INCIONG V COURT OF APPEALS NATURE A petition for review on certiorari of the decision of the Court of Appeals affirming that

of the Regional Trial Court of Misamis Oriental, which disposed of Civil Case No. 10507 for collection of a sum of money and damages FACTS - RTC ordered Inciong to pay Phil. Bank of Communications (PBC) P50,000 w/ interest. His liability resulted from the promissory note (P50,000) w/c he signed w/ Rene Naybe and Gregorio Pantanosas on Feb. 3, 1983 holding themselves jointly and severally liable to private respondent PBC. The promissory note was due on May 5, 1983 - The due date expired w/o the promissors having paid their obligation - PBC sent telegrams demanding payment and a final letter demand through registered mail - Since both obligors did not respond, PBC filed a complaint for collection of the money against the 3 obligors. - Only the summon addressed to Inciong was served bec. Naybe was already in Saudi Arabia Petitioners' Claim - In his answer, petitioner Inciong alleged that he was persuaded by Campos to act as a co-maker in the said loan in order to go into the falcate log operations business - Petitioner alleged further that five (5) copies of a blank promissory note were brought to him by Campos at his office. He affixed his signature thereto but in one copy, he indicated that he bound himself only for the amount of P5,000.00. Thus, it was by trickery, fraud and misrepresentation that he was made liable for the amount of P50,000.00. - Annexed to the present petition is a copy of an affidavit executed by Gregorio Pantanosas, who is a co-maker in the promissory note. In the affidavit, he supports the allegation that they were induced to sign the promissory note on the belief that it was only for P5,000. - He also said that the promissory note should be declared bull and void also on the grounds that: - The promissory note was signed outside the premises of the bank - The loan was incurred only for the purpose of buying a chainsaw worth 5thousand; even a new chain saw would cost only P27k o Petitioner and Pantanosas were not present during the time the loan was released ISSUE WON the promissory note should be declared null and void HELD No - The stated points are factual, which should be determined in the lower court not in this court - By alleging fraud in his answer, petitioner was in the right direction towards proving that he agreed to a loan of P5k only. However, fraud must be established by clear and convincing evidence. Mere preponderance of evidence is not adequate - On his argument that since the complaint against Naybe was dismissed, his should be dismissed as well: It is to be noted, however, that petitioner signed the promissory note as a solidary co-maker and not as a guarantor. While a guarantor may bind himself solidarily with the principal debtor, the liability of a guarantor is different from that of a solidary debtor - A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation, and each creditor is entitled to demand the whole obligation. - Because the promissory note involved in this case expressly states that the three signatories therein are jointly and severally liable, any one, some or all of them may be proceeded against for the entire obligation - The choice is left to the solidary creditor to determine against whom he will enforce collection. Ratio - as a general rule, bills, notes and other instruments of a similar nature are not subject to be varied or contradicted by parol or extrinsic evidence - (Tolentino) explains: "A guarantor who binds himself in solidum with the principal debtor under the provisions of the second paragraph does not become a solidary co-debtor to all intents and purposes. There is a difference between a solidary codebtor, and a fiador in solidum (surely). The later, outside of the liability he assumes to pay the debt before the property of the principal debtor has been exhausted, retains all the other rights, actions and benefits which pertain to him byreason of the fiansa; while a solidary co-debtor has no other rights than those bestowed upon him in Section 4, Chapter 3, title 1, Book IV of the Civil Code. - when there are two or more debtors in one and the same obligation, the presumption is that the obligation is joint so that each of the debtors is liable only for a proportionate part of the debt. There is a solidarily liability only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires.

ALIPIO V COURT OF APPEALS FACTS - Respondent Romeo Jaring[1] 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 of P300,000.00 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 only a portion of the second was paid leaving a balance of P50,600. despite demand, the balance remained unpaid thus Jaring sued for the collection of such amount. In the alternative, he prayed for the recission of the sublease contract should the defendants fail to pay the balance. Purita Alipio on the other hand 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 is now amended and reads: - 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. - Trial court denied 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. CA also denied appeal stating: - 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 as mentioned in Climaco v. Siy Uy wherein the court stated that the deceased Siy Uy was not the only defendant, Manuel Co was also named defendant in the complaint 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. This was also the case in Imperial Insurance, Inc. v. David. In the said case, the court stated that . 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. - Petitioner filed a motion for reconsideration but it was also denied, hence this appeal. ISSUE WON 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 HELD NO. Ratio 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. - 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. The issue to be resolved is whether private respondent can, in the first place, file this case against petitioner. Under the law, the Alipios' obligation (and also that of the Manuels) is one which is chargeable against their conjugal partnership. When petitioner's husband died, their conjugal partnership was automatically dissolved[9] and debts chargeable against it are to be paid in the settlement of estate proceedings in accordance with Rule 73, 2 which states: 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. - As held in Calma v. Taedo, 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. Indeed, 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 - This ruling was reaffirmed in the recent case of Ventura v. Militante wherein it was stated that 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. Furthermore, the Court said that the cases cited by the CA were based on facts different from the case at hand. - 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. 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 Disposition 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.

LAFARGE CEMENT PHLIPPINES, INC. V CONTINENTAL CEMENT CORPORATION FACTS - 8/11/98: in a Letter of Intent (LOI), petitioner Lafargeon behalf of its affiliates including Petitioner Luzon Continental Land Corp. (LCLC) agreed to purchase respondent Continental Cement Corporation (CCC). At the time, CCC were respondents in a pending case against Asset Privatization Trust (APT) [GR No. 119712] - 10/21/98: both parties entered into a Sale and Purchase Agreement (SPA)

- under clause 2 of the SPA the parties allegedly agreed to retain P117,020,846.84 from the purchase price to be deposited in an interest-bearing account in Citibank NY for payment to APT - petitioners allegedly refused to pay APT; fearing foreclosure, CCC filed w/ the RTC of QC a Complaint w/ Application for Preliminary Attachment against petitioners [CC No. Q-00-41103] - petitioners moved to dismiss the complaint on the grounds of forum-shopping- to avoid being in default, petitioners filed their Answer and Compulsory Counterclaims ad Cautelam against Respondent CCC, its majority stockholder Gregory Lim, and its corporate secretary Anthony Mariano, praying for the sums of P2.7M as actual damages, P100M as exemplary damages, P100M as moral damages and P5M as attys fees and costs each - petitioners allege that the Writ of Attachment was procured in bad faith - the RTC dismissed petitioners counterclaims since the counterclaims against Lim and Mariano were not compulsory, the Sapugay ruling wasnt applicable, and the Counterclaims violated procedural rules on the proper joinder of causes of action - acting for MFR, the TC admitted an error in pronouncing the counterclaim was against Lim and Mariano only; the RTC clarified that it impleaded the two, even if CCC was included then ISSUES 1. WON the RTC gravely erred in ruling that (a) petitioners counterclaims against Respondents Lim and Mariano are not compulsory; (b) Sapugay v. Court of Appeals is inapplicable here; and (c) petitioners violated the rule on joinder of causes of action. 2. WON the RTC gravely erred in refusing to rule that Respondent CCC has no personality to move to dismiss petitioners compulsory counterclaims on Respondents Lim and Marianos behalf. HELD 1. 1(a) Sec 6 Rule 6 of the Rules of Civil Procedure states: (A counterclaim is) any claim which a defending party may have against an opposing party - they are generally allowed to facilitate the disposition of the whole controversy in a single action - a counterclaim is permissive if it is not necessarily connected w/ the subject matter of the opposing partys claim and may be filed in a separate case - a counterclaim is compulsory if it arises out of the transaction or occurrence of the subject matter - compulsory counterclaims must be set up in the same action or be barred forever NAMARCO v. Fed of United Namarco Dist. lays down the criteria to determine counterclaim type: 1. are issues of fact and law raised by the claim and by the counterclaim largely the same? 2. Would res judicata bar a subsequent suit on defendants claim, absent the compulsory counterclaim rule? 3. Will substantially the same evidence support or refute plaintiffs claim/counterclaim? 4. Is there any logical relation b/w the claim and counterclaim? - a positive answer to all four would indicate it is compulsory - The court then examined petitioners basis for their allegations using these criteria: 1. Lim and Mariano were responsible for making the bad faith decisions and causing the plaintiff to file this baseless suit and procure an unwarranted Writ of Attachment 2. They are also the plaintiffs co-joint tortfeasors in the commission of complained acts and as such are jointly and solidarily liable 3. Lim and Mariano should pay P5M each for counsel fees and litigation costs. For damage to the reputations of defendants, a sum of P100M each for moral damages is prayed for - since the alleged damages suffered by the defendants were a consequence of petiitioners actions, the requisites for compulsory counterclaim are met. 1(b) In the Sugapay case, Respondent Mobil Phils. filed an action for replevin against the sps Sugapay. The sps failed to keep their end of a Dealership Agreement; they answered with a counterclaim alleging the plaintiff refused to give them gas. They still had a post surety bond w/c they couldnt claim w/o the Agreement, later discovering Mobil and its manager, Cardenas, intended all along to award the agreement to Island Air Product Corp.

- an issue raised was whether Cardenas, who wasnt a party to the original action, could be impleaded in the counterclaim - the Court held that new parties may be brought to the action to accord complete relief to all in a single action and to avert a multiplicity of suits - respondent CCC contends that as a corporation with a separate legal personality, it has the juridical capacity to indemnify petitioners even w/o Lim and Mariano; the Court however points out that the inclusion of the co-defendants is not premised on the assumption of CCCs financial ability but on the allegations of fraud and bad faith against them, making them indispensable parties - in Sagupay, Cardenas was furnished w/ a copy of the Answer w/ Counterclaim but he did not respond. Hence the Court considered his apparent acquiescence, despite his active participation in the trial, and adopted as his answer the allegations in the complaint, and is deemed to have submitted to the TCs jurisdiction. Sec 12 Rule 6 of the Rules of Court state that only upon service of summons can the TC obtain jurisdiction over them. - in the instant case, no records show that Lim and Mariano are aware of the counterclaims or that they actively participated in the proceeding. So unlike in Sagupay, the court cannot be said to have treated CCCs motion to dismiss as having been filed on their behalf 1(c) CCC claims that while the original complaint was a suit for specific performance based on a contract, the counterclaim was based on tortuous acts of the respondents, violating the rule on joinder of causes of action as stated in S5 Rule 2 and S6 Rule 3 of the Rules of Civil Procedure -these rules are founded on practicalitydismissing the counterclaim for damages would likely only lead to a separate case re-filing it. Nevertheless, the two are indispensable parties 2. Art 1207 of the Civil Code provides that obligations are generally considered joint unless expressly stated or when the nature of the obligation requires solidarity. Obligations arising from tort, however, are always solidary. -the fact that liability sought against CCC is for specific performance and tort, while those against Lim and Mariano are based solely on tort does not negate the solidary nature of their liability -petitioners assertion that CCC cannot move to dismiss the counterclaims on the grounds that pertain solely to its individual co-debtors cannot be given credence. A1222 of the CC provides: With respect to (defenses) w/c personally belong to the others, (a solidary debtor) may avail himself thereof as regards that part of the debt for w/c the latter are responsible. -the filing of CCC of a motion to dismiss on grounds pertaining to its individual debtors is allowed -however, it lacks the requisite authority to file this motion on the behalf of Lim and Mariano thus, unless expressly adopted by Lim and Mariano, the motion has no force and effect as to them Disposition Wherefore, the petition is granted and the assailed orders reversed. The court of origin is ordered to take cognizance of the counterclaims and to cause the service of summons on Lim and Mariano

Quiombing
NATURE PETITION to review the decision of the Court of Appeals FACTS - This case stemmed from a "Construction and Service Agreement"1 concluded on August 30, 1983, whereby Nicencio Tan Quiombing and Dante Biscocho, as the 1st Party, jointly and severally bound themselves to construct a house for private respondents Francisco and Manuelita Saligo, as the 2nd Party, for the contract price of P137,940.00, which the latter agreed to pay. On October 10, 1984, Quiombing and Manuelita Saligo entered into a second written agreement under which the latter acknowledged the completion of the house and undertook to pay the balance of the contract price in the manner prescribed in the said second agreement. - On November 19,1984, Manuelita Saligo signed a promissory note for P125,363.50 representing the amount still due from her and her husband, payable on or before December 31, 1984, to Nicencio Tan Quiombing. On October 9,1986, Quiombing filed a complaint for recovery of the said amount, plus charges and interests, which the private respondents had acknowledged and promised to pay but had not, despite repeated demands. Instead of filing an

answer, the defendants moved to dismiss the complaint on February 4, 1987, contending that Biscocho was an indispensable party and therefore should have been included as a co-plaintiff. The motion was initially denied but was subsequently reconsidered and granted by the trial court. The complaint was dismissed, but without prejudice to the filing of an amended complaint to include the other solidary creditor as a co-plaintiff. - Rather than file the amended complaint, Quiombing chose to appeal the order of dismissal to the respondent court, where he argued that as a solidary creditor he could act by himself alone in the enforcement of his claim against the private respondents. Moreover, the amounts due were payable only to him under the second agreement, where Biscocho was not mentioned at all. ISSUES WON one of the two solidary creditors may sue by himself alone for the recovery of amounts due to both of them without joining the other creditor as a co-plaintiff. HELD 1. Ratio YES. The essence of active solidarity consists in the authority of eachcreditor to claim and enforce the rights of all, with the resulting obligation of paying every one what belongs to him; there is no merger, much less a renunciation of rights, but only mutual representation. Inclusion of Biscocho as a coplaintiff, when Quiombing was competent to sue by himself alone, would be a useless formality. Reasoning The question of who should sue the private respondents was a personal issue between Quiombing and Biscocho in which the spouses Saligo had no right to interfere. It did not matter who as between them filed the complaint because the private respondents were liable to either of the two as a solidary creditor for the full amount of the debt. Full satisfaction of a judgment obtained against them by Quiombing would discharge their obligation to Biscocho, and vice versa. Each one of the solidary creditors may do whatever may be useful to the others, but not anything which may be prejudicial to the latter. Suing for the recovery of the contract price is certainly a useful act that Quiombing could do by himself alone. Parenthetically, it must be observed that the complaint having been filed by the petitioner, whatever amount is awarded against the debtor must be paid exclusively to him, pursuant to Article 1214. This provision states that "the debtor may pay any of the solidary creditors; but if any demand, judicial or extrajudicial, has been made by any one of them, payment should be made to him." If Quiombing eventually collects the amount due from the solidary debtors, Biscocho may later claim his share thereof, but that decision is for him alone to make. It will affect only the petitioner as the other solidary creditor and not the private respondents, who have absolutely nothing to do with this matter. As far as they are concerned, payment of the judgment debt to the complainant will be considered payment to the other solidary creditor even if the latter was not a party to the suit. Disposition Petition granted. Decision set aside.

COUNTRY BANKERS INSURANCE V CA NATURE Petition for certiorari to review the decision of the Court of Appeals. FACTS - The CA affirmed the RTCs decision, to wit: WHEREFORE, THE COMPLAINT OF THE PLAINTIFF Enrique F. Sy is dismissed, and on the counterclaim of the defendant O. Ventanilla Enterprises Corporation, judgment is hereby rendered: 1. Declaring as lawful, the cancellation and termination of the Lease Agreement (Exh. A) and the defendants re-entry and repossession of the Avenue, Broadway and Capitol theaters under lease on February 11, 1980; 2. Declaring as lawful, the forfeiture clause under paragraph 12 of the said Lease Agreement, and confirming the forfeiture of the plaintiffs remaining cash deposit of P290,000.00 in favor of the defendant thereunder, as of February 11, 1980; 3. Ordering the plaintiff to pay the defendant the sum of P289,534.78, representing arrears in rentals, unremitted amounts for amusement tax delinquency and accrued interest thereon, with further interest on said amounts at the rate of 12% per annum (per lease agreement) from December 1, 1980 until the same is fully paid;

4. Ordering the plaintiff to pay the defendant the amount of P100,000.00, representing the P10,000 portion of the monthly lease rental which were not deducted from the cash deposit of the plaintiff from February to November, 1980, with interest thereon at the rate of 12% per annum on each of the said monthly amounts of P10,000.00 from the time the same became due until it is paid; 5. Ordering the plaintiff to pay the defendant through the injunction bond, the sum of P100,000.00, representing the P10,000.00 monthly increase in rentals which the defendant failed to realize from February to November 1980 resulting from the injunction, with legal interest thereon from the finality of this decision until fully paid; 6. Ordering the plaintiff to pay the defendant the sum equivalent to ten per centum (10%) of the above-mentioned amounts of P289,534.78, P100,000.00 and P100,000.00, as and for attorneys fees; and 7. Ordering the plaintiff to pay the costs. -Respondent Oscar Ventanilla Enterprises Corporation (OVEC), as lessor, and the petitioner Enrique F. Sy, as lessee entered into a lease agreement over the Avenue, Broadway and Capitol Theaters and the land on which they are situated in Cabanatuan City. The term of the lease was for six years from June 13, 1977 to June 12, 1983. After more than two years of operation of the theaters, the lessor OVECmade demands for the repossession of the said leased properties in view of Sys arrears in monthly rentals and non-payment of amusement taxes. On August 8, 1979, OVEC and Sy had a conference and by reason of Sys request for reconsideration, he was allowed to continue operating the leased premises upon his conformity to certain conditions imposed by the latter in a supplemental agreement dated August 13, 1979. - In pursuance to their latter agreement, Sy reduced his arrears in rental. However, the accrued amusement liability tax had accumulated to 84,000.00 despite the fact that Sy had been deducting amounts from his monthly rental with the obligation to remit said deductions to the city government. Hence, letters of demand dated January 7, 1980 and February 3, 1980 were sent to Sy demanding payment of the arrears in rentals and amusement tax delinquency. The latter demand was with the warning that OVEC will repossess the theaters on February 11, 1980 in pursuance with their lease contract and their supplemental letter-agreement. But notwithstanding the said demands and warnings Sy failed to pay the abovementioned amounts in full. Consequently, OVEC took possession thereof in the morning of February 11, 1990. - Sy filed the present action for reformation of the lease agreement, damages and injunction. And by virtue of a restraining order dated February 12, 1980 followed by an order to issue a writ of preliminary injunction, Sy regained possession of the theaters. Petitioners' Claim - Sy alleged that the amount of depositP600,00.00 as agreed upon, P300,000.00 of which was to be paid on June 13, 1977 and the balance on December 13, 1977 was too big; and OVEC assured him that said forfeiture will not come to pass. - Sy sought to recover from OVEC the sums of P100,000.00 for repairs in the Broadway theater; P48,000.00 for electrical cost of OVECs illegal connection in the Capitol theater; and P31,000.00 for electrical cost of OVECs illegal connection in the Broadway theater and for damages suffered by SY as a result of each connection. - It is also alleged that on February 11, 1980, OVEC had the three theaters padlocked with the use of force, and as aresult, Sy suffered damages at the rate of P5,000 a day because of his failure to go thru the contracts with movie and booking companies for the showing of movies. - Finally, Sy prayed for the issuance of a restraining order/ preliminary injunction to enjoin OVEC from entering and taking possession of the theaters upon Sys filing of a P500,000.00 bond supplied by Country Bankers Insurance Corporation (CBISCO). Respondents' Counterclaim - By reason of Sys violation of the lease agreement, OVRC became authorized to enter and possess the theaters as well as to terminate said agreement so the balance of deposits given by Sy had thus become forfeited. - OVEC would be losing P50,000.00 for every month that the possession and operation of the theaters remain with Sy. - OVEC incurred P500,000.00 for attorneys fees.

ISSUE WON respondent is unjustly enriched at the expense of petitioners HELD NO. Ratio As a general rule, in obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance. However, there are exceptions: 1) when there is a stipulation to the contrary 2) when the obligor is sued fro refusal to pay the agreed penalty 3) when the obligor is guilty of fraud Reasoning The forfeiture clause in the lease agreement would not unjustly enrich OVEC at expense of Sy and CBISCOcontrary to law, morals, good customs, public order or policy. A penal clause is an accessory obligation which the parties attach to a principal obligation for the purpose of insuring the performance thereof by imposing on the debtor a special prestation (generally consisting in the payment of a sum of money) in case the obligation is not fulfilled or is irregularly or inadequately fulfilled. In the case at bar, the penalty cannot substitute for the P100,000.00 supposed damage suffered by OVEC from opportunity cost. It represents the P10,000 per month in additional rental during the ten months of injunction period. Thus, it must be applied against the injunction bond. Disposition ACCORDINGLY, finding no merit in the grounds relied upon by petitioners in their petition, the same is hereby DENIED and the decision dated June 15, 1988 and the resolution dated September 21, 1988, both of the respondent Court of Appeals are AFFIRMED.