Daily payments of P12,000.00 from
January 1, 1982 to March 31, 1982
Daily payments of P13,000.00 from
April 1, 1982 to June 30, 1982
Daily payments of P14,000.00 from
July 1, 1982 to September 30, 1982
Daily payments of P15,000.00 from
October 1, 1982 to December 31, 1982
Daily payments of P16,000.00 from
January 1, 1983 to June 30, 1983
Daily payments of P17,000.00 from
July 1, 1983
2. CBL or LLAMAS shall remit to DMC on or before 11:00 a.m. everyday the daily cash payments due to DMC in accordance with the schedule in paragraph 1. DMC may send a collector to receive the amount due at CBL’s premises. All delayed remittances shall be charged additional 2% penalty interest per month.
3. All payments shall be applied to amortizations and penalties due in accordance with paragraph of the restructured past due installments above mentioned and PN Nos. 16 to 26 and 52 to 57.
4. DMC may at anytime assign and/or send its representatives to monitor the operations of CBL pertaining to the financial and field operations and service and maintenance matters of M.A.N. units. Records needed by the DMC representatives in monitoring said operations shall be made available by CBL and LLAMAS.
5. Within thirty (30) days after the end of the terms of the PN Nos. 16 to 26 and 52 to 57, CBL or LLAMAS shall remit in lump sum whatever balance is left after deducting all payments made from what is due and payable to DMC in accordance with paragraph 1 of this agreement and PN Nos. 16 to 26 and 52 to 57.
6. In the event that CBL and LLAMAS fail to remit the daily remittance agreed upon and the total accumulated unremitted amount has reached and (sic) equivalent of Sixty (60) days, DMC and Silverio shall exercise any or all of the following options:chanrob1es virtual 1aw library
(a) The whole sum remaining then unpaid plus 2% penalty per month and 16% interest per annum on total past due installments will immediately become due and payable. In the event of judicial proceedings to enforce collection, CBL and LLAMAS will pay to DMC an additional sum equivalent to 25% of the amount due for attorney’s fees and expenses of collection, whether actually incurred or not, in addition to the cost of suit;
(b) To enforce in accordance with law, their rights under the Chattel Mortgage over various M.A.N. Diesel bus with Nos. CU 80-39, 80-40, 80-41, 80-42, 80-43, 80-44 and 80-15, and/or
(c) To take over management and operations of CBL until such time that CBL and/or LLAMAS have remitted and/or updated their past due account with DMC.
7. DMC and SILVERIO shall insure to CBL continuous supply of spare parts for the M.A.N. Diesel Buses and shall make available to CBL at the price prevailing at the time of purchase, an inventory of spare parts consisting of at least ninety (90%) percent of the needs of CBL based on a moving 6-month requirement to be prepared and submitted by CBL, and acceptable to DMC, within the first week of each month.
8. Except as otherwise modified in this Agreement, the terms and conditions stipulated in PN Nos. 16 to 26 and 52 to 57 shall continue to govern the relationship between the parties and that the Chattel Mortgage over various M.A.N. Diesel Buses with Nos. CM No. 80-39, 80-40, 80-41, 80-42, 80-43, 80-44 and CM No. 80-15 as well as the Deed of Pledge executed by Mr. Llamas shall continue to secure the obligation until full payment.
9. DMC and SILVERIO undertake to recall or withdraw its previous request to Notary Public Alberto G. Doller and to instruct him not to proceed with the public auction sale of the shares of stock of CBL subject-matter of the Deed of Pledge of Shares. LLAMAS, on the other hand, undertakes to move for the immediate dismissal of Civil Case No. 9460-P entitled "Dionisio O. Llamas v. Alberto G. Doller, Et. Al.", Court of First Instance of Pasay, Branch XXIX. 60
It is clear from the foregoing that the restructuring agreement, instead of containing provisions "absolutely incompatible" with the obligations of the judgment, expressly ratifies such obligations in paragraph 8 and contains provisions for satisfying them. There was no change in the object of the prior obligations. The restructuring agreement merely provided for a new schedule of payments and additional security in paragraph 6 (c) giving Delta authority to take over the management and operations of CBLI in case CBLI fails to pay installments equivalent to 60 days. Where the parties to the new obligation expressly recognize the continuing existence and validity of the old one, there can be no novation. 61 Moreover, this Court has ruled that an agreement subsequently executed between a seller and a buyer that provided for a different schedule and manner of payment, to restructure the mode of payments by the buyer so that it could settle its outstanding obligation in spite of its delinquency in payment, is not tantamount to novation. 62
The addition of other obligations likewise did not extinguish the promissory notes. In Young v. CA 63 , this Court ruled that a change in the incidental elements of, or an addition of such element to, an obligation, unless otherwise expressed by the parties will not result in its extinguishment.
In fine, the restructuring agreement can stand together with the promissory notes.
Neither is there merit in CBLI’s argument that the compromise agreement dated July 24, 1984, in Civil Case No. 0023-P superseded and/or discharged the five promissory notes. Both Delta and CBLI cannot deny that the five promissory notes were no longer subject of Civil Case No. 0023-P when they entered into the compromise agreement on July 24, 1984.
Having previously assigned the five promissory notes to SIHI, Delta had no more right to compromise the same. Delta’s limited authority to collect for SIHI stipulated in the September 13, 1985, Deed of Sale cannot be construed to include the power to compromise CBLI’s obligations in the said promissory notes. An authority to compromise, by express provision of Article 1878 64 of the Civil Code, requires a special power of attorney, which is not present in this case. Incidentally, Delta’s authority to collect in behalf of SIHI was, by express provision of the Continuing Deed of Assignment, 65 automatically revoked when SIHI opted to collect directly from CBLI.
As regards CBLI, SIHI’s demand letter dated December 13, 1983, requiring CBLI to remit the payments directly to SIHI effectively revoked Delta’s limited right to collect in behalf of SIHI. This should have dispelled CBLI’s erroneous notion that Delta was acting in behalf of SIHI, with authority to compromise the five promissory notes.
But more importantly, the compromise agreement itself provided that it covered the rights and obligations only of Delta and CBLI and that it did not refer to, nor cover the rights of, SIHI as the new creditor of CBLI in the subject promissory notes. CBLI and Delta stipulated in paragraph 5 of the agreement that:chanrob1es virtual 1aw library
5. This COMPROMISE AGREEMENT constitutes the entire understanding by and between the plaintiffs and the defendants as well as their lawyers, and operates as full and final settlement, adjudication and termination of all their rights and obligations as of the date of this agreement, and of the issues in this case. 66
Even in the absence of such a provision, the compromise agreement still cannot bind SIHI under the settled rule that a compromise agreement determines the rights and obligations of only the parties to it. 67 Therefore, we hold that the compromise agreement covered the rights and obligations only of Delta and CBLI and only with respect to the eleven (11) other promissory notes that remained with Delta.
CBLI next maintains that SIHI is estopped from questioning the compromise agreement because SIHI failed to intervene in Civil Case No. 0023-P after CBLI informed it of the takeover by Delta of CBLI’s management and operations and the resultant impossibility for CBLI to comply with its obligations in the subject promissory notes. CBLI also adds that SIHI’s failure to intervene in Civil Case No. 0023-P is proof that Delta continued to act in SIHI’s behalf in effecting collection under the notes.
The contention is untenable. As a result of the assignment, Delta relinquished all its rights to the subject promissory notes in favor of SIHI. This had the effect of separating the five promissory notes from the 16 promissory notes subject of Civil Case No. 0023-P. From that time, CBLI’s obligations to SIHI embodied in the five promissory notes became separate and distinct from CBLI’s obligations in eleven (11) other promissory notes that remained with Delta. Thus, any breach of these independent obligations gives rise to a separate cause of action in favor of SIHI against CBLI. Considering that Delta’s assignment to SIHI of these five promissory notes had the effect of removing the said notes from Civil Case No. 0023-P, there was no reason for SIHI to intervene in the said case. SIHI did not have any interest to protect in Civil Case No. 0023-P.
Moreover, intervention is not mandatory, but only optional and permissive. 68 Notably, Section 2, 69 Rule 12 of the then 1988 Revised Rules of Procedure uses the word ‘may’ in defining the right to intervene. The present rules maintain the permissive nature of intervention in Section 1, Rule 19 of the 1997 Rules of Civil Procedure, which provides as follows:chanrob1es virtual 1aw library
SEC. 1. Who may intervene. — A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with leave of court, be allowed to intervene in the action. The court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether or not the intervenor’s rights may be fully protected in a separate proceeding. 70
Also, recall that Delta transferred the five promissory notes to SIHI on September 13, 1983 while Civil Case No. 0023-P was pending. Then as now, the rule in case of transfer of interest pendente lite is that the action may be continued by or against the original party unless the court, upon motion, directs the person to whom the interest is transferred to be substituted in the action or joined with the original party. 71 The non-inclusion of a necessary party does not prevent the court from proceeding in the action, and the judgment rendered therein shall be without prejudice to the rights of such necessary party. 72
In light of the foregoing, SIHI’s refusal to intervene in Civil Case No. 0023-P in another court does not amount to an estoppel that may prevent SIHI from instituting a separate and independent action of its own. 73 This is especially so since it does not appear that a separate proceeding would be inadequate to protect fully SIHI’s rights. 74 Indeed, SIHI’s refusal to intervene is precisely because it considered that its rights would be better protected in a separate and independent suit.chanrob1es virtua1 1aw 1ibrary
The judgment on compromise in Civil Case No. 0023-P did not operate as res judicata to prevent SIHI from prosecuting its claims in the present case. As previously discussed, the compromise agreement and the judgment on compromise in Civil Case No. 0023-P covered only Delta and CBLI and their respective rights under the 11 promissory notes not assigned to SIHI. In contrast, the instant case involves SIHI and CBLI and the five promissory notes. There being no identity of parties and subject matter, there is no res judicata.
CBLI maintains, however, that in any event, recovery under the subject promissory notes is no longer allowed by Article 1484(3) 75 of the Civil Code, which prohibits a creditor from suing for the deficiency after it has foreclosed on the chattel mortgages. SIHI, being the successor-in-interest of Delta, is no longer allowed to recover on the promissory notes given as security for the purchase price of the 35 buses because Delta had already extrajudicially foreclosed on the chattel mortgages over the said buses on April 2, 1987.
This claim is likewise untenable.
Article 1484(3) finds no application in the present case. The extrajudicial foreclosure of the chattel mortgages Delta effected cannot prejudice SIHI’s rights. As stated earlier, the assignment of the five notes operated to create a separate and independent obligation on the part of CBLI to SIHI, distinct and separate from CBLI’s obligations to Delta. And since there was a previous revocation of Delta’s authority to collect for SIHI, Delta was no longer SIHI’s collecting agent. CBLI, in turn, knew of the assignment and Delta’s lack of authority to compromise the subject notes, yet it readily agreed to the foreclosure. To sanction CBLI’s argument and to apply Article 1484 (3) to this case would work injustice to SIHI by depriving it of its right to collect against CBLI who has not paid its obligations.
That SIHI later on levied on execution and acquired in the ensuing public sale in Civil Case No. 84-23019 the buses Delta earlier extrajudicially foreclosed on April 2, 1987, in Civil Case No. 0023-P, did not operate to render the compromise agreement and the foreclosure binding on SIHI. At the time SIHI effected the levy on execution to satisfy its judgment credit against Delta in Civil Case No. 84-23019, the said buses already pertained to Delta by virtue of the April 2, 1987 auction sale. CBLI no longer had any interest in the said buses. Under the circumstances, we cannot see how SIHI’s belated acquisition of the foreclosed buses operates to hold the compromise agreement — and consequently Article 1484(3) — applicable to SIHI as CBLI contends. CBLI’s last contention must, therefore, fail. We hold that the writ of execution to enforce the judgment of compromise in Civil Case No. 0023-P and the foreclosure sale of April 2, 1987, done pursuant to the said writ of execution affected only the eleven (11) other promissory notes covered by the compromise agreement and the judgment on compromise in Civil Case No. 0023-P.
In support of its third assignment of error, CBLI maintains that there was no basis for SIHI’s application for a writ of preliminary attachment. 76 According to CBLI, it committed no fraud in contracting its obligation under the five promissory notes because it was financially sound when it issued the said notes on April 25, 1980. 77 CBLI also asserts that at no time did it falsely represent to SIHI that it would be able to pay its obligations under the five promissory notes. 78 According to CBLI, it was not guilty of fraudulent concealment, removal, or disposal, or of fraudulent intent to conceal, remove, or dispose of its properties to defraud its creditors; 79 and that SIHI’s bare allegations on this matter were insufficient for the preliminary attachment of CBLI’s properties. 80
The question whether the attachment of the sixteen (16) buses was valid and in accordance with law, however, has already been resolved with finality by the Court of Appeals in CA-G.R. SP No. 08376. In its July 31, 1987, decision, the Court of Appeals upheld the legality of the writ of preliminary attachment SIHI obtained and ruled that the trial court judge acted with grave abuse of discretion in discharging the writ of attachment despite the clear presence of a determined scheme on the part of CBLI to dispose of its property. Considering that the said Court of Appeals decision has already attained finality on August 22, 1987, there exists no reason to resolve this question anew. Reasons of public policy, judicial orderliness, economy and judicial time and the interests of litigants as well as the peace and order of society, all require that stability be accorded the solemn and final judgments of courts or tribunals of competent jurisdiction. 81
Finally, in the light of the justness of SIHI’s claim against CBLI, we cannot sustain CBLI’s contention that the Court of Appeals erred in dismissing its counterclaim for lost income and the value of the 16 buses over which SIHI obtained a writ of preliminary attachment. Where the party who requested the attachment acted in good faith and without malice, the claim for damages resulting from the attachment of property cannot be sustained. 82
WHEREFORE, the decision dated April 17, 2001, of the Court of Appeals in CA-G.R. CV No. 52667 is AFFIRMED. Petitioner California Bus Lines, Inc., is ORDERED to pay respondent State Investment House, Inc., the value of the five (5) promissory notes subject of the complaint in Civil Case No. 84-28505 less the proceeds from the sale of the attached sixteen (16) buses. No pronouncement as to costs.
SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.
Endnotes:
1. Rollo, pp. 62–72. Penned by Associate Justice Elvi John S. Asuncion and concurred in by Associate Justices Cancio C. Garcia and Oswaldo D. Agcaoili.
2. Id. at 52–60.
3. Records, pp. 10–21; 1077–1079.
4. Id. at 3.
5. Id. at 1215.
6. Id. at 170–174.
7. Id. at 22–26; 1080–1084.
8. Id. at 28–31; 1086–1089.
9. Id. at 175–181.
10. Id. at 183–220.
11. Id. at 225–236.
12. Id. at 32–33; 1090–1091.
13. Id. at 34–53; 1092–1111.
14. Id. at 54–55; 1112–1113.
15. Id. at 281.
16. Id. at 282.
17. Id. at 283–285.
18. Id. at 258–264.
19. Id. at 265.
20. Id. at 1–9.
21. Id. at 274–276.
22. Id. at 278.
23. Id. at 61.
24. Id. at 292–295; 306.
25. Id. at 691–694.
26. CA Rollo, p. 103.
27. Ibid.
28. Id. at 101.
29. Records, pp. 761–764.
30. Id. at 772.
31. Id. at 795–797.
32. Id. at 755.
33. Id. at 861–865.
34. Id. at 864.
35. Rollo, p. 72.
36. Id at 26, 29–30, 36.
37. Rollo, pp. 294–295.
38. Id. at 297.
39. Id. at 299.
40. Idolor v. Court of Appeals, G.R. No. 141853, 7 February 2001, 351 SCRA 399, 407.
41. Ocampo-Paule v. Court of Appeals, G.R. No. 145872, 4 February 2002, 376 SCRA 83, 88.
42. Ibid.
43. Babst v. Court of Appeals, G.R. Nos. 99398 & 104625, 26 January 2001, 350 SCRA 341, 356.
44. Ibid.
45. Reyes v. Court of Appeals, G.R. No. 120817, 4 November 1996, 264 SCRA 35, 43.
46. Sps. Reyes v. Court of Appeals, G.R. No. 147758, 26 June 2002, 383 SCRA 471, 482.
47. Quinto v. People, G.R. No. 126712, 14 April 1999, 305 SCRA 708, 714.
48. Ocampo-Paule v. Court of Appeals, supra, note 41 at 88.
49. Quinto v. People, supra, note 47 at 715.
50. Ocampo-Paule v. CA, supra, note 48.
51. Molino v. Security Diners International Corporation, G.R. No. 136780, 16 August 2001, 363 SCRA 358, 366.
52. Ibid.
53. Quinto v. People, supra note 47 at 715–716.
54. Guerrero v. Court of Appeals, 140 Phil. 335, 342–343 (1969).
55. Sps. Reyes v. Court of Appeals, supra, note 46; Magdalena Estates, Inc. v. Rodriguez, 125 Phil. 151, 157 (1966).
56. 34 Phil. 978, 986 (1914).
57. No. L-28967, 22 July 1975, 65 SCRA 207, 218.
58. 100 Phil. 381, 385 (1956).
59. Cochingyan, Jr. v. R&B Surety and Insurance Co., Inc., No. L-47369, 30 June 1987, 151 SCRA 339, 350.
60. Records, pp. 170–173.
61. Cochingyan, Jr. v. R&B Surety and Insurance Co., Inc., No. L-47369, 30 June 1987, 151 SCRA 339, 350.
62. Tropical Homes, Inc. v. Court of Appeals, G.R. No. 111858, 14 May 1997, 272 SCRA 428; See also Tible v. Aquino, No. L-28967, 22 July 1975, 65 SCRA 207, 217–218.
63. G.R. No. 83271, 8 May 1991, 196 SCRA 795, 800.
64. ART. 1878. Special powers of attorney are necessary in the following cases:chanrob1es virtual 1aw libraryx x x
(3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired;x x x
65. Records, p. 3.
66. Records, p. 264. Emphasis supplied.
67. Guerrero v. Court of Appeals, No. L-22366, 30 October 1969, 29 SCRA 791, 796.
68. Cruzcosa v. Hon. H. Concepcion, 101 Phil. 146, 150 (1957).
69. SEC. 2. Intervention. — A person may, before or during a trial, be permitted by the court, in its discretion, to intervene in an action, . . ..
70.Emphasis supplied.
71. Section 19, Rule 3 of the Rules of Court.
72. Section 9, Rule 3 of the Rules of Court.
73. See Vda. De Cailles v. Mayuga, G.R. No. 30859, 20 February 1989, 170 SCRA 347, 356.
74. Ibid.
75. ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:chanrob1es virtual 1aw library
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee’s failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage of the thing sold, if one has been constituted, should the vendee’s failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.
76. Rollo, p. 304.
77. Id. at 306–308.
78. Id. at 304, 308.
79. Id. at 309.
80. Id at 309–310.
81. Turqueza v. Hernando, No. L-51626, 30 April 1980, 97 SCRA 483, 488.
82. Banque Generale Belge v. Walter Bull & Co., Inc., 84 Phil. 164, 172 (1949).