G.R. No. L-20887 - Ong vs. Fonacier

Case Summary (G.R. No. L-20887)

Initiation of the Civil Action and Default Proceedings

Ong filed the civil action on July 11, 1956 in the Court of First Instance of Camarines Sur against Fonacier. Ong sought recovery of several alleged loan amounts—P3,000, P1,000, P100, P60, and P50, or a total of P4,210—plus P2,000 moral and actual damages and P1,000 attorney’s fees. Fonacier was declared in default on December 19, 1956, but he subsequently filed his answer on December 29, 1956, accompanied by a motion for leave to file a third-party complaint against Fernando A. Gaite, and he likewise asserted a counterclaim against Ong.

On January 7, 1957, the trial court initially denied leave to file the third-party complaint because Fonacier was in default. Upon Fonacier’s motion, the court later lifted the order of default on March 6, 1957, admitted Fonacier’s answer, and granted leave to file the third-party complaint.

Fonacier’s Theory in His Answer, Third-Party Complaint, and Counterclaim

Fonacier’s answer, third-party complaint, and counterclaim alleged that he was the owner of iron lode mineral claims in Jose Panganiban, Camarines Norte. He stated that on September 29, 1952, he designated Gaite as his agent to operate the claims under a minimum royalty of P50 a ton, payable to him. Fonacier further claimed that Gaite undertook to operate the mineral claims from March to October 1954, and that under their arrangement, a royalty of P50 per ton was payable to Fonacier by Gaite and Ong, jointly and severally. Ong’s alleged payments, according to Fonacier, were payments of such royalties, and he maintained that Gaite and Ong still owed him a balance ranging from at least P2,237.25 to at most P8,850. He also sought attorney’s fees of P2,000 and actual damages of P3,000.

Gaite’s Answer and Counterclaim Against Fonacier

Gaite filed an answer to the third-party complaint on August 10, 1957, with a counterclaim. In substance, Gaite alleged that Fonacier and Gaite had entered into a contract dated December 8, 1954 known as “Revocation of Power of Attorney and Contract.” Gaite claimed that Fonacier acknowledged Gaite’s 10% participation in the royalty from the mines. Gaite further asserted that Fonacier received royalties of P40,000 and P50,000, in which Gaite was entitled to a 10% share, totaling P9,000. Gaite alleged that Fonacier had paid him only P1,666.67, leaving a balance of P7,333.33, and he sought P15,000 actual damages, P10,000 moral damages, and P5,000 exemplary damages.

Fonacier responded to Gaite’s counterclaim by filing his answer on September 24, 1958. Fonacier alleged that Gaite had sold his 10% participation to Fonacier for P20,000, and that Fonacier later sold 90% of his royalty (including the acquired 10% participation) to Larap Mines & Smelting Co. Fonacier stated that he paid Gaite only P1,666.67 for the purchase of the 10% participation because Gaite failed to deliver a balance of about 13,045.45 tons of the 24,000 tons of iron sold by Gaite to Fonacier under the agreement dated December 8, 1954.

Procedural Motions and the Pendency of Related Litigation

Gaite moved on September 26, 1958 to declare Fonacier in default on Gaite’s counterclaim, asserting that Fonacier’s answer was filed out of time. The dispute, according to the record, involved L-11827, Gaite vs. Fonacier, which was then pending in the Supreme Court. In a decision promulgated July 31, 1961, Fonacier’s contention regarding a balance of minerals still due was rejected.

Meanwhile, on October 2, 1958, Fonacier moved to declare Ong in default as to Fonacier’s counterclaim against Ong. On October 10, 1958, Ong was declared in default for failure to file a responsive pleading to Fonacier’s counterclaim. Ong moved on October 22, 1958 for reconsideration and to set aside the default order.

Fonacier also moved on November 2, 1958 to declare Gaite in default on the third-party complaint. After postponements sought by Fonacier, the trial court set the case for November 5, 1958.

At the hearing, Ong and Gaite appeared, but Fonacier did not. A telegraphic motion for postponement, received at 10:00 A.M. on November 5, 1958, sought a further postponement because Fonacier’s counsel, Atty. Mauro Castillo, was to appear in a criminal case in Manila on the same date. The trial court found the postponement request unjustified. It proceeded with trial in Fonacier’s absence, and on the same day received evidence presented by Ong on the complaint and by Gaite on his counterclaim against Fonacier.

Trial Court Decision and Fonacier’s Appeal

On January 6, 1959, the trial court found that Ong had loaned Fonacier P3,000, P1,000, and P60, for a total of P4,060. It also ruled that Gaite was entitled to P7,333.33 as claimed in his royalty-related counterclaim. The trial court dismissed the third-party complaint and ordered Fonacier to pay the stated sums, with interest at the legal rate from the filing of the action until payment and the costs.

Fonacier filed a petition on March 4, 1959 to set aside the decision, which the trial court denied on July 10, 1959. Fonacier then perfected an appeal. The trial court initially refused to allow the appeal, but in a mandamus proceeding, the Supreme Court ordered the trial court to allow it. The records were later elevated to the Court of Appeals, and by resolution of February 2, 1963, the Court of Appeals certified the appeal to the Supreme Court as involving questions purely of law. Fonacier’s subsequent motion to reconsider the certification, aiming to raise questions of fact, was denied by the Supreme Court on February 26, 1963.

Issues Raised on Appeal

In the Supreme Court, Fonacier contended that the trial court erred in proceeding with trial in his absence and allegedly violated his constitutional right to be heard by denying his request for postponement. He further argued that the trial court’s decision was premature because, in his view, the issues were not yet joined due to unresolved pending motions. These included Gaite’s September 26, 1958 motion to declare Fonacier in default, Ong’s October 22, 1958 motion to set aside the order declaring Ong in default, Fonacier’s November 2, 1958 motion to declare Gaite in default in the third-party complaint, and Fonacier’s motion of November 4, 1964 for leave to file an amended answer to Gaite’s counterclaim.

Supreme Court’s July 8, 1966 Disposition and Reasoning

The Supreme Court held that postponements were matters within the trial court’s sound discretion. It emphasized that Fonacier was not without counsel because he had two lawyers, Attys. Pedro Guevara and Mauro Castillo. It also noted that Fonacier’s third motion for postponement was denied after the court had already granted his first two motions. The Supreme Court further stated that the motion filed on October 13, 1958 had not been served on Ong, so the trial court was not bound to consider it. It also invoked controlling rulings that approval of postponement motions addressed to the court’s discretion could not be taken for granted and that a party had no reason to assume that a third postponement motion would be granted. Consequently, the Supreme Court found Fonacier’s failure to appear unjustified and therefore inconsistent with the claim of denial of the right to be heard.

On the second contention, the Supreme Court rejected the premise of prematurity. It reasoned that although the described motions were pending, the issues were joined by the pleadings, not by the motions. The Court observed that all parties had already filed responsive pleadings, except for Ong’s failure to answer Fonacier’s counterclaim, but it treated Fonacier’s counterclaim as compulsory because it was necessarily connected with the subject matter of the complaint and based on the same defenses previously pleaded in Fonacier’s answer. It stressed that motions do not constitute pleadings, and that unlike Principe vs. Eria, where the issues were not joined due to lack of a responsive pleading, the circumstances here showed that responsive pleadings had been filed. The Supreme Court also added that by proceeding to decide the case, the trial court, in effect, denied the pending motions and treated the responsive pleadings as properly and reasonably filed. Accordingly, it concluded that the decision was not premature.

Lastly, Fonacier’s additional motion dated May 19, 1963, seeking to remand the case or allow correction and completion of the record on appeal, was addressed within the confines of the appeal as certified to involve questions of law only. The Supreme Court held that the proposed additional materials were unnecessary for adjudicating the legal issues already presented, and it denied the motion. The Supreme Court affirmed both the appealed decision and the order denying the petition to set aside, with costs.

Amending Resolution of September 13, 1966: Interest Computation

Fonacier later filed a motion for amendment of the Supreme Court’s decision promulgated July 8, 1966. The Supreme Court granted the requested clarification only as to the computation of legal interest.

As to the first point, the Supreme Court explained that the phrase “from the filing of the action” in the trial court’s decision, as affirmed, should be deemed to refer to the relevant date for each party’s claim: the filing of the complaint for Ong’s award, and the filing of Gaite’s counterclaim for Gaite’s award.

As to the second point, the Supreme Court relied on Article 2209 of the Civil Code, which provides that when an obligation consists in the payment of a sum of money and the debtor incurs in delay, the indemnity includes interest agreed upon or, absent stipulation, legal interest of six per cent per annum, as damages for delay. The Supreme Court held that after the dates of the respective demands in court, Fonacier incurred delay and was liable for interest. However, it ruled that the period during which the appea

Case Syllabus (G.R. No. L-20887)

Juan Ong filed a civil action for a sum of money in the Court of First Instance of Camarines Sur on July 11, 1956 against Isabelo F. Fonacier.
Ong sought recovery of alleged loans totaling P4,210, plus P2,000 moral and actual damages and P1,000 attorney’s fees.
Fonacier was declared in default on December 19, 1956, yet he filed an answer on December 29, 1956 that included a motion for leave to file a third-party complaint against Fernando A. Gaite.
The trial court initially denied leave on January 7, 1957 because Fonacier was in default.
On March 6, 1957, the trial court lifted the order of default, admitted Fonacier’s answer, and granted leave to file the third-party complaint.
Fonacier’s answer, third-party complaint, and counterclaim alleged that he owned iron lode mineral claims in Jose Panganiban, Camarines Norte, and that he designated Gaite as agent to operate the claims under a minimum royalty.
The pleaded arrangement fixed a royalty of P50 per ton, with Fonacier receiving the royalty and the operator to pay such royalty to him, jointly and severally with Ong, for a time described as from March to October 1954.
The pleading characterized the sums delivered by Ong to Fonacier as payments of royalties rather than loans, and alleged that Gaite and Ong still owed Fonacier a balance stated as at least P2,237.25 and at most P8,850 on royalties.
The pleading also claimed attorney’s fees of P2,000 and actual damages of P3,000.
Gaite filed an answer to the third-party complaint on August 10, 1957, with a counterclaim.
Gaite’s counterclaim alleged a contract dated December 8, 1954 entitled “Revocation of Power of Attorney and Contract,” where Ponacier acknowledged Gaite’s 10% share in the royalty.
Gaite alleged he was entitled to 10% of the royalties received by Fonacier in the amounts of P40,000 and P50,000, producing a share of P9,000.
Gaite alleged Fonacier had paid only P1,666.67, leaving a balance of P7,333.33, and prayed for P15,000 actual damages, P10,000 moral damages, and P5,000 exemplary damages.
Fonacier filed an answer to Gaite’s counterclaim on September 24, 1958, alleging he sold Gaite’s 10% participation to him for P20,000 and later sold 90% of his royalty, including the purchased participation.
Fonacier’s defense asserted he paid P1,666.67 because Gaite failed to deliver a stated balance of about 13,045.45 tons of the 24,000 tons of iron sold by Gaite to Fonacier under their December 8, 1954 agreement.
Gaite moved on September 26, 1958 to declare Fonacier in default as to Gaite’s counterclaim on the ground that Fonacier’s answer was filed out of time, noting that the dispute was the subject of a then-pending case (L-11827).
The Court’s earlier decision in L-11827, promulgated on July 31, 1961, rejected Fonacier’s contention of a balance of minerals still due to him.
Fonacier moved on October 2, 1958 to declare Ong in default as to Fonacier’s counterclaim, and on October 10, 1958, the trial court declared Ong in default for failure to file a responsive pleading to Fonacier’s counterclaim.
Ong moved on October 22, 1958 for reconsideration and to set aside the order of default.
Fonacier moved on November 2, 1958 to declare Gaite in default as to the third-party complaint, and he also sought leave to file an amended answer to Gaite’s counterclaim after two postponements requested by him.
The trial was set for November 5, 1958, but Fonacier did not appear at the hearing.
The court received at 10 A.M. on November 5, 1958 a telegraphic motion for postponement by Fonacier, and the reason given was that counsel Atty. Mauro Castillo was to appear in a criminal case before the Court of First Instance of Manila on the same date.
The trial court found the postponement request unjustified and proceeded with the trial in Fonacier’s absence.
On November 5, 1958, the trial concluded with evidence presented by Ong and by Gaite in support of their respective claims against Fonacier.
The trial court rendered judgment on January 6, 1959, ordering payment by Fonacier to Ong of P4,060.00 and ordering payment to Gaite of P7,333.33, with interest at the legal rate from filing until payment and costs.
The trial court dismissed the third-party complaint.
Fonacier filed a petition to set aside the decision on March 4, 1959, and it was denied on July 10, 1959.
Fonacier appealed, and the trial court initially refused to allow the appeal.
In a petition for mandamus, the Court ordered the trial court to allow the appeal.
The records were later elevated to the Court of Appeals, which by resolution of February 2, 1963 certified the appeal to this Court as involving questions purely of law.
Fonacier’s motion for reconsideration of that certification, aimed at raising factual issues, was denied by this Court on February 26, 1963.
Fonacier argued on appeal that the trial court erred in proceeding in his absence and in not granting postponement, which he claimed violated his right to be heard.
The Court later also addressed Fonacier’s motion for amendment of the decision via a Resolution dated September 13, 1966, amending the computation of interest.

Procedural Posture and Appeals

The controversy began as Ong’s complaint filed on July 11, 1956, with Fonacier asserting counterclaims and impleading Gaite through a third-party complaint.
Multiple incidents of default and motions were filed before trial, including defaults relating to Ong, Gaite, and the third-party pleading.
The case proceeded to trial on November 5, 1958 despite Fonacier’s absence.
After the trial court’s decision on January 6, 1959, Fonacier pursued a motion to set aside, then appealed.
The appeal’s initial blockage by the trial court was cured through mandamus, which compelled allowance of the appeal.
When elevated, the Court of Appeals certified the case as involving questions purely of law, and this Court denied reconsideration seeking review of facts.
The Court’s review on appeal therefore addressed only questions of law, despite the parties’ efforts to implicate issues dependent on factual findings.
After the July 8, 1966 decision affirming the judgment, Fonacier filed a motion for amendment, which the Court partially granted in a subsequent September 13, 1966 Resolution.

Key Allegations and Pleadings

Ong’s complaint alleged that Fonacier received various sums allegedly as loans, which Ong sought to recover.
Fonacier’s defense and counterclaim reframed the same transaction as royalty payments arising from mineral claim operations.
Fonacier’s pleaded theory was that he designated Gaite as agent to operate the mineral claims under a P50 per ton royalty, with royalties payable jointly and severally by Gaite and Ong.
Fonacier claimed that Ong delivered money as royalty payments rather than loans, and that a remaining royalty balance was still owed to him.
Gaite’s counterclaim asserted a contractual basis for Gaite’s 10% participation in royalties arising from the December 8, 1954 agreement.
Gaite alleged that Fonacier received substantial royalties, paid only a small portion, and thus owed the balance of P7,333.33 plus damages.
Fonacier’s answer to Gaite’s counterclaim alleged that he purchased Gaite’s 10% participation for P20,000 and later sold a larger portion of the royalty.