JOSE SORIANO, PLAINTIFF-APPELLANT, VS. COMPANIA GENERAL DE TABACOS DE FILIPINAS, DEFENDANT-APPELLANT.

This is an appeal taken by both parties from the decison of the Court of
First Instance of Manila which rendered judgment for the plaintiff-appellant,
Jose Soriano, on the principal claim, denying, however, the latter’s claim for
damages but granting to defendant-appellant, Compania General de Tabacos de
Filipinas, its counterclaim.

Plaintiff’s complaint alleges, among others, the following: That sometime in
September 1937, defendant granted plaintiff a crop loan account to finance the
planting, cultivation, harvesting, and milling of sugar cane in plaintiff’s
various sugar cane plantations in Negros Occidental; that to secure payment of
the various amounts which plaintiff would withdraw from said crop loan account,
plus the corresponding interest, plaintff on September 17, 1937, executed a deed
of mortgage in favor of defendant, mortgaging to the latter the properties
specified and described therein; that, the parties expressly stipulated that
subject to its terms and conditions, the deed of mortgage cogld be renewed upon
their mutual agreement at the end of the crop year; that pursuant to the said
renewal clause, plaintift and defendant executed on or about August 5, 1941
another document entitled “CREDITO SOBRE AZUCAR-RENOVACION DE HIPOTECA CON
GARANTIA ADICIONAL” for the 1941-42 crop year, by virtue of which the former
deed of mortgage was renewed and plaintiff granted an additional crop loan of
P253,000.00 for the 1941-42 crop year; that to guarantee the payment of this
additional crop loan plus the interest that would be due thereon as well as the
payment of the outstanding balance under the previous crop loans, plaintiff
mortgaged in favor of defendant the same sugar plantations formerly mortgaged
under the previous deed; that as additional security therefor, plaintiff
likewise mortgaged the sugar can crops that would be planted and harvested from
the sugar plantations during the 1941-42 crop year, the sugar that would be
produced and milled from said sugar cane crops during the said crop year, and
all the centrifugal sugar with 96 degrees or more of polarization that would be
produced from any sugar cane plantation of plaintiff for the 1941-42 crop year;
that plaintiff obligated himself to assign and deliver to defendant the
corresponding quedans pertaining to all the sugar mortgaged; that during the
crop year 1941-42 plaintiff produced a total of 65,787.53 piculs of export
sugar, which, together with the other sugar produced by plaintiff, was, pursuant
to the agreement, delivered by plaintiff to defendant for its sale at the most
advantageous prices, the proceeds of which sale to be credited to plaintiff’s
account; that pursuant to the agreement of August 5, 1941, plaintiff had been
obtaining various sums from defendant from time to time, which with interest
thereon, and after deducting the proceeds of the sale in 1941 of a small part of
plaintiff’s sugar delivered to defendant, amounted to P648,806.D6 as of December
29, 1941; that in the computation icf the balance due from plaintiff, defendant
did not include the proceeds of the sale of 51,528.01 piculs of sugar belonging
to plaintiff and delivered to defendant, which sale was willfully withheld from
plaintiff; that the amount of P648,806.06 was carried in the books of the
defendant as the total indebtedness of plaintiff for which defendant continued
to charge plaintiff interest at the rate of seven per cent (7% per annum
compounded every six months, which was and is the usual rate of interest charged
by defendant on crop loans granted by it to planters; that during the Japanese
occupation defendant sent periodic statement of accounts to plaintiff, who,
noticing from said statements that his debt was considerably increasing due to
the accumulation of the interest charged by the defendant and in view of
defendant’s demand for payment as expressed or implied in said statements of
account, decided to pay and did pay as much of his supposed debt as he could
during the Japanese occupation by borrowing money from his business associates
and selling some of his valuable real and personal properties; that shortly
after the liberation, plaintiff made several inquiries from defendant about the
status of his export sugar produced during the 1941-42 crop year amounting to
65,787.53 piculs which plaintiff delivered to defendant; that plaintiff was
informed by the defendant that said sugar was destroyed during the war and it
advised Plaintiff to file a war damage claim before the War Commission of the
United States; that acting on the said advice and by virtue of the certification
in writing issued by defendant attesting to the loss of said sugar during the
war, plaintiff filed the corresponding war damage claim and was accordingly paid
by the War Damage Commission the sum of P130,000.00 which plaintiff is willing
to return to the United States Government; that plaintiff received from
defendant an itemized statement of account dated May 28, 1949 regarding his
pre-war crop loan for the 1940-41 and 1941-42 crop years,” which account, after
deduction of the payments made by plaintiff during the Japanese occupation,
showed a balance of 928,677.35 due the defendant as of March 10, 1945 which
amount increased to P37,078.00 as of December 29, 1948 as a result of the
addition of compound interest being charged by defendant; that after receipt of
the above mentioned statement of account, plaintiff investigaged as to wnat
really happened to the export sugar he delivered to defendant and discovered
that 51,528.01 piculs of sugar, instead of having been burned and destroyed
during the last war as falsely represented by the defendant to plaintiff and to
the War Damage Commission, had actually been shipped to and sold by the
defendant in the United States on different dates in 1941, months before the
outbreak or the war; that the proceeds of such sale were kept and retained by
defeudant for its own use without crediting the same for the account of
plaintiff, to the damage and prejudice of plaintiff; that on June 27, 1956,
plaintiff wrote defendant a letter informing it of what he had recently
discovered and demanded that it pay to plaintiff the proceeds of the sale of the
51,520.01 piculs of sugar; that as defendant could not deny this startling
discovery, it disclosed and admitted on August 2, 1956, in a letter of even date
and or other occasions subsequent thereto, that it really had sold plaintiff’s
export sugar amounting to 51,528.01 piculs before the outbreak of the war, but
claimed that according to its existing records it had sold a total of 63,528.01
piculs of sugar (including 12,000 piculs previously credited to plaintiff’s
account and never disputed) at the rate of P5.508 per picul; that plaintiff
questioned the price of P5.508 per picul at which defendant allegedly sold
plaintiff’s sugar; that plaintiff informed defendant that according to his
investigation the plrice of sugar on February 21, 1941 was P6.44 per picul which
on May 27, 1941 went up to P7.55 per picul that after a long negotiation and
several exchange of communication between plaintiff and defendant, the latter
proposed to fix the price at P6.20 per picul which plaintiff accepted; that
notwithstanding repeated demands defendant refused and still refuses to pay
plaintiff the value of the 51,528.01 piculs of sugar in the total sum of
P319,473.66 plus accrued interest of seven per cent (7%) per annum compounded
semi- annually from the dates the sugar shipments were respectively sold; that
the total proceeds, with interest thereon as above alleged, amounted to
P737,681.00 as of June 30, 1956; that defendant in representing to and inducing
plaintiff to believe that the export sugar produced during the 1940-41 crop year
was destroyed during the war, when in fact it had sold said sugar, and in
retaining the proceeds of said sale while charging plaintiff 7% interest
compounded semi-annually on Plaintiff’s debt, and compelling plaintiff to sell
his valuable property to liquidate practically the whole of said debt, acted in
bad faith and with malice and wanton attitude for which it stands liable to pay
plaintiff moral and exemplary damages; that as a consequence of the willful
refusal of defendant to pay plaintiff the amounts mentioned, plaintiff was
forced to engage the services of counsel for the purpose of recovering the said
amounts, the reasonable value of which service is submitted to the discretion of
the court. The complaint accordingly prays that judgment be rendered in favor of
plaintiff ordering defendant to pay the plaintiff the sum of P319,473.66, the
value of plaintiff1s sugar sold by defendant plus the accumulated interest
thereon at 7% per annum compounded semi-annually, which total amount with said
interest, added up to P737,681.00 as of June 30, 1956; to pay the sum of
P50,000.00 for moral and exemplary damages; to pay reasonable attorneys fees;
and to pay the costs of the suit.

In its answer to this complaint, defendant denies certain allegations while
admitting others. As first affirmative and special defense, defendant alleged
that the totality of the export sugar produced by plaintiff and delivered to it
amounted to only 64,253.26 piculs for the 1940-41 crop year; that in accordance
with the agreement of August 5, 1941, plaintiff irrevocably authorized defendant
to receive the former’s export sugar in the latter1 s own name and for the
latter’s sale and disposition under the obligation to sell the same for the
account of the plaintiff, whenever ordered to do so; that it was and has been
the long established practice known to plaintiff for defendant to ship abroad in
its own name as much sugar as ship-space allowed, and when any of defendant’s
clients, such as plaintiff, sent instructions to defendant to sell at a certain
price, defendant merely cfedits client’s crop loan account with the value of the
sugar so ordered sold at the price prevailing on the date of the instructions
received by defendant; that plaintiff pursuant to such established method
ordered the sale of only 16,000 piculs of sugar out of the 64,253.26 piculs
assigned to defendant but never expressed to defendant his desire to sell the
rest of his sugar; that the sugar claimed by plaintiff as shipped to the United
States in 1941 was so shipped in the name and for the account of defendant and
not for the account of plaintiff; that the rest of plaintiff’s sugar, aside from
the aforesaid 16,000 piculs, was included in the 500,000 piculs stored in
defendant’s warehouse in Iloilo which were burned by the Philippine Army on
April 15, 1942, for the loss of which he was duly compensated by the War Damage
Commission. As second affirmative and special defense, defendant alleged that
granting, without conceding, that plaintiff is legally entitled to be credited
with the 51,528.01 piculs of sugar he claims to have been shipped for his
account, (1) automatic compensation should take place by operation of law to the
concurrent amounts between the two debts because the plaintiff is a debtor of
the defendant on his crop loan account and at the same time a creditor of the
defendant for the proceeds of the sale of plaintiff’s sugar; (2) if plaintiff
wants to be credited for the sale of the sugar received by the defendant for the
1940- 41 crop year, plaintiff must be contented with receiving the price of
sugar in the world market at those times when plaintiff’s sugar was delivered to
defendant, which was approximately P4.00 per picul, and consequently the value
of the 51,528.01 piculs of sugar at the said price would be P206,112.04; (3)
that plaintiff’s total debt to defendant at the beginning of the Japanese
Occupation would be P648,306.06 less the credit of P206,112.04 and the interest
charged for this amount; (4) that plaintiff made undue excess payment during the
Japanese Occupation in Japanese currency which excess payments were accepted in
good faith by defendant; (5) that such untfue excess payments by plaintiff to
defendant in Japanese currency became valueless after liberation, (6) that
defendant cannot be held liable for said excess payments made by plaintiff in
Japanese currency. By way of first counterclaim, defendant alleges that
plaintiff borrowed from defendant after liberation various sums for the purchase
of fertilizer to be used in his sugar plantations, which sums with interest is
agreed upon in writing amounted to P55,513.36 as of June 30, 1956; that
plaintiff notwithstanding repeated demands for the payment of such account,
refused and still refuses to pay defendant such amount. By way of second
counterclaim, defendant alleges that the complaint is unfounded, capricious, and
malicious; consequently, defendant is entitled to he reimbursed for such
attorney’s fees as the court might find just and equitable. The said answer
accordingly prays that judgment be rendered in favor of defendant— (1)
dismissing the complaint of plaintiff, with costs against him; (2) on the first
counterclaim, ordering plaintiff to pay defendant the sum of P55,518.86 on his
post-war account, plus interest thereon at 7% per annum compounded semi-annually
from June 30, 1956, and (3) on the second counterclaim, ordering plaintiff to
pay the defendant such amounts for attorney’s fees and damages as this Court
might find just and equitable. Plaintiff’s reply to defendant’s answer alleges
among others, that while under the crop loan agreement, plaintiff’s sugar could
be sold by defendant only with the prior consent of plaintiff, yet said crop
loan agreement also specifically granted defendant the full authority, in its
exclusive discretion and without plaintiff’s further consent, to sell at the
best obtainable price in the market, any of plaintiff’s sugar remaining unsold
after the month of June following the end of each milling season (October to
March), the proceeds of such sale to be applied to the account of plaintiff;
that sometime in 1940, because of worsening international situation there
developed an acute shortage of shipping space and the probability arose that the
tremendous amount of sugar the defendant had then in its possession belonging to
its several customers, might not be shipped and sold to the United States, the
plaintiff, upon request of defendant, had ordered and authorized the latter to
dispose of and ship to the United States, at the first available space, all of
his export sugar that he would be producing from time to time, with the
understanding that the proceeds would be credited to the account of plaintiff;
that it was in pursuance of this arrangement that defendant had always been
shipping and selling, for plaintiff’s account, all the latter1s export sugar
that were mortgaged to defendant; that after defendant had been informed by
plaintiff of his discovery about the sale of his pre-war export sugar by
defendant ,the latter expressly confirmed to plaintiff that long before the
outbreak of the war it actually shipped to the United States on different dates,
for the account of plaintiff, on board S/S Pan Royal, Yaka, Raphael Semmes and
Sagoland, said plaintiff’s 51,52o.01 piculs of sugar which were all covered by
several quedans assigned and delivered to it under the terms of the crop loan
agreement; that plaintifr tuerefore denies that the said 51,528.01 piculs of
sugar was part of-the 500,000 piculs allegedly burned by the Philippine Army on
April 15, 1942; that the proceeds derived by defendant from the sale of said
51,528.01 piculs were never credited to the account of plaintiff but were
instead wrongfully and maliciously retained by defendant for its own use to the
prejudice of plaintiff; that plaintiff never requested defendant to furnish him
a statement of his account during the Japanese Occupation; that the statement of
account sent to him by defendant during the Japanese Occupation had been
received in the ordinary course of business and were to all intents and purposes
demands for payment, particularly that defendant continued to charge interest on
his indebtedness as shown in said statement, at the rate of seven percent (7%)
per annum, compounded every six months; that the statement of account dated May
28, 1950 which was received by plaintiff on or about December 27, 1950, moved
plaintiff to investigate what really happened to his pre-war export sugar and
led to the discovery of the facts alleged in the complaint; that the sale by
defendant of said 51,528.01 piculs of sugar belonging to plaintiff, was never
the subject of any prgposed compromise, but said sale was freely, voluntarily
and spontaneously admitted by defendant; that the only points of difference
between plaintiff and defendant that they discussed with a view of reaching a
compromise referred to the price at which the said 51,528.01 piculs of sugar
were to be liquidated and to the basis of computing the amount that should be
refunded to plaintiff; in the course of said discussion, defendant offered
plaintiff to credit the latter with the value of his 51,528.01 piculs at the
rate of P6.20 per picul as to the date they were shipped to the United States
and that whatever amount he paid during the occupation in Japanese war notes in
excess of his indebtedness would be redfended to plaintiff upon the basis of the
Ballantyne Scale; that although plaintiff was agreeable to the price of P6.20
per picucul, he rejected defendant’s proppsal not only because of their refusal
of defendant to pay him the interest of 7% per annum to be compounded
semi-annually, but also because said proposition was obviously unfair and
unjust; that this is so because had defendant credited plaintiff with the
proceeds it had derived from the sale of said sufear at the time they were sold
to the United States, plaintiff would not have lost some of his valuable
properties and he would not have been forced to borrow money from his business
associates during the Japanese Occupation. By way of reply to defendant’s first
and second affirmative defenses, plaintiff among others, alleges that as
defendant did not credit him with the proceeds it derived from the sale of the
51,528.01 piculs of sugar, and inasmuch as plaintiff’s debt to defendant before
the war was almost liquidated and paid during the Japanese Occupation when
required to do so by defendant, the latter is now estopped to claim automatic
compensation allegedly by operation of law, and that since defendant had
admittedly sold plaintiff’s sugar as the latter’s agent, said defendant is now
bound to turn over to plaintiff (as its principal), the said proceeds that it
had derived from the sale of the sugar in question which, together with the
corresponding interest thereon, amounted to P787,681.00 as of June 30, 1956. By
way of answer to defendant’s first counterclaim, plaintiff alleges that after he
discovered that defendant was indebted to him in the sum of 9787,681.00 as of
June 30, 1956 for the sale of the sugar in question and which sum was not
credited to his account, plaintiff made several demands upon defendant for the
payment thereof with specific instructions that the sum of P55,518.60 (not
P55,518.86) which he owes defendant under the fertilizer account as of June 30,
1956, be deducted therefrom, which defendant, however, up to the present, had
not complied. And by way of answer to defendant’s second counterclaim, plaintiff
alleges, among others, that he has a good and valid cause of action agginst
defendant. Said reply accordingly prays that judgment be rendered against
defendant in accordance with the prayer embodied in plaintiff’s complaint, with
the modification that defendant be credited with the sum of P55,518.60 which
plaintiff owes defendant under the fertilizer account . Upon these pleadings and
the oral and documentary evidence adduced by both parties, the case was
submitted for decision. On May 3, 1960, the lower court found for the plaintiff,
stating in part as follows:

“RESPONSIVE TO ALL THE FOREGOING, judgment is hereby rendered ordering
defendant to pay to plaintiff the total amount of 9220,273.66, being the
proceeds from the sale of the 35,528.01 piculs of sugar in question with
interest thereon at the rate of six (6%) per cent per annum from June 27, 1956
until fully paid, plus six (6%) per cent interest per annum on the amount of
P99,220.00 from August 18, 1941 to December 31, 1942, and on defendant’s
counterclaim, ordering plaintiff, in turn to pay to defendant the amount of
P55,518.60, with costs against the defendant.”

From this decision both parties appealed raising several questions.

It is defendant’s first contention in this appeal that the question regarding
the exportation of plaintiff’s 16,000 piculs of sugar could not be raised
anymore because plaintiff was already credited on December 31, 1942, with the
sum of P64,016.08, the valueof the sugar in question. Plaintiff, however,
maintains that the issue involved here is not whether plaintiff should be
credited or not but whether plaintiff should have been credited with the
proceeds of the sugar on August 18, 1941, the date when the sugar was exported
instead of on December 31, 1942; and whether the plaintiff should be credited
with the sum of P99,2000.00 (at the rate of P6.20 per picul) with interest
thereon.

It is clear from the record and admitted by the defendant that in August,
1941, 16,000 piculs of sugar were in fact exported for the account of plaintiff;
that defendant “first obtained the special permission” of the plaintiff for
authority to export the latter1s sugar in the defendant’s bodega in Iloilo; and
“armed with that authority” did in fact export 16,000 piculs of sugar. However,
the issue begins where defendant maintains that because plaintiff did not give
instructions to sell the 16,000 piculs of sugar exported for his account, this
regained unliquidated and placed in a suspense account when the war broke
out.

Defendant’s position is untenable. If it had indeed exported plaintiff’s
sugar in question on the strength of and “armed with” the authority granted to
it by plaintiff, the defendant would no longer need additional authority to sell
said 16,000 piculs of sugar for plaintiff’s account. The authority given by
plaintiff to defendant to export the former’s sugar, is understood to include,
and does inciude the authority to sell said sugar for plaintiff’s account.
Having admitted the authority to export the sugar, defendant need not 4wait for
further instructions from plaintiff to sell. As the lower court correctly
stated:

“it appearing from plaintiff’s arguments and defendant’s counter arguments
just quoted, that they are at one as to the fact that ‘TABACALERA EXPORTED
15,000 PICULS OF SUGAR FOR THE ACCOUNT OF JOSE SORIANO SOMETIME IN AUGUST OF
1941’, it was defendant’s obligation to credit plaintiff’s account with the
proceeds thereof as of the date last mentioned, without a need for any
instructions or confirmation by or from plaintiff. Having credited plaintiff
with the said proceeds only as of December 31, 1942, instead or August 13, 1941,
derendant is deemed to have incurred in delay in the performance ol its
obligation, resulting in the payment of stipulated interest on the proceeds in
question by plaintiff from August 18, 1941 to December 31, 1942 X X
X.”

Plaintiff therefore is entitled to be credited with the proceeds of the sugar
from the date of shipment, on August 18, 1941, at the price per picul and with
the rate of interest to be determined elsewhere in this opinion.

The next question raised in this appeal refers to the remaining 35,528.01
piculs of sugar left in defendant’s possession after the sale of the 16,000
piculs of sugar for plaintiff’s account. The lower court in this connection
found that “defendant even admits having sold the said sugar for its own account
and accordingly for its own profit.” The defendant now contends that this
finding by the lower court is “without basis whatsoever”; the defendant arguing
that if this admission had in fact been made, there would be no case at all
because the very issue is whether the defendant did in fact export plaintiff’s
sugar, defendant denying that it did, and maintaining that the same remained in
Iloilo and was never exported because what was exported—granting that
plaintiff’s quedans were used—was defendant’s own sugar and finally because the
use of plaintiff’s quedans did not mean the use of plaintiff’s sugar.

The record bears out defendant’s admission in this connection. In answer to
paragraph IX of plaintiff’s complaint, which in effect states that the sugar in
question, instead of having been burned and destroyed during the war as falsely
represented by defendant, had actually been shipped and sold in the United
States on different occasions in 1941, the defendant alleged in part as follows:
that the sugar referred to in said paragraph was shipped to the United States
for defendant’s own account and not for the account of the plaintiff. As first
affirmative and special defense, defendant likewise alleged that it was and had
been the long established practice known to plaintiff, for defendant to ship
abroad in its own name as much sugar as ship space allowed, and when any of
defendant’s clients, such as the plaintiff, sent instructions to sell at a
certain price, defendant merely credits the client’s crop loan acoount with the
value of the sugar sold at the price prevailing en the date of the instructions
received by defendant. And lastly defendant averred that the sugar claimed by
plaintiff as shipped to the United States in 1941, was so shipped, in the name
and for the account of defendant and not for the account of plaintiff.

In addition to this, some documents—Exhibit K, a letter of defendant
addressed to plaintiff; Exhibit K-2, a statement of plaintiff’s sugar production
for the 1940-41 crop year; Exhibit M-1, a memorandum prepared for the General
Manager of defendant corporation—invariably and evidently point to the fact that
at several instances, defendant had made export of plaintiff’s various amounts
of sugar.

In view of defendant’s pleading, as well as the abovementioned documentary
evidence, it is undeniable that defendant had admitted having actually shipped
to the United States the sugar in question many months before the war broke out,
although the defendant claims to have made said shipments for its own account
and not for plaintiff’s account.

The issue then boils down to whether plaintiff is entitled to be credited
with the proceeds of the sale of the said 35,528.01 piculs of sugar.

Defendant avers that plaintiff should not be credited with the proceeds of
the said sugar because the same was exported and sold in the United States
without plaintiff’s authority and for defendant’s own account; that it is the
company practice to credit plaintiff with the proceeds of such sugar as ordered
sold by the latter for his account; and since plaintiff allegedly did not
instruct the defendant to either export or sell the 35,528.01 piculs of sugar,
it follows plaintiff can not be credited with the proceeds thereof.

This contention cannot be sustained. In line with what we had stated inibhe
previous assignment of error, there was no need for an authorization from
plaintiff to export his sugar because the defendant was expressly authorized to
sell plaintiff’s sugar delivered to it, in pursuance to the loan agreement. And
this is conclusively shown by the clause contained in the agreement. The
authority to sell reads as follows:

“VENTAS. Los azucares quedan desde el dia de la expedicion de los quedanes,
en el caso de entregarse por medio de estos o desde el momento de recibirse en
los almacenes de la compania en el caso de entregarse en sacos, a ia libre
disposicion de la Acreedora Hipotecaria, que podra, a su discrecion,
almacenarlos en espera de mejora de precios, venderlos en plaza o embarcarlos
para al exterior por cuenta y riesgo del Deudor Hipotecario, todos
ellos o parte de ellos, en el momento que lo estimare conveniente u oportuno,
con la conformidad el Deudor Hipotecario, al precio corriente en la
plaza de Hollo en la fecha o fechas en que la vent a o ventas se verificaren,
pero despures de pasar los 90 dias desde la fecha de expedicion de los
quedanes o de la entrega en el almacen de los azucares, la Accreedora
Hipotecaria queda expresamente autorizada y facultada para venderlos
immediatamente sin la conformidad del Deudor Hipotecario al precio corriente en
plaza en la fecha or fechas de la venta o ventas.” (Italics supplied)

“Pero el caso, sin enbargo, de que el Deudor Hipotecario-tuviere un saldo
deudor en sucuenta con la Acreedora Hipotecaria que provenga de otros creditos
aparte del concedido para la presente cosecha, la Acreedora Hipotecaria queda
tambien expresamente autorizada y facultada para vender los azucares del Deudor
Hipotecario- a su entera discrecion en qualquier tiempo, al precio corriente en
plaza en la fecha o fechas en que se vereficaren dicha venta or ventas, sin
la conformidad del Deudor Hipotecario.”

This authority to sell was likewise stated in another printed document which
the plaintiff signed:

“Por cuanto, he convenido con la citada Compania General de Tabacos de
Filipinas, en todo ello y en que dicha Compania General de Tabacos de Filipinas
pueda vender con mi (nuestro) consentimiento los azucares correspondientes a
dicho quedanes aplicando su importe al y pago a mi (nuestra) deuda con intereses
y demas gastos, entendiendose que si el dia 30 de Junio de 19 (41) lo susodichos
azucares o parte alguna de ellos estuvieren aun sin vender, entonces dicha
Compania General de Tabacos de Filipinas podra venderlos al precio en plaza en
la fecha o fechas que a su exclusive discrecion creyere mas conveniente, para lo
cual le autorizo desde ahora renunciando a todo derecho en contrario que pudiera
tener.”

By virtue of the above geoted provisions of the loan agreement between the
parties, the defendant was authorized to sell plaintiff’s sugar produced during
the crop year 1940-41 even without the consent or instruction of the plaintiff
when (X) the plaintiff’s crop loan account for 1940-41 crop year was not fully
liquidated within the period of 90 days from the date the quddans were issued or
from the date the sugar was stored; and (2) when the plaintiff had outstanding
obligations due to the defendant arising from credit accomodations other than
the ones covered by the crop loan contract for the year 1940-41.

Since it is borne by the records that at the start of the crop year 1940-41,
plaintiff still had an outstanding debt to the defendant in the amount of
P428,829.29, pertaining to the crop year 1939-40, the defendant upon receipt of
the quedans and the sugar covered by them from plaintiff’s crop in 1940-41,
could have sold the said sugar at its entire discretion at any time and at the
current price obtaining on the date of sale even without the permission of the
plaintiff. Now, as it is a proven fact as admitted by defendant that it had
shipped 35,528.01 piculs of sugar belonging to plaintiff, it stands to reason –
in view of defendants authority as embodied in the crop loan agreement – that it
shipped said sugar for the account of plaintiff. Defendant cannot avail of its
defense that it had so shipped the sugar for its own account on the ground that
plaintiff did not instruct it to export the sugar for plaintiff’s account. The
trial court therefore cerrectly ruled that “defendant was expressly authorized
to sell plaintiff’ s sugar delivered by the latter to the former at prices best
obtainable in the market, and to credit plaintiff’s account with the proceeds of
the sale.”

However, as a corollary to this particular assignment of eeror, defendant
argues that although the crop loan agreement expressly authorized tt to sell
plaintiff’s sugar without the latter’s consent, it had, nevertheless, not
availed of such authority because of its policy to first secure the prior
authority or instruction of the planters before it could sell the sugar.

This contention is untenable. Although defendant presented evidence to show
its alleged practice of first securing its client’s permission to sell sugar,
the evidence is inadmissible. The agreement between the parties had been reduced
to writing, and under its terms defendant could sell and was so authorized to
sell plaintiff’s sugar in any manner it deemed convenient, provided that tne
proceeds thereof be credited to plaintiff’s account. Defendant now cannot be
permitted to adduce evidence to prove its alleged practice, which to all
purposes, would alter the terms of the written agreement. Section 22, Rule 123
of the Rules of Court provides: “When the terms of an agreement have been
reduced to writing, it is to be considered as containing all those terms, and
therefore, there can be, between the parties and their successors in interest,
no evidence of the terms of the agreement other than the contents of the
writing, except in the following cases: x x x.” Whatever therefore is not found
in the writing must be understood to have been waived and abandoned (3 MDRAN
189). Inasmuch as the case at bar does not fall under any of the exceptions
mentioned in the Rule cited, defendant may not adduce evidencd to show a
practice other than that permitted by the terms of the agreement. The lower
oourt therefore correctly ruled against the admissibility of such evidence.

Defendant also contends that it was its practice to indiscriminately use its
client’s quedans delivered to it under the terms of the crop loan agreement and
whenever it thuv used said quedans, it is argued, it did not necessarily mean it
used the sugar covered by the said quedans. This contention is erroneous.
Quedans represent the sugar covered by it (Siy Cong Bieng vs. Hongkong and
Shanghai Banking Corporation, 55 Phil. 598, 604, 605). It is evidence to show
that the person in whose name it was issued is the owner of the quantity of
sugar mentioned therein. Consequently, when defendant used plaintiff’s quedans,
it used the sugar covered by the said quedans.

Contrary therefore to defendants contention, plaintiff’s 35,528.01 piculs of
sugar was not left in its bodegas and burned during the Japanese Occupation.
Evidence clearly proves that defendant had exported plaintiff’s sugar and did
not credit the latter with the proceeds thereof. In view of the foregoing,
plaintiff is entitled to be credited with the proceeds of the sale of the
remaining 35,528.01 piculs of sugar.

The trial court having held that the sugar exported by defendant belonged to
the plaintiff and that the latter is entitled to credit for its value, defendant
now contends on appeal that the lower court erred in not reducing the value by
the war damage compensation admittedly received by the plaintiff and in not
ordering the plaintiff to pay the defendant the P130,000.00 admittedly received
by plaintiff from the War Damage Commission.

The records reveal that because of defendant’s certification that plaintiff
had lost 35,528.01 piculs of sugar stored in defendant’s bodega during the war,
plaintiff was able to receive from the War Damage Commission the sum of
P130,000.00 as war damage compensation. It is defendant’s argument now that in
view of the lower court’s finding that defendant exported the 35,528.01 piculs
of sugar in question, plaintiff did not lose said sugar but instead, it was
defendant who lost the sugar burned in its bodegas, and who should be entitled
to the War Damage compensation.

On the other hand, plaintiff, citing the provisions of the Philippine
Rehabilitation Act of 1946 (Title 50 U.S.C.A.), maintains that in view of the
false representations made by defendant in its certification to the War Damage
Commission in favor of plaintiff, the War Damage Commission, under section 1757
of said law, “could take such actions as may be necessary to recover” from the
plaintiff whatever amount paid to him on the strength of the false certification
issued by the defendant; that since the payment made to the plaintiff was
erroneous, the money he received retains its character as public funds of the
U.S. Government and could not be disposed of except by the said Government
through its authorized agency, and consequently defendant should direct its
petition to the War Damage Commission; that defendant has not presented evidence
showing loss or damage it had suffered during the last war for which it should
be Compensated with the sum which plaintiff received as damage compensation.

We believe and so hold in this connection, that the defendant is the lone
entitled to the payment of the P130,000.00 war damage compensation because, as
the lower court found, the sugar lost in the bodega for which the war damage
compensation was paid, belonged to the defendant and not to the plaintiff. But
since the one who filed the claim and who received the war damage compensation
is the plaintiff, and it now results that the claim as presented was false
because the representa- tion made therein that the sugar lost was his when in
fact, as now established, belongs to the defendant, plaintiff has incurred
certain liability with the War Damage Commission in respect to the amount
received by him. He is not now at liberty to dispose she’ amount without the
knowledge and consent of the War Damage Commission. In other words, said amount
does not legally belong to him and consequently, he can not turn it over to the
defendant. If this is so, the amount can not be deducted from whatever may be
found to be due from the defendant to the plaintiff, because the War Damage
Commission, not being a party to this action, can not be bound by the judgment
to be rendered by this Court. But neither is the plaintiff entitled to retain
the war damage compensation. We note plaintiff’s recognition of this fact and
its undertaking the refund thereof to the War Damage Commission. However, in
fairness to the defendant, we believe the proper remedy is to make a judicial
consignment of the sum of P130,000.00 by the plaintiff to permit the defendant
and the War Damage Commission to interplead and have their respective rights or
claims thereto judicially determined.

Defendant, after making several analyses of the various effects of the
payments that plaintiff made during the Japanese Occupation, contends that the
lower court erred in not applying the law on automatic set off, so that payments
by the plaintiff during the occupation in occupation currency were overpayments
which lost their value.

Defendant’s analyses are of no consequence because its first analysis is
premised on the theory that plaintiff’s sugar was destroyed by the Japanese
Forces—which theory we have disregarded earlier in this opinion – while the
second analysis is premised on the theory that plaintiff’s payments made during
the occupation were in the nature of deposits on plaintiff’s current account
maintained with defendant and consequently valueless by virtue of Executive
Order No. 49 issued by President Garcia—which theory, again, we cannot sustain
because the payments made by plaintiff, as the records will bear, were not
deposits but actual payments of the crop loan extended to plaintiff by
defendant. Furthermore, plaintiff is not praying for any reimbursement of any
alleged overpayments but on the contrary, he is praying for the value of the
35,528.01 piculs of sugar which defendant exported without crediting to his
account.

Defendant cannot also avail of the defense of automatic compensation because
under the provisions of Article 1195 of the Old Civil Code, as well as Article
1278 of the New Civil Code, compensation takes place when two persons in their
own right are creditors and debtors of each other. Now, if, as defendant
theorizes, the sugar was “shipped to the United States for the defendant’s own
account”, it cannot then reverse its fctand and consider plaintiff as its
creditor. And even if, for the sake of argument, we consider plaintiff to be
defendant’s creditor to the extent of the value of the 35,528.01 piculs of sugar
which defendant exported without crediting to plaintiff’s account, then
plaintiff would be defendant’s creditor only because of defendant’s fault and
breach of the crop loan agreement by not crediting plaintiff with the sale of
the sugar.

Neither could defendant invoke the provisions of Article 1895 of the Old
Civil Code on solutio indebiti because the doctrine is clearly not
applicable to the case at bar. What plaintiff is demanding in this action is not
a return of any erroneous payments—as is maintained by the defendant—but the
payment of the proceeds realized by defendant from the sale of plaintiff’s
35,528.01 piculs of sugar.

Defendant’s next contention is that the trial court erred in requiring
defendant to pay the plaintiff for the sugar in question at the rate of P6.20
per picul after it had found the said price to “have been reckoned with as
reasonable and fair by both parties”, because plaintiff has not presented any
evidence to prove the prices of sugar on the dates his sugar in question were
shipped by defendant and because the price of P6.20 per picul was only the price
at which defendant was willing to liquidate plaintiff’s sugar and offered solely
for purposes of a compromise agreement which failed.

Defendant’s contention cannot be sustained. Plaintiff’s Exhibit L, a letter
written by plaintiff to the General Manager of the defendant company, quotes the
price of sugar ranging from P7.30 to P7.55 per picul in 1941, which prices were
obtained from the Lopez Sugar Central Milling Co. and the Elizalde &
Company. In fact, defendant’s own official, Mr. Alfonso Dampiere, testified that
the price of sugar in 1941 was between P6.00 and P7.00 per picul. It therefore
appears that plaintiff in order to avoid litigation was agreeable to liquidate
the sugar in question at P6.20 per picul as offered in compromise but the
compromise failed due to some other reason explained in plaintiff’s brief.

With respect to defendant’s contention as to the admissibility of said price
in evidence, he brings to light our decision in the case of El Varadero de
Manila vs. Insular Lumber Company (46 Phil. 176, 178) that as a general rule, an
offer of compromise is inadmissible in evidence, but where the amount named in
the offer to accept a certain sum in settlement appears to hawe been arrived at
as a fair estimate of value, it is relevant. In this case we held that the rule
of exclusion of compromise negotiations does not apply where there is no denial
expresssed or implied of liability for the 35,528.01 piculs of sugar. The
records bear that defendant admitted having shipped the sugar and consequently
admitted liability therefor. From all thatnappears on the record, the only
question that seemed to have been the subject of the compromise negotiations was
the price at which the said sugar would be credited to plaintiff’s account. And
inasmuch as the price of P6.20 per picul appears to be a fair estimate of the
value based on the prices quoted by the other sugar centrals during the 1941
period and the declaration of defendant’s own witness to that effect, said price
is relevant evidence and not falling with the exclusion rule.

Defendant’s last assignment of error is that the lower court erred in
ordering it to pay 6% interest on the P99,200.00 representing the value of the
16,000 piculs of sugar it had exported from August 18, 1941 to December 31,
1942.

The evidence establishes that defendant exported plaintiff’s 16,000 piculs of
sugar on August 18, 1941 but did not credit plaintiff with the proceeds thereof
on the said date but credited plaintiff only on December 31, 1942 with the sum
of P64,016.80. Pursuant to the crop loan agreement, it was defendant’s
obligation to credit plaintiff’s account with the proceeds of the sale as of
August 18, 1941. The lower court therefore correctly found that the defendant
incurred in delay in the performance of its obligation in this respect and
correctly ordered the defendant to pay the stipulated interest on the proceeds
in question from August 18, 1941 to December 31, 1942. In determing the value of
said sugar, the lower court correctly considered from the evidence the price of
P6.20 per picul, the price then prevailing in the market in 1941, so that the
value of the 16,000 piculs of sugar should be P99,200.00 instead of 964,016.80.
Having incurred in delay, in crediting plaintiff with the said amount, defendant
should pay plaintiff 6% interest on the the sum of P99,200.00 from August 18,
1941 to December 31, 1942.

Plaintiff as appellant, however, first contends that the trial court erred In
holding that “it finds no legal, contractual or factual basis for awarding
plaintiff’s claim for interest at seven (7%) per cent per annum compounded
semi-annually on the proceeds of the sale of the sugar, to be computed from the
dates when the sugar were respectively shipped and sold in the United States to
the date of payment”.

In this connection the lower court stated:

“In other words, defendant justifies its acts complained of in reliance upon
the alleged practices which, although not found in the parties’ written
agreements, were followed by it and its clients. In thus relying upon the said
practices, it can hardly be said that the defendant, acted from a desire to
defraud plaintiff so as to bring said defendant’s acts within the contemplation
of the word ‘fraud’ used in said Article 1101 of the old Civil Code. This is so
for the reason that said acts, being in accordance with practices previously
followed by defendant and known to its clients, may be inconsistent with any
deliberate willful or malicious intention on its part to take advantage of
plaintiff’s property at the letter’s expense, while on the other hand, they may
be perfectly consistent with good faith and the honest belief that the said
practices were regular and above board. That this Court has now found that the
said practices could not be made to prevail over the written covenants between
the parties, and that the defendant is accordingly liable to the plaintiff for
the proceeds of the 35,528.01 piculs of sugar in question, does not detract from
the sincerity of the defendant’s acts and much less taint them with any
fraudulent purpose.”

After finding no fraud in defendant’s failure to credit plaintiff with the
value of the 35,528.01 piculs of sugar, the lower court went further to consider
the extent of the damage suffered by plaintiff but did not, however, award any
interest. Said the lower court:

“Nevertheless, it is undoubted that because of the defendant’s failure to
credit plaintiff’s account with the proceeds of said 35,528.01 piculs of sugar,
plaintiff was unjustifiably compelled to pay the stipulated interest thereon, he
was damaged and prejudiced to the extent of this undue payment, as to the exact
or approximate amount of which neither plaintiff nor defendant has seen fit to
enlighten this court.”

The question tnerefore, to be determined in this particular assignment of
error is whether defendant was guilty of fraud in failing to credit plaintiff
with the proceeds of the sale of the sugar in question and whether plaintiff is
entitled to interest by way of damages and at what rate.

The records show that pursuant to the crop loan agreement, the defendant
usually sold plaintiff’s sugar and thereafter credited him with the proceeds
thereof. But in the earlier portion of this opinion, we found that defendant did
in fact export 35,528.01 piculs of plaintiff’s sugar on certain dates for which
the plaintiff was not credited. Consequently, plaintiff’s debt to the defendant
remained outstanding, a great part of which, however, was liquidated by
plaintiff during the Japanese Occupation leaving a balance as of January 1,
1945. After the liberation, plaintiff inquired from defendant as to what
happened to the sugar he produced during the crop year 1940-41, to which
defendant replied that plaintiff’s sugar had been burned by the Philippine Army
on April 15, 1942. Armed with defendant’s certification attesting to said loss,
plaintiff filed a war damage claim with the War Damage Commission and was
consequently paid therefor. However, sometime in 1951, plaintiff learned from
the General Manager of the offices of the La Carlota Sugar Central that the
sugar he produced and delivered to the defendant during the abovementioned crop
year, and which defendant claims to have been lost during the war, was in
reality shipped and sold by defendant in the United States many months before
the outbreak of the war, without crediting plaintiff with the proceeds thereof.
Thereupon, plaintiff notified defendant of what he found out and there began a
series of negotiations between the parties which later proved to be
failures.

It is plaintiff’s contention that these facts clearly and convincingly prove
the evident dishonest intention of defendant to defraud plaintiff and to keep
for itself the proceeds derived from the sale of the sugar, and that defendant’s
act of hiding from plaintiff the fact that it had shipped his sugar is
sufficient proof to show deceitful and fraudulent intent of defendant to enrich
itself at the expense of the plaintiff. Plaintiff further states that had
defendant acted in good faith and credited plaintiff with the proceeds of the
sale, his debt would have been greatly reduced and plaintiff would not have had
to incur difficulties in paying the same.

Under the circumstances, we believe, and so hold, that defendant is guilty of
fraud in the transaction. The trial court in declaring defendant free from fraud
relied upon the alleged practice of defendant to first obtain the permission of
its clients before selling the latter’s sugar, the court reasoning that
defendant’s act in accordance with the alleged practice “may be inconsistent
with any deliberate, willful or malicious intention on its part to take
advantage of plaintiff’s property.”

The difficulty with this reasoning is that it makes use of the alleged
practice of defendant as a basis to presume good faith on the part of the
defendant when the said practice was not proved during the trial, and
furthermore, evidence of said practice was not even accepted by the lower court.
It is inconsistent for the lower court to first rule out said alleged practice
for being unmeritorious and as nothing but a “concoction and an afterthought
defense” to later take the same into account in determining whether defendant is
guilty of fraud, bad faith and wanton malice.

The main reason, however, which makes us believe that defendant acted in bad
faith is the fact that it completely concealed the shipment of plaintiff’s
sugar. If it is true as defendant contends in its brief—that defendant shipped
plaintiff’s sugar for its own account and therefore, under that theory, not
obligated to credit plainttiff with the same, then why did defendant not inform
plaintiff of this fact? What makes defendant’s conduct more doubtful ia this
regard is that it even led plaintiff to believe that plaintiff’s sugar was
burned. Borrowing the lower court’s language, “to add insult to injury”,
defendant even helped plaintiff to secure a war damage compensation from the War
Damage Commission. Furthermore, if defendant had really shipped the sugar for
its own account, why had defendant gone through a series of negotiations with
plaintiff regarding the price per picul for which plaintiff would be credited?
The inevitable conclusion is that defendant fraudulently led plaintff to believe
that the latter’s sugar had been burned, concealing the fact that the said sugar
had actually been shipped for which plaintiff had not been credited.

Whether plaintiff is entitled to damages for defendant’s fraudulent act is a
point which plaintiff discusses at length in his brief.

It is plaintiff’s main contention that defendant should be made to pay the
same rate of interest it had been charging and collecting from plaintiff (7%
compounded semi-annually) and which plaintiff should not have paid had defendant
duly. credited him with the proceeds of the sale of the sugar. However, as an
alternative argument, plaintiff also maintains that in the event that this Court
finds no legal, contractual, or factual basis to grant his demand for the
payment of the 7% interest as above stated, the defendant is nevertheless,
liable, as an agent of plaintiff, to pay interest at the rate of 6% per annum on
the same amount in question. Lastly, plaintiff argues that in the event the last
contention be not sustained by this Court, defendant is still liable to pay
plaintiff the interest at thd rate of 6% per annum on the amount of P220,273.66
from the date of plaintiff’s first extrajudicial demand till the date of
payment.

Suffice it to state that the records do not sufficiently prove the existence
of an agency between the plaintiff and the defendant, for altbaggh defendant was
authorized to sell plaintiff’s sugar at the best price obtainable and to credit
plaintiff with the sale thereof, these facts alone do not establish the
existence of an agency. The authorities relied upon by plaintiff to support his
contention that an agent is liable to pay interest to the principal is therefore
not applicable. Neither can plaintiff now successfully argue that defendant was
not authorized under the crop loan agreement to charge 7% interest compounded
semi-annually and thus be obliged to return the amount collected as interest at
that rate because plaintiff did not raise this issue before the lower court and
cannot now raise the same for the first time on appeal. In any case, the
defendant is liable to make good the loss or injury that it had occasioned the
plaintiff from its wrongful concealment of the shipment and disposition of
plaintiff’s sugar. Legally looked at, defendant had incurred in delay in its
obligation to credit plaintiff with the proceeds of the sale of the 35,528.01
piculs of sugar. Hence, under the provisions of Article 1108^[1] of the old Civil Code as well as Article
2209^[2] of the New Civil Code, plaintiff
is entitled to the payment of legal interest from the date the shipments were
made—which were the same dates that plaintiff was entitled to be credited
therefore—to the date of payment.

As previously stated elsewhere in this opinion, the plaintiff is entitled to
be credited and in fact was credited with the sum of P64,916.80 for the sale of
the 16,000 piculs of sugar shipped on August 18, 1941. We also sustained the
findings of the lower court fixing the value of the 16,000 piculs of sugar at
P99,200.00 at the rate of P6.20 per picul. However, in this connection,
plaintiff points out that the lower court did not order the defendant to pay the
sum of 935,183.20 which is the difference between the sum of P99,200.00 the
value of the sugar as fixed heretofore, and the sum of 964,016.80 which is the
amount with which defendant credited plaintiff for his sugar on December 31,
1942. It is beyond question therefore that plaintiff is, in con- sonance with
our findings injthe preceding paragraphs, entitled to recover from defendant the
sum of P35,183.20 plus six per cent interest per annum from the date when the
sugar was exported to the time of payment. In addition to this, defendant should
likewise pay plaintiff six per cent interest per annum on the sum of P64,016.80
from the date of shipment of the 16,000 piculs of sugar on August 18, 1941 to
December 31, 1942, the time when defendant only credited plaintiff with the said
amount.

Plaintiff next alleges that the lower court erred in not ordering defendant
to pay him interest at the rate of 6% per annum on the accrued interest on the
various amount due from defendant, from the filing of the complaint to the date
of payment. Plaintiff citep Article 2212 of the New Civil Code providing that
“interest due shall earn legal interest from the time it is judicially demanded,
although the obligation may be silent upon this point.”

We have held in several instances that accrued interest draws legal interest
from the time that the suit is filed for its recovery. (Bachrach v. Golingo, 39
Phil 012; Hodges v. Regalado, 69 Phil 588; Salvador v. Palencia, 25 Phil 661;
Philippine Engineering Co. v. Green, 48 Phil 466). However, in Zobel v. City of
Manila (47 Phil 169, 187), we held that Article 1109 of the Old Civil Code (from
which Article 2212 of the New Civil Code was taken) providing for interest upon
interest is applicable only to obligations containing a stipulation for
interest. In the case at bar, while it is true that plaintiff is entitled to the
payment of interest on the various amounts due from the defendant, nevertheless
these interests have been granted by way of damages. The interest granted to the
plaintiff did not arise from an obligation of the defendant to pay the same on a
contractual basis. The event which gave rise to plaintiff’s right to recover
interest was not a conventional obligation, but defendant’s failure to credit
plaintiff with the proceeds of the sugar for which he incurred in delay.
Plaintiff’s contention therefore cannot be sustained.

Plaintiff also maintains that the lower court erred in not holding that
plaintiff is liable to pay defendant only the sum of P29,256.00 on the
fertilizer account which he incurred after the liberation, because the original
account for the fertilizer amounted only to P29,256.00 and this increased to
P55,518.86 as of June 30, 1956 because of the interest of 7% per annum
compounded semi-annually which defendant had charged. It is argued that since at
the time this account was incurred defendant has already indebted to plaintiff
for the value of the sugar the latter exported, said fertilizer account should
ipso facto be compensated by plaintiff’s credit against the
defendant.

This contention is untenable. Plaintiff does not deny the existence of the
fertilizer account. In fact in his answer to defendant’s counterclaim, he prays
that “defendant be credited with the sum of P55,518.60 which plaintiff wwed the
defendant as of June 30, 1956, under the fertilizer account.” Having admitted
the debt and not having questioned the same during the proceedings in the lower
court, the plaintiff cannot now raise the issue on appeal. The trial court’s
finding in this connection is therefore affirmed.

Plaintiff lastly prays that the defendant be ordered to pay a reasonable
amount for moral and exemplary damages and attorneys fees.

As to the payment of moral and exemplary damages, while it may be stated that
this Court finds the defendant guilty of fraud and bad faith in leading
plaintiff to believe that his sugar was lost, nevertheless, it is a fact that
the fraud was perpetrated prior to the effeattvity of the New Civil Code.
Plaintiff’s complaint states that shortly after the liberation, he had inquired
from defendant about the status of the sugar he produced during the crop year
1940-41 and it was then when defendant informed him that his sugar was burned
and eventually aided him in filing the war damage claim. Now, under the old
Civil Code, practically the only damages allowed therein are compensatory and
those agreed upon in a penal clause. Moral damage was not expressly recognized
in the said Code. In fact, this Court prior to the New Civil Code, had awarded
moral damages only in a few cases (Report of the Code Commission, p. 72). In
view of the foregoing, it is doubtful if plaintiff is entitled to the payment of
either moral or exemplary damages.

As to the payment of attorney’s fees, however, we believe that inasmuch as
defendant had acted in evident bad faith in refusing to satisfy plaintiff’s
plainly valid, just and demandable claim, the plaintiff is entitled to the
payment of reasonable attorney’s fees. Under the circumstances obtaining in this
case, this Court finds it just and equitable that attorney’s fees and expenses
of litigation be recovered by plaintiff. Accordingly, and taking into account
the extent and nature of the legal work employed and the amount involved, this
Court holds that defendant should pay plaintiff the amount of P15,000.00 as
attorneys fees.

WHEREFORE, modified as above indicated, the decision of the lower
court is hereby affirmed, with costs in both instances against the defendant
appellant. Plaintiff, upon obtaining full satisfaction of this judgment, shall
consign with the proper court, the sum of P130,000.00 for the purpose indicated
in this decision.

SO ORDERED.

Concepcion, C.J., Reyes, J.B.L., Dizon, Regala,
Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Ruiz Castro,
JJ., concur.

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^[1] Should the obligation consist in the
payment, of a sum of money, if the debtor should become in default, the
indemnity for losses and damages, in the absence of a stipulation to the
contrary, shall consist in the payment of the interest agreed upon or should
there be no agreement, in the payment of interest at the legal rate. Until
another rate is fixed by the Government, the legal rate of interest shall be six
per cent per annum.

^[2] If the
obligation consists in the payment of a sum of money, and the debtor incurs in
delay, the indemnity for damages, there being no stipulation to the contrary,
shall be the payment of the interest agreed upon, and in the absence of
stipulation tne legal interest, which is fix per cent per annum.