30.

COMGLASCO v SANTOS

Topic : Article 1267 ,

Facts:

On August 16, 2000, respondent Santos Car Check Center Corporation (Santos), owner of a
showroom located at 75 Delgado Street, in Iloilo City, leased out the said space to petitioner
Comglasco Corporation (Comglasco), an entity engaged in the sale, replacement and repair of
automobile windshields, for a period of five years at a monthly rental of P60,000.00 for the first
year, P66,000.00 on the second year, and P72,600.00 on the third through fifth years.1

On October 4, 2001, Comglasco advised Santos through a letter2 that it was pre-terminating
their lease contract effective December 1, 2001. Santos refused to accede to the pre-
termination, reminding Comglasco that their contract was for five years. On January 15, 2002,
Comglasco vacated the leased premises and stopped paying any further rentals. Santos sent
several demand letters, which Comglasco completely ignored. On September 15, 2003, Santos
sent its final demand letter,3 which Comglasco again ignored. On October 20, 2003, Santos
filed suit for breach of contract.4

Issue:

Whether or not judgment on the pleadings was properly invoked by the trial court as basis for
rendering its decision?

Whether or not material issues were raised in [Comglasco’s] answer?

Whether or not summary judgment or judgment on the pleadings is the proper remedy for
[Santos] under the circumstances of the present case?
Whether or not the amount deposited for advance rental and deposit should be credited to
[Comglasco’s] account?
Whether or not attorney’s fees may be granted by the trial court without proof and legal
basis?
Ruling:

Finally, as to whether attorney’s fees may be recovered by Santos, Article 2208(2) of the Civil
Code justifies the award thereof, in the absence of stipulation, where the defendant’s act or
omission has compelled the plaintiff to incur expenses to protect his interest. The pre-
termination of the lease by Comglasco was not due to any fault of Santos, and Comglasco
completely ignored all four demands of Santos to pay the rentals due from January 16, 2002 to
August 15, 2003, thereby compelling Santos to sue to obtain relief. It is true that the policy of
the Court is that no premium should be placed on the right to litigate,21 but it is also true that
attorney’s fees are in the nature of actual damages, the reason being that litigation costs
money.22 But the Court agrees with the CA that the lesser amount of P100,000.00 it awarded to
Santos instead of P200,000.00 adjudged by the RTC, is more reasonable.

WHEREFORE, premises considered, the petition is DENIED for lack of merit.

146. Carino vs Court of Appeals G.R. L-47661

Pablo Encabo applied with the Land Estates Division, Bureau of Lands, to purchase a parcel of
land, which was a part of the Tuason Estate purchased by the governmen, for resale

Encabo, through petitioner Cirila Vicencio, , came to an agreement with Josue Quesada
transferring rights over the lot to the latter, conditioned on approval by the Land Tenure
Administration. The transfer of rights by Encabo to Quesada was not put in writing but payment
of the price for the rights transferred was evidenced by receipts on which Cirila Vicencio signed
as a witness.

The LTA, unaware of the transfer of rights by Encabo to Quesada, adjudicated the lot in favor of
Encabo, and the LTA and Encabo signed an "Agreement to Sell" .LTA later came to know about
the "transfer" of rights from Encabo to Quesada. It disapproved the same on the ground that
Quesada was not qualified to acquire the lot because he is already a lot owner. However, before
the LTA's disapproval of the transfer of Encabo's rights to Quesada, the latter had entered into
possession of the lot in question. Quesada had also allowed Cirila Vicencio to enter into
possession and occupancy of the same lot.

Encabo executed a Deed of Sale of House and Transfer of Rights,his rights over the lot, subject
to approval of the LTA., Encabo wrote a letter to the LTA requesting permission to transfer his
rights. Another such request was made on 20 April 1960 but without making mention of who the
transferee would be Encabo and Quesada executed a document wherein the latter purportedly
resold to the former (Encabo) the house and the rights over the lot. On 19 April 1960, Juanito
Cariño filed a petition with the LTA seeking approval of the transfer to herein petitioners of rights
to the lot in question on the basis of the Deed of Sale of House and Transfer of Rights executed
by Pablo.

Both claimed the right to purchase the lot in question from the LTA. After the submission of their
respective pleadings and evidence, the LTA rendered a decision holding that the status quo
should be maintained. It reasoned out that "the authenticity of the alleged deed is not for this
office to decide, as only the courts have that prerogative.

The Cariños appealed to the Office of the President, which affirmed it. Motions for
reconsideration were filed by the Cariño's but were denied, the last denial being contained in a
letter signed by Acting Assistant Executive Secretary Juan S. Cancio.

The Cariños refused to give up the lot despite the rulings of the LTA and the Office of the
President; thereafter, the Encabos filed an action in the Court of First Instance of Manila to
declare them as the owners of the lot and for the Cariños to deliver the possession of the lot
itself, and to pay rentals for their occupancy of the properties plus attorney's fees.

Topic:
Art. 1409. The following contracts are inexistent and void from the beginning:
(2) Those which are absolutely simulated or fictitious;
These contracts cannot be ratified. Neither can the right to set up the defense of illegality
be waived.
Ruling:

There has been no legal transfer of rights in favor of the Cariños because neither the LTA nor
the Land Authority has approved or given due course to such transfer of rights. The LTA never
waived its right to approve the transfer of rights. It only ruled that the status quo will be
maintained so long as the Court has not yet ruled on the authenticity of document
88. Union Bank of the Philippines vs Development Bank of the Philippines G.R. 191555

Facts

Foodmasters, Inc. (FI) had outstanding loan obligations to both Union Bank’s predecessor-in-
interest, Bancom Development Corporation (Bancom), and to DBP. FI and DBP, among others,
entered into a Deed of Cession of Property In Payment of Debt whereby the former ceded in
favor of the latter certain properties in consideration of the following:

(a) the full and complete satisfaction of FI’s loan obligations to DBP; and

(b) the direct assumption by DBP of FI’s obligations to Bancom in the amount of
P17,000,000.00 (assumed obligations).

DBP leased back for 20 years the said property to FI which was obliged to pay monthly rentals
to be shared by DBP and Bancom. DBP also entered into a separate agreement with Bancom.
FI assigned its leasehold rights under the Lease Agreement to Foodmasters Worldwide, Inc.
(FW); while Bancom conveyed all its receivables, including, among others, DBP’s assumed
obligations, to Union Bank.

Claiming that the subject rentals have not been duly remitted despite its repeated demands,
Union Bank filed a collection case against DBP before the RTC. DBP countered that the
obligations it assumed were payable only out of the rental payments made by FI. Thus, DBP’s
obligation to Union Bank had not arisen. In addition, DBP sought to implead FW as third party-
defendant in its capacity as FI’s assignee and, thus, should be held liable to Union Bank.

DBP filed a motion to dismiss on the ground that it had ceased to be a real-party-in-interest due
to the supervening transfer of its rights, title and interests over the subject matter to the Asset
Privatization Trust (APT). Said motion was denied by the RTC. Finding the complaint to be
meritorious, the RTC, in a Decision dated May 8, 1990, ordered: (a) DBP to pay Union Bank
and

(b) FW, as third-party defendant, to indemnify DBP, as third- party plaintiff,

The CA set aside the RTC’s ruling. Separately, the CA upheld the RTC’s denial of DBP’s motion
to dismiss. Union Bank and DBP filed separate petitions for review on certiorari before the
Court. The Court denied both petitions. Union Bank filed a motion for execution before the RTC,
praying that DBP be directed to pay the amount of P9,732,420.555. DBP filed its own motion
for execution against FW, citing the same CA decision as its basis. The RTC granted both
motions for execution. As a result, a writ of execution dated October 15, 2001 (October 15, 2001
Writ of Execution) and, thereafter, a notice of garnishment against DBP were issued. Records,
however, do not show that the same writ was implemented against FW.

DBP filed a motion for reconsideration from the Execution Order. The motion was denied.
Aggrieved, DBP filed a petition for certiorari before the CA.
The CA dismissed DBP’s petition, finding that the RTC did not abuse its discretion. DBP
appealed the CA’s ruling before the Court.

The Court granted DBP’s appeal, and thereby reversed and set aside the CA’s ruling and the
RTC’s Order of Execution/Writ of Execution.

Union Bank filed a Manifestation and Motion to Affirm Legal Compensation. The RTC issued an
Order denying the above-mentioned motion for lack of merit. With Union Bank’s motion having
been denied, it filed a petition for certiorari with the CA. The CA dismissed Union Bank’s petition,
finding no grave abuse of discretion on the RTC’s part..

Issue:

The sole issue for the Court’s resolution is whether or not the CA correctly upheld the denial of
Union Bank’s motion to affirm legal compensation.

Ruling:

The rule on legal compensation is stated in Article 1290 of the Civil Code which provides that
"[w]hen all the requisites mentioned in Article 1279 are present, compensation takes effect by
operation of law, and extinguishes both debts to the concurrent amount, even though the
creditors and debtors are not aware of the compensation."

WHEREFORE, the decision appealed from is SET ASIDE and another one is RENDERED,

(i) Ordering Foodmasters Worldwide, Inc. to pay defendant and third-party plaintiff-appellant
Development Bank of the Philippines representing the unpaid rentals as well as P10,000.00 for
attorney’s fees; and

(ii) Ordering Development Bank of the Philippines to remit 30% Union Bank of the Philippines.

SO ORDERED.

In fine, since requisites 3 and 4 of Article 1279 of the Civil Code have not concurred in this case,
no legal compensation could have taken place between the above-stated debts pursuant to
Article 1290 of the Civil Code. Perforce, the petition must be denied, and the denial of Union
Bank s motion to affirm legal compensation sustained.

WHEREFORE, the petition is DENIED. The Decision dated November 3, 2009 and Resolution
dated February 26, 2010 of the Court of Appeals in CA-G.R. SP No. 93833 are hereby
AFFIRMED.