GAN TION, PETITIONER, VS. HON. COURT OF APPEALS, HON. JUDGE AGUSTIN P. MONTESA, AS JUDGE OF THE COURT OF FIRST INSTANCE OF MANILA, ONG WAN SIENG AND THE SHERIFF OF MANILA, RESPO…

The sole issue here is whether or not there has been legal
compensation between petitioner Gan Tion and respondent Ong Wan Sieng.

Ong Wan Sieng
was a tenant in certain premises owned by Gan Tion.  In 1961 the
latter filed an ejectment case against the former,
alleging non-payment of rents for August and September of that year, at P180 a
month, or P360 altogether.  The defendant
denied the allegation and said that the agreed monthly rental was only P160,
which he had offered to but was refused by the plaintiff.  The plaintiff obtained a favorable judgment in the muni­cipal
court (of Manila), but upon appeal the Court of First Instance, on July 2,
1962, reversed the judgment and dismissed the
complaint, and ordered the plaintiff to pay the defendant the sum of P500 as
attorney’s fees.  That judgment became
final.

On October 10, 1963
Gan Tion served notice on Ong Wan Sieng that he was increasing the
rent to P180 a
month, effective November 1st, and at the same time demanded the rents
in arrears at the old rate in the aggregate amount of P4,320.00,
corresponding to a period from August 1961 to October 1963.

In the meantime, over Gan Tion’s opposition, Ong Wan Sieng was able to obtain a writ of execution of the judgment
for attorney’s fees in his favor.  Gan Tion went on certiorari to
the Court of Appeals, where he pleaded legal compensation, claiming that Ong Wan Sieng was in­debted to
him in the sum of P4,320 for unpaid rents.  The appellate court accepted the petition but
eventually decided for the respondent, holding that although “respondent Ong is indebted to the petitioner for unpaid rentals in an
amount of more than P4,000.00” the sum of P500
could not be the subject of legal compensation, it being a “trust fund for
the benefit of the lawyer, which would have to be turned over by the client to
his counsel.” In the opinion of said Court, the requisites of legal
compensation, namely, that the parties must be creditors and debtors of each
other in their own
right (Art. 1278, Civil Code) and that each one of them must be bound
principally and at the same time be a principal creditor of the other (Art.
1279), are not present in the instant case, since the real creditor with
respect to the sum of P500 was the defendant’s counsel.

This is not an accurate statement of the nature of an award for
attorney’s fees.  The award is made in
favor of the litigant, not of his counsel, and is justi­fied by way of indemnity for damages
recoverable by the former in the cases enumerated in Article 2208 of the Civil
Code.^[1]
It is the litigant, not his counsel, who is the judgment creditor and who may enforce
the judgment by execution.  Such credit,
therefore, may properly be the subject of legal compensation.  Quite obviously it would be unjust to compel
petitioner to pay his debt for P500 when admittedly his creditor is indebted to
him for more than P4,000.

Wherefore, the judgment of the Court of Appeals is
reversed, and the writ of execution issued by the Court of First Instance of
Manila in its Civil Case No. 49535 is set aside.  Costs against respondent.

Reyes, J.B.L. (Acting C.J.), Dizon, Zaldivar, Sanchez, Fernando, and
Capistrano, JJ., concur.

Teehankee and Barredo, JJ.,
took no part.

Concepcion, C.J., and Castro, J., on leave.

^[1]
Fores vs. Miranda, 105 PHIL. 268, 272; Necesito et al. vs.
Paras et al., 104 PHIL. 75, 86.