GONZALO CHUA GUAN, PLAINTIFF-APPELLANT, VS. SAMAHANG MAGSASAKA INC., ET AL., DEFENDANTS-APPELLEES.

This is an appeal taken by Gonzalo Chua Guan (referred to later as GUAN) to
the Court of Appeals from the order of the Court of First instance of Nueva
Ecija of June 6, 1951 in Civil Case No. 646 of that court. Defendants-appellees
failed to file their briefs and the appeal was given due course by that Court
without said appellees’ brief. By its resolution dated April 22, 1954, the
appeal was certified to us because it was said to involve only questions of law
as well as the jurisdiction of the trial court. It is docketed here under G. R.
No. L-7914.

This case involves two other cases which may be regarded as of ancient
origin, one of them decided by this Court far back in 1935, and the other
decided by this Tribunal only this year, but initiated in 1934. The transaction
involved are long and not without complications and we shall relate them in
chronological order as far as possible in order to have a better understanding
of the parties and the issue, involved.

In the year 1931, Gonzalo H. Cotoco (later referred to as COTOCO) was a heavy
stockholder in the Samahang Magsasaka Inc. (later referred to as MAGSASAKA), a
corporation duly organized and existing under and by virtue of the laws of the
Philippines with principal office at Cabanatuan, Nueva Ecija, 5,894 of its
shares of stock being in his name. On and before that year he was engaged in the
business of buying and selling palay particularly in the province of Nueva
Ecija, and in connection with his business he owned and maintained two rice
mills and warehouses located in Cabanatuan, Nueva Ecija where as many as 100,000
cavans of palay belonging to different owners and vendors, were usually
deposited We have no exact information as to the conditions under which he made
the purchase but there is reason to believe that the palay were deposited in the
warehouse by vendors who later and from time to time made the sale of their
deposits when the current price of the palay suited them. In or about the month
of August of that year 1931 it would appear that much if not all of 100,000
cavans of palay deposited in Cotoco’s warehouses had not yet been paid for by
him. On August 13, 1931, Cotoco absconded, leaving only about 4,000 cavans of
palay in said warehouses. One of the depositors Lucia Y. Matias (later referred
to as MATIAS) who was not able to recover her deposit of palay or its price,
filed an action in court (Civil Case No. 6043) against Cotoco to collect the
amount of P11,023.80. This was on August 26, 1931. On the same date the she
secured a writ of attachment of the aforementioned 5,894 shares of stock of
Magsasaka, which attachment was duly noted on the same date on the books of the
corporation. But before that date date, on June 18, 1931, Cotoco had mortgaged
the 5,894 shares of stock to one Chua Chiu to guarantee the payment of a debt
amounting to P20,000.00. The deed of mortgage was registered in the office of
the Register of Deeds of Manila on July 23, 1931, and was noted on the books of
the corporation on September 30, 1931. Matias eventually obtained judgment
against Cotoco and the 5,894 shares of stock previously attached by her were, on
October 3, 1932, sold by the Provincial Sheriff to her as highest bidder for
P2,947.00. However, the corresponding certificate of sale was not issued to her
until March 28, 1944.

There were about eight other creditors of Cotoco, some of them presumably
depositors of palay in his warehouses, and these creditors filed actions against
him in the Court of First Instance of Nueva Ecija, each one securing a writ of
attachment against the same 5,894 shares of stock which attachments were also
noted on the books of the corporation.

On November 28, 1931, Chua Chui sold all his mortgage right and interest in
the said 5,894 shares of stock to Guan, the deed of mortgage having been
registered in the office of the Register of Deeds of Manila on December 28, 1931
and noted on the books of the corporation on January 4, 1932. Upon maturity of
the mortgage debt and Cotoco having failed to pay the same, Guan foreclosed the
mortgage and at the auction sale held on December 22, 1932, he, as highest
bidder, bought the 5,894 shares of stock for the sum of P14,390.00. The Sheriff
executed the corresponding certificate of sale in his favor. Thereafter, Guan
took the certificate of sale to Magsasaka, and demanded that the shares of stock
be transferred in his name on the books of the corporation but the latter
refused to make the transfer giving as a reason the fact that prior to the sale
of the shares in his favor the corporation had received many writs of attachment
issued over the same shares.

Because of this refusal of Magsasaka, Guan filed an action against it for
mandamus to compel it to make the transfer, claiming that he was a bona fide
purchaser of the shares. Said case for mandamus reached the Supreme Court and
was docketed here under G.R, No. 42091 and the Tribunal rendered a decision
promulgated on November 2, 1933, and published in 62 Phil, 47. The question
therein involved was whether or not the registration of the chattel mortgage
executed by Cotoco in favor of Chua Chiu in the office of the Register of Deeds
of Manila on July 23, 1931 gave constructive notice to the attaching creditors.
In that decision this Court held that “the attaching creditors are entitled to
priority over the defectively registered mortgage of the appellant” (Chua Guan).
The decision, however, did not end the litigation over the aforementioned shares
of stock.

On May 17, 1934 Magsasaka filed interpleader case No, 6870 in the Court o,
first In stance of Nueva Ecija to secure a judicial ruling as to who among the
several attaching creditors and the mortgage- creditor had a better right to the
5,894 shares of stock listed in its books in the name of Cotoco. All the
attaching creditors as well as the mortgage creditor filed pleadings in
intervention. Attaching creditor Matias filed her pleading on October 23, 1936
quoting the dispositive part of the decision of this Court in case G.R. No.
42091 published in 62 Phil, 472, and invoking the principle of res
judicata. She further claimed that she was the first attaching creditor.
The parties on April 26, 1938 submitted a stipulation of facts containing the
dates on which the different creditors attached the shares in question. They
also agreed that the Supreme Court decision rendered in case G.R. No. 42091 be
made an integral part of said stipulation so that it may be considered in
deciding the case No. 6870. After hearing, however, the lower court although it
took notice of the decision of the Supreme Court, particularly the dispositive
portion thereof, and disregarding the same, rendered judgment dated December 27,
1940, contrary to it and ruled that Guan was “the legal owner of the 5,894
shares of stock” and had “a better right to said shares than each and everyone
of the attaching creditors.” Two of the attaching creditors-intervenors Matias
and Philippine Guaranty Co. appealed to the Court of Appeals under prewar case
CA-G.R. No. 9186. Before the said Court of Appeals could decide the appeal,
however, all the records of the same were lost or destroyed when the building of
the appellate court was burned as a result of the bombing by the American
Liberation forces sometime in 1944. Due to said loss the appeal was left pending
for a long time.

After Liberation the members of the Board of Directors of Magsasaka in
meeting held in the year 1945, and upon suggestion of Atty. Mariano Sta. Romana,
president of said corporation, passed resolutions ordering the transfer to
Matias of the aforementioned 5,894 shares of stock, pursuant to these
resolutions new shares of stock for the same number were issued to her by the
Corporation on October 20, 1950, and par valued at P29,470.00. Thereafter,
Magsasaka caused to be withdrawn and paid to Matias dividends declared
corresponding to the years 1947 and 1949 in the total sum of P4,135.80.

Because of the aforementioned acts of the corporation, Guan filed against
Magsasaka, Mariano Sta. Romana and Benigno Puno as President and Vice-President
thereof and four others as members of the Board of directors, the present action
Civil Case No, 646 of the Court of First Instance of Nueva Ecija, seeking to
restore the shares of stock in question to their original status pending final
determination of the appeal in case CA-G.R. No. 9186 in the Court of Appeals
involving the Interpleader Case No. 6870. The complaint was amended on October
29, 1950 in order to include Matias as party defendant. In said complaint
Gonzalo Chua Guan prayed:

“That judgment be rendered ordering the defendants, jointly and severally,
(1) to make good and available the 5,894 shares of stock that are being
litigated or in lieu thereof to pay an amount equivalent to its market value as
of this date and deposit same with this Court to await for the final termination
of the case covering said 5,894 shares of stock originally registered in the
books of the corporation in the name of Gonzalo H. Cotoco; (2) to pay the
dividends withdrawn by Lucia Y. Matias and paid by ths defendant corporation for
the years 1947 and 1949 amounting to exactly FOUR THOUSAND ONE HUNDRED THIRTY
FIVE PESOS AND EIGHTY CENTAVOS (P4,135.80 ), the latter to be deposited with
this court or with the Philippine National Bank to await for the final
determination by the competent court as to who shall be entitled thereto; (3) to
pay to the plaintiff the amount of TWO THOUSAND PESOS (P2,000.00) representing
his attorney’s fees in the instant proceeding as well as all other expenses
incurred and to be incurred in connection with this case until its termination.”
(Record on Appeal, pp. 3-9.)

On August 28, 1950, Sta. Romana filed a motion to dismiss the. complaint
against him and the other members of the Board of directors on the ground that
there was another action pending between the same parties for the same cause
(Civil Case No. 6870) pending appeal and because the complaint stated no cause
of action against them, for the reason that the inclusion of Magsasaka as party
defendant was sufficient since they were only past members of its Board of
Directors. The lower court, denied the motion to dismiss by its order of
September 20, 1950, because the court knew of “no move on the part of any of the
parties to reconstitute the old expediente” (CA-G.R. No. 9186).

On May 4, 1951, Atty. Mariano Sta. Romana filed another motion to dismiss on
behalf of Matias on the ground that the court had no jurisdiction over the
subject matter of the action; that there was another action pending between the
same parties far the same cause and that the record of Civil Case No. 6870 had
been found intact in the Court of First Instance of Nueva Ecija and that
furthermore the cause of action was barred by a prior judgment.

On May 23, 1951, the trial court finding that only the plaintiff’s attorney
had been notified of thid motion to dismiss, ordered that the rest of the
parties be notified and it set the motion for hearing on May 30, 1951, stating
that the court wanted to be satisfied that the record of Civil Case No. 6870 was
complete with all the evidence as well as the transcript of the stenographic
notes taken during the trial.

On June 6, 1951, the lower court entered the following order:

“The petition filed by Atty. Mariano Sta. Romana for the dismissal of this
case dated May 4, 1951, under the ground alleged in the same is hereby granted.
Parties ared directed to reconstruct Civil Case No. 6870 whose record, as per
reliable information, exists in this court as in fact we saw the same. This
dismissal shall be understood as under the condition that no action shall be
taken regarding the share of Lucia Y. Matias until said case is finally decided
or terminated.” (p. 107, Record on Appeal.)

Plaintiff Guan filed two motions for reconsideration of the order of
dismissal but both were denied on the ground that , the appealed case No. 6870
pending in the Court of Appeals may be reconstituted from the original record
existing in writhe Court of First Instance of Nueva Ecija. Plaintiff appealed
from this order to the Court of Appeals which as already stated certified the
appeal to us.

On September 21, 1951, appellant Gonzalo Chua Guan petitioned the Court of
Appeals for the re constitution of the appeal in Civil Case 6870. This petition
was denied on the ground that the time for filing said petition had already
expired, but on November 17, 1951 the same Court’ by resolution ordered the
reconstitution of the records of said appeal which was done. Upon certification
of the appeal as reconstituted, to this Court the appeal was docketed here as
G.R. No 7252. On February 25, 1955, this Tribunal rendered a decision in said
case, the dispositive part of which reads as follows:

“Wherefore, the decision appealed from is reversed. Judgment is hereby
rendered declaring: (1) that the rights of appellants Lucia Y. Matias and the
Philippine Guaranty Co., Inc. over the 5,894 shares of stock in the Samahang
Magsasaka Inc., enjoy priority over the right of appellee Gonzalo Chua Guan; (2)
that as between the two appellants, the right of the first enjoys priority over
the second, it having been registered ahead on the books of the corporation;
and, (3) it appearing that said shares of stock have already been sold to
Gonzalo Chua Guan by the sheriff on December 22, 1932, the sale should be, as it
is hereby, declared subject to the liens in favor of herein appellants, in the
order of their priority, to be dealt with in accordance with law. This decision
is only effective with regard to appellants and appellee and is not extensive to
other parties who have no appealed. Costs against the appellee.” (G.R. No.
L-7252, Feb. 25, 1955.)

Final entry of judgment was entered in G.R. No. L-7252 on April 4, 1955.

Now, as regards the appeal of Guan from the order of dismissal of his
complaint in Civil Case No. 646 taken first to the Court of Appeals and later
certified to us and docketed here as case G.R. No. L-7914, defendants-appellees
Matias and Mariano Sta. Romana filed a petition to dismiss the appeal dated
March 31, 1955 on the ground that the issue involved in the appeal had already
been decided between the same parties in two cases, namely, G. R. No. 42091 (62
Phil. 472) and G.R. No. 7252, the dispositive part of the decision in the last
case being quoted above, or at least decide this case after considering the two
aforementioned cases. Appellant has answered the petition, objecting to the
same.

Considering our decision in G.R. No. L-7252 particularly the dispositive part
thereof, we see no good reason to continue the present appeal, have the parties
file their respective pleadings and later decide the case on its merits, for the
reason that the execution of the judgment now final in G.R. No. L-7252 would
satisfactorily and completely solve the problem, involved in the present appeal.
We are inclined to agree with appellant that at the time he filed his original
complaint in Civil Case No. 646 he might have had a good cause of action for the
reason that although he obtained a favorable judgment in Civil Case No. 6870
wherein Judge Pecson declared him the legal owner of the 5,894 shares of stock
and that he had a better right to said shares than each and everyone of the
attaching creditors, nevertheless MAGSASAKA through its Board of Directors
transferred said shares in the name of Matias, and furthermore, gave to her
dividends declared on said shares for two years. However, our decision in G.R.
No. L-7252 changed that situation by declaring Guan to be the legal owner of the
shares in question, but subject to the liens of Matias and the Philippine
Guaranty Co. We venture to say that in executing said judgment, the shares may
now be transferred in the name of GUAN provided that he pay off the liens of
Matias and the Philippine Guaranty Co., the amount payable to Matias to be
reduced by the dividends she had received amounting to P4,135.80; or else, the
said shares may be transferred in the name of GUAN subject to the liens
aforementioned, and that to enforce said liens, if necessary said shares may
have to be sold and from the proceeds of the sale the amounts of the two liens
may be paid in the order of their priority, but as already stated, the dividends
received by Matias to be deducted from the amount of her lien.

In view of the foregoing considerations and with the indications therein
contained, the motion to dismiss the appeal is granted, and the appeal is hereby
dismissed, without costs.

Bengzon, Padilla, Reyes, Jugo, Bautista Angelo, Labrador,
Concepcion, and Reyes, J.B.L., JJ., concur.