Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 134100 September 29, 2000

PURITA ALIPIO, petitioner, vs.COURT OF APPEALS and ROMEO G. JARING, represented by his Attorney-In-Fact RAMON G. JARING,respondents.

D E C I S I O N

MENDOZA, J.:

The question for decision in this case is whether a creditor can sue the surviving spouse for the collection of a debt which is owed by the conjugal partnership of gains, or whether such claim must be filed in proceedings for the settlement of the estate of the decedent. The trial court and the Court of Appeals ruled in the affirmative. We reverse.

The facts are as follows:

Respondent Romeo Jaring1 was the lessee of a 14.5 hectare fishpond in Barito, Mabuco, Hermosa, Bataan. The lease was for a period of five years ending on September 12, 1990. On June 19, 1987, he subleased the fishpond, for the remaining period of his lease, to the spouses Placido and Purita Alipio and the spouses Bienvenido and Remedios Manuel. The stipulated amount of rent was P485,600.00, payable in two installments ofP300,000.00 and P185,600.00, with the second installment falling due on June 30, 1989. Each of the four sublessees signed the contract.

The first installment was duly paid, but of the second installment, the sublessees only satisfied a portion thereof, leaving an unpaid balance of P50,600.00. Despite due demand, the sublessees failed to comply with their obligation, so that, on October 13, 1989, private respondent sued the Alipio and Manuel spouses for the collection of the said amount before the Regional Trial Court, Branch 5, Dinalupihan, Bataan. In the alternative, he prayed for the rescission of the sublease contract should the defendants fail to pay the balance.

Petitioner Purita Alipio moved to dismiss the case on the ground that her husband, Placido Alipio, had passed away on December 1, 1988.2 She based her action on Rule 3, §21 of the 1964 Rules of Court which then provided that "when the action is for recovery of money, debt or interest thereon, and the defendant dies before final judgment in the Court of First Instance, it shall be dismissed to be prosecuted in the manner especially provided in these rules." This provision has been amended so that now Rule 3, §20 of the 1997 Rules of Civil Procedure provides:

When the action is for the recovery of money arising from contract, express or implied, and the defendant dies before entry of final judgment in the court in which the action was pending at the time of such death, it shall not be dismissed but shall instead be allowed to continue until entry of final judgment. A favorable judgment obtained by the plaintiff therein shall be enforced in the manner especially provided in these Rules for prosecuting claims against the estate of a deceased person.

The trial court denied petitioner's motion on the ground that since petitioner was herself a party to the sublease contract, she could be independently impleaded in the suit together with the Manuel spouses and that the death of her husband merely resulted in his exclusion from the case.3 The Manuel spouses failed to file their answer. For this reason, they were declared in default.

On February 26, 1991, the lower court rendered judgment after trial, ordering petitioner and the Manuel spouses to pay private respondent the unpaid balance of P50,600.00 plus attorney's fees in the amount of P10,000.00 and the costs of the suit.

Petitioner appealed to the Court of Appeals on the ground that the trial court erred in denying her motion to dismiss. In its decision4 rendered on July 10, 1997, the appellate court dismissed her appeal. It held:

The rule that an action for recovery of money, debt or interest thereon must be dismissed when the defendant dies before final judgment in the regional trial court, does not apply where there are other defendants against whom the action should be maintained. This is the teaching of Climaco v. Siy Uy, wherein the Supreme Court held:

Upon the facts alleged in the complaint, it is clear that Climaco had a cause of action against the persons named as defendants therein. It was, however, a cause of action for the recovery of damages, that is, a sum of money, and the corresponding action is,

unfortunately, one that does not survive upon the death of the defendant, in accordance with the provisions of Section 21, Rule 3 of the Rules of Court.

x x x x x x x x x

However, the deceased Siy Uy was not the only defendant, Manuel Co was also named defendant in the complaint. Obviously, therefore, the order appealed from is erroneous insofar as it dismissed the case against Co. (Underlining added)

Moreover, it is noted that all the defendants, including the deceased, were signatories to the contract of sub-lease. The remaining defendants cannot avoid the action by claiming that the death of one of the parties to the contract has totally extinguished their obligation as held in Imperial Insurance, Inc. v. David:

We find no merit in this appeal. Under the law and well settled jurisprudence, when the obligation is a solidary one, the creditor may bring his action in toto against any of the debtors obligated in solidum. Thus, if husband and wife bound themselves jointly and severally, in case of his death, her liability is independent of and separate from her husband's; she may be sued for the whole debt and it would be error to hold that the claim against her as well as the claim against her husband should be made in the decedent's estate. (Agcaoili vs. Vda. de Agcaoili, 90 Phil. 97).5

Petitioner filed a motion for reconsideration, but it was denied on June 4, 1998.6 Hence this petition based on the following assignment of errors:

A. THE RESPONDENT COURT COMMITTED REVERSIBLE ERROR IN APPLYING CLIMACO v. SIY UY, 19 SCRA 858, IN SPITE OF THE FACT THAT THE PETITIONER WAS NOT SEEKING THE DISMISSAL OF THE CASE AGAINST REMAINING DEFENDANTS BUT ONLY WITH RESPECT TO THE CLAIM FOR PAYMENT AGAINST HER AND HER HUSBAND WHICH SHOULD BE PROSECUTED AS A MONEY CLAIM.

B. THE RESPONDENT COURT COMMITTED REVERSIBLE ERROR IN APPLYING IMPERIAL INSURANCE INC. v. DAVID, 133 SCRA 317, WHICH IS NOT APPLICABLE BECAUSE THE SPOUSES IN THIS CASE DID NOT BIND THEMSELVES JOINTLY AND SEVERALLY IN FAVOR OF RESPONDENT JARING.7

The petition is meritorious. We hold that a creditor cannot sue the surviving spouse of a decedent in an ordinary proceeding for the collection of a sum of money chargeable against the conjugal partnership and that the proper remedy is for him to file a claim in the settlement of estate of the decedent.

First. Petitioner's husband died on December 1, 1988, more than ten months before private respondent filed the collection suit in the trial court on October 13, 1989. This case thus falls outside of the ambit of Rule 3, §21 which deals with dismissals of collection suits because of the death of the defendant during the pendency of the case and the subsequent procedure to be undertaken by the plaintiff, i.e., the filing of claim in the proceeding for the settlement of the decedent's estate. As already noted, Rule 3, §20 of the 1997 Rules of Civil Procedure now provides that the case will be allowed to continue until entry of final judgment. A favorable judgment obtained by the plaintiff therein will then be enforced in the manner especially provided in the Rules for prosecuting claims against the estate of a deceased person. The issue to be resolved is whether private respondent can, in the first place, file this case against petitioner.

Petitioner and her late husband, together with the Manuel spouses, signed the sublease contract binding themselves to pay the amount of stipulated rent. Under the law, the Alipios' obligation (and also that of the Manuels) is one which is chargeable against their conjugal partnership. Under Art. 161(1) of the Civil Code, the conjugal partnership is liable for ¾

All debts and obligations contracted by the husband for the benefit of the conjugal partnership, and those contracted by the wife, also for the same purpose, in the cases where she may legally bind the partnership.8

When petitioner's husband died, their conjugal partnership was automatically dissolved9 and debts chargeable against it are to be paid in the settlement of estate proceedings in accordance with Rule 73, §2 which states:

Where estate settled upon dissolution of marriage. ¾ When the marriage is dissolved by the death of the husband or wife, the community property shall be inventoried, administered, and liquidated, and the debts thereof paid, in the testate or intestate proceedings of the deceased spouse. If both spouses have died, the conjugal partnership shall be liquidated in the testate or intestate proceedings of either.

As held in Calma v. Tañedo,10 after the death of either of the spouses, no complaint for the collection of indebtedness chargeable against the conjugal partnership can be brought against the surviving spouse. Instead, the claim must be made in the proceedings for the liquidation and settlement of the conjugal property. The reason for this is that upon the death of one spouse, the powers of administration of the surviving spouse ceases and is passed to the administrator appointed by the court having jurisdiction over the settlement of estate proceedings.11Indeed, the surviving spouse is not even a de facto administrator such

that conveyances made by him of any property belonging to the partnership prior to the liquidation of the mass of conjugal partnership property is void.12

The ruling in Calma v. Tañedo was reaffirmed in the recent case of Ventura v. Militante.13 In that case, the surviving wife was sued in an amended complaint for a sum of money based on an obligation allegedly contracted by her and her late husband. The defendant, who had earlier moved to dismiss the case, opposed the admission of the amended complaint on the ground that the death of her husband terminated their conjugal partnership and that the plaintiff's claim, which was chargeable against the partnership, should be made in the proceedings for the settlement of his estate. The trial court nevertheless admitted the complaint and ruled, as the Court of Appeals did in this case, that since the defendant was also a party to the obligation, the death of her husband did not preclude the plaintiff from filing an ordinary collection suit against her. On appeal, the Court reversed, holding that ¾

as correctly argued by petitioner, the conjugal partnership terminates upon the death of either spouse. . . . Where a complaint is brought against the surviving spouse for the recovery of an indebtedness chargeable against said conjugal [partnership], any judgment obtained thereby is void. The proper action should be in the form of a claim to be filed in the testate or intestate proceedings of the deceased spouse.

In many cases as in the instant one, even after the death of one of the spouses, there is no liquidation of the conjugal partnership. This does not mean, however, that the conjugal partnership continues. And private respondent cannot be said to have no remedy. Under Sec. 6, Rule 78 of the Revised Rules of Court, he may apply in court for letters of administration in his capacity as a principal creditor of the deceased . . . if after thirty (30) days from his death, petitioner failed to apply for administration or request that administration be granted to some other person.14

The cases relied upon by the Court of Appeals in support of its ruling, namely, Climaco v. Siy Uy15 and Imperial Insurance, Inc. v. David,16 are based on different sets of facts. In Climaco, the defendants, Carlos Siy Uy and Manuel Co, were sued for damages for malicious prosecution. Thus, apart from the fact the claim was not against any conjugal partnership, it was one which does not survive the death of defendant Uy, which merely resulted in the dismissal of the case as to him but not as to the remaining defendant Manuel Co.

With regard to the case of Imperial, the spouses therein jointly and severally executed an indemnity agreement which became the basis of a collection suit filed against the wife after her husband had died. For this reason, the Court ruled that since the spouses' liability was solidary, the surviving spouse could be independently sued in an ordinary action for the enforcement of the entire obligation.

It must be noted that for marriages governed by the rules of conjugal partnership of gains, an obligation entered into by the husband and wife is chargeable against their conjugal partnership and it is the partnership which is primarily bound for its repayment.17 Thus, when the spouses are sued for the enforcement of an obligation entered into by them, they are being impleaded in their capacity as representatives of the conjugal partnership and not as independent debtors such that the concept of joint or solidary liability, as between them, does not apply. But even assuming the contrary to be true, the nature of the obligation involved in this case, as will be discussed later, is not solidary but rather merely joint, making Imperial still inapplicable to this case.

From the foregoing, it is clear that private respondent cannot maintain the present suit against petitioner.1âwphi1 Rather, his remedy is to file a claim against the Alipios in the proceeding for the settlement of the estate of petitioner's husband or, if none has been commenced, he can file a petition either for the issuance of letters of administration18 or for the allowance of will,19 depending on whether petitioner's husband died intestate or testate. Private respondent cannot short-circuit this procedure by lumping his claim against the Alipios with those against the Manuels considering that, aside from petitioner's lack of authority to represent their conjugal estate, the inventory of the Alipios' conjugal property is necessary before any claim chargeable against it can be paid. Needless to say, such power exclusively pertains to the court having jurisdiction over the settlement of the decedent's estate and not to any other court.

Second. The trial court ordered petitioner and the Manuel spouses to pay private respondent the unpaid balance of the agreed rent in the amount of P50,600.00 without specifying whether the amount is to be paid by them jointly or solidarily. In connection with this, Art. 1207 of the Civil Code provides:

The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestations. There is a solidary liability only when the obligation expressly so estates, or when the law or the nature of the obligation requires solidarity.

Indeed, if from the law or the nature or the wording of the obligation the contrary does not appear, an obligation is presumed to be only joint, i.e., the debt is divided into as many equal shares as there are debtors, each debt being considered distinct from one another.20

Private respondent does not cite any provision of law which provides that when there are two or more lessees, or in this case, sublessees, the latter's obligation to pay the rent is solidary. To be sure, should the lessees or sublessees refuse to vacate the leased property after the expiration of the lease period and despite due demands by the lessor, they can be held jointly and severally liable to pay for the use of the property. The basis of their solidary liability is not the contract of lease or sublease but the fact that they have become joint tortfeasors.21 In the case at bar, there is no allegation that the sublessees refused to vacate the fishpond after the expiration of the term of the sublease. Indeed, the unpaid balance sought to be collected by private respondent in his collection suit became due on June 30, 1989, long before the sublease expired on September 12, 1990.

Neither does petitioner contend that it is the nature of lease that when there are more than two lessees or sublessees their liability is solidary. On the other hand, the pertinent portion of the contract involved in this case reads:22

2. That the total lease rental for the sub-leased fishpond for the entire period of three (3) years and two (2) months is FOUR HUNDRED EIGHT-FIVE THOUSAND SIX HUNDRED (P485,600.00) PESOS, including all the improvements, prawns, milkfishes, crabs and related species thereon as well all fishing equipment, paraphernalia and accessories. The said amount shall be paid to the Sub-Lessor by the Sub-Lessees in the following manner, to wit:

A. Three hundred thousand (P300,000.00) Pesos upon signing this contract; and

B. One Hundred Eight-Five Thousand Six-Hundred (P185,6000.00) Pesos to be paid on June 30, 1989.

Clearly, the liability of the sublessees is merely joint. Since the obligation of the Manuel and Alipio spouses is chargeable against their respective conjugal partnerships, the unpaid balance of P50,600.00 should be divided into two so that each couple is liable to pay the amount of P25,300.00.

WHEREFORE, the petition is GRANTED. Bienvenido Manuel and Remedios Manuel are ordered to pay the amount of P25,300.00, the attorney's fees in the amount of P10,000.00 and the costs of the suit. The complaint against petitioner is dismissed without prejudice to the filing of a claim by private respondent in the proceedings for the settlement of estate of Placido Alipio for the collection of the share of the Alipio spouses in the unpaid balance of the rent in the amount of P25,300.00.

SO ORDERED.

Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-41768 December 17, 1935

VIUDA E HIJOS DE PIO BARRETTO Y CIA., plaintiff-appellee, vs.ALBO & SEVILLA, INC., VlCENTE ALBO, EUGENIO SEVILLA and ANGEL GARCHITORENA, defendants-appellants.

Teofilo Mendoza and Vicente Bautista for appellants.Laurel, Del Rosario and Sabido for appellee.

IMPERIAL, J.:

The plaintiff brought suit to require the defendants to pay a certain rent stipulated in a contract of lease. The defendant appealed from the judgment ordering them to pay, jointly and severally, the plaintiff the sum of P11,400 as unpaid rents from April 1, 1932 to October 31, 1933, inclusive, the sum of P600 a month from November 1, 1933 until the termination of the contract of lease, plus P1,000 as penalty and attorney's fees, and the costs.

The pertinent facts requisite to resolve the appeal are condensed in the following stipulation of the parties:

1. That the plaintiff is a corporation duly organized and existing under the laws of the Philippine Islands, with its main office at No. 720, Echague Street, Manila;

2. That the defendant Albo & Sevilla, Inc., is likewise a corporation organized and existing under the laws of the Philippine Islands, with its office at No. 670, Dasmariñas Street, City of Manila; and the other defendants, Vicente Albo, Eugenio Sevilla and Angel de Garchitorena, are all of age with legal capacity to be parties in this suit;

3. That on July 15, 1930, the plaintiff and the defendants entered into a contract of lease, the original of which is attached hereto and made an integral part of this stipulation as Exhibit A;

4. That by force of said contract of lease the defendants occupied the "Cine Collegian" and regularly paid the rent therefor until February 28, 1931;

5. That thereafter the rents for said cinema have been paid by Angel Garchitorena either by check of Benigno del Rio or in cash;

6. That the receipts for rent paid from March, 1931, were issued in the name of Albo & Sevilla, Inc., without prejudice to the right of the defendants Albo & Sevilla, Inc., Eugenio Sevilla, and Vicente Albo to adduce evidence that the said issuance has not come to their knowledge from March 1, 1931;

7. That on January 19, 1931, the defendants Eugenio Sevilla, Vicente Albo and Angel Garchitorena executed a chattel mortgage of the fixtures and of the "Cine Collegian" in favor of Vda. e Hijos de Pio Barretto and Co., Inc., which was presented for registration on February 6, 1931, but said document was not registered; and that said mortgage was executed under the stipulation in subsection (h) of the second paragraph of the contract of lease, Exhibit A. The original of said deed is attached hereto and made an integral part of this stipulation marked as Exhibit B;

8. That by a deed of February 28,1931, Vicente Albo and Eugenio Sevilla, in their own behalf and in that of the corporation Albo & Sevilla, Inc., sold their right interest, and participation, including the the rights of lease of the "Cine Collegian", to Angel Garchitorena and Benigno del Rio, copy of which is attached to this stipulation and made a part thereof as Exhibit I, reserving plaintiff's right to establish that it neither has knowledge of, nor consented to, said sale;

9. That on August 15, 1931, Angel Garchitorena and Benigno del Rio executed in favor of Viuda e Hijos de Pio Barretto & Co., Inc., another chattel mortgage of the same fixtures and chattels of the "Cine Collegian" described therein, which deed is duly registered in the office of the register of deeds of the City of Manila pursuant to Act No. 1508, copy of which, duly certified by said registry office, is attached to this stipulation as Exhibit C;1awphil.net

10. That the defendants have been required by the attorneys for the plaintiff to pay the rent, as evidenced by the letters of February 6, 1933, and March 1 of the same year, copies of which are attached hereto as Exhibits D and D-1, respectively; and the defendants have orally alleged that they are no longer connected with the "Cine Collegian" in virtue of the aforesaid sale to Benigno del Rio and Angel Garchitorena.

In the chattel mortgage deed of August 15, 1931, mentioned in paragraph 9 of the stipulation of facts, are found the following important clauses:

First: That we are the owners in fee simple, free from all lien, incumbrence, and charge, undivided and share and share alike, of the following property found in the building known as "Cine Collegian", belonging to the corporation Viuda e Hijos de Pio Barretto & Co., Inc., situated on the corner of Mercedes and Trinidad Ayala Streets, Ermita, Manila.

x x x x x x x x x

Third: That to secure the payment of the monthly rental of Six hundred pesos (P600), Philippine currency, for the occupancy of the "Cine Collegian", payable within the first five (5) days of every month, in advance, until December 31, 1936, as well as the faithful compliance with the terms of the existing contract on said "Cine Collegian", we, the undersigned, do constitute a first, special, and voluntary mortgage upon the property described in the first paragraph hereof, and upon all our right, interest, action, or participation in the properties described in the second paragraph hereof, in favor of the corporation Viuda e Hijos de Pio Barrette & Co., Inc., its heirs and assigns. . . .

We, Angel de Garchitorena and Benigno del Rio, mortgagors, and Jose G. Barrette, manager of the corporation Viuda e Hijos de Pio Barretto & Co., Inc., mortgagee, do swear individually that the foregoing mortgage has been constituted to secure the obligation therein specified, that the said obligation is just and valid, and that the said mortgage has not been fraudulently constituted.

Under the facts, the only question perhaps which we must resolve is whether the contract of lease was novated by the substitution of lessees, and, if so, whether the, substitution was consented to by the plaintiff lessor.

Articles 1203 and 1205 of the Civil Code provide:

ART. 1203. Obligations may be modified:

1. By the change of their object or principal conditions;

2. By substituting another in place of the debtor;

3. By subrogating a third person to the rights of the creditor.

ART. 1205. Novation which consists in the substitution of the of a new debtor in the place of the original one may be made without the knowledge of the latter, but not without the consent of the creditor.

Responsive to the said provisions, the substitution of the debtor or in an obligation with the creditor's consent, produces novation by bringing into being a new obligation in place of the old. Applied to the case under consideration, the result is, that if the plaintiff consented to the substitution of Angel Garchitorena and Benigno del Rio in lieu of the original lessees, it has exhausted all its right of action against the latter and can only enforce the same against the new lessees. Our inquiry, therefore, will bear on the existence of such consent.

Exhibit 1 undoubtedly evidences that Vicente Albo and Eugenio Sevilia conveyed all their rights, interest and participation in the "Cine Collegian", whose business was styled Albo & Sevilla, Inc., in favor of Angel Garchitorena and Benigno del Rio, including all their rights, interest, and obligations under the contract of lease entered into on July 15, 1930. This appears in the aforesaid deed, and so also in paragraph 8 of the stipulated facts. True, the plaintiff had no hand in this document Exhibit 1, for which sole reason it may be alleged that it neither knew nor consented to the transaction. However, in the quoted clauses from the duly registered chattel mortgage Exhibit C, executed on August 15, 1931, by Angel Garchitorena and Benigno del Rio, wherein the plaintiff directly intervened and took part through the manager Jose G. Barretto, who signed in its name, appear statements of the contracting parties clearly and logically compelling the deduction that, under its terms, the plaintiff knew of the conveyance made by Vicente Albo and Eugenio Sevilla in favor of Angel Garchitorena and Benigno del Rio, and virtually approved of and consented to the substitution of the new lessees. It is first to be noted that the document states that Garchitorena and Del Rio mortgaged the same chattels which Albo, Sevilla, Garchitorena and Albo & Sevilla, Inc., had already previously mortgaged to the said plaintiff to secure the obligations which they assumed under the contract of lease Paragraph 1 next states that Angel Garchitorena and Benigno del Rio became the owners of the same chattels. Paragraph 3 likewise states that the period of the contract of lease is extended to December 31, 1936, and that the security is for the faithful compliance with the other conditions stipulated in the original contract of lease. The concluding clause of the deed is a reiteration that the security takes in all the

condition; and obligations arising from the contract of lease. In the face of such circumstances, we believe the only logical and reasonable deduction is that in view of the second mortgage, the plaintiff was apprized of and acquiesced in the change of lessees.

The plaintiff argues that Vicente Albo and Eugenio Sevilla undertook to be joint and several sureties for the payment of rents under the third paragraph of the contract of lease which says: "Third: Messrs. Vicente Albo, Eugenio Sevilla and Angel Garchitorena, jointly and severally under take with Albo & Sevilla, Inc., to comply with all the obligations of the lessees in this contract." We understand and so hold that by the terms, clear to be sure, of said clause, Albo and Sevilla did not execute a special and separate bond, but only intended to state that the obligations assumed by them with Garchitorena and the corporation Albo & Sevilla, Inc., relative to the conditions of the contract of lease, were joint and several in nature. It would be repugnant to the nature of the contract of guaranty and to the provisions of article 1922 of the Civil Code to construe that the intention of said alleged sureties was to become guarantors of their own obligations. Granting, however, That it were a bond, which seems to us absurd, their obligations as sureties were extinguished at the same time as their obligations as debtors or lessees, under the express provisions of article 1847 of the same Code.

After the promulgation of the decision rendered in this case, which is practically that above-quoted, the co-defendant Albo & Sevilla, Inc., filed a motion entitled "Motion to clarify the dispositive part of the judgment" praying that the judgment be modified by absolving it likewise from the complaint. In support of the petition the point is made that the corporation Albo & Sevilla, Inc., was likewise released from its obligation as lessee in view of our holding that there had a novation by the substitution of lessees. And the whole argument rests on the stipulation in paragraph 8 of the agreed statement of facts that the corporation had likewise conveyed its interest, rights, and obligations in the contract of lease Exhibit A to Angel Garchitorena and Benigno del Rio. The contention, although it was not discussed at length in the original decision because it was not raised then in the briefs,, is clearly untenable and without merit. It should be borne in mind that while such fact has really been stipulated, however, the said paragraph 8 has likewise stated that Exhibit 1, which is the deed of conveyance furnishing one of the grounds of novation, forms an integral part of said stipulation, hence, its content cannot and should not be overlooked in ascertaining who transferred their obligations to the new lessees under the contract of lease. Viewing the fact stipulated in paragraph 8 in connection with the contents of Exhibit 1, and interpreting them together pursuant to the provisions of article 1285 of the Civil Code, it will plainly be seen that the corporation Albo & Sevilla, Inc., neither intervened in Exhibit 1 nor conveyed its rights and obligations in the lease from which it follows that the plaintiff could not have consented expressly or impliedly to non-existing contract. We said that there was a novation the original contract of lease in view of certain statements appearing in the second chattel mortgage deed, Exhibit C, from which the plaintiff necessarily obtained knowledge of the existence of the deed of conveyance Exihibit 1, and in yielding assent to the second mortgage, the logical and inescapable deduction is that it consented impliedly to the substitution of lessees. If these were the grounds of the novation, and if the corporation Albo & Sevilla, Inc., neither took part nor intervened either in the deed of conveyance Exhibit 1 or in the second chattel mortgage Exhibit C, it is evident that the novation was not extended to it, nor can it successfully allege that it was substituted by the new lessees. We, therefore, conclude that the petition is absolutely groundless and untenable.

In its reply to the motion of Albo & Sevilla, Inc., the plaintiff likewise petitioned that we affirm the appealed judgment on the ground that, although Vicente Albo and Eugenio Sevilla were relieved from their obligations as lessees in view of the substitution, nevertheless they continue to be bound by all the consequences of the original contract of lease as sureties. In other words, the plaintiff reaffirms that under paragraph 3 of the deed of lease, said two defendants also acted as sureties of the other lessees. The language of paragraph 3 does not lend itself to such interpretation. Manifest is the parties' intention that Vicente Albo and Eugenio Sevilla did not bind themselves as sureties of the other co-lessees, their only intention being to make known that the obligations assumed by all the lessees were joint and several in nature. This same conclusion was already stated in the original decision when the same point was considered and discussed. We, therefore, hold that the Plaintiff's petition is likewise groundless and untenable.

Wherefore, the appealed judgment is modified, absolving the defendants Vicente Albo and Eugenio Sevilla from the complaint, and the same is affirmed in all other respects, without special pronouncement as to the costs in this instance. So ordered.

Hull, Butte, and Diaz, JJ., concur.

Separate Opinions

VILLA-REAL, J., concurring and dissenting:

I am in accord with the majority opinion in so far as it modifies the appealed judgment the defendants Vicente Albo and Eugenio Sevilla from the complaint, and I dissent in so far as it affirms the rest of the aforesaid judgment ordering Albo & Sevilla, Inc., to pay, jointly and severally with Vicente Albo, Eugenio Sevilla and Angel Garchitorena, the plaintiff the sum of P11,400 as unpaid rents from April 1. 1982 to October 31, 1933, inclusive, the sum of P600 a month from November 1, 1993, until the termination of the contract of lease, plus P1,000 as penalty and attorney's fees, and the costs.

In paragraph 8 of the stipulation of facts, the following appears:

8. That by a deed of February 28, 1931, Vicente Albo and Eugenio Sevilla, in their own behalf and in that of the corporation Albo & Sevlla, Inc., sold their right, interest, and participation, including the rights of lease of the "Cine Collegian", to Angel Garchitorena and Benigno del Rio, copy of which is attached to this stipulation and made a part thereof as Exhibit I, reserving plaintiff's right to establish that it neither has knowledge of, nor consented to, said sale.

While the deed of sale Exhibit 1 does not state that Vicente Albo and Eugenio Sevilla likewise sold the rights and interest of Albo & Sevilla, Inc., in the latter's behalf, nevertheless, in reciting in said paragraph 8 of the stipulation of facts that the said deed of sale included the rights and interest of said corporation, the omission in the said deed of sale Exhibit 1 was remedied. If by virtue of said sale, to which implied consent was later given by the plaintiff-appellee Viuda e Hijos de Pio Barrette & Co., Inc., in informing to the execution of the chattel mortgage Exhibit C, the defendants Vicente Albo and Eugenio Sevilla were released from their obligation as lessees of the "Cine Collegian", it follows that Albo & Sevilla, Inc., was likewise discharged under the said paragraph 8 of the stipulation of facts.

Moreover, and this is the most fundamental, the contract of lease having been novated, all the joint and several lessees, including Albo and Sevilla, Inc., were released from its effects under the provisions of article 1143 of the Civil Code, reading:

ART. 1143. The novation, compensation, merger, or remission of the debt, made by any one of the solidarity creditors, or with any of the solidary debtors, extinguishes the obligation, without prejudice to the provisions of article 1146.

Any creditor by whom any of these acts may have been done, as well as he who may collect the debt, shall be liable to the others for their proportional share of the obligation.

The juridical relation existing between a joint and several creditor and the joint and several debtors is the same in its effect as that existing between a simple creditor and the joint and several debtors. If the novation made by a joint and several creditor with any of the debtors of the same class extinguishes the obligation, there is no juridical reason why the novation made by a simple creditor with some of the joint and several debtors should not produce the same effect of extinguishing the obligation. Under the same principle, the implied novation made by the lessor, the herein plaintiff-appellee Viuda e Hijos de Pio Barretto & Co., Inc., with two of the joint and several lessees, the herein defendants-appellants Vicente Albo and Eugenio Sevilla, of the contract of lease of the "Cine Collegian", extinguished the obligation with respect to the joint and several lessee Albo & Sevilla, Inc. (See decision of the Supreme Court of Spain of February 21, 1912.)

Article 1281 of the French Civil Code sanctions this result in providing that all the co-debtors are discharged by the novation that had taken place between the creditor and one of the joint and several debtors.

Ruggiero, in his work entitled, Institutes of Civil Law, volume II, page 92, speaking of passive solidarity, or that which permits a creditor to whom several debtor have the same indebtedness to claim the total thereof from any of them, concludes as follows: .

If, therefore, the interruption of the prescription, default, the novation, the remission of the debt, the oath are acts affecting the debt in its objective unity, it follows: That . . . (3) the novation between the creditor and one of the debtors the others, unless the creditor should have required the inclusion of the other co-debtors, because the latter's refusal to adhere to the new agreement would keep alive the old indebtedness (article 1277, Italian Civil Code). . . ..

I am, therefore, of the opinion, that the corporation Albo & Sevilla, Inc., should also be absolved from the complaint.

Malcolm, and Goddard, JJ., concur.

AVANCEÑA, C.J., dissenting:

This is a suit brought to require compliance with an obligation arising from a contract of lease.

The contract was entered into on July 15, 1930, between the plaintiff, as lessor, and the four defendants Albo & Sevilla, Inc., Vicente Albo, Eugenio Sevilla and Angel Garchitorena, as lessees, who bound themselves jointly and severally to comply therewith. On January 19, 1931, three of the defendants, namely, Eugenio Sevilla, Vicente Albo and Angel Garchitorena, secured compliance with the contract by a mortgage of certain chattels. On February 28, 1931, two of the defendants, Vicente Albo and Eugenio Sevilla, conveyed their interest, participation and rights in the lease to the other lessee Angel Garchitorena

and to Benigno del Rio. On August 15, 1931, Angel Garchitorena and Benigno del Rio, to secure compliance with the same contract of lease, mortgaged the chattels which had already been mortgaged for the same purpose on January 19, 1931, as well as other properties described in the mortgaged deed.

From these facts the majority infers that the contract of lease was novated by the substitution for the lessees Eugenio Sevilla and Vicente Albo of Angel Garchitorena and Benigno del Rio. In view of this conclusion, the majority absolves Eugenio Sevilla and Vicente Albo from the complaint and renders judgment against the defendant Angel Garchitorena and Albo & Sevilla, Inc.

If, as the majority decides, the contract of lease in question was novated by the substitution of some of the lessees, all of them being joint and several lessees, the obligation created by said contract was extinguished under article 1146 of the Civil Code, and, consequently, Albo & Sevilla, Inc., should be discharged as the contract of lease the action against it is no longer in existence.

In my opinion, however, the contract of lease was not novated, and the appealed judgment against all the defendants should be affirmed.

The novation which consists in the substitution of a new debtor for the old one cannot be made without the creditor's consent. The conveyance by Vicente Albo and Eugenio Sevilla of their interest, participation and rights in the lease to Angel Garchitorena and Benigno del Rio was without plaintiff's consent. But, the prevailing opinion states, this consent was impliedly given by the plaintiff when it entered into the mortgage contract of August 15, 1931, with Angel Garchitorena and Benigno del Rio. The ground of the conclusion is, that by virtue of said contract the plaintiff learned that Vicente Albo and Eugenio Sevilla had conveyed their rights in the lease to Garchitorena and del Rio, and having accepted the mortgage executed by the latter by reason of that conveyance, the plaintiff thereby consented to said conveyance.

There is nothing, however, in the mortgage contract of August 15, 1931, partly quoted in the majority opinion, supporting this conclusion. There is absolutely no mention therein of such conveyance of the rights of lease. The only deduction from that contract is that Albo and Sevilla sold to Garchitorena and Del Rio the chattels which were mortgaged on January 19, 1931. But this does not perforce imply that Albo and Sevilla also conveyed their rights of lease. The contract of lease was different from that of mortgage, and in the latter only three of the lessees intervened and it was entered into long after the contract of lease was executed. It was unnecessary for the lease that the mortgage be constituted, as the former was entered into without the latter, which was executed months afterwards. Thus viewed, whatever plaintiff knew of the conveyance of the mortgaged properties, did not serve to apprize her of the fact that the lease rights likewise changed hands. The most that can be said is that the plaintiff consented to the conveyance of the mortgaged properties to Garchitorena and Del Rio, but it can not be said that thereby it likewise consented to the transfer of the lease rights of which it does not appear that it had knowledge.

Neither is the majority's theory helped by the fact that Garchitorena and Del Rio secured compliance with the conditions of the lease by a mortgage, as a third person may secure another's obligation by a mortgage without bringing about thereby a substitution of the debtor. Nor the fact that the plaintiff accepted the extension of the lease, since, aside from the fact that an extension is not a novation, even if it were, it would be a novation of the conditions of the contract but not by the substitution of a debtor by another.

My opinion is that there has been no substitution of debtors by others, and that the defendants continue to be the lessees of the "Cine Collegian" and should all be ordered to pay to the plaintiff the latter's claim in this case, thus affirming the appealed judgment.

Vickers, J., concurs.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 164401 June 25, 2008

LILIBETH SUNGA-CHAN and CECILIA SUNGA, petitioners, vs.THE HONORABLE COURT OF APPEALS; THE HONORABLE PRESIDING JUDGE, Regional Trial Court, Branch 11, Sindangan, Zamboanga Del Norte; THE REGIONAL TRIAL COURT SHERIFF, Branch 11, Sindangan, Zamboanga Del Norte; THE CLERK OF COURT OF MANILA, as Ex-Officio Sheriff; and LAMBERTO T. CHUA, respondents.

D E C I S I O N

VELASCO, JR., J.:

The Case

Before us is a petition for review under Rule 45, seeking to nullify and set aside the Decision1 and Resolution dated November 6, 2003 and July 6, 2004, respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 75688. The impugned CA Decision and Resolution denied the petition for certiorari interposed by petitioners assailing the Resolutions2 dated November 6, 2002 and January 7, 2003, respectively, of the Regional Trial Court (RTC), Branch 11 in Sindangan, Zamboanga Del Norte in Civil Case No. S-494, a suit for winding up of partnership affairs, accounting, and recovery of shares commenced thereat by respondent Lamberto T. Chua.

The Facts

In 1977, Chua and Jacinto Sunga formed a partnership to engage in the marketing of liquefied petroleum gas. For convenience, the business, pursued under the name, Shellite Gas Appliance Center (Shellite), was registered as a sole proprietorship in the name of Jacinto, albeit the partnership arrangement called for equal sharing of the net profit.

After Jacinto’s death in 1989, his widow, petitioner Cecilia Sunga, and married daughter, petitioner Lilibeth Sunga-Chan, continued with the business without Chua’s consent. Chua’s subsequent repeated demands for accounting and winding up went unheeded, prompting him to file on June 22, 1992 a Complaint for Winding Up of a Partnership Affairs, Accounting, Appraisal and Recovery of Shares and Damages with Writ of Preliminary Attachment, docketed as Civil Case No. S-494 of the RTC in Sindangan, Zamboanga del Norte and raffled to Branch 11 of the court.

After trial, the RTC rendered, on October 7, 1997, judgment finding for Chua, as plaintiff a quo. The RTC’s decision would subsequently be upheld by the CA in CA-G.R. CV No. 58751 and by this Court per its Decision dated August 15, 2001 in G.R. No. 143340.3 The corresponding Entry of Judgment4 would later issue declaring the October 7, 1997 RTC decision final and executory as of December 20, 2001. The fallo of the RTC’s decision reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, as follows:

(1) DIRECTING them to render an accounting in acceptable form under accounting procedures and standards of the properties, assets, income and profits of [Shellite] since the time of death of Jacinto L. Sunga, from whom they continued the business operations including all businesses derived from [Shellite]; submit an inventory, and appraisal of all these properties, assets, income, profits, etc. to the Court and to plaintiff for approval or disapproval;

(2) ORDERING them to return and restitute to the partnership any and all properties, assets, income and profits they misapplied and converted to their own use and advantage that legally pertain to the plaintiff and account for the properties mentioned in pars. A and B on pages 4-5 of this petition as basis;

(3) DIRECTING them to restitute and pay to the plaintiff ½ shares and interest of the plaintiff in the partnership of the listed properties, assets and good will in schedules A, B and C, on pages 4-5 of the petition;

(4) ORDERING them to pay the plaintiff earned but unreceived income and profits from the partnership from 1988 to May 30, 1992, when the plaintiff learned of the closure of the store the sum of P35,000.00 per month, with legal rate of interest until fully paid;

(5) ORDERING them to wind up the affairs of the partnership and terminate its business activities pursuant to law, after delivering to the plaintiff all the ½ interest, shares, participation and equity in the partnership, or the value thereof in money or money’s worth, if the properties are not physically divisible;

(6) FINDING them especially Lilibeth Sunga-Chan guilty of breach of trust and in bad faith and hold them liable to the plaintiff the sum of P50,000.00 as moral and exemplary damages; and,

(7) DIRECTING them to reimburse and pay the sum of P25,000.00 as attorney’s [fee] and P25,000.00 as litigation expenses.

NO special pronouncements as to COSTS.

SO ORDERED.5 (Emphasis supplied.)

Via an Order6 dated January 16, 2002, the RTC granted Chua’s motion for execution. Over a month later, the RTC, acting on another motion of Chua, issued an amended writ of execution.7

It seems, however, that the amended writ of execution could not be immediately implemented, for, in an omnibus motion of April 3, 2002, Chua, inter alia, asked the trial court to commission a certified public accountant (CPA) to undertake the accounting work and inventory of the partnership assets if petitioners refuse to do it within the time set by the court. Chua later moved to withdraw his motion and instead ask the admission of an accounting report prepared by CPA Cheryl A. Gahuman. In the report under the heading, Computation of Claims,8 Chua’s aggregate claim, arrived at using the compounding-of-interest method, amounted to PhP 14,277,344.94. Subsequently, the RTC admitted and approved the computation of claims in view of petitioners’ failure and refusal, despite notice, to appear and submit an accounting report on the winding up of the partnership on the scheduled hearings on April 29 and 30, 2002.9

After another lengthy proceedings, petitioners, on September 24, 2002, submitted their own CPA-certified valuation and accounting report. In it, petitioners limited Chua’s entitlement from the winding up of partnership affairs to an aggregate amount of PhP 3,154,736.65 only.10 Chua, on the other hand, submitted a new computation,11 this time applying simple interest on the various items covered by his claim. Under this methodology, Chua’s aggregate claim went down to PhP 8,733,644.75.

On November 6, 2002, the RTC issued a Resolution,12 rejecting the accounting report petitioners submitted, while approving the new computation of claims Chua submitted. The fallo of the resolution reads:

WHEREFORE, premises considered, this Court resolves, as it is hereby resolved, that the Computation of Claims submitted by the plaintiff dated October 15, 2002 amounting to P8,733,644.75 be APPROVED in all respects as the final computation and accounting of the defendants’ liabilities in favor of the plaintiff in the above-captioned case, DISAPPROVING for the purpose, in its entirety, the computation and accounting filed by the defendants.

SO RESOLVED.13

Petitioners sought reconsideration, but their motion was denied by the RTC per its Resolution of January 7, 2003.14

In due time, petitioners went to the CA on a petition for certiorari15 under Rule 65, assailing the November 6, 2002 and January 7, 2003 resolutions of the RTC, the recourse docketed as CA-G.R. SP No. 75688.

The Ruling of the CA

As stated at the outset, the CA, in the herein assailed Decision of November 6, 2003, denied the petition for certiorari, thus:

WHEREFORE, the foregoing considered, the Petition is hereby DENIED for lack of merit.

SO ORDERED.16

The CA predicated its denial action on the ensuing main premises:

1. Petitioners, by not appearing on the hearing dates, i.e., April 29 and 30, 2002, scheduled to consider Chua’s computation of claims, or rendering, as required, an accounting of the winding up of the partnership, are deemed to have waived their right to interpose any objection to the computation of claims thus submitted by Chua.

2. The 12% interest added on the amounts due is proper as the unwarranted keeping by petitioners of Chua’s money passes as an involuntary loan and forbearance of money.

3. The reiterative arguments set forth in petitioners’ pleadings below were part of their delaying tactics. Petitioners had come to the appellate court at least thrice and to this Court twice. Petitioners had more than enough time to question the award and it is now too late in the day to change what had become final and executory.

Petitioners’ motion for reconsideration was rejected by the appellate court through the assailed Resolution17dated July 6, 2004. Therein, the CA explained that the imposition of the 12% interest for forbearance of credit or money was proper pursuant to paragraph 1 of the October 7, 1997 RTC decision, as the computation done by CPA Gahuman was made in "acceptable form under accounting procedures and standards of the properties, assets, income and profits of [Shellite]."18 Moreover, the CA ruled that the imposition of interest is not based on par. 3 of the October 7, 1997 RTC decision as the phrase "shares and interests" mentioned therein refers not to an imposition of interest for use of money in a loan or credit, but to a legal share or right. The appellate court also held that the imposition of interest on the partnership assets falls under par. 2 in relation to par. 1 of the final RTC decision as the restitution mentioned therein does not simply mean restoration but also reparation for the injury or damage committed against the rightful owner of the property.

Finally, the CA declared the partnership assets referred to in the final decision as "liquidated claim" since the claim of Chua is ascertainable by mathematical computation; therefore, interest is recoverable as an element of damage.

The Issues

Hence, the instant petition with petitioners raising the following issues for our consideration:

I.

Whether or not the Regional Trial Court can [impose] interest on a final judgment of unliquidated claims.

II.

Whether or not the Sheriff can enforce the whole divisible obligation under judgment only against one Defendant.

III.

Whether or not the absolute community of property of spouses Lilibeth Sunga Chan with her husband Norberto Chan can be lawfully made to answer for the liability of Lilibeth Chan under the judgment.19

Significant Intervening Events

In the meantime, pending resolution of the instant petition for review and even before the resolution by the CA of its CA-G.R. SP No. 75688, the following relevant events transpired:

1. Following the RTC’s approval of Chua’s computation of claims in the amount of PhP 8,733,644.75, the sheriff of Manila levied upon petitioner Sunga-Chan’s property located along Linao St., Paco, Manila, covered by Transfer Certificate of Title (TCT) No. 208782,20 over which a building leased to the Philippine National Bank (PNB) stood. In the auction sale of the levied lot, Chua, with a tender of PhP 8 million,21emerged as the winning bidder.

2. On January 21, 2005, Chua moved for the issuance of a final deed of sale and a writ of possession. He also asked the RTC to order the Registry of Deeds of Manila to cancel TCT No. 208782 and to issue a new certificate. Despite petitioners’ opposition on the ground of prematurity, a final deed of sale22 was issued on February 16, 2005.

3. On February 18, 2005, Chua moved for the confirmation of the sheriff’s final deed of sale and for the issuance of an order for the cancellation of TCT No. 208782. Petitioners again interposed an opposition in which they informed the RTC that this Court had already granted due course to their petition for review on January 31, 2005;

4. On April 11, 2005, the RTC, via a Resolution, confirmed the sheriff’s final deed of sale, ordered the Registry of Deeds of Manila to cancel TCT No. 208782, and granted a writ of possession23 in favor of Chua.

5. On May 3, 2005, petitioners filed before this Court a petition for the issuance of a temporary restraining order (TRO). On May 24, 2005, the sheriff of Manila issued a Notice to Vacate24 against petitioners, compelling petitioners to repair to this Court anew for the resolution of their petition for a TRO.

6. On May 31, 2005, the Court issued a TRO,25 enjoining the RTC and the sheriff from enforcing the April 11, 2005 writ of possession and the May 24, 2005 Notice to Vacate. Consequently, the RTC issued an Order26 on June 17, 2005, suspending the execution proceedings before it.

7. Owing to the clashing ownership claims over the leased Paco property, coupled with the filing of an unlawful detainer suit before the Metropolitan Trial Court (MeTC) in Manila against PNB, the Court, upon the bank’s motion, allowed, by Resolution27 dated April 26, 2006, the consignation of the monthly rentals with the MeTC hearing the ejectment case.

The Court’s Ruling

The petition is partly meritorious.

First Issue: Interest Proper in Forbearance of Credit

Petitioners, citing Article 221328 of the Civil Code, fault the trial court for imposing, in the execution of its final judgment, interests on what they considered as unliquidated claims. Among these was the claim for goodwill upon which the RTC attached a monetary value of PhP 250,000. Petitioners also question the imposition of 12% interest on the claimed monthly profits of PhP 35,000, reckoned from 1988 to October 15, 1992. To petitioners, the imposable rate should only be 6% and computed from the finality of the RTC’s underlying decision, i.e., from December 20, 2001.

Third on the petitioners’ list of unliquidated claims is the yet-to-be established value of the one-half partnership share and interest adjudicated to Chua, which, they submit, must first be determined with reasonable certainty in a judicial proceeding. And in this regard, petitioners, citing Eastern Shipping Lines, Inc. v. Court of Appeals,29 would ascribe error on the RTC for adding a 12% per annum interest on the approved valuation of the one-half share of the assets, inclusive of goodwill, due Chua.

Petitioners are partly correct.

For clarity, we reproduce the summary valuations and accounting reports on the computation of claims certified to by the parties’ respective CPAs. Chua claimed the following:

A 50% share on assets (exclusive of goodwill) at fair market value (Schedule 1) P 1,613,550.00

B 50% share in the monetary value of goodwill (P500,000 x 50%) 250,000.00

C Legal interest on share of assets from June 1, 1992 to Oct. 15, 2002 at 12% interest per year (Schedule 2) 2,008,869.75

D Unreceived profits from 1988 to 1992 and its corresponding interest from Jan. 1, 1988 to Oct. 15, 2002 (Schedule 3) 4,761,225.00

E Damages 50,000.00

F Attorney’s fees 25,000.00

G Litigation fees 25,000.00

TOTAL AMOUNT P 8,733,644.75

On the other hand, petitioners acknowledged the following to be due to Chua:

Total Assets – Schedule 1 P2,431,956.35

50% due to Lamberto Chua P1,215,978.16

Total Alleged Profit, Net of Payments Made,May 1992-Sch. 2 1,613,758.49

50% share in the monetary value of goodwill(500,000 x 50%) 250,000.00

Moral and Exemplary Damages 50,000.00

Attorney’s Fee 25,000.00

Litigation Fee 25,000.00

TOTAL AMOUNT P3,154,736.65

As may be recalled, the trial court admitted and approved Chua’s computation of claims amounting to PhP 8,733,644.75, but rejected that of petitioners, who came up with the figure of only PhP 3,154,736.65. We highlight the substantial differences in the accounting reports on the following items, to wit: (1) the aggregate amount of the partnership assets bearing on the 50% share of Chua thereon; (2) interests added on Chua’s share of the assets; (3) amount of profits from 1988 through May 30, 1992, net of alleged payments made to Chua; and (4) interests added on the amount entered as profits.

From the foregoing submitted valuation reports, there can be no dispute about the goodwill earned thru the years by Shellite. In fact, the parties, by their own judicial admissions, agreed on the monetary value, i.e., PhP 250,000, of this item. Clearly then, petitioners contradict themselves when they say that such amount of goodwill is without basis. Thus, the Court is loathed to disturb the trial court’s approval of the amount of PhP 250,000, representing the monetary value of the goodwill, to be paid to Chua.

Neither is the Court inclined to interfere with the CA’s conclusion as to the total amount of the partnership profit, that is, PhP 1,855,000, generated for the period January 1988 through May 30, 1992, and the total partnership assets of PhP 3,227,100, 50% of which, or PhP 1,613,550, pertains to Chua as his share. To be sure, petitioners have not adduced adequate evidence to belie the above CA’s factual determination, confirmatory of the trial court’s own. Needless to stress, it is not the duty of the Court, not being a trier of facts, to analyze or weigh all over again the evidence or premises supportive of such determination, absent, as here, the most compelling and cogent reasons.

This brings us to the question of the propriety of the imposition of interest and, if proper, the imposable rate of interest applicable.

In Reformina v. Tomol, Jr.,30 the Court held that the legal interest at 12% per annum under Central Bank (CB) Circular No. 416 shall be adjudged only in cases involving the loan or forbearance of money. And for transactions involving payment of indemnities in the concept of damages arising from default in the performance of obligations in general and/or for money judgment not involving a loan or forbearance of money, goods, or credit, the governing provision is Art. 2209 of the Civil Code prescribing a yearly 6% interest. Art. 2209 pertinently provides:

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.

The term "forbearance," within the context of usury law, has been described as a contractual obligation of a lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to repay the loan or debt then due and payable.31

Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, if proper, and the applicable rate, as follows: The 12% per annum rate under CB Circular No. 416 shall apply only to loans or forbearance of money, goods, or credits, as well as to judgments involving such loan or forbearance of money, goods, or credit, while the 6% per annum under Art. 2209 of the Civil Code applies "when the transaction involves the payment of indemnities in the concept of damage arising from the breach or a delay in the performance of obligations in general,"32 with the application of both rates reckoned "from the time the complaint was filed until the [adjudged] amount is fully paid."33 In either instance, the reckoning period for the commencement of the running of the legal interest shall be subject to the condition "that the courts are vested with discretion, depending on the equities of each case, on the award of interest."34

Otherwise formulated, the norm to be followed in the future on the rates and application thereof is:

I. – When an obligation, regardless of its source, is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages.

II. – With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation breached consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the

rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation not constituting loans or forbearance of money is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.35

Guided by the foregoing rules, the award to Chua of the amount representing earned but unremitted profits, i.e.. PhP 35,000 monthly, from January 1988 until May 30, 1992, must earn interest at 6% per annum reckoned from October 7, 1997, the rendition date of the RTC decision, until December 20, 2001, when the said decision became final and executory. Thereafter, the total of the monthly profits inclusive of the add on 6% interest shall earn 12% per annum reckoned from December 20, 2001 until fully paid, as the award for that item is considered to be, by then, equivalent to a forbearance of credit. Likewise, the PhP 250,000 award, representing the goodwill value of the business, the award of PhP 50,000 for moral and exemplary damages, PhP 25,000 attorney’s fee, and PhP 25,000 litigation fee shall earn 12% per annum from December 20, 2001 until fully paid.

Anent the impasse over the partnership assets, we are inclined to agree with petitioners’ assertion that Chua’s share and interest on such assets partake of an unliquidated claim which, until reasonably determined, shall not earn interest for him. As may be noted, the legal norm for interest to accrue is "reasonably determinable," not, as Chua suggested and the CA declared, determinable by mathematical computation.

The Court has certainly not lost sight of the fact that the October 7, 1997 RTC decision clearly directed petitioners to render an accounting, inventory, and appraisal of the partnership assets and then to wind up the partnership affairs by restituting and delivering to Chua his one-half share of the accounted partnership assets. The directive itself is a recognition that the exact share and interest of Chua over the partnership cannot be determined with reasonable precision without going through with the inventory and accounting process. In fine, a liquidated claim cannot validly be asserted without accounting. In net effect, Chua’s interest and share over the partnership asset, exclusive of the goodwill, assumed the nature of a liquidated claim only after the trial court, through its November 6, 2002 resolution, approved the assets inventory and accounting report on such assets.

Considering that Chua’s computation of claim, as approved by the trial court, was submitted only on October 15, 2002, no interest in his favor can be added to his share of the partnership assets. Consequently, the computation of claims of Chua should be as follows:

(1) 50% share on assets (exclusive of goodwill)at fair market value PhP 1,613,550.00

(2) 50% share in the monetary value of goodwill(PhP 500,000 x 50%) 250,000.00

(3) 12% interest on share of goodwill from December 20, 2001 to October 15, 2000[PhP 250,000 x 0.12 x 299/365 days] 24,575.34

(4) Unreceived profits from 1988 to May 30, 1992 1,855,000.00

(5) 6% interest on unreceived profits from January 1, 1988 to December 20, 200136 1,360,362.50

(6) 12% interest on unreceived profits from December

20, 2001 to October 15, 2002[PhP 3,215,362.50 x 12% x 299/365 days] 316,074.54

(7) Moral and exemplary damages 50,000.00

(8) Attorney’s fee 25,000.00

(9) Litigation fee 25,000.00

(10) 12% interest on moral and exemplary damages, 9,830.14

attorney’s fee, and litigation fee from December 20, 2001 to October 15, 2002[PhP 100,000 x 12% x 299/365 days]

TOTAL AMOUNT PhP 5,529,392.52

Second Issue: Petitioners’ Obligation Solidary

Petitioners, on the submission that their liability under the RTC decision is divisible, impugn the implementation of the amended writ of execution, particularly the levy on execution of the absolute community property of spouses petitioner Sunga-Chan and Norberto Chan. Joint, instead of solidary, liability for any and all claims of Chua is obviously petitioners’ thesis.

Under the circumstances surrounding the case, we hold that the obligation of petitioners is solidary for several reasons.

For one, the complaint of Chua for winding up of partnership affairs, accounting, appraisal, and recovery of shares and damages is clearly a suit to enforce a solidary or joint and several obligation on the part of petitioners. As it were, the continuance of the business and management of Shellite by petitioners against the will of Chua gave rise to a solidary obligation, the acts complained of not being severable in nature. Indeed, it is well-nigh impossible to draw the line between when the liability of one petitioner ends and the liability of the other starts. In this kind of situation, the law itself imposes solidary obligation. Art. 1207 of the Civil Code thus provides:

Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each of the latter is bound to render, entire compliance with the prestation. There is solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. (Emphasis ours.)

Any suggestion that the obligation to undertake an inventory, render an accounting of partnership assets, and to wind up the partnership affairs is divisible ought to be dismissed.

For the other, the duty of petitioners to remit to Chua his half interest and share of the total partnership assets proceeds from petitioners’ indivisible obligation to render an accounting and inventory of such assets. The need for the imposition of a solidary liability becomes all the more pronounced considering the impossibility of quantifying how much of the partnership assets or profits was misappropriated by each petitioner.

And for a third, petitioners’ obligation for the payment of damages and attorney’s and litigation fees ought to be solidary in nature, they having resisted in bad faith a legitimate claim and thus compelled Chua to litigate.

Third Issue: Community Property Liable

Primarily anchored as the last issue is the erroneous theory of divisibility of petitioners’ obligation and their joint liability therefor. The Court needs to dwell on it lengthily.

Given the solidary liability of petitioners to satisfy the judgment award, respondent sheriff cannot really be faulted for levying upon and then selling at public auction the property of petitioner Sunga-Chan to answer for the whole obligation of petitioners. The fact that the levied parcel of land is a conjugal or community property, as the case may be, of spouses Norberto and Sunga-Chan does not per se vitiate the levy and the consequent sale of the property. Verily, said property is not among those exempted from execution under Section 13,37 Rule 39 of the Rules of Court.

And it cannot be overemphasized that the TRO issued by the Court on May 31, 2005 came after the auction sale in question.

Parenthetically, the records show that spouses Sunga-Chan and Norberto were married on February 4, 1992, or after the effectivity of the Family Code on August 3, 1988. Withal, their absolute community property may be held liable for the obligations contracted by either spouse. Specifically, Art. 94 of said Code pertinently provides:

Art. 94. The absolute community of property shall be liable for:

(1) x x x x

(2) All debts and obligations contracted during the marriage by the designated administrator-spouse for the benefit of the community, or by both spouses, or by one spouse with the consent of the other.

(3) Debts and obligations contracted by either spouse without the consent of the other to the extent that the family may have been benefited. (Emphasis ours.)

Absent any indication otherwise, the use and appropriation by petitioner Sunga-Chan of the assets of Shellite even after the business was discontinued on May 30, 1992 may reasonably be considered to have been used for her and her husband’s benefit.

It may be stressed at this juncture that Chua’s legitimate claim against petitioners, as readjusted in this disposition, amounts to only PhP 5,529,392.52, whereas Sunga-Chan’s auctioned property which Chua acquired, as the highest bidder, fetched a price of PhP 8 million. In net effect, Chua owes petitioner Sunga-Chan the amount of PhP 2,470,607.48, representing the excess of the purchase price over his legitimate claims.

Following the auction, the corresponding certificate of sale dated January 15, 2004 was annotated on TCT No. 208782. On January 21, 2005, Chua moved for the issuance of a final deed of sale (1) to order the Registry of Deeds of Manila to cancel TCT No. 208782; (2) to issue a new TCT in his name; and (3) for the RTC to issue a writ of possession in his favor. And as earlier stated, the RTC granted Chua’s motion, albeit the Court restrained the enforcement of the RTC’s package of orders via a TRO issued on May 31, 2005.

Therefore, subject to the payment by Chua of PhP 2,470,607.48 to petitioner Sunga-Chan, we affirm the RTC’s April 11, 2005 resolution, confirming the sheriff’s final deed of sale of the levied property, ordering the Registry of Deeds of Manila to cancel TCT No. 208782, and issuing a writ of possession in favor of Chua.

WHEREFORE, this petition is PARTLY GRANTED. Accordingly, the assailed decision and resolution of the CA in CA-G.R. SP No. 75688 are hereby AFFIRMED with the following MODIFICATIONS:

(1) The Resolutions dated November 6, 2002 and January 7, 2003 of the RTC, Branch 11 in Sindangan, Zamboanga Del Norte in Civil Case No. S-494, as effectively upheld by the CA, are AFFIRMED with the modification that the approved claim of respondent Chua is hereby corrected and adjusted to cover only the aggregate amount of PhP 5,529,392.52;

(2) Subject to the payment by respondent Chua of PhP 2,470,607.48 to petitioner Sunga-Chan, the Resolution dated April 11, 2005 of the RTC, confirming the sheriff’s final deed of sale of the levied property, ordering the Registry of Deeds of Manila to cancel TCT No. 208782, and issuing a writ of possession in favor of respondent Chua, is AFFIRMED; and

The TRO issued by the Court on May 31, 2005 in the instant petition is LIFTED.

No pronouncement as to costs.

SO ORDERED.

PRESBITERO J. VELASCO, JR.Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBINGAssociate Justice

Chairperson

ANTONIO T. CARPIOAssociate Justice

DANTE O. TINGAAssociate Justice

ARTURO D. BRIONAssociate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

LEONARDO A. QUISUMBINGAssociate Justice

Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNOChief Justice

Footnotes

1 Rollo, pp. 36-45. Penned by Associate Justice Romeo A. Brawner (Chairperson, now retired) and concurred in by Associate Justices Jose L. Sabio, Jr. and Jose C. Reyes, Jr.

2 Id. at 90-91. Penned by Judge Mariano S. Macias.

3 Reported in 363 SCRA 249.

4 Rollo, p. 69.

5 Id. at 38.

6 Id. at 72.

7 Id. at 73-76.

8 Id. at 78-81.

9 Id. at 77.

10 Id. at 40.

11 Id. at 85-89.

12 Id. at 90.

13 Id.

14 Id. at 91.

15 Id. at 93-112.

16 Supra note 1, at 45.

17 Rollo, pp. 47-55.

18 Id. at 52.

19 Id. at 175.

20 Id. at 304-307.

21 Id. at 92, Minutes of Sale.

22 Id. at 256-257.

23 Id. at 238-240.

24 Id. at 264-265.

25 Id. at 266-267.

26 Id. at 276.

27 Id. at 446A-446B.

28 Art. 2213. Interest cannot be recovered upon unliquidated claims or damages, except when the demand can be established with reasonable certainty.

29 G.R. No. 97412, July 12, 1994, 234 SCRA 78.

30 No. L-59096, October 11, 1985, 139 SCRA 260.

31 Eastern Shipping Lines, Inc., supra note 29, at 93-94; citing Black’s Law Dictionary 644 (1990).

32 Id. at 94.

33 Id. at 92; citing Florendo v. Ruiz, G.R. No. 60225, May 8, 1992, 208 SCRA 542; Reformina, supra note 30.

34 Id. at 94-95.

35 Id. at 95-97.

36 Interest computed as follows:

Interest Period Interest Year Principal Rate (months) Earned Balance1988 420,000.00 6% 167.5 351,750.00 771,750.001989 420,000.00 6% 155.5 326,550.00 746,550.001990 420,000.00 6% 143.5 301,350.00 721,350.001991 420,000.00 6% 131.5 276,150.00 696,150.001992 175,000.00 6% 119.5 104,562.50 279,562.50

Totals 1,855,000.00 1,360,362.50

TOTAL (Principal plus Interest), as of December 20, 2001 PhP 3,215,362.50

37 SEC. 13. Property exempt from execution.––Except as otherwise expressly provided by law, the following property, and no other, shall be exempt from execution:

(a) The judgment obligor’s family home as provided by law, or the homestead in which he resides, and the land necessarily used in connection therewith;

(b) Ordinary tools and implements personally used by him in his trade, employment or livelihood;

(c) Three horses x x x or other beasts of burden x x x;

(d) His necessary clothing and articles for ordinary personal use, excluding jewelry;

(e) Household furniture and utensils necessary for housekeeping x x x;

(f) Provisions for individual or family use sufficient for four months;

(g) The professional libraries and equipment of judges, lawyers, physicians x x x;

(h) One fishing boat and accessories x x x;

(i) So much of the salaries, wages, or earnings of the judgment obligor x x x;

(j) Lettered gravestones;

(k) Monies, benefits, privileges, or annuities accruing or x x x growing out of any life insurance;

(l) The right to receive legal support, or money or property obtained as such support, or any pension or gratuity from the Government;

(m) Properties specially exempted by law.

But no article or species of property mentioned in this section shall be exempt from execution issued upon a judgment recovered for its price or upon a judgment of foreclosure of a mortgage thereon.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 116652 March 10, 2003

NINOY AQUINO INTERNATIONAL AIRPORT AUTHORITY (NAIAA), petitioner, vs.COURT OF APPEALS, UNITED BUS LINES and JOSE M. SILVA, respondents.

CARPIO MORALES, J.:

Being assailed in the present petition for review on certiorari is the decision of the Court of Appeals in CA-G.R. CV No. 27814, "United Bus Lines, et al., v. Ninoy Aquino International Airport Authority."

The following facts are not in dispute:

By a lease contract executed on November 22, 1963, the Civil Aeronautics Administration (CAA), predecessor of petitioner Ninoy Aquino International Airport Authority (NAIAA), a government instrumentality, leased to respondent United Bus Lines (UBL), a single proprietorship owned by its co-respondent Jose M. Silva (Silva), a portion of the state-owned Lot No. 3270-B-1 under the CAA's jurisdiction measuring 60,115 square meters which is located at the Manila International Airport (MIA) in Pasay City. The lease was for a term of 25 years at an annual rental of P1,200.00.1

Under the lease contract, it was the duty of the lessee UBL to, among other things, put up at its expense a bus terminal and buildings or facilities necessary for the operation of a first class land transportation station serving both as a tourist attraction and the needs of the travelling public in line with plans and specifications to be approved by the lessor.2

On the part of the CAA, it warranted that it has good title over the leased premises and bound itself to indemnify UBL for damages and losses the latter might suffer due to any restriction, encumbrance or defect in the former's rights to the premises.3

The lease contract contained a provision on extension of the period of lease under the following circumstances:

7. Should the LESSEE, due to war, civil commotion, act of God, or any other cause beyond their control, be prevented from occupying the leased premises or be obliged to give up possession thereof, the rentals hereinabove agreed upon shall abate during the time that the leased premises are not occupied by the LESSEE. It is, however, agreed that during that time, the LESSOR may lease the premises to any person or persons until such days as LESSEE may occupy them, and the terms of this Contract shall be considered as extended for a period of time equal to that during which LESSEE was not in possession of the leased premises. (Emphasis supplied). 4

On February 2, 1979, the CAA filed a case for unlawful detainer against respondents with the then Pasay City Court, docketed as Civil Case No. 13835, upon the grounds that 1) they committed breach of contract, they having failed to build the bus terminal and other transport facilities in the leased premises and to pay rentals amounting to P1,975.00 as of June 1, 1978, and 2) the CAA needed the premises as relocation site for the Joint Oil Companies Aviation-Fuel Storage Plant in the interest of safety.5

As respondents belatedly filed their answer to the complaint, the Pasay City Court rendered on July 28, 1979 a judgment by default in favor of the CAA, ordering respondents to vacate the leased premises and granting the other reliefs sought by the CAA.6

On appeal, the then Court of First Instance of Rizal, Branch 27 in Pasay City, by Decision of October 28, 1981, finding the unlawful detainer complaint to be one for rescission of contract, reversed the city court's decision for having been rendered without jurisdiction.7 .And it found the CAA to be without right to pre-terminate the lease contract with respondents.

Subsequently, however, the CAA and respondents entered into a judicially approved compromise agreement dated May 7, 1982.8 In said compromise agreement, both parties recognized the existence and effectivity of their November 22, 1963 lease contract, subject to the amendments that 1) the lease be for a period of eight more years from the date of the compromise or an addition of one and half years to the twenty-five-year original term thereof, and 2) such portion within the leased premises needed for the CAA's Joint Oil Companies Aviation-Fuel Storage Plant be replaced or substituted by another property of the CAA. Expressly waived and settled under the compromise were all of the parties' respective claims, causes of action and demands against one another and all issues that arose therefrom.

Less than a year before the expiration of the amended lease contract or on October 6, 1989, respondents filed a complaint, docketed as Civil Case No. 6929, before the Regional Trial Court (RTC) of Pasay City against the CAA's successor agency, the NAIAA (petitioner), for Reformation of Contract and Fixing of Term of Lease.9

Alleging that they were deprived of possession of the leased premises for the entire original and extended period of lease due to the presence of squatters in certain portions thereof as well as the adverse claims of ownership from some individuals and entities, respondents charged that petitioner failed to deliver the premises for their full, effective and peaceful enjoyment and possession, thereby rendering the agreed lease term meaningless and necessitating the fixing of a new period for the lessee's benefit. Respondents thus prayed that the lease agreement be reformed so as to have a new term of fifteen years, to start running after the premises are totally cleared by the lessor of any form of disturbance; that all expenses incurred by them as a result of the filing of the suit be deemed as advanced rentals; and that petitioner, together with its officers, employees and representatives, be enjoined from engaging with third persons in any manner which might affect their rights over the premises.

Petitioner denied10 respondents' claim of dispossession, insisting that it had complied with its duty of placing and maintaining them in complete possession of the entire leased premises. While it asserted that it cleared the leased premises of squatters and other claimants, it nonetheless contended that respondents were estopped from alleging any disturbance of their occupancy prior to May 7, 1982 by virtue of their waiver embodied in the compromise agreement.

And petitioner claimed that respondents failed to utilize the leased premises for the purpose as stipulated under the contract, it noting that they had subleased portions thereof to several entities which devoted the same to uses that deviated from their original intention.

Petitioner sought a counterclaim of P50,000 in litigation expenses incurred due to the "groundless" suit filed by respondents.

Documentary evidence of respondents consisted of the following: Respondent Silva's demand letter dated July 3, 198011 asking the CAA administrator to address the adverse claim of ownership of the Estate of Don Antonio Rodriguez on the leased premises in view of incidents which occurred on June 30 and July 1, 1980 where said estate's representatives informed respondents' personnel of its ownership of the leased premises and even begun construction of improvements thereon; a September 23, 1981 Order12 of Branch 28 of the Court of First Instance of Rizal-Pasay City in Civil Case No. 9219-P ("The Estate of Don Antonio and Hermogenes Rodriguez, represented by Ms. Judith Rodriguez in her capacity as administratrix of said estate v. Teodoro Santos, et al.") enjoining respondent Silva and others from introducing improvements on the premises; a civil complaint13 filed by Shepparton Construction and Development Corporation against respondents' sublessees whereby it claimed title to the premises and sought recovery thereof from them; an October 13, 1983 letter14 to respondent Silva from the MIA personnel in-charge of squatters' relocation, Federico M. Alba, assuring that the premises would be cleared of squatters by December 1983; three letters dated February 1, 1989,15 November 25, 198916 and January 26, 199017 from both respondent Silva and his counsel asking the airport general manager to place respondents in full possession of the premises by clearing the same of squatters and other claimants; and two documents pertaining to Silva's application18 for reactivation of his franchise to operate public utility buses and a pro-forma invoice19 pertaining to his purchase of 500 units of buses and additional 200 units of taxis.

At the witness stand, respondent Silva related his dispossession of about ninety percent of the premises due to petitioner's inability to keep away a sizeable number of squatters and various entities claiming title thereto.20 While he maintained that he had built a garage or terminal for his twenty units of taxis in accordance with the lease contract and that the same contract did not prohibit him from subleasing portions of the leased premises, he attributed his partial failure to totally put up first class bus terminal facilities to petitioner's non-performance of its obligation to place the lessee in complete and peaceful possession thereof.21

On the other hand, petitioner's evidence consisted mainly of the testimony of Felixberto Calma (Calma), its Commercial Development Officer who was charged with the supervision of petitioner's concessionaires. Calma denied that respondents had been deprived of full possession and enjoyment of the premises, he inviting attention to the sublease by them of portions thereof to establishments operating a restaurant, supermarket, barber shop and tailoring shop.22 And he maintained that by 1983 petitioner's personnel had cleared the premises of squatters who began entering them in 1980; that although there were still a few remaining squatters in the premises, their occupancy did not affect respondents' business;23 and that respondent Silva was no longer operating buses and taxis, and since the structures on the premises were empty, he did not know if they were being utilized or developed for a transportation terminal.24

Branch 113 of the Pasay City RTC rendered judgment in favor of respondents by decision25 of May 31, 1990, the dispositive portion of which read as follows:

WHEREFORE, after having thus considered the evidence on record, testimonial and documentary, the Court hereby renders judgment as follows:

1. The period (sic) the lease contract is declared extended for another TEN 10 years from the date of the finality of this decision;

2. The rental to be paid to the defendant is now P10,000.00 annually for the entire area leased;

3. The counterclaim is dismissed. (Emphasis supplied).

On appeal by petitioner, the Court of Appeals affirmed the trial court's decision.26 Like the trial court, it found evidence supporting respondents' main averment that respondent UBL was dispossessed of certain portions of the leased premises starting in 1980 up to the expiration of the amended contract in 1990, hence, it applied the earlier quoted paragraph 7 of the contract providing for the extension of the lease for such period as the lessee is deprived of possession of the premises.

Hence, the present petition for review on certiorari27 faulting the Court of Appeals:

. . . IN SUSTAINING THE TRIAL COURT'S FINDING THAT RESPONDENTS ARE ENTITLED TO A TEN-YEAR EXTENSION OF THEIR LEASE CONTRACT WITH PETITIONER.

In the main, petitioner contends that respondents are not entitled to any extension of the lease in light of their failure to accomplish the very purpose of the lease agreement; that respondents had not been deprived of possession of the premises, but even if they were with respect to certain portions thereof, they waived their right to raise the issue of dispossession in the May 7, 1982 compromise agreement with petitioner; that paragraph 7 of the lease contract providing for extension of the lease applies only where the lessee is totally dispossessed of the premises; and that the extension of the period of lease in favor of respondents impairs petitioner's freedom of contract and is manifestly oppressive for being indefinite, the same having been decreed to start from the date of finality of the trial court's judgment.

The jurisdiction of this Court over cases brought to it from the Court of Appeals is limited to a review of questions of law since the factual conclusions thereon are as a rule conclusive.28 There are of course exceptions to this rule, but none obtains in the case at bar to warrant a scrutiny of the Court of Appeals conclusions which are supported by the evidence on record29 and carry even more weight, it having affirmed the trial court's factual conclusions.30

The dispossession of respondent UBL from certain portions of the leased premises for an approximately ten-year period from 1980 to 1990 due to incursions of squatters and other claimants is an established fact based not only upon respondents' evidence but also upon the admissions to that effect by petitioner's own witness Calma.31 In accordance with the lease contract then, the term of the lease should be extended for such period as the lessee was deprived of possession of the premises.

Regardless of the extent of dispossession, whether total or partial, the provision on extension of term applies since the lessee's failure to use a portion of the leased premises is equivalent to a dispossession from the entire area in question, the agreement of the parties being precisely the lease of the whole 60,115 sq. m. of petitioner's lot at the Manila International Airport.

By the terms of the contract then, petitioner's obligation to deliver to respondent UBL the entire leased premises and maintain the latter in peaceful, uninterrupted possession was indivisible. When respondent UBL could not occupy and use portions of the leased premises, it was in effect deprived of possession thereof for there was incomplete performance by the petitioner of its principal prestation, thereby calling for the application of the contractual provision on extension of term.

A contract is the law between the parties and courts have no choice but to enforce such contract so long as it is not contrary to law, morals, good customs or public policy.32 Nothing appears objectionable in the lease contract between respondents and petitioner such that the latter is no less bound by its terms and conditions like any other private person or entity that is party to a contract.

Contrary to petitioner's contention, by no means did respondents through the May 7, 1982 compromise agreement waive their right to raise the issue of their dispossession from the leased premises. The said compromise clearly stated that what the parties waived were all issues or questions which arose out of or were connected with petitioner's unlawful detainer case against respondents. Respondents' failure to have full possession of the premises through no fault of their own was definitely not an issue that was asserted or touched upon in both the unlawful detainer case and in the compromise agreement subsequently executed.

While this Court upholds the trial court's and appellate court's ruling that respondent UBL is entitled to a ten-year extension of the period of lease, it does not uphold that which reckons the period from the date of finality of the decision of the trial court. If that were the case, respondent UBL would hold on to the leased premises for a period longer than it is entitled under the ten-year extension, thereby virtually rendering nugatory petitioner's right of ownership over the premises.

The extension must thus begin on the day following the May 7, 1990 termination of the amended lease contract or on May 8, 1990, to last for a 10-year period or up to May 8, 2000. Since respondents have in fact been in continuous and uninterrupted possession of the premises since the promulgation of the trial court's decision of May 31, 1990 and during the pendency of the case at bar, they have already occupied the premises in the exercise of their adjudged right to the extension for the full period of ten years.

The judgment of the trial court is thus now deemed enforced.

As for petitioner's countercharge that respondents did not comply with their obligation as lessee, the same had not been sufficiently proven. On the contrary, evidence shows that respondents built a garage for respondent Silva's taxis. And while respondents did sublease portions of the premises to several persons, there was no express prohibition on the matter in the lease contract, hence, there was no violation33 thereof.

WHEREFORE, the assailed decision of the Court of Appeals is hereby AFFIRMED with the modification that the ten-year extension of the term of the lease granted in favor of respondents should be reckoned from May 8, 1990, and as respondents had continuously been in possession of the leased property during the pendency of this case, their right to the extension or up to May 8, 2000 had been enforced. The lease contract between petitioner and respondents is now, therefore, deemed terminated.

SO ORDERED.

Puno, Panganiban and Sandoval-Gutierrez, JJ ., concur.Corona, J ., on leave.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 109648 November 22, 2001

PH CREDIT CORPORATION, petitioner, vs.COURT OF APPEALS and CARLOS M. FARRALES, respondents.

PANGANIBAN, J.:

When there is a conflict between the dispositive portion or fallo of a decision and the opinion of the court contained in the text or body of the judgment, the former prevails over the latter. An order of execution is based on the disposition, not on the body, of the decision.

The Case

Before us is a Petition for Review under Rule 451 of the Rules of Court, assailing the October 28, 1992 Decision2and the April 6, 1993 Resolution3 of the Court of Appeals (CA) in CA-GR SP Nos. 23324 and 25714. The dispositive portion of the said Decision reads as follows:

"WHEREFORE, judgment is hereby rendered DISMISSING: a) CA-G.R. SP No 23324, for being moot and academic, and b) CA-G.R. SP No. 25714, for lack of merit."4

The assailed Resolution denied petitioner's Motion for Reconsideration.

The Facts

The facts of the case are summarized by the Court of Appeals in this wise:

"These two cases have been consolidated because they involve the same parties and/or related questions of [f]act and/or law.

xxx xxx xxx

"I. CA-G.R. SP NO. 23324

"PH Credit Corp., filed a case against Pacific Lloyd Corp., Carlos Farrales, Thomas H. Van Sebille and Federico C. Lim, for [a] sum of money. The case was docketed as Civil Case No. 83-17751 before the Regional Trial Court, Branch 51, Manila. After service of summons upon the defendants, they failed to file their answer within the reglementary period, hence they were declared in default. PH Credit Corp., was then allowed to present its evidence ex-parte.

"On January 31, 1984, a decision was rendered, the dispositive portion of which reads as follows:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff PH Credit Corporation and against defendants Pacific Lloyd Corporation, Thomas H. Van Sebille, Carlos M. Farrales, and Federico C. Lim, ordering the latter to pay the former, the following:

'A) The sum of P118,814.49 with interest of 18% per annum, starting December 20, 1982 until fully paid;

'B) Surcharge of 16% per annum from December 20, 1982;

'C) Penalty Charge of 2% per month from December 20, 1982, computed on interest and principal compounded;

'D) Attorney's fees in an amount equivalent to 25% of the total sum due; and

'E) Costs of suit.

'SO ORDERED.'

"After the aforesaid decision has become final and executory, a Writ of Execution was issued and consequently implemented by the assigned Deputy Sheriff. Personal and real properties of defendant Carlos M. Farrales were levied and sold at public auction wherein PH Credit Corp. was the highest bidder. The personal properties were sold on August 2, 1984 at P18,900.00 while the real properties were sold on June 21, 1989 for P1,294,726.00.

"On July 27, 1990, a motion for the issuance of a writ of possession was filed and on October 12, 1990, the same was granted. The writ of possession itself was issued on October 26, 1990. Said order and writ of possession are now the subject of this petition.

"Petitioner claims that she, as a third-party claimant with the court below, filed an 'Urgent Motion for Reconsideration and/or to Suspend the Order dated October 12, 1990', but without acting there[on], respondent Judge issued the writ of possession on October 26, 1990. She claims that the actuations of respondent Judge was tainted with grave abuse of discretion.

"We deem it unnecessary to pass upon the issue raised in view of the supervening event which had rendered the same moot and academic.@lawphil.net

"It appears that on January 31, 1991, respondent Judge issued an order considering the assailed Order dated October 12, 1990 as well as the writ of possession issued on October 26, 1990 as 'of no force and effect.'@lawphil.net

"The purpose of the petition is precisely to have the aforesaid order and writ of possession declared null and void, but the same had already been declared 'of no force and effect' by the respondent Judge. It is a well-settled rule that courts will not determine a moot question or abstract proposition nor express an opinion in a case in which no practical relief can be granted.

"II. CA-G.R. SP NO. 25714

"Petitioner claims that the respondent Judge's Order dated January 31, 1991 was tainted with grave abuse of discretion based on the following grounds:

"1. Respondent Judge refused to consider as waived private respondent's objection that his obligation in the January 31, 1984 decision was merely joint and not solidary with the defendants therein. According to petitioner, private respondent assailed the levy on execution twice in 1984 and once in 1985 but not once did the latter even mention therein that his obligation was joint for failure of the dispositive portion of the decision to indicate that it was solidary. Thus, private respondent must be deemed to have waived that objection, petitioner concludes.

"2. The redemption period after the auction sale of the properties had long lapsed so much [so] that the purchaser therein became the absolute owner thereof. Thus, respondent Judge allegedly abused his discretion in setting aside the auction sale after the redemption period had expired.

"3. Respondent Judge erred in applying the presumption of a joint obligation in the face of the conclusion of fact and law contained in the decision showing that the obligation is solidary."5 (Citations omitted)@lawphil.net

Ruling of the Court of Appeals

The Court of Appeals affirmed the trial court's ruling declaring null and void (a) the auction sale of Respondent Ferrales' real property and (b) the Writ of Possession issued in consequence thereof. It held that, pursuant to the January 31, 1984 Decision of the trial court, the liability of Farrales was merely joint and not solidary. Consequently, there was no legal basis for levying and selling Farrales' real and personal properties in order to satisfy the whole obligation.

Hence, this Petition.6

The Issues

In its Memorandum,7 petitioner submits the following issues for our consideration:

"I

Whether or not the Court of Appeals disregarded the basic policy of avoiding multiplicity of motions.

"II

Whether or not the Court of Appeals erred when it disregarded the body of the decision and concluded that the obligation was merely a joint obligation due to the failure of the dispositive portion of the decision dated 31 January 1984 to state that the obligation was joint and solidary.

"III

Whether or not the Court of Appeals disregarded the policy of upholding executions."8

The Courts Ruling

The Petition is devoid of merit.

First Issue:Omnibus Motion Rule

Petitioner contends that because private respondent did not question the joint and solidary nature of his liability in his (a) Motion to Quash Levy Execution9 dated August 23, 1984, (b) Urgent Motion to Order Sheriff to Suspend Sale on Execution10 dated December 3, 1984, and (c) Motion to Declare Certificate of Sale Null and Void11 dated January 9, 1985, he cannot now raise it as an objection. Petitioner argues that the "Omnibus Motion Rule" bars private respondent's belated objection. We do not agree.

The Omnibus Motion Rule is found in Section 8 of Rule 15 of the Rules of Court, which we quote:

"Subject to the provisions of section 1 of Rule 9, a motion attacking a pleading, order, judgment, or proceeding shall include all objections then available, and all objections not so included shall be deemed waived. (8a)"

As an aid to the proper understanding of this case, we should at the outset point out that the objections of private respondent contained in his Omnibus Motion12 dated November 5, 1990 were directed at the proceedings and the orders issued after the auction sale of his real property covered by TCT No. 82531. In his Omnibus Motion, he asked for the recall and quashal of the Writ of Possession issued on October 26, 1990; the annulment of the June 21, 1989 auction sale of the said real property and the recomputation of his liability to petitioner.

However, the three (3) Motions that petitioner referred to above were clearly directed against the execution of private respondent's personal properties. A perusal of these Motions will show that at the time, his objections were directed at the acts of execution against his personal properties.

In his Motion to Quash Levy Execution,13 private respondent pointed to the properties of herein moving defendant x x x located at his residence at No. 17, Bunker Hill St., New Manila, Quezon City, per the Notice of Levy and Sale,"14 and asked for the quashal and setting aside of such Notice. He was thus referring to the levy on his personal properties. By the same token, in his Urgent Motion to Order Sheriff to Suspend Sale on Execution,15 he referred to a copy of a sheriff's notice of sale dated November 22, 1984,"16 which in turn alluded to the sale of his levied personal properties. Similarly, in his Motion to Declare Certificate of Sale Null and Void,17 he once again assailed the sale at public auction of his personal properties. It is thus clear that up to that point, he was questioning the levy and sale of his personal properties. He could not have known at the time that he would be made to answer for the entire liability, which he and his co-respondents were adjudged to pay petitioner by reason of the trial court's judgment of January 31, 1984.

After private respondent realized that he was being made to answer on the entire liability as a solidary debtor, he filed his Omnibus Motion questioning the Writ of Possession and all incident orders and proceedings relevant thereto. This realization dawned on him, because his real property was levied and sold despite the previous sale of his personal property. Only at this point was he in a position to assert his objections to the auction sale of his real property and to put up the defense of joint liability among all the respondents.

The Rules of Court requires that all available objections to a judgment or proceeding must be set up in an Omnibus Motion assailing it; otherwise, they are deemed waived. In the case at bar, the objection of private respondent to his solidary liability became available to him, only after his real property was sold at public auction. At the time his personal properties were levied and sold, it was not evident to him that he was being held solely liable for the monetary judgment rendered against him and his co-respondents. That was why his objections then did not include those he asserted when his solidary liability became evident.

Prior to his Omnibus Motion, he was not yet being made to pay for the entire obligation. Thus, his objection to his being made solidarily liable with the other respondents was not yet available to him at the time he filed the Motions referred to by petitioner. Not being available, these objections could not have been deemed waived when he filed his three earlier Motions, which pertained to matters different from those covered by his Omnibus Motion;

True, the Omnibus Motion Rule requires the movant to raise all available exceptions in a single opportunity to avoid multiple piecemeal objections.18 But to apply that statutory norm, the objections must have been available to the party at the time the Motion was filed.

Second Issue:Basis of Private Respondent's Liability

Petitioner argues that the CA erred in disregarding the text of the January 31, 1984 Decision of the trial court. In concluding that the obligation was merely joint, the CA was allegedly mistaken in relying on the failure of the dispositive portion of the Decision to state that the obligation was solidary.

We are not impressed. A solidary obligation is one in which each of the debtors is liable for the entire obligation, and each of the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. On the other hand, a joint obligation is one in which each debtors is liable only for a proportionate part of the debt, and the creditor is entitled to demand only a proportionate part of the credit from each debtor.19 The well-entrenched rule is that solidary obligations cannot be inferred lightly. They must be positively and clearly expressed.20 A liability is solidary "only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires."21 Article 1207 of the Civil Code explains the nature of solidary obligations in this wise.

"ARTICLE 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestations. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity."

In the dispositive portion of the January 31, 1984 Decision of the trial court, the word solidary neither appears nor can it be inferred therefrom. The fallo merely stated that the following respondents were liable: Pacific Lloyd Corporation, Thomas H. Van Sebille, Carlos M. Farrales and Federico C. Lim. Under the circumstances, the liability is joint, as provided by the Civil Code, which we quote:

"ARTICLE 1208. If from the law, or the nature or the wording of the obligations to which the preceding article refers[,] the contrary does not appear, the credit or debt shall be presumed to be divided into as many equal shares as there are creditors or debtors x x x"22

We should stress that respondent's obligation is based on the judgment rendered by the trial court. The dispositive portion or the fallo is its decisive resolution and is thus the subject of execution. The other parts of the decision may be resorted to in order to determine the ratio decidendi for the disposition. Where there is a conflict between the dispositive part and the opinion of the court contained in the text or body of the decision, the former must prevail over the latter on the theory that the dispositive portion is the final order, while the opinion is merely a statement ordering nothing23 Hence the execution must conform with that which is ordained or decreed in the dispositive portion of the decision.

Petitioner maintains that the Court of Appeals improper and incorrectly disregarded the body of the trial court's Decision, which clearly stated as follows:

"To support the Promissory Note, a Continuing Suretyship Agreement was executed by the defendants, Federico C. Lim, Carlos M. Farrales and Thomas H. Van Sebille, in favor of the plaintiff corporation, to the effect that if Pacific Lloyd Corporation cannot pay the amount loaned by plaintiff to said corporation, then Federico C. Lim, Carlos M. Farrales and Thomas H. Van Sebille will hold themselves jointly and severally together with defendant Pacific Lloyd Corporation to answer for the payment of said obligation."24

As early as 1934 in Oriental Commercial Co. v. Abeto and Mabanag,25 this Court has already answered such argument in this wise:

"It is of no consequence that, under the written contract of suretyship executed by the parties, the obligation contracted by the sureties was joint and several in character. The final judgment, which superseded the action brought for the enforcement of said contract, declared the obligation to be merely joint, and the same cannot be executed otherwise."26

The same reasoning was recently adopted by this Court in Industrial Management International Development Corp. v. NLRC,27 promulgated on May 11, 2000.

Doctrinally, the basis of execution is the January 31, 1984 Decision rendered by the trial court, not the "written contract of suretyship" executed by the parties. As correctly observed by the trial judge:

"x x x [W]hat was stated in the body of the decision of January 31, 1984 [was] only part of the narration of facts made by the Judge[,] and the dispositive portion is to prevail."28

The only exception when the body of a decision prevails over the fallo is when the inevitable conclusion from the former is that there was a glaring error in the latter, in which case the body of the decision will prevail.29 In this instance, there was no clear declaration in the body of the January 31, 1984 Decision to warrant a conclusion that there was an error in the fallo. Nowhere in the former can we find a definite declaration of the trial court that, indeed, respondent's liability was solidary. If petitioner had doubted this point, it should have filed a motion for reconsideration before the finality of the Decision of the trial court.

Third Issue:The Policy of Upholding Executions

Petitioner argues "that the issue of whether or not the judgment debt should be construed as joint or solidary can only affect the determination of the existence or absence of an excess in the proceeds of the sale."30 He further maintains that private respondent's interests are protected anyway even if all his properties are sold, because "any excess in the proceeds of the sale over the judgment and accruing costs must be delivered to the judgment debtor."31

We cannot accept these arguments. What can be sold on execution is limited by the Rules of Court, as follows:

"When there is more property of the judgment obligor than is sufficient to satisfy the judgment and lawful fees, he (sheriff) must sell only so much of the personal or real property as is sufficient to satisfy the judgment and lawful fees."32

A writ of execution is void when issued for a sum greater than that which is warranted by the judgment or for the original amount it states despite partial payment thereof. The exact amount due cannot be left to the determination of the sheriff.33

Petitioner finally insists that it is "futile for private respondent to contest the sale in execution conducted in the case at bar because of the general policy of the law to sustain execution sales."34

Simple logic dictates that a general policy to sustain execution sales does not guarantee that they will be upheld at every instance. Petitioner itself

grounds for setting aside such sales: a resulting injury or prejudice, fraud, mistake or irregularity.35

Being made to pay for an obligation in its entirety when one's liability is merely for a portion is a sufficient ground to contest an execution sale. It would be the height of inequity if we allow judgment obligors to shoulder entire monetary judgments when their legal liabilities are limited only to their proportionate shares in the entire obligation.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Melo, Vitug, Sandoval-Gutierrez, and Carpio, JJ., concur.

Footnotes

1 This was one of the low-numbered cases redistributed to justices who had no backlog in their dockets, pursuant to the Court's "Zero Backlog" project under AM No. 00-9-03 SC, February 27, 2001.

2 Rollo, pp. 37-44; penned by Justice Regina G. Ordoñez-Benitez, with the concurrence of Justices Gloria C. Paras (Division chairman) and Eduardo G. Montenegro (member).

3 Rollo, p. 45.

4 CA Decision, p. 7; rollo, p. 43.

5 CA Decision, pp. 1-5; rollo, pp. 37-41.

6 In a Resolution, dated November 22, 1999, the Court required the parties to submit their respective Memoranda within thirty (30) days from notice. This was sent through registered mail to all the parties. Petitioner, through counsel, submitted its Memorandum on February 9, 2000. This was noted by the Court in a Resolution dated April 15, 2000. On July 3, 2000, the Court resolved to require respondent's counsel, Atty. Anthony Jay Consunji, to (a) show cause why he should not be disciplinarily dealt with or held in contempt for failure to comply with the Court's Order and (b) comply with the Court's Resolution for him to submit respondent's Memorandum — both within ten (10) days from notice thereof. This Court Resolution was again sent-to respondent through registered mail, but was returned unserved with the annotation "RTS ADD. MOVED OUT LEFT NO FORWARDING ADDRESS." On November 22, 2000, the Court required petitioner to submit to the Court the correct and present address of counsel for private respondent within ten days from notice. Petitioner then manifested to the Court on January 31, 2001 that it had no knowledge of the current address of counsel for private respondent and moved the latter's right to submit his memorandum be deemed waived. Under the premises and to avoid further delay, the Court deemed the Comment of private respondent as his Memorandum.