lltpuhlit of tbt Jbilippint~

~uprtmt QCourt
;ffianila

THIRD DIVISION ·

PHILIPPINE TRUST COMPANY G.R. No. 171897

Petitioner,
Present:

VELASCO, JR., J, Chairperson,

-versus- VILLARAMA, JR.,
MENDOZA,*
PERLAS-BERNABE,** and
JARDELEZA, JJ.
FLORO ROXAS and EUFEMIA
ROXAS,
Respondents. Promulgated:
October 14, 2015

x----------------------------- ~-~- - - - x

DECISION

JARDELEZA, J.:

We consider whether the principle of legal compensation may be

applied to offset the judgment debt of petitioner Philippine Trust Company
("PTC") and the loan obligation of private respondents Floro and Eufemia
Roxas ("Spouses Roxas").

The Spouses Roxas procured loans from PTC in the amount of

Php 2,523,200 to finance their real estate business. 1 These loans were
secured by real estate mortgages on the Spouses Roxas' real properties.
On April 10, 1979, the Spouses Roxas, PTC, and Roben Construction and
Furnishing Group, Inc. entered into "a contract of building construction,"
under which PTC granted an additional loan of Php 900,000 to the Spouses
Roxas to enable them to finish their ongoing housing projects located at

Designated as Additional Member in lieu of Senior Associate Justice Antonio T. Carpio, per
Special Order No. 2225 dated September~9,20 _.
Per raffle dated October 12, 2015.
Rollo, p. 8.
 Decision 2 G.R. No. 171897

Cabcaben, Mariveles, Bataan. This was superseded by a new "contract of

building construction" executed by and among PTC, Spouses Roxas, and
Rosendo P. Dominguez, Jr. ("Dominguez"). Dominguez substituted Rohen
Construction as the contractor under the same terms and conditions of the
contract dated April 10, 1979. The new contract stipulated that the money
loaned from PTC shall be devoted to the funding of the housing projects, the
rentals of which when finished, would then be used to liquidate the loan. It
also provided that PTC may only release the proceeds of the loan for the
purchase of materials and supplies when requested by Dominguez and with
the conformity of the Spouses Roxas. 2 Invoices covering materials previously
purchased with the funds should also be submitted to PTC before any
subsequent release of funds is made. 3 PTC, however, released to Dominguez
the sum of Php 870,000 out of the Php 900,000 although the Spouses Roxas
had agreed only to the release of not more than Php 450,000, as evidenced by
a promissory note dated April 11, 1979. 4

Due to financial difficulties, however, the Spouses Roxas did not finish
the housing project. As a result, they did not receive monthly rentals from
prospective lessees of the houses, which led to missed amortization payments
in their loans from PTC. 5

On March 28, 1980, Dominguez filed a complaint against PTC and the
Spouses Roxas with the Court of First Instance (CFI) ofManila, 6 Branch XL
for breach of the contract of building construction. This was docketed as Civil
Case No. 130783. The Spouses Roxas in tum filed Civil Case No. 130892
with the CFI of Manila against Dominguez and the insurance company that
issued his performance bond. These two cases were later consolidated. 7

When the Spouses Roxas filed their answer in Civil Case No. 130783,
they included a cross-claim against PTC. 8 Jn response, PTC filed a
counterclaim against the Spouses Roxas on their unpaid loan obligation
amounting to Php 3,053,738.50 9 plus interest and the amount of Php 245,720
as attorney's fees; and, in default of such payments, the foreclosure of the real
estate mortgages executed by the Spouses Roxas in favor of PTC. After trial
on the merits, the trial court rendered a decision in favor of Dominguez. It
denied PTC's counterclaim for lack of sufficient proof, without prejudice to
the filing of a collection suit against the Spouses Roxas. Both PTC and the
Spouses Roxas appealed to the Court of Appeals, docketed as CA-G.R. CV
No. 30340. To this date, the same remains pending. 10

Id. at 8-9.
Id. at 9.
Id.
Id.
Now the Regional Trial Court of Manila.
Rollo, p. 9.

I
Id.
Id. at 93.
10
Id. at 67-68.
 Decision 3 G.R. No. 171897

In a parallel development, while Civil Case No. 130783 was still

pending in the trial court, PTC, on August 31, 1981, filed with the provincial
sheriff of Bataan a petition for extrajudicial foreclosure of the same real estate
mortgages. The Spouses Roxas opposed the petition and filed a verified
complaint against PTC for damages with preliminary injunction in the
Regional Trial Court of Bataan docketed as Civil Case No. 4809 ("Main
Case"). The complaint sought to restrain and enjoin the sheriff from
proceeding with the foreclosure sale while Civil Case No. 130783 is still
pending. 11 On December 26, 1988, the Bataan R TC rendered a Decision in
favor of the Spouses Roxas, the dispositive portion of which reads as follows:

WHEREFORE, the Court hereby renders judgment

(a) Ordering the issuance of a writ of permanent injunction
perpetually enjoining defendant Philippine Trnst Company
and defendant provincial sheriff of Bataan or any of his
deputies from foreclosing extrajudicially the real estate
mortgage(s) executed in its favor by plaintiffs covering the
real properties subject of this action;

(b) Condemning said defendant bank to pay to

plaintiffs: (1) Ordinary damages for breach of the provisions
of the contract of building constrnction (Exhs. "B" & "26"),
in the sum of One Hundred Thousand Pesos (Pl00,000.00);
(2) Moral damages for the improvident extrajudicial
foreclosure of plaintiffs' mortgage(s) after it had elected
judicial foreclosure thereof, in the amount of Three Hundred
Thousand Pesos (P300,000.00) for both plaintiffs; (3)
Exemplary damages by way of example or correction for the
public good in the sum of Fifty Thousand Pesos
(P50,000.00); (4) Attorney's fees in the amount of Fifty
Thousand Pesos (P50,000.00); and (5) Double costs of suit
[ ].

SO ORDERED. 12

The Court of Appeals affirmed the decision of the Bataan RTC. The
decision became final and executory, prompting the Spouses Roxas to file a
Motion for Execution. PTC responded by filing an Opposition to the Motion
for Execution, where it raised for the first time legal compensation to offset
the judgment debt due to the Spouses Roxas.

On January 25, 1994, the trial court denied PTC's Opposition and
issued a writ of execution, holding that PTC is deemed to have waived legal
compensation as a defense because it failed to invoke the same as an
affirmative defense in its answer. PTC filed a motion for reconsideration of
the order, which was denied by the trial court on April 19, 1994. 13 PTC filed

JI
Id. at 58.
12
Id. at 58-59.
13
Id. at 111-112.
 Decision 4 G.R. No. 171897

another motion for reconsideration, which was again denied by the trial court
on June 7, 1994. 14

PTC filed a Petition for Certiorari 15 under Rule 65 with the Court of
Appeals seeking the annulment of the trial court's order issuing the writ of
execution and its subsequent orders denying PTC's motions for
reconsideration. On November 17, 2005, the Court of Appeals dismissed the
petition for lack of merit. It found that not al 1requisites of legal compensation
under Article 1279 of the Civil Code were present and that the defense oflegal
compensation was belatedly raised by PTC, considering that it was raised for
the first time at the execution stage. 16 The Court of Appeals denied PTC's
motion for reconsideration on March 9, 2006. 17

PTC then filed this Petition for Review on Certiorari 18 under Rule 45,
arguing that the Court of Appeals erred in not finding that all the requisites of
legal compensation were present and in ruling that the defense of
compensation was belatedly raised. PTC claims it did not raise legal
compensation as a defense before the Bataan R TC because the judgment debt
was not yet due at the time it filed its answer. Furthermore, it had already set
up as a compulsory counterclaim the loan obligation of the Spouses Roxas in
Civil Case No. 130783, which was pending with the former CFI of Manila.
But because the Manila court denied PTC's counterclaims, PTC argues there
is a change in the situation of the parties that makes execution inequitable.

In response, the Spouses Roxas assert that the execution of the Bataan
R TC decision is proper because the prevailing party is entitled to a writ of
execution as a matter of right once a judgment becomes final. 19 Moreover, the
decision in Civil Case No. 130873 is not a supervening event that warrants
the stay of execution. 20 The Spouses Roxas also dispute the applicability of
legal compensation because both the demandability of the loan as well as the
exact amount due had been put in issue in Civil Case No. 130873, which is
now pending appeal with the Court of Appeals as CA-G.R. CV No. 30340. 21
The Spouses Roxas maintain that PTC is deemed to have waived
compensation as a defense because it did not raise compensation either in a
motion to dismiss or as an affirmative defense in its answer to the Main Case. 22
Finally, the Spouses Roxas point out that the orders of the Bataan RTC were
challenged by PTC through a Rule 65 petition. Thus, it was incumbent upon
PTC to prove lack or grave abuse of discretion on the part of the Bataan RTC,
which PTC ultimately failed to do. 23

14
fd. at 118-119.
15
fd. at 120-140.
16
fd. at 20-21.
17
fd. at 26-27.
IX
Id. at 3 l-52.
19
Id. al 234-235.
20
ld. at 235-236.
21
Id. at 237-242.
22
Id. at 242-245.
21
Id. at 232-234.
 Decision 5 G.R.No.171897

The petition has no merit.

II

We agree with the Court of Appeals that it was too late for PTC to set
up legal compensation as a defense because the Main Case had already
reached the execution stage. The rule is that once a decision becomes final
and executory, execution shall issue as a matter of right, 24 and the issuance of
a writ of execution is the court's ministerial duty, compellable by
mandamus. 25 This is in accordance with the doctrine of immutability of final
judgments, which states that a judgment that has become final and executory
is immutable and unalterable, and may no longer be modified in any respect,
even if the modification is meant to correct what is perceived to be an
erroneous conclusion of fact or law, and regardless of whether the
modification is attempted to be made by the court rendering it or by the highest
Court of the land. 26 Although there are recognized exceptions to this doctrine,
one of which is where there is a supervening event that renders execution
inequitable or unjust, 27 none obtains in this case.

First, there is nothing unjust or inequitable in the issuance of the writ of

execution in this case because execution will have no effect on the unpaid loan
obligation of the Spouses Roxas to PTC. The Spouses Roxas' unpaid loan
obligation to PTC is the subject of a separate case now pending before the
Court of Appeals, CA-G.R. CV No. 30340. Thus, there exists a proper forum
where PTC may be allowed to recover whatever is due from the Spouses
Roxas. What is inequitable is to allow PTC to recover its credit in full in
CA-G.R. CV No. 30340 while concurrently being allowed to offset its
judgment debt in this case. In such instance, there would effectively be double
recovery on the part of PTC-which we cannot sanction because of the
fundamental proscription against unjust enrichment. 28

Second, it would be more unjust to stay the execution of a decision that

had become final and executory twenty three (23) years ago. There should be
an end to litigation, for public policy dictates that once a judgment becomes
final, executory, and unappealable, the prevailing party should not be denied
the fruits of his victory by some subterfuge devised by the losing party. 29
Unjustified delay in the enforccme'nt of a judgment sets at naught the role and
purpose of the courts to resolve justiciable controversies with finality. 30 To
accept PTC's contentions would not only be unfair to private respondents but,

14
RULES OF COURT, Rule 39, Sec. I.
25
Valenzona v. Court <dAppeals, G.R. No. I 06895, September I 0, 1993, 226 SCRA 306, 311.
26
Edillo v. Dulpina, G.R. No. 188360, .January 21, 20 I 0, 610 SCRA 590, 601-602.
27
Valenzona v. Court o/Appeals, supra.

t(}7·
28
Rodriquez v. Ponferrada, G.R. Nos. 155531-34, July 29, 2005, 465 SCRA 338, 355.
29
Times Transit Cooperative, Inc. v. NLRC, G.R. No. 117105, March 2, 1999, 304 SCRA 11,,
:io
EdU/o v. llu/p;na, .<u1wa "1 602.
 Decision 6 G.R. No. 171897

more importantly, would defeat a vital policy consideration behind the

doctrine of immutability of final judgments.

The Bataan R TC and the Court of Appeals also conectly ruled that PTC
should have raised the argument on legal compensation at the trial stage. The
I 964 Rules of Court, which was then in effect at the time the Main Case was
filed by the Spouses Roxas in 1980, provides that:

RULE 9. Effect of Pleadings

Sec. 2. Defenses and of?jections not pleaded deemed

waived.- Defenses and objections not pleaded either in
a motion to dismiss or in the answer are deemed waived;
except the failure to state a cause of action which may be
alleged in a later pleading, if one is permitted, or by motion
for judgment on the pleadings, or at the trial on the merits;
but in the last instance, the motion shall be disposed of as
provided in section 5 of Rule 10 in the light of any evidence
which may have been received. Whenever it appears that
the court has no jurisdiction over the subject-matter, it shall
dismiss the action. 31 (Emphasis added)

Although legal compensation takes place by operation of law, it must

be alleged and proved as a defense by the debtor who claims its benefits. Only
after it is proved will its effects retroact to the moment when all the requisites
under Article 1279 of the Civil Code have concutTed. 32

PTC's contention that it could not have raised legal compensation as a

defense because it was not yet a debtor of the Spouses Roxas when it filed its
answer is unconvincing. Under Rule 8, Section 2 of the 1964 Rules of Court,
"[a] party may set forth two or more statements of a claim or defense
alternatively or hypothetically, either in one cause of action or defense or in
separate causes of action or dcfenses." 33 Thus, the defense of compensation
would have been proper and allowed under the rules even if PTC disclaimed

31
The 1997 Rules of Court modified the 1964 text but retained the same "deemed waived" provision:

RULE 9. Effect of Failure to Plead

Section 1. Defenses and ohjections not pleaded. ~ Defenses and

obJcctions not pleaded eithc1· in a motion to dismiss or in the answer
arc deemed waived. However, when it appears from the pleadings or
the evidence on record that the courl has no jurisdiction over the subject
matter, that there is another action pending between the same parties for
the same cause, or that the action is barred by a prior judgment or by
statute of limitations, the court shall dismiss the claim. (Emphasis added)

12
IV ARTURO M. TOLENTTNO, COMMENTARIES AND .JURISPRUDENCE ON THE CrVIL CODE OF TIIE
PfllUPPJNES, 379 ( 1990); DE LEON & DE LEON, .IR., COMMEN(TS
AND CASES ON OBLIGATIONS AND
CONTRACTS 441 (2014).
1.1
Reproduced verbatim under the 1997 RULES OF COURT.
 Decision 7 G.R. No. 171897

any liability at the time it filed its answer. In Marquez v. Valencia, 34 we held
that when a defendant failed to set up such alternative defenses and chosen or
elected to rely on one only, the overruling thereof was a complete
determination of the controversy between the parties, which bars a subsequent
action based upon an unpleaded defense. Unmistakably, the rationale behind
this is the proscription against the splitting of causes of action.

In any case, even if PTC were excused from pleading compensation as

a defense in its answer, we note that PTC still failed to raise this defense in its
motion for reconsideration of the Bataan R TC decision and in its subsequent
appeal. Hence, there can be no other conclusion than that PTC is already
estopped from raising the issue of legal compensation.

It is fairly clear to us that the reason why PTC did not raise legal
compensation as a defense in the Main Case is because it was banking on a
favorable ruling on its counterclaim in the other case, Civil Case No. 130873.
It was presumably an informed choice arrived at by PTC and its counsel, with
full knowledge of the consequences of its failure to plead this specific
claim/defense in the Main Case. Unfortunately for PTC, its counterclaim in
the other case was disallowed. Having adopted the wrong legal strategy, PTC
cannot now expediently change its theory of the case or its defense at the
execution stage of the Main Case. Following the doctrine of election of
remedies, 35 PTC's choice of setting up the Spouses Roxas' unpaid loan
obligation as a counterclaim in Civil Case No. 130873, which has gone to
judgment on the merits but is pending appeal, precludes it from raising
compensation of the same loan obligation for the purpose of opposing the writ
of execution in the Main Case. Equitable in nature, the doctrine of election of
remedies is designed to mitigate possible unfairness to both parties. It rests
on the moral premise that it is fair to hold people responsible for their choices.
The purpose of the doctrine is not to prevent any recourse to any remedy, but
to prevent a double redress for a single wrong. 36

III

Even if we assume that legal compensation was not waived and was
otherwise timely raised, we find that not all requisites of legal compensation
are present in this case. Under Article 1279, in order for legal compensation
to take place, the following requisites must concur: (a) that each one of the
obligors be bound principally, and that he be at the same time a principal
creditor of the other; (b) that both debts consist in a sum of money, or if the
things due are consumable, they be of the same kind, and also of the same
quality if the latter has been stated; (c) that the two debts be due; (d) that they

J4
99 Phil. 740 (1956), cited in Arre;:;a v. Dia=..fr., G.R. No. 13343, August 30, 200 !, 364 SCRA 88,
97 .
.15
D.M. Consunji, Inc. v. Court ofAppeals, Ci.R. No. 137873, April 20, 2001, 357 SCRA 249, 266.
("When a party having knowledge of the facts makes an election between inconsistent remedies, the
election is final and bars any action, suit, or proceeding inconsistent with?he ected remedy, in the
absence of fraud by the other party. The first act or election acts as a bar.")
11. Id.
 Decision 8 G.R. No. 171897

be liquidated and demandable; and ( e) that over neither of them there be any
retention or controversy, commenced by third persons and communicated in
due time to the debtor.

Here, the fourth requisite is absent. A debt is liquidated when its

existence and amount are determined. 37 Compensation can only take place
between certain and liquidated debts; it cannot extend to unliquidated,
disputed claims. 38 Since the loan obligation, including its amount and
demandability, is still being disputed in CA-G.R. CV No. 30340, PTC's credit
cannot be considered liquidated as of yet. Consequently, no legal
compensation could have taken place between PTC's loan credit and the
Spouses Roxas' judgment credit.

IV

Finally, we observe that PTC appears to have willfully engaged in

forum shopping. PTC, in its own words, opposed the execution of the Bataan
RTC decision because ''the Decision promulgated on September 4, 1990 by
the RTC of Manila, Branch 40 [in Civil Case No. 130783] denied Petitioner's
counterclaims." 39 Forum shopping is committed by a party who, having
received an adverse judgment in one forum, seeks another opinion in another
court, other than by appeal or the special civil action of certiorari. More
accurately, forum shopping is the institution of two or more suits in different
courts, either simultaneously or successively, in order to ask the courts to rule
on the same or related causes and/or to grant the same or substantially the
same reliefs. 40

The relief PTC now seeks is compensation of its judgment debt with
the Spouses Roxas' loan obligation. Tn the other case, Civil Case No. 130783
(now CA-G.R. CV No. 30340), PTC asks for the payment of the same loan
obligation of the Spouses Roxas. Essentially, PTC is seeking the same relief
in both cases: the extinguishment qf" the Spouses Roxas' loan obligation.
Under Article 1231 of the Civil Code, payment and compensation are modes
of extinguishing an obligation. Although legally distinct, both must be
pleaded in the same case if the obligation sought to be extinguished and the
parties thereto arc identical; otherwise, it would constitute splitting of causes
of action.

Forum shopping exists when the elements of litis pendentia are present,
viz.: (a) identity of parties, or at least such parties as those representing the
same interests in both actions; (b) identity of rights asserted and relief prayed
for, the relief being founded on the same facts; and (c) the identity of the two
preceding particulars is such that any judgment rendered in the other action,
.17
First United Constructors Corporation. v. Bayaniha11 Automotive Co11Joration, G.R. No. 164985,
January 15, 2014, 713 SCRA 354, 367.
38
Sil ah is Marketing Corp. v. Intermediate Appellate Court, G.R. No. 74027, December 7, 1989, 180
19

"'
SCRA 21, 25.
Rollo, p. 45.
YounK "· Keng Sen., G. R. No. 143464, M 0<0h 5, 2003, 398 SC RA 629, 63 6-63 7. '()
I
 Decision 9 G.R. No. 171897

will, regardless of which party is successful, amount to res judicata in the

action under consideration. 41

We find that the elements of litis pendentia-and, as a consequence,

forum shopping-exist in this case. PTC's claim for legal compensation is
founded on the same unpaid loan obligation now being litigated in
CA-G.R. CV No. 30340. Although that case originated from a complaint filed
by Dominguez for breach of contract, PTC counterclaimed the entire unpaid
loan obligation, plus interest, owed to it by the Spouses Roxas. In other words,
PTC had squarely put in issue the matter of the Spouses Roxas' indebtedness
arising from the loans the latter obtained from PTC. It is immaterial that PTC's
cause of action in the other case was set forth by way of a counterclaim, since
the latter partakes of the nature of a complaint by the defendant against the
plaintiff. 42 On the other hand, while the Main Case originally involved a
different subject matter and cause of action (i.e., the injunction against PTC's
extrajudicial foreclosure and the Spouses Roxas' claim for damages) as that
embraced in CA-G.R. CV No. 30340, the primary issue raised by PTC in its
Opposition to the Motion for Execution, and subsequently in the petition for
certiorari with the Court of Appeals and the present petition, pertained to the
same loan obtained by the Spouses Roxas. Thus, with respect to the Spouses
Roxas' indebtedness to PTC, there is a clear identity of parties, of subject
matter, and of cause of action. Consequently, once a final decision in CA-G.R.
CV No. 30340 is rendered, it will constitute res judicata and bar further
litigation on the same loan obligation, including any dispute on the
applicability or non-applicability of legal compensation.

Forum shopping is an act of malpractice that is prohibited and

condemned because it trifles with the courts and abuses their processes, and
degrades the administration of justice and adds to the already congested court
dockets. 43 Under Section 5 of Rule 8, willful and deliberate forum shopping
is a ground for summary dismissal of the case and constitutes direct contempt
of court, as well as a cause for administrative sanctions. The litigation could
have ended promptly if PTC had simply paid its judgment debt and awaited
the final decision in the other case to recover whatever is due from the Spouses
Roxas. Instead, this plainly unmeritorious case had to clog our docket and take
up the valuable time of this Court.

WHEREFORE, the petition for review is DENIED for lack of merit.

The Decision dated November 17, 2005 and Resolution dated March 9, 2006
of the Court of Appeals in CA-G.R. SP No. 35203 are hereby AFFIRMED.
Costs against petitioner. r
41
Ayala Land. Inc. v. Valisno, G.R. No. 135899, February 2, 2000, 324 SCRA 522, 530-531.
42
lntram11ros Administration v. Contacto, G .R. No. 152576, May 5, 2003, 402 SCRA 581, 590.
41
Young v. Keng Seng, supra.
Decision 10 G.R.No.171897

SO ORDERED.

EZA

WE CONCUR:

sociate Justice
Chairperson

JAa~~
ESTELA l\{}ERLAS-BERNABE
Associate Justice

ATTESTATION

I attest that the conclusions in the abrveecision had been reached in

consultation before the cases were assigned t he writer of the opinion of the
Court's Division. /

PRESBITER J. VELASCO, JR.

As ·vciate Justice
Chait!} rson, Third Division
Decision 11 G.R. No. 171897

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the

Division Chairperson's attestation, it is hereby certified that the conclusions
in the above Decision had been reached in consultation before the cases were
assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief'Jus tice