REINSURANCE COMPANY OF THE ORIENT, INC., PETITIONER, VS. THE HONORABLE COURT OF APPEALS, HON. FIDEL A. PURISIMA, AS JUDGE OF THE CFI OF MANILA, BRANCH XX, GAUDIOSO M. TIONGCO, A…

On 24 April 1963,
Joaquin V. Gozun, Jr. signed a promis­sory note for P30,000.00, promising to
pay respondent Gaudioso M. Tiongco or order the sum of P30,000.00, with
interest at 10% per annum.  The condition
of the note was that its payment was to
be secured by a surety
bond acceptable to the payee.  On 8 May
1963, the spouses Joaquin V. Gozun, Jr. and Maria Nieves Toledo-Gozun jointly
and severally, as principals, and petitioner Reinsurance Company of the Orient,
Inc. (“Reinsurance”), as surety, executed a surety bond in favor of
respondent Tiongco in the sum of P30,000.00 to guaranty faithful compliance
with the terms and conditions of the 24 April 1963 promissory note.

A week later, on 17 May
1963, respondent Tiongco and the Industrial & Commercial Factors, Inc.
(“Factors”) entered into a financing and servicing agreement,
stipulating, among other things, the following:

“x x x             x x x                 x x x

7. That Factors
shall purchase only accounts receivables arising from a promissory note
executed by Mr. Joaquin V. Gozun, Jr., in the amount of P30,000.00, with
interest at 10% per annum, dated April
24, 1963.

8. That the Firm
[respondent Tiongco] guarantees to Factors the genuineness and legality of the
accounts receivables assigned to Factors, covering the articles sold and of the
obligations evidenced thereby, as well as
the solvency of the customers, and such guarantee shall continue and
remain in force and shall bind the Firm until all the amounts and liabilities
owing under and by virtue of the said accounts receivables shall have been paid
or remitted in full to Factors.  The Firm
hereby renounces the benefits of excussion granted to him by the provisions of Article
2058 of the New Civil Code.

x x x              x x x                 x
x x

11. That Factors may
resell or reassign to the Firm the accounts receivables discounted by Factors
and the Firm shall repurchase the same for the total amount due, owing and
outstanding from the Firm’s customers at the time of the resale or
reassignment, for any or all of the following grounds:

(a) When the
customer for any reason is unable to pay the whole amount or any part thereof
under the terms of the accounts
receivables;

(b) When the
customer refuses to pay the whole amount under the accounts receivables
discounted;

x x x              x x x                 x
x x.”

On the same date (17 May
1963), respondent
Tiongco, in consideration of the sum of P34,500.00, executed a deed of
assignment in favor of Factors ceding, transferring and assigning all his
rights and interests in the promissory note executed by Joaquin V. Gozun, Jr.,
in the amount of P30,000.00, dated 24
April 1963.

On 6 November 1964,
Factors wrote a
demand letter to Joaquin V. Gozun, Jr. demanding payment of the sum of
P30,000.00, exclusive of interests, the promissory note having become due on 17 October 1964 but remaining
unsettled.  A similar letter of demand
was sent on the same day to petitioner Reinsurance.

On 9 November 1964,
Factors wrote a
demand letter to respondent Tiongco, advising the latter to pay
P35,061.18 arising from the financing and servicing agreement dated 17 May 1963.

On 23 December 1964,
petitioner Reinsurance wrote a letter to Factors informing the latter of its
conformity to extension of the time for payment of the P30,000.00 note up to
the end of January 1965.

No payment having been made even after the extended date, Factors
filed a complaint in the Court of First Instance of Manila, Branch 20, docketed
as Civil Case No. 61254,
against respondent Tiongco, the spouses Gozun, and petitioner.  The prayer of Factors’ complaint read:

“WHEREFORE, it is respectfully prayed that judgment be
rendered in favor of the plaintiff;

1.  Ordering the defendant Tiongco to pay the
plaintiff [Factors] the sum of THIRTY-SIX THOUSAND TWO HUNDRED SIXTY-NINE PESOS
& 99/100 (P36,269.99) under the
terms and conditions of the Financing and Servicing Agreement (Annex ‘A’);
and/or

2.  Ordering the defendants spouses Gozun and Reinsurance Company of the Orient, Inc., to
pay the plaintiff jointly and severally, with defendant Tiongco, the sum of
THIRTY-FOUR THOUSAND EIGHT HUNDRED SIXTY-SIX PESOS & 96/100 (P34,866.96)
plus interest thereon at ten per cent (10%) per annum from November 30, 1964
until complete payment is made;

3.  Ordering all defendants to pay the plaintiff,
jointly and severally, a sum equivalent to twenty five per cent (25%) of their
outstanding obligation, as litigation
expenses and attorney’s fees;

4.  Ordering defendant Tiongco to pay the plaintiff
the collection fee of one per cent (1%) and a penalty of three and five tenth
(3.5%) percent per month on the accounts receivable representing the sum of P36,269.99 as of November 30, 1964;

Plaintiff further prays for such other relief as this Honorable Court may deem just
and equitable on the premises.”

In his Answer with a Cross-Claim
against Reinsurance and the Gozuns, respondent Tiongco prayed that:

“x x x in the
event that judgment be rendered ordering him, [Tiongco] to pay to the plaintiff
[Factors] the amount claimed in the latter’s complaint, that the
cross-defendants [petitioner and the Gozun spouses] be simultaneously ordered
to pay [him] back x x x whatever
amount is paid x x x to the
plaintiff in accordance with said judgment;

x x x              x x x                 x
x x”

Upon the other hand, petitioner Reinsurance in its Answer denied
having any liability to Factors, and asserted a cross-claim against the Gozun
spouses, praying that:

“x x x             x x x                 x x x

In the remote event that cross-claimant [Reinsurance] is adjudged
liable under [Factors’] Complaint, cross-claimant further prays that judgment
be rendered – x x x”

Under the cross-claim -?

“a) sentencing cross-defendant
[Gozun spouses] to pay the cross-claimant whatever amount or amounts the latter
may be compelled to pay under its Surety Bond, RICO Bond No. 105/63, to the
plaintiff [Factors] plus interest
thereon at the rate of 12% per annum, computed from the date of such payment to
the date when reimbursement is fully
effected by cross-defendants;

 b) sentencing cross-defendants to pay the
cross-claimant an additional sum equivalent to 25% of whatever amount or
amounts cross-claimant may be compelled to pay to plaintiff under its Surety
Bond,  RICO Bond No. 105/63, by way of
attorney’s fees and expenses of litigation;

 c) pending the hearing of this case, that
cross-claimant be appointed receiver without the necessity of filing a bond as stipulated
in the Agreement of Counter-Indemnity with Mortgage (Annex “2-RICO”),
and to take charge of the properties mortgaged;

 d) that the usual decree of foreclosure issue
for the sale at public auction of the aforementioned
two (2) parcels of land, and for the disposition of the proceeds thereon in accordance
with the Agreement of Counter?Indemnity with Mortgage (Annex “2-RICO”),
upon failure by cross-defendants to fully reimburse to cross-claimant whatever
amount or amounts it may be required to pay under the Surety Bond, RICO Bond
No. 105/63.”

The spouses Gozun also filed their Answer, with a cross­-claim against Tiongco.

After trial, Judge L.B. Reyes of the Court of First Instance of
Manila on 6 June 1970
rendered a Decision,^[1]
the dispositive portion of which stated:

“WHEREFORE, judgment is rendered –

(1) Ordering defendant
Gaudioso M. Tiongco to pay plaintiff [Factors] the sum of P36,269.99, under the
terms and conditions of the financing and servicing agreement, and the
collection fee of 1% and penalty of 3.5% per month on the accounts receivable
as of November 30, 1964; or, in default of said defendant-?

(2) Ordering
defendant spouses Joaquin V. Gozun, Jr., and Maria Nieves Toledo-Gozun and
defendant Reinsurance Company of the Orient, Inc. to pay plaintiff, jointly and
severally, the sum of P34,866.96, plus interest thereon at 10% per annum from November 30, 1964, until complete
payment is made;

(3) Ordering all
defendants to pay plaintiff, jointly and severally, a sum equivalent to 10% of
their outstanding obligation, as litigation
expenses and attorney’s fees.

On the cross-claim, ordering cross-defendants Joaquin V.
Gozun, Jr., and Reinsurance Company of the Orient, Inc., to pay back,
jointly and severally, the cross-claimant Tiongco whatever amount is
paid by the latter to plaintiff in accordance with the judgment in this case,
and, in case defendant Reinsurance Company of the Orient, Inc., pay(s) the
claim of plaintiff, ordering cross-defendants Joaquin V. Gozun, Jr., and Maria
Nieves Toledo-Gozun to pay cross-claimant Reinsurance Company of the Orient,
Inc., whatever amount or amounts the latter would pay under its surety bond,
RICO Bond No. 105/63, to plaintiff, plus interest thereon at the rate of 12%
per annum, computed from the date of such payment to the date when
reimbursement is fully effected by cross-defendants; to pay cross-claimant an
additional sum equivalent to 10% of whatever amount or amounts cross-claimant
would pay to plaintiff, by way of attorney’s fees and expenses of
litigation.  Upon failure of cross-defendant[s]
to fully reimburse to cross-claimant whatever amount or amounts might have been
paid under its surety bond, the usual decree of foreclosure shall issue for the
sale at public auction of the two parcels of land described in the agreement of
counter-indemnity with mortgage and/or
pledge (Exhibit “3-RICO”), and for the disposition of
the proceeds thereon in accordance with the said agreement.

The cross-claim of Joaquin V. Gozun, Jr., is dismissed for lack of
merit.

The counterclaim of defendant Gaudioso M. Tiongco is dismissed in
view of the result.”^[2]

A motion for reconsideration was filed by petitioner Reinsurance, on the grounds, among others,
that:  (a) its liability, if any, is
based exclusively on its surety bond; (b) it is a stranger to the financing and servicing agree­ment between Factors
and respondent Tiongco; and (c) its liability, if any, cannot be increased or
extended.  The trial court resolved this
motion by amending its decision:

“Hence, paragraph
(2) of the dispositive part of the decision is hereby amended to read as follows:

‘(2) Ordering defendant spouses Joaquin V. Gozun,
Jr. and Maria Nieves Toledo-Gozun and defendant Reinsurance Company of the
Orient, Inc. to pay plaintiff, jointly and severally, the sum of P30,000.00, plus interest
thereon at 10% per annum from November 30, 1964, until complete payment is
made.

x x x                   x x x                 x
x x’

WHEREFORE, with the correction made, which hereby amends the
dispositive part of the decision rendered in this case, the motion for reconsideration and new trial of [petitioner]
is DENIED.”

On appeal, the Court of Appeals, in CA-G.R. No. 47991-R, affirmed
the decision of the lower court.  The
decision became final and a Writ of
Execution dated 25 August 1980 was issued.

On 5 September 1980,
petitioner Reinsurance paid to Factors the sum of P84,980.00 broken down as
follows:

(1) Principal of
Promissory Note                                P30,000.00

(2) 10% interest per
annum from

November 30,1963                                                  47,250.00

(3)
Litigation expenses and

attorney’s fees
under par. 3                                       7,725.00

(4) Filing fee                                                                            5.00

T O T A L                                     P 84,980.00

Respondent Tiongco on 24 October 1980 — which date was
well within the 60-day lifetime of the Writ of Execution — paid to Factors the
sum of P221,329.19.  On the same date,
however, the lower court issued a Notice of Garnishment addressed to the Rizal
Commercial Banking Corporation (“RCBC”) for:

“the amount of THIRTY-SIX THOUSAND TWO HUNDRED SIXTY-NINE AND
NINETY-NINE CENTAVOS (P36,269.99), plus
1% collection fee and 3.5% per month penalty charges from November 30,1964 and
other charges in accordance with the terms of the Writ of Execution dated August 25,1980 as
attached” —

to be obtained from the account of
petitioner Reinsurance with the bank, in favor of respondent Tiongco (as the
latter had already paid Factors).  The
trial court also issued a notice of levy upon personal property of petitioner.

Petitioner Reinsurance moved to set aside the notice of levy and
the notice of garnishment upon the ground that its liability under the decision
was only for P30,000.00, plus interest at 10% per annum from 30 November 1964
until the amount was paid; and that this amount, which with accumulated
interest had reached P84,980.00 as of 8 September 1980, had already been paid
to Factors on that date.

On 26 February 1981, the trial court, this time through then
Judge Fidel Purisima, denied petitioner’s motion, ruling that the decision, to
enforce which a Writ of Execution had been issued in 21 August 1980, which
decision ordered petitioner Reinsurance and the spouses Gozun to pay back,
jointly and severally, respondent Tiongco “whatever amount is paid by the
latter to [Factors] in accordance with the judgment of this case” — had
become final.  Accordingly, the RCBC
issued a manager’s check in the amount of P280,367.02 to respondent Tiongco and debited Reinsurance’s account for the
same amount.

Petitioner thereafter filed with the Court of Appeals, docketed
as C.A.-G.R. No. SP-12108, a Petition for Certiorari to annul the Writ
of Execution and the proceedings resulting in garnishment, and to compel
respondent Tiongco to return to petitioner the amount of P280,367.02.  Petitioner contended that its liability under
the amended decision of the lower court was only for P84,980.00 — the amount
of the promissory note which it had secured, plus interest and costs of suit;
and that it could not be made to assume the obligation of respondent Tiongco to
Factors under the financing and servicing agreement, which with accrued
interest and other charges as of
9 March 1981 had reached the amount of P280,367.02, since it (Reinsurance) was
not a party thereto.

By a Decision
dated 7 May 1982, the Court
of Appeals, speaking through Mendoza, V. J., denied the petition, holding that
it had, in C. A. – G.R. No. 47991-R, earlier affirmed the modified judgment of
the lower court in toto, which judgment had already rejected
petitioner’s contention:

“The judgment, subject of the writ of execution, carefully
distinguishes between the liability of [petitioner] and its liability to
Tiongco.  As far as Factors is concerned,
[petitioner’s] liability is for
P36,269.99 plus a collection fee of 1% a month and penalty of
3.5% a month of the amount outstanding.

Nor can [petitioner] elect to pay Factors the lesser amount in
order to avoid payment of the greater sum to Tiongco.  [Petitioner’s] liability to Factors arises
only ‘in default of Tiongco.’ If Tiongco does
not default in the payment of his liability, [petitioner’s] liability to
Tiongco arises, and it is for ‘whatever amount is paid by the latter to Factors
in accordance with the judgment in this case.’

x x x              x x x                 x
x x                 x x x

However, except for the amendment of par. (2), which refers to
[petitioner’s] contingent liability to Factors, the trial court refused to
reconsider the other parts of the decision. 
For its part, when the lower
court’s decision was appealed to it, this Court rejected [petitioner’s]
contention that the promissory note had been novated by the execution of the
financing and servicing agreement, even as it affirmed the
judgment of the lower court in toto.

[Petitioner] did not appeal any further.  Consequently, it cannot now urge the same
arguments without violating the principle of res judicata.

In the second place, the contention that to make [petitioner] liable
for ‘whatever amount is paid by (Tiongco) to (Factors)’ as the judgment directs
would be to make [petitioner] liable under the financing and servicing agreement to which [petitioner] is not a
party is not correct.  It is true that
there is a difference in the amount which Tiongco is
required to pay to Factors and that which [petitioner] is required to pay to
the same party, that is, P36,269.99
in the case of Tiongco and P30,000.00, in the case of [petitioner].  The difference is due to the fact that Tiongco’s
obligation to Factors under the financing and servicing agreement includes not
only the discounting of the note at the rate of 29.75% per month but
also the payment of a collection fee of 1% per month and a penalty of 3.5% per
month on all outstanding amounts in the event the note is not paid within 72
hours from the date of its maturity on October 17, 1964.

While it is true that Gozun and [petitioner] are not parties to the
financing and servicing agreement, it is equally true that were it not for the
failure of Gozun to pay the note upon its maturity, Tiongco would not have been
liable for the discount rate, the collection fee, and the penalty to
Factors.  As very well pointed out by
Tiongco, the difference represents damages suffered by Tiongco as a result of
Gozun’s and [petitioner’s] failure to pay the amount of the note on time.”^[3]

Its motion for reconsideration having been denied, petitioner
came to this Court on the present Petition for Review.

Petitioner Reinsurance asks us to hold that both Judge L.B. Reyes
of the trial court and the Court of Appeals in C.A.-G.R. No. 47991-R erred in holding petitioner Reinsurance
liable beyond the terms and conditions found in the promissory note of 24 April
1963 executed by Mr. Gozun and on which Reinsurance became liable as surety
pursuant to the Surety Bond it had issued in favor of respondent Tiongco.

The fundamental difficulty with Reinsurance’s position is, of
course, that the decision of Judge Reyes became final and executory upon being
affirmed by the Court of Appeals in C.A.-G.R. No. 47991-R.  Neither Gozun nor Reinsurance filed a
Petition for Review to this Court after the Court of Appeals affirmed the
decision of Judge Reyes back in August 1980.

It is true that even a judgment
which has become final and executory may be clarified under certain
circumstances.  The dispositive portion
of the judgment may, for instance, contain an error clearly clerical in nature
(perhaps best illustrated by an error in arithmetical computation) or an
ambiguity arising from inadvertent omission, which error may be rectified or
ambiguity clarified and the omission supplied by reference primarily to the
body of the decision itself. 
Supplementary reference to the pleadings previously filed in the case
may also be resorted to by way of corroboration of the existence of the error
or of the ambiguity in the dispositive part of the judgment.  In Locsin,
et al. v. Paredes, et al.^[4] this Court allowed a judgment which
had become final and executory to be clarified by supplying a word which had
been inadvertently omitted and which, when supplied, in effect changed the
literal import of the original phraseology:

“x x x it
clearly appears from the allegations of the complaint, the promissory note
reproduced therein and made a part
thereof, the prayer and the conclusions of fact and of law contained in the
decision of the respondent judge, that the obligation contracted by the
petitioners is joint and several and
that the parties as well as the trial judge so understood
it.  Under the juridical rule that the
judgment should be in accordance with the allegations, the evidence and the
conclusions of fact and law, the dispositive part of the judgment under consideration should have  ordered that the  debt
be paid  severally, and in omitting the word or adverb ‘severally’
inadvertently, said judgment became ambiguous. 
This ambiguity may be clarified at any time after the decision is
rendered and even after it had become final (34 Corpus Juris, 235, 326). 
The respondent judge did not, therefore, exceed his jurisdiction in clarifying the dispositive part of the judgment by supplying the
omission.”^[5] (Underscoring supplied)

In Filipino Legion Corporation vs.
Court of Appeals, et al.,^[6]
the applicable principle was set out in the following terms:

“[Where there is ambiguity caused by an omission or mistake
in the dispositive portion of a decision, the court may clarify such
ambiguity by an amendment even after the judgment had become final,
and for this purpose it may resort to the pleadings filed by the parties, the
court’s findings of facts and conclusions of law as expressed in the body of the
decision.”^[7]
(Underscoring supplied)

In Republic Surety and Insurance
Company, Inc. v. Intermediate Appellate Court,^[8]
the Court applying the above doctrine said:

“x x x We
clarify, in other words, what we did affirm. 
What is involved here is not what ordinarily regarded as a clerical
error in the dispositive part of the decision of the Court of First Instance,
which type of error is perhaps best typified by an error in arithmetical
computation.  At the same time, what is
involved here is not a correction
of an erroneous judgment or dispositive portion of a judgment.  What we believe is involved here is in the
nature of an inadvertent omission on
the part of the Court of First Instance (which should have been noticed by private respondents’ counsel
who had prepared the complaint),
of what might be described as a logical follow-through of something set forth both in the body of the decision and in the dispositive
portion thereof:  the inevitable follow-through, or
translation into, operational or behavioral terms, of the annulment of the Deed
of Sale with Assumption of Mortgage, from which petitioners’ title or claim of
title embodied in TCT 133153 flows.”^[9] (Underscoring supplied)

The question which arises, therefore, is whether or not the
doctrine in Locsin, Filipino Legion and Republic Surety is applicable in the instant
case.  A careful review of the Reyes’
decision and of the Court of Appeals’ decision in C.A.-G.R. No. 47991-R shows
that the Reyes’ decision had no ambiguity or inadvertent omission in its
dispositive portion which may, notwithstanding the finality of that decision,
legitimately be clarified by referring to the body of the Reyes’ decision.  The dispositive portion of the Reyes’
decision had two parts:  Part I and Part
II.

Part I dealt with the claims of Factors asserted against
respondent Tiongco and against the Gozun spouses and petitioner Reinsurance in
the following manner –

(a) Claims of Factors against respondent Tiongco:

“(1) Ordering
defendant Gaudioso M. Tiongco to pay plaintiff [Factors] the sum of
P36,269.99, under the terms and conditions of the financing and servicing
agreement, and the collection fee of 1% and penalty of 3.5% per month on the
accounts receivable as of November 30, 1964; or, in default of said
defendant –“

(b)  Claims of Factors against the Gozun spouses
and petitioner Reinsurance:

“(2) Ordering
defendant spouses Joaquin V. Gozun, Jr., and Maria Nieves Toledo-Gozun and
defendant Reinsurance Company of the Orient, Inc., to pay plaintiff,
jointly and severally, the sum of P34,866.96, plus interest thereon at 10% per
annum from November 30, 1964, until complete payment is
made;”(Underscoring supplied)

Part II dealt with (a) the cross-claim asserted by respondent
Tiongco against the Gozun spouses and petitioner Reinsurance, as well as (b)
the cross-claim asserted by Reinsurance against the Gozun spouses in the
following manner:

“On the cross-claim, ordering cross-defendants Joaquin
V. Gozun, Jr., and Reinsurance Company of the Orient, Inc., to pay back,
jointly and severally, the cross-claimant Tiongco whatever amount is paid by the latter to plaintiff in
accordance with the judgment in this case, and, in case defendant Reinsurance Company
of the Orient, Inc., pay[s] the claim of plaintiff, ordering cross-defendants
Joaquin V. Gozun, Jr., and Maria Nieves Toledo-Gozun to pay cross-claimant
Reinsurance Company of the Orient, Inc., whatever amount or amounts the latter would
pay under its surety bond, RICO Bond No. 105/63, to plaintiff, plus interest
thereon at the rate of 12% per annum, computed from the date of such
payment to the date when reimbursement is fully effected by cross-defendants;
to pay cross-claimant an additional sum equivalent to 10% of whatever amount or
amounts cross-claimant would pay to plaintiff, by way of attorney’s fees and
expenses of litigation.  Upon failure of
cross-defendant(s) to fully reimburse to cross-claimant whatever amount or
amounts might have been paid under its surety bond, the usual decree of
foreclosure shall issue for the sale at public auction of the two parcels of
land described in the agreement of counter-indemnity
with mortgage and/or pledge (Exhibit “3-RICO”), and for the disposition
of the proceeds thereon in
accordance with the said agreement.

x x x                                  x
x x                             x x
x”

(Underscoring supplied)

It will be noted that in Part II of the dispositive portion,
Judge Reyes ordered the Gozun spouses and
petitioner Reinsurance “to pay back jointly and severally, the
cross-claimant Tiongco whatever amount is paid by the latter to plaintiff
[Factors] in accordance with the judgment in this case,  x x x”.  Complying with Paragraph (1) of Part I of the
dispositive portion of the Reyes’ decision, respondent Tiongco paid Factors the
amount of P221,329.19, and it is this
amount (with interest computed up to 26 February 1981) which Reinsurance was
compelled to pay to respondent Tiongco and which Reinsurance now seeks to
recover.  There was, in other words,
literal compliance with the wording of Part II of the dispositive portion of
the Reyes’ decision.

Viewed in the light most favorable to it, Reinsurance in effect
urges that there is contradiction between Part I dealing with claims of Factors
and Part II dealing with cross-claims of Tiongco and Reinsurance.  Unfortunately, in itself, no contradiction is
apparent in the dispositive portion of the decision.  Part II of the decision ordered the Gozun
spouses and Reinsurance to reimburse Tiongco whatever Tiongco paid under the
judgment; and Tiongco paid under Part I Paragraph (1) as he was ordered to do
by the decision.

We do not mean to suggest that there was no error in Part II of
the dispositive portion of the Reyes’ decision; indeed it is quite clear to the
Court that Part II was vitiated
by error.  But that error became irremediable when the
Reyes’ decision became final.

That error, most succinctly described, lies in the failure of the
trial court and of the Court of Appeals to take account of the provisions of
Article 2209 of the Civil Code which provides as follows:

“Art. 2209.  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, the legal interest, which is six per cent per annum.”

Both the Gozun spouses
and Reinsurance were liable under the terms and conditions of the promissory
note which stipulated payment of the principal amount of P30,000.00 plus
interest at the rate of 10% per annum. 
By operation of Article 2209, quoted above, in relation to the
promissory note, the measure of damages to which the Gozun spouses and
Reinsurance could have appropriately been held to for mora, was not
whatever respondent Tiongco had been compelled to pay to Factors under the
financing and servicing agreement, as Judge Reyes had decreed in his
decision.  The appropriate measure of
damages was, rather, simply the payment of an additional 10%
per annum of interest; that is, the Gozuns should have been held liable only for 10% interest for the use of the money (from date of
execution to date of payment) or “monetary interest”, plus 10% interest
as damages for delay in payment (from date of demand to date of payment) or
“compensatory interest”^[10].  There would have been no inequity in
requiring respondent Tiongco to bear by himself alone the balance of his
liability under his financing and servicing agreement with Factors.  Only Tiongco was party to that agreement and
he alone benefitted by it:  he
immediately realized the present value of the P30,000.00 stipulated in the
promissory note instead of having to wait for maturity of the note.

All the above mentioned notwithstanding, petitioner Reinsurance
is bound by the terms of the Reyes’ decision which constitutes the law of the
case, having been rendered by a court with undisputed jurisdiction ratione
materiae and jurisdiction ratione personae, even though
that decision was, as a matter of law, incorrect.

To be sure, there is also some inequity implicit in the result
reached here.  The Gozun spouses and
Reinsurance paid twice:  once to Factors
(the amount of P84,980); and again to respondent Tiongco (the amount of
P280,367.02).  But as Mendoza, V. J.
in C.A.-G.R. No. SP-12108 said, they have themselves principally to blame.  They allowed the Reyes’ decision to become
final; they also paid Factors directly before respondent Tiongco was in default.  They overpaid Factors; they overpaid Tiongco
too.  The Gozuns and Reinsurance had a right of recourse against both
Factors and against Tiongco, but at least as against Tiongco, that right of
recourse has been lost.

The harshness of the result here must be balanced against the
fundamental nature of the public policy involved and to which we must give
effect.  All litigations must at last
come to an end, however unjust the result of error may appear.  Otherwise, litigation would become even more
intolerable than the wrong and injustice it is designed to correct.  Considering the litigiousness of our people
and the volume of litigation being processed in our judicial system, the
importance of that public policy cannot be overstressed.

For all the foregoing, the Petition for Review is hereby
DENIED and the result (but not necessarily the reasoning) of the Decision of
the Court of Appeals in C.A.-G.R. No. SP-12108 dated 7 May 1982 and its Resolution dated 23 July 1982 are hereby
AFFIRMED.  No pronouncement as to costs.

SO ORDERED.

Fernan, C.J., (Chairman), Gutierrez, Jr., Bidin, and Davide, Jr., JJ., concur.

^[1]
Records on Appeal, pp. 23-35.

^[2]
Id., pp. 33-35;
Underscoring supplied.

^[3]
Decision of the Court of Appeals, pp. 11-12; Rollo, pp. 60-69.

^[4]
63 Phil. 87 (1936).

^[5]
63 Phil. at 91-91.

^[6]
56 SCRA 674 (1974).

^[7]
56 SCRA at 691; also:  Presbitero v.
Court of Appeals, 129 SCRA 443 (1984).

^[8]
152 SCRA 309 (1987).

^[9]
152 SCRA at 315.

^[10]
The terms “monetary interest” and “compensatory interest”
are borrowed from, 5 Paras, Civil Code of the Philippines,
pp. 767-771, 1068 (12th ed., 1990). 
See also:  Integrated Realty
Corporation, et al. v. Philippine National Bank, et al., 174 SCRA 295
(1989); Lopez v. Del Rosario and Quiogue, 44 Phil. 98 (1922); Zobel v.
City of Manila, 47 Phil. 169
(1925).