Gold Star Mining Co., Inc. vs. Marta Lim-Jimena, et al.

A corporation that violates a subsisting preliminary injunction by paying funds to a party enjoined may be ordered to pay the amount so paid to the party protected by the injunction, not as a penalty for contempt, but as a decree of restitution to make the violated injunction effective and prevent the court's award from being rendered nugatory, with the paying corporation entitled to recover the amount from the party to whose liability it is imputed.

Victor Jimena and Ananias Isaac Lincallo entered into a written agreement in 1937 whereby Lincallo bound himself to turn over to Jimena one-half of the proceeds from all mining claims he would purchase with money advanced by Jimena. This agreement was modified in a 1939 notarial instrument, duly registered with the Register of Deeds of Marinduque in his capacity as mining recorder, to include in the equal sharing arrangement not only the proceeds from several mining claims but also the lands constituting the same, and to bind their "heirs, assigns, or legal representatives." The mining rights over part of the claims were assigned by Lincallo to Gold Star Mining Co., Inc. sometime before World War II, and in 1950 the corporation paid him P5,000 as a quitclaim for pre-war royalties.

In 1937, Ananias Isaac Lincallo bound himself in writing to turn to Victor Jimena one-half of the proceeds from all mining claims that he would purchase with money to be advanced by the latter. This agreement was later modified in a 1939 notarial instrument, duly registered with the Register of Deeds of Marinduque in his capacity as mining recorder, to include in the equal sharing arrangement not only the proceeds from several mining claims, which by that time had already been purchased by Lincallo with various sums totalling P5,800.00 supplied by Jimena, but also the lands constituting the same, and to bind thereby their "heirs, assigns, or legal representatives." Apparently, the mining rights over part of the claims were assigned by Lincallo to Gold Star Mining Co., Inc., sometime before World War II because in 1950 the corporation paid him P5,000 in consideration of, and as a quitclaim for, pre-war royalties.

On several occasions thereafter, the mining claims in question were made subject-matter of contracts entered into by Lincallo in his own name and for his benefit alone without the slightest intimation of Jimena's interests over the same. On 19 September 1951, Lincallo and one Alejandro Marquez, as separate owners of particular mining claims, entered into an agreement with Gold Star Mining Co., Inc., the assignee thereof, regarding allotment to Lincallo of 45% of the royalties due from the corporation. Four months later, Lincallo, Marquez and Congressman Panfilo Manguerra, again as owners, leased certain mining claims to Jacob Cabarrus, who, in turn, transferred to Marinduque Iron Mines Agents, Inc., his rights under the lease contract. By virtue of still another contract executed by these lessors on 29 February 1952, 43% of the royalties due from Marinduque Iron Mines Agents, Inc., were agreed upon to be paid to Lincallo.

As early as August 1939 and down to September 1952, Jimena repeatedly apprised Gold Star Mining Co., Inc., and Marinduque Iron Mines Agents, Inc., of his interests over the mining claims so assigned and/or leased by Lincallo and, accordingly, demanded recognition and payment of his one-half share in all the royalties allocated and paid and thereafter to be paid to the latter. Both corporations, however, ignored Jimena's demands. Payment of the P5,800 advanced for the purchase of the mining claims, as well as the one-half share in the royalties paid by the two corporations, were also repeatedly demanded by Jimena from Lincallo. Acknowledging Jimena's contractual claim, Lincallo off and on promised to settle his obligations. On 14 July 1952, Lincallo promised for the last time to settle everything on or before the 30th day of the same month.

Lincallo, however, did not only fail to settle his accounts with Jimena but transferred on 16 August 1952, a month after he promised to pay Jimena, 35 of his 45% share in the royalties due from Gold Star Mining Co., Inc., to one Gregorio Tolentino, a salaried employee, for an alleged consideration of P10,000.00. On 2 September 1954, Jimena commenced a suit against Lincallo for recovery of his advances and his one-half share in the royalties. Gold Star Mining Co., Inc., and Marinduque Iron Mines, Inc., together with Tolentino, were later joined as defendants. On 17 September 1954, the trial court issued, upon petition of Jimena, a writ of preliminary injunction restraining Gold Star Mining Co., Inc., and Marinduque Iron Mines Agents, Inc., from paying royalties during the pendency of the case to Lincallo, his assigns or legal representatives. Despite the injunction, however, Gold Star Mining Co., Inc., was found out to have paid P30,691.92 to Lincallo and Tolentino.

The corporation claimed later on appeal that the injunction had been superseded and/or dissolved on 25 May 1955 by the trial court's grant of Jimena's petition for a writ of preliminary attachment "to supersede the writ of preliminary injunction previously issued." But as the grant was conditioned upon filing of a bond to be approved by the trial court, no writ of attachment was issued because the bond offered by Jimena was disapproved. Jimena and Tolentino died successively during the pendency of the case in the trial court and were, accordingly, substituted by their respective widows and children. After a protracted trial, the lower court rendered a decision, the dispositive portion of which declared the plaintiffs as successors in interest of Victor Jimena entitled to one-half of the 45% share of the royalties of Lincallo under his contract with Gold Star, and to one-half of the 43% shares of the rental of Lincallo under his contracts with Cabarrus and Marquez; condemned Lincallo to pay various sums; declared the deed of sale between Lincallo and Tolentino effective only as to one-half of Lincallo's share; condemned the estate of Tolentino to pay P24,386.51; condemned Gold Star to pay P30,691.92 solidarily with Lincallo; and condemned Marinduque Iron Mines to pay P7,330.36.

• Lack of Cause of Action: Petitioner argued that the Court of Appeals' decision finding that respondents Jimenas have a cause of action against it was reversible error, as the same does not allegedly appear in the complaint filed against petitioner corporation.
• Injunction Superseded: Petitioner argued that the P30,691.92 penalty for violation of the injunction cannot be imposed because the injunction in question had already been superseded and/or dissolved by the trial court's grant of Jimena's petition for writ of preliminary attachment.
• Amount Not Prayed For: Petitioner argued that the sum of P30,691.92 was not prayed for in the complaint.
• Lack of Contempt Proceedings: Petitioner argued that the corporation was never charged, heard, nor found guilty in accordance with, and pursuant to, the provisions of Rule 64 of the (Old) Rules of Court, citing section 3 thereof, now Rule 71 of the Revised Rules, requiring prior written charge for indirect contempt and due hearing.

• Juridical Link: Respondents argued that while there exists no privity of contract between Jimena and Gold Star, the common subject-matter supplies the juridical link, similar to the status of the first and second mortgagees of a duly registered real estate mortgage.
• Subrogation Under Article 1177: Respondents invoked the Spanish maxim "el deudor de mi deudor es deudor mio," finding sanction in Article 1177 of the New Civil Code, which provides that creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter for the same purpose.
• Agency Under Article 1883: Respondents argued that Lincallo, in transferring the mining claims to Gold Star without disclosing that Jimena was a co-owner, acted as Jimena's agent with respect to Jimena's share of the claims, and that the principal may sue the person with whom the agent dealt with in his own name when the transaction involves things belonging to the principal.
• Inadequacy of Garnishment: Respondents contended that the remedy of garnishment suggested by Gold Star is utterly inadequate for the enforcement of Jimena's right against Lincallo because Jimena wanted an accounting and wanted to receive directly his share of the royalties from Gold Star, and that recourse is not open to Jimena unless Gold Star is made a party in this action.

• Cause of Action: Whether respondents Jimenas have a cause of action against petitioner Gold Star Mining Co., Inc. despite the absence of privity of contract.
• Violation of Injunction: Whether the award of P30,691.92 against Gold Star for violation of the preliminary injunction was proper notwithstanding that (a) the amount was not prayed for, (b) the injunction was allegedly superseded by the grant of the writ of preliminary attachment, and (c) the corporation was never charged, heard, nor found guilty in contempt proceedings under Rule 64 of the Old Rules of Court.

• Cause of Action: Yes. The Jimenas have a cause of action against Gold Star. The common subject-matter—the mining claims and royalties—supplies the juridical link between them, and Lincallo acted as Jimena's agent with respect to Jimena's share of the claims, making Gold Star properly joined as a defendant.
• Violation of Injunction: Yes. The award of P30,691.92 was proper. The preliminary injunction was subsisting because no writ of preliminary attachment was actually issued, and the award was not a penalty for contempt but a decree of restitution to make the violated injunction effective, with the amount to be imputed to Lincallo's liability.

• Cause of Action: The Court adopted the Court of Appeals' reasoning that the situation at bar is similar to the status of the first and second mortgagees of a duly registered real estate mortgage—while there exists no privity of contract between them, the common subject-matter supplies the juridical link. The evidence overwhelmingly established that Jimena made prewar and postwar demands upon Gold Star for the payment of his one-half share of the royalties but all in vain, so he was constrained to implead Gold Star because it refused to recognize his right. Jimena sought accounting of the royalties paid by Gold Star to Lincallo and direct payment to himself of his share, which relief cannot be granted without joining Gold Star specially in the face of the attitude it had displayed towards Jimena. The Court also cited Article 1177 of the New Civil Code, which allows creditors, after having pursued the property in possession of the debtor to satisfy their claims, to exercise all the rights and bring all the actions of the latter for the same purpose. From another standpoint, Lincallo, in transferring the mining claims to Gold Star without disclosing that Jimena was a co-owner although Gold Star had knowledge of the fact, acted as Jimena's agent with respect to Jimena's share of the claims, giving Jimena an action against Gold Star pursuant to Article 1883 of the New Civil Code, which provides that the principal may sue the person with whom the agent dealt with in his own name when the transaction involves things belonging to the principal.

• Violation of Injunction: The Court observed that the facts speak for themselves. Considering that no writ of preliminary attachment was issued by the trial court, the condition for its issuance not having been met by Jimena, nothing can be said to have superseded the writ of preliminary injunction in question. The preliminary injunction was, therefore, subsisting and evidently violated by petitioner corporation when it paid the sum of P30,691.92 to Lincallo and Tolentino. As to the contention that Gold Star may not be penalized without prior written charge for indirect contempt and due hearing, the Court failed to see merit, as it misses the true nature and intent of the award. The award is not so much a penalty against petitioner as a decree of restitution, in order to make the violated injunction effective, as it should be, by placing the parties in the same condition as if the injunction had been fully obeyed. If Gold Star had only heeded the injunction and had not paid to Lincallo the royalties of P30,691.92, such amount would now be available for the satisfaction of the claims of Jimena and his heirs against Lincallo. By sentencing Gold Star to pay, for the account of Lincallo, the sum aforesaid, the court merely endeavoured to prevent its award from being rendered pro tanto nugatory and ineffective. That the questioned award was not intended to be a penalty against Gold Star is shown by the provision in the judgment that the P30,691.92 to be paid by it to Jimena is "to be imputed to Lincallo's liability under this judgment," leaving the way open for Gold Star to recover later the whole amount from Lincallo, whether by direct action against him or by deducting it from the royalties that may fall due under his 1951 contract. That the recovery of this particular amount was not specifically sought in the complaint is of no moment, since the complaint prayed in general for "other equitable relief."

• Juridical Link Supplying Privity — While no privity of contract may exist between two parties, the common subject-matter of their respective rights and obligations can supply the juridical link between them, similar to the status of first and second mortgagees of a duly registered real estate mortgage. The Court applied this doctrine to hold that Jimena had a cause of action against Gold Star despite the absence of direct contractual relations, because both had interests in the same mining claims and royalties.

• Creditor's Subrogation Under Article 1177 — Creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in his person; they may also impugn the acts which the debtor may have done to defraud them. The Court relied on this provision to justify Jimena's direct action against Gold Star, the debtor of his debtor Lincallo.

• Principal's Direct Action Against Third Party Under Article 1883 — The principal may sue the person with whom the agent dealt with in his own name when the transaction involves things belonging to the principal. The Court applied this doctrine by treating Lincallo as Jimena's agent with respect to Jimena's share of the mining claims, since Lincallo transferred the claims to Gold Star without disclosing Jimena's co-ownership, although Gold Star had knowledge of the fact.

• Restitution for Violation of Injunction — An award for violation of a preliminary injunction is not so much a penalty against the violator as a decree of restitution, in order to make the violated injunction effective by placing the parties in the same condition as if the injunction had been fully obeyed. The Court held that by sentencing Gold Star to pay, for the account of Lincallo, the sum paid in violation of the injunction, the court merely endeavoured to prevent its award from being rendered pro tanto nugatory and ineffective, and the amount was to be imputed to Lincallo's liability.

• "The situation at bar is similar to the status of the first and second mortgagees of a duly registered real estate mortgage. While there exists no privity of contract between them, yet the common subject-matter supplies the juridical link." — This passage, adopted from the Court of Appeals, articulates the doctrine that a common subject-matter can supply the juridical link necessary for a cause of action despite the absence of privity of contract.

• "Said award is not so much a penalty against petitioner as a decree of restitution, in order to make the violated injunction effective, as it should be, by placing the parties in the same condition as if the injunction had been fully obeyed." — This is the ratio decidendi for the Court's ruling on the violation of the injunction, distinguishing the award from a contempt penalty and characterizing it as a restitutionary remedy.

• "That the questioned award was not intended to be a penalty against appellant Gold Star Mining Co., Inc., is shown by the provision in the judgment that the P30,691.92 to be paid by it to Jimena is 'to be imputed to Lincallo's liability under this judgment.' The court thus left the way open for Gold Star Mining Co., Inc., to recover later the whole amount from Lincallo." — This passage demonstrates that the award was restitutionary in nature, as the imputation to Lincallo's liability allowed Gold Star to recover the amount from Lincallo.

N/A — The decision does not cite any prior case law as precedent.

• Article 1177, New Civil Code — Provides that creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all the rights and bring all the actions of the latter for the same purpose, save those which are inherent in his person; they may also impugn the acts which the debtor may have done to defraud them. The Court cited this provision to justify Jimena's direct action against Gold Star as the debtor of his debtor Lincallo.
• Article 1883, New Civil Code — Provides that the principal may sue the person with whom the agent dealt with in his own name when the transaction involves things belonging to the principal. The Court applied this provision by treating Lincallo as Jimena's agent with respect to Jimena's share of the mining claims.
• _Section 3, Rule 64, Old Rules of Court (now Rule 71, Revised Rules) _ — Requires prior written charge for indirect contempt and due hearing. The Court distinguished the award in this case from a contempt penalty, holding that the restitutionary award did not require such proceedings.

Concepcion, C.J., Dizon, Makalintal, Sanchez, Castro, Angeles, Fernando and Capistrano, JJ., concurred. Zaldivar, J., was on leave.

N/A — No dissenting opinions were noted in the decision.