FEDERICO SUNTAY, PLAINTIFF AND APPELLANT, VS. FORTUNATO F. HALILI ET. AL., DEFENDANTS AND APPELLEES. FEDERICO SUNTAY, PLAINTIFF AND APPELLEE VS. FORTUNATO F. HALILI ET AL., DEFE…

In
a complaint filed by Federico Suntay (later referred to as the
plaintiff) against Fortunato F. Halili (later referred to as the
defendant) and Virgilio I. Ramos, Maximo Santiago and Graciano Queyquep
(later referred to as the other defendants) in the Court of First
Instance of Quezon City, the plaintiff prays for a declaration of
nullity for lack or illegality of cause or consideration under the
provisions of articles 1352 and 1409 of the Civil Code, in relation to
those of the Revised Election Code, of the contract of lease entered
into by and between the plaintiff as lessor and the other defendants as
lessees on 27 September 1951, involving three parcels of fishpond land
with a total area of 530.67 sq. m. more or less, situated in Hagonoy,
Bulacan, delimited and described in TCT No. 19832 and OCT No. 16900,
issued by the Registrar of Deeds in and for the province of Bulacan in
the name of the plaintiff (Annex A, pp. 28-32, rec. on app.); of the
promissory notes signed by the plaintiff on 4 September 1951 for
P5,000, on 29 September 1951 for P30,000, on 7 November 1951 for
P10,000, and on 10 November 1951 for P10,000, in favour of the other
defendants, mentioned and copied in paragraph XII of the plaintiff’s
complaint, and of the assignment of their leasehold right by the other
defendants in favor of the defendant on 1 October 1951 (Annex B, pp.
18-22, rec. on app.); a judgment ordering the defendant to pay to the
plaintiff the sum of P64,000 for the use and occupation of the
plaintiff’s fishpond from 1 October 1951 to 1 October 1955; and the
costs and other just and equitable relief (civil No. Q-1564). The
plaintiff predicates his prayer upon the following allegations: that in
the elections held in 1951 he was the candidate of the Liberal Party
for the office of Provincial Governor of the province of Bulacan; that
before the day of the elections the defendant, a member of the Liberal
Party and then Provincial Governor of Bulacan, offered to help the
plaintiff in his election campaign; that sometime in September 1951 the
defendant told the plaintiff that it was necessary for him to incur
expenses to enable him to continue helping the plaintiff in his
election campaign; that the plaintiff told the defendant that he had no
money to give him for that purpose; that the defendant told the
plaintiff that he (the defendant) could secure cash advances for him
(the plaintiff) provided he promised to pay them later on; that the
plaintiff accepted the defendant’s proposition; that on or about 27
September 1951 the defendant told the plaintiff that he had already
spent P32,000 in the plaintiff’s election campaign which amount he had
secured as advances from the other defendants; that he would need the
same amount to continue campaigning for the plaintiff and could secure
the needed amount as an advance from the same defendants but that he
would like to have a concrete assurance that the said advances would be
repaid by the plaintiff; that to meet the defendant’s demand on 27
September 1951 the plaintiff executed a contract of lease in favor of
the other defendants of his three parcels of fishpond land which
yielded an annual rental of P16,000, mentioned earlier, for a period of
four years from 1 October 1951 to 1 October 1955, for and in
consideration of the rental of P32,000; that the rental of the fishpond
actually agreed upon for the period of four year’s was P64,000, it
being understood that the sum of P32,000, not mentioned in the contract
of lease, would be to pay for the advances allegedly secured by the
defendant from the other defendants, and the sum of P32,000, mentioned
in the contract of lease, would be to pay for advances the defendant
would later secure from the other defendants; that to assure the other
defendants that the plaintiff would pay subsequent cash advances to be
granted by them to him, to be spent in his election campaign, the
plaintiff signed four promissory notes in favor of the other
defendants, to wit: on 4 September 1951 for P5,000, in favor of the
defendant Virgilio Ramos or order, payable within 120 days from date,
with interest at the lawful rate; on 29 September 1951 for P30,000 in
favor of the other defendants or order, payable within three years from
date; on 7 November 1951 for P10,000 in favor of the defendant Maximo
G. Santiago or order, payable within 120 days from date, with interest
at the lawful rate; and on 10 November 1951 for P10,000 in favor of the
same defendant Santiago or order, payable within 120 days from date;
that the plaintiff had not received any of the sums mentioned in the
contract of lease (Annex A) and the promissory notes or anything of
value or service in lieu thereof; that the defendants had not demanded
from the plaintiff payment of the principal or interest due on the
promissory notes; that further referring to the contract of lease,
Annex A, on 1 October 1951 the other defendants assigned their
leasehold rights to the defendant without the plaintiff’s consent; that
since that date, 1 October 1951 up to 1 October 1955, the defendant had
been in possession of the plaintiff’s parcels of fishpond land; that as
regards the total expenses in his election campaign, directly and
personally disbursed by him, the same did not amount to P12,000, which
is the total emolument for one year attached to the office of
Provincial Governor of Bulacan; that the representations made by the
plaintiff to the defendant that the latter had received the total
amount of P119,000 as advances and spent in behalf of the plaintiff in
his election campaign in 1951, were false and fraudulent; that the
plaintiff realizes that he had been remiss in authorizing the defendant
to spend in his behalf the amount of P119,000, ostensibly for his
election campaign, but did not realize that he had been so when he
signed the contract of lease, Annex A, and the promissory notes because
they were signed during the hectic days of his campaign, when he was
relatively inexperienced as a politician and when he had implicit trust
in the defendant; that the contract of lease, Annex A, and the
promissory notes executed by him are void for lack or illegality of
cause or consideration under the provisions of articles 1352 and 1409
of the Civil Code in relation to those of the Revised Election Code;
that by the contract of lease, Annex A, and its assignment by the other
defendants to the defendant, the latter had enriched himself at the
expense of the plaintiff to the extent of P64,000, the reasonable
rental value of the fishpond lands for four years, which amount
defendant is, by reason of equity, duty bound to pay to the plaintiff;
and that the plaintiff had not made any previous demand on the
defendants with respect to his cause of action against them for the
reason that such demand would surely be rejected by them.

On 5
November 1955 the defendants filed an answer with counterclaim,
admitting paragraphs 1, 2, 3, 5, 9 and 10 of the plaintiff’s complaint
but denying the rest of the material averments and alleging that the
reasonable rental value of the plaintiff’s fishpond is only P8,000 a
year; that the annual salary attached to the office of provincial
Governor of Bulacan is P5,000 only; that it was the plaintiff who urged
the defendant to help him (the plaintiff) in his election campaign and
not the latter who offered his help to the former; that it was the
plaintiff who begged and solicited from the defendant cash advances to
spend in his election campaign; that out of friendship the defendant
agreed to give the plaintiff cash advances provided the latter would
repay the former and would execute the corresponding promissory notes
that it was the plaintiff who offered to lease to the defendant his
fishponds for and in consideration of the rental of P32,000 for a
period of four years; that although the plaintiff’s price was too high,
the defendant, in his desire to help the plaintiff, readily accepted
his offer; that to conceal the fact that the defendant was giving
financial accommodation to the plaintiff, it was agreed that the
contract of lease be executed in the name of the other defendants as
lessees although the true lessee was the defendant; that to protect the
rights of the defendant, the supposed leasehold rights of the other
defendants were assigned to the former with the knowledge and consent
of the plaintiff; that the real payee of the four promissory notes
executed by the plaintiff was the defendant; that for that reason they
were indorsed to him in blank by the payees with the knowledge and
consent of the plaintiff; that the amounts appearing in the said
promissory notes were actually received by the plaintiff from the
defendant and when they matured the latter demanded payment thereof but
the former had refused to honor the said demands. The defendants prayed
in their counterclaim that the plaintiff be ordered to pay to the
defendant the sums of P5,000, P10,000 and P10,000 in the promissory
notes executed by him in favor of the other defendants, which were
indorsed in blank by the respective payees to the defendant with the
knowledge and consent of the plaintiff; to recognize the defendant’s
right to hold the fishponds subject of the contract of lease, Annex A,
for another four years resulting from the plaintiff’s failure to pay
the amount of P30,000 in the promissory note executed by the plaintiff
in favor of the other defendants which was also indorsed in blank by
the payees to the defendant with the knowledge and consent of the
plaintiff; to pay to the defendant P10,000 as attorney’s fees to be
incurred by him and P25,000 as actual, mental and moral damages
resulting from the institution of an action for detainer by Venefrida
A. Rivera and Pantaleon Owera in the Justice of the Peace Court of
Hagonoy, Bulacan, at the instigation of the plaintiff; to pay to the
defendants P10,000 as attorney’s fees to be incurred by them in
defending their rights in this case and P50,000 as mental, moral and
actual or exemplary damages resulting from the institution of this suit
which is clearly unfounded. The defendants also prayed for a writ of
attachment of the plaintiff’s properties to the extent of the amount of
their counterclaim.

On 5 November 1955 the plaintiff filed a
motion praying that the defendants’ application for a writ of
attachment be set for hearing to afford him an opportunity to object
thereto.

On 9 November 1955 the defendants filed in the office of the
Registrar of Deeds in and for the province of Bulacan a request for the
annotation of a notice of lis pendens of the properties covered by OCT No. 16900 and TCT No. 19832.

On 15 November 1955 the plaintiff filed a reply answering the
defendants’ counterclaim and praying for the dismissal of the same.

The other motions and ruling of the Court incident to the identity
of Pantaleon Owera and his relation to the plaintiff to prove the fact
that it was the latter who instigated the former to file a case for
detainer against the defendant in the Justice of the Peace Court of
Hagonoy, Bulacan, need not be mentioned at this stage of the case.

On 23 May 1957 the Court rendered judgment holding that the
execution of the contract of lease, Annex A, and the promissory notes
by the parties concerned was influenced by the election of 1951 when
the plaintiff was a candidate for the office of Provincial Governor of
Bulacan; that the defendant extended financial accommodations to the
plaintiff due to heavy expenses incurred by the latter in his election
campaign; that the financial accommodations were made in violation of
the provisions of the Revised Election Code; that for that reason the
said contract and promissory notes were illegal; that the defendant,
being a public utility operator, is prohibited by the Revised Election
Code from contributing or making any expenditure in connection with the
election campaign of the plaintiff; that the execution of the contract
and promissory notes in the name of the other defendants as lessees and
payees to conceal the fact that the defendant was violating the
provisions of the Election Code constitutes simulation for the purpose
of violating the law, hence contrary thereto and to morals, public
order and public policy; and that the plaintiff and the defendants
being in pari delicto should be left where they are and
neither can recover out of their illegal transactions, and declaring
the contract of lease, Annex A, and the promissory notes null and void
and dismissing the plaintiff’s and the defendants’ claims in their
respective pleadings.

Both the plaintiff and the defendants have appealed and they have filed a joint record on appeal.

The plaintiff has assigned the following errors allegedly committed by the trial court:

1. The lower court erred in not finding that there
   were no considerations paid to plaintiff by defendants tinder the lease
   contract (Exh. D) and the promissory notes (Exhs. B, C, F, and G), and
   that the same were therefore null and void.

2. The
   lower court erred in not sentencing defendant Halili to pay to
   plaintiff the sum of P64,000.00 as reasonable compensation for four (4)
   years for the use and occupation by the former of plaintiff’s fishpond.
   (Brief for the plaintiff-appellant, pp. A-B.)

The defendants have made the following assignment of errors:

1. The lower court erred in holding that the money
   representing the consideration of the contract of lease Exhibit “12”
   (Exhibit “D” for the plaintiff), as well as the sums of money mentioned
   in the four (4) promissory notes Exhibits “14”, “15”, “16” and “17”
   (also Exhibits “B”, “C”, “E” and “G”, respectively, for the plaintiff),
   were financial accommodations by the defendant Halili to plaintiff “in
   the pursuit of a common aim, that is, of winning the election (of
   plaintiff) for Governor in the province of Bulacan for the Liberal
   Party.”

2. The lower court erred in
   gratuitously holding that defendant Halili made the financial
   accommodations to the plaintiff “to enable the latter to Violate
   section 48 of the Revised Election Law enforced at the time” for which
   reason and because defendant Halili was then a public utility operator
   “the loan must be held to be illegal bargain and in open violation of
   the referred article 1409 of the new Civil Code and section 48 of the
   Revised Election Code”, and consequently null and void ab initio.

3. The
   lower court erred in holding that the parties to the contract of lease
   and to the four (4) promissory notes marked Exhibits “12”, “14”, “15”,
   “16” and “17” are fictitious and that the alleged purpose of the
   defendant Halili in placing the said transactions in the names of
   fictitious parties was “to avoid openly committing an act prohibited by
   the above provisions (section 47) of the Revised Election Code.”

4. The
   lower court erred in holding that simply because “the transactions
   represented both in the promissory notes as well as in the contract of
   lease are financial accommodations extended by Governor Halili to Dr.
   Suntay, in connection with the gubernatorial election in the province
   of Bulacan,” the said transactions are “simulated contracts” which are
   made in violation of the provisions of articles 1345 and 1346 of the
   new Civil Code, for a purpose contrary to law, morals, public order and
   public policy, being expressly prohibited by law.

5. The
   lower court erred in holding that since the contract of lease and the
   four (4) promissory notes marked Exhibits “12”, “14”, “15”, “16” and
   “17” are “illegal bargains” under the provisions of section 48 of the
   Revised Election Code, in relation to section 184 of the same Code,
   “Governor Halili is in pari delicto as well as
   plaintiff Dr. Suntay”, and that therefore under articles 1411 and 1912
   (1412) of the new Civil Code, defendant Halili could not recover on his
   counterclaims arising out of the aforesaid transactions.

6. Even assuming, arguendo, that the parties are in pari delicto,
   still the lower court erred in not dismissing the plaintiff’s complaint
   instead of rendering judgment in favor of “plaintiff Federico Suntay,
   declaring the promissory notes as well as the contract of lease null
   and void, as they were executed in violation of article 1409 of the new
   Civil Code and section 48 of the Revised Election Code” thereby in
   effect, giving its aid to the plaintiff, a party considered by the
   lower court to be in pari delicto.

7. The lower court erred in giving credence to the testimony of the plaintiff.
8. The
   lower court erred in not giving credence to, and holding in effect to
   be incompetent, the testimony of the witnesses for the defendants,
   particularly the testimony of the defendants Virgilio Ramos, Maximo
   Santiago and Graciano Queyquep.

9. The lower
   court erred, and gravely abused its judicial discretion, in insisting
   on making an ocular and physical examination of the defendant Halili
   allegedly to determine whether or not the said defendant Halili was
   really physically and mentally incapable to be placed on the witness
   stand, as well as in refusing to hear and to accept the expert
   testimony of Dr. Jose Fernandez, director of Philippine Mental Hospital
   and the physician attending to the defendant Halili, that anything
   which may alarm the said defendant Halili, such as the ocular and
   physical examination of his person insisted upon by the lower court or
   any similar examination by physicians other than the one who used to
   attend to and treat him, might cause a fatal relapse.

10. The
    lower court erred in not holding that plaintiff received from defendant
    Fortunato Halili the respective sums mentioned in the promissory notes,
    Exhibits “14”, “15”, “16” and “17”.

11. The
    lower court erred in not dismissing the plaintiffs complaint and in not
    rendering a decision granting the defendants’ counterclaims. (Brief for
    the defendants-appellants, pp. a-f.)

Both appellants assailing the findings of fact made by the trial
court; the amount sought to be collected by the plaintiff from the
defendant as prayed in his complaint being P64,000 only; the total
amount sought to be recovered by the defendants from the plaintiff in
their counterclaim being P120,000 only; and the total sum sought to be
recovered by both being less than P200,000, this Court has no appellate
jurisdiction to decide this case.

Therefore, pursuant to section 31, in connection with sections 17
and 29, Republic Act No. 296, as amended, the case is remanded to the
Court of Appeals for determination and judgment.

Bengzon, C. J., Labrador, Concepcion, Reyes, J. B. L., Paredes, and De Leon, JJ., concur.
Barrera and Dizon, JJ., took no part.