7/11/2015

G.R.No.163605

FIRSTDIVISION

GILM.CEMBRANOG.R.No.163605
andDOLLFUSSR.GO,
Petitioners,Present:

PANGANIBAN,C.J.,Chairperson,
versusYNARESSANTIAGO,
AUSTRIAMARTINEZ,
CALLEJO,SR.,and
CHICONAZARIO,JJ.
CITYOFBUTUAN,represented
byCITYMAYORLEONIDESR.
THERESAPLAZA,CVCLUMBERPromulgated:
INDUSTRIES,INC.,MONICO
PAGONGandISIDROPLAZA,
Respondents.September20,2006
xx

DECISION

CALLEJO,SR.,J.:

[1]
BeforetheCourtisaPetitionforReviewonCertiorarioftheDecision oftheCourtof
[2]
Appeals(CA)inC.A.G.R.SPNo.75328,nullifyingtheOrders oftheRegionalTrialCourt
(RTC), Butuan City, Agusan Del Norte, Branch 4, in Civil Case No. 3851, as well as the
[3]
[4]
Resolution oftheCAdenyingthemotionforreconsiderationthereof.TheassailedOrders
oftheRTCdirectedtheSherifftogarnishthe
bankaccountoftheCityofButuanamountingtoP926,845.00 and directed the Development
BankofthePhilippines(DBP)toreleasetheamounttopetitionersAtty.GilM.Cembranoand
Atty.DollfussR.Go.

http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

1/20

7/11/2015

G.R.No.163605

TheAntecedents

CVC Lumber Industries, Inc. (CVC) was a timber concession licensee in Bunawen and
Veruela, Agusan del Sur. Cembrano, then its Marketing Manager, participated in a
biddingforthesupplyofpilesandpoleswhichweretobeusedfortheconstructionof
thenewCityHallofButuanCity.ThecontractwasawardedtoCVC,underwhichitwas
todelivertotheCityofButuan757timberpilesataunitcostofP1,485.00oratotalof
P1,124,145.00 within 60 days from receipt of the order in the event of delay in the
delivery, CVC would be liable for liquidated damages, to be deducted from the total
valueofthecontractprice,andincaseofpartialdelivery,liquidateddamageswouldbe
deductedfromthetotalvalueofthedeliveredportion,perRule9ofPresidentialDecree
[5]

(P.D.)No.526.

OnMay6,1991,theCityofButuanissuedaPurchaseOrder

[6]
for757timberpilestoCVCor

GilCembrano.Topartlyfinancethepurchaseofthemerchandise,petitionerCembrano,along
with Gener Cembrano, secured a P150,000.00 loan from the DBP, as evidenced by a
Promissory Note

[7]
dated June 4, 1991. To secure the loan, they executed a real estate

mortgageoveraparceloflandcoveredbyTransferCertificateofTitle(TCT)No.T5491.

[8]

ThepurchaseorderwasmodifiedonAugust22,1991withrespecttothespecificationsofthe
[9]

timberpiles.Theseller/supplierfurnishedthesametoCVCorGilM.Cembrano.

Withinthe60dayperiod,CVCwasabletomaketwo(2)deliveriesof117and57pieceswhich
respondentacceptedandpaidfor.On August 26 and September 9, 1991, Cembrano received
payment of P148,574.25 and P84,645.00, respectively, for the aforesaid deliveries, as
evidencedbythedisbursementvouchersissuedbytheCityinfavorofCVCLumberIndustries,
[10]
Inc.ItappearsonthefaceofthevouchersthatthepayeeisCVCorGilCembrano.

OnNovember13,1991,the60dayperiodforCVCtomakedeliveriesofthetimberpiles
expired.CVCofferedtodeliver100timberpilesworthP148,500.00, but respondent refused.
OnNovember19,1991,CVC,throughpetitionerCembrano,requestedforanextension,until
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

2/20

7/11/2015

G.R.No.163605

December 11, 1991, to complete the delivery of timber piles.

[11]
City Engineer Edgardo T.

Sanchezdeniedthisrequest,andrecommendedthatanewbiddingbeheldontheunexecuted
[12]
TherebiddingwasheldonDecember2,1991withtheapprovalof

portionofthecontract.

formerCityMayorGuillermoSanchez,withoutnoticetoCVC.

At the instance of CVC, through Cembrano, an investigation regarding the unilateral

cancellation of the contract and the subsequent rebidding was conducted. The City Legal
Officer rendered a report upholding the validity of the contract with CVC and the purchase
orderissuedbytheCitytoit,consideringthesuspicioushasteattendanttoitsterminationand
[13]
The City Legal Officer made the

the irregularities surrounding the rebidding process.

followingrecommendationtotheMayor:

1.TohonorthecontractwithCVCLumberIndustries,Inc.orMr.GilM.Cembranoand
compromisewiththesamebyrequiringthesaidcontractortocompletedeliveryoftimberpiles
withintheperiodof45calendardayswithoutchargingtheprovidedliquidateddamages,which
CompromiseAgreementshallprovideforitsautomaticexpirationafterthelapseoftheabove
mentionedperiod

2.TodeclaretheDecember2,1991biddingNullandVoidandconfirmthestoppayment
orderofthisofficepermanently

3. To endorse to the Committee on Good Government and to the Office of the

Ombudsman the irregular acts of the City General Service Department Head for appropriate
AdministrativeandCriminalaction[s],respectively

4.TosuspendtheCityGeneralServiceDepartmentHeadforaperiodofnotmorethan
90 days for him to fully face the charges filed against him before the Committee on Good
Government

5. To request the Committee on Good Government to conduct further investigation

within the Office of the City General Service to determine involvement of other government
[14]
employeesinthesaidirregularities

CVCandCembrano,throughGoascounsel,filedacomplaintforbreachofcontractand
damagesagainstrespondent,claimingthatCVCsustaineddamagesamountingtoP856,695.00
thevalueofthetimberpileswhichitwasreadytodeliverandthevalueofthoseitfailedto
deliveronaccountofthecancellationofthecontractonNovember13,1992.Cembranoalleged
thereinthathewastheMarketingSupervisorandanagentofCVC,thathesecuredaloanfrom
theDBPandexecutedarealestatemortgageoverhispropertyascollateraltopartlyfinancethe
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

3/20

7/11/2015

G.R.No.163605

purchaseofthetimberpoles/piles.ThecasewasdocketedasCivilCaseNo.3851.

InitsAnswer,theCityofButuanadmittedtheallegationsinthecomplaint.

Meanwhile,duringameetingoftheCVCBoardofDirectorsonSeptember 3, 1992, Monico

[15]
PagOng was elected President and Isidro B. Plaza as Corporate Secretary.
Plaza also
becametheresidentmanagerofthecorporation.

On May 27, 1996, the trial court rendered judgment in favor of the defendants and
orderedthedismissalofthecomplaintonthefollowingratiocination:

It may be recalled that as of November 13, 1991 the contract had already been
terminated for failure of the plaintiff [CVC and Cembrano] to complete deliveries on the
originalperiod.Sincetherequestforextensionbytheplaintiffwasdenied,thedefendant[City]
wasnolongerobligedtoacceptanydeliveryassaidacceptancecanbeconsideredawaiveror
abandonment of the right to rescind. The obligation of plaintiff to make complete delivery,
according to the contract, expired on November 13, 1991. The law is clear that obligations
arising from contracts have the force of law between the contracting parties and should be
compliedwithingoodfaith.Thepowertorescindisgiventotheinjuredpartywhich,inthis
caseisthedefendant.Theplaintiffbeingapartywhodidnotperformtheundertakingwhich
[sic]hewasboundbythetermsoftheagreementtoperform,itisnotentitledtoinsistuponthe
[16]
performanceofthecontractbythedefendantorrecoverdamagesbyreasonofthebreach.

Cembrano appealed the decision to the CA. The appeal was docketed as CAG.R. CV
No.55049.TheCArenderedjudgmentreversingthedecisionofthetrialcourtandorderedthe
City of Butuan to pay its liability to Cembrano and CVC. The dispositive portion of the
[17]
Decision
reads:

INVIEWOFTHEFOREGOING,thedecisionappealedfromisherebyREVERSEDandSET
ASIDE.DefendantCityofButuanisdirectedtopaytheplaintiffsthetotalsumofP926,845.00
inaccordancewiththeabovecomputation,with6%interestasofthedatethisdecisionattains
finality.

Costsagainstdefendantappellee.

[18]
SOORDERED.

The appellate court declared that it was undisputed that CVC, through Cembrano, its
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

4/20

7/11/2015

G.R.No.163605

MarketingSupervisor,participatedandwonthebiddingforthesupplyof757timberpilesand
[19]
and that the contract was between CVC and the City of Butuan. The CA likewise

poles,

affirmed the findings of the Investigation Report made by the City Legal Officer, and CVCs
[20]
entitlementtodamagesamountingtoP926,845.00.

The City of Butuan thereafter filed a petition for review on certiorari with this Court,
docketed as G.R. No. 149466. However, the petition was denied on November 12, 2001 for
failuretoobservethe15dayperiodtoappeal,andfailuretoserveacopythereoftotheCA.

[21]

TheCityfiledamotionforreconsideration,whichtheCourtdeniedwithfinalityonJanuary16,
[22]
Thus,theCAdecisionbecamefinalandexecutory.

2002.

OnMarch1,2002,Cembrano,inhisbehalfandasattorneyinfactofCVC,executeda
DeedofAssignment

[23]

coveringofthemonetaryawardoftheCAinfavorofGo,hisuncle.

[24]
In a letter
dated March 19, 2002, Go wrote the City Mayor of Butuan City,
requesting payment of the P926,845.00 awarded to it via the decision in CAG.R. CV No.
55049plusinterests,toavoidtheembarrassmentoftheimplementationofawritofexecution
[25]
against the City. However, in a letter
dated July 15, 2002, CVC, through its Resident
Manager Isidro B. Plaza, informed the City Mayor that it was laying claim to the money
judgmentandrequestedthattheamountberemittedit.

[26]
Ina2ndIndorsement
datedJuly17,2002,theCityLegalOfficerrecommendedthat
theSangguniangPanglungsodappropriateP926,845.00topayfortheawardinfavorofCVC
under CAG.R. CV No. 55049. During a meeting with the Sangguniang Panglungsod
Chairman and Members of the Committee on Appropriation and Finance, Cembrano and Go
agreedthatunderthedecision,theamountduetoCVCwasP926,845.00with6%interestper
year.TheSanggunianresolvedtoreferthemattertotheCityBudgetOfficer.

[27]

[28]
Inaletter
datedOctober30,2002,theCityLegalOfficerrequestedtheCityBudget
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

5/20

7/11/2015

G.R.No.163605

OfficertoreleaseP926,845.00plus6%legalinteresttoCVC.TheCityTreasurerandtheCity
[29]
Mayorsignedacheck
datedNovember5,2002forthesaidamountwithCVCLUMBER
INDUSTRIES, INC/MONICO E. PAGONG as payee. The check was received by PagOng
[30]
forCVC,asevidencedbyadisbursementvoucher.

Thereafter, Atty. Go, acting as counsel for CVC and Cembrano, filed a Alternative
[31]
MotionforIssuanceofaWritofExecutionorEntryofJudgment
intheRTCinCivilCase
No.3851.Thecourtissuedanordergrantingthemotion.TheSheriffsarrivedintheOfficeof
the City Mayor to enforce the writ on November 28, 2002, but were told that the City had
already remitted the amount. Thus, the Sheriffs submitted a Return on the Writ of Execution
declaringthattheyfailedtoenforcethewritonaccountoftheCitysclaimthatithadalready
remittedtheP926,845.00toCVC.

[32]
In a letter
dated November 29, 2002, Plaza wrote the City Treasurer that the
proceedsofthe210pilesofpolesandpilesdeliveredtotheCityatthepriceofP311,850.00
hadnotbeenremittedtoCVC.HerequestedthatCVCbefurnishedcopiesofvouchers,checks,
officialreceipts,includingCembranosauthoritytotransactbusinesswiththecitygovernment
and other documents. Plaza, likewise, informed Go that the amount of P120,000.00 as his
attorneysfeesandlitigationexpensesunderthedecisioninCAG.R.CVNo.55049wasready
[33]
forclaiming.
[34]
TheCityLegalOfficerfiledaManifestation,
alsodatedNovember29,2002, that it
hadalreadypaidtheP926,845.00toCVC,throughPagOng,itsPresident.GofiledanUrgent
[35]
Motion (To Direct Sheriffs To Garnish Defendants Bank Account),
alleging that the
paymentbytheCityofButuantoMonicoPagOngwasnotincompliancewiththedecisionin
CAG.R.CVNo.55049,asaffirmedbytheSupremeCourt.Itwas,likewise,assertedthatthe
creditors under the CA decision were CVC Unit VI and Cembrano, not Plaza or PagOng. It
insisted that the payment made by the City to PagOng did not discharge its obligation to
Cembrano.Itwas,likewise,assertedthatthecreditorsundertheCAdecisionwereCVCUnit
IVandCembrano,notPlazaorPagOng.ItinsistedthatthepaymentmadebytheCitytoPag
Ong did not discharge its obligation to Cembrano. It was alos averred that the logging
operations of CVC and TriumphTimber Corporation were consolidated in one timber
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

6/20

7/11/2015

G.R.No.163605

concession license, and that the two corporations conducted the operations under an
independentandseparateentitywhichwasCVCUnitVI.Theplaintiffsmovantsprayedthat:

WHEREFORE, it is respectfully prayed of this Honorable Court to issue an order

directingSheriffsROGERKINANAHAS,withtheassistanceofVICENTETIUandARTHUR
CALO, to enforce the writ of execution by way of garnishment of defendants bank accounts
pursuanttoSection9,Rule39,specificallyparagraph(c)oftheRevisedRulesofCourt.

Plaintiffs further pray for such other remedies that may be just and equitable in the
[36]
premises.

The City opposed the motion, contending that Cembrano was merely the agent or
marketing supervisor of CVC as alleged in the complaint in Civil Case No. 3851 although
Cembranowasimpleadedasoneoftheplaintiffs,therealpartyininterestentitledtothesum
ofP926,845.00wasCVC.Cembranowasboundbyhisallegationinthecomplaintthathewas
merely the Marketing Supervisor for CVC. It pointed out that Go and Cembrano failed to
impleadPlazaandPagOng,whowereindispensablepartiesintheirmotionhence,themotion
was a mere scrap of paper. The City of Butuan suggested that the issue of who between
plaintiffCVCorCembranowasentitledtotheamountofP926,845.00shouldberesolvedby
[37]

them.

Forhispart,PagOngfiledaManifestation,statingthatherefrainedfrominterveningin
thecaseforthesimplereasonthathewasthePresidentofCVC,thusclothedwiththeauthority
toreceivetheP926,845.00.HeappendedtheretotheminutesofthemeetingoftheCVCBoard
[38]
ofDirectorsonSeptember3,1982,duringwhichhewasappointedPresident.

[39]
On January 8, 2003, the court issued an Order
granting the motion of Ong and
Cembrano, and ordered the Sheriff to garnish the bank account of the City of Butuan in the
DBPfortheenforcementofthewritofexecution.ItruledthatthepaymentmadebytheCityof
ButuantoPagOngwasillegalbecauseitwasmadeinamotionforwritofexecution,andPag
Ongwasnotapartytothecaseandhadnopersonality.Fortheirpart,GoandCembranofileda
motiontocompeltheDBPtoremitthegarnishedamounttothem.OnFebruary 3, 2003, the
[40]

trialcourtissuedanOrder

grantingthemotionandorderedtheDBPtoremitP926,845.00to

CembranoandGoincash.ThedispositiveportionoftheOrderreads:
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

7/20

7/11/2015

G.R.No.163605

WHEREFORE, in view of the foregoing, the garnishee, Development Bank of the

Philippines,ButuanCityBranch,throughitsmanager,Mr.WilfredAlava,isherebyorderedto
release one half of the garnished amount or the sum of P490,609.955 in CASH to Atty.
DollfussR.Go.

As there is no showing from the pleadings filed by defendant City of Butuan that
CVCLumberIndustries,Inc.,stillexist,Mr.WilfredAlavaislikewiseorderedtorelease
the remaining half of the garnished amount in the sum of P490,609.955 in CASH to
plaintiffGilM.Cembrano.

[41]
ITISSOORDERED.

[42]

TheDBPcompliedandreleasedtheamountofP981,219.91toCVCandCembrano.

On February 4, 2003, the City of Butuan filed a Petition for Certiorari and
[43]
with the CA against CVC, PagOng, Plaza and Cembrano, assailing the

Prohibition

January8,2003Orderofthetrialcourt.ThecasewasdocketedasCAG.R.SPNo.75328.It
insistedthatithadalreadypaidrespondentCVCandCembranoasorderedbytheCAinCA
G.R.CVNo.55049.

[44]
Atty.GofiledaComment
onthepetitionforandinbehalfrespondentsexceptPag
OngandPlaza,allegingthattheRTChadtheinherentpowertorulethatsuchpaymentmade
bytheCityofButuantoPagOngwasillegal.

[45]
claimingthatthepetitionhadbecome

Foritspart,theCityofButuanfiledaReply,

mootandacademicbecausetheDBPhadalreadyreleasedthemoneytoGoandCembranoon
February4,2003.

OnAugust5,2003,theCArenderedjudgmentgrantingthepetition.Thefalloreads:

IN VIEW OF ALL THE FOREGOING, the instant petition is hereby GRANTED and the assailed
OrdersRECALLEDandSETASIDE,andanewoneenteredRECALLINGandDECLARING
NULL and VOID the Orders dated January 8, 2003 and February 3, 2003, and altogether
quashingthewritofexecutionorgarnishmentissuedinthiscase.Asafurtherconsequenceof
thisorder,Atty.DollfussR.GoandplaintiffGilM.Cembranoareorderedeachtoreturntothe
petitioner City of Butuan the amount of P490,605.955, which they received as a result of the
implementationofthewritofgarnishmentissuedinthecase.Costsagainsttherespondents.
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

8/20

7/11/2015

G.R.No.163605

[46]

SOORDERED.

The CA ruled that, under the Decision of the CA in CAG.R. CV No. 55049, either
respondentCembranoorPagOngcouldreceivetheawardofP926,845.00fortherespondent
CVC.Moreover,theCityofButuanactedingoodfaithindeliveringthechecktothePresident
ofCVC.Inasmuch as it had already remitted the judgment debt, the City was released of its
obligation under the Decision in CAG.R. CV No. 55049 hence, the trial court committed
grave abuse of its discretion amounting to excess of jurisdiction when it ordered the
garnishmentofthebankaccountofpetitionerButuanCitywiththeDBP,andinorderingthe
banktoreleaseP490,609.955toAtty.DollfussR.Go,andtheremaininghalftoCembrano.

The CA, likewise, declared that: [w]hatever intracorporate disputes over any
controversy existing between Cembrano, on the one hand, and PagOng on the other, is
something which they have to thresh out in an appropriate proceeding and not in the case
beforeit.

[47]

Consequently,theappellatecourtorderedGoandCembranotoreturnwhateach

received from the DBP to the City of Butuan. The appellate court also stated the judgment
creditorcanverywellsatisfythejudgmentdebtevenbeforeawritofexecutionshallhavebeen
issuedbythecourtfortheimplementationofitsdecision.

[48]

Go and Cembrano filed a Motion for Reconsideration, insisting that the trial court did
notcommitanygraveabuseofitsdiscretioninissuingtheassailedordersofthetrialcourt.As
gleaned from the evidence on record in Civil Case No. 3851, the transaction subject matter
thereof was between Cembrano and the City of Butuan, and Plaza and PagOng had no
participation or involvement therein whatsoever. Cembrano maintained that it was he who
fundedthepurchaseanddeliveryofthetimberpolesandpilestotheCityofButuan,sincehe
securedtheP150,000.00loanfromtheDBP,theamountCVCusedtofinancethepurchaseof
timberpolesandpiles.
Thisisgleanedfromtheevidenceadducedduringthetrial,consistingofthePromissoryNote
heexecutedinfavorofDBPforP150,000.00,andtherealestatemortgageexecutedbyhimin
favor of the DBP over the property belonging to his mother covered by TCT No. 17068 as
[49]
security for the payment of said loan.
They appended to the motion the real estate
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

9/20

7/11/2015

G.R.No.163605

mortgageexecutedbyCembranoinfavoroftheDBPandtheirformalofferofevidencefiledin
CivilCaseNo.3851.

TheCA,however,deniedthemotionforreconsiderationinaResolution

[50]
datedApril

5,2005.

CembranoandGo,nowpetitioners,assailtheDecisionandResolutionoftheCAonthe
followinggrounds:

I
BOTH PETITONERS WERE DEPRIVED OF THEIR CONSTITUTIONAL AND
PROCEDURAL DUE PROCESS WHEN THE HONORABLE COURT OF APPEALS
ORDERED THEM TO RETURN TO THE CITY OF BUTUAN THE AMOUNT OF
[51]
P490,609.955

II
THAT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF
LAW NAY GRAVE ABUSE OF DISCRETION IN DECLARING PAYMENT BY THE
CITY OF BUTUAN TO MONICO PAGONG AND ISIDRO PLAZA, WHO WERE NOT
PARTIES TO CIVIL CASE NO. 3851 AND CAG.R. CV No. 55049, IS A VALID
PAYMENT OF THE JUDGMENT DEBT IN CAG.R. CV No. 55049 AND IN SETTING
ASIDE AND DECLARING NULL AND VOID THE WRIT OF GARNISHMENT ISSUED
[52]
BYTHECOURTAQUO.

III
THEDECISIONOFTHEHONORABLECOURTOFAPPEALSINCAG.R.CVNo.55049
HADBECOMEFINALANDEXECUTORYANDCOULDNOTBECHANGEDBYTHE
HONORABLE COURT OF APPEALS 1ST DIVISION ON A MERE PETITION FOR
[53]
CERTIORARIINCAG.R.SPNo.75328.

PetitionerGoaversthathewasmerelythecounselofpetitionerCembranoinCivilCaseNo.
3851, and was not a party in said case nor in CAG.R. CV No. 55049. He and petitioner
Cembrano were deprived of their right to due process when they were ordered by the CA in
CAG.R.SPNo.75328toreturntheP490,609.955garnishedbytheSheriffinCivilCaseNo.
3851.TheproperrecourseoftherespondentCitywastofileaseparatecomplainttoresolvethe
issueofwhoisentitledtotheamounttheissueofwhetherpetitionerGowasobligedtoreturn
theamountwhichhereceivedasattorneysfeesandreimbursementoflitigationexpensesand
whetherpetitionerCembranowasentitledtotheP490,609.95wouldhavetobeventilatedand
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

10/20

7/11/2015

G.R.No.163605

resolvedafterafullblowntrial.

PetitionersaverthattheCAcommittedaseriouserrorwhenitdeclaredthatthepaymentbythe
respondentButuanCitytorespondentCVC,throughitsPresidentPagOng,validlydischarged
itfromitsobligationinCAG.R.CVNo.55049itlikewiseerredinrulingthattheacceptance
ofP926,845.00byrespondentPagOngreleasedtheCityofButuanfromitsobligationsonthe
premisethatPagOng,aspresidentofCVC,couldbeconsideredasapersoninpossessionof
credit.

PetitionerCembrano,beingoneoftheplaintiffsinCivilCaseNo.3851andanappellant
inCAG.R.CVNo.55049,isentitledtoonehalfoftheaward,whichhehadalreadyassigned
to petitioner Go hence, the latter is entitled to onehalf of the award, or P490,609.955.
Petitioner Go maintains that the deed of assignment is a valid contract between him and
petitionerCembrano.PetitionerscitetherulingofthisCourtinHarryE.KeelerElectricCo.v.
[54]

Rodriguez.

PetitionerGoaversthathewasnotapartyinCivilCaseNo.3851(CAG.R.CVNo.55049
and CAG.R. SP No. 75328). He was merely the counsel of the plaintiffs in Civil Case No.
3851,andwhoweretheappellants
CAG.R. CV No. 55049. Hence, the CA in CAG.R. SP No. 75328 cannot compel him to
returntheP490,609.955hereceivedfromtheDBP.Petitionersinsistthattheproperremedyof
respondentCityofButuanistofilethepropercomplaintagainstthemsothattheycanfilethe
appropriatepleadingsintheirdefense.

For its part, the respondent City of Butuan avers that it complied with the decision in
CAG.R.CVNo.55049whenitremittedthefullamountofP926,845.00torespondentCVC.
Contrarytohisclaim,petitionerCembranoisnotentitledtoonehalfofthemonetaryawardin
CAG.R.CVNo.55049forthesimplereasonthathewasmerelyCVCMarketingSupervisor,
andhappenedtoparticipateinthepublicbiddingforthesupplyoftimberpilessolelyinthat
capacity.AsruledbytheCAinCAG.R.SPNo.75328,petitionerCembranoadmittedinhis
UrgentMotion(toDirectSherifftoGarnishDefendantsAccount)thathewasclothedwiththe
properauthoritytoparticipateinthebiddinganddeliverthetimberpilesunderthecontract.It
maintainsthatwhatshouldprevailisthedispositiveportionofthedecisioninCAG.R.CVNo.
55049,andthatawritofexecutionwhichdoesnotstrictlyadheretothedispositiveportionof
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

11/20

7/11/2015

G.R.No.163605

thedecisionisinvalid.

It further maintains that it acted on its honest belief that respondent PagOng, as CVC
president,wasauthorizedtoreceivepaymentinbehalfofsaidcorporation.CitingArticle1240
of the New Civil Code, respondent City maintains that its payment to CVC, through its
President,satisfieditsobligationsunderthedecisionoftheCAinCAG.R.CVNo.55049.It
wascompletelyunawareofanydisputebetweenCVCandCembrano.Moreover,ifpetitioners
believed that they were entitled to the P490,609.955 out of its remittance of P926,845.00 to
CVC,theyshouldhavepresentedevidenceintheRTCtoprovetheirclaim.

For their part, respondents PagOng and Plaza aver that as president of CVC and chief
executive officer, Pagong was authorized to receive the amount of P926,845.00 from
respondentButuanCity.
Thethresholdissuesinthiscaseare:(1)whetherornottheremittanceoftheP926,845.00made
by respondent City of Butuan to the respondent CVC, through its president respondent Pag
Ong, released it from its obligation under the decision in CAG.R. CV No. 55049 and (2)
whether the CA erred in ordering the petitioner to return the P981,219.91 to the account of
respondentCitywiththeDBP.

TheRulingoftheCourt

On the first issue, the respondent City, as judgment debtor, is burdened to prove with
legal certainty that its obligation under the CA decision in CAG.R. CV No. 55049 has been
dischargedbypayment,whichunderArticle1240oftheCivilCode,isamodeofextinguishing
[55]

anobligation.

Article1240oftheCivilCodeprovidesthatpaymentshallbemadetothe

personinwhosefavortheobligationhasbeenconstituted,orhissuccessorininterest,orany
[56]

personauthorizedtoreceiveit.

Paymentmadebythedebtortothepersonofthecreditorortooneauthorizedbyhimor
bythelawtoreceiveitextinguishestheobligation.

[57]

Whenpaymentismadetothewrong

party, however, the obligation is not extinguished as to the creditor who is without fault or
negligenceevenifthedebtoractedinutmostgoodfaithandbymistakeastothepersonofthe
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

12/20

7/11/2015

G.R.No.163605

[58]
creditororthrougherrorinducedbyfraudofathirdperson.

Ingeneral,apaymentinordertobeeffectivetodischargeanobligation,mustbemadeto
theproperperson.Thus,paymentmustbemadetotheobligeehimselfortoanagenthaving
authority,expressorimplied,toreceivetheparticularpayment.Paymentmadetoonehaving
apparentauthoritytoreceivethemoneywill,asarule,betreatedasthoughactual
authority had been given for its receipt. Likewise, if payment is made to one who by law is
authorized to act for the creditor, it will work a discharge. The receipt of money due on a
judgmentbyanofficerauthorizedbylawtoacceptitwill,therefore,satisfythedebt.

[59]

When there is a concurrence of several creditors or of several debtors or of several creditors

anddebtorsinoneandthesameobligation,itispresumedthattheobligationisjointandnot
solidary.

[60]

Themostfundamentaleffectofjointdivisibleobligationsisthateachcreditorcan

demandonlyforthepaymentofhisproportionateshareofthecredit,whileeachdebtorcanbe
heldliableonlyforthepaymentofhisproportionateshareofthedebt.Asacorollarytothis
rule, the credit or debt shall be presumed, in the absence of any law or stipulation to the
contrary, to be divided into as many shares as there are creditors and debtors, the credits or
debtsbeingconsidereddistinctfromoneanother.

[61]
Itnecessarilyfollowsthatajointcreditor

cannotactinrepresentationoftheothers.Neithercanajointdebtorbecompelledtoanswerfor
[62]
[63]
the liability of the others.
The pertinent rules are provided in Articles 1207
and
[64]
1208
oftheCivilCode.

Weagreewiththepetitionerscontentionthat,underthefallooftheCAdecisioninCAG.R.
CVNo.55049,respondentCitywasorderedtopayP926,845.00totheplaintiffsinCivilCase
No.3851:

IN VIEW OF THE FOREGOING, the decision appealed from is hereby REVERSED and
SET ASIDE. Defendant City of Butuan is directed to pay the plaintiffs the total sum of
P926,845.00 in accordance with the above computation with 6% interest as of the date this
decisionattainsfinality.
Costsagainstdefendantappellee.

[65]
xxx

http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

13/20

7/11/2015

G.R.No.163605

The Court adopts with approval the investigation report of the City Legal Officer. As a
consequenceofwhich,Wefindplaintiffstobeentitledtodamagesasfollows:

Thevalueofthetimberpilesdefendants
refusedtoacceptcomputedat
P1,485.00pertimberpile..P148,500.00

Thevalueof447timberpileswhich
plaintiffswerereadyandcould
havedeliveredwereitnotforthe
unilateralterminationofthe
contractP708,345.00
AttorneysfeesP50,000.00

LitigationexpensesP20,000.00

[66]
oratotalofP926,845.00

As gleaned from the complaint in Civil Case No. 3851, the plaintiffs therein are
petitioner Gil Cembrano and respondent CVC as such, the judgment creditors under the
fallooftheCAdecisionarepetitionerCembranoandrespondentCVC.Eachofthemisentitled
toonehalf(1/2)oftheamountofP926,845.00orP463,422.50each.

IncompliancewiththedecisionoftheCAinCAG.R.CV55409,respondentCityremittedthe
P926,845.00torespondentCVC,andthatrespondentPagOngreceivedtheamountforandin
behalfofCVCandnotinhispersonalcapacity.ConsideringthatrespondentPagongasCVC
president was authorized to receive the money, respondent Citys payment discharged
respondentCityofitsobligationunderthedecisioninCAG.R.CVNo.55049.However,since
petitionerCembranodidnotreceiveanycentavooutoftheP926,845.00remittedtorespondent
CVC,theobligationtoremitonehalfoftheamount,orP463,422.50,topetitionerCembrano
wasnotextinguished.

The petitioners and the respondent City are correct in their contention that the general
ruleisthatthefalloorthedispositiveportionofthedecisionisthesubjectofexecution.Where
thereisaconflictbetweenthedispositiveportionandtheopinionofthecourtcontainedinthe
text or body of the decision, the former must prevail over the latter on the theory that the
dispositiveportionisthefinalorder,whiletheopinionismerelyastatementorderingnothing.
[67]
Theotherpartsofthedecisionmayberesortedtoinordertodeterminetheratiodecidendi
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

14/20

7/11/2015

G.R.No.163605

[68]
ofthedispositiveportionofthedecision.
Wheretheinevitableconclusionfromthebodyof
thedecisionissoclearastoshowthattherewasamistakeinthedispositiveportion,thebody
[69]
ofthedecisionwillprevail.

Inthiscase,thefalloordispositiveportionoftheCAdecisioninCAG.R. CV No. 55049 is

plainandunambiguousinthatrespondentCitywasorderedtopaytopetitionerCembranoand
respondentCVCtheamountofP926,845.00plusinterest.Inthebodyofitsdecision,theCA
declaredthattheplaintiffsaretobeentitledtodamages,asfollows:

The Court adopts with approval the investigation report of the City Legal Officer. As a
consequenceofwhich,Wefindplaintiffstobeentitledtodamagesasfollows:

Thevalueofthetimberpilesdefendants
refusedtoacceptcomputedat
P1,485.00pertimberpile..P148,500.00

Thevalueof447timberpileswhich
plaintiffswerereadyandcould
havedeliveredwereitnotforthe
unilateralterminationofthe
contractP708,345.00
AttorneysfeesP50,000.00

LitigationexpensesP20,000.00

[70]
oratotalofP926,845.00

Wenotethatunderthedecisionoftheappellatecourt,thevalueof447timberpileswhichthe
plaintiffscouldhavedeliveredtorespondentCitywasP708,345.00.

WeagreewithrespondentscontentionthatunderthedecisionoftheCA,thewinningbidderfor
the sale and supply of timber piles/poles was respondent CVC, and that petitioner Cembrano
wasmerelytheCVCMarketingSupervisorwhorepresenteditduringthebidding,andthatthis
wasalsoallegedinthecomplaintbeforetheRTC.TheCAinCAG.R.CVNo.55049further
declaredthatrespondentCVC,notpetitionerCembrano,securedtheDBPloantoaugmentits
capital. Consequently, respondents argue, CVC being the contracting party and petitioner
Cembrano being a mere agent of CVC, the latter is entitled to the value of the timber
poles/piles subject to be supplied to respondent City contrary to the plain and unambiguous
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

15/20

7/11/2015

G.R.No.163605

fallo of the decision. However, if this contention of respondents had been correct, the CA
should have dismissed the complaint insofar as petitioner Cembrano was concerned, on the
premise that he had no cause of action against respondent City. The CA did not do so, and
instead ordered respondent City to pay P926,845.00 to petitioner Cembrano and respondent
CVC.

ItbearsstressingthatthereweretwoplaintiffsinCivilCaseNo.3851.Itappearsinthe
complaintthatpetitionerCembranowasapartyplaintiff.Heallegedthatitwashewhosecured
a loan from the DBP of P150,000.00 and mortgaged the property of his uncle as security
therefor to partly finance the purchase of timber poles/piles to the respondent City. The
plaintiffsadducedinevidencethePromissoryNoteexecutedbyCembranoandtheRealEstate
[71]
The Purchase Order issued by the City was

Mortgage he executed in favor of the DBP.

delivered to respondent CVC or Cembrano. Based on the disbursement voucher for the
paymentoftheP24,640.00paid
by the respondent City for the supply of poles/piles, it appears that the payee is CVC or
Cembrano.InthereportoftheCityLegalOfficerwhichwasapprovedbytheCourtofAppeals,
itdeclaredthatthecontractofrespondentCityforthesupplyoftimberpoles/pileswasCVCor
Cembrano.Infine,Cembranowasapartyplaintiffinhispersonalcapacityandnotmerelyas
Marketing Supervisor of respondent CVC. The CA resolved that, based on the evidence on
record,petitionerCembranoandrespondentCVCwereentitledtotheamountofP926,845.00.

Toreiterate,itisthedispositivepartofthejudgmentthatactuallysettlesanddeclaresthe
rights and obligations of the parties, finally, definitively, authoritatively, notwithstanding the
existenceofinconsistentstatementsinthebodythatmaytendtoconfuseitisthedispositive
partthatcontrols,forpurposesofexecution.

[72]

RespondentCVCdidnotfileanymotionforthereconsiderationoftheCAdecisionin
CAG.R.CVNo.55049.SincepetitionerCembranohadassignedhisrightsandinterestsunder
thedecisiontopetitionerGo,thelatterreceivedtheamountofP490,609.955onthebasisofthe
deed of assignment executed by petitioner Cembrano. Petitioner Go cannot be compelled to
returnthesametorespondentCity.
SincerespondentCVCwasentitledtoonlyP490,605.955undertheCAdecisioninCA
G.R. CV No. 55049 but received P926,845.00, there was, in fine, an overpayment of
P490,605.955madebyrespondentCity.Thus,respondentCVCisobligedtoreturntheamount
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

16/20

7/11/2015

G.R.No.163605

of P490,605.955 to respondent City. Since petitioner Cembrano had already assigned

P490,609.955 to petitioner Go, the latter likewise had the right to receive the P490,609.955
fromDBP.PetitionerCembranoshouldthusbemadetoreturntheamountofP490,609.955he
receivedfromtheDBPtorespondentCity.

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The

decision of the Court of Appeals is AFFIRMED with MODIFICATION. Petitioner Gil
CembranoisORDEREDtoreturntorespondentCityofButuantheamountofP490,609.955,
with6%interestperannumtobecomputedfromthefinalityofthisdecision.RespondentCVC
is ORDERED to return to respondent Butuan City the amount of P490,609.955, with 6%
interestperannumtobecomputedfromthedateoffinalityofthisdecision.Nocosts.

SOORDERED.

ROMEOJ.CALLEJO,SR.
AssociateJustice

WECONCUR:

ARTEMIOV.PANGANIBAN
ChiefJustice
Chairperson

CONSUELOYNARESSANTIAGOMA.ALICIAAUSTRIAMARTINEZ
AssociateJusticeAssociateJustice

MINITAV.CHICONAZARIO
AssociateJustice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the
conclusionsintheabovedecisionwerereachedinconsultationbeforethecasewasassignedto
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

17/20

7/11/2015

G.R.No.163605

thewriteroftheopinionoftheCourtsDivision.

ARTEMIOV.PANGANIBAN
ChiefJustice

[1]
PennedbyAssociateJusticeConradoM.Vasquez,Jr.withAssociateJusticesMercedesGozoDadole(retired)andRosmariD.
Carandangconcurringrollo,pp.1422.
[2]
PennedbyActingPresidingJudgeVictorA.Tomaneng.
[3]
Supranote1,at66.
[4]
CArollo,pp.15,79.
[5]
Rollo,pp.6768.
[6]
Id.,at106
[7]
Id.at145.
[8]
Id.at146.
[9]
Id.at107.
[10]
Id.at149150.
[11]
Id.at151.
[12]
Id.at152.
[13]
Id.at155161.
[14]
Rollo,pp.160161.
[15]
CArollo,p.75.
[16]
Rollo,p.71.
[17]
PennedbyAssociateJusticeRodrigoV.Cosico,withAssociateJusticesRamonA.BarcelonaandAliciaL.Santos,concurring
rollo,pp.6774.
[18]
Id.at7374.
[19]
Id.at67(DecisioninCAG.R.CVNo.55049).
[20]
Id.at73.
[21]
CArollo,pp.2526.
[22]
Id.at27.
[23]
Rollo,p.190.
[24]
CArollo,p.28.
[25]
Id.at33.
[26]
Id.at3435.
[27]
Id.at5556.
[28]
Id.at36.
[29]
Id.at37.
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

18/20

7/11/2015

G.R.No.163605

[30]
Id.at38.
[31]
Id.at2932
[32]
Id.at212.
[33]
Id.at213.
[34]
Id.at3940.
[35]
Id.at4150
[36]
Id.at49.
[37]
Id.at6265.
[38]
Id.at7078.
[39]
Id.at15.
[40]
Id.at79.
[41]
Id.(Emphasissupplied.)
[42]
Rollo,p.89.
[43]
CArollo,p.2
[44]
Id.at95102.
[45]
Id.at121127.
[46]
Rollo,p.63.
[47]
Id.at62
[48]
Id.at63
[49]
Id.at116118.
[50]
Id.at66.
[51]
Id.at37
[52]
Id.at39
[53]
Id.at293
[54]
44Phil19(1922)
[55]
Jimenezv.NationalLaborRelationsCommission,G.R.No.116960,April2,1996,256SCRA84,89.
[56]
Culabav.CourtofAppeals,G.R.No.125862,April15,2004,427SCRA721,729730.
[57]
BankofthePhilippineIslandsv.CourtofAppeals,G.R.No.104612,May10,1994,232SCRA302,310311.
[58]
Id.at311.
[59]
PhilippineAirlines,Inc.v.CourtofAppeals,G.R.No.49188,January30,1990,181SCRA557,567.
[60]
D.Jurado,COMMENTSANDJURISPRUDENCEONOBLIGATIONSANDCONTRACTS,10th ed(1993),p.174.
[61]
Id.at177.
[62]
Id.
[63]
Art.1207.Theconcurrenceoftwoormorecreditorsortwoormoredebtorsinoneandthesameobligationdoesnotimplythat
eachoneoftheformerhasarighttodemand,orthateachoneofthelatterisboundtorenderentirecompliancewiththeprestations.
There is solidarity liability only when the obligation expressly states, or when the law or the nature of the obligations requires
solidarity.
[64]
Art.1208.Iffromthelaw,orthenatureorthewordingoftheobligationstowhichtheprecedingarticlerefersthecontrarydoes
http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

19/20

7/11/2015

G.R.No.163605

notappear,thecreditordebtshallbepresumedtobedividedintoasmanyequalsharesastherearecreditorsordebtors,thecreditsor
debtsbeingconsidereddistinctfromoneanother,subjecttotheRulesofCourtgoverningthemultiplicityofsuits.
[65]
Rollo,pp.7374.(Emphasissupplied)
[66]
Id.at73.
[67]
PHCreditCorporationv.CourtofAppeals,421Phil.821,833(2001).
[68]
Id.
[69]
Id.at834Peoplev.Lacbayan,393Phil.800,810(2000).
[70]
Rollo,p.73.(Emphasissupplied)
[71]
ExhibitsCandC1.
[72]
Espirituv.CourtofFirstInstanceofCavite,No.L44696,October18,1988,166SCRA394,399.

http://sc.judiciary.gov.ph/jurisprudence/2006/september2006/G.R.%20No.%20163605.htm

20/20