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[G.R. Nos. L-21477-81. April 29, 1966.] court in the assessment of liabilities of the parties.

court in the assessment of liabilities of the parties. In its view only petitioner Francisca Viluan,
FRANCISCA VILUAN, Petitioner, v. THE COURT OF APPEALS, PATRICIO as operator of the bus, is liable for breach of contract of carriage. The driver, Hermenegildo
HUFANA AND GREGORIO HUFANA, Respondents. Aquino cannot be made jointly and severally liable with petitioner because he is merely the
latter’s employee and is in no way a party to the contract of carriage. The court added,
REGALA, J.: however — "Hermenegildo Aquino is not entirely free from liability. He may be held liable,
Seven persons were killed and thirteen others were injured in Bangar, La Union, on February criminally and civilly, under the Revised Penal Code (Articles 100 and 103), but not in a civil
16, 1958, when a passenger bus on which they were riding caught fire after hitting a post and suit for damages predicated upon a breach of contract, such as this one (Aguas, Et. Al. v.
crashing against a tree. The bus, owned by petitioner and driven by Hermenegildo Aquino, Vargas, Et Al., CA G.R. No. 27161-R, January 22, 1963). furthermore, the common carrier,
came from San Fernando, La Union and was on its way to Candon, Ilocos Sur. It appears that, Francisca Viluan, could recover from Aquino any damages that she might have suffered by
as the bus neared the gate of the Gabaldon school building in the municipality of Bangar, reason of the latter’s negligence."cralaw virtua1aw library
another passenger bus owned by Patricio Hufana and driven by Gregorio Hufana tried to Neither may respondents Patricio Hufana and Gregorio Hufana be held liable in the opinion
overtake it but that instead of giving way, Aquino increased the speed of his bus and raced of the appellate court because the plaintiffs did not amend complaints in the main action so
with the overtaking bus. Aquino lost control of his bus as a result of which it hit a post, crashed as to assert a claim against respondents as third party defendants.
against a tree and then burst into flames. The appellate court likewise disallowed the award of moral damages for P1,000.00 to Carolina
Among those who perished were Timoteo Mapanao, Francisca Lacsamana , Narcisa Mendoza Sabado, there being no showing that the common carrier was guilty of fraud or bad faith in
and Gregorio Sibayan, whose heirs sued petitioner and the latter’s driver, Hermenegildo the performance of her obligation. Accordingly, it rendered judgment as
Aquino, for damages for breach of contract of carriage. Carolina Sabado, one of those injured,
also sued petitioner and the driver for damages. The complaints were filed in the Court of "IN VIEW OF ALL THE FOREGOING, we hereby find defendant-appellant Francisca Viluan solely
First Instance of La Union. liable to the plaintiffs-appellees for the damages and attorney’s fees awarded to them by the
In their answer, petitioner and her driver blamed respondent Gregorio Hufana for the court below and further declare null and void the lower court’s award of moral damages in
accident. With leave of court, they filed third party complaints against Hufana and the latter’s the amount of P1,000.00 in favor of plaintiff Carolina Sabado. Thus modified, the judgment
employer, Patricio Hufana. appealed from is affirmed in all other respects, with costs in this instance against defendant-
After trial, the court found that the accident was due to the concurrent negligence of the appellant Francisca Viluan."cralaw virtua1aw library
drivers of the two buses and held both, together with their respective employers, jointly and From this judgment petitioner brought this appeal. In brief, her position is that since the
severally liable for damages. proximate cause of the accident was found to be the concurrent negligence of the drivers of
"IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered, declaring the plaintiffs the two buses, then she and respondents Patricio and Gregorio Hufana should have been held
entitled to damages to be paid jointly and severally by the defendants and third-party equally liable to the plaintiffs in the damage suits. The fact that the respondents were not
defendants as follows: sued as principal defendants but were brought into the cases as third party defendants should
All such amounts awarded as damages shall bear interest at the legal rate of six per cent (6) not preclude a finding of their liability.
per annum from the date of this decision until the same shall have been duly paid in full. We agree with petitioner’s contention. To begin with, the Court of Appeal’s ruling is based on
Defendants and third-party defendants are further ordered to pay proportionate section 5 of Rule 12 of the former Rules of Court, 1 which was adopted from Rule 14-A of the
costs."cralaw virtua1aw library Federal Rules of Civil Procedure. While the latter provision has indeed been helpful to
Both petitioner and her driver and the respondents herein appealed to the Court of Appeals. preclude a judgment in favor of a plaintiff and against a third party defendant where the
While affirming the finding that the accident was due to the concurrent negligence of the plaintiff has not amended his complaint to assert a claim against a third party defendant, 2
drivers of both the Viluan and the Hufana buses, the Court of Appeals differed with the trial
yet, as held in subsequent decisions, this rule applies only to cases where the third party In this case the third party complaints filed by petitioner and her driver charged respondents
defendant is brought in on an allegation of liability to the defendants. The rule does not apply with direct liability to the plaintiffs. It was contended that the accident was due "to the fault,
where a third party defendant is impleaded on the ground of direct liability to the plaintiffs, negligence, carelessness and imprudence of the third party defendant Gregorio Hufana" and,
in which case no amendment of the plaintiff’s complaint is necessary. 3 As explained in the in petitioner’s motion for leave to file a third party complaint, it was stated that "Patricio
Atlantic Coast Line R. Co. v. U.S. Fidelity and Guaranty Co., 52 F. Supp. 177 Hufana and Gregorio Hufana were not made parties to this action, although the defendants
(1943) are entitled to indemnify and/or subrogation against them in respect of plaintiff’s
"From the sources of Rule 14 and the decisions herein cited, it is clear that this rule, like the claim."cralaw virtua1aw library
admiralty rule, ‘covers two distinct subjects, the addition of parties defendant to the main It should make no difference therefore whether the respondents were brought in as principal
cause of action, and the bringing in of a third party for a defendant’s remedy over.’. . . defendants or as third-party defendants. As Moran points out, since the liability of the third-
"If the third party complaint alleged facts showing a third party’s direct liability to plaintiff on party defendant is already asserted in the third-party complaint, the amendment of the
the claim set out in plaintiff’s petition, then third party "shall" make his defenses as provided complaint to assert such liability is merely a matter of form, to insist on which would not be
in Rule 12 and his counterclaims against plaintiff as provided in Rule 13. In the case of alleged in keeping with the liberal spirit of the Rules of Court. 4
direct liability, no amendment is necessary or required. The subject-matter of the claim is Nor should it make any difference that the liability of petitioner springs from contract while
contained in plaintiff’s complaint, the ground of third party’s liability on that claim is alleged that of respondents arises from quasi-delict. As early as 1931, we already ruled in Gutierrez
in third party complaint, and third party’s defense to his alleged liability on the claim is set up v. Gutierrez, 56 Phil., 177, 5 that in case of injury to a passenger due to the negligence of the
in his answer to plaintiff’s complaint. At that point and without amendment, the plaintiff and driver of the bus on which he was riding and of the driver of another vehicle, the drivers as
third party are at issue as to their rights respecting the claim. well as the owners of the two vehicles are jointly and severally liable for damages. Some
"The provision in the rule that, "The third-party defendant may assert any defense which the members of the Court, though are of the view that under the circumstances they are liable
third-party plaintiff may assert to the plaintiff’s claim,’ applies to the other subject, namely, on quasi-delict.
the alleged liability of third party defendant. The next sentence in the rule, "The third-party Wherefore, the decision appealed from is hereby modified in the sense that petitioner as well
defendant is bound by the adjudication of the third- party plaintiff’s liability to the plaintiff, as respondents Patricio Hufana and Gregorio Hufana are jointly and severally liable for the
as well as of his own to the plaintiff or to the third-party plaintiff,’ applies to both subjects. If damages awarded by the trial court. The disallowance of moral damages in the amount of
third party is brought in as liable only to defendant and judgment is rendered adjudicating P1,000.00 is correct and should be affirmed. No costs.
plaintiff’s right to recover against defendant and defendant’s right to recover against third
party, he is bound by both adjudications. That part of the sentence refers to the second
subject. If third party is brought in as liable to plaintiff, then third party is bound by the G.R. No. L-6291 April 29, 1954
adjudication as between him and plaintiff. That refers to the first subject. If third party is THE SAN PEDRO BUS LINE, PAULINO DE LA CRUZ, and TEODOLO LACDAN, doing business
brought in as liable to plaintiff and also over to defendant, then third party is bound by both under the name of "THE SAN PEDRO BUS LINE," petitioners,
adjudications. The next sentence in the rule, `The plaintiff may amend his pleadings to assert vs. NICOLAS NAVARRO, and the HON. ASSOCIATE JUSTICES OF THE FIRST DIVISION, COURT
against the third-party defendant any claim which the plaintiff might have asserted against OF APPEALS, respondents.
the third-party defendant had he been joined originally as a defendant,’ refers to the second
subject, that is, to bringing in third party as liable to defendant only, and does not apply to PARAS, C.J.:
the alleged liability of third party directly to plaintiff."cralaw virtua1aw library
Nicolas Navarro filed a complaint in the court of First Instance of Rizal against the San Pedro The other contention of the petitioners is that it was erroneous for the Court of Appeals to
Bus Line, Paulino de la Cruz and Teodulo Lacdan, doing business in the name of the San Pedro award in favor of respondent Navarro damages in the amount of P9,500, his claim in the
Bus Line, alleging that the plaintiff, on April 21, 1943, rode as a passenger in Manila bound complaint being only for P4,500. It appears, however, that the complaint prayed for "such
bus No. TPU-7654 owned and operated by the defendants; that while on its way the bus further relief as may be deemed just and equitable," and this of course warranted the granting
collided with another vehicle, causing serious physical injuries to the plaintiff, with in the complaint. Indeed, under section 9, Rule 35, of the Rules of Court, "the judgment shall
subsequent post-traumatic psychosis which might incapacitate him for life; that as a result grant the relief to which the party in whose favor it is rendered is entitled, even if the party
thereof the plaintiff suffered damages, for actual medical and hospital expenses and loss of has not demanded such relief in his pleadings."
earning power, in the total sum of P4,500 which the plaintiff sought to recover from the It is also urged by counsel for the petitioners that the finding of the Court of Appeals that
defendants. In their answer the defendants admitted the occurrence of the accident and the respondent Navarro is insane, is not supported by any evidence, and that on the other hand,
injuries received the plaintiff, but disclaimed responsibility for the accident. After trial, the in the motion for new trial filed by the petitioners, accompanied by the affidavits of Marcelo
court dismissed the complaint on the ground that there was "no proof whatsoever of the Legaspi and Ceferino Terello, respondent Navarro is shown not to be insane, with the result
relation of the defendants San Pedro Bus Line and Paulino de la Cruz with the damages that there is no basis for awarding the additional amount of P5,000. However, apart from the
claimed by the plaintiff." The plaintiff appealed to the Court of Appeals which, on part of fact that the finding of the Court of Appeals is factual and therefore conclusive, the said sum
which reads as follows: "WHEREFORE, it appearing that the trial court erred as charged, and was granted by the Court of Appeals, not only for the resulting insanity of respondent Navarro
that the facts and the lawfully warrant a recovery by the appellant, the judgment appealed in but for his pain and suffering in general; and we are not prepared to hold that the award is
the total sum of P9,500, with interests thereon from the date this action was commenced. excessive as compensation for moral damages.
Costs are charged against the appellees." The defendants have elevated the case by way of a
petition for certiorari. Wherefore, the decision complained of is affirmed, and it is so ordered with costs against
It is contended for the herein petitioners that they cannot be held civilly liable to respondents petitioners.
Nicolas Navarro, for the reason that the Court of First Instance of Rizal had dismissed the
criminal charge against petitioner Paulino de la Cruz, driver of the bus involved in the accident,
citing the case of Martinez vs. Barredo,* Off. Gaz., 4922. In answer to this contention, it is [G.R. Nos. L-12634 & L-12720. May 29, 1959.]
enough to advert to the conclusion of the Court of Appeals — which is correct — that the JOSE G. TAMAYO, Petitioner, v. INOCENCIO AQUINO, ET AL., and SILVESTRE RAYOS,
action was not based on tort or quasi delict, but was one for breach of a carrier's contract, Respondents. SILVESTRE RAYOS, Petitioner, v. JOSE G. TAMAYO and INOCENCIO AQUINO
there being a clear distinction between culpa as a source and creator of obligations (aquiliana) ET AL., Respondents.
and culpa in the performance of an already existing obligation (contractual). As already held
in the case of Castro vs. Acro Taxicab Co.** 46 Off. Gaz., 2023, "para que prosperase la accion LABRADOR, J.:
del demandante pidiendo indemnizacion de daños y perjuicios bastaba que probase la Inocencio Aquino and his children brought this action against Jose G. Tamayo, holder of a
existencia del contrato de pasaje esto es, que causo lesiones y daños en el pasajero. De certificate of public convenience to operate two trucks for damages for the death of
acuerdo con la doctrina enunciada, para el exito de la accion de daños no era necesario que Inocencio’s wife, Epifania Gonzales, while riding aboard Tamayo’s truck. It is alleged that while
se probase la culpa, desuido a negligencia del chofer que guiaba el taximetro No. 962." The his (Inocencio Aquino) wife was making a trip aboard truck with Plate No. TPU-735, it bumped
case of Martinez vs. Barredo is not controlling, since it referred to an action based on criminal against a culvert on the side of the road in Bugallon, Pangasinan; that as a consequence of
negligence. this accident Epifania Gonzales was thrown away from the vehicle and two pieces of wood
embeded in her skull as a result of which she died; that the impact of the truck against the
culvert was so violent that the roof of the vehicle was ripped off from its body, one fender and places upon him as an incident or consequence of registration. Were a registered owner
was smashed and the engine damaged beyond repair. Complaint was filed for the recovery of allowed to evade responsibility by proving who the supposed transferre or owner is, it would
P10,000 as actual damages, P10,000 as moral damages, and costs. be easy for him by collusion with others or otherwise, to escape said responsibility and
Upon being summoned, defendant Tamayo answered alleging that the truck is owned by transfer the same to an indefinite person, or to one who possesses no property with which to
Silvestre Rayos, so he filed a third-party complaint against the latter, alleging that he no longer respond financially for the damage or injury done. A victim of recklessness on the public
had any interest whatsoever in the said truck, as he had sold the same before the accident to highways is usually without means to discover or identify the person actually causing the
the third-party defendant Silvestre Rayos. Answering the third-party complaint, Rayos alleged injury or damage. He has no means other than by a recourse to the registration in the Motor
that if any indemnity is due, it should come from Jose G. Tamayo, because he did not have Vehicles Office to determine who is the owner. The protection that the law aims to extend to
any transaction with him regarding such sale. him would become illusory were the registered owner given the opportunity to escape
The Court of First Instance found that the truck with plate No. TPU-735 was one of the trucks liability by disproving his ownership. If the policy of the law is to be enforced and carried out,
of Tamayo under a certificate of public convenience issued to him; that he had sold it to Rayos the registered owner should not be allowed to prove the contrary to the prejudice of the
in March, 1953, but did not inform the Public Service Commission of the sale until June 30, person injured, that is, to prove that a third person or another has become the owner, so that
1953, one month after the accident. On the basis of the above facts, the Court of First Instance he may therebyy be relieved of the responsibility to the injured." (Erezo v. Jepte, supra).
ordered the defendant Tamayo and the third-party defendant Rayos to pay plaintiffs jointly The decision of the Court of Appeals is alsoo attacked insofar as it holdds that inasmuch as
and severally the sum of P6,000 as compensatory damages, and another sum of P5,000 as the third-party defendant had used the truck on a route not covered by the registered owner’s
moral damages, with interest, and authorized the defendant or third-party defendant, franchise, both the registered owner and the actual owner and operator should be considered
whoever should pay the entire amount, to recover from the other any sum in excess of one- as joint tortfeasors and should be made liable in accordance with Article 2194 of the Civil
half of the amount ordered to be paid, with interest. The court also dismissed the third-party Code. "Art. 2194. The responsibility of two or more persons who are liable for a quasi-delict
complaint. Appeal against the above decision was made to the Court of Appeals. This court is solidary."cralaw virtua1aw library
affirmed the judgment of the Court of First Instance in all respects, and against this judgment
certiorari was issued by us on separate petitions of Tamayo and Rayos. But the action instituted in the case at bar is one for breach of contract, for failure of the
Tamayo claims exemptionn from liability, arguing that the owner and operator of the truck at defendant to carry safety the deceased to her destination. The liability for which he is made
the time the accident was not he but Rayos. In answer we state that we have already held in responsible, i. e., for the death of the passenger, may not be considered as arising from a
the cases of Medina v. Cresencia, 99 Phil., 506; 52 Off. Gaz., (11) 4606; Timbol v. Osias, 98 quasi-delict. As the registered owner Tamayo and his tranferee Rayos may not be held guilty
Phil., 432; 52 Off. Gaz. (3) 1392; Montoya v. Ignacio, 94 Phil., 182; 50 Off. Gaz., 108, and Roque of tort or a quasi-delict; their responsibility is not solidary as held by the Court of Appeals.
v. Malibay, L-8561, Nov. 18, 1955, that the registered owner of a public service vehicle is The question that poses, therefore, is how should the holder of the certificate of public
responsible for damages that may be caused to any of the passengers therein, even if the said convenience Tamayo participate with his transferee, operator Rayos, in the damages
vehicle had already been sold, leased or transferred to another person who was, at the time recoverable by the heirs of the deceased passenger, if their liability is not that of joint
of the accident, actually operating the vehicle. This principle was also reafirmed in the case of tortfeasors in accordance with Article 2194 of the Civil Code. The following considerations
Erezo v. Jepte, 102 Phil., 103. The reason given by us for the above liability imposed upon the must be borne in mind in determining this question. As Tamayo is the registered owner of the
registered owner of the vehicle under a certificate of public convenience is as truck, his responsibility to the public or to any passenger riding in the vehicle or truck must be direct, for the reasons given in our decision in the case of Erezo v. Jepte, supra, as quoted
". . . we hold with the trial court that the law does not allow him to do so; the law, with its above. But as the transferee, who operated the vehicle when the passenger died, is the one
aim and policy in mind, does not relieve him directly of the responsibility that the law fixes directly responsible for the accident and death he should in turn be made responsible to the
registered owner for what the latter may have been adjudged to pay. In operating the truck "Willful injury to property may be a legal ground for awarding moral damages if the court
without transfer thereof having been approved by the Public Service Commission, the should find that, under the circumstances, such damages are justly due. The same rule applies
transferee acted merely as agent of the registered owner and should be responsible to him to breaches of contract where the defendant acted fraudulently or in bad faith."cralaw
(the registered owner), for any damages that he may cause the latter by his negligence. virtua1aw library
In the case at bar, the court found, furthermore, that inspite of the fact that the agreement Both the Court of First Intance and the Court of Appeals considered the violation of the rules
between Tamayo and Rayos was for Rayos to use the truck in carrying of gasoline, the latter of the Public Service Commission prohibiting transfer of public vehicles without approval by
used the same in transporting passengers outside the route covered by the franchise of the Commission as justifying the award of moral damages. We believe that both courts erred.
Tamayo. For this additional reason, the agent or Rayos must be held responsible to the The law expressly provides that award of moral damages can be made in a suit for breach of
registered owner, to the extent that the latter may suffer damage by reason of the death contract only when the defendants acted fraudulently or in bad faith. We do not believe that
caused during the accident. The responsibility of the transferee was already adverted to by the holder of the certificate, defendant Tamayo, was guilty of fraud or bad faith. There
us in the case of Erezo v. Jepte, supra, when we held expressly. appears to be no fraud at all in the transfer. Transfers are prohibited only if made without
"In synthesis, we hold that the registered owner, the defendant appellant herein, is primarily approval by the Public Service Commission. There may have been a violation of the
responsible for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant- regulations because Tamayo did not secure a previous authority to transfer from said
appellant) has a right to be indemnified by the real or actual owner of the amount that he Commission, but he actually applied for and obtained said permission or approval about a
may be required to pay as damage for the injury caused to the plaintiff-appellant." (Erezo v. month after the accident. Besides, the truck was transferred to Rayos with the understanding
Jepte, supra.) that the same was not to be used as a public convenience, so that insofar as Tamayo is
We hereby affirm that the responsibility of the transferee of the public vehicle be as above concerned, there could have been no shade or tint of bad faith at all. Consequently, the
denied. ground upon which moral damages may be demanded from him by the plaintiffs does not
The procedural means by which the liability of the transferee to the holder of the certificate exist.
should be enforced is that indicated by us in the above-quoted portion of the case of Erezo v. Neither can wee find that there was fraud or bad faith committed on the part of the transferee
Jepte. This procedure was adopted by Tamayo, the defendant herein, when he presented or agent. There may have been a breach of the agreement between Tamayo and Rayos, but
third-party complaint against Rayos. The courts below should not have dismissed this third- this was not the immediate cause of the accident. It was the negligence of the driver. What
party complaint, and should have adjudged the responsibility to make indemnity in the law would seem to consider as bad faith which may furnish a ground for the award of
accordance therewith. The transferee is liable to indemnify the registered owner for the moral damages in the case at bar would be bad faith in the securing and in the execution of
damages that the latter may be required to pay for the accident, hence the remedy is by third- the contract and in the enforcement of its terms (Article 1338, Civil Code), or any other kind
party complaint (See Rule 12, Rules of Court). of deceit which may have been used by both defendants. None can be said to have been
We now come to the question of the damages that the Court of Appeals and the Court of First present in the case at bar. There was no bad faith on the part of the agent Rayos, there was
Instance awarded to the plaintiffs. The actual or compensatory damage of P6,000 is not negligence of the driver employed by him, but this is certainly not bad faith on defendants’
seriously questioned by any of the defendants, but the award of P5,000 as moral damages is part contemplated by law.
questioned by them in this appeal. We agree with the appellants that as the responsibility of For the foregoing considerations, the judgment appealed from is hereby modified, in that the
Tamayo and his agent Rayos is culpa-contractual, no award of moral damages can be given. defendant-appellant Tamayo is hereby ordered to pay to the plaintiff-appellees the sum of
The law on this matter is expressed in Article 2220 of the Civil Code, which P6,000 as compensatory damages for the death of the deceased, but that he (Tamayo) has the right to be indemnified by third-party defendant-appellant Rayos of the amount he is
hereby ordered to pay. With costs against appellants.
[G.R. No. 31339. November 27, 1929.] On July 6, 1923, in order to secure the payment to the Philippine National Bank of the
THOS. N. POWELL, Plaintiff-Appellee, v. THE PHILIPPINE NATIONAL BANK, Defendant- additional sum of P12,000 with interest, Severino P. Aldeguer executed a second mortgage in
Appellant. favor of said bank of the said lots, Nos. 1318 and 470 of the Pontevedra cadastre, and a first
mortgage on the sugar-cane harvest of 1923-1924 on said land, as well as on twenty-two head
VILLA-REAL, J.: of labor cattle (Exhibit G).
The present appeal was taken by the Philippine National Bank from a judgment of the Court On February 23, 1925, in pursuance of a writ of execution issued by the Court of First Instance
of First Instance of Iloilo ordering it to pay the sum of P7,926.18 to the plaintiff, Thomas N. of Manila, dated October 31, 1924, in civil case No. 25663 of said court, wherein the Asia
Powell, together with the legal interest thereon from October 9, 1928 until fully paid, with Banking Corporation was the plaintiff, and Severino P. Aldeguer and others were the
the costs of the trial. defendants, the sheriff of the Province of Occidental Negros levied execution on the
In support of its appeal, the bank assigns the following alleged errors as committed by the aforementioned lots, Nos. 1318 and 470, mortgaged to the Philippine National Bank (Exhibit
lower court in its decision, to B).
"The lower court Following the procedure prescribed by law, the provincial sheriff of Occidental Negros on
"1. In not holding that the fact that the fertilizer purchased by Severino Aldeguer of Felipe March 30, 1925 sold at public auction, all Severino P. Aldeguer’s rights, title and interest in
Gomez was used on the sugar cane planted on the land in question, has created a lien upon said lots Nos. 1318 and 470 to the Asia Banking Corporation, as the highest bidder for the sum
said sugar cane to secure the payment of the promissory notes issued for the fertilizers. of P4,000. The writ of execution was for the sum of P4,625 with interest at 9 per centum per
"2. In holding that there is no legal provision in force in these Islands applicable to said lien. annum from September 20, 1920, plus the cost, which amounted to P58.52 (Exhibits C and
D). The sheriff issued a deed of sale of said lands, which were described in certificates of title
"3. In not holding that the provisions of articles 356 and 1922 of the Civil Code are applicable Nos. 10977 and 10978, in favor of the Asia Banking Corporation and sent it to the register of
to the instant case. deeds of Occidental Negros by registered main on May 29, 1925, having been recorded upon
"4. In not absolving the Philippine National Bank from the complaint with costs against the receipt thereof in Bacolod.
plaintiff."cralaw virtua1aw library On March 28, 1925, Severino P. Aldeguer bought 40 tons of fertilizer from Felipe Gomez for
The following facts, agreed upon by the parties, are pertinent and necessary to the solution use in the cultivation of the two parcels of land mortgaged by him to the Philippine National
of the questions raised in this appeal:chanrob1es virtual 1aw library Bank, executing a promissory note for P5,200 payable on February 28, 1926.
On December 17, 1920, in order o secure the payment of the sum of P17,000 with 12 per cent On February 15, 1926, Severino P. Aldeguer again bought 3 tons of fertilizer from Felipe
interest per annum, Severino P. Aldeguer executed a mortgage deed in favor of the Philippine Gomez for use upon the said land, executing a promissory note for P390, payable on January
National Bank on lots Nos. 1318 and 470 of the cadastral survey of Pontevedra, Occidental 15, 1927.
Negros, appearing upon the original certificates of title Nos. 10977 and 10978, issued by the These promissory notes were endorsed by Felipe Gomez to the Philippine National Bank.
registrar of deeds of said Province of Occidental Negros (Exhibit E). For some reason or other Severino P. Aldeguer failed to exercise his right of repurchase, and
On July 5, 1923, after a liquidation of accounts between Severino P. Aldeguer and the on April 23, 1928, the provincial sheriff of Occidental Negros executed the final deed of sale
Philippine National Bank, from which it appeared that the former owned the latter the sum of Severino P. Aldeguer’s land mortgaged to the Philippine National Bank, in favor of the Asia
of P33,348.75, the former mortgage deed (Exhibit E) was amended making the mortgaged Banking Corporation (Exhibit 1).
property liable for the new amount with 8 per cent interest per annum, and retaining the On April 25, 1928, the Asia Banking Corporation sold said lots Nos. 1318 and 470 to Urquijo
other conditions of the contract (Exhibit F). Hermanos for P45,000, after undertaking to liberate them from all liens (Exhibit J).
On April 25, 1928, the Philippine National Bank furnished the Asia Banking Corporation the According to this legal provision, the Philippine National Bank, having acquired the promissory
following statement of Severino P. Aldeguer’s account up to April 25, 1928: notes executed by Severino P. Aldeguer is payment of the fertilizer used in the cultivation of
To remaining balance of P/Note signed by the two parcels of land mortgaged to said Bank, had a preferred right to the crops harvested
Mr. Severino P. Aldeguer on July 5, 1923 on said lands from February 28, 1926 and January 15, 1927, on which dates the promissory
for P32,373.64 P29,500.00 notes fell due, and also the dates in which the crops produced by the fertilizer were
On April 26, 1928, the Asia Banking Corporation, through its attorneys tendered the Philippine presumably harvested. According to the agreed statement of facts, Ynchausti & Co. delivered
National Bank a check for P29,307 in payment of Severino P. Aldeguer’s debt to the latter, to the Philippine National Bank sugar milled in its central from the cane grown upon Severino
secured by the mortgage of the lands abovementioned. P. Aldeguer’s land mortgaged to said bank. Instead of applying that sugar to the payment of
On April 27, 1928, the Philippine National Bank returned the check to the Asia Banking the promissory notes acquired by it from Felipe Gomez, applied it to the payment of its credit
Corporation with the following statement of Severino P. Aldeguer’s account with it: against Severino P. Aldeguer secured by the two parcels of land that produced said crops. In
To remaining balance of P/Note signed by Mr. Severino P. Aldeguer on July 5, 1923 for doing so, it waived its preferred right to said sugar for the payment of said promissory notes,
P32,373.64 Total 37,459.87 because that preferred right subsisted in so far as the sugar continued to belong to the debtor.
Upon receipt of said statement, and on the same day, April 27, 1928, the attorneys of the Asia From the time the Philippine National Bank applied it to the payment of its credit against
Banking Corporation addressed a letter to the Philippine National Bank requesting the Severino P. Aldeguer, with the latter’s consent, said sugar ceased to belong to said Severino
reconsideration thereof. P. Aldeguer, and became the property of the aforesaid Philippine National Bank. (12 Manresa,
The Philippine National Bank declined to make the reconsideration but expressed its 685.)
willingness to accept an additional sum of P7,511.36 in full payment. In order to comply with With regard to the defendant-appellant’s contention that Severino P. Aldeguer had a right to
its obligation to Urquijo Hermanos, the Asia Banking Corporation was forced to pay the compel the Philippine National Bank to apply said sugar to the payment of the promissory
Philippine National Bank the amount of P7,511.36 under protest, made in a letter dated April notes for the fertilizer, such debts being the most burdensome to him, in accordance with the
28, 1928. provisions of articles 1172 and 1174 of the Civil Code, suffice it to say that such application
On receipt of said amount, the Philippine National Bank, on May 3, 1928, executed in favor of should have been made at the time of payment, and not afterwards, when his account with
the Asia Banking Corporation a release of the mortgages on the lands in question (Exhibit H). the bank had already been credited.
The real and exact state of accounts of Severino P. Aldeguer with the Philippine National Bank
from September 4, 1924 to April 25, 1928, is as follows: The second question to be decided in this appeal is whether the Asia Banking Corporation had
With respect to the first assignment of error, the pertinent part of article 1922 of the Civil any right to the fruit and rents of the lands purchased at public auction, up to the 25th of
Code April, 1928, when the sheriff of Occidental Negros issued the final deed of sale of said lands
"ART. 1922. With respect to determinate personal property of the debtor, the following are in its favor.
preferred:chanrob1es virtual 1aw library The pertinent part of the English text of section 463 of the Code of Civil Procedure,
"6. Credits for seed and expenses of cultivation and harvesting, advanced to the debtor, with
respect to the fruits of the crops which they were used to produce; "SEC. 463. Sale of real property and certificate thereof. — Upon a sale of real property, the
"If the personal property, with respect to which the preferences is allowed, has been purchaser shall be substituted, to, and acquire all the right, interest, title, and claim of the
removed, the creditor may claim it from the person who has the same, within the terms of judgment debtor thereto, subject to the right of redemption as hereinafter provided. . .
thirty days counted from the time it was so removed."cralaw virtua1aw library ."cralaw virtua1aw library
In the case of Riosa v. Verzosa and Bulan (26 Phil., 86), this court laid down the following the products thereof during the period of legal redemption where said debtor is in possession of them. Nothing could be more just or equitable; for, if by section 465 of the Code of Civil
"SALE OF REALTY UNDER EXECUTION; RIGHT OF OWNER TO RETAIN POSSESSION DURING Procedure quoted above, the debtor must pay 1 per centum monthly interest on the purchase
PERIOD OF EQUITY OF REDEMPTION; EJECTMENT OF OWNER BY PURCHASER. — When real price, at the time of the redemption, the purchaser would profit twice, if in addition to said
estate is sold under an execution and the owner is in possession thereof, he is entitled to interest he were entitled to the rents and fruits of the land sold which remained in the
remain in possession of the property sold and to collect the rents and profits of the same possession of the debtor. It the debtor is unable to make the repurchase, the interest of the
during the period of the equity of redemption. (Section 464, 465, 468, and 469 of Act No. 190; purchaser’s capital during the period of redemption, is compensated by the difference
De la Rosa v. Santos, 10 Phil., 148.) By virtue of the provisions of section 469 (Act No. 190) between the true value of the land sold and the purchase price; for, it is well-known that the
where the land is in possession of a tenant at the time of the sale under execution, a different price obtained at judicial sales for land subject to execution is usually less than the market
rule prevails."cralaw virtua1aw library value. Now then, from what time is the purchaser entitled to the fruits and rents of the real
In the case of Velasco v. Rosenberg’s Incorporated (32 Phil., 72), this court like wise laid down property purchased remaining in possession of the debtor in case the debtor failed to take
the following advantage of his right to repurchase?
"EXECUTION SALE; RIGHT OF PURCHASER TO COLLECT RENT DURING PERIOD OF Section 465 of the Code of Civil Procedure, quoted above, provides that the judgment debtor
REDEMPTION. — The judgment debtor who is in possession of property sold under execution may redeem the thing sold from the purchaser within twelve months following the day of the
cannot be required to pay the purchaser rent for such property, during the period of sale, by paying the selling price plus interest at the rate of one per centum per month; and
redemption."cralaw virtua1aw library section 466 of the same law provides that if within the twelve months following the sale no
And in the case of Pabico v. Ong Pauco (43 Phil., 572), this court also laid down the following redemption is made, the purchaser or his successor in interest is entitled to the proper deed of conveyance, or, what amounts to the same thing, the purchaser becomes the owner of the
"1. SHERIFF’S EXECUTION SALES; PLACING PURCHASER IN POSSESSION. — The doctrine of property purchased, otherwise he would not be entitled to the proper deed of conveyance.
caveat emptor applies to execution sales and the sheriff has no authority to place a purchaser As absolute owner of the land, the purchaser is entitled to its possession and to receive the
of land under such a sale in possession. In attempting to do so he becomes a trespasser and rents and fruits thereof, and the judgment debtor is obliged to deliver said land, together with
an action for forcible entry and detainer may be maintained against the person so placed in the fruits and rents collected since the ownership was consolidated by reason of failure of
possession. redemption, except that he is entitled to reimbursement for expenses of cultivation,
"2. TRANSLATION. — Correction of the Spanish translation of section 463 of the Code of Civil harvesting, and preservation, according to article 356 of the Civil Code.
Procedure."cralaw virtua1aw library In the instant case, while it is true that the judgment debtor Severino P. Aldeguer was entitled
Section 465 of the Code of Civil Procedure, provides as to retain possession of the parcels of land acquired by the Asia Banking Corporation at public
"SEC. 465. Time and manner of redemption. — The judgment debtor, or redemptioner, may auction by virtue of execution, and to collect the fruits and rents pending the expiration of
redeem the property from the purchaser, at any time within twelve months after the sale, on the period of redemption, inasmuch as he failed to exercise his right of redemption within the
paying the purchaser the amount of his purchase, with one per cent per month interest twelve months following the day of the sale, which took place on March 30, 1925, the
thereon in addition, up to the time of redemption, together with the amount of any ownership of the same became consolidated in the purchasers, the Asia Banking Corporation,
assessments or taxes which the purchaser may have paid thereon after purchase, and interest and from March 30, 1926, said bank was entitled to collect the fruits and rents of said lands,
on such last-named amount at the same rate. . . ."cralaw virtua1aw library until the final delivery of the latter to it own April 23, 1928, when the final deed of sale of the
According to the doctrines quoted above, the purchaser of a debtor’s real property at public lands was executed in favor of said Asia Banking Corporation.
action by virtue of a writ of execution of a judgment, has no right to collect the rents or receive
According to the statement of Severino P. Aldeguer’s account with the Philippine National As to the question of procedure raised by the defendant- appellant, who contends that to
Bank, submitted by the latter to the Asia Banking Corporation, all the products of said lands affirm the judgment appealed from would amount to ordering Severino P. Aldeguer, who is
up to April 4, 1928 were delivered by Ynchausti & Co. to said Philippine National Bank, and not a party in this case, to pay the amount of said judgment, we hold that there is no merit in
credited to said Severino P. Aldeguer’s account with the latter. When said Philippine National such contention, because, as he is not a party to this case, the decision cannot affect him;
Bank, then applied the products of the lands mortgaged to it to secure the payment of and, furthermore, as he is not a necessary party for the final solution of the questions raised
Severino P. Aldeguer’s mortgage debt, from 1927 to 1928, said products already belonged to by the parties herein between themselves, he need not be impleaded.
the Asia Banking Corporation. For the foregoing considerations, and finding no error in the judgment appealed from, the
Summarizing, then: (1) When the Philippine National Bank, as mortgage creditor of Severino same is affirmed in its dispositive part, with costs against the appellant. So ordered.
P. Aldeguer and assignee of Felipe Gomez’s right to the promissory notes for the fertilizer
used by Severino P. Aldeguer in the cultivation of the lands mortgages to said bank, applied
the products of said lands to the payment of its mortgage credits, it waived its preferential G.R. No. L-39427 February 24, 1934
right over said products for the amount of the aforesaid promissory notes; (2) from March 30, TIRSO GARCIA, in his capacity as receiver of the Mercantile Bank of China, plaintiff-appellee,
1925 when Severino P. Aldeguer’s right of the redemption of the two parcels of land in vs.LIM CHU SING, defendant-appellant.
question was sold at public auction to the Asia Banking Corporation by virtue of execution,
until March 30, 1926, when the period of redemption expired, the fruits and rents collected VILLA-REAL, J.:
from said lands belonged to said Severino P. Aldeguer as judgment debtor in possession
thereof; and 93) that from March 30, 1926, when the ownership of the Asia Banking This is an appeal taken by the defendant Lim Chu Sing from the judgment rendered by the
Corporation was consolidated, the latter the purchaser at public auction of Severino P. Court of First Instance of Manila, the dispositive part of which reads as follows:
Aldeguer’s right of redemption, until April 23, 1928, when the final deed of sale of the fruits Wherefore, judgment is rendered sentencing the defendant to pay the sum of P9,105.17 with
and rents was issued in favor of said Asia Banking Corporation, the said fruits and rents from interest thereon at the rate of six per cent per annum from September 1, 1932, until fully
said lands, belonged to the last mentioned banking corporation. paid, plus the sum of P910.51, as attorney's fees, with the costs of this suit.
Wherefore, we are of opinion and so hold: (1) That a mortgagee who, at the same time, is a In conformity with the stipulation, this judgment shall be subject to execution after ninety
holder of promissory notes for the value of fertilizer used in the cultivation of the mortgaged (90) days. So ordered.
lands, and who collects said products and applies them to his mortgage credit, waives the In support of his appeal, the appellant assigns the following alleged errors as committed by
preferential right granted to him by articles 1922, case 6, of the Civil Code, upon said products, the court a quo in its decision, to wit:
the amount of said promissory notes becoming an ordinary credit: (2) that the judgment 1. In denying the motion dated December 27, 1932, praying for the inclusion of Lim Cuan Sy,
debtor in possession of land by virtue of execution is entitled to collect its fruits and rents being the principal debtor, as party to this suit.
during the year fixed by the law for the redemption (Riosa v. Verzosa and Bulan, 26 Phil., 86; 2. In holding as improper the compensation of the defendant's debt of P9,106.17, claimed in
Velasco v. Rosenberg’s Incorporated, 32 Phil., 72); and (3) that if the period for redemption the complaint, with his credit amounting to P10,000 with the Mercantile Bank of China.
expires without the judgment debtor having made use of this right, the ownership of the land 3. In not ordering that after the compensation the plaintiff-appellee, as receiver of the
sold becomes consolidated in the purchaser, who thereupon becomes entitled to collect its Mercantile Bank of China, should liquidate the dividends of the defendant-appellant's shares.
fruits and rents, paying the judgment debtor the expenses of cultivation, harvesting and 4. In sentencing the defendant-appellant to pay to the plaintiff-appellee the sum of P910.51
preservation (article 356, Civil Code). as attorney's fees, plus interest at 6 per cent per annum on the sum of P9,105.17, with costs.
5. In denying the motion for a new trial.
When the case was called for hearing, the parties submitted the following stipulation of facts comply with his obligations, the plaintiff required the defendant, as surety, to sign a
for the consideration of the trial court, to wit: promissory note for the sum of P19,105.17 payable in the manner hereinbefore stated
Come now both parties and to this Honorable Court respectfully submit the following (Exhibit A). The defendant had been paying the corresponding installments until the debt was
stipulation: reduced to the sum of P9,105.17 claimed in the complaint. The defendant is the owner of
1. The defendant admits the facts alleged in the complaint. shares of stock of the plaintiff Mercantile Bank of China amounting to P10,000. The plaintiff
2. The plaintiff admits the allegations in the answer, particularly with reference to the fact bank is now under liquidation.
that the defendant is the owner of two hundred shares at a par value of fifty pesos (P50) each, On December 27, 1932, the defendant-appellant Lim Chu Sing filed a motion praying for the
that is (Pl0,000). inclusion of the principal debtor Lim Cuan Sy as party defendant so that he could avail himself
of the benefit of the exhaustion of the property of said Lim Cuan Sy. Said motion was denied
3. The court may render judgment in accordance with this stipulation, but the same shall be in open court by the presiding judge without the defendant-appellant having excepted to such
subject to execution after ninety (90) days. order of denial.
Wherefore, they respectfully submit this stipulation and pray that judgment be rendered in The proceeds of the sale of the mortgaged chattels together with other payments made were
accordance therewith. applied to the amount of the promissory note in question, leaving the balance which the
The facts alleged in the complaint and admitted by both parties under the above quoted plaintiff now seeks to collect.
stipulation of facts are as follows: The first question to be decided in this appeal is whether or not the court a quo erred in
On June 20, 1930, the defendant-appellant Lim Chu Sing executed and delivered to the denying the motion for inclusion of a party a defendant, filed by the defendant-appellant.
Mercantile Bank of China promissory note for the sum of P19,605.17 with interest thereon at According to the provisions of section 141 of the Code of Civil Procedure, ". . . Rulings of the
6 per cent per annum, payable monthly as follows: P1,000 on July 1, 1930; P500 on August 1, court upon minor matters, such as adjournments, postponements of trials, the extension of
1930; and P500 on the first of every month thereafter until the amount of the promissory time for filing pleadings or motions, and other matters addressed to the discretion of the
note together with the interest thereon is fully paid (Exhibit A). One of the conditions court in the performance of its duty, shall not be subject to exception. But exception may be
stipulated in said promissory note is that in case of defendant's default in the payment of any taken to any other ruling, order, or judgment of the court made during the pendency of the
of the monthly installments, as they become due, the entire amount or the unpaid balance action in the Court of First Instance." "An `exception' has been defined as an objection taken
thereof together with interest thereon at 6 per cent per annum, shall become due and to the decision of the trial court upon a matter of law, and is a notice that the party taking it
payable on demand. The defendant had been, making several partial payments thereon, preserves for the consideration of the appellate court a ruling deemed erroneous. (8 Am. Enc.
leaving an unpaid balance of P9,105.17. However, he defaulted in the payment of several P. and P., 157.)" " `Errors in a judgment or decree will not be noticed on appeal in the absence
installments by reason of which the unpaid balance of P9,105.17 on the promissory note has of objections and exceptions taken below, and they should be sufficiently specific to direct
ipso facto become due and demandable. the attention of the court to the alleged defects.' (8 Enc. Pl and Pr., 289.)" (Garcia de Lara vs.
The facts alleged in the answer and admitted by both parties under the same stipulation of Gonzales de Lara, 2 Phil., 297.) Inasmuch as an exception is an objection taken to the decision
facts are as follows: of the trial court upon a matter of law and is a notice that the party taking it will submit for
The debt which is the subject matter of the complaint was not really an indebtedness of the the consideration of the appellate court the ruling deemed erroneous, failure to interpose it
defendant but of Lim Cuan Sy, who had an account with the plaintiff bank in the form of "trust deprived the appellant of the right to raise the question whether or not the court a quo
receipts" guaranteed by the defendant as surety and with chattel mortgage securities. The committed the alleged error attributed to it in its ruling which had not been excepted to by
plaintiff bank, without the knowledge and consent of the defendant, foreclosed the chattel the said appellant. The inclusion in, or exclusion from an action of a certain party is a question
mortgage and privately sold the property covered thereby. Inasmuch as Lim Cuan Sy failed to of law. The herein defendant-appellant, not having excepted to the order of the Court of First
Instance of Manila denying his motion for the inclusion of Lim Cuan Sy as party defendant, is process. Therefore, the defendant-appellant should not again be made to pay for them (Bank
estopped from raising such question upon appeal (Roman Catholic Bishop of Lipa vs. of the Philippine Islands vs. Yulo, 31 Phil., 476).
Municipality of San Jose, 27 Phil., 571; Vergara vs. Laciapag, 28 Phil., 439; Andrews vs. In view of the foregoing, this court is of the opinion and so holds: (1) That failure to file an
Morente Rosario, 9 Phil., 634). exception to a ruling rendered in open court denying a motion for the inclusion of a party as
The second question to be decided is whether or not it is proper to compensate the defendant deprives the petitioner, upon appeal of the right to raise the question whether
defendant-appellant's indebtedness of P9,105.17, which is claimed in the complaint, with the such denial proper or improper; (2) that the shares of a banking corporation do not constitute
sum of P10,000 representing the value of his shares of stock with the plaintiff entity, the an indebtedness of the corporation to the stockholder and, therefore, the latter is not a
Mercantile Bank of China. creditor of the former for such shares; (3) that the indebtedness of a shareholder to a banking
According to the weight of authority, a share of stock or the certificate thereof is not an corporation cannot be compensated with the amount of his shares therein, there being no
indebtedness to the owner nor evidence of indebtedness and, therefore, it is not a credit (14 relation of creditor and debtor with respect to such shares; and (4) that the percentage
Corpus Juris, p. 388, see. 511). Stockholders, as such, are not creditors of the corporation (14 stipulated in a contract, for costs and attorney's fees for the collection of an indebtedness,
Corpus Juris, p. 848, Sec. 1289). It is the prevailing doctrine of the American courts, repeatedly includes judicial costs.
asserted in the broadest terms, that the capital stock of a corporation is a trust fund to be Wherefore, with the sole modification that the costs be eliminated from the appealed
used more particularly for the security of creditors of the corporation, who presumably deal judgment, the same is hereby affirmed, without special pronouncement as to costs of this
with it on the credit of its capital stock (14 Corpus Juris, p. 383, sec. 505). Therefore, the instance. So ordered.
defendant-appellant Lim Chu Sing not being a creditor of the Mercantile Bank of China,
although the latter is a creditor of the former, there is no sufficient ground to justify a
compensation (art. 1195, Civil Code; Acuña Co Chongco vs. Dievas, 12 Phil., 250).
The third question to be decided in this appeal is whether or not the court a quo erred in
sentencing the said defendant-appellant to pay the sum of P910.51 as attorney's fees in
addition to interest at 6 per cent per annum on the amount sought in the complaint.
The pertinent clause of the promissory note Exhibit A reads as follows: "In case of default of
any of the above installments, the total amount of the balance still unpaid of this note will
become due and payable on demand plus interest thereon at the rate of 6 per cent per annum
from date of this note until payment is made. And I further agree to pay an additional sum
equivalent to 10 per cent of the said note to cover cost and attorney's fees for collection."
The stipulation relative to the payment of interest at the rate of 6 per cent per annum on the
unpaid balance of the promissory note Exhibit A refers to the capital and the 10 per cent
stipulated for costs and attorney's fees cannot be considered as interest but an indemnity for
damages occasioned by the collection of the indebtedness through judicial process. Therefore
the two rates in question cannot be combined and considered usurious interest.
With reference to the costs, the 10 per cent stipulated in the promissory note is for costs and
attorney's fees which may be incurred in the collection of the indebtedness through judicial