LAND SETTLEMENT AND DEVELOPMENT CORPORATION, PLAINTIFF AND APPELLEE, VS. CAROLINO MUNSAYAC, DEFENDANT AND APPELLANT.

On 3 June 1957, in the Court of First Instance of Manila the Land Settlement
and Development Corporation^[1] brought an
action against Carolino Munsayac to recover two sums of money and interests due
thereon. It alleged, as first cause of action, that on 9 December 1946 the
defendant purchased from the Agricultural Machinery and Equipment Corporation
(AMEC) two tractors, crawler, International TD-9, for and in consideration of
the sum of P9,777.50, payable by installment as follows: P2,444.38 upon the
signing of the contract and P7,333.12 in three equal annual installments, the
first, second and last installments to be due and payable on 9 December 1947 and
on the same date every year thereafter, any amount remaining unpaid to bear
interest at the rate of 4% per annum and the stipulated interest to be
compounded upon failure to pay any installment due; and that to secure payment
of the balance of the purchase price and interest thereon, the defendant
executed a chattel mortgage on the said tractors in favor of the AMEC without
prejudice to the right of the latter to exact fulfillment of the obligation
undertaken by the defendant under the contract in an ordinary action (Annexes A
& B); and as second cause of action, that on 29 April 1947 the defendant
purchased from the same corporation two tractors, one model TD-18 and another
model TD-9, for and in consideration of the sum of P5,922.50, payable by
installment as follows: Pl,480.61 upon the signing of the contract and P4,441.87
in three equal annual installments, the first, second and third installments to
be due and payable on 29 April 1948 and on the same date every year thereafter,
any amount remaining unpaid to bear interest at the rate of 4% per annum and the
stipulated interest to be compounded upon failure to pay any installment due;
and that to secure payment of the balance of the purchase price and the interest
thereon, the defendant executed a chattel mortgage on the said tractors in favor
of the AMEC, without prejudice to the right of the latter to exact fulfillment
of the obligation undertaken by defendant under the contract in an ordinary
action (Annexes C and D); and that as of 15 February 1957, the total amount of
the defendant’s indebtedness to the plaintiff on the two causes of action is
P2,l85.67, the unpaid balance of the purchase price of the four tractors and
accumulated interest for failure to pay on time the installments due, stipulated
at the rate of 4% per annum (Annex E); that notwithstanding repeated demands
made by the plaintiff upon the defendant to pay his indebtedness, the latter has
refused and failed to pay it; and that by reason of such refusal and.failure to
satisfy the plaintiff’s claim, the plaintiff has incurred damages in the form of
attorney’s fees and expenses of litigation amounting to 25% of P2,l85.67. It,
therefore, prayed that the defendant be ordered to pay it the total sum of
P2,185.67, with interest thereon at the rate of 4% per annum from 16 February
1957 to 3 June 1957 when the complaint was filed, and thereafter at the lawful
rate until the whole amount be fully paid; 25% of P2,185.67 as attorney’s fees;
and the costs of the suit, and for other just and equitable relief (Civil No.
32687).

On 13 July 1957 the defendant filed a motion to dismiss the plaintiff’s
complaint on the ground that the Court has no jurisdiction of the subject matter
of the complaint and that the complaint states no cause of action. In support of
his motion, he claimed that as shown in the statement of account, Annex E, his
total indebtedness to the plaintiff is P1,927.28 only excluding interest; that
under the provisions of section 44(c), in relation to section 88, of
Republic Act No. 296, as amended, courts of first instance have original
jurisdiction “in all civil cases in which the demand, exclusive of interest, or
the value of the property in controversy, amounts to more than two thousand
pesos;” that in view thereof the Court has no jurisdiction to hear and determine
the plaintiff’s claim; and that there being no allegation in the plaintiff’s
complaint that its claim had not yet been paid, it “has not alleged facts
sufficient to constitute a cause of action against the defendant.” On 30 July
1957 the plaintiff filed an objection to the defendant’s motion to dismiss,
disputing the defendant’s claim. On 3 August 1957 the Court denied the
defendant’s motion to dismiss for lack of merit and ordered him to answer the
complaint within ten days from receipt of notice of the order. On 20 August 1957
the defendant filed a motion for reconsideration of the foregoing order. On 7
September 1957 the Court denied the defendant’s motion for reconsideration.

On 25 September 1957 the defendant filed his answer admitting the allegations
contained in paragraphs 1 to 9 but denying the allegations contained in
paragraph 10 of the complaint, claiming that the “plaintiff never made any
extrajudicial demand for the payment of defendant’s indebtedness;” and setting
up the affirmative defenses that the court had no jurisdiction of the subject
matter of the complaint for reasons already stated and that the plaintiff was
not entitled to collect from him attorney’s fees and expenses of litigation for
lack of stipulation in their contract.

At the hearing held on 21 October 1958, neither the defendant nor his counsel
appeared despite previous notice. On the same date the Court rendered judgment
holding that—

* * * By reason of the admission in defendant’s answer there remains no
question of fact to be tried by this Court and the only question is one of law.
* * *. Under Sections 4 and 5 of Article 2208, NCC, the Court may award
attorney’s fees even in the absence of any stipulation in the cases therein
related, one of which is where the defendant acted in bad faith in refusing to
satisfy plaintiff’s plainly valid and demandable claim, and also in the case of
a clearly unfounded proceeding against the plaintiff. In the mind of this Court
these provisions apply squarely on the facts of the present case. (pp. 53,
54-55, rec. on app.)

and ordering the defendant—

* * * to pay the plaintiff the sum of TWO THOUSAND ONE HUNDRED EIGHTY-FIVE
PESOS AND SIXTY-SEVEN CENTAVOS (P2,185.67), with 4% interest thereon from
February 16, 1967 until the filing of the complaint on June 3, 1957, and
thereafter, at the legal rate of 6% until the whole amount is paid to the
plaintiff, plus P200 as attorney’s fees, and the costs of this action. (pp. 55,
rec. on app.)

The defendant has appealed to this Court on questions of law only.

At the time of the. filing of the appellee’s complaint the jurisdictional
amount originally cognizable by courts of first instance was limited to more
than P2,000.^[1]

The appellant presses the question of jurisdiction. It is a settled rule that
when a party has several claims for money against another arising from different
transactions, he may sue for recovery of the total amount in a single
complaint.^[2] The totality of his claims
exclusive of costs and interests determines the jurisdictional amount of the
court.^[3]

It appears that the parties have stipulated that “any amount (of the purchase
price or installment) remaining unpaid shall draw interest at the rate of 4% per
annum” (Annexes A and C) and that unpaid interest shall be “compounded upon
failure to pay the installments due” (Annexes B and D). It also appears in the
statement of account, Annex E, that in the first account (C.F. No. 307), the
appellant had an unpaid balance of P63.98 as of 3 June 1955 and P4.38 interest
due thereon at the rate of 4% per annum from that date to 15 February 1957; that
in the second account (C.F. No, 657), the appellant had an unpaid balance of
P1,863.30 as of 20 September 1953 and P254.01 interest due thereon at the same
rate from that date to 15 February 1957. Pursuant to the appellant’s undertaking
that interest unpaid shall be compounded or added to the principal indebtedness
upon failure to pay the installments due, the interests due on the respective
amounts became part of the principal. Adding up all the outstanding accounts
unpaid and the interests due thereon, we have P2,185.67 as the total amount due
from the appellant, which was then within the jurisdictional amount cognizable
by the Court of First Instance.

Even if the interests of P4.38 and P254.01, or a total of P258.39, be
excluded from the total amount of P2,185.67, claimed by the appellee, thereby
reducing its claim to only P1,927.23, still the case remained within the
jurisdiction of the Court of First Instance, because the appellee alleged in its
complaint “that notwithstanding repeated demands made by the plaintiff
(appellee) on the defendant (appellant) on the amounts of the First and Second
Causes of Action, the latter has in gross and evident bad faith, neglected,
failed, and refused and continues to neglect, fail and refuse to pay his account
long overdue; and that by reason of the defendant’s (appellant’s) neglect,
failure and refusal to satisfy the plaintiff’s (appellee’s) valid, just and
demandable claim, the plaintiff (appellee) incurred damages in the form of
attorney’s fees and expenses of litigation amounting to 25% of P2,185.67, the
plaintiff’s (appellee’s) claim under this complaint,” and prayed that the
appellant be ordered to pay it “damages in the form of attorney’s fees amounting
to 25% of P2,185.67, the plaintiff’s (appellee’s) claim under this complaint.”
Consequential damages and attorney’s fees, when properly recoverable as an item
of damage, are not excluded from the jurisdictional amount, is the rule in
Suanes vs. Almeda-Lopez, 73 Phil. 573. Therefore, consequential damages
and attorney’s fees, when properly recoverable as an item of damage, is included
in the jurisdictional amount. Article 2208 of the Civil Code provides that “In
the absence of stipulation, attorney’s fees and expenses of litigation, other
than judicial costs, cannot be recovered, except; (5) Where the defendant acted
in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly
valid, just and demandable claim.” Twenty-five per cent of P1,927.28 amounts to
P481.82. Adding these two amounts, we have a total of P2,409.10, which brings
the total claim of the appellee within the jurisdiction of the Court of First
Instance.

The appellant in his answer having admitted the material averments of the
appellee’s complaint except paragraph 10, claiming that the latter did not make
any extrajudicial demand for payment of his indebtedness, and not having
introduced any evidence in support of its defense, is now precluded from raising
questions tending to inquire into the facts of the case as alleged in the
appellee’s complaint and expressly admitted by him in the answer.

The appellant contests the legality of that part of the judgment ordering him
to pay interest at the rate of 6% per annum from 4 June 1957 notwithstanding the
fact that the stipulated rate is 4% per annum on unpaid accounts. In other
words, he claims that the rate of interest for which he should be liable is only
4% per annum on unpaid accounts from the date the installments were due until
they are fully paid. The appellant is in error. The 4% interest stipulated by
him and the appellee is penalty for failure to pay on time the installments due
while the 6% interest imposed by the trial court from 4 June 1957 is penalty for
failure to satisfy the plaintiff’s valid and demandable claim after
extrajudicial demand. In the absence of stipulation for the latter eventuality,
the lawful rate of 6% should be imposed. This the trial court correctly did.

The judgment appealed from is affirmed, with costs against the
appellant.

Bengzon, C.J., Bautista Angelo, Labrador, Reyes, J.B.L.,
Paredes, Dizon, De Leon, and Natividad, JJ., concur.

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^[1] The Agricultural Machinery and
Equipment Corporation, which sold the four tractors in question to Carolino
Munsayac, was created under the provisions of Commonwealth Act No. 694. On 4
October 1947, it was converted into a department of the National Development
Company (the Machinery and Equipment Department) and all its properties and
assets were transferred and assigned to the said Company, pursuant to section 7,
Executive Order No. 93, series of 1947 (43 Off. Gaz. 4547, 4549). On 23 October
1950 the Machinery and Equipment Department of the National Development Company
was dissolved and the Land Settlement Development Corporation (LASEDECO) was
created, and “the personnel, records, properties, equipment, assets, rights,
choses in actions, obligations, liabilities, and contracts of the former were
transferred to, vested in and assumed by the latter,” pursuant to Executive
Order No. 355, as authorized by Republic Act No. 422 (46 Off. Gaz. 4671-4676).

^[1] Section 44(c), Republic Act No. 296.
This section was amended on 1 August 1959 increasing the jurisdictional amount
cognizable by court of first instance to more than P5,000 (Republic Act No.
2613)

^[2] Soriano vs. Omila, 97 Phil.,
62; 51 Off. Gaz., [7] 3465; Despo vs. Sta. Maria, 98 Phil., 305; 53 Off.
Gaz., [12] 3759; Campos Rueda Corporation vs. Sta. Cruz Timber Co., 98
Phil., 627; 52 Off. Gaz., [3] 1387.

^[3]
Section 44 (c), in relation to section 88, Republic Act No. 296; Carlos
vs. P. J. Kiener Construction Ltd., 100 Phil., 29; 52 Off. Gaz., [15]
6554.