of lawyer fees entitled without
according to lawyer the opportunity to prove the legitimate value of his services.
3. IMPORTANCE OF RECORD IN DETERMINING ATTORNEY FEES:
1. Whatever attorney fees may have been approved by the Court were result of
compromise and were the written consent of all heirs and of all signatories. The record can reflect
what an attorney has done.
2. However, in fixing attorney fees solely on basis of records of the case,
without allowing OCCENA to bring evidence to prove what is the proper amount of attorney fee’s
they are entitled to, MARQUEZ has committed a grave abuse of discretion correctable by certiorari.
Other factors in assessing lawyer fees:
                            i.     Amount and character of service rendered
                           ii.     Labor, time and trouble involved
                         iii.     Nature and importance of litigation or business services were rendered
                         iv.     Responsibility imposed
                           v.     Amount of money or value of property affected by controversy/involved in employment
                         vi.     Skill and experience in performance of services
                        vii.     Professional character and social standing
                      viii.     Results secured
3. An attorney may properly charge a much larger fee when it is contingent than
when it is not.
2. BINAMIRA DELIBERATELY MADE FALSE ALLEGATIONS WHICH TEND TO
IMPEDE OR OBSTRUCT ADMINSITRATION OF JUSTICE:
1. Claimed to have duly executed mortgage which in reality is only a proposed
mortgage not signed by parties.
2. Record showed only a certain P50,000 loan and not P100,000 as he claimed
against the petitioners.
3. Stated that SAMUEL OCCENA became president of Bohol Land Transport
after making the P100,000 load. Corporate secretary of Bohol Land said otherwise.
4. Stated a certain income distributed to heirs when no income existed.
5. Said that executrix failed to state assets which are actually gifts or furniture
payments to the executrix personally.
6. Mentioned that petitioners and executrix did not pay him when there was a
receipt signed.