Case Summary (G.R. No. 254282)
Key Dates
Initial ejectment case events: 1961 (rents for August and September 1961).
Court of First Instance judgment (reversing municipal court and dismissing complaint; awarding P500 attorney’s fees): July 2, 1962 (final).
Notice of rent increase and demand for arrears: October 10, 1963 (increase effective November 1, 1963; demand for arrears totaling P4,320).
Supreme Court decision date: May 21, 1969. (Applicable constitution for the decision: 1935 Philippine Constitution.)
Procedural History
Gan Tion filed ejectment in 1961 alleging unpaid rents for August and September 1961 at P180 per month. The tenant denied the claim and asserted the agreed rent was P160. The municipal court ruled for the plaintiff, but the Court of First Instance reversed on July 2, 1962, dismissed the complaint, and ordered the plaintiff to pay the defendant P500 as attorney’s fees; that judgment became final. Despite Gan Tion’s opposition, the defendant obtained a writ of execution on the P500 award. Gan Tion sought relief by certiorari in the Court of Appeals, pleading legal compensation (set-off) of the P500 against the claimed arrears of P4,320. The Court of Appeals accepted the petition but ruled for the respondent, holding that the P500 could not be subject to legal compensation. The Supreme Court reviewed and reversed the Court of Appeals.
Issue Presented
Whether the P500 awarded as attorney’s fees to the tenant may be set off by legal compensation against the landlord’s claim that the tenant owed P4,320 in unpaid rents — i.e., whether the requisites for legal compensation between Gan Tion and Ong Wan Sieng are present so as to extinguish or reduce the execution of the P500 judgment.
Applicable Law
- Civil Code provisions on legal compensation: Articles 1278 and 1279 (requisites that reciprocal debts exist between the parties and that each is a principal creditor and debtor of the other).
- Article 2208 of the Civil Code (basis for indemnity and damages, cited in relation to attorney’s fees).
- Precedents cited in the decision: Fores v. Miranda (105 Phil. 268) and Necesito et al. v. Paras et al. (104 Phil. 75), which bear on the nature of attorney’s fee awards.
- Constitutional context: decision rendered under the 1935 Philippine Constitution (decision date 1969).
Court of Appeals’ Reasoning (as reviewed)
The Court of Appeals concluded that, although respondent Ong owed petitioner more than P4,000 in unpaid rent, the P500 award for attorney’s fees could not be the subject of legal compensation. The appellate court characterized the P500 as effectively a trust fund for the benefit of the tenant’s lawyer, reasoning that the real creditor of that sum was the counsel and therefore the requisites of legal compensation (mutuality of principal debts between the parties) were not satisfied.
Supreme Court’s Analysis and Rationale
The Supreme Court rejected the Court of Appeals’ characterization. It emphasized that an award of attorney’s fees is made in favor of the litigant (the client), not directly in favor of counsel; the award operates as indemnity for damages recoverable by the litigant under Article 2208. Consequently, the litigant — not the counsel — is the judgment creditor and may enforce the award by execution. Given that the tenant was the judgment creditor of the P500 and the landlord asserted a larger indebtedness against the tenant, the essential requisites for legal compensation under Articles 1278 and 1279 were present: the parties were creditors and debtors of each other in their own right, and each acted as principal creditor and debtor vis-à-vis the other. The Court concluded that i
...continue readingCase Syllabus (G.R. No. 254282)
Citation and Procedural Caption
- Reported at 138 Phil. 244, G.R. No. L-22490, decided May 21, 1969.
- Case caption as extracted above: Gan Tion, petitioner, versus the Honorable Court of Appeals, Hon. Judge Agustin P. Montesa, as Judge of the Court of First Instance of Manila, Ong Wan Sieng and the Sheriff of Manila, respondents.
- Decision authored by Justice Makalintal.
Core Issue Presented
- Whether legal compensation exists between petitioner Gan Tion and respondent Ong Wan Sieng such that execution of a judgment awarding attorney’s fees in favor of Ong Wan Sieng should be set aside.
Facts: Lease, Rent Dispute, and Initial Proceedings
- Ong Wan Sieng was a tenant in premises owned by Gan Tion.
- In 1961 Gan Tion filed an ejectment case against Ong Wan Sieng alleging non-payment of rents for August and September 1961, at P180 per month, totalling P360.
- The defendant (Ong Wan Sieng) denied the allegation and asserted that the agreed monthly rental was only P160, which he had offered to pay but which the plaintiff refused.
- The municipal court of Manila rendered a judgment favorable to the plaintiff (Gan Tion).
- On appeal, the Court of First Instance, on July 2, 1962, reversed the municipal court, dismissed the complaint, and ordered the plaintiff to pay the defendant the sum of P500 as attorney’s fees.
- That judgment (ordering payment of P500 attorney’s fees) became final.
Subsequent Correspondence and Claims for Arrears
- On October 10, 1963, Gan Tion served notice on Ong Wan Sieng that he was increasing the rent to P180 per month, effective November 1st.
- At the same time (October 10, 1963), Gan Tion demanded rents in arrears at the old rate in the aggregate amount of P4,320.00, corresponding to the period from August 1961 to October 1963.
Execution of Attorney’s Fees Judgment and Petitioner’s Opposition
- Over Gan Tion’s opposition, Ong Wan Sieng was able to obtain a writ of execution of the judgment for attorney’s fees in his favor (the P500 judgment).
- Gan Tion sought relief by filing a certiorari petition to the Court of Appeals, asserting legal compensation (set-off) because Ong Wan Sieng was allegedly indebted to him for unpaid rents amounting to P4,320.
Court of Appeals’ Disposition and Reasoning
- The Court of Appeals accepted the certiorari petition but ultimately decided for the respondent (Ong Wan Sieng).
- The Court of Appeals acknowledged that “respondent Ong is indebted to the petitioner for unpaid rentals in an amount of more than P4,000.00.”
- Nev